Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike discuss the long, slow, SaaS ramp of death. They define it, tell you how to recognize it, share their own experiences with it, and give tips on how to get out of it using tactical and mental coping mechanisms.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of “Startups for the Rest of Us,” Mike and I discuss the long, slow SaaS ramp of death. This is “Startups for the Rest of Us,” episode 282.
[Theme music]
Rob [00:18]: Welcome to “Startups for the Rest of Us,” the podcast that helps designers, developers and entrepreneurs be awesome at launching software products, whether you’ve built your first product, or your just thinking about it. I’m Rob –
Mike [00:26]: And I’m Mike.
Rob [00:27]: – and we’re here to share our experiences to help you avoid the same mistakes we’ve made. What is the word this week, sir?
Mike [00:32]: Well, we’re making a final push to get all the development work done for Bluetick before the end of next week because, obviously, at the end of next week, right after that, MicroConf starts up. So, we’re trying to get everything out the door and just doing some testing on different things, making sure people can use it end-to-end; and then, hopefully, by the end of next week, I’ll be able to start onboarding people a little bit in advance of the intended release date; or, at least the private release to the early-access people. I’ll start onboarding people, and I do have a volunteer to be the first person on it. So, I’ll start working with that person, and we’ll go from there.
Rob [01:05]: That’s exciting, man. How does it feel?
Mike [01:06]: Good. There’s obviously little jitters about, “Well, I know that some of this code is” — I wouldn’t say it’s janky or anything, but probably hasn’t been tested a lot. I think there’s a big difference when you’re first rolling something out versus something that has gone through thousands or tens of thousands of iterations and you know that it’s pretty solid, and that it’s got a lot of the edge cases taken care of. But because I’m reading mail from people’s mail servers, like the iMap protocol, there’s a lot of edge cases. So, there’s all these things where things could go wrong. And I went through over a hundred thousand emails in my own mailbox, so I’ve mined those out and got all the edge cases out of there; but who knows what else is out there, you know?
Rob [01:54]: Oh, yeah. Once you get into this stuff, kind in the wild, where you have emails; or, you have data that may not be as well-formatted as, quote-unquote, “in a laboratory,” or in unit tests that you might write, there’s always going to be edge cases. We’ve seen such crazy stuff with Drip, whether it’s on the reply-tracking side, or just something wants is to send. You send tens of millions of emails a month, and suddenly you’re just going to find edge cases. So, I would guess that right off the bat, you’ll catch a few as new folks sign up, and then there’ll be a nice lull where you’re okay. Then once you hit scale, where you start really doing a lot of iMap stuff, you’ll probably see even more weird edge cases. Like, emoticons or emojis won’t work, or there’s just tweaky stuff that different mail servers do.
Mike [02:29]: Yeah, then there’s also places where, in the RFCs for the iMap protocol, there are ambiguities, and different mail servers handle those things differently. Some will follow the letter, and some will just ignore what the RFC says. So, there’re places where, for example, you’re not supposed to have nulls in certain places; and there are emails that do it, and they just ignore the protocols. Then especially when you get into things where people are sending spam, for example, or you’re looking in a spam folder and saying, “Okay. Well is there an email in here that got miscategorized that we want to validate whether or not someone replied to it?” Any of those could be really screwed up just because who knows where those things came from, or what mail server they could have originated from? They could’ve even just come from a Perl script or something like that. Who knows?
Rob [03:16]: Yeah, I like to think of it kind of like if you had code raw JavaScript without a jQuery, right? All the browsers handle things differently, and there’s all these edge cases. And ten, 15 years ago when we did code bare-bones JavaScript, it was such a hassle. There is no jQuery equivalent for mail servers, and you have to deal with all the nuances and the product differences and, as you said, the ambiguities of the spec.
Mike [03:38]: Yeah. We’re already separating out some of the code where we are trying to identify what the mail server is in order to start handling some of those edge cases just because we know that this particular case is handled very well in this mail server, and this other mail server just simply doesn’t handle it at all.
Rob [03:55]: That is the worst! The worst is when you start having ‘if’ statements, and they’re, “If mail server is XYZ…” Aw, that’s terrible, man.
Mike [04:02]: Yeah.
Rob [04:02]: Well, it’s good to hear you’re still on track, and excited to hear an update once you have that first early-access person in and then when you get to your milestones of getting five or ten people in there, using it. First paying customer – it’s all coming quickly, man.
Mike [04:16]: Well, technically, all of them are paying customers at the moment.
Rob [04:20]: Oh, nice, nice.
Mike [04:21]: Everyone who is on my early-access list of these initial sixteen people, they’ve all paid me for it. So, it’s really just a matter of making sure that it’s working for them. Obviously, if it doesn’t work or it can’t work for them, then I’ll issue refunds as needed; but everyone that I’m putting on it over probably the next six weeks or so is essentially a paying customer already.
Rob [04:439: Right, but when I was saying “coming on board,” I meant subscribing –
Mike [04:44]: Oh, yes.
Rob [04:44]: – because they paid you up front for the privilege of early access, and that’s obviously cool for both sides; but at a certain point, you’re going to have to prove enough value that they’re willing to pay that every month. And that time will come once they’re using it. Cool.
We have a whole slew of new iTunes reviews. I won’t read them all, but Jerry Weir from Luxembourg said, “A great show. Value in every episode. If you’re at all into starting your own business, alone or on a team, you shouldn’t miss out on ‘Startups for the Rest of Us.’”
We have [Prof.?] DuChamp from the United States. He says, “Listen, or miss out. You choose. If you’re doing anything related to startups, you would be plain silly to not listen to this podcast. Mike and Rob do a really good job of explaining the minutia of building your platform. It’s not about interviewing the biggest names in the industry, or even talking about trending topics. They get into stuff that really matters.”
So, thanks, guys, for the five-star reviews. We got seven or eight other new ones, 475 worldwide so far. If you want to help us on our push to get 500 worldwide reviews in iTunes, please log in and give us a five star.
Mike [05:42]: A few minutes ago, I mentioned that we were working on getting Bluetick finished before we MicroConf, and one of the things we’re doing this year is that – we usually do giveaways for a lot of the different sponsors; and then as part of “Startups for the Rest of Us” and the Micropreneur Academy, we give away a couple of different things. This year, we’ve just decided to give away an Amazon Echo, so that’ll be one of the grand prizes from Micropreneur Academy this year.
Rob [06:05]: When the Echo first came out, I almost bought it. I think it was, like 99 bucks if you were in the early access program, and I decided not to because I kick-start so much stuff as it is, that I have stuff laying around my house and stuff that I’ve given away, or sold, or whatever; and I just didn’t really want another device. But there’s buzz building around this thing, and I’ve heard that it’s really cool. You have one, right?
Mike [06:25]: Yes, I have one. It’s very interesting. There’s a lot of different voice commands that you can give it. I ended up on a mailing list. I don’t know whether it was part of registration process or anything like that, but what they’ll do is they will email me as they start adding new features, and they’ll tell you in the email, “Hey, say this to the Amazon Echo, and it will start responding to you in this way or that way.” Or, you can play games with it. They’ll tell you about new games that came out, or new things that they’ve integrated into. There’s a few, different, other devices you can get that will automate different things in your house. You can integrate it, I think, with Nest at this point, but there’s also other thermostat controls that you can use. Then there’s a device that you can plug into your car, for example; and because your car is probably close enough to your house to get Wi-Fi and connect through that. You can ask Echo information about your car based on what it is feeding back through that interface. So, there’s a lot of other devices that they’re working on, but in and of itself, it’s pretty interesting the types of things you can do with it. My kids will use it for a few different things here and there, too.
Rob [07:24]: I think Amazon is sneaking in the backdoor, and I they’re going after, eventually, the home automation market. Right? I think they’re going to try to be the hub for all of that, which was not apparent when they first launched this. I thought of it as more of a media device and a to-do list management device and a timer or something; but it seems like they’re making inroads. I guess with – as well as the speaker and the voice recognition work, that it’s getting legs. I’m hearing people talk about it, so it’s on my wish list right now. I would guess I’ll be getting one in the next month or two. All I really want – I want to be able to set a kitchen timer verbally, without having to use my hands. I want to be able to start a Spotify playlist, start Pandora, audible books and put stuff on to-do lists. If I could do all that verbally, and it was seamless, and it worked almost every time, it’s a no-brainer for me.
Mike [08:08]: Yeah, I’d say the voice recognition is pretty good in it. There was a few times where it will obviously fall down. If you happen to say a name, for example, then it will just pick it up. Or, if it even thinks that you did, then it will try and interpret whatever it is that you said. So, there’s obviously those types of issues, but you’re going to get that with any device, I think.
Rob [08:26]: Yeah.
Hey, I’m listening to the book “Masters of Doom” again. The last time I listened was probably a couple years ago, and it’s a story of id Software. It’s John Carmack and John Romero, who built Doom and Quake and Wolfenstein 3D; and I can’t get enough of this story. This is either the second or the third time I’ve listened to it and, to be honest, I just kicked it on. I was going to listen to the first ten or 20 minutes, just to refresh my memory of some things; and I’m three or four hours in now. It’s such a compelling book, and it’s one of those complete outlier stories where they just happen to hit a few, big changes in videogames and computer games. They hit the cusp right in the late ’80s, early ’90s as PC games are just starting to come into fruition. They were also working 90-hour weeks and loving it. There were a lot of extenuating circumstances. They were kind of the perfect age to do it. They weren’t older with families and kids and everything, so there’s reasons that what they did resulted in the success that it did. Nonetheless, the story is so compelling and well-told. It’s just fun to go on the ride with them.
Mike [09:25]: Very cool. Yeah, I still have that on my list of things to check out at some point, and I just haven’t gotten to it.
Rob [09:31]: Yeah, it’s purely a fun startup read. It’s obviously not a true story, but it’s not something that you’re going to take away actionable business tidbits or anything.
Mike [09:39]: Right, and that’s probably why it hasn’t really made it up the top of my list yet.
Rob [09:43]: Totally. Yeah, you’ve got other things on your mind.
So, today we’re talking about the long, slow SaaS ramp of death. This top came from a thread in Founder Café, which is our private membership community. We asked for topics for the podcast, and someone said, “I’d love to hear you guys talk about the long, slow SaaS ramp of death. What is it? Did you experience it? How do you recognize it? How do you get out of it? Tactical, as well as mental coping mechanisms to help you get through it would be interesting.” Two or three people chimed in about elements they wanted to hear about, and so I figured we’d start. We’d define it. We’d talk about what it’s like to experience it, how you recognize it, some ways to basically cope with it, both tactically and mentally.
Mike [10:20]: Yeah, I first heard this term several years ago at the Business of Software conference, and it was a talk given by Gail Goodman, who was the CEO of Constant Contact. I think Constant Contact got recently acquired by somebody for – I don’t know. It was a billion dollars or some ridiculous number like that. She talked about the very early days of Constant Contact and how, when they launched, they weren’t getting a lot of traction, and the growth was incredibly slow. They were one of the – I wouldn’t say the first SaaS company out there, but they started back in I think it was around 2000 or something like that, and that’s about the time where her talk picked up. She showed an example of what the growth was like, and it was a very, very long ramp of very low growth. Of course, you know over time that the growth compounds, but it seemed like the growth levels that she was expecting were significantly lower than what you would expect for a SaaS company.
Rob [11:19]: Yeah, and since they were so early in the SaaS space, they had a hard time even convincing people to use web-based software. Everybody wanted to download the stuff on their desktop. As a result, the growth was lower than you would see today, but the interesting thing is that this concept of a “long, slow SaaS ramp of death” resonated so much with everyone who has ever been involved in a SaaS app; because although the pitch or the slope of the ramps these days may have a sharper curve because we can grow things faster and people are more used to paying for SaaS, it’s still stands that we all still feel this. So, even if Gail talked about a specific growth rate, and nowadays we can do five times that, or ten times that, it still feels like a “long, slow SaaS ramp of death” if you compare it to people who are starting consulting firms or productized consulting firms; or someone who maybe gets a hit, a mobile app in the App Store; or, someone who’s doing big enterprise sales and doing those that are 100,000, 200,000 a pop. They can start and grow a business. All those can start and grow a business a lot faster than SaaS. SaaS is essentially the tortoise in the race, right, where it just plods along, plods along, and it grows. The particular growth rate isn’t what’s important here; it’s that it will always feel slow. That’s really why this phrase resonated with so many people. It’s very, very rare that someone’s not going to feel this if you’re starting a company.
Mike [12:41]: I think that’s probably an important point to come on and talk a little bit about – is the fact that it’s always going to be slower than you want or slower than you expect. I think that’s part of a human inclination to want more; or, to just want something to be faster, or better; or, to expect that you’re going to do better than you’re currently doing, because there’s always higher expectations that you put on yourself, rather than those expectations that other people are putting you.
Rob [13:08]: Yeah, we’re all impatient. We’re entrepreneurs, and that’s the point, is that we don’t like systems that don’t make sense, and we don’t like things that move slowly; and that is what makes us founders. That’s what makes us start things, to try to change things; and we want to change things now, not in six months, not in two years. Unfortunately, SaaS apps take a lot longer than we want them to. I was trying to think of any exceptions that I can think of in recent memory of actual SaaS apps that have had such steep growth curves that the founders might not feel that they went through the “long, slow SaaS ramp of death,” and I can only think of a couple. One is Slack, and Slack is one of the fastest-growing SaaS apps in history, as far as I know. I think Xero is another one. They raised $170 million. According to a recent podcast I heard, they are claiming to be the fastest-growing SaaS app, so maybe those people don’t feel that way. Also more within our community, I think Buffer has grown very quickly; and Laura Roeder’s Edgar, they all had good growth curves. I wonder if you went and asked Leo from Buffer, though – Leo or Joel, to be honest – if they felt like early days didn’t have a “long, slow SaaS ramp” – because now they have traction, right? Now they have a name and that mini brand that Jason Lemkin talks about, which we’ll discuss a little bit later. But, the early days of getting that boulder moving up the hill, I think, is always going to feel like the “long, slow SaaS ramp of death.”
The problem is that this feeling is exacerbated by the massive success stories that surround us, because we hear these outlier success stories. We hear and we see Buffer’s metrics and Laura Roeder talking about Edgar getting to 100k and MRR in five months, or however long it took. And, frankly, while those are great stories, they are Cinderella stories. They are one in a thousand, or one in 500. They’re very rare, and they set your expectations to unrealistic levels. Same thing with Peldi in the early days launching Balsamiq. He had great success. It took off like a rocket ship, and he got to a half million dollars. It wasn’t a SaaS app, but it got to half a million dollars in revenue in the first year. I remember someone signing up for the Micropreneur Academy right after that and saying, “Yeah, my goals is to get to half a million dollars in my first year.”
[15:12] We had to say, “Whoa, whoa, whoa. No, that’s completely out of the realm of possibility.” Not literally out of the realm, because it could obviously happen; but it’s just not going to happen. Peldi hit just such this unique culmination of things: right place, right time, right idea, right person. Everything matched up for him, and I would say the same thing for the Buffer guys and for Laura Roeder with Edgar and for Slack. Of the thousands or tens of thousands of startups that have launched in the past few years, there’s literally a handful that have had that.
So, I think the idea here is don’t let these unrealistic expectations make you think that you have to be growing as fast as everyone else, because it’s not the case. Hundreds and thousands of other startups are growing a lot slower than those other guys. They really are outliers. We can be happy for them, and we can look to see what they did to succeed and try to adopt that, but we can’t have the expectation that our startups are going to grow like theirs.
Mike [16:03]: Well, the other thing to keep in mind is that it’s more about what is right for you and what’s appropriate for you and what you want to get out of it. Just because you have this idea in your head that you could grow the startup extremely fast or extremely big in a very short time period, the other question that I don’t necessarily think that most people think about is, “What is the cost of doing that?” And I don’t mean the cost in dollars. It’s what’s the cost on your mental sanity, your health, your relationships and all the other stuff; because unless you’re running a high-growth startup that you have investors that you report to, that you really need to be able to show massive growth in order to even justify your own existence – if you’re running your own business, the only person you actually have to answer to is yourself. So, I think there’s a different matter of the expectations and scenarios for a lot of these things as well.
Rob [16:53]: Another part of this question that the original poster asked – he said, “How do you recognize the ‘long, slow SaaS ramp of death’?” My sentiment is that you’re just always going to experience that. That’s the default, right? It’s going to be the rare, rare outlier case. And you’re going to know if you’re not experiencing it, because things are going to be blowing up like crazy, and you’re going to be growing 50 grand a month in MRR or something. Then you’re not really experiencing it. But, to be honest, I don’t personally know a SaaS founder who hasn’t felt this as they’re going through it; because no matter how fast you’re growing, you always want to grow faster. Today, if you don’t have a SaaS app, or you’ve just launched, I bet you’re thinking, “Boy, if I could grow at a thousand dollars a month, that would be amazing.” But as soon as you get there, then you’re going to want 2,000, and when you get to 2,000 a month, you’re going to want 5,000. It’s really the arrival fallacy, right, of you’re never going to be happy with it. It’s always going to feel like you’re on the “long, slow SaaS ramp of death,” so I think recognizing it isn’t even an issue. I just think accepting that it’s going to be there is the way to go.
Mike [17:49]: With all of that said, there are some things that you need to keep in mind in terms of being able to cope with that, and what we’re going to talk about now is some tactics for coping with those particular feelings of either an inadequate growth rate, or you just aren’t getting to where you want to go as fast as you want to be.
The first tactic is to try and establish some sort of virality around your product. I don’t necessarily mean go out and try and identify some mechanism for making sure that your product is in front of every, single possible person it could be in front of. It’s more about trying to find ways that you can scale the app using mechanisms other than yourself or the things that you’re doing. So, when you talk about virality in general, what you’re usually talking about is other people talking about your product on your behalf so that you don’t have to do it, so that you don’t necessarily have to be present for every conversation. You don’t necessarily have to be driving every little bit of traffic. If there’s people talking about your app, then, in essence, what ends up happening is that you benefit from that traffic. So, whether it is other people writing up articles about your product, or you doing a podcast tour and talking about the product, essentially you’re leveraging other people’s networks and other people’s influence. What that can do is that can help drive growth for your app without you being directly involved in all those various aspects of it.
Rob [19:08]: Yeah. True virality is really hard to get into a product, and try to fit it in retroactively is not easy. Very, very difficult. You tend to have to design the product itself around a viral loop. So, thinking about something like, when you sign up for Facebook, how they ask you to invite friends and that you really can’t get much out of it until you’ve invited those friends. That was an early viral loop. That’s been overdone so much that it doesn’t work as well as it used to, but people first started doing that, it was pretty clever. Even having a “powered by your app’s name” link in something that is customer-facing, so we have the “powered by Drip” link at the bottom of our widget. MailChimp has “powered by MailChimp” at the bottom of their emails, of their free plan. I think Hotmail did that in the early days, where they had “powered by Hotmail,” or something like that; and that really helped drive a lot of viral growth early on.
So, the idea here is that your “long, slow SaaS ramp” is always going to be there, but the way to make it more palatable so you can deal with it is to have growth; because growth really does solve most problems. I think I should couch this. We’ve said this many times, but you’re really not going to grow until you find product-market fit. You have to build a product that people really, really want. Then grow from there. The first step is to basically find product-market fit as quickly as possible. During that part, you’re going to have just a flat growth curve, pretty much. It may take you months. It may take you longer than that, but that’s going to be the really hard part. Once you have product-market fit, growing is a fairly repeatable and scalable process. There’s a lot more detailed and specific information about growth than there is about finding product-market fit, because finding product-market fit is so much more about art than it is about science; whereas, growth is a lot more about the science of it. So, getting this growth going is what can help you feel better and get you out of the long, slow SaaS ramp. Obviously, baking virality – that could be an entire podcast series just doing that, but that’s one thing to keep in mind as you’re getting started.
