Show Notes
- MicroConf Europe Tickets Available
- Success story: LogoMaker.com and LogoDesign.com
- Music to get motivated: Noon Pacific
- FogBugz
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I discuss SEO across multiple domains charging before product market fit and more listener questions. This is Startups for the Rest of Us: Episode 190.
[00:10] Music
[00:18] Rob: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:27] Mike: And I’m Mike.
[00:28] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So, what’s the word this week, sir?
[00:31] Mike: MicroConf Europe is not yet sold out, so if you are interested in acquiring some tickets to that, you can get your tickets over at Microconfeurope.com and sign up for that mailing list, we have some emails going out shortly. There are some advanced emails that have gone out so far, I believe next Tuesday when this episode goes live is when we will start opening up the doors on that list, so definitely head on over if you are interested, hopefully we will see there.
[00:54] Rob: Come hang with us in Prague in late October. So hey, kind of a milestone for me today, Drip email automation that we have been working on since January, we released it to an early access group, I think it was about a month ago, I mentioned it on the podcast when we did, but we launched to all of our customers, new and old, all new sign ups, everyone as of just a few hours ago, everyone has access to it, so it feels pretty good to get that out.
[01:20] Rob: I recorded a bunch of screencasts, because I found email automation is simple enough its bunch of rules where you can move people in and out of lists, you can do stuff based on whether they click a link or whether they make a purchase or whether they do something else. They sign up for a trial or whatever, but there is so much more complexity to this that needs to be explained. That’s what I spent the last several days doing. Before we announce it, I mean the feature has been ready for frankly 3 or 4 weeks. We haven’t made any changes to it since early access except from adding new stuff but I really wanted to get enough, a couple of case studies and I have some blueprints for different rules that we are using internally, on our SaaS apps and that I am seeing other people use it like e-book downloads, that it’s having the idea of how to use this powerful tool rather than just saying here is this powerful tool, go use it, right? So that’s what, I really wanted to help folks get on board with it, so we will see how that pans out.
[02:11] Mike: Neat, well, and news on my end, I have got half a day left of consulting work and then after that I will be on AuditShark full time at that point. Around noon tomorrow I will be a “free man.”
[02:19] Rob: How does that feel?
[02:20] Mike: A little disconcerting to be kind of back in that position, but I am looking forward to it, my schedule has backed off significantly, so I have been working kind of part time and I have been laying out like what my days look like working on it full time so far, so it will be an interesting change, I have definately been splitting up my mornings and afternoons considerably more than I ever did when I was consulting, so.
[02:40] Rob: Right, I remember when I kind of quit consulting that I suddenly had way more time than I knew what to do with but I really had to convince myself to focus and to take that time and put it to good use to move the product forward, because I was no longer forced into this artificial two or three hour a day thing, of evenings and weekends, and so I had to be more mindful of my time but it was fantastic, I remember the day vividly, I hope you celebrate, go to a coffee shop.
[03:07] Mike: I try to coffee shop last Friday and didn’t go so well.
[03:09] Rob: Didn’t go well, yeah.
[03:11] Mike: The issue was that they didn’t have a place for me to plug my laptop in, so at around noon I was almost out of battery power.
[03:20] Rob: Oh! Yeah, that’s, you can’t do that. So we got an email with the subject line of Music To Get Focused and it was from Michael Koper. And he says “Hey, Mike and Rob, love your podcast, I am a new listener, and it helps me a lot with the creation of my first SaaS app and he goes on to reference the, when we talked about music to help getting you focused and he says, “I found this iPhone web app called Noon Pacific and it’s noonpacific.com, every week they release a new playlist with 6 to 8 songs for free, the music is handpicked from different music blogs, the type of music really helps me to focus, it’s very relaxing and nondisturbing. You can loop on the playlist for the week over and over and you can listen to other playlists, hope it helps the others same as it helped me.”
[03:58] Mike: Yeah, speaking of sharing good news and tips, we got an email from Rob Marsh who says “Hi, Rob and Mike, just wanted to drop you guys a line and say thanks for the podcast, it’s definitely the top of my listening list, and as a non-techie I find much of the advice you guys give very useful. I found the podcast about the time I was asked by my corporate boss to downsize my entire division of 40 people. I was the last person on the termination list. Your podcast gave me ideas and information, that made acquiring my first app much easier, that app logomaker.com is an online logo design resource for people looking to start a business or prove a concept with a professional looking but inexpensive logo design, although I didn’t build it, I have learned a lot as I have been trying to grow it over the past two years, this week I am launching my second site logodesign.com which has a different focus. Helping designers connect with potential clients. Just want to say thanks for the ideas, information, and encouragement, you give your listeners each week, you guys have been a great resource.” So that email comes in to us from Rob Marsh. Keep up the good work, Rob and let us know how things go.
[04:50] Rob: So last update before we dive into some listener questions. Drips growth is just starting to pickup to a point like, I have been on that learning phase, remember on my MicroConf talk we talked about building, learning and scaling. We have been in the learning phase trying to figure out what people need, getting email automation out the doors is a big step in that process, probably not coincidentally within the past 1-2 months, growth is just starting to creep up. So I can’t tell yet if it’s a blip, if it’s a coincidence but I have some aspirations, some high hopes that, a, it’s going to continue and, b, now that automation is out, there will be more of a compelling reason to keep people around. Trying to hit product market fit so that people come in, use the product, get a lot of value out of it and then change their behavior, you know, and actually continue to stick with it. So I will obviously update in future episodes as things go with that, but so far so good, last couple of months.
[05:44] Mike: You know, there were some people on Twitter who were asking me about how things were going with Google because of AuditShark’s experience with the panda update and things have actually not only reverted back to normal, but they have actually been better than they were before.
[05:56] Rob: Nice see that typically happens with sites that aren’t doing anything, gray hat, black hat that when these updates come the gray hat, black hat guys get booted, right, or just get downgraded and then the other I say, more legitimate SEO sites are able to move up, so that’s good news.
[06:14] Mike: It is disconcerting in the fact that it happened at all. So it means that I am kind of in that, I am probably in that gray zone, so that means that I need to kind of revisit a lot of those pages and make sure that I move, I guess into more of a legitimate territory in Google’s eyes, which kind of sucks because you don’t necessarily know everything that they are looking at, I have been looking through the moz collateral that they publish every year, basically kind of indicating what they believe, the Google’s algorithms are based on, and how much weight each of those things carry, so I have been going through those, and taking a look at them and trying to match them up with what I am doing on some of those pages to make sure that hopefully this won’t happen again.
[06:49] Rob: Very cool. Well, let’s dive into some listener questions today, we have several backed up and I want to cover them, our first one comes from Jay Adams and he has two questions, he says the first is I received a different amount than what was invoiced to an enterprise customer overseas, it turns out that an intermediary bank charged a wire transfer fee, I have no way to track these fees and wondered how other startups are doing with it.
[07:13] Mike: Banks are just such a black box, I don’t even know how they calculate some of the fees.
[07:18] Rob: To be honest, I have never heard of an intermediary bank charging a fee on it and I would question the legality of that because typically it’s the sending bank and the receiving bank, right? And the sending back will often charge a fee, it’s like a $35, $45 fee for an international wire transfer depending on what country it goes to. The receiving bank sometimes has fees for receiving wires, and that’s a whole other deal. I have never heard of like an in between bank, I would personally call your bank and try to figure out how that happened, why that happened, there has to be a schedule of fees somewhere, that’s how I would look to handle it, the way I have handled this in the past when I have had international contractors that I have had to do wire transfers to, is if the payment is broken up over multiple payments, I will cover the wire transfer on one and then make the contractor cover it on another or just split the fee 50:50, sometimes I ask them to eat it, I mean it kind of all depends. Not knowing the fee in advance is probably the more disconcerting part of this.
[08:15] Rob: Jay’s second question, he said it’s an unrelated question but he says, I currently have two websites, noxigen.com for the main company site and systemfrontier.com for the product landing page. I may offer a few other products in the future but I really want to push my primary product’s brand as well as simplify site management. I plan on relaunching the sites soon with a fresh new look and more content. Am I hurting my marketing and SEO efforts by having multiple sites?
[08:42] Mike: I would say you are probably not hurting your marketing efforts. The thing I would wonder about is how related are these products that you are going to be launching, how much overlap is there between them, could you do any sort of cross sales or up sales to people, because if you are selling into similar markets, there is the potential that you could bundle it and so if there are complimentary features between the two products or any sort of integrations that you could build and especially if you are going to go down the road of offering 3, 4, 5, different products and then bundle them together as a suite, if you look over companies like Red Gate where they have got all these tools around databases so they have got all these SQL server tools, SQL developer tools, dot net development tools, and they start bundling them together, I mean you can buy any of them for their lowest and at one point it was $30 but most of them are anywhere between $100 and $800 or $900, but then they start bundling them, if you were to buy just one of – every single one of the products individually it will cost you $4000, $5000, $6000, but they bundle them together and it will cost you $1500 or $2500 or something along those lines. So I would look at what you are doing and see if it kind of fits that model and if so, then you probably want to have one site for everything where you have this hierarchy on the pages, where you are doing all of your sales and marketing and trying to figure out on that main page, whether people are interested in one thing or another and then kind of pushing them down the tree but it really depends on what your outlook is for those future products and how much integration there is going to be.
[10:08] Mike: Now in terms of being able to maintain them, it depends on whether or not you are going to be the one maintaining them, that might be something that maybe you put together the initial architecture for that site, and then hand that off to somebody to actually implement a lot of those things, because implementing the look and feel can be extremely time consuming on an ongoing basis, especially if you are going to changing all right lot of that stuff.
[10:29] Rob: My take on this would be you should have a product site, you don’t need a company site since you already have one, I would tend to make that a thinner smaller site and not have a bunch of product info on it, because then you are competing with yourself for search terms and you really want the product site to rank for your main terms. So I do think that in terms of SEO, you are going to want to, you know, have more links pointing to your product site because that’s where people are going to go, research it and buy it, whereas if they come to your company site and see a bunch of products, it’s just a much harder path for them to actually get to a purchase. With that said, I think there is some value in having a company site that does list all of your products, if you go to the numagroup.com, you can see an example of that, I think Wildbit has a similar website, where they kind of list all their products and it gives you an idea of who is behind the company and what they are up to. I think there is value there but that’s not something that I would push a lot of traffic to, and I think if you are looking at having multiple products and you want to integrate or have upsells between them and bundle them with Mike was saying, I think you do that on the individual product sites that you still have systemfrontier ranking well when you introduce your second product then you can have like a little side bar in systemfrontier and you can have a checkout option where it’s an easy add on, a check box to also get this other piece and that you educate them on each of the individual product sites, you can also mention this on your company site, and again the company site in my opinion is more about information rather than commerce and each of the product sites are about product information with always a push towards a call to action of buying. So I hope that helps, Jay, thanks for writing in.
[12:12] Rob: Our next question comes from Ben Porov [ph] and he says, “Hey, Rob and Mike, I am just curious to get your thoughts on the test driven approach to development. Is it better to incorporate this principle into your project from an early stage or is it more of a hindrance to progress? It seems there is a lot of pros and cons to consider, if you were starting a new project today, would you test or not test? And for those who aren’t aware of test driven development or don’t know what it is, if you are really going to be strict about it, you would actually write a test first before you write any application code and you always start a new feature by writing a test, having it fail and then writing code. That’s the strict adherence to it. I know a lot of people who do “TDD” and they don’t actually write the test first, they just write a feature and then write a bunch of test to kind of test suite to test that feature before it’s every released into production.
[12:57] Mike: That’s how I do it, I will write the function and then make sure that it’s working and then write a bunch of tests after the fact in order test edge cases and make sure that it’s working and then when you have your build process kick off, it runs through all those tests, and you can make sure that nothing else that you did broke anything core, it’s a hard question to answer. I think it depends a lot on the product and how much you are going to be involved in the development process because I think that as you start outsourcing software development those tests become more and more critical, especially for a lot of the core pieces because you are going to have people in there and making changes that they don’t necessarily understand why the architecture is the way that it is and there maybe some very, very subtle nuances to how it’s put together that they are just not familiar with or they don’t know or maybe it was documented and they just didn’t read that part or it didn’t stick in their head, so there is advantages to that but the downside is that it takes you extra time to put these tests in there. So it kind of depends on what I guess, stage you are in terms of customer development to figure out, are you actually solving right problem because the worst thing in the world would be to go out build the products and have all these unit tests in there that are going to make sure that it’s functioning correctly but then if you are not actually solving problems for the customer, then it doesn’t really matter, you have written all this, not only have a written a product for nothing but you have written all these extra tests for nothing as well. So I think it depends a lot on how sure you are of that market and your ability to sell into it and as time marches on you really want to make sure that you are putting some of those tests in place. I am at a point right now where I am actually looking into potentially hire somebody to just write unit tests because there is a lot of–there are some core libraries that I wrote that I have some unit tests in because I knew that those would not change and then I kind of backed off from unit testing for a while and now I am at the point where I am revisiting it and going back to it, maybe that’s the right answer to my situation but it may not necessarily be the right answer for your situation.
[12:56] Rob: Yeah, I have written a lot of code without tests just because we didn’t used to write tests, right, I mean it wasn’t until 2006-ish that I started really hearing about TDD and started implementing it around 2007. It is a learning curve. Like when you first start it takes a long time just to figure out how to write tests, what to test, you become effective at it, you get faster at it the more you do it, it s a learned skill and so that first uphill learning curve is pretty steep but then you get better at it. I have heard estimates that its around 20% additional development effort. So if a feature is going to take 10 hours, it will probably take around 12 hours if you write tests. For me I will never have another piece of software written without tests, especially not a SaaS app, we have full test suites literally in the thousands for Drip and it has allowed us to make some major changes to the app without too much worry that things were going to go bad and trying to go back now and write the Drip test suite would be an enormous amount of time, it probably would be a developer or two for a month and I don’t think they would do as good a job as Derrick did as he went through the code, because you know, once it’s all fresh in your head, it’s easier to write the test. With that said, I do agree with Mike that it could be viewed as premature optimization by some. If you are building a prototype, you are entering a really uncertain market, yeah, it can be faster to release software without tests, but for my money anything I launch I am going to probably stick with it until it works and if you are going to have multiple developers working on a project over time, if you are going to keep it around for multiple years and if it’s going to be a somewhat complex and critical app that you are going to make your living on, by my vote I will never have another one that does not have a full test suite, and in fact we are in the process, we are almost done, rewriting HitTail in Rails, I am going to moving it to over to Amazon ec2, so I don’t have to deal with classic ASP anymore and that was one of the reasons that I wanted to do that. One of the pros to it is that we have just a massive test suite now.
