Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions including topics about company identity, using accountability emails, and SaaS project management.
Items mentioned in this episode:
- Screensaver Ninja
- Cyfe
- DigMyData
- Big Snow Tiny Conf
- How to build an MVP with Rob Walling (7 Day Startup Challenge)
Transcript
Rob [00:00]: Alexa, add Chocolate Chip Cookies to my shopping list. Xbox, turn off. Okay, Google, search for Boston, Massachusetts.
Mike [00:12]: This isn’t working, I don’t think.
Rob [00:13]: In this episode of Startups For The Rest Of Us, Mike and I discuss company identity, using accountability e-mails, SaaS project management and we answer more listener questions. This is Startups For The Rest Of Us, Episode 273. Welcome to Startups For The Rest Of Us, the podcast helps developers, designers and entrepreneurs be awesome at launching software products. Whether you’ve build your first product or you’re just thinking about it. I’m Rob.
Mike [00:42]: And I’m Mike.
Rob [00:43]: 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 [00:48]: Hate mail for this episode’s intro can be sent directly to you for turning on people’s Xboxes and ordering Chocolate Chip Cookies.
Rob [00:54]: That’s Miketaber@gmail – cool. What’s going on with you this week?
Mike [00:59]: I’m gearing up and trying to get a couple of things hammered out before I head out to Big Snow Tiny Conf next week. If you don’t hear from me, I probably ran into a tree because I haven’t skied in a while.
Rob [01:10]: That will be fun.
Mike [01:11]: I’m probably not very good anymore.
Rob [01:12]: That will be cool, and that’s Brian Casel’s conference city puts on up in Vermont and then in then in Colorado.
Mike [01:18]: It’s in Vermont with Brad Touesnard, and there’s also a Big Snow Tiny Conf West that is now headed up by Dave Rodenbaugh. I know that Brian Castle is involved with that. I don’t know to what extent but I know that Brian is going to that one as well. That’s a little bit after – I think a couple of weeks after this one.
Rob [01:34]: That will be fun. They’re really small, right? They’re like 10 people, or 12 people.
Mike [01:36]: Yeah. I think the one in Colorado is maybe 9 or 10 people. The one in Vermont, I think it has 11 or 12. I’m not sure on the exact number, but they are really small.
Rob [01:48]: By the way, it’s Brad Touesnard. It’s a silent ‘S’, yeah. Anyways.
Mike [01:55]: Apologies Brad.
Rob [01:57]: I’m sure that’s pretty common. So I had a fun chat yesterday with Dan Norris. Dan is the author of the Seven Days Startup. He did this seven day startup challenge where he got a bunch of folks to come on and do “Q and A” and talk with him about different aspects of doing a, we know what he calls a seven day startup, which is a really short timeframe startup that you get out the door within seven days. So a lot of productized services, and prototypes, and MVPs and stuff come out of it. There’s only a portion that is software. There’s also people doing physical products, and knowledge products, and other stuff like that. We did it on Blab, and it’s recorded. We’ll link it up in the show notes. It was really fun. We talked minimum viable products.
I had five minutes or so at the front where I was talking about how I understand minimum viable products, and the myths around them, and gave some examples. And then Dan said a little bit, and there were so many questions. We did almost an hour of Q and A, and there were some really good questions in there that we had to [?] back and forth. So if you’re wanting to know more about Dan Norris’, and my. thoughts and opinions on MVPs, and some clarifications that I think are important on this topic, check it out. We’ll link it up. It’ a long URL but it’s on Blab.im, and you can just watch it, like a video right in your browser.
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Mike [03:06]: Very cool. Anything else going on?
Rob [03:08]: Yeah. The one other thing I want to mention is I’ve been watching the show called “The Profit”, P-R-O-F-I-T. Have you seen it?
Mike [03:14]: I have not.
Rob [03:15]: It’s a reality TV show. I’m not a fan of most reality TV because it’s so engineered and they act like it’s reality, but it’s loosely scripted or the producers set up these scenarios. I’m sure this one is similar vain. It’s a reality TV show about this dude who’s a billionaire and he goes in and buys hurting businesses, or part of them, and then he works with the people to improve them. So it’s businesses anywhere from – he’s done a car buying service, he’s done a gym type thing with monthly memberships, a candy store and stuff. It’s really cool. The guy knows his stuff. I like Shark Tank, but Shark Tank feel a lot like theatre. But there’s not many business lessons that I feel like you can take away from Shark Tank. It is this big spectacle. The Profit has some of that in it. The guy, Marcus, who’s running it – this billionaire guy – super sharp dude. When you hear him talk about stuff and explain it, it’s interesting. It airs on some weird network like CNBC or something, but I buy it on Amazon and watch on my Roku. It’s something I’d recommend. It’s the closest thing to business entertainment where there’s actually some lessons to be learnt from it that I’ve encountered. I wanted to mention it. I think, if you’re looking for a show and interested in this kind of stuff that it’s something to check out, called The Profit, P-R-O-F-I-T.
Mike [04:29]: Very cool. What are we talking about this week?
Rob [04:31]: Today, we are answering a bunch of listener questions. They continue to pile up. We have some really good ones this week. Our first one is about company identity, and this one is an anonymous question and he said, “I recently heard of your podcast and I became an instant fan. I’m working through your backlog. My startup at the moment has two products. We didn’t plan it this way, but my business partner quit and the original product was his idea and he was the domain expert. I’m maintaining that product but I found myself not being able to evolve it, grow it, sell it, etcetera. Since then, we launched another product, and we might have more in the future. This seems to be frowned upon in the startup world. It’s seen as lack of focus. I’m glad I found your podcast where this approach is not necessarily considered wrong. I’m not ruling out the possibility of one day finding one of these products perform so much better than the others that I will end up getting rid of them, but for now, that’s not the goal. My problem though is one of identity. When people ask me about my startup, I used to say “W”, where W is our first product. Then I started saying “Y”, where Y is our second product. Now I’m saying “C”, where C is the name of the company, and then I tell them about our products. But I find that most people immediately focus on the fact that we have more than one product and forget what they are. When you are a multiproduct startup, how do you identify yourself? How do you pitch for the sake of networking?”
Mike [05:39]: I think you and I have both run into this exact same problem before, haven’t we?
Rob [05:44]: Yeah, for sure, doing multiple things like MicroConf, and having software products, and the academy, and writing a book and all that, and the podcast. You got to figure out a way to talk about it from an umbrella perspective.
Mike [05:56]: Yeah. I think in some cases it makes more sense to talk directly about a specific product. It’s almost dependent upon the context of the networking situation that you are in. So if you’re at a conference for a particular line of business that you’re product is applicable to, you would talk about that particular product. I’m making an assumption here that these products are not necessarily related to each other, and that’s probably where some of the confusion comes from, because if they don’t have an overlapping market then it’s difficult to relate them to each other and to the person that you’re talking to. So that’s, kind of, the underlying assumption that I’m making here. But if you are in that situation, if you are in that networking mode where you’re talking to people and they’re applicable to a certain product, talk about that product.
I would just say, “We develop a product that does this,” and don’t really talk about yourself as a company, because if they want to find you as a company, they’re going to find you through that product. If you talk about your company itself, nobody cares about it, and it seems like you’ve run into this, where people don’t remember your business, they remember what you do. And that’s really the core of the issue is that people are remembering what you do, not who you are. That’s how you have to address this, because you want them to remember that product because that would backtrack the person back to you if you’re looking to network with them. When you are in a social situation where you’re trying to explain to a friend what you’re doing, you can give them a little bit more of the back story about the company and say “Oh, this is where we came from, this is what we do.”
When you’re in one of those in-between situations, where you don’t know whether or not the person you’re talking to is in the market for one product versus another, you, kind of, have to pick and choose. I’ve gone both ways where I’ve said, “I run a small software company that does this, this and this.” Then if they express interest in any one of those specific things then you can talk more about that. But I usually leave it a little bit more of a high level thing, so that you can let them talk a little bit, and feed off of whatever it is that resonates with them. I find it that works best for me. It depends on the social situation that you’re in.
Rob [07:54]: I think the key here is that he is in a different situation than, let’s say, you and I, because he has multiple software products. Whereas if you say that you wrote single founder handbook, you have a MicroConf and you have a podcast, you can say, “Well, I’m in the startup space,” and you can group that under a personal brand thing. He’s trying to network based on what these products do. He’s in a little bit different scenario. With that in mind, you hit the nail on the head when you said, “Figure out what the other person is going to be interested in.” If I’m at a cocktail party and I’m speaking to someone and I find out that they are a lawyer or that they work at a hospital or whatever, when they ask me what I do, I’m probably going to say, “I run a small software company.”
That tends to be my lead-in, because typically the next question then is something more about the company like, “Oh, what does your company do?” At that point, I would probably say, “Well, we have multiple products but our biggest one is X.” Because that’s what they’re trying to do is, kind of, figure out what you’re up to. However if one of my pieces of software was aimed at lawyers, of course, that’s the one I would lead with. I would say, “One of them is actually in the legal field and it helps lawyers do XYZ.” So, I think, getting a tiny bit of information before you answer this question is going to go a long way. I don’t think there’s a single blamket respons is going to be right for everyone. I would keep in mind that the simpler you keep it up front and then let people edge in with further detailing questions where they’re getting more and more information is probably the way to go in this scenario. I hope that helps anonymous.
Our second e-mail is not a question. It’s more of a suggestion and a look at something that has worked for one of our listeners. It’s from [AnderstoPeterson?]. He’s a multi-time, MicroConf attendee, an attendee talk in Europe. He says, “Hey guys. I send out an accountability e-mail every three weeks with status on my project time block, my biggest questions right now, and what I’m working on for the next few weeks. These e-mails have been the single most important thing that have helped me to speed up my progress building this new business. The amount of self-chosen pressure makes me wake up every morning and think, “I’ve done nothing yesterday. I have to get my stuff together, because I’m going to be e-mailing people about this in the next few weeks.” This, coupled with the advice I get from those who receive it, is invaluable. I’ve gotten a few of my friends to do a similar e-mail, so I thought it might be worth mentioning on your show.”
Ander suggests this in addition to mastermind calls that he does. If it’s a tactic that seems like it might work for you, wanted to throw it out there. If you do put this into place, and you feel like it’s something that works for you, and you find a few people who you can e-mail and it keeps you accountable, let us know at questions@startupfortherestofus.com and we’ll give you a shout out in a future episode and thank Anders for that helpful advice. Our next question comes from Chad Rogers and he says, “Here’s an interesting, more technical question that comes to mind about platform as a service versus VMs, Virtual Machines. Trade offs in considerations including cost scale ability, maintain ability and up time. In other words, merging your own VM servers versus using cloud platforms, like say a Google app engine, an Amazon EC2, a Rack Space cloud, that type of thing.” Ready, Mike? Go. It’s a big question.
Mike [10:54]: It is a big question. Some of this depends at what stage of your business you’re at. If you’re really early in and you don’t necessary care about bleeding edge performance – which is especially true when you are so early on that you don’t really have any performance concerns on the system – you can just spin up a VM and use that. The other option is to go with something that’s more of a platform as a service that you don’t have to worry about all of the underlying considerations. Now, the tradeoff there is the fact that you have to understand exactly what it is that you’re getting into when you’re using those platforms as a service, because if you’re not monitoring them and watching them, it’s very easy to have something that spins a little bit out of control, and then racks up a huge bill you weren’t necessarily anticipating.
First it’s something like a VM, where you generally know that it’s going to be a fixed cost. But with a platform as a service, that variable cost could be substantially lower on an ongoing basis as long as you’re managing it well enough. So in some ways it depends a little bit on where you want to spend your time managing things. Do you want to spend it at the virtual machine level, or do you want to spend it making sure that your infrastructure is not going sideways and monitoring everything to make sure that you’re not going to get a monster bill at the end of the month? Some places have different coupons that allow you to cut down on the cost and things like that.
One of the other advantages of a platform as a service is you have a tendency to scale out, and you basically just add resources to it – which is a very generic way of thinking about it – versus virtual machines which you tend to scale up until a certain point and then from there you also scale out. There was a story that went around years and years ago about the guy who ran the website “Plenty of Fish” when having 64 Gigs of RAM of a server was just this massive investment. It was 8 or 10 years ago. He decided to go to a SQL server that had 128 Gigs of RAM because he did not want to rework his code to make it more efficient. It was easier to just spend $50,000 or $60,000 to upgrade the machine and buy a new one than it was to reengineer a lot of the code. That’s basically the decision you’re making here, is what do you want to spend your time and effort on? Do you want to spend it on the infrastructure, or do you want to optimize the code [?]. It seems to like that’s a very similar trade off that you’re making in these cases.
