Show Notes
Transcript
[00:00] Mike: This is Startups for the Rest of Us: Episode 182.
[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.
[00:19] Rob: And I’m Rob.
[00:20] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week Rob?
[00:23] Rob: Well, feels good to get back in the swing of things after MicroConf last week. I spent about 8 hours going through email, had several hundred in the inbox but I go to inbox zero again yesterday. It feels good to get back working on Drip and HitTail again. Drip is still 1-2 weeks out from the launch of behavior email or email automation and I thought we were a couple weeks out a couple weeks ago but just due to us leaving for MicroConf and all that stuff things get delayed. Well we talked to the UI I should say with myself and Derek and we’re getting moving on it. I’m not doing a ton of marketing on Drip right now just because all the marketing changes once that’s out because we become a different tool for kind of a different audience to be honest. We still have our old capabilities but it’s just a different thing.
[01:10] Mike: Cool.
[01:11] Rob: How about you?
[01:12] Mike: I think I mentioned in the last podcast that I was taking a vacation out in the desert. The plan was to go out and drink whisky and smoke cigars and I had maybe one glass of whisky and no cigars the whole time. I actually fell asleep on Thursday like right next to the campfire twice in the same day.
[01:26] Rob: It’s exhausting. I felt the same way. I slept a lot. The extrovert hangover I kept saying.
[01:32] Mike: Gotcha. Well I think being in the desert it just dries you out and dehydrates you so even if you don’t drink, you still just wake up with a hangover.
[01:40] Rob: And I guess on the Brightside for me HitTail is looking to have one of its best growth months ever but just in monthly recurring revenue growth and it’s moving back towards in the previous high that I had it at and this is due to getting away from tracking code and using the Google web master tools importer. So it’s good to have a win now and again to keep you motivated. There was like several months there where it just felt like all losses and the winner, it discourages you especially if it comes during that dark and cold time of year, glad to kind of be through that and be able to kind of hang my hat on something for the time being. And it’s not that Drip is not doing well or that MicroConf was a success. Drip is doing well but to really have something going up into the right is always a good motivator.
[02:24] Music
[02:27] Mike: I guess we’re talking today about the state of AuditShark.
[02:30] Rob: There were several comments in I think it was in the 170’s. Folks just asking about AuditShark you hadn’t given a thorough update in a while. I know that there’s been stuff going on behind the scenes. Some of it is sensitive. Right? It’s stuff that you can’t necessarily just come out and say what’s going on because so we wanted to kind of get passed MicroConf and get to a point where we could spend a whole episode digging into a lot of the specific comments, thoughts, questions that folks had. And there were several different commuters on both sides of the table. There was a guy named Mathew, Larry Scott Charles and Josh, thanks for your comments. But I think we’re going to cover four main topics today. These are all brought up by commenters specifically.
[03:09] The first one is slow progress. Like what do you say to the slow progress of AuditShark? Second one is the target market like do you have a target market? And the next one is talking about features and development versus talking about marketing, talking more about writing code than talk about marketing and the last one is about whether you are following your own advice. Someone put it if you wrote in to startups for the rest of us, what would your advice to yourself be?
[03:33] So let’s dive into the first one here. We’re going to talk about slow progress. I have a couple quotes. One quote is what do you say to AuditShark and its very slow progress? The other one is in the episode about 12 ways to know when to bail on your project and that was episode 171 at least 10 ways clearly applied to AuditShark. Now I actually don’t think 10 of those ways. I think maybe half of them applied but what are your thoughts on this? You’ve been working on AuditShark I think or about four years now and you started with a target market of banks that didn’t work out you’ve since been looking for a target market and like web and online folks were the market for a while, it seems like that maybe has or hasn’t worked out and you’re working on new stuff. I guess the first thing that you should probably comment on is what do you say to the fact that AuditShark feels like it has pretty slow progress?
[04:22] Mike: Well I think that most people who listen to the podcast don’t necessarily realize that I own three different companies, one of them is a consulting company and then my software company and then the Micropreneur academy with you. And with the consulting company, really, I spend a huge amount of time there which I’m not particularly happy about but the fact is that I’ve spent years where I’ll spend between 40 and 45 weeks a year on the road. Of that time, I’ll fly out on a Sunday and I fly back on a Friday and between travel and the actual work schedule, I’m probably putting in 60+ hours a week just doing the consulting stuff.
[04:56] So it doesn’t leave a whole heck of a lot of time outside of that in order to work on it and that’s kind of why I really went down the road of hiring people to kind of bring in and help put different pieces of AuditShark together because I was spending so much time on the road and what that allowed me to do is it allowed me to do the consulting which is essentially high pay and then turn around and take that pay and allocate it to different contractors who cost significantly less than me and then I can manage them. But that’s still not easy to do because they’re still a huge latency you’ve got to deal with.
[05:26] But at the end of the day when you’re working 60 hours a week during the week from Monday to Friday and then you go home and you want to spend that time with your family. Realistically it’s hard to allocate a lot of extra time to AuditShark and I’ve been able to do it but it’s still hard.
[05:41] Rob: Right. And you’ve been working on it for four years. The first two years you were trying to code everything yourself and so you would come back from consulting and some weeks you were getting like three hours a week of coding but you were talking about it because there’s a product you’re working on but it wasn’t like you’re making these massive strides towards the goal and it wasn’t until you’re a couple years in that you really started and you were able to let go of some of the code base and kind of outsource it. And then that is when you actually started making more coding progress. Right?
[06:10 ] And you’ll notice a shift at that point. I don’t remember but what episode it was but a lot of feature started getting built at that point and then that wasn’t like another year and you were moving forward but what I think your blind spot during that time is I don’t think you went out and find the market or you thought that you had the market but it just wasn’t there and then that’s been like kind of the last year has been coming to that conclusion of like oh no, I missed the mark on this. The market that I thought wanted it doesn’t want it and then since then you’ve been trying to find what that is.
[06:36] Mike: Right. And that market was banks. I was originally going after small banks because I saw this list of I think it was around 8,000 banks or something like that 8,500 banks. And of those, only 10 took up the top 80 or 90% of the market. So the rest of the market was left of these much smaller banks and I thought oh well they have regulatory compliance. They need to do this stuff. And what I found out after talking to them, I realized that and I’ve already built a bunch of stuff they said yeah, we’re interested in that. And then when I went back to them and said hey, I’m almost ready to show you something, that was when I started getting into more in depth conversations with them they said well, actually we have a third party company come in and do those audits for us. We don’t do it on a regular basis.
[07:18] There were a couple of different things that kind of went through my mind at that point. One is like I could say I could go to the third party people that they have come in that these consultants but at that point it’s not necessarily going to be something that the banks are going to end up using on a regular basis. They basically need it once and then that’s it and they don’t need it again for another year and then I’m like well that’s not really an ideal Saas model for me. That’s not what I want.
[07:43] The other thing is I knew that scaling up and trying to go after a bunch of those companies was going to be somewhat difficult so I kind of backed off of that. I didn’t really want to go the third party auditor route at that time kind of looking back on it, it might have been a better idea but I guess I didn’t think hard enough about it.
[07:57] Rob: I think you were locked in the Saas. You really wanted the subscription revenue and you’re already year two into building this web app, this web version of AuditShark and that didn’t necessarily apply as well to third party auditors.
[08:11] Mike: It did but I missed it. And the reason I missed it and the reason I missed it was I was kind of focused on the idea that the banks would be using the software. So I was like oh, well the banks are only going to use it once a year. They really don’t need this so maybe I should go out and find another market. Completely overlooking the fact that if I went instead to those third party auditors and said hey, would you be willing to use this on each of your customers? And although the products benefits their customer, I would charge them instead I just totally missed that.
[08:38] Mike: Yeah. That makes sense. This actually might be a good transition point into point number 2 which is about target market and we can come back to the 12 ways if we have time. But there are multiple comments in terms of target market. These are all quotes from the comments. One person said maybe if I understood AuditShark’s target market a little more and how Mike is going to attack it, I would have more confidence in his advice. Honestly, I think he’s still searching for a market, one that I’m not sure truly exists other than one of customizations for each prospect or client. That was one comment.
[09:06] The next one was what is AuditShark’s target market? Has that changed since 2011? And then the third one was more of a compliment and it says I disagree with the naysayers. Mike has moved on. He’s bringing his product to different markets. He’s now moving on to security companies and auditors. So talk a little bit about that specifically obviously you said banks didn’t work out, third party auditors didn’t work out at the time but it sounds like that might be a good market. But where do you stand today and why do you stand there? You know? Like what evidence do you have that the market you’re talking about is probably viable?
[09:37] Mike: In terms of the people who are using it, as I said before, I completely missed the fact that I could charge those third companies money instead of the banks because my thought was well banks need this particular function done. They’re the ones who should be paying for it. And that’s not actually the case. The case is that these third party auditors are the ones who use the software on behalf of the bank and then they use it and they mark it up to the banks so they charge the bank however many thousand dollars to do an audit and then they pay me some small specific fees associated with the number of machines that they audit in that environment. And like I said, I missed that upfront. It makes a lot of sense and then people that I’ve talked to, that’s exactly how they operate and they’ve said yeah, so I will pay X dollars a month for this particular piece of software that does XYZ.
[10:24] Rob: So the question on the table then is what is your target market today?
[10:28] Mike: The target market is essentially auditors who have to do that as part of their job. It’s essentially looking at the target market as if when you build a product, who has this particular problem? Who is bleeding from the neck and needs this problem solved? And it’s really the auditors who come in and say okay I’ve got a job to do. I have to go out to 50 machines or I have to go out to 100 machines and I have to gather all of these settings.
[10:49] Well each one of those settings takes you a minute to gather which a lot of times they will because and you might have a list of 150 things that you need to look at. And if each of those takes you one minute to get then that’s 150 minutes which is about 2.5 hours per machine. If you have 100 machines that’s a huge chunk of time, talking 250 hours to pull back that information. You have a piece of software that can pull it back very, very quickly for you, you don’t have to spend 250 hours on it. And what’s that worth? Well if you’re times $50 an hour, times 250 hours, if you’re paying less than $12,500 for that, that’s a no brainer.
[11:23] Rob: Right. So you know that there’s a problem out there that people need to be auditing AuditShark can do that, now how do you know this aside from saying there’s an X billion dollar market and I have to grab 1% of it. I’ll be successful like you’ve told me offline that you’ve been in specific talks with dollar amounts mentioned like there’s stuff going on. So why don’t you talk a little bit about that?
[11:45] Mike: Sure. To give a little bit of background from 2003-2005 I worked for a company called Pedestal Software. And they sold compliance software. From 2005 to about 2008 or 2009 I worked doing consulting on that piece of software because in 2005 the company was sold and then I just kind of struck off on my own and I was brought in to do consulting on that product. And I implemented it, extremely large companies like Johnson and Johnson, Pfizer, NASDAQ, the Department of Defense, united health group, DuPont, all these different companies that are not small companies. And I saw exactly how they did it. I saw exactly how the process that they used and what sorts of things were important to them and what sorts of things weren’t?
[12:25] So when I took that knowledge and went offline and started building AuditShark, I knew what these auditors were looking for. It wasn’t s as if I just plucked this thing out of the sky and said hey I’m going to do some research, maybe do some keyword stuff. The way I looked at it was I had this domain expertise that probably nobody else in the planet really has like 1) I’m a software developer and 2) I’ve done consulting in this very, very specific niche industry for four years. So I know what’s important to them. I know what will work and I know what will not. So to bring them back to specific numbers, since January, I’ve been discussing with a specific customer and it’s an enterprise deal. And enterprise deals take notoriously long to come through.
[13:05] The second thing is that it is an enterprise deal. You’re basically swinging for the fences. It’s not like you can sell them some software and go little ways and then have them buy more later on. When they buy software, they buy lots and lots of licenses all at once. So for them, it’s not going to be a small purchase. They don’t buy 5 or 10 licenses, see how it goes and then by 30 million licenses, that’s just not how it works. Basically they look at all their available options. They evaluate them kind of widdle it down maybe do some demos and trials and then they pick one and then they buy it and they move forward with it.
[13:37] So you’re going to get either lots of revenue or zero. And I didn’t really want to come to the podcast and say oh I’m really working on this enterprise deal and then 3 or 4, 5 months down the road have it come up to zero because that’s really what was going to happen or could happen.
[13:50] Rob: Right. And by working on the enterprise deal, you mean you had multiple calls, you’ve done a demo. You’ve submitted pricing. Right? I mean you’re way well into this discussion.
[13:59] Mike: Exactly. And at this point, as far as I know, my product is the only one being recommended at this point. They’ve looked at other products and the other products simply don’t do what they need. I don’t think that’s any small coincidence based on what I said before about me being an expert in this particular field and as a side note I really hate saying that I’m an expertise in this but the fact is I’m a software developer and have done consulting in this particular space. I know exactly what they want, I know exactly what they need. Combining those two things, it kind of does make me an expert in this very, very specific thing that they need.
[14:30] Rob: Right. We all know that deals fall through all the time. Right? So there’s not a huge amount of certainty but you do know that there’s interest and you do know that the people that you’ve demoed to and talked to the guys that are actually going to be implementing it really, really liked it like it’s a neck bleed situation for them so that implies – right? It could simply that there are other people who also have the neck bleed situation and you’re saying that based on that four years of consulting you did, you know that it’s a neck bleed situation.
[14:55] And then the other thing is the deal, even if it goes through, it could take another – who knows? Six months. It could take another 8 months right? You just don’t know they could budget it for the later half or whatever I mean this stuff takes a long time so it’s not something that’s going to come through next week. it’s not 100 trial users that convert in 21 day trials but if this one hits or one like it, it’s a little bit of a game changer for you.
[15:19] Mike: Yeah, definitely. Starting pricing for that is six figures and that’s starting and they would buy quite literally thousands of licenses and if it goes well, they could roll it out enterprise wide which is a multiple of roughly 25 times that. Obviously I can’t charge them gobs and gobs of money because there’s kind of an upper limit to software when you get into the enterprise space because of volume discounts. You look at any software that’s out there, some vendors who sell MacAfee policy auditor which is a somewhat similar product but if you look at theirs and the pricing for it, their pricing drops down to I think 5 or $6 per machine at some point and that’s after you get passed like 50,000 machines. But their pricing on it I think is 30 or 35 and that’s just to buy one license for it and if you buy one license, it costs you $35. If you buy 50,000 it costs you $5 for each of them instead.
[16:07] Rob: Right. But let’s focus on this target market thing. So that, it’s a sold lead in this niche. It’s a Fortune 500 company that you’re talking to [Cross-talk] I don’t think you’ve said it yet. And I think the thing that you’ve gained out of this is even if the deal doesn’t go through, you have a decent level of confidence that there are other companies like this and if you can get in there and do the high touch sales, and this is enterprise sales. Right? I mean you’ve been spending time talking to these guys that this is a possibility for you and I think another thing that you told me offline that perhaps opens this up to be more possible for you is consulting. How much consulting are you going to be doing moving forward.
[16:42] Mike: Virtually none. I basically put in to have my time cut to pretty much zero starting in mid September and depending on how paperwork and PO’s go it may actually be quite a bit earlier on that. And then my consulting would go to zero and I’m not worried about the money because like I said I’ve got income sources. What I really need is I need those 60 hours a week back so that I can focus on getting AuditShark in front of customers and talking to them. I mean that’s really the big thing is being able to have the time to talk to people because if I’m on the road, it’s hard to step out in the middle of a workweek with a customer and then say oh, I need to take an hour off because I need to go do this software demo or make some phone calls and do some cold calls or follow-up on emails with these other people. You just can’t really do that.
[17:26] Rob: Yeah. And your progress is slow as a result. Right. I think the other thing in terms of the target market, you also mentioned another potential client it seems like in the same market but they’re not in enterprise. They’re more that external auditor. The Fortune 500 you’re talking to the internal auditors. These are people who work for that company who want to do auditing and they buy do a large one time purchase like you said being the six figures probably whereas there’s that external auditor market that you referred to earlier who would perhaps be auditing banks or just be auditing anyone who needs auditing. A there’s a small company that has said that they are very interested in AuditShark. Is that right?
[18:04] Mike: Yup. The major difference there is more or less there’s two things. One is the size of the company and the second one is what machines they’re going to be using the software on. So when you’re talking about the enterprise customers, the internal auditors, they’re auditing their own machines. And they’re auditing tens of thousands of them in some cases. When you’re talking about the external auditors or the third party auditors as I’m calling them, they are much more smaller this particular company has less than 10 employees and all of them go out to customers on a regular basis an audit their machines and their books and everything else.
[18:36] And it kind of ties into financial services but it allows them to act as an up sell because if they’re coming in to audit their books they can say well we can also do a risk assessment or risk audit on your computers to see how much of your financial information is vulnerable to external threats. So they can essentially use that to up sell their own services and this particular company does that on a very regular basis. And some of their customers are Fortune 100 and 500 companies. They do have in roads into some of these larger companies who maybe want a second set of eyes on their machines or kind of look over what their internal auditors have done because there are known and documented cases where they’ve gone out and they said okay we’re going to have the IT director go out and do these audits and everything’s managed internally and then they have third party auditors come in and say what a second, these results don’t match up. Come to find out their IT director falsified results.
[19:30] So as the CIO or CEO of the company you are criminally liable for some of those things in a public company. You do not want to be signing off on stuff that could put you in jail. So that’s the reason why they have these third party auditors come in sometime even though they have their own set of internal auditors. They want this third party checked because it helps keep them out of jail. And they’re spending the company to do it so it’s really no sweater off their back.
[19:54] Rob: Right. So as I said you’ve spoken with one firm who is interested. I imagine you have a list of additional terms or other ways to get in contact and try to explore that market which is heavily overlapping with it’s just internal versus external. Right? And they would use the same piece of software at your desktop edition you spent several years building the web version and it seems like the desktop edition which is kind of been off shoot to that has really gained a lot more steam, a lot faster than that web version did.
[20:22] Mike: Right. And I think there’s a couple different reasons for that. I think the primary reason for that is that it’s so quick and so easy to demo. I mean you literally you open it up, you click file, load and you open up a policy. You can do it against local hosts or another machine but literally you just type in a machine name, you hit audit and boom. It just starts pulling back results from that machine. You don’t need to install software on it. You don’t need a lot of configuration. If you need to put in your credentials you can but if you’re already logged into widows with the credentials that have access to that machine, you’re just going to start pulling back results. And that’s an extremely powerful demo to be able to show to an auditor.
[20:58] Versus the web version where it’s like oh well you have to sign up for an account. Now you have to download this piece of software. And then you have to install it and you need to type in your credentials when you install it and now we have to wait a few minutes for it to sync up and now we can schedule something and then you wait for 3 or 4 minutes and then you can look at results in the web interface. It’s a totally different demo scenario. The desktop edition was essentially built in order to overcome that. At the same time, that desktop edition also serves other purposes.
[21:25] Rob: Right. And it sounds like it’s had faster uptake. And you know the desktop version was a little controversial. I mean I brought it up I think on the podcast and then again off line and several folks in the comments brought it up and this is kind of point three which is you talking more about features and development versus marketing. So here’s a couple quotes. 1) It says Mike you do seem to talk about this feature or code or making it do this and that instead of how many customers you’ve acquired this week. It definitely seems more like the internal side project which clearly you get enjoyment out of and then someone else said 1) stop writing code. 2) Get customers now.
[21:59] And I had kind of said a variation of this to you offline. Right? Of like you talk a lot about the development you’re doing especially when the desktop version came up, I asked you specifically like who requested that? Why are you building another app or another off shoot or another interface? No one has offered you money for this. I guess the first question I have for you is why did you go build this desktop version when you’ve already spent all this time building a web version?
