Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer the question of whether to build or buy. Just because as a developer you know you can build it doesn’t mean that’s the best option. The guys do a gap analysis on building versus buying software.
Items mentioned in this episode:
Transcript
Mike: In this episode of Startups For The Rest Of Us, Rob and I are going to be talking about how to answer the question of whether to build or to buy. This is Startups For The Rest Of Us Episode 355. Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob: And I’m Rob.
Mike: We’re here to share experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob: Things are pretty good. Feels like a summer is turning into fall and I’m ready for another summer before winter starts.
Mike: Is it like the post-vacation vacation?
Rob: A little bit like that, yeah. We actually got a pretty cool email from [Tom Lagris 00:00:48] and the subject is How To Survive With Health Coverage In A Startup. He says, “Love the show, listen to every episode on my commute.” He lives in Melbourne, Australia. He said he wanted to comment on our discussion from Episode 352 around health care, and I’ll read from his email.
He says, “An option which people do is to move abroad to start their startup. Obviously, this depends on family situation, if you need local networks of people for discovery, etc. But a SaaS business can be started from anywhere, and in fact, many countries actually offer funding to entrepreneurs to go their first six months to build stuff. For example, [00:01:19]. If you pick a country with free or baseline healthcare like the UK, Australia, or New Zealand, then you have solved the healthcare problem. Using Stripe Atlas or similar still allows you to have a Delaware/US entity. That would be an idea for future episodes, best countries to go for six months to a year to build your SaaS product. Cheers.”
Good advice. I think if I was 20 years younger I would totally consider doing that.
Mike: Yeah, that reminds me of Tropical MBA episode I heard a while back, Episode 365, where they talked about Estonian e-residency and all the different things that go into it. Just reminds me of that and the idea of being location independent because that’s really what the Tropical MBA is based on. It was really interesting hearing from the Director of Estonia’s e-residency program and how they’ve positioned it to allow people to establish that e-residency and then work from anywhere in the world and just basically use that as their financial center.
If you’re interested in that, we’ll link that up in the show notes but I’ve definitely recommended that for people. If you’re interested in looking into going abroad and getting an idea of what one country’s solution to that particular problem is, there’s a lot of different places that are starting to offer very similar things.
Rob: Yeah, I certainly think it’s not for everyone. I think that depends on your personality and that depends on if that type of thing is interesting.
When I was younger—I enjoy travel now more than I used to. Frankly, when I was in my 20s, which is when I probably would’ve done this, before I got married or before I had kids, I kinda wanted to be here to start the company. I think it depends on really what your goals are and your personality and that kind of stuff.
How about you, what’s going on?
Mike: We got another email from Steven Johnson who said, “Hi Rob and Mike, I wanted to say thank you. I love the community and the podcast. A year ago, I was doing around $5,000 a month and I started listening to your podcast, made some change to my business based on what I heard. Since April, I’ve been averaging about $15,000 a month.” Steven writes us from Glacier Peaks Studios. That’s great to hear, Steven. Really appreciate that email.
Rob: Yeah, that’s awesome. This is one of the big reasons, when we get emails like this, this is why we do the show and this is why we do the conference and this is why we talk about this stuff and share the knowledge we’ve learned. It’s to help other people, to build the community and have us all have the rising tide lift all the boats.
Mike: Aside from that, the other thing I’ve got going on is just banging away at support issues and getting customers on-boarded into Bluetick. My launch went reasonably well for what my expectations were, and things are moving forward at a fairly fast pace at the moment, just making changes to the app and making it easier for people to self on-board and guide them through the on-boarding process, identifying where the bottlenecks are and hopefully get them solved.
Rob: Doing support and on-boarding, do you have any time to write code?
Mike: For the on-boarding, it’s a lot of code that’s in the app to recognize certain conditions. When those things come up, that’s most of the code I’m working on, just making it so that it can identify what the next steps are for the person, and then say hey, this is what you need to do to make things easier to find in the app. For example, if a mailbox starts to fail, or if they haven’t even set one up, pop up a message when they first log in. It says hey, this is what you need to do, so that they know exactly what they need to do and they don’t have to go to a personalized on-boarding session or anything like that.
Rob: Yeah, that makes a lot of sense. The nice part is as you do this, you should receive fewer questions, you should see more people getting further into the app. We used to have a dashboard where we had three or four steps that people needed to do to get set up with Drip. Next to each account we had, it was like checkboxes. I could just flip to see all new trials and I could see who hadn’t checked the boxes. We started basically measuring progress on an aggregate basis of what percentage of current trials have installed the Javascript, have activated a campaign, have activated a form or whatever. I forgot what the four steps were, I think another one was a workflow.
We definitely saw noticeable progress to a point, and then it just stopped improving. You peak out, that’s when it told us we’ve done a pretty good job with our on-boarding, it could probably be improved but we kept adding stuff in it and it wasn’t really doing it. Hopefully, you will get to that point soon. Then, you can stop. You can stop worrying about it for now and get back to building features and doing whatever else it is that you need to do.
Mike: Yeah, that was one of the first things I did, built a dashboard. It has almost, kind of what you just described. I used numbers to indicate whether or not they’ve done it or not, then it’s just color coded at the boxes in a basic table. Anyone who’s logged in or who’s creating an account or subscription, I could see whether they’ve done this step. For example, they added a mailbox, yes or no. It’s color coded if they have; it’s red if they haven’t, and it’s green if they have. Then it tells me the number that they’ve created.
I can see how far they are along and how heavy of a user they are as well, but I don’t have anything that gives me statistics or overtime what the percentage or conversion rate or anything like that is on those. That’s something I probably have to add in at some point. Yeah, that’s the basic stuff that I’ve been doing right now.
Rob: Sounds good. What are we talking about today?
Mike: Today, we’re going to be answering a question that came from [Christopher Yarl 00:06:29]. He had a question about whether to buy something off the shelf or to build it.
He says, “Hi Mike and Rob, thanks for the great podcast. I’m currently planning my next step for my business which is a small SaaS app. My question is this, one of the components that I need is a JavaScript library with some specific drag and drop capabilities on the frontend. There’s one commercial alternative out there but it’s pretty expensive and buying it would consume a lot of my available resources. I’m also hesitant because chances are that only supports about 50% of the functionality that I need, which will leave me with very little funds. I’ll still have to do extensive programming on my own in a library that I’m not familiar with. What would you do in a case like this and why?”
I thought what we’d do today is walk through the general steps that you would go through and the questions that you would ask if you’re in a situation like this where you’re trying to figure out whether or not you should buy this library even if it’s very expensive, because I’ve been in situations before where I have this library or this piece of functionality that I want or need, and the library for it is expensive. It could be a couple thousand dollars, and it might not get you as far as you want or need to be.
The fact of the matter is you’re going to have to learn all the stuff that goes with it, and it may not be worth it. The question is do you dump a couple thousand dollars on something, or even if it’s a couple hundred if your budget is much smaller, do you do that and then try and figure out afterwards or there are other ways around this particular type of problem?
One of the dangers that we have as developers is that we know that we can build almost anything given enough time. The fundamental question here is how do you determine when it’s better to build something versus buy it? It applies to things like software libraries, components, infrastructure, entire software packages for example. You really need to do some sort of a gap analysis between whether or not you build versus buy. But in order to do that, you have to have questions that you’re going to ask to help establish what that gap looks like.
Rob: Yeah, I do think there are times. I think in most instances, if you’re thinking about build versus buy, hopefully you’ve already thought through this seriously. You’ve already thought, “Do we actually need to get this going?” You spent time evaluating it.
But I do think it is an interesting thought experiment to sit down and think are there alternatives to this, to doing it the way that you want right from the start. I think about in Drip, we have workflows which are visual marketing funnels. We didn’t build those from the start, we built basic automation rules to start with which were basically there’s a trigger on the left, there’s an action on the right, there’s dropdown lists to select what you want to do. We didn’t invest the five months of time or whatever many thousands of dollars. I’m sure if a library even existed to do that kind of stuff, it would’ve been expensive.
We didn’t do that because we were able to get by for I guess a year, a year and a half, with just basic automation rules. That’s something to think about, it’s not going to be in all cases, in some cases you absolutely need to get the dragon drop or to get the best thing for the job in order to make the app work. If not, it’s always good to think about alternatives.
Mike: Next step when you’re doing your gap analysis is to try and figure out what the critical features are that you need, versus the ones that are nice to have. Rob just described what the process they did with Drip was where they didn’t build those workflows, the visual workflows upfront, they just built these little rules that you could chain together and they all ran independently with much more of a manual process, I’ll say, to put them together, but it worked. That’s really what helped people in the early days and helped the business get to a point where it was making money.
If it’s not directly in the path of getting the business to making revenue, then you can probably avoid it. You can probably get away with not doing it. I think another piece that comes into answering this question is how far along are you in the business? If you’re not making any money at all, these types of questions make a lot more of a difference than when you’re making $10,000, $20,000 a month because then you’ve got money to play with, you’ve got revenue that’s coming in, and you can pay for things. Versus when you still don’t have any money and you’re not real sure whether or not that bet is going to pay off.
I think that’s the fundamental place that Christopher is coming from, he doesn’t have a lot of money to dump into this because it’s not making anything yet.
Rob: Yeah, which is a tough sell for me. In his situation specfically, given that he’s going to spend almost all his money and then still have to write a bunch of code which is only going to get him halfway there, I would either not buy it and build it, which I have a tough time saying. If there’s something that can save you months of development time, it’s almost always worth buying.
The second option is I would consider saving up longer, get more money in the bank so that it doesn’t kill all of your savings. But it’s tough. Early on in your entrepreneurial career, you’re going to have more time than money. Then later on, you should have more money than time, and you’re going to swap at some point. It sounds like Christopher is still early in his career. If you do have more time than money, you can hammer this out and you can work these long nights and weekends, or even during the day, he doesn’t mention that he has a job.
I would honestly probably, if I were in his shoes and I was thinking about this, I think the money is probably going to serve him better somewhere else. It’s a tough call but that’s probably what I would lean towards, just hammering it out, which again I hate to say because as developers we always want to build it. “Oh, I can build it better, I can build it cheaper than that person.” You’re going to way underestimate how long it’s going to take you.
Mike: But I think the third option, which is kind of an implicit one, is can you just avoid either one? Can you just not buy it and not build it at all? Can you get away without it and completely, for the time being—not to say you’ll do it forever, but can you push off or delay the decision until much further in the future? I think in a lot of cases, there are definitely ways to do that which will help you move the product much further forward than you otherwise would if you sat down and spent all the time working out through the library and building stuff.
It really depends on where that component or that library has to reside in your code base and what it does for you. But there’s a lot of situations where you don’t even have to do it at all and you can just avoid it entirely for the time being.
Rob: Sure, that makes sense. I think in the context of this episode, we should assume that, obviously, you’ve evaluated that and you’ve decided that you do need it. We should expect, if Christian was asking that question, obviously if he can avoid buying it then he should or avoid building or buying then he should. We should probably assume that he really can’t, that it’s the core of his app. Let’s just assume it’s the one feature that is going to be in his app, this drag and drop thing.
With that in mind, the next to tie in to each other, on the next things to think about, one is when do you need these features available in the timeline of your app? What would be the timeline to develop them, to build them from scratch versus to buy them. Is putting the money down, does it save you enough time that it makes it obviously worthwhile? Does it save you two months or three months and you have other competitors around, or two or three months is a vital component to your success.
I think about something like LeadPages acquiring Drip. During the acquisition process, one thing that Clay, the CEO of LeadPages, had said was this is going to give us a two-year jump in this space. They could obviously have built their own ESP, they have software developers, they have product people, they had funding to do it. But he said the reason we’re paying this money for your company is to really leap frog us. That time that it’s going to save us is a big deal for a company that’s trying to get somewhere very quickly.
If you’re listening to this podcast, the odds are pretty low that you’re in that boat. But this idea of when do you need features available and how long will it take to build them, I think, is the next thing to think about.
Mike: Next on the list is do you have the runway available to develop those features if it takes twice as long as you think it’s going to, if that’s all you work on. By all you work on, I mean nothing else gets done during that time. Can you coast until those things are done?
This really goes back to the fact that most of us are inherently terrible at estimating timelines, especially when they get too far out. It’s easy to say okay, this is going to take me a couple of hours, or even on a longer project to say three or four weeks, yeah, we can get this done. Once you get out to something that’s three to six months, there’s so much involved and all the things that need to go in it that it’s going to be really difficult for you to identify in advance all the little gotchas and edge cases that you’re going to run into that need to be dealt with.
For you to replicate a lot of things in a very complex library is going to be difficult and it’s probably going to take you twice as long as you think it will. That’s not just because we’re bad at estimating, it’s also because we’re inherently overoptimistic as developers over what sorts of problems we’re going to come into and our ability to resolve them in a timely fashion because we’re going to get pulled in a lot of different directions. It’s difficult to dedicate all of your time to just those things.
Doubling the amount of time that you think that it’s going to take is probably a reasonable, if not overly conservative thing. You might even want to quadruple it.
Rob: Yeah, I think that’s the key there. Double or quadruple. It just does wind up taking a lot of time. Often times, because we don’t think of edge cases, once you get into something you realize oh if I don’t do that, then it’s going to break, this is confusing for the user so we have to add this whole other series of screens or something like that. I agree. This is a tough one. It’s so easy to be optimistic and estimate one month or two months to build something and have it easily take four months to actually get it into production. There’s a difference between packing out some code and actually having fully unit tested, high code quality, maintainable performance, all these things can easily take you another month or two. It’s something that we don’t really think about.
Another thing to consider is can you resell what you think you could build? What you’re building, is it related to the existing product or would you need to target an entirely new audience? Obviously, if it’s a new audience, you don’t even want to think about launching a second product. It is interesting to think that if you were to build the library, would anyone else out there buy it? Again, I’m guessing the answer is going to be no, that it’s not worth it for the distraction. It’s definitely an interesting thought experiment, I think.
Mike: I think ideas like this come up a lot when we’re developing things just because we look at that and say it’s been really valuable to me, maybe I can make some money from this and sell this component to other people and build a business around that as well as this other thing. Really, you’re just splitting your focus. In most cases, it’s not going to work out, unless you’ve built out an API or a library yourself that is usable in a general case scenario and you have the time to dedicate to it. Chances are really good that you probably don’t have the time to dedicate to it because it’s a lot more time consuming to build a second business at the same time as the first. It’s honestly not going to work out very well in most cases. Can’t think of an example of where I’ve seen somebody develop two different products at the same time and sell them to different audiences.
Rob: Yeah, you’re just stretched too thin, especially when you’re a solo founder.
The next thing to think about is what commercial or open source options are available? Are they cost effective in meeting your timeline? Because buying something can be expensive. If it doesn’t get you all the way there, then there’s still that whole lot of struggle of adding onto it. And then open sourced can frequently—ah, I shouldn’t say frequently. It can be more trouble than it’s worth if you get something that is not maintained going forward, you get a project, essentially, that gets abandoned or that has already been abandoned, or maybe you get it and you spend a week tying into the API and then you realize that it’s buggy or it doesn’t do what you need to do. This part is harder than it seems. It’s relatively infrequent that I think you’ll find a perfect match off the shelf that you can buy that’s going to solve all your problems right away.
Mike: That’s totally true, but I don’t necessarily think that you need to solve all your problems right away. Really in the early days, we are just trying to solve the problems for the customers and there’s a lot of things you can get away without doing. If you can just curve off a tiny little slice of the thing that you’re trying to implement that is in the path to revenue for your customers, then you can find an alternative that isn’t nearly as good as what you want.
Yes it’s a suboptimal solution, but if you integrate it in such a way that you’re only using those pieces that you desperately need to get something working that people are going to pay for, then it gives you the ability to go back to it in the future and buy something that is more expensive or has more features and is an alternative to the one that you’re originally looking at. Maybe that’s the optimal thing that you should buy, but are there solutions out there that are a lot less expensive or can get you to where you need to be that are an alternative to what the optimal solution is for the time being?
Along with that, is the technology or the component that you’re looking at, is going to provide you with any sort of a competitive advantage? That competitive advantage can be either speed, efficiency, productivity. All three of those things can be either for you or for your customers. If you can put something into your app that is going to make your customers more productive or more efficient at what they’re doing, then they can get into your app, do their job, and get out. It will provide more value to them because of those things. They’re able to do those jobs faster than they would if they were in a different app.
Again, those things apply to you as well. If you are able to develop something faster or be more efficient about the resources you’re using, maybe it’s AWS resources or servers or backend storage, if the component allows you to do those things at a lower cost and is able to improve your bottom line because you’re not spending as much money doing hosting for example, all of those are things that you should take into account when you’re trying to determine whether or not to build or buy it.
Rob: Here’s another thing I’ll throw out. With Drip nowadays, in almost all cases, we would choose to buy it just because we’re at the point having the funding of LeadPages. It would be pretty extreme that I would want to take developer time away from building features or scaling the app to go build something. Not even build but think about an example, continuous integration.
We pay hundreds of dollars a month to Circle CI, to handle continuous integration, but there are free open sourced CI servers that we could download, put on a [Easy 2 00:20:44] instance or multiple, scale that computing power up and down, but we’d have to maintain it and that needs someone to learn how to use it and it would be a switching cost. When you look at it as a few hundred bucks a month and you think about not only how much does a developer make but how much you’re losing, the opportunity cost of a developer, a dev ops person, not improving the app, it’s a bit deal.
That’s the other thing. All of this rotates around how fast do you need to move and how fast do you want to move. And then how much money do you have?
Mike: Coupled with that, you said that you’re paying a lot of money for Circle CI. There’s also a question of what is the maintenance cost of keeping things up to date? Are there things that are going to be changing that are outside of your control, or do they handle it for you as part of the updates? That could be protocols that are changing on the internet.
If you got a networking library for example, a lot of times it makes more sense to use something off the shelf than to build your own because there’s so many different edge cases and exceptions that you can run into that you’re just simply not going to think of or consider when you’re trying to build your own. It’s just too complicated to keep up to date with all the different things that are going on.
Rob: Finally, I think the question you should probably ask anytime you’re building a future, considering spending time or money on something is can the scope of what you need be reduced in any form or fashion? Going back to the first principles and rethinking do you actually need to build or buy what it is that you’re thinking about, or is there an alternative or is there a way to reduce that scope?