Another tactic that works pretty well is to target a community of users that has strong word-of-mouth; they talk a lot online. An example of a community that doesn’t do this is folks who own construction businesses. They may talk once a year at trade shows, or they may talk amongst themselves with industry trade publications; but the word-of-mouth for your product is not going to be strong until you have the vast majority of that market. Whereas, in the designer community, or the agency community – the consultants, the SEO and marketing consultants – or, the founder community – all these communities, they have really strong word-of-mouth because they’re always constantly sharing with one another what they’re up to, new tools they’re finding. Just picking an audience can be a big part of helping you grow faster. Because, again, if I build accounting software for construction firms, versus accounting software for startups, I’m going to be so much more likely to get that early strong word-of-mouth with the startups, because they’re just talking to each other more often. And so, this won’t cure your “SAS ramp of death,” but if you really do build an amazing product – you can think about how Zen Payroll and Zenefits came on the scene, and they targeted startups first. Then once they got that strong word-of-mouth and the mini brand, then they were able to spin that up into faster growth.
Mike [22:16]: One of the interesting pieces of what you just said about targeting communities that have a strong word-of-mouth is that this is an area that I think a lot of people discount, or don’t think about when they’re first looking at building a product, because they’re more interested in the problem itself and how they can solve it and how they can do better than the other things out there. They don’t necessarily think a little bit further down the road about, “How are people going to find this?” “Is there going to be either a viral loop that I can tap into, or an existing market of people that are going to be easier to get in front of than other people?” “Are these people talking to one another?” What you just said about the word-of-mouth – I hear a lot of people saying, “I’m going to go after the real estate market,” or, I’m going to go after the attorneys market, because they’re under-served, and their software is terrible.” I’m not saying that either one of those things is an untrue statement, but at the same time, if you completely discount the fact that a lot of these people don’t necessarily talk to one another outside of those trade shows on a yearly basis, then it makes getting that word-of-mouth growth loop very, very difficult.
Rob [23:20]: Right. We’re not saying that you can’t grow without these things, but these are the higher-growth approaches. These are things that are not content marketing and paid acquisition. Those are great, standard, long-term approaches. SEO is another one. Those are your standbys. Those are your blocking and tackling, right? You’re going to implement those, and that’s going to get your growth curve going over time; but you will ride on the long, slow SaaS ramp if all you’re doing is content marketing, paid acquisition and SEO; because that stuff just takes a long time to do. Right? There’s this phrase “grinding it out” that I think about. A way to try to short-circuit that and not feel like you’re grinding it out as much is to use one of these faster-growth approaches. And that’s virality. That’s targeting the community with strong word-of-mouth that we’ve talked about.
Another one is to try and get to a million dollars in ARR as soon as possible. I realize we’re all trying to do that, but there’s this thing called a “mini brand.” I think this term was coined by Jason Lemkin from SaaStr. I really like his stuff. He basically says once you hit a million, you will tend to have this thing called a “mini brand.” You’re not a brand that everybody knows, but you’re a brand that enough people know that you will just start having strong word-of-mouth even if you didn’t have one before. You’ll start having an audience and fans, even if you didn’t have one before. That’s actually when it gets easier to grow, once you cross into the seven-figure range, because you’re just on the lists. When the people write the blog posts about the “Ten Best XYZ Accounting Software,” you’re on every one; because once you hit that rate, you have enough users that people are talking about you, and you just have a footprint. That’s another kind of hack – is to get to that point and to get enough customers using you that people are just naturally talking about you.
Mike [24:54]: The last hack that you can use to leverage a higher growth rate is to look at an audience or a community that you might already have access to, so whether that’s one that you’ve built yourself or one that you’re familiar with or involved in. You look around at a lot of these stories about people who have a really high growth rate. “Oh, I posted on Reddit or Hacker News, and I got 300, or 400 subscribers on the first day for my app.” They talk about these large growth rates. It’s because they were already plugged in. If you’re not plugged into that particular network, then it’s very difficult to just walk in and on day one you have the credibility from people to be able to attract that type of user base or that community. A lot of times, if you’re not already involved in that community, they have no idea who you are. So, when you approach them from the outside, they say, “Oh, well, you’re just self-promoting and self-advertising, so I’m really not interested in listening to what you have to say, because you’re not here to benefit the community. You’re here to benefit yourself.”
So, if you’re already involved in some of those communities, look to those to tap into; but if you don’t, again, you can also build your own audience. You can build your own community over time before you get to the point where you launch. And having that built-in audience before you launch can be really, really helpful, especially if you’re targeting that audience with your product. If there’s not a lot of crossover or overlap between what your product does and the community, it’s not going to be very helpful. It’s very similar to a lot of these stories you hear about entrepreneurs who have these massive audiences. It doesn’t have to be a hundred thousand or a million people. It could just a mailing list of a couple thousand people that are following them on their blog. A lot of times, what you find is that when they launch a product that’s not applicable to that, they might get one, or two, or five sign-ups out of it; but they’re not going to get the hundreds or thousands that you might expect if they had 20 or 30,000 subscribers.
Rob [26:44]: Yeah, and it’s interesting. Obviously, being part of a community is one thing, but it’s so much more valuable to really have your own audience, to basically have your own email list where you’re communicating with people. The hard part with that is, as you just said, you can have a mailing list of 20,000 people who were listening to you talk about design, or entrepreneurship, or something. Then if you actually go and launch a product, like a SaaS product, especially, it’s going to be really hard to get them to buy from you. It’s not just going to happen magically. I’ve seen it happen over and over where people have personal brands, and they have a sizable email list – let’s say 15 to 30,000 range – and they start a SaaS app, and it just doesn’t resonate because: a) you didn’t have a product-market fit from the start; b) if you haven’t already been selling these people something, directly – aside from info products, because info products are exceptionally easy to sell to audiences – but if you haven’t really had a specific brand name in a specific space – Laura Roeder is actually a good counter example to all this, right? She did build an audience, and they were buying from her. They were buying social media training from her for years and years, so she was selling really solid stuff. Then she essentially launched a tool to do exactly that. Everything she’d espoused, she launched a SaaS app called Edgar that does all of that. That was such a perfect fit, and it’s such an example of how to do it.
Rather than having that blog where you have, “Alright, designers and entrepreneurs are buying stuff from me about how to launch products,” and suddenly you just go and launch your SaaS app that isn’t a SaaS app that helps people launch products. It’s a SaaS app that does their accounting, or helps them do – I don’t know – landing pages. I’m just trying to come up with ideas here. You will get a few who sign up, but since it’s not directly in line with everything you’ve been talking about, your uptick to your own audience is going to be a lot lower than you think, unless it’s directly in line. So, I think having an audience can be super powerful, but it can also leave you to have higher expectations than you should, of how many of those will actually convert. When we were launching DRIP, I valued the leads that I got through Facebook ads and through organic traffic and through these other means, podcasts that were higher than my own audience; because I knew that, while I would get some hardcore folks who wanted to use Drip or to use a product that I built, I knew that the conversion rate on my own list – my Software by Rob list – would not be as high as these other traffic sources that had come truly to see the product and to get the value proposition that I was preaching.
Mike [28:58]: I do want to clarify one, little, tiny piece of that because we glossed over it: the fact that what we’re saying here is not that you can’t use your own personal audience that is unrelated to find specific people, or to mine it for people you can use very, very early on in the process to make sure that you’re building something that people want, and that it’s something that they need, and that they’ll pay for and all that stuff. What we’re really focusing on here is the fact that that list is not going to be as applicable for high growth rate. It’s not that you can’t use it for a lot of the early customer development and stuff like that. That’s absolutely what you should be using it for and what you can, and it works really well. We’re just saying that you’re probably not going to get giant growth rates out of it is all.
Rob [29:41]: That’s a good point. Exactly. That’s what you should use it for, is the early days, getting to product-market fit. But once you tap that list a few times, you’re done. You’re not going to keep growing from it.
All right. So, let’s dive into the last section here. We’re going to talk about some mental coping mechanisms, because there’s obviously a lot of stress that goes along with this, and there can be frustration when things aren’t growing quickly. In fact, if you go back and listen to my MicroConf talk from last year, I talk about how frustrated I got after we watched and just kind of plateaued between 7 and 10,000 MRR, and we weren’t able to get past it for another four or five months, till we actually found product-market fit and started growing. So, I have a few tactics here of ways to get you through that and some thought processes to think about it.
The first one is just to have realistic expectations from the start. Realize that if this is your first-ever SaaS app, it’s going to grow really slow. You’re going to make a lot of mistakes, and don’t look at the examples that we mentioned above of people who grew really fast. Look at examples of people in your community, whether it’s the MicroConf community, Founder Café community; and ask what realistic growth rates are. I can tell you that when you’re at a thousand MRR, and you’re growing at a few hundred dollars a month, that’s a perfectly realistic growth rate, and you should actually — I won’t say you should be happy with it, because you should never be happy with anything, right? As a founder, you want to be pushing it further, but that is not a terrible rate if you’re just trying to figure out your early marketing approaches. So, 10, 20 percent growth when you’re doing a thousand or 2,000 bucks a month isn’t very much, right? It’s a few hundred dollars a month. And while you shouldn’t be striving in these early days to kick it up ton 50 percent or 100 percent growth month over month, and while that is totally possible, that’s not something that you should expect or be disappointed if you’re not achieving. I think that’s something that gets people stuck – that they see these outsize results, and their expectations are not realistic.
Mike [31:25]: One of the points that Rob just made about having realistic expectations from the start of it is that a lot of times, you’re still really trying to figure out what that product-market fit looks like. Early on, you don’t have it. Chances are really, really against you that, out of the gate, you have product-market fit and you know exactly what it is that people want. And even if you do know what people want, sometimes it’s difficult to put it in words that resonate with those people. And those are two very, very different things. Just because you’ve built what they want and what they need, it doesn’t necessarily mean that it’s easy for you to convey that to people in a way that makes it easy for them to not only understand, but to attract their attention. So, keep that difference in mind and understand that when you’re going through this process, a lot of it is about figuring out exactly what those things are that resonate with people, because those are the things that are going to drive your growth. It’s not having the best product, or the product that hits all the check boxes that somebody has. It’s about being able to relay that information to somebody in a way that attracts their attention.
Rob [32:27]: The next tactic I have for mentally dealing with this is to have a mastermind group. This is advice we give a lot, but that is going to be something that’s going to be able to give you a sanity check on your growth. I think that’s probably the third tactic I’d mention – is to get a sanity check on your growth, whether that’s through your mastermind group, looking at normal SaaS metrics, just asking around, asking in Founder Café. Look at normal growth for the vast majority of these apps, not these one-in-a-thousand outliers.
Mike [32:55]: The next coping mechanism is to celebrate some of the different milestones that you meet, whether that’s a thousand dollars a month, or $5,000 a month, or even if it’s just those numbers in total, in aggregate. One of the episodes previously, in episode 268, we talked about setting annual goals; and one of the recommendations was to concretely define some different milestones and make sure you celebrate them, whether that’s going out to dinner some night, or buying yourself something. Just make sure you’re setting aside time to pay attention to those milestones and realize that each one of those is a stepping stone on the way to something bigger and better, because obviously you don’t go from a dollar a month to a $100,000 a month overnight. It just simply does not happen. That said, you do have to be mindful of the different steps that you’re taking along the way, because there are going to be a lot of those steps.
Rob [33:46]: I think lastly, take some time to reflect. Look back six months, 12 months and compare your revenue to this month’s. It’s surprising how you can get to a point where it feels normal to be at X revenue a month or X growth rate per month; but if you look back even just a few months, you were way less than that. You forget the progress you’ve made, and you forget how hard you’ve worked to get where you are. So, this isn’t celebrating milestones as much as it is just look at how far you’ve come and think about the work that you’ve put in and the results and the benefits that you’re reaping from that, and just celebrate and be happy with that. Then, the next day wake up and be pissed off at how slow you’re growing and try to do five more marketing approaches, because that is the roller coaster of doing this. That’s the roller coaster of startups, and it’s the roller coaster of SaaS, for sure.
Mike [34:31]: Yeah, and I think it’s important to look back at that past revenue, because chances are really good that – especially if you’re not making a full-time living from your app – that most, if not all, of the money that you’re making from your app you’re probably putting right back into it. So, you look at your bank account, and it hasn’t changed. Or, maybe it’s even lower than the previous month because you spent all of the money that you made this month, plus all and then some of the money that you made the previous month. So, it’s very difficult to just look at the dollar amount in your bank account and recognize what your accomplishments actually are. You really need to go back and look and compare your revenue over time in order to get a better understanding of that, because you probably are spending as much money as you possibly can in order to drive that growth, and it’s not obvious through just looking at that bottom line in your bank account where that growth is, or even that you have growth.
I think that wraps us up for the day. If you have a question for us, you can call it in to our voicemail number at 1.888.801.9690. Or, you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. 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 281 | Tools You’ll Need for Your Bootstrapped Startup
Show Notes
In this episode of Startups For The Rest Of us, Rob and Mike talk about tools you’ll need for your bootstrapped startup. They discuss the different options to choose from pertaining to the pre/post revenue stages of your business.
Items mentioned in this episode:
- Conference Notes Podcast with Mike Taber
- Gusto
- MailChimp
- Drip
- BlueTick.io
- Ontraport
- Infusionsoft
- Quickbooks
- Less Accounting
- Baremetrics
- Google Webmaster Tools
- Clicky
- Mixpanel
- Kissmetrics
- KickoffLabs
- LeadPages
- Skype
- Google Hangouts
- Join.me
- GoToMeeting
- WebEx
- SproutVideo
- Vimeo
Transcript
Mike [00:00]: In this episode of Startups for the Rest of Us, Rob and I are going to be talking about tools you’ll need for your bootstrap startup. This is startups for the rest of us episode 281. Welcome to Startups for The Rest of Us, the podcast helps developers, designers and entrepreneurs to be awesome at launching software products, whether you’ve build your first product or you’re just thinking about it. I’m Mike.
Rob [00:24]: And I’m Rob.
Mike [00:25]: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What are you doing this week, Rob?
Rob [00:29]: I’m getting excited for MicroConf. It’s just a couple of weeks out in Las Vegas and we have a pretty cool speaker lineup I’m excited about. A lot of new names this year, names that folks may not have heard of but that either you or I have seen speak elsewhere or we have been highly recommended by MicroConf attendees that we trust. There’s folks like Claire Liew from Know Your Company who did a Believe at BoS Lighting Talk. We have Amir Khella from Keynotopia who has spoken in several places and Scott Nixon from Happy Herbivore recommended him and I’m excited about his story the more I talk to him on Skype. A lot of people haven’t heard the story Keynotopia but it’s pretty fascinating. We have Tracy Osborn from WeddingLovely and Patrick Campbell from Price Intelligently and of course Des Traynor from Intercom, which is cool. There’s several others and some names that you’d recognize as well. It’s cool because I feel like it’s a bit of a sleeper year in terms of brand new big name folks. I’m excited about the possibility of the quality of these talks that I think people will come across with.
Mike [01:30]: I think it’s interesting how at some conferences you look at the lineup especially early on and either you are attracted to it or you really notice it. There’s a bunch of standout names that you’ve heard before and they’re high profile names. I totally agree with you. A lot of the names we have on the docket this year are not probably as well know but the speaking quality is still there, the stories are still going to be interesting. It will be great to see how things turn out this year and what comes out of that.
Rob [01:59]: I think of it in terms of Joanna [Wylde?], when she first spoke at MicroConf, she was an up and comer at the time in this space. Brandon Dan was at the time. He first spoke; it was like four or five years ago maybe. It was a while ago. We’ve had several folks like Josh Pigford was still running PopSurvey. Samuel [Hullick?] before he was doing – there’s a lot of folks who are now more prominent in our space, who have graced the stage before they were big names and that’s how I feel about several of the speakers here. I have a feeling that they will be becoming well know partially from taking the stage at MicroConf. You get some name recognition there. There’re headed on that trajectory and I think we’re just helping them along. How about you? What’s going on?
Mike [02:42]: A couple of days I signed out what I hope is going to be my final to the people who have prepaid for Bluetick before I start on-boarding them in the next couple of weeks. Right now we’re testing and trying to work out some of the different kinks and the application and make sure that the basic usage scenarios and the basic workflow that people will go through to use the product are in line with not only expectations but everything’s working and we’re properly handling everything. A few minor issues here and there and we’re dog-fooding it internally but it’s looking good so far.
Rob [03:13]: You’re deadline that you’ve set for that is April 1. Is that correct?
Mike [03:17]: Yeah. Unfortunately, there’s a lot of things that play into that unfortunate part of it but at April 1st obviously is April Fool’s Day and it wasn’t intentional. It just happened to be Friday of – I think I counted out a certain number of weeks that was either 12 or something like that. I said, “Okay, I want to have it done by this time,” and that it just happened to be the day. It’s also two days before MicroConf.
Rob [03:38]: I know. You picked that day before we scheduled MicroConf, I think?
Mike [03:41]: Yeah. I did. That’s not exactly true. We knew what the dates were going to be for MicroConf but it was leading up to it. It was like I just did the calculation and I thought to myself, well, it would either be the 12 weeks or I could try to rush things so I’d have to do it in less time, which I didn’t think was all that feasible. I knew that I’d have to start cutting things and making concessions or whatever. If I pushed it, I would have to push it by probably at least two weeks. It’s just because the way that MicroConf fell. It’s like, “Well, I’ll try and get it done before hand.”
Rob [04:13]: But you’re on track right now?
Mike [04:14]: Yeah, so far. There’s still two and a half weeks to go. By the time this episode comes out, it will be a week and a half.
Rob [04:19]: That’s cool. For folks who don’t know what Bluetick is, what’s the one or two sentence explanation of what it does?
Mike [04:27]: It’s essentially a sales automation tool that allows you to follow up with people in an automated fashion. The system follows up for you so that you don’t have to, as opposed to other tools like Boomerang or followup.cc. You can have them ping you and remind you that you need to follow up with somebody but this will do it on your behalf so that you don’t have to. Obviously there’s very distinct places where you would use it in your sales workflow but the idea is to help move somebody from one stage of your sales funnel to the next.
Rob [04:59]: Very nice. As for me, I’m on the Drip front. February was a good month. In fact, in [?] it was the best month we’ve had of growth and that followed up the launch of workflows in January. All the trials or some of the trials converted then and that seems to have kicked us up to a next stage of growth which is good. We also, coincidentally, didn’t have anything to do with that growth but we hired two people in the past couple of weeks. I’ve been trying to hire a Senior Rails Developer since November, December and it just happened that we happen to find him right towards the end of February. We also figured out we needed another person in customer success, hopefully, it’s the last hiring that we’ll be doing for a while because it is time-consuming and not necessarily – the goal of drip is not to have a lot of people. We’re not going for headcount, like funded startups are but it is nice to have finally because those were open loops. They were continually in my trailer board to find a person to help with this and find the next developer and stuff. Now that that it is closed out, it feels good to have that behind us and we can all move faster, able to handle the workload, get more features built and more people on-boarded. Things are going good.
