Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike revisit eight things they wish they knew when they were starting out. After five years of additional knowledge and experience they share some new tasks on the topic.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of Startups For The Rest Of Us, Rob and I are going to revisit eight things we wish we knew when we started out. This is Startups For The Rest Of Us episode 234.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob [00:23]: And I’m Rob.
Mike [00:24]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week Rob?
Rob [00:27]: Well, by the time this episode airs, I will be heading to San Francisco for Microsoft’s Build conference.
Mike [00:34]: Interesting. So how’s that going to work out?
Rob [00:36]: Yeah, because when we were offline you said, “Oh, because of all the .NET development you guys are doing these days,” because we’re [?] now, but Drip has been asked to be part of one of the Microsoft programs, and it’s kind of a nice little enterprise deal for Drip. They bought a bunch of licenses and they’re going to be implementing – I obviously can’t give too much. There’s an NDA until they announce it, but they’re integrating it into one of their big programs, so they comped us a booth there, and I think I’m recording a couple podcasts while I’m up there, and doing some lightning talks – couple fifteen minute talks about marketing automation and that kind of stuff. So, if you find yourself at MS Build give me a tweet @Robwalling or just swing by the Drip booth, and I’d love to connect with you.
Mike [01:15]: Very cool. So, I’m still trying to catch up on work after MicroConf. I don’t know about you but –
Rob [01:19]: Yeah, same thing. I just about dug myself out of email as of yesterday.
Mike [01:23]: Yeah, it’s funny. I dug myself out of email, and I was down to I think two or three, and now I’m back up to several dozen again. It’s like, “Oh, just let it stop.” It’s almost like the post office. You wish you could opt out of email, like all email, at some point.
Rob [01:35]: I know. My executive assistant I hired has been really helpful over the past two weeks because I went heads-down on MicroConf, and then she just kept everything sorted. And, it’s not that I’m getting any less email, in fact I’m getting more email each month, but she kept stuff in the this week and the today tab. So, when I came back I really only had maybe fifty emails that I really had to respond too, and typically when I come back from MicroConf there’s like between 3 and 400 emails that I basically have to just spend a few hours sifting through and replying to. So, she saved me quite a bit of time. It made me realize she’s only saving me, whatever it is 20 minutes a day, maybe, 20 to 30 minutes, but over the course of a week of not checking email, that time really adds up.
Mike [02:14]: Yeah, but that also comes down to the fact that you have to be using that time for good.
Rob [02:19]: I’ll say.
Mike [02:20]: Because if you end up wasting that time anyway, it doesn’t really buy you anything.
Rob [02:22]: Right.
Mike [02:23]: I definitely use to have that problem where I’d save some time in certain areas, and then I’d just end up wasting it elsewhere, so I wasn’t really gaining anything. So, this week I’m testing out a Thunderclap campaign. If you go over to thunderclap.it – somebody described it to me as sort of like an aggregated buffer app. So, what you can do is go over to thunderclap.it, you can set up a campaign, and you invite people to essentially help promote whatever your product or service is, and it will schedule people’s tweets, or Tumblr posts, or Facebook posts to all go out at a specific date in the future. There’s specific limits about how many people you can invite. There’s different levels that you have to meet, or you can pay for it to just go out no matter what. If you pay for it, then it’ll give you additional benefits of the service, so they have, essentially a freemium model.
It’s interesting because you can invite all these people to promote something that you’re doing, and then at the designated time, they all basically go into the social networks all at the same time. So, if you get a hundred people contributing, and each of them have say 2,000 followers, for example, then you get exposure to like a hundred times 2,000 people, which can be pretty significant. I mean, the time window for that exposure I think is pretty limited, but at the same time, you can get a lot of exposure all at once as opposed to doing it piecemeal and trying to get it throughout the course of like several weeks or months.
Rob [03:44]: Yeah, it’s certainly convenient. I had never heard of this before. I’m assuming it’s a new service, but it’s certainly convenient, and you’re using it for your book launch right? Your Single Founder Handbook comes out in a couple weeks, and at a certain date, at 11am Eastern, all of these tweets, and tumbles, and Facebook posts are going to go live all at once. So, I’m curious to see what impact it has, and to hear back about the experiment.
Mike [04:03]: Yeah, me too. It’ll be interesting just to kind of watch and see what happens. If nothing else, I mean, it’s not like I spent a whole heck of a lot of money on it.
Rob [04:10]: We have some new iTunes reviews, several new reviews actually. We have 417 worldwide reviews, and the most recent are from Trevor Jaye. He says, “Motivational, educational, and entertaining. These guys are great, and the fact that they can put out such great content every week is amazing. I highly recommend anyone looking for a bit of inspiration to tune into these guys as much as possible.” We also got a five-star review from Zach Kessin. He says, “Don’t make all the mistakes yourself. Learn from these guys who are sharing what they know so well.” So thank you very much for the iTunes reviews. If you haven’t given us a five-star review, we would love it if you would log into iTunes, or Stitcher, or Downcast, and you don’t even need to write out any sentences. You can just click the five-star button. We really appreciate it; it helps us keep the show going. It’s motivation for us, and it helps us rank higher in iTunes, and it helps more people find us.
Mike [04:57]: So, I remember reading a blog post from Joel Spolsky years and years ago, about something that they were doing where the interesting part of it was that the CEO was basically dealing with all these printer issues to print labels and manually send stuff out, and I’ve realized that he wasn’t joking when he said that sending products out manually was a logistical nightmare.
Rob [05:17]: I endured the same thing when I initially sold my book. I think I sold 300 copies, and then I had to fulfil them, and I had no plan in place to do that. It’s a lot more work than you think it is to pack 300 books.
Mike [05:27]: It is. It’s way more work than I thought it would be.
Rob [05:30]: I wound up hiring a local college student to come for an eight-hour day and basically fill out custom forms. This is before stamps.com, or at least before I knew it existed, because that’s what I would do now is get the scale and have someone do that. I actually had to go to the post office and do it. So, you had to fill out custom forms basically by hand. So, I had her come over for about eight hours and paid her to affix labels and do all that kind of stuff. It was well worth it. Even beyond that, I still had a bunch of logistical work of printing labels myself.
Mike [05:58]: Got you. Yeah, I found my wife had some things just laying around to be able to print the labels, so that was actually the easy part, but going through all the books and signing them all, that’s the part that really just takes forever. Instead of hiring a college student, I roped my wife into sitting there doing all that stuff for me.
Rob [06:13]: Or your kids, I think any one of those would be a good plan.
Mike [06:16]: I don’t know. My wife put the first couple of labels on incorrectly. They were in the wrong spot. The return address was in the middle, and I’m like, “What are you doing?”, and she’s just like, “I’m sorry, I just wasn’t paying attention.”
Rob [06:25]: Nice. Yeah, I have my eight-year old help sometimes fulfilling Drip t-shirts and books and stuff, and I will often have to correct his work.
Mike [06:34]: It’s almost like hiring.
Rob [06:35]: I know. It’s so hard to find good help, right? So what are we talking about today?
Mike [06:40]: Well, we originally did a version of this topic back in Episode 4. It’s been nearly five years, and the episode at the time was called “8 Things We Wish We Knew When We Started”, and I figured what we’d do is we’d go through that topic again, and see if there are different things that we would say now versus what we said then. So, I wanted to just revisit it. There’s five years of learning between when we did that episode and now. So, is there different advice that we would give ourselves, is kind of the main question. So, I copy-pasted the list into our outline, and I put that at the bottom. I didn’t really look through things before coming up with my list of four and you’ve got your own list of four, but I figured we’d go through them, and see how things are different now than they were five years ago.
Rob [07:18]: This is one of the most requested episode formats. We often get, “Hey you guys talked about x in Episode 15. What do you think now?” It’s pretty frequent, so I can see us doing several of these in the coming months; basically revisiting some old topics and giving a new take on them. It might be interesting to read our lists from Episode 4 before we start. My four from back in 2010, I guess, was that traffic isn’t enough, that one big link won’t make you successful, to thinking years not months, and that marketing and sales take as long to learn as software development.
Mike [07:50]: And my list was: number one, the amount of administrative overhead of creating a business is a lot higher than you think it is, number two, you can’t do everything yourself – outsourcing time consuming tasks is essential to success, three, don’t waste time making the optimal decision, make a decent decision and move on, and four, if it’s easy in the beginning, that’ll probably change – if it’s not easy that’s normal.
Rob [08:08]: Nice. So, let’s dive into what we’ve put together for this episode, kind of the updated takeaways. My first one is to play long ball – essentially, to think in years and not months. Like I said five years ago, I think that still holds true, and it’s something I really believe in, even having moved down the line now and been doing this for longer. I think that kind of ties into the stair-step approach that we talked about a few episodes ago, that I blogged about, that I’ve now had in talks. It’s that the odds are not great that you’re going to start something and have this grand success within a few months. That any time you hear about people doing it, there are typically some extenuating circumstances, that someone has tried five different apps, and then the sixth one caught, and grew really quickly. Or, if someone does it on their first app, that it usually is more of a Cinderella story. It’s a really unique outlier situation if someone does have quick success. So, think in years, not months, and go in it as a marathon, and look to play long ball instead of trying to get instant growth and instant success.
Mike [09:08]: Mine in some ways kind of ties into that theme or idea, because my first one is you can’t skip steps in the learning process. What I’ve realized is that if you try and reach too far, then things are just going to be that much harder for you. And, in some ways, I was kind of thinking about your stair-step approach in this, where there are certain things that you almost have to learn along the way. As you said, I mean, if there’s that Cinderella story, there are people out there who have gone from 0 to 100 in the first shot, but that’s not common. By skipping some of those steps, or trying to intentionally skip them, it makes it that much harder for you. You might as well have gone for something smaller in order to go through that learning process, because you have to go through it in some way, shape, or form. You’re better off doing some smaller things in order to get that experience and the successes under your belt, not just the learning successes but also the financial successes under your belt as you go through it, because if you go too far without those financial successes, obviously your runway’s going to fall short. So, you need to go through those steps in order to learn things as you go along.
Rob [10:09]: My second thing I wish I knew when I started out is the importance of relationships. Especially, seven, eight years ago, as I was really starting to come into fruition and have apps generate the majority of my income, I was trying to do it all on my own, because there really wasn’t a bootstrap community at that point, and I didn’t have connections. I didn’t have a mastermind group. There was no MicroConf . I didn’t have a network that I could leverage. People told me, “You need to build relationships.” Or, I’d read this in books, or hear it in podcasts or whatever. I didn’t realize how important that would actually be, and that having a community of like-minded people – how important that is, how much quicker and enjoyable it can make the journey, not only in ways of people helping you out, offering to promote your product, offering to give you feedback, but even the support of being able to talk to other founders and find out that what you’re going through is normal, and the hard times are what we all go through.
Having a mastermind group to talk to and get advice, some of the key insights of the last couple of years have come out of the two mastermind groups that I’m in. So, I think that if you’re trying to do this all on your own, and listening to a few podcasts, and you’re reading books, and you think that you’re just going to be able to kind of dive in based on pure knowledge and tactics and grow something, I think you’re missing out on a big piece of it, and I think you’re going to dramatically extend the length of your journey, and not in a good way. Right? You’re going to prolong the learning. You’re going to make a lot of mistakes that you would otherwise not if you had folks around to lend you a hand and lend you support.
Mike [11:43]: The second thing I wish I knew when I started out was that establishing trust is a critical step on your marketing path. I mean, I knew when starting out that people do not just come to your website and then buy from you. That’s not common behavior from most people. However, one of the things that I don’t think I fully grasped was the importance of all the different follow-ups and the individual touches from people, whether it’s emails, or different things on your website, or white papers, or phone calls, things like that. I don’t think I fully grasped how important all those little things are, because they add up to a level of trust that essentially helps convince people to buy, because people just online are typically in this mode of “no”. That’s their first thought. “Are you interested in this?” “No I’m not.”
I think it’s just very common for people who are browsing around on the internet, they see an offer of some kind, and their immediate answer is “no”. But, given enough time, and enough trustworthy touches, I’ll say, it essentially brings them over. Especially if they were interested in it at all. I mean, because they need to be able to trust you in order for them to buy into whatever the product or service is that you’re offering. And, it’s not going to be an immediate thing. It might be three or four emails or something like that, it might be an email course, it might be thirty or forty emails. But, you have to get through all of those different things to help establish the trust between you and the prospect in order to get them to essentially come over to the side where they look at it and say, “Hey, I trust this person enough to give them my money, and I think that I’m going to get value out of this transaction.”
Rob [13:09]: Yeah, and there’s varying ways to approach this. I think the two most common are to go out and build a personal brand and build an audience, and people then know, like, and trust you. This is done typically through blogging or podcasting or video blogging, whatever, Instagram, and people feel like they know you. Then you have some type of product you can sell them, whether that is a book, or a conference, or a physical product like Gary Vaynerchuk with wine, and that’s one way to do it. If that’s your thing, and you’re the personal brand type, and you want to build a personality and put in the time, it’s a long road because you have to put in a ton of time creating that content. That does not happen over the course of six months. It’s years and years of showing up every week and producing. I think some people come out and say, “This is the best way to do it, and the only way to do it.” And I totally disagree with that. I think it’s one approach.