Mike: Hopefully, a lot of these questions that we’ve surfaced and the topics that we’ve talked about resonate with you in a way that helps you determine whether or not you should build or buy something. Really, you just need to go through the list of things and say what is the most important thing to you right now and are there things that can be pushed off? The final thing is do you even need to make this choice right now?
Rob: That wraps us up for the day. If you have a question for us, call our voicemail number at 888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, we’ll see you next time.
Episode 354 | The Art of Product with Guests Derrick Reimer and Ben Orenstein
Show Notes
In this episode of Startups For The Rest Of Us, Rob talks with Derrick Reimer and Ben Orenstein about the art of product. They cover Ben’s transition from full time work to working solo. Derrick talks about the changes to his life after the Drip acquisition.
Items mentioned in this episode:
Transcript
Rob: In this episode of Startups For The Rest Of Us, I talk to Derrick Reimer and Ben Orenstein about the art of product. This is Startups For The Rest Of Us Episode 354.
Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob, and Mike is out this week so I’ll be talking with Derrick Reimer and Ben Orenstein. We’re all here to share our experiences to help you avoid the same mistakes we’ve made.
This week, I’m very excited to invite Derrick and Ben on the show. If you haven’t heard of them, they co-host a podcast called The Art of Product. You might recognize Derrick’s name because he is the co-founder of Drip and he has been on this show a couple of times in the past. Ben Orenstein spoke at MicroConf starter this year and he’s maybe best known for hosting the Giant Robot’s podcast as well as being a prolific Ruby On Rails developer. He recently left ThoughtBot to go out on his own.
Without further ado, let’s dive right into the interview. Derrick, Ben, thank you so much for taking the time to join me today.
Derrick: Thanks for having us.
Ben: Absolutely.
Rob: Ben, before I even intro you, I want to start with a story. I cut you off before the interview started and you said, “Hey, I went to the emergency room this weekend.” I said really, what happened? What was your next sentence?
Ben: Have you ever heard of Acroyoga?
Rob: That is the best lead-in to an emergency room trip I’ve ever heard. Walk us through that, Ben, what happened?
Ben: Acroyoga, I guess it’s short for acrobatic yoga. The basic gist is it’s a partner practice. You’re doing a lot of lifts and things of that nature. On Friday night, I was sitting, basically. My partner was laying on the ground with his legs at 90 degrees, an L, and I was sitting on his feet and leaning backwards in a back bend. It turns out that this guy was basically too small to base me, that’s what he was doing was called. He just wasn’t quite strong enough to support my weight. The first time we tried it, I fell off to the side harmlessly. “Aw, that didn’t quite work. Let’s try that again?” He was like okay, we can try it again.
We really should’ve stopped at that point realizing he just wasn’t quite strong enough to do it, but we went for it anyway. The second time, he collapsed and ended up dumping me more or less back onto my head, backwards.
Rob: Ouch. Concrete?
Ben: No, we trained in this Aikido studio. They’re used to throwing people. There are mats which is good. But I ended up basically doing a back somersault over my head with a degree of mobility requirement that I don’t have. I heard all of the vertebrae in my neck pop and felt this intense strain on all the muscles that run from my neck down my back.
I rolled out of it and then came up and was like okay, I can feel my fingers, I can feel my toes, okay that’s good. Nothing’s tingling, I don’t see any spots, I don’t think I have a broken neck. But all that tissue and muscular tear on the side of my neck was basically on fire. I couldn’t turn my head to the left, I couldn’t look up or down, I could only keep my head perfectly straight.
I tried to walk it off for a few minutes and then I was like no, I’m going to go to the hospital. I did. They put me in a cervical collar and were like we’re going to CT scan your neck and hopefully there’s no bone damage. Fortunately, it turns out there was none. Just soft tissue stuff, which is great, because it will heal fairly quickly. I was definitely worried there would be bone problems or worse, spinal problems of some kind. Got off pretty easy, it turns out.
Rob: Yeah, cause that stuff hangs around forever. Anybody I know who’s had even these minor back injuries, it’s just decades of dealing with it. Well, that’s good news, man. Glad you’re okay.
Ben: Thank you.
Derrick: Do you regularly do Acroyoga?
Ben: I regularly do it over the last two weeks. I have fallen in love with it over the last handful of days. It’s super fun, except for the crashing on my head, I feel way more mobile and strong in interesting ways. I’m totally digging it.
Derrick: That’s cool. Do you think you’ll go back once you’re healed?
Ben: For sure. I learned some lessons, I got off kind of easy and learned some lessons along the way. Should’ve absolutely had a [00:04:35], should not have had someone who I outweigh by 50 pounds trying to support me, should’ve realized when it failed the first time that we should’ve either stopped or gotten a [00:04:42]. There were a lot of warning signs that I just brushed by that now I think will set off much stronger warning bells in my head.
Rob: Indeed.
I want to take a step back and give a little introduction of both of you guys. Derrick, my co-founder of Drip and now VP of Engineering for Drip at LeadPages, lives here in Minneapolis. Derrick, you’ve been on the podcast twice before, is that right?
Derrick: Yeah, I think so.
Rob: Yeah, a couple times. You talked about the code tree sale and then I don’t remember what we talked about the other time. Folks should be relatively familiar with you.
And then Ben Orenstein, formerly of the Giant Robots podcast, and now you’re out on your own, independent, and you actually were a speaker at MicroConf Starter Edition this year. We’ve all known each other for a few years now.
The reason why I had to bring you guys on is a couple things. One, because you’ve launched a new podcast, it’s called The Art Of Product. I think that anyone listening to Startups For The Rest Of Us who is thinking about building software products and going the SaaS route should take a listen to The Art Of Product. You guys are what, maybe 8 or 10 episodes in?
Ben: Yeah, about 10.
Rob: You guys have a good vibe. It’s conversational, you’re both developers. I almost said Rails developers but I know you’re not dabbling in Elm and Elixir and other things. Maybe you’ve always dabbled in those. I just think that for folks who want to hear an even more technical look at starting software companies and a technical look at building software, because both of you have done it now for a decade or more. The Art Of Product is a podcast for them to check out.
Have you guys been enjoying the first 10 episodes, has it been fun?
Derrick: Yeah, I’ve been having fun with it. I’m still surprised sometimes that people actually enjoy listening to us just talk about what we’re working on. But I know that personally, that’s one of my favorite formats when I listen to a podcast, just hearing what people in the industry are up to and the day to day things that they’re struggling through or having triumph over. It’s been fun to just keep chronicling our story and hearing positive feedback from folks on Twitter and stuff, it’s a good shipping, I think.
Ben: I would second that. I think the radio has gotten a little more interesting lately since I quit my job and went independent. Now, Derrick is working on a large, successful SaaS company and I’m working on a small product business. We have two interesting angles on making money online.
Rob: That’s cool. How would you summarize the podcast in a couple sentences?
Ben: It’s two dudes talking. A brand new, groundbreaking format that no one has tried before.
Rob: Right. But it works because both of you have personality, and you’re both doing interesting things which really helps. Not just in work, it’s like Ben, you’re in a barbershop quartet and you’re doing Acroyoga and occasionally falling on your head. Derrick is traveling, he’s always working on side projects, he has his blog. There’s a lot of stuff going on and I think that’s always—interesting people make interesting radio, that’s how I think about it.
Ben: I think one strength that we bring to the table is that Derrick and I both do a pretty good job of not filtering too much. We’ve had episodes where one or both of us had been really struggling or feeling really down and we don’t sugarcoat that, we don’t shy away from it. I quit my job about two months ago, I think it’s episode two or something and you can tell I’m reeling, basically. I was expecting it to be hard but it ended up being much more shocking than I anticipated. I’m super, super down. I’m not talking about what’s freaking me out and why I’m scared and what’s harder than I thought it would be.
I think we both do a pretty decent job of putting that out there because I think it’s good to have that kind of stuff exposed. I think it’s useful for some people to hear that and to understand what it’s like to try scary things and to realize that hey, if I’m having these feelings, I’m not the only person doing it. I’m not the only person that experiences things like this.
Derrick: Yeah, we joke that sometimes it just turns into a therapy session. I think a big part of that is trying to debunk the imposter syndrome that a lot of people experience. Even people who are “successful” or have been doing what they do for a long time still kind of go through the same struggles that you’re going through if you’re even newer to the industry or something. We’re always trying to be authentic and genuine. To me, I start having a lot more fun once I started breaking down those walls and just trying to put it all out there every week.
Rob: I think that authenticity comes across too. Until you guys aren’t too… you may have outlines but I guess the pretty loose, you don’t edit much inside the episode, you just talk and what comes out goes to tape. Is that accurate? That’s just my guess.
Ben: Yep, that’s pretty much on.
Rob: That’s cool, awesome. For folks who are familiar with the Giant Robots Smashing Into Other Giant Robots, is that the correct title of the previous podcast?
Derrick: That is, yes.
Rob: Okay, it’s long, so I just forget if it’s smashing or banging or something. Ben, you were the host of that for what, hundreds of episodes, right?
Ben: Yeah, I used to work at a company called ThoughtBot and we had that podcast launched about four years ago, I think. I was the host through that whole run, something like 210 episodes, somewhere around there. Around maybe 20 or 30 episodes ago, I brought Derrick on as a co-host. Other people had been co-host or I had done interview formats in the past, but the most recent incarnation was Derrick and I doing what we do now on Art Of Product.
Rob: Alright, cool. That actually leads into talking about the transition. You mentioned that you worked for ThoughtBot for the last several years, I think it’s a bulk of your professional career. You’ve just recently transitioned away from that full time work to being independent. You’re working on a product right now and have ideas for other stuff. Talk a little bit about that transition, what inspired it, how it’s gone, some of the pitfalls but also the fun stuff that’s happened.
Ben: Yeah, I was at ThoughtBot for six years. I was working on ThoughtBot’s SaaS apps. I had started one of them, it was called UpCase and I had ended up managing another one of them called Farm Keep. That was really an awesome experience. I had started off just as a consultant there writing Ruby, and then eventually ended up more on the business side which is exactly where I wanted my career to go.
I’d fallen a little bit out of love with programming at that time. I wanted sort of a new field and a new challenge rather than trying to continue leveling up my programming skills. Getting to start those businesses and run those businesses was perfect for me.
After a handful of years at that, it started to get a little too same-y. I’ve always, my whole life, thrived when I am pushing myself into different situations, especially with this deep learning curve. That’s when I’m happiest, when my pace of improvement is noticeable and I’m getting better at something all the time. I felt like I had run a lot of the experience and knowledge out of what I could do at ThoughtBot. I felt like I need to make some sort of change.
Honestly, I didn’t know fully what I wanted to do when I left, but I knew it was about time to try it. I talked to a bunch of people first, you included, Rob, and just said, “Hey, here’s roughly what I’m thinking, here’s my financial situation, here’s my background, here’s what I might work on. Am I crazy?” Pretty much everyone said no, you’re not crazy, this seems pretty reasonable. I decided to go for it.
After spending some time thinking about what my first effort might be, I decided to build a course. I ended up after my time at ThoughtBot with a lot of Ruby On Rails knowledge in particular about how to write good Rails apps. The first thing I’m working on is a course called Refactoring Rails which is targeted at people that have been working on a Rails app for maybe a couple years and started to see the pace of development slow down. This pretty much always happens, it’s almost impossible to not slow down. But there are a number of specific, tactical things you can do, changes you can make to your app, and features you can use or not use that will help make that slow down minimal.
My days mostly right now are cranking out videos. I plan out a video, and then record it, and edit it, and send it out to my list, and repeat.
Rob: So you’ve gone from hosting a podcast and writing code and marketing SaaS apps to recording videos and pushing them out. Is the work as fulfilling, is it more fulfilling, what is that?
Ben: I would say it’s not quite as fulfilling. I do miss programming, and there is a little bit of programming. The videos I’m recording are actually me writing code live and showing how I would refactor things. There is a coding component to it. I’m finding myself more and more missing that deep work of focusing on a programming problem for a whole day and just having the time race by. I find it harder to get into flow when I’m doing tasks like editing video or planning out a video. I think the results of this course might be that I want to get back into some sort of programming things.
Rob: Yeah, I could see that. Derrick, you and I talk frequently enough about the importance of allowing our developers on the Drip team to get into that deep workflow state. That’s something that I know you talk about the dopamine rush for you has always been pushing features into production, but I also know that part of your job that you have loved the most is being able to put the headphones on, sip the latte, and get into the deep zone and get a lot of code cranked out.
Derrick: Yeah, I think that’s the creative muscle that you’re getting to exercise. When you’re a developer, that’s like your natural form of creative expression. It’s hard to not have that as a certain element of your day to day. I don’t think it has to be 100% of it, but I feel like for me, it would always have to be a percentage I feel like, for me to feel like I’m exercising that muscle.
Rob: That makes sense. Do you feel like—maybe not the last couple weeks, because I know that you’re out of town last week, I was out of town a week before. I’m sure there’s a lot of stuff going on. Over the past three to four months as our team has grown up to when we were acquired a year ago we were at 3 engineers and I think we’re at 10 at this point. You have a lot more managerial roles, technical lead roles. Your role has expanded, I’ll put it that way. Do you feel like over the past three or four months, you’ve still been able to have moments where you do get in flow?
Derrick: There’s been moments for sure. It’s been less than it used to be, definitely. I will also say that I get a lot of satisfaction off of working with one of the team members, pair programming, I’m talking about that a fair amount on Art Of Product. It’s like being one of the developer and we’re working through a hard problem, and even if I’m not writing a lot of code there, I’m just doing more of the thinking, the thought process of solving a problem. That also tends to give me the same rush.
Just watching some team members be successful at balancing between the designers and the JavaScript engineers and seeing that whole machine work and knowing that I can push things in the right direction at various points to keep people unblocked. That definitely gives me some of that satisfaction as well. It’s a different kind of satisfaction, I think, and it’s hard to compare it to that true flow state.
Rob: Yeah, I totally agree. I had to make that transition as well several years ago because I basically stopped writing production code the day you locked me out of the repo.
Derrick: Oh yeah.
Rob: Code chains that I tried to make that Derrick rejected. I still miss it. I don’t regret the decision that I made to transition away from coding full time, but I absolutely miss those so many days when you can just, as Ben said, the day goes so fast because you’ll look up and you haven’t eaten lunch and you’re four hours past the time.
Anyways, transitioning back, Ben, off on a tangent a little bit. You were talking about your transition and that the work itself is a little less fulfilling right now. How has it been, I know one of the concerns you have that you voiced on The Art Of Product was that you were concerned you’d be isolated or feel isolated because you are an extrovert and you get motivated by being around people and being on a team. Do you find that you did feel isolated, and then how have you combated that?
Ben: Yeah, I definitely felt it. That was one of the things that came up in those early days. I was expecting that part to be hard because I know I’m an extrovert, but it was even harder than I thought it would be. The good news is I found some coping strategies that worked pretty well for me.
I quickly got a coworking space. Going to a place where other people are working and I can just chat with people even while I’m filling up my water makes a pretty big difference. It’s little things, it’s small interactions. I wouldn’t say I have any deep, new friendships at the co-working space. It’s just those little things like someone to grab lunch with, someone to get coffee with, someone to say hi to that really just energizes me in a deep way.
That helped. I wouldn’t say I’ve solved it by any means. When I’m recording video and editing it, I need to do that in a quiet space that has to be away from everybody else. Even when I’m planning out an episode, it’s a lot of deep work of writing and focus.
The co-working space has kind of worked as a hack. At the end of the day, no one’s on my team, it’s just me doing this effort and I’m the only one paying attention to it in a certain way. I wouldn’t say I’ve solved it, I think I’m still very much a team person. I like working on stuff with people. I’ve gotten some of that social interaction squared away and that’s helping, but I still feel at times a bit of a yearning for other people to care about what I’m doing and to be doing things with a group.
Rob: I think that’s a good point.
Derrick, you and I have talked. In the past, I know at one point you were a single founder and wanted to be the solo-preneur and run a small lifestyle business. After we started working together, we found the partnership to work so well. Then, we grew a team and we enjoyed working with our original team and now obviously the folks we’ve hired. How has your thinking changed, or has it changed on that whole running a company on your own versus more of what Ben’s talking about which is getting energy from the team? In future efforts, assuming you move on at some point to do another project, do you think that you’ll want to be solo or do you think you’ll want to have a team around you?
Derrick: That’s really interesting. I think it definitely has morphed my thinking about it. I feel like four or five years ago, I was all about how much can I do as one solo person, how many hats can I wear in the most strategic way so that I’m just captain of my own destiny, one person going solo. My feelings about that are definitely changed. Our collaboration with Drip, with working with the core team. It’s fun to grow the team and see the full actualization of Drip at a larger scale, but I still look fondly back at the days where it was a core team of five or six of us sitting in an office together.
That was really, I feel like, the sweet spot of working with a small enough team where you can all be in a room together, you can all bat around ideas. You have a lot of people on the team who are cross functional. Anna in customer success is doing a call, and then throws an idea across the room, and the developers are both sitting there and we kind of hash stuff out and get on a white board. Those kind of interactions are gold. It’s hard to imagine not at least having a small team like that with a future endeavor at some point. It may start out solo but yeah, I couldn’t imagine trying to wear all the hats and do everything on my own.
Rob: I think back to when I was working full time for the people. It’s funny because Ben’s insight into himself of needing other people around him obviously shows that, Ben, you know yourself pretty well. When I was leaving full time work, I was the exact opposite in the sense that I knew I didn’t want to be around people. The thing that I looked forward to most was going and working in my bedroom and never talking to anyone. I’m an introvert, it shows difference of personalities that even two software developers can have.
I think you don’t necessary fit the mold of the software developer who wants to go to their basement and code, you seem to really straddle multiple worlds, I think, with the extrovert and the personality and the ability to speak very well from stage as well as also having mad code shops.
Ben: I appreciate that. I’m not sure why that is, I guess I’ve just always enjoyed [00:21:21] skills. Since I enjoyed this deep part of the learning curve, I want to not just get really good at code and then keep getting better at programming, I want to be good at programming and then I want to learn how to speak in front of people and I want to learn how to run a business, and I want to learn how to market.
