Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions on topics including managing emotions, cost of an MVP, taking a business idea and more.
Items mentioned in this episode:
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 build your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. Where this week, sir?
Mike: Well, just wanted to give people a reminder that today is the last day to apply for the Starter Edition scholarship and I said before, we’ve got over 25 to give away. We will link it up in the show notes, but definitely go check it out if you’re interested at all in coming to MicroConf Starter Edition. Just fill out the application, it doesn’t take more than 5-10 minutes to do, and we will have those within the next couple of days. The notifications will go out and let people know who’s been awarded the scholarships and hopefully everybody who is able to accept them. If not, then we’ll go back to the pool and go to the “runners-up” to see who else is available. Obviously, some people’s travel plans change or whatever. So, we’ll make sure that if we’re going to give somebody a scholarship, they can actually use this. It may take a few extra days.
Rob: Yup. Head over to Episode 433 on startupsfortherestofus.com for a link to that in our show notes. For me, not a ton of updates. Was on vacation and now, looking forward to some home construction being done on our house here in Minneapolis. We bought it about eight months ago and during the escrow process, an inspection picked up some anomalies in the stucco so we got a credit to have those fixed. All that’s fine except for the fact that it was supposed to take two months and it’s been like seven months of construction.
Things are getting put back together now but it just kind of wears on you and it can be loud. You and I’ve recorded in the past few months, I’m having to mute, we have to edit out things, and there’s people in my house all the time. So, I’m really looking forward to that being done. They had to replace some windows and re-stucco things. They can’t re-stucco things because it’s too cold right now, so they have to wait. There’s scaffolding and such. It’ll still be up, I’m guessing, for another month or two until it warms up. At least the inside can be completely done and all the outlets work again. They had to rip receptacles out and turn the power off on certain parts of the house.
Given that two of us work from home and we homeschool the kid, a lot of us are home a lot of the time. I think if I was going into an office, it will almost be easier because it will just be done while we’re not here. But when I’m talking to you on this podcast and then two construction workers walk in and start painting the walls, I’ll admit, it’s a little distracting.
Mike: You think?
Rob: Yeah. So I’m looking forward to that. That’s really in the kind of end-game right now. They’re just putting trim on things, and hanging blinds and such. I’m very much looking forward to getting past that.
Mike: Yeah. Having to redo anything in your house just really sucks. It’s just the worst.
Rob: Yup. Always costs more. It’s like software. Always costs more than you wanted to. It always takes longer to do than you think.
Mike: Yeah. So, what are we talking about this week?
Rob: Well, we have some listener questions. We’re going to kick us off with a voice mail. As always, voice mails rise to the top of our listener questions stack. This is a good question about the emotional side of running a startup and what to do when you make a change and it makes people angry. How to handle that?
Benjamin: Hey guys. It’s Benjamin from Philadelphia. I run a company called Commit Swimming. It’s a small SaaS app product. Recently, I raised prices and I’m looking to hear you guys thoughts on some feedback that I’ve gotten. I thought I did everything that I could to properly communicate to customers, like that the price increase was coming, why it’s happening, and what it was going to be. I also communicated clearly what it was then a couple of months later.
I inevitably would like about 1500 paying subscribers. I’ve gotten a few pretty nasty emails back on the topic and it’s one of those things that I just feel kind of down as a founder. It wasn’t like a money-grab situation. It was in order to pour more money developing features for the same customers that I’m serving. That type of emotional backlash can really take a toll.
I’m just curious to have a discussion around. I could hear Mike and Rob’s talk on what situations have you come across that made you feel like, “Oh did I do something wrong? How can I right this wrong?” and how do you deal with that internally? Another founder with all that emotional baggage riding on you, either in the sales process or in a situation with increasing prices or dissatisfied customer, that feeling that you just messed up and you disappointed somebody. How do you handle that internally and then how do you try to make it right with the customer?
I’d love to hear your thoughts, in particular, the emotional side of it? Thanks again for everything you guys do. I love your podcast, I love everything that you have done so far for the community, and I look forward to hearing your thoughts on this. Thanks guys. Bye.
Rob: So price increases huh, Mike? Nothing ever goes wrong with those.
Mike: Of course not.
Rob: That’s a good question. Obviously, we could talk about the price increase specifically, but that’s not really his question. It’s just that, what do you when people get mad. Did you do something wrong, didn’t you, and how do you deal with all that? What are your thoughts on it?
Mike: I think that the one piece of advice I have that trumps everything else is context matters here. If you were to take a few steps back and try to be extremely objective about what the situation was and what happened, does it makes sense for people to be extremely angry? The number of people has a big impact. He says he’s got 1500 paying subscribers. Well, how many nasty emails did you get from that? Was it 5 or was it 500? That’s a big difference.
Rob: Yeah. He says it was only a couple, which is an indicator, right?
Mike: Exactly. That was my point was that when he said he only got a couple of emails, to me that says that it’s probably not a big deal. That’s only partially related to his question because the question was how do you deal with the emotional side of it? My point here is that you should take a few steps back to make sure that you’re being objective about how you addressed the situation, how you brought it to them, how you let people know, and then is their response justifiable? If it was 500 people complaining, then obviously that means you probably screwed up. If it’s only a couple and even if they’re extremely vocal and extremely upset over, it’s probably not your fault.
I’ll point to an email that I got literally two days ago from Backblaze saying, “Hey, just wanted to let you know, we’re raising our prices.” They’re raising them from $5 a month to $6 a month. I literally just got done using Backblaze. To make sure that my entire machine was backed up, I’m going through and pulling down files that I wasn’t sure whether or not would be included in my end of backup that I did at home, and I’m extremely happy with it.
So when I got this email saying they’re going to increase it from $5 to $6 a month, that’s technically a 20% increase. But at the same time, I am ecstatic with that. You can raise it to $7.50 and I really would not care. I would pay you right now again. They even have a button there inside the email that says, “Hey, you can purchase an extension and essentially grandfather yourself in for the next two years at the original price that we had put forth back in 2008,” but they went through and they laid out their entire justification for it.
Again, that’s actually a little hack that I would say you can offer to them to extend their current pricing by a predetermined amount of time. If there were 5 or 10 people who emailed you and they were extremely upset about it, it has nothing to do with you. It’s about them. It’s about their situation. Whatever you did was like the straw that broke the camel’s back. It has nothing to do with the specifics of what you did or how you could have done things differently. It’s there’s probably something else going on there that you didn’t know about, you couldn’t have known about, and quite frankly there’s nothing you could have done about. I probably wouldn’t worry about it if it fell into that category.
Rob: Yeah. There are rules of thumb when doing price increases, specifically, and we’ve talked about it on the show, I had tweets written about it barely four weeks ago, and I don’t think that’s the point of this question. The point really is what you said, which is gathering context and trying to look at it rationally when it’s an emotional response that we all have because we relate to other people, we want to do well, we want to do right by our customers, and if you get even one or two really nasty emails, it can bring you down, even if you did everything right. Everything is right as you could possibly do it and communicated it well and all that stuff.
Just at any point when you make a person or some people angry, I think the things that I always remember is to number one, to apologize, number two, if it’s really a super small minority then to hold your ground. That’s something that you could always evaluate. If someone says, “Hey, I’ve been a customer for 10 years, I recommended all these people, and I use it when I teach my class at this college or blah-blah-blah,” then maybe you do make an exception.
Overall, if it’s just someone who’s just angry because you’re doing something that you need to keep your business afloat or you need to continue running your business, then you probably just need to apologize and be like, “Hey, maybe there are other options for you.” That is what I found over the years is the people who tend to get all huffy about things, get huffy about everything. They’re the most vocal ones and they’re frankly people who you would rather not have their money. I would rather have them use a competitor that can be something that you suggest to folks.
That doesn’t cover really his question which is, how do you handle it mentally and emotionally. I think there’s a few coping strategies that I’ve learned and developed over the years. The first thing is try not to take it personally. Easier said than done but really step back and say, “Look, this person doesn’t know me. They don’t know what’s going on. They’re just typing stuff. They wouldn’t say this to my face at a conference or whatever.” That’s the first thing. Second thing is get a sanity check on it. This is something I would bring up in my mastermind group. I would throw this out, “Hey, this is what’s happened, this was the email, and it was brutal.” You are going to have camaraderie. You’re going to have that community from people who are saying, “Yeah, this happened to me, too,” and then it normalizes the experience.
Let’s say a couple of times a year, I’ll get an email from a founder who’s like, “Oh my gosh. This person’s totally railing on me on Twitter about XYZ. Tell my what I should do?” or like, “Help me,” or whatever, and I will basically give them advice like, “Yup, this has happened to me. This is how you deal with it. It sucks but it happens to all of us.” If you’re doing anything interesting out in the world, you’re going to have people get mad about something at some point. That’s not a justification for pissing everybody off all the time, but once in a while you’re going to do something or say something or make a move that’s going to do it. Realize that that comes with doing interesting things and realize that it’s part of the course and it’s something you have to develop a thicker skin about.
Those are the basic open strategies and that’s probably what I would do. I would also not send flippant or rush responses. Boomerang or snooze those emails for a day to give yourself time to think about it. Don’t ruminate on it. Don’t sit there and stress about it constantly. It’s not as big of a deal as you think.
I think on the flip side is, did the person change and you have 100 people email you, like you said, Mike, 50 or 100, well then realize that you may have done something wrong and try to figure out what that is. Is it really unfair or did you just not communicate it well? Can you go back and communicate it better? Or do you need to back away? Do you need to undo it?
Intercom did this 3-4 years ago, where they were going to double or triple their prices and they grandfather for 6-12 months. People were furious and there was a huge uproar. They actually backed down and they didn’t raise their prices. Then and there, I think raise them two years later and they did the same thing but they communicated it better. It still made people mad but don’t give them an excuse to be mad. They’re going to be mad about a pricing change, anyway.