Mike [06:03]: Earlier, we were talking briefly about MicroConf. James Carbary from Sweet Fish Media had me on the conference notes podcast that you can check out. We’ll link that up into the show notes. He was interviewing me about MicroConf and what the takeaways were from MicroConf 2015. We talked a little bit about that and if you’re interested, we’ll link that up in the show notes.
Rob [06:22]: Sounds good. What are we talking about today?
Mike [06:24]: Today what we’re going to be talking about is some of the different tools that you’ll need for running a bootstrap startup. We want to talk a little bit about what’s reasonable, what’s not and essentially how to allocate your money in your startup. The major focus here is mostly on tools, not necessarily things like the cost of doing business and getting insurance or office space or other physical things that you need to run your business or maybe computers of whatever. What we’re really trying to do is focus on the things that you’ll need to use on a monthly basis. That cuts out a lot of those different things I’ve just talked about but we’re also actively cutting out things like software tools because depending on your tech stack, that’s going to, pretty dramatically, between different startups. We decided to avoid that as a matter of choice.
Rob [07:11]: Software development tools. The actual stuff you need to build software like maybe source control on your editor and if you need Microsoft licenses to IDEs and stuff like that. But we will be talking a lot about software that you need subscription to SaaS apps and stuff like that.
Mike [07:25]: Exactly. We also divided these into two different phases, I’ll call them. The first one is a pre-revenue and the second one is post-revenue. In the pre-revenue, we’re going to be talking about some of the different tools that you’ll want to look at or some general guidelines that you can follow in deciding which tools you use for your business and then there’s also the post-revenue stage, where we talk a lot about the different categories or classifications of tools that you might be interested in using for your startup and what some of the different options are.
Rob [07:54]: Cool, let’s dive in.
Mike [07:55]: In the pre-revenue stage, the emphasis here is making sure that your business has enough money to get through to the point where you have a source of revenue for the business on ongoing basis. If you spend, let’s say $100,000, to try and get your startup off the ground but you only bring in $5,000, then clearly that business is not probably going to fly. The idea here is to spend as little money as possible yet still get your products out the door so that you can make more money, so that you can feed that back into the business. But if you’re spending far faster than you’re able to acquire money, chances are really good that that business is just never going to go anywhere. At that point you’re probably better off finding a different business to use, a different product to offer, a different service to offer. In this case, in general what we’re looking at is the idea that if you’re spending more than $50 a month for any individual tool or any individual service, then you might want to take a hard look at that and figure out is that really necessary for your business pre-revenue.
Rob [08:55]: A good example of this is a tool like a Mixpanel or a CaseMetrix that start around 150 bucks and obviously there’re free plans and stuff but if you were start paying for them. I haven’t installed either one of those when I bring out a pre-revenue product. Once you get 1,000 or 2,000 in revenue, it becomes easier to justify spending that kind of money. There’re great insights you can get out of that software. But if you install that for months and months and you don’t have enough revenue to pay for it, that one always feels like an iffy proposition. All these comes back to how much money do you have to start the business because let’s say you raise an inch round. This probably doesn’t apply to you as we said in the title. We called this ‘Tools You Need for Your Bootstrap Startup’. These guidelines may apply less to that. If you’re self-funded and you do have 20, 30 grand in the bank that you’re using to get this thing going, that could also be an exception to this.
You may want to use faster. If you recall when we were building and launching Drip, I had other apps that were able to bankroll it. We wanted to move faster. We did spend more money than maybe these guidelines suggest. If you truly are working a day job and launching something on the side in your nights and weekends, a good guideline is about a $50 topper for any individual tool or service that you’re going to use. Getting started on day one of your writing code, the only couple of things that I can think of that are absolutely critical, aside from your development tools, are some web hosting and payment processing. A lot of other stuff you can get by with [?] essentially with the free stuff like the Google Analytics and the Webmaster Tools and the basic things, especially as a one person shop, which will probably be at this time. There’re a lot of tools that have a free plan for a single solo founder or a single user. You’re going to want to take advantage of those in this early stage.
Mike [10:46]: Another example or a very specific example of one of those things is being able to collect e-mail addresses and signing-up for $200 e-mail marketing platform when you don’t have any revenue and you’re really not getting enough traffic to drive to that to be able to collect those e-mail addresses. You can get by with a free MailChimp Account, for example. That will, at least, get you started. You don’t need to spend a ton of money on these tools especially when the free plans will suffice while you’re trying to figure out whether that business is going to work at all. The second guideline for a pre-revenue company is to not spend more than $200 a month across all of the different tools that you’re using. The idea behind this is that if you are really launching something on the side and let’s say you’re a fulltime employee at some place else, you’re just doing this on the side, it can be difficult to go through all of those tools and pay attention to all of them or give them the attention and care that they need in order to make them work for your business.
Chances are you’ve got a lot of other things going on, you’ve got all the development going on, you’re still trying to figure out what that market looks like. If you really have that many tools that you’re looking at, chances are good that you’re probably not focusing on the right things. You really need to be talking to the customers and spending a lot more time in those areas and building what it is that they want as opposed to trying to use all these different tools to optimize something when, quite frankly, you don’t have the traffic or the level of interest or attention from people that you really need in order to get to make that optimization work.
Rob [12:16]: I think that’s a good point, that tools can and will be a distraction if you want to chase down the next shiny object. It’s like stop breathing product on and parker news and looking at all the shiny new marketing SaaS or development SaaS that’s coming out. Focus on you building what you have instead and just use the basics like we’ve already said. Hosting, payment processing, maybe a landing page provider. That’s probably about it. I’m thinking back to Drip. We had revenue from other products that were being able to back it. But we had hosting; I had WP Engine Account for the blog and the knowledge base, payment processing and maybe one or two other things but it was very minimal. We’re talking on a recurring basis. What we’re not talking about here, let’s dive into the exceptions. It’s still with pre-revenue. We have three exceptions. One of them is paid ads. That’s not what we’re talking about at all here. We’re talking about tools on a recurring basis.
Paid advertising to gather information or you get in front of people is an exception to this because I believe that spending money to learn things is so valuable at this pre-revenue stage. Ideally, you’ll be able to run a reasonable test for about $100 to $200 per test. Long term, as it gets bigger, some tests may require several thousand dollars before you try to scale it up. That’s not what you’re trying to do at this point. You’re trying to find cheap clicks, split test value propositions and learn more and build a small list and that kind of stuff. For a few hundred bucks, you should be able to do that. This will let you figure out what you’re doing right and what you’re doing wrong so you can leverage that information as you’re building the product.
Mike [13:51]: The second exception here is also the legal or accounting fees to get set up as a business. Quite frankly, you can get by without setting up a full blown corporation or doing any of that stuff before you even have a product that’s out the door. You can do a lot of things and depending on who you’re working with, whether your CPA, you may be able to write off a lot of those development costs once you have gone down the path of getting an official corporation or officially filing a DBA or something along those lines. A lot of things, you can just backdate those. Again, you have to talk to your CPA about how that would work for your business. But the reality is a lot of those costs are minimal anyway, especially in the long term of your business. Over the course of your business, you’re probably going to be spending hundreds of thousands of dollars and not being able to write off $1,000 or 2,000 from the very beginning is probably not going to break the bank for you.
Rob [14:45]: We’re not lawyers or CPAs obviously but I will tell you that every business that I’ve started and every product that I launched, I have pushed off the legal and the accounting stuff as long as I possibly could. In terms of accounting, I may have done the book-keeping using tools like Xero that we’ll talk about later or Less Accounting. But the legal stuff of actually getting that as corp set up or whatever it is, the LOC, it all depends on your risk tolerance. Boy, I’ve always tried to push that off as long as possible because if you don’t have revenue and you’re spending money and time setting all that stuff up, you’re detracting from your ability to grow. The third exception, in this preliminary stage, is contract labor. If you’re hiring work, you’re hiring folks, let’s say on UpWork or even just contractors through your network, it is harder to do this one on the cheap. You can find cheaper people but you’re going have to spend more time managing them and correcting their work in general.
Realistically though, there has to be a limit on these contractor cost. If you’re seeking 20 grand in the product development for something that doesn’t have any customers or pre-launch lists, you’re probably going down the wrong path. But if you have interest, you have that launch list and you’re in communication with people, that gives you the confidence to spend more and more money. When people come and ask, we’ll often get the question of like how much does it cost to build a mobile app or how much should I pay to build my SaaS MVP or that kind of stuff. The loose range that I typically throw out is 5 to 10K and obviously it depends on what you’re building and how much software development and management experience because that dictates the level and the seniority of the developer you’re going to be able to hire, which is going to impact the cost of it and all that.
But if you have a lot of marketing skills and you have a list and you know what you’re doing then of course, dropping a lot more money than 20K might make sense. But if this is your first time and you’re doing on nights and weekends, you really need to keep a tight constraint on these things and especially in the early days. I was in the single digit thousands. That was my comfort level of how much I would drop before I would get someone in and at least paying me something for the product.
Mike [16:50]: I guess what those things said about the pre-revenue stage. Let’s move on to post-revenue. One of the differentiations here that I feel like we really need to make is the fact that when you’re talking about a pre-revenue business, there’s a very finite time window during which that pre-revenue period is sitting. It’s easy to look at a lot of different examples of those types of businesses because it’s all in this very tightly defined range. When you’re talking about post-revenue, that could mean anything from one dollar a month to a million dollars a month. Most of the time when we’re talking about our listeners or the audience that we’re referring to is generally businesses that operate up into the five, six or seven figures a year. With that kind of stuff in mind, it’s also very difficult to generalize and say, “Well, you should only be paying $25 or $30 a month on this particular thing because depending on whether you’re closer to $1,000 a month or $100,000 a month, you may be paying significantly more based on the requirements for your business. Most of the guidelines in prices that we’re going to throw out are entry level but you could also extrapolate those a little bit because some of them are based on per-user pricing and you may have one user or you may have 15 or 20. Those prices can fluctuate a little bit but will at least give some guidelines around starting points.
Rob [18:09]: Let’s kick it off with probably the most important tool for a startup that’s obviously going to be doing stuff online, it’s your hosting. This cost is going to depend a lot on your app, your infrastructure requirements but I like to ballpark between 50 and 200 bucks a month. This is post-revenue so this is when you’re not on shared web hosting anymore. At this point, you’ve beefed up and you have some type of virtual machine, whether it’s on Rackspace, on Amazon EC2 or you’re on a Heroku instance, that’s when I feel your post-revenue, you feel more comfortable outsourcing some of the management of this and paying a little more to get a couple of servers, at least, to have high availability and good performance. I think that a decent ballpark, when you’re ramping up is between 50 and 20 bucks a month.
Mike [18:57]: I think that $50 to $200 a month could also be per server as well. If you have 10 servers, you might be paying $2,000 or $3000 for the servers that you have. It comes down to what your app is. Something else that falls under this bucket is whether or not you’re running your sales website at the same place as your app is. Those are two probably different things. You might run your sales website on WordPress and have it hosted at WP Engine. One site of a WP Engine is going to run you $30 a month but you can also upgrade your plan to the next level, which is $100 a month. These are round about numbers but they do give you an idea of what the starting points look like and what’s reasonable.
Rob [19:40]: In pre-revenue you can be – a lot of stuff have launches on shared hosting for 20, 30 bucks a month. As you get towards launch or maybe after you get 5 or 10 people paying you for it, then you move to this better hosting basically where you have your own servers. If you’re a hardcore developer and you have a little bit more money in the bank, you probably going to start with this level of the 50 to 200 bucks. It’s a bummer when you’re sitting there coding for four, five months and you want to have a landing page up and you’re paying 50 or 100 bucks a month just to do that. That’s never made much sense to me.
Mike [20:12]: The next category is payroll. If you have gotten to the point where you are post-revenue and let’s just assume you’ve even gotten past the post-revenue part, you start to go fulltime; one of the things that you need to look at is payroll. I’ve looked at payroll providers over the years and tried out a couple of different ones. The one that I settled on recently was Gusto. They used to be called Zen Payroll but they changed their name about five or six months ago. I have no idea what the rationale behind that change was but they did change it. Something like this should probably run you around $40 to $50 a month. Some of the larger, I would say more entrenched players, that if you’re not eligible for Gusto based on where you live, you might have to go with someone like [?] or Paychex. Those are U.S. based companies. I don’t know what the options are in other countries but either one of those is probably going to run you anywhere from $50 to $75 a month. What I have noticed about those types of companies is that they have a tendency to quote you a price and then they will tack on additional fees for doing things like, “Oh, we’re going to over-night your paperwork so that it’s there on pay day.” It’s like, “Well, everything’s direct deposit. I don’t need you to over-night it,” but they’ll do it anyway and it’s an extra $10 or $20 per pay period and that’s how they do that. It can get pricy, which is why is why I gravitated much more towards Gusto because it’s just a flat rate. Everything’s taken care of on line. They also take care of 1099s for you so you don’t have to worry about that as well, especially if you’re going through contractors that are outside of a platform like UpWork.
Rob [21:47]: Don’t do your payroll yourself. That’s insane. I’ve known some small businesses that do that and there’s no reason to do that anymore. I used Paychex for several years. Eventually, their payroll started having a lot of errors. They did a really good job early on and it was great. I think I was paying about 100 bucks a month and it was totally worth it and then more and more errors as we scaled up and it was all via phone. It was like you could have some reports online but it was junky. You couldn’t update anything online so I would have to be on the phone all the time and it doesn’t work into my workflow. The fact that Gusto, formerly Zen Payroll, is fully online and is as good as they are. They’re cheap. It’s like 24 bucks a month and then 5 bucks per employee and it’s unlimited payrolls or something. If you’re one of two people, it’s in the 20s or 30s. This is a no brainer.
Mike [22:30]: They recently updated their pricing too. They went up a little bit.
Rob [22:34]: Oh, did they?
Mike [22:34]: Yeah.
Rob [22:34]: Did they grandfather us?
Mike [22:35]: I don’t know. I’m grandfather, I think.
Rob [22:39]: The next category is video hosting. Obviously you’re going to have some demo videos. You’re going to have some marketing videos. You’re just going to have a need for videos as you scale up even a little bit. YouTube is free but you have so little control and the player is not very nice. It’s not very attractive I should say. At the end of your video, they pop up 20 related videos that are from other people. It takes you out of what you’re doing. It’s not very professional. To me, again it’s post-revenue. As soon as you have some revenue, you’re going to want to go with someone like Wistia, which is about 240 bucks a year or Vimeo, which is 200 bucks a year or SproutVideo, which is in that range. They might have a $10 or $15 a month plan because you’re going to get so much more control. You’re going to get better metrics. A lot of them have e-mail capture built in, where you can gait a marketing video at a certain point or a valuable video that you want people to watch.
You can feature-gait it to where in essence they have to enter an e-mail to get past that. That can go directly into a provider like a Drip or MailChimp or something. This is when I hadn’t really thought of earlier on because it slipped under the radar. But as soon as we had video that needed to appear on our website, which is SSL, we could only use a few providers. Since I didn’t want to use YouTube, it became expensive pretty quick. I remember we started off with a $20 plan and then by the time we had a few videos it was up to 50. I pay either 100 or it might be a little more than that like 120 a month to Wistia because of the volume of bandwidth and the features. We needed some specific features that are feature-gaited up to that point. It’s not outrageous for sure but when you can start at 20 bucks a month, it’s a pretty good way to go.
Mike [24:18]: I will point out that I think both Wistia and Vimeo have free plans that you can get on if you want to get started with those services on day one. If you are pre-revenue, you can use those services obviously if there is feature-gaiting. If you get to a point where you’re scaling and you’re using a lot of bandwidth or there’s other features that you want to be able to use, you may have to start paying for it. But again, the pricing isn’t completely outrageous either. The next category is e-mail marketing tools. By e-mail marketing, really what I mean is capturing e-mail addresses from people and being able to send out bulk e-mails. A lot of different tools fall under this bucket; MailChimp, AWeber, Constant Contact, those types of tools. The idea here is that you want something that is going to allow you to send out mass e-mails to your mailing list.
Rob [25:06]: This is actually one of the others that if you’re pre-revenue, this was the other thing that we had. I talked about hosting and payment providers. E-mail marketing would be the other one. In the very early days, if you’d collect e-mails and send a broadcast once in a while, MailChimp is not a bad tool for that. It’s only once you segment the list and try to do anything of any complexity that you might run into problems and need to outgrow it. That’s when you move into these e-mail marketing automation tools, which are going to run you 50 bucks a month and up. That’s like a Drip, [?] and Infusionsoft and when you’re post-revenue, this is a necessity. It’s rare that you’re going to grow and scale on a basic e-mail marketing tool that doesn’t have the automation stuff baked into it.
Mike [25:47]: The next category is cash management software services. In virtually every case if you’re looking for any sort of book-keeping software, I would go Xero. They have an online subscription. You go out there and it’s very easy to use. It generally follows accepted best practices for accounting. If you know anything about accounting, you can do anything that you would probably need to do inside of Xero. There’s also other options out there. QuickBooks Online is probably the big player in this particular space. They do have QuickBooks Desktop Edition. There’s also other tools out there like Less Accounting and Outright. There’s other ancillary tools that I would probably put underneath this category such as Baremetrics or FirstOfficer.io, that allow you to analyze the incoming payments. I might also throw PayPal underneath this and I would also put something like FreshBooks or Expensify for doing invoices and receipt tracking. Generally speaking, most of those tools should not cost you very much, $20, 30, 40 a month at the most for each individual one. Being able to know how much money is coming in and how much is going out is going to save you a ton of time at the end of the year especially if you’re post-revenue and you have to start tracking how much did I spend? How much did I make? How much can I write off? All the reports and stuff that you need out of that. If you don’t have it tracked, it can be very difficult. If you have a very simple business, you can do it in Excel. But once you start getting complicated with anything, you get lots of transactions. It’s hard to track all that stuff outside of excel.
Rob [27:16]: We live in the golden age of starting a business. The fact that you can get all the power of the tools you just mentioned and you don’t need to install a server because it’s all SaaS and you can pay, like you said, 10, 20, 30 bucks a month for these, is just amazing. 10 to 15 years ago it was so much of a hustle, you install desktop software and then you had to back the files and the desktop software wasn’t very good. When you change computers, you had to try to remember to get the files. It was so much of a hustle. This is a much better approach. The next category, we have it as two items but I’ll lump it into one. The first is Website Traffic Analytics and the next one after that is Advanced Analytics. For just basic analytics, Google Analytics is great, Google Webmaster Tools, Clicky, which is at getclicky.com is 10 bucks a month. Those show you your unique visitors and aggregate data.
These are a no brainer for getting started and you should have them if, for nothing else, to have the historical data, you should have these installed. The advance side is going to be a tool more like a Mixpanel or CaseMetrix and that can often give you a per visitor insight. You can identify people and know what individuals did. You can analyze funnels with more advanced precision and all that stuff. They have free plans but they get expensive quick. It goes from free to 150 a month. For business generating even a few thousand bucks, it’s probably worth it because the insights you can pull out of that on how to optimize your funnel are a big deal. It’s scaling up if you’re doing 20, 30, 40 grand a month. You should be using one of these tools
Mike [28:42]: The next category is dashboarding software, which if you are running a business and you have a lot of different tools, sometimes you have to go to multiple tools in order to find a lot of different KPIs or Key Performance Indicators that you’re looking for. Sometimes it’s more helpful to have a dashboard of some kind. There’s different options out there like DigMyData or Cyph. There seemed to be more and more of these types of tool popping up all the time. What I find is that I like the idea of having a dashboard and being able to look at that data at a glance. But what I find is that if I see some piece of data that I want to drill into, I then have to go over to the tool anyway. Having a dashboard itself probably doesn’t do a lot for me except for give me the ability to publicize some of that data to other people on the team. If you’re just using it for yourself, if you’re a one person company, my guess is dashboards are probably not going to help you very much. They look nice and they sound great in theory but as a business owner, you’re probably going to be digging into that data anyway.