I think over a long time of doing all this, I’ve put together a handful of skills that you maybe don’t see in one person. I think maybe that’s the exception, people tend to focus on a thing and be like hey, I’m really good at this, I’m going to double down on this. Whereas I’m like hey I’m okay at this, I’d like to pick up a couple more skills that I’m okay at.
Rob: That makes sense. We’re going to do over, under here. I’m going to say ten years and both of you are going to say answer this.
Ten years, will you still be committing code to a production repo that people are using? Or, you can still work on a software company or be running a software company or whatever but ten years over, or under?
Ben: That’s a fascinating question.
Rob: I hate to put you on the spot. I was just thinking out loud. I just think it’s a fascinating thing to think about.
Ben: My guess is I still will be. There’s only been a handful of things that I have found so fascinating that they’ve retained my interest over a super long time. Programming has been one of them. I’d be kind of surprised to see that change. I think we’re at a renaissance of writing code for money and to provide value to businesses and things like that. I feel like this industry is only going to get more interesting. I think if I had to guess, it’s going to hold my interest and I’m going to want to still be making stuff directly.
Rob: So we get an over from Ben. How about you, Derrick?
Derrick: It’s an over for me as well. I feel pretty strongly, and I feel like this is not a hypothesis that I’ve totally tested. I feel like it is possible to still be the captain of a company, CEO as you may call them, and still be a person who contributes code. A traditional trend that you see is people starting out as a developer, writing the code, and then walking away from the code so that they can focus on the rest of the business aspect.
I think that is certainly one path you can take, but I feel like there is a secondary path where it’s like instead of totally giving up the code and focusing on marketing or what that other side of the business, I feel like you can still be a technical CEO founder and ultimately hire or get this through a co-founder, the marketing side of the business. I feel like you can flip that on its head so you don’t have to totally walk away from the code. I’m at least hoping that that’s a model that works because it’s hard to picture myself not actually being involved in code at all, I still can’t picture that that would look like.
Ben: Yeah, I have a quick anecdote that supports that. Six years ago, I went to interview at ThoughtBot and I was supposed to talk to the CEO. He’s like, “I’ll be with you in one second, I just want to get this test passing.” That had such an impact on me. I was like oh, I’m definitely going to work here. That is such a good sign. When the CEO is still doing technical work, he’s still technical but even more importantly, it means he understands what the life of being a developer is still. There’s no disconnect there, and that was awesome.
Also recently, Alex MacCaw who’s the CEO of Clearbit which is a company that I respect like crazy. I reached out to him on Twitter and said, “Hey, are you still writing any code for Clearbit?” He said, “Yeah, I wrote the feature that we’re shipping tomorrow.” It’s totally possible and I think it’s a workable model.
Rob: Mad props. Peter from Teamwork, he’s the co-founder. He still commits code to the repo and they’re over 100 employees now. They do about $15 million ARR or something like that, their SaaS app. I know there are folks out there that are doing that.
Ben: Yeah, so we’re both overs. Does that mean we shouldn’t start a company together, Derrick?
Rob: I think your skill sets may not be complementary, there’s a lot of overlap.
Ben: Rob, what do you think about that? Do you think, if I was like hey, I wanna get really serious about growing a SaaS company, is giving up the code something that I should consider?
Rob: It depends on what you mean by really serious. If you want to build a deck of million ARR SaaS company, I do think it would be something that I would consider. I think it would be the most efficient way to get there, just because coding at a certain point would become a distraction. It’s so hard.
If you’re going to head up a company, you become interrupt driven because you have to drop everything when people Slack you. I just can’t imagine enjoying coding. You can probably still get some code written, I just can’t imagine enjoying that when people are pinging me on Slack because they need an answer or stuff’s going to fall over in the next hour.
Ben: If I wanted to pair up with somebody, I would either be looking for someone technical to head up the technical stuff or the other stuff to head up that side. In your mind, is finding the technical co-founder an easier thing to do than the opposite?
Rob: Boy. I think for you, since you could do either but you enjoy the code more, my opinion would be that you should be able to find someone to do operational stuff. Since you would be so opinionated about the code in a good way if you’re running it, but in a bad way if your co-founder is running that. You could imagine the arguments or the disagreements that emerge from that.
Personally, I think if you do still want to stay in the code, I don’t think that’s a terrible choice if you can find somebody who can be the operations person. Hopefully, I think as Derrick and I found, hopefully someone who may be used to be a developer and doesn’t want to write code anymore and does want to walk away.
I feel like part of the power of Derrick and I’s partnership is that I am technical enough. I wrote production code four or five years ago. We still can have really in depth conversations, especially in the early days when it was just the two of us and he could talk to me about detailed stuff you can’t talk to a non-technical person about. I feel like that might be, just seeing Derrick and I’s model work, that might be the perfect fit for you.
Derrick: Yeah, I think you and I overlap in all the right ways. I care about the business side and I actually want to be involved in the business strategy conversations, but my main focus is the code. LIkewise, you’re predominantly thinking about product and operational type of stuff for the team but we can sit down and hash out like alright, here’s what I’m thinking for this architectural piece. We talk stuff through, and those are usually productive conversations as well. I feel like we both step into each other’s territory but not in a harmful way or clashing way, but just in a very complementary way.
Rob: Yeah, I think we’ve had conversations where if we do wind up, we both have opinions on all the areas of a company or the product. If we wind up disagreeing about something, I will absolutely be like this is a technical decision and it’s yours. I step away and I don’t feel like I have any more insight into it. I feel like I have a lot less insight into it and that Derrick has the ownership and the responsibility of it.
Derrick, we’ve covered Ben’s transition away from full time work to independence. Just about a year ago, I guess it was about 13 months ago, you and I sold Drip to LeadPages. Month or two later, we moved to Minneapolis. What’s new in your life?
Derrick: Obviously, moving is a big step for me. I never lived outside of the town that I was born and raised in. I’ve been taking this as an opportunity to experience something new. I definitely don’t regret the decision. Minneapolis is an awesome city, we’ve been getting to enjoy everything that comes with living in a really world class city, that’s been a great experience. Also, just joining a company of 180 people has been great learning experience too.
Most of my work experience prior to that has been at small companies, so I was at a small family business in college that I worked at part time where it’s just a few of us in an office, and then obviously Drip grew to 10 people. To be part of a large organization is a fascinating experience to observe and see how things operate and see how many of the things that we figured out along the way actually translate well into a large organization. Yeah, it’s been a fun ride.
Rob: What do you think has been the hardest thing about the transition for you personally or professionally?
Derrick: I think the biggest struggle is probably all aspects of scaling the company. The technical side, we’ve been dealing with quite a bit of database issues and queue issues. These are all things that come with the territory of growing the business like this. When you’re acquired and now you suddenly have thousands more trials than you had before, these are all things that are naturally going to happen.
It’s been, I would say, a period of very aggressive learning where you have to be on the ball all the time of looking around the corner for the next scaling challenge. It’s been pretty exhausting, I’ll say. I think I felt that recently, and the vacation I took this last week has helped me. I think I need to do a little more of that because it’s been a pretty intense year of just learning and working through scaling challenges.
Also, growing a team. We now have a development team of ten folks. We’re very picky in our hiring. The hiring process was pretty long to get the team out to where it is today. Just figuring out how to scale myself and de-couple myself from processes where I normally had been previously deeply involved in has been a challenge, but a good challenge. It’s good to see the team start to take responsibility for things that I normally would’ve been squarely on my shoulders.
Rob: Yeah, I would agree. I think that’s been the hardest part. Moving to a 180 person company when we first moved here, coming back to the conversation earlier about introvert versus extrovert, it is interesting that although I am introverted, when I wanted to go solo or go out on my own I didn’t want to work with a bunch of other people. But by that time that we had grown Drip, I really enjoyed working with you guys. I moved here and I was the only one from the Drip team just sitting in the corner on my own and that felt super lonely and isolating. As you one by one started showing up, it was like oh, this feels so much better. It’s good to have the team around.
Mixing things up a little bit. Ben, I wanted to come back to the course you’re working on. You mentioned your video course, is it Refactoring Rails?
Ben: Yes, that’s right.
Rob: I’m sure there’s some folks listening to this episode that want to learn more about it, potentially check out, maybe you could give away a couple of the videos so people could hear about it. Where is that, what URL?
Ben: refactoringrails.io.
Rob: Cool. You’ve been working on that for a couple months? Are you releasing that as you go, or is that a launch day coming up?
Ben: I’ve been releasing samples. I have 4 videos done out of what I expect to be about 10. Making progress, chipping away. Every time I finish one, I send out either the whole thing or part of it to the people that are on the launch list. It’s been dripping out steadily.
Rob: Very cool. refactoringrails.io. You’re using Drip for that launch list, am I right?
Ben: 100%.
Rob: Alright.
Ben: After most of Art Of Product episodes, I get free tech support from Derrick.
Rob: Totally.
Derrick: If you want a main line to the co-founder of Drip, you just got to start with our podcast.
Ben: I have a quick question for you, Rob. Actually, speaking of free tech support, this is actually free marketing support. I believe, by default, when I make a campaign in Drip, it has this option checked so it will only send emails to people in their local timezone at 11:00AM or something like that. I’m not sure if that’s a default but I have it checked on one of my campaigns. Would you call that the best practice? Is that typically going to give good results, or do I need to not worry about that?
Rob: I would say yes, it is the best practice in terms of all the split tests and experiments I’ve done over the years. That’s kind of a default. It depends on what time is on your end. If you’re on the East Coast, you don’t want it to be too early for people on Pacific, so I would tend to go a little later, maybe around 11:00AM, between 10:00AM and noon, probably. Whereas if I’m on Pacific, I might go a little earlier.
But to be honest, if you’re one or two hours or three hours off, you’re going to see very small difference. At our scale, meaning thousands or tens of thousands of people on the list, it kind of doesn’t matter. I wouldn’t be super worried about it. You can, of course, run the split testing in Drip and you can test that out on your audience but I bet you probably either wouldn’t have enough clicks to actually get a statistically significant answer or it would just be so similar if you tried 11:00AM versus 1:00PM or something.
Ben: That’s kind of what I figured. It kind of comes down to almost just my impatience. I’ll finish a thing on Friday at 3:00PM, and I’m like ah, no one’s going to get this until Monday at 11:00AM, I want the feedback faster.
Rob: You can try sending a broadcast right when you get it done Friday at 3:00PM and just do a poor man’s split test. You know your historical, you can look at all your opens and all your click rates, just try it once and see if it tanks.
I know that accidentally one time, this is pre-Drip, I was in Mail Chimp and I scheduled something. Instead of 10:00AM, I scheduled 10:00PM. It was not good. It was buried in people’s inboxes. When they went to delete, it wasn’t near the top as they were working. I remember the open rate being substantially less. I ran a couple other experiments where I sent at an odd time and sometimes it hurts and sometimes it doesn’t matter. I think generally, during the day for a work audience is pretty good.
I ran a job website at one point. It was Sunday. Everyone thinks about applying for jobs on Sundays because they hate their jobs. There would be this big spike in traffic and that’s where these emails would get the most traction.
Ben: Makes sense.
Rob: That’s it, cool. refactoringrails.io. Derrick, you have a blog at scalingsaas.net that you don’t update very often, is that right?
Derrick: I’m going to correct you, scalingsaas.com.
Rob: Oh that’s right, you got the .com.
Derrick: Yes, I wanted to blog more than I actually have which is why podcasting has been a good medium for me. But I do occasionally crank out a post here or there. scalingsaas.com, you can follow me in text there.
Rob: Sounds good. Gentlemen, thanks again for coming on the show. If folks want to hear more from you, they can head over to The Art Of Product podcast.
Ben: Thanks for having us.
Rob: Absolutely, my pleasure. That wraps us up for today.
Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under Creative Commons. You can subscribe to us in iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript. Thanks for listening, we’ll see you next time.
Episode 353 | Noah Kagan’s Post-Launch Advice for Bluetick
Show Notes
In this episode of Startups For The Rest Of Us, Mike and Noah Kagan of AppSumo, talk about the evolution of Bluetick. Mike discusses how the idea came about, development, and issues faced along the way. Noah provides some post launch marketing advice and tactics.
Items mentioned in this episode:
Transcript
Mike: In this episode of Startups For the Rest of Us, I’m going to be talking to Noah Kagan about Bluetick marketing tactics. This is Startups For the Rest of Us, episode 353. Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike, you got to say, “And I’m Noah.”
Noah: What’s up, man? I’m Noah.
Mike: We’re here to share experiences to help people who made the same mistakes we’ve made. What’s going on this week, Noah?
Noah: This week, I’m doing marketing. That’s kind of what I’ve been thinking about with our sumo.com business, just who’s the customer, where are they, what kind of plan can we put in place to help reach out to them.
Mike: Awesome.
For the listener who may not be familiar with Noah Kagan, he’s the founder of AppSumo and sumo.com. They offer a variety of free tools for small businesses. You put a little JavaScript snippet on your website and essentially you end up with a suite of tools that helps you build your email list, promote it, get people into your sales funnel, and really just manage a lot of the online marketing that you do. Is that an accurate ballpark assessment of that?
Noah: Yeah. Our whole company’s purpose is we help the small dudes or the little guys become sumos. We have two businesses, one’s AppSumo which is a GroupOn for geeks, and sumo.com which is the tools for people to be able to promote themselves, mostly around growing their mailing list and growing their customer base.
Mike: Awesome. Today, we were going to dive into Bluetick. I just launched it a couple of days ago, I think this episode will go out actually a week or two later. I wanted to talk to you a little bit about it just because you’ve got a knack for all things marketing, to be perfectly honest. You’ve done a lot of different work with some very high profile companies like Mint and Facebook, especially in the early days of those companies.
I wanted to talk to you a little bit about if you were running Bluetick based on where it is today, what would you do and how would you approach things moving forward? Take that not only for my own selfish purposes to use that moving forward, but also to illustrate to the listener what sorts of things are possible and what sorts of things they should be looking at when they’re trying to get their product out the door right after they launch.
Noah: Totally. I don’t know how much you shared with your audience on the podcast, maybe you want to give a little bit of a background for possibly new listeners or to anyone who haven’t heard about Bluetick yet?
Mike: Sure. Bluetick is a warm and cold email follow up tool. The basic idea is that if there are certain points in your sales funnel that you know where you typically have to reach out to somebody more than once to get them to do something, whether that’s to reply or to fill out a form, or to submit information, something along those lines, then you put them into this email sequence. It will email them. If they don’t perform that action, it will email them again. It will keep emailing them again until it either runs out of emails to send or the person does that. You can have them pulled out of the email sequence, put into a different one.
It integrates with Zapier. People use it for integrating into a variety of tools like Asana and various CRMs to help them move people through so that they don’t have to do it manually. Otherwise, you have to copy from spreadsheets and things like that. It’s a pain in the neck to track of how many emails you’ve sent to each person and how far down in the email sequence they are.
Noah: How did it come to where it is today? Were you on the toilet and you’re like, “Hey, I really am tired of doing follow-ups. I need to go build software because I’m a smart developer.” How long did it take? I’m curious more of where the problem and the creation came from.
Mike: You were actually one of the first speakers at MicroConf back in 2011.
Noah: I thought you were going to say I was one of the first speakers to never be invited back, which that is true. I’m still waiting for my invite.
Mike: The hot sauce incident, I think that’s what did it. There was hot sauce 12 ft up in the wall.
Noah: [00:03:49] incident, it will not be talked about.
Mike: There was a no hot sauce rule after that. Disregarding that, when Rob and I were running MicroConf, he typically handles a lot of the speaker side of things and I handle the sponsor side of things. What I found was that when I was emailing sponsors to see if they were interested in sponsoring MicroConf, what would happen is I would send somebody an email and they wouldn’t respond. I would have to send them another one and possibly two or three more.
At some point along the way, they would reply. Usually, these were sometimes warm contacts, sometimes they were cold contacts. In most cases, because my email fell much lower on their priority list, they didn’t necessarily see it as necessary to respond right away. Of course, there’s good intentions there. “Oh, yeah, I’ll get to this. I don’t have time right now because everything else gets in the way.”
I would find myself emailing them two, three times, four times, over the course of a week or two, or three weeks, something like that. I found myself saying the exact same things to them over and over. I had the idea that there could be a piece of software out there that would do this for me.
I know exactly what the second, third, and fourth emails are going to be. The first ones are usually customized, Bluetick allows you to do exactly that. But those followup emails are all heavily driven from a template. They’re pretty much automatic. It’s really just to kind of get a response from somebody and help move the conversation forward.
Noah: So you had the idea, you’ve had these problems with these guys. I’m just curious, these are the things I’m thinking about. How did you go from that to saying, “Alright, I’m gonna build a software around that.”
Mike: I started doing a little bit of validation around it. My thought was oh, I could sell this to other conference planners and event planners. What I did was I looked into it, tried to figure out what a pricing model would look like, and realize that unless you ran a lot of conferences on a very regular basis, then you probably wouldn’t use the software.
Just because the pricing model didn’t really work out in terms of finances for me. If I charged a couple hundred dollars, it’s a little bit of a tougher sell than if I were to charge $50 a month for it. But if I’m only charging $50 a month, how many times are they actually going to pay me? It maybe two or three because they’re doing sponsorships for a couple of months leading up to the conference, and then they don’t need it for the rest of the year.
I tried doing the validation for a while and then I said this just isn’t going to go anywhere. And then fast forward a few years, I kind of came back to it and said well, there’s actually a lot of other situations that this applies to. Following up a consulting services company where they’ve got a proposal out to somebody, or they’re just trying to get the conversation started, or they’re just trying to find the right person to talk to. Those are all situations where this type of tool applies. But initially, I was looking at the wrong type of buyer for it. The right solution, wrong target person.
Noah: Who were you hitting up originally?
Mike: When I was first trying to figure out who to go after, I was looking at event planners and conference coordinators because I knew what that looked like. Right now, what I’m looking more at is services companies, anyone who has a price point that’s probably above $2,000 but less than $10,000. It’s well worth your time and effort to follow up with those people, but a lot of people don’t just because they either feel bad or they don’t want to go through that emotional hassle of sending that second, third, or fourth email.
I’ve got lots of data that shows me if you send that first email, yes you may get a 30%, 40% response rate, but if you send four or five, your response rate can increase dramatically to 70% or 80%.