[17:03] Mike: One of the other benefits of having that test suite as you write it and this is kind of one of the clear benefits of test driven development is that when you start making changes in your own code, you can know whether or not you broke stuff in the core that you may not have tested fully and I will give you a very specific example from AuditShark is when I was writing all of those unit tests because the core of AuditShark uses this essentially a scripting language that I wrote, I test a lot of things in the scripting language to make sure that it still works and there was one point where I was making some what I thought were relatively minor modifications to how the engine was operating essentially make it more efficient and I ran it through the test suite and it broke like 200 different things and it was not obvious that it broke them. This very, very small piece that I thought was just an edge case, I literally didn’t even think too much about it. I was like, Oh! I will get to that and then I forgot about it and it was that edge case that bailed me. And there were couple of hundreds of these things that just failed and I wouldn’t have noticed it unless I had that test suite because I was doing some very small tests and saying, okay, does this work or does it not, and it does but as soon as you start running it through all these edge cases which test suites tend to exercise those edge cases and they will do it a lot more efficiently than you ever will by hand it will catch all those things. So it could have been almost disastrous had I kind of rolled that out, and not really thought about it, I just threw it in here and then 3, 4, 5 months down the road, I found out that there is all this stuff that just doesn’t work, it would have been so much more difficult to find that.
[18:34] Rob: Thanks for the question, Ben. Hope that helps. Our next question is from Jim Monroe and he says “Hi guys, as always fabulous show. I went back and listened to an older episode, I can’t remember which episode, where Rob was talking about a funnel to convert a mailing list to a group of customers who are interested enough to pay for early access.” So I think Jim is talking about as I was going through the Drip process. Jim says “I am not sure I understand this transition process, can you elaborate on, #1, how to identify the best target customers you’re your list? Do they self select? #2. Assuming the product is a minimum viable product are you just having them pay via PayPal, I don’t have any payment methods setup, and #3, how do you go from asking if they would pay for the product to actually agreeing to drop money and get early access to what is probably not a complete product yet.
[19:19] Mike: So I think there is couple of different ways you can do this. If you are using something like MailChimp and I assume that Aweber and Constant Contact have very similar mechanisms. But with MailChimp you can actually see who is opening the emails and who because they rate them with a star system to see kind of how engaged those people are.
[19:37] Rob: You can do that in Drip too I will just note.
[19:39] Mike: So you go in there and you take a look at those and you can essentially eyeball it and that’s how you select those people because if people are skipping over your headlines and not even opening up the rest of the emails that you are sending to them, then chances are really good that those people are not your “best” target customers on your list. In terms of targeting those people and trying to find out more information about them to kind of really see who is and is not a good fit, because if you talk to any of them one on one, they are going to seem like a good fit but what you can do is you can find those people who according to the statistics say, hey, this person is actually opening the emails or interested, send those people a survey of some kind and ask them some very specific questions and you can almost cross-section the people who are on your list to find out what criteria they match. How are these people similar to these other people over here, what are the differences between them? So maybe one person runs Windows, another person runs Linux. Maybe somebody does SaaS development, somebody else does desktop development. There is a lot of different ways you can kind of cross section them and once you figure that out, you map those back to essentially figure out who your ideal customers is, who is going to be the best person and the most likely to pay for your product, those are the people that you want to go after and those are the ones you want to ask, hey, would you pay money for this right here? Whether the product is complete or not, if you are actually solving their problem those are the ones you want to try and get to pay for it.
[20:58] Rob: So when I was working with the launch list for Drip I really had two lists, I had this list of about 17 people who I knew in some form or fashion had committed to at least trying Drip out and they were willing to pay for it and those people I communicated with individually one on one and each one of them I onboarded manually. I told them they would have to pay for it eventually, the price would be X, and I named a specific price, but told them that they could try it as long as they need it without paying until they gotten value out of it. Then I had this launch list of 3500 people by the end and that launch list is more something like Mike said you have to start looking into and start trying to see patterns. Opens is one good metric to be able to see how people are interacting with your stuff. The other thing I did was I emailed a survey that we discussed in an episode, is around the 130s or 140s where I talked, I called it a customer development survey, it essentially asked what their biggest pain points are, what they were hoping Drip is going to solve for them, now anyone who responded to that instantly becomes a much more interested party to me and I think around that time I had somewhere between 1500 and 2000 on the list and I got just under 200 responses, so that was a nice chunk and then from there based on the responses I could sort even further and actually have real data individually and I asked them for the email in the survey email with just a Google spreadsheet with a Google Form over it. So it’s very simple to set up. Now that I had their email again I could then map it to individual people and I started talking to those people one on one as needed and the people with whom Drip was going to have the most resonance based on what we build, those are the folks that I contacted sooner, and by the time I contacted them I was already through 3 or 4 months of early access of these other 17 people and so I did ask for credit card upfront and at that point I did have like 21 or 30 days trial by the time I got down the line with the bigger list. Jim, I appreciate you writing in and I hope that’s helpful.
[23:01] Rob: Our next question is from Margo Kaypax [ph] and she says “Hi, Rob and Mike, I have been a long time listener of your podcast and you have motivated to bootstrap my own businesses. It’s more than motivation, I have been taking little bits and pieces from you every week, thanks for that. I am writing because I have started to work on having someone produce content for my sites and most important an email newsletter. What is your favorite newsletter tool to handle email newsletters from start to finish? Over the last 24 months, I have seen so many businesses that offer this service and I am unclear which is better than another and why. What is your criteria for choosing a tool, is MailChimp still the best? Which is your favorite and why? Thanks for everything, Margo.”
[23:37] Mike: I will tell you what I use. I use a combination of MailChimp and Drip and there are two reasons for that, one is because MailChimp was around long before Drip ever was. So I needed a newsletter tool and essentially MailChimp fit the bill very, very well, they will give you couple of thousand emails subscribers up front for no cost, if you want to get rid of their logos and stuff you have to start paying it around the 500 mark, but even then once you start paying, it’s only, I think their pricing starts at like $10 or $15 a month or something like that, it’s fairly inexpensive. The problem that I see with MailChimp is that they don’t necessarily give you the fancy things to put stuff on your website to drive people into the list and that’s partly why I use a combination of Drip and MailChimp. I will say the line is starting to get blurred but obviously Rob is kind of going in a different direction than MailChimp with his marketing automation. So I think the two of them serve, I will say, different purposes and obviously there is different price points as well.
[24:32] Mike: Some of the stuff that I do in Drip I actually take those and hand them off over into MailChimp and then there is other things where I just leave them in Drip, depends on what I am doing and which is the lists that I am working with but I do use a combination of both. I don’t think that there is a best one out there, there is no best one, it’s really which one meets your needs and which one is simple to use. I mean you may very well start off using one particular product because it’s easy to get into but then as you use it more and more you start to find that there is limitations around it and you just can’t use it for everything. So for example, very early on, one of Drip’s limitations was that you couldn’t really put in any sort of template and then that got added in. So over time, a lot of these the downsides and the cons of going with a particular piece of software can go away, unless you have gone back and reevaluated them, probably not going to see those. So for example, if I were to look at AWeber today there are probably things in there that I didn’t know they could do or they added in there that I never noticed before because I am just not a customer of theirs. So your needs change over time, the tools change over time and what’s best for you today may not be the best for you in 2 or 3 years. That said, you can sort of end up with little bit of vendor lock in just because you get on to a tool and you are there for so long, you have got all these processes and procedures in place for using that tool. It’s integrated in all your different websites and applications and then it can be hard to get out of that because it takes so much engineering effort to walk away and use something else even if it is a better tool for you at that time, I would say especially if you are early on pick one that is easier to get started with and just understand that your needs very well may change and the tool may not do what you want it to do later on and that’s just life, every single tool is like that, whether it’s email newsletter or whether it’s a CRM package or database, doesn’t matter, I mean your needs change, products change.
[26:26] Rob: Yeah, I think if you are just getting started and you are going to be building a list probably fairly slowly and you just want to send a few broadcast emails I would go with MailChimp because it’s free to 2000 subscribers, it’s perfectly fine for sending broadcast emails, it really works for beginners and I think don’t waste time paying for a tool for six months while you kind of figure this out and build your list slowly. I do think that MailChimp it is limited, you may hit a point where you want to do more exotic stuff with your list and if you even get auto responders going it’s kind of a fiasco with MailChimp, the UI is not clear, there are just some issues there, so that’s where you look at a tool like a Drip or AWeber’s UI is not great either, but there is like Vero and customer.io and companies like that that are doing some to there things and help you send auto responders and the UI is much easier to use. We all have more advanced automation stuff but if you never get there then MailChimp could certainly service your needs well for quite some time.
[27:32] Rob: Our next question is from Boris and he says, “I have developed a SaaS app, its skyfeedback.com. It allows businesses and customers to communicate instantly and privately via SMS, I just launched about a month ago, I ran a Google AdWords campaign and so far no customers, expect it was only used during a church conference and it worked great. I have a question, what is the strategy to advertise something that businesses are not searching for? I find that SMS customer feedback is something people do not search for and I feel like this service has to be explained and sold through a sales agent, am I correct in that assumption? Thanks for you advice, Boris.”
[28:10] Mike: It would seem to me that something like a SMS customer feedback mechanism, software service is probably going to be something where you can’t justifiably charge a heck a lot of money for, it seems like it would be a relatively low price point, by low I mean less than $30, $40, $50 a month or possibly a year, it kind of depends on what customer segment you are going after, and why it is that they are using the service, what problem is that they are actually solving. So your example of using it for a church conference and it works great, it seems to me like the price point for something like that maybe either free or something that maybe they pay $10 for it, that’s not something that you are going to be able to use sales agents for. I mean you are not going to have a sales rep come and start making all these cold calls and trying to sell it for $10 a pop or $20 a pop. It’s just not going to work, especially if it’s one time fee. So I think you need to little bit more digging and find out who is actually having these problems and dig a little further than that to figure out what is the value of getting answers to those things, why do they want that feedback? Is this the only way to do it because I think what you will find is that for example on a church conference or any given conference for example, the way to get feedback is one is to send him an email and point them to a Google Form which is great, what is this SMS tools have over that, what are the advantages of using your mechanism versus something like that and really try to position yourself against them and figure out whether this is even viable because from my standpoint I am looking at it and saying, well, if I were to use this at a conference, I don’t know is a SMS message out to people is really the most effective way to get information back from people because you can send it out to a bunch of people, you are not going to get it back in real formatted mechanism and you are going to be limited in the number of characters that people are willing to type on their phones. So those are the things that kind of come to mind and I know that that is not a direct answer on it but it seems to me like customer development around the actual problem itself is really where you need to go with this.
[30:10] Rob: Yeah, I would agree with Mike, this feels a little bit like a solution in search of a problem that’s not ideal now that you have launched but it’s not the end of the world and you have to go find people who are having this problem and niche it down. That’s what I would start with. Because your home page says this is for businesses and customers to communicate and that is just way too broad, so if it’s conferences or conference organizers that are going to put this on or if it’s churches themselves or if it’s meet up groups, or if it’s SaaS apps, you figure out who needs this, where this really is a pain and this really improves their experience find those people. Yeah, you are not going to be able to advertise to them because they are not looking for it, but once you find who they are then you know where they are. You can look in on LinkedIn groups, you can find them on Facebook and post ads there, you can post ads through something like BuySellAds once you find out what types of sites they frequent, you can go directly to trade sites and buy ads there, you can go to trade shows. I mean there is all these ways to do it but you have to know who your customer is. It is a big advantage if your customer is actually searching for the thing you offer in a generic way and you can just do SEO and do AdWords and get to the top of Google and get clicks but in your case, that’s not the case and a lot of business don’t have that and instead they have to target a market rather than targeting the customer as they are searching for it.
[31:32] Mike: Something like this it might be best to kind of figure out who your ideal customer for it would be, and the one that kind of pops into my head would be radio stations and for something like that you could presumably use a sales rep of some kind because it would be easier to track down radio stations and find somebody in there but as people are talking on the radio they have got this giant audience of people that they are talking to and they could ask them stuff. They could poll them for information, so they can run contests like very, very quickly using this type of tool but you would have to explain to them the benefits and maybe put a working prototype in front of them and let them use it for a month or couple of weeks or whatever and teach them, you would have to onboard them but that seems to me that might be a better fit and that kind of goes towards a profile where you have got this one business to many customers relationship, it might also work for companies like Dunkin Donuts where they have got a coffee shop on every corner and they want to send an SMS message to people, maybe to integrate with geo location, maybe not but those are some things to think about. I mean you need to find out who is actually going to use this and what problems you are trying to solve.
[32:37] Rob: So hope that helps you out, Boris. Our last question today comes from Mark Stevens and he says, “Hi! guys, I was interested in your comments on FogBugz. I think I probably signed up for the same business software conference as Rob, I wondered if you could expand on what you think it now lacks and what newer tools are offering.”
[32:55] Mike: I think for me there are a couple of things that I would say FogBugz lacks, and the first one is on the service desk side. So using FogBugzas a customer support mechanism is passable, it does work. I wouldn’t say that it’s the best tool in the world for it, so it’s just not as nice as I would like it to be from a customer perspective. I can’t really integrate a widget onto my website or into my SaaS app and allow people to interact with that and essentially talk directly back to FogBugz. Now they have APIs, I could do it, I could engineer something but I don’t want to have to. I mean I am already paying for their software, I don’t want to have to pay for this add-on and I would have to engineer it probably from scratch. Couple of other things is their Kiln integration I think is pretty good but I would also like to see something where you can get – you can either subscribe to or get notifications of some kind, maybe their web hooks or something along those lines, for when check-ins happen. For example, I mean I have a bunch of people working on things. I actually use BitBucket in some cases because I want an email notification whenever somebody checks something in and I want to see information about that check in who did it, which repository it went into and those kinds of things. So those types of things I think are very, very helpful and I think that they could take those things there, I am not allowed to switch just for the sole reason of getting some of the things because then I lose a lot of history and I lose a lot of other stuff as well.