Rob [29:39]: Landing pages is another category here. That will cost you, let’s say, between 20 and 50 bucks a month. There’s KickoffLabs, LeadPages, Unbounce, Instapage. There’s a lot of players in this space. ClickFunnels is another one. It’s funny because I never used landing pages when I was hacking away solo on everything because I would just copy to HTML and I’d modify it and I’d do all that. But now that we’re working on a team and we’re moving fats and there’s a bunch of people doing stuff and we have a marketer who, just fulltime, is running experiments, it helps to have something where you can just crank out a landing page in 10 minutes and not have to worry about deploying and having it in source control and is it on the main website or is it WordPress and do I have a plug in. it is simpler to have one of these providers. You’re mileage may vary and each company may do it differently but I have definitely been sold on the value of using one of these landing page providers, if for nothing else, for some of the templates are nice. The speed of implementation, the speed of iteration has accelerated by using one of these platforms.
Mike [30:38]: The next two categories, I’m lumping these together but they’re both sales tools. Essentially you have your basic entry level CRMs. These will run you $10 to $20. Sometimes that’s per user, sometimes it’s just a flat rate. This is for a basic CRM or a basic sales tool of some kind. In this category I would put things like Pipedrive, Highrise or Zoho and many of the basic sales or CRM tools like that. The next level up, once you start to get a lot of information in there and you start to do more advance things or you want to do any sort of automation, it’s almost very similar to e-mail marketing, where you’ve got basic e-mail marketing and you’ve got the advanced stuff. In the advanced category for sales tools, you’re probably looking at $50 and up per user. I would say that Bluetick falls into this category. You’ll also find tools like Salesforce or Closed.io. The basics of most of these tools is that it helps to automate or improve your sales process and because of the increased efficiencies that those types of tools provide you, they do cost quite a bit more.
Rob [31:39]: Our next category is demo software meaning software that helps you give demos to your potential customers. Some free options are things like Skype, Google Hangouts, join.me, all of which we tried at Drip and they all had one hang up or another. They’re other unprofessional or a lot of people aren’t on Skype or you have to get approval from their username in order to contact them. It just feels like you’re running a junky service. We have since moved on from those. GoToMeeting and WebExpo have free plans. I haven’t used either of them but I know they’re popular. We’ve settled on Zoom which is 15 bucks a month per user. It’s working out quite well. There’s a lot of tools available for this. You just want to find something that is A, professional and B gives you a lot of control and allows you to demo whatever you need and frankly you may also want the user, depending on whether if you’re also using this sometimes for on-boarding or some high end support, you may want the user to be able to share in their screen and that’s a nice benefit of a tool like Zoom and GoToMeeting. These should be in there. They’re anywhere from free up to about 15 to 20 bucks per user, depending in the features you want. You can find something that’s like $50 per user per month. You should be able to get by with 15 to 20 range.
Mike [32:51]: Now that we’ve talked a lot of those different categories, we want to talk about two different exceptions that we came up with for this. The first one is that in general spending money to learn something is worth the investment. You’re looking at a specific channel and you’re spending money there to try and figure out whether you can use that channel to acquire customers or you’re trying to learn things about your audience. It’s very difficult to give guidelines about what specifically you should be spending on these things because if you are making $1,000 a month, clearly you don’t want to be spending $1,000 a month on your advertising or $10,000 a month on your advertising to learn something. But if you’re bringing in $100,000 a month, spending $10,000 to try and figure out whether or not a particular channel is going work for you to acquire customer, that could be justified. It’s difficult to provide specifics in this particular area because of that but we do want to point it out as something of an exception to this. It’s hard to give guidance about exact numbers for that.
Rob [33:48]: It’s also hard to give guidance. Your pre-revenue is a pretty finite space and there’s not a lot of room there. You can be specific about it. Post-revenue is anywhere from a dollar a month up to hundreds of millions a month. It’s hard to give all of these ballparks. Generally, we’re talking about businesses that are doing up to in the seven figures a year. Once you’re in the eight figures, a lot of stuff changes. With that in mind, the other exception to all of this is headcount. Salary for one employee is going to eclipse everything in this list combined. But we just wanted to talk about tools today and the software tools that you would need to get started up.
Mike [34:27]: We’re running a little short on time here but we do want to live you guys with two tips in general about looking at the different services that you’re using in your business. The first one is that you should buy tools that do the job that you need done not tools that you have seen other successful people or businesses using. A lot of time just using that particular tool that somebody else is using isn’t going to make you as successful as they are. It’s more about how you use the tool and what jobs you’re accomplishing with them as opposed to the tools that you’re using.
Rob [34:54]: The other tip I’ll throw out is to buy what you need now not what you’re going to need in the future because otherwise you’re going to be paying for something that you can probably upgrade to at the point when you need it. There’re some minor exceptions. If you think about a Mixpanel or CaseMetrix, the more historical data you have the better. Unless you do have a lot of budget that dropping 100, 150 bucks a month from the very start is a dubious proposition if you’re trying to bootstrap a startup. In general, the best advice is to buy what you need now and not something that you think you’re going to need in the next six months. That wraps us up for today. If you have a question for us, call our voicemail number at 8-8-8-8-0-1-9-6-9-0 or e-mail 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. We’ll see you next time.
Episode 280 | The Productivity Project with Guest Chris Bailey
Show Notes
In this episode of Startups For The Rest Of Us, Rob interviews Chris Bailey, author of The Productivity Project. They discuss aspects of the book and Chris shares some of his personal experiences with productivity techniques both successful and unsuccessful.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of Startups for the Rest of Us, I interview Chris Bailey, author of ‘The Productivity Project’. This is Startups for The Rest of Us Episode 280. Welcome to Startups for The Rest of Us the podcast helps developers, designers and entrepreneurs to be awesome at launching their software products, whether you’ve build your first product or you’re just thinking about it. I’m Rob.
Chris [00:26]: And I’m Chris.
Rob [00:27]: We’re here to share our experiences to help you avoid the same mistakes we’ve made. Mr. Chris Bailey, thank you so much for joining me today on the show.
Chris [00:34]: I am honored. Thank you for having me.
Rob [00:36]: For folks who don’t know, you are the author of a book called ‘The Productivity Project’ as well as the man behind alifeofproductivity.com.
Chris [00:44]: That is me.
Rob [00:45]: I first heard about you on Unmistakable Creative Podcast that Srini Rao hosts. He raved so much about your book that I had to check it out. I’m really glad you have it up on Audible. That’s how I consume almost all of my material. To be honest, I’m really not a fan of productivity books in general. The reason I don’t like them is because I feel like they tell me the same thing over and over like don’t multitask and other stuff, get up early, exercise.
Chris [01:13]: That’s just bullshit. I don’t know if I’m allowed to swear but it’s such BS getting up in productivity.
Rob [01:18]: I know and I wanted to get into that in the interview. That’s what I liked about it, is that I bought it on a lock because Srini raved so much about it. I was probably a chapter in and already I realized, “Oh, man. This is the change in my game.” I started taking notes frantically. I have a Mosca Notebook that only when stuff is really that I want to take with me, I write in this notebook. I already had a bunch of notes scribbled. This was about two and a half weeks ago maybe three weeks ago I started listening. I have a bunch of things that I have adapted and adopted from it. That’s saying a lot because as much information as I consume, I don’t tend to necessarily move as much into my daily routine. Your book has already had an impact on me. I’ve talked about it on this podcast a couple of weeks ago. I wanted to have you on the show just to talk through a few of the things because I feel like you experimented on yourself and that’s the cool part of this, right?
Chris [02:07]: Yeah.
Rob [02:07]: You don’t come off as some expert who has this theory that everyone should follow. You basically say, “I tried this. I failed a bunch of times but some of it worked and here’s what I found.”
Chris [02:16]: I’m personally not too big a fan of those people. That was one of the things I found in this productivity project, is a lot of people call themselves gurus. That’s a good sign by the way. When somebody calls themselves a guru or my pet peeve is a thought leader. When somebody prescribes themselves as a ‘thought leader’, that’s a pretty good sign that they’re not. You hit on one of the things that I think is crucial about productivity tactics is that spending time reading about them is great. They’re entertaining. You can look at productivity porn as long as you want but if you don’t make all that time back and then some, you’re basically just wasting your time. The idea behind the productivity project was to spend a year and experiment with everything that I could find under the sun that had to do with my productivity to see if it helped me get more done or get less done and whether I actually earned that time back. So much of the stuff out there simply doesn’t.
It’s this productivity porn of becoming busier or just doing more instead of achieving more. It might sound corny but I have this idea that productivity isn’t about how much we produce. We can produce e-mail all day long and not accomplish a single thing. We could spend all day on Twitter and not accomplish a single thing. What we’re left with though, at the end of the day, the residue of our day is what we accomplish. That’s what productivity is all about, I think.
Rob [03:40]: Yeah, well said. I have some notes here and one of the points that you make in the book is you say, flat out, most productivity hacks didn’t work. Most of the things you tried didn’t work. Do you have a theory on why that is?
Chris [03:51]: I think because the idea of so many changes is way sexier than what you have to actually do to make the change happen. Waking up earlier is one of my go-to examples as something that just doesn’t work. It depends on your situation because if you have a family, kids, maybe waking up at 5:30 will help you in your productivity because it will give you this bubble of clarity and focus after you wake up. But it depends on what your life is like. The studies out there, at least, show that there is zero difference in socio-economic standing between somebody who wakes up early and somebody who wakes up late. It’s what you do with the hours of your day that matters. You think of the idea of being an early riser that wakes up at 5:30, waking up at 5:30 to meditate, get a cup of coffee and catch up on the news and social media and start a writing ritual maybe. A lot of people have a sepia tone fantasy of what they want to do and what they want their life to become.
It’s so easy to focus on that fantasy instead of what you have to actually do to make that change happen. Everybody on the planet wants to become a billionaire and get a six pack but in the moment, you want nothing more than to play hooky and grab a cheeseburger. It’s the idea of these changes that is so much more attractive than what you have to actually do to make them. That’s another thing. You got to make that time back but you also invest energy and willpower into investing in your productivity. There’re big costs to investing in your productivity which is why it’s so crucial to figure out whether a change is worth making in the first place.
Rob [05:33]: You conjecture in the book, you say, “I believe that I’ve made a 10 X improvement from any of these productivity acts because it takes time and will power to manage and implement.”
Chris [05:42]: Oh, yeah. It’s so easy to look at the idea instead of the cost or something.
Rob [05:46]: In the book, you talk about how you, yourself, tried to become an early riser and didn’t really work for you. I’m a night owl like yourself. My wife is an early riser and I have this phrase, when she gets up at 5:30 and does all these stuff and I say, “The smug superiority of the early riser.” It didn’t work out for you. Why was that? Is it body clock thing? What do you think?
Chris [06:10]: I think it is. We all have different chronotypes, which is how our energy naturally fluctuates over the course of the day. One of the things I did for this project was I conducted research with all the books and academic journals I could get my hands on. I talked to the biggest productivity experts out there, big in reputation not in physical size and I also conducted these productivity experiments on myself where I used myself as a test tube to experiment with things like working 90-hour weeks, watching 300 Ted Talks in a week, becoming a total slob for a week and gaining 10 pounds of muscle mass living in isolation. Getting up at 5:30 was one of the first experiments I conducted. I struggled with shoehorning this habit into my life for three months. After that, I learnt a lot about habit formation along the way if that one. After I had finally done it, I had this routine that productivity dreams were made of or at least I had imagined they were made of.
But then I realized that I absolutely hated the ritual. I had to go bed at 9:30 in order to get a full night sleep, which I absolutely hated. It was either that or struggle through the next day on a low tank of energy. One of the crucial findings I made from this experiment is that just as not all tasks in our work are created equal. We accomplish a lot more doing certain things like engineering a new product or working on a report for whatever it is that the highest return [?] the new job are than we do checking e-mail, social media or attending a meandering meeting of some sort. Just as not all tasks in our work are created equal, not all hours of the day are created equal. Depending on our chronotype, which is when we’re naturally wired to have the most energy, we have varying amounts of energy depending on the hour of the day. The go-to example that a lot of people use for this is if you’re a morning bird, you’re going to have a crazy amount of energy so your wife has a crazy amount of energy at 5:30 in the morning or at least more than what I consider clinically sane in humans.
People like myself and yourself, we have more energy late at night and so we bring more energy to what’s in front of us later on in the day. A change like waking up at 5:30 might not necessarily work as well for people like us. But we can take advantage of this idea, though, that our energy fluctuates over the course of the day. One of the main findings from the productivity project was that everything I researched, throughout the year of productivity, fell into better management of one of three categories; managing my time, attention or energy. The better we manage all three of these ingredients, the more productive we can become. It’s so easy to look at time and this is what we’ve done for hundreds of years. When we work in an office-type environment, it’s simply not as important as it once was. When one person brings twice the amount of attention to their work and they shut off distractions and they can focus deep around their work, they’re going to become more productive, than somebody who is constantly distracted and can’t focus, and accomplish more in the same amount of time.
Energy is the same way. If you don’t burnout at one in the afternoon and instead you cultivate having a lasting energy level throughout the day, likewise you’re going to be able to bring more of yourself to your work so you don’t burnout. When you rejuvenate your energy levels by taking more frequent breaks and doing tactics along those lines, you bring more energy to your work which allows you to accomplish more in less time. Managing your energy is a crucial thing. That goes to when you’re naturally wired as well. Another one of the experiments I did shortly after waking up at 5:30 every morning was charting how much energy I had every hour on the hour for three weeks. Every hour I had an alert on my phone telling me, “Chart how much energy, focus and motivation you have right now.” I charted those and I found that between the hours of 10:00 a.m. and noon and 5:00 and 8:00 p.m. in the evening and onwards, I had more energy than any other hour of the day.
That was when I brought the most energy to what was in front of me. The more important tasks I worked on during that time, as an example writing for my website, doing tedious research or after that writing this book, the more I accomplished in the same amount of time. This is a central idea I think it’s crucial to think about when it comes to your productivity is that productivity isn’t just time anymore. If you don’t cultivate your energy properly, you’re going to burnout. Your productivity will be short. The same is true with our attention. You probably know this better than anyone. Attention is the rarest commodity that we have but it’s not the most limited commodity that we have. Time is. Because it’s so rare, when we cultivate more attention to bring to what’s in front of us and spend it intelligently, we can get that much more done. Man, that was a long answer. I’m so sorry.
Rob [11:02]: No, that was a good one.
Chris [11:03]: You got me going. That was like a trigger question.
Rob [11:06]: You touched on two things that I was going to bring up. This is really good.
Chris [11:09]: This is good.
Rob [11:10]: Probably my favorite concept from the book, one of my strongest takeaways was your framework of time, attention and energy because most books are more about managing time. I’ve always seen, in my work career, there were two things is what I’d imagine it had. There was time and energy. I would strategically use caffeine and other things to help me have the most energy when I needed. But I was missing an element and that’s what I liked about your book. Everything you said lined up with my experience and then added to it and gave it deeper understanding of topics I didn’t quite have my hand on. Adding that third element of attention made me realize why, when I get a bunch of e-mails, if someone’s saying, “Hey, I just need five minutes of your time,” that doesn’t sound like a lot. It’s not the time that’s the hard part. It’s the switching the attention.
Chris [11:54]: I find this way. One of the things I do more and more is speaking around the book, around productivity, around whatever the hell people want me to speak about. It’s weird that people want me to talk at all. I find that if I give a half hour talk somewhere, that’s a half hour of time and that’s a half hour of energy. But I’ll worry about that talk for days leading up to it. It takes days of attention to just do that one talk. It’s an idea like switching to e-mail. E-mail is the pain-point that so many people have. We might not spend a ton of time on e-mail over the course of the day but when we switch between e-mail and every other context of our work 30 or 40 times, which is the average for most people according to Rescue Time, I believe the number is 41 times a day, that’s 41 times than when we have to perform a conceptual shift from one element of our work to another. We never perform that shift productively because it takes energy, willpower, so many things for our minds to switch from one context to another. That’s why you have some days where you repeatedly check your e-mail where you don’t have much to do and you’re exhausted by the end of it. It’s because you burn so much mental juice switching between these different contexts.
Rob [13:09]: Touching on that, during your answer, you mentioned but didn’t name the Biological Prime Time which is your concept of where you stopped consuming caffeine and alcohol for three weeks and you tracked which hours of the day were your, what you call your BPT. Now I’m assuming you must structure your work schedule to do your high energy high attention work around those times. Is that the idea?
Chris [13:35]: For sure. We’re talking, right now, in the middle of my Biological Prime Time. I’m having some [?] to boost. It allows me to bring more of myself to the elements of my work that are more important, like talking to you right now is more important than a lot of the things I’m going to do later on in the day. Why not schedule your day around when you have the most energy? Productivity, at the same time, is so often a process of understanding our constraints. If you work for the men or any one of these things, you might have more constraints than someone like you or I would. But still when you do have that flexibility, it’s crucial to not squander it. Biological Prime Time, by the way, I don’t want to take credit for that term. It was coined by Sam Carpenter who wrote a book called ‘Work the System’ I believe. This was the golden nugget I took away from that book is this idea of thinking about it in those terms.
Rob [14:31]: I’ve read that book but I didn’t remember that term so I’m [?]
Chris [14:35]: Credit where credit is due.
Rob [14:36]: Indeed. Right within, I think it’s the first chapter of your book. You do challenges during the book. It’s not every chapter but where it’s appropriate where you say, “Look, put the book down, grab a pen and paper, spend 10 minutes and do this.” Your first challenge is called The Values Challenge. You ask the question, “If you had two extra hours in everyday, in every work day or in everyday period because you’re more productive, what would you do with that time? Sit down, think about that and write it out.” What’ the importance of answering that question?
Chris [15:08]: It’s thinking about what you want productivity to do for you. Everybody has a different purpose for productivity. Some people see it as a way of doing more and more and cramming more into the day. But I see it as a way of making more times for the things that are actually meaningful to me. In a typical day, I like to think I’m pretty productive. It would be a surprise if I wasn’t productive after dedicating a year of my life to improving that side of myself. On a typical day, I do my work in six or eight hours; before investing in my productivity, that would have been 16 hours worth of work. I see it as a way of doing everything I have to do in less time so I have more time for the things that are actually meaningful to me like spending time with loved ones outside of that. I’m a pretty big nerd like I would imagine you are and a lot of the audience is. I like soaking in cosmology lectures. I’m learning to program. I totally suck at it right now but I’m putting my [feelings?] out for that.
If anybody knows any good resources, I don’t want to get flooded with stuff. If you want to e-mail me on or two places to learn that, just anything that takes my curiosity throughout the rest of the day. I see it as a way of carving out more time for the things that are actually meaningful. Those challenges, by the way, I’m not a fan of challenges after chapters of a book. I decided to put these in there because they prime your mind to think about ways of implementing the tactics in the book. They’re very simple and they reduce what I talk about in the individual chapters down to something that you can action at the end of them. What do you think about challenges at the end of chapters? What are your thoughts?
Rob [16:51]: I tend to ignore them and skim over them. In your book, I did maybe two or three of them, which is saying a lot because I tend to do zero of them.