Noah: That is really interesting. I found the same thing. I’ve used a similar tool. What was shocking for me is 50% of my replies to people came on the second email. It was like oh wow. It’s one of these things where most people I’m sure, Mike, you get a bunch of emails and a lot of people get a bunch of emails. You delete them. If it’s really important, people will follow up. If it’s something that’s important, the data actually really shows that.
Did you go and just build this right away or did you sell a bunch of them and get customers before you made it? How did that go?
Mike: What I did was I created this little explainer video. It was about a minute and a half long. I sent it to a handful of people in my network who I thought would have this particular problem and ask them, “Hey, is this a problem that you have? If so, are you willing to talk to me about it? I think I have a solution that would solve it.”
I got probably about a dozen conversations out of that fairly quickly, out of about 20 to 30 people that I send it to. I had those conversations. That was the initial discussion. I would ask them, “Is this something that you would pay for?” Most of them said yes. Once I got to the point where I had 12 people who said yes I would pay for this, then I sat down and I created balsamic mockups of what the application was going to look like, how it was going to work.
And then I went back to those people a month later and said, “This is what it will be, what do you think?” Then walked them through everything, gave them a “demo” of the product using those mockups. And then I asked them for a credit card, for a pre-payment. People gave me anywhere between a one month to three months pre-payment, I let them choose how much they were going to pay which helps me figure out what the price point was going to be. If that would make sense for me—if it was going to be $5 a month, I didn’t want to deal with it. But if it was $50 or $100, that’s reasonable.
After going through that, I ended up with about 15 or so people that gave me pre-payments, anywhere between one and three months, and anywhere between $40 and $100. I ended up with close to $2,000 worth of pre-payments.
Noah: Dude, go you. That is awesome. I think most people do it backwards. Build, build, build, hopefully someone comes. You’re like let’s see if people buy. I think one thing that’s a good thing for your audience to think about and it’s a good reminder for myself is that you had people already that you could reach out to. Either you had a mailing list or you had some audience or you had some type of network. I think most people do that way too late.
One of my favorite silly examples is people want to eat vegetables so they go like they have a garden. They dig a hole, plant a seed, and then they try to eat the seed the next day. I’m like obviously you have to water it, wait, and nurture it. I think you did a really interesting job where you’ve been doing this over a year so it made it easier for you to go validate this type of business idea. For people out there, go start a mailing list, go start a website, go start joining Facebook groups, go to conferences like MicroConf or whatever that is. It’s just a really good thing.
One thing I’m curious is who are the people that pre-pay? I think that’s amazing. What were they really excited about?
Mike: Most of them were services companies who wanted to get somebody into their sales pipeline or wanted to get somebody to a meeting so that they can have a call and talk to them. The issue that they had was that they would send somebody an email and say, “Hey, can we hop on a call?” The person wouldn’t respond, or they’d send them the link to their Calendly, youcanbook.me, or whatever that they were using. They’d suggest a couple of times and the person wouldn’t do it. Then, they would have to go back and follow up with them.
I built Bluetick in such a way that you can send them that link and it will send and inject data into the query string for that. So that when they click on it, they schedule a time, it closes the loop so that you don’t have to go back and pull the person out of the email sequence, it’s all done automatically for you. It tracks that on the backend so you can check what is your conversion rates and things like that on those emails that you sent, which one was the most effective, and it really just helps automate that whole process so that you don’t have to do anything beyond that first email. You just set it and by the time that person gets to that end of the sequence, the email has done its job.
Noah: You sold $2,000 worth to people, most of them wanted it for sales. What did you do next?
Mike: After that, I sat down and hired a couple of developers to help me build it. Spent about four months or so doing that. Then, probably two or three months after that trying to work through very early issues with customers, trying to figure out is this going to work for you, how does it work in your business, and just trying to get them to use it.
I ended up taking my entire development team that I hired, fired them all because everything behind it was really just not very good. I spent about six months re-architecting a bunch of things. At that point, probably around November this past year, that’s when I added my first customer who started paying on a monthly basis. Since then, I’ve been adding customers over the course of the past six, seven months or so. Right now, it’s sitting at around 20 to 25 active customers, and around $1,100 to $1,200 MRR.
Noah: Hold on, dude. That was crazy. What happened? You’re working with these guys or girls, and then you fired them after?
Mike: Basically. It was a team of three people, and they didn’t know each other. It’s just three independent contractors. I tried to position to them like hey, one of you needs to take the lead and step up and do this particular role and manage stuff. None of them really wanted to do it because it was all off of Upwork, they’ve never worked together before. In terms of management, I was trying to hand that off to them so that I could focus on customer stuff. It fell apart.
I blame myself for it because I didn’t necessarily give them as much guidance in terms of the design and engineering upfront as I probably needed to. My expectations were probably too high for them.
Noah: How would you do that differently? It’s funny, in the past six months as I’ve been doing more personal stuff, I was building some recruiting software. I used actually the Pakistani in the outsourced team that helped me build AppSumo seven years ago. Man, it was a freaking struggle. “Alright, cool, we’ll do those features.” Then they come back with the features and I’m like this is not even close to what I exactly told you guys to do and I showed you what to do.
I’m curious, how would you better communicate, hire a better team, how would you do that next time you build something?
Mike: I think that the design itself really needs to have more details or more screencasts or walk throughs with me explaining things. One of the things that I did was I would give them a document that says, “Hey, this is what it’s supposed to do.” It’s really dry and boring to look at those things. Even if you have things on the screen, it doesn’t necessarily lend itself to everybody on the team doing things in the same way.
If you have three different people who are tasked with building three different areas of the application, you still need somebody to coordinate between them to help understand, “This is the style we’re going to use, this is how we’re going to do paging and sorting,” things like that. There’s a lot of backend stuff that was just an absolute mess. It was implemented completely differently from one page to the next.
From the end user standpoint, the app barely works. It was because of all those issues. There wasn’t enough focus, I’d say, on letting them know about areas where they really need to be concerned about, which were things like you can’t just assume that you’re going to get ten records here, you might get hundreds or thousands of records, or even hundreds of thousands.
The replaces in the app where it just wasn’t scalable in any way, shape, or form and it would fall apart once you started using it. That’s what a lot of the reengineering effort was focused on.
Noah: That’s actually interesting. How much did that cost you to begin with, and then how long did it take once you took it back over to just finish it?
Mike: I’d have to go back and look but I don’t think it was more than probably $15,000 or so to have them work on it, between the three and six months that they worked on it. Most of them were working on it part-time. I don’t think it was more than $15,000.
Noah: Then how much was the new version?
Mike: The reengineered version, I did all that work myself. It took like six months to do it.
Noah: If you could go back, it sounds like ten months plus some of the validation. A year, give or take. What do you think would’ve been an alternative to get it out sooner? If you had to start this all over tomorrow, what would you do?
Mike: I’d probably stub out certain parts of the code base myself so that it’s clear how to do certain things or clear how to manage certain types of problems. There’s typical things you would do in an app like security controls, team accounts, and things like that. You really need to have those types of designs engineered upfront. If you don’t, then you’d have to figure out what to do with them later.
But there’s also that trade-off that you have to think about. Are you going to over engineer upfront to make sure that you get it right, or are you just going to slap something together and put it out there and see if it works and if it resonates with people and then re-do it afterwards so that you don’t figure out later on if you’re making a mistake? I think it depends a lot on how much money you have to spend on it and how much time, versus how quickly do you want to get to market and make the mistakes.
Are you okay with prototyping certain parts of your app, for example? Are you okay with prototyping the whole thing and throwing it away once you’ve validated that the idea’s going to fly? It depends on where in that spectrum you fall.
Noah: Where do you think most people make mistakes around that?
Mike: I’d say that people spend probably too much time building the app as opposed to putting it in front of people.
I had something that was barely functional in front of people in about four months. I realized early on where the problems were, why they weren’t using it, and what sorts of issues they were running into that made them not want to use it. That was helpful in that I got there quick, but at the same time those types of problems took a long time to solve partially because I wasn’t familiar with some of the technologies. Using a stack that I was probably more familiar with would’ve been a little bit better, but I can’t really do anything about it at this point.
Noah: One thing that I’m considering, and then we can get into the marketing plan about how to scale this out, cause I actually use a competitor tool, we could talk about that as well. If you couldn’t have built any software, you’re an engineer so you’re obviously very smart. Engineers are smarter than everyone else. If you couldn’t build a software, how would you have done the software and how would you have just done the service without the software?
I think what people miss a lot of the time, they’re like oh, software as a service, it’s just a SaaS recurring revenue. They don’t know that SaaS means you’re doing a software that’s replacing a service. I think that’s really critical that people just jump to the software. I’m like do the service a few times. In most businesses, you can actually implement ghetto versions of it to see if it’s something valuable for people before you go out and build software.
Mike: Yeah, I think for this, to figure out whether or not that was an idea that would fly, like in terms of the validation piece of it, to see if the process itself works. If you didn’t know that the process worked, then you could probably just create your own email account or ask somebody, “Hey, can you create a mailbox on your domain? I will send the emails for you.” When people get replies, then I will shoot it over to you unless you take over the conversation. You could do that, that would probably be the easiest way.
Noah: Dude, that’s a great idea.
Mike: If you don’t know how to code, if you don’t know how to do anything like that, you basically have to say how can I insert myself in here to do what a computer would do?
Noah: Dude, I love it. I’m just going to repeat it cause it’s so good. You’re like, “Hey, just give me access to your inbox or give me a separate account. I’ll even write the emails,” and you do it for them and then they’re like oh shit, this is working. Then, you could actually go build software.
Mike: Yup. I think that would work if you didn’t know anything about it or if you weren’t technical. I think in my case, I had done some of that early validation because I was doing this exact same process for MicroConf sponsors and I basically just took that process and implemented it as a piece of software. I think it depends on the type of problem you’re going to solve, whether or not that specific solution will work. But I don’t see any reason why if you’re going to build software that solves problem X, you can’t just do it manually until you can program a computer to do it.
Noah: Yeah, that makes a lot of sense. You finally got it built six months later because you took over, you did it yourself. I’m curious for the people who aren’t technical, a lot of MicroConfs and your listeners are, but for the non-technical, how would they find someone to build it? Let’s say they validated it. Where would you go?
Mike: I started out with Upwork. I think that they combined with freelancer.com or something like that, I forget what the other one was. There’s also weworkremotely.com. The issue you find though is that the better developers, you have to pay more money. If you’re operating as a bootstrapped business or running it on the side, then you have this constant challenge or balance that you’re trying to strike between paying somebody to develop something versus either doing stuff yourself or paying somebody who is a lower cost so that you’re not burning through your runway as quickly. Cool?
Noah: Any of those different types of services, does Fiverr have any development?
Mike: Ah, I don’t know. I’ve never looked on there. Maybe they do, but my guess is that it’s probably very certain problems.
Noah: That’s fair. You finally build it and you give it to these people. What do they say? They’ve been waiting for it.
Mike: Depends on where you are in the timeline. After the four to five month mark, I count from January or 2016, because that’s when I broke ground on code. And then in April or May is around when MicroConf was, and right after that I came back and I started putting it in front of people. It really just wasn’t ready.
I had a hard time getting people to use it, I created accounts for them and they just really wouldn’t use it. I spent several months trying to figure out why it was that people weren’t using it, what was it not doing for them. There were just a ton of issues here and there, basically throughout the entire app. A lot of it just needs to be re-architected. It took me six months to get it to the point where I was getting people to start using it and realized now this is at a point where I could actually sell it to people.
I actually took somebody from outside of that core group of people and said, “If you want access to this software, you’re going to get charged on day one.” I was still trying to on-board those people, but I had given carte blanche access to use the software or not until they were getting value out of it, that’s when I would start charging them. There wasn’t any real impetus for them to start using it because it was obviously putting something on their task list, because then they have to start using it.
But then if they start getting value out of it, then I’m going to start charging them. I didn’t really draw the line in the sand for them until probably four or five months ago.
Noah: Interesting. Now you finally got it out, you finally got most of the bugs fixed, let’s jump to the marketing thing. Let’s get to the meaty stuff where a lot of people say, “Hey, how do I get more people to find my product and buy my product and grow my business?” I think the missing part sometimes is do you have something people actually want? Do you ever wonder about that, or think about if this is something people actually wanted?
Mike: For this product, no. I think that’s actually an interesting question, the way you phrase it because I don’t think that most people, when they’re building something, even question whether or not people want it. I don’t think that they do. I don’t think I’ve ever questioned anything that I’ve ever built and said do people actually want this? You don’t know that or even really consider it until after you put it out there, and then people don’t buy it. You’re like, “Oh, do people really want this?” You’re not going to build something that you don’t think people want.
Noah: Yeah, we think that. I don’t think anyone tries to be like, “I can’t wait to build stuff that no one’s ever going to use.” You know what I mean? I generally don’t think that’s the case.
Mike: Exactly. That could just be self-delusion too. It’s not to say that that’s not a possibility, it just means that no, I never really seriously thought that, and I still don’t. But it doesn’t mean it’s not a fair question, objectively, do people care?
Noah: What was your plan to get it out there? This is where we can start going through the marketing plan stuff that we went over in your document.
Mike: There’s different stages that I would say the app needs to get to. There’s the early adopters or beta users, whatever you want to call them. That group of people needed to get on-boarded and start being successful with it. Then there’s this level where I feel like it needed to start getting a critical mass of 20 or 30 people before I can go public with it and start pushing it out to larger numbers of people. That’s where it is today.
Most of the people who are on there now have either been using it for several months or were part of the very early access group, or just heard about it through word of mouth. I’ve actually gotten a lot of referrals from people who have been using the software and then recommended it to somebody else and said, “Oh, you’re having problems with X? I was too. I switched over to Bluetick and those particular problems went away. I found a lot of success in asking specific people for referrals and getting into other people’s networks and leveraging those networks to add more people into Bluetick.
Noah: Referrals, and then did you pick a goal, did you pick a customer? How did you organize that at a high level?
Mike: With the referrals, a lot of them were people that I didn’t know. It wasn’t as if I necessarily had a particular goal in mind, it was just who do you know that has this particular type of problem, and then is Bluetick a good fit for solving that problem for them? Most of it boil down to doing a demo for them, talking to them about their problems, if there were ways to reengineer the software a little bit to fit that particular use case.
I found a couple of use cases that people have hit on, one is podcasters who want to get sponsors for their podcast. It’s funny that that has come up because several years ago, when I was first doing the early validation, I was looking at event coordinators and conferences. They just didn’t happen often enough, but podcasters record every week or every other week. There’s a much higher frequency, and they could actually use the software to do exactly what it was originally going to be for for event coordinators.
Noah: A few other things. It seems like one challenge you’re figuring out is who is the ideal target customer?
Mike: Yup, that’s absolutely true.
Noah: For me, I use Outreach, there’s Mixmax, there’s Boomerang, there’s FollowUp.cc, there’s a good amount of different people doing this. Even with sumo.com and AppSumo, there’s always competitors. I’ve never seen a business where there is not competitors, even people like Tesla. There’s a bunch of other car companies, and guess what, there’s public transportation, there’s biking and Uber. Sometimes, their biggest competitors don’t even realize.
I guess the thing for you and people out there is just not to get discouraged. That’s also advice for myself. There’s always some competitor.
I think that what I’m curious for you is who do you think your customer will end up being? Is it for SMBs that are small sales teams, is it the podcast marketing tool? I do think with the outreach and some of these guys, I think we’re paying $500 a month per person or something pretty crazy and you can’t just sign up for it, you have to have a demo and all this other stuff.
Mike: I have talked to people who have been using Outreach or switched away from Outreach. One of their biggest complaint was the fact that it costs so much per license. I talked to somebody a few weeks ago and they said that there were quoted $150 or $160 a month per person. Bluetick is only $50 a month per person and it does largely the same type of things. I’ve heard from people who have used various competitors that they had problems with them.
What I did early on when I was doing the validation was I focused in on those problems and said how can I avoid Bluetick having any of those problems? I worked really hard on the engineering side of things to make sure that those things don’t happen. For example, being able to add somebody into more than one email sequence at a time and recognize when they’re in one versus the other and pull them out of the correct one for example.
Another one is being able to make sure that the emails are not being missed. If a reply comes in, how do you guarantee that the software does not miss a reply? I do that by synchronizing the entire mailbox, which I don’t know of anyone else who does that. It’s basically brute forcing to make absolutely sure that does not happen. And there’s a few other little things here and there, but those are kind of the main pieces that I focused on because the people I talk to were generally unhappy with other options.
In many ways, I won’t say the target market is this but I feel like a good chunk of my early customers are probably going to come from people who are fed up with other products and are looking for a solution because of specific things that they run into.
Noah: We can go about how I like to think about marketing plans and some of the things I’d recommend for you to do.
How do you know which customer you’re going to finally be like let me hone in on this customer and this pricing?
Mike: That’s a good question. I don’t know what that looks like right now, that’s something I’m still trying to work out. I’ve shied away from honing in specifically on one particular use case or one particular type of customer so far because I don’t feel like I have enough customers who fit a given profile yet to be able to say I’m going to go in this direction.
My concern is really that the tool gets pegged for getting sponsors for podcasters, for example. I don’t want the tool to be pigeon-holed into something like that too early. I don’t know what the best customer looks like. Maybe that’s not even a valid concern, maybe I shouldn’t be worried about that.
Noah: I think you should, and I think that’s where you’re going to win. Winning means just making the business a lot easier. What I’ve been thinking about a lot in the past few weeks is called PPD. Who’s my person, what’s the price for them, and what’s my differentiator? Your PPD, I guess PDP or whatever way you want to organize it, for yourself is this is something that when I was doing marketing at Mint was probably one of the reasons that we did well. It obviously was not just me, there’s a bunch of people that made Mint.
What we did is we targeted people who read personal finance books. It was free. Your price is zero which is good, and then differentiator was it was free, and the people was very exact. It was like if you’re reading a personal finance blog, I want you. If you’re not reading personal finance blogs, I don’t care. The more that you can do that, and even commit to it for three months.