[34:17] Rob: Yeah, I have several in mind as well. We use FogBugz a lot. I use it for both driving development like product management as well as for customer support and there are few things that I found are like limitations these days. One is there is no mobile app and really the mobile web interface is terrible, and so I often check email on my phone and whenever I have a FogBugz issue, I am kind of screwed because I can click through, I can kind of read the issue but then try to do anything with it is a pain and I know that if someone built a really nice web app I am sure Zendesk or Desk or Snappy or somebody has a good mobile app and makes this actually usable.
[34:55] Rob: Another thing is I would love to be able to and I don’t know if anybody does this one, but I have thought of this a lot. I get the issue in my queue and in my email to be able to reply to it and actually reply have something appended and then assign it to someone would be amazing via email because I can do it all within my gmail app on my phone. That’s something I found just to be a limitation is that when I am on mobile it’s kind of a fiasco. Another thing is it is pricey compared to other solutions. Check out a solution like Snappy, at besnappy.com, that’s from Ian Landsman at UserScape and I think they would be 10 bucks a user, 15 bucks a user, so quite a bit cheaper than FogBugz or half the price and a lot of the other helpdesk systems are similarly less expensive.
[35:41] Rob: I find that not having a knowledge base built in is kind of a pain because I would love to be able to resolve an issue and then just move it into a knowledge based article kind of beef up my response and migrate that in to have a searchable knowledge base but instead I have a third party knowledge base that I am using and I have to migrate stuff manually over there. The UI of FogBugz, I think is out of date. It’s kind of slow, it’s kind of Ajax, but it was built really what? 10 years ago and they added Ajax onto it, so it’s just not as usable, not as fast as like a more modern system would be and there are a couple of other things mostly around CRM stuff. Like we use it for support. I would love to be able to attach notification like attach an email to an issue so that often times five people will request a feature and I am just adding them manually into the issue itself and then I go in manually and email each of them but I know there are systems where they request a feature, you add them into a notification list and when that thing is resolved then they all get emailed and it says, this has been built and it is done per your request. So it’s more of an automated process, it’s more strongly typed. And also really in terms of CRM type stuff and unless I see someone’s name and recognize it, I have no concept when I get a new support request, all I see is an email and a name and so I don’t know like, is this person a customer, what plan are they on, how long have they been a customer? How many campaigns do they have? How long have they been using their app, all of that stuff, and I know that there are apps that will integrate with it. They will give an easy API and I could pipe some of my customer data in to make it just – give me a bit more of an intelligent view of who I am actually supporting, and what they mean to my business. So those are actually 4-5 things mostly off the top of my head. I would guess there are systems out there that are doing most of the things I have said but since we use FogBugz, I don’t really have a recommendation but surely if you have one, it would be good to see it in the comments for this episode, episode 190.
[37:40] Mike: Well, I think that about wraps us up for the day. 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 Out of Control by MoOt, used under creative comments. You can subscribe to us in iTunes, by searching for startups or by RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 189 | Founder Hot Seat with Matt from Quote Manager Pro
Show Notes
- ZipGrade – iOS, turns a teacher’s iPhone into a scantron grader
- Use Twitter Lead Gen Cards to Boost Your Drip Campaign
- David Hehenberger’s WP Plugin business, FatCatApps
- Our hot seat guest was Matt from Quote Manager Pro
Transcript
[00:00]Rob: In this episode of startups for the rest of us, Mike and I have our first ever founder hot seat with Matt from Quote Manager. This is Startups for the Rest of Us, episode 189.
[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 built you first product or your just thinking about it. I’m Rob.
[00:25] Mike: And I’m Mike,
[00:26] Rob: We are here to share our experiences to help you avoid the same mistakes we’ve made. So where we at this week sir?
[00:30] Mike: We have another bootstrap list in our success, his name is John from Zip Grade and he says, ‘I started listening to your podcast about two years ago while having a fulltime job in a commodities trading firm, each day I on my two plus hour roundtrip train commute, I started building an app that turns a teacher’s iPhone into a grading scanner. Last week I gave notice at my job so I can spend the summer focused on building the product and the company in time for the new school year in the fall. It’s a leap of faith, but with support from my family and friends, I think it’s a viable approach based on sales growth and research.’ And he goes on to say that he’s graded 1.6 million tests with his app and 15,000 installs and several thousand paying customers.
[01:05] Rob: Awesome, congratulations John. That’s really cool. We have another one. When I was in Scotland last week I met David Hamburger; he has a WordPress plug in business also a podcast listener. He quit consulting a while ago because of this WordPress plug in business, said he’s followed a lot of our advices about doing WordPress first, wants to do SaaS ultimately but he’s taken a bite out of it early and so he’s making enough revenue now. He’s kind of travelling the world, he’s in the tropical MBA crew, so he does a lot of perpetual travelling but I added him to our success stories page as well and he has a WordPress pricing grid plug in. You can check that out at fatcatapps.com.
[01:42] Mike: So in other news, Google hates me
[01:44] Rob: Why do they hate you?
[01:45] Mike: Well I have evidence in my Google Analytics account that they hate me. The panda update went out a couple of weeks ago and I apparently got hit by it.
[01:53] Rob: Yeah, Panda 4.0, yeah
[01:54] Mike: AuditShark seems to have been hit by it, but on the bright side, it seems like it’s coming back. About three or four days ago things went back to the way that they were and they’ve been there ever since there, since Friday
[02:06] Rob: You weren’t doing any funky SEO stuff there, were you? Did you build links or anything?
[02:10] Mike: No, I wasn’t. I think that what happened is that they pushed out an update and then it probably, you know, kind of like similar to some of their other ones where they push on an update and it goes a little bit too far and then they make some tweaks and then it pulls back a little bit and then puts some people from the red zone, back into the black zone.
[02:25] Rob: Right, Google hates me on any given month as well. So I wouldn’t feel too bad about it. I need a Postgres DBA. Do you know one?
[02:32] Mike: You know what; I don’t even know anybody using Postgres.
[02:36] Rob: Really, so they’re not easy to find. But if you’re listening to this and you are Postgres DBA, or I mean if you are a systems admin with heavy Postgres DBA experience, I need someone to help with. We are migrating an app from one system to Postgres and needs some optimization help with it and then get backup set up and then just monthly backup monitoring, so. I’m looking for someone freelance.
[02:55] Another thing I wanted to note is guest post went live today on Drip’s blog and its blog.getdrip.com, It’s a really interesting hack for building your mailing list for free using Twitter lead gen cards. I won’t go into the approach too much but it truly is a free way that if someone’s on Twitter, you can put this lead gen and pin it to the top of your feed and then if they click the Join Us, all they have to do is click the Join Us button and since Twitter already has their email address, it opts them in right away and you just paste certain amount of code in and this dude the guy who did it, put the submit URL for his Drip form right into Twitter and so it just posts it right to his Drip campaign and so just with one click, you can get people in there. And I’ve already seen a few tweets, someone said it was actually Derrick Bailey, he said that they received like a thousand opt ins in the last month. Really cool hack and it’s written up like in grave detail on the drip blog, I wanted to call attention to it.
[03:51] Mike: Very cool.
[03:52] Rob: Last thing I have, have you seen the TV show Halt and Catch Fire?
[03:57] Mike: I have not.
[03:58] Rob: Okay, so it’s a new show on AMC, it’s two episodes in and its basically, it’s very similar to Mad Men but instead of advertising execs, it is set in like 1981/82 right around the time that IBM PC is being developed and so its all about the people who are trying to reverse engineer the IBM PC. Basically make the first PC clone. So far it’s pretty good, it’s pretty well executed and they’ve invested in the writing and the acting for this show, so, very good show for our audience. Very good show for the nerd in me, the geek in me who likes to see a high quality show based on stuff that you are familiar with because they are showing all types of chips and they are talking about operating systems and using acronyms, VLSI and I’m like, ‘Hey I know what…I learnt about that in college,’ So I don’t know if it’s for everyone but I would recommend it
[04:43] Mike: Well the real question is, is it accurate? Because I’ve seen some of those shows where they try to act like they know what they are talking about and for 90% of the people on the planet, they wouldn’t know anything otherwise, but then they’ll get some of the acronyms wrong and you are just like, ‘Oh, dear God’..
[04:57] Rob: From what I’ve heard and what I’ve seen, they have a couple of consultants on the set at all times. There’s like an IBM thing at the very beginning and they got the exact same font and they wanted to replicate that in the display. So I think that they, as far as I can tell, they are holding pretty near and dear to that. They knew that it would be a bunch of computer people watching it, and they knew that we’d nitpick it. So I think they are being kind of cautious in that respect.
[05:18] Music
[05:22] Mike: So today we’re going to have a hot seat style interview with Matt from Quote Manager Pro and if you want to get in touch with Matt, his email address is Matt@quotemanagerpro.
[05:32] Rob: Yeah, I guess the other thing is that Matt mentioned after our interview that he is interested in finding a person or two for a Skype mastermind and so if you hear his story and it resonates with you, and you feel like you are working either slightly ahead or slightly behind him in a similar niche, like a related app idea, I would consider emailing him at the email Mike mentioned earlier because certainly getting together in a mastermind would be a good idea.
[05:58] Mike: So this week, what we’re going to do, we’re going to have sort of a hot seat style interview with Matt from Quote Manager Pro and what we’re going to do, this episode is going to be a little bit different than most of the episodes that we do and we’re going to have Matt talk to us about what his application is, how it works, what pain points it solves and what market he’s going after with this. And then we’re going to start asking him some questions, he’s going to ask us some questions about how he’s going to attack this market, and how he can take his product to market.
[06:24] Rob: Matt is prelaunch. He’s working on a product called Quote Manager Pro, it solves a pain point of his, and he emailed us out of the blue. Mike and I had been discussing it for a few months
[06:34] Mike: So Matt, I guess we’ll start off and how are you doing today?
[06:37] Matt: Doing well. I appreciate this opportunity to speak with you today. I’m really excited about it.
[06:41] Mike: Great, I think maybe you should give us a little bit of short description of the app and kind of what problems it’s solving.
[06:47] Matt: Sure, so Quote Manager Pro is targeted at the manufacturers around the world really. I’m focusing on the US, but really what it does is it allows for companies who are manufacturers that build assemblies, might be electrical assemblies, pneumatic assemblies, liquid fluid distribution assemblies, these types of assemblies when their quotes are put together for their customers, the process of going to get quotes for the line items, the components, the build to print items that go into that build is very manual. So it’s usually done through email. So it’s a process of emailing multiple suppliers for every line item.
[07:26] And then that estimator as it’s called in the industry, is waiting on that supplier to feedback information to them so that they can then make a decision about which supplier they want to award that business to and then they have to take that over and put it into a spreadsheet where they can add it all up, put it together, by multiple quantity breaks and then they have their total material costs. So Quote Manager Pro is going to effectively automate all of that. So the industry is a bit old school in its ways, so it’s going to be a bit of a challenge to educate the industry about this automation
[08:00] Mike: Based on that, what is the current status of this. I mean obviously as Rob said, you are pre-launch but is the application built, do you have any early access customers that you are working with, where are things right now?
[08:11] Matt: The application is in development. I’ve been working with a developer, and I outsourced the development to a company in India, that was mostly driven by cost. It’s about a month into development right now, and we’re targeting a release in, a beta release sometime in the August time frame. As far as who we’re marketing it to or who I’m speaking to or have been speaking to in the way of customers, I really really wanted to focus, before I even started any development, I wanted to focus on validating the idea with multiple customers. It solves my own pain because truth be told I have a day job to work, and I work for a manufacturer and I’ve had this pain. I’ve suffered with this pain for eight years, believe it or not, so it’s taken me this long to really realize that I should do something about it and I can do something about it. So, I went out and I contacted a lot of different companies in the industry, a lot it’s initially about eight or ten companies and just asked them, just by cold calling or people that I had in my network, I asked them, I educated them on the software and made sure that it was going to be something that would suit their needs like it did mine. So, it’s been validated and I’ve got a great response, there’s going to be some people that it doesn’t work for but I’m anticipating a large market that it will solve a problem.
[09:30] Rob: I’m curious, when you spoke to these eight companies, was it easy to explain. Are they all on the same page in terms of everybody using, I think u mentioned they used Excel to manage this right now. So when you called them up and you said, ‘Look the estimating process is this, I’m going to have software that’s going to automate that’. Was that enough or did it require an in-depth conversation where you really had to explain to them how you were going to automate this?
[09:56] Matt: It’s a pretty in-depth explanation, like I mentioned earlier, it’s kind of an old school mentality, so it’s a little difficult to pull people from that manual way of doing things with Excel and simple email to a SaaS solution. I dare not mention the phrase SaaS because nobody’s going to know what that means. It’s a good in depth conversation to have because they are experiencing the same pains. Like in a lot of cases, you don’t know you are experiencing a pain until somebody lets you know that there’s a different way of doing it. So those conversations have been successful.
[10:29] Rob: Okay, so if you spoke with eight or ten companies, how many of them told you, ‘Yes, this absolutely fills a pain point and solves something for us and we’d absolutely be at least willing to give it a look’.
[10:41] Matt: I’d say it’s at least 80%
[10:44] Rob: Okay, did you talk price, did you talk a specific price when you spoke with them
[10:48] Matt: Some of the customers I have, about four of them I had and they…something of this, it’s easy to demonstrate an ROI so, I did talk price with them and they said absolutely, that would be something that we would be interested in at that price point.