[22:24] Mike: Well I mean the primary reason was because I needed something that I could demo easily. What I wanted to do ultimately was have a video on my website that would kind of walk you through it but I also realized that just looking at the video, reading some stuff on it wasn’t necessarily going to be what would drive traffic or drive people to kind of come in and actually take a look at it. What I was hoping to do was basically take that and use it as sort of a marketing thing where I could put it on the website and say hey you can download this and this is what the web based version of the tool would do.
[22:54] So my initial intention was to take in and say okay well you can use this against just local hosts or you can type in one machine or two machines or something like that but when I started building it and actually saw what was really kind of possible with it, it kind of brought me back to between 2003 and 2005 working on security expressions and how quickly and how powerful that was to show to people. And I think that I’ve kind of forgotten that. When you put that in front of somebody, it’s actually quite amazing. I’ve heard from people who have looked at and said wow this is really awesome. I can’t believe that you’re able to do this.
[23:26] So that kind of turned the conversation a little bit and was probably not until I had really started going down the road of development of the desktop edition and say hey maybe I should take this and make this off shoot of the product that hooks into the web’s system as opposed to just kind of an independent marketing thing. The other thing I wanted to was I want to be able to use it to draw publicity to do AuditShark for some very specific circumstances. So recently for example the heart bleed problem has kind of surfaced on the internet. Well how do you know if your servers are susceptible to heart bleed? Well you kind of probably have to go do quite a bit of research and figure out what heart bleed is and how you know whether you’re susceptible to it or not.
[24:02] If I can take a version of AuditShark and essentially package it with a pre-built policy file that only does one thing which looks to see whether or not you’re vulnerable to heart bleed and package it and allow you to download it from my website, then that would be something that would be probably inherently valuable to a lot of people because they’re not going to want to come to my website type in their credentials to their Linux servers and say hey, go check my servers. That’s just not going to happen. And if it did happen, I’d love to have your credentials but that’s not what I was looking for. What I was looking for was something I could put on my website that would address some very, very specific scenarios. So any specific vulnerabilities or worms or things like that come out and be able to put that out there and use this sort of marketing play.
[24:46] And in the past what I’ve seen other companies do is if there’s major exploit of credentials from different companies, if there’s an exploit where they pull a bunch of passwords, they will setup websites where you can go in and you can type in your username and it will tell you whether or not the password was leaked. And I found that to be extremely useful because it’s interesting to find out whether or not your password was leaked to different sources and that’s really just a marketing driver. And that’s how I view that.
[25:12] Rob: So what do you say to the sentiment of someone saying stop writing code and get customers now? Like have you stopped writing code or have you slowed it down because for a while I mean it was several years. You just talked about new features you were building without customer request. It wasn’t someone saying I’m willing just talked about new features you were building without customer request. It wasn’t someone saying I’m willing to pay you money if you built this next feature like what’s your status?
[25:31] Mike: So right now there code has slowed to a crawl. There’s a few minor things that are going in. I call them minor but they’re actually pretty important. So for example licensing. Licensing was not in there. When I started handing out demons of the AuditShark desktop edition, we hard coded the date. It was like here’s the date and it just simply will not work after this. We could build the licensing mechanism but that’s going to take time. Let’s just get this out the door. So there were shortcuts that we took very, very intentionally because we wanted to get it out the door and get it in people’s hands and they’ve taken a look at it. They said wow this is really awesome. I love what it does.
[26:04] And I’ve gotten a few requests but we really haven’t gone down the road of implementing any of them. really what we’ve been focusing on is some clean up, making sure that the code isn’t going to crash or handles edge cases a little bit better because there are certainly places where it doesn’t handle everything as well as it could. And then the reporting is going to be a focus moving forward but we really haven’t put any effort into that either. So there’s a lot of things that could be done but I’m really not working on them. I do have some contractors who are working on some stuff but I’m just not – that’s not my focus right now my focus is kind of revamping some of the marketing on the website, talking to customers directly and doing whatever I can to kind of extricate myself from the consulting so I have more time to spend on that stuff.
[26:48] Rob: Right. Okay. Now in looking back over the past year where you perhaps haven’t had as much focus on that as maybe you should have, why did you decide to continue building and not getting – making phone calls to customers and that kind of stuff.
[27:04] Mike: Well it’s hard to make phone calls when you’re pegged at 60 hours a week during the work week. So this is a B to B product and it’s hard to get in touch with those people. The demo alone for the enterprise customer took me probably close to 8 weeks to schedule a time to have that demo. It’s just not easy to do partly because of my schedule, partly because of their schedule.
[27:21] Rob: Right. And this is one of the reasons we talked about – maybe it was probably two years ago about the enterprise marketing you had said I don’t really want to go into it because I don’t have time to do all the sales calls and to do stuff during the day and that kind of stuff and so it surely makes sense that at this point if you’re kind of your life situation or your work situation’s changed then perhaps that market’s more open.
[27:43] Mike: Yeah I think it’s a lot more viable now than it was even 4 or 5 months ago. Part of that is because of the desktop edition and the directions that it’s turned.
[27:51] Rob: Well let’s jump to the fourth and kind of final point that I pulled out of the comments and it was about not following your own advice. So here’s one quote from the comments. The commenter said in one episode, Mike even said not to take his own advice with respect to his work with AuditShark. And the next quote is what do you say to people who say you are not following your own advice with regards to timeline, remember, we always say 4-6 months and you’re now 4 years in, having a market before you build which thought you did but maybe you didn’t do as thorough of a job as you should have in identifying that market and talking to them. And then currently although today isn’t applicable but maybe six months ago when this comment was posted, not having a target and continuing to build an app and not putting the brakes on development.
[28:37] Mike: I think a lot of the reason we give people general advice about a timeline is there’s a few different things that factor in. One is the motivation to actually continue and two is how long is it going to take you to figure out whether or not somebody’s actually going to pay you for something. And again this is general advice versus specific situation advice. So the advice I think that we tend to give and the advice I tend to give is general advice. But when you start talking to somebody about a very specific situation, there’s always exceptions and I’ve been accused in the past of treating AuditShark like a special snowflake and in some ways I would say that it is and the specific way that I would say that it is do I know what people really want? Are there specific features that I’m aware of that they need? And there really are.
[29:21] I mean I know what the used cases are. Do I know that people will pay for it? Yes I do know that they’ll pay for it. Do I have everything set in stone as to exactly how I’m going to get in front of five more enterprises, no I don’t. That’s what I would say a shortfall but I don’t think that’s the end of the world either especially if I’m able to kind of cut back on my consulting and right now I’m in the process of talking to enterprises and able to successfully do that and move the process forward while I am still consulting as much as I am. I get the sentiment. I do understand it but I think that in parts of this, some that advice just simply doesn’t apply. I think our general advice is also not to go after enterprise markets.
[29:57] Rob: That’s right. And that’s the difference. When I bought HitTail and you were working no AuditShark, we kind of started averaging from that first step of the stair step where I say get something that’s making 1-1,000 grand a month, WordPress plug-in, a Photoshop add on, an eBook, whatever, some small niche app. But at certain point when you’re going after a mid 6 or a 7 figure business stuff does start to diverge. You have to take different steps to do it. So I’m not necessarily agreeing with you in saying that you should go beyond 4 to 6 months because I know that the fact that you’ve spent as much time as you have, it’s taken its toll right? I mean it’s taken its toll on your motivation. I imagine you’ve questioned whether you should keep going but frankly have been impressed with your willingness to continue because most people I know if they get a couple years into something there, just not ever going to make it to launch and frankly you did. You have a completed product at this point.
[30:53] Mike: That could also be called stubbornness or stupidity. You can always look at those things in retrospect and things are either genius or just stupid and it really depends on what the outcome is you know?
[31:02] Rob: Yeah so it seems like the summary I mean the three points here were you know, not following your own advice on timeline, having a market before building and then having a target market. Timeline yeah, it seems like you’ve kind of agree with that. The shorter the better, should’ve been 4-6 months, probably should’ve chewed off a smaller problem but you’re here now, what can you do looking back? Having a market before building you thought you did, I think that’s a mistake you’ve admitted to in the past on these episodes right? That you wish you’ve done more due diligence with the market you wish you’d nail it down better before you started building.
[31:13] Mike: Yeah I think with that though, there’s two different pieces of that because our general advice is make sure that you have a market for the product before you start building it and I think it’s more to make sure that there’s a problem that is worth solving to people. So I built a piece of compliant software that will go out to machines and pull back information and allow you to validate settings. And that is a problem that definitely needs to be solved. But there’s lot of different ways to solve that problem and a lot of different people to solve that problem for. And I solve the problem but I didn’t necessarily nail the initial market that I was going to go after. Problem definitely needs to be solved. Did I get the right people the first shot? No, I don’t think that I did.
[32:07] Rob: You had problem solution fit. You didn’t product market fit because you didn’t know what market you should go after. And I think to be honest, myself and the listeners doubted that you had problem solution fit and some may sill doubt that you have problem solution fit. I think you had confidence the whole time but maybe haven’t quite been able to convince us that it has and I think the fact that an enterprise has now essentially submitted you in for budget or whatever step you’re at at this point that they’re seriously considering moving forward and you gave them a quote and stuff, I think that led some creating to the fact that you’ve at least solved their problem and with another consulting firm looking at it I mean there’s becoming more evidence of that.
[32:46] Mike: The underlying issue there is that there’s a big difference between developer and cis admins so like I’m very much across the line there. I do a lot of systems administration with my consulting, managing large networks of machines with enterprise software packages so I get how that stuff works. I get how active directory works and how you would use a lot of the different enterprise tools just to manage the machines in an enterprise. So I don’t think that’s common knowledge. I think that most people who do know that who are developers are very much minority. There’s not a lot of people who are developers who also kind of cross over into that systems admin area.
[33:25] So I think that’s probably where a lot of this confusion comes from because as developer you’d have to ask why do I need to know what a registry key is set to and it’s like well you know, because that could indicate whether your firewall is on or off and if you have 10,000 machines, you need to check, how are you going to do that? Oh let me just write some code for it. And my response is exactly. That’s how you do that. But what if you need to check a different registry key or what if you need to check services or what if you need to check file auditing settings, or all these other things? So my code base is essentially an engine that will allow you to do all of those things in a much more simplified mechanism that will remotely go out to all those machines and pull back that information.
[34:07] Rob: You known one other thing we haven’t brought up at all Mike is your health issue that you had for like 2 or 3 years that again you don’t want to blame for lack of progress or lack of motivation on a health issue but certainly played a part in the fact that things have taken you a while to get here.
[34:23] Mike: Yeah. I would say that the health issue has probably been going on for more than two years. There’s probably close to four which I indirectly in some ways blame on the level of consulting that I’ve done over the past several years because it has ramped up a lot and it has gone into travel. So as I started working on AuditShark, I could almost probably guess to say yeah my health issue is kind of arose partially as a result of me doing consulting and AuditShark at the same time. I’m sure that it factors into it, by how much? I don’t know. But yeah I mean the health issue is definitely a big thing. I brought it up at MicroConf and I actually had probably 2-3 dozen people come up to me after my talk and explicitly thank me for talking about the issues and bringing them to people and just kind of bringing them to light.
[35:10] So that it’s not as if everyone’s kind of going through those things alone and I showed graphs and I think that was probably one of the more powerful parts of my talk was showing when I got a diagnosis exactly aligned with when some of my website traffic and Twitter following, all of those things, they started kind of taking off all at the same time. And then a few months later I think it was December that I kind of officially launched AuditShark, that’s not too far after August. Going back to that, I think that I could probably blame some of the lack of progress on AuditShark on some of those health issues but I don’t really want to use it as escape either. And I definitely didn’t want to bring it up last August-September timeframe because I didn’t really know what it meant at that time either. In retrospect I can see there are some pretty clear uptakes in a lot of different things since that time. So I think a lot of things have changed over their past 6-9 months.
[36:05] Rob: I would agree I mean especially in the last six months I think that’s where in seeing your graphs for your Twitter followers and your visitors to the website and just the level – it was right after that you’re like hey I have these landing pages. Hey I have some ads running. Hey I have retargeting. Hey I have – you know what I mean? You were just getting yourself in gear on the marketing side in a way that I had not seen in the previous 3.5 years on AuditShark and that’s when you started making this progress. Right? I don’t think it’s by mistake that suddenly you’re talking to a Fortune 500 company in January. I think that all plays into it. Right? You get your mojo back and then you really start hitting things hard and something comes out of that.
[36:40] I think overall in summary we’ve talked about slow progress. We’ve talked about whether or not you had or have a target market talk about focusing too much no features right? Versus development. And on following or not following your own advice but I think the bottom-line is that you’ve made mistakes going through this. We’ve talked about that before. And you’re going to get more mistakes. We’re all going to make more mistakes moving forward before you get your product to where you want it to be for sure. But it seems that at this point you have a much better grip on these issues that I think you’ve had in the past 3-4 years. There’s more confidence. You certainly have more confidence in what you’re doing. I can just tell when we’ve had conversations about it.
[37:20] You haven’t taken the shortest path. I think that’s the one thing that I would say is like it’s taken you four years to get here. I think you could’ve done it in a year. I mean it is a bigger project. All these things compiled, there were mistakes. There’s health issues, there’s 60 hour workweeks. There’s all that stuff and that kind of all adds up to just leading to a very long path which is often hard to travel.
[37:44] Mike: I think everybody wishes that whatever they’ve done that was difficult took them a lot less time to do it but at the end of the day I can’t say I’m disappointed with where things are at right now because I think that things are in a really good spot right now. It’s not to say that I don’t have a lot of work cut out for me going forward. At the same time I think I’m well positioned to be able to take the work and effort that we’ve put in so far and kind of take that to the next level.
[38:06] But one thing I did talk to a couple people about was how I talk about things on the podcast because I guess it’s not very clear to most people that when I say I’ve done this or I’ve done that, I generally mean we. It’s something that I need to work on. It was the team behind me that basically hired out of the consulting revenue. There’s a lot of things that they’ve done and pulled together at my direction that I probably just didn’t have time to do on my own. So that’s something that I kind of need to correct moving forward I think.
[38:35] Rob: Because it’s implying that you are still writing code?
[38:37] Mike: Yes.
[38:38] Rob: You’ve actually been less focused on the technical stuff over the past 6-12 months than it might appear if you were listening to the podcast because a lot of times you said I did this whereas it was your developer.
[38:48] Mike: Right. A lot of times I’ll scope something out and I’ll say okay here are the screens. This is what it’s got to look like. This is how it’s going to function. And then they’ll go do it. There will be some back and forth between them and it’s not like I’m not involved at all, it’s just that I’m usually double checking work doing testing things like that. I’m still technically working on it but I’m not necessarily writing the code for it. I do still feel like I’m involved in it.
[39:08] Rob: So if you have a question or a thought or a comment on what we’ve talked about in this episode, you can call our voicemail number at 1-888-801-9690 or we’re always available via email at questions@startupsfortherestofus.com. 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. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Thanks for listening. We’ll see you next time.
Episode 181 | Our Takeaways from MicroConf 2014
Show Notes
Transcript
[00:00] Rob: In this week’s episode of Startups for the Rest of Us, Mike and I discuss our takeaways from MicroConf 2014. This is Startups for the Rest of Us: Episode 181.
[00:08] Music
[00:15] 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.
[00:23] Mike: And I’m Mike.
[00:24] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So we’re still here in the Tropicana in Las Vegas. We just wrapped up a 2 ½ hardcore days of speakers. There’s 9 speakers, 11 attendee talks, 210 attendees this year. I had a great time. Pretty tired but I think it was worth it.
[00:43] Mike: It’s totally worth it. I mean every year I came back and thinking to myself you know, a little bit scared just kind of like oh, what are we going to do next year? We’re going to be able to deliver because expectations have been so high and everyone comes up and says oh I love this conference, it’s great. The next year comes along and it’s just everyone, you get the exact same feedback. It’s awesome to be able to kind of continuously do that year after year but of course it continues to set the bar at just a really high level.
[01:06] Rob: Right. Yeah this is definitely the most exhausting but probably the most fun 72 hours of my year and I guess now we have two of them because Europe is in October. Actually I guess we can announce that now. We just got confirmation from the hotel that MicroConf is going to be in Prague October 27th and 28th, that’s a Monday and Tuesday. If you came to this MicroConf and if you didn’t get enough, you’re glutting for punishment, head over to microconfeurope.com and we obviously are building that early bird mailing list.
[01:34] Mike: Talked to a couple people last night and I told them what it was and several of them are like oh, I can’t wait to go to that one or I’m definitely going to look into that because some of them are based over here and we had a bunch of people who had gone to MicroConf Prague and they actually didn’t come to the one in Vegas in previous years because they were wondering like is it really worth the flight over there? Then they went to Prague and said oh, I’m totally going to the one in Vegas and then got to the same thing over here where I’ve kind of explained to them we’re trying to replicate the exact same experience that they get here so people don’t say this MicroConf over here is better than that one and we don’t end up with disparities between them.
[02:09] Rob: What my favorite part this year I think when we stood up and asked for show of hands and said who here hasn’t – to at least one previous MicroConf and it was somewhere in the 60% – 70% range, a very high return rate. I think it speaks to how tightly knit the community feels here because I feel like a lot of people know each other. I know there are a lot of first timers. We could see it on the – we had a little rip on the badge but the people who come back, it just builds that momentum and it makes you feel like you’re coming back to hang out with a bunch of friends and talk about really interesting stuff that you can’t talk about the rest of the year.
[02:43] Mike: Yeah I think that’s a really, really good point because one of the things that people have told me kind of throughout the conferences that there’s nobody who lives near them that’s doing the same types of things. So they in many ways feel very isolated because they kind of feel like they’re working in a vacuum. There’s nobody around that they can really talk to and MicroConf gives them that excuse to not only come to Vegas and hang out with a bunch of people but to learn lots of things that are really going to help them with their business throughout the year.
[03:10] Rob: Yeah I mean I think we’ve talked about it recently though like doubling down on community is something that we’re diving into and with Micropreneur academy and now Founder Café and two MicroConfs in a year, that’s where I think so much of the value is, and masterminds. We’ve dove into that as well so it makes natural sense that having a conference like this and getting everybody together in the same place is probably more valuable like Ted said the first year and like I say every year from the stage is probably more valuable than the talks is to just get together and share experiences and really get other people’s insights and know what you’re up to.
[03:45] Mike: I think that was probably one of my favorite parts of the conference was just the fact that we were able to bring 210 people this year and it didn’t feel that large. I mean there were a lot of people who said oh, how many people you have? They hear 210 and they’re like whoa, that’s a lot more than I thought. It doesn’t feel that big. And I think part of that was just the logistics of the room because the room that we had this year was wider than it has been in years past. So I think that worked out really well. But the quality level of the attendees I mean I can probably have talked to anybody there and I didn’t get a chance to talk to everyone but I talked to a lot of people and it was just everyone had something to share that you could learn from and that’s really a cool experience. It doesn’t matter who you talk to. You can learn something from them.
[04:26] Rob: Yeah. I had 2 or 3 people come up and say oh, the conference is smaller than it was last year. For whatever reason whether it was just the room size or just that they felt they knew more people but last year we did about 170 something and this year right about 210. In terms of things that could go better, things that we would improve, I think that the big thing that we ran into this year for the first time ever surprisingly enough was the Wi-Fi was really erratic. But we pay several thousand dollars, 3 or 4 grand every year to get custom Wi-Fi dropped in and it’s supposed to b able to support hundreds and hundreds of deceives and obviously people were getting kicked off. It worked a good chunk of the time but people were getting booted. That was pretty disappointing when we called the Cox out several times to take a look at it but it was erratic. That was probably kind of my low point.