I think what I’ve noticed with marketing is that people don’t want to be very narrow because they’re going to lose out on customers. An example of that was yesterday I was talking to my friend who helps me with design work. He said, “Hey, the most lucrative customers are my web app and mobile app designs, but I get all these other businesses and I want money but I’m not making a bunch, so what do I do? It’s hard to say no to that.” I said great, more you’re saying no, the more it means you’re focused and you have the right customer. But find someone else that you can pass them off to and say hey, this is a great person for all these things you want, I’m this. In reality, he can get better at that skill and he could start charging more.
If you had two today, Mike, I’m curious, if you could only serve one person and you said for the next month, let’s just keep it really short, I’m only going to focus on this person. Who do you think that would be?
Mike: I would probably say the owner of a services company that has less than ten people in it. By ten people, I would say ten people total but probably two or three that are charged with doing the outreach efforts and marketing and sales for that business to help them build the business and build the relationships they need with their customers.
Noah: Let’s go with that, now we’ve got something. We’re doing service people who need more customers. Web design agencies, what’s an example of that?
Mike: Software development, web design. You could go so far as print design. Anyone where there’s a service based component where you typically have to talk to the customer in some way, shape, or form before you can really start working on them. Because of that, you end up with the type of business where you have multiple people involved in the creative process because you’ve got a sales rep or marketing person on the front end and they’re really doing business development, and then they hand off the business or the work to be done to somebody else, and then that person does it but they’re the ones getting compensated or the money is being generated for that consultant company based on their work. It’s not really that sales person upfront.
The price points for them tend to be higher. It may be a couple thousand dollars, maybe $3,000, $4,000, $5,000 a week, but it’s worth it for them to follow up with their customers. That’s really the key point that I found, the price point that they’re selling at has to be high enough for them to justify doing those outreach efforts. We talked about this earlier, the second, third, fourth emails, those are the ones that you also see a fairly high response rate.
If you can get to the point where you have a business if a lead is worth $4,000, $5,000, you only send them one or two emails, it’s probably not enough. You need to get to a point where you get an answer, you don’t want to send an email into a blackhole and just assume that they’re not interested. You have to follow up until you get an answer one way or the other, even if it’s no, you don’t care, you just want to know if that lead is dead.
Noah: You have that, and then what’s next? What’s next for you with that? I think sometimes when people ask for advice, this is why I tend to never give advice, is because we all have our own plans. You already have some kind of plan that you already want to do. I think when people are giving advice, just try to understand what people’s plans already are and see if you can assist that, that’s why I asked that before I tell you to go do all this stuff.
Mike: Yeah, I think the biggest question in my mind is how do I get in front of those people? It doesn’t even necessarily need to be at scale either. It’s how do I get in front of those people so that I can capture enough of their attention and enough of their interest to get the conversation going when they don’t know who I am, when they don’t know what Bluetick is or what it can do for them. Maybe they’re familiar with cold or warm emailing software and CRMs and sales funnels and things like that, but they aren’t necessarily looking specifically for these types of tools.
Noah: I am curious. How come you’re not targeting… MicroConf has how many people on their mailing list and you have so many on your mailing list. How many people are on that mailing list?
Mike: I’d say between them probably 8,000, 10,000, something like that.
Noah: Just out of curiosity, how come you didn’t focus on serving those people? Or tailoring this more to them?
Mike: I won’t say that I haven’t. Bluetick is my business, and then there’s also the Micropreneur Academy which under that umbrella you have the podcast and MicroConf and Founder Cafe. We don’t really mix email lists. I would say I wouldn’t necessarily feel comfortable going out and trying to do a sales blast or anything like that to them, just because that’s not what they were there for, it’s not what they signed up for.
It’s different if I talk to somebody at MicroConf where they come up to me and ask me questions about Bluetick because they’ve heard about it and they’re interested in it. I have no problems doing that, especially when they’re coming to me. “Oh yes, I know this person, I feel like I can trust them. They’re going to do the right thing for me.” That’s not an issue, it’s that going outbound to that audience, to those particular mailing lists is too head-putted.
Noah: That’s just one feedback, and then we can go through marketing plans. We’ll do a marketing plan in 15 minutes or less, it’s like dominoes. I think most people with marketing, and this is something that I think why sometimes my marketing is done well is that I do go to the people I already know first. I try to serve them first.
What I mean by that is I don’t know, and maybe you do and I’m totally off-base. I don’t know how many people you have that are already running software development firms, and maybe it’s a lot. The easier thing you already have for sure is you have a bunch of people who already like you, who probably have businesses or know someone who has a business that I would try to tap my close network first before I even try to think of my secondary or fourth networks I have no clue of.
Mike: No, that’s a good point. I just have to think of creative ways to do that.
Noah: I don’t even think you have to be creative, dude. Not to be mean about it, but those people already like you. I don’t know if they hate me or like me but for sure they like you. You don’t even have to sell them. Be like, “Hey guys, there’s something I’m launching, you guys are launching things, I’d love to get anybody’s feedback on it or if you guys want to use it, feel free.” You can hook them up if you want, that’s totally on your discretion.
It’s just like when I started AppSumo, I started a business for startups because I love startup software. I like promoting stuff. I had a network of that. I went out to my network on LinkedIn, I went out to all my friends and said, “Hey, can you tweet this?” It just made it really easy cause I tried to help and serve the people I already had access to versus ones I had no clue of.
Mike: That’s a good point.
Noah: Just something to consider. It’s been really interesting talking about this, here’s just a few thoughts about it.
What’s your goal for the year with Bluetick?
Mike: My goal with it, by the end of the year, I kind of classify the end of November as the end of the year because December I don’t think a whole lot is going to get sold. By the end of November, I’d like to hit $10,000 in MRR.
Noah: Okay, that is key. I just want to highlight it for people out there. If you don’t have a goal with a timeline, I just don’t think you can be successful. Someone said this quote, it’s like a boat without a router. You’re just going randomly. Maybe you’ll end up in America, maybe you’ll end up in South America, who knows?
I love that you have a goal. And then to that goal with that timeline, what’s your plan now to hit the $10,000?
Mike: I have a bunch of notes and stuff that I still feel like I need to organize a little bit better, kind of like you said just going without a router. I have a lot of tactics and specific things that I could do kind of written out, probably have a couple of hundred things. I haven’t really organized them to what your PPD, the person price differentiator. I haven’t narrowed down to say these are the people that I’m actually going to go for and these are the tactics that I’m gonna slot in to actually do that.
I have some ideas that have kind of worked in the past few months. One of them is doing influencer outreach and going on podcasts and things like that. I’ve also taught about doing joint webinars, I’ve talked to a few different people who have fairly large audiences themselves and said that they’d be willing to talk about Bluetick and have me on the podcast to talk about cold and warm email strategies, things like that.
Those are the things that I would probably lean more towards right now just because I’m more comfortable with them. I think that there’s also plenty of other things that I either haven’t done before or I’m not comfortable with, or just don’t even know about or haven’t thought about that I could do to increase traffic and add sales and customers.
Noah: Do you mind if I give some suggestions of what I do?
Mike: Absolutely, that’s what you’re here for.
Noah: Do whatever you want, but here’s how I would organize your marketing a little bit tighter. Number one, I think you should just pick a specific customer and then make your website very tailored to them. When I go to bluetick.io, it’s not very clear who it’s for. It’s like, “Hey, everyone should send cold and warm email followup software.” There’s feature driven, demographic driven, and then psychographic driven types of headlines. It’s not speaking to anyone.
For me, if I come to Bluetick, it should be we help service companies make two times more money. Oh, how the hell do you do that? And then that hooks me into what you do.
This is getting there. We send follow up emails so you don’t have to, but what does a followup email actually mean? If you’re talking to your specific audience, let’s say you target podcasters just to get guests, it’s like we help two times you book your guests, or don’t waste so much time booking guests. “Oh yeah, I’m a podcaster, I waste a bunch of time. That’s really painful.”
I think your marketing, the way that I would do it, is think about who your customers are. This is what I do. Either use live chat or just talk to them and ask them how they describe your business. Use a recorder, record it interviewing for the podcast, interview a customer, and take their language. I don’t know how they talk to their friends, but the way they talk to their friends is the way you need to talk to them, or their colleagues. That would be number one.
Number two, with your overall marketing plan, the way I like to do it is I love your goal, $10,000. You need to break that down monthly. What does that mean for August, for September, October, November, December? From each month, you should have how much MRR do I need to be to get my $10,000 by the end of the year? Then within each month, I break out if I need to go from $1,000 to $3,000, I need $2,000 MRR. What are ways I can get that? What I like to do is list out ten different ways, then I make estimations about how much MRR I can get from each activity.
For example with sumo.com, we were trying to double the amount of customers we have in the next six months. I have a list of six different things, it’s content marketing, affiliate marketing, paid marketing, free tools, SEO kind of stuff. I estimate based on some historicals and just guesses, how much I think each one is going to happen. I sort it, and then I pick just three. I don’t think we can do that many things great. I execute on just those three for the month. At the end of the month, I’d say, what did it actually produce versus what I expected?
The beauty of that then is I can cut the one that doesn’t work, keep one or maybe two that do work, and then add in another experiment, the 80-20 rule. What that does is it forces some discipline on accountability. “Wow, this is what it should do if I actually executed correctly,” and help you hit your goal. Does that make sense?
Mike: That makes perfect sense. That’s dead-on accurate. That’s fantastic, to be honest.
Noah: It’s a basic spreadsheet, I don’t use crazy software, it’s totally free, Google Spreadsheets, or illegally download Excel or maybe open source it. Even for you, you could even do one on one. A lot of times I do that in the beginning, just referral.
With sumo.com, when we started it, I just literally went out to people that I knew. If you don’t know a bunch of people, go join MicroConf, go get involved in things if you don’t know people before you need them and before you want to work with them. If you do have people, how can you go one by one and do that? We literally went through every single person on my LinkedIn account.
You know I’ve been doing internet stuff for 15 years, it took me a long time. But at the end of it, it was like oh wow, we have a good amount of people using this now and paying us. It’s one of your tactics, I wouldn’t want to discount even direct selling one by one and say I think I could probably generate $500 from that and then you do it at the end of the month. You’d be like, “I did $300, it was pretty damn good versus other things. I’ll do more of that next month and then less of something else.”
Mike: That point, I could export all my contacts on LinkedIn and just look through them, see who I think would be a good fit, or should just be filtered out entirely and then throw them into Bluetick and just do that personal outreach. I can do that. There’s nothing preventing me, I don’t think.
Noah: I think that’s even more genius. Use your own product, use your own dog food. I think that’s epic, man.
Mike: I actually use that during the course of demos. Previously, up until this week, I had just a little field on the website where you could ask for an invitation code and then they go to the next page, fill out a survey. Anyone who filled out a survey, I’d look at what they said and then plug them into Bluetick and then use Bluetick to get them to a demo. During the demo, I would show them, “Hey, this is how Bluetick got you to this demo.” It works really, really well. We got an 80% response for it.
Noah: Dude, that’s genius, I love that. This is a new method that I’ve been using with my marketing and I’m starting to apply it in other parts of the business, and it’s called Proactive Dashboards. The idea there, Mike, and for people listening is that you create a dashboard for yourself and your team of things you can do on a weekly basis that is fully controllable by you.
What do I mean by that? Mike, can you control if someone responds to your email or not?
Mike: Not directly, no.
Noah: You can’t force somebody to respond to your email. You can be like, “No, do it, I’ll kill you.” I’m going to be like meh, whatever.
Mike: There’s 300 of them.
Noah: Yeah, and then we’ll just filter emails or whatever. Point being is you can’t control them but can you control how many emails you send?
Mike: Yeah, absolutely.
Noah: Completely. I create Proactive Dashboards for my podcast, The Noah Kagan Present one that we were talking about earlier, and then for sumo.com we have a proactive dashboard. For each of these teams, it’s things that we can control that help us hit our goal.
Let’s say your goal is this MRR goal, you have a person doing sales for you or for yourself. It’s like can I send ten emails a week? That’s controllable by you. Each week, we do a green or red, whether we hit our goal. Then, you can have other things. How much ad spend? Did you spend $50 in ads? One of the guys in our team, it’s like hey, did you run two marketing experiments this week? I don’t really care which things they actually do, I just care that they do it or not do it. I want them to take initiative and all that other good stuff.
The point of the proactive dashboard is that it’s kind of this living controllable dashboard that will help you hit your goals. You can adjust it as needed, meaning you’ll probably be doing stuff like we were doing a bunch of Pinterest for a while. It was just doing nothing. After a month, it was said kill Pinterest, what’s working better? Quora. Okay, let’s increase our Quora. We did and we saw Quora go up. This week, we’re experimenting with LinkedIn. I’m seeing a lot more LinkedIn traffic and engagements so we’re experimenting with one post on LinkedIn a week.
Basically, I encourage everyone to think about what are controllable things I can be accountable for or make my team accountable for on a weekly basis that will help me hit my goals?
Mike: That’s awesome. I guess in terms of psychology, what does that do for you? Obviously, you do have control over these things. Is that why this works? Is it a psychological hack that doesn’t put you in a position where you just freeze because you’re not sure what to do?
Noah: Dude, I’ve gone to a bunch of therapy. I know everything.
I think why I like this and why the teams like it is a few different reasons. One, you want to play games you can win. If you’re doing things and your end vanity metrics aren’t working, it’s very demoralizing. But this is something where I can control it completely. I learned this from my friend [davidgrasshopper.com 00:44:07].
One, it’s controllable so you feel like you can actually win. Two, a lot of us like to see that we have streaks. The green and red every week and you start seeing you have green, you’re like okay cool, I’m doing well, I’m getting my stickers.
Three, I do think the fact that you make—I don’t know if this is as much with the psychology of it but the fact that you adjust it. For example, these marketing tests. If we were doing marketing tests and it would never help our goal, we would just cancel it. I think it just makes you a little bit more short term, like alright, am I doing the activities that I can control that are helping me move to where I want to be? So far, it’s been really great. I’m starting to implement it and I’m looking forward to it.
With the Sumo team, the webinar guy, it’s like hey you have to make one YouTube video a week. He’ll start doing it and then it’s like holy crap, that’s actually really driving traffic and customers, now you got two. And then maybe it’s like you have to do a collaboration every other week. Did you do that or not? That’s less control but did you email five people to collaborate with? That’s controllable. I think more ultimately, I have power to choose in this. I think with certain other times, you feel you’re at their mercy of hoping things work out. I don’t really believe in hope, I believe in making sure things work.
Mike: I think I have a blog post or a conference talk some place called hope is not a strategy. I completely ripped that off from Scott Adams.
Noah: I think with marketing, that’s why I always tell people to spreadsheet it. I call it quant-based marketing and I’ve written a bunch about it on OkDork. The ideas, if you need to hit $10,000, map out all the ways you think you would get to $10,000, execute on it, see which ones are right and which ones are wrong, and then keep iterating on it versus I want to be $10,000, I’ll just do a bunch of random shit and hopefully it gets there.
I don’t think if you’re trying to travel somewhere you would just say alright let’s just get on a plane and hope it lands where I want to go.
Mike: Yeah, I can’t imagine that works out for most people.
Noah: It doesn’t. A lot of the time, you’re going to try things, some of it is gonna work, some of it is not going to work. The point is that for sure in business, things aren’t going to work, that’s a guarantee. Knowing that things aren’t going to work, it’s great, but you have to say now that I know that, what things are working so that I can do more of them?
Mike: I think your point earlier about playing games that you know that you can win, I think that’s probably the killer insight that really needs to be a high level takeaway from all this.
Noah: I think that’s great, man. It sounds like overall for your marketing, one, you already got customers and revenue which is further ahead than most other people which is amazing. I would just put a little bit more organization around the PPD. Who’s the person, what’s the price, what’s your differentiator. There are options out there, so who’s your exact person?
And then in your marketing plan, I think it’s just hey, here’s my plan laid out for the year, here’s my things for this month, let me go execute on them. Let me have my weekly dashboard. And then, start iterating from that. You’ll be like holy crap, I hit $10,000 sooner than I thought.
Mike: Awesome, that’s fantastic advice. I know that you’ve got a gig going here soon. Where could people find you if they want to follow up with you?
Noah: If you’re interested in my personal stuff, Noah Kagan Presents podcast or okdork.com, I talk about business stuff that I’m learning from our business which is sumo.com, which is tools to grow your email list. We also have the AppSumo.com which is GroupOn for geeks. Any of that you can find me, I’m pretty darn accessible. If you can’t find me online, I don’t know, something is wrong.
Mike: You’re not looking hard enough I would say.
Noah: I didn’t get enough attention in high school so I’m desperate for it now. I hope to get invited back to MicroConf one day if I can earn that right. There will be no Sriracha, or I might just bring one bottle.
Mike: You take it easy. Thanks for coming on the show, I really appreciate it. If you as a listener have a question for us, you can call it into 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 in iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, we’ll see you next time.
Episode 352 | Housing Multiple Products Under One Brand, Stair-Stepping, Pricing Tiers, and More Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike take a number of listener questions including housing multiple products under one brand, stair-stepping, and dealing with pricing tiers.
Items mentioned in this episode:
Transcript
Rob: In this episode of Startups for the Rest of Us, Mike and I talk about housing multiple products into one brand, stair stepping, pricing tiers, and more listener questions. This is Startups for the Rest of Us episode 352.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs, be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: 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: I finished up my 21 day video series and I made Bluetick live over bluetick.io. I pushed it out to my mailing list and went from there. That went out on Tuesday and it is now Thursday.
Rob: Indeed, you did. Congratulations, man. This is a big milestone.
Mike: Thank you.
Rob: You’re public. People can go to bluetick.io, sign up for a trial, the whole deal.
Mike: Yup, for the time being. I’m debating whether or not to pull it back now at this point and make people go through a demo.
Rob: Demo only?
Mike: I don’t know. I’m going back and forth on that, to be honest. I have to think about it a little bit more but we’ll see how it goes. I need to think about it and figure out what would be the best strategy, because I know how the demos and stuff go and I also know how the product is portrayed on the website because the website is just not finished yet. It might be best to go in that direction at least for a little while, anyway. I can even do a launch every three or four weeks or something like that.
Rob: It feels to me, at this point, it’s time consuming but it feels like the right choice to still do demos so you can hear. You’ve built something that a small number of people want. You’re edging into some product market fit because you have paying customers and you’re in the low four figures. To get to where that’s 10 or 20 times that number, I think you have more to go, to build some unique features and I think those demos will really help not just close more sales, but will just help with the education and the customer development effort.