[11:04] Rob: Got it. And you have price plans from that. I see you have like a free plan, it’s pretty low usage, and then you have like 139 and maybe a 299 and up, right, so it’s enterprise-ish. Not true enterprise, but it’s kind of like it’s above the tiny little SaaS pricing which is warranted because this is obviously a high touch sales market. You’re not going to put up a learning page and gather emails and then run Facebook ads and automate split test your way out of this one. This is definitely a very time consuming sales process, long sales cycle and so the high price point based on what I’ve read about the product is definitely a requirement in order to just justify the time that either you or someone else is going to spend. Given that, how did you come up with the pricing?
[11:46] Matt: I can easily, like I’ve said, do some ROI numbers and say, if it saves a person…if it increases their efficiency by 10%, meaning it saves them 10% of their time, then I can easily calculate that on a monthly basis and therefore I have a value that I can put on it. There was a little bit of guessing, I’m kind of walking around in the dark here a little bit because I’ve never done this before. So I’m trying to use as much as an analytical well thought out model as possible. So I tried to use a mathematical formula like I mentioned to come up with something, but I also wanted to have a price that is low barrier to entry. There’s companies out there that have…I talked to a company a few weeks ago that’s got fifteen estimators, so that would be fifteen seats. In my plan that would be an enterprise level sale, but there’s others that are just mom and pop type of operations where they have one. So I didn’t want it to be a barrier entry to them either, because I think, like I said, it’s going to provide a lot of value to them as well.
[12:45] Rob: Sure, now I know we’re going to dive into marketing stuff. In terms of your pricing, it’s always in the dark. Every time we come up with pricing, you really- no matter how many times you do it, you’re kind of just taking your best guess to start with and then as you get feedback, you’ll be able to- as you get feedback and as you become more of a name, right? You’ll become a brand name at some point. If you launch and everyone going to start using Quote Manager Pro, then you can raise prices. So I think you’re fine for now. I would consider, and looking at prices, you have five plans. I would consider getting rid of the free plan just because I’m not a fan of free plans, and especially in this enterprise market. You can easily offer a long trial, right? because you can say 30 day trial or you can say 60 day trial or you can even get people in there and continuing to extend their trial as you work with them through the sales cycle. But I don’t know if many higher priced apps like this do a free plan, per se. It’s kind of off the books. It’s like call us, and they’ll give you a free plan while you’re adopting it, but once you start using it in production, you’re paying a hefty price for it.
[13:50] Mike: Yeah, I was going to mention that as well. I would kill that free plan. And part of the reason why I would kill that, I think Rob made some good points about being able to extend somebody’s trials for as long as you need. But the fact of the matter is that, because this is such a manual sales process, you’ve got to do a lot of hand holding for these people because most of them- you said yourself already, just in talking to people, there is a hefty amount of explanation that needs to go into it upfront. you don’t want them to say, ‘Oh, well this is great, but what I’m going to do is I’m going to use your product and because I can use the free plan and I don’t need to have files and stuff uploaded, I can just have them email me those files and then manually enter data or whatever’, they can kind of get around those things anyways. So I think that maybe you just want to kill that free plan to kind of by pass that issue. But also just kind of simplify your pricing because you’ve got five plans down there and I look at it and it’s just like, wow, you’ve got free, and then you’ve got pro and enterprise and enterprise obviously is going to be much north of a thousand dollars a month but then you’ve got zero on the other end, and it just- it looks awkward. It puts a weight on what the value of the product actually is.
[15:03] Matt: Yeah, that’s an excellent point, I hadn’t thought of it that way. The whole reason, my whole thought process of having- adding that free level there is to really hook people in at a low level. I am going to offer a trial, I was thinking fourteen days there and that’s just an arbitrary number; I’d love to hear your thoughts on that, I think you mentioned a longer trial period might be beneficial but again the zero dollars per month was going to be, as you see there’s a limited amount of disk space and a limited amount of bandwidth, so two things. One, it would hook people in to get people to use it, even if they think that they don’t need it. And then number two, once they reach those limits, they would QuoteManager Pro would probably be integrated into their processes and then they would want to- they would go to that first paid level.
[15:49] Mike: The thing is, though, I’ve seen like my uncle does stuff in the manufacturing industry. And I’ve seen some of the files and stuff that he deals with and you can have one file that will literally chew through 20 Megs and like three, four, five those and you could chew through your entire bandwidth very very quickly. So that free plan at that point kind of goes out the window. It’s not useful for those types of things, whether they are CAD drawings, some of those things can be just massive. You want to be very careful about some of those limits as well. I’ve seen people get scared off just by those limits, because they are like, ‘Oh, I’ve got these files that are huge, so I’m not going to sign up for this plan because it only gives me 10 gigs of disk space and I know that I’m going to need 40 or 50 and there’s nothing that kind of talks them through saying that that’s not going to be an issue because you can buy extra disk space or anything like that. And that’s not on here but that’s something to kind of think about or keep in the back of your mind. It depends on what specific niches that you are going after and what types of files they have, what size those files are. So I almost might back off of those limits until you kind of get enough customers in there to kind of figure out what the averages are. Because it seems like what you are trying to do is put the cart before the horse where you want to say, ‘I want somebody to move from 139 dollar plan to the 399 plan if they go over 100 gigs of space but reality is you might have these customers coming in and they might be chewing up either significantly less or significantly more.
[17:13] Rob: You are selling the not truly non-technical users they are not going to know what 100 gigs really is. Or what that means. I think that you’re pricing looks more complicated that it needs to be. It looks more technical than it needs to be to a non-techie. We all know what gigs are and I totally get it. But the storage is fairly cheap especially if you are using something like S3 or a server with a bigger hard drive. So I would agree with Mike at this point, I would probably remove the limits until you get ten customers in there using and paying it. then you’re going to be able to see the curve and you’re going to be like, ‘Wow, these guys are using a tremendous amount’ And even then, I don’t know that I would put limits as much as I’d just raise prices across the board. Unless you feel like they really understand what these limits mean, if you were to have these phone conversations with the eight people that you’ve already talked to and say, ‘Hey, you can have 100 gigs a file’, if they were to say, ‘Oh, I know exactly what that means’, then you’re safe doing it, but my guess is that’s not the case given the folks you’re dealing with.
[18:11] Matt: That is great feedback. Not to belabor this point, but the point of that was to number one to have a tipping point so that they would get over a hundred gigabytes and then they would have to go to the next level. Number two it’s a limit, just kind of as a safety precaution before we roll out in case they start using a huge amount. Then they would have to- because I don’t want the cost to be prohibitive. If its unlimited, and somebody’s using it- just blowing it way out of proportion, a terabyte, then I don’t want it to be eating away at the profit and cost more than it…
[18:45] Rob: That makes sense. I think initially, I think I would handle it- your first ten customers, you are going to personally be handling them the whole way to get them on and get them using it and I think during your discussions this is something that can be handled with nuance, because you can say exactly what you just told us. Right? Like you can say, ‘Look, there’s no hard limit’ or you can say, ‘Hey, the limit on all the plans is 500 gigs. Just kind of make up a number that you feel comfortable with. They are not going to know what that means upfront, and then you’ll be able to see pretty quickly as they start using it, ‘Oh, these guys aren’t using anything’. The limits may be irrelevant. Everybody may use less than ten gigs. Or if you get in there and it really is an issue, then the pricing needs to adjust to that, but I feel like you don’t know yet and getting your first five or ten customers in is not going to be- even if you are underpriced, it’s probably not going to take you under if you have maybe some kind of limit that you communicated to them at some point.
[19:38] Matt: Okay, great
[19:40] Rob: I’m back and forth on this. But I would consider not doing tiers to start with and just doing a per user pricing, to keep it really simple. And seeing how that goes. If you look at…
[19:51] Matt: Just a quick question if I can interject, Is there any industry data that talks about- that measures the effectiveness of projects, SaaS projects like this that have done on a per user basis or on a limits basis?
[20:06] Rob: No, I haven’t seen it. And the idea is that the per user, if it really is a per user thing, like that the more user who use it within a company the more value they get out of it and everything else doesn’t really cost you money, then per user is simpler and per user is better for your customer. It’s just because then they can come and they don’t have to get auto upgraded to a tier where, like right now you have a one user and then the next year is three users and the next year is five users, so when they go up to that second tier, it’s not ideal for the customer. You’re making more money, but they are not getting the value out of it, because they may only have two users at that point. So that’s kind of the push and pull. I don’t know any data about this or any studies anyone has done with it, that’s just how I think about it as I’m going into it. So early on before I have a brand name, before everybody loves my product and before it’s something that’s easier to sell, I would lean towards making it simpler especially for the initial customers. And thinking about not doing tiered pricing and making 99 dollars or 149 per user and then put a flat limit on usage and then allow them to buy extra disk space if they need it, it’s probably how I’d do it
[21:13] Mike: Yeah, I think if you talked to Patrick McKenzie, some of the consulting that he’s done in the past, he’s basically shown outright that if you- generally speaking, if you go more towards a tiered pricing model, you’ll make more money. In the early stages I don’t think you should necessarily be concerned about making as much money as you possibly can and optimize for profit; you need to optimize for figuring out what your marketing plan is and getting people on boarded and figuring out all the hurdles and the objections that they have and the way to do that is to remove as many possible things as you can so that they are not asking questions about stuff that’s totally irrelevant. So for example, when Rob and I were talking about the bandwidth and disk space, you remove those things and those questions don’t even enter their minds, just like, ‘what does 300 gigs mean? How much stuff am I going to have that I can upload?’ If don’t even show it, they are not even going to think about it.
[22:01] Matt: Right, got it.
[22:03] Mike: So we’ve talked a little bit about the application and what it does. I think the next place we want to go is to start talking about what sorts of marketing have you done so far. It sounds like you’ve talked to some early prospects; gotten some feedback from them about the fact that they do have these issues and they are willing to pay for it. What sorts of marketing plans have you put together and road maps have you laid out as to where you think you’re going to be going next with the product and how are you going to reach out to people?
[22:30] Matt: This has been an area where I’ve struggled in the past. I like to think that it’s coming together a little bit better with this project but I’ll just let you know where I’m at. So I’ve kind of segmented the marketing approach into stages. And one is prelaunch, and then post launch and then onboarding and then retention. Really the marketing for reasons that we’ve already talked about, the most effective marketing that I’m seeing is calling. Is talking to people. I’ve done some emailing using my ISP, but then I’ve recently started to use a CRM package to do some emailing and that’s not been effective. [23:08] There have been a few people that have responded but generally people either don’t open the email or maybe 20-25% open it and I get very very few responses. So, it’s been a challenge. I think a lot of the marketing plan that I have, I’m finding that it really is intertwined with the tools that you use. And that’s CRM tools and also marketing automation tool. So this is an area that I’m having to quickly learn about and how to utilize the tools that are out there, they are relatively new tools to me since my last start up which was iPhone apps in 2009, I think. So since then, a lot has changed and I want to utilize those as much as possible.
[23:50] Rob: Yeah, I think before we dive into marketing or as we go into it, I guess the question in my mind is, have you solved a problem yet? I feel like we’re still- you know that you have a problem and you know that you are building a solution for it. How can you validate with those, you said you called eight to ten people, 80% of them said they were interested, so let’s just say they are seven people. Seven people that said yes, they are interested in this. What’s the quickest way or easiest way to talk to each of those seven now and figure out if what you are building is going to solve their problem? Because we don’t know that yet. Is there a way to get them screenshots of what you are planning to build or what you have built, have they already walked through that? Or is that all done?
[24:35] Matt: So yeah, I get what you’re asking now. So no, the answer very quickly is no, its not- the development is not at a level to where screenshots are ready. I do have some wire frames that I just made out in PowerPoint and they are really kind of awful to be honest with you. I’m not much of an artist but they get the point across to a developer. I’m hesitant to send those wire frames out to potential customers because I just don’t want it to look bad. I don’t want them to get the first impression that it’s going to look horrible like this and then that’s it for them. So I’m actually waiting to the point where those screen shots are available and that will probably be, I’m hoping six weeks or so, six or eight weeks and then I can use that as a tool in my marketing efforts. As of right now, I’m just smiling and dialing as they say, when I can I’m calling people and I’m really introducing myself as a software entrepreneur and getting feedback and letting them know with words here are the features. That’s all I have right now.
[25:33] Mike: You said you work in this industry, the manufacturing industry, correct?
[25:38] Matt: Correct.
[25:39] Mike: So you have seen, not competing products, but other types of software products that they generally use, right?
[25:46] Matt: Not really. As I mentioned earlier, it’s very manual. Its email and Excel and some people have given me feedback or sent me screen shots of their own systems of doing it and I’ve validated that they are doing the same thing that we do.
[25:58] Mike: Okay, I guess what I wanted to concentrate on was not sending them screen shots and things that you have so far because I’ve done some work in the manufacturing area and I’ve seen some of the stuff that they use and some of it is just God awful ugly. And that’s being nice.
[26:15] I don’t know as I’d be too scared about that, sending what things you have, because what they’re ultimately end up seeing is going to be better. And I know you said you did these in PowerPoint, I might recommend using something like Balsamiq Mockups to build the UI and present those to them, because then it’s very clearly a mock up and it doesn’t give them the impression that it’s done. And that’s one of the key advantages of using something like Balsamiq. And it’s only I think 80 dollars or something like that for a license. But you need to just build these screenshots and send them over to them and say, these are the thing that you would use. And you don’t have to build everything, you can just build the pieces that you think are going to be most interesting to them and show them generally how it’s going to work.
[26:56] Because they are going to want to know, ‘what is the process for using this product going to be like, how is it going to integrate into my system and how is it going to integrate into the process that I currently use. As manufacturing, they are probably not going to want to change the way that they do things and you need to know that upfront. you need to know what processes they are currently going through, you know generally what they do, but there’s probably a lot of nuances that you’re not necessarily aware of between the different companies, You’re going to need to account for those. And my concern would be you spend the next couple of months building this thing and it matches for you but they may do things in a slightly different order or just different enough that it makes it difficult for them to sign on because now they have to change their process. And as you said, they are old school, they don’t want to change but that’s going to make it difficult for them to say, ‘Hey, let’s drop what we’re doing and sign on to this.’ Because they don’t want to change what they’re doing now. They want to make it as seamless as possible.