Check the boxes of grandfather if you can. If you can’t, then you really got to communicate why the product is better. There’s all these steps and mitigation to raising prices that I would do. But really, it’s with experience and going through this a few times, you just learn to not take it so personally and to try to get a realistic gauge of, anytime anyone’s mad it doesn’t mean you’re wrong.
That’s the thing. A lot of us take that on like, “Oh someone’s mad at me. I did something wrong.” That’s not necessarily true. There are people who are just mad at about everything all the time and today is their day to be mad at you for something that frankly probably is better for all of your customers in the long term. If you have more money to keep the business afloat and that build the app out and whatever else, and if no one else had an issue with it like you said, Mike, with CrashPlan, $5 to $6, you just don’t care. Netflix raise their prices a dollar, I just don’t care because it’s a good service. I’m going to keep it and I’m not going to get in this fake outrage over $12 a year.
Mike: Another strategy is, if you have objectively determined that you are not at fault and it is really the other person there, not you, you kind of step away from those things. If it’s emails that would come in, hand them to a support rep and say, “Just respond to this as nicely and politely as you can.” That way, you’re not the one who’s suffering the mental anguish over having to respond to those because honestly, you’ve got other things to deal with in the business than replying to a support email from somebody who is going to cancel anyway.
Rob: Thanks for that question. I hope our thoughts were helpful. The next question is from Rodrigo Pontes and his question is, “Should I target the manager or the company?” He says, “Long time fan, first time caller.” Actually he said first question but long time, first time. Have you heard that, Mike, on the morning DJ stuff?
Mike: Yeah, I have.
Rob: Long time, first time. Long time listener, first time question asker. “I’m a solo founder bootstrapping a SaaS web app called OneOneMeeting, oneonemeeting.com. OneOneMeeting is a note-taking app exclusively for one-on-one meetings. It allows you register meeting notes, commitments, goals, and share it between the leader and the team members. So, it’s specifically one-one-one between managers and people that report to them.”
“What should I do in my early marketing efforts? Target individual managers that could buy OneOneMeeting for their own use, or target HR executives that could implement it in the whole company? For more details, I have two paying customers that bought it for their own use and I have about five colleagues of my day job employer on a free trial and a scheduled meeting with our VP. They try to demo it and try to sell a corporate account for my whole company. I’m still at my day job, so I have limited time to do sales and in-person presentations during work hours.”
What are your thoughts?
Mike: This is one of those questions where I’m not necessarily the target market, so my advice here should be taken with a grain of salt. I think if I were to say one way or the other you should target this one or that one, the reality of the situation is I don’t really know, but what I would say is that there’s a couple of different ways I would try and find that out.
I think that the question or the point about having limited time to sales and personal meetings right now is a limiting factor, I would try to go outside of your current network and go to, as you said, the colleagues of your day job employer, go find out information from those people and try and narrow down, as quickly as possible, which of these two you should go after. Then from there, you also want to branch out and ask every single person who’s using it, if they would introduce you to somebody else who might be a good fit for it.
If you can get three introductions, that’s great. Always ask for three, settle for one, but push for that one. This is a one-to-one meeting note-taking app, so if they’re not willing to introduce you to one other person, then they’re probably not willing to actually use it to have these meetings anyway. So, I would go down that path and try to figure that out.
The other thing I would comment on is that, because it’s so early on, I don’t know if you really know what your pricing model is actually going to be yet, like individual plans versus corporate plans. I think those are kind of up the air and exactly what the pricing around those should be. I feel like it’s too early to tell. I seem to think that you need to go down a little bit further in the rabbit hole and try to figure out where it’s going to resonate and get traction before you start focusing on one or the other.
Rob: This wouldn’t normally be a clear-cut decision except for the fact he said his time is limited during the day. I think that if you go after a HR execs, they’re getting so hounded by people trying to sell them stuff, that they really are going to require a lot of hand-holding and a lot of proof to push it through.
I feel like you should go with the more guerrilla approach, like Slack and Dropbox do, where they infiltrate at a lower level in the org chart and then once you’ve got a bunch of people using it, then you ring them up and you say, “Hey, I’ve noticed that you have 10 different managers using this. You want to have good management of this, an insight, blah-blah-blah. You know, you need to get our enterprise account.”
I don’t know if that means that it needs to be free for one manager at a time or whatever. You look at Slack and you look at Dropbox, and that’s how they’re able to do that. People can sign-up essentially without a credit card and you can really infiltrate the org that way. You have to find if managers have a credit card with some type of limit on it so you could make it relatively inexpensive, but once you actually do sell their account to the VP of HR, that there would be a need to be a big step-up in price because selling a product like this is going to be hard to scale at a low price. Although if you do per seat pricing, then it should naturally scale itself because the successful companies tend to be growing anyway, and if it works, they’re going to want to add more and more of their teams on twit. I could see the whole $3, $5, $7 per seat pricing working if you can get 50-100 people at an org using it.
All that to say, if I were in your shoes, I would personally go after the managers because I think the managers are the ones that are going to get the value out of it. The person whose pain point it really solves in the most direct way and the managers are the ones that can start implementing it without a bunch of bureaucracy and approvals and all that stuff. If they can just run wild with it and prove it out, then it’s a much, much easier sale as you go up the chain. Thanks for the question, Rodrigo. I hope that was helpful.
Our next question is about taking someone’s business idea. I’m going to leave him anonymous. It’s interesting. He says, “Little background about me. I have a Bachelor’s of Science in Computer Science and Business Administration. I’ve been working on IT since 2006 as a developer and a manager. Two years ago, I worked for an online company that I found to be really interesting and right up my alley. I applied, I got hired on as a developer to help maintain and update their current website. Come to find out that their new site was never going to see the light of day due to the fact that the manager overseeing everything wanted to keep adding useless features to the site. The site was from the 90s and was written in a language that is no longer supported and it can’t support more modern features that a growing business website needs. This really bugged me so I left the company.”
“Then one day I was talking to a friend over drinks and he said I should start my own thing so I did. From there it snowballed into a reasonable product that I think I can take to market. My question is, when I started with the company, I had signed an NDA and a non-compete valid for one year after I left. That one year mark is coming up in the next week. I want to start pushing content out to get things going. I didn’t work on anything on the site while I was there and I’m not using any code or tech from the company because I consider that stealing. Everything I’ve created is 100% from scratch and of a different language and technology stack than the one at the prior company.”
“Have you guys ever had to deal with anything like this? Looking at it either my point of view as the startup or as the old company with the 1990s website? Also, I want to say a huge thanks for sharing your experiences. You guys answered a lot of my questions on your podcast.”
What do you think about this, Mike? Do you fully understand what he’s asking? He’s basically launching a competitor to something and they’re outdated tech. I don’t think he’s asking an ethical question because I think he’s going to do it. It’s more the legal side of it? Can they sue him?
Mike: Well, I think a lot of what he said seems to be different from what he’s actually asking. My understanding of what he has said was he was hired to help develop and maintain the current website of this other company and he signed an NDA and a non-compete. But then he left and he’s coming up a year later for his NDA and non-compete no longer being valid. And the products he wants to build is what the company was developing. I don’t think it’s actually anything related to the website for that company.
Rob: That’s what I’m confused about.
Mike: Yeah. That’s what I gather as the situation is what he’s building is actually what the company itself produced and that his non-compete would be wide enough to cover whatever their product was and is the product that he’s building is that, although he was hired to just work on the website.
Rob: Let’s go with that assumption because I was confused as to was it the website the product? Is it just like a lead gen company, the website is the product. There is no product behind it. You just drive ads or you do SEO and then you get people to send in form, and then you basically can sell those leads. That’s what I was thinking but maybe there’s a software behind it and he’s replicating that. What do you think here?
Mike: There’s the fine between what is legal and what’s not in which it’s impossible for us to comment on the specifics of that if we were in that situation. I have been in this exact situation. I was in this situation with AutoShark, where I basically knew that the product that I was rebuilding from scratch was going to go away at some point in the future. My thought was if I were to rebuild it, I can essentially come in and replace the product that was end-of-life.
What I found was that the fear of being sued by a large company that has the ability, the resources, and the lawyers that are just on staff already, was paralyzing. That is always going to stick in the back of your mind and you will not get away from it. I don’t know how big they are, or I don’t know what they do, or I don’t know how much of an impact you would have on them, but for me, it was paralyzing. I had a very hard time separating the business and marketing stuff that I was doing.
My situation was probably complicated because I was also still doing consulting work for them. It wasn’t really a non-compete because I was a separate company anyway but I was a subcontractor for them. So I was barred from going back to those existing companies that I’ve already done consulting work for which was installing the sort of software but then I’m also building a replacement for. Mentally, it’s very difficult to get past that.
I won’t say that the easier route is to just go on a completely different direction, but if you have the domain knowledge and expertise and you think you can execute on it better than them, by all means. Just be prepared that if you do a good enough job at some point, they may decide to come back and sue you, but they can sue you anyway. They can sue you and say, “Well, you developed this IP that we own,” and any company that you have left could theoretically make that claim. It doesn’t mean it will hold up, but that’s going to be an issue that you’re going to have to reconcile and come to terms with. Is it realistic that they can do it? Is it going to happen? It’s probably not, but it could.
Then there’s the other side of the coin where if you do a good enough job, they may decide, “Hey, it’s going to be better for us to acquire this than to continue building the thing that we have in-house.” That’s entirely possible as well. But again, it’s probably just as likely is them suing you. That’s something that you’re just going to have to mentally deal with, make a decision, and move on, because otherwise you’re going to spend far too much time thinking about it and not enough time actually working on the business.