The other approach is we see folks who build a software product. They build maybe a SaaS app and they establish trust not through a personal brand, not through blogging and putting out content every week, but through sticking around and building a product name that people start to associate with something, right? It’s essentially a brand, it’s trustworthy. So, you can see examples of this, like maybe with Bidsketch, or I think Baremetrics has a brand, and I think WP Engine now has a brand name. I would venture to say that in our circles, Drip has some kind of brand name. You don’t have to do it through a personal brand; you can build trust, like you said, with getting folks on a product email list essentially, like an email crash course, and building a relationship over time and providing value. Then, when someone’s ready to buy, it’s not some type of cold sale, although it might start off as a cold touch if you’re sending traffic to your site through ads. But, if you nurture them over time through these various touches, you can build trust without having to do the whole personal brand thing.
The third thing I wish I knew when I started out is that certain products have one natural marketing channel, and that in most cases you shouldn’t spend time looking for others beyond that channel. What I mean is certain websites might get a ton of organic SEO traffic. An example of this would be my beach towel website years ago, or if you have an e-commerce site that has long-tail rankings, or if you have a WordPress plugin that ranks in wordpress.org, they get 80, 90% of their traffic from a single source. It’s a very natural marketing channel for that product, but the mistake that I made early on, especially, was to then try to take that product and double down on it, and spending six months or a year trying to find other marketing channels and grow it. Often times if you have a product with a single channel, this is what I call a step-one product, it really isn’t worth the time trying to make ads work or try to do content marketing for a WordPress plugin, or going outside of this single channel that is essentially free traffic.
Mike [15:57]: So, are there any specific criteria that you can think of that would essentially relegate different products into “this is the only channel where this is going to work”, as you said, the natural marketing channel for it? Are there certain criteria or characteristics of them?
Rob [16:10]: Yeah, typically it’s lifetime value. Typically if it’s a one-time sale, and the lifetime value is less than say, I’ll ballpark it at about $120. If it’s less than that, it’s going to be really hard to invest money and acquire customers, because display advertising, pay per click, content marketing, any type of outbound email, any of that stuff, you’re going to need to make more than a minimum of 120. Realistically around 200 is when it starts getting easier. So, if you have one-time sales, and you’re only making 30, $40 off a sale, you just don’t have a lot of choices. If you have a current price, and you’re making more than that, between 120 and $200 that’s when you can start thinking, “Okay, I’m going to invest into some SEO. I’m going to have some articles written. I’m going to start building that email list. I’m going to go beyond buy ads and really expand out.”
Mike [17:00]: The third thing I wish I knew when we started out was that in many cases, it’s better to not know anything about what you’re getting into. Two notable examples I can think of off the top of my head were MicroConf and my book. I think in both cases, these things turned out well, but I wonder, going into it had I known how much work it was going to be, if I was going to go through and follow through with it. I mean, it was something that I wanted to do, but I didn’t fully realize how much work and effort it was going to take. I think a lot of other people have comments on this as well. I think Paul Graham has also said this. Basically, just not knowing what you’re doing can be an incredible benefit because you don’t know how hard it is, and until you get into it you don’t realize it. In fact, sometimes until you’re done with it, you don’t necessarily realize how hard it was. So, you’re willing to take those risks, you’re willing to go through that learning experience because you didn’t know any better.
Rob [17:50]: Yeah, I agree with this, actually. I have found myself in the midst of some things that were worth doing, but they were harder than I wanted them to be. Had I known how hard they’d be, I probably wouldn’t have started them. MicroConf , like you said, is a great example. I think building an app from scratch and growing Drip is another example of the last two plus years of my life spent doing it. These are hard things and I think as founders we have to do them. I think that’s how we’re wired, and if we didn’t do them we would be unhappy, I think, in general. I think that’s kind of what we need to do, but being a little naive about how hard these things actually are I think is a natural benefit, kind of like forgetting how painful childbirth is or something like that. It’s an adaptation that allows us to revisit these pains and keep doing them over and over, in essence.
My fourth thing that I wish I knew when I started out is that having multiple products is good. I like the diversification, I like the experience you get. But, entering multiple markets is not good. This is a mistake that I made early on because there was no one around to tell me that it was a mistake. But, in essence, I feel like I probably wasted quite a bit of time in having multiple small products that were in disparate niches, right? So, I was selling beach towels to consumers, I had some e-books on just random topics that were totally unrelated, I had .NET invoice selling to, essentially, .NET developers, consultants, and some small businesses who wanted control of their data. I had a number of other products, and there was no overlap between the audiences. There’s an old marketing saying that I like, and it’s, “Selling an existing product to a new audience is good. Selling a new product to an existing audience is good. But you almost never want to sell a new product to a new audience.” That’s when it’s hardest, right? When you’re first starting out, you have to do that, but once you get one under your belt, my advice would be to not stray out and try to do this new market and new product thing again, because that’s when the time frame really extends and the learning is so painful. So, if I could do it all over again, I would have looked to take the initial audience of the first product or two that were successful, and double down on that, and essentially, find out what else they needed, and basically build or acquire products like that. I just think the flywheel and the momentum that you build serving the same market, there’s a ton of benefit to it.
Mike [20:13]: The fourth thing that I wish I knew when I started out was that community is everything. I think this relates back to number two for yours, but it’s hard to get by completely on your own. I think that when I started out, back in 2005 or so, there was a part of me that really believed that you could just kind of sit in your basement and work on stuff and things would work out for you. You didn’t need other people. Obviously, a lot of things have changed since then, but I feel like in the last five years it’s really emphasized to me the importance of having all those other people to rely on and talk to, whether it’s MicroConf , or inside a founder cafe, or just in a mastermind group. All these other people, just as you said, they give you direction, they give you these other insights about their experiences that you don’t have, or you’re not privy to, because you didn’t have those experiences. So, they can help direct you on the right path and keep you off of the wrong one.
Rob [21:01]: So, you actually had four more that you came up with, under the “others” category. So, these are like our four bonus things we wish we knew when we started out.
Mike [21:09]: And, it’s interesting. I wrote these down because I was just kind of brainstorming a little bit about what sorts of things that came to mind that either other people have brought to me, or I’ve kind of noodled around in the back of my head a little bit, but we’ll go through these four. The first one was that the more you learn, the harder it is to make decisions sometimes. This kind of goes back and relates a little bit to the fact that sometimes it’s better to not know anything about what you’re getting into. But, if you know a lot about something, sometimes it’s difficult to make a decision because you start thinking about all these “what if” scenarios. You think about all the different challenges and problems you’re going to have, and all these different things, and you view them as roadblocks. So, you sit there and you spend more time trying to think about how to avoid those roadblocks rather than actually sitting down, doing the work, and just saying, “Okay, I’m just going to plow through this, regardless of however long it’s going to take.” So, maybe it takes you a little bit of extra time to plow through them, but you are not procrastinating, you’re essentially wasting all that other time trying to think of ways around the problems that you haven’t even gotten into yet.
Rob [22:08]: Kind of the curse of knowledge, right?
Mike [22:10]: Yeah.
Rob [22:11]: Yeah, I think that the more I’ve learned, I have found it easier to make decisions, but I do think that I found it harder to give clear, concrete advice when people ask questions because I think of all the things that could potentially go wrong now. I see so many more pitfalls. So, I think in talking about it, I have – naturally I put up a lot more caveats. It’s always “it depends”, and there’s a lot of different variables and then you have to give ranges. I think things were so much more clear five years ago when I knew a lot less, and I could just emphatically say, “Yes, you should always do this. You should never do that.” The more I learned, the more I realized that that’s not the case, actually. That’s why I’m suspicious when people come out and use these words: always, never, should, because they reek to me of inexperience, of your view is not broad enough to realize that there are nuances to this and that none of these things are black and white. Very, very rare that you’ll find something that where “never” and “always” apply.
Mike [23:09]: The second one was that you’re never too old to become an entrepreneur. I actually had a couple of people joke to me leading up to MicroConf that, “Oh, I’m going to be the oldest person there.” The reality is it doesn’t necessarily matter. I mean, people have different career paths and different personal life arcs that go along with them. You can be 21 years old, you can be 65, you can be 75. I mean there are definitely entrepreneurs out there who are also advanced in their years. It almost doesn’t matter. You’re never too old to start something new.
Rob [23:39]: The third one is that knowing what you want or need isn’t as important as knowing why you want or need it. I think this depends on your time frame. I think if you’re early in your entrepreneurial career and maybe you’re trying to quit your job, I think knowing that you want and need it and that you’re willing to really drive for it and invest a lot of time, I think that’s as important as knowing why, because I think just getting there is such a journey that focusing on it is huge. Now, once you get there, you’re suddenly going to discover “wow, this isn’t all it’s cracked up to be”. It’s great, but it doesn’t fulfil you for the rest of your life, right, the arrival fallacy in that you get there and then within a few months you then need to start sorting out your “why”. I think that’s at every step. At every goal and big arrival that you think you’re going to have over the course of your 20, 30 year entrepreneurial career, I think first you need to decide on “what”, and then you’re going to get there and you’re going to achieve that “what”, and then you have to figure out “Why did I do that, and why did that fulfil me?” And that “why” that drives you to that next “what”, that next thing of what is it that I’m going to pursue and how am I going to kind of chart this course of starting businesses.
Mike [24:48]: Yeah, for me this one was more about understanding that the “why” is not about what it is that you’re achieving, it’s about the journey to achieve it. Your real goal isn’t necessarily to achieve whatever the goal is, but it’s to enjoy that journey, to go through it, and experience all the things that go with it. Yes, it’s great to achieve whatever the goal is, whether it’s $10,000 a month in revenue, or 50 or 100. That’s great, but knowing that your journey is essentially the driving reason behind it, at least for me, that’s the driving reason. Different people are going to have different thoughts about why it is that they want to achieve these different goals. But to me, it’s the journey that’s important; you have to enjoy life and to enjoy whatever it is that you’re doing. If you’re not enjoying it, then why bother?
And then the last one on my “others” list was “quitting while you’re ahead is not the same thing as quitting”. I remember this as a quote from the movie American Gangster. It just struck me as something that is fundamentally truthful, because you look at that and say, “Well, if you’re quitting, nobody likes a quitter.” But, at the same time, when you’re quitting while you’re ahead, because you know that other things are going to come along that are either better or are going to torpedo all the things that you’ve done so far, you’re essentially recognizing what your situation looks like and making a conscious decision to move on, versus being in a situation where you’re fighting a losing battle that you cannot possibly win. For example, a number of years ago where they were trying to create a calendar app. It was going to be all web-based, and then all of a sudden out of left field Google comes along and announces that they’re coming out with a calendar app as well. Instead of trying to fight against that machine, they did what I thought was a very admirable move, and just decided to kind of pull the plug and say, “We’re going to quit this. We’re going to go on and move on to something else.” They made that as a conscious decision and I think that’s the differentiating factor here, is that you’re making a conscious decision to move on versus fighting against a machine that you know you’re going to lose against, and folding up shop well in advance of that because you’re deciding to say, “Hey, look this is not going to work out. I recognize that. I’m just going to move on and I’m going to do something where I can be successful.”
Rob [26:47]: That wraps us up for today. If you have a question for us, call our voicemail number at 888-801-9690, or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We‘re Outta Control by MoOt used under creative commons. Subscribe to us on iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 233 | 7 Takeaways from MicroConf Vegas 2015
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike discuss their seven takeaways from MicroConf 2015.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of Startups For The Rest Of Us, Mike and I discussed our seven takeaways for MicroConf Vegas 2015. This is Startups For The Rest Of Us episode 233.
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.
Mike [00:27]: And I’m Mike.
Rob [00:28]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
Mike [00:33]: Well, I got back from MicroConf about maybe 12 hours ago. I got in around midnight and it’s 1:00 in the afternoon right now and I’m still recovering even though I had an extra day on the tail end of the conference. So, I don’t know about you but I’m tired.
Rob [00:45]: Yup, yup. Feeling pretty out of energy. I slept until noon two days after the conference and still just can’t quite recover. I can’t quite catch up. I didn’t even stay up that late. I didn’t drink very much. It just kind of takes it out of you. It’s this extrovert hangover, I think.
Mike [00:59]: Yeah. I drank a lot of water but I really didn’t drink anything else. It’s just constantly. It’s weird because it’s Vegas so of course it’s weird because it’s Vegas so of course it’s actually dry and I felt like I was over drinking water and I was always just not drinking enough and I always felt full though because of that.
Rob [01:12]: Yeah. For sure.
Mike [01:13]: So, one of the things I heard from a lot of first-timers at MicroConf was that it was really intimidating because there were just so many people there but I got somewhat mixed reviews about the attendee badges. So what we did this year, which was a little bit different in previous years. In the past what we did is we gave people things that said basically returning attendee and some people kind of as a joke started putting like two, or three, and four of them on their badges. So this year we switched over and to help eliminate that, we’ve handed out this first-time attendee ribbons essentially that you could hang underneath your badge. And some people loved them and then there were a couple of people I talked to who were just like,Yeah. I ‘m not wearing that.
Rob [01:49]: Yeah. For the most part, I heard that people liked it because it allowed them to connect with other folks who were also first-timers. I think I only met one person who said that they didn’t want it on there, that it was like a badge of shame or something, but I thought it was a good idea and it allowed folks to connect.
Mike [02:03]: Yeah, I did too and I don’t know how you felt about it but I felt it was, if you saw somebody with a first-time attendee badge it was like,Hey, come talk to me.