[05:10] Mike: Yeah. I think that was probably the low point of the conference for me as well is just the Wi-Fi kept going up and down and it was really nice to have a conference coordinator who could really just kind of actively go after that and say hey you guys really need to fix this and call them and have them come back a couple times because otherwise we would have to do it and that kind of takes our focus away from the conference and that can be tough for me because you really want to be able to guide the conversations and talk with people and interact with them and make sure that the conference is going well and you don’t have to deal with the infrastructure problems. It was great to have him be able to actively deal with that stuff while we’re managing other things.
[05:43] Rob: Yeah that’s been one of the real bonuses of being able to grow the conference a bit is that we’re able to afford a coordinator and he’s taken a huge amount of the work away from us so that was super helpful. Thanks to Zander for doing that. So let’s talk about some of the talks that impacted us. We obviously can’t talk about all of them. They were including attendee talks which are shorter takes about 12 minutes a piece, there were a total of 20 talks. There are several here that I wanted to bring up with the first one is your talk. You went on Monday morning. You talked about – to be honest, you started talking and you were talking about your Twitter strategy about building your Twitter following that you had like a long tail SEO strategy and it felt as you were going through said you have like pieces, five acts.
[06:25] And you got three acts in and I was like where is Mike going with this? My inner monologue was like I don’t know what he’s doing. And then you stepped through and in the fifth act you kind of did the big reveal. This is why all these graphs started growing up at this time because basically that health problem that we’d actually talked about this in what 20 episodes ago and you’re like that health problem was basically fixed at this point or we figured it out and now we started taking some medication. That like brought it all together and I got that same feedback form a number of people who were like at first I was wondering where Mike was going with it and then at the end it had a real impact on people and a lot of people were asking questions about like you know, how that felt.
[07:00] Because you mentioned testosterone, it’s a testosterone level that was messed up. I could already tell people were like asking how did you get tested? Did you go to a doctor? Did you hurt yourself? There’s obviously other folks in the audience who are struggling with similar types of stuff. So I think that was a big deal. How did you feel about it?
[07:17] Mike: I thought the talk itself went really well. I mean in years passed there have been certain parts of talks that I’ve given where I feel I’ll say a little disjointed or forgetful about these sorts of things that I was talking about and this one was definitely longer than previous talks that I’ve done but it all felt very, very smooth to me. I’ve never felt at any point during the talk and this one just it seemed like it just flowed for me. I got through it and I had probably about two dozen people come up to me afterwards and talk to me and ask me various questions about it because at the end of the day it wasn’t necessarily about my particular health problem. The point that I wanted to raise is that if you’re not taking care of yourself, it’s very difficult to take care of other people including your customers, your friends, your family and obviously family is part of why we do this and we want to be able to live a lifestyle that is beneficial to us and be able to spend that time with them. And if you’re not doing things that you love then kind of what’s the point?
[08:11] But if you’re not taking care of yourself you can’t put yourself in that position. And if you get into a situation where some of these things are affecting you let’s say for example you have some sort of hormone imbalance and it’s affecting your work, well what do you do to get out of that? Well you work more because you think that working more hours is going to help. And the fact is it actually doesn’t. It hurts you because then you’re working more hours. You’re more tried. Your mental energy drops and it becomes the snowball effect where you’re actually going in the wrong direction. You’re working more to catch up but it’s actually hurting you more. And you don’t realize it.
[08:46] Somebody pointed out to me, it’s almost like the example of putting a frog in boiling water and it’s so hot the frog jumps out. But if you’re sitting in that water and it slowly warms up over time, you can kill the frog and it will just die because it doesn’t realize that it’s being boiled to death and that’s exactly the same position that I kind of ended up in. It was just things were going wrong and it was slow enough that I didn’t realize it like if you break your leg, you know something that’s and that’s seriously wrong but if you have some sort of hormone imbalance that takes place over time and whether that’s trust or your work is impacting you, you’re not getting enough sleep at night, you’re not exercising they take a toll on you over time and it’s slow enough you don’t realize how bad that problem is until something breaks or something kind of snaps you out of it. And that was really the point that I wanted to make to people and I heard a lot of people who were just having random conversations, talked about health issues. It was really, really awesome to see.
[09:40] Rob: Yeah. And what was cool is you had a bunch of graphs and you had a graph of the number of Twitter followers you had a graph about of the number of I think it was unique visits to you website based on organic traffic. And they basically were bumping along the bottom and then on a certain day, boom, they all spiked up and you had like 2 or 3 of those and you put a big red arrow and the dates were all basically within a month of each other and that was the month that you figured this whole thing out. I don’t think that’s a coincidence. I mean that’s what you’re pointing out right? It’s like your motivation before that was very low and you just didn’t want to work on things and then when you turn it around, it’s a stark contrast. This is self care. It’s like caring for yourself and understanding when – you’re lows and how long those lows are happening and why they’re happening and if it’s going on longer than a month or two then there’s probably something to be fixed.
[10:27] The next talk, Sherri Walling’s talk, my wife’s talk piggy backed really well on that and she spent a full 40 minutes diving into the various causes of it and how to have time in and then how to have a time out from work and time in includes things like retreats, mastermind groups, it’s diving into your work but organizing it and getting support, organizing the thoughts in your head around it and then the time out is things that are away from work and those are – she had a bunch of them. It was like service, travel, vacation time with family, time away from screens, that was a big one right? Like screen free Sundays, yeah there was a lot in that. I actually want to go back and watch the video again and kind of take some notes. I’m looking forward to puling some more action items out of her talk.
[11:08] Mike: I think what was really cool about her talk was that one of the things she did was extremely simple. It was just she did this very simple breathing exercise and I took a glance around in the middle of it just to kind of see like who is participating in it and everybody was. It was so simple and it was so short due. It didn’t take any time or effort to do and it worked. I mean people felt better. I felt better afterwards and it was just so simple and it’s something that you could do at your desk. There’s just you’re breathe in and out a couple of times very regimented pace and just really concentrate on your breathing and it’s just a very simple hack, it’s a body hack is really what it comes down to and it just works. And I think that’s not something that people really think about while they’re sitting there and saying oh I got to rustle with this problem and I’m all stressed out and just take a step back and breathe a little bit and things get better
[11:54] Rob: Yeah and I saw a tweet from a MicroConf attendee returning home who said I used the Zen founders deep breathing on the way home because I’m a nervous flyer and it got me through the flight.
[12:04] Mike: That’s awesome.
[12:05] Rob: Yeah. I think what might be the most memorable talk of this year was that Jesse Mecham’s talk. Jessie is the founder of youneedabudget.com YNAB and it’s downloadable desktop software, it’s a budgeting software. So it may be similar to like the quick end or something. He nailed it. He had the mix of humor, interesting story. He’s at 27 employees now and I think the title of the talk included the number 4 million dollars in revenue I don’t know if that’s this year or what year it was but obviously a very large company that’s selling $60 onetime fee software to consumers.
[12:43] But what was cool was he went through his first five years. I think he’s been in business nine years and he just went from day one and told all the stories and the foibles and how he had no idea what he was doing, there was no hacker news or quora, he didn’t listen to any gurus, no methodology, he just tumbled his way though and had some really actionable takeaways for people who are hesitating or who feel like they need to read one more book to do it because his whole point was to start doing stuff. And as simple as that sounds, he just had story after story example after example of him doing stuff, it not working but as he iterated, it grew and he showed the doubled revenue from 200 to 400 to 800 by doing little tips and tricks so his was definitely one of my favorites.
[13:24] Mike: It was actually really interesting to see that his first product was not a piece of software it was an excel spreadsheet that he was selling, that’s kind of a proof of concept but it was just really cool to see like he made all these mistakes and did all these things you would look that and say oh that will never work and it’s like it did work because people actually had that problem and were willing to pay for it. And as you said, over time, he’s iterated and done better and almost up to 4 million in revenue na 27 employees and you don’t get that overnight. It did take nine years to get there but he’s there right now and it’s awesome to see that path that he’s gone through and you’d look at and say oh, yeah, sure, he’s done this overnight and it’s like no there’s this long process behind it and it just takes time and effort and just continuous iteration.
[14:08] Rob: So I closed up the first day talking about Drip, the title was something like how I launched a Saas app to $7,000 in recurring revenue in month 1 and it was the story of Drip of how I validated the idea and then the slow launch that we did and user onboard and that kind of stuff and it felt good about the talk. I think after last year’s talk which is how I grew HitTail I don’t know if this was as good a story. Right? Because the story’s not done yet but I did get positive feedback on the on boarding part specifically because I really walked through how we onboard people with Drip and it’s a high performing on boarding process and we spent a lot of time on it so that I hope is a big takeaway that people took from the talk.
[14:47] Mike: I think one takeaway that maybe you kind of mentally glossed over because to you, it’s not necessarily relevant but I think that a lot of other people see it as relevant is that in MicroConf the kind of experiences that you see and hear is not just in the success stories but it’s also the failures and the things that you get into something and you make a mistake and then you go back and say okay well what can I do differently? And the one slide that really sticks out in my mind is you had a slide where there was this road and there’s just this giant boulder in the middle of the road. And you got to a point where it’s just you’re trying to move forward and you couldn’t. There’s this giant roadblock and you had to backup and say okay well now what? How do I get through this roadblock?
[15:23] And the answer is you don’t in some cases. The answer is go in a different direction because that’s just to possible. You can’t go in that direction because you’re not going to be able to. It’s going to take too long. It takes too much effort and resources that you simply don’t have right now. That definitely impacted a lot of people because they look at that and they say hey, even Rob Walling makes mistakes. some people were kind of talking about this quote which was don’t feel bad about what you’re doing because what you’re doing is you’re comparing your daily life against other people’s highlight reels. And that’s so true and it’s really nice to see people sharing not just the successes but also the failures and the mistakes made along the way so that other people can learn from them and realize that everyone makes mistakes, everyone has these times where they just can’t proceed forward and you have to take a step back and you have to reevaluate and sometimes reevaluating means going in a different direction.
[16:15] Rob: Yeah. That’s a good point actually. Several people came up and mentioned that. I was kind of deliberate about it in the talk but I realized there were even more mistakes I could’ve called out and I think that would’ve been beneficial but I think I had 2 or 3 foibles that I did during that launch and during building Drip that I called out. The particular mistakes aren’t important but you’re right. It was just so people could see oh, he took missteps and how did you handle them because we’re all going to take missteps and it would be nice to know how to do it.
[16:39] The other thing that I called out that folks mentioned was I talked about a couple points where I was really disappointed. I was really anxious. I was depressed. I just felt like crap because something didn’t go right. We spent a month doing something and I felt like we’re not moving forward. And to stand up on the stage and say this part really sucked, I saw tweets about that people saying wow now I don’t feel bad when that happens on my product because I know that basically we all go through this.
[17:05] Mike: What did you think of Annie’s talk?
[17:07] Rob: So Annie Cushing is a Google analytics genius I’ll say. She basically dropped so much knowledge in the first 120 seconds of her talk that it made me embarrassed to think that I’ve ever logged into a Google analytics account. She knows Google analytics better than anyone I’ve ever seen. So if you haven’t heard of her, you can go to annielytics.com and that’s just what she does. That all she does 40-50 hours a week is consult and build custom reports and she knows it in and out better. She knows every little nook and cranny and all the weird bugs and errors that I would look at and say oh that’s an anomaly but she’ll just call like there’s four errors in this report and here’s how you get around them and I love it.
[17:46] I mean I think she had 9 or 10 questions that every entrepreneur should be asking their analytics. I mean it wasn’t the obvious things. Right? It wasn’t like oh how many visits do I get? It was like digging in and looking at like which competitors might be spying on you or which of your products is the most successful? I mean she was pulling data that I didn’t even know where data would be.
[18:07] Mike: And then there were other things she talked about like last click attribution which if you’re not familiar with what that is, it is how is it that somebody clicks on something and then it buys your products. Where is the credit for that click going to? And it’s not necessarily actually where they last clicked because maybe they came in through social network or a newsletter or something along those lines and maybe it went to your website and then there was a direct link back to your website and then they bought something, it’s like where does that credit go? And really it gets distributed but it could be very difficult to find out some of that information and she shed a lot of light on to that process and how you should really be thinking about it. And I thought that was really cool. It was nice to see her dig into Google analytics because I think so many people use it and it’s just so hard to understand if you’re not an expert in it.
[18:54] It was nice for her to share that kind of knowledge with everybody and there was a huge amount of response from that and I remember talking to somebody who was sitting in the back of the room. They commented to me oh yeah in the middle of her talk there were probably 30 or 40 people who were rewriting some of their Google analytics campaigns and custom reports just based on the stuff that she was saying. So I don’t know if Google tracks that form a single IP but I’m wondering if it got flagged for something.
[19:16] Rob: Yeah. I think she probably combined a 4 or 8 hour workshop into a 40 minute talk. I mean that’s basically what it felt like. I think another notable one was Brandon Dunn and his talk was six tricks that helped me triple my Saas growth rate. He talked about reducing churn through some targeted emails and even personal emails. He’ll turn off his auto responder sequence inside his trials then he’ll just send personal one on one emails from him to people who are using it. And he has the whole required text field when you cancel because he really wants to find out why you canceled. And there were four other tricks and obviously it’s helped him grow plan scope. Almost everyone in the audience can probably take something away from his talk.
[19:57] Mike: The really interesting part about his talk was the six different things that he had were actually at six different parts of the interactions with customers. So he had one trick that he did upfront and another trick in the middle and basically ran the gambit through all these different scenarios so it wasn’t like there was one part of this funnel where he did 2 or 3 different things and made things better. It was just six different points throughout the sales process. He did six different things and overall it grew his on boarding rate and his conversation rate for something like 30% 33% I think he said. It was really cool to see the multiplicative effect of implementing all of those different things.
[20:34] Rob: And then sprinkled throughout the days we had sessions of attendee talks. We had a really good showing. We had 42 attendee talks submitted this year and we only had time to do 11 of them. All of them did quite well. I mean I heard people getting takeaways from pretty much every talk that was given very high bars set every year. This year with MicroConf we actually pulled three speakers from attendee talks last year, Nathan Barry, Bandon Dunn and Sherri waling and moved them into kind of the main stage speaker so I can see that certainly being an option next year as well.
[21:08] One talk I wanted to call out is Dave Rodenbaugh’s talk which was titled how to buy your way to fame and fortune as a bootstrapper. And he basically talked about acquiring WordPress plug-ins which is something that not a lot of folks have done, not a lot of folks have acquired software because we all want to build it but it was a very well told story and obviously quite a big success for him. I think that was a good one. And Dave’s just been – he’s been all for MicroConf and we’ve encouraged him to do attendee talks in the past. It was good to see him get up and share his knowledge to the crowd.
[21:35] Mike: Yeah, I really liked how he tied that together and showed that not only was he acquiring things but he acquired them and then showed kind of afterwards all the work and effort he did and put into it to make those products better and 90% of it was really just the marketing side of stuff. He acquired a product that didn’t have good marketing and he turned that around and was able to essentially tell a great story to the customer such that they were able to buy a slightly tweaked and slightly better product than it had previously done. But it already had a solid code base. It wasn’t that the product was bad. It was that the marketing was bad. And he took that and he ran with it and he built decent businesses out of these WordPress plug-in.
[22:15] Rob: And of the 11 attendee talks, 2 of them were about WordPress plug-in. John Turner did his talk on how I built the six figure WordPress plug-in business while working a day job and John actually still has his day job. He said it’s low stress and really doesn’t have any desire to leave but he has the coming soon plug-in and I think there’s one maintenance mode plug-in as well. He just kind of walked through the whole story of kind of discovering the academy basically. It was cool to hear his story because I’ve heard it through tweets and things here and there but to actually hear it full on about how reading through the stuff in the Micropreneur academy changed his thinking to go niche and that once he did that, things really picked up for him. He’s at 800,000 downloads from wordpress.org. He has a couple of plug-ins and he had a theme online for a while that I think he took off but I definitely enjoyed his story.
[23:04] Mike: Yeah. I think the number of 800,000 downloads just kind of blew my mind. it’s just like wow you know, that’s a huge footprint and it gives you a huge number of people to sell your products to and he also talked a little bit about some of the pitfalls of dealing with that and how he was able to grow his business through interacting with the WordPress ecosystem.
[23:25] Rob: Another attendee talk that I got a lot of comments on was by Harry Hollander of Moraware software and it was called sales calls don’t need to be painful. What I liked about this is Harry’s a developer. He’s like us. He doesn’t want to do sales calls and he specifically called that out and he said their sales cycle used to be 6-12 months and it would be 30 hours working with a customer to get them committed to using their software. They build software for countertop installers. And through just honing their questions and kind of figuring out a better process, they have moved that down to I think it was three hours that they now spend with customers and it’s like a couple of weeks.
[24:05] So it’s just an amazing story of kind of iterating – they didn’t split test in the traditional sense but they really just tried a bunch of different things and they basically boil it down to asking four questions of someone you know they’re on a sales call with. I don’t remember the four questions. Do you?
[24:21] Mike: There were four questions that the very first question was what are you doing today? And the idea behind that question is they want to find out in Harry’s business they have software that helps people schedule kitchen countertop instillations. So their first question is how do you schedule kitchen counter top instillations today and if their answer is we don’t, that’s kind of the end of the sales call. You don’t need to go any further because their software and their products just can’t help them. So that’s a very good qualifying question.
[24:47] And then their follow-up questions, the second question is what works about that process and the third question is what doesn’t work about that? The fourth question is what will happen long-term if you don’t change the way you’re doing things? Harry actually mentioned that’s a very good way for the customer to talk and get it out that they’re essentially selling themselves on this new product that they’re looking at because they know that they need to get off of their current system and this other product can help them, the product that Moraware Software provides but the customer is essentially talking themselves into buying something to solve their pain point. How much is it going to cost them if they don’t switch and that’s really the bottom line is they want the customer to talk. And he said one of the really hard parts about this is to ask the question and then shut up. He said that’s really, really hard to do.
[25:34] Rob: He said he’s done almost 2,000 sales calls and that he pretty much knows there’s only two different answers to the first question as an example. So he knows what they’re going to say before they say it but he said that’s not the point. You still have to ask it and you have to be quiet so that they can basically talk themselves into realizing how much value they’re going to get out of your software.
[25:55] Last couple attendee talks that I liked, one was from Ryan Delk. He’s head of growth at Gumroad and Gumroad is a service that helps folks sell products like typically one time downloadable so a lot of info products, music, I think they have videos and you know, movies and such. But a lot of info marketers are starting to use them. And they have done, seen thousands of launches so they have all kinds of data and he was able to break out some really interesting things about pricing. He was saying that you should have tiered pricing and that it should be around 1X 2.2X and 5X and those are the best numbers they’ve seen.
[26:34] So obviously if you’re 1X price is just for the eBook and it’s $19 then 2.2 times that is around $40-45 and that should be your next tier. And then you go up about another 2.5 times that. so you’d go up into the $90 or $99 range and you obviously have to add more value to those higher ends but he’s saying what when people do that, that they get like another – I think it’s an additional 62% of revenue and there’s just a substantial amount that comes from that middle and that top tier and that’s just one of the things. I mean they were like 6 or 7 points he dropped like that in the span of 12 minutes.
[27:06] Mike: I think the number he showed were probably the best part of it because it was actual data about not just what you should do but why you should do it and what the average results are from doing that. That was probably the most powerful part about it was as you said they’ve got access to so much data and statistics they can run those numbers and correlate them and provide them back to people and say these are the things that are working and this is why you should do these things and this is going to be the results of those things.
[27:33] Rob: And I think rounding us out for this episode is the attendee talk by Samuel Hulick. It was called UX basics that convert users into customers and Samuel was actually my marketing intern that I had hired last year and he’s then started useronboard.com where he does a lot of on boarding critiques and he’s written a book. And actually that was cool. He basically is giving the book away to everybody who attended MicroConf. We had a couple nice giveaways. I give away my startup VA course as well. But Samuel’s talk I thought was good. I love his Mario analogy where he says your customer’s Mario and your customer doesn’t want the flower that they’re going to capture. They want the result which is turning into the large Mario that spits fireballs and he has that analogy in his book as well. It definitely hit home with me because it makes me realize of course they don’t want the product. They want what the product turns them into.