Rob: Yeah. That’s a good point. It’s weird because this does get back to the ethical-moral conversation we had a couple of episodes ago. I think that legally, if you document everything and you really are on the right side of the law, then you should be okay in the long run. But they can still sue you and you still have to hire a lawyer to defend yourself. And you still have to either negotiate a settlement or go to court, which is very expensive, and you still have to prove all this. There’s a lot of ifs. Even if you’re on the right side of the law, in my distant third-hand experience with working at companies where lawsuits are going on, no one wins but the lawyers. The only ones that make money are the lawyers. It’s really not good to get involved in that. That’s always my thought with lawyers and lawsuits. It’s really kind of be on the right side of that.
Then there’s the side of it that I think about as an entrepreneur. It’s like, is this interesting to you to build this or will it be boring? Is it just an opportunistic view of like, “Hey, I can make some money with this,” or is it like, “No, this is actually something that I really, really want to do”?
I would caution against doing something just because you saw it work at a different company and you feel like you could build better tech than them. That’s not a recipe for success in my work. But if you have taken their success as a reason to not do customer development and not build an email list and not make sure there’s demand and not make sure that you have the credibility to do this, I think you’re making a mistake and I think you could build a product and release it to Crickets. Or it could be years and years of toil on this and does that sound fun? Just like any other product that would launch, I would ask myself, is there really a market here? Am I the one to do this? And does this sound interesting to me?
Mike: It looks like from the opportunistic nature of something like that, if it’s already in an established business, they are doing their sales and marketing and getting customers, it’s very easy to think you can replicate some of that. It’s like an iceberg. There’s tons and tons of things that go on under the covers of the business that you have absolutely no knowledge or exposure to and a lot of times, some of these things are very relationship-driven. You don’t even know it because you’re not even aware of how those conversations even happen. It’s very difficult to compete in those situations, so just be very cautious about that.
Rob: Yeah. It’s like you said, it’s easy to be inside a business, look around, see everything wrong with it, and be like, “I can do this better,” but it’s actually really hard to do better. It’s not something that can happen overnight. Just building better tech isn’t, in my opinion, going to be the key to that.
I think the other thing to think about is, you use the term taking someone else’s business idea. It’s a trip that if you hadn’t worked for them, you would just be a competitor. It’s like, did Drip take MailChimp’s business idea? Did Drip take Infusionsoft’s business idea because it competed with them? Well, no. We did our own thing our own way. We found customers, we got feedback, then we implemented features, and blah-blah-blah.
The difference here is you worked for them and you saw inside the business. There is complexity there where if you are going to compete with them that you need to get over the thought that you took their business idea. I think it comes back to what you said, Mike, is that it’s going to hang over your head mentally. Whether you think about the legal side of it or you just have this internal embarrassment or shame that you “took it/stole it” is what you’re implying, if you hadn’t worked for them, that wouldn’t be the case. If you think that you’re going to hang on to it like that and constantly think that you’ve taken this business idea from them, I would caution you against perhaps doing this. We’ll just ask you to think about it because it can get in your head.
More than half of being a successful founder, I believe, is just dealing with the mental side of things and being able to handle your own psychology, understanding yourself and not just stressing out or not putting much of a burden on yourself, not having things that aren’t true be running through you head, that negative self-talk, and this could be a source of that. In your shoes, I would really think hard about whether you can mentally get over that hurdle of thinking that potentially you took this business idea because you don’t want that hanging over your head for the next several years as you build this up. Thanks for the question, anonymous. I hope that was helpful.
Our next question is about how to approach a B2C company. This is a long email, someone summarized it. It says he’s a huge fan of the podcast, started listening about five years ago. He’s a senior developer, he’s always had the product itch, and he’s working on an app. It’s called VidHug, vidhug.com. It started as a scratch-your-own-itch project for his mother’s birthday and it’s definitely B2C. It’s low LTV. It’s non-recurring revenue. He says, “I feel like I have a mini Rob on my shoulder most days, saying ‘What are you even doing with this?!’ Thing is, I don’t really have a counterpoint for you except for a feeling and that feeling comes from talking to customers that are now able to do something they previously could not.”
So, the idea with VidHug is you can send out an email with a link and people can record basically birthday wishes or well wishes and they all get combined into this 30-second or 60-second video. If you go to vidhug.com you can see samples of these videos. If it’s someone’s birthday and then their grandkids in there, their kids in there, aunts and uncles, whatever, all recorded there and then all gets mashed up.
He said he launched it in July 2018 to Crickets. He didn’t do any pre-marketing, he got a few paying customers, didn’t really get a break until earlier this year when he’s got some organic traffic flowing from a referral in a blog post. He’s on pace to do $600 a month and that’s a funnel he can now improve. He says, “I’m also turned to build a B2B side of the business and I found a potential application of remote and distributed companies using VidHug to celebrate employees or onboard new employees. I’ve got three companies trying this out. I tried validating a separate B2B site for this, but I think it was spreading myself too thin and I’m just going to go down with vidhug.com for now.”
“The primary move forward is to focus on growing organic channels on the B2C side through SEO and referrals and also build a B2B side which would bring recurring revenue. Do you think I’m crazy for even trying this?” Just as a point of data, he has basically a free tier and then he has one that is $15. It’s a one-time thing for the B2C side. What do you think, Mike?
Mike: Well, to answer his question there actually, “Am I crazy for even trying?” The answer is yes. It’s just a matter of how crazy we all are.
Rob: Exactly. It’s just a specter.
Mike: It’s varying degree, yes. I feel a little bit early on to be trying to separate and go after both B2C and B2B. It seems like the revenue is a little bit low and I feel like the marketing channels you have to reach out to, the type of audience, the types of content that you have to build for them, the feature set, and all these other things, it feels like it creates two different businesses. I get where he said he tried validating a separate B2B site for the application and he felt like he’s spreading himself too thin, but it seems to me you’re going to do the same thing if you try and cater to a B2B market as well. Maybe not, maybe you can just integrate it with certain types of things or multiple-use for accounts, for example. Maybe there’s an obvious way to upsell people into a more B2B version of the app. Maybe that’s a way to go for that, but it does seem like it’s a little bit early.
So going back to the question of are you crazy for trying something that’s B2C? I would say no. I definitely think that there are opportunities out there for people to build B2C businesses that are solid and profitable. It’s just a matter of making sure you are methodical about how you pursue your different traffic sources, putting people in your mailing list, optimizing the product itself for revenue for getting people into it, and making them happy. If you can do those things, it doesn’t matter whether it’s B2B or B2C. You’re still going to have happy customers who are going to give you money. But that last piece of it is the key part. They have to be happy and give you money because if they’re not giving you money, you don’t really have a business.
I think that’s the challenge that most people run into with B2C companies is that your LTV tends to be much lower and you need a larger number of customers in order to make it work. There are a lot of viral components to something like this. You can email out to a bunch of people and if one person gets in there and then email 50 people, now you’re in front of 50 people instead of just one. That’s a huge viral aspect that a lot of things that try to do B2C don’t necessarily have because this has that kind of bait into it that’s an encouraging sign. It’s not the only thing I would look at but it’s definitely encouraging.
Rob: Yeah. It’s tough because B2C is just hard. It’s just a different game. With this customer lifetime value, you can’t run ads, you can’t pay salespeople. So many things you can’t do. It literally be outreach to bloggers, offering it free to bloggers, sponsoring bloggers, I keep saying bloggers, podcasters, whatever, people with audiences. Here’s the thing. If you’ve got a bunch if Instagramers with huge followings, YouTubers, bloggers, podcasters, yeah it would be possible to grow this. But it’s a completely different playbook than what we typically talk about or what you’re going to hear from MicroConf speakers, for example, or an attraction book where it really is more focused on doing a lot more B2B stuff.
You just have to ask yourself, is that what you want to do? Do you want to build those relationships with influencers and figure out how to get them to do it and then talk about it? That would be my playbook for this. Personally, I don’t enjoy that. It’s hard to do without the existing relationships, be it can be expensive response for them, it’s pretty risky, it’s not super repeatable, you just got to go one to the next, there’s just a lot to it. You got to ask yourself, “Hey, is this something that I want to do?” and if not, then I would look at the B2B side.
The tough part of it is it’s not a critical must-have thing, but I do think it’s kind of clever and it’s a fun nice-to-have that I have seen larger companies, even companies that 50 or 100 people, do special things when they onboard new people and make funny videos to welcome them or things like this. While I don’t know if they would pay for it, I think that would be a question you’d want to start having with people before you dug into the B2B side. That’s certainly a more repeatable thing but I still think there’s just a lot of risk.
I don’t see an angle here and that doesn’t mean there is no angle. Really, they’re just a feature. This is just one feature. It mashes up some video. It’s cool but it’s not as sweet a thing and it’s not something that people will use every week and rely on. It’s going to be harder. It’s not going to be the core of the HR’s workflow or the core of the manager’s workflow. It’s just a nice-to-have.
I think that’s the other thing to think about is, I had businesses in the early days that only made $1000 a month, $2000 a month, and frankly, I learned a lot from them. It was a stair step approach. I learned how to whatever, do run ads, do SEO, do display ads, do AdWords and that kind of stuff, and I took that experience with me to the next thing.
In its current incarnation, do I think VidHug can be a mid six-figure business? I don’t. It’s just my opinion, it doesn’t mean I’m right or wrong, but I don’t see an angle there as it stands today. But then again, I could have said that about Drip the month it launched because it was just an email capture form and autoresponder. Then we kept pivoting and grinding, customer developing, slow launching, and doing all the things that you heard me talk about on this podcast over the years, and eventually got it well under the seven-figure mark.