Mike: I totally agree with that.
Rob: Sounds good.
Mike: How about you? What’s new with you this week?
Rob: WordCamp Minneapolis is happening starting tomorrow. It’s over the weekend. That will be the weekend before this podcast goes live. I’m actually moderating a panel there with Cory Miller, my wife Sherry, and a guy from OSMI, which is Open Sourcing Mental Illness. It’s about staying sane while starting up or staying sane while being a developer and that kind of stuff. It should be fun here, Friday morning.
On Monday, I fly out to California. It feels kind of a much needed vacation. I’ve been travelling quite a bit but most of it has been work time. When I went to Chicago with my son, I pretty much worked that whole week. I’m actually planning to go to Central Coast, California and really take some time away and do some thinking about what I want to see in my life, both professionally and personally over the next 6 to 12 months.
I won’t have time to do a full retreat by any stretch, but I bet I’ll be able to carve out a few hours here and there. It feels long overdue to just step away from the laptop, get my head clear, and get a little bit of distance from work, both literally and figuratively.
Mike: Cool. Sounds like a good time.
Rob: I hope it is.
Mike: What’s on the agenda for today?
Rob: We have more listener questions. I’m finally getting to where we have, I don’t know, maybe after this episode, we’ll only have maybe half dozen in the queue. That feels good because we get backed up where we have 20, 30 in the queue and I feel like we’re not answering people’s questions in a reasonable amount of time. Cool part today is we do have a couple of voicemails. And as I like to say, if you want to go to the top of the question queue, you can send us an audio file to questions@startupsfortherestofus.com or you can call our voicemail number at 1-888-801-9690.
Let’s dive into the first voicemail.
Jeff: Hey there Mike and Rob. This is Jeff Olsen calling from Saint Paul, Minnesota. A question for you guys. We have two profitable sites, one of them is membership. It’s called Food Blogger Pro, and the other is a food blog called Pinch Of Yum. We’re using some of the profits from those sites to build some software. One is a WordPress plugin. We’re building that [00:04:21]. The other is a SaaS app called [00:04:26] that reads nutrition information for content creators.
Wondering what your suggestion would be for how to structure that as a business. You have multiple businesses, multiple brands, you put this all under one umbrella, multiple LLCs, multiple [00:04:44]. We’d love to hear you talk through how that works, thanks.
Rob: Just to clarify. They have a food blog that would be, I would say it’s a B2C play. It’s amazing recipes and pictures of food. It’s called Pinch of Yum. Then they have a membership website for people who want to become food bloggers, which is cool because they have the proof of concept. They’re not teaching people how to become food bloggers without being food bloggers themselves. That’s a membership website.
And then they have two pieces of software that they’re either building or have built. One is a WordPress plugin. I think that’s for food bloggers. And then they have a SaaS app that does nutrition information. I assume it embeds it on a site or reads it or something like that.
There are four things. They’re all food related but they’re not all B2C. There’s B2C and then there’s B2food blogger. It sounds like maybe two or three of them are. With that background, it sounds like there are really two questions to think about. It’s like there’s corporate structure for LLCs versus one and it sounds like there’s a branding thing, like should they be multiple brands or should they perhaps be all shared under one website. What do you think about all that, Mike?
Mike: I think I’m a little confused about why all of them are starting at the same time or at least it feels that way based on how the question was worded. Do you know…?
Rob: Yeah, I do know more than that. Pinch Of Yum has been around for years and then they started the membership website. That’s been around for a few years but less than the food blog. I think these software things are in the works or maybe the WordPress plugin is done and they’ve kind of done them sequentially. I would of them like I had a blog and then, I would actually have to think about this, but I think what is now FounderCafe but what used to be called Micropreneur Academy came next, then the podcast came and then MicroConf. It’s kind of they were sequentially but there was overlap type of thing. What do you think?
Mike: It’s a tough call. I don’t know as much about each of those individual things. It seems that if there’s both B2C and B2B mixed in, then that makes things difficult and you probably want to separate them a little bit more. But if there’s much more overlap in that and it’s all B2C, then combining them would probably be a better way to go, especially if they’re all kind of in the same niche or a general field or vicinity to each other.
The advantage to separating them completely is that you can cross promote between them and people will probably feel like those are completely different services or things. But I think if it’s a B2C play, then chances are good that they’re probably not going to subscribe to more than one of them if it’s a paid membership or something like that.
I think that there are pros and cons to each of them. I don’t know if there’s a best solution though. Maybe just combining the B2C stuff and then combining the B2B stuff would be the way to go there. In terms of the corporate structure, I don’t know if you really even need to separate them. Not unless you plan on spending one of them off. That’s something you could really do later if you really needed to.
As you start combining them, it’s going to be difficult to disentangle them, especially if you put them all under the same corporate umbrella. The two B2C plays would be difficult to separate if you intertwine them early, and the same with the B2B stuff. The B2B stuff I think would be probably easier to separate but maybe not.
Rob: I am obviously with the caveat that neither you or I are lawyers nor can we give legal advice. I can tell you from the corporate structure perspective what I had done and then where it tripped me up. But I had a single LLC in all my products. He basically has four products. You can call them businesses but really, you manage them like products. You could manage them under a single corporate umbrella. That’s how I did it for years.
Eventually, when Drip did become, it was obvious it was more than a product, it was becoming an entire business and had more employees than the rest of my products combined, that is when I spun that out into its own S Corp. That was a painful process to do. It took several months part time of going through books and setting up new stuff and trying to pull it out.
That was very, very handy that I had done that once we started talking about acquisitions in terms of people acquiring us because once it was spun out, it was so much easier for them to just acquire all the assets of this company, of this corporation, rather than trying to… it would have been a nightmare. I don’t even want to think about how much of a mess that would’ve been.
That would be the first thing I would think. If you really do plan to keep a lifestyle business and you think you will keep these things forever, then you could think about doing the way I had, which was put them all under one LLC. It is the easiest way. If you think you would ever sell one or more of them, then unfortunately, you got to think about breaking them out and having their own Stripe account and each one having their own bank account so that it doesn’t all co mingle. Those are tradeoffs there.
In terms of brand, I agree with Mike. You just think about the audience. It sounds like one is B2C and the rest are actually B2food blogger. It services for food bloggers and software for food bloggers. Then it seems like you have two brands. You have the Pinch Of Yum which is a great brand on its own and has an audience. And then maybe somewhere on there, you have a little thing that’s a food blogger or want to be a food blogger. We also offer this and it leads over to those three things.
They may have their own websites, but I do think there should be kind of a central brand that you come up with that these things are related and you can cross sell them assuming again that it’s the same audience for all three.
Mike: Just to tackle a little bit what Rob said about splitting the business and then possibly selling it later, one thing you could do is a hybrid approach. When you’re doing things in your books, like when you’re hooking things up to a Stripe account for example, you can create different Stripe accounts for each product and then on the back end, inside of Stripe, you can essentially just add different email addresses. It gives you the ability to see and toggle back and forth between them and then send all the transactions and stuff back in your books, and keep them separate in your books so that you can specify a “product line” or a line of business and attribute the expenses and income from each of those things into that product line.
The difficulty comes when you have a single service that you use that spans multiple ones. Let’s say you have a Drip account. You use it for all of them and so it’s one subscription and you pay, I don’t know, $100 or $200 a month and you use it for all four of them. Then you almost have to say, “Well, yes. This goes into this bucket. It’s mutually used by everyone.” If you do sell it later on, you can point directly to those things and separate them out easily when you do go to sell the business. You could even do that in advance of selling it.
If you get to a point where you decide hey, I want to do this, you split everything out, put it all into its own separate LLC or different business, and you’ve got everything already separated. That’s a hybrid approach you could go. That’s actually the kind of hybrid approach that I’ve taken right now just because of all the different things that I have going on. It’s interesting to be able to separate the different products and say this is how much revenue this gets versus how much the expenses are.
Rob: Good question. I appreciate you sending that in. Hope the answer was helpful. Our next question comes from a founder who wanted to stay anonymous. He says, “I’m working for a founder on an idea to automate a process that works in a couple of very lucrative industries. Before I started, there was no product, just an idea and a false start with a development company. I feel like I’m doing the work of a co founder. They’re supplying me industry knowledge, contacts, and funding. I’m running all the discovery, coming up with growth hacking strategies, doing the prototyping, setting the technical and product strategy, and working to build the product with the development company.”
I don’t think Chris is a developer but they’re outsourcing the development. He’s kind of being a product lead. It’s what it sounds like. “I’m due to sign a proper contract of employment with him under a new limited company in a couple of months. My question is what can I expect/demand in the new contract? Is it too much to ask for equity or share options?”
Mike, I feel like there are two questions. Number one is do you feel like he is doing the work of a co founder or more of a product lead? And two, there’s his question. What can he expect or demand?
Mike: From the description that I hear here, it does sound to me a lot like the co founder. I’m a little unclear on the part where he says that they’re supplying the industry knowledge, contacts, and funding avenues. I’m running all the discovery, coming up with growth hacking strategies, doing the prototyping, etc. It sounds to me like that’s almost the division that you would make between two co founders or between an investor and somebody who is building the business.
It seems odd to me there’s this whole industry knowledge, and contacts, and funding avenues. And then separate from that, this person is doing discovery. What kind of discovery is that? Is that like product discovery? Is it customer discovery? It seems a little odd that that has been delegated to him. But it does seem to me like this is much more of a co founder relationship than anything else. I’m not real sure how many people are involved either. Is it one other person? Is it two or three? That’s not real clear from the question either. I think based on that, I would look at that to see how you would approach it.
If things are gumming along where there’s an expectation of a contract, I think it would be a mistake to wait for that contract to appear and then negotiate from there because once it’s down in writing, they’ve already got their expectations written down and what they think is fair and then you’re negotiating from where they’re already at, and it may not even be close to what you’re looking for. I think if you have those discussions early on before they write anything down, then you can probably get much closer to what it is that you’re looking for, whether that’s co founder status or 50% if it’s only one other person or 33% if it’s two other people, etc.
But I would not wait until you get that contract in front of you to start having those discussions because otherwise, you’re going to find yourself probably disappointed just because the expectations weren’t set up front.
Rob: I feel like this is a tough one because I’m not convinced that he’s doing the role of a co founder. I feel like he is a product person. I think the question when I think about a co founder is how hard are you to replace. If you’re working for free and doing a bunch of work, you’re really hard to replace because it’s hard to find people who work for free and who do a good job.
But if you’re getting paid a fair salary for what you’re doing and the expectation thus far has been that you kind of are a contractor or an employee, I think you have to think about how hard would it be to replace you. You and them are the only ones that are going to know this because there’s a lot of details and moving parts with this.
I feel like if you’re more of someone that they could just find someone else to manage this and pay them a salary and they do have the funding to do it, then I think you are much less in a co founder role or at least a very minority co founder. In that case, your percentage drops. I think if you truly are driving the vision and bringing just levels of game that most people would not be capable of bringing, then you could consider yourself, there’s like founding employees. There are phrases like that.
Typically, co founders are people who are putting in money. Most of the co founders will be putting in money as well. It’s not always but there’s a lot more equality between what everybody is doing. Frankly, industry knowledge, contacts, and funding avenues are actually I’m going to say they’re the harder part. Building a great product is not easy but there are a lot of people who can do that. Whereas trying to replace the people with the industry knowledge of a specific industry, the contacts of the specific industry and funding avenues, that is pretty important stuff.
All that to say, I think that if you do feel like you’re truly a co founder, I agree with Mike that you’re going to want to start this conversation early before stuff gets in writing. Yes, I definitely feel in both cases to be honest that you’re entitled or that you should get some type of equity, even if you are someone who they can replace, founding employees often get 1% equity, 2%, 3% equity. It’s a pretty small amount but it’s not totally unheard of if you really are driving the product.
I would even think, depending on how big the business might get eventually, even up to 5%, if you do truly feel like a co founder or consider yourself that, now, we’re talking 10% to 50%. It depends on how many people are involved. That’s kind of the range I would think about. What do you think?
Mike: I actually had missed the part about the paid work. I was operating under the assumption that it was more or less unpaid and part time on the side. I just missed the part where he said he was getting paid for it. I guess I would reverse a little bit but I do agree with you that it sounds to me like he’s pulling a fair amount of the load. He did comment it like I know you said that all the prototyping and the technical stuff and product strategy.
You can put people in to do that stuff, but what’s the discovery that he’s doing? That’s the part that I’m unclear. Is it actual customer discovery? If so, how much industry knowledge and contacts are they actually bringing? That was my question about it. It could go either way. I think there are a lot of subtleties here that we’re just not quite getting.
Rob: I know he wants to stay anonymous because obviously, he wouldn’t want someone to overhear it. He can’t give us all the details but it really does depend on a lot of those details. I think those were general thoughts but wish you the best of luck with that.
Our next question is from David. It’s a question about pricing tiers and dead zones. He says, “Our product Uber rider has a tiered per seat pricing model, where the more seats you purchase, the lower the per seat cost. This leads to dead zones where the price for 40 seats and 50 seats are almost the same if you target 50 as a breakpoint. Is this a bad approach and should a flat per seat price model be adopted to avoid this? We have had some push backs from larger 200 plus seat customers that the pricing was too high. How do you strike a balance here?”
What do you think, Mike?
Mike: This is hard because I’ve looked at specifically this problem before and you’re absolutely right. There are places where it is more cost effective to buy more seats than less, especially if you’re right on those thresholds. What I’ve seen larger companies do in these cases is that they’ll essentially sell you a larger package. Even just for the soul reason that it costs less money and they sell it based on the idea that it gives you overhead.
When you swap people in and out or people leave the company, you don’t have to worry as much about whether or not the license is blocked for x number of days or if you’re transferring it to a new person that you hired in anticipation of someone else leaving. You can just reuse it between them because you’ve got the overhead to play around with.
You can work that into sales discussions. When you start looking at extremely large customers where you mentioned the 200 plus seat customers, I’ve seen pricing for enterprise customers go as low as 10% of the list price. If you’re getting pushed back there, it could be that that’s the problem. They’re expecting a larger discount than you’re providing but at the same time, you also want to be a little bit careful of that because just because somebody is complaining about the price, it doesn’t mean that it’s too high.
If all of them are walking and not buying it, then yeah, that’s probably an issue to look at. But just because they say that it’s too high, it doesn’t mean that it actually is.
Rob: Yeah, it’s funny. I’ve always leaned towards having this flat per seat pricing and then offering discounts to larger customers because larger customers are going to tend to talk to anyways in advance or there’s a point where you just call for pricing and you deal with them. You give them whatever discount you need to land them.
But I have seen more apps that used to have flat per seat pricing move towards tiers, FogBugz is an example. The reason they moved, from what I can see, is they actually wanted to lower the pricing on the low end. You can now get a five seat FogBugz account for $20 a month. That means $4 per seat. As soon as you go to over 5, you need to go to the 10 seat license and that’s $100 so now you’re paying $10 per person. What they want to do is take the air out of the low end and they switching costs are hard in these systems and so they’re actually trying to get people in so that they use the product, get locked in and enjoy using the product hopefully.
And then eventually, way up high, I don’t know, it’s like 250 seats. It starts to drop very slowly and I think that could be a prejudice. If you drop the price slowly enough, then you won’t have dead zones or you could just put it up to a point, have just a few tiers that are flat because that’s how FogBugz is. The 10 is 100. The 20 is 200. The 30 is 300. It’s just pretty much linear. It kind of is like having no discount and then wherever the point where customers feel they deserve a discount or need a discount, you can just do a call us or expect the people to ask about it.
I could go either way. I think in the early days, if I were still trying to get market share, product market fit, all that stuff, I think it’s easier to keep it simple. But once you have more data, more information about usage, you know whether you have lock in or not, you know if the low end is going to be something that you really want to go after, you just get more knowledge about the space, you could actually make your pricing more complex because you have data with which to drive that pricing.
I think trying to guess out of it early on without data is probably a bad move and it’s going to mean you re-do your pricing multiple times. Whereas if you start flat, simple, and just go forward, you can always move to tiers later. I hope that was helpful, David.
Our next question is about health insurance in the US. It’s from Albert. He says, “Hey guys, over the past few months, I’ve grown more and more frustrated by my current 9:00AM to 5:00PM job and more excited about my side project. I’ve been considering quitting my job if I manage earn enough funding to be able to support myself for a year or two, while working on the startup full time. My main concern would be the health insurance situation. If I were to quit my job and give up its benefits, how do you recommend I get health insurance? Should I get personal insurance or are there any services that work with startups and single founders? I’m based in Florida. Thanks.”
The US, Mike. The only country in the world where people voted for the right to go bankrupt from health insurance issues. It’s kind of catastrophic for entrepreneurs. I think it’s an absolute catastrophe that there are founders, I see this, people talk to me, they don’t want to leave their jobs and be a founder and founders are the people who make a difference in the economy. It’s like the small businesses, people who create jobs. That’s where real job creation happens. What’s the number? It’s like 80% of jobs created last year are in companies like 10 people or smaller. Some insane number like that.
The fact that this many people are concerned about it and rightfully so, because it is expensive, it’s just a real shit storm. I think it’s something that we got to figure out. Anyways, that’s his concern. What do you think about it?
Mike: Like you said, it’s a hard situation. I don’t think that there’s any easy answer. I’ve had conversations with people about this. Depending on where you live, the rates can vary pretty dramatically from one place to the next. I’ve seen things as low $800 a month for a small family of four and then I’ve also seen rates as high as $1,500 to $1,800 for what appears to be the same coverage.
I remember bouncing back and forth between various insurance companies for about four or five years mainly because the same exact plan would rise dramatically in price from one year to the next and then the exact same coverage from a different insurance company would be dramatically lower for no good reason. Like I said, I have my conspiracy theory about what they’re doing and how they’re trying to figure out how much can we charge people. And they just jack up the price until enough people turn out, then they turn around and then they change the price.
Rob: That’s such a conspiracy though because they regulate it. We had the guy write in, you know.