[28:26] Mike: Yeah I thought that was really good analogy partially because it demonstrated like for example if you’re the small Mario, there are certain attributes that the person has. There may be a little bit less apps to do things or take risks but when they turn into fireball Mario it’s just like oh, I’ll take it. I don’t really care. It’s not going to do anything to me. It’s not going to wreck my world because I got this power behind me at this point and I’m not going to die if I go down the wrong path. And it’s very interesting to see that analogy just because I think that most people don’t necessarily realize that as you said, it’s not about the product. It’s kind of what the product turns you into.
[29:03] Rob: So we did video all the talks including the attendee talks and as soon as we have those, they will be available in the Micropreneur academy. It will probably be a month or two and then I’d imagine we’ll make most of them available in about 10 months as we’re promoting the next one, we’ll be releasing those. We know we never released the attendee talks form last year to the public so we should probably do that soon.
[29:25] I really wanted to take the sponsors, the folks who have essentially allowed MicroConf to be possible. Kiss Metrics sponsored this year as well as Software Promotions and Balsamic, Bid Sketch and Cumbia returning sponsors, Constant Contact sponsored several times and User Hue which is Lance Jones of Copy Hackers was really cool and User Hue actually gave us some oculus riff headsets to give away, three of them and that was a big hit. Constant contact also gave an iPad air so that was as a way to make the event memorable. It’s cool.
[29:55] Mike: Also software promotions, I was working on a video course for SEO. I think it’s called SEO demystified that they’re giving a pretty sizeable discount to all of MicroConf attendees and it’s Dave Collins who’s behind that and he does some really, really great work so I would definitely take a look at that if you guys have an opportunity. It’s coming out soon I think. He said that the target date was May 15th but whenever it comes out, he’s definitely going to make that discount available to all the MicroConf people.
[30:19] Rob: So I think that kind of wraps up our take always from MicroConf Vegas 2014. If you’re interested in perhaps hearing about MicroConf 2015 which should be hopefully next April, head over to microconf.com get your name on the mailing list. We sold out in around 20 minutes this year so I don’t know what next year is going to look like. Every year it seems to get it takes about 1/20th of the time so hopefully it won’t sell out in a minute next year. But also as I said earlier, we’re doing MicroConf Europe and microconfeurope.com gets you there. We are putting together that mailing list as well.
[30:53] Mike: If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 180 | The Benefits & Drawbacks of SaaS (for Users and Founders)
Show Notes
Transcript
[00:00] Mike: In this week’s episode of Startups for the Rest of Us, Rob and I are going to be talking about the benefits of SaaS. This is Startups for the Rest of Us: Episode 180.
[00:07] Music
[00:15] 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.
[00:23] Rob: And I’m Rob.
[00:24] 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?
[00:28] Rob: Well, this one will come out when we are in Vegas at MicroConf. So I like you haven’t really gotten anything done in the past week because we’re just wrapping up a bunch of final details so that’s really my only update. For folks who are MicroConf, looking forward to seeing you.
[00:42] Mike: Yeah I’m kind of in the same boat as you are, just wrapping up stuff at MicroConf and I do have to say I am really, really looking forward to my camping trip/ vacation after MicroConf is over and not necessarily because of all the work and stuff going into MicroConf there’s lots of other stuff going on too but I really just need a vacation.
[00:58] Rob: Yeah and you’re going unplugged right? Like into the desert or something?
[01:01] Mike: I’m going to try and turn everything off.
[01:02] Music
[01:06] Rob: We’re going to be talking about the benefits and drawbacks of software as a service and choosing that for your app and whether you choose that over desktop or mobile or other things. Now this came about because I was listening to bootstrapped.fm with Andrey Butov, Ian Landsman and episodes 35 and 36 they had some long discussions about how Saas is potentially overblown or over hyped that it’s not applicable for everything that it’s not applicable for everything that it’s overused in some cases and all that stuff.
[01:34]The people are kind of defaulting I think in the broader startups basis especially people are not really – the big funded companies are really going towards the recurring revenue and the SaaS stuff. So it got me thinking that there are some cases where it’s a really good idea and there’s some really good reasons to go with SaaS and at the same time there are some really poor implementations of it and there are some times where you shouldn’t go after SaaS. And so that’s what we’re going to be diving into today, the benefits and the drawbacks. And to kick us off, what we really wanted to do is kind of define what SaaS is. The further we got into it, even you and I have maybe a disagreement over certain apps like is Dropbox a SaaS app or is it a cloud app? These are the five classifications I have.
[02:15] First is software is a service. Right? This is a SaaS app. These are things like Sales Force, Bid Sketch, Mailchimp, HitTail, Kiss Metrics. They’re web apps that live on a single server. They have multi-tenant data bases and people come and pay a recurring typically monthly or an annual fee to access the web app. So it’s basically a hosted web app. The next category is a desktop app. So this is Photoshop, an FTB client, just WinZip, all the stuff we think of as running in the desktop.
[02:45] And then the third category is server apps. So these are things that also run on a local computer. They aren’t necessarily a desktop app in the way that we think about it so it’s something like maybe MYSQL or exchange server or even think about FogBugz, not the on demand version but the one you download and install. WordPress is the same way. If you got a wordpress.org you download something, you install it on a server so it’s not a SaaS app but some people seemed to be confused and think that any time you have a web app, even if it’s downloadable that it’s Saas and in this case we’re saying it’s not.
[03:16] And then the last couple categories, one is mobile, IOS, android apps, the other ecosystems. And the last one is cloud. And I was putting things like Dropbox or Amazon S3 or Amazon’s cloud player in this thing that I don’t consider SaaS because the core interface is not a web interface.
[03:33] Mike: I guess I was just thinking because I mean we were discussing whether Dropbox for example, should that be considered desktop app or should it be considered a SaaS app? And obviously you came back with this third category that’s kinda a cloud app. And I think kind of differentiating it makes a lot more sense than specifying it as strictly a desktop app or a SaaS app. But I look at something like Dropbox and I say well, I guess in some ways I am paying for the software but really I’m just trying to synchronize my files back and forth. So I use the free version.
[04:02] So to me, I don’t think of it as SaaS because I don’t pay for it. I don’t know if I really think of that as SaaS and I think that’s more because of the web interface I’ll say but like S3 for example, that’s online storage so yes that’s a subscription model but I don’t necessarily think of that as SaaS. That’s more like hosting fee if that makes sense.
[04:22] Rob: So you are agreeing of pulling these out of the SaaS category into something. I called it cloud and it seems like these things, a lot of them are storage based and the recurring fees – Amazon doesn’t have a recurring fee. It’s usage based. It’s not a flat recurring. Dropbox does have a recurring fee.
[04:40] Mike: Yeah. I don’t think I have a problem calling Dropbox a SaaS app of some kind.
[04:44] Rob: Is it SaaS or is it desktop?
[04:46] Mike: Like I said, I think putting it in its own category because it kind of bridges the divide but because you do install it on your machine but there’s components that operate out of the cloud without those it would be kind of useless.
[05:00] Rob: Yeah and see that’s how I see the difference here is that if you install Photoshop or you install just a simple desktop Microsoft word, something that installs, I know they all have these cloud components now that had been retrofitted in but you could use them completely offline and there’s no drawback to it whereas you can’t use Dropbox or Amazon S3 or Amazon’s cloud player which is their music service but the core thing is that you can stream it from anywhere. So that’s why I’ve created this fifth category of cloud that I want to kind of differentiate between what we’re talking about today which is SaaS. Right? And these are two different things.
[05:34] Mike: the one thing I would point out though is for something like Dropbox, they do have a local LAN sync so you don’t actually need the cloud for it.
[05:41] Rob: Right.
[05:41] Mike: I think that’s why it’s so confusing as to how to categorize it because they have this LAN sync where even if you’re completely disconnected from the internet, you can still sync between two different machines.
[05:52] Rob: Right.
[05:52] Mike: So at that point it’s a cloud and it’s like well, kind of. It’s over the network but it’s not necessarily outside. When you look at something like that I mean from Dropbox’s perspective, you would rather people do that because then the data is not hitting your servers more than once or people aren’t hitting your servers.
[06:09] Rob: Yeah. No. I bet 99.9% of Dropbox users are not using that and the real Dropbox that I guess I’m referring to here is the one that needs the internet that use the bone of the benefit is that you don’t have that local, if the building burns down, you don’t worry about your data.
[06:27] Mike: Right. But this just operates in the background. What I mean is it’s a feature where there’s a copy the file locally while you go out to the internet and pull it down if you can pull it from somebody’s machine nearby that it’s all over the local network.
[06:38] Rob: So it’s a form of cashing it.
[06:39] Mike: Kind of. Yeah.
[06:41] Rob: But the cloud is still the premier or the first class [Cross-talk] I think it’s still a cloud app of some kind. This one all seems to be API based. If you think about it like Dropbox, you could really think about it as just storage somewhere and then a bunch of different ways to get at that storage. There’s like 10 different UI’s based on your platform. There’s all the mobile versions and all the desktop versions in a web version and all that stuff, S3 similar right? Amazon cloud player, similar. There’s a bunch of different desktop and web versions and mobile versions. I think that’s where maybe cloud comes through where it’s a little different. SaaS I think is web. The web is the primary interface. Even if data’s coming in from trafficking code or from other API’s or anything. The primary way that you get at that data is go to a website and you log in and that’s I think the differentiating thing that I think about when I’m looking at these two categories.
[07:30] Mike: I think that’s partially where SaaS kind of came from I mean because you look at something like Basecamp or Salesforce and that historically where these things came from so when you think SaaS, you immediately think web application.
[07:41] Rob: Right.
[07:42] Mike: I like having cloud as kind of its own separate category because it sort of implies that there’s this other category that yes its sort of Saas but there’s also local components that may operate independently sometimes but for the most part they really need to interact with that piece that’s out in the cloud that you may very well a subscription service for.
[08:03] Rob: Right. And I don’t like the cloud as such a buzz word and everybody’s using it these days but I do think it’s a decent application of that category. So let’s move on a little bit and look at – I had one thought on why SaaS is being so dramatically adapted like it really has been this upward trend. And if you look back into around the year 2000 there were probably just a handful of SaaS apps. It just was so hard to build really good apps that could even come close to mimicking a desktop app.
[08:33] And then as AJAX and browsers and coding technology on the web got better, 37 Signals becomes popular, Salesforce, kind of pioneers through it, Constant Contact, these really early writers in the SaaS market and I remember seeing them early on I think wow, I would never do that. I don’t want my data stored out on their server. We have to pay every month instead of I could just host in on my desktop box here. I remember hosting like an email server just so I could send out small email blasts because I didn’t want to pay the $20 a month or whatever to Constant Contact.
[09:03]But the thing is as these things have gotten cheaper they’ve gotten more reliable and as I have multiple devices, SaaS has really taken off because it gives you access to that stuff from everywhere. So I think a lot of the desktop apps and a lot of the paradigms that we saw in the 80’s 90’s and early 2000’s have now been moved or are moving to the web.
[09:22] So in the old days you buy like a proposal, you download a proposal software, you install in your desktop and you build it, now you’d go to a place like Bidsketch. In the old days I would think you’d download long tail keyword tool and install it on your desktop and now you might go to something like HitTail that’s all in the cloud. So there is definitely a trend and pretentiously a faddishness and I think that’s where there is some backlash. I think people could be pushing into SaaS for the wrong reasons, taking a look at the benefit and not think about the drawbacks or just over extending themselves into it.
[09:51] Mike: For the benefits and the drawbacks, I mean there’s two different perspectives to look at. I mean first one is from the perspective of the user and the other one is from the perspective of the developer and those two things can be wildly different. I mean something that is good for the user may be bad for the developer and vice versa.
[10:07] Rob: Yeah, exactly. So let’s dive into those. Let’s first talk about the benefits of SaaS over other forms like the installable apps from the user’s perspective. The first one is there is no installation and I don’t know about you but I change laptops now every 18 months. I have a bunch of different devices and multiple desktop, multiple laptops and so I do not have to install something and keep a DMG file or an EXE file depending on your platform. Keep that handy or else have the log in so I can go back and download it when I download my next version. Is it even going to be compatible with the new OS, all that stuff goes away when you’re using a SaaS app from user’s perspective.
[10:42] Mike: I cheat on that front because I just take full drive snapshots and backups so if I ever have to reinstall my machine I just lay the image back down and I don’t have to worry about it but I think that’s partly because I know how to do that stuff because I’ve done it for so long to me it’s not a big deal but I think that most people in general probably don’t necessarily have that knowledge,
[11:03] Rob: Yeah so that’s one way around it but obviously like you said most people aren’t going to do that. The next benefit of SaaS from a user’s perspective is there’s no upgrades so stuff is just upgraded in place. Right? The web app is there. It’s always new. It’s the newest version. Hopefully if they’re continuing to work on it and fixing bugs as they come up whereas if you’re on a desktop or a severer and you have an old version, the upgrade process can be and will be at some point a big pain. It will take a bunch of time. If you have a bug or a security vulnerability you have to drop everything you’re doing and you have to do an upgrade. And if that breaks things, if the data changes, it can be a hassle. And this all goes all the way from server apps that I’ve had to maintain to desktop apps like if I would upgrade to a newer version of like Photoshop, Microsoft word or whatever, you have all these files that might now be incompatible, some of them gets skewed up during the upgrade.
[11:56] With QuickBooks, where is your data? Where does that live? ITunes is the same way. Like when I would move from one laptop to another, just getting that data was always the biggest hassle of the move. Was trying to find like the QuickBooks file and make sure I had everything in the iTunes library and so not having to upgrade and not having to maintain the local files to maintain your state is definitely one of the pluses that I see for SaaS.
[12:18] Mike: I think there’s a difference between maintaining your files and kind of the title of this particular point which is no upgrades and I’ll give you a prime counterpoint for it that we’ve actually run into. PayPal’s upgrade of all of your data to the new PayPal interface.
[12:35] Rob: We have not done that because I’m too scared. But that’s PayPal. See, that’s two things. 1) It’s PayPal and I don’t trust that they’re going to do a great job with it and be one that will get better over time and 2) this is like something they’ve been regretting for years. It’s a huge upgrade that they are like actually migrating data. And if you don’t know what we’re talking about, if you log into your PayPal account, some people are seeing this thing that says migrate to the new PayPal. I think they’ve written a whole new UI. I’m sure it’s going to be cool. They’re mucking with data at that point. If you think about what’s your experience with most SaaS apps. The ones that work pretty well, you don’t even know that they moved, that they’ve added features. You don’t even know if they’ve changed the back end data model because they’ve just taken care of it.
[13:10] Mike: That is the general rule I think for most SaaS apps. They do upgrades and they can do an upgrade in the middle of while you’re using the software and you just don’t notice because they basically got a switchover mechanism where you just don’t even notice. You’re suddenly using the new version…
[13:26] Rob: Right. And it’s not that way every time, not for every SaaS app, not for every user. You run into same issues but by and large for me personally the experience of not having to upgrade software anymore is a big plus. And I think for most consumers, most people who aren’t heavily technical I would say it’s probably a plus for them as well.
[13:45] Mike: Yeah and I think there’s two reasons for that. One is how many different applications does any given user given company have that they would need to upgrade on a regular basis and what is the schedule of those upgrades? I mean if the software does not upgrade very often then it’s probably not that big a deal so for example something like word only comes out every couple years of sequel server for example but then you have other things to take into account like a service packs and security patches and things like that. So I think those things kind of create a differentiator a little bit but yeah I mean obviously not having to upgrade the SaaS apps is something that is attractive for most companies.
[14:25] Rob: The next benefit was when you get a new computer, there’s no reinstall. There’s no looking for that installation file. There’s no trying to find your data and moving it over and making sure you get everything.
[14:35] Mike: Or your license key, god that’s the worst like when you have to track down all your license keys for everything, it’s a nightmare.
[14:42] Rob: The next benefit of SaaS for the user is the lower upfront cost since it is a subscription, you may not have to drop $300 or $400 at one time, maybe you can pay $15 $20 a month for it even out that spending over time.
[14:54] Mike: Hopefully leveling out your total cost of ownership and if you go and sign up for a piece of software that really just isn’t working out then you haven’t just sunk a couple thousand dollars into a piece of software that becomes shelf ware because you know, it just didn’t work out for you. You can at least try things out and it cost you a lot less initially to get started with it.
[15:16] Rob: Alright, our next benefit for users is that SaaS apps accessible from most devices. So I work sometimes on a desktop sometimes among someone else’s laptop, sometimes I’m on mine I’m on my iPhone, I’m on my iPad. frankly sometimes I’m at a public computer at a hotel and my data is accessible from all those places and that’s a perk that you don’t have with something like if I’m accounting in QuickBooks on my local machine even if it’s on a network drive, unless I made that accessible from the outside world which obviously I wouldn’t recommend from a security perspective then you can’t get access to your data sometimes when you need it on the road. I know SaaS apps are not ideal when you’re logging in form a mobile browser but still I’ve done it and it works.
[15:57] Mike: Right. If you’re using a password manager for them then you’re kind of screwed.
[16:00] Rob: On contraire sir now if you use I think it’s last pass, they have a browser and the passwords auto populate in it so it’s the last pass browser. I think tying with this accessible from all devices is that multi-user capabilities are easily built in. It’s not to say that they’re free but with things, I’m thinking of like trying to share QuickBooks files in the old days or trying to share word docs you’d like email them around or you would put them on some share drive and then two people would open them at once and things would crash whereas with the SaaS app ideally if you have a team or you have multiple people who need to look at your accounting or who need to work on a single doc the collaboration is a lot easier to do and it’s kind of handled for you assuming that the developer has built it.
[16:46] Mike: That’s a very subtle differentiator there between multiuser versus collaboration because just having multiple users doesn’t mean that collaboration is easy.
[16:54] Rob: Right. Like real time collaboration is a whole other thing but yeah, I’m just saying multiple people at least being able to kind of edit and view stuff maybe not at the same time.
[17:03] Mike: Just being able to collaborate on the same data set that’s the important piece of it. It’s not just having multiple users because I think with QuickBooks for example on the downloadable one, you can have multiple users but it doesn’t really do any good.
[17:17] Rob: And the second to last benefit from a users perspective is that your data is stored for you and it’s backed up for you and you don’t have to worry about having crash plan or other things running locally. You don’t have to worry about a backup not running and losing your accounting data or losing a bunch of word docs because in theory the SaaS app that you’re entrusting them to is taking care of the backups and they have that all handled. Now we’ll look at the drawbacks in a second and one of the drawbacks is a potential of that not happening but assuming it is and it’s a reputable company and they’re getting stuff done, it does take some of the burden off of your shoulder as a user.
[17:52] Mike: And the last benefit is that companies who offer SaaS apps have to continually earn your business or you can leave at any time. So if you’re running into issues or you have bad experiences with their support or with their software, because of that lower outlay of cash up front, the cost of switching through, the monetary cost of switching to you, but it’s a lot less than it would be than if you were to invest a whole ton of money upfront into the solution that ultimately find out doesn’t meet your needs.
[18:22] Rob: Let’s dive into some of the drawbacks of SaaS for users there are quite a few of those as well. First is recurring charges. And depending on how long you use an app it may be cheaper to pay that big upfront fee than to pay that fee every month. And I know that some people just don’t like subscriptions. Right? They don’t want to pay the monthly fee and they prefer to just kind of plunk it down and be done with it.