That’s the thing. As it stands today, VidHug is a cool side project and frankly I’m impressed that you’ve gotten it to $600 a month, given the price point and all that. But I think it depends on how you’re thinking about it. If you think about it as good learning and you want to build it up to $1000-$3000 a month, that to me seems doable, and it will be learning, it will be a little bit of income, I don’t know how you would ever get it past there. Maybe you’ll eventually come to a point where you see an angle to do that.
I also had a lot of businesses that never did. I had ebooks and info products. I had ecommerce site and I had small software products and I had one-time software products. All of those topped out and I could never get them past, let’s say, between $500-$5000 a month. I had several that were in that range. Eventually, I had to sunsetted them or I sold them as I moved on to bigger things.
My gut is that VidHug will will fit into that space, that role into your entrepreneurial career, there’s certainly a time and place for those, and you just got to figure out, I think, how you are thinking about it and where you want it to take you. Thanks for the question, Amir. That was a fund one and certainly wish you the best of luck as you move forward with VidHug.
At this point, we are completely out of questions. Zero questions, Mike.
Mike: Zero?
Rob: Zero.
Mike: I have a question for you.
Rob: What’s your question?
Mike: If Elon Musk actually gets us to the point of taking us out into the outer reaches of outer space, where do you think that we should go first?
Rob: Mars?
Mike: No, I mean not just outer space. Out of our solar system. Where do you think we should go first?
Rob: I have no idea. I don’t know enough about astronomy to know what’s interesting.
Mike: Well, do you know which star cluster’s the closest?
Rob: Alpha Centauri?
Mike: It is. You think we should go there?
Rob: Sure.
Mike: I don’t think so. I checked online, it’s only got three stars.
Rob: Badum-boom. There it was.
Mike: If you have a question for us, you call into our voicemail number 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt, used under Creative Commons. Subscribe to us on iTunes by searching for ‘startups’ and visit startupsfortherestofus.com for a full transcript to each episode. Thanks for listening and we’ll see you next time.
Episode 432 | How to Indirectly Overcome Sales Objections
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to indirectly overcome sales objections. Solving the problem of having to answer some of the same questions numerous times, the guys come up with some ways to combat sale objections when you’re not in a direct conversation with the potential customer.
Items mentioned in this episode:
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 build your first product or you’re just thinking about it. I’m Mike.
Rob: And I’m Rob.
Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Rob?
Rob: I’m doing alright, sir. I’m getting ready to head out to Mexico for about a week with family and we’re just looking to escape the cold. We haven’t left Minneapolis every month like we normal do during the winter. We’ve been here three years and we made this commitment to one another, Sherry and I did, that if we’re going to stay here, we need to leave about once a month. It’s a Delta hub so it’s really easy to get places to rack. We can get to Florida. It’s about 2½-hour flight. We can get to Cancún in 3½. We can just get to a lot of warm places really easily and inexpensively. Our first and second year here we just left a lot, but this year, due to some family stuff and other things, we really have been here all winter. Sherry left a few times to speak at conferences but we have not done a family vacation, so we are very much looking forward to beating the cold, getting out of here, frankly hanging out, and catching some waves on a playa in Mexico.
Mike: That’s cool. I have never been to Mexico. It a place I’ve wanted to go to for a while. I just never really made it a priority, I guess.
Rob: It’s great fun and depending on where you go, it can be a fun cultural experience or it can just be a fun vacation if you don’t with the hotel and such, but I highly recommend it.
Mike: Oh, business expense. MicroConf Mexico.
Rob: Absolutely. We should totally do that. Don’t think that I have not start cooking that up already. Sherry suggest that every year in winter because there aren’t any winter conferences. It’s all spring and fall but I think there’s an opportunity there.
Mike: Yup, probably.
Rob: How about you? What’s going on?
Mike: Well, I spent the last several days rebuilding my desktop and basically reinstalling the operating system on it. It’s been running into a lot of problems where it would just crash at night when I put my computer to sleep and then the next day when I go to wake it up, things just did not every come back properly. It started out like it wasn’t very often and it surely got worse and worse over time, and then lately, the thing has just been crashing left and right.
So, I was just like, “All right, is this a software problem? Hardware problem?” I ran a bunch of hardware scans and stuff on it and everything looked fine, but something was wrong and I couldn’t figure out what it was. So, I was just like, “Alright, I really need to update this.” I was looking back through my programs that were installed and I realized I had not reinstalled it since 2010.
Rob: So you’re just imaging the drive?
Mike: No, it’s the same operating system I’ve had since October 2010.
Rob: Yeah, that doesn’t work well.
Mike: And I pushed off on it for so long. I was running Windows 7 and I needed to have IIS 8 on it at least, in order to do certain things and the development stuff that I’m doing. You can’t install it on Windows 7. You have to have at least 8 or higher. I pushed off on it for probably two years or so, and like, “All right, I’m done.” I spent the weekend backing everything up, copying things over, and up and running on Windows 10. It’s actually quite nice now. I haven’t had a single crash.
Rob: I was going to say, “Windows 7? Hasn’t 10 been out for years? What are you doing?”
Mike: I just did not want to go through the pain and hassle of copying everything over and possibly losing something that I actually needed, because things were back-and-forth between. Something were in Dropbox, some things were not. I have […] I could get things if I really wanted to but it’s still just a hassle. You lose a fair amount of time and then there’s always that fear on the back of your mind like, “Is there something that I’m missing?”
Rob: Yeah. That’s tough. I remember doing that. I remember rebuilding the machines. I tend to do it one to two years when I upgrade the laptops and I would rebuild from scratch just to avoid the cruft that were built up. I haven’t don’t that in a while. We’ve talked about this in the past. I think Windows has some things that are better than Mac and I think Mac has some things that are better than Windows. I think that particular piece that I have not rebuilt the laptop in seven years now or eight years since I switched, I think that’s something that MacOS does quite well. Since I do all the incremental upgrades and it auto updates, I’m always on the new version. I used to give myself about a day. It was like 8-12 hours to basically rebuild the machine and I don’t have to do that anymore.
Mike: Yeah. I had to track down licenses. That makes for a head for all the right files and right versions. That was a big hassle and I just didn’t want to go through it.
Rob: Totally. I hear you and I think the nice thing I think that’s gotten users who’ve gotten along is, “I’ve moved so much more into the cloud.” I used to have Microsoft Word and Excel, then I had all the data I had to move so it’s on an external hard drive. But now, everything is in Dropbox and I’m in Google Docs. It’s just so many more web-based things, so I have fewer and fewer apps that I actually install as I would need to move to a new machine.
Mike: Yeah and fortunately, things have progressed. I have a local NAS device that’s got three of four terabytes worth of space on it. What I did was I did a physical to virtual migration of my entire machine and moved it over there. Then I created another copy of the entire thing on my hard drive. Now, I’m running the new system but in a window over on the side. I have the old system up and running inside of a virtual machine. There’s been times this past week where I had to go in there and say, “Oh, I did not grab this file or these files weren’t backed up, or I need to pull from the registry and export these settings and import them over here. They weren’t anywhere else or the application just didn’t have any other way to get at them.”
Rob: Yeah. You realize, both of our listeners have now tuned out?
Mike: Yes, all two of them.
Rob: All two of them, yeah.
Mike: I thought we had three?
Rob: Three, maybe yeah. Hi mom.
What about MicroConf scholarships? There’s some cool stuff going on with this.
Mike: Yeah. Last year, we talked about this before where last year I had quietly put together a scholarship program and we ended up giving away a total of 14 scholarships. This year, we have over 25 to give away with. A total of 27 scholarships that we can award. I’ll link this up on the show notes and if you’re interested in coming to Starter Edition, you fill out the application, and the last day for that is Tuesday, February 26. I intentionally made it to Tuesday so we can do the announcement today and then we can also do an announcement on that day. If people happen to forget, there will be one more announcement for next week’s podcast. We’ll talk about that. You have the link there, just go fill out the application. It’s pretty short. It asks some fairly basic questions. It shouldn’t take you more than 5 or 10 minutes to fill out. We have plenty of scholarships to give away so if you are interested, head over there and hopefully we’ll see you there.
Rob: The only update on my end is TinySeed applications. They basically close tomorrow when we’re recording this, so they would have closed by the time folks are listening to this. Things have gone very well, to be honest. It was more of a response than I’ve expected given then it’s our first batch and we’re still trying to build a brand name. I remember when we started MicroConf and people were like, “Micro what?” It doesn’t have any meaning and then you do it year after year after year and then eventually it’s almost like this inside story or a brand, really. It invokes a meaning in their mind.
The same thing with Drip. When we launched Drip, no one knew what it was and then eventually, you can say the name of it and people know what it is. TinySeed is doing that, that seed stage, so to speak. But still, we got a lot of applications and I’m going through those, having some great conversations with founders, really looking forward to digging in here over the next couple of weeks, and figuring out who we’re going to go with.
Mike: That’s good to hear. Does it seem like the decision-making is going to be a lot more difficult than you thought it would be or is it going to be easier? Any insights that you can share or no?
Rob: That’s a good question. With some of the founders and companies we’re talking to, it’s obvious that they’re a good fit and we really want to make it happen. Then there are some that are just definite nos. It’s like hiring someone for a role. There’s yeses, there’s nos, then the maybes are the hard ones. You’re not going to get a dozen perfect applicants that perfectly fit everything so you have to figure out if they really dig into any type of yellow flag and figure out, “Do I think this business can do this? Do I think these founders can do this?”
I think it will be easier on some friends and also harder on others. It just depends on how many we can get. I’m trying to fill a cohort and I think the cohort’s going to be between 10 and 12 companies, I would guess. Finding that many is world’s different than hiring because typically, I’m hiring one person for one role, but in this case I’m essentially trying to hire 10 or 12 companies or founders for the role.