Mike: I know. I know. But it still feels that way. No matter what, you feel like you’re getting screwed by the health insurance companies, that’s just the way it is. Whether it’s happening or not, whether they’re doing a delivery or not, you feel that way. I don’t have any good answers here. I used to use an insurance broker in Massachusetts. You really can’t do that anymore because it’s small potatoes for them and a lot of the larger insurance companies don’t work with the brokers anymore. The small brokers just said, “We’re done. We don’t do that anymore.”
Rob: Isn’t it just when you go on an exchange? That’s what they have now, right? Is it healthcare.gov or whatever in the US?
Mike: You can but you’re not required to.
Rob: I understand but that would be where I would start.
Mike: Yeah.
Rob: That’s probably where I would start looking. As well as, Kaiser is not as cheap as it used to be. I had Kaiser my entire life growing up until I was in my 20’s. There’s always the HMO horse. They’re actually a premium brand now, they’re very expensive. Not very, they are expensive. But I would rather fall back to that. This is just personal, what I used to do when I was in between things that provided health insurance. I would do Kaiser or I would go to these exchanges or even go to, yeah there’s healthcare.gov for the government but there’s like a ehealthinsurance.com and there’s a couple other, I think was it healthcare.net? I’m trying to look for it right now.
It’s basically these places where they will give you quotes. There’s a bunch of people competing. You can at least look up insurance by state, and by this, and by benefit. It’s just a matter of doing some research and then realizing that the premiums are way too high for every plan and that you’re not going to want to use any of them. That’s how it always is for me. And then just picking the least of the evils.
Mike: Something else you can do is talk to a CPA and find out what you can right off and what you can’t because depending on whether you buy an individual plan for yourself as a family, where you’re paying out of pocket, versus buying it through the business, that may make a difference. It might cost you a little bit more but if you can write off more of it or write off the whole thing, then it drops your overall taxes. There are games that you can play there too. Just be aware that there is a big difference between an individual plan which is for you or just your family or whatever versus one that comes and insures your business and the employees in it, which you can be an employee in the business.
And then you also have to be careful about whether or not you’re classified as an employee in the business, based on what the state requirements are and whether or not you have to provide coverage. I think if you’re under 50 employees, you’re kind of exempt from most of those things but you opt in one way or the other.
Rob: Right. What we did with Drip as it started gaining a little momentum and we’re still very small but some people were trying to get their own personal health insurance and it was a lot more expensive and it wasn’t taken by as many doctors. I went to Zenefits. Since we were an S Corp, just got it set up there and was able to get everybody health insurance through Zenefits. It still was quite painful. It seems like it should be easier than it is but these are the options that I would look into.
Our last question for the day is from Mike Fleming. He’s asking about multiple email provider conundrum. He says, “The short version is what’s the best way to combine transactional email, newsletter, and Drip campaigns in terms of subscriber consolidation and cost effectiveness? As a small SaaS owner, I used Postmark for transactional emails and MailChimp for newsletters. I’d love to add Drip campaigns. When I do though, I’ll have two providers. MailChimp and Drip that I have separate silos of user info. There’s a third if you count my apps user accounts. If you combine my newsletter subscription and user accounts, I’m well into Drip’s custom pricing tier, which is cost prohibitive for me at this time. My problem consists of having these email mechanisms while managing the silos and not breaking the bank. What are best practices in this area? Also, thanks for all the great info over the years. Every Sunday, I load my iPod with Startups for the Rest of Us. It’s the first thing I listen to on my Monday morning commute. Thanks.”
I have thoughts on this.
Mike: Really. Do you, now?
Rob: Yeah. Can you imagine why?
Mike: I can imagine why. I would love to hear this. I have a couple of my own but I’m curious to hear what you have to say specifically.
Rob: To me, your apps user accounts, you got to decide what’s the source of truth for your business. If you have a SaaS app, then to me, your database should be the source of truth for all of this stuff and everything else should try to sync up with it but you should always look back at your database. It’s different if I sell my book and I have a blog. For those, Drip is my source of truth. I have no database because they’re not SaaS apps. Your mileage may vary but if you’re a SaaS app, I think your own database is the source of truth.
In which case, Postmark’s transactional so that’s not another source of tags or anything. It’s just a mechanism to get email out. Really, you have your own database and it should sync up with whatever email provider you’re using. You’re using MailChimp right now for newsletters. I would either stay whole hog on MailChimp or whole hog on Drip. I know Drip can do obviously way more automation and more sophisticated, more powerful than MailChimp. If the pricing doesn’t work and you can’t possibly get over there, then I would just hack MailChimp. I know it sucks but hack it until it works.
Once you have the money or realize that the hacking was too much of a pain in the ass, because oftentimes another $50 or $100 a month sounds like a lot until you are maintaining these hacks because you outgrow MailChimp, which is how we get a lot of folks who do come from MailChimp to Drip. They have just outgrown it and they had hack after hack trying to do modern stuff. MailChimp has “automation” but it’s not that good.
As much as I respect MailChimp, I like the founder, Ben Chestnut, when I email him, he emails me back. I respect the hell out of what they’ve done. They have legacy and it’s tough to get around that. Smaller episodes like Drip have been able to, I would say, just do a better job at making it easy to do exactly what you’re trying to do. Drip campaigns, autoresponders, and sophisticated funnels.
That’s the weighing, the balance that I would do. I would not spread my people across both MailChimp and Drip. Again, you could try to sync it up using API, we both have APIs. I just don’t think that’s worth it. I think you have to bite the bullet. You pay extra. Our pricing is actually quite similar to MailChimp so it’s funny that I don’t know exactly how many subscriber you have, maybe there’s a tier where it goes off the rails but it’s usually 20% different or something. It’s not like we’re twice the price or anything.
That’s how I would think about it. Again, your SaaS database, source of truth and then stay with a single provider and go with the one that does the best job. I personally, what do you call it, it wouldn’t be pennywise and pound foolish in the sense of I want to spend five extra hours writing custom code to make MailChimp do something when it’s like how much is five hours worth to me? How many months of extra 20% or 30% could that pay for in a tool that could actually do this out of the box, so to speak. Those are my thoughts. What do you think, Mike?
Mike: I guess my thought really went directly to the number of subscribers he had. I totally agree with what you’re saying about not splitting them up because that was the first thing that I had actually thought of, splitting them up and saying okay, all the newsletter subscribers, you put those on MailChimp and then all your actual users, you put them in Drip. I think that you’re just asking for trouble at that point so I immediately discount it, probably like you did.
My second thought was going to the list itself and the list size and the pricing differences between them. While you were talking, I just pulled them up and plugged in 100,000 subscribers into Drip and into MailChimp. I’m not clear on MailChimp, if it’s 100,000 subscribers, he didn’t say that number but I just pulled the number out of the hat. It’s $475 a month, and then on Drip it’s $779.
The question in my mind becomes there’s two things. One is as you said, how much extra time are you going to spend trying to make it work in MailChimp and my guess is it’s probably more than three or four hours a month. The other thing is with the mailing list of 100,000 subscribers, what could you do that would get you an extra $300 a month out of that mailing list?
It seems like with that many people on it, you should be able to or you should at least be able to call that list down to a bit more of a reasonable size if those people are not active. Get those people off that mailing list if they’re just not opening emails and they’re not engaged in any way, shape, or form. Like they’re not doing you any good, they’re dragging all your stats down and they’re giving you false information.
Rob: I’m glad you compared pricing. I’m showing $649 although I guess that’s annual if you go to Drip annual. You’re right. That is a 70% difference or 60% difference or something. It’s a lot more there. One thing that we have noticed, and this is not marketing speak or anything, we notice when people come over from MailChimp or AWeber or these other list based solutions, if they have 100,000, since you can have duplicates, the same person can be in multiple lists and you would get charged for each of those, we typically see 20% to 30% drops in list size. 100,000 that would go in Drip would only be 70,000 or 80,000. In which case the pricings could run up here. 70,000 is going to be $569. 80,000 is going to be $600 or something.
It brings you down even closer. Again, I’m not saying you should move to Drip or that you’re a fool to stick with MailChimp because they built a solid tool but it depends on what you’re doing and like Mike said, how much extra are you going to get out of a tool that allows you to build sophisticated flows and to do things based on people’s behaviours and what their purchase behaviours and that kind of stuff.
In addition, we have pruning built in. That’s another way to get your list down. It’s just remove everybody who hasn’t opened the last x emails. That’s how people keep list size down. There really isn’t pruning in almost every other email tool. Everyone of our competitors doesn’t have that because it makes them less money but we built that tool to make super one click easy to get people out. Again, that’s another way to reduce that cost.
I think that’s a good question though. I bet other folks have thought about it as well. I appreciate you sending that in.
Mike: With that question, I think we’re running pretty close to out of time. If you have a question for us, you can call it into 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 in iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 351 | Harnessing the Power of Your Marketing Data
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about harnessing the power of your marketing data. Syncing information between marketing tools is a difficult task and its easy to make mistakes. The guys talk through some ways to make it easier.
Items mentioned in this episode:
Transcript
Mike: In this episode of Startups For the Rest of Us, Rob and I are going to be talking about harvesting the power of your marketing data. This is Startups For the Rest of Us, episode 351. Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob: I’m Rob.
Mike: We’re here to share experiences to help you avoid the same mistakes we have made. What’s going on this week, Rob?
Rob: Do you ever notice that when you intro the show, you say, “Rob and I are going to be talking about XYZ” and that I say, “Mike and I talk about XYZ”?
Mike: No.
Rob: You haven’t noticed that? Alright. I wonder if anyone else has.
Mike: Why do you think that is?
Rob: I think because you’re actually talking about the conversation we’re about to have because you know that 20 seconds later, we’re going to be talking about this, whereas I’m kind of like putting it up as an intro, as if it was independently recorded – almost like it’s done after the fact. “In this episode, Mike and I talk about blah blah blah.” It’s almost like it’s something that happened in the past.
Mike: Like you’re a time traveler, and you’re doing it in the future.
Rob: Exactly. Anyways.
Mike: Anyways.
Rob: Now that we’ve lost all our listeners, you know what’s up for me? This week – last week, once this episode goes live, Clay Collins stepped down as the Leadpages CEO, and he decided that it was a good time to bring in someone to scale the company. He made specific comments of – which I really respected – like this was his impetus. He initiated it. This wasn’t just him offering flowery language, as some founders get kicked out by their board. They say things like this, but I know the backstory of that guy.
I know the inner workings of what happened, and he said, “Look, I’m really good at growing a company from zero to $10-15 million, and we’re a lot more than that now. We need more process, and we need someone who can really scale this thing up to $50-100 million, so the COO John Tedesco, who I’ve worked with now for a year, in essence, since we’ve been at Leadpages – he is taking over as CEO.”
Clay is really taken some time off. He’s gonna spend more time with his family. The dude is super smart, and he reads a lot of stuff. He’s into investing. I mean, he has enough hobbies to keep him busy, and he won’t be down for long. He’s like one of us, where it’s like you’re just constantly – you have that next thing going. Frankly, I applaud his decision to do this, and I think he’ll have some nice – I hope he’ll have some nice restful time as he steps away from it.
Mike: Honestly, I think that’s really smart and insightful on his part to know really where he fits into the startup process and understanding where he provides the most value and realizing that there’s probably going to be a time, where either he’s not good at it or he doesn’t enjoy it. So it’s better to move things around and put a succession plan in place, so that he can go do the things that he really wants to do or is really good at, versus continuing down that road because you feel pressured to or you feel like you are supposed to do that versus “this is the right thing to do.” I agree with you. I think that that’s totally the best-case scenario – is he makes that decision as opposed to somebody else making it for him.
Rob: Right. And making it for him, like kind of overstaying your welcome, and then people are like, “Um…” They’re bored like, “Um…” Your C-Level Suite is like, “Dude, what’s going on here?” Yeah, I agree. It is genuinely – obviously there’s always uncertainty when this type of thing happens. From my perspective, when I first heard – which is a while ago – I was like, “Alright.” Clay and I worked close together, and I know him. He’s a known quantity. I know how we interact together, so I was a little concerned because they did a national search for replacement. They didn’t just say, “Well, the COO is gonna take over.”
My concern was like, “Who’s that gonna be? Is it gonna be someone that I don’t know that runs a company completely different than Clay did? It’s gonna be this big shakeup that I’m not going to enjoy working with all that stuff,” and then the more I learned and the more I heard they were thinking about going with John, I had an inner sense of relief because he’s a known quantity. I’ve worked with John, so there’s obviously gonna be some changes. I’m sure, John’s gonna run it a different company than Clay did, just because they’re very different people, but I’m really genuinely curious and interested to see what’s coming here in the next couple of months.
Mike: I wouldn’t think it’s unusual for a company to run a national search like that and then end up hiring somebody internally anyway. I would imagine that even if somebody applies internally – if they were planning on doing a search for a CEO anyway, they’re gonna do that just so that they get a lay of the land and see if there’s other things that they’re missing because the last thing you wanna do is promote somebody from within, only to find out that they’re really not a good fit for that particular thing and you feel almost obligated to give them the position, versus if you actually do a full-blown search. You’ll feel a lot better about making the decision – assuming you go internally anyway.
Rob: Totally. It’s almost like a fiduciary duty or could be considered. It’s like we’ve got to protect all the shareholders. Let’s do the right thing, rather than do something that may look like an inside job or an insider – almost like a nepotism thing, although it’s not family, but that kind of stuff.
How about you, man? You are knee-deep in a launch right now.
Mike: Yeah. I sent out my first launch email yesterday and trying to record a video today that I still have not gotten to, and I’m hoping to get to that soon. But I got a few replies for my email that I sent out yesterday, from people who are interested in signing up. I’ve got some other people, who I’ve talked to over the past week or two that they basically just said, “Hey! This is not a good time right now, but in a couple of weeks, let me know” or they’ve got a vacation coming up or they’re gonna be out of the country or what have you.
I’ve got some things that are coming up, but the real impetus is really push hard on the email list this week. I’ve got a series of, I think, four or five emails that have got to go out, and I’ve still gotta write most of them so that’s gonna be the big priority for me over the next several days – is getting those emails written and scheduled, and then making sure that all the signup code is in place, so that people can get in, and they know what to do and have some videos that will walk them through how to do different things. All that stuff. It’s not hard. It’s just time-consuming to be honest.
Rob: Yeah. I know how that goes. How would you describe your mood? Are you excited? Are you stressed out? Are you just wanting to get it over with?
Mike: Real stressed out, to be honest. It’s just because I know all the different things that need to get done. There’s like the short list and then there’s the long list. The short list is the time-consuming stuff that has to be done in a relatively limited time frame, and then there’s the long list of all the things that I would really like to do or should be done or need to get done, but I can push them off theoretically until after the launch date, but I’d rather not, if I could get them in. I just can’t. I don’t have the resources or time or anything to be able to do that. Plus my wife’s out of town this week, which I hadn’t anticipated until after I decided on the launch date, and then I realized, “Oh, she’s out of town from Wednesday morning until Sunday night.”
Rob: Piece of cake.
Mike: Sure.
Rob: These kids are watching themselves, right?
Mike: Right. They’re cooking me dinner and making breakfast, yeah.
Rob: That’s perfect.
Mike: Right.
Rob: Totally not happening.
Mike: Yeah, totally not burning the house down.
Rob: Yeah, that’s pretty much what you’re trying to do. Oh man, I didn’t hear that part.
Mike: Yeah. What’s even worse is on the schedule, it was messed up. I thought she would be back Saturday night, because that’s what the calendar says. She looked at it and realized that on her calendar, it shows that she’s out till Sunday, but her hotel only goes until Saturday. It was like, “Oh, that sucks!” because I really thought – it was two days ago, when I found out that she was not gonna be back until Sunday.
Rob: I’m sorry. That’s not cool. Yeah, [inaudible 0:07:31] when you get this.
Mike: It’s nobody’s fault.
Rob: No. I don’t mean, not cool on Ally’s part. I just mean it’s not cool when that kind of stuff happens, and this is entrepreneurship. This is launching a startup, while you have a real life and you have a family, and this kind of stuff happens. It’s a drag, and it stresses you out, but it would almost be too easy without these wrenches getting thrown into the works.
Mike: Business would be awesome if you didn’t have to worry about customers or money.
Rob: Customers, people, money. Yeah.
Mike: Support issues. Yeah.
Rob: Yeah. Cool, so what are we talking about today? Is it one of the most fascinating topics that we’ve ever talked about on this podcast?
Mike: Absolutely. It’s all about harnessing the power of the marketing data that you have available to you and making sure that the data that you have in each tool is accurate, which doesn’t sound very sexy, but at the same time, it’s very useful. If you don’t have things wired up properly, you can very easily miss things from one tool to the next. Or let’s say that things aren’t getting synced properly between your app and either your marketing software, like your marketing automation software or your email list software. Your billing code, for example, because somebody can sign up for an account, but they may use a different email address – is their generic catchall for all the credit card statements and stuff that they sign up for because they want all of the billing emails to go there. But they don’t want to use that email address to actually sign up for your service, so now you’re going to end up with mismatches between things.
What we’re going to be doing today is talking about how to synchronize some of that information between your prospects, leads, and the contacts and the fact that – of course, generally doing that sucks, but it has to be done. One of the things that I’ve noticed is that inside Drip, for example – I think that Drip does a really good job of this. But they differentiate between tags, events, and custom fields. Since I look to that as the source of authority for those types of things, why don’t you explain a little bit about the differences between them? Because I think you guys are doing a fantastic job of explaining it on your website.
Rob: Thank you. I appreciate that. The reason we do a good job, I think, is that we have been asked that question, especially in the early days, so many times – “What is the difference between these things?” To me, this is the heart of marketing data. In almost any marketing system you go into, you’re gonna see tags and custom fields, for sure, and then we innovated in the marketing automation space, in the email marketing space. We brought in events, so we pulled that over from analytics like Kissmetrics and Mixpanel.
Here’s the simple answer. Tags are basically just a string, like a single word or phrase that you can attach to a person, so you typically use it to segment or bucket groups of subscribers. I might import 10 subscribers, and you just say, “I’m gonna tag them with ‘microconf 2017 attendees’.” That tag is just a piece of text, and it attaches to the record. Then you can later search who has these tags. I only want to send to people with these tags and not these other tags. Tags, I think, are pretty well-known, and they’re common now in marketing automation platforms and in a lot of others likes sales platforms and stuff.