[18:42] Mike: Yeah. I know people who have gone out and specifically purchased the installable version of a piece of software because they didn’t want to pay for the recurring charges. And interestingly enough one of the founders of Atlassian had kind of talked a little bit about whether or not you should do a SaaS version of something versus a onetime charge for it and his differentiator was essentially does the app become more valuable over time? And if the answer to that is yes then you should charge a subscription fee for it. And if the value of that drops over time then you shouldn’t get all your money upfront. And I thought that was a really insightful mechanism for determining whether you go more towards the SaaS model or more towards a onetime fee for a piece of software or for anything for that matter.
[19:29] Rob: Another drawback of SaaS from user’s perspective is frankly web apps are often not as powerful as desktop versions or downloadable versions of software simply because the desktop has a decade or two of programming that API’s are stronger. It’s local so things can be faster if you’re going to do heavy image or video manipulation, there’s just a lot of cases where building a desktop app is actually better from a usage perspective when you’re actually inside the app working on it.
[19:55] Mike: Some of it has to do with the processing capability, some of it’s just a matter of what’s possible in the web across browser mechanism versus what’s possible on a desktop because with a desktop typically you’re deciding what the operating system is going to be that you’re developing for and you can say okay I’m only developing for Mac or I’m only developing for Windows. And if you start going down the road of developing for both, a lot of times not all the time but a lot of times, the complexities of having two different versions of the same piece of software is a different skill sets, it costs a lot more in terms of time and money and implementation than if you only chose one platform and you’re essentially limiting the scope of what you’re going after.
[20:37] Rob: And I think this gap is narrowing over time. Certainly 10 years ago there was a huge gap between what you could do in a desktop and in a web app and that’s smaller now with just all the web technologies, Ajax and front end stuff that’s come about. But still you see older web apps especially like you log into PayPal, it is grindingly slow. I mean you’re not even trying to do anything exotic and it is painful to use the web app.
[20:58] Someone actually built a desktop front end for PayPal where you download it and install it and then in the background it would check every X minutes and it would download all your transactions so that you could then actually search them and not have to go get a cup of coffee while you waited for the transactions to appear. It’s a pretty clever idea basically outlining a desktop interface over what is now a pretty legacy app.
[21:21] Mike: Another drawback of SaaS over an installable piece of software is that it cost you a lot more to switch in some cases and the real issue here is that if you’re trying to switch from one application to another, if you have a desktop app that you’re switching to another desktop app then you can run them side by side and you don’t have to worry about importing all of your data in one shot and you also don’t have to worry about how am I going to go about doing this without paying for two different subscriptions?
[21:48] Because with the SaaS app you literally have to dump all your data, get it over to the new system, get it in there and make sure that everything’s working and that can be a huge undertaking in terms of time and effort to do that. But if you have two desktop apps and you’re switching from one to another, you can move some of the data over and just the stuff that you need that it’s kind of like your active working set and the rest of it you can leave in the old app and if you ever need to go back to it or moving forward you need to get at it, you just fire up the old app and you can get to it. But with SaaS, that’s a lot more difficult. You really need to kind of bite the bullet if you don’t want to be paying both of those subscription fees at the same time.
[22:25] Rob: The next three drawbacks are all interrelated and it’s privacy of your data, security of your data and backups of your data. And so privacy is is someone else able to access that data is this other company since its not living on your premise, are they able to look at that data? Security, is it going to get hacked? Is your credit card or other sensitive data going to get stolen? Because you are now in control of that security and you’re entrusting that to a third party SaaS provider and then backups. Are they actually doing backups and are they actually going to be able to recovery your data or if they go down and everything’s gone, you really didn’t have necessarily an opportunity to at least be responsible for that so people who like to have more control over it and don’t want to entrust it to a third party, these are three pretty major drawbacks for users.
[23:13] Mike: I think all three of those boiled down to one thing. It’s like do you trust the vendor in terms of the privacy, security and backup? Do you trust that they’re doing the right things and have they told you what it is that they are doing so that you do have that trust in their process?
[23:28] Rob: And then the last drawback is that too many logins, I hear people complaining I have 50 logins, 100 logins to different SaaS apps and that’s just a pain. So I think it’s more of a minor inconvenience that can be solved with a password manger like one pass or last pass.
[23:40] Mike: Yeah. I have over 500. It’s ridiculous.
[23:44] Rob: Wow, in your password manager?
[23:45] Mike: Yeah just in general. I have over 500 different logins and that’s probably on the low side.
[23:50] Rob: That’s another – the whole password issue needs to get solved. That’s not the right way to authenticate anymore like somebody needs to figure out a better way to do that because username password thing, it’s just too easy to hack. Nobody remembers them. Unless you’re using a password manager, people use the same one over and over and there’s just major security issues with it so I’m hoping that someone will fix this in the next few years, come up with a major innovation in that space.
[24:12] So now let’s dive into the benefits and the drawbacks from the developer’s perspective. So this is the founder or the person who’s building the software. What are your benefits? What are your drawbacks? And let’s start it off with one of the big benefits that’s always mentioned is no installation support. And so if you have a desktop app, you have a server app, everybody who does a free trial you have to support them. You have to give support to people who may never pay you and I don’t know if you’ve ever logged into a customer server that is completely catastrophically in bad shape with all kinds of crazy stuff going on but even if you have an app and you’ve tested in on all the platforms over and over, it works fine. It installs for you.
[24:50] But they go install it on their 20 year old server running windows 95 you have to then help them or else you just kind of – A) you get a bad rep or B) you’re just never going to make the sale. Right? So not having to deal with that as people are installing and trying to get some value out of your software is a major upfront time saver that I would say is the benefit for Saas for developers.
[25:10] Mike: Just over the last couple of weeks I’ve talked a little bit about in the past about the desktop version of Audit Shark. I had request to support, installing it and running it on windows XP and I’m just like unless you have a lot of money to spend on this particular thing, it’s probably not going to happen.
[25:26] Rob: Yeah, exactly.
[25:27] Mike: Plus you have all these conflicts that you can run into on somebody’s machine just because they’ve got other software or if it’s not like something where you’re hooking into IS or a patch here or something like that if you’re opening your own ports for example you could write in the port conflex or other services that just shut things down. So for example I’ve seen a lot of antivirus software that will just say hey, I don’t trust your software and it just shuts it down. I mean I’ve seen it do that before with just the installer so it just says I don’t trust your installer and boom, done, it just kills it.
[25:57] Rob: Yeah. We used to spend a lot of time when .net invoice was selling at its peak. I would spend a lot of time doing support and troubleshooting people’s servers and I’d log in and it was just crazy the setups they had and how old they were and how many – just how poorly it was setup and yet it’s my responsibility as the owner of my product to be able to figure out how to make that work. And so we would invest hours into software people had bought it and it was kind of like if you say no or you just say ah, your server’s too screwed up then they just say alright then give me a refund because we had a 30 day refund policy. So you’re basically saying I don’t want to invest this time here but I know that money’s going to basically come out of my bank account if I don’t so I always struggled with that. I know that as you hit scale, it might get a little better but that’s definitely one of the drawbacks of having to install stuff.
[26:43] I think tying into this is upgrade support. Whenever we’d release a new version of .net invoice or if you release a new version of a desktop app you then have a lot of customers that are upgrading all at once. So you can have several thousand people who are now running into issues whether it’s their data, whether it’s an incompatibility with their OS or something like that, so upgrade support from the developer perspective can also be a big burden especially when you only do upgrades say 2 or 3 times a year you release a new version and it’s like boom, go ahead and just knock off the next week or two just to help people get setup with that.
[27:18] Mike: Just to be clear, I mean this is something you can in some ways run into if you’re hosting a SaaS app just because in some cases you are going to have to move or migrate somebody’s data from kind of an old version to a new version or something. I think that the headaches are significantly less than if you got an installable component that runs on their desktop because they’ve got dependencies to worry about as well.
[27:40] Rob: The next benefit is that troubleshooting bug fixes all that stuff, it’s easier because everyone’s using the same code base and it’s easier to reproduce errors. When you have that single web server and everybody’s using it, I mean it’s pretty rare that we are not able to reproduce an error that someone’s run into, it only tends to be browser plug-in and that kind of stuff. But overall troubleshooting bug fixes, the fact that you can release bug fixes instantly if it’s affecting a lot of people is a huge plus more as the desktop app you have to roll out a new version and notify everybody and then they get upset. If you do that too many times, people start getting really upset about it whereas the SaaS you can just do it silently in the background, you fix the stuff you’re improving the software constantly and no one really needs to be bothered with it.
[28:24] Rob: I think the other benefit is that you own the platform itself that its installed on so that you can hook into it and troubleshoot stuff directly on a server and there’s only one place to do it that you don’t have to go 3 or 4 different places on a customer’s environment with what as you said can be totally screwed up machines and you also don’t have to worry about VPN-ing in. You don’t have to worry about any sort of security or firewall issues with that sort of thing. If it’s your server, you can kind of control everything.
[28:53] Rob: the last benefit we have from a developer’s perspective is the recurring revenue. It’s that you don’t start each month at zero dollars in revenue. You’re really always chasing the next sale as I saw back in like 2008, 2009 somewhere .net invoice’s revenue catered 80% in one month when kind of the recession hit. And that was a big wakeup call. I already had some recurring stuff but I realized, boy I really want to double down on recurring businesses so that that doesn’t happen when I’m really paying employees and not really reliant on that revenue.
[29:23] And so I know there’s both sides to recurring revenues. Some users may not like it but from a business perspective, from a founder’s perspective, this is the Holy Grail. And this I think is the number one reason that so many of the Silicon Valley and funded startups are heading into this market is because of the recurring revenue and not having to do the enterprise sale stuff of this huge contracts and chase them down and get these big revenue spikes. The recurring revenue really is a good way to go.
[29:48] Mike: I think that’s the point though is that it takes out the revenue spikes and evens out your cash flow and you can see generally much further in advance if your revenue is starting to trend downwards. So if your revenue craters 80% in one month I mean it’s really hard to see that coming but if you start seeing significantly higher numbers of people kind of falling out of your funnel or cancellation, things like that, you can keep an eye on it a little bit better I think.
[30:15] The other thing I think is that if a recession hits or something mass market comes into play where people are going to stop paying for stuff, they’re not going to make capital purchases anymore they’re going to pay ongoing expenses but they won’t necessarily make new ones. That’s the kind of thing that you probably run into is that people stop paying for new stuff. But if they were already paying for it, they love to get rid of that. They kind of cut all new purchases first and then if it’s an ongoing issue, an ongoing economic meltdown, they will start cutting back on other things but they won’t do that right away. So for example when the economy tanks, consulting was the very first thing to go because that was something that people were actively paying more money for.
[30:55] Rob: Alright now, let’s look at some drawbacks of SaaS from a developer’s perspective. The first one is that you have to maintain up time and that down time is a really big deal. This is lot more complex than releasing an app into the wild. Once it’s installed on the user’s system, it’s their responsibility to keep it up, to maintain the data, to keep the server running. But with SaaS, it’s your responsibility and this is not trivial unless you are technical you have someone who is solid at technical stuff and you’re able to take care of the backups and you’re able to really maintain that uptime to a certain level, you’re not going to last as a SaaS provider.
[31:28] Mike: I think it’s one of those things that when people are first building their apps they probably spend a lot of time on because they’re like I don’t want this thing to go down. It’s gotta be rock solid and I’ve seen people spend lots and of time. I’ve done it myself on making sure that the service is going to be up almost 100% of the time and that’s really hard to do first of all just from a technical perspective but at the same time like they’re going to be times where you just need to do some scheduled down time and there’s nothing you can do about it. But I think that’s one place where people spend probably far more time especially early on when a minimal number of customers would be impacted by down time anyway.
[32:06] Rob: Another drawback from a developer’s perspective is you have an obligation once you launch a SaaS app and people are using it, you can’t just walk away from it or abandon it. It’s obviously not great if you build a desktop app and do the same thing but at least people can continue to use it and get value out of it. If you walk away from a SaaS app, it has a limited lifespan. Either the server’s going to have an issue at some point, it’s going to get bugs. It’s going to security flaws. It just needs maintenance or else this thing will run into itself into the ground a lot faster than desktop apps. So there’s an obligation there.
[32:36] The worst thing you can do it’s not to get zero customers, it’s to get like 50 or 100 customers and then want to walk away from it because you’re kind of letting those people down they’ve invested in you, they believed in your app and now what are you going to do? Just tell them go spend their time and migrate to another platform or something. I mean there’s an upfront commitment I think when you launch a SaaS app then it’s probably not as important as with a downloadable installable app.
[33:00] Next drawback of SaaS from a developer’s perspective is platform and browser compatibility issues and this is basically the troubleshooting factor of someone is using a crazy browser on a Linux system where they have privacy plug-ins or cookie blockers or ad blockers or all kinds of stuff, this is where it gets complex and if you can’t reproduce it, it does become kind of pain. That’s probably the most complex kind of bug fixing and bug trucking stuff that we’ve seen trying to reproduce things where people have weird configurations. Luckily it doesn’t happen very much, not nearly as much as I saw when installing downloadable stuff for customers.
[33:39] Mike: Yeah I mean this is where some of the issues coming up with the minimum version number for different browsers that you support and then just the sure number of browsers I mean are you supporting Firefox? Are you supporting opera, chrome, IE? What versions of IE? The compatibility issues between them and understanding what versions of jquery or what different plug-ins could potential impact your software? That can be a huge – not a huge undertaking but it can be a big deal for what you’re trying to support and its costly in terms of time to troubleshoot those. Once you figure them out it is hopefully helpful moving forward as you kind of scale up the company and get more customers but initially those interactions are going to be in some cases long and protracted and just difficult to get through.
[34:22] Rob: This is definitely a drawback but the thing I like about it, because we had something with someone who use an IE7 or IE8 with Drip and they ran into something, might have been HitTail actually and we went in and it took like 4 hours just to – we had to get a virtual machine setup this whole thing but when we finally figured it out it was a weird thing in IE and we fixed it and now if anyone else comes along with IE8 it’s fixed for them because we have one version of the code and that’s where the benefit is of like – it’s always such a hassle with desktop installation because you have to deal with their configuration and once you fixed it it’s not fixed for everyone so you may have to do things multiple times.
[34:58] Mike: When you’re doing that type of thing and this kind of leads into the last drawback which is that when you’re interacting with those customers, it’s an opportunity for you to either lose a customer or gain their loyalty. I mean customer support is really, really key when you have a SaaS app because every single time you interact with a customer if you lead them with a bad taste in their mouth they can say you know what, I’m really tired of these guys, I‘m just done. I’m going to leave. And then you’ve lost that revenue for that customer from that point forward.
[35:26] Rob: I think this is something that people don’t always realize but people can leave SaaS apps pretty easily. It’s definitely a benefit for the customer I think that customer support is so critical with SaaS. So I think kind of to wrap us up and summarize, you might be thinking, listening to this, so when should I make something a SaaS app? When should I make it a desktop app or downloadable app? And I like to think about it on kind of three distinct categories. The first is functionality. Like is the functionality better served by making it a desktop app or a mobile app or some type of cloud app then do that. But if it’s better served as a web app then go that route.
[36:02] The second is the market. is the market that you’re going to be selling into, are they willing to go subscription and are they willing to pay a price that makes this thing maintainable because B to C SaaS apps are really, really hard. B to B, not so difficult. So think about the market and look at that aspect of it. And the third one is do you have the expertise? Do you have the experience or do you have the money to hire someone who really knows what they’re doing because SaaS is not something that I think these days that beginners can just dive into and do it right. If you can get an app built, you can throw it up on a $10 shared hosting account, you don’t know how to do the security, the privacy, the backups, all this other stuff.
[36:39] So if you don’t have any experience with it, I’d encourage you to go get the experience or to get enough money to hire someone who’s really solid at this and who could build a SaaS app right. So those are kind of the three elements that I think about if someone were to be deciding whether to build SaaS or not.
[36:54] Mike: I think it’s interesting to note that when you look at those three things, not one of them was directly on our list of benefits or drawbacks. It’s all about the user’s interaction with the software and has very little to do with the ancillary stuff like is it secure? Do they have to support upgrades or installations? It’s all about the functionality and can you get to the market with that type of product and are you going to be able to compete with it?
[37:20] Rob: Right. I think some of them planned – the privacy, security and the backups plan to the expertise part…
[37:24] Mike: Yeah but I think that’s more of a perception issue that may very well be left over from legacy apps that people are already used to in that space for example.
[37:33] Rob: I don’t know if just perception – I actually think that truly having privacy, security and backups is important, not just the perception of having good privacy, security and backups and to do that, you have to have expertise in SaaS. We have to know what you’re doing to do it right.
[37:49] Mike: Right. But I’m talking about the user’s perspective of them being comfortable with that sort of thing. So for example, if you’re going after manufacturers for example, manufacturing in general they want everything in house. They want it local because that’s what they understand and they’re comfortable with and if you come out with a SaaS app for something that would replace something that they already have a desktop app for, I think you would have a very difficult time going into that market just because they’re not used to that kind of things. So you’re going to have a much harder sale even though the app might be better.
[38:20] Rob: Right. That makes sense. Yeah. And I think for the record I said this before probably on this podcast but definitely in talks that I’ve done that personally I will never build a non-recurring app again. Now it may not always be a SaaS app because you could build like a cloud app that’s recurring or there are other ways but for me, having done business with one time purchases with stuff I have to install on people’s computers, all that outweighs any of these other benefits that I get from those things. So I will purposefully only select ideas where I don’t have to build an app that installs on other peoples software where I have to support that and where there’s only a one time sale and I don’t have recurring fees.
[38:59] Mike: And I think that’s something that you take into account way, way before you even start writing code.
[39:04] Rob: That’s exactly right. That wraps us up for today. If you have a question for us, call our voicemail 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. We’ll see you next time.
Episode 179 | When to Ask Your Customers for Credit Cards
Show Notes
- Sarah Hatter’s book The Customer Support Handbook
- How to Connect with Industry Leaders to Grow Leads – RivalFox’s follow up to last episode http://t.co/aRpcCtilv1
- Totango 2012 SaaS Conversions Benchmark
Transcript
[00:00] Rob: In this episode for Startups for the Rest of Us Mike and I discussed when you should ask your customers for credit cards. This is Startups for the Rest of Us: Episode 179.
[00:08] Music
[00:16] 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.
[00:25] Mike: And I’m Mike.
[00:26] 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 sir?
[00:29] Mike: As you know, MicroConf is just a couple of weeks away. I do want to send out a congratulations to Brian Marble and Eric Nagem. Each of them won free tickets to MicroConf compliments of Constant Contact and Balsamic respectively. They got an email from or mailing list at startupsfortherestofus.com and entered into those contests and were selected as the winner. So they get a free ticket to MicroConf and if you’re interested in hearing other things about some of the stuff that Rob and I are working on or other things in the startup community then head on over to startupsfortherestofus.com and you can sign up for the newsletter there.
[00:59] Rob: I had a coupe notes about last week’s episode and some other thoughts. One is that Rival Fox which they wrote the blog post that we based the episode on, they published a follow-up to that. We’ll have a link to that in the show notes but you can also go to Rival Fox’s blog and hear about that. The other part is we had a question about how to manage bug tracking and how to modify existing features even if you’re a developer and you don’t want to modify those features. And when I brought that up to Derek my lead developer he said write tests like spend the extra 20% of your time and write test or the more test coverage you have, the more confidence you can have to modify existing features.
[01:38] And if you’re a founder and you’re not the actual developer, then give your developers that extra time to be able to write test and that’s something I’ve realized with Drip we have a luxury that we don’t have with HitTail because Drip has extensive test coverage and HitTail does not. And so there’s a little more trepidation to go in and modify the guts of the code because you always run the risk of breaking something.