That’s been cool. It’s been a learning experience for me but also what I liked about it is it builds on all the knowledge and all the experience that I’ve built up through my whole career including interviewing people, digging into things, hiring, and then all the SaaS knowledge, the knowledge of businesses, knowing what metrics to ask for and knowing how to shape those, knowing when someone says their conversion rate is this versus that and then digging in and finding out it actually isn’t that because they’re calculating it different, all this stuff that if I wasn’t knee-deep in this stuff and hadn’t been for a decade or more, I think it would be even harder. But it’s in my wheelhouse to be able to evaluate these things.
It feels both daunting but also it feels good and it feels like I’m able to understand the business pretty quickly just having all the conversations we have, the MicroConf folks, the podcast listeners, the angel investing, the advising and all that stuff, as well as running my own companies, there’s a familiarity with this. I feel like we speak the same language, which is really nice.
Mike: I was going to say that familiarity probably helps to some extent just because you’re not trying to figure out what they know that you don’t. It’s like there’s a lot of stuff that’s built-in already, like you know the stuff, and it’s just a matter of do they know it too or are they making mistakes along the way that you’ll be able to help easily course correct.
Rob: Yeah and that’s the thing. That’s where doing something outside of our wheelhouse, like if we get an applicant who’s doing mobile app or it’s a B2C physical product subscription service, I’m not sure if my same evaluation criteria can apply. I’m not also sure are there levers we can pull like we can with a SaaS app? It’s that kind of stuff. That is where it gets complicated. They are edge cases that you have to evaluate and think through.
Mike: And also, I’m excited and it will be interesting to see how it turns out.
Rob: Indeed. What are we talking about today?
Mike: Today, we’re going to be talking a little bit about how to indirectly overcome sales objections. I think we’ve had a couple of episodes in the past where we’ve talked about when you are in one-to-one discussions and directly talking to people in more of a sales capacity, how to address different concerns or objections that they have. I think there’s also a lot of objections that comes up when people are just visiting your website or they’re learning about you, and they have all these things that are in their head, but you can’t tease it out of them because you’re not directly in front of them. Question is, how do you know that you’re giving them the right information, what ways can you get in front of them or provide that information to them that is going to make sense help to alleviate any of their concerns?
This idea for this episode came about because I received an email from one of my agency customers. They had some questions that were relayed to them from their customer because they’re managing this customer’s account. They said, “Well, what is it that you’re doing for data security inside of Bluetick?” I’m not really comfortable because I saw this message and I didn’t really understand what it meant. It made me step back a little bit and think about what other things am I doing that will put this information out there? I looked and I was like, “Oh, well I could just write a KB article about this,” but made me look at all the other different ways that you can present that information. So, this episode is really going to be about different ways you can present those things to people that will help overcome those sales objections.
Rob: Got it and the indirect piece is because directly overcoming a sales objection would be, you’re on a sales call, someone has an objection, and you say, “Well, this is how we handle it, blah-blah-blah,” whereas you’re saying, this is the way to document it or disseminate the information to many people in a more passive way. Is that right?
Mike: Yes, that’s correct. That’s a great differentiation between the direct versus indirect, but it’s also a matter of making sure that that stuff is publicly available to them so that they can go get it whenever they want because when you’re in that direct sales scenario, if they have a question, they’re going to ask it. You don’t know what questions that they have or that they’re going to ask when they’re just browsing your website or they’re reading something about your service or they’ve come across it on Google.
The idea is how do you put these things out there in such a way that it’s not, for example, a giant wall of text that they’re not going to read anyway because then they’ll just say, “I’m out of here,” or maybe they’ll fire an email to you that’s going to be something that’s buried in there someplace anyway.
Rob: Yeah, that makes a lot of sense. The thing that people should keep in mind is that for every person who asks you or who has a sales objection like this, there are probably 5, 10, 50 other people who have a similar thought and maybe just never asked, left your website or didn’t sign up because whether it gave them a negative feeling or whether it just felt like too much work to find you support email and email you, there can always be one-off questions or one-off concerns. You’ll start to recognize those over time but in the early days of anything, you start to get the same question over and over and that’s when you realize, “I really need to document this and push it to the forefront of my website or of my marketing.”
Mike: I think it’s very easy to get caught in the loop where somebody comes in with a question like that and you answer it, and then somebody else comes in with the same question and you answer it. It seems to be very easy to just answer the question and move on, but without documenting it or without putting something in place so that that information is available to people so they can go look for it, that’s basically just causing you more headache and pain down the road that is hard to measure.
Rob: Yeah for sure. There are obviously a bunch of different ways that we’ll talk through here. Let’s dive into the first one.
Mike: The first one is related to your website, specifically around the design and the sales copy. Obviously, people have to have a certain level of trust from your website and a lot of times they will get that from the design. But the sales copy needs to speak to them. It needs to talk to the problem that they’re trying to solve.
Specifically, one of the things that you can do is on the About page, explain who you are, explain why is it that you exist, and explain what sort of domain knowledge and expertise you have in this area. That, in and of itself, will build trust but at the same time it also lets them know what is it that you stand for, why are you even in business, and why should they (a) give you money, and (b) trust you with their data.
The second area that you can do this is with blog articles. Whether you have a dedicated content section on your site or blog articles that you publish and then you email out to your mailing list, either way you want a repository of information so you can essentially demonstrate that you have knowledge of the topic that your software addresses.
In the case of Bluetick, for example, beyond one-to-one email marketing or follow-ups, differences between sending bulk email versus individual emails directly to people from your own mailbox, all those types of things factor into giving you a footprint on your website and it contributes to the SEO, but it also contributes to the awareness of the customer that you have a set of knowledge that they could benefit from.
Rob: Yeah and a blog is a nice way to do it because people can search Google and find it. Another way to think about it or another alternative is to do KB articles, which are nice because people will specifically seek them out. I don’t tend to go to product blogs if I have more support questions but I will go to KBs. Often, I don’t want to email support and I think a lot of people don’t want to email and wait for an answer.
If you can make a lot of this stuff available in a KB that you know if it’s published, that it was probably reviewed by people, and assuming it’s not outdated, you can almost have more confidence in a KB article sometimes than email a one-off support question. They have 50 different support people answering questions like, “Do you know that that person knows what they’re talking about?”
I know that in the early days, it’s hard to build out a KB and it’s hard to justify the time, but these kinds of questions, if people can just answer them themselves, it really will save you a lot of time as well as, as we’re talking about here, handle overcoming these objections indirectly.
Mike: When you send an email to support and they answer that says X, Y, and Z, I’m definitely one those types of people who questions it a little bit especially if it’s an edge case or if it’s on the complete other end of the spectrum, where it’s something that seems like it should be straightforward basic functionality and they can’t point me to a KB article. The KB article just tend to give me a little bit more confidence that, “Hey, this is the official stance,” or, “This is exactly how it’s supposed to work and people have reviewed it,” like you said, and that trust factor versus somebody’s answering the emails for support and I don’t know who it is or what their level of skill or expertise is.
Rob: Right and the other nice part about KB articles is they often will have a screen cast or they’ll include a screenshot. You can just get so much more information from that than a quick one-off support reply that’s two or three sentences long and doesn’t have all the visual elements and the time invested in it.
Mike: Right. The level of information and the different ways you can present it in a KB article are a lot nicer just because you can use those visuals and you can use the text, or you can use a video of some kind and embed it in there. You can cater to different people’s ways of consuming that same information.
The next way to do this is through email courses and webinars. I lump these together because they are similar and that you’re essentially broadcasting. The idea here is that you’re doing a deep dive on a very specific topic that’s relevant to the audience. With a webinar, the prospect is going to get to know you a lot better and that lends a certain amount of trust and credibility to you just by virtue of them hearing your voice or seeing your face in the course of the webinar.
With email courses, if you’re writing the email course yourself or the same person has written the entire course, then it’s going to have a very particular voice to it. I’ve noticed in my writing. I can go back 5, 10, 15 years and see that my writing itself has a very particular voice associated with it that I can recognize. I don’t know if other people feel that way or maybe other people have changed quite a bit over time, but mine tends to feel very familiar when I go back and reread things that I’ve written in the past. You’ll get that consistency throughout an email course as well.
I think that that’s what people are looking for, is consistency in knowing that when they’re doing business with you, they can expect a certain level of quality and confidence that you know what you’re doing and you’re going to be able to help them, versus if you have an email course that is very disjointed or it’s all over the place, they don’t have that same sense and they’re going to start to ask questions, maybe not directly or that they could verbalize, but they’re going to have the sense of, “I don’t quite trust these people, I’m not quite sure why, and I can’t put my finger on it.”
Rob: Another way to indirectly overcome sales objections is with downloadable resources like white papers, case studies, ebooks, ultimate guides. People who educate others and do a really good job of it in a non-markety way, they are held in pretty high regard, especially if they’re really providing tools for folks to do their job better or to be better at what they do.
If you move back in the day a little bit, HubSpot has always been really good about this with their education leadpages, with all the webinars, the free guides, and the free stuff they gave away. I recall Kissmetrics having a ton of white papers that did a good job. I don’t know who’s doing this really well today in a way that I would model it, but I’m sure there are folks out there—feel free to post in the comments for this episode, it’s episode 432—you can build a lot of credibility by educating. Just look at anyone who has a podcast or a blog for years and years. You begin to respect their opinion. Or if they write a book. There’s a lot of ways to do this.
Now for a product, if you’re a SaaS app, you’ll probably not going to write a book or necessarily build a personal brand around it. But you can achieve some of that using things that people can download, take away, and read on their own. A Kindle version of an ebook or a PDF version of a white paper. If it’s well-done, it’s well-titled, it’s distributed to your list, it really is actionable stuff and it’s of the quality that people would be willing to pay for. I think that’s something to think about.