[27:53] Matt: Right, okay. That’s great feedback. The bigger problem is how do I manage my time? How do I accomplish things with a limited amount of time? Because I’ve got a day job, so, I’d love to hear if you have comments there.
[28:05] Rob: I think you have three risks that I see. The three biggest risks are have you really solved the problem. And you don’t know that for sure yet. I know that you know you’ve solved your own problem, but it’s going to be another month or two until you know if you’re able to solve every one’s problem, the seven people you have on the list. So that’s something I think you want to answer and eliminate as quickly as possible. The next thing is, just the adoption rate of non techies, non-technical folks don’t jump from app to app, it’s going to be an enterprise sales process and it’s going to take months and months of working with each client to get them to sign on.
[28:42] Now, the good side of that is if your pricing is structured accordingly, it’s not going to matter, because you’re revenue is going to grow. Even if you want to sign up one new customer a month, if they are paying 300 bucks a month, that’s actually, a decent growth rate for a really early SaaS app in a market like this. In a non-hockey stick market. That’s your second risk. And I think you’re probably well aware of that, that you’re not going to be able to put up a landing page and get people to sign up directly from it. I would take some hints from companies like Hub Spot or like MoreAware software. I don’t know if you’ve been to MoreAware software but Ted and Harry are friends of ours, longtime MicroConf antendees, and they sell software to countertop installers. And it’s a similar audience, it’s more of the construction of the industrial area, People do not buy from the website. Ted and Harry don’t do SEO as far as I know.
[29:32] If you go to their pricing page, there are some pricing grids, but then its call to buy. Because the almost always, not almost, they always have to walk people through it and tell them what it does. There is like a pdf order form but the reason they don’t have the try online or anything like that and the reason that I’m not wild about you having a free plan or even having a defined free trial, is that you’re going to be dealing with each person one on one and so you’re going to be able to decide what they need and give them that individually. That’s much more of what this is going to look like, so, I think that’s the second risk, is just figuring out how to optimize this sales process and I think taking hints from Hub Spot and MoreAware where you’re trying to get people to do a webinar, do a phone call, do a demo, that’s what’s going to sell this. Not them reading a sales page and clicking a free trial, because they are not going to take the initiative to do this because what they have works now, it works well enough and it’s a pretty big commitment for them to get into new software and then try to sell their company on it, their boss on it and all that stuff.
[30:34] So I really do think it’s going to take time with you or someone that you hire truly sitting down and doing a sales gig. Those are the two big risks. The third one is exactly what you just said, your time on a weekly basis. You have a full time gig and so you’re going to be trying to tackle this market that is going to require a lot of time for each sale and you’re going to be trying to tackle it on nights and weekends, presumably. And I think there are a number of ways around it. So, I’ll throw one out. I read through your emails because you talked about this at length and it was helpful for me to think about it today. I think you have two options. One is that if you have money, if you have some money saved up, that you need to hire someone to do this. Someone how is experienced enough at sales and who is hungry and who is willing to learn about your product and really take this thing forward.
[31:26] I think this is a risky approach. I don’t know anyone who has made this work, who has not been- typically the best sales person is the CEO, it’s the founder, it’s the first person, because they know it, so no one’s going to sell it as good as you. And especially in these early days, it’s going to be really really hard. So even if, let’s say you found a top- a really good software sales person, and don’t get me wrong, software sales people they make a lot of money. There’s a lot of money in software, so you’re going to be paying top dollar. You’re not going to find someone on Odesk for fifteen bucks an hour to do what you need. You may be able to piece some of it out into just doing a demo of it; you can farm that out to an assistant or to someone but you’re not going to sell software in these early days unless it’s someone who’s really hungry for it. I just don’t think it’s optimal at this point.
[32:10] I think the next best solution is for you to either have the time to do it, to make the time to do it or for you to find a cofounder. I’m a single founder and I’m not often telling folks to find cofounders but someone without equity in this venture, it’s going to be hard in these early days unless you think you can scrap it through. Because here’s the thing, if you scrap it through and you do this early customer development on your own, get those first ten customers in, at that point, you may have a sales process that’s down and that you know well enough. And the product may be mature enough and by then let’s say you have ten customers, and average monthly is 300 bucks and now you have three grand a month to play with in addition to whatever extra from your salary, you have a little bit more. So if you can scrap it out just for the next x months, let’s say takes you six months or nine months to get the first ten paying customers in there, I do think you’re in a better position at that point. You’ve also reduced risk, so then the equity you have to give away is lower. That’s kind of my initial thoughts
[33:06] Mike: One that I found helpful is targeting customers who are not in your time zone. If you have a full time job that you’re working eight to five or nine to five or something like that, then presumably everyone else is kind of working on a similar schedule and what you can do is once it gets to the end of the day, you can go up to your car, go on your way home or if you live close to the office, you get home quickly and you can start making calls into customers who are in different time zones. So I’m on Eastern Time and if you go to Google and you just search for manufacturing in California or manufacturing in Oregon, or manufacturing in Washington State, search down there’s probably a handful of links that you’ll find one from Wikipedia that lists a bunch of manufacturing companies that are based in each of those states.
[33:51] Now on Wikipedia, there’s literally a category that’s called manufacturing companies based in x and it’ll show you whichever state. Go through those lists and start targeting those people. Because what that’ll do is that’ll give you a couple of extra hours where you’re at the end of the day, you’re off hours for your company and there still working because it’s still three o’clock there or four o’clock there and you can make those calls which is still very regular business hours for them, but it’s not for you. And they’re not going to care one way or the other. So that gives you a good starting point to be able to get in front of those people and talk to them in a way that fits everyone schedule
[34:27] Matt: Yeah, I agree, great feedback and that’s actually something that I’ve had success with. I do- I have been doing that where I get to the house at 5:15 or so and then start calling and it’s 3:15 on the West Coast, so that has been successful for me and some of these customers where I’m generating interest with have been on the West Coast. What about hiring- I’m kind of concerned about your comments that you can’t find anybody on Odesk for fifteen bucks or whatever. I’ve dealt with people oversees the whole time I’ve been doing startups which is probably ten years or so, but there’s only been two startups but anyway, I think it’s more prevalent now and available to us now as a group of entrepreneurs but are you really sold on the fact that there can’t be somebody in say the Philippines that would be able to do a decent job for appointment setting or something.
[35:17] Because, if I’ve got a huge list of potential clients, I need to weed through those and categorize them out, the ones that are interested or the ones that have zero chance
[35:26] Rob: Got it, yes, I definitely think you can find someone to do that. Just to do the initial call and just train them to answer some very basic questions and do a pitch, yes, I do think you could find someone. I have not personally done it. I know some folks who have hired people to do that – assistants and such, I do think that’s probably a viable way, is to figure out what can you strip away. There’s the core sales gig and you kind of need to handle that right now, but what else can you strip away. And there’s actually a service, there’s a couple of services that have cold emailed me and maybe when we’re off the call I can look for that because I have them in a marketing doc somewhere, but they’ve cold emailed me and they said they are like an appointment setting service.
[36:04] Matt: I try to be as realistic as possible with my situation and realism is that I’m busy all day long, so I’m trying to find resources and ways that I can work around that. So I’m actually already using a person in the Philippines to do some web research and find companies. That list that I’m calling off of, she’s doing a great job with that and that’s very inexpensive to do. But the next level I think is that verbal communication with a potential customer, so yeah, I would appreciate any type of service or something that you might recommend or if anybody could recommend a service that I could use, or they have used that would be fantastic.
[36:42] Rob: Sure, feel free to post that in the comments for this episode. It’s episode 189.
[36:48] Matt: One thing that I hear a lot in podcasts is sort of the theoretical things about how to set up marketing programs and the different stages of marketing and the ARRR model and the get keep and whatever, I can’t even remember anymore, but I don’t hear a lot about the tools that are used- that companies use successfully to make that happen. I’ve heard marketing automation is something that I’ve just in the past few days started to do some research on and there’s things like InfusionSoft and there some other ones that can be fairly expensive, so I want to try to avoid that expense as much as possible. What recommendations do you have for integrated CRM and marketing automation tool to get the word out but also to help manage the existing customers and the potential customers?
[37:39] Rob: I’ve got to be honest; I think you’re getting ahead of yourself by thinking about marketing automation. Split testing, all of the marketing stuff that comes with scaling, you are months and months away from that.
[37:51] Matt: I don’t disagree, I like to be- take a systems approach towards a project as much as I can so I like to set up early for that, so I don’t have to come back later and set up. And now since the project is in development I figured that that’s one area that I can try to set up or at least have an idea of which direction I might want to go. But I don’t disagree with you on that.
[38:13] Mike: I think the issue though is that by spending the time on that now, you’ve already said flat out that you’re strapped for time. If you’re going to spend time going after that aspect of it, what are you not getting done that you could have spent that time on? Because six months, nine months down the road, once you get in a better position, your needs may very well change and chances are really good that they will change which means that all the time that you spend now is completely wasted.
[38:38] Rob: yeah, and I can throw out some simple recommendations that will help you in the present day because even if you only have ten people you’re talking to, having a very simple CRM just to weave people through the funnel I think could be helpful. And there’s something called Pipe drive, pipedrive.com that I would take a look at. It’s probably stripped down just enough that it’ll work really well for your solution. Certainly something like Sales Force is going to be way overkill, its way expensive and it’s complicated. But you’re doing a sales job now for probably the next six months, rather than a marketing job. I think building an email list, you could sign up for MailChimp and throw a form there, you could sign up for Drip, and put a drip email capture form, probably worth doing, might take an hour or two. I’m building marketing automation into Drip right now; we’ve just launched some of it, so that could be a less expensive. Because InfusionSoft is about 200 bucks a month, Drip is like 50 bucks a month and we’re going to raise prices soon, but all of that really just feels too early. I don’t feel like you know yet if you’ve built something that people want. And the premature optimization and the losing of even a few hours a week is not something I would recommend at this point I think.
[39:48] Matt: Okay, so maybe focus more on continued validation and then just potential sales.
[39:54] Rob: Sales, yes. Because marketing and sales are obviously two different things and you’re talking about marketing automation, which is down the line. You need to just start that marketing- that funnel optimization and all that stuff once you’re starting to scale. And who knows when that’ll happen. You’ll know when it happens but you may never get there. A lot of apps never get to that point where they can actually retain someone, retain enough customers to make it worthwhile. I think sales and investing into sales and investing into lead gen, you’re already on that track. You know where you need to go with this. Everything you said indicates you know that you have to do high touch sales and you know you’re going to have to spend a lot of time to do it, the more leads you have in your funnel, that would be great. So if you can figure out a way to easily do that I think the way that you found that works is the cold calling for now.
[40:38] Obviously in bound marketing is going to be something but is very time consuming to do that. And are your people going to be online? Are they doing any types researches? Is it worth doing SEO for some of these terms? You don’t know yet. It could be worth some research, but I don’t think it’s going to be a high volume of leads, but if you’ve done some keyword research at all and seen if there are any searches for your software, you would have to know what that term is. It’s kind of estimate software but it’s very specific for manufacturers. I think there’s perhaps some value in there but I would hate for you to go down the rabbit trail of writing a bunch of articles and setting up a blog and then not getting any traffic and cold calling would have yielded you several thousand dollars a month in revenue by that point.
[41:22] Mike: So Matt, I think that about wraps us up. Do you have any final questions for us?
[41:26] Matt: I have millions of questions but we don’t have that much time, so what you’ve offered has been fantastic information and getting your perspective is very helpful for me so thank you very much. That’s about it I can think of right now.
[41:40] Mike: Well thanks for being our guinea pig
[41:43] Rob: I appreciate you coming on the show Matt
[41:44] Matt: Glad to be here. I hope it’s useful to some people out there
[41:48] Mike: If you have a question 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 Out of Control by MoOt, used under creative comments. You can subscribe to us in iTunes, by searching for startups or by RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 188 | Six Hacks for Building Your Mailing List
Show Notes
- Bose QuietComfort 20i Acoustic Noise Cancelling in-ear Headphones
- JeffBullas.com
- 6 Simple Tips to Grow a Large Email List
- LeadPages
Transcript
[00:00] Mike Taber: In this episode of Startups for the Rest of Us, Rob and I are going to be talking about Six Hacks for Building Your Mailing List. This is Startups for the Rest of Us, Episode 188.
[00:07] Music
[00:14] 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 build your first product or you’re just thinking about it. I’m Mike.
[00:23] Rob Walling: I’m Rob.
[00:23] Mike: We’re here to share experiences to help you avoid the same mistakes we’ve made. What’s the word of this week, Rob?
[00:28] Rob: Yeah, I got some good comments on Episode 185 about moving from Windows to Mac. Robert Graham specifically laid out a bunch of really cool keyboard shortcuts. He says that he’s been exclusively on the Mac since 2000. He talks about something called AlfredApp.com which helps with their command space search. It helps improve it even more. Command space allows you to search anything on your box, but Alfred allows you to configure out even more.
[00:51] Then, Jumpcut which is Jumpcut.SourceForge.net. It creates a history and a buffer for your clipboard which obviously would be pretty cool. Windowing is improved by Shift It, he says, and he could just link this all and the comments for 185. Just a lot of good tips for some other stuff that we didn’t cover about text editing and taking screen shots, and that kind of stuff. I want to send a thanks out to Robert Graham for that.
[01:13] Mike: Very cool. Thanks. I think we talked a little bit in the past about getting a good set of headphones for listening to podcasts or working out and just trying to get in the zone but I came across Bose QuietComfort 20i Noise Cancelling In-Ear Headphones. I already have a pair of noise cancelling headphones that go over your ear, and I always wanted in-ear headphones that were noise cancelling but I can never find them. I guess, Bose came out with these in-ear headphones, and I was using them the other day when I was mowing the lawn. I couldn’t hear anything. I was just listening to the podcast. It was great. It was fantastic use of like an hour-and-a-half of my time.
[01:48] Rob: Wow. In-ear headphones that blocked out the lawn mower.
[01:52] Mike: Yes. It was awesome. I couldn’t believe it. I didn’t expect it to work as well as it did and I also have in-ear headphones that don’t have noise cancelling but I tried this out. They’re expensive. They’re like $300 but they work really, really well. I couldn’t hear the lawn mower, I couldn’t hear the weed whacker. It was just everything in my ear was crystal clear.