Chris [17:01]: Me too. I wrote the challenges for people like you and me who don’t do challenges.
Rob [17:09]: The way I’ve been summarizing your book to people and you can correct me if this is an incorrect summary. What I basically say, “Look, this guy took like 100 productivity hacks and approaches and tried them out on himself over the course of a year and then he basically wrote a book about the 20 or so that worked for him.”
Chris [17:28]: Yeah. That’s a good way of framing it. What I really did is I looked at all the productivity books, the research, the neurological books out there, books about the brain and workplace performance. I also conducted these weird experiments on myself to tell some stories along the way so it’s not boring as hell. I looked at all of that stuff and thought how did these – I think they were more than 100. I’ve never actually counted with everything I experimented with. There were a few hundred things, there must have been, that I tried out; keeping sticky notes everywhere from finishing stuff I had to get done, all these different organizational systems for managing my work and my life and compartmentalizing everything. This is about the 25 things out of those hundreds that actually work and most importantly that actually stuck with me because change the idea of something can be so powerful. But, again, you have to actually do it for it to work. I like that idea.
Rob [18:29]: That summary of it?
Chris [18:30]: Yeah. It’s a good summary.
Rob [18:31]: Cool, even though it’s hundreds instead of a 100 but for some reason I had remembered the number 100.
Chris [18:35]: You just got to put the number u a little bit, make it sound a little bit more impressive. He experimented with tens of thousands experiments.
Rob [18:44]: One of the things you experimented with that I really liked because this is something I’ve long held, it’s like a value, is you tried working 20 hours a week and then your tried working 90-hour weeks and you compared your productivity and you found …
Chris [18:58]: It was about the same.
Rob [18:59]: About the same but you said it was a nominal increase in productivity in your 90-hour weeks. Why is that?
Chris [19:07]: The thing was I felt so much more productive and I think it was because –
Rob [19:14]: Working the 90-hour weeks you did?
Chris [19:15]: Yeah and it was because there was no guilt that sipped into my work. I think so often the less guilty we feel about our work, the more productive we feel. Guilt works hand in hand with busyness. It’s an idea I’ve been thinking a lot about. When you have more work to do than you have time to do it in, the natural incline is almost to dedicate more time to your work instead of more focus and energy and leave those by the wayside, burnout, multitask and try to take on too much stuff. It doesn’t work in practice. Working 20 hours a week, when I looked at how productive I felt, I felt four times more productive in the 90-hour weeks. I felt like I had accomplished that much more. But when I looked at how much I actually accomplished in those weeks; that was the most surprising lesson I discovered from the project by far. I only accomplished a bit more working 90 hours a week. I think it was because of two reasons.
The first is because of Parkinson’s Law, which says that our work tends to expand to fit how much time we have available for it. This is why you feel like you’re living at capacity in your home life but then the new season of House of Cards or orange is the New Black comes out and you suddenly, this magical 10 or 15 hour window opens up over the course of a few days and you find time to watch the entire season. It’s because what we do tends to expand to fit how much time we have. Our work is no exception. I did the same amount of work, it’s just that I expanded and wasted so much more time in the 90-hour weeks. I also didn’t manage my energy properly. A deadline is one of the most powerful things on the planet. Everybody on the planet knows this. Let’s say it’s Monday and somebody tells you, “Dude, you just won an all expenses paid trip to Australia but it leaves tomorrow evening.”
Chances are you would find a way to do most of the week’s work in those one or two days so you could accomplish as much as you need to in order to get on with the imposed deadline. Our work hours are the same way. The 20-hour weeks were the exact same way because I shrank how long I worked for in general, I forced myself to expend more energy over that shorter distance of time so can get it done and it filters down to the individual tasks in our work too; if you have a big project to write, code or whatever it might be. If you, instead of scheduling an entire afternoon to do that and burning some time and attention on Twitter, e-mail and all these different things, you schedule a one and a half hour block of time and you force yourself to stop at the end of that. You’ll force yourself to expend more energy over that shorter distance of time so you can get everything you need to do done. Managing and shrinking how long we’ll work on something for is also a gateway to managing our energy in that way too.
Rob [22:14]: Nice. My most recent blog post I published is called ‘How to Force Yourself to Ship (Even Though it’s Hard)’ and it’s all about how at Drip, the company I run, we don’t set many deadlines but we did have to set one for a recent feature we launched and it just kicked us all into high gear. I’m definitely a believer in that.
Chris [22:35]: Shrinking how long you do something for, it’s a way of imposing a deadline on yourself, whether it’s for a task or your work in general. This is why; I think it’s in Sweden that they’re going to a 30 or 35-hour week. If you have people who are motivated, that’s going to work because they care enough about their work to expend more energy to get it all done. They’ll waste less time. If you have people who aren’t that motivated, chances are they will just slack off for 30 hours.
Rob [23:03]: You mentioned that research suggests that the ideal work week is between 35 and 40 hours?
Chris [23:09]: Yeah. That’s what the research seems to suggest. This is not to say that crunch time doesn’t work because it absolutely does. When you work consistently long hours, your productivity after a few weeks begins to fall off a cliff and become obliterated. It’s not that one 90-hour week is terrible for your productivity because if it’s once a year, it’s really not. Sometimes projects have to ship; sometimes you have to work insane deadlines. But most of the time if you work consistently longer than 35 hours a week, your productivity is going to begin to plummet. That’s a side note, a little Ted debate on working hours. As a rule, people usually work fewer hours than they think they do. You can get this insight when you track your time. One study, I have it here in front of me because I’m weird like that. People who claim to work between 60 and 64 hours a week actually work an average of 44.2 hours; from 60 down to 44.2. People who claim to work 75 or more hours, they actually average 54.9. There’s often a huge gap and it’s because when we think we work longer hours, it’s as if the world needs us twice as much. So often we work fewer hours than we think we do.
Rob [24:32]: Yeah, that makes sense. One of the other things that I took away from your book and I actually started and put my name right away was this rule of three daily tasks or three daily accomplishments. Earlier on with your research, you said on your website that you have this stats page where you tracking how many words you had written that day or how many – you’re trying to quantify it and you realize that was focusing on efficiency and that was a mistake. You started asking yourself, “Did I get done what I intended to do today?” That was your new measure or productivity. I feel like the three daily tasks ties heavily into that. You want to talk a little bit about that?
Chris [25:09]: Yeah. Intention lies at the heart of productivity. This deliberateness, I would equate productivity on so many levels with deliberateness. Being more deliberate about what we spend our time on in general, everyday or every hour in the case of working more mindfully in the moment because it’s in the moment, like we were chatting about earlier, that we want to have a six pack and we also want to grab a cheeseburger. If we can bring the idea of deliberateness down to the moment, that’s where the magic is made as far as productivity is concerned. The idea of managing everything you want to spend time on, it’s something so many people talk about. But so many of the systems out there won’t make you care about what you have to do. The best rule I found for that is, as you’re probably well aware of, it’s almost stupidly simple how easy this idea is. That’s where its power lies; is in inserting these intentions each day.
The idea of the rule of three is this; at the beginning of the day, you fast-forward to the end of the day in your head and then you ask yourself, “By the time the day is done, what three main things will I want to have accomplished?” Those become your primary focus throughout the day. The idea behind it is that it only takes a few minutes, first of all, which makes it so powerful. You don’t have to spend hours organizing everything on your plate. It allows you to insert this intention because it’s hard to remember what’s important throughout the day. When everything hits the fan over the course of the day, these serve as the guiding light for what you want to accomplish over the course of the day. My three, as an example today, I am writing six articles for my website. I am putting together a list of all the places I’m speaking at to coordinate them in one place. My goal is to finish making two talks. It’s a lot of work. It doesn’t include everything, like it doesn’t include our chat right now, the other miscellaneous [poparia?] of the day.
It includes the three main things you want to accomplish. It aligns what you work on over the course of the day, not to what you have to do, like a task list does, but what you want to accomplish when the day is done. That’s really what you’re left with. It works because it’s in that deliberateness that you decide not only what you do and not only what is the most important to spend your time on but also what you don’t spend your time on. You take the time to separate what’s important from what isn’t. I mentioned earlier that productivity is so often the process of understanding the constraints that we have. Some days they’re stocked with meetings. You’ll have less freedom and flexibility to determine what you actually need to accomplish or want to accomplish. By taking the time to understand those constraints, you can become more deliberate about your work over time. At first when I implemented this rule, I learned about it from J.D Meier, who’s Microsoft’s Director of Business Programs.
A lot of people have talked about it before. It was his book ‘Getting Results the Agile Way’ that turned me on to this idea. At first I way overshot the three things and so I would say, “I’m going to write 1500 words today,” and I would write 3000 or 4000 or I would undershoot them. The next day I would say, “Okay, I’m going to write 5000 words,” and I’d write 2000, just as a very simple example. Over time, you begin to settle into this place of understanding the constraints that you have. How much time, flexibility, energy, focus and attention you’ll have, how often you’ll have to switch between these different contexts so that you can get a grip of not only what you’re going to accomplish but how much potential you actually have to do that.
Rob [29:06]: As I said, this is one of the things that I’ve adopted and it’s helped me focus on something I should have been doing anyway. When you say, in the book, it is such a simple thing, thinking of the three things you want to get done in each day. I think you said to do it for the entire week as well.
Chris [29:22]: Yeah, I forget that point. That’s a pretty big point.
Rob [29:26]: Yeah I know.
Chris [29:26]: I do it and I should have been cued because I have the three weekly things I intended to accomplish right above that on the big ass whiteboard in my office. The idea is every Sunday I usually do this. I set the three main intentions for the week. The three daily ones won’t always fit into the three weekly ones but often times they do. It reminds you of what’s important throughout the week when you’re carving out those daily intentions too because that’s the process. You figure out what’s important in general but it’s on a weekly basis that you set these very short-term milestones that fit into those ideas. It’s on a daily basis that you execute on them. It’s on a moment by moment basis that these challenges come up with actually working on them which is why ideas like single-tasking, stop multitasking and shutting off distractions can be so powerful.
Rob [30:23]: It seems to me that the idea of this rule of three on a daily basis rule, rule of three on a weekly basis and shutting off the multitasking and all the alerts and stuff. It’s not that they take time to do but it requires deliberate discipline and it’s almost like a certain level of attention and energy that you have to devote, which is step back, clear your mind and say, “What three things do I want to accomplish today and this week?” That’s the hard thing to do, I found. I find that it takes energy and attention to do that. My mind tends to want to resist that and wants to flip into my e-mail inbox because as you called it, that’s the Netflix of the work world, right?
Chris [31:02]: Yeah. That’s why it’s crucial to do it at the start of each day. You only have so much willpower throughout the day and once that’s depleted, your productivity, your focus is toast and you’re going to be working on autopilot. It’s important right at the start of the day, before you jump in to do these things because that’s when your energy is the greatest. That’s when you have the most cognitive juice because you haven’t burned too much glucose in your brain from working on other stuff too.
Rob [31:29]: I think that’s one of the points that I took away from your book; is that these things, like the low return tasks you call them, which are the checking your e-mail, checking Twitter or Facebook or all that stuff that beckons to you that feels productive, that fires with [?] your brain, it’s quite unproductive in general.
Chris [31:51]: I would challenge people if they want to try out the tactics that we’re talking about. Let’s be honest, most people aren’t going to buy the book so let’s make this conversation as valuable as we can. Try these things out but observe how much they allow you to accomplish compared to how you were working before. That’s where the money is mad because these tactics become self-reinforcing once you realize how much more they let you get done over the course of the day. The rule of three is great gateway one to start with. If you start by defining the three daily intentions that you have and then observe whether you actually accomplish them, how you’re working differently, how your working towards those three things, it will become self reinforcing. You can make the connection between getting more done in less time and the tactics that you’re experimenting with. One of the worst things you can do, and this is what I found in the productivity project, is blindly accepting blanket productivity advice because you’ll fall into so many traps, pitfalls and so much stuff that frankly doesn’t work.
I would say that more things don’t work than the things that do. I tried to pick the best ones but maybe not all of these will work for you too. Maybe you’ll resist them more than you’ll feel comfortable with and so you don’t end up doing it. That’s cool too. But when you look at the difference in how much you accomplish when you do the tactics and whether or not you get the time back that you spend reading about these things because that’s where productivity becomes crucial. I think that’s so important.
Rob [33:26]: I would agree. If you’re listening to this, the way I’m approaching the book is not to take all 25 of these and try to integrate them into my work life or my personal life for that matter. I read through it and I took away things that I felt like would work for me, given what I do on a daily basis, my personality, what I know about myself. The notes that I took instead of all 25, it looks like I have 9 or 10 that I feel like are really going to jive with me. I’m not trying to adopt all of them at once. I’m tackling two of them to start with. It’s the five minute meditation in the morning and embarrassingly pretend to do that in my car in the parking lot once I get to work and I just sit there.
Chris [34:05]: That’s cool. At least you’re now driving then.
Rob [34:06]: Yeah I’m now driving. I clear my mind. The fact that it’s only five minutes has made it an easy one or me.
Chris [34:13]: This is a good tip to give people. When you want to make a change, find how resistant you are to the ritual. If you say, “Okay, I’m going to really try and meditate,” and then you meditate, I’m going to say, “Okay, I’m going to mediate for half an hour each day.” Eventually you’re not going to have half an hour or you’re not going to feel like doing it for half an hour and the habit is going to just collapse in on itself. You can combat this though by shrinking how long you’ll do something for until you don’t fell that resistance anymore. You say to yourself, it works for going to the gym, meditation, going of a walk around the neighborhood, for pretty much anything. You say, “Okay. I don’t feel like meditating for half an hour today. Could I do 25 minutes?” The thought of it still puts me off, “What about 20 minutes?” It’s getting better but, “What about 15 minutes?” Getting better, “10?” Yeah, I can meditate for 10 minutes. You meditate for 10 minutes.
When you get to that 10 minute mark, because you’ve overcome that initial resistance because things are never as intimidating in practice as they are in ideas, chances are you’ll want to keep going. The same is true for the gym, going for a run, for pretty much anything; doing your taxes, cleaning up the basement. By overcoming that initial resistance, you can keep going after that. So many other things are intimidating that we want to do. When we shrink and be kind to ourselves in the process and we’re not a total hard ass on ourself for trying to make our life better, we can do that much more and make them stick.
Rob [35:45]: Indeed. I like the way you couch the meditation. I’ve never been a meditator, never really been done it. Your instructions were just be aware of your breath. That’s it. Nothing more complicated than that. You can set a timer for five minutes. Close your eyes. All you want to do is think about your breathing and you’re trying to clear you mind. As thoughts come in, like distractions and such, which they will, don’t judge them. Watch them pass through you like you’re on a freeway overpass, I think, is what you said. Watch them just float away and let them go to the next thing.
Chris [36:15]: Because that’s what you realize when you start to mediate, is that no thought is permanent. No sensation in your body is permanent. No emotion is permanent. That’s what I find entertaining while meditating. You find the weirdest things entertaining after a while. It obviously doesn’t take much to entertain me. I find these emotions that come up in meditation to be so informative in a weird way because I’ll go through a period of boredom and then I’ll go through a period of restlessness and then I’ll be really worrying about something or other that I have to do or a big talk that I have to give, whatever the hell it might be. Then I’ll go through a period of happiness. You experience so many emotions but every time you do, you simply refocus on your breath. It sounds stupid, doesn’t it? Meditation is so stupid in practice because of how simple it is. You’re focusing on your breath. What could be the benefit of that?
The research out there is conclusive around how helpful meditation can be for us. I don’t want to come off like I’m a hippy like, “I have a business degree and I’m more into productivity than anything and so meditation should be the furthest thing from my interest.” The research that’s been conducted around how we manage our attention shows that in an average moment, we dedicate 53% of our attention to whatever is in front of us. We basically leave half of our attention on the table. I don’t really have to talk about this because it’s obvious and everybody’s experienced this. We’re trying to work but then we remember that we forgot to close the garage door when we left in the morning or we begin to worry about what we have to do next or we begin to think, “Oh, crap, I have to focus on this now,” or we begin to worry or we get distracted. Because of all these things, most of which are internal, we only bring about half of our attention to what’s in front of us.
What the neurological research and the attention research around meditation shows is that we can up that number. Instead of brining 53% of our attention to what’s in front of us, we can bring 63% and then 73, 83, 93. I don’t like the word ‘efficiency’ especially as far as productivity is concerned. It reduces the idea down to something’s that really cold and corporate and it’s all about a spreadsheet. There’s no better word to use. If you have two people, let’s say the average person who brings 53% of their attention to what’s in front of them and then you have somebody who brings 93% of their attention to what’s in front of them. The second person is going to accomplish twice as much in the same amount of time. They’re going to get eight hours of work done in four hours because they manage their focus that much more intelligently. This goes to the idea that our work benefits from all the attention and all the energy we can possibly bring to it.
We used to work in factories doing simple and repetitive work that didn’t take much brain power. But when we moved from the factory to the office, suddenly instead of making widgets all day, we could show up hangover if we really wanted to, we could be distracted all day long, we could chat with people all day long and still crank out those widgets. When we went from the factory to the office, suddenly our work benefits from all the focus, attention and energy we can possibly bring to it. This idea – and you can tell that I get a bit excited by it. Excited might be not even a generous term. The idea that building up how much attention we can bring to the moment is something that belongs in a cave in India with some skinny iyogi meditating all day long. It’s bullshit frankly because our work benefits from that focus. One of the things that turns people off about meditation is that that the process is so simple it seems like you’re wasting time. It does take time to meditate but you get those five minutes back 10 times over throughout the day because of how it allows you, not only de-stress, which allows you to bring more calmness, more focus to your work. It also allows you to bring more of yourself to your work, which is a crucial.
Rob [40:33]: That’s a good way to say it. A lot of us focus on time management, blocking out our time and making sure that we’re being fairly efficient with things so that it doesn’t expand. That’s one of the three aspects. The second is energy. I always think about that as maybe turning on some music loudly or using caffeine strategically, which I’ve done for years. The third piece that I hadn’t really sunk home with me until I read your book is that there’s this third element and it’s this attention/focus. That is what you’re talking about here. If you’re able to clear your mind and get a harness, get a hold on all the threads going on, you can improve that third element. With all three of those in check, that’s when you’re absolutely your most productive and when you’re going to get the most done in a day.
Chris [41:16]: Exactly. It seems so simple, right? You just sit. It doesn’t matter where you sit. You don’t need a fancy meditation. You can do it on a chair if you really want to; just observe your breath. That’s it. Observe its [?], its flows. I like to focus on the sensations in my nose. The thing about meditation is that you attention always wonders off. That’s what it does. That’s the way your brain is wired. We’re wired to perceive threats in our environment. We’re wired to think of any mental threat that might come up and be distracted and derailed by that. But we don’t have many sabre-toothed tigers walking around us anymore. Instead, we stresses of the office. We have to bring more focus to the work that’s in front of us. The idea is that every time your mind wanders off to thinking about something else often times like any fantasy. It will wander to any and every fantasy, threat whatever you can think of. It will go there.
The idea is that whenever it does, you gently bring it back to your breath. I like to laugh a little bit at myself at how much my mind wanders off. You can’t be hard on yourself when it does. Gently bring it back and see it as the natural tendency of your mind. Every time you bring that attention back, the neuro signs behind meditation show that it heightens your executive functioning. It heightens the amount of control your brain has over itself. You might think like, “Doesn’t my brain already have a ton of control over itself?” But it doesn’t. You’ve probably experienced that feeling where you’re trying to fall asleep and your mind won’t shut off. There is the mind that’s always churning and always working away and won’t shut up and shut down for the night. But then there is the part of the mind that looks at the brain – maybe I’m sounding like a total hippy now – your mind observes your brain doing all these stuff. You can step back from your thoughts, de-clutter them a little bit, make them a bit calmer and allow them to not get the better of you. I fall asleep very quickly these days, often times within minutes. I’m usually not all that tired when I go to bed. My mind is calmer than it used to be.