At Drip, we published an ebook, we published a video course with Patrick McKenzie, we published something else, and we were giving away this content that was quality that we could have sold. In fact, we would give it away for a week, and then I believe we would put on Gumroad and sell it for cheap, $9 or something. That actually became trivial but interesting revenue stream at a certain point that I have left unnoticed because it was just all hanging out in Gumroad. But there was real value to these things and when we gave them away to our customers and prospects, they appreciated them and I think they learned a lot.
Mike: I think it’s a really interesting point that you bring up about the quality of it and having it in a level that you could presumably charge for. That’s something I probably hadn’t quite put into words before, but that’s a very interesting take on it. I agree with you. It’s a fantastic way to get yourself out there and it’s a good way to establish a marketing channel as well. It sounds to me like it was a non-trivial revenue stream for Drip at one point.
Rob: Yeah it was in the early days. What’s interesting is 5, 10 years ago, just having a blog and having essays was enough and it would drive traffic if you’re doing it well. The bar has just become higher and higher. So, if you see people who are doing content marketing really well these days, they really are doing really long pieces, 5000, 10,000, 15,000 words. They really are ebook-level and whether those are downloadables, PDFs, or they’re just published as a single long-scrolling blog post, that is something that Google lends more authority and credibility to these days.
Content marketing has really been all about SEO in the long term. You can get the initial push, you can build your list, people are watching what you’re doing, and they can like your marketing. But longer-term to build a sustainable business, it can’t just be about that social bump. It has to be about the longer-term organic traffic and the authority that you’re gaining in the search engines.
Mike: I think one of the last places that I can think of where you can indirectly overcome sales objections was in testimonials. Most of the times, you see these embedded on somebody’s website but I have seen them embedded inside of a white paper before or case studies. Case studies are a great place where you’re essentially getting this massive testimonial from somebody. The idea here is that people will look at that and say, “Well, if it work for so and so,” and that person is a similar customer to them or similar profile, whether it’s the same business size or same market vertical, their thought is, “Well, this should work for me as well.” Even if they do have other objections, if they look at that company and they say, “Well, I either empathize with them or I feel like I’m very similar to them. If it work for them, it should work for me.” It goes a long way towards overcoming objections that they can’t necessarily put into words.
Rob: Yeah. Case studies are a nice one. It’s one of those where one thing you throw them on your home page, you throw them in your footer, the nice head hot, some quotes around it, and those are cool and they could lend credibility depending on your space. If you get case studies that are done well, those can have a lot of impact. By the time someone cares about a case study, it’s okay if it’s markety because they’re interested in and they’re evaluating your product at that point. It’s not top of funnel anymore. That’s how you have to think about these things.
I know we’ve gone from overcoming sales objections and I keep putting it back to the marketing funnel because I feel the two can overlap. You can do both at once. But top of funnel stuff tends to be educational content. You build them a list and everything, and by the time you’re doing case studies, you really are trying to address objections that people have, you’re trying to educate on some of the nitty-gritty of how other people are using your product, and it can be a nice example for folks who are just trying to figure out what you app does.
Mike: One thing I wanted to tack on the end of this which I didn’t specifically put in the outline here was about chat widgets. You can put a chat widget on your website that allows you to interject yourself into the conversation on a website. Whether you use something like Drift, or Intercom, or custom chat widget, or something along those lines, the idea is you’re having that direct conversation with people, which is exactly why I didn’t include it because at that point you’re no longer indirectly overcoming the sales objections. But that is another good way to help overcome them, so I do want to make sure that I brought it up.
Rob: That’s more of a direct way.
Mike: Right.
Rob: Until they get AI that is good enough to do it without human involvement. I guess even then, it would be direct. It will just be a computer directly doing it.
Mike: Yeah. It’s a good question. It’s an existential question.
Rob: It’s an existential question for the internet.
Mike: Which will lead for some future episode.
Rob: Indeed and if you have a question for us, call our voicemail at 888-801-9690 or email us at questions@startupsfortherestofus.com.
So Mike, if a tree falls in a chat widget and no human typed that tree falling, did it really happen?
Mike: Uh, I don’t know.
Rob: 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.
So Mike, McDonald’s or Taco Bell?
Mike: Oh, I don’t know. Probably McDonald’s.
Rob: Neither?
Mike: Neither, yeah. If I had to choose, probably McDonald’s, I guess.
Rob: Here’s a funny story. It was 50 below. It was the coldest say in Minneapolis in decades. With wind chill, it was 50 below. I took my car into the shop. I had an appointment booked weeks in advance. I go there and it’s running really long. It’s 11:30 or 12:00, I’m starting to get super hungry, my car’s in the shop, and I can’t walk very far because it’s so cold.
I looked and there’s two fast food places right in front of the car dealership. I can’t see their signs from where I’m going. I walk over to one and it’s like 10 inches of snow all piled up and stuff. It’s cold, the wind’s blowing, and people were looking because I’m walking like Han Solo. My least favorite fast food of all fast food is Burger King and all I’m thinking is, “Please, for the love of God, do not let it be Burger King.” I walk up to it and it was a […] Burger King. I could not believe it. There it is, like what are the odds?
So I walked next door and I’m like, “Please, anything else. All of the Arby’s are fine. I don’t like McDonald’s but I’ll eat there, blah-blah-blah.” Then one next to it is Taco Bell, which I’m okay with but I don’t think I’ve had Taco Bell in a decade. We just don’t eat fast food, you know?
Mike: Yeah, I agree. I haven’t gone to Taco Bell in forever, either. Last time I remember going to something similar was went to a Del Taco. It was the first at MicroConf with Ethan Shaw at two o’clock in the morning.
Rob: Yeah. That’s funny. Anyway, Taco Bell was like I remember. It’s processed food but it’s got a lot of salt to it so it tastes really good and then I was super tired after. Now I know why I don’t go to Taco Bell.
Mike: Yup.
Rob: But it was good. It was tasty.
Mike: It’s tastier at 3:00 AM I’m sure.
Rob: Oh, absolutely. Thanks for listening. We’ll see you next time.
Episode 431 | Converting Free Users to Paid, Vesting, Business Ethics, and More Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions on topics including converting free users to paid, vesting, business ethics and more.
Items mentioned in this episode:
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 build your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So, where this week, Mike?
Mike: A couple of a personal milestones for January. The first one is that I have averaged over seven hours of sleep per night since I got my CPAP machine. So that is good. I’m glad to see that I’m actually getting sleep these days. The other one for January specifically, I kind of got back on the bandwagon for exercise. I have logged 12 days of exercise for January. It’s one of those small personal wins. It doesn’t really make a difference in the grand scheme of things, but it’s nice to see that things seem to be getting back on track.
Rob: That’s awesome. The seven hours, isn’t that up from—
Mike: Three-and-a-half?
Rob: Like four hours? I mean, that’s a huge difference. Obviously, sleep makes a difference in so much stuff. In fact, I showed an audiobook that I was listening to. The Power of When is what it’s called but a lot of it is about sleep. Just that like not getting enough sleep, it just shapes your whole mindset, you can get sad, depressed, you can be pessimistic. I’m all of those things if I don’t get enough sleep. But is that why? I mean, the 12 days of exercise for you, is it because you’re getting more sleep that your able to do that?
Mike: Yeah, definitely. I do not have the will power to go to the gym if I don’t get enough sleep. I just recognize that, which kind of sucks. It means that if my sleep goes off the rails, then pretty much everything else goes off the rails, too. The sleep is definitely kind of the underlying factor, but obviously the other stuff contributes in other ways. If I’m getting enough sleep but probably not enough exercise, then I could probably get by. But if I’m not getting to sleep then not exercising contributes to other negative things that happened and just completely throws me off the rails.
Rob: Yeah, I can totally imagine that. The same thing happens to me. Glad to hear it and has your mindset shifted as well?
Mike: Yeah, definitely. I’m definitely more optimistic about just about everything, to be honest. In some ways I look back at it and it’s night-and-day difference between now and a couple of months ago. It’s just partly the mindset but partly the ability to actually remember things. I remember conversations that I was in before where I would literally just forget words. I still have something lingering effects of that but I’m hoping that it gets better and eventually goes away.
I don’t know how bad things can get or how long it can affect you, the sleep deprivation. I have read horror stories and stuff about people who don’t get enough sleep for extended periods of time. It’s just like a long-term brain damage and stuff, which was kind of terrifying, but I don’t know how bad that was for me and it’s not something to find out exactly anytime soon. If I don’t remember it that it did ever happened, I don’t know.
Rob: That’s right. Can’t we just blame it on getting old, too?
Mike: You could. I’m young.
Rob: We had a pretty cool comment on episode 423 which is where we talked through our goals for 2019. You essentially looked back on 2018 and you said it was a complete bust. I’ve got ones out of five on all my goals and I was pulling some things out of you like what were some wins. Sarah chimed in on the comments and said, “Hey, Mike. I think you can think about 2018 a bit differently. You actually had a major win, which was finding out that you have sleep apnea. Without that discovery, 2019 would have been the same or even worse than 2018. Now you know the problem is, you can do something about it. As you both discussed, lack of sleep messes up absolutely everything.” I want to throw in here that knowing is half the battle after all, am I right?
Mike: Yeah, I guess.
Rob: So back to Sarah, she said, “So rather than feeling crappy about not meeting any of your 2018 goals, maybe you could reframe 2018 as a transition year or turning point. Best of luck for 2019. Hope it’s everything you want to be.”
Mike: Thanks there. I really appreciate that. Even recently, I’ve started kind of rethinking my thoughts on what last year were. I write it off as kind of more of a learning experience of like, yes this happen and it sucks but at the same time there’s literally nothing I can ever do to get that time back. So, I may as well just kind of buckle down and move on.