[02:09] Rob: Yeah, that’s impressive. That’s the kind of stuff, when I talk about listening to 50 or 60 podcasts, it’s because I am listening to them all the time when my brain is not occupied. It is when you’re mowing the lawn or when I am out doing yard work, all that kind of stuff. It really is a nice way to get some time back.
[02:26] If you do have room for the bulkier over-ear headphones, I use the Sennheiser HD280s. I think they’re about 80 or 90 bucks on Amazon. What were the ones that you got that are in your ear?
[02:37] Mike: It’s the QuietComfort 20i.
[02:39] Rob: I got it. A few hundred bucks, so it’s an investment. We have several new reviews in iTunes. They’re from Cozy200. He says, “Just another fan. Fantastic show. As a new bootstrap startup founder, I rely heavily on my developers and shows like yours for guidance through the process. We’re extremely bootstrapped. Well, more like strapped than anything else, but a quick shout out to you both. Thanks for helping the entire community improve.”
[03:02] A Son Watcher from the UK says, “This is an undiscovered gem. I only recently discovered the show after reading a post on Hacker News about useful podcasts for startups, and it’s awesome. I listened to it consistently for a couple of weeks and it’s reinvigorating my motivation to push some niche-SaaS apps to market.”
[03:18] Tyler Bandfield from the US, he says, “This is the only podcast I am subscribed to. I think the title says it all. Well, I enjoy listening to a variety of podcasts. This is the only one I view as a can’t-miss. Not only is there always something actionable and relevant in each episode but Mike and Rob’s initial discussion of what they’ve both been working on with their own projects is always a nice dose of motivation. If you’re running your own business, working on a side project, or just want to start creating something, this is the podcast for you.”
[03:42] As always, thanks a ton for the reviews. If you’ve been listening and getting value out of the show, we’d really appreciate it if you would log in to iTunes, and give us a five star. You don’t even have to write the full review. You can just do a five-star rating without having to spend any other time and we’d very much appreciate it. What are we talking about today?
[03:58] Mike: Back in Episode 72, we had talked about eight tactics for building a pre-launched mailing list. We talked a little bit about leveraging your existing audience and doing some SEO, and trying to rely on some viral content like infographics and things like that. Then, where to try and pick up people to add to your mailing list, whether it’s Hacker News or Facebook Ads or a variety of other places where you could do advertising, Twitter, Facebook.
[04:42] What I think we’re going to focus on today is specific hacks that you can use to grow an e-mail list, and this is based off of a blog post by Jeff Bullas who provided six simple tips to grow a large e-mail list. We’ll link back to this in the show notes but we’ve got our own take on some of this and modify at least one of them substantially.
[04:44] The first one is to turn your price and page into a lead generation page. This is something I am actually in the process of doing for AuditShark for the pricing page. Something I’ve seen somebody do is request contact info before showing pricing. This is an interesting idea because it gets you people’s contact info and allows you to follow up directly with them before they even really start looking at pricing or signing up.
[05:07] If you have any long sales process or it’s a complicated sales process, I think that this is something that can work really well. There’s definitely cases where this is not going to work. If you look on anyone’s websites now, for example, I don’t think that it would work very well for Drip because the sales process and the value proposition for that I’d say is probably fairly straightforward for the most part but for something like AuditShark, compliance is a complicated product. It’s a complicated proposition to make to somebody. I think that getting that contact information from people so that you can follow up with additional marketing is a much better way to go in cases like that but as I said, there’s definitely cases where doing something like this is not going to work.
[05:48] Rob: Yeah. For lower price, obviously for B-to-C, it’s probably not going to work very well and for lower priced SaaS, the odds are you’re going to be able to get someone to sign up for a trial round and didn’t happen to get on the list but I agree with enterprise, more complex stuff, a new product that needs to be explained, any of that stuff.
[06:05] That’s why you see the Hub Spots and the KissMetrics, and a lot of the more expensive apps out there, they really have a lead gen form right there. They really want you to call and talk to someone, or to do a demo, or to sign up for a webinar. That’s the call to action rather than actually getting you to sign up directly on your first visit because they know that it’s such a big decision that you really need more information before you can do that. That is where doing lead gen on your pricing pages instead of trying to push people towards your trial is obviously a win.
[06:35] Mike: The next hack is to use pop-overs on your website and more specifically use something like an exit popup. The way an exit popup works is while they’re on the page, and viewing it, and working through the content, you’re not going to show any sort of popup but as soon as they try to move the mouse cursor off of the website, maybe up to the browser bar so that they can click on the back button, it will show a popup to the person and ask them to either subscribe or provide their name and e-mail address, or take some sort of other call to action.
[07:02] There’s a lot of variations of this type of thing that you can find at WordPress.org like WordPress popup or Popup Domination but at the end of the day, the idea is pretty similar. You’re really trying to drive them to a call to action to get them on your mailing list or get some contact information from them so you can follow up with them later.
[07:18] At the end of the day, it actually works. People use them. Internet marketers use these types of things because they work. Other things that are a little bit less intrusive I’d say is something like Hello Bar. The real key to using a popup successfully is to not be a jerk about it. You really want to measure what works and what doesn’t, and anything that’s working to drive people on to your mailing list, you want to use those things and anything that isn’t that’s driving people away, you want to avoid those things.
[07:43] Rob: Yeah. I’d throw out another nonintrusive popup is the Drip widget. It’s in the lower right of your screen. It’s like an Olark chat window and it just pops up unobtrusively after x seconds. You can configure it to do that. The reason with that is because I agree, I am not a big fan of the really big, take-over-the-screen popups.
[08:03] With that said, you have to ask yourself what you feel comfortable with. I think each person’s decision as to how much they want to optimize something, how much they want and they’re comfortable optimizing it. I will probably never have and I never have had basically a light box that comes over my blog website to try to build my mailing list. I know that it would build it faster but I also know that over-optimizing it creates a negative experience for some of my users, and I am not willing to do that.
[08:31] You have to ask yourself that. Just because something works, do you want to go to that point? If you think about selling something. Let’s say, you’re trying to sell something in a presentation or sell something on TV, the maximum amount of optimization is to do an infomercial. All the stuff that they do in those infomercials, where they, say, “Only three low payments of this but wait, there is more,” and all that stuff, it really works; but at a certain point you have to ask. Do I want to go to that extreme and to eke out every last percentage point? I think it comes down to a personal or a brand decision at that point.
[09:02] Mike: The third hack is to follow a strong writing formula for your blog posts and for the content that’s on your blog. You can definitely do these types of things in landing pages as well but for your blog post, you want to have a clean intro to a specific problem. You want to include some story because statistically, people remember stories significantly more than they remember actual numbers and statistics. They’ll remember that story and they’ll relate it to statistics, and they will go look it up; but they won’t remember the statistics themselves. They will remember the story. They just won’t remember the exact numbers that went with it.
[09:34] The other thing is to make sure that there is value for your target audience. When you’re looking at the value that you’re going to provide to that target audience, you want to know who that target audience is. Are they a beginner in your field? Are they intermediate? Are they advanced? Who is it that you’re actually talking to because not every blog post is going to be able to talk to everybody who is at each stage of using the type of product that you’re offering. You want to make sure that you’re talking to a very specific audience and know what it is that you’re offering to them.
[10:01] Then, the next step is to make sure that you’re crafting a great headline for that blog post, and then publish it with a call to action of some kind. You want people to take an action after they have read the blog post and whether that is a popup of some kind or just a little footer at the end of it where you say, “Hey, if you want to hear more information, subscribe to this newsletter.”
[10:19] Rob: Something interesting. I started writing an experiment on SoftwareByRob.com which is my blog. It was that in terms of getting folks on to the e-mail newsletter, the right-hand side, upper right, which is my sidebar, that widget got way, way more and I don’t remember if it was three times or four times but it was substantially more signups than did the signup thing at the end of the blog posts.
[10:44] I thought that the signup thing at the end of the blog post would be it because that’s where a lot of the individual traffic comes to. If someone reads the post and at the end, it says, “Did you like that? Do you want to hear more? Like this.” It just seemed like the natural place to be asking someone for their e-mail address. It was good enough to keep around but nothing compared to that upper-right position.
[11:04] Obviously, your milage may vary depending on your blog but it was nice to be able to test that and know for sure. Then, what I noticed is that I put it at the bottom of my about page and a couple of my pages that are non-post, and those got almost zero signups. Pretty confidently, I could take those off and not feel like it was hurting my subscriber growth, but at the same time, I felt like it was cleaning up my site. It was simplifying and actually improving the user experience without hurting the newsletter signup process.
[11:31] Definitely in terms of that call to action and all the stuff, you do want to test as much as you can. You don’t want to go overboard with it if you don’t have a ton of traffic but I get enough traffic that it was worth figuring out the difference between those two.
[11:44] Mike: The fourth hack for building up your mailing list is to use landing pages that provide incentives to subscribe. Whether you’re offering an e-book, or videos, or screencasts that you can offer interviews, cheat sheets, case studies, any of those things are good things to offer people in exchange for their e-mail address. Most people would be incentivized enough to provide an e-mail address because what’s an e-mail address worth? They can always come back and unsubscribe.
[12:08] Obviously, you have to make sure that you’re going to let them know upfront you’re not going to spam them and they can unsubscribe at any time because nobody wants to give away their e-mail address to somebody who is just going to hand it out to everybody or sell it off. There are definitely things that you can use like those e-books, and screencasts, and things like that to help incentive people and give them something in return for that e-mail address.
[12:28] Rob: The nice part is that you can reuse content especially if you do have a blog, a lot of people don’t go back and read early posts but they can still be very valuable. At one point, I had a virtual assistant go through and I told her some posts that I wanted her to gather together, she put them in a big word doc. Then, I paid a designer to format it. I, now, have a 170-page PDF e-book and that’s like a 12-point font. It really is almost a full-sized book. It’s all writing that I had done over the past seven or eight years. I had it packaged up really nice, and that is one of the incentives that I hand out.
[13:02] Just because you have older content that you already published somewhere doesn’t mean you can’t go back and use that as an incentive if it is in fact something that someone is going to want to read. I’ve also seen something working lately or I’ve heard really from Clay Collins of LeadPages but he said that having something that is very specific to the actual post, assuming that that post is getting enough traffic to make it worthwhile but having something specific to the post really escalates how many people will opt in.
[13:30] If you write a blog post about a specific kind of landing page, then LeadPages will give away that landing page template as HTML at the bottom, or if you’re talking about how to write, craft specific types of e-mails, then giving away an e-mail template at the bottom, or giving away an Excel spreadsheet that has something to do with it. That will accelerate your opt-in rate. It makes sense because it’s in context. It’s not a generic giveaway. It’s actually something relating to the post.
[13:54] I think you’d want to probably publish the post and either know that it’s going to get a lot of traffic before you create that giveaway or watch it as traffic builds overtime through SEO and other viral stuff, and then create the lead magnet because to be honest, you probably can’t do this for every blog post. You need to pick and choose, and you want to put your effort where you think there’s actually going to be enough traffic.
[14:16] Mike: The fifth hack is to run A/B tests on critical elements once your webpage or your blog reaches a critical mass. If you are drawing enough traffic in to be able to run this test, and you definitely want to start testing your headlines. Google Analytics will help you identify which pages are getting the most traffic. Obviously, if you have any other type of tracking software on your website where it’s able to track webpages that are getting the most traffic, you can use those as well.
[14:42] There are also WordPress plugins where you can use them to automatically do A/B testing on some of the different headlines. For example, I think AppSumo has one but there’s other ones as well. Those are the types of things that you want to start testing. If you’re not using WordPress, then it’s not terribly difficult to code your own but you definitely want to figure out which ones are resonating with people and which ones aren’t, and use those headlines.
[15:04] Another thing that I’ve done in the past which has been helpful is to use something like Bitly, for example, where you are going back to a particular webpage and creating those URLs. Then, on Twitter, if you’re posting those URLs using very specific headlines, people see the URLs but they don’t necessarily see where the link goes until after they click on it. You can test the same URL with different headlines in Twitter and see which ones are resonating with people.
[15:31] The sixth hack for building your mailing list is to essentially keep your subscribers happy because you don’t want to have people on your mailing list if in two weeks, three weeks, or four weeks down the road they leave because you’re abusing them as subscribers.
[15:45] You want to provide relevant content to them. You want to think twice before you start hitting that publish button, and really think about what is it that you’re sending to them and are you providing value to them. The last thing to keep in mind is that you have to understand that not everyone is going to read everything that you write.
[16:0o] And as Rob mentioned earlier, a lot of his content from his blog repurposed into an e-book for his website to give away as an incentive but you can repurpose a lot of that content into your mailing list because not everyone is going to go back and read everything that you’ve written. Repurposing content has its place but it doesn’t mean that every blog post should go into your newsletter.
[16:20] You shouldn’t go all the way back to the beginning of time and start sending those out to everybody because there are going to be people who have read those and if they start seeing things that they’ve already read or they see too much of that slanted in that direction, they’re probably going to unsubscribe and you’ll lose them as subscribers. You do want to keep your churn rate down.
[16:36] Rob: I think another part of keeping your subscribers happy is sending stuff that is super, super relevant and obviously really valuable to them. There’s this movement and this change that I see coming in e-mail now that I am knee-deep in the marketing space with Drip is that people are … In terms of folks who have successful newsletters, the thing that they are doing differently is they are using this behavioral e-mail that sends subscribers different e-mails based on behaviors they take.
[17:04] If someone makes a purchase from you and they buy a specific book, then you now know that they have an interest in that and that they’re a customer, and you can start them on a different sequence based on them clicking that button. If they click on a lot of links that involve SEO, you tag them with the SEO tag and then you start sending them more SEO links and less about conversion rate optimization or whatever.
[17:24] This behavioral e-mail stuff and I am talking about this because at first, I wasn’t a believer. This is even a year or a year-and-a-half ago where I didn’t quite get it yet but I am really understanding the power or the ability to go from one to many, which is what e-mail marketing is today, to going down the one to a few. To where you’re really talking and customizing your newsletter, your list, just your whole movement through your funnel and your relationship building, and you’re able to customize that for multiple people, and that is why we launched this rules engine in Drip, the automation rules, the behavioral e-mail aspect.