Rob [02:09]: Exactly. Yup. I felt the same way. Sherrie told me the same thing that she was kind of trying to help post, help like welcome folks who had the first time. I got an interesting email from Scott Ewell of Bootsrapped with kids, both he and [Brock?] made it to the conference and Scott said,This was a more rewarding experience for me the second year. Last year I felt a little intimidated/overwhelmed by it all, but this year, seeing familiar faces from last year and reconnecting was a really great experience. And then, this is a part of like I said,I think there’s an evolution from. And he has a number of steps and it’s; number one, working in Corporate America; number two, discovering micropreneurship; number three, attempting something and feeling the impostor syndrome; number four, connecting the one or two others doing the same; number five, discovering the broader community; and then number six feeling part of the broader community. And it feels like for Scott, this second time that he’s really starting to connect and feel part of that broader community which is both MicroConf but obviously even beyond that.
Mike [03:04]: Yeah. That ‘s a really interesting way to put all that. I really like that. It’s not something I could really probably thought of in those terms before. But yeah, those are definitely great points. I really like how he just kind of laid it out like that. One of the things that I found this year and I don’t know if you felt this way, even though the conference was about the same size, it felt harder this year to get to everyone. So for example Scott, I went to the gym one morning, I think it was on Sunday morning, and I had a longer discussion with Scott at the gym while we were working out that I did any of the time. I barely saw him the rest of the conference.
Rob [03:33]: Yeah. I think just due to the fact that so many people come back to MicroConf. We get between a 60% and 70% return rate that everyone knows each other now. A lot of people know each other. And so, it means that you have more people that you want to talk to and there were probably a dozen people who I know really well that I just never got a chance to talk to even though I saw them around.
Mike [03:54]: Yeah, same here. I think there were a lot of people who I know them online but I hadn ‘t really met them in person and I wanted to carve out time and talk to them and it’s just never really got around to it. We were never in the same place at the same time or busy in other discussions, something along those lines, but I don’t know, I don’t know what the answer is there. [crosstalk] conference.
Rob [04:11]: I know. Yeah. We haven’t grown it. It’s been the same size for two years. We definitely have some discussions to have just around making sure that first-timers get a chance to engage with people. There were some chat on Twitter about trying to get more women to the conference. I think these are both things that you and I planned to discuss and try to attack for next year.
Mike [04:31]: Yeah. I had some conversations with some people at MicroConf. So if anyone has any thoughts or suggestions, feel free to privately email us and we’ll kind of take them under consideration, especially if it’s just around like ideas about what to do, about some of those things because Rob and I have our own thoughts and opinions on it but it’s just the two of us kind of thinking about these things and talking through them and relaying what other people have told us and just the conversations we have had. And so if you have thoughts on these things, just feel free to email them to us.
Rob [04:56]: So I want to dive into our seven takeaways for MicroConf this year. The first one is that relationships are crucial and I think this came out in a number of talks. This also came out in a number of conversations I had in the hallway track of people talking about how valuable their masterminds are. I started thinking about it and the number of times I mentioned Derek, Rubin or Jeff Epstein in my talk, probably 20-25 times just kept saying,Yeah. I was trying to make this decision. And then I asked their opinion or Derek and I decided this, for a guy who ‘s kind of a single-founder type and likes to do stuff solo, I sure mentioned other people and how much they ‘ve helped me a lot.
Mike [05:35]: Yeah, I find that too. I think it came out a lot more at the conference and just on that note if people are looking for a mastermind group, there’s a website you can go to called mastermindjam.com and Ken Wallace is behind that and he basically helps put people together into mastermind groups based on a profile of like different criteria and things like that. So if you’re interested in one, definitely go to over mastermindjam.com and Ken will try and put you together with like-minded individuals.
Rob [06:01]: I’m glad Ken did that. You and I have been talking about doing something like this and just haven’t had the time so it’s great. So he’s a Micropreneur Academy member and he came to MicroConf this year and he obviously sees the value of mastermind group. So I like that there’s a resource for our community to take advantage of that.
Mike [06:14]: I think the second major takeaway for MicroConf is do not hang stage lights near a sprinkler system.
Rob [6:20]: Yeah, in case you haven’t heard, we had a sprinkler go off in the middle of the conference and it spilled black smelly water that had been in pipes for 50 years all over the back of the room. Luckily, it was the back and not the center so we got a few people wet, I think a pair of shoes, and maybe a laptop were ruined but that was pretty surprising. What were you thinking when you saw that happened?
Mike [06:42]: I remember thinking,I’m not entirely sure what’s going on but I’m glad I paid that extra dollar for terrorism insurance just in case.
Rob [06:50]: Seriously. Yeah, it was a complete shock. This thing just goes off in the back of the room and people start scattering and again luckily, it was all the way against the back wall so it wasn ‘t like it was above a huge group people, but people pretty much evacuated the room and it was right as we were heading in the lunch and I was thinking right as that happened like,Wow. Is this it? Is MicroConf over this year? How are we possibly going to recover from this? But within about 10 or 15 minutes, I started realizing,This will go on. Even if we just get a portable PA system in here and we do some groups until they can get a room for us, I could do my talk without slides. I just started thinking of all the alternatives that we could start doing and realized that the conference would not be over.
Mike [07:32]: Yeah. It kind of goes back to all the different problems we ‘ve had over the years to be honest because somebody asked me,How’s the conference going? And every time that anyone asks meHow’s the conference going?, I always turn around and ask them. Yeah, because if they don ‘t see anything, then it’s going great because there’s all this stuff behind the scenes that you and I see that things are going wrong and if nobody notices then things are going great. And pretty much every year, we’ve had something go wrong and almost nobody has ever noticed. And this is I think the first year that something major has happened where it’s not like you can hide that. It happened right in the middle website tear downs and it was obviously that something is going on. It cleared the room. So, you just have to kind of deal with it and move on. There was a little bit of indecision there it’s like,Okay. What is going to go on now? How do we handle this? How do we move forward and not just have to end the conference right this second?
Rob [08:21]: Yeah. And the nice part is since it was during lunch, the hotel was able to scramble and get another room set up and in essence, they did it over lunch and then for about another half hour. So we lost half hour of the schedule but we just ran a half hour over towards the end of the day. So we didn’t lose any programming and the only thing that it did was put us 30 minutes behind schedule which is pretty impressive to be honest. I was thankful that Zander was there to handle that and that the hotel was able to scramble that quickly and get us back on track.
Mike [8:49]: A bunch of people said that it was kind of amazing that we were able to recover as quickly as we did from that little incident, not exactly little but from that incident, it was just amazing how fast we were able to recover. And Zander did a fantastic job. I can’t count the number of people who came up to me and said,Wow. Zander is awesome. He does a really, really great job helping you guys to this conference.
Rob [9:07]: Yeah. He’s really taking a lot of the load off of us. So, our third takeaway from MicroConf 2015 is that if you have a product that you need to find your fit first whether you call it product market fit or whether you call it building something that people actually want and are not churning out of, that you need to find that before you start marketing. This came up in a number of different talks. I think most notably my talk focused on it for a good third of the talk and Hiten Shah spent maybe a third to a half of his talk talking about how to find product market fit, what it looks like, how to measure it. And in the responses to the survey that we sent to attendees afterwards, a lot of folks were talking that this was their number one takeaway is to not just build something and then try to run all these marketing approaches that we always hear about but to build something, ensure you have this fit, and then start marketing because if you start marketing before that too hard, then you will just lose a lot of money and basically pour it down the drain.
Mike [10:06]: Yeah. It’s about the efficiency of what your marketing is because if you don ‘t have that product market fit first in your marketing, it’s just the efficiency is so much lower because you’re going to convert all that worse and people are going to churn out faster because what they bought is not going to necessarily what they were expecting and I think that ‘s really the main takeaway from that. It’s more about the efficiency of your marketing.
Rob [10:26]: Fourth takeaway from MicroConf was that buttons matter and to test them, and often to test them in conjunction with headlines. And this was from Joanna Wiebe ‘s talk. Joanna is from copyhackers.com and her talk was one of the highest rated this year and I thought it was a very, very good talk. She talked a lot about how much the text on buttons actually matters and just showed a number of split test talking about why that ‘s the case and why we often focus too much on headlines and don ‘t look enough at the text that we’re putting on buttons.
Mike [10:58]: One of my big takeaways from her talk was that there’s always a lot of these best practices that people repeat over and over again and the reality is that a lot of them don ‘t necessarily pan out and you still have to test them and even if they’re best practices, you still have to test those things because it’s not always clear that they ‘re really going to work that way.
Rob [11:15]: If you haven’t followed Joanna, I’d recommend checking out @copyhackers on Twitter or right in copyhackers.com because she has some really exceptional content around copywriting and conversation rate optimization. Our fifth takeaway was actually from one of the attendee talks. So over the past couple of years, we’ve allowed attendees to submit talk ideas and then before the conference they are voted on by the other attendees. And so, I think this year we got around 35 talk submissions and we took the top 12 and so these actually all 3 of these last takeaways are from attendee talks. This first one is from Jacob Thurman and he’s been to every MicroConf as I know I think for the last five and he talked about selling his single-founder software product. He called it a [Micro ISP?] but it’s in essence just him running the show and it was a fascinating look at what it took to build this up and then the decision-making process of whether to sell and how much to sell it for, and he had some really actionable takeaway that seems like that would be all kind of a gut feeling. But he had this great spreadsheet where he laid it out and he also talked about how to make big decisions and not make them poorly.
Mike [12:28]: A couple of other things that were takeaways from his talk is to not make big decisions when you’re not at your peak level of performance and he had this acronym called HALTS, H-A-L-T-S. It would basically stood for, don ‘t make big decisions when you are hungry, angry, lonely, tired, or sick because you’re going to make good decisions at any of those points. And it intuitively makes sense when you think about it that way but if you’re making those decisions in the moment, then I can definitely see how you would make the wrong decisions and come to regret them later.
Rob [13:00]: Yeah, and for the record the HALT acronym without the S it’s actually very famously used in psychology and he talked about that and then he realized he had a stomach issue during this time where he had stomach pains and so he added the S to it and I thought that was pretty clever.
Mike [13:14]: And I think this is the topic that most people in our community don ‘t necessarily talk a lot about because it almost seems like there’s not a lot of buying and selling in our particular space, I’ll say. I know that there is some but I think it’s just not widely discussed.
Rob [13:27]: Yeah. It seems like more and more this is happening as our space is getting more mature because there are more people self-funding. You would see Patrick McKenzie selling a few. I’ve obviously bought a lot in the past and sold a few. I think Brian Castle sold one or is selling one. [Field Erickson?] selling were [?] but I mean there is becoming a little bit of liquidity as more of us are doing it and I think as we kind of stair-step up, it can either autopilot your old ones or you can sell them and selling them is not a bad idea to get a nice little chunk of cash. Now in the old days, selling them meant putting them on flip and getting 12 to 18 months ‘ worth of profit which was a drag but now if you actually build a good product, you can get 3 years ‘ worth of net and it makes it more realistic to do, right. It makes it more worthwhile I guess I’ll say because it allows you to take that money and then invest it up into more complex products.
Mike [14:17]: Yeah. That ‘s kind of the leveling-up that we’ve kind of talked about a little bit on this podcast in the past. So, it’s good to see that stuff going on though.
Rob [14:24]: Yeah. Our sixth takeaway was from Ted Pitts attendee talk, and Ted is with Moraware Software. He’s one of the co-founders Ted and Harry who have been to a lot of the MicroConfs as well and they run countertop installation software. So it helps countertop installers to schedule and do things like that. And he talked about the most important SaaS metric that no one talks about which was profit, and I thought it was cool because he talked about how they’re doing substantial amount of revenue with only seven employees, and that they’re not a big sexy Silicon Valley startup but they ‘ve been in business for, what was it? 10 years, or 12 years.
Mike [15:01]: Yeah. It ‘s a long time.
Rob [15:03]: Yeah, it is. And you know what, they’re just legit like they’re just around and they’re stable and both of them have [known?] an attendee talks and Harry has been on the podcast back around episode 40 or 50 and they’ve just kind of been around the community and I like their presence, and I like that they’re not going after these big startup ideas even though they have a successful business. They haven’t thought of flipping it and selling it to go after something more sexy, and that they’re really just content to run this highly profitable business that kind of owns this niche and it does really well with it. I think that’s something to be kind of respected. I respect what they have done and I like to hear Ted talk about it in his talk about them at finally achieving profitability even though they ‘ve kind of been profitable for years but just talking about the rough ups and downs of getting here.
Mike [15:47]: Yeah. I thought it was interesting to how Ted put things into perspective with really just talking about profit. It opens up your options, is really the bottom line. It lets you do things that you might not otherwise have the ability to do and just being able to have that profit around to use as you want it or you need it. Obviously, if you need it then you have to spend that money, but you don ‘t have to spend the money. You can just keep it and there’s nothing wrong with that. There’s nothing wrong with just keeping the money.
Rob [16:12]: Our seventh takeaway from the MicroConf 2015 was from Jordan Gal ‘s attendee talk and he talked about outbound email and called emailing prospects and essentially said doing sales calls, doing sales emails for prospecting and what I like about his talk is it was 12 minutes. It was super actionable. He laid out all the numbers of exactly how much it cost to compile a list, to send the emails, to work with the leads. It was really compact and he showed all the tools that he used, and so, I appreciate that. I think that ‘s something we’ve always tried to do with MicroConf is to have actionable talks that you can basically takeaway and use in your business next week and Jordan has definitely delivered on that.
Mike [16:50]: Yeah. That was a very tactical talk. He told you exactly how to do it. It was basically a play-by-play of this how we do this and this is how you can too, and I thought that that was very, very useful.