Rob: Yup. Sometimes, that’s what you’ve got to do. We also had another comment that I thought was poignant and it was about episode 428 where we answered some listener questions. One of them was about equity split. Rob chimed in. I don’t know his last name, it wasn’t me. He chimed in on the comments and he said, “Regarding the equity split question, you missed mentioning vesting periods and cliffs, which is super important.”
He’s correct and what’s interesting is normally I do when we talk about equity splits. Typically even if two co-founders are starting a company together, you want them to vest their equity over a period of time. The range tends to be to 2-4 years and you often had a cliff at the front, meaning you get zero equity until one year in. Then you vest that whole year at a time and then you vest the rest on a monthly schedule.
It’s not how you have to do it but it is the most common way to do it. I think it’s how Y Combinator is kind of setup and I believe the use are there either a three- or four-year festing with a one-year cliff upfront. I appreciate Rob for calling that out. What you’re trying to save yourself from is someone working on your business for six months, leaving, and then he or she owns half the company. You’re trying to avoid that so that everyone puts in their time and earns their equity in a sense. Thanks for chiming in with that Rob.
Mike: One other thing that I wanted to mention is that I’ve started adding to the email courses and stuff that I have on the Blue Tech website and based on those, I actually got an email this morning from somebody and invited me to contribute to their online publication, wanted to talk to me a little bit more about it, so I’m going to try and set up a meeting to discuss that with them next week. There’s another one that I have that is in the works as well that’s completely unrelated to the online course that I have. Both of them have publications that are catering to people who are doing email marketing, so it’s kind of exciting to see that those opportunities are starting to show up.
Rob: That is fun. Will you mention them on the show and/or link to them when the time comes?
Mike: I will as soon as at least when they get closer to going live or I know that they’re actually going to go live. I’m sure that you’re no stranger to this, but I’ve been on podcasts before, different places, written articles and stuff, where you write it and submit it or you record the episode and then for whatever reason, it just never sees the light of day. So I’ll wait a little while until I actually do that.
Rob: Yeah and I actually do more vetting now of podcasts or magazines or whatever that want to interview me. I have had enough for those happen where I spend the time I do it and then it never see the light of day. It’s kind of tough.
Today we are answering some listener questions. Our first is a question about business ethics check. I think this is kind of interesting. It’s from Paul McMahon and he says, “Hi guys. I don’t think you’ve ever done a show on business ethics. I’d be interested in hearing about some of the ethical challenges you face when running your businesses and how you’ve approached them.”
“For me personally, my biggest challenge has been deciding how to approach dealing with business I consider to be unethical. For example, as a business, Facebook has shown many times that they’re willing to make moral compromises in exchange for growth and revenue. This makes me not want to support them. At the same time, I have a positive ROI on Facebook ads. How do I balance my disdain for their business with growing my own business?”
“Another example is what you do about customers whose businesses or organizations you consider to be unethical. In my case, I run a niche job board tied to my personal identity. It’s a manual process onboard customers. I talk with every company wanting to use it. I’ve had some companies want to use it whose business I think is immoral while still legal. I’ve waffled on whether or not to accept them as customers. I wonder if you’ve ever faced similar challenge.”
“As bootstrappers, we normally don’t have a board or shareholders to answer to. This makes it hard to hide behind the idea that we should just do whatever is best for the company. The company is a direct reflection of our own goals and beliefs. Ultimately the specific ethical challenges we face depend on us personally. So, rather than looking for advice with challenges I faced, I’d be more interested in hearing about yours and how you’ve dealt with them.”
Mike: I think that’s a great question but it’s also extremely involved and nuanced based on who you are what you value. I’ve seen people commenting specifically on Facebook, for example. Paul specifically called Facebook out as one of those companies where he’s kind of making this moral compromise to exchange it for growth and revenue because it does bring business by spending money on Facebook ads, but how do you go about doing that and how do you justify that?
I can’t say that there’s one go to answer for is because it really depends on your level of comfortability with that, what it is you’re offering, and the types of people that you’re serving. Personally, I look at it as like, if you’re not getting in front of your customers, then are you doing them a disservice by not trying to help them? Obviously, you can go back-and-forth on that all day long. I think for me it depends a lot on the advertiser’s platform themselves, whether it’s something that I use or would use. If it’s something that I’m not going to use or have absolute qualms about using, then I probably wouldn’t do advertising on there.
At the same time, I have a Facebook account. So, would I do Facebook advertising? Yes. Do I have kind of a personal moral dilemma over them making money from that? Yes, to some extent, but there’s also not a lot of other options. I think that’s kind of a big deal to think about, like do you have other options? Are there ways that you can not support them and other financial ways but still get what you need out of them? They’re a big company. They don’t care.
Rob: I think that’s a good point I want to hop in here. Look at Amazon, Apple, Google, Facebook, GE, and Procter & Gamble. In all these companies, I don’t love everything they do. They all make missteps and they all do some things that either are unethical or immoral or whatever, however you want to frame it, and your point of it being nuanced and having to weigh these things, it’s interesting.
I like how you said, “From now I’m not going to do Facebook ads.” Really should delete your Facebook account, too. Some people do that, but if you haven’t done that, I don’t know that it matters to you enough if you’re still engaging with the platform.
Mike: That’s kind of what I was thinking. If you’re not so opposed to Facebook that you haven’t deleted your Facebook account yet, then you’re probably not that violently opposed to them such that supporting them through advertising on their platform really makes that much of a difference. But if you have deleted it, then you’re probably not going to create a new one just do you can do that.
I know there are some people who have deleted their Facebook accounts and then created one specifically so that they could do advertising. That’s because Facebook will not allow you to advertise unless you have a Facebook account linked to it, which kind of sucks but if your going to go down that route, then what you do about it? Your options are to not do the ads or to do them.
Rob: Yeah. What’s interesting is he’s asking basically about ethics and these terms, ethics and morals, they do relate to right or wrong conduct. But if I look up a definition of them, I always think of this is like they can be used interchangeably but ethics refer to rules provided by an external source and morals are individuals on principles. Ethics can be laws, or it can be workplace code of conduct, or can be religious principles, whereas morals are something that comes from inside you.
I do think here that they can overlap but they’re not always the same. Sometimes your morals can conflict with the ethics with laws. You don’t agree with a law that’s passed and you wholeheartedly don’t think that’s ethical. I’m not trying to muddy the water or get philosophical here, but I do think that with bigger businesses it is easier to make this ethical argument that it’s a larger body and there’s legal requirement that you do what’s best for the shareholders, whereas with smaller companies it’s not.
Have I faced moral dilemmas over the years? Yeah, I have. There was a time when I was unemployed. It was right after the dot com bust. Someone who’s going to give me a contract for $15,000, I would have kept this. This was when we were young and living pretty svelte. It was good. Then it keep us going for a couple months, probably three months or so. I went through, talked the guy through my hourly rate, did all the stuff, and he’s like, “This sounds great, let’s get started right away.” I was going to work from home, there was all this thing, and then when he started walking me through the site I was like, “This isn’t something I can support,” like, “I’m sorry but this isn’t something I can show to my kids.”
While I don’t have an issue with it and it’s not illegal, it’s just not something that I can do. It was a very hard decision for me but I’ve never looked back and thought, “Boy, I really should have sacrificed…” There was just something in me that didn’t agree with it. I’m not sure I can count any of the times where I’ve followed my moral compass, that I regret doing that.
So, if I were onboarding customers and I had an issue with what they’re up to, I guess you can piss people off by saying, “Hey, you know what? I’m sorry, we just can’t accept you.” They could get angry. Could they sue you? I suppose, but is it really worth their time and if you have something in your terms of service to cover you there, that you can cover that legal thing?
In my opinion, if you run your own business and you bootstrap, you’re doing it for a lot of reasons. One of those is so really you control your own destiny. I feel like I want to be able to get up everyday, look myself in the mirror, and believe in what I’m doing. Each of us might have a slightly different definition of that because our morals are different from person-to-person.
One part of that for me is I want to be able to tell my kids about any investment I make in any company and any company that I fund, that I advise, that I work on, I never want to have to say, “Oh yeah. Don’t tell the kids about that company.” There are certain businesses that are legal, that I am going to personally not invest in or be associated with because of that. That happens to be my moral compass but it doesn’t necessarily need to be yours as a listener.
Mike: Yeah. I think there’s a good distinction there between ethical, moral, and illegal. I definitely don’t want to be on the side of doing things that are illegal, but at the same time, I think if you take a step back from that and look at the United States, for example, there is marijuana legalization all over the place but it’s still not legal at a federal level. It becomes a very much gray area at that point. Is it legal? Is it not? It depends on which laws you’re looking at.
There are some people who are like, “I don’t care,” or, “I don’t agree with the law and I’m not going to follow it.” That’s totally your choice and maybe you’re doing something illegal at that point, but is it moral or ethical? I think that your points about the difference between those are head on. I agree with you in terms of what I would be willing to do and what I would want to be able to show to my kids. I wouldn’t want to be involved in stuff that I will have to hide from them. I’m not in the hiding things.
Rob: This is an interesting one and I think that Paul asked specifically about the ethics, but I think what he’s talking about is morals. He talked business ethics but he said, “I had some companies want to use it whose business I think is immoral,” and that is subtle, it’s nuanced, but it actually is a different thing because ethics would be, again, an external kind of force on you.