Rob [13:12]: Yeah. I want to touch on something you said earlier on. I think it really depends on what stage you’re at, and how much control you need, and how much cost you can endure because if you’re really earlier on, you don’t have a lot of customers, then a platform is a service. It is so nice that you don’t have to maintain all the stuff and keep these servers patched. There’s just so much that goes into that. It’s a lot more time than you think it is. Even if you know how to do it, none of that moves your business forward. I would always opt towards going with a platform as a service at the start. What we ran into at DRIP, pretty quickly – it was even in just a few months – was that the cost was so high because all of the incoming requests. We were growing pretty quickl, and so we scaled up. We sent a bazillion e-mails, and we have all these analytics data coming back to us in real time. To try and get a pass to support that was expensive. We did move over to Amazon EC2 VMs and as a result we now have the burden of keeping these things maintained and doing all of the devop’s work. For us, it totally makes sense. We could frankly hire a full time person to do this, just based on the amount of money that we’re saving from a past approach. But the platform as a service is always where you’re going to want to start unless you know that you’re heavy duty analytics right off the bat. I hope that helps, Chad. Our next question is for me, actually. It’s about Trello setup. It’s from Finacis Poli Crinakis.
He says, “Rob, in a recent episode, you mentioned you only use a single Trello board for all you projects. How do you handle working with different teams per project? Is the board exclusively available only to you? Do you copy tasks to other boards where your team is?” And the answer is, “Yes”. My Trello board is a single one. I have a single Trello list for my to-dos, even though I’m working on multiple projects. I used to have multiple boards and multiple lists, and then you spend a bunch of time churning and not knowing what to do next. I want to be able to order everything in a single to-do list so that when I go to look for that next task, it’s right there and I’m not thinking to myself, “Oh, should I work on this or should I work on that?”
That means that I can’t necessarily share stuff with people because it’s all baked into the same board. So yes, if I need to assign a task someone else then I do wind up moving or copying that to where my team is. We do work with some shared Trello boards, but that’s not my main day to day to-do list. That’s the way I have it set up, and it works well for me and the way I work. Maybe it will work for you as well. Thanks for the question.
Our next question is about SaaS project management. It’s from J. Davis. He says, “I’m working on building a SaaS app that has a hardware component, and I’ve never undertaken a project like this before. I’m working with a partner company that already has an established client base, understands the market quite well, and assures me that their clients are in need of a product like this.”
So a little injection here; before I built anything I would figure out what the assurance is – like what data do they have, what have they shown you, aside from just them telling you, “Hey, yes, we have people,” Because if you go through a bunch of costs and do this and they really didn’t do their customer development or their due diligence on this one, it’s going to be a real bummer. That’s a sticking point for me right there just in the first paragraph. But let me continue with the email. Jay says, “I’ve built a proof of concept, and given the partner company a demo which they’re happy with. The next phase is to start organizing the project and I’m looking into scrapping methods form the Agile Management Framework to help me get things organized and to find the project goals. I already run my own IT company and can hopefully fund the project development with my consulting work as well as allocate it roughly 40 to 50% of my work week to it. I have some quick questions I hope you can help with. The first is how do you guys approach a new project as far as practical management goes? Do you have a set process? Have you tried anything like Agile? And the other question is what are some pitfalls, you would suggest, to keep an eye out for as far as project management Is concerned?”
Mike [16:40]: I think I’d echo Rob’s earlier question about how much validation has that company done for their own clients. If they’ve done that much validation for it, why haven’t they done it themselves? I would be a little bit more cautious about that aspect of it, because it sounds like you’re making an assumption that they have fully validated the idea and that you don’t have to do that work, when the reality is that that may not necessarily be true, or may not be true to the degree that you need it to be in order to make the financial aspects of it work out. So you might need to sell 10,000 units, but if their validation only said that they can sell 5,000 realistically, then you’re going to have a hard time being able to make ends meet. Because you’re either going to have an overrun with the supply, or you’re not going to have enough to meet the demand which, obviously, that’s a problem that money can fix. But if those numbers are off it can put you in a bad financial spot. Aside from that, how would you approach the project management from a practical management standpoint? That boils down to what are the different steps that need to be gone through in order to take the project to completion? So because this is a physical product, you’re going to need to have that POC System pretty well scoped out so that you can have it manufactured. I’m not a physical products guy, so there’s certainly a number of assumptions that I would probably have to make in doing that. But you’re going to want to know what all those costs are, whether there is unit cost, shipment cost, anything where you need to reship that stuff. So if it’s shipped directly to you or, if you have a drop-shipped, what are the cost components associated with each of those? You’ll also want to know what sorts of marketing efforts that you’re going to be able to have access to through this other company, and whether or not they are going to be funding it versus whether you are going to be funding it. You don’t want to have this list of questions about the entire process that you just iterate through and try to find the answers to all of those questions. I would do a lot of that work before you go down the path of laying out any money to have the product physically developed, because once you start down that path it’s very difficult to put the brakes on it. You want to have any unknowns, or question marks, answered well in advance of that, because you don’t want to have to put the brakes on it somewhere along the way because there was something that came up that was completely unanticipated that, had you just asked the right questions earlier on, you would have know that that was going to be an issue.
Rob [18:55]: If I were in your shoes, I wouldn’t get too hung up on finding a methodology, and finding too many things to apply to apply to this to offer heavy process. You’re going to be fairly agile just by nature – not capital ‘A’ agile – but just you’re going to move quickly. If you are a single person running this, and you can make decisions, and you’re in-charge of the development, then putting together an Excel Spreadsheet with estimates and costs, and getting whatever folks you’re working with in on that, some Google Doc, and having deadlines that are right in that spreadsheet could be plenty. It depends on the complexity of this. That’s where I would start. You can move on to a more sophisticated thing with milestones and things that get pushed and all that, and try to do a Microsoft Project like a Gantt Chart and all that. I would not start there.
I would also maybe read a book about Agile. I have used some of the stuff that came out of Agile, like daily stand up meetings can be useful with software. I don’t know how useful they are with hardware, because I don’t know how fast this project is going to move. Is it going to move quickly enough that a meeting every morning is going to have something new to say? Or should it be two times a week, or once a week? I think I’d just really use a lot of common sense, and try not to get hang up in the exact documents, the exact diagrams, the exact things in the naming and all that. If everyone else doesn’t know what those words mean – you know, because there’s a whole vocabulary that goes a long with Agile. If everyone else doesn’t know what that they mean, then it’s not actually that helpful.
And I think just talking about it common sense terms is where I would start, and certainly reading a book on Agile could be helpful, but I’d try to walk that line between being too obsessed with the process and trying to do the common thing that gets stuff done really quickly. In terms of the pitfalls, you asked, the biggest pitfall is no one ever delivers on time. I’m overstating it only a tad, but pretty much all deadlines and all costs are going to out the window. Expect it to take twice as long and cost twice as much. I think that’s the number one pitfall I would look out for. Don’t be too optimistic, and don’t let a vendor, or designer, or whoever, convince you that they’re going to be able to deliver something in X amount of days, because I bet it’s going to wind up being closer to 2X. You have any other pitfalls that you could think of?
Mike [20:56]: Not off hand. Like I said, the one thing I would be concerned about, to some extent, is shipping cost. For whatever reason, those can double or triple, and it doesn’t seem like much at the time. But when you start talking about a hardware component that you have to ship one or two of them out to each individual customer – depending on whether you’re drop shipping them, or you’re having them all shipped to you in one shipment, and then turning around and then reshipping them out, that can add a substantial amount of costs to the product you’re selling based on whatever the per unit cost is, especially if it’s a low priced cost. Then factor in the fact that you’re probably going to have to ship replacements and things like that. There’s going to be some margin of those things that you manufacture that, for whatever reason, they don’t work.
Rob [21:39]: All right. Our last question for the day comes from J. Pablo Fernandez, from screensaver.ninja. He says, “Hey Rob and Mike. I started listening to Startups for the Rest of Us recently. After a couple of episodes, I went back into my feed and downloaded them all. I’m still working my way through and learning a lot. Thanks so much for your podcast. It’s a great resource. I have question about a product I launched this year. We all have many websites that display information we want to stay on top of; Google Analytics, Case Metric, Twitter Feeds, Issue Trackers, Custom Dashboards etcetera. But it’s really easy to forget to check their state one day, lose the habit, and end up missing an important event. This is why I created Screensaver Ninja. It’s a screen saver that display web pages so you never miss this information, or any other information that keeps coming back to you over and over. I wanted to build this product by myself, and I also thought it was going to be popular with tech entrepreneurs, a group of people I’m very comfortable talking to. Unfortunately, sales to that audience were not great. My biggest sales segment is one that I have a hard time growing, because it’s unapproachable, big organizations such as banks, Ivy League universities, multinational conglomerates etcetera. What do you suggest I do? How can I increase sales?” Again his URL is at screensaver.ninja. What do you think, Mike?
Mike [22:44]: Rob, you and I talked about this a little bit offline. We have a little bit of a difference of opinion on whether or not the biggest sales segment qualifies, and how it is qualified. There’s not enough detail in this question to answer this question for us. The question that we have is, “How do you quantify that biggest sales segment? Is it the fact that there are people in these large organizations buying it? Or is it the sales quantities from these organizations?” I’ve worked with large organizations who have these enterprise level agreements with Apple, and they will buy hundreds or thousands of copies of a particular piece of software, and they’ll just essentially buy them direct through Apple, because they have those developer agreements in place and they’ll just say, “Okay, this is our master account. Let’s just buy 100 or 1000 copies of this.”
I could easily see a scenario where you’ve got a school of 2000 or 3000 students, and 2000 or 3000 computers at school, where they come in and they say, “Hey, we want the homepage for the school to be displayed on every single machine that’s here as part of the screen saver because we have these bulletin boards that go out there, and we want to be able to post messages to our entire school system using that screensaver. I could definitely see them wanting to do that. Because otherwise your other option is to redeploy a new screensaver to every machine in the environment. It’s kind of a non-trivia task. Rob, I think you had a different take on what he meant by the sales segment, right?
Rob [24:05]: Yeah, he said, “My biggest sales segment is one that I have a hard time growing because it’s unapproachable, big organizations such as banks, Ivy League universities, multinational conglomerates etcetera.” My take on it is that I was reading this as it was not the entire organization buying thousands of copies, like you were saying. I was thinking that it was individuals within these organizations buying copies on their own. So it was a guy in an IT department at a bank. It was a software developer at a Fortune 500 company, or a professor, or a grad student at an Ivy League university, not the actual organization. So I think the answer to this question differs depending on which case it is. If you’re correct and it really is enterprises buying this, then I would try to figure out how are they finding you? How did these enterprises stumble upon you? And what gave them the confidence to buy 500 or 1,000 copies? And how can you replicate that process? It’s not going to be something you can approach, unless you want to go through the whole enterprise sales cycle. Outbound stuff for a product like this could be a challenge. What do you think, Mike?
Mike [25:07]: Depending on the answer to that question, is it a few individuals in the company who are buying it and then using it, versus are they actually buying hundreds or thousands of copies of it? I think in each of those cases, depending on what the answer is, is going to dictate how you address the marketing effort. Because if you find that the use case in a large organization is for them to be able to put that screensaver out so that they can get bullets and word messages out to everybody in the environment, then that is a different marketing message that you’re going put on your website because you’re going to want to target those people. Another option would be to have a different section of your website that essentially addresses that particular type of marketing message.
Because if you go to screensaver.ninja, there’s really only one page for the marketing message. You can also put positioning in there to say, “If you were a school, this is what you can use it for. And this I how it can be helpful in your environment. Maybe you want to remind people of what the calendar is, or what those different sports events that are coming up.” All those types of things. If it’s a corporation they’re going to want to have a little bit different information in there, which in those types of environments, displaying a webpage on somebody’s screensaver – especially if it’s metric state of any kind – is probably not a good idea from a security standpoint, unless it’s all public information like their stock prices and things like that. So depending on what the specifics of the situation are is going to, kind of, dictate what you do, and how you position your product. I think it’s more about market positioning at that point, and getting the answers to those fundamental questions answered, rather than a blanket, “This is what I should do. I should go out and try to cold call, and reach into these organizations.”
Rob [26:52]: In either case, the question is, “How have they found you? How can you double down on that?” The one other thing that comes to mind, since it looks like you sell it through the Mac App Store, is, “What does your app store SEO look like? What are people searching for to find this? And how can you improve your app store SEO?” That will help you to a certain extent, but if you’ve already had some traction in a market that’s buying a bunch of copies, I would think app store SEO would be less important, and it would be more about figuring out how to replicate how those people found you.
Mike [27:18]: The other thing that he mentions is that the problem that it was trying to solve was being able to display information that you might want to stay on top of such as Google Analytics, or Case Metrics, or Twitter Feeds and things like that. It seems to me, in larger environments, that’s going to be much more not just proprietary information, but stuff that you would want generally secured. You wouldn’t want it just flashing up on your screen – maybe somebody is at a coffee shop or something like that, with their laptop – you wouldn’t that displayed there. You also wouldn’t want it generally displayed across the entire environment, especially if it’s like Sales Metrics and things like that. So in smaller environments, there’s a lot of different dashboard tools that I can think of that are addressed at smaller organizations that will essentially take new data feeds in. So Cyfe.com, for example, allows you to basically plug in data feeds from all over the place, and they have a ton of different integrations with a lot of different tools that allow you to look at all of that consolidated information in one place. DigMyData is another service that does very similar things. The UI and UX is different, but at the end of the day they both do those things. Yes, you have to log into them, but at the same time you don’t have to worry about somebody driving by your laptop or desktop and glancing at stuff they probably shouldn’t necessarily have access to.