Rob [17:01]: I think that ‘s part of the feedback we got from the survey. What’s nice this year is we’re recording this episode but we have already sent the survey and received feedback from the attendees and that is typically not the case. But some of the feedback, as always, it ‘s mixed, right? Some people I want more inspiration, some say less inspiration. But one of the threads that I was noticing is some folks wanted some more tactics and I don’t know quite why that happened this year but it seems like there were some highly tactical talks and maybe fewer technical talks that we’ve typically had.
Mike [17:31]: Yeah, I’m not sure. I think it depends a lot on where people are in their business which is another one of those discussions you and I kind of have to figure out because there ‘s those people who have come back. I asked in the audience, how many people were at the different numbers of MicroConfs and so who was there for the first time, who had gone to one or two, three or four before. And then there were probably a larger number of people there who have been to five MicroConfs than I would’ve thought based on where you are, you’re going to want different amounts of tactics and I think we’d need to go back and take a look at some of the feedback and kind of figure out where people are at before we made those judgment calls. But it’s an interesting discussion to have and an interesting problem to think about. So, you have to look at those things and maybe take those into account as well.
Rob [18:12]: Yeah. That ‘s a really good point. I think that is probably why we’re getting more and more varied feedback where in the early years it was pretty consistent like,You should do this to improve the conference. And it was obvious that ‘s what we needed to do, but now we get this wide swath of input and i think it comes from having some folks who are, there are still a handful of people who are looking for an idea, who attend MicroConf but that ‘s really a minority. But we do have people who are just launching and just getting started and then we have folks who are running literally multimillion dollar software companies, and it’s kind of like how do you present enough content for all of those groups, that whole spectrum to be happy with it when they get something out of it.
Mike [18:51]: Yeah, to be useful to everybody. If you’re catering to everybody, you’re really catering to nobody and that ‘s kind of what makes it toughest because there’s this big spectrum from right now of people who are first-time attendees and they’re just kind of thinking about it. They just don ‘t even have an idea yet, and they’re there for inspiration, and then you do have the people who have been to five and they ‘ve got a business that ‘s doing several million dollars in revenue every year. Catering to both those types of people at the same time, I think it’s really, really challenging for the speakers.
Rob [19:17]: One other thing we tested out this year was workshop. So we did two workshop the day after MicroConf. One was headed up by Hiten Shah and the other by Patrick McKenzie, and you had actually wanted to do this for several years and I’ve been kind of against them to be honest just because I’ve never seen them well executed. And then when I went to DCBKK, Dan and Ian ‘s event last October, I saw workshops that I thought were well executed. And so far, the initial feedback was that the workshops were worth it and we haven’t even pow wowed on this offline but I get the feeling that this is something that we’re going to want to continue because I think that is where the more advanced folks were catered to. Because if someone is doing 50,000 MRR in their business, they aren’t necessarily going to get a ton out of general talks anymore but these workshops for Hiten and Patrick really dug in to everybody ‘s funnel and everybody ‘s process and gave super actionable points of how to grow. I get the feeling that ‘s where they got their money ‘s worth.
Mike [20:19]: Yeah. I talked to several people because what I’m going right now is I have to go back through and look up everybody ‘s information and reach out to them but I want to schedule at least 10 or 15 minutes to talk to every single person who went to a workshop if I can get them on Skype or on a call or something like that. And I’ve already had three or four of these discussions already because there are people who stuck around after the conference, but that was the sense that I got from people. There were definitely things that we could’ve done better upfront in terms of communication and letting people know what the workshops were and what was going to be in them, but we didn’t get tickets out until partly into January. So, we got that done and we got that all taken care of and then all of a sudden, we ‘ve got workshops to deal with and if we don ‘t do them this year, we have to wait another year to do any sort of iteration on them. So, I wouldn’t say that they were added in after the fact but the reality is it was just working on them was held up by the fact that we didn’t have a signed contract for the hotel until January. So, some of that was our fault buty the people coming out of the workshop by and large, all I’ve heard is great feedback from them just,Yes, I would absolutely do this again. It was fantastic. It was very, very helpful.
Rob [21:22]: So does wrapping up MicroConf Vegas make you excited for MicroConf Europe here in the fall?
Mike [21:29]: As long as there’s no sprinkler systems involved.
Rob [21:31]: I know. Oh, we’ll get planning on that soon. So, to recap, our seven takeaways from MicroConf Vegas 2015 were number one, that relationships are crucial; number two, don ‘t hang stage lights near a sprinkler; number three, find your product fit first and then start marketing; number four, buttons matter, test them; number five, don ‘t make big decisions when you’re not at optimum performance; number six, the most important SaaS metric no one talks about is profit; and number seven, how to run an outbound email campaign.
Mike [22:01]: 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 commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we ‘ll see you next time.
Episode 232 | How to Design a Killer Client Demo
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to design a killer client demo. They put together a basic four part outline that will help you take your customers to the next step.
Items mentioned in this episode:
Transcript
Mike [00:23]: In this episode of Startups For the Rest of Us, Rob and I are going to talk about how to design a killer client demo. This is Startups For the Rest of Us, episode two hundred and thirty-two.
Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products. Whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob [00:24]: And I’m Rob.
Mike [00:25]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob [00:28]: A couple weeks ago I mentioned I was going to be hiring an executive assistant, super part-time, remote, to help with my email volume, and to go through and do some filtering. And I’ve been thinking about doing this for a couple of years, and really couldn’t see a way that someone could actually help and save me time. But with my schedule going from having four hour tasks, that I do during a day, to basically hundreds of five minute tasks, which is essentially what I do now, I really did see that I probably needed to do it.
So I hired an executive assistant. Found her on oDesk. She’s based here in the U.S., and it’s actually working our pretty well. She’s basically just filtering my inbox into two separate labels. She’s either putting them in one of the two labels or she’s deleting them. And I just gave her instructions, and walked her through the screencast, and then if she has questions she asks me. So the two labels I’m using are ” _today” and “_this week”, and it really translates into “urgent” versus “you can do this whenever.” And underscores there, of course, to keep them at the top of the list. But I’ve been shocked at how much time it’s saving me. It’s not hours a day, for sure, but it’s probably maybe twenty to thirty minutes a day. Just getting all that sorting gone, there’s TrueTwit validations that come through from people on Twitter and she’s handling those and one by one I’m figuring out these little things she can do to save me two minutes here and two minutes there, and it’s cool. It’s cool just to open up Gmail and never look at the inbox. That’s been the hardest thing, either on my phone or on Gmail, is to only look at Today tab essentially and see what she’s putting in there.
Mike [02:00]: Yeah, that’s interesting, because I find the same thing. If I try to avoid doing my email throughout the day, or just try to batch it up, the most difficult thing is not going in there and looking at it just out of habit, sheerly our of habit. I grab my phone and it’s like “Oh, do I have any messages?” It’s obviously a bad habit, but hard to break, too.
Rob [02:16]: Yeah. I do the same thing. And I have peeked in the inbox, especially on weekends. She doesn’t work, so on the weekends I do have to check on my inbox if I want to see stuff that’s coming in. But overall, I’ve been pleased with it so far, and I’m hoping that overtime I can give her more and more little things to do as she learns my work flow.
Mike [02:32]: Very cool. So we got a lot of positive reviews from the “Being Married to a Founder,” episode a couple weeks ago, when we basically outsourced the podcast to our wives. Jay Adams said, “This is one of the best episodes yet. It’s great to hear insights from other founder’s spouses, and how it relates to our own situations.” And Richard says, “Well done. That must have been quite scary to do. I’d love to hear some more advice you could give to founders on how they can make it easier on their spouses.
Rob [02:55]: Very cool. Yeah, I thought that was a neat fifth anniversary episode, right? We could get off the mic and put some other voices that I think have a lot of interesting things to say. And Richard, if you’re looking for other advice on working with your spouse and communicating, that kind of stuff, I have a podcast with Sherry, my wife, and it’s called Zen Founder at Zenfounder.com. Every week or two we’re addressing that kind of stuff. It’s keeping your family and yourself sane while you’re starting up.
Mike [03:20]: And I’ll vouch for it as it’s a good podcast. I listen to it.
Rob [03:23]: Cool. So I have some bad news. I hired a part-time marketing assistant, essentially. He had a full-time job during the day, and he was doing stuff on the side for me. And I had a thirty day trial. We were trying to figure out if we could work together, if he could do the work and stuff, and he quit about three weeks in and he just said, “It turns out I don’t have as much free time in a week as I thought I did.” He said, “I feel bad that I can’t put in as much time as you need, so I’m just going to bow out now before it becomes an issue.” So that was a bit of a bummer. It’s a bit of a bummer to try and get down to someone and hire them, and then have them not be able to do it. But the good news is through some crazy circumstances I stumbled across a candidate who could not only fill that gap of online marketing, but she also has customer success experience, giving demos. She has a unique skill set, I’ll put it this way. Because, normally, you can find someone who can do onboarding, and be a customer liaison or account executive, but they don’t have internet marketing experience. And she happens to have both of them. So I made her an offer this week and it looks like things are going to move forward with that. So very good ending to what was otherwise some bad news that I received last week.
Mike [04:30]: It’s always rough to have to end one of those things in the middle of it, especially when it’s not your decision. But in some ways it’s better to have those decisions forced on you, early, especially, then to have to make the hard decision later on and say “This isn’t working out and I have to end it.” Because then it’s more of a mental weight that you’re going to carry around for probably at least a couple of weeks, if not a month or two, before you pull the trigger and say “This has to end now, because it just can’t go on any further.”
Rob [04:53]: Exactly. And I really appreciated him just coming out and saying. I have no ill feelings at all. I appreciated his honestly, and the fact that he didn’t want to waste either of our time. He didn’t just fade away like a lot of contractors do, and not get back in touch, because that’s, like you said, a real bummer because it drags on for weeks and weeks.
Mike [05:10]: Yeah. I might have mentioned this before. I was interviewing somebody for a developer position, and my typical process is go through, talk to them for a little while on a phone call and explain to them what the position is, and then ask if they’re still interested. And I actually had somebody tell me, “Yeah, I’m not interested.” I was shocked. I was just like “Oh. Okay.”
Rob [05:28]: That’s good to know now.
Mike [05:329: “That’s good to know now. Thanks.”
Rob [05:32]: So before we dive into the meat of this episode, we got an email from Wilson Peng and he says, “I’m a self taught Rails guy, but self-teaching myself through all the sites you mentioned didn’t work.” And he’s referencing our episode, it was three or four episodes ago where we talked about whether a non-technical founder should learn to code or not, if they’re going to start a SaaS app. And we threw out some different sites like One Month Rails and Udemy and other things and he says, “After I started working for Iron.io I was pretty much able to code anything, mainly because we worked out of a co-working space, which is where all the [Dev?] tool startups work, and it was beyond easy asking for help when I ran into problems.”
What I thought was interesting is, one thing we didn’t mention on the “Should I learn to code episode,” is that in my opinion, the best way to learn to code, by far, is to get a forty hour a week job coding and have a mentor. Have someone you are either an apprentice to, or they’re just an informal mentorship relationship, where you can go and they can show you how to architect and they can show you the stumbling blocks and how to get around them. The reason we didn’t mention that on the episode is that the person asking the question already has a full-time consulting business going and he’s thinking about launching a SaaS app on the side. So he doesn’t really have the leeway to go and work forty hours a week salary for someone to learn to code. But in my opinion, it’s far, far better to get a full-time gig in coding, if in fact you do want to learn to code. So what are we talking about today?
Mike [06:59]: Well, we have a question that came in from Guy Lewis, and Guy wrote to us and he said, “Hi, guys. It almost goes without saying how valuable your podcasts are, so firstly, thanks so much for sharing your hard-earned experience. My question is can you do a podcast on how to set up an online demo? What tools and equipment are necessary, and what have you learned about managing consistency across a team? Thanks again, gents. Guy Lewis.”
Well, Guy, I think in terms of the tech itself, the tech can be fairly straightforward, especially if you’re doing an online demo. For our podcasts we just use Skype. I use Pamela on my machine because it’s Windows, and Rob uses –
Rob [07:29]: Call Recorder.
Mike [07:30]: – Call Recorder because it’s on a Mac. You probably don’t need those particular features, and you probably wouldn’t be using Skype to run a demo. I would recommend either GoToMeeting or WebEx. If you go with GoToMeeting, I will warn you in advance that the recording does not work very well. So if you’re anticipating recording the demo, I’ve always had problems with it, and when you do get the recording it always goes into this unique GoToMeeting format that you have to use their player for. So just keep those things in mind when you’re using it. But otherwise, in terms of the tech, in terms of the headset and microphone, I would use a headset. Don’t use a stand alone microphone. Use something that is going to sit on your head. You don’t really want to be using a phone if you don’t have to. If you are going to use a phone, make sure you’re using a headset that goes with it, so that as you turn your head or look at different screens your voice isn’t fluctuating for the customer. You want a very uniform experience when you’re doing that.
As I said, the tech stuff itself is very easy. I think that when you’re looking at a client demo, what you really want to concentrate on is, what is the customer looking for? What is it they want to learn? How do you present it to them? And how do you go through that process of conveying the information to the customer in a way that is going to essentially lead them from that call to whatever the next step is.
So what we’ve done is we’ve put together an outline of the four basic steps of how to design a killer client demo that is going to help you take that customer from where they are today to the next step, whether that next step is them giving you a credit card right then and there or another call or a trial or et cetera.