Custom fields are really just name-value pairs. That’s how you think of it. If you use MailChimp, they call them “merge tags.” We call them “custom fields,” but it’s basically like if you want a first name, then the name is “first name” and the value is “Rob.” Or you could have last name or telephone number or address, so there’s just a name-value pair. It’s kind of like having two tags that are linked, but really it’s just name-value.
Events are the thing that – there’s no other marketing automation platform that has events, like Drip does. Again, we borrowed it. We migrated it over from analytics. Events are similar to tags, in that they have a name. There’s a text thing, but they also record a timestamp of when the event happened. You can look at how often it happens, so someone could – you can’t have a tag applied seven times. A tag is applied, or it’s not. It’s applied, or it’s removed, whereas an event – you can say they made a purchase seven times. That actually makes sense in the context.
Events also have a payload, meaning they have a collection, almost like a JSON Blob or a collection of name-value pairs. You think about an event like “Made a purchase,” what type of values do you want attached to that? You probably want a price, may want an item title, a skew – something like that. If the event is “Visited a page on your website,” what’s a metadata you might want to know about that? What was the page? Maybe you already know when it happened? Maybe you know how many times they visited this page. You could attach that all to that single event. They’re kind of like, in my opinion, a better version of tags, although tags still have some use.
I realize that was a long explanation, but I wanna describe it like if you’re a sophisticated marketer, it could have been shorter, but I wanted to make it approachable to lay people – basically a lay person. We have a good KB article on getdrip.com, and we will link that up in the show notes.
Mike: Yeah, I think the big differentiator there is just – with the tags versus events. The tags really give you a single indicator that says, “This person fits this particular profile,” and you can’t apply that tag more than once to somebody versus the event, where it can be – like you said, somebody could make more than one purchase. That’s an event. But the tags in Drip will just by default prevent you from adding a tag to somebody more than once, because it doesn’t make sense in that particular context.
The other thing that struck me was the payload side of it, because an event can have a payload associated with it. It’s really a description of that event and all the different parameters or properties of that event, and that may be important for something down the road.
Rob: Yeah, and the way I think about it is custom fields are – they’re like a description of the person, who the person is, because it’s like first name, last name, and properties about them – maybe have their plan and the price they’re paying you – stuff like that. Tags tend to be the buckets or groupings of people, and then events are things that people do. That’s the plain English version of it.
The reason we’re talking about this and defining these things is that tags, events, and custom fields are really the heart of your marketing data. This is how you have information and the learnings about the people that are on your list, coming to your site, etc. I think we’re gonna dive in now to – there are definitely other things, other data points, but these are probably a big part of what you’re gonna wanna try to be syncing between your marketing tools.
Mike: One thing to kind of point out in terms of those things, like Bluetick has tags and custom fields. One thing that I use custom fields for is tying contacts inside of Bluetick to other applications. You’re not always using, for example, a numeric ID or an email address, depending on which tool you’re using. Some of them will use one or the other, or they’ll even have a hash of some other data value or of the email address, and it’s difficult to match the data from one tool to another unless you have that information included.
I actually use the custom field in Bluetick sometimes to attach it to some other products. For example, a pipedrive deal – I’ll add a pipedrive deal ID in as a custom field. That’s the name of it, and then there’s a value associated with it that says, “Here is ID 123,” for example, that you can use inside of Zapier or other tools to tie the data back and forth, or to be able to map events from one tool to another.
But along those lines, let’s talk about some of the different ways that you can map information from one tool to another. The first one is a manual or custom sync. When you’re doing this, really what you’re trying to do is just export data from one tool into another, and you may either be doing that through the API itself or you may be downloading a spreadsheet or creating a CSV file and uploading it. These things are brittle. That’s the biggest problem with this is that the tools themselves – they require a lot of code or engineering work to take those things and translate them and move the data from one tool to another. It’s really hard to keep up with the changes. That’s really the biggest drawback to this.
That said, it can be the easiest way to get up and running or to get an initial prototype of “Hey, how does this data sync or data transfer work?” but longer term, as you expand what you’re doing, it’s probably not a great strategy to rely on that too much because it is probably not automated. Yeah, you could create a scheduled job or a cron job someplace that runs it on a periodic basis, but that doesn’t necessarily mean that it’s going to be the best way because it is so brittle. It can fall down, and when it does, you may not even know that something went wrong or that it’s not doing what it’s supposed to until much later. Then it’s almost too late.
Rob: Yeah, unless you’re kind of at scale and you’re really gonna monitor it. I’ve written some manual – they’re like cron jobs and stuff that would sync up between systems, and it just seems like every three to six months, something would go pretty badly wrong, and I would have to investigate. I have to stop what I was doing.
It’s like if you have developers – have a team of developers and you’re maintaining a whole system, and this is just one piece of it – that’s cool. But if it’s literally you hacking together a PHP script and putting it in a directory and having it run on a cron, meaning on a schedule-basis, that’s not set-it-and-forget-it. You’re gonna need to send yourself emails when it fails. It may die. A bunch of stuff can happen with it, and so this is not an ideal thing, if you’re just running it on your own and you want a set-and-forget solution.
Mike: I think your point about having something break every three to six months is spot on, from what I’ve seen. I used to export the data from Gumroad into a spreadsheet, and then I would take that and then I had a small script that I wrote that would take that data and then upload it into Infusionsoft. Like you said, every three months, something would change, and then something would break. Then I’d have to spend time on it. It just really was not worth the time and effort. Because they didn’t really support a lot of other ways to get data in and out, it just made things harder and more difficult. It’s hard to deal with a time-consuming time sync.
Rob: The problem is as developers, it’s super easy to build this thing for the first time, and so it’s very appealing to do so. It’s kind of like, “I can just hack up a script here in an hour. There’s an API here. There’s an API here. I pull it out and put it in.” You can. That’s right. It’s not that part though. It’s the maintenance of it that’s the pain.
Mike: The next mechanism that you can look at is using a tool that’s built specifically for syncing data. The tool that come to mind right off are Zapier and If This Then That. I think that mostly what I found is that for individual events, this tends to be something that you turn towards. Zapier obviously has a huge base of applications that they work with. I think they’re up over 800 at this point. Finding an integration between one tool that you’re using and another tool is generally pretty straightforward, but the problem with doing those is that, depending on how complex your sales funnel is or your marketing funnel and what data you need to move from one to another – it’s very easy to miss or realize after the fact that you should have been forwarding this particular data over and you weren’t. Then you have to go set it up, and there’s this line in the sand drawn, so to speak, which is not – before that point, you almost have no data. You can go back and upload it afterwards using a Zapier integration and a spreadsheet or something like that, but it still means that you have to do extra work in order to get it.
I do find it really useful, to be perfectly honest. I have a lot of stuff tied in through Zapier, and it’s supported in Bluetick. So I don’t want to make it sound as if that’s not a viable route, but it can be easy to miss things – is really the point – if you don’t have your marketing funnel mapped out.
Rob: Yeah, I think Zapier’s pretty handy for marketing stuff actually. I know we use it with our own internal stuff and in our own internal marketing communications and getting data in and out. I know we recommend it to customers a lot. It kind of takes the place in the short term of a first-class integration, because we build a lot of integrations. I think we have 40-plus that are direct with Drip and something else, but Zapier gives us another – I don’t even know – hundred maybe, and that’s helpful. Then we can get reports on which are the most common Zaps, and then we can say, “Well, we should build first-class integration with that – with those folks.”
From a business owner’s perspective and you’re running your own startup, I think it’s definitely cool to have that Zapier integration. Then I think as a marketer, it can be a really valuable tool. You’re right. There is that thing of if you miss stuff, and then it’s a fiasco. They do have rate limiting, so if you hit Zapier’s endpoint – if an app hits it more than (I forget what the limit – it’s fairly low) – but if they hit it more than X amount per hour, then those things will just bounce, and so that app has to know to retry, which obviously we do with Drip, but I know there are a lot of other apps that are not doing that. There are pluses and minuses, but overall I give Zapier two thumbs up.
Then you mentioned If This Then That, which I’ve always viewed – I think it’s more of a consumer version of Zapier. If This Then That came first, and I remember some people being like, “Isn’t this just a clone of If This Then That?” It was like, “No. It’s like a B2B version.” They integrated with the apps that we, as entrepreneurs and business owners, wanted [inaudible 0:20:25]. If This Then That’s integrated with Yahoo! Pipes and all this kind of stuff on the internet that isn’t necessarily applicable to businesses. But I haven’t actually used If This Then That. I’ve only used Zapier.
Mike: Yeah. I signed up for If This Then That account a while back, because I was trying to link things between Dropbox folders, and it wasn’t – neither Zapier or If This Then That were able to look into a subfolder and monitor a subfolder that hadn’t yet been created. You can point it to a folder, but if you wanted to monitor it for files in directly that folder, it was fine. But if you wanted to monitor for a folder getting created and then files being added to that folder inside – neither one of them can do it. That’s not their fault. It’s basically Dropbox not being able to offer that.
I found the UI of If This Then That extremely confusing. I signed up for my account. I tried to use it. I probably spent several hours on it, and I’m like, “You know what? I’m done.” I literally deleted my account entirely. I couldn’t deal with it. Because I couldn’t figure out how to do anything. It didn’t seem like it gave you access to a lot of the underlying pieces of how it works. Your description of “it’s aimed at the consumer market,” that makes sense to me now, because I was just like, “How do you even offer a product like this?”
Rob: I think If This Then That has done a lot of integrations with home automations stuff. I think Zapier really has not. That says where they’ve differentiated.
There are other alternatives, of course, to these two, and we’ll link up a core, a thread when someone asks, “What are the alternatives.” There’s a big list there, if you’re interested in looking at more, but for my money, Zapier’s definitely the leader in terms of B2B and marketing data that we’re talking about.
Mike: The next mechanism you can try and use is a product called Segment. You can get this at segment.com. It used to be called Segment.io, but the big draw here is that it allows you to essentially replay some of the events that have happened in some of your different marketing automation tools or your different sales tools, and then pipe them to different places. It’s really good for doing that at scale, and because it gives you the capabilities of really just using one snippet of JavaScript, and you can turn on and off different tools in the application that you’re sending data to. And because it gives you that backlog of things, as soon as you connect it to your account or put it on your website, you then get a full history of all the previous things that have happened and can send them into a new tool.
Let’s say that you decide to move from one tool to another. Tool 2 is gonna be the go-to later on. You can always just turn that new one on and pipe all the previous data into it. I always thought that that was like a really fascinating way of doing things. They used to have a different pricing model as well. They would look at the tools that you were sending data into or pulling data from, and they would charge you more based on what those tools were. Like Salesforce, for example, tends to be an expensive tool, so it ended up being in a higher price tier even if you weren’t using it very much.
Rob: I didn’t realize you could replay old events with Segment.
Mike: I’ve not done it myself. I have seen – there was documentation. Like the last time I looked at it, in terms of how to do that stuff, that was my understanding was you could basically replay things to – basically pipe all your previous data into a second tool.
Let’s say, somebody wanted to switch from AWeber or something like that to Drip. They could take a lot of their old data and pipe it from – they used to go into AWeber – let’s say it’s 30 days or 60 days or whatever – and they say, “Okay. Take this 30 or 60 days’ worth of history and send it into Drip instead and replay it, so that that now in Drip will get all of that information.” I don’t know how far it goes back, but that was the sales pitch for it.
Rob: That’s interesting because I was going to say, “That would be hefty if they were keeping all your data forever.” That’s always the thing I thought they didn’t do, just because of the volume that they would have to absorb.
Mike: Yeah. My suspicion is that they don’t do that forever, but I would imagine that they probably have at least a semi-limited history. Even if it’s a couple of weeks, that couple of weeks could be important to you. If you wanted to just try out a new tool, it gives you a much easier way of doing that because when you sign into a new tool, especially if it’s any level of complexity, you’ve got nothing there, so you don’t really have a good idea of what it can do for you. But if you can prepopulate it with actual, live data from your own systems for the past couple of weeks – you sign up, pipe it all in, and boom! It’s there. You can actually use it and see what it would really do for you.
Rob: Yes. Segment.com is a solid tool. They integrate with a ton of things, and as you said, it’s not for the one-off moving tags and custom fields here and there. It’s an event-based system. It allows you – the original thing was that they allowed you to put the Segment JavaScript on your website, and then you could pipe it anywhere. You could pipe in into Kissmetrics or Mixpanel or (I think) Google Analytics. You can pipe it into Drip, which we integrate with them.
You could pull stuff into and out of HitTail, like they integrated with us back in the day. They actually wrote that integration, but now when you do it, I think you have to write your own – is my recollection. It’s a good tool, and it’s for masses of data. I think that it can be super helpful for getting data into and out of systems, and being able to report on them and not necessarily in Segment, but they integrate with a bunch of analytics and reporting tools.
That’s something – some people will come in. they’ll use Drip, and they’ll say, “I want all this fancy pivot table capabilities and blah blah blah. I want all this stuff.” It’s like, “We’re a marketing automation platform. We’re not a business intelligence platform. We’re not gonna build that into Drip,” but here, we integrate with Segment. We send a ton of data to them, so just hook up your Segment account, then pipe that into one of these BI tools and you’re set. You can do whatever you want. It allows us not to have to build the world into Drip and to be able to put boundaries on things.
Mike: I think using it as a data hub is extremely helpful. The downside of it is, of course, there’s a lot of complexity there, too, so you could easily spend hours, days, or even weeks just evaluating it and seeing if it’s gonna fit into your business and just spending the time learning how to use it. I found that when I first signed up for it a long time ago was that it was a huge time sync to really get up and running with it and understand how the different things worked and how it pipes data from one place to another and how you would do some of that data piping. That said, it is really powerful. You can do a lot with it.
Moving on to the next section. I think one of the key pieces of advice in a situation, where you’re trying to get all the data from one place to another is to settle on a single source of authority. That’s a phrase that I’ve used for years, talking about systems management software and trying to manage large numbers of machines, whether it’s a couple of 100 or 25-100 thousand machines all at once.
It’s very difficult to do that, if you don’t have a single source of authority for that information. Because if data gets out of sync, you need to know what is the master source where this information comes from. Who’s the gatekeeper of this?
Let’s say you got Tool 1 and Tool 2, and Tool 2 doesn’t have a piece of information, is it not supposed to have that information or does it not have it yet? You have no idea by looking at that tool or the other one, unless you’ve already decided which of those two is going to be the master data source.
Rob: Yeah. This is actually an interesting thing happening, with ESPs and marketing automation platforms – is we build Drip – I keep bringing back to Drip because this stuff’s really something we have dealt with a lot – is all this data syncing. This source of authority – I think Brian Dunn calls Drip his source of truth, in terms of the data. Or you could call it the customer database. Some people might call it a CRM, because really it is customer relationship management, but that has now been, in terms been bastardized into sales software.
What you’ll find out is if you do a lot of email marketing, then quickly your email provider (assuming it stores data like clicks and purchases and has your tags and has your events) – it can quickly and easily become your source of authority or your source of truth. That’s something we have been doubling down on as we notice more people doing that.
First it was solopreneurs who said, “Drip is where I keep all the data, and I want to get all the data in there.” Then we started seeing two and three-person companies. Now we have five and ten-person companies. Really interesting to see. We’ve [inaudible 0:28:36] down and started building more stuff to allow people to do that, and so I think if you are gonna do a lot of online marketing, that’s something to think about. It’ll probably be a CRM or a marketing automation platform that’s gonna be this customer database for you.
Mike: I think that actually brings up an interesting point that I run to – is that what is the idea or how do you identify who a person is in your source of authority? Is it gonna be an email address? Is it gonna be some sort of a generated unique identifier or something like that? Because it’s difficult when you get into a situation, where somebody signs up like they put in their credit card. All the billing information goes to that one email address, and then they sign up and they have a user account that is a different email address.
In marketing, the automation software – a lot of them, the email address is kind of that source of authority or that unique identifier for that person, and in the case of billing information, especially if it’s a one-user account, now you have two email addresses. It really is the same person, and it’s hard to differentiate between them sometimes. That’s why some people will go towards using a CRM for that, but again, there’s pluses and minuses in both aspects, whether you’re using a marketing automation tool like Drip or if you’re using a CRM. Both of them are gonna have pros and cons for that type of schema.
The last thing to talk about is how do you keep some of these data paths straight? I think there’s pretty basic guidelines about how to track the information flow from one tool to another, but the basic – you can start it out with is just a pen and paper. That’s easy to get started with, when you’re just trying to build out and map what your sales and marketing funnels look like, because you can just really quickly draw something out. But as it gets more complicated, you’re probably gonna have to graduate more towards a tool or a document or a spreadsheet that is going to allow you to put a lot more information in there.
Something that I found useful is to implement some sort of a workflow in either a desktop or a cloud-based workflow tool. There’s a bunch of them that I’ve tried. I’ve tried things like Gliffy. I’ve tried Draw.io. I’ve tried Moqups. I’ve tried doing things in Drip’s workflow tool as well, and that works great so long as you are operating within the confines of Drip. Once you start to go out of that and do things that are not involved directly with Drip, it sort of falls apart a little bit. That’s not a knock on Drip specifically.
Rob: Sure. Just the reality of it – yeah.
Mike: Yes. It’s just the reality of it. That’s not what it was for. The one I’ve actually settled on is a product called Lucidchart. Fairly inexpensive. It’s like $8 or $9 a month for one of their more advanced accounts, but you can get it for $5 a month on the lower end.
Rob: I’ve heard of it. I haven’t used it, but I’ve heard some people speak highly of it.
Mike: Yeah, it’s really good for being able to map out what a workflow looks like, in terms of how people enter your marketing funnel and how they go into another one. Then you can also have a bunch of different things wired together, so you can zoom in on one specific piece of it. Then you can just encompass it and say, “Okay, this is how people get onto our mailing lists,” and that’s like the whole workflow. Then once they’re there, you have a different diagram and document that describes how they move through the sales funnel itself or the onboarding funnel. Each one of those could be a completely different document. You just link back and forth between them.
Rob: I think that wraps us up for the day. If you have a question for us, call our voicemail number at 888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Out of Control by MoOt. It’s used under creative commons. Subscribe to us in iTunes by searching for Startups and visit our website for a full transcript of each episode. Thanks for listening. We’ll see you next time.