Rob [28:37]: Also keep in mind that he’s selling it for $10. So the lifetime value on a single purchase is going to be too low to do any type of real marketing. You’re pretty much going to have to do free channels. It’s going to be app store SEO, or SEO, or some type of virality. There’s no advertising channels, or any type of outbound stuff you can do, when you’re selling something for $10 lifetime value. But if enterprises are buying it and they’re buying 1,000 copies, now you’re lifetime value becomes $10,000. So for that, you can afford to spend more time working on it, and more money to capture those people who are paying that higher dollar amount.
Mike [29:14]: Yeah. Those other services that I offer, both cyfe.com and digmydata.com, both of them are SaaS subscriptions. That dramatically changes the amount of lifetime revenue for those. But yeah, everything you said was spot on. So i think that about wraps us up for today’s episode. If you have a question for us, you can call it in to our voicemail number at 1-8-8-8-8-0-1-9-6-9-0, or you can e-mail it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Out of Control’ by MoOt, used under creative comments. 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 272 | Planning For Your Imminent Demise
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike discuss a listener question about planning for your imminent demise. They talk about how to prepare for the worst and give examples of things they have put in place themselves.
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 be talking about planning for your imminent demise. This is Startups For the Rest of Us, episode 272. 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 [00:28]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week Rob?
Rob [00:37]: Something big is coming Mike. Something big is coming to Drip. It’s our biggest feature since we launched automation in, you know, what 15, 16 months ago. And –
Mike [00:38]: Is it a password reset?
Rob [0:41]: It is not a password reset. You’ve seen this one. You know what’s coming. It’s going to go live in about a week from when this airs, and we’ve been working on it for months, like five months. And I’m pretty excited about it, man. It’s a bit of an innovation on automation, and it’s going to help people visualize things a little better and just make it a lot easier to build complex flows.
Mike [00:58]: It does look pretty.
Rob [01:00]: Very much. How about you, what’s going on?
Mike [1:00]: Well I took my kids to see the new Star Wars movie a couple weeks ago, and the definition of irony – because my son’s name is Luke – and he has taken to going around telling people Star Wars spoilers like “Han shot first.”
Rob [01:13]: Nice. That’s a great — what is he like seven or eight?
Mike [01:15]: He’s nine.
Rob [1:15]: That’s a great nine year old spoiler. Because my son doesn’t understand the concept of spoilers. You know, when we were young there weren’t spoilers. If you went and told someone within a week after a movie came out, the ending, that was a real bummer. But there wasn’t the spoiler culture. I think without the Internet it wasn’t such a thing, and so I was trying to teach my nine year old also, like, “You can’t tell people what happened. You can’t tell the big parts. Even by accident, don’t mention them.”
Mike [1:38]: We made it clear to our kids, because one of our friends, they’re son, one of his friends had kind of ruined it for him and told him one of the spoilers, and then he almost told our kids but his dad was there. And I think that’s why he didn’t. So we took them one of the first days that it opened just to make sure that that didn’t happen to them. But we also made it very clear to them like, “You’re not to talk about the movie to any of your friends just so you don’t ruin it for them.”
Rob [2:01]: Indeed. So we have a bunch of iTunes reviews. We have 460 worldwide reviews. So we have some new ones I wanted to share with the listeners. We have Jay Carbary from the U.S. He says, “Loving this podcast. Episode topics are interesting. The content is incredibly helpful, and the episode length is perfect. Keep up the great work, Rob and Mike.” We have [Great Llama?] from the U.K. He says, “Keep it up guys. A massive help on a weekly basis. This podcast has helped me focus and fine tune my plays more than any other. I’d be so much further off without it. Your advice has been truly inspirational.” And from “Soccer83” of the U.S. he said, “Heard way too much about this podcast to not check it out. It quickly became one of my absolute favorites. As a bootstrapped entrepreneur myself I listen to a ton of podcasts. This is my favorite. Thanks guys.” Really appreciate the kind words, and even if you don’t have time to go in and write a few sentences, if you could go into iTunes – or whatever podcatcher you use – click that five star rating. It helps us rank higher. It helps keep us motivated and making new episodes.
Mike [2:55]: And if you don’t have access to iTunes, or just don’t want to use their interface because it’s terrible, then you can just write back to us at questions@startupsfortherestofus.com like Matt did. And he said, “Hey Rob and Mike. I love the show. I’ve been listening for a long time, and you guys continue to provide value. I’m bootstrapping a SaaS app as a non-technical founder and have used many actionable tips from the show. While I’ve also made a ton of mistakes I’m starting to see the hard work pay off and I attribute some of that success to your show. Thanks for all that you do, Matt.” And he runs an app over at Converthr.com. So thanks for that Matt. I really appreciate it. I think the only other thing going on is I mentioned that the FounderCafe migration was going on last week and everything went pretty well. There was only two minor issues with a couple of people who couldn’t log in because their usernames were the same as their email addresses. And somebody else had had an issue where some of the emails that were being sent for password resets were getting blocked because the vendor we used for sending out those emails monitors to see whether or not the email bounces. And if it does – for any reason whatsoever – it will no longer send email to that. So it was just a minor issue of finding the person’s username and unblocking it from the vendor.
Rob [3:53]: And if you’re not hanging out with a bunch of self-funded, bootstrapped startup founders you should come to FounderCafe.com, enter your email address. And we’re not taking new folks right now, but we are looking to start bringing in new groups here in the next month or two as we get our legs under us with this new platform. So what spurred the topic this week?
Mike [04:14]: Well we got a question to us from Brian and he asks us via email, he said, “I imagine this isn’t something most people want to think about, but if you happen to be a one man show what are some tips for handling your unexpected demise? I keep thinking about the situation of having a SaaS business, monthly charges automatically firing off, and your on ice while your wife is getting things in order and the service hits a glitch. I don’t have a SaaS business at the moment, but my wife would have no idea what to do. Have you guys prepared for the worst?”
Rob [04:38]: So the short answer for me is, “Yes, in general.” Even before I had business partners on the projects I’m working on I had a friend who I had talked to and said “Look, if I kick the bucket I’ve asked Sherry to contact you, and I need you to help her sell them basically.” I mean now it would be a little bit easier now that we have all the brokers around, but I did, kind of, give him general instructions and laid out some simple stuff. Because you’re right, my wife wouldn’t have known the technical side of how to maintain any of that, and there was an understanding that he would help maintain them just long enough until he was able to sell them. And we did have a bit of a vice versa thing were I was going to do that for him as well. And we also have, of course, a will, or a living trust, or whatever you want to set up. And I think that’s, kind of, the fundamental piece you need to have in place. But this really is an edge case that’s not necessarily covered by that, because it’s such a logistical piece of it. And we’re really going to dive into a bunch of steps and other things to keep in mind that Mike has laid out for us.
Mike [05:31]: So I think, as with some of the other episodes that we’ve done on topics that, kind of, touch on anything that is tax or legal related, we have to offer the standard disclaimer; we’re not CPAs and we’re not attorneys, and if you have specific questions about what laws apply to you specifically you really need to reach out to one of them and get their professional thoughts and opinions on it. But that said, here are some of the things that we, kind of, feel are important. And the first on on the list is to have a document that’s accessible to someone that outlines the highlights of the business. And this document needs to be accessible in essentially a secure place. You want it to either be in a safe deposit box, or a keyed safe someplace with a physical and digital copy of everything that needs to be known in order to take things over. Now whether that is simply a username and password that are written down on a piece of paper that you can hand to somebody that gets you into like a Google Docs account and just tells you where that document is that you need to get to, that in itself should probably be sufficient. But again, you need to make sure that that’s under lock and key someplace that it’s not easily accessible, because what you’re really doing is your providing the keys to the kingdom to somebody. And you also have to make sure that that someone is someone that you trust. And as Rob’s mentioned earlier in the episode, he and somebody else have kind of a reciprocity agreement between them that says they’ll do that for each other. But you want to have someone that you can designate that is going too be able to go get that stuff if the need ever arises.
Rob [06:55]: Right, and the reason that this wouldn’t be a great idea to just having a shared Dropbox folder is this is crazy sensitive information. These are like kingdom passwords, your root password and that kind of stuff. So you really don’t necessarily want it to be online unless maybe it had some really extensive encryption, and you had previously agreed on a password that was already handed over to the person. This is very sensitive stuff. The tough part with this is keeping it up to date, because we just forget about it. And so I think even if it’s six months out of date maybe it’s still viable. I think once it’s a year out of date it’s like this stuff’s going to be helpful but it’s not really going to cover it all. So I think that’d be something that you’d want in a calendar reminder that every year you come back in and update this. And this interesting thing is, you know, if you’re a sole founder than you probably need an external person, a developer, or someone, you know, a friend to handle this. If you have co-founders, or business partners, then typically there’s going to be something in your partnership agreement, or your articles of incorporation that specify what happens if one partner dies, and then someone else handles it. So it’s a little more, I would say it’s almost easier if you have business partners, because there’s someone else there to step up and handle this kind of stuff.
Mike [08:01]: And you just mentioned business partnerships there. You have to be a little careful about those as well, because the last I checked it depends on the business structure as to how the business is going to be handled if somebody in the business dies. So for a partnership, generally speaking, that partnership essentially dissolves when one partner dies. So you have to be very careful about whether or not you have a partnership, or an S corporation, or an LLC, and then specifically what the laws in the place that you live are that apply to that business structure, because something like an S corp can live on after you die but a partnership cannot. So you just have to check the laws and make sure you’re aware that the business structure also has an influence on these things. It’s not just about the logistics of handling things. It’s about what happens to the business afterwards as well. The second thing on our list is to make sure that you have a up to date list of the services that you’re using, and what they’re used for. And a lot of times you can pull something like this from your credit card statement. This is actually a very good way to keep that up to date, is if you’re paying for monthly services – or even annual subscriptions to different things – it’s very easy to go back and look at your last 12 months of credit card statements and identify what it is that you’re paying for and be able to make a correlation between those things and the different services that you’re using to run the business. Some things are going to be easier to get rid of, and some things are not. But at the same time, going back to the very first thing on the list is making sure it is documented how to get into those services. Because if you don’t know how to get into those services — and, I guess the primary one would be able to get into your mailbox to be able to do things like password resets at a very bare minimum. But also if you have the ability to authenticate to those different services, whether it’s a spreadsheet of passwords or credentials to a password manager, you need a way to be able to access those things. So the first part of that is just being able to have that list of services, and then being able to access all of them.
Rob [09:55]: That password manager is key here, so you don’t have to spell all these out on paper, on a thumb drive, in plain text or something. Just being able to give them a single password to your OnePass or your LastPass account is going to be a huge help. And you don’t have to then keep that updated, because you are automatically doing that in your day to day course of business. So it’s not some external thing that’s going to get out of date as you change passwords. I had to do this recently – make a list of all the services we were using – because when we spun Drip out as its own corporation, got a new bank account, new credit cards and all that stuff, that all that had to be transferred over. I did exactly what you said. I basically just went to the [Numa?] Group credit card, and I only looked back for maybe 45, 60 days. I know there’s some annual stuff that I may have missed that will come through later, but I skimmed through it, made a list, and I think there were about 30 services. Somewhere in that range. Like between, let’s say, 25 and 35 services, and I just logged in one by one, updated the credit card info and took care of it. So depending on how many you’re using, and what you have going on, this can take up to, I’d say, a few hours to take care of.
Mike [11:02]: The next thing on the list is making sure that the basic accounting information for the business is available. And that includes not just the statements themselves and how all the different financials are doing – because you might use something like Xero, or LessAccounting, or QuickBooks or all these different things to import all your banking statements – but you also need to be able to make sure that they can get into those bank accounts and look at the up-to-date banking information and credit card information so that they can continue to accept the payments on behalf of the business, and continue making bill payments based on the business. That also includes things like your payment providers. Whether you’re using Authorize.net, or Stripe, or anything like that, you need somebody to be able to get into those. And there’s kind of a, I’ll a little caveat here, or a little wrench in the works, which is that in order for somebody to log in from a new computer they may need to answer some sensitive questions about you, or where you went to school, or who your girlfriend was in fifth grade, or something like that. So you may very well need to document some of those sensitive questions that a bank might have asked you a long time ago. So those are the types of things you need to keep in mind when you’re documenting some of this stuff, because that is going to be important for them to get access to your accounts.
Rob [12:12]: And this one’s tough, because you really want to keep this stuff under wraps. So it’s not like something you want to have written on a plain piece of paper and sitting in a desk drawer somewhere. You really need to think seriously about the security of this info.
Mike [12:25]: Is now an appropriate time to go into the lack of security of that info by the U.S. government, and they lost every single piece of information on me including my fingerprints last year?
Rob [12:32]: Did they really?
Mike [12:34]: Yes.
Rob [12:35]: And by lost they mean sold them to the highest bidder or something?
Mike [12:37]: I really don’t know. I just got a letter in the mail from them saying, “Hey, by the way, we did a background check on you, and we lost every single piece of information on you dating back 15 years, including your fingerprints. So just 3D print yourself some new ones.
Rob [12:52]: Finally I’m clear. Now you can go commit a crime and no one will find you. Is that the idea?
Mike [12:56]: Or, you know, everybody will find me. I don’t know.
Rob [13:00]: Yeah, or they’ll certainly overhear you. It’s a bit of an aside but there’s this movie called “Citizen 4”. Have you seen it?