[01:59] Mike: That’s something that has completely slipped my mind as well. I remember a while back I was writing some stuff inside of the core of Audit Shark. I was changing how the engine itself was working to make it more efficient and then I made a bunch of changes to it and then I ran through my suite of the unit test which runs a couple hundred tests on the core of it, core auditing engine and there were a bunch of them that passed but then there was this whole slew of them that failed that it was something really small, some edge case that I hadn’t thought of while I was implementing the fix or the update and it just all these things failed that I probably would not have noticed or recognized until it got out on the field and it was too late. So yeah, definitely those unit tests can certainly save you when you’ve got things that are very intricate or complicated that are interacting between each other.
[02:43] Rob: Absolutely. And the other benefit is that when you do find a bug in production, then you go into your code, you fix it and then you write a test that ensures that bug will never get into production again. So over time you can always discover new bugs as you’re introducing new code but all that existing code it’s just locked down and you become so much more confident. You can make grand sweeping changes and actually feel okay about them because like you said, you don’t have to test every nook and cranny because your test handled the bulk of that for you. They obviously don’t handle 100% of it but they handle quite a bit of it.
[03:17] Mike: Hey, I asked someone to point out – if anyone follows Sarah Hatter and her team over at Cosupport, they just launched a new book called The Customer Support Handbook. They started selling it I think back in December and they were basically selling pre-released copies of it that came bundled with a basket and all these atomic fireballs and various other things. But you can go out to Amazon right now and get it and we’ll link that up in the show notes. I kind of glanced through it yesterday when I got my copy of it. It looks pretty detailed so far. I think that Sarah’s got a really good handle on customer support and if you don’t know who she is, she handled the customer support for 37 Signals for a long time before she kind of struck on her own and created the company Cosupport.
[03:56] Rob: Yeah. I hadn’t noticed the launch. I’m glad you pointed it out. I’m going to be buying the Kindle version. It looks like it’s only $8 on Amazon, it’s kind of a no brainer. One other update for me on Drip specifically, we are maybe hopefully only two weeks out from having this email automation. It’s like marketing automation but it’s specifically with email and place and Drip. And from what I can tell and from what both existing customers and some prospect, I think it’s going to open as something to do with pretty broad market and it’s a hungry market, a marketing atomization’s kind of a new thing. I mean it’s not super new. Infusion Soft’s been around for several years but it’s really starting to hit its stride and I feel like people are getting into it more even folks like who own Saas apps or the info marketers used to just have a single list are now moving people between multiple list based on that user’s behavior.
[04:37] Frankly there are some tools out there that do it but everyone who uses them tells me that they suck it’s kind of like when everybody uses QuickBooks but everybody hates it, that’s what I’m hearing about, tools like Infusion Soft and I guess Marketo is good but it’s like a couple grand a month or something. I mean it is a space that I think could be right for some disruption so I’m excited to get that out and to basically do a pretty big marketing push into that market because it really does change the value proposition of Drip.
[05:06] Mike: Let me get this straight because I haven’t asked you about this before but by email atomization you essentially mean that there are triggers that the user can kind of trip over and trigger inside of Drip. Let’s say I run Audit Shark and somebody goes into Audit Shark and does something whatever that something is. Maybe they’re not just signing up for a trial but it could be something that they setup their first system for example to be audited and then that fires like a callback into Drip and Drip will send them an email that you guys monitor all of the interactions between the user and that email and send it out and figure out whether they actually read it or not and can do follow-ups and things like that.
[05:41] Rob: That’s exactly right. And so it can be triggered based on obviously signing up for a trial would be a good one. You could put your whole trial sequence inside Drip and we use liquid templating so you can have if then so if they’ve done this and haven’t done that you can – modify the text in the email ad you can just have a fairly standard template if they convert to paid then you can automatically move them into paid customer list or the current customer list. And like you said, as they use a new feature or if they don’t log in for X amount of days or month or whatever, there’s just all these behavioral things that can be done in an app.
[06:15] Now there’s also stuff on the marketing side where if they click this particular link in an email you can tag them. They click an SEO link, it brings them into a blog post. Talks about SEO, you can tag that person they’re interested in SEO. And so you can then say when they get done with their current sequence, move them to my other sequence my SEO sequence and then when they get done with that, funnel them back into the main sequence. So there’s both a marketing angle to it and there’s also like an in-app more of a Saas app type model behind it.
[06:42] So I’m interested to find out which one of those is bigger because I know people doing both of those sides of it but without actually getting into it and starting to market all I won’t know which of those markets is bigger and hungrier for this type of automation.
[06:54] Mike: That’s cool. Sounds really neat.
[06:55] Music
[06:58] Well as you said in the intro, today we’re going to be talking about when to ask your customers for credit cards. This question gets asked to us quite a bit so I thought we would do a whole episode on the topic and talk about some of the pros and cons of some of the different approaches and I think one of the big things that we get is why do we recommend asking for credit cards upfront when some of the data that’s floating around out there if you look at the date itself it kind of clearly shows that the opposite is actually more profitable.
[07:23] Rob: I think what we’re going to see today is the short answer to this question is you should ask for credit cards upfront. But it’s not like a 90-10 situation where 90% of the time you should ask for credit cards upfront ad 10% you shouldn’t. I’d say it’s more like a 60-40 or a 65-45 where when you hit these certain milestones this critical mass when you have enough time to do certain things, then switching to no credit card totally makes sense. But without having an entire episode to expound upon that, that’s always been the answer that I’ve given folks when in doubt, ask for credit card upfront. So I’m excited to dive into this topic honestly because we’re going to be able to give it a lot more talking through.
[08:01] Mike: So I think we’ll start into some of the pros to asking for a credit card as part of the signup process and then we’ll talk about some of the cons of that and then we’ll talk about asking people for credit cards after they’ve started their trial. To begin with, some of the pros of asking them for a credit card as part of the signup process is that theoretically it filters out some of the people who are not serious and the idea here is if you ask somebody for a credit card than they must be serious about it because they’re clearly willing to pay for it.
[08:26] I think that’s a good qualifier but I also think that not necessarily true. It’s not an absolute role that says hey, if somebody gives me their credit card then they’re absolutely willing to pay for it and that’s totally not true because in most people’s marketing materials, it typically says something along the lines of 30 day money back guarantee or whatever the number of days is. You’re saying that you’ll give them a refund. The problem with that is they see those things and to them there’s really virtually no risk for them to put their credit card and the fact of the matter is if they do put their credit card in, they can always come back later and if you do charge them, they can do a charge back just thinking that filters out all the non-serious people is just not necessarily correct.
[09:03] Rob: Yeah. I think I see it the other way. In Drip I have a two step signup process. The first step doesn’t mention credit card your email and password and then the second step ask for credit card. So I have information on people who aren’t entering their card. I can see who gets through and I can see who doesn’t enter their card and far and away the people who don’t enter credit cards are way, way less qualified and I can tell because I have there the URL that they enter and I have their email address. Right? So I can tell if it’s a business address and then I can tell what the URL is.
[09:36] And by and large the people who are skipping out and not entering their credit card in the second step, not starting a trial either have a fake URL, they have URL that’s like a default WordPress install, they have some type of a micro niche site that is never going to work for Drip anyway. It’s not going to be worth the money to pay for it. The just have 404’s or they just have URL that doesn’t even have a site up. It’s not 100% but I would say it may be 80% plus of those people. So for me through that experience, and my intuition says that you will get more qualified people and then for that experience, that’s kind of the data point I’ve used.
[10:13] Mike: I pointed out that it’s not necessarily true because I think there’s the inclination for people to believe that if I ask for a credit card then I’m only going to get people who are well qualified and I just want to point out that there are going to be people who come through there that are not…
[10:28] Rob: That’s definitely true. Also from experience. Yup.
[10:30] Mike: So the second part is that you don’t have to follow-up and ask them for a credit card. I mean if they’ve signed up, they put in their credit card information, you don’t have to follow-up with them later and in some ways that’s a benefit to you but it’s not necessarily benefit to the customer because they do have to enter in their credit card upfront. So if you’re basically making it so that they have to kind of stop what they’re doing if they wanted to go through the signup process and they’re not able to just do the signup process, I’ve read various blog posts from people who have said flat out I didn’t sign up for such and such service because my wallet was upstairs and I would’ve had to go upstairs go get my credit card and then I just never went back to it.
[11:08] So I think that lowering that barrier entry can certainly help you but clearly one of the benefits of asking it for as part of the signup process is you don’t have to ask for it later. You don’t have to follow-up with them.
[11:18] Rob: I’ll add two points to this. The first is if you ask for credit card upfront you should always email every customer before their trial expires and let them know their card is going to be charged in typically three days is the rule I use. This is not I take a credit card and the drop out of site and try to be forgotten. That’s not how we grow apps. That’s not how you build a successful app. You definitely need to touch base with folks before they’re charged and every month when they’re charged you send them a receipt and you offer refunds if people want to cancel at that point. So that’s first thing.
[11:49] The second part is if you do implement a two setup signup process where you get someone’s email and their chosen password the first step and then credit card the second, that gives you an opportunity that if someone doesn’t complete the process, you can feasibly ping them a day later and say hey I noticed you didn’t sign up. Was it the credit card? Did you not have your wallet or something like that because I have actually had a Drip customer tell me the exact same thing. I do this. We have a Drip sequence people are subscribed to. It’s only one email long and basically just touches base and says hey you didn’t sign up with your card. Did you need assistance or did you just forget or whatever?
[12:23] But that then coverts a few more of those people who like you said their wallet was upstairs and maybe this time their wallet isn’t upstairs so that’s a way to kind of get around that not having credit card on hand objection.
[12:33] Mike: I don’t think that’s terribly common to have that two step process. I sign up for a lot of services over the past couple years and there’s not very many that have that two setup process for where you’re creating your account you enter in your email address and password and maybe a URL or something like that and then on the next page, you ask them for credit card information. I don’t see that totally often. So I think that’s definitely a good takeaway for people who are listening to this.
[12:57] Rob: I haven’t seen very much either and it’s been quite successful with this at Drip.
[13:01] Mike: The third benefit to having a credit card as part of the signup process is you get a higher trial to paid conversion rates. And if you go back and look at the Totango Saas report which we’ll link to as part of the show notes. You look at that and it pretty clearly illustrates that the people who come in and enter in their credit card information upfront typically have a higher trial to paid conversation rate.
[13:24] Rob: This is a little bit of a vanity metric. Obviously someone paying you money is not a vanity metric but if you’re not looking then down the line that I think we’re going to get into here pretty soon. I’m talking about how many people churn out over the next few months, you’re not looking at the full picture. This would be kind of a weak argument if I were to say well the only reason you should do is because they’re trial to paid because if you don’t retain people for very long and everybody cancels in the first month then obviously that’s not ultimately the best thing to do.
[13:50] Mike: So let’s talk about some of the downside of asking for the credit card upfront. Obviously the first one is to get lower signup rates. Again that’s something that kind of way with the people who are signing up. I mean do you want a lot of people who are not very well qualified or do you want a few people who are very well qualified? So that’s something that you have balance to there.
[14:08] Rob: Let’s talk a few numbers. We do have this Totango report that we’ll link up. They give some ranges and they’re pretty accurate as far as my experience has been. And they basically say if you’re asking for credit card upfront you tend to be around a 2% visitor to trial signup and I’ve seen 1-2% as a general rule for Saas. Now with no credit card required they have 10% as their kind of general ballpark so it’s about a 5X difference. It’s about 5 times more trials or as you said, I guess you said lower signup rates so it’s about 1/5 of the trials coming through your funnel if you’re asking for credit card.
[14:44] Mike: And this is on page 8 of that report. The next thing is that you’ll tend to not engage with customers as much because you already have their payment details and what happens is that you have stopped trying to earn their business. So you’ve got this pay wall up in front of your app and in order to get into your app you basically force them to give you their credit card information and then once you’ve got it, what I’ve seen is a tendency to stop doing marketing to those people, to stop trying to continue to sell them on the product because they’ve already bought it.
[15:12] So I think the mentality is really well they’ve already purchased it. What do I need to keep selling them on it? I think the reason for that is you want to make sure that they follow through and don’t do a charge back that they don’t cancel that they’re still going to be a customer after 30, 60, 90 days because you want them to get into your system and stay there. I mean the lifetime value of that customer is going to increase over time. So you want to do whatever it takes to make sure that they stay there for a long period of time.
[15:39] Rob: Yeah I think this is a common mistake. I think you’re right. It’s a crutch to fall back on the fact that you asked for credit card to assume that the people are then just going to onboard themselves. You still have to spend a lot of time getting someone, using the app, getting value out of the app so that when they get that three day prior to charge email that they do in fact want to stick around and that they don cancel right away. Now at the same time it tends to be easier to get people who have entered their credit card to get onboard because they are a little more qualified.
[16:07] They have slightly more invested because they have given you credit card details that they know if they don’t get on boarded that they need to remember to cancel on that kind of stuff. So there’s a balance here but I think it’s a no-brainer that if you are asking for credit card or not that you still have to spend the time to engage you customers during that trial or else you’re going to lose them whether you have their credit card or not.
[16:27] Mike: The next sound sides of asking for their credit card upfront are you end up with a lower paid retention rate after 90 days and a lower end to end conversion rate. And again this goes back to the Totango report and these are in relation to asking for a credit card and the numbers that they show are that after 90 days the retained paid customer after that 90 days is 60% with a credit card require but its 80% if you do not require a credit card. And on the end to end conversions it’s .6% if you require a credit card and 1.2% if you do not require a credit card.
[17:00] Rob: Right. So they’re saying you convert twice as many people with no credit card. Now you have to manage five times the number for trials but you convert twice as many with these numbers. These numbers vary in both directions, both credit card and credit card not required. So it truly does depend on your product and how well you’re able to handle onboard and just how engaged you are and how much you’ve optimized that funnel, a broad swaft across all the companies that Totango studied certainly indicates that end to end conversion rates with credit card are lower.
[17:30] Mike: So let’s talk a little bit about asking for credit cards after somebody has created their account and started their trial. One of the first things that you’ll see is that you get a significantly higher signup rates and the Totango report shows it’s about five times what it is as if you were to ask for credit cards upfront.
[174:8] Rob: I think it’s at least five times. I’ve seen apps where they might get a 1% before credit card and they can get well up over 10% without credit card so 5 in my experience has been the low end and I could easily see 10 or 15 X more trials which can be a good thing. If you can handle that volume it’s actually you can optimize stuff a lot quicker if you’re getting that many trials. Right? Because you just have so much more volume coming through your funnel.
[18:15] Mike: I think that’s something else to point out is that just because you have a lot more people coming through your funnel, that doesn’t necessarily meant that you have the time to follow-up on. I think one of the key things that a lot of this data doesn’t necessarily tell you is that you really need to be able to have the resources behind you to follow-up with these people if you’re not requiring a credit card. If you got and just kind of assumes that you have 10,000 visitors a month to your website and these are the approximate numbers that it’s going to shake out to but that comes out to 1,000 trials a month. And 1,000 trials a month is a lot more difficult to manage than 200 say.
[18:54] Rob: And you’re jumping ahead to one of the cons but the point is it’s the downside of the pro that we’re discussing. At a thousand trials a month, if you have any kind of manual setup or any kind of code you need to install or any step that might require assistance, you are going to need like a half time or a full time support person just to help with on boarding if you’re driving that many trials. It’s night and day. Think it 5 times the amount of support than the asking for credit card route. and so that’s where if you’re a company and you have 5 or 10 people or you can hire full time support person, then yes, moving towards not asking for credit card is something I would recommend at least testing.
[19:31] But if you’re a solopreneur and you’re working on a Saas app on the side nights and weekends you launch it and you’re just trying to scramble and get enough money to quit your job not asking for credit card can be kind of real danger zone because you just don’t have the bandwidth to be able to onboard and engage with the volume of trials that you’re going to get.
[19:50] Mike: I think one of the weird things about this report is that it shows that when you’re not asking for a credit card the number of free users to free trials to paid users is significantly lower than if you’re asking for a credit card but then the number of those people who end up paying you for more than 90 days is about 20% higher. It’s 80% versus 60% for a credit card. I don’t see anything in here that kind of explains why that is. That’s one thing that it’s a question mark.
[20:16] Rob: Yeah. I think that it’s that people are making a very deliberate choice to convert to paying customer. And it’s not that the people who enter their credit card upfront and then get the three day email and see it and they kind of say well I’m going to keep using it. I’m not on boarded yet but I’ll just stick around for a month or two. I mean I’ve done this several times. Then you get 2 or 3 months down the line, your card’s been charged and you eventually cancel. I think that’s what’s happening with those folks whereas on the other side where you’re 20 days into a trial and it’s kind of like hey, have you gotten value out of this? If so, enter your card and we’ll move you into a paid account. That’s a very deliberate decision.
[20:53] And I think those folks don’t enter a card unless they’ve on boarded and gotten value out of the app and by that time, they’re just much more likely to stick around so that’s – you’re right. It doesn’t say that – that’s kind of my theory on why the retention rates are there dramatically higher. It’s a very stark difference and that leads to the other two pros you were going to mention which is that you have a higher paid retention rate after 90 days not asking for credit card and at least according to this report and their study that you have a higher end to end conversion rate.
[21:22] Now the tough part is if you’re doing this on your own, I would always recommend to test. Right? You got to test both approaches. It’s pretty complicated to do so. It’s not like setting up a Google split test. There’s a lot of numbers and a lot of things you have to look at over an extended period of time and so this is not something that I would recommend that again if you’re doing it on the side, you’re more of an entry level entrepreneur or you’ve just launched, it’s like this is a complex beast and you can easily look at the wrong metrics or not look at it over a long enough period of time and make the mistake and judgment.
[21:52] And that’s again why the short answer I have is always get the pre-qualified people, ask for credit card upfront. But the longer answer is as you get more advanced, you can do something like this. Very similar you know how I talked about a freemium being the samurai sword that if you don’t know what you’re doing you can cut your arm off but a master can do amazing things with it.
[22:09] I kind of feel like this credit card debate is the same way when you’re getting started the easy way is to ask and then down the line you can test and or you know what you’re doing more and you know more about your value prop and you’re just able to encourage people who haven’t given your credit card to enter that credit card. You’re on boarding so much better and you just have a lot more to lend to optimizing that process.
[22:31] Mike: I guess the way I see it is you don’t necessarily understand or fully comprehend what it is that’s resonating with your audience yet.
[22:39] Rob: So it’s not that you don’t know what you’re doing. It’s just you don’t know what your audience is thinking yet. So by asking for the credit cards upfront, you kind of filter it down to the people who really need it and make the decision upfront hey I know that I need this and this guy supplies so I’m going to pay for it and then you talk to those people and then eventually down the road when you get more resources available to you then you can kind of convert over.
[23:02] Rob: That’s right. Yeah, that phrase you don’t know what you’re doing yet, I use that for myself when I’m still learning about how to market an app. Until I find that place where I can scale it and I’m still in that learning phase. Right? So it doesn’t mean you’re a beginner versus advance. It just means you’re still trying to figure out that value proposition that resonates with folks.
[23:20] Mike: I think the biggest issue with not asking for the credit card is you need to follow-up with people a lot and you need to optimize that because you have to have a lot of information from your customers in order to be able to do it effectively because you can create email sequences and follow-ups and all these other things but if you don’t have like for example the resources to call people back and ask them questions or ask them why they haven’t done something then it doesn’t matter. That’s going to drop your ability to convert people from a free trial into a paid conversion.
[23:53] Rob: Yeah. If you look at the people who are not asking for credit card and having success with it and make sure that last part is there because a lot of people are not having success with it and don’t know any better. But if you look at a Kiss Metrics, if you see someone who’s making it work, they have invested hundreds of hours into making that work because you have to optimize this part of the follow-up sequence. You can’t just dump someone in and expect them to get started. You need to either be making phone calls, you need an expertly written email trial sequence, you need a lot of on boarding in the app. There’s a lot that goes into this that that is harder here than it is if you ask for credit card upfront.