Rob [08:57]: Yeah, to jump in and actually touch back to the tech stuff. When you get your headset make sure it’s a USB headset to avoid the hum. I often find that gaming USB headsets are pretty good. The other service that I’ve used for giving demos is Join.me, and it’s a free service, but obviously that comes at a price. Free like a puppy. I have used Skype for a bunch of demos, and it’s not the most professional thing, just because you have to add them as a Skype user, as a contact, and then share the screen and stuff. It works fine, but moving forward, if I were actually to start scaling this up, like you said, Mike, Skype is not the way to do it.
Mike [09:30]: Yeah, both GoToMeeting and WebEx have free tiers. So I think that you get up to two or three users, or something like that, and it’s completely free. So as long as you’re not running a large scale demo for five or six people in different locations, you’re good.
Rob [09:44]: Cool, let’s dive in.
Mike [9:56]: So the first step in designing a client demo is your open. And in the opening, basically what you want to do is you want to let the other person talk. You don’t want to go into what it is that you do, or how you do it. What you want the customer to do is you want them to describe their problem in their own words. And if more than one person is on the call, you want them to ask them to reiterate their current challenges and allow other people who are also on the call to chime in. That does a couple of different things. First one is it level sets everyone’s expectations, so that everyone on the call knows exactly why they are there and why they are talking to you. The second thing it does is it allows them to provide you with the information that you need further on in the call.
Now you can leverage things that they’ve said later on, but you can’t do that unless you’ve asked them. So if they say, “Well we’ve had a problem getting our servers connected to X, Y, and Z services.” Later on in your call you can create a hypothetical scenario and you talk specifically to that and you say, “Well, and so and so had this problem where they were trying to get these servers connected to X, Y, and Z services,” and basically reiterate exactly what their problem was, and the fact that you’ve been able to solve it. But again, if you don’t ask those questions, you don’t know the information, so you can’t relate it to them later on.
Rob [10:57]: Yeah, I like this open. I think this combines maybe the first two questions of what I consider a really good sales call outline. And this was presented by Harry Hollander two years ago in his attendee talk at MicroConf. His first two questions of the three question outline are, number one, “What are you doing now for X?” So for me it would be “What are you doing now for email marketing?” [Auto Shark] might be, “What you are doing now to access your server’s security risk.” And the second question is, “What about that isn’t working for you?” And I think that those two combined, kind of gets at this opening, right? You’re basically saying “”What’s your situation today, and what’s the problem with that? Why are we even on this call? Why are you looking at this as an opportunity?”
Mike [11:38]: So, also as part of the open, once the stage has been set, that’s about the time when you start talking about who you are, what the product you have is, what the history of the product is. Some people don’t like to do this. Other people prefer to do it. If you’re talking to large enterprises it’s almost expected of you that you’re going to talk to these things because they want to know that whatever it is that you’re pitching to them has a history behind it, that they’re going to be able to rely on. So the larger the customer, the more you’re probably going to have to put this type of thing in here. But at the same time, there are situations where the person’s done their research. You probably don’t even have to talk about it. I’ve actually gone into demos where I walked in and I asked the questions and then I put up a slide and said, “This is our history.” It’s really not important. Nobody cares. And just clicked to the next one. And people laugh about it but they remember it, too. They realize that what you’re doing is you’re getting to the heart of the matter, the things that matter to them, because you don’t care about you, you care about them and care about solving their problems. And in some ways it’s just psychology. It’s just explaining without telling them that you care about them, and you’re not there to just talk about yourself.
Rob [12:41]: Sure. Yeah, what I’ve found is – I haven’t done many cold demos, they all have quite a bit of interest by the time we get on a call – and so I tend to give a little bit of info about Drip when I get on the call, but it’s like you said, you don’t want to talk about yourself here. You’re really trying to get at what the customer is trying to achieve. So I think building a little bit of credibility up front is helpful. You can say, “We’ve been in business this long,” or “We have this many thousands of customers,” or just position yourself like “We’re the lightweight marketing automation that doesn’t suck. That’s really who we are,” just to get even one or two sentences in there of setting the stage of the call. And you can always go into this later. The person’s going to have quite a few questions for you – at least they should – and you can answer those toward the end once you’ve gotten this early stuff out of the way.
Mike [13:28]: Yeah, you bring up a really, really good point there, which is you have to know what the stage looks like before you even get on the call. The last thing you want to do is get onto a call and think that you know who you’re talking to, or the type of customer that you’re talking to, and get it wrong. Because you can very well end up showing them the wrong presentation. And we’ll talk a little bit about that later on, but just to give you a very brief example, one of the people that I was talking to in the past couple of weeks, I thought I was talking to a very small IT company that did security assessments, and I went in and I gave my sales pitch, and I was talking to them and I was like “Oh, yeah, we work in this general vicinity and people who we are interested are between the two hundred and five hundred node range.” Which that’s going to depend on who you’re talking to. You don’t want to sell somebody who’s working with extremely large environments that you deal in the small range. Well, it turns out that that was actually what it was. He’s like “Yeah, we wanted this for a thirteen thousand node environment,” and I’m like “Oops! Just shot myself in the foot there.” So you really want to know what the stage is before you even get on that call. So if you have a way to ask questions before you even get to the point where you have the demo, that’s the ideal scenario, because then you can tweak your presentation specifically to them. And usually it’s worth doing that if you’re going into these direct one-to-one sales environments.
Rob [14:37]: Yeah, and I’ve found it helpful to have a lot of flexibility during this whole process. I know we’re still on step one, which is the open, but I haven’t prepared slides for these sales demos. I typically will get on the line, have a conversation, get a little more detail about what they’re looking for, and then I will demo the part of the app that they want to see and I will do a live demo. I realize that won’t work in all cases. If you were demoing to five people or something, you probably want a few slides to give them whatever credibility and give them some ideas of common questions or something, but I feel like having a lot of flexibility and really making it a conversation, rather than a presentation, has worked out better for me.
Mike [15:14]: Yeah, and I think that just depends a lot on the size of the customers you’re working with and what their expectations are.
And that goes into your second part of your demo which is, essentially, the lead in. And I think that, Rob, you probably handle these things a little bit differently than I do, but I like to gather as much information about the target customer as I can before I get in there so that the demo itself is tailored explicitly to them. So it almost looks like they’re the ones who are part of the demo. And the way I do that is I essentially start out by telling a story, and the story is about a hypothetical client of mine. It’s best if you can use a real one, but I try to include a photo, a job title, et cetera, and explain who the person is that has the problem. And this problem that they’re having should very closely mirror the problems of the person you’re talking to. And the only way you’re going to be able to do that is if you’ve talked to them on the phone, or via email, before you even get on the call. So, especially if you’re talking to groups of people, then you can talk to one person, get a feel from them about what the problems are that they’re facing, and then incorporate those in the demo. And then when you get into the demo itself, you’ve got two, three, four, five people on the call, and you’re relaying exactly what their situation is to them, and to the rest of the person – except for that one who you had previously talked to – the demo that you’re presenting is exactly describing the situation that they’re in. So at that point it really looks like you are on the ball, you are doing exactly what it is that they need you to do.
Rob [16:33]: That’s a pretty nice hack. Yeah, I’ve definitely never done this. I always just take the questions, find out their situation, and answer them and do a demo. But if you actually have prep work that you’ve done in advance, I think that would come off quite professional.
Mike [16:44]: Yeah, like I said, it depends on how much time you have to prepare, and what the dollar amounts are. If you have a twenty-five dollar product it’s not worth doing this every single time. But if you’re selling for thousands of dollars, it makes a big difference. Especially in their perception, and the number of people you’re doing these demos for. Because at the end of the day it’s all a numbers game.
Rob [17:01]: Right, and I think you raise a good point that we should probably touch on here, is when should you do these demos? Because, obviously, if you have a ten dollar a month SaaS product then doing a demo for every new prospect isn’t feasible. It’s just not economically viable. Now I do think that early on in your product’s lifespan – basically when you’re doing a lot of things that don’t scale – I do think that even with a ten dollar or twenty dollar a month product, that I would be willing to do these demos, because the information you’re going to get out of them is so valuable to you. But once you’ve hit the point where you have built something people want, and you’re getting people to sign up for your trials, then I tend to only do these demos for people who are going to spend more than X dollars a month, or per year. And for me that number is right around a hundred and fifty, two hundred dollars a month. It will depend on your business. Like you said, Mike, if you’re selling something that’s thousands of dollars – let’s say you have a fifty thousand dollar contract, or fifty thousand dollar project that you’re going to be selling – than obviously it’s worth doing something like this. I don’t know if you have a specific number in mind of how low it goes before you won’t give a demo?
Mike [18:01]: It’s got to average out to at least a couple hundred dollars a month, is really what it comes down to. So if I’m selling something for five thousand dollars I’ll do a demo. But if it’s for a thousand I might or might not.
Rob [18:11]: Right, a thousand a year.
Mike [18:12]: Yeah. Those are excellent points. You have to know what those numbers look like, and what’s worth it for you to do the legwork before you go down this road.
Rob [18:18]: And I actually think that number goes up over time, at least in my experience with the product, because early on you’re just scraping to do everything you can to get sales. You start giving to most everybody and then it’s like “All right. Only people who are going to pay us fifty bucks a month, then we’ll do it.” And then you get a few months more down the line and that doesn’t move your needle anymore, so you need to jump up to a hundred bucks or a hundred fifty bucks. And I think overtime with any good product that is growing, that’s naturally going to happen, and that dollar amount is going to go higher.
Now there is an in-between here where you can record, certainly not a personable demo, but if someone requests a demo and they are only a thirty or forty dollar a month client, you can send them a pre-recorded screencast that isn’t highly produced, and looks almost as if you could have recorded it just for them. I’ve known a couple guys who do this, and I’ve started doing it as well. It will still give them a nice demo, and as long as you have a few markets that you’re focusing on and you can record one for each, that’s pretty applicable to this person’s question, that’s a nice in-between. So you don’t have to just tell them “No,” but you can say “Sure, here’s this screencast demo that we’ve recorded,” and send it to them, and not have to do all the scheduling and the manual in-person thing.
Mike [19:22] Yeah, those are great ideas. Jumping back to the lead in, another thing that I like to incorporate in the lead-in is part of this hypothetical story about a hypothetical client, talk about the things that that client tried, what didn’t work, and why those things didn’t work. And these are things that you can extract from the initial person that you set up the call with. Before you had said that Harry basically starts out the conversation with those things. I don’t know if it makes a material difference. Maybe it does, maybe it doesn’t. I haven’t tested it. But again, having those things in there so that the customer knows that you know what you’re talking about and you have addressed these types of issues before and if those things mirror their experiences, then again, you’re speaking their language. They know that you’ve gone down this road before, and that level of trust just goes up with you.
Rob [20:05]: Yeah, and the cool part is that, assuming you’ve vetted your customer well and you have the information before the call, you can tailor that story, like you said, to mirror their journey. And the customer will essentially be nodding their head the entire time, because they know what this path looks like. And like I said before, it comes of really professional when it looks as if you’ve really catered everything to them and it really connects with their use case.
Mike [20:27]: Yeah, and in some ways you can almost relate this entire presentation back to something that you would find on a long form sales page, because the long form sales page it intended to walk them through the journey, talk about all the different pain points, and hit on all the different things that that person who’s reading it, all the challenges they’re likely having with whatever the situation is that they’re in, and you lead them down the path. Well, you’re doing the exact same thing in this particular demo. You list out all the different challenges, what the customer ultimately did about them, and all of those things should lead down the path to your product.
And that leads up to step three of the demo, which is the middle. And in the middle you’re going to talk about how you went about solving the challenges for this customer. And again, going back to step one, you relate it back to that opening so that your product and your company history converge with this hypothetical customer who mirrors your prospect. And again, you’re basically aligning the starts. You’re putting everything all in the right places so that the only natural conclusion that the person can come to, that is listening to the demo, is that your product sounds like it’s going to be a great fit.
So once you’ve aligned all these things, one of the other things you want to do is you want to touch on all of the different challenges, but don’t necessarily talk too much in detail about them, because you want to allow the customer to come back and provide you with additional input because, obviously, they’ve tried different things and they’re going to have different perspectives. They’re going to have some bad experiences that they’ve gone through, with maybe some competitive products or manually doing things. You always want your product to be the natural conclusion but you want to essentially allow them to speak to you to say “Hey, by the way, we did try that and it didn’t work and here’s why.” Or if they have any objections. You want them to be able to bring those things up so you have an opportunity to talk to them about it. And if you’ve done your homework in terms of doing sales demos, at the same time, anytime a customer asks you a question on a call you should also be keeping a separate document some place that it lists your customer objections, because those are the things that people are going to want to know and you want to be able to have a concrete answer for any time the customer says something. For example, “Oh, that price point is too high.” It’s like, “I understand that you say that but,” and then you list out five reasons why your price isn’t too high. And if you have those things all thought out in advance, because you have taken the time to set those things off to the side when a customer asked about it, and then you think through exactly what the answer is, when another customer comes to you and says “Hey, I have this particular problem,” you tell them the price, they say that’s too expensive, then you have a concrete answer that you don’t have to think about. You don’t have to come up with it on the spot, because if you come up with it on the spot it’s going to be different every time. And it really helps to have that concrete answer. And as you give the answer, if somebody pushes back with it you make a note of that objection, you work it out on the spot, and then you go back to your objections list and say, I tried this, they said “What about this other thing,” so you have to come up with something else to respond to that objection as well.