Mike [13:06]: I’ve heard of it. I have not seen it.
Rob [13:09]: It’s Edward Snowden. It’s a documentary on when he was actually doing the leaks, and it is just frightful. It is unbelievable. If you haven’t watched this, I highly, highly recommend it. It’s on HBO. It’s about that topic, about keeping stuff secure, and how really it’s all just an illusion of security. Anyways, I think there’s a difference here between we’re talking about having passwords and your fifth grade girlfriend written down somewhere. Yes, the government could probably find those and they could subpoena them and they could get that kind of stuff. But not particularly worried about that in this case. This is more about someone stumbling upon them, or copies getting made, or coming into the wrong hands of someone who wants to do something nefarious with them.
Mike [13:44]: Of course. It was just a side anecdote of it almost doesn’t matter how secure you are in the things that you do, it’s more that you’re almost at the mercy of wherever you store or put that information. So it’s only as strong as the weakest link, and unfortunately the government does not appear to have been a very strong link in that case. So moving on, the fourth one is to make sure that you have some basic information about the different technologies you’re using. Whether that’s different servers, and you have them hosted over in Azure, or AWS, or some basic technical layouts of how some of the different pieces fit together. What you’re really looking for is the ability to hand off some basic documentation about how your infrastructure is built or put together. And this is especially useful if you have multiple servers that are running your SaaS application that need to talk to one another. Because if any one of those goes down, you’re application is probably dead in the water. And if that happens your website might be up and running, but it’s not obvious or clear that there are other things in the background that are wrong. So if you have something like that that you’re able to hand off to somebody who is technical in nature, that they can take that and at least be able to figure out at a fundamental level where things are and how they fit together, then they can troubleshoot any major infrastructure problems.
Rob [14:59]: An interesting point here is that having a contract, let’s say a contract developer who works for you is actually a risk mitigation factor in this case. Because let’s say you’re the only developer, and only owner, and only founder of this company, and it’s just a one person shop, if you die and someone needs to take it over it is really someone entering into your world, and you have to have this kind of documentation. And you have to keep it up to date. I mean it’s going to be really hard for someone to get up to speed with it. But if you had just a single developer who also worked on it, and you then just had his or her contact information, if you were to die then someone would be able to contact them and at least keep them going. Kind of like when you transfer a sale of a business. If you can keep the contractors on it’s a lot easier to keep it going. So I’m not saying that if you don’t have contractors that you should hire them, but it is an interesting thing to think about of that it could essentially be more stable and outlive you if you do have other things in place, and other kind of stop-gap measures in place, and other people who are familiar with it. So that “bus factor” — you know, you’ve heard that phrase ‘the bus factor’? If you get hit by a bus who takes this over? And right now we’re kind of saying, “Well you just write it on a paper.” But I actually think having another human being involved to that degree might be worthwhile when you hit a certain point of success.
Mike [16:09]: And that leads us directly into the fifth item on our list which is to have contact information for those contractors readily available so that if operational decisions need to be made, or you need in depth technical information about anything that’s going on, or something that’s been deployed those people are going to probably know a heck of a lot more about it than anybody who’s stepping into your shoes to fill in. So, as long as you make sure that you have documented that, or even just pointed out where it can be found, I don’t think you need to report back line by line, “This contractor worked for me from this time period to this time period.” If you’re hiring them through an online platform such as Upwork, or a variety of other ones, that can really be helpful because then the person just has one place to go to and they can see a lot of that contractor history. So having all that stuff consolidated in one place can be really helpful. Another thing that would be helpful is if you have that wired into your payroll provider, and if you’re paying them through that payroll provider then it makes it a lot easier for the person to have just one or maybe two places to go through. So you can just point them to those – to Upwork.com and I use – it used to be called Zen Payroll – but now it’s Gusto.com. But I can point somebody to those two places and that would take care of everything. So I think those are the main points that we wanted to touch on, but there’s some, kind of, addendums to some of this information. Early on we pointed out that it’d be wise to designate somebody who you trust who can temporarily take over. And one of the reasons for that is that your family is probably going to be too busy and having too many other things going on to want to deal with the business directly. And essentially what this person will do is they’ll serve as something of a firewall between your business and your family. So they interject themselves in there to handle those things, and take care of things, and make sure that your family doesn’t have to think about or deal with any of that stuff.
Rob [17:54]: Another thing to think about is your family is probably going to have zero interest, or ability, to carry on the business. So I think that – one of the first things that I’ve thought about – is how do you come up with ideas for how to either sell your share, or sell the whole thing, and liquidate the business? And I think documenting some basic steps on how to do that or – as we talked about earlier – kind of, appointing someone to assist with that is a big deal. Now I think if you have a child or, I don’t know, someone else who might want to take it over who’s in your family — because I’ve often thought about my kids. My oldest child is nine and at this point he couldn’t take over the business, but he’s writing code now, and if when he hits 18 or 20 he wanted to be part of that and have some type of say in whether it got sold off when I died, or he was able to take it over I’d like to have that conversation. I think that’s worth having. But for most of us, if you don’t have someone in your life like that who’s going to be able, or willing, to take it over then really your best bet for your family is to be able to sell it. And whether you have a broker laid out, or a friend who can help assist that, or if there’s a business partner who essentially has to buy you out per terms in like a corporate arrangement, that’s going to be the best for your family is to get that big lump sum in addition to probably the life insurance that they’re getting.
Mike [19:08]: Another thing to keep in mind is that you could probably document some of these things in your will, but even with a will there’s a couple of different problems associated with that. The first one of which is it takes time to change your will. So it’s not something that you want to do everyday, because you’re probably going to have to have some legal representation review it and make sure everything’s kosher with it. And even if you do it could still be challenged. So you really want to have some basic steps and guidelines in place that can be used in, kind of, an interim fashion until the final decisions are made around that. And that’s really, I think, the main thrust of what we’ve been talking about today; how do you keep things at least minimally operational until you get to a point where your estate can essentially settle the business and decide what to finally do with it?
Rob [19:55]: Right. And I think that if you have a family and you don’t have life insurance at this point that would probably be something that I would seriously consider because I see that as kind of the first line of defense. It’s like the business, selling that and getting it organized and all that stuff, it’s going to take time, and the idea is that life insurance helps right away so that your family’s not in dire straights while things are getting sorted out. And then hopefully the business winds up being a windfall if and when it’s sold.
Mike [20:18]: The other side of that is that life insurance, as you said, is that first line of defense, and I totally see it that way as well, but the fact is that that life insurance could be worth substantially more than what your business is worth depending on where it is. I mean, if your running as a single founder company and you haven’t grown into any number of employees then chances are good that your insurance policy is some very large multiple of whatever your revenue is going to be from selling that business. So you do have to keep those types of things in mind and figure out what the order of resolution for those things are and what the time frames are, because selling a business is not going to be an overnight thing, as you said. So that’s something that you really need to be mindful and aware of, that that’s something that’s going to come down the road. And in terms of making sure the family has short term cash available to them, that life insurance is probably going to be the best bet. But even before that you should probably have a savings account set aside that’s going to take care of the short term between the time that the insurance company gets the official notification and they cut a check to take care of the life insurance policy. Because I don’t know how long that takes. I imagine it’s not like six months to a year, but I can’t imagine it’s anything less than probably several weeks to a month.
Rob [21:25]: So the bottom line is it really boils down to having a basic exit plan and keeping it as up to date as you can and as secure as you can. And so next week we’ll be talking about a topic that’s not such a bummer. Thanks for the downer topic Mike.
Mike [21:38]: Anytime.
Rob [21:37]: So this entire episode was outlined and discussed based on a listener question. If you have your own listener 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 in 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 271 | Lessons Learned Analyzing 250 SaaS Pricing Pages
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about lessons learned analyzing 250 SaaS pricing pages. They give their opinions and takeaways on the article and how it may apply to smaller size SaaS businesses/products.
Items mentioned this episode:
Transcript
Rob: [00:00]: In this episode of Startups for the Rest of Us, Mike and I discuss lessons learned from an analysis of 250 SaaS pricing pages. This is Startups for the Rest of Us, Episode 271.
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 [00:28]: And I’m Mike.
Rob [00:28]: 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, after a couple of months of effort on this, we’re finally pulling trigger on migrating Founder Café into Discourse. I ran through a dry run of the migration earlier today. Everything seemed to go pretty well. I think we ran into one minor issue but it was because a table was not able to accept the amount of data that we’re throwing into it. We fixed that and everything else seems to be going well.
Rob [00:53]: Very nice. For those who aren’t familiar, Founder Café is our membership community for self-funded startup founders and folks who get a lot of value out of the podcast and want to engage more with the community. We’ve been running it for several years. We’re moving it from an old platform that wasn’t working as well and moving it into Discourse which, so far, has been pretty cool. It has a lot of neat features. I like what Jeff Atwood and his team over at Discourse are doing with it.
Mike [01:19]: The user experience in general is going to be a lot better for us. The primary reason for moving is just partly for that community aspects but also the price considerations because the current platform we’re on is fairly expensive. There’s a huge number of features that we just simply haven’t used. We thought when we moved over to it that we were going to start using a lot of those features and it turned out that we just didn’t and they didn’t turn out to be as important as things that were much more focused on the forms and community interactions. Because of that, it fell short on a couple of different areas. If you go to a product that does a lot of different things, what you find is inevitably it will fall short on some of the things that you might find to be important. For us, that community aspect of it was really important. The other thing is that it wasn’t really designed to be like a paid membership site. It really wasn’t designed to be a membership site, it was really aimed at internal internets for large companies. Because of that, there were a bunch of workarounds that we had to do. At the end of the day it just didn’t work out for us. How about you? What’s going on with you?
Rob [02:20]: We ran an interesting experiment at Drip over the holidays. In essence, your trial to pay conversation rates often plummets over the week of Christmas and the week after Christmas, before New Year’s. What we did is we pushed everyone’s trial out, in terms of their expiration day. We pushed it out by a couple of weeks, anyone who’s going to expire during that time. We e-mailed them and let them know that we were doing that, kind of said, “Hey, happy holidays. Here’s our gift to you at the end of the year,” like restarting the trial in essence, checking in with people who aren’t set up. It gives everybody a little longer trial but it’s a really good reason to do it and to avoid the dip in conversion rate during that time.
With that said, it is very much an experiment, I’ve never done it before, and we have no idea what the results are going to be. We’re just now starting to see the trial to paid conversions from that earliest set of that and so far, so good. We’re a day into it. It’s not anything that has real results yet, but it has been a trip. Basically, there were no trials converting for two weeks and that is absolutely nervewracking as a SaaS founder and as someone who tracks my metrics as closely as I do. I, everyday and frankly every night after billing runs, I’m in there looking at the revenue and what the trial count is and all that stuff. Those are just haywire right now because we kind of decimated the last two weeks of our metrics. The idea is that it will pay off in spades here in January but it will be interesting to see.
Mike [03:47]: On the bright side, you can run most of your yearend analysis stuff two weeks in advance.
Rob [03:51]: Yeah, I know. We didn’t have final revenue and all that but it certainly didn’t change very much in the last week and a half of December after we moved these folks out.
Mike [04:00]: The only other thing I’m working on is migrating a lot of my e-mail campaigns over from Infusionsoft into Trip.
Rob [04:09]: Coming back, huh?
Mike [04:11]: Well, there were a bunch of things that I was looking at inside of Infusionsoft that were fairly attractive. At the end of the day, I got into it and was using it. They introduced a bug back in June or July or something like that, for something that I was using within the Twitter Lead Cards. They just refused to fix it. I ended up having to build this report inside their UI, which showed me all the things that were going wrong and then I would have to go in and manually fix them. It was like every day or every a couple of days I would have to go in and fix a bunch of data errors because the Twitter Lead Cards simply did not work. I kept asking them and saying, “Hey, are you going to fix this?” And they’ll, “Oh, we’ll get to it,” or “It’s not really important,” or “People aren’t really requesting it.”
I was like, “Look, if you don’t fix this, then I’m just not going to be a customer anymore.” They’re like, “Oh, we’ll have somebody get back to you soon,” and I guess they were going to have somebody in their engineering department get back to me. It’s been, I don’t know, several weeks and I’m still waiting, so I’m done with it at this point.
Rob [05:05]: That’s tough. They are a major competitor of ours and so I don’t want to speak poorly of them but I have heard similar stories from folks running into bugs that haven’t been fixed and stuff along those lines. It’s a bummer.
Mike [05:16]: I heard similar stories from other people and for a while, it worked great, did everything I needed it to and it was kind of chugging along. If you’re not running into those bugs, then you’re fine, but as soon as you do and it’s not high on their priority list, then it become a problem. It’s a problem for you but not necessarily a problem for them. It’s higher on my priority list than it is theirs.
Rob [05:38]: Sure, sure. There’s a reason we get a lot Infusion software FUGS and you’re adding to that total. Today we are talking about lessons learned from an analysis of 250 SaaS pricing pages and we get the information from an article on The Next Web and we’ll certainly link that up in the show notes. The article is titled ‘I analyzed 250 SaaS Pricing Pages – Here’s What I Found.’ It’s written by Benjamin Brandall and he says, “We recently had a major overhaul of our pricing and landing page and wanted to get a good idea of what a high-converting pricing page looked like.” He went to the SaaS 250. It’s a list compiled by Montclare and the list is supposed to indicate the most successful SaaS products in the world.