[17:58] I am still trying to figure out exactly how to talk about it. It’s amazing, the stuff that you can do and the stuff that you can build with this, and I am not just talking about Drip. There is InfusionSoft, and there is Office Auto Pilot, and there is other ways to do it but just that entire concept. I think that’s where we’re all going to be moving and I just think that’s the future of personalizing this e-mail stuff so that I think that heavly ties in to this keeping your subscribers happy point.
[18:21] I also wanted to add, I think maybe a bonus seventh tip, and it’s just based on my experience building my mailing list. It’s really all embodied. I’ve done some split testing and then it was just some best practices but it’s all embodied in the subscribe form at SoftwarebyRob.com in the upper right. If you look at it, I want to call out a few elements.
[18:39] First thing is I don’t call it a newsletter. I did it at one point but I quickly realized like that feels generic and it feels like something that a corporation is handing out. It’s their quarterly newsletter. I call it Growth Secrets for Self-Funded Startups, not a newsletter. It’s not an e-mail list. It doesn’t say join the list. It doesn’t say anything like that. It just talks about growth secrets for self-funded startups. The call to action which is the button, it doesn’t say, subscribe, it doesn’t say sign me up. It says get the Book. That’s what it says because that’s what people want.
[19:07] Then, I have a couple of bullet points. The bullet points I have are what you get for signing up, and the bullet points are: a 170-page e-book collecting my best startup articles from the past five years. Then the next one is, previously unpublished startup-related screencasts. You’re getting stuff that no one else is getting. The third is, exclusive techniques I don’t publish on this blog. Lastly, I have a quote. It’s a testimonial.
[19:28] It’s all in a pretty compact space. It sounds like a lot of information. It’s really tiny and like I said, I have tested some parts of this and seen this iteration of it performs the best. I think having a quote is a big deal and I think having multiple things really describing what people get for signing up and putting a lot of value there, like a 170-page e-book filled with startup articles is actually pretty interesting. As I am reading this, I’d probably change it to, say, startup tricks or startup growth secrets instead of just articles.
[19:57] I want to throw that out as a framework of a descent way to really describe that if you’re going to get someone to buy in the type of information that you’re going to want to give them in order to get them to get over that friction of giving in their e-mail address.
[20:10] Mike: I think those are all really great tips. I do something similar on my blog. I don’t have anything there for my mailing list where I say flat out, you’re going to be getting these things but I basically tell people that they are going to get actual advice, tips, and stories.
[20:24] Rob: I think that about wraps us up for the day. If you have a question for us, call our voicemail number at 888-801-9690 or e-mail us at Questions@StartupsForTheRestOfUs.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt 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 187 | Startup Metrics (A Slide Deck by Andreas Klinger)
Show Notes
- The slides
- 1 hour youtube video of Andreas presenting these slides
- AARRR discussed in episode 112
Transcript
Rob Walling: [0:00] In this episode of Startups For the Rest of Us, Mike and I discuss a six‑hour Lean Analytics workshop put on by Andreas Klinger, called “Startup Metrics, a Love Story.” This is Startups For the Rest of Us, Episode 187.
[0:14] [music]
Rob: [0:23] Welcome to Startups For the Rest of Us, the podcast that offers developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product, or you’re just thinking about it.
[0:31] I’m Rob.
Mike Taber: [0:31] And I’m Mike.
Rob: [0:32] We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
Mike: [0:36] A few weeks ago, we put out a call for people to email us in their stories and let us know if they’ve quit their jobs based on listening to this podcast. We got one in from Jerome Samuels.
[0:46] He says, “This is Jerome Samuels, founder at www.goalreports.com. I wanted to let you know that this week I quit my day job to focus fully on growing my two bootstrap startups. Thanks for all the great advice. I could have not have reached this point without your show.”
Rob: [0:59] Awesome. Congratulations, Jerome.
[1:01] When this podcast goes live, I’m going to be in Scotland speaking at the “Small is Beautiful” Conference and they actually emailed Sherry a couple of weeks ago and she’ll be speaking as well. They saw her MicroConf video for her attendee talk from last year and they wanted her to talk about anxiety and pressure and all that stuff and entrepreneurship.
Mike: [1:18] Very cool, so free trips to Scotland.
Rob: [1:19] Exactly. Seek me out at the conference. I’m having a little Micropreneur Meetup, a little dinner on Thursday evening at a local place in Glasglow. Lastly, we received a lot of good comments on the podcast recently. In episode 184, we talked about hosting recommendations and Andrew Connell brought up some other options aside from just the VM side or aside from virtual machines.
[1:43] Because you and I talked about using Amazon Web services and using EC2 stuff, where you have your own virtual machine that you’re able to control and you talked about Azure as your virtual machines. Andrew Connell brought up what’s called PAAS, platform as a service. Which is things like the true Azure, where you’re just uploading your code into this bucket and it’s executed.
[2:03] Heroku is the same way and the Google app engine is the same way, where you don’t have a VM, everything is taken care of for you. You don’t need to do backups. You don’t need server patches and server maintenance and all that stuff. Andrew’s a proponent of that and he mentions several options. There’s obviously Azure, Google app engine, and Heroku, like I said.
[2:23] I’m still not a fan of these platforms as a service providers or at least the way it’s being executed. Because what I noticed is that you don’t have a ton of control and if you need anything that’s nonstandard, you aren’t able to install it.
[2:35] I know we had looked at using Heroku for Drip, but you don’t have enough control to install some of the more exotic gems that we wanted it. For me, that it’s just a deal breaker to not have that control.
[2:45] I think these things may expand to the point to where they are able to better serve the needs of maybe more complex apps. At this point, it’s not something that I’ve used, so I have a tough time recommending it to other people.
Mike: [2:58] Yeah. AuditShark actually uses the Azure Platform as a service. I’ve used it. It’s got its pluses and minuses. Somebody who has like a lot of systems administration knowledge, I’m perfectly comfortable just firing up a VM and using that.
[3:13] I also build it on that platform knowing that I’m probably not going to be the one who’s going to be managing things long‑term. I don’t necessarily want somebody to have to hire somebody to manage virtual machines if I don’t have to.
[3:24] The plus side though is that if you go that route, you can always scale back and go over to a virtual machine at anytime. If you are on a virtual machine and you want to go to platform as a service, you have to re‑engineer some stuff.
[3:37] It depends on where you’ve started, and where you ultimately want to end up as to what is going to be the right choice for you, and what’s going to give you the most flexibility.
[3:45] All of that said, I think that there’s definitely large learning curves in terms of deployment and managing deployments, and pushing out new code bases, and being able to roll things back.
[3:56] It’s not nearly as simple when you get into platform as a service, because there’s all these different individual components. You have to manage each of them separately.
[4:05] If you want to roll back, it’s not as easy as just taking a database snapshot. You have to make sure those things are done in the right order, and it’s not just about doing them in the right order. It’s about making sure that you do them in a very tight time window.
[4:21] The problem is that none of them are necessarily fast when you want to do certain things. Like if you’re in SQL Server, you can go in, you can go onto the Command line, and you can actively kill a lot of the incoming database connections.
[4:33] I don’t know if you have that option with the Azure version of databases. I think it’s called “SQL Azure.” It’s a little bit harder to disconnect people in order to do a backup.
[4:43] Now, you can still have it do a backup, but it just feels like you have more control when you have direct SQL Server installed on the machine. That’s the way I feel when I’m using it.
[4:52] I feel like I have more control over everything and all the individual pieces when I’ve got a virtual machine. Plus, with a virtual machine, a lot of times you can just install everything all in one box. You take a snapshot of that box, and you’re done.
[5:05] When you’re using all these individual services, it’s not so clear cut. You can’t just take a snapshot of that one machine. Which is a benefit for redundancy purposes once you start scaling up really, really high, but it almost feels like going with a virtual machine.
[5:16] It might be a better fit for entrepreneurs when they’re dealing with much lower numbers of customers, because it’s going to take you awhile to get to that point.
[5:23] I’ve heard a lot of people say, “Oh, well, it takes six months, a year, or two years to get to the point where a SaaS application is bringing in enough revenue for it to fully support you and possibly one or two other developers. Do you really need all that stuff up front? And the answers is probably not.
Rob: [5:38] I think lock‑in was my other concern. If you built something specifically for Google App Engine or for Azure, and you wanted to put it somewhere else on a VM, my understanding is that you, after, then go make code changes to it, that it’s not actually as simple as just moving it over.
Mike: [5:51] Not necessarily, it depends on exactly what you’re doing and how you’re doing it. For the code that’s executing on Azure for example, if you’re writing an MBC or Web Forms applications, you’re going to essentially extract those pieces of it and just install it onto a VM, and you don’t have to worry about it. Basically, you’re just ripping a code out and you’re ripping configurations out.
Rob: [6:11] I got it.
Mike: [6:12] Versus, if you’re going from a VM over onto the Azure platform as your service, then you have to add these configurations in.
[6:17] For the back and storage, for example, you’d have the same issue. If you’re using blob storage or Azure tables, which are different than sequel tables. It’s basically no sequel system. You’re going to have lock‑in if you do that versus, if you’re going to go back to…Amazon’s got their key value pair storage, which is basically the same thing.
[6:38] There’s MongoDB, I think. There’s Redis. You choose any of those technologies, you’ve got vendor lock‑in, whether you like it or not. It’s all the same type of thing, it’s just a matter of which vendor you’re choosing.
Rob: [6:47] Right. And Andrew Connell also points out some benefits, though. He says you only pay for what you use, like a VM. You can have a VM with only 15 percent utilization, but you’re paying for the whole thing, whereas the platform as service stuff is really, truly a metered thing. Then there are some…Both AWS and Azure have the start‑up plans and allow you to do it free for quite a while.
Mike: [7:09] I think that that’s the big sales pitch for those, but at the end of the day, it’s probably not significant enough to actually matter in most cases, I don’t think, at least not at the small scales that we’re talking about.
Rob: [7:19] It depends on how big your VM is. If you go with someone like DigitalOcean or Linode.com, it can be really inexpensive. Cost may not be that big of a deal. I don’t think that scaling would be easier, that’s the last thing Andrew points out. Is that if you’re in Azure, scaling up should feasibly just be rotating a dial, whereas…I’d been surprised on EC2, as we’ve had to scale up. I mean, you basically need to instantiate a new VM, re‑install everything.
[7:43] We’ve always had a deploy script that does that, but it’s still…There is definitely time to move up. If we’re moving the database, there’s some downtime involved as we move the data over. If we’re moving code, we can round‑robin it. It is more cumbersome than I’d thought. It’s more like having physical boxes, than being on platform, as the service would be.
Mike: [8:03] If you go with your Azure, Rackspace, or anything like that, you can…I believe you can just redeploy those images and just give them more resources. I mean, I can sell them on the platform as a service on the Azure site, so I don’t really notice, but I know that with Rackspace, if I need a bigger machine, I just bring the thing down and add more resources and bring it back up again. It literally takes seconds to do.
Rob: [8:24] Right, yeah. EC2 has fixed instances. You can’t just add RAM to something. You have to move up to the next highest one, from what I understand. If you try to take your image and just change it to the next size one, it doesn’t work.
Mike: [8:39] They actually have it separated, probably on different hardware for the instance types.
Rob: [8:43] I got it.
Mike: [8:44] With Rackspace, I think they have this cloud infrastructure in the back‑end, and they bring it up on whatever hardware is available. It’s meant for that purpose. If I want to add more RAM to a machine or decrease the amount of RAM and hard‑drive space, I can just do it. Unlike on the Windows site, you can’t decrease it [inaudible 09:00] . Once you go up, you’re done, but with the Linux images, you can go up or down.
Rob: [9:05] Thanks, Andrew Connell, as always, for the insightful comment.
[9:09] [music]
Rob: [9:12] Today, we’re talking about a six‑hour Lean Analytics workshop put on by Andreas Klinger. This slide deck caught my eye. It’s on slideshare.net. We’ll link out to it in the show notes. It’s called, “Startup Metrics, a Love Story.” It is so in‑depth. It’s one of the best examinations of early start‑up metrics. Not just SaaS metrics, but he talks about some BDC stuff, marketplace, metrics.
[9:35] I really just wanted to take a few points out of it. Obviously, since it’s six hours, it’s a 170‑something slides. There’s no chance we’ll be able to cover even 15 percent of it. We’re going to start with an opening thought. As I went through this, I was debating whether his slides only applied to deep innovation or whether they work with some tried‑and‑true just launching a new app.
[9:56] What I mean by that is, a lot of times when you read the “Lean Startup” book or you hear Steve Blank talking about stuff, his stuff doesn’t necessarily apply to a smaller niche app.
[10:05] Let’s say you just have a SaaS app that wants to help, electricians manage their projects, you’re not going out and trying to build the next Uber, or you’re trying to build the next Twitter, or the next Facebook, like some new idea that doesn’t exist. You’re really just applying an existing app idea to a new market, to a new niche.
[10:23] Something I don’t like about a lot of the start‑up talk, is it leaves out all the bootstrappers. What I liked about “Startup Metrics, A Love Story,” is that the more I got into it, the more I think it applies to stuff that we’re talking about. It applies to smaller SaaS apps. It applies to niche SaaS apps. He also does a good job of applying it to communities and marketplaces, like I said.
[10:42] I think it applies more broadly than you might think. Let’s dive into the first point. Andreas talks about, he says, “missing the mark.” He says, “The biggest risk of a start‑up is not the risk of time or money that you’re investing, it’s building almost the right thing.” And he says, “The pain is in seeing a successful competitor who does what you do, but has one little detail that you never focused on.”
[11:07] This is a fascinating point. To see how many people…You look at how MailChimp approached the market versus AWeber. That AWeber have been around for years, so is Constant Contact. And when MailChimp came on the scene, I remember thinking, “What, another one? Really, how are they going to do any of that”? And now they are, as far as I know, they are the biggest.