Rob [23:19]: I think the important thing to keep in mind here is if someone’s objecting to your product they can either be just throwing up roadblocks, as some people do, and they just want to see if you have answers, or they could genuinely be concerned that the product isn’t a fit. And the idea of these demos, just as with all sales, it’s not to convince someone to use a product that isn’t a good fit for them. And I’ve been on calls and demos like this before, where I realize halfway through that the product isn’t a good fit for them, and that they should go use, either a more expensive competitor, or maybe it’s a less expensive competitor. They just don’t need the features that I’m offering. And at that point I’m not trying to convince them to put on this shoe that isn’t going to fit their foot. So that’s something to keep in mind is that try not to just think about objections and the counterpoints to those. Then you will come off as perhaps being pushy or something. Keep in mind that you really want to listen to what a customer says and try to get at the deeper meaning of that.
At the same time, I think there are a lot of objections that are thrown up. Price is one. That’s a lame objection. If the product is a really good fit for them, and it’s going to make them a ton of money, or save them a bunch of money, or save them time, then the price is not super relevant, within reason. It’s some twenty, thirty percent difference between a competitor, it just doesn’t make sense. So that is a lame objection. It is something that I would push back on pretty hard, but I would always do it very courteously with a “Yeah, I totally understand.” Kind of have to lead it in that way, right? I make it a conversation. It’s not like an argument. I want it to be much more conversational than argumentative.
It probably goes without saying but I think it’s something that you want to keep in mind is that sales, in my opinion, is not about convincing someone to use a product. It’s just assessing their needs, and trying to figure out if you’re a good fit. And if it is, showing them that it’s a good fit. And that’s what I think these four steps that we’re laying out here are doing.
Mike [25:00]: Rob, you bring up an excellent point, is that if your product is not going to be a good fit you have to be honest with them and tell them flat out and say “Look, I don’t think that this is going to be a good fit, and here are the reasons why I don’t. You’re looking for this, I don’t have that. You’re looking for this other thing over here, we don’t have that either. And the way you need to do this over here is not going to work with your systems,” et cetera. You can essentially throw the objections up yourself. And sometimes people are just looking for a way to get off the phone. They already have their own agenda, or something like that. There are going to be people out there who have their own agenda when you get on a call and you’re just not going to know about it. And it sucks to be in those situations because sometimes a vendor’s brought in for the sole purpose of being compared to somebody else. And it’s not that you ever had a real chance to begin with, it’s just that you might have been brought in to help lowball a price or something along those lines, and you don’t know it. But that being said, you do have to know when you’re in over your head, and if your product’s not going to be a good fit, tell people. And if they push back at that point and say “No, no. We really want to try it,” handle them with kid gloves a little bit because you don’t necessarily know what you’re getting into.
Rob [25:58]: Right. Especially with SaaS, where they can cancel at any time, right? It’s not like you get some big one hundred thousand dollar signature and you’re really trying to push this through. If you convince someone to try your product out, you’re going to spend a lot of time onboarding them, and then if they cancel in thirty days you have actually wasted more time and you’re out more money than is worth it.
Mike [26:15]: So near the end of the middle section is really when you want to get into how your product works. You want to show them. So it’s not enough to lead them through this hypothetical scenario, where you’ve talked about their problems and how this hypothetical customer solved their problems with your product, that it mirrors their situation, and then leave them hanging. You want to prove it. And I actually have a slide in my presentations that basically says “Prove it,” because I’ve said all these things, but you have to show them that you mean what you just said. And so I’ll walk them through whatever the presentation is, and specifically focus on the things that they’ve said are important. So if they want to know about discovery I show them that. If they want to know about recording I show them that. You really have to get a sense of specifics, what are important to them before you get to that point. And, obviously, when you’re demoing a product itself you can go anywhere you want. There’s no real script to that. But the outline itself of how the demo will go, essentially leads you to this part where then you’re showing them the product and how it works and how it solves their problems.
Rob [27:12]: So we’ve covered the open, the lead in, the middle. Let’s talk about the close.
Mike [27:18]: In the close you essentially want to talk about what the next steps are with the prospect. And you want to formally agree to some sort of a timeline, whatever that timeline happens to be. So if, for example, you’re talking with an organization that, let’s say that they’re very informal, they only meet once a month or once every two months, you’re next call with them might not be for six weeks. Obviously you don’t want to be selling to those types of people, but if you are you have to know what that timeline is. And it’s not just about setting expectations for them, it’s about setting expectations for yourself, because you don’t want to be thinking, “I’ve got to get ready for this sales demo, and I’m expecting this sale to come in”, only to realize it’s not going to come in for at least eight weeks, because the customer isn’t even going to talk to all the people that are involved for another four or five weeks. So those are the types of things that you need to keep in mind, but the timeline itself, ask them directly about what their timeline is, do they need any other people to be involved? It goes back to the BANT acronym. Do they have budget? Who has the authority to make the decision? What are the next steps? All these different things that factor into it, you need to know what those things are and figure out what those are on the call. Just ask them flat out. What’s your budget? Whose got the authority? Do you actually have a need for this, which you’ve clearly established that. And what’s your timeline? So that’s what the BANT, B-A-N-T stands for.
Rob [28:36]: Yeah, timeline’s a big one, because otherwise these things can drag on and people won’t make the decision. And you can bring this up very casually. I will typically say “All right, so do you have any other questions?” And they’ll say, “No, I think that wraps it up.” And so then I’ll say, “Okay, so would you like to sign up for a trial? What’s your timeline? I can get you set up with a trial.” It can be something easy like that, and it doesn’t feel forced and they can feel free to say “No, I’m not ready,” or “Yes, I’d like to get started right away.” It can be brought up pretty casually. That’s in the less complex scenario, right, where there’s only one or two people involved, but I think your BANT applies when it’s selling into the enterprise and there are multiple stakeholders that you have to get on board.
Mike [29:09]: That’s another good point, is that all these different steps, I think that they naturally lead you through the process, but the specifics of how you address the questions or how you deal with asking what the next steps are, whether it’s very informally or having a focused discussion on it. Maybe you even take that discussion offline with a manager who has the authority to actually sign the check, because he doesn’t necessarily want all his techs in the room talking about the actual budget for it, or pricing. Maybe those are things that aren’t necessary for them to know, and a lot of people just don’t want their techs involved in those discussions. But all of this goes back to the idea that, ideally, you should know what you want out of the call and out of the demo before it even starts. Do you want them to go to a trial? Do you want them to make a purchase? Do you want to get to another call? Do you want to talk to somebody who’s in charge of budgeting? What is the next step? And that depends a lot on what your type of product is and what the logical next step is. And your entire presentation, or your demo, should revolve around what that next step is going to be. It should lead to it.
Rob [30:07]: Right and I often ask, before a call, as we’re emailing to set it up, “What would you like to get out of the demo?” Right? So finding out what the customer, or I guess it’s a prospect at this point, wants is also super valuable to make sure that you can provide that during t demo.
Mike [30:21]: I think the only other thing I’d mention is if you’re dealing with higher end products, what you don’t want to do is if somebody emails you or calls and says “Could you send us over a pricing sheet,” the last thing you want to do is send it to them. It sounds counterintuitive because they’ve asked for it, but you want to have a demo and a discussion about what their needs are first. Because, otherwise, it’s the fastest way to walk yourself out of a deal.
It’s funny because I’ve done this in the past. I’ve never responded to a pricing request with pricing information and then later landed the sale. Every single time I’ve sent pricing to someone who asked for it, without doing a demo and having a discussion with them first, every single time I’ve regretted it and it’s never worked out. And it’s not to say that it can’t in some situations, but if you have higher price points I don’t think that it works.
Rob [31:04]: If you have other thoughts for us or questions regarding this killer client demo outline you can call our voicemail number at 888.801.9690 or you can email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Out of Control” by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups and visit Startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 231 | Breaking through SaaS Plateaus with Ruben Gamez
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike discuss breaking through SaaS plateaus with Ruben Gamez.
Items mentioned in this episode:
Transcript
Rob [00:00:00]: In this episode of Startups For the Rest of Us, Mike and I discuss breaking through SaaS plateaus with special guest Ruben Gamez. This is Startups For the Rest of Us, episode 231. Welcome to Startups For the Rest of Us, the podcast that helps developers, designers and entrepreneurs to be awesome at launching software products. Whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:00:28]: And I’m Mike.
Rob [00:00:28]: And we’re here to share our experience that will help you avoid the same mistakes we’ve made. So [?] this week Mike?
Mike [00:00:28]: Well we’ve got an e-mail from Trevor Smithland. He wrote in to let us know about a product he has called Enhance Cast and essentially it’s a podcast listening app that allows you to instantly access the content that is coming out of the podcast. So essentially they do some transcriptions and they basically bookmark a bunch of different things and if you’re busy doing something, essentially it allows you to bookmark the content to be able to come back to it later. They do some fancy [pasings?] to make sure that the content is marked up with meta tags, but I looked at it and it was pretty cool. It was almost like a visual representation of the podcast. You can find that at enhancecast.com.
Rob [00:01:06]: Very nice. Lets dive in the interview today. This week we have a special guest on the show. It’s Ruben Gamez with Bidsketch. Thanks a lot for coming on the show Ruben.
Ruben [00:01:15]: Thanks for inviting me.
Rob [00:01:16]: So my guess is that most people listening to this podcast already know who you are. Ruben is the founder of Bidsketch which is proposal software, it’s a SaaS app and started of being focused on designers but now really Bidsketch is more of a horizontal app and it has a pretty [?] market. Ruben when did you launch Bidsketch?
Ruben [00:01:35]: I launched Bidsketch about five and a half years ago.
Rob [00:01:37]: In terms of Saas timelines you’ve been around quite a long time.
Ruben [00:01:41]: Yeah, I’ve been doing this for a while in the interviews that I had I used to say that I was in software. I guess I have to change that up a little bit.
Rob [00:01:48]: Yeah because it changes over time and now you can say SaaS and a lot of people know what that means. Where as five years ago we used to say web based software and that’s still how I kind of talk about my stuff at cocktail parties and I typically get the “what does that mean?” So the reason we wanted to have you on the show today Ruben is you and I talk quite a bit. We’re more in touch about things. We’re actually in a mastermind group as well and one thing I’ve noticed about how you operate is that you are really good at breaking through plateaus. There are inevitable plateaus when you are running a business and specifically with SaaS I am starting to see this pattern of folks hitting a plateau right after launch. So typically in revenue is in we’ll say is about a thousand bucks to two thousand bucks to low four figure amount and people launch and then that launch dies down and they don’t know what to do next. So there is kind of a plateau as they figure that out. And then the next plateau depending on pricing, [insurance?], and all that stuff seems to hit around lets say ten to twelve thousand bucks a month and it often requires an adjustment. Unless you’ve got everything just right from the start and you knew your market and your pricing’s on, you’ll probably going to hit a slowdown about there and then there tends to be this next one, let’s say it’s in the twenty five, forty thousand dollar range that we see folks hitting. There are different causes for each of these but you’ve powered trough these plateaus and I’ve seen you do it using a series of tactics, you’ve a good mind set about it and frankly you seem to have a high level of process. I know you haven’t blogged about it and I haven’t heard you talk about it on a podcast so I kind of wanted to dive in to that today and figure out how it is you think so that others can learn from you.
Ruben [00:03:27]: Sure. One thing I’d like to mention is that what I’ve noticed from certain apps is that that first plateau is a lot higher if the price point is higher for the app or product.
Rob [00:03:39]: That makes a lot of sense. I mean I saw myself with HitTail which was a ten, twenty dollar product on the low end versus Drip which was a 49.99 product on the low end. Although they were slightly different and that I had a launch list for Drip so I could get out to several thousand people quickly. That first plateau, instead of being a one or two thousand dollars it actually was about seven thousand dollars. So which was a much better place to be at. If you were trying to quit your job you’re almost there if you’re already at seven, but I agree. People who are going after ten dollar price points, even getting to a thousand dollars a month is quite a bit of work. So I guess to start when your opinion or from what you’ve seen, because you’ve also talked to a lot of entrepreneurs, founders are asking you for advice and that kind of stuff. Why do you think there is that one to two thousand dollar plateau right after launch?
Ruben [00:04:29]: Sometimes I talk to people that have hit that plateau or say they’ve hit a plateau but actually haven’t hit a plateau. It’s more about that they haven’t got enough product market fit to get any growth initially. So there is a difference between hitting a plateau and just getting started.
Rob [00:04:46]: Yeah, go into that further. What do you mean by that, the difference?
Ruben [00:04:48]: So if you just launched and you have maybe no customers or you have maybe five customers or six customers because I’ve talked to a group of people that fit this profile. They either have no customers or they have 10 or fewer customers. Generally that means they never had growth for them to get to a plateau. So they haven’t plateau, I don’t consider that a plateau. They’re just getting started. They need to get enough product market fit to actually get some interest and get people paying for the product. At that point it’s very questionable whether there is anybody that really values the solution to the problem enough to want to pay for that product.
Rob [00:05:29]: So the question is still “have they built something that anyone wants to use?”
Ruben [00:05:34]: Right.
Rob [00:05:35]: They haven’t even answered that yet.
Ruben [00:05:35]: Right.
Mike [00:05:36]: So at that point that’s very different place than you do have a thousand in recurring revenue or two thousand in recurring revenue so there is some interest there. Right? And obviously getting to product market fit is really hard. It takes a lot of work and there is a lot that you can do to get there. For the people that are in that one to two thousand dollars and they start to hit a plateau generally you see a couple of reasons why they’re hitting that. One of the more common reasons is that they just don’t have enough volume, they don’t have enough trials, they don’t have enough qualified traffic to be able to get to where they want to get. They are trying to get to six thousand or ten thousand and ten thousand is pretty common for a lot of people, but they are working on optimizing their conversions because they think that they need more customers. “Well I’m not getting enough of these trials to convert to customers” or “I’m having to many people cancel”, but in reality they just don’t have enough trials to focus on that just yet. It’s really important to not ignore that but if you’re just getting a thousand visitors a month or two thousand visitors a month your price point isn’t extremly high and you’re converting a hand full of those customers. [And to trial some of those to customers?] then you’re not going to optimize your way in to a ten thousand dollar a month business.