You and I had a debate before on whether or not – or not even a debate, just a discussion of each of these metrics you should probably hold them loosely because these companies, some of them are public, some of them are not. They’re looking at just private data and whatever they can scrape together. As we know, that tends to be less than accurate. Anyways, he looked at 250 of let’s just say they were all successful SaaS companies. A lot of them are big enterprise companies like Salesforce or LinkedIn. They do have Basecamp on the list and companies like New Relic. They have Google on the list and I’m assuming that’s for one of their paid offerings because it’s certainly not google.com. They named Dropbox and stuff like that; a lot of folks that we’ve heard about.
He analyzed their pages and then he tries to pull takeaways and he pulls several takeaways like X% of these companies highlight a package, it’s the best option and that kind of stuff. What we wanted to do today is first talk a little bit about this kind of article and the methodology of it, and our opinions on that and then dive into the takeaways and talk about when we think those actually apply and when we think they don’t apply to folks who are probably listening to this podcast. Because if you’re listening to this, you’re probably not starting the next Salesforce. You’re not starting at $10 billion or $1 billion or maybe even $100 billion company. You’re probably aiming to start a SaaS company with a price point between 10 and 99 bucks a month. That’s the lens that we want to lend to this is when our opinions and our experience, and the testing and the data that we have, based on our experience, when we would use these approaches and why we think maybe that data lines up or doesn’t line up with this article.
Mike [07:54]: Yeah, and I think that’s probably the most important takeaway because I think that throughout the course of this podcast, we’re probably going to pick at this list of commonalities or suggestions from this article. It may very well come across like we’re either not necessarily argumentative, it’s probably not the right word, but very anti against some of the conclusions that are drawn in this. You have to remember that this is from the SaaS 250 and those 250 companies are a list of some of the most successful SaaS companies according to Montclare. Because of that, those companies are in an entirely different category than the types of people who are probably listening to this podcast. Bear that in mind as you’re listening to this podcast. Where do you want to start?
Rob [08:35]: The interesting thing, the first note that he talks about is he says, “Why did 80% of companies not have pricing pages?” He says of the 250 companies, only 48 of them had pricing pages and the rest had pricing available on request by contacting sales people. He talks about how Jason Lemkin – Jason Lemkin was the CEO and co-founder of EchoSign. He sold that company plus a previous company and he is a SaaS genius. He blogs over at saastr.com. If you listen to no one else about SaaS, listen to Jason Lemkin. He tends to talk about the $100 million and billion dollar SaaS companies. There’s stuff that he says that doesn’t necessarily line up with our audience or our approach to it, but as a rule, the stuff he says is not inaccurate if you do want to build a large company.
He has a bunch of reasons; we won’t go through them all, why these companies don’t have pricing pages and he talks about how deals, as you get into the larger deals, they’re going to get more complex as you grow. Discounting becomes difficult if you have a pricing page. If you’re selling into the enterprise, then actually having a low price can really devalue your products. Being a $99 price point is not something that a company like a Fortune 500 company wants to use. They really want to talk to someone, to have the demo, to do the assessment of needs. They really want to go through the long sales process, as much as that sounds insane to us, who want to do it self-serve. But if you really are selling to the enterprise and you really are trying to grow that $100 million company, you need to sell into the enterprise, then having a pricing page is actually a bad approach. That’s one of those things you have to keep in mind. It’s like just because 80% of these don’t have pricing pages, doesn’t mean that you shouldn’t. It’s only if you’re going to be selling into the enterprise that you should consider only having a call only for pricing.
Mike [10:20]: I think that ties back to what type of business that you want to run and what type of customers you want to have. Because if you want to go the self-serve route, then you clearly want to have a pricing page and it’s going to very clearly list out everything that you’re offering and what the prices for it are. But if you want to push up into those $100,000 or a million dollar deals, then you really shouldn’t. I don’t disagree with the conclusions here but it boils down to what type of business that you want to run and how much effort you want to spend on each individual customer to bring them on board. Obviously, with an enterprise-level customer, you spend a heck of a long time, wooing them as a customer but it’s also financially very lucrative if you can plan them. That said, sometimes the other direction is much more appealing to you, depending on what type of person you are and how you want to run your business. It really just depends on what you want.
Rob [11:13]: Right. The final caveat I’ll say to this is he looked at 250 SaaS pricing pages and then pulled out some data from them. I think it’s interesting, it’s novel. It’s kind of like a Myers Briggs Test where it’s like, “Oh, that’s something. That’s an indication of something.” This is certainly not rigorous, scientific study of all SaaS companies. It definitely steers towards or leans towards these big, large enterprise companies that tend – since they are big, they tend to also be selling to other large enterprise companies. It’s something to keep in mind as you’re reading through this. The first point, there’s 11 points that he covers. I don’t know if we’ll have time to get through all of them. Let’s kick off the first one. The first one is that the average number of packages offered on pricing pages is three and a half. What do you think about that?
Mike [11:55]: I’ve never seen a half a package before, but I guess it’s like the 2.3 kids in the United States.
Rob [12:00]: It’s an average, he says the average number. I could imagine if it had three and then half? That’s not an optimal use case, people. Don’t put three and a half. What do you think about the idea? Obviously he’s saying a lot of them have three, a lot of them have four, some have two, some five. The idea that having about three or four pricing tiers is what they did, is what these folks see as optimal.
Mike [12:21]: That’s seems like your classic case of price anchoring. You’ve got your low tier price and then you’ve got a high tier price. The middle one obviously helps you in many ways to anchor it, especially if you’re using that as your most profitable plan, assuming that is your most profitable plan, because sometimes it’s not. Having those three options and then a ‘call us’ option; it seems to me very, very common. I wouldn’t necessarily say that this is a surprise or a shock in any way, shape, or form. That said, I do think you need to be careful about which of the tiers that you decide to use as your price anchor, whether you want to try and anchor people to the top one and get them to subscribe to a lower tier or maybe go for the middle one and there’s going to be people who go above that. It depends on how in demand your products is and where it fits in the market.
Rob [13:09]: Yeah, I think my rule of thumb is when in doubt, have three pricing tiers, like you said, so that you do have the price anchoring. Having three plus an enterprise with either a ‘call here’ button or some type of calculator as you see on the Drip pricing page. It has a calculator there because people can have 50, 000 subscribers or 100,000. We could do a call for that, call us or click here for demo, but we’ve chosen to do a calculator. That’s what I do by default until you have time to test otherwise. I think that having about three pricing tiers and maybe four is about the right way to go. I think that if you can simplify it down to a single tier where is built on or priced based on the number of users or a single metric where you can just say, “All right, it’s 10 bucks per user, per month.”
That’s how Helpdesk Software, CRM software does it. Or, if you can go like a lot of e-mail marketing softwares, it’s purely based on the number of subscribers. It gets difficult if you’re going to have tiers because then you at least need some type of tiering on your homepage. If can boil it down to where it’s a simple pricing, I actually think that that can work as well. It’s looking around and seeing what your competition is doing and if you try to do it too different than the rest of the market, you will cause some confusion and we ran into that, earlier on, with the way that the Drip pricing was done. I think that if you don’t have a competition, that figuring out what to pivot this on, is always going to be a challenge. If you do have competition, there’s probably a standard in the space and not veering away from that is probably a decent rule of thumb as well.
Mike [14:36]: One thought that comes to mind about the three and a half or whether it’s three or four pricing tiers is that I wonder how much of this decision is actually driven by the design of the pages and how much space you have available. If you look at most pricing pages, if they have three or four, they’re typically using almost all the space across the page. If you try to add another one, it would be difficult that things would start to get smooshed or you’ll have to drop the text size and if you try to drop below that to, let’s say two, it makes the space look a little but barren. The UI just looks a little but lost because there’s too much white space. I wonder how much of this decision is actually based on white space design on the pricing page as opposed to what would really make the most sense for people.
Rob [15:21]: I think responsive designs have also changed this because to go responsive means that as you squeeze it inward and go to a cell phone size screen, the, really tier should either go on top of each other, it will have to move around. It starts looking weird and the old model of having all the features listed on the left and then check boxes throughout your tiers, it breaks down when the tiers flop on top of each other instead of next to each other. I bet responsive design has also had an impact on how many of these tiers or at least how they’re structured and how they’re displayed. The next takeaway is that only 50% of the companies highlighted a package as the best option. What are your thoughts on that?
Mike [15:59]: I like that Benjamin calls out some of the different reasons why you might highlight some of the different pricing tiers on your websites. For example, if you have a specific plan that is the most profitable for you, then calling that out to help draw people’s attention to it can be helpful and that it will essentially generate more revenue for you. What I question is how much A/B Testing has been done on this to identify whether or not that’s pushing people towards a specific plan or away from it. Because I think there’s a natural tendency for us to say, “Oh, let me draw people’s attention to this,” and think that it is going to anchor people’s minds to that plan and they’re going to be more likely to select it. In fact, they might do the opposite, where if you highlight the most expensive plan for example, somebody might look at that and say, “Oh, well, I’m not that big. I don’t need that level of service so I’m going to go for the one below it.” I wonder how much testing has been done around whether or not it drives people to a plan or away from it. I think that that’s something to definitely consider when you’re implementing that. You should go in and measure that because you could very well be shooting yourself in the foot as opposed to helping yourself.
Rob [17:05]: I’ve always been a fan of highlighting a plan and I tested this with HitTail and it worked out. It had a positive ROI by keeping a plan highlighted and my average revenue per user, per month went up when I highlighted the second from the bottom instead of not having highlighted or in highlighting the bottom. It drove more people to use that. It was the recommended plan and people who were in a hurry or who wanted to take the take the recommendation, wound up doing it. That doesn’t mean that it’s always a good thing to do or that you should always use the second from the bottom or anything like that. I just know the one time that I have actually tested it, that it really did work out and raised revenue. I think that trying to highlight the top plan is one of the suggestions here and I think that always seems odd when that’s done. You have to use your head here. Highlighting in the middle is my rule of thumb to allow people to get an idea of where you think they should start.
The third takeaway was that just 69%of companies sell the benefits. I have strong feelings about this one. He says it’s only 69% of companies, like he expected more people to do that. The thing, though, is by the time you get to a pricing page, you should already be sold on the benefits. Your homepage has a ton of benefits, and I think you should get into some features towards the bottom of your homepage. Your features page should have benefits and features.
By the time I’m coming to look at a pricing page, I’m at least entertaining the idea that I might use this software and price is now coming into play. I think that listing a bunch of benefits of like, “Hey, it will save time and make you money and save you money,” is just lame. I actually get irritated when stuff is that high level on a pricing page because I want it to be digging in more at that point to actual differences just between the pricing plans. That’s all I want to know at this point. If I want to go hear about your benefits, I’ll go to your homepage or your benefits or wherever else. On the pricing page, I’m trying to figure out how much do you cost and what are the differences between the plans? The more benefits that are listed, the more confusing it is because they are too high level. I want to know the exact features that are included in each tier.
Mike [19:08]: I think it’s just the way that this is phrased and some of the underlying assumptions that you pointed out, because the whole article is based on the analysis of pricing pages. You’re not going to use those benefits on the pricing page. You might want to put it at the top and a headline or something like but you’re certainly not going to sell each individual plan with all of the different benefits. You need to know the details about what it is exactly that you’re paying for. That’s why all these features are going to be listed so that you can, as a buyer, can do a feature comparison between those different things. I almost disagree with the way that this is phrased just because it seems to me like on that particular page, you would want to sell based on the features, not necessarily on the benefits.
That’s because it’s specifically talking about the pricing page. If you’re talking about the homepage or various other pages, then you probably want to sell based on the benefits. I think that you really need to very clearly spell out all of the different features on that page so the person who’s buying it knows exactly what it is that they’re buying in relation to some of the other things. The other side of this is that when he says just 69% of the companies sell the benefits, how much of the benefits are you including in that 69%? Is one sentence enough to get you over the hurdle of saying that you’re selling on benefits or what? It’s not clear to me what that actually means.
Rob [20:25]: It is an interesting takeaway nonetheless. I like that he took a look at it. Number four is that 81% of companies organized their prices low to high. When I read this, I thought, “Of course.” Whenever I come to a pricing page, I like to see it low to high. It just makes sense. It actually throws me off when I come and the high price is all the way on the left. However, he has a quote from Lincoln Murphy at SixteenVentures and Lincoln Murphy said, “The left to right, high to low approach seems to provide a statistically significant lift every time.” I like the way that Lincoln Murphy phrased that, in terms of “seems to provide a statistically significant lift every time,” like in his experiments, he’s [couching?] it, in a good way, to not say, “This always works so this is what you should do.” He’s just stating his experience. That’s interesting, counter-intuitive to me. It’s not something I’ve ever done because it irritates me so much. It’s like when you go to a site that has a bunch of annoying pop-ups or it has an exit antenna. It’s not stuff that I like to experience. Even if it can get you 1% lift or 2% lift, I haven’t done it myself but I am curious if folks out there are doing it and having success.