Rob [43:36]: Mr. Chris Bailey, your book is ‘The Productivity Project’. Your website is alifeofproductivity.com. You have any other ways you’d like folks to keep in touch with you?
Chris [43:46]: Those are the two main ones. I always hate being selly about these stuff that I do.
Rob [43:51]: No, don’t sweat it.
Chris [43:52]: On Twitter.
Rob [43:53]: All right, what’s your handle?
Chris [43:54]: @wigglechicken.
Rob [43:56]: That’s nice.
Chris [43:58]: The business one is at @aloproductivity.
Rob [44:01]: Your book is available of Amazon and obviously it’s an audio book on Audible, which is how I’ve consumed it.
Chris [44:06]: Yeah, anywhere fine books are sold.
Rob [44:08]: Indeed. Thank you so much for taking the time to come on the show, Chris.
Chris [44:12]: Thanks for having me.
Rob [44:13]: If you have a question for us call our voicemail number at 8-8-8-8-0-1-9-6-9-0 or e-mail 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 279 | How Google’s New Search Results Will Affect You
Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Dave Collins, SEO and internet marketing expert about Google’s new search results. They discuss how these recent changes will affect small business owners and what you should be doing to stay up to date.
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Transcript
Mike [00:000]: In this episode of Startups For The Rest Of Us, I’m going to be talking to Dave Collins about how Google’s new search results will affect you. This is Startups For The Rest Of Us episode 279.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products. Whether you built your first product or you’re just thinking about it. I’m Mike.
Dave [00:25]: I’m Dave.
Mike [00:26]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How’re you doing this week, Dave?
Dave [00:30]: Hi. I’m fantastic. Thank you, Mike. How are you?
Mike [00:33]: I’m good, good. So I want to give you a quick introduction everybody. If you’re not familiar with who Dave Collins is, Dave is a SEO and Internet Marketing expert from Software Promotions, and he’s a frequent MicroCom speaker. He’s been doing this since 1997 or so?
Dave [00:48]: Yeah.
Mike [00:48]: Which is a really long time. I think I was still in college, and probably many of our listeners had not even gotten to college yet. So just to make you feel old there.
Dave [00:56]: Thanks very much.
Mike [00:57]: So I guess to get started with, let’s take a little bit of a step back and talk about some of the recent changes that have come up that Google has pushed out. First of all, why does it feel like everything is always changing in the world of SEO?
Dave [1:09]: So really it depends on who you ask. Every SEO question, that’s how the answers always start, so we can’t be proven wrong. But everything’s changed. It’s very, very fluid. Google has to keep moving and redefining the goal post.
It depends how cynical you are. Personally, I believe that Google keep changing everything, basically to provide their users with the best experience. But this isn’t with their interest in mind. It’s perverse. It’s with their interest in mind. As in, if every time we go to Google we don’t find what we’re looking for, there’s a limited number of searches that we can carry out before we start thinking about looking at Yahoo or Bing or DuckDuckGo or wherever. So there’s this constant cat and mouse game, in a way, between the people who are trying to trick Google, and the people who’re trying to manipulate the results, and Google who absolutely don’t want to be manipulated.
Mike [02:05]: I can’t imagine anybody trying to manipulate the Google search engine results.
Dave [02:09]: No, must be some sort of, I don’t know, science fiction type of thing, but there’s nothing to gain. Why on earth would someone want to do that?
Mike [02:16]: Right. So let’s talk about a little bit of recent history. What’s happened over the past couple of years? Obviously there’s been various updates. Most of them have been named like Panda, and things like that, that have come out, and for the most part, it seemed like these changes were good. It seemed like what they were trying to do was they were trying to identify the people who were trying to game the results, and modify things such that they would get rid of those people, or at least remove those people from the search engine results by identifying them in certain ways. Clearly they mishandled some of that, and there were certain people who got dropped completely, and then got added back in after some complaints and everything. But they at least had some basic ideas of what it is that they were trying to accomplish. What else has gone on recently that we need to be looking at?
Dave [02:58]: The trend. It all goes back, in a sense, is cat and mouse. That in a sense, days gone by, Google more or less came up publicly and said, “One of the ranking factors that we take into consideration might, for example, be how many websites link to you.” So all these scammy SEOs all over the world got very excited. A whole industry was born, and up to a point it’s still running, of products and services that will simply get you links.
So then Google changed the rules a little bit and said, “Well, actually, it’s not all links. It’s more about the quality of links.” But people didn’t listen. So then, they effectively said, “Okay, if you have too many really horrific links pointing to you, we’re going to penalize you. We’re going to slap you. And it hurts.”
So this game is constant and ongoing. People have a theory, “This makes a difference. Doing X results in an increase in traffic.” Everyone does it. Google stamped down on it. So they’ve stamped down on links. They’ve stamped down perversely on over-optimization. So depending on how you look at SEO, I looked at it as helping Google understand the content of your website. So if you do too much of helping Google to understand your content, you get penalized for it. And yeah, it’s ongoing. But the most recent of all is what we’ve seen in the last week or so with the total change with what’s happened to the ads on the right-hand side of the search results.
Mike [04:27]: So really, what we’re talking about is this giant cat and mouse game between people who are trying to game the system, and Google, and the rest of us who are caught in the middle of it, where there’s a lot of us who aren’t necessarily trying to game those search results, but because we’re caught in the middle we’re affected by them. So it seems to me that that’s part of the reason why Google is doing this. It’s not to directly hurt us or help us. It’s because they want to make the search results better, and they’re trying to basically fight these types of people who’re doing these gray hat or black hat strategies that they are not comfortable with and they don’t like. Are there any other reasons that they’re doing it?
Dave [05:03]: Well, all things lead back to profit when it comes to Google, which will surprise absolutely no one. So there are two things they’re trying to do. They’re trying to give us better results, which in turn feeds that profit. And they’re also trying to make more money out of people who are clicking on the ads, which is obviously where most of their revenue comes from.
But you touched on a really, really important point. That this whole idea of collateral damage, that you today don’t need to have done anything horrible black hat to get hit by one of these penalties. Like I said, Google redefined the rules of what’s good and bad. They don’t just move the goal post. They completely, sometimes, make them invisible and put them in different ends of this stadium. But you don’t need to have done anything wrong to get slapped. It’s just that, a, you might have inadvertently done something that Google have now decided, after the fact, is not a good thing. Or you might actually just be collateral damage. You’re caught up in it, and you’ve not actually done anything wrong, but Google have decided for whatever reason, you fall foul of their invisible unknown rules, and you take a hit, and it can be devastating.
Mike [06:10]: There’s a term that gets thrown around a little bit called, “The Google Slap,” which is essentially, somebody looks at your site and says, “We’re going to basically ban you from Google search results.” Is that different than this type of collateral damage that we’re talking about, where they’ve just changed the rules and you happen to be affected by them, versus they went in and they said, “We’re taking you out”?
Dave [06:30]: Yeah, there’s very much a difference. What they both have in common is when you see that your Google organic traffic has fallen from 120, 150 a day to 1 or 2 a day, irrespective which rule you’ve broken, or which type of penalty you’re experiencing, it feels the same. But they are very different. So in your Google Search Console – what used to be Google Webmaster Tools – you can see a “manual penalty”. And that’s exactly as the name implies. If Google have decided, for whatever reason, for instance, you have far too many horrible links of low quality this or that purely to manipulate them, they’ll apply a manual penalty, which is more or less someone in Google typing it into the Google PC – if they use a PC – and basically saying, “We don’t’ like this site. Let’s remove it from the listings.”
The other type is they change the rules, they roll out a new filter or a new algorithm, and you just fall. It’s not that they’re penalizing you, it’s just that they may have decided that your website isn’t as relevant for the people searching for these terms. So instead of, let’s say, having an average position of three or four, you’re suddenly on page two. So you’re going to plummet. But you’ve not actually been hit by a penalty, but you are very much a victim of these changes.
Mike [07:49]: So how much of this is based on their own self-interest, versus them wanting to help people be recognized for providing good content and providing great links out to the community?
Dave [08:01]: So, in a way, it all goes back to the same place. If Google provide you with a good user experience that means you’re going to continue using Google, which means that you’re going to click on some of these ads and they’re going to make more money. So they’re all very much interchangeable. But nowhere have I ever heard anyone from a senior position in Google saying that in some way they’re motivated, or driven, by the desire or the wish to make the world a better place. I’m not sure. I think Reddit used to have some sort of goal about making the world a better place, or making the world less sucky – something like that.
So Google’s great aspirational goal was – in days gone by – “Don’t be evil.”, or “Do no evil.” I can’t remember the exact wording.
Mike [08:45]: It was, “Don’t be evil.”
Dave [08:46]: “Don’t be evil.”
Mike [08:46]: They don’t still subscribe to that is what you’re saying?
Dave [08:48]: Well, it seems to have vanished. It’s a big company. There’s a lot of data, and it’s quite tricky to find references nowadays. But I’ve always thought of all the goals to set yourself, I have all sorts of personal and professional goals. And actually a little bit of me wants to make the world a very slightly better place by raising my children to be nice, good people with good values. But having a goal to do no evil, don’t be evil, what is that? They’ve drawn a line between bad, very bad, and evil. So they can do something bad, or they can even do something very, very, very bad. But they’re not going to quite cross that line into pure evil. So as we discussed earlier, does that mean murder, an act of just killing one person? That’s very bad, but not necessarily evil.
So if that’s what you’re about, if you were at least in the early days driven by not being evil, surely they could’ve set the bar a little bit higher?
Mike [0:09:47]: You would think. You would think.
Dave [09:48]: There’s room there, isn’t there?
Mike [09:50]: I suppose yeah, you’re right. There is definitely a little bit of room there. I don’t know how much.
So with all these changes that are going on, as I said before, it seems like the people are trying to do the right things, and trying to at least pay attention and help Google and provide them some guidance around what your website is doing and how it’s laid out and things like that, but not be overly helpful, because quite frankly, most of us just don’t have that kind of time on our hands. How is it that we’re supposed to keep up with changes like this? Are there resources that we can use? I know that Mark Cutts puts a bunch of stuff out, but it’s hard to stay up on top of all of that stuff. And there’s obviously tons of different websites that you can go to that are doing nothing but constantly talking about different tactics that you can use, and different strategies. But is there any resources out there that you can use – newsletters for example – that just, kind of, distill things down a little bit for you?
Dave [10:42]: So, again, you’ve touched on a really good point that – for want for better phrase – “normal people” don’t have time for this sort of thing. And even if you do — let’s say next week as an example, you carve out three hours and you’re going to do SEO. So Monday morning 9:00 till 12:00, you’re going to do SEO. It’s written in the diary, in the calendar. Well, once you get there, the very first thing you’re going to think, most likely, is, “Where on earth do I start?” And if you go searching for what people are saying, the SEO industry has no shortage of; let’s say, “opinionated people with questionable values”. Let’s put it that way. So a lot of people are going to say a lot of things, but the signal to noise ratio is absolutely horrific.
So Google have a whole load of amazing resources. I already mentioned Google Search Console. This is free. You just set it up. It takes a minute to set up, and it’s way better than a whole lot of SEO tools that actually a lot of people pay for. Then they also have no shortage of their information and resources for webmasters. Only a month or so ago, I think, they issued their latest webmaster guidelines. Trust me, this is not a document that you want to be reading. It doesn’t help.
But there is again – I’m going to be off Google’s Christmas card list forever by the end of this – but there’s a certain level of hypocrisy, because I always feel that up to a point, Google are kind of saying, “Don’t optimize. Don’t do SEO. We’re brilliant. Our spiders and robots and our coders, developers, we are brilliant at figuring out what’s on your site.” But then they also give you some information, and it’s like every time someone from Google opens their mouth and says something -=- you mentioned Mark Cutts who’s been out of that side of Google for quite a while – but they had the Mark Cutts version too. Every time he says something everyone quotes and it goes back to that cat and mouse. People go frantically to change this, or add this add-on, or put this in their agenda, or look into the latest thing, and it doesn’t really end.
There’s some really good information out there. There’s SearchEngineLand.com, which I think they do daily email summaries. But there too, to be honest, there’s so much speculation in the world of SEO, so much, that it’s really hard to find a trusted source.
We got a newsletter called Google Demistifier. It goes out every Tuesday, only covers one topic, and we try to be completely biased, because we’re looking at a lot of data, a lot of people’s accounts, so we get a good idea for what’s out there.
But doing SEO is incredibly difficult today. It’s become a lot more complicated. It’s become more time consuming. And I think probably a fair number of people who listen to this podcast will relate to the fact it’s pretty scary doing SEO, because we have this fear of, “If we do this and Google don’t like it, what’s going to happen?” And I think that’s part of the problem for the industry, or for the area of SEO that we all face. But I do believe that nowadays we’ve got to the point where you can’t sit there and do nothing anymore. You actually have to more or less proactively start doing this, even if it’s scary.
Mike [13:57]: Now one of the things you mentioned there was the Google Search Console, which is not the same as the Webmaster Tools.
Dave [14:03]: It is the same. They just renamed it, just to confuse people a little bit.
Mike [14:08]: Because it looks completely different than the Webmaster Tool.
Dave [14:11]: They’ve done it up. You see if you log in to Webmaster Tool, it just redirects you now to Search Console.
Mike [14:18]: Oh, I see.
Dave [14:18]: They’ve done it up. It’s a seriously useful resource. It’s quite incredible the information they give you.
Mike [14:22]: Got it. Got it. Okay, because yeah, that makes a little bit more sense. Because when you do log in – I have come across that page before, and it obviously lists out a bunch of different web properties that you have, but it’s not necessarily showing you things that you have not verified through your DNS records, for example.
Dave [14:41]: Exactly. It’s not a be all and end all. But there is something so useful in there, which there’s a section in the Search Console called HTML Improvements. And ultimately, what HTML Improvements is, is Google pointing at your website and saying, “This is what we would suggest you fix on your website.” So there’s a lot of hype and there’s a lot of misleading information, but when Google basically say, “Fix these five issues on your website, because this can only help your SEO,” in my opinion, that’s worth paying attention to.
Mike [15:15]: Got it. So we’ve got things like some of the different Webmaster Tools, the Google Search Console, the newsletter that you guys have, but a couple of other resources that we just talked about – we’ll link some of those up in the show notes. So those are some of the places where a small business owner can go to at least learn some of these things. Now let’s talk about one of the main things that we really came onto the show to talk about, which was, what are some of the recent changes that they have done? What are the biggest changes that Google has made recently that is probably going to affect most of the listeners here?
Dave [15:46]: So this is something that’s happened just in the last week – very, very recent. And basically what they’ve done is they’ve taken away all the ads, all the text ads that are on the right-hand side, that were on the right-hand side. They’re gone. This is obviously on the desktop; mobile is a completely different ballgame. But on desktop, there are no longer ads on the right-hand side. Before, they were up to three ads on top, while now they have up to four ads on top. Usually it is four ads on top. And up to three at the bottom. So what this means is when you carry out search on Google, instead of seeing the standard couple of ads at the top, organic listings, and all down the side the actual paid ads, it’s totally, totally different. It looks different; it feels different. I’m actually pretty amazed, in a sense, by how little fuss has been about this. This is, in my opinion, the biggest change that I’ve seen Google roll out, ever, since possibly – maybe since introduction of AdWords. Maybe it’s even bigger than that. And it’s going to affect, not everyone, but almost everyone.
Mike [16:49]: So we’ve talked a little bit before about why Google has made some of the previous changes. Are there any specific reasons why they made this particular change?
Dave [16:57]: Well, obviously, it’s all speculation, but the only possible incentive that I can see for Google displaying four ads at the top instead of potentially no ads at the top is revenue. I can’t see any other reason whatsoever. It’s certainly not about quality of the results that are shown, because as we all know, we’ve all experienced searching something in the ads that we click on aren’t necessarily relevant to what we’re looking for. So this is not a quality update. This has to be driven, in my opinion, solely by revenue.
Mike [17:31]: So we talked a little bit before about a lot of us being collateral damage. What are the downsides to this particular change that they’ve made?
Dave [17:38]: To be honest, I don’t want to be all “doom and gloom”, but there are a lot of negatives. So what we’re now seeing is potentially 11 ads on the first page’s search results is now at best it’s 7. That’s going to have a major impact; more than half of them at the top. And it’s safe to say that, with time, those top four slots are going to start costing a lot more. But ultimately, if have an ad with an average position of eight, that’s on page two. And you can probably – it’s safe to assume most people don’t even get to page two when they’re looking for something. They refine the actual search. So that’s one thing.
The actual organic results – the SEO results, if you like – they really got pushed down. So the typical format, if you carry out search at Google, you now see four ads, you see the knowledge graph, which is effectively Google scraping websites and just pasting that information in, that can still be on the right-hand side. But quite often it’s below the ads that you have, ads knowledge graph.
And on a recent blog post that I wrote I took a screenshot of the search results for things to do in London. And you had four ads, a load of knowledge graph information, and right at the bottom – this is at pretty high resolution on my monitor – at the bottom there was one single organic listing being shown. And sure I can scroll down the page, but if I’m going to find what I’m looking for, why would I? There’s all sorts of theories out there, but ultimately no one knows what’s going to happen. But this is definitely going to have an enormous impact on SEO, and I don’t think it’s going to be positive.
I think the biggest ramification that we’re going to see is some AdWords account holders – if they’re especially with let’s say low margin products or high competition, or both – they’re going to be squeezed out. They’re going to be squeezed out by companies with budgets that actually can justify, make sense, or perhaps they’re just oblivious to how much they need to spend for these top four. And I think that’s going to hurt them quite badly.
And the other negative I can think of is I can’t see how this is actually going to be positive for the user, for the person going to Google and searching. I just can’t really see that happening.
Mike [19:55]: So it doesn’t sound like there’s any reasons for Google doing this other than basically making money. It’s not really because it was for the end user experience. It was basically because they want to make more money from this. And obviously, us as website owners, we are in an unfortunate position where Google has such power over the traffic on the Internet that there’s really just not anything that we can do about it, except just deal with the aftermath of it. We’ve talked about a lot of the downsides for us. Are there any upsides to this change that they’ve made?
Dave [20:24]: Yeah, there definitely are some positives, definitely. I think one, I think when you advertise on AdWords, you’re going to see hopefully some more meaningful and accurate average positions. So the days before these changes where you could get three ads at the top and let’s say seven or eight ads on the side, adding fourth position could be the very top at the right-hand side and that could actually sometimes be more effective than being in position one, two, or three, because you appear to be the top. So number four could most likely do better than positions two and three. So that gets a whole lot simpler, because now we know top four means exactly that. There is no right-hand side. There’s going to be better clarity there.
I also think – potentially, it’s all theory – there may be more consistency in ads as well; that they’re starting to look more familiar. Things like the side links aren’t jumping out, so that sort of evens things out a little bit.
Definitely, if your ad in position four for the most part, you’re going to be happy. Then there’s also – I should’ve mentioned this already — the other thing that could be on the right-hand side, as well as the knowledge graph – in other words the Google scrape – Google shopping ads are showing up on the right-hand side still as well. So if you’re using Google shopping ads, you’re probably going to see quite a significant increase, and you’re probably going to see that working quite well for you. But I have my own issues and reservations with Google shopping. But yeah, it’s not all bad.