Rob [00:06:57]: Well that’s more of a balancing act because your balancing between getting traffic versus making sure that you’re not leaking everybody out the bottom of your funnel. So how do you go about making sure that you’re balancing that correctly?
Ruben [00:07:10]: Well this is why I mention that there is a difference between the businesses that just have something like ten customers and the ones that have enough to be in the thousands and recurring revenue because they do have some interest. So one of the problems that I see often is that people don’t know where their conversion rates should be or their retention should be. Now every business is different but there are ranges right, there are rules of thumb. So I’ll see somebody working on trying to improve their retention. Let’s say that they’re trying to do somewhere around 5% or 8% or something like that, but they’re working with such low numbers that you can’t really count on those numbers too much. Now I’d look at retention and say “wow, you really need to work on retention!” even in low numbers if a quarter of your customers aren’t sticking around then that’s definitely a red flag for me. But really when it’s just you, you kind of need to switch and focus more on one thing than the other. Especially if you’re doing part time so once you learned what the ranges are and you see there aren’t any obviously red flags to where just nobody is converting into a paying customer and almost everybody leaves after a couple of months then really the next thing is to get enough volume to sort of take you to the next level, but then you also want to go back if your retention is a little high and focus on that and make that better.
Rob [00:08:34]: Yeah I view it as a pendulum. I always swing to one side and then I notice that you kind of optimize something to the point of these numbers are starting to look good. [?] has gone down and now it’s time to insert more traffic into that funnel. I’ve even seen a pendulum swing over, lets say maybe four years ago, I remember Mike and I talk on another podcast about how everyone is focusing on traffic and people weren’t optimizing enough and they weren’t split testing enough and they weren’t doing that stuff. I see it the other way now. I think to many people are trying to optimize to early, but that’s basically what you’re saying here is that you can’t optimize your way in to a ten thousand dollar a month business. Yo need to drive five, ten thousand uniques a month in order to get to that point probably, and it depends on price point and all this other stuff but one or two thousand uniques a month isn’t going to do it.
Ruben [00:09:24]: Right, exactly. That’s one of the more common things. Another one is pricing. So you’ll probably not going to get pricing right when you launch. You’re probably not going to have pricing right a year or two after you got your product out and people don’t spend enough time testing and adjusting their pricing early on. In the early days in the first few weeks and months that’s when you need to test your pricing most. It can be a little bit harder if you’re working with very small numbers, but we’re talking about businesses that do have some customers and have had a little bit of growth. So you should be just testing prices and improving that.
Rob [00:10:02]: Yeah, that makes sense. I’ve done the same, I’ve changed HitTails pricing twice after I required it and with Drip I’ve changed the entire pricing model. It was based on one thing when we’ve launched and it’s now based on a number of subscribers. It’s a more standard marketing automation approach. Then I think I’ve actually changed not the price points themselves but the volume that you can do for each price point. I think I’ve changed it at least twice, maybe three times and all that is based on user feedback and looking at reports and that kind of stuff. I won’t say it’s right or wrong but I know it can be better optimized but it’s something I don’t have time to invest in to much right now.
Mike [00:10:36]: Right, and it’s better than it was when you first started.
Rob [00:10:39]: It is, I’ve moved in the right direction. I think when you first start to it’s hard because lets say you wan’t a 99 dollar a month app. You really need a lot of functionality for someone to pay 99 bucks in any type of volume and so you either have to spend a lot more time building that app or you have to have some type of brand name because over time the more customers you get, the more people are talking about it, you do become that brand and people will say, “Oh, well everyone recommended this to me so I am willing to pay 99 buck.” But when no one has heard about you it is hard to ask as much as your app might be worth up front.
Ruben [00:11:12]: That’s true. In the early days I modeled my pricing after after fresh books pricing because a lot of people just look at ether competitors or alternatives that may be similar and basically copy them in pricing and that’s pretty much what I did. Fresh books wasn’t a competitor, but they were the most similar of the apps that were out there because after someone creates a proposal, once they get a deal then they create an invoice. I went with that pricing mode but it was wrong for my business. I didn’t learn that latter until I started testing pricing and sort of learnt what worked for my business and start talking to people. Once I did that really ignited some big growth for it.
Rob [00:11:50]: I kind of mentioned at the start that we have three plateaus we’re going to talk about. There is that first one that is post launch and sounds like the pattern you’re seeing is most people try to optimize their way up to there, bur really they should be going after more traffic in general. The second plateau if I recall when you hit, that is when you adjusted your pricing, is that right?
Ruben [00:12:08]: Right.
Rob [00:12:09]: Talk to us a little bit about that process. You hit this plateau lets say between ten and fifteen grand a month and you’re wondering why it’s not going up. How did you figure out what the cause was? Did you have to run a lot of different tests and try things or was it pretty obvious? And then how did you go around fixing that?
Ruben [00:12:24]: I launched with that same pricing, so I’ve gone a long time without testing pricing at all. So I had this feeling in the back of my mind that I should make a pricing change, that I should do something there. Also I’ve added a lot of features since then so it was a very different product from when I launched the other thing is I wasn’t charging very much for a B to B app. So if you have a B to B app and you’re charging ten dollars a month or twenty dollars a month for your low end plan, that isn’t necessarily wrong but you can very likely charge a lot more for your lower tier plan. So there are all this things that are coming together and there was some feedback. Feedback is tough with pricing, because a lot of the feedback that you get with pricing is that is too expensive which isn’t right. You have to mostly ignore that unless almost everybody tells you that, you are going to get a certain amount of people just telling you that every single month so one of the things that I did was add a cancellation comments in a free form text field. When somebody went to go cancel, it was required to fill out and add their comment in there and every once in a while I’d see people complain about the price, so I think my lower end tier plan was nine dollars a month and people would say this is too expensive etc., etc. I kind of wondered about that, “should I charge it a little less”, I never did it. I think I charged five dollars a month, but one of the interesting things as I moved up my pricing and ran all different types of tests is that every time that I change pricing, say right now my lower tier is 29 dollars a month, I always get the same number of people saying that it’s too expensive, but if I reduced it by five dollars or ten dollars, they’d pay for it. That never really happens because my product was ten dollars cheaper, it was twenty dollars cheaper, so I always find that really interesting.
Mike [00:14:18]: But I think that it’s difficult for somebody who is starting out to make those mental leaps because you’re looking at this looking back in retrospective and say, “well I was there and you didn’t buy it then and now it’s more expensive and you’re complaining that five or ten dollars would have made a difference”. But for the person who is stuck at this plateau they don’t have that history, they’re not that much further in to the future and trying to look backwards.
Ruben [00:14:39]: Right. I think the important thing for them is to know that it’s normal to get people saying that it’s too expensive. If they’re not getting that then they’re definitely under charging. I think the time to wonder whether it is over priced might be just when a lot of people are saying that, that is one of the top reasons why people are cancelling.
Rob [00:15:02]: I would agree with that based on experience as well. So that was at the back of your mind and that’s why you’ve attacked it early on. How did you go about figuring out what your pricing tier should be and do you actually restructure your pricing or did you just kind of increased the tiers themselves, just increased the dollar amounts per tier?
Ruben [00:15:19]: There had been one or two tests that I ran in the past, early on when I first launched with pricing. Basically I just increased the pricing on the tears I had and I got to a point where I just wasn’t making as much money. So then I lowered the pricing back to where I was making the most money. Later on when I revisited the pricing and I wanted to run these new tests, I changed my approach I didn’t just increased the pricing on the tiers. So that was okay to get me up to a point, but the big results came from just completely just restructuring my pricing. Started of doing a lot of customer interviews and looking at my usage data. So it was a combination of qualitative and quantitative data that I used to figure out what were the key features that people were using and what type of customers were signing up. So I changed my pricing from two plans to three and those three plans directly reflected the type of customers that I get. So one of them is a freelancer plan, the other one is a studio plan, and the last one is an agency plan. All of those changes helped me earn more per customer per month.
Rob [00:16:31]: After you made that pricing adjustment you keep saying you tested it. Now did you run a split test where you had half the people see the old pricing, half the people see the new and then did you just follow it through trial signup or did you followed it all the way through to see how many converted which each price point?
Ruben [00:16:47]: Yes so I actually had multiple tests with pricing, so I tested pricing maybe four, five months, something like that. I started of with some of the more simpler tests. I wanted to isolate for example plan names from pricing increases. I wanted to know that going with three plans was actually making a difference. So I wanted to know that renaming the plans from these generic plan names: basic, premium, whatever I was using to something to what a customer could look at and say this is the plan for me. I wanted to know that that made a difference. I also did that with plan features. Then once I actually got to the revenue number, I’ve let those run a little bit longer, in each case didn’t just look at whether or not more people were clicking on the signup button. I’ve also looked at, “do more people sign up” and then, “okay, now I have a trial”. Then I continued to look at, “do those trials convert”. So at the end do I end up with more money? Same thing with retention, it takes a lot longer to look at a retention because customers some times will be around for a year or two. You can’t always follow on retention until it’s just been several months. I actually had to row back a pricing change that had been in place for three months because I looked at that retention and it wasn’t better. Everything else looked good, it looked like I was making more money, but about three months later when I looked at retention for those [cohorts?] I saw that this is actually worse than what I had before so I [went right back?].
Rob [00:18:20]: It’s crazy. So you really have to look at your data and not just look at how many people clicked that initial sign up button, it can change all the way down the line.
Ruben [00:18:29]: Right, once I decided okay, this is working better I switched it over. So I did split test that and I switched it over but when I rolled back my pricing I wasn’t still split testing that. Everyone was going over the new pricing. The important thing about that is I think that you just have to continue watching it and sort of compare it to what it was before your price increase.
Rob [00:18:53]: Right and are you using KISSmetrics to kind of track that all that way through? Is that longitudinal data?
Ruben [00:18:57]: Yes I use KISSmetrics and then I just look directly in my data base. So I use both.
Mike [00:19:02]: It sounds to me like one of the interesting points that you kind of– I was almost completely glossed over, but you at least mentioned it that testing these pricing points I mean it sound like they’re early on when you hit that post launch plateau, pricing is one of those issues that you really need to look at to make sure that you are charging the appropriate amounts and then at the next plateau you hit, by changing your pricing you are able to essentially accelerate your growth of the product. But in each of those cases it takes a while to get through those pricing tests. I think you have mentioned three or four months of testing in order to just test the price and then in addition to that you said that in order to test retention and basically make sure that you’re not loosing people faster that takes even longer.
Ruben [00:19:42]: Right, but you can capitalize on these pricing changes sooner. So some of these pricing changes are– if they’re working early on meaning if you’re getting more trials out of it, there is a pretty good chance that those trials will convert at a similar rate. So what I have seen with price testing is that that’s what happens, most of the time they will convert at the same rate. The churn will be about the same, there might be some differences but it’s not major, so you can actually switch things over, but if you do that then you do want to watch that to make sure that you are right about the trial to payed conversion rate and that you are right about the churn rate as well.
Rob [00:20:18]: So you kind of make a quick decision and then you back check that and 90 days later you can truly verify that everything turned out the way you thought it would based on your math.
Ruben [00:20:26]: Right.
Rob [00:20:29]: So it’s interesting you know we talk about these plateaus and I imagine that there might be someone in the audience who doesn’t know what that looks like so I was thinking as you were talking that you might have a SaaS app where you’re doing four grand a month and the next month you’re doing fifty five hundred and that feels fantastic. Then the next month you’re doing six grand and then seventy five hundred and you’re just going up. You’re at ten grand, eleven grand, twelve grand, and then all of a sudden it’s twelve two and the month after that is twelve thousand four hundred, and twelve thousand five hundred and literally your revenue just stalls out. I’ve been through it, you’ve been through it, we’ve seen this and it can kind of rattle you because a) it’s unexpected, it’s like, “everything was going so good and all of a sudden it’s not working” and it can also discourage you. So we’ll touch on the mindset in a second because I think that’s important but when you’ve seen these plateaus coming the first time it kind of shocks you, the second time you kind of figure it out and the third time it’s like almost expected, you’re almost anticipating it. How long have most of these plateaus– do you think there is a range, like how long is it taking you to break through each of them? In months.
Ruben [00:21:29]: In months?
Rob [00:21:29]: Yeah.
Ruben [00:21:30]: Generally four to six months. It depends.
Rob [00:21:35]: It depends on how deep it is and how much stuff you have to do to test and all that.
Mike [00:21:39]: I think the sooner you can break out of it the better, I mean the best thing is to avoid them. Do it all together right.
Rob [00:21:44]: Just see them coming and be constantly– see that’s something you’ve done really well. Recently as you have run a lot of split tests now you’re at the point obviously where your traffic tens of thousands uniques a month and you can run split tests and optimize your way to an increase in retention or whatever.
Ruben [00:21:58]: right but even in the early days when you have a lot less volume you can forecast when you’re going to plateau. I think barometrics came out with some forecast tool that — for free recently — that helps you do that. But it’s a really simple calculation you can just do it in a spreadsheet or open up a calculator and looking at a percentage of the customers that are cancelling at what point am I basically going to plateau. [As the number of trials not in customers?] are not going to be enough to upset that.