Mike [21:27]: I’m in your boat on this one. It throws me off when the highest price is on the left. It is a little irritating and I don’t know why. Maybe it’s the OCD in me. It seems odd when the highest price is on the left rather than on the right.
Rob [21:40]: The next take away is that 38% of companies list their most expensive package as ‘contact us’. What do you think?
Mike [21:47]: I think that if you’re trying to land some of those larger customers, that totally makes sense. You could very well me leaving a heck of a lot of money on the table if you have a higher tier plan there that would work for, let’s say, 90% of your customers. But there is this 10% of the people out there that still need something above and beyond that. You’re almost positioning yourself at that point to say, “Hey, we can’t serve you,” or “We can’t help you.” You’re almost writing off that 10% immediately. A lot of times if those types of companies come and they see that you only support 200 users for example, and they have 700 or 1,000, they’re going to immediately assume that you are not going to be able to handle the load that they’re going to place on your servers and they’re going to go find something else.
You need to be a little bit cautious here, but you also have to be in tune with what the general size of your audience is. You might also want to draw some delineation between your company and some of your competitors to say, “Hey, we serve people under 500 employees really, really well. But if you’re above that, go to these other people. They’ll handle it.” You can position yourself that way because you are really cutting into the lower tier of the market for that competitor. I think that there’s nothing wrong with going in that direction, you just have to be consciously aware that that is exactly what you’re doing when you choose to put a maximum on those plans rather than a ‘contact us’.
Rob [23:08]: Yup, it’s a good rule of thumb to always have that enterprise or that high-end plan, have a ‘contact us’. The next takeaway is that the most common call to action is ‘buy now’.
Mike [23:20]: This is a pricing page. Isn’t that supposed to be the call to action?
Rob [23:23]: He compares like ‘buy now’ is 27% and ‘sign up’ is 23%. ‘Start your free trial’ is 8%, ‘try’ is 6%, ‘contact us’ is 4%. I don’t know what necessarily he’s calling out. I guess the conclusion here is that people are saying that you click this to buy now. It does feel weird with a SaaS app. I don’t think of buying a SaaS app as much as I think of either signing up for a free trial or signing up. Beyond that, if you think about it, you probably want to provide a benefit here instead of buy because buy makes it think, “All right, I’m going to take a bunch of money out of my pocket and give it to you.” [?] want to provide a benefit like grow my list faster or get started building my list, something to where the person is they know they’re signing up for SaaS and they know they’re signing up to get a benefit. If you have a benefit there, it’s probably going to convert better anyways.
Mike [24:09]: Looking through what he’s got listed out here; it seems to me he’s comparing the texts there as opposed to what they’re trying to get you to do because the other category has 32% listed in it. Things like more info or fill out the form and things like that. All these are designed in some way, shape or form to move you to a paying customer. I think his point here is ‘buy now’ is the most common. I don’t know if it really makes a difference. At least to me as a buyer, when I go to those pages, I don’t consciously differentiate between them. I don’t necessarily care. It comes down to what the statistics and the numbers tell you for your page, whether or not it works. I don’t notice myself making decisions based on whether this is ‘buy now’ or ‘free trial.’ I don’t necessarily statistically analyze every decision I’ve ever made on those pricing pages either.
Rob [24:56]: My guess would be a lot of these pages I would guess have never been split test. I know that seems kind of shocking. I guess they just haven’t run the numbers or haven’t thought to split test ‘buy now’ versus an actual benefit someone would get. My guess is that they would get a lift now. Would that lift make a difference to the business? I don’t know. Maybe that’s why they haven’t split tested. My guess is they haven’t had the time because they’re busy working on other stuff. That’s the thing we’re looking at. 250 pricing pages from successful SaaS companies doesn’t imply that these are the most optimized with the best SaaS pricing pages.
Mike [25:24]: The other thing to consider there is that you have to have a significant enough volume to come in through those pages to begin with, in order to do effective split testing on those. If you just look at the numbers alone and let’s say that you’re getting 100 people a day clicking on something and if you can get a 10% lift on that page, then you’re getting an extra 10 people a day clicking on it, extrapolate that a little bit, that’s an extra 300 people a month. Let’s say 10% of them convert, you’re talking an extra 30 paying customers a month. But, if there are easier ways for you to get 30 customers a month, you’re probably going to spend the time and effort doing those things rather than testing over the course of three to six months to try and figure out what the best copy is on some of those buttons. It depends a lot on your volume as well.
Rob [26:13]: That’s true if you’re smaller. Of these 250 companies, I bet every one of them has the volume to run a test in a couple of days. We were talking Autodesk and UpWork. I’m even way down in the line. I’m at 134, I’m at EMC and Dell and other companies I haven’t heard of, CollabNet.
Mike [26:31]: I was couching that for our listeners.
Rob [26:33]: Got it. Not for these guys.
Mike [26:34]: Yes.
Rob [26:36]: Another one is that 63% of these companies offer a free trial. This comes back to these being large enterprise companies. I know that in the self-serve market that a free trial is how people get in and get going. Often times, if you’re selling something that is $30,000 a year as a SaaS because a lot of these do annual SaaS contracts. It’s 30 grand a year, 50 grand a year. It’s a huge decision you’re making, but it’s probably a pretty complex piece of software. As a software company, you don’t want someone clicking a button and just getting dumped into an account because without the proper demo, and the proper guidance, and the proper help, they’re going to be confused and they’re going to say, “Oh, this app is confusing. I don’t know what to do here.”
Actually, a free trial could be a detriment. I don’t always think it’s a good approach. However, if you’re a listener to this podcast, then you’re probably starting a SaaS with a smaller price point. In that case, I do think that free trials tend to be a boon if you’re doing self-serve. There’s some different options here. You could either go freemium, which I would not recommend unless you know what you’re doing. You could do a free trial if you have really good on-boarding and you have really good on-boarding follow-up. You could go with no free trial and make people pay as soon as they start using the app. The latter two are the ways to go. I’ve always liked free trial. There’s probably a whole episode on why I like free trials and why I’ve always done that. That’s my default rule of thumb because especially when you’re getting started, it’s hard to get people to pay upfront, but moving to the point where people are paying upfront, I think, is also a good approach.
Mike [28:03]: The other thing to point out here is when you’re offering that free trial, you’re giving somebody an opportunity to say, “Hey, I know you’re signing up here, maybe you take a credit card maybe you don’t.” That’s not specifically called out here as one of the things that’s done. When you’re giving them that free trial, then you’re giving them an opportunity to say, “Hey, you don’t need to do all the work to get the value out of this immediately.” You can push it down the road either a week, two or three weeks, whatever. You can do the work then. You can at least get them in, get some initial things set up and then do the work later versus if you don’t offer that free trial, then they’ve paid the $50 or $100 per month and they’ve paid it right then.
Because they don’t have that free trial period, they’re going to feel compelled to start using it right away, which would essentially decrease your conversion rates because people are going to look at that and say, “Well, there’s no free trial. I’m not ready to do this just yet so I’m not going to do it. I’m going to come back at some other time.” Unless they’re on an e-mail list or they’re really on track to buy your software down the road, then they may very well just never come back. I think that making sure that there is a free trial of some kind on your site is almost a necessity. Even if you look at a lot of the enterprise vendors, there’s typically a free trial of some kind that you can get at. Whether you have to give them your information in order to get it, that’s a different story, but almost all of them still offer a free trial of some kind. I think it’s very rare to buy a piece of software sight unseen and have to purchase it without being able to use it first.
Rob [29:33]: The next one is that 81% of pricing packages are named. I feel like this is a lesser known one. I was surprised it was as high as it is. The idea here is that if you’re going to name your packages, you want it to be linked to a buying persona. You don’t tend to want to offer Lite, Pro and Pro+ Plans because those aren’t that helpful. The better way to do it is they give you an example from Huddle. They offer three plans; they have Workgroup, Enterprise, and Government and Public sector. Those are their three plans. That’s where you really start talking. If you have a Freelancer, Consultant, and Agency as your three plans, people can segment. They can come in and say, “Oh, I am a freelancer. That’s the one I need.” At least it helps guide them. If you are at all able to put some names to it that actually have meaning and aren’t these generic headers at the top of the pricing tier, that’s pretty helpful. I was surprised to hear that 81% of packages are named. I’m wondering how many of these were named things like Lite, Pro, and Pro+
Mike [30:32]: Interesting data point. I heard the CEO of FreshBooks talk at Business of Software several years ago. He talked about some split testing that they did on their pricing page. If you look at their pricing page, they’ve got these weird names for some of their different pricing plans. Their top tier is Mighty Oak and then they’ve got Evergreen, and then Seedling and Sprout, which if you look at that, it doesn’t mean a whole heck of a lot. But when they took those things away and they replaced them with much more generic versions of it, like … I forget what exactly what it was they used, so I won’t try to remember or make something up, but they were very, very generic names or they did that or they didn’t even put a name on it. They noticed this significant conversion rate drop because they didn’t have something there that would help guide people. That’s an interesting data point to take away from that, not just having something like Workgroup, Enterprise, Government and Public Sector or Startup, Growing Business, et cetera. You can have off names, I’ll call them, like Mighty Oak or Evergreen that relate to your business that people are going to relate to or resonate with a little bit more. Those can help your conversion rates.
Rob [31:34]: The last one we’ll cover today is that only 6% of these pricing pages show a money-back guarantee on the page. He talks about there been two sides to this argument. One is that offering this guarantee derisks the sign-up for your customer. If they’re making an impulse purchase or they are signing up for a trial or even paying right away, then of course money-back guarantee is something that is going to lend them confidence in your product and it could encourage them to sign up. The other side of it is that the SaaS 250, they often have these annual contracts. They lock you in for a year or two-year contracts even. Why would they offer it? They don’t need to or want to offer a money-back guarantee. They don’t need to. They’re such a brand name that they can get folks to sign up without it. If you’re doing self-serve, having that money-back guarantee especially to start, especially when you’re not a brand name, is helpful. Even once you are a brand name; I think it’s a good policy to have in general, so why not have that on the pricing page? I do think that it has an impact on certain people, if you’re an unknown to them, of what confidence they have in signing up for your service.
Mike [32:39]: I wonder if part of this might also be related to how much of the onus that you want to push onto the user for using your software versus guaranteeing that your software works and does what it promises to the user, because I think that those are two different scenarios. If the user signs on and they have signed up for your product, they start using it, they use it here and there but they don’t fully commit to it, 60 days later they come back and they say, “Hey, I’d like a refund.” Maybe they even forget completely that they have the account and six months down the road, they come back and say, “Hey, I’d like a refund for the past three months or six months.”
You and I have seen that before, where somebody forgets that they bought something and signed up for a subscription. Then they come back six months later and say, “Hey, can I get a refund on all of this?” Maybe even longer. I’ve seen people go for a year or two and forget that they have a subscription and try and get all of that. It’s almost unfair to you, as a business, to have to offer that. Out of policy, we do that as a matter of course just because we don’t like the idea of taking somebody’s money for not delivering value to them. At the same time, whose fault is it that they didn’t use it? Whose fault is it that they weren’t getting the value out of it? The fact of the matter is you have to put in the work in order to get something out of it. There is some of those things that factor into this as well. Whether you put it on the pricing page or not, I’d say that as a matter for debate. As to whether or not you would adhere to that as a matter of policy, I think that’s a completely separate issue.
Rob [34:06]: Well said.
Mike [34:07]: On that note, if you have a question for us, you can call it in on our voicemail number at 1-8-8-8-8-0-1-9-6-9-0 or you can e-mail it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Out of Control’ by MoOt, used under creative comments. Subscribe to us on iTunes by searching for startups in business and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 270 | Our Predictions for 2016
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike make their predictions for 2016, forecasting bootstrapping related topics as well as the greater technology space.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of Startups For the Rest of Us, Rob and I talk about our predictions for 2016. This is Startups For the Rest of Us, Episode 270. 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 have made. What you doing this week, Rob?
Rob [00:28]: Things are pretty good. It’s the last week of the year and we have a new Drip HQ. We moved offices just a few blocks to a nicer building. We’re up on the second floor now, with a nice view of a busy street, and it feels cool to be downtown and just have a lot of people around. It’s like a 50,000-square foot building here in downtown Fresno, and it’s good to be around even more tech companies. We were around maybe 27-ish small software companies over at the other building, but it was only about 10,000 square feet, and this one just has a larger feel. And it’s new construction retrofitting a 100-year-old building. It’s got a unique vibe to it.
Mike [01:03]: Cool. Did everybody move from the other building over to this one? Or how does that work?
Rob [01:07]: A lot of us did, yeah. It was up to you if you wanted to move. The rent’s a little higher here. And it’s in a different location, so some folks opted to stay at the other one and then were backfilling with other companies. There’s been a nice tech scene that’s formed here over the past few years. And so what’s nice is there’s a waiting list at both buildings, from what I understand, and so we’re able to keep them occupied and keep the energy level. It’s something that I think’s going to be taken up. We’re one of the first companies, but I think there’s maybe a half dozen, that are moved in here, and there’s going to be 40 eventually. So it’s still pretty sparse, but just seeing people on the hallway and being able to look out over a cool downtown street is fun. It’s a different vibe than I’m used to, but it’s neat.
Mike [01:44]: That’s cool.
Rob [01:44]: How about you? What’s going on?