Mike [21:56]: Right. But again, most of these push people down the path of spending money with Google in order to get to some of those top rankings, with the exception of those situations where you end up in the long-tail search results, and you happen to be at the top. But you’re still going to be below paid listings at that point.
Dave [22:14]: Exactly. So irrespective which viewpoint you take, and which stance you take, it seems every direction you look it’s all about an increase in revenue.
Mike [22:24]: Right, right. So based on that, where is this headed? Is this the only change that you can see them making in the near future, or are there other things that they’ve, kind of, announced that they’re going to be rolling out in the near future that are things that we need to pay attention to, and take a look at, or at least be aware of?
Dave [22:41]: So all of this is very new. So right now, there’s some noise about this on, for instance, the WebmasterWorld Forums. And some people are seeing an increasing click-through-rate, for instance. Some people are seeing a decrease in cost per conversion, which is all very well and good, but it’s all new. So it doesn’t mean anything. New behavior isn’t the same as what you’re going to expect to see in four, five weeks, six weeks down the line. So Google are in no way putting their feet up on the desk now and saying, “We are now done. Our goal to not be evil, and to maximize our ad revenue is complete. We’re finished. Everything’s done here. Now we’ll just let the internet run itself.”
There are some predictions being made already, which is beyond insane, but no one knows what’s going to be ahead. But one thing that’s guaranteed, Google are not going to – first of all, they’re not going to finish to try and maximize their ad revenue – which I don’t have any problem with. They’re certainly not going to finish trying to provide better organic results, so that we find what we’re looking for, so that we keep coming back to Google.
And you see that touches on the aspect of this that I, personally, find most interesting. This is the first update that I’ve seen by Google that’s actually left me scratching my head wondering, “Aside from revenue, why would they do this?” I wrote this in this blog post that they wrote about it. This is the very first time that I actually started to do the unthinkable, which was look at options like Bing. I actually went to Bing and DuckDuckGo, because there’s already – for some searches – it looks like the results are very ad-heavy. And they are. I can’t even imagine what it’s like at a low resolution, where really you are only going to see ads on your screen without scrolling the mouse. And we’re all lazy. We only scroll the mouse if we have to.
So as we touched on when we were discussing this, I have to wonder how many people are going to want to go to a search engine when the results that they see are primarily dominated by ads. If they keep going in this direction and become mainly, if not solely, ads that are on display, I can’t see people wanting that experience. I mean, would you?
Mike [24:59]: No, probably would not.
Dave [25:00]: No. It’s a strange, sort of, future that they’re potentially carving out for themselves. But I do have faith in Google that they’re smart people; they will have thought about this. I’d love to hear Google’s response. But, yeah, I’m completely baffled and I’m pretty much certain that what’s ahead of us is more change. I can’t overstress it. It won’t even be the first move in something. It’s not even really starting. It’s all rolling out. It’s all new.
I think another interesting aspect of this brings it more in line with the mobile experience. So for a while now, you could have four ads at the top of the mobile result. You know, search on your mobile phone. And I think, again speculation, but I think it’s very much about this convergence of devices that there are blurred, more blurrier maybe, blurrier lines between desktop, PC, smart phone, tablet, laptop, and so on. And I think Google want to give this consistent experience across all devices. So I suspect, I do think that’s probably part of it. But, again, it all goes back to profit.
Mike [26:08]: So, I guess we’ve talked a lot about what they are currently doing, what they have done, what it means for us, but we haven’t really talked about the one issue that I think is probably most important to the people listening to this is, what is it that we should be doing? Because obviously what we don’t want to do is sit in the middle of that game of cat and mouse between Google and people who are doing black hat SEO tricks, and end up – we don’t want to spin our wheels, we don’t want to do things that don’t matter – but we want to maximize our time and the return on the investment in that time. So what do we do?
Dave [26:40]: So the first thing to do, I think, is if there’s ever been a good time to put SEO and Google on your – let’s say, take it off your “to-do” list and put it on your actual radar – so this is something you start to pay attention to. Now is a really good time. I’ve heard a few people express this, sort of, helplessness along lines of, “Well, if organic is going down there’s nothing we can do about it.” But I’m a big fan – a big believer – in staying informed. And I think more than ever we have to stop paying more attention. We need – especially if you’re spending on AdWords – you really need to pay very close attention to, for instance, average position. Which I think a week or so ago, before this change, your average position was an indicator, but not as important as a lot of people thought. Whereas now it’s vital. If you’re consistently getting your ads in average position five, it’s very, very safe to say you’re going to see a huge drop in performance, and you’re going to have to market his informed decision whether it’s worth doing what you can to either try and get the ad higher by, in a way, gaming the system, getting a better quality score, or if you’re actually going to simply pay for it to get in that top four.
So, more than ever, you’re going to have to know your numbers with your AdWords accounts. And same with SEO. I can’t even begin to guess right now what effect we’re all going to see in our organic data, other than, say, it’s going to be very big. But the one thing I definitely want to know is I’d want to know what’s happening. I’d want to know if my organic traffic is dropping, by how much – if that’s a really vital channel for me.
If I’m a business and, let’s say, I don’t know, organic traffic accounts for 60% of our traffic and let’s say 50% of our sales, it could be time to diversify into other channels, and start spending a bit of time – maybe money – in some of the other options. But it’s really about being informed. And I think one strategy that will actually work for both – for AdWords and organic – is long-tail keywords. I think these are a potential – I won’t say a life-raft, but let’s say a lifebelt – in that, AdWords for instance, you’re not going to have as much competition with the long-tail keywords. So these are the keywords that aren’t so obvious, that aren’t getting quite as many searches as the big obvious ones, but add them together and they can be very sizeable. So I think in AdWords, long-tail keywords could be a very good strategy right now, because you’re going to have less competition meaning, you can make sure that you’re in that top four throughout.
And long-tail keywords’ always have been a good SEO strategy, but bearing in mind that the SEO results are getting squeezed down right to the bottom of the page, I think more than ever this has to become a more or less a standard SEO strategy from now. Well, I won’t say forever, but from now until the next major update.
Mike [29:36]: And just to be clear, one of the things that you’ve alluded to, but didn’t directly call out, is that there’s a very big difference between what your ad placement ranking is – whether you’re third or fourth position – versus your search engine result ranking. Those are two entirely different things, and you would monitor them entirely differently using different tools.
Dave [29:53]: Yeah, absolutely. There’s a huge – it’s almost impossible to pin down the differences, they’re so many – but it’s most simple obviously for AdWords you get to decide if you want to go up, either tweak the system or spend more. With SEO, sadly, it’s never quite that simple.
Mike [30:11]: So essentially, all the things that you’ve talked to boil down to what amounts to four different things that we need to be doing. First one is to monitor the placement of your ads and keywords. Are you number one, number four for ads – or in terms of your keywords – are you on the first page or are you on the fifteenth page? So that’s the first recommendation that we can take out of this.
The second one is monitoring your traffic levels, and making sure that you know where they’re headed based on other things that you’re doing. The third one is using the Google Search Console to identify things that you need to do on your website to either fix usability issues, or improving your search presence. Because Google will tell you directly what it is that you have to do. And then the last one is to really just stay, at least peripherally, informed about what’s going on, either using your newsletter, or the WebmasterWorld Forums or a variety of the different things that Google has provided. Is there anything else that you want to add to that list?
Dave [31:06]: Yeah, I’d say and the other thing is hidden number five is most businesses have SEO on their to-do list. In other words, we all mean to get round to it at some point, but there are always more pressing things to be done. And I think we’re now are at that time where it’s become, I’d say, pretty close to mission critical. It doesn’t mean you need to invest ten hours a week. We don’t have ten hours a week. But if you can be keeping an eye on this, and if you can just schedule 30 minutes a week – just to keep an eye on these things – and at least respond to the most pressing issues, in my opinion, that’s seriously time well-spent.
Mike [31:41]: And that could be something incorporated into “Marketing Monday” of all days.
Dave [31:44]: Absolutely. Exactly. Or Mocking Wednesday.
Mike [31:48]: Well, thanks for coming on, Dave. I really appreciate you taking the time to step in and help our listeners understand a little bit better some of the changes that they’re going to be seeing from Google, or what Google has already rolled out.
Dave [31:58]: Thank you very much. I love the show and I’m delighted to be here again.
Mike [32:02]: And if you have a question for us, you can call it into our voicemail number at 1-888-801-960, or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under creative commons. Subscribe to us on iTunes by searching for “startups” and visit StartupsForTheRestOfUs.com for full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 278 | How to Build and Launch a Membership Website
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike share their experience and give insight on steps to validate, build and launch a membership website. They also give tips on how to decide whether a membership site is the right platform for your idea.
Items mentioned in this episode:
Transcript
Rob [0:00]: In this episode of Startups For the Rest of Us, Mike and I talk about how to build and launch a membership web site. This is Startups For the Rest of Us, episode 278. Welcome to Startups For the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products. Whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [0:26] : And I’m Mike.
Rob [0:27] : And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
Mike [0:31]: Well I’m pleased to report that I’ve got a end-to-end deployment process in place for Bluetick, so the April 1st deadline that I’ve been shooting for is looking good right now.
Rob [0:41]: That’s only five weeks away. You’re still on track?
Mike [0:44]: Yeah.
Rob [0:45]: April 1 is the day that you’ll expect, or that you’ll hoping to have a couple early access people in, is that right, five to ten of them?
Mike [0:50]: I mean it kind of depends on exactly how the development process shakes out in terms of getting them on before that date or afterwards. But I want to have everything ready to go by then, and it may just take some time to put everybody on there, but that’s the goal to shoot for at the moment.
Rob [1:06] Cool. Glad to here you’re still on track, because we’d originally talked about that a couple months ago, about that deadline. These things change over time and you’re still on track. That’s good news. So the day after this podcast airs is Jason Calacanis’ launch festival in San Francisco and I will be there, or I’m planning to be there. Although I booked something in Airbnb and I tried to book it and the person never got back, and then said maybe. So I may be there and like sleeping on the street, but I have a ticket to the launch festival and I’m planning to be there, I guess, even if I have to drive. My brother lives about an hour away, even if I have to stay with him and drive in each day, I’ll do that. So if you are at the launch festival tweet at me or DM me or something and I’m trying to set up a little gathering of bootstrappers, or folks who listen to this podcast. I don’t know that it’ll be as formal as a dinner, but probably just a meeting place at a bar or something to get together and chat.
Mike [1:58] : Cool. Well about an hour ago you and I had just finished up a worldwide call for the membership Web site that you and I run called FounderCafe, and we very nearly rolled it into today’s podcast, to do a live podcast. But you didn’t bring it up until after the call was over.
Rob [2:13] : Yeah. I know. It would have been interesting. We’ve never done a live podcast in front of an audience with a chatroom and all that stuff. But this, of all topics, like you said, today’s topic would have probably been a pretty good one to do it. Maybe next time. I was a little hesitant because we’ve never recorded in anywhere but Skype, and we know how that works and it’s repeatable and predictable. And this would have been an off the cuff, hey, let’s just record ourselves in Google Hangouts and hope we can get the audio out later.
Mike [2:37] : Yeah. And I’m sure that there’s tool out there that allow you to do that, but that’s a risky thing to do.
Rob [2:42] : To basically record a whole episode and then not know if it’s going to turn out technically very well. Last thing, for me is, there’s an epic post that Zach on my team wrote. It’s up on the Drip blog, we’ll link it up. But blog.getdrip.com, you’ll find it in the top few of the listings. Zach wrote this epic tear down of Derek Halpern’s email launch. He recently launched a course called, I think it was called “7 Figure Courses”, and he just hammered through this thing. It’s like awesome. He analyzed every email in the series, and talks about why it works, and analyzes specific sentences, and then offers a checklist download at the end, just a bunch of stuff. It’s 3,000, words or 3,500, I mean it’s huge. It might even be longer than that and it’s got a dozen screenshots and stuff in it. This is one of the best tear-downs I’ve seen in a while of an email launch sequence. And while you don’t have to obviously use everything and all the mechanisms that Derek Halpern does, this takes a look at why each of them works and could allow you to potentially take the same ideas and thoughts and put them into your emails.
Mike [3:42]: I saw that. That’s a fantastic post. If you have any questions about what sorts of things should go into an announcement like that, or a lead up to something that you’re launching, there’s a lot of really great ideas in there that you’re probably implementing at least some of them, but I would be hesitant to say that you’re implementing all of them, because there’s a lot of really good things in there. Some things I looked at and said “Oh, I got to try that.”
Rob : [4:05] So today we’re tackling a big topic, and this was requested in a thread inside FounderCafe. And FounderCafe is the membership web site that Mike and I run where we gather bootstrappers together and built on DISCUS, which is a forum and discussion software. We have conversations, we ask, answer questions and just kind of everybody engages. We also do calls periodically; Google Hangouts where people can ask stuff in a chatroom. Try to do it monthly but they wind up being once every probably month or two. When I asked for topic suggestions for the podcast, this topic today about how to build and launch a membership web site, was requested several times. And so we wanted to cover it, because we know that there’s a lot that goes into doing this – to validating and building and launching a membership web site – but we definitely have had experience, and we’ve actually launched the Academy several years ago, the Micropreneuer Academy, and then essentially moved the platform from WordPress to a third party SaaS host for that, and then recently moved it again, this time into DISCUS in order to focus on the interactions with entrepreneurs. And we also did a re-branding at that point from Micropreneur Academy to FounderCafe. So we have experience on a lot of realms of doing this. Certainly this is not something that we’ve done dozens of times, so I wouldn’t claim to be a membership web site expert. But we have taken some hard knocks on this, and I think we have some insight to lend on it. So I’ve broken this down into three main categories or topics. The first is how to validate, second is how to build, and the third is how to launch. And so there’s a bunch of different sub points under each of those. The first piece about validation is one that I think that folks may overlook. And it’s to ask yourself this question, “Does this topic that you’re thinking about, or that you’re an expert in, does it warrant a full-membership web site? Does it warrant someone paying you every month or every quarter to have access to content and potentially discussion? Or, is a video course or an eBook a better way to go – something that’s a little more static, and that doesn’t require, A, all the work, but, B, all the audience engagement and all the effort of getting an entire membership Web site set up.
Mike [6:15] : Yeah. And I think the way that you can ask yourself that question – that probably phrases it a little bit better than just saying “Which one of these should I do?” – is that you evaluate the reasons why you are looking to build a membership web site. So if you’re looking at that and saying, “I want to do this because I want a recurring source of revenue. ” that’s the wrong way to look at it. What you really should be looking at it from is the perspective of the customer, the person who’s going to be a subscriber to your community. So if they look at that, and you can put yourself in their shoes, and you can say, “Yes, this is not only providing value, but it is providing more value over time.” And I think that that’s the real key here as to whether or not it should be something like a membership site – where it’s a recurring subscription fee – or something that is a one-time fee. And I think the differentiator there… I was listening to, I think it was Scott – I can’t remember the guy’s last name – Farquhar from Atlassian. He was speaking at Business of Software, and he answered this question about, “how do you decide whether something should be a recurring subscription fee, or whether it should be a one-time fee?” And his answer to that was pretty compelling. It was, “Does this provide more or less value over time? And if it provides more value over time, then you can justify a subscription fee. But if the value that it provides over time goes down, then it should be a one-time fee, so that way they get all their value upfront, and then they walk away.” And that’s very similar to this in determining whether or not you make it into a course or an eBook, or you have it into a membership web site that people would pay for on a recurring basis.
Rob [7:45]: And one concrete example of this is, I had a friend several years ago – I think it was maybe four or five years ago – and he was really doubling down on building a personal brand around recording awesome screencasts. Like how to do a really good product demo, how to tell a story, and how to it all with a screencast. And he had a whole approach that he used and was really good at it and was getting paid by Fortune 500 companies several thousand dollar – I don’t know, it was like ten grand or 15 grand to record these demos. And so then he started blogging about it and, I think, was kind of writing an eBook, and he was thinking that he was going to do a membership site around this topic. But the more we got into it and discussed it, he said, “You know? It’s like you learn some things, and you learn these tips and tactics, and then you can go do it, and then you’re done. And a lot of people either only record one of these screencasts over time, or maybe a couple, and you can learn a lot from just an eBook or even just a video course, I think, which is what he wound up doing. But you didn’t need, A, ongoing content that was updated, or, B, discussions; forums with people interacting, because there wasn’t really a community built around it, and there wasn’t necessarily a need for that ongoing value, to tie back into what Mike was just saying. I think an interesting way, in terms of actually validating, if you decide, “Okay. I am working on something that I think people would want ongoing support with, and there’s new stuff coming out that I want to provide new content on.” I think there’s a couple interesting ideas in terms of validating it. One is instead of launching as a full membership Web site, is to try to push something out on Udemy, or Udacity, or Teachable, and just do a simple video course, and see how much uptick you get, and who’s interested in it, and then you gain, kind of, a broadcast capability to those people. So if you do sell a few thousand of your video course to them, later on there’s a likelihood that you could use that as an audience, that if you’re going to go off and build something else you could potentially promote to them. I don’t know about the terms of service with those sites, and if you did promote that if that’d be a problem, but it’s an interesting idea if you’re starting from not a large audience to, kind of, prove the concept and figure out boy, “How hard is this content going to be to create.” and “How much time do I have to spend.”, is this worth it, and are people interested in it? Because I think without an audience that’s something that you could consider. My advice though would be you really don’t want to launch a membership web site without some type of an audience, like whether you have a blog or a podcast, or some type of email list that you’ve build up over time. Because starting from a cold stop, I’ve never seen anyone do that. Because a membership web site is not an eBook. It’s not something that you can sell on some merits. It’s very hard to do that, I’ll say. Getting someone to spend 20 or 30 bucks on an eBook is one thing, if you’re providing the reason to do it and have a good sales letter. But trying to start a membership web site where you’re going to have people interacting on forums and you don’t have a community built in advance can be really, really hard to do. When I talk about this Udemy, Udacity, Teachable, etc. approach, I’m thinking more that you do have some type of audience, even a smaller one, that you can send to those courses and promote them, and if no one buys them then you know you’re probably off the mark with the whole deal. But if there’s a lot of uptick and they are popular, then you can use that to level up. I mean, I do view it as a stair step approach of maybe building email lists and then stair-stepping up to just an online video course, and then considering whether or not you want to level up to an actual, essentially a subscription product like a membership Web site.
Mike [10:54]: Yeah. When I think back to how we started the Micropreneuer Academy – and I don’t want to set it up as saying it’s an anti-example to what you just said – but I think that there’s a caveat with what we did, which was we, kind of, started it from scratch, but there were people being fed into that from our blogs and from social networks. But in addition to that, we weren’t just selling a community. There was also the course content that was associated with it, and that course content was regularly coming out. So the forums were, kind of, half of that membership web site, and then the other half was courses, which we eventually made a decision to move away from course content. But that’s one way that you could potentially build up the community there. and hand hold it until it gets to the point where it’s a little bit more self-sustaining. So maybe that’s one approach that somebody might be able to take.