[24:31] And so if you don’t have week’s worth of time to not only put out a V 1.0 but to watch how that works and measure it in terms of your on boarding into trial emails and that whole process then this is where it can be a danger zone. Use that phrase again, if you don’t know what you’re doing yet then this is a lot harder than it looks to actually make these numbers work the way that Totango shows.
[24:53] Mike: Yeah, one of the interesting things that I’ve heard that the business of software conference a few years ago was there was a round table discussion and there were a bunch of people from some fairly large companies there and one of the people was there from Red Gate and he flat out said that as part of their trial sequence and stuff they basically ask people for some information about themselves like their email address and phone number and things like that. And what they started doing was they started calling people 20, 30 days after they downloaded a trial. And what they found was after doing the measurements and stuff was that the purchase price, the average purchase price of somebody that they called was something like 60 or 70% higher than it was than if they did not call.
[25:39] It was enough like you at that and say what’s 60-70%? It was something the difference in actual numbers was something like $1,300 to $2,400 $2,500 or something like that. So the cost of them not making that call was something like over $1,000 and they were consciously choosing to not make that call and they’re just like we don’t know why we’re not doing this. We just don’t have the ability to call. We’re not consciously choosing to call those people. And they’re making enough money that it does necessarily mater to them but they could theoretically have been a lot more successful if they were calling those people.
[26:12] And you would think that a company their size would be able to afford to hire people to just go out and call people and it was just not something that they were doing this time.
[26:21] Rob: I think you’ve made a good point there that if a company like that can’t make this worked without credit card and that they aren’t doing the right steps to actually get this 1.2% conversion rate that Totango’s report talks about, it shows you that it’s difficult. It’s not impossible for a small shop to do it but if you’re one person, two people, three people, it is going to be a challenge and you’re really going to have to know what you’re doing and be willing to invest a lot of time in it until you see the numbers grow. It’s not something you can just set one time and forget.
[26:49] Mike: Yeah, I think the other thing that brings out is that you can’t really treat those free trials as if they were just a black box. I mean you really need to engage with your customers and that makes a huge difference in whether or not they cancel or whether they fork over their credit card and actually pay for the service. I mean the other side of that is how quickly they realize the value versus when they perceive the value of the products makes a huge difference as well. So if you put together this great marketing story for them and they look at that and they say oh yeah, I see the value in that. Here’s my credit card information.
[27:22] But if they don’t actually see the value of that, then an maybe it takes 30, 40, 50 days for them to see the value, that makes a big difference as well. I think Rob you’ve kind of talked a little bit around this in the past by discussing how you’ve – I think it was the length of your free trial for I believe it was HitTail. You dropped it from like 28 days to 14 days or 21, something along those lines.
[27:43] Rob: Yeah. When I first acquired HitTail, the trial was 60 days long and I immediately moved it to 30 and then I moved it to 21 after maybe 6 months of testing and it allows you to iterate faster and it also frankly we had improved the product and so people got value out of it sooner. And the more you learn about how quickly people get value out of it the shorter you can make that trial. Having a 7 day trial is not a bad thing. If you give people value in the first few hours having a 24 hour trial or no trial, charge them upfront and then refund them, that’s how a lot of web host do it because as soon as you have a web hosting account, you have space on the server. You’re getting value out of it.
[28:20] And to be honest, I’m actually considering either going with no credit card with HitTail jus as a test or also testing asking for a charge upfront. Because as soon as you get into HitTail now, there’s no tracking code and there’s no weight anymore. Right when you get in your link it up to your Google web master tools account, boom, you get suggestions right away within minutes of being in. So the length of time until that awesome experience, that literally went from 15, 16 days that a lot of our customers was taking down to about 5 minutes. So realistically my whole on boarding flow should change. I can take better advantage of that frankly.
[28:53] So there’s a lot of options here and I think that the more data you have and the more that you’ve seen your customers get value out of it, the more behavior you’ve been able to witness it just gives you more areas in your quiver in order to test new things.
[29:06] Mike: Something else that we haven’t really talked about yet is that the Totango report really differentiates in three different categories not just two. The first one is the credit card required upfront. Second one is credit card not required upfront and then they have this third category where what they call it is best in class Saas leaders. If you look at that category, it’s essentially people who don’t really fall inside those numbers. They were doing significantly better than all of the other people in there. So maybe they’re looking at the top 5% or 10% of the Saas companies that are feeing data into their system and saying what are these guys doing? How are they doing so much better than everyone else?
[29:46] And it’s interesting because they point out that one of the things that those best in class people do is they don’t restrict that top of the funnel. They don’t ask for credit card upfront which kind of makes sense because we kind of talked about that but the other thing that they have to do is they have to monitor those trial users and in any group of trial customers there’s going to be some people who are more inclined to buy from you just because of the fact that whether it’s who you are or whether they really need the product.
[30:13] Again, it’s those people who probably would’ve given you their credit card upfront if you’d asked for it but by following up with those people and actively looking for them in their metrics and say oh, Sally joined today and she spent two hours inside of our applications so clearly she needs this. So let’s follow-up with her today versus Joe who signs up and then doesn’t log in for four days he’s probably not nearly as well qualified.
[30:39] Rob: I’d also be really interested to see the worst in class and when they’re doing differently. I think that would be really educational. But this is cool to see. They say the best in class companies have that large top of funnel they don’t ask for credit card, says they have awesome content. They do a lot of inbound marketing. They obviously have a higher touch approach to sales because they doing lead scoring and they’re nurturing those trials and they’re focusing on the people who are getting value out of it or who feasibly could. And you know, as we’ve said, that does definitely take more effort than some people have at this point in their product.
[31:11] Mike: And they’re also actively reaching out to people who are essentially at risk customers. I remember Dharmesh Shah at the Business of Software conference had said flat out that they have the CHI’s, the customer happiness index and they can essentially predict when somebody is going to cancel and they were using them to identify those people and in advance of them cancelling would call them up and say hey, we just want to know what we can do to help but he basically said that you target those people and try to make sure that they have everything that they need so that they don’t cancel.
[31:43] Rob: Yup and the Totango report says proactively reach out to at risk customers to offer help. And so that’s not just an automated email follow-up sequence that means either manually emailing someone or better yet getting on the phone with them and that’s what these best in class companies are doing and I think that’s the part that people skip over when they read this report or when they hear oh, I shouldn’t ask for credit card. There is some effort here. Well worth it if you’re at scale because the numbers are very different it’s a whole other side of the business that you definitely need to focus on if you want to make it work that way.
[32:16] Mike: Yeah and I think that’s probably where a lot of the confusion maybe comes from where we tend to recommend A) ask for credit card upfront unless there’s very specific reasons that you have for not doing so and it’s because all of that active follow-up, the proactively reaching out who are at risk and nurturing those leads as they come in. When you have so many people who are coming in, it’s hard to follow-up with all of them and again you don’t necessarily know your marketing message upfront. So those things make it difficult to manage that large number of people versus asking for their credit card upfront, trying to do your best to kind of pre-qualify people and using that credit card and then following up with that smaller group of people so you get to that scale.
[32:57] I heard a podcast had Ruben Gomez on there and he said he was actively testing without a credit card now in order for him to iterate faster. It was a very interesting podcast. If I find it I’ll link it up in the show notes but it’s definitely a good listen to hear what his process was for that.
[33:15] Rob: Yeah and that’s a good example right there. You could point to Ruben and say well he’s doing it, I’m going to do it too but Ruben has a lot of experience and has a lot of info about his customers and he’s done extensive interviews, a whole back story to that that you don’t know about. So if you’re at his level and not just his level as a marketer and a founder but his level in terms of knowing your customers then you should absolutely dive into that. It takes time to get there.
[33:38] You know with all this, I will point out that I’m definitely considering testing no credit card with Drip and with HitTail as I’ve already said. It’s not always this blank recommendation. Like I said it’s not a 90-10 thing. It’s really in the middle and it depends on the situation you’re in and I think that’s why we wanted to spend a full 30-40 minutes talking about it today because the short answer doesn’t really give the full picture. I think how I feel about this subject.
[34:04] Mike: One thing that you’ve mentioned to me offline was that in some cases that you felt that some people use not asking for credit card is a crutch for overcoming bad marketing. Why don’t you talk a little bit more about that because I thought that was very insightful.
[34:16] Rob: Yeah, I mean you see some folks just getting started, asking for credit card upfront and no one’s signing up and then they basically say well, it must be because I’m asking for credit card instead of saying my marketing is not very good. My messaging isn’t very good. My website’s not doing a good job of convincing people that this is actually a valuable product or it really isn’t a valuable product and I didn’t test the market in advance. And so it’s easy to fall back on not asking for credit card to try to open up the funnel and I think that’s tempting to do.
[34:43] now on the flip side if you do open it up to get more people into that funnel and then figure out why people are getting on boarded and try to figure out who is actually getting value of it and you’re really going to dive into that, then I can see that being a decent move but the real beginner folks that I have seen try to do this weren’t going to that extent. They were just opening up the credit card hoping that more people would convert and that was it.
[35:09] Opening up to more credit card is the first step of a long series of a lot more work that you need to do to then optimize your positioning and your value prop on your website, upgrade your marketing, update the copy, there’s lot that needs to be learned and done once you do that. It’s not just this secret trick that you can use to suddenly skyrocket your growth.
[35:32] Mike: Yeah and kind of hidden underneath there is if you’re going to go that route, there’s nothing to say that you can’t figure out what your marketing message is doing wrong and then go back and start asking for credit cards again upfront afterwards. Because if your goal is to open it up just to get more people in because asking for credit card upfront is not working and you’re just trying to get people in to the sales funnel to talk to them and kind of understand what it is that their needs really are and then you tweak your marketing messages and then you revert it back.
[36:02] I mean I don’t think that there’s anything wrong with that but it has to be a deliberate choice to be doing that too. I think that as you said, people used as a crutch for bad marketing and then they still don’t fix their marketing. They just say oh, well this increased my sign up rates. So I’m going to leave it as is and not do anything.
[36:17] So hopefully that this whole discussion kind of clarified what our recommendation is and why it is that way even though it does in many cases go against what this Totango report recommends. But if you have question for us, you can call it into 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. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 178 | Growth Hackers, Small Wins, Buying Websites, and More Listener Questions
Show Notes
Transcript
[00:00] Mike: This is Startups for the Rest of Us: Episode 178.
[00:03] Music
[00:11] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
[00:19] Rob: And I’m Rob.
[00:20] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week Rob?
[00:24] Rob: Well, I found a new tool that’s helping me unsubscribe from a lot of email newsletters and it’s called unroll me. It’s unroll.me. I put it in my Gmail account and it scans through all of your emails and it figures out how many emails subscriptions you have. I think I had 211 that it identified. Now, some of them are things like Amazon so I’m not going to unsubscribe from those. But there were a bunch that either I just don’t recognize or there are things that I subscribed to a long time ago and I’ve ever unsubscribed from. So just one by one you click the link and it tells you you’re unsubscribing from these things. So I’m assuming since they parsed the email, they grabbed the unsubscribe link and go hit it with an HTTP post.
[01:06] Then you can do a roll up of all the rest of them or as many as you want so you can say well I want like Groupon and Living Social and maybe my Facebook updates and a bunch of other things. I want you to Unroll Me to grab those when they come in, compile them into a digest and then pop that back basically into my inbox only once a day so you can say I want it to run every morning at 9 AM or every afternoon at 3 PM just so you’re not getting that constant stream of kind of these info notifications and stuff. So it’s really – I’m not using that piece of it, the rollup yet but I did go through and unsubscribed from probably 70 or 80 of those 211.
[01:43] Mike: Wow. I am just shocked that you have like 211. Although I haven’t run it against mine so I have no idea what…
[01:50] Rob: I’ve unsubscribed from a ton of things. I don’t tend to don’t to subscribe to a lot of things and I unsubscribe quickly so I bet you’ll be over 200 as well. I heard this originally on another podcast. And the guy said he had 227 and he didn’t think he’d have that. So my guess is by the time it finds everything – because there were some things from like a couple years ago that I haven’t received an email in a while so…
[02:09] Mike: Okay, so it like goes all the way back into your mailbox and looks…
[02:11] Rob: In your archives. So what’s going on this week?
[02:14] Mike: I’ve been kind of following things on the internet lately and Nathan Barry just released a course on how to double your launch revenue. And from the looks of it, it looks primarily aimed at educational and information course type products. It looks pretty good. It looks very, very high quality. I mean just look at some of the other things that Nathan’s done. He’s also a speaker at MicroConf but he does do a lot of really, really good stuff and look at the stuff he does do. It is very high quality.
[02:37] Rob: Indeed. Cool. So I’ve been thinking this week. Based on a discussion over on podcasts just called Bootstrapped, it’s at bootstrapped.fm and Ian Lanceman and Andre were discussing the term growth hacker. Ian hates term growth hacker which is fair enough. But I was thinking does growth hacker – is that term useful? Is there any use to it or not? And it got me thinking about how new words come into our lexicon, words like freemium that you’ve never heard of before maybe five years ago or pivot or cloud computing web 2.0 crowd source, long tail, there’s these terms that are kind of invented and then they’re given a meaning. They’re infused with a meaning based on the original person, the person who coins it typically gets to define a meaning. But then that meaning kind of often runaway from them. Right? Because it depends on how people use it.
[03:20] And so you think about the long tail like Chris Anderson wrote the book about the long tail and when it first came up, it had a certain meaning. I think that meaning has stuck pretty well. Right? It hasn’t been like abused in a bunch of ads and used poorly whereas that term web 2.0 came out and it made sense at the time. It was like oh, this is a different web. The first web was all about brochure wear and the second web I think what was it about? Like self publishing right? It was kind of blogging and stuff in 2002.
[03:48] But then it got so overused by people who didn’t know what it meant that it became irritating. Right? And then there’s a backlash against it by the Technorati don’t want to use that word because it’s now considered lame. So I think it can go either way. And we’ve talked in the past when you know I’ve talked about lean startup about how a lot of words that came out of that like pivot and maybe product market fit which I know is actually originally from Mark Andreessen. When you hear them too much you start saying oh, these are just bogus words. But they give us a common vocabulary. Right?
[04:17] When I say pivot, whether it irritates you or not, whether you feel it’s a buzzword or not, it has a real meaning and we all know what that meaning is and it’s a nice short hand to have. That’s how I’ve viewing growth hacker as like a short hand that people understand yes, it is just a marketer but it’s a little different. Would you say Noah Kagan is just a marketer? There’s something different about him than the people with clip boards and spreadsheets that I worked with back at the credit card company. It’s a more specific term. That said, growth hacker is being used and abused everywhere and I think that the term is probably now bankrupt that it is more annoying than is useful. What’s your take on this?
[04:51] Mike: I still feel like the term growth hacker is not as clearly defined as it probably could be and I think that when I hear terms like that, they can mean one of our like 30 or 40 different things. I don’t give them a lot of credence and I probably think less of them just because I hear people use them and they mean something different based on who you’re talking to and at that point, it just loses all relevance to me. So that’s why those things kind of irritate me and I really think it just boils down to the fact that there’s no concrete definition and not everybody is using the same terminology. I think it just needs to be – calm down a little bit, solidify what it really means.
[05:30] Rob: Yeah. If you go to – Sean Ellis coined it and then Andrew Chen kind of expounded on it so that’s the original definition of it. I respect both those guys as marketers and as people who’ve grown companies. But then you’re right. There’s a book on growth hacking by some PR guy who I don’t have a ton of respect for. He’s a good PR guy but I don’t have a ton of respect for in terms for in terms of like growing startups. Right? And I view growth hacking is like getting inside a startup and going after numbers and elevating the thing and not using spammy techniques as is often said but that’s how I view it.
[06:01] Whereas other people think oh, growth hackers are more like the original growth hack that Andrew Chen talked about as air b and b basically spamming craigslist. And so that maybe gets it off on the wrong foot because now growth hacking is kind of equivalated with maybe some blacker hat techniques.
[06:15] Mike: For me, when somebody says growth hacker, I think of it as something that is kind of going back to your example where you said it’s Noah Kagan and would you just classify him as just a marketer and the answer is no, he’s not. But at the same time, when you say growth hacker it encompasses so many things that it kind of lost its meaning. To me, it’s almost like you say growth hack and you’re basically saying everything except for doing all the traditional marketing things that you would’ve done 10 or 15, 20 years ago. That’s what it means to me in which that doesn’t really clearly define it and that’s the problem that I see.
[06:50] Rob: Yeah so if you’re listening and you’re interested in another discussion of this where I was originally inspired, it’s episode 36 of bootstrapped and we will link it up in the show notes.
[07:01] Mike: We’re coming up on MicroConf so I figured it’s time to startup our quest for good MicroConf jokes to kill time. So I have a question for you. What is the best place to hide a dead body?
[07:11] Rob: I don’t know.
[07:12] Mike: Page 2 of Google search results.
[07:13] Rob: Nice. How about at the top of the organic search results? Because have you looked lately? Have you searched and seen like 4 or 5 ads that Google is putting above the organic results and they took away the background color and it is not very easy to tell that these things are ads. Boy, if you start to block out – because our eyes we start to blackout banners and we start to block out things like these, the little yellow ads without the background color, it really does look like organic results.
[07:42] Mike: They’ve been doing this for years though. I mean they’ve been gradually moving things together and blurring the line between the paid search results and the organic search results.
[[07:51] Rob: But they have not did it like this though. I mean this is a big step that the background color has always been different and they’ve always made it really clear. They either put a box around it or that background color showed you where the ad started and where they ended and now it’s harder to tell. In addition the ads up top used to look different than the search results and they don’t. It’s almost the exact same format. There’s a title. There’s URL and then there’s some result text and then there’s links. I bet they’ll get a lot more clicks on ads.
[08:15] Mike: Yeah. I feel like it’s been like that for quite a while now.
[08:18] Rob: No, this is just a recent change.
[08:21] Mike: We’re on different data centers though. We’ve checked that before.
[08:23] Rob: Yeah I know but people were talking about it just in the past week or two on the other podcast I listened to is definitely a recent change.
[08:29] Mike: Got it. Well today we’re going to dive in some listener questions. So our first email comes in from Jake Berdis and he says hi Rob and Mike. I just wanted to say a massive thanks for all the inspiring info you share through the startups website and above all on the podcast. I’ve been a listener for the last year or so and the value you are sharing has been a huge help to me in setting up my own business. We offer websites as a service as opposed to software as a service and the best thing is I just made my first two sales. It’s so true what they say. They’ve completely changed the way I think about things. Before the sales, I was confident my idea was a good one for sure but I had days of uncertainty and sometimes staying motivated was a real struggle. Now I know that if one customer’s willing to pay for my solution then there are more out there who will be too. Thanks again guys.
[09:09] Rob: Nice. So that’s a little success story from a listener and I am definitely a believer in those small early wins. Getting a sale at some point and having someone you don’t know actually pay you money, the first time that ever happens, no matter how much we say it here, you’re not going to realize how big of a deal that is and how it really does change the way that you view business because suddenly it becomes wow, I can do this. You have doubts until that point that you can ever actually get someone to pay that money.
[09:38] Mike: Well the other nice thing about that is that as you build those sales, they stack on one another. It kind of builds up your confidence in charging down the road for it and it gives you the confidence in saying to people hey this is wroth something and this is why it is priced at this point because it is valuable to people and this is what people are getting out of it. So Jake thanks for sharing that with us.
[09:58] Our next one comes from nelson Whitmore and he says hey guys, I’m working on my first enterprise SaaS business and I’ve got a great product sweet in mind for home builders. I’m trying to take the lean approach and haven’t started coding anything yet. The platform I’ve designed has three products that I could sell independently but having all three is what will really make the platform work. When I go to validate the idea with potential customers, do I pitch the whole platform do I just pitch the first piece and give small product out there and up sell later down the road? Thanks. Love the show. Nelson.