Mike [01:45]: Well, I’ve realized that one of the things that I talked about last week on our yearly goals episode was I was going to try and be writing more. And I realized that I should probably have classified that as more of a success than I think I initially did because I realized that one of the things that I’ve been doing is keeping a journal and writing in it three times a day. And I don’t know why I completely spaced out on that, but I did. So I would probably say that that was much more of a success than I initially had indicated on the podcast even though I write it for myself. But I write in it, like I said, three times a day: once first thing in the morning, and then once in the late afternoon, and then once just before I go to bed.
Rob [02:21]: Yeah, it’s interesting because your goal was actually “Keep up my writing habit.” And that doesn’t necessarily mean publishing, although that’s what I had read it as. I’d assumed that you meant to actually blog and push stuff live. Was that your intent when you said, “Keep up the writing habit,” was just to write and not necessarily to publish?
Mike [02:38]: It was a little of both. I think I had initially intended to publish more, but at the same time, there’s a certain amount of content that you create that you don’t ever necessarily publish either. And what I wanted to do was to make it more of a habit than anything else, so just getting into the habit of writing on a very regular basis as opposed to writing a couple of blog posts or writing a couple of articles or something like that and then not coming back to it for two of three months and just doing zero work on it in any way, shape, or form of writing.
Rob [03:06]: I see some value in writing and not publishing, but I think there’s so much more value in getting it live. And so I would give you a half pass on this.
Mike [03:14]: Sure.
Rob [03:14]: Just on my personal, metric system, my arbitrary, personal metrics.
Mike [03:18]: Yeah, but I think that when I’d looked at that on last week’s episode, I’d looked at it from the perspective of, “Oh, I haven’t really written anything at all.” And that wasn’t necessarily true. I agree with you I’d probably get half credit on that, definitely not full credit of course because I don’t think it got published. There’s a huge amount of work in there that just never got published. But the idea I had in mind was like, “Oh, I was actually writing quite a bit here.” I do think I need to do a better job of publishing more, so that will make its way to the forefront, I think, this year.
Rob [03:45]: Indeed. Other news, wrapping up the year, was able to finally make a solid hire to help with growth. He started last week. So pretty excited about that, able to pull some stuff away from myself and Anna, marketing tasks that we’ve been handling. And he is going to be able to focus on this stuff. And so one example is I was messing around with retargeting and trying to optimize it and get it to the place where it needed to be. And then eventually we stopped it at a certain point, and he is able to spend 30 hours a week basically focusing on this kind of stuff. And so already he came in with a much more advanced- and it’s a time-consuming approach but it’s definitely one that I think has legs. So I’m really looking forward to getting going in January with our ramping back up marketing. Because as of essentially next week, when this episode comes out, that’s when things start to come back alive and all the dips and trials and the dips and growth and all that stuff I think starts to turn around for all of us. And so yeah, I’m always excited to hit the ground running as we enter early in mid-January.
Mike [04:39]: It seems odd to be hiring right at the very end of December.
Rob [04:43]: Yeah, it was a little bit of a coincidence. I think I posted it in November and then really wanted to find the right candidate. Because what’s interesting is there are a lot of developers, as an example, and designers. And they’re not necessarily easy to find really good ones, but they’re out there, and you know how to test for that. But finding someone who has the right mentality, or the right experience, and the right hunger to actually do pretty intense marketing and really go after the growth opportunities, it’s still such a nascent, unique skill set, right? It’s not something I think that’s easy to test for. And so that’s what I did, was went around and around with a bunch of people. And when he finally came on, I realized that it’s actually a pretty good time for him to come on because it’s so quiet.
And so we haven’t launched anything yet, but it’s been all prep work. I got him onboarded, got him in the system in terms of payroll and all that HR stuff, and then got him into our processes. He’s now the blog editor in essence. And he really hasn’t started doing any outreach or doing any of the stuff yet, but he’s all set up to hit it hard next week when everything actually ramps up. So it turned out to be decent timing even though it didn’t first appear it would be.
Mike [05:49]: Very cool. To circle back on one of the things that we talked about last week, was some of the different monthly experiments and things that I wanted to do this year, and you had ask me to come back with a list of these 12 different things. And so what I did was I sat down and I started looking at those, and what I realized was it wasn’t necessarily a series of month-long experiments so much as it was an extension of what I read in a book called Habit Stacking. You can find it on Amazon. We’ll link it up in the show notes. It’s called Habit Stacking: 97 Small Life Changes That Take Five Minutes or Less. And what I want to do is essentially stack a bunch of these things together. And a lot of them are just little things. They’re not necessarily major life alterations or anything like that.
So one of them, for example, is drinking at least eight glasses of water a day, which I did it for a little while, but I didn’t keep up with that habit. So what I want to do is I want to go back to some of these and revisit them and start working on those and try and stack them up over time. And I’ve stumbled across a website called healthmonth.com, which allows you to put forth goals that are essentially measurable, and you can put things like that in there. So whether it’s getting up early, or exercising, or setting aside time to do X, Y or Z, you can track those things in there. And it will go on a month-by-month basis, and you get to essentially measure your progress against that of other people who have set a similar number of goals for the month.
Rob [07:06]: So are you going to report on that weekly, bi-weekly here on the podcast?
Mike [07:10]: Probably not. Because, like I said, there’s a bunch of them in there. But you had asked me to put together what that list was, so I’ll quickly run through them. We’re not going to spend very much on it, I don’t think. But they included things like exercising at least 30 minutes a day for 6 times a week, drinking 8 glasses of water a day, going to bed and waking up early at certain times, no junk foods or snacks after 7.00 PM, setting aside an hour to write for my blog, working at a co-working facility 3 times a week, which is something I’ve tried in the past but it’s never really stuck or worked out for me. So I think I’m ready to go back and try and revisit that and try it for a month or two.
Another one was to track all my food intake every day, meeting 10 new people in a given month. I’m going to specifically target a non-MicroConf month for that. I’m not going to cheat on that one. And then spending 15 minutes a day doing, I think I’d talked about this before, it’s a mental game called SuperNBack which allows you to train your brain to remember things a little bit better. So I’ve got a game called Reactor on the iPad that is really good for that, and then scheduling my work day in advance, and checking e-mail only twice a day, which I do that on occasion, but I’m not real good at limiting myself and checking e-mail twice a day so –
Rob [08:19]: Is each of those a one-month thing then?
Mike [08:21]: Yes, they are. My goal is to say, “Okay, let me take one or two of these and just do that for at least a month and see if I can maintain that habit over the course of the month.” And the goal, of course, is to, by the end of the month, turn it into a habit as opposed to something that I’ve just tried out. And if I need to extend it as something that I’m going to track, I will. But the idea is to be able to take those things and engrain them into my daily routine so that I don’t necessarily have to think about it or track it anymore, I will just do it. And that way, I can drop off my list of things that I want to stick with. And if it turns out that there’s something that I really just don’t enjoy or don’t want to continue with, then I’ll just drop it off. And then the next month I won’t continue tracking that or doing it.
Rob [09:07]: I think if there’s one adjustment I would make, as you said, you want to look at one or two of these things in a given month, and I would definitely not start with that. If you’re going to go January 1, pick one and focus on it. If you try to do too many things, it overwhelms you and it’s hard to change behavior. So at least for the first five or six months, until you get the hang of this, I would probably try to attack one thing at a time, unless you really feel like you can do multiple things.
Mike [09:31]: Yeah, some of them are easy enough. For example, drinking more water per day, that’s not terribly difficult. Really what it boils down to is just remembering to do it. So you can do that with timers. I found that there is a prescription reminder application from I think it’s Walgreens or something along those lines that you can throw something in there and it just reminds you every couple of hours to do something, and I’ve used that in the past.
Rob [09:54]: So you mentioned drinking eight glasses of water per day, but you missed the one of drinking eight glasses of beer a day.
Mike [10:00]: Well, that is in the water. You can call it beer if you want to, but –
Rob [10:04]: Right. Beer, water with hops.
Mike [10:06]: Yes.
Rob [10:06]: All right. Well, let’s dig in today. We’re doing our predictions episode, which is an episode that we like to have fun with, right? We made some predictions about a year ago, and some of them have nothing to do with entrepreneurship. We had predicts about Google Glass, net neutrality. And so we revisit those and we figure out if we had success or totally whiffed on those. And then we look at some predictions moving forward and what we think is going to happen in 2016. I think we each have one or two that might relate to bootstrapping, and then others that we just see in the greater tech space. So why don’t you kick us off with maybe looking back at some of your predictions from 2015?
Mike [10:37]: So the first one I had was that net neutrality is going to take a bigger stage. And the thinking I had behind that was that Netflix had started paying service providers for higher bandwidth to serve up a lot of their content. And internet speeds, in general, have increased by 50% since the beginning of last year. So what I was thinking was that this was going to be essentially a problem for many businesses where they were going to feel that they needed to pay for their content to be served up. And I don’t think that this has really come true. I haven’t seen a lot of battles or a lot of public discussion about people having to pay extra for their content to be served up. And it could just be that Netflix is so large and serves up so much bandwidth worth of content every single night that they’re more of an outlier than anything else.
What I have seen though is an interesting shift in how a lot of the content providers have started to go direct to people. So I think it’s interesting that companies like HBO and Starz and Showtime have started coming out with their own subscription services that essentially bypass the cable networks. So I don’t think that those directly affects net neutrality. I would probably call this one a miss more than anything else, but it’s interesting to see the shift for the content providers to go direct to the consumers rather than directly through cable providers.
Rob [11:55]: Yeah, I’d agree with you on this one. I don’t think you hit the nail on the head, but there’s definitely something cooking there where we’re going to continue to see shifts and conflicts in this space. My first prediction for 2015 was that Twitter would become profitable and it would piss off its users in the process, but it would be a solid opportunity for paid placement or promotion for bootstrappers and startups. And I think that I was wrong on the first two aspects because as far as I know, Twitter was not profitable during any quarter in the previous year. They obviously haven’t recorded Q4 earnings, but in Q3, they were still losing money. I don’t feel like they pissed off their users in the process of not becoming profitable. What I was trying to imply there was that they would become profitable but they would have to just stuff so many ads down our throats that there’d be a backlash. That didn’t happen. Solid opportunity for paid placement and promotion, I do think that one is correct and that Twitter cards and other Twitter paid placement is still a viable alternative, even heading into 2016, to get some cheap clicks.
Mike [12:53]: My second prediction was that the number of startups in the wearables category is going to skyrocket, both in terms of the hardware and software. And I hesitate to say that this was a complete failure or a complete success in either way. It just doesn’t seem to me like there’s been a huge number of startups in this area. Obviously Apple came into this space with the Apple Watch, and Fitbit and a couple of other companies have started pushing their wearables, but it doesn’t seem like the number has skyrocketed. I was thinking it would have much more of an impact than it probably has.
Rob [13:26]: Yeah. I think there hasn’t been enough of a ecosystem around it since the Apple Watch. It didn’t “take off.” I know a lot of people bought it, but it really has not become a day-to-day use thing. I don’t think I’ve seen anybody in a while wearing an Apple Watch, maybe one or two people at a tech conference or something. But it hasn’t become a day-to-day thing like an iPod or an iPhone did that I think the wearables category is either still getting going or it’s dying at this point, and I’m not sure which. I think eventually wearables will find out which form factors work for us, but 2015 was not the year of that, for sure.
Mike [13:59]: Yeah, I have seen a couple of people use them, but I think it’s going to be probably several years before companies really figure out what people even really want from a wearable device.
Rob [14:08]: Yeah, and that’s what we were saying back in 2013. So my second prediction was that video ads, namely YouTube ads, would be a big opportunity for cheap clicks in 2015. And I think this one was a success. I don’t know how bold of a prediction it actually was. I guess the way they could have not been an opportunity for cheap clicks is if a lot of advertisers had jumped in on it and, to be honest, that’s what’s happened with Facebook ads now, right? Facebook is a lot more competitive. They’ve nailed mobile and they’re making buckets of money off of their ad platform. And typically when the provider’s making buckets of money, like a Facebook or a Google, that means it’s not a good opportunity for cheap clicks anymore.
And so that could have feasibly happened with YouTube in 2015. It did not. It is still a big opportunity for both retargeting and just cheap ad clicks in general, if you can figure it out how to make it work and reach your audience. If you haven’t looked into it and you are looking for another paid marketing avenue, YouTube ads continue to be there.
Mike [15:02]: My third prediction was that Google is going to screw all the bootstrap startups and there’s very little we can do about it. And I don’t think that there was any large event that comes to mind in terms of Google making our lives difficult. Obviously they make changes to the UI in some of their different applications and stuff like that, and the cost of doing paid advertising through Google AdWords is really high. But it doesn’t seem to me like there was any one major event that you could point to and say, “Hey, these guys have really screwed over a bunch of people.” I would chalk this up to an inaccurate prediction.
Rob [15:33]: My third prediction was that VR, Virtual Reality, would actually be a hit with the early adopters set in 2015, and that did not come true. I know that a couple of headsets came out. It does not seem, even with the early adopters, to have taken off in any way, shape, or form.