Rob : [11:41]: You know. when I was getting the Academy off the ground I did have enough of an audience to get it going because I had 25,000 RSS subscribers at the time. That and four bucks will get you a latte at Starbucks. But it wasn’t an email list, like if I had 25,000 email subscribers it would have been so much better. I think I had hundreds of people on an email list at the time, because I hadn’t realized the power of email at the time. This was probably 2009, I think. 2009, 2010 timeframe. I did have that RSS audience and that was what kickstarted it. Without that I don’t know how I would have done it. And we’ll talk a little bit more about it in the building, but I had seeded the forums and gotten a few people in there from that audience. And if you’re going to have forums you need to have people in there interacting, or else it looks like a ghost town. And right away I was able to sell a hundred people to get inside the Academy from the start, and then that was, essentially the impetus. Because if you’re not able to kickstart that really early on, you’re going to have an issue with feeling like a ghost town. That’s only if you decide to do forums. Now there’s a decision that comes up, we’ll talk about a little bit, about whether or not you want to do that or just offer content. Another interesting example – and this is the first time I’d seen it done, but in terms of validating a membership web site concept – was Adrian Rosebrock from PyImageSearch, and he validated it using Kickstarter. And we’ll link over to that, but it’s the PyImageSearch Guru’s Computer Vision membership community, basically. He posted it up there, but he had an email list and he built it up and he launched to that list for them to go kickstart the thing if they were interested. And what they were buying was the first three months or the first however many months of their membership to that thing, and he got past his goal, well, well past his goal, and was able to, essentially, get some cash out of it upfront to justify building it. In essence, I think his goal was $2,500 and he wound up getting about $35,000 in backers. So that was obviously a really nice validation that the idea had some legs. But again, he didn’t start from no audience. He did have an email list that he utilized very well. We actually did a case study of him because he used DRIP to do it. And if you search back through the DRIP blog you can find out what he did, and how he did it to basically, to get the kickstarter funded.
Mike [13:45]: So as Rob just said, the first stage is to essentially validate the idea. The second one is to build it. And at the very beginning of building you have to make some decisions about exactly what it is that you’re going to be building, and what you’re going to be doing for your customers. Are you going to have just forums? Are you going to have just content? Are you going to be doing both? Doing both is a heck of a lot of work. If you’re going to be building content, content can take a long time to build. Back when Rob started the Academy, and just to give a quick timeline here, when the Micropreneur Academy started it was actually just Rob. And that was for probably what, was it three, four, five months, something like that?
Rob [14:22] : Somewhere in that.
Mike [14:23]: Yeah. So I. kind of, signed on board after that point because Rob was overwhelmed and needed some help with it. So he looked through his Rolodex and I ended up on the shortlist and we basically worked out how that was going to work.
Rob [14:35] : You were my fifth choice, Mike.
Mike [14:37] : I was your fifth, excellent.
Rob [14:38]: No, you weren’t. Man, to talk about overwhelmed. I was working 20 to 30 hours a week just hammering out content. I’ve never created so much content as I was there. And I felt like I just could not keep up with how much content I had committed to.
Mike [14:53]: I can’t even imagine how difficult that was, because even when I came on and I started building content, that was a heck of a lot of work. Basically we split it down the middle at that point. I was doing half and you were doing half, but I can’t imagine doing double that for three months beforehand.
Rob [15:11]: It was a bit of work.
Mike [15:12] : But basically what we were doing is we were building content, and Rob would build – I forget what it was we started out – like we were doing two lessons each per week, or one lesson each per week, and every single week we would push out new content. But in addition to that we were also helping to nurture the community, and interacting with people on the forums and just asking people questions. So it was a combination of building the content, talking to people in the community, maintaining the forums, and then in addition to that, doing marketing for it as well. So it wasn’t really a trivial amount of work. There was a huge amount of work because we were doing both things. We were generating the content at the same time. And I think that if you go back to the very first step where we talked about validation, if you were deciding whether or not you’re going to do a membership Web site or a video course, or an eBook or something like that, depending on how long it takes you to build one of those things is going to dictate how much work it’s going to be down the road for you. So you do have to make some decisions about what you want to offer people and what it is that they’re going to find valuable.
Rob [16:12]: Yeah. I think in a perfect world, if you’ve created a nice base of content already – like you’ve written a book, or you’ve written an eBook, and you’ve gotten people on the same page with kind of shared base of knowledge, then launching a membership web site that was just forums/a community around that topic, and you guys have that shared vocabulary from whatever it is that you’ve wrote that everyone’s been reading, that, to me, is the easiest way – or maybe the best way to do this. Because it’s very natural for someone that if they’re getting value out of a community, and it’s high quality, for them to consider paying for that on an ongoing basis every month. It’s less so with content, because at a certain point you tend to run out of good content. And the content, I think, could be sold almost separately as a way to, again, get everyone on the same page and, I think, there’s this phrase that “people will come for the content and they stay for the community”. This is kind of a common phrase people throw out with membership web sites. And I think that’s true. I think that being able to train people, and offer advice and that kind of stuff with an actual curriculum, is helpful. But I think the idea of being able to perpetually create content to keep someone around month after month and year after year is a really tall order, because eventually the topics, you just run out of interesting topics that you haven’t covered already. Now an exception to this is if your membership web site, or a content producer more like Mixergy, where you’re doing interviews, then yes, there is an evergreen, perpetual thing that you can do, and you can just do a few more interviews and spit them out. But if that’s not it, and you really are the personal brand and, it’s your thoughts and your content and your take on this that makes it unique, I would lean towards trying to put enough content together that people really dig it and you can either sell that as its own thing, and then offer the community as an add-on rather than focusing on trying to have both content and community tied up in the same thing. And I think, looking back, that’s something I probably would do differently with seven years, in essence, of hindsight on the Academy. Back then the only membership web sites I knew did both, and it was A, too much work for one person, and B, in the long run I think that focusing more on the forums and the community would have probably been a better approach.
Mike [18:19]: One of the things that we did early on was that we took a look at how many people were inside the Academy. And we were probably about 16 months into creating content, and we looked at that and said, “Well, how many people who are joining this month are going to see the content that we’re creating from the 16th month?” And that question made us go back and take a look at stuff and start thinking about churn rates and things like that because we were charging people every single month. And what we realized was that we were putting the same amount of effort into the content 16 months after we started that we did in the first month and the second month and the third month. So there really wasn’t exactly a good ROI for that. So what we did was we compressed a lot of that content back down, and we said “Okay, we’re going to make this into a course, and our billing mechanism was just, “We’re going to charge for 12 months of the course, and if you wanted to buy it all upfront you could do that. We’d make some special offers along the way, about three or four months in.” But you could buy the whole course for, I think it was like probably $500 or $600, something like that. But that was it. So even doing that though, like when we were selling it to people, we had a roadmap of all the different content that we wanted. And that’s something else that I would highly recommend doing upfront as part of this. If you’re going to go the route of content, know exactly what it is that you’re going to build along the way so that you can make things lead from one into another, and you can decide, “Okay. This lesson, or this module, is going to be there in week 17, or month three or something like that, and then the next month you’re going to follow it up with X. And if you have all of those things laid out – whether you use Trello or a spreadsheet or anything like that – lay them out so that it really is, kind of, a course, so that things build on top of each other like Legos. So that way you’re building, kind of, a foundation and you’re moving up from there. I guess that applies more probably if you’re doing like a drip content of any kind. So you’re dripping that out over time. But early on, if you’re building all the content, you don’t have all the content built so you kind of have to drip it out. Having that roadmap upfront and in place on day one is really going to provide, not only you a lot of value because it tells you exactly what you need to do moving forward, but it’s also going to provide you some marketing materials that you can provide to the people who you’re onboarding.
Rob [20:31]: Yeah. That’s a good point to bring up, is when you’re building content for a site like this, if you do decide to actually build it into the site, and not do this kind of more standalone or one-time product, and you’re going to build stuff along the way, then I would do exactly what you said, which is basically have an outline for maybe three months, maybe four months, but only build the first couple of weeks – maybe two to four weeks worth of content – because if you don’t know if the idea is going to fly, and you haven’t done extensive validation or you still have doubts, you don’t want to build months and months worth of content. Because if it doesn’t fly then you’ve wasted that. You can, instead, build the first few weeks and then you drip it out over time, and as the frontrunners – the first people who sign up, make it to that next week – you can basically turn it out right before they arrive at that point. And that can create some helpful deadlines, to be honest. I remember feeling stressed about it, but it forced me to create a lot of, what I consider, it’s the most content and some of the best content I’ve ever produced, was in that six to twelve month timeframe when I was just running week to week. Now, it was exhausting and I couldn’t do anything else, and that’s all I did pretty much full-time, except from just managing the little software products that I have. But I think that was a nice motivator. Now in retrospect, would I ever do that again? Probably not at this point, because it just was so hard, it was so much time and it was so much work. So something that you have to weigh when you’re thinking about this, do you want to include content in your membership web site?
And the last piece I’ll throw out is if you decide that you are going to have a forum piece, and again that’s typically the piece I hear about that keeps people coming around is that community aspect, start to think through how you’re going to have a plan to spur conversation. Both to get people onboarded, because if someone’s never posted to the forum they’re much less likely to ever post to it. So you want to get them in, get them introducing themselves. It’d be great if there was beyond introducing, there was even another one that was a question about you, what’s your business? or something like that. Then having a weekly discussion topic that the people can come back to week after week, I think is another thing to think about. And if you can hire a community manager that would great. Or if you’re going to handle it yourself, that’s something else to do. But forums don’t tend to grow and thrive by themselves. They tend to need some nurturing along the way.
All right. You’ve validated, you’ve built it, now the thought is how are you going to launch it? That’s your last step before everything really starts. Your last step before everything starts. I’ll say it again, I can’t imagine launching a membership web site without an email list of at least a couple thousand people. I don’t know how you’d do it without an existing audience, because trying to run ads or trying to just do it without this base of people would be very, very hard. So with that said, build the list first. You got to build up your content producing chops if you’re going to do this, or you’re personal brand and your audience. And then you’ll want to launch to them. And I’ll talk in a couple minutes about how to do that with email. But before that, one of the ways to prep the inside of your membership web site is if you do have forums, you have to let some charter members – or founding members – inside early to basically populate those forums. You want to seed them with some questions and some discussions. With the Academy I think I let four or five people in. I called them charter members. I don’t remember, I may have comped them all lifetime, but I don’t know that you need to do that. If people are really interested you could just give them 50% off as charter/founding members. It depends on the situation you’re in, and how desperate you are for them. But getting these folks in early and getting them participating will be a big win for you to have something in the forums when people arrive. Even if you only have a dozen or two forum topics when someone gets there.
Mike [23:59] : Yeah. This is really, really important because the last thing you want to have when people log in is to have that community be a ghost town. So there’s a couple of different ways that you can do that. One thing that we’ve found that worked really well was to let a bunch of people in all at the same time. And what that does is it tends to create sort of momentum for people to introduce themselves, and they see, “Oh, this other person introduced themself. And then a second person and a third person.” And then suddenly they feel like there’s a lot of people who are also new, just like them. And I think there’s different ways to approach that particular problem, but essentially what you’re doing is your creating conversation starters, so people can see what other people are working on, what they’re doing, what they’re interested in, and start asking questions. And that’s really where the value of the community comes from is people talking to one another and providing other conversation starters. “Oh, I see that you’re in this part of the country. Where are you? I used to live there.” So those types of things are probably not directly important to the type of product that you’re building this community around, but it is extremely important for having that sense of community because it gives them something to talk about. If you have nothing to talk about, there’s no community.
Rob [25:09]: Yeah. And that cohort approach of basically not letting people in all the time, but letting people in in groups, serves both the approach of getting folks in all at once both, so they can get something out of it, but so that you can manage that whole process. We found it being much more beneficial to have 25, 30 new people all at once, rather than have them trickle in over the course of a few months. And the nice part if we’ve also found that it increases conversion rates, because people are focused and more ready when the time comes, rather than just signing in to check out what it’s like.
Mike [25:40]: Yeah. And maybe you should explain that a little bit, because that really boils down to doing a launch. Because what we were doing when we had the cohorts was we would draw a line in the sand and after a certain date, let’s say the first Tuesday of the month or something like that, we would say, “Okay. Let’s take everybody who signed up over the past 30 or 60 days and send them through this launch sequence.” And that’s essentially going to be this new cohort that comes into the community. So we found that that was very effective. We did, too, some testing around allowing people to just sign up whenever they wanted. There really wasn’t the pressure for them to say, “Oh, well, I can only do this now. Or if I want to do it a week from now I won’t be able to, I’m going to have to wait another month or two months or something like that.” That really helps drive some of the people in and say, “Okay. Let me make the decision now, as opposed to just pushing the decision off and then never really deciding because they said I can do this at any time.
Rob [26:32]: And in terms of your launch, like Mike just said, you are definitely going to want to launch with a series of emails. I’d say four or more emails. I went into this in my book, and we, of course, talk about it inside the Academy. We’ve probably talked about it on the podcast before. There’s a lot of info about this. You could go back to the Derek Halpern post that I talked about just a few minutes ago, about the tear down we did on the DRIP blog. You’ll see that sending a lot of emails tends to – as long as you’re doing it tastefully – will tend to produce better results, and it’s not just this one launch email, but it’s building up some anticipation. You can do it in a classy and really respectful way, and offer tastes of things and talk about what it’s going to be, and try to flesh out the idea of what this is really going to be so that people get a picture of it in their minds, and you’re not trying to basically sell someone on signing up to a membership web site in a thousand words. Which is, essentially, if you’re just going to do it in one email, is what you’re trying to do. So you’re really going to spell out the benefits, everything that will be part of the experience, and talk about what it’s going to offer for them. And so, setting up that series of emails is something that you’ll do in the initial launch, and then if you do decide to do cohorts, like we have traditionally done, then you can basically modify those just a bit and use them to then launch to the groups every month or every two, as you open the doors.
Mike [27:48]: Another decision you have to make about your launch is how you’re going to charge people. And this boils down to essentially the frequency. Are you going to charge them monthly? Are you going to charge them quarterly? Are you going to charge them just one time and it’s going to be unlimited or lifetime access? It, kind of, depends on the type of site that you’re running. If you have just forums, then it’s probably best to do something quarterly or annually. And what that does is that allows you to get them out of the mindset of “I’m going to try this out for a month or for two months.” Because the fact of the matter is they’re probably not going to get a lot of value out of it in 15 days or 30 days. So what you really want to do is push them much more towards a quarterly or annual plan of some kind. That doesn’t mean that it needs to be $3,000 or anything like that. I mean you could charge $50 or $100 either a quarter or per year. It depends on what it is that you’re building this community around. But the point still stands. I mean, you have to make a decision about whether or not you are going to be charging monthly or quarterly basis. Going back to the other side of it, if you’re providing content plus forums, then I think that you can move much more towards a monthly plan. Especially if you’re dripping out content over that time period. You could presumably build a community site where you have content that everybody gets access to all the content on day one, and then they have access to the community. But if they come in there and they say, “Oh, let me spend my 15 or 30 day free time period in here. I’m going to consume all the content and then I’m going to quit.” That defeats the purpose of having that type of arrangement. In that case you might say. “Well, I can go through and I can say it will be $400 to join and this is what the content is. And then over here I’m going to charge separately for ongoing access to the community.” So those are both different approaches that you can take in terms of how you’re going to be charging them. But it really depends a lot on the type of content that you’re charging further access to.
Rob [29:43]: Yeah. The point here is that most people tend to wander in and out of forums, right? They’re not in them all day or everyday. So one month you may get busy and you don’t use the forum, and if you’re getting billed for it every month, you’ll look and say, “I’m not using that. I’m not getting value out of it.” and cancel it. But if someone’s going to be getting reasonable value out of it, they’re going to get some value out of it every quarter, let’s assume. They’re probably not going to go six months and then get value out of it. The odds are it’s going to be every 90 days or something, they’re going to get a nice little hit from it. And so that’s the idea here is to try to match up the billing cycle with the value cycle of what someone’s receiving. So there’s a lot to talk about on this one, but I would agree with what Mike said here, that if you’re doing forums only, I would always lean towards quarterly. That’s the model I’ve seen working. But you could definitely do annual as well. I know you’ll have to ask for more money. You’re going to get more failed credit card charges, because they’re going to fail between there. You’re going to get more charge backs if you do annual. You have all these things that can go wrong. But I think those are probably the best way to go. And then if you’re releasing a ton of content then monthly you are providing them a lot of value, and I think it’s easier to justify that.
And then I think the last topic we have time to cover today is churn. Membership Web sites have tremendous churn compared to SaaS apps, because a lot of them are information and they’re not necessarily critical to a business’ success, or a person’s success doing something. And so they tend to historically have churn that is a lot higher than maybe a mission critical SaaS app that someone’s using. And I’ve talked to several – I’d say a couple dozen membership web site owners – and the average lifetime on membership web sites can be as low as between three and six months, which essentially means you’re churning out – you might have a 30% or a 20% churn rate where you’re losing that many people each month during that time. Some ways to think about this are to try to look at where you lose most of your people, and think about whether there’s something you could offer folks to stick around, and to try to find out why they are churning out. Like if they say, “The content just stops being good after month four,” then think to yourself, “Okay. So should I just give away the content because people are valuing that so much? Give it away to everybody and then just make the forums the piece that keeps people there?” Or if folks say, “I just didn’t have time to use it.” then maybe are you putting out too much information? Are you overwhelming people? Or, if everyone cancels after month four or month five, do you want to consider maybe pitching them at month two or month three with something that’s like, “Hey, we have a pretty reduced-price annual plan that can keep you around for the whole year, and it’s half the price of if you’re going monthly.” And then if someone’s on the fence or in doubt then maybe they upgrade to that plan. So there’s some different ways to think about it and a way to reduce the risk for the customer, and to also try to head off, or eliminate, some of the cancellation reasons that folks might be having. Because there’s a lot of reasons, of course, to cancel your membership if you see it coming in every month and you’re not getting value.
Mike [32:36]: This is something that when you’re first starting a membership site, can be really difficult to figure out, because you’re looking for trends in your churn, and every single month things are changing. And as months go on, you’re entire platform is changing as well. So you have to, kind of, look back with a bit of a critical eye and say. “Okay, what is it that changed?” And this is where having cohorts of people can be really helpful, because if you’re tracking those cohorts of people into your community, then you can say, “Okay, these people that came in in the first month, at what point down the road do they typically churn out.” And then the people who came in the month after that, what point did they churn out? Is your churn rate going up or down for each of those cohorts? And what is changing in the background? Are you adding content, are you moving content around, or are you improving anything? And as Rob said, are there pieces of content that you’re providing to them that are just not very good, or are you just overwhelming them with too much? All of those things can factor into it. Especially when you’re early on it can be very easy to just completely ignore churn, because chances are good that you’re growing the community at a rate that it eclipses what your churn is. So it’s sometimes difficult to see what’s happening there, because if your revenue is growing so fast that it basically trivializes or minimizes the churn rates, then you won’t notice that there’s a problem until it’s almost too late. That’s definitely something that you have to be careful of and look back at and figure out whether people are even paying attention to the content that you’re building.
So to just recap a little bit. This was how to build and launch a membership web site, and a lot of it was based on our own experience around building and launching the Micropreneur Academy. And basic steps really, are to validate what you have and what you’re looking at building, go ahead and build it using a variety of different technologies that are out there, and making sure that you’re crafting it in such a way that it’s going to be usable for your community. And then the third step is to launch and make sure that you are setting things up in such a way, in terms of the rate that you’re charging people, and doing ongoing launches to make sure that people are coming in as a cohort so that you can measure things and ensure that what you’re providing to people is valuable. And if you’re interested in the FounderCafe you can go over to foundercafe.com and everything that we have for our online community is laid out there.
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