[10:26] Rob: Well, so Nelson is talking about two separate things. One, he’s talking about validating the idea and then the second part is he’s talking about building. So those are two separate steps. I think that when I originally pitch it, I would lead in with just the first of the three parts but I would mention that, the 1 year or the 18 month game plan is to do all three of these things. And the interesting part is perhaps what you’ll find out then is that the second or third parts are more important to the potential customer than the first one is and there, you’re just gathering information. So you’re not actually tying to enforce the plan on them but you’re kind of saying here’s what I plan to do. Do you have any feedback? Is there a better way for me to do this?
[11:02] Then the second step is you’re now going to go build something for these customers. I would absolutely not build all three points. I would not try to build or market or launch all three of them. I would build the first one as quickly as possible would get it out, get people using it, see what value they can get out of it, see how you need to iterate on it and try to market that. And you’re going to learn so much from that that my guess is your vision of how the second two need to be built and rolled out is going to completely change.
[11:30] Mike: I totally agree with the second half of everything you said about just building one thing. The first half, I think I would probably advise trying to figure out which of those three things is the one that should be built first? I think I’d really drill into that with people and maybe you lead with a different product because you really want to figure out which of those three products is the one that you should go after first because it maybe that people are not interested in the second or the third product at all. Maybe they’re interested in the third but not the second or vice versa or maybe they’re just not interested in either of them. And you really need to figure out whether or not people are going to give you money for it based on going out and looking for that product on their own as opposed to just having a conversation with you about it. I mean is it something that you’re going to be able to sell and not face to face I’ll say.
[12:15] Rob: Yeah. I think it’s easy to have this grand vision of a big suite of products. I’m not just going to build Microsoft word. I’m going to build word, excel, PowerPoint and all these other things. But it’s kind of like slow down, pick the one that you think you can get the most traction with first and then once you’re – you’re going to spend six months or a year. I know it seems like oh it will take 2 months to build and get it out there. It’s going to take forever, a lot longer than you think. Once you get to that point then you’ll have customers and you’ll have a bunch of knowledge and then you’ll be able to basically stack the bricks and kind of stair step yourself up.
[12:45] Mike: So Nelson I hope that helps. Thanks for the question. Our next one comes from Stanley Tan and he says hey Rob, I’m loving your podcast because you talk from a startups point of view about getting your 10th user and not from a company getting their thousandth user. I have a couple of questions for you. The first one is are you using a system to track your bugs? Second, how do you keep your product bug free, third, how does your team handle the process of pushing out new features and fourth, how do you improve an existing feature? The reason for this last question is my developers has untouched an existing feature because they said it will cause the system to be unstable. Thanks a lot. I appreciate it.
[13:18] Rob: For bug trucking, we use Fog Bugs. It’s good. I don’t think it’s the best of breed anymore. It was probably the best of breed in 2005 or 2006. I think there are newer tools out that if I were starting from scratch I would probably use them. I’ve actually considered moving over to something GitHub for tracking. There’s a big switch in cost but Fog Bugs is what I use. I use their on demand hosted version.
[13:40] Next question was how do you keep your products bug free? Well there are no bug free software products in the world so don’t think that you’re going to have products that are bug free. But the way we keep HitTail and Drip from having a lot of bugs is that we – customer support and we fix them quickly. We deploy almost daily to Drip. We probably have 3 or 4 deployments a week where we push new stuff out. Most of that is features but as bugs are found, we take care of them fast.
[14:08] His next question is how does your team handle the process of pushing out new features. We use GitHub and we have – web developer does a pool request and then we merge it into the trunk and then the trunk always compiles. There’s over 1,000 unit tests written for Drip and so anytime we check something into the trunk and we do a deployment, before that happens, all the tests have to pass. And so that’s how we push out new features. And so a new feature push and a complete deployment of everything is literally one command that activates a script and that deployment takes several minutes because there’s a restart a bunch of stuff, copy a bunch of code. Check things out, put a label but it’s all automated.
[14:47] With HitTail, pushing out new features is a little more manual but we use Git for it but it’s just a lot of command line, several command line things to copy something in and out of somewhere else. But that gives us a flexibility to easily rollback. Everything is versioned and so if I do a deployment and stuff chokes, I can roll it back pretty easily unless there are a lot of database changes. And then, fourth question less related to deploying he says how do you improve an existing feature.
[15:14] And I mean every developer – no developer wants to touch existing features that other people built but you just have to. That’s a bottom-line. If you’re a competent developer, if you’re working in the industry and you’re actually working on code whether it’s yours or other people, you need to get over it and you just spend the time to do it. It takes longer. Yes, it’s not as easy but there’s so much software written. All software is legacy software at this point and so when I improve an existing feature, I get in, try not to break things and then I QA it and have someone else QA it and you basically do the best that you can.
[15:43] Mike: There are going to be times where you’re going to have to touch a feature that is going to impact a lot of different things and it could very well be that by tweaking that feature you’re going to introduce a bug. I mean that’s just the nature of software that just happens. There’s not a lot that you can do about it. Systems to track bugs I use Fog Bugs. I also use Pivotal Tracker. Fog Bugs seems like its losing ground in the industry and there’s a lot of other things out there that would probably work better for me so I’m kind of experimenting with Pivotal Tracker right now. I will probably do some more experiments with Jira and go from there kind of figure out where I want to go with it.
[16:18] But as you said, there’s a huge switching cost so with Pivotal Tracker, I used it on a project that we were doing for part of MicroConf which seems to have worked out a little bit and then I’ve got another project that I’ve been working with Pivotal Tracker on and it seems like it’s working pretty well but I still want to give some other tools a shot. And then in terms of keeping a bug free – there isn’t software that’s bug free really what I tend to do is I look for the bugs that I can live with as opposed to the ones that are just going to totally destroy the product or make it completely unusable. I mean if the product’s unusable, you got to do something about it but if there are things that won’t work as well as you would like, you kind of have to look at those and say I’ll live with them for now. For now maybe a couple of days, a couple of weeks, might be six months to a year, it depends on what other things come up as a priority.
[17:07] And then in timers of pushing out new features for Audit Shark, what we have is several branches like each person has their own individual repository and then there’s kind of main branch and when you finish merging everything from all the repositories into yours, you can push it to the main branch and then what happens is on the build server, there’s – I use a product called final builder which basically runs through all the unit tests, does all the complies, packages everything up and then pushes that out to as yours to make sure that everything’s working the way its supposed to. So I guess that kind of wraps up how we handled the technical side of the things that we’re doing. So hopefully that helps you out Stanley.
[17:47] Our next one comes from peter Allen and he says I’m launching an app this summer and building a launch list. One of my main competitors signed up. It doesn’t feel right to be emailing my competitor all the news about the new project. Wondering what your thoughts are on this. Should I take them off the mailing list?
[18:0] Rob: That’s an interesting one. I think your competitor’s going to find out your info whether he’s on the list and you send it to him or not. With that said, I don’t know why you wouldn’t take him off. I’ve never had this happened. I don’t know if I would or wouldn’t. Not sure that I have a strong sense of what I would do if this happens. So I think I would go with your gut feeling if you’re concerned about him finding stuff out then pull them off. You have any thoughts on it Mike?
[18:23] Mike: I don’t know. I’m torn on this one as well. I don’t think that there’s any harm in taking them off because he is one of your main competitors, you may as well take them off. But at the same time, what you probably should have done by now is go over to your competitors website and take a look at their stuff and sign up for any mailing list that they have so that you see what they’re doing. So you’re probably doing it yourself and if you’re not, you probably should be.
[18:43] Rob: And it sounds like he’s leaning towards pulling him off and so I guess if you’re leaning towards that, I would probably just do that.
[18:50] Mike: I don’t think there’s anything wrong with taking him off. Especially since you’re kind of still in the pre-launch phase and if you haven’t launched the product yet, if you’re still trying to build up that marketing side of things, then there’s nothing to say that they couldn’t go out there and do the same things that you’re saying in your mailing list which are I’ll say quasi-private. But the second you launch and your website is up and live, everything’s public. So if you’re banking on them, never come into your website and see what you’ve got going on then that’s not just realistic if it’s a matter of trying to keep things kind of under the radar and only for the people on your mailing list up until that point then that’s a different story and I don’t see any issue taking them off.
[19:29] Our next question comes in from Simon Edwards and he says hi guys, love the show. I’m massively inspired. Now if I can just kick the corporate stooge gig. My question is where do you find software for sale? I know Rob bought the invoicing software from somebody but how did he find it? I’ve looked at a bunch of sites but most were selling ad words sites or scripts, not functional software. I think taking something that is 60% done will get me over the hurdle I need to clear. Any advice is much appreciated. Thanks.
[19:51] Rob: So I’ll start by saying don’t buy something that’s 60% done. Buy something that’s done and is close to having customers and product market fit meaning it already has solved the problem for specific market. That’s the ideal scenario that you can buy something that already has that and just use marketing to grow it. But if you buy a half finish software product, you’re better off just writing it from scratch in general. So I wouldn’t look to just buy a code base. If you want to go buy a code base, go to Google and type in like clone script like PHP clone scripts and go to those sites. And there’s clones of all types of stuff that you can get for $50 or $100. So if you just want code that does something, that’s where I’d head.
[20:27] But when you’re buying an app, think of it about buying existing marketing because that’s what the real value is, its revenue and the marketing that’s already been done. So there’s already inbound traffic if there’s existing customers those are just so much more important than the code that you’re going to be buying. The first part of the question was about where to find them and we actually recorded a podcast back in 2010. It’s episode 15, how to buy a web application and most of that still applies if you go back and listen to it but in general the apps that I have purchased I have found on forums. That’s where I found .net invoice. It was on the old site point forums.
[21:00] I have purchased them on Flippa and you’re right, Flippa is a big mass of junk but you have to dig for the diamonds if you’re going to buy something there. Right? Everyone logs in and thinks they can type in SaaS and find this amazing SaaS deal and that’s not how it looks just like the guys who make money on real estate don’t just walk down the street to the for sale sign and buy the house and they flip it for a bunch of money. That’s not how it works. You have to put in time. You have to learn in. you really have to invest the time to filter there.
[21:27] The third thing I’ve done is cold emailing and that’s how I found HitTail and that was an app that I had used and I emailed the founder and she wasn’t really maintaining it anymore and so she was willing to sell it. And then the other thing I’d look at is brokers. There’s some good brokers feinternational.com is one and empire flippers is another. And those guys have higher and apps and it’s probably purchase price between $20,000 and a couple hundred grand there. But those are the higher quality ones that actually have customers and they’re real businesses, they’re not just someone wrote some code and has it up on a server somewhere with zero marketing and zero customers.
[22:00] Mike: So Simon, I hope that helps. Our next one comes from Chris Kirkland. He says in episode 169 he stated that starting a community based website is hard. This was talked about around the 30 minute mark going into the podcast. Do you consider social networking site the same as community based websites? I would like to build a social network focused on helping businesses to promote their services and products similar sites like LinkedIn, talk biz now etc. Can you give me some insight on the best way to do this or this is a long journey?
[22:28] I think the big challenge you run into with these – any sort of community site whether it’s a social network of any kind of a community based website, the value really doesn’t come in until you hit this critical mass. And getting to that critical mass can be a long slog and the issue with that long slog is if it takes you too long to get that critical mass then you run into issues where people think that the site’s abandoned, they’re to going to come back to it and people are just not going to give it a chance. And you can try to re-invigorate the site later on after you get – let’s say you get 300 or 400 or 500 people and you can email them all and say hey, we’ve just done a new site redesign or something along those lines that kind of bring them all back at the same time and hopefully that can kind of jumpstart things if things have fallen by the way side.
[23:14] But the bottom-line is building those community based websites, really has those two factors where you have to reach that critical mass and it has to be within a certain timeframe and if you don’t do it quickly enough, then the site is just never going to really take off. And those are the two key things that you have to keep in mind when you’re trying to market it. The best hitting to do I would say is actually focus more on building email list because with an email list you can wait unit it gets to that critical mass and then invite them to a site and that will probably workout a lot better for you but you still have to be able to have something to say to that community.
[23:49] Rob: Yeah, building a community site you have to have the community first. That would be my advice. If you look at all the communities that you’re familiar with that you’ve seen work let’s say all the jolan software forums, where did he start? Well he had the blog, he had the people, boom, he sent them there. When they started stack overflow, Joel and Jeff both had enough people to get a community site going because your community site or your social network, your forum is worth nothing until there are X number of people there and that X might be 200 active users, that’s a bare minimum you can have just to support it and then keep it alive.
[24:24] And when you have 10 you may as well have zero because those 10 are going to leave because no one else is there. You have to instantly jumpstart it to that minimum number and I don’t know if 200 is a number. I’m kind of just drawing that out. But you look at thread list which is the t-shirt community site, that started as like forums for artists and then thread list now has voting where you can vote on t-shirts. They would never have been able to make that happen if they started it from scratch but if they had the audiences and then a bunch of copy cats came in and tried to do the same thing but they just said oh it’s the technology and they built the same thing but they didn’t have the artist there willing to vote on it.
[24:57] I would even say it’s a long slog like SaaS because at least SaaS you can start it if you have two customers who are paying you, you still have two customers who are paying you the product’s still valuable to them. But with something like a social network or a community site, you have to instantly jumpstart it to a certain amount or else, it’s a ghost town.
[25:12] Mike: Yeah. And I think that’s part of the reason behind the success of the Micropreneur Academy and MicroConf because we had this community in place, rob stated the Micropreneur academy from his blog and kind of brought people into that community. Form the Micropreneur Academy we started the podcast and then when we decided to go out and do MicroConf we already had this community of people that we were tapping into from both the podcast and from the Micropreneur Academy. So we were able to make that jumpstart happen but if you aren’t able to do that, it’s just not going to work.
[25:42] Our next question comes in for Jim Monroe and he says hi guys, I’ve looked at several methods of coming up with ideas from niche websites included in the Micropreneur Academy and via research I’ve gone with my top traffic pics but I’ve had difficulty when it comes to creating useful or shareable content with a niche that I’m not an expert in. I like to create useful content to attract visitors and newsletter signups and not just regurgitating the junk I’ve read about said topic on the internet let alone do it on a weekly or more frequent basis. Do you have any suggestions on generating the content base for a new niche website? Do I just avoid content marketing like this even if the niche appears to be a good one? Outsourced article writing or just BS my way through it? Thanks guys. Still digging the podcast. Great work.
[26:21] Rob: I think it depends on how big of a product you’re looking to build. If you’re trying to do a SaaS product and you want to grow it to tens of thousands of dollars a month in revenue then you either need to be into that niche enough that you’re able to create content or you need to have the funds to hire someone who can create high quality content and that’s going to be between 1 and $300 per sharable blog post.
[26:45] But if you’re looking to create just a tiny little ad sense micro niche site then yeah, you can either crank out some articles, do some research, crank out some articles or you can hire someone $20 to $30 per article and go that route. It’s kind of up to your goals there. I think that if I was going to be diving into a SaaS app that I’m going to do for the next two years, you’d want to have at least some interest in it or some knowledge of it. I don’t think you need it in every case. I guess I’ve seen people have success but that’s not the case but it does depend on your personality.
[27:12] Mike: Yeah. I think Rob’s got it right. I mean it’s a balancing act of how much revenue you’re expected to come out of this versus how much you’re going to put into it. And if you can afford to spend the money and its going to be something that you’re going to be working on for a long time then go ahead and spend the money on it now but if you can’t, then you kind of have to do it yourself until you get to a point where you do have the money to spend and hire other people to do it because there’s going to be a lot of other things that you need to focus your time on especially for something that is going to be a big commitment on your part in terms of time for the business moving forward.
[27:45] Rob: I also think that content marketing is not for everyone. There’s a difference between tactical niche terms and long tail keywords that you’re just trying to attract traffic to that you maybe researched some Google ad words or the Google ad words planner I guess is what its called now or use a tool like long tail pro or HitTail or market samurai and you get keywords and then just want to build kind of a larger surface area, search engine surface area, that will bring in traffic.
[28:11] But then there’s the other side through content marketing based on how I understand it or how I would define it is it’s more of super high quality stuff that gets shared. It’s more buffer and kiss metrics and biz sketch. I mean these are people that are very experienced and they get 50 or 100 tweets each. They’ll pull in some search engine traffic for sure but they’re not solely focused on keywords. They really are focused on getting traffic through social sharing. So it depends. I don’t know if you’re defining content marketing as that but that’s how I would differentiate between those two things.
[28:42] Mike: Our next question comes in form David Welton. He says hi, at MicroConf Europe Rob mentioned he tends to move to something new every year. Another presenter Peldi mentioned that for him, balsamic was where it’s at and he’s happy with that. Any ideas about deciding on when and how to move on from something or not to and how to go about doing so. PS, thanks for having a transcript available. David.
[29:02] Rob: This one depends on your personality. Peldi I think is just committed to his app and he loves being in the space that he’s in and the bouncing to another thing probably sounds like a ton of work or just a headache that he wants to avoid and he’s built up – what does he have? 12 employees now? So it’s a company and he’ll probably be happy doing that for 10 or 20 years. I enjoy the change up of working on something pretty new about every 18 months and so for me, working on the same app for 10 years sounds like a grind.
[29:30] And so I think it’s more of a personal choice in terms of how to go about doing so, the way that I’ve done it when I’d move on is I’d find someone to be either the product manager or if it doesn’t need new features, some of my sites and apps are mature and They don’t actually need code written then I just find someone to handle the tier one support and then you essentially step away and you move on to that next project.
[29:53] Mike: I would say that if you are bored with something you kind of need to move on or if you could just get to one point where you know that it’s not going to grow any further, it almost doesn’t matter what you’re doing or if something happens at the market place that you just don’t have any control over and it looks like it’s going to probably shut down or eventually destroy the business then you might want to move up that time table moving on to something else so that you’re in a good position so that when that does happen that you moved on to something else completely so you’re not depending on that revenue stream anymore.
[30:24] I really think that rob’s right. it depend a lot on your personality and whether or not you’re looking for new things and get bored with any specific thing that you’re working on. And if you’re just not interested in that then you kind of need to move on and find something else and whether you sell that product or keep it as a portfolio piece, again that’s kind of a personal preference thing but it also depends a little bit on your resources and whether or not you can manage that as a product inside your portfolio.
[30:47] Rob: I think you actually made a good point about if you’re getting bored with a product that it’s probably time to move on and I think there’s balance there right? If you’re bored with it for three weeks, give it some more time. But if you’re bored, unmotivated for six months, the product is having revenue you just can’t get it passed the plateau and you just have no interest in working with it then yeah, it’s better to move on to something that interests you and that you can actually invest energy and grow than to just have this kind of ongoing struggle and to see this thing wasting away because it’s just a drag on your motivation.
[31:19] And if you’re bored with it and you really don’t have the motivation after months and months of trying, it’s better off in someone else’s hands frankly and that person is either someone you hire to manage it if there’s enough money there or doing a sale and then take that money to go then launch your next effort. I do think it’s easy to get – do some franchise when something gets hard and then want to give up after – it’s too hard to grow this. I‘m just going to bale on this thing. I do see people bouncing around and never really having bigger successes because they don’t stick with stuff long enough but that comes back to knowing yourself like do you tend to stick with stuff long or do you tend to give up on stuff too quickly, trying to think it through potentially get some outside advice as well hopefully from your mastermind group.
[31:57] Mike: Yeah that reminds me of quote from the movie American gangster. Quitting while you’re ahead is not the same thing as quitting.
[32:02] Rob: Yeah. If you have question for us, call 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. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.