Mike [15:49]: My next prediction was that Google Glass isn’t going to go anywhere fast. And I would say that this one, it’s hard for me to judge on whether or not this prediction is successful because I have not seen very much uptake and people using Google Glass. But just a couple of days ago, Google came out and said, “Hey, we’ve got another version of Google Glass coming out.” I really thought that they were probably going to be shutting it down. But I just don’t see any demand for it. I don’t think that people are going to use it in a widespread fashion. I can definitely see places where people would use it in very specific scenarios, but I just don’t see it becoming widely adopted.
Rob [16:23]: Yeah, it was an experimental form factor and they were pushing the envelope. It didn’t take off. They obviously sold their early $1500 versions. They’ve redoubled, and they’re iterating on a hardware schedule, right? You can’t iterate as fast with hardware as you can with software. I think it will find some niches and it will be really worthwhile for whatever, airplane mechanics or surgeons or something. But I don’t see that this will have mass market adoption. I would agree that if you look back a year ago, we didn’t know if Google Glass was going to take off or if they were going to do an actual consumer version. So I think your prediction came true. The fact that nothing really happened with it is what happened in 2015.
My next prediction is that we would see our first sub-$100-a-year, consumer-level, five-terabyte cloud storage service. And I think the week after I said this, someone said that Microsoft was already offering unlimited cloud storage. And then within the past month, they actually revoked that. I don’t know if you heard about that, but they basically said, “We’re not going to do unlimited anymore.” And they backed it way off to a couple of terabytes, I guess. So I’m not sure if this has happened. I was trying to Google around a little bit before this episode and I didn’t particularly come across a mass-market, five-terabyte, sub-$100-a-year service. Certainly, if it didn’t happen this year, I think it’s going to happen in 2016. But maybe if someone out there knows of a reputable service that’s not some fly-by-night thing in someone’s garage that is actually offering this level of storage for that price, you could hit us up in the comments or via e-mail at questions@startupsfortherestofus.com.
Mike [17:49]: Yeah, it’s interesting because I’ve looked around at that a little bit as well, and you see places where they’re doing unlimited backups for $5 a month for Backblaze and a couple of other service, but that is more of an archiving service. It’s not necessarily real-time like Dropbox, where even Dropbox is what, $15 a month or something like that. You can get a terabyte, but you can’t get five yet. But I think you’re right though. I think that it’s coming.
My last prediction was that cloud platforms and services are going to be viewed as a commodity by the end of the year, with not much differentiation between them other than their brand identity. And I have gone through and poked around the differences between Amazon, like the AWS services, Azure, and Rackspace. And quite frankly, there is very little to differentiate them from one another. They’re all trying to point to Gartner or third-party companies that are doing experiments and research on the platforms to try and find out which one is the fastest and which one is the best. And of course they’re paying these companies to do that research. So it does make it a little bit suspect when they come back and say, “Oh, sure. Microsoft paid us, but we did find that they were faster.” But I don’t see very much difference between any of these different platforms. I just don’t see it. So I would say that this one’s a win.
Rob [18:59]: My last prediction for last year was that we would start seeing 3-D printers in the houses of our early adopter friends and I would call this a miss. I know very few people who have 3-D printers in their homes. I’ve seen them start to get into schools. Several of the schools in our area have them, seeing them more and more in local labs and makerspaces, also saw them for sale at Barnes and Noble the other day. There was a 3-D printer there, which was surprising. But being in the home thing, it just doesn’t seem to be there, and I’m wondering if it’s ever going to have that moment that computers had where suddenly we all owned one, or if 3-D printers are going to continue to be this external service that we see at schools and maybe in offices and facilities that need to print and we’re all just going to do it on-demand instead of owning and maintaining our own 3-D printers.
Are you ready to dive into our predictions for 2016?
Mike [19:46]: Yeah, absolutely. Let’s go.
Rob [19:47]: Why don’t you kick us off?
Mike [19:48]: Well, the first one is an add-on to last year and it’s about the wearables category. And I don’t see this going too far. I think that there’s still going to be a lot of churning in the wearables category and it’s going to be several years before any of these devices become really big. I think that the Apple Watch is not going to be nearly as big as the iPhone or the iPod ever turned out to be. So I think that Apple is, in the coming years, going to be looking to see what other products they can develop. And maybe they’ll launch a new product by the end of the year. I don’t necessarily think that’s the case, but at the same time, the general prediction here is that over the course of the coming year, we’re probably not going to see a lot out of this category. There’s going to be some new announcements here and there, but there’s not going to be anything major that comes out of it.
Rob [20:30]: Ooh, I like this prediction because it feels pretty bold. Because I think we’re ripe for someone to come in and really nail this. And it is most likely going to be Apple with like a V2 of the watch, because that’s when they start getting traction with stuff, but I think somebody’s out there really doing some good work, and there’s a decent chance that we could see someone disrupt this category this year.
Mike [20:48]: Got you. Well, I’ll take the opposed view on that and say, “Not this year.”
Rob [20:51]: Yeah, totally. Well, that’s why I like the prediction, right? That it’s actually bold, and maybe a little bit counter to what I think some other folks might think. My first prediction is that single-round bootstrapping, also known as fundstrapping, will become a common, viable option, both in our circles and elsewhere. I’m just hearing more and more about bootstrappers who are getting to a little bit of traction, let’s say between 5 and 20K MRR, and then raising around to just up the game to grow pretty quick, and then to get to profitability and essentially issue dividends to the investors and then spit off cash, instead of doing these multiple rounds of financing where you’re just trying to get bigger and bigger and bigger, and eventually most of them implode.
And so whether you call it fundstrapping or single-round bootstrapping, this is a term I’m tossing around right now, I am seeing more of it, and my hope is that it does continue to become a pretty viable option in 2016. The reason I like this model is because it counteracts all of the negatives of raising traditional VC funding, right? The thing of someone taking over your board and taking control is gone because there’s no board seats. The idea that you’re pushed to get just get bigger and bigger and bigger and basically destroy a company that could be viable as a million-dollar or five-million-dollar company is gone because that’s not what you’re doing. It also gets around the idea of “I’m going to build slide decks instead of build businesses, and I’m going to spend six months pitching and trying to raise this $2 million thing. And that’s the big victory lap is when I raise the funding.” That goes away because let’s say you’ve already built the business up to a 5 to 20K MRR business, which means you’ve actually done something interesting and you’ve had the rubber meet the road, and then you’re purely raising the fundraising as a growth mechanism, which is always the point where I have thought that funding is a good idea. It’s when you have some traction and you just need to add $1 in order to pull $5 out the other side.
So all that to say I still think bootstrapping is very, very much alive and it’s going to be far more common. But this idea of a [?] raising a single round, single-round bootstrapping as I’m looking at it now I think is something that I’d like to see more of in 2016.
Mike [22:51]: Are there any other specific metrics you’re pointing at for here or you’re looking at for specific websites where there are terms sheets for this type of thing commonly available?
Rob [23:00]: Yeah, I see your point. It’s like, “How do you measure this?” right? Because I basically said it will be a common/viable option. What we’ve already seen in 2015 is Indie.vc has basically an outstanding offer on their website to do this. I have heard David Hauser was on Rocketrip podcast a few weeks ago talking about this kind of stuff, although he’s investing at a higher MRR. I’m doing it. I’ve talked to a couple of other successful folks, who, if I’d mention their name, you would know who they are, and they’re looking to invest in startups like this. Because the interesting thing is these kinds of startups have a huge chance of success, but it’s more of a modest chance of success. So it’s a lower risk than investing in the next Twitter or Facebook, and there’s a lower rate of return as well, right? You’re not going to 10X your money with this. You’re not going to 100X your investment. But you stand a much, much better chance of hey, maybe you earn 10%, 20%, 30% on your money every year as this thing spits off dividends. And so I do see people moving into it. I don’t know that I have an absolute metric of what I think we could measure this by, but it’s just something that I think’s going to become more prominent in 2016.
Mike [24:04]: Yeah, that leads into my next prediction, which is I think that we’re going to see a lot more bootstrappers in our circles concentrating less on making money for the sake of making money and focusing more on doing what they enjoy doing and living their lives on their own terms. And essentially what that amounts to is a less of an emphasis on consumerism and accumulating stuff. Because I think you get to a certain point in your life or your career, and you look at it and you say, “Having the big house or the big mansion on the hill doesn’t really matter so much as the things that you’re doing and the things that you find enjoyable on a regular basis.” And this is another one of those things where I think it’s difficult to measure, but I feel like we’re going to hear a lot more stories about this kind of thing.
Rob [24:43]: My second prediction is that Twitter will become less relevant than it is today. It will return more back to its roots where a lot of journalists are using it, news continues to spread on Twitter and the technorati will use it. But the adoption curve for Twitter I actually think is going to be on the decline. I think it’s going to be ripe for an acquisition. It’s still has been unable to turn a profit. It’s been unable to monetize it’s user base, and it just can’t do that forever. And I think 2016 will spell some changes for it. I still think Twitter is a reasonable communication tool, but it’s definitely a lot different than it was a year or two ago. And unless Jack is able to get in and really turn things around, I think they’re looking to be on the decline in 2016.
Mike [25:25]: My next prediction is that we’re going to see fewer IPOs and more acquisitions in the tech space, especially at the higher end. And the reason I think that is because from the so-called unicorn companies, there’s a lot more of them now than there used to be, the ones that that are valued at a billion dollars or more. And I don’t see a lot of these companies doing anything dramatic or really innovating in their spaces. I think that they’re going to hunker down. And they may run some experiments here and there, but it also feels to me like their main growth strategy is going to be through acquisitions and acqui-hires rather than building their own stuff and extending their reach. And as a result, I think that we’re going to see fewer of these companies actually go through an IPO, and we’re going to see more of them eating each other alive.
Rob [26:09]: That’s interesting. That ties into my third prediction, which is that the public markets will continue to value companies lower than the private markets. This has already started in 2015 where companies being privately held as they raise rounds of funding, they’ll be valued at a certain level, and then they go public and their stock actually drops when they go public. And this was the exact opposite 15 years ago, right? That was the liquidity event and the big payday when everyone doubled their money from the most recent private round. And it’s been the opposite a number of times in 2015. And this ties in with what you’re saying, that unicorns are starting to stagnate.
A lot of them don’t have unit economics that actually make sense. They have literally been paying a dollar to make 50 cents. And they keep saying, “We’re going to make it up in volume.” And certain business models, like in Amazon, you can do that with, but several of these unicorns have forsaken any type of not even just profit, but any type of unit economics that make sense. And so I think we’re going to see some fallout from that, as you predicted, and I think that’s going to continue to result in these public market valuations being lower than private markets, which is going to keep a lot of people private longer, resulting in fewer IPOs.
Mike [27:13]: Yeah, it almost seems to me like the fact that they’re paying more to acquire a customer than they’re making from the customer, it’s not even just that they’re doing that. It’s just that they’re also not maintaining those people as customers moving forward. So you had said that oh well, companies like Amazon can do that and make it up on volume. And I think what you really mean is that because somebody uses Amazon, they’re so happy with it, they will continue to be a long-term customer for it. So depending on how you’re going to measure the cost of acquisition for that customer, maybe it is a dollar and you only make 50 cents from the customer, but over the course of the long term, you’re going to be a Amazon customer for a long time. I looked on my account, and I think I have been an Amazon customer for almost 15 years now. I’ve spent easily tens of thousands of dollars with them. And they’re able to do that. But I think a lot of these companies are just not getting people to come back because it’s interesting for people to check them out. But after that, they have no real reason to come back and buy a lot of other stuff from them.
My last prediction is that drone technology’s going to take some serious step forward. And I base this on the idea that new FAA Regulations that have come out that essentially force people to register any drones that are over eight ounces, and I think it’s about 250 grams or so. And there are a lot of drones that fall into that particular category, but because of that lower weight limit that says, “Hey, anything underneath this limit, you don’t need to register,” I think that there’s going to be a lot of technology advances in the space that make it feasible to have drones that are very small, or I’ll say featherweight or ultra-light or whatever the term is, that they’re going to be using for that these days. But I think that you’re going to see a lot of advancements in the size of the components and the weight reduction and things like that to essentially circumvent the FAA Regulations for registration.
Rob [28:58]: And my fourth and final prediction for 2016 is that virtual reality will actually be a hit this year with the early adopter sets. So this is just carrying last year’s forward. I think this thing’s going to catch. I think VR and AR really have a future. And I hope it doesn’t turn into an AI thing where 10 years down the line, I’m still making the same prediction. But I feel like with the release of the Oculus, which is supposed to happen, what, here in Q1 of 2016, that we’re going to start seeing something catch on because [?], the Internet of Things, wearables, and VR, right? These are the next big things. One of these has to catch.
Mike [29:30]: I think I heard a podcast episode from, was it the Daily Tech News Show, where they talk a little bit about some of these different things. And especially with the VR headsets and things like that, there are certain things that almost need to be in place in order for it to catch on. Like the early days of the internet, you need to be able to buy stuff and you need to be able to not take the headset off in order to interact with the world around you. And if there’s any sort of pay walls inside of a virtual reality system that you have to leave that frame of reference, it’s going to make it difficult for it to catch on.
Rob [030:02]: So those are our predictions for 2016. It’s our last episode of the year, and we will see you in early January. If you have a question for us, call our voicemail at 888-801-9690, or e-mail us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under Creative Commons. Subscribe to us 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.