[11:26] They did a couple of things different that AWeber and Constant Contact had done, and that’s made them the leader. I think Buffer did the same thing. There were a number of competitors in the space that Buffer is in. When they came on the scene, I felt the same thing. “Really, these guys are going to do this? Aren’t there already this places that can buffer it? I already used Hootsuite that can do it.” And yet, they rocketed to the top.
[11:45] They’re like a low seven‑figure business and they’re doing great. The other one I was thinking about is Square. Square really made it a lot easier. They tweaked one or two little things, and they have just kicked the crap out of all the merchant accounts, even PayPal Web Payments Pro, which was the one I used to use, because it was easier. I really see what Andreas is saying. I like what he’s saying here about building almost the right thing, might be the most painful thing of starting a start‑up.
Mike: [12:08] I think that’s because you look at the things that somebody else’s done. You know how much time and effort you invested into it, and you just miss one detail. That’s just the most frustrating and aggravating thing. They’re successful and you’re not.
[12:20] I think that there’s probably a lot of people who are listening to this podcast who have built something, who have gone through that pain themselves. It’s Steve Jobs who said that’s easy to connect the dots looking backwards, but you can’t do that looking forward.
Rob: [12:32] Next thing Andreas talks about is product/market fit. I like this concept. This concept was coined by Marc Andreessen, who obviously was one of the co‑founders of Netscape. He’s a brilliant start‑up strategist. He’s in the realm of a Paul Graham. His quote…He said, “Product/market fit is being in a good market with a product that can satisfy that market.”
[12:55] As soon as he coined that, it was like a revelation in the start‑up space. Of all of us building stuff, whether it’s that revolutionary thing, or whether it’s just building another email marketing app or another SEO app, until you’ve found a product/market fit, you can’t scale, because you hit this point, and there’s actually a bunch of graphs in the slideshow that I think it’s pretty interesting.
[13:19] He basically shows, just bumping along, that your churn is too high, and people either aren’t signing up, because your value proposition isn’t there, or they’re signing up and churning out. I’ve experienced all of these things in the past couple of years, by the way, with the apps I’m building. Then there’s this line, and if you hit product/market fit, that’s where you start scaling up, and that’s where that magical hockey stick starts.
[13:39] I think the thing to think about, instead of thinking of product/market fit as a buzzword, is to realize that if you’ve built something that people are really not churning out of, that people are sticking around, and you see your churn go down, you just start to see growth. You have to be blocking and tackling.
[13:54] You have to be doing the marketing, driving people into your funnel, and optimizing things, but this is really the only point at which you can start to scale up the business, is after you’ve built a product that this market really wants and you start realizing how to reach that market.
Mike: [14:09] The most difficult piece of this is that you don’t know that you have product/market fit, and you don’t know what it’s going to take to get it, until you’ve already got it. People can think that they’re going to have product/market fit.
[14:20] They can talk to all the different potential customers and actual costumers that they have, but until they get to the point where they’re actually growing and their company is not churning out costumers, then you have to look backwards to figure out whether you’ve got product/market fit. You can’t look forward, and I think that’s probably the most difficult piece.
Rob: [14:38] Andreas points out, he says, “Early stage,” ‑‑ and he puts that in quotes ‑‑ “Early stage has nothing to do with how long you’ve been in business.” He’s defining it as being before product/market fit, and that’s when you’re in an early stage. You’re still iterating. You’re still trying to find that point at which you build something that people really, really want. He quotes a stat from a study.
[14:57] He says,”83 percent of start‑ups are pre‑product market fit.” That totally resonated with me. It’s like four out of five, basically, are pre‑product market fit. I totally see that. It’s like when you talk to somebody who’s just struggling to drive traffic or keep people around, or they get sign‑ups and nobody sticks around, that’s what’s happening.
[15:15] It’s like they haven’t built something that people want to where you can get to that growth. Remember, Paul Graham talks about with Y Combinator they’re looking for 5 to 10 percent weekly growth. They’re talking 20 to 40 percent monthly growth, month over month.
[15:31] That’s what, once something has product/market fit and once you’ve actually built something that people really want, that’s the kind of growth that they would expect. That’s what’s a no‑brainer to raise‑funding. That kind of growth is really the hockey‑stick of what people are talking about. Andreas points out, like 83 percent of start‑ups are before that point, they just haven’t found it.
Mike: [15:51] This isn’t to be confused with the problem/solution fit, either, because those things, they go hand in hand. You do need to get to both of them, but product/market fit is, obviously, a little bit different than problem/solution fit.
[16:03] With problem/solution fit you try to make sure that you’re solving the right problem that people are going to pay for, but product/market fit is really about identifying the people and the types of people who need that particular product. You do need both, but I don’t necessarily think that everyone truly understands the difference between them and is able to focus on both of them.
Rob: [16:24] It is challenging. I think I would define problem/solution fit as being before product/market fit, I think, almost in all cases, because you have to find that problem. You have to build a solution that works to solve that problem, and that’s what problem/solution fit is. Once you’ve done that for one person or for five people, then you now have to say, “OK. How do I make this into a product”?
[16:48] Problem/solution fit doesn’t imply that you really have a full‑fleshed product built out. Maybe you’re still doing stuff really manually. Maybe you’re still doing consulting, you’ve just found a problem that you know how to solve, now you have to then build a product and hope, and not just hope but iterate it and ask. Then, as you said, you have to take that next step, find the market for it, learn how to market to that. That’s when the whole business model stuff comes in plan.
Mike: [17:13] The issue that I see is that, just because you have solved the problem, doesn’t necessarily mean that people are willing to pay to have that problem solved. That’s where the product/market fit comes in.
Rob: [17:22] Absolutely.
Mike: [17:23] One does come before the other, but I think people focus too much on solving the problem and not necessarily enough on finding that market for it, where that will scale.
Rob: [17:32] The next thing Andreas points out, and I like this, is he talks about when analytics are not applicable. He says most web analytic stuff we talk about, including split testing, funnels, referral optimization, et cetera, is meant for after product/market fit.
[17:50] He goes through several slides where he points out how Google Analytics is not relevant at this point. Analytics, they just don’t do much for you before product/market fit, because you can’t optimize and aggregate at this point because you don’t know what you’ve built yet.
[18:05] This ties back to a couple conversations we’ve had. Remember? We answered a question that Andrey Butov had raised on Bootstrapped.fm podcast. He was talking about this specific thing about how to do really early stage stuff before you have even 500 unique visitors on your website. How do you do split testing and funnels?
[18:23] We basically came on and said you don’t. All that stuff is for after you have a critical mass. I hadn’t thought about it as being pre‑ and post‑product market fit. I just thought about it having enough traffic to do it, but I think Andreas brings up a good point here. It’s not worth optimizing these funnels until you know that you built something people want.
[18:41] I realized that I had been doing this intuitively with Drip. I don’t want to drive a bunch of traffic and optimize a bunch of funnels. I really haven’t because we’re still trying to find that thing that really applies to this product market and really keeps a lot of people from churning out.
Mike: [18:56] There’s a quote from Ash Maurya, who says that “We need to pivot before products’ market fit and optimize after,” which is totally true. If you’re not familiar with him, he’s the founder of Spark59, and he’s author of “Running Lean.” He has a blog called “Practice Trumps Theory.”
[19:12] It’s totally true. You have to make sure that you’re paying attention to analytics when they’re applicable and just completely ignoring them and throwing them out the window when they’re not because there are times when, no matter what the analytics say, they are wrong.
Rob: [19:25] Your question is probably, what would be the alternative to analytics? In this early stage you can’t look at Google analytics, don’t want to look at split tests and funnel reports and stuff. This ties in. I think why I like this, because it resonates a lot with stuff we’ve talked about on the podcast.
[19:39] If you look back at the slow launch that I did with Drip, I talked to every customer as I went through it. I didn’t look at any of these reports. You don’t need many people coming through your funnels in the early days. You just want them to stick around.
[19:52] The advice is don’t look at averages. Talk to customers individually. That’s really what the slow launch embodies, right? It was like getting one person in at a time, building what they needed, not just getting them on board but figuring out, do we have the features that are going to make you really want to stick around and really continue paying for this product?
[20:11] If not, let’s build those before we continue. That is the alternative to analytics. It’s literally talking to every customer, doing high‑touch sales, handling them, and getting them into your app in the very, very early days. Then the next step, still pre‑product market fit, is just start looking at things using cohort views.
[20:32] It involves looking at groups of people in as small of a group as you can because anytime you’re talking about averages at this point and looking at things in aggregate it tends to be really inaccurate. You want to look at the most granular level possible so that you can actually see trends with…instead of seeing that your overall churn average is 25 percent. It’s not helpful.
[20:53] What you want to do is you want to say, “What’s the overall churn for people in their first week, in their first month, in their second month, after their third month”? These things all will give you a completely different picture, especially at this point before you have enough critical mass to really have some smooth averages.
Mike: [21:09] Looking at those types of things, using the cohorts to view the trends, is really after you’ve got enough data and you’re in a position to start looking at the analytics themselves. As you said, the good news is you don’t need that many people in the early days to figure it out.
[21:21] You want people to stick around, but you also want to do that customer development and talk to each person individually. That’s really what you’re talking about, saying, “What is the alternative to analytics”? It’s customer development. If you don’t do that customer development, you’re not going to get the information you need to be able to mentally aggregate people.
[21:38] Our brains are wired to match patterns and recognize patterns. Sure, we can program that stuff, but it’s a lot more difficult to take those conversations and translate them into some data that we can look at.
[21:51] You have to rely on your brain a little bit to say, “Oh, this person said this thing. This other person said something else, but it was sort of similar. Oh, they’re probably talking about something that is very closely related. Let me dig into that a little bit more, and let me mentally group those people together.”
[22:06] Maybe you use those people as a cohort because they’re in the same industry or because they are trying to solve the same types of problems or have a similar size business, something along those lines.
Rob: [22:17] Early on with Drip right after the slow launch as soon as I started getting enough people using it that I could get some members, we built a dashboard where I could see the churn and see the lifetime value. Right away I knew that it was completely almost nonsensical. It wasn’t helpful at all.
[22:33] It didn’t help me guide the business because the numbers moved so quickly because of our low number of actual trial users. When you have 50/60 trials in the queue and just not that many paying customers, it’s not helpful to look at stuff in aggregate. The basics that I typically would look at is a customer’s lifetime. You just take one, and you divide it by your churn rate.
[22:56] If you’re losing six percent of your people per month, you divide 1 by 0.06, and you get just under 17 months. That would say on average people are sticking around for 17 months. Then you can look at your average revenue per user, and you multiply those two things. You can get your customer lifetime value, but that stuff isn’t helpful at this stage.
[23:14] The real question is, so what should you focus on in this pre‑product market fit stage? We actually discussed startup metrics for Pirates in Episode 112. The startup metrics for Pirates are acquisition, activation, retention, referral, and revenue. It’s AARRR, and this is coined by Dave McClure.
[23:35] This is in line with any type of funnel stuff that we would have talked about. The answer to the question, what should you focus on? If you look at this AARRR, you’re supposed to focus on retention. Retention is a function of user happiness.
[23:48] It describes not only someone visiting again but actually doing a core activity again, that they’re sticking around and using the app. If you’re thinking, “What should I focus on”? You have to build something that people are using and continuing to use. Again, that comes back to this idea of the slow launch.
[24:07] If I got someone in there and they’re using and they decide not to, then I need to figure out, A, can I build stuff that will help them use the app over and over that will make it a critical part of their workflow? Or do they happen to be in a demographic or group that I’m just not going to cater to for?
[24:25] That’s where you’re trying to figure out product/market fit because you may not be building a product for the blogging market as an example, which I wasn’t with Drip. When I did have a blogger come in and I had a couple, and I wasn’t able to retain them, I realized that, oh, it’s that I’m not going after that market.
[24:43] Whereas if I had an info marketer or someone with a SaaS app come in, use Drip, and then cancel, “Well, I have a real problem,” that’s what I was focusing on ‑‑ how to retain people that are in your target market.
Mike: [24:53] I think the one thing you left out there is that you really need to focus only on one core metric at a time because if you’re trying to change two different things at the same time, any actions that you make to instantiate that change, it’s going to be difficult to draw a correlation between whatever the action was and those end results.
[25:12] You may attribute some of those things incorrectly, and you don’t want to do that. You want to make absolutely sure that any changes that you’re making to the product or the marketing are explicitly coming out with one concrete result.
[25:24] If you’re not able to do that, then it’s going to make it a little bit more difficult for you to make decisions moving forward because you can change two different things that had one result over here, but maybe it was a combination of those two things that you changed that created that result. You doubled‑down on something, and it doesn’t work.
[25:41] You just wasted a ton of money because it was those two things in combination with each other, or you chose the wrong thing to double‑down on. You want to make sure that you’re only focusing on one thing, and that’s one reason why.
[25:50] Another reason is that it can be difficult to try and focus on more than one metric at a time. If you’re not focusing on just one of those metrics, then you can just easily do the wrong things.
Rob: [26:01] As a startup you’re obviously limited by time and money, especially for bootstrapping. You do it on the side like a lot of our listeners are. Trying to focus on even two metrics, you just don’t have the time to attack both of those things at once.
[26:17] When I’ve launched apps or when I’ve started to grow apps and I see that I’m not retaining people and that I’m bleeding out of the bottom of the funnel, I will stop all marketing because I don’t have the time at that point and the multitasking ability to be able to handle all the marketing that’s coming in, optimizing those funnels, and trying to retain people.
[26:36] That’s where I would go into this operation retention thing where I would try to find every reason that people were cancelling and just spend 30 to 60 days just taking care of that.
[26:45] Then I would circle back and focus again on the marketing and the funnels because I do believe that it’s virtually impossible to do both well. That’s really what Andreas is saying here. A startup should focus on only one core metric at a time.
Mike: [27:01] That wraps us up I think. If you want to find out more about this particular presentation, come to the website. You’ll find a link in the show notes that links over directly to the presentation over on SlideShare. If you have a question for us, you can call it into our voice mail number at 1‑888‑801‑9690 or email us at questions@startupsfortherestofus.com.
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