Rob [00:22:26]: Yes, then you can look and say, “is churn to high” and if so I need to start working on that now, six months in advance of that plateau. Or is it that my number of trials is still at a hundred and fifty every month, but if my churn is low but I only have a hundred and fifty trials, how do I get to three hundred trials in the next six months? Right? Six hundred is sustainable. Or is it a price point? If my average revenue per customer is only fifteen dollars a month, twenty dollars a month, how do I double that in the next six months? Right? Is that the kind of process you go through?
Ruben [00:22:56]: Exactly so one of the more interesting things was that even in the earlier days like I said a lot of times it’s just volumes. Sometimes it is retention. Well, it’s always retention, retention is always part of it, but sometimes it’s churn that they need to focus on. So one thing that I was thinking about was at what point in the early days, lets say somebody has a thousand dollars a month in recurring revenue or so. At what point is their churn to high to actually say, “okay, this is the thing that I need to focus on”.
Rob [00:23:29]: Earlier you said it was a quarter, 25%.
Ruben [00:23:32]: Yeah, even lower than that like if I was starting over again and I had product and my churn rate, even in the early days and even if I know that numbers aren’t all that great when you don’t have that many customers, you don’t have that many trials coming in, there is a difference between having a 15% churn rate and 5%. I have had 5% churn in those early days. If I had a product that had a 10%, 15%, I’d probably pay attention to that.
Rob [00:24:01]: So I think my number would be anywhere over 15%, it would be any twenties too high. The problem with this is that we’re talking about an average and typically your first sixty day churn is going to be a lot higher then everything else and when you average everything in it gets kind of muddy.
Mike [00:24:18]: The other thing that makes that difficult is that it could be a function of what your product is. So for example when Rob and I were testing things with the [?] we noticed that there was a distinct drop of at the forth month. And by that time someone has paid a couple hundred dollars they have to really think about it, it’s like, “am I really going to continue on this path or is this just something I was kind of interested in but not really and I’m not going to follow through with it”. And people were making the decision around the forth month to basically just kind of drop out. So sometimes it’s time dependent as well.
Ruben [00:24:46]: I agree. It very much depends on the type of product. With some products it might be kind of natural like how you mentioned of membership sites and [?]
to where you see a big drop of after a certain point of time. And for that industry or for that type of product, churn reads might be higher, so that’s a good point. Even Jason Cohen mentioned somewhere that he was worried of his churn at 2% for WP engine and then he found out that, “hey, that’s actually doing pretty good, that’s the normal for hosting”.
Rob [00:25:16]: That’s crazy low. Most SaaS operators would kill for that. So that’s the thing I mean I think to talk about an aggregate number is not totally accurate, it would be so much better to have that cohort, that churn grid to be able to look at it, but with Drip I didn’t have the churn grid, until maybe four or five months ago because the data just wasn’t there in order to get an aggregate number. So when I was looking at it when we first launched it was 23% a month or something. It’s because I had a ton of new trials in the funnel and as those moved on and my trial volume kind of dropped of after the launch, that dropped way down, it dropped in to the I think it was at 12% or 13% for a while and then I get a bunch a new trial and it kind of bounce right up because for sixty days your so ruff on churn.
Ruben [00:25:59]: Yeah well that’s the other thing that I like. Drip is a really good example because you can’t solely rely on just you analytics, not to look at collective data. Watching you work on Drip and getting to product market fit so a lot of people just say, “well getting to product market is binary”, but it’s not, it’s a [gradient?]. So you can have a lot of product market fit or just enough to get to a point. What I found interesting watching you work on Drip was that early on you didn’t have really good numbers because the amount of customers you had, but you relied a lot on customer conversations and gut kind of, right? You knew what you were building and what you wanted to see and because you did have that experience on other products and apps it’s sort of a little bit easier to go with gut sometimes.
Rob [00:26:51]: That’s right and I think that if you don’t have that then the customer conversations are huge and then I think finding someone either a mastermind or a mentor or adviser, someone who does have that feeling and who has experience to [?].
Ruben [00:27:04]: Exactly.
Rob [00:27:05]: Cool so we kind of cover the first two plateaus that one to two thousand dollar range, the ten to fifteen. Then there is this twenty five to thirty thousand dollar plateau. Lend you thoughts I mean how did you push past it, do you have thoughts on the general cause of that that you see in other apps? Or do you think it varies widely?
Ruben [00:27:22]: So there are obviously a lot more people who back at one thousand or two thousand dollars a month or ten thousand right then get to twenty or thirty thousand or even forty thousand. So I know fewer people that gotten up to that point and then only some of them plateau there and it seems to kind of be different from the ones that I know so I can’t really say that I noticed really specific patterns but it’s usually a retention. Right? Losing way to many customers still or you just need to get a lot more customers to get in to the next stage. For me it was more about setting up, once I automated my marketing because it’s a combination of some manual processes and automation, but setting up systems and processes to scale up marketing.
Rob [00:28:06]: Kind of moving it up to the next step or the next level.
Ruben [00:28:10]: Right, it’s more about doubling down on what’s working.
Rob [00:28:13]: So you have seen a lot of plateaus, you have gotten through a lot of them. When you see that you are going to be plateauing in how ever many months it is, what’s your process at that point? Like how do you start thinking about it mentally in order to– are you preempted or when you get there to start systematically knocking out the things that are keeping you at that plateau?
Ruben [00:28:35]: Generally if you look at it at the highest level what I do is try to identify where is my problem. Ether I am not getting enough customers or I’m loosing to many customers. It’s always a combination of both, but one of them is going to be a bigger problem then the other. But that’s too broad it’s too hard to tackle. So even if I say, “ok well I’m just not getting enough customers” then what? There is so many different things that you can do with that, so what I do is I break it down to the smallest possible things that I can. So I’m not getting enough customers so “ok, why not?”, am I not getting enough traffic? Am I not getting enough qualified traffic? Am I not getting enough trials? Are those trials not converting into customers at the right rate? What is it that is going wrong? So as part of this process is setting a goal that I want to reach and I typically start with this. I’ll pick my number and I want to get to– it’s usually revenue based to this much recurring revenue, what do I need to get to that number, so then I start to break down how many trials I need at this price point to get there. What does my churn need to be? Maybe start to play around with some numbers. What if I get more trials or increase my average revenue per customer or move down my churn? Typically once I’m looking from that perspective and then I take a look at my problem areas I just start by picking of the lowest hanging fruit. So there are going to be some things that are just a lot easier to do then others. So maybe increasing my traffic will get me more customers but so will dramatically reducing my churn, but maybe my churn is at a low enough place to where it’s just going to be way to hard and way to much work to do that, so the easier thing is to really get more traffic.
Rob [00:30:30]: Got it. And getting those rules of thumb. What kind are the ranges? What should my churn be? What should my trial to paid be? What should my visitor to trial be? But that’s part of the method that you’re using to analyze this and the way that we have come across those values is a) by personal experience of the apps that you run, right it’s your experience, it’s also by talking to other founders weather it’s in a mastermind or talking to people, doing skype calls, talking to people at a conference, maybe MicroConf. I think folks in Founder Caffe or Micropreneur Academy could easily if they brought their numbers, I would happily analyze someones numbers on the forums. There are probably some blog posts somewhere that kind of talk about it but I think there’s so much more value being able to talk one on one or one to a group with other founders because the specifics of the situation always dictate where your numbers should be.
Mike [00:31:20]: Right, right.
Rob [00:31:22]: Any range that you and I could throw out here it’s still going to be a wide range because it depends on your pricing and your market and your this and your that.
Mike [00:31:29]: I think knowing the range is bare minimum that you need to know and there are too many people that don’t know that. So if I didn’t know that it would be almost impossible for me to be able to break out of one of these plateaus. And it would be a guessing game and it would have to be luck, complete luck.
Rob [00:31:48]: I’m going to throw out some ranges and I wan’t to see if you agree to them. Kind of a small B to B SaaS app lets say between Bidsketch which starts at around twenty nine bucks and on up to something that maybe starts to ninety nine bucks a month. That’s the lower end range that we would be dealing in with boot-strappers. I would say from visitor to trial when asking for credit card up front you should be between about 0.8% and 2%.
Ruben [00:32:12]: Yes.
Rob [00:32:13]: Alright, maybe 0.75 I mean one would be great but I think that if you would charge around ninety nine bucks a month I think getting 1% is ambitious and you could do really well. So that’s where I have that loathing. Not asking for credit card – what’s the range there? Is it five to fifteen? Is that too broad?
Ruben [00:32:29]: I went almost a year without asking for a credit card upfront. So I would say that five is too low but you know, I guess it depends on how much traffic you’re getting in and all that stuff. I would go with that. If you’re getting less then 5%, just know that five is low.
Rob [00:32:46]: Right so better have like a ninety nine dollar product if you are doing five. If you have a ten dollar product and you are doing five you’re in real trouble. You should be closer to fifteen. Okay, and trial to paid if you’re asking for credit card upfront I want to be between 40% and 60% conversion trial to paid. I know that some people go higher than that but –
Ruben [00:33:05]: Some go a little lower but if you’re in the thirty’s –
Rob [00:33:09]: Yeah, there’s room for improvement. And if you’re not asking for credit card, I’ve never had an app that I done that with but the range is what like ten to twenty? Five to fifteen? That’s the one I forget.
Ruben [00:33:22]: Yeah so I’d say five is too low. Maybe on the low end eight to twenty. Several people have done this. I’ve done this myself and it’s interesting, I’ve actually moved up that number like 8% to 17% and not have a significant or meaningful increase in paid customers. Simply because of how aggressive or passive I am in converting those visitors into trials.
Rob [00:33:49]: That’s right because if you are overly aggressive then they churn out really quick. Is that right?
Ruben [00:33:53]: Well less of then convert into paying customers, because I’m being super aggressive into converting them into a trial.
Rob [00:34:00]: Into a trial. Got it. Okay, and then churn rates, typically I see the first sixty days combined somewhere between lets say if you’re at 20% I think you’re doing pretty well and I’ve seen churn rates at about 40% in the first sixty days. To me that’s the danger zone if you’re above thirty nine.
Ruben [00:34:22]: It’s crazy that when you look at a business like [Mas?] and they’re like 40% from their first ninety days or something like that. They have a really nice business [?].
Rob [00:34:35]: Yeah I think that’s price point because they started at ninety nine, they had a lot of traffic, but I think forty is where the top end of where I’d want to be though.
Ruben [00:34:42]: Yeah if I had 45%, 50% I’d –
Rob [00:34:46]: [crosstalk] And then lastly post sixty day churn or ninety day churn. I mean this one really depends like you said Jason Colen with hosting with WP engine 2%. And that’s 2% per month after the first sixty that’s phenomenal. I think most SaaS businesses would kill for that. The ranges that I see I feel like 5% to 8% is where I see most bootstrap businesses in our price range landing. Like if you’re at 9% or 10% I’m starting to feel less comfortable with that. That means after your initial sixty day of churn you are now loosing one in every ten customers if you’re at 10% and that’s a lot, I mean it’s tough to replace that.
Ruben [00:35:23]: It is a lot. Typically at most any scale, if you’re loosing that many customers then you’d want to take care of that.
Mike [00:35:34]: So going back to the discussion about plateaus a little bit, once your business comes to this screeching halt, how do you go about making sure your mindset is in the right place because I think it can be incredible demoralizing hitting one of these plateaus and your entire business basically grinds to a halt for basically months at a time and you’re not able to kind of push to and figure out really what’s going on. Because your business it may not be getting worse, but it’s certainly not getting better and you are always looking to make sure that things are going up and to the right. So how do you make sure that your mind is in the right place and that you are thinking about the right things to help push through that plateau.
Ruben [00:36:10]: I think it helps to know that it’s normal, most businesses unless they have 0 churn or negative they’re going to plateau at some point. Expect it if you have a SaaS product, try to predict it, it’s pretty easy to do, so those things help. They help but it still sucks. When you hit it they’re not going to make it so that you feel like, “okay, this is okay, I can do this” and you’ll move forward without being fazed at all. For me it’s frustrating, I think one of the more common things I felt in the past, frustrated with the progress and especially if you try a lot of things, or in my earlier days when I had less experience I had less confidence that I could break through. S o the questions would come up and still to this date they come up, “can I go past this?” these are the negative talk that comes up every once in a while. And I think that one of the things that has been super helpful for me is that just being able to talk honestly about it. First it’s just being honest to myself about it and then having a mastermind group and having friend that I can talk to about it. It’s really easy for people to just ask, “hey how’s it going with the product, how’s everything?” and for the automatic response to be, “yeah, it’s going great” and then just talk about things that are going well. It’s a lot harder to be honest and just say that you’ve hit a plateau and that you’re struggling with the trials or churns or something like that. But I think it’s important to do, it’s helpful, it’s really tuff to just not talk about it and sort of try and deal with it entirely yourself in your head.
Rob [00:37:46]: Awesome. Ruben thanks so much for coming on the show, you’ve dropped a lot of knowledge here today. If folks what to keep in touch with you online, keep tabs on what your up to, what’s the best way to do that?
Ruben [00:37:56]: Twitter probably so earthling works on Twitter.
Rob [00:37:59]: Very good and thanks again hope to have you on the show again soon.
Ruben [00:38:02]: Thanks for inviting me.
Mike [00:38:03]: If you have a question for us you can call it into our voice mail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Out of Control by Moot, used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.