Mike: And honestly, this is something that I’ve struggled with to some extent because with Blue Tech, specifically, people can use Blue Tech for cold email outreach. I’m not a huge fan of it. I don’t do a lot of cold email outreach mainly. I will pinpoint, email certain people but I’m not going to throw them into an automated sequence if I don’t think that it’s a good chance that they’re going to be interested in. Quite frankly, I will find ways to make it a warm introduction instead of a cold email. I’m just not going to drop somebody a completely cold email because (1) I don’t think that it works very well, and (2) I think there’s better ways to provide value and get in front of people than just drop in a completely cold email out of the blue.
There are people who do feel that that’s a viable strategy and they want to do that. I do struggle to some extent with what do I do with those people and how should they be treated. I don’t treat them any different than any other customer, but at the same time I do struggle to some extent with what should I do with the business itself, how do I turn these people away, or say, “Hey, maybe there’s another piece of software the you should be going to use,” because some of them will come to me and say, “Hey, I have my own mail server and I am able to send…” I forget what it was. Some customer came to me, a prospective customer and they said they got their own mail server and they bumped it up for 32 processors and could send thousands of emails per second. This is not something I really want to be involved in. I kind of know in the back of my mind without being told what is probably going to happen there.
Rob: Right. Some of that is kind of a morality thing or kind of moral compass. The other part of it is risk mitigation of like, “This is going to end poorly and I don’t want to be associated with that,” and I think these two can overlap at times.
Mike: Oh yeah, definitely. There is that aspect of it. We talked about this at MicroConf to some extent, too. There’s certain marketing strategies that people will use and it’s not illegal, it’s not something that you can’t do, it’s just you’re not necessarily entirely comfortable with it, so you won’t do that. It’s a hard decision making and every single situation is a little bit different. It’s just hard and I don’t have a great advice for that.
Rob: I hope our thoughts are helpful, Paul. Thanks for writing in. Our next question is perhaps an easier one. It’s about converting free users to paid. Someone has a freemium product, his name is Mark, and he actually asked this question openly on Twitter about a week ago. I think it was Adrian Peter, he kind of pinged you and I and Reuben on Twitter. I said I have some quick thoughts but frankly, this deserves more than 280 characters of thought.
I ask Mark, the original poster, to write in with more details. He didn’t. I’m assuming he either got busy, just wasn’t that interested in hearing our thoughts or whatever. I still think it’s an interesting question to talk about because I think this is something that folks struggle with. He said, “I’ve just found out that my freemium product has on average 9000 users a day, access it with only 140 people paying for the advanced features. I’m looking for someone who can mentor me on how to migrate those free users to happy paying users without pissing them off.” While we’re not going to mentor him, I have some thoughts on how to think about doing this. But why don’t you kick us off with some ideas?
Mike: I think to start with is that 140 people out of 9000 is about a little over one-and-a-half percent. It’s like 1.55%. If my memory serves me, that’s actually not a terrible freemiun rate.
Rob: Yup. I believe Dropbox, in the early days, the numbers they published was like 3% from free to paid over 12 months. When they did that, they had such a high funnel volume, that that was their business model. Who knows what it is now. I agree, 1.5% is in the order of magnitude or what Dropbox had.
Mike: Right. To start off, that’s not terrible. Did he say what this product was? I don’t see that here.
Rob: No, he didn’t. That’s, again, why I asked him. I don’t know if it’s B2C. I don’t know.
Mike: My guess is that it would be B2C. It doesn’t seem like it would be anything else.
Rob: Yeah, I would think so. I’m not sure why you would do freemium with deep B2B. I shouldn’t say that because there’s MailChimp and Drip and they have free plans. There’s whole reasons for that. But flippantly on the service, if you have 9000 free users and 140 paid, I’m guessing it’s the B2C product.
Mike: Right. I think there’s a few different ways you could go about this. It looks to me he’s going down the path of analyzing who is using the product. That’s a great place to start. If he know that 9000 users a day are accessing it, something that brings that to mind, though, is that the users per day is not necessarily reflective of the total number. That 1.5% that you and I just talked about is probably substantially lower than that because he’s saying users per day are actively logging in versus how many is it over a month, or three months, or over the course of the year? How many total accounts are there versus the number of people who are using it? I’m not saying that you’re going to be able to charge all those people. It’s kind of like a benchmark for how many people have started using it and decided to keep using it versus how many people decided that it was worth it enough to pay.
That aside, take a look at seeing what features people are using. Compare them between the paid users and the free users. See if there are places where they are using certain features or using a certain amount of it. Let’s say Buffer, as an example. If you have a certain number of social profiles connected, I think it’s three or four, you’re still qualified for the freemium plan. But then, once you get above that, then you have to pay for it. See what those metrics look like and see if there are places where you can see that there are people who would probably pay for it if there was a barrier there or there was a paywall to go over that limit.
In order to convert them over from free to paid, you’re going to have to be really, really careful because if you simply take something away, let’s say that the limit was, you decided that it should be 5 and a lot of people have 10, those people who are not paying for it now are going to be really, really upset that you made them start paying for it, even though you’re providing value. You can kind of segment your list a little bit, see who signed up with a work account versus a free account.
There’s places on GitHub where you can go in and you can find a list of mail servers. They include things like Gmail, Yahoo!, AOL, and all those things, basically free email accounts. Those providers, match that up against your list, see who’s probably using a work account versus a free account, and target those people who are using a work account first as the people to try and get them to upgrade. Offer them some sort of special discount or incentives, Maybe something above and beyond what the typical package would be.
You can also do kind of a Netflix model where you grandfather them in for a certain time period, let’s say six months or a year, and say, “Look, we’re going to start charging for this but we’re not going to do it right now. We’ll do it in that timeframe.” That way, you can kind of gauge the response as opposed to just doing it and then dealing with the fallout. Those are just a bunch of things off the top of my head. Rob, I’m sure you have plenty to add.
Rob: Yup. I totally do. That’s the thing. I think there are different options here that you have to think about. If it’s B2C, the numbers are actually not that bad. The first thing I try to figure out is why are people not upgrading and I probably email or everybody who is not and say, “What are you looking for?” Just start conversations. “What in our paid plans isn’t that enticing? What do you need?” Maybe 8000 of them are just teenagers or are people who live in a country where they just don’t have the money to pay for it. None of this is worth it. It’s trying to get to not that they aren’t upgrading but why aren’t they upgrading. That would be the first thing I’d think about.
If you decide, “Oh, there’s a bunch of businesses using this and they should be paying for it more than 1.5% or whatever,” then I think you kind of have four options. You can email everybody with a one-time upgrade reward like, “Hey, get a free $20 Amazon gift card.” That’s a terrible idea but this free ebook or this free audio series or this free physical book or just some type of reward to upgrade right now to paid. Probably not going to do great but it’s one option. It’s simple. It’s quick.
Another option is to offer maybe a one-time special pricing tier and be like, “This is only available once and it’s the same price as what everyone else is getting but you get twice as much or three times as much if you upgrade now.” That keeps your price the same.
The next level up is to kind of giving a lot of stuff is offer a one-time lifetime discount and be like, “Look, the price will be half of what everyone else is the normal sign-up for the rest of the time that you’re on the product,70%, or whatever you want to do, but you have to pay for a year in advance,” and just see what kind of result you can get there.
The last option is, frankly if free plan is working for you and it is marketing which is really what free plans are supposed to be, then you don’t want to close it down. But if free plan is a lot of cost for you, whether it in support or it’s in hosting, and you want to consider closing it down, then that’s kind of your last option. Yes, you will make a few people mad but there’s always fewer people mad than you think will be.
You could close the free tier with 3-12 months of notice basically offer one of the above options that I’ve already given, and just say, “Look, due to this and that, I’m a single founder, small bootstrap company, we don’t have the resources. I’m sorry, it was an experiment, and sometimes, these things happen.” People understand that. You’ll get two responses from 8000 that will be all huffy about it. Or maybe it’s 10 but still, it will be a tiny fraction.
I have done this before. I acquired HitTail and there was this huge free tier. People were abusing the system, frankly, and I have to shut one down. I did it just like that. I did and I’ve got some emails from people who are mad, and then I’ve got a bunch of people that upgraded. It was enough to kind of co-hosting cost for each month, based on the number of people that upgraded.
Those are the options I think that really come to mind and obviously some of those overlap. […] what you said but I think there are definitely ways to be thinking about this. Free plans are tricky. I think that’s the bottom line. They’re not as clear-cut, not as easy to navigate as just straight ahead trial to paid, but that doesn’t mean you shouldn’t do them.
Mike: Yeah. I think there’s definitely an approach to basically chipping away at that number and increasing it from 140 to as high as you can get it obviously, but there’s ways to do it and it depends a lot on how much time you have or how much time you want it to take. You can just send out an email and say, “Hey, in two weeks we’re going to start charging for this and kind of shut down the free plan.” But that’s a hard line in the sand and it’s difficult to back away from versus the opposite approach which is approach them with a soft hand and try to slowly move people over and not make them too upset. You just take a much longer period of time to do it and over time you kind of ratchet that up and slowly be a little bit more tightfisted about it. I would be a little cautious with that number of people.
Rob: Yup, I agree. I got a couple of other questions. We only got a couple of more minutes but I went to Quora and I went to the startups category. I pulled a few more questions out. We’ll see how many we have to get through. Mike, I’m curious. What is the worst startup business idea that you’ve ever heard?
Mike: I have the perfect one that I’ve heard. I was talking to somebody. It was maybe 2-3 years ago. He has told me how he had this great idea for a startup and they’ve already gotten something like $300,000 worth of funding for it and have basically burned through it all. Somehow, this company is worth $8 million and the basic idea of it—this is kind of his words, I’m paraphrasing this to some extent—he kind of said it’s a combination of Facebook, Pinterest, Twitter, and he named off two or three other major online businesses like that people who listen on this show would recognize. I’m just like, “You have got to be kidding me.” I don’t want to mash them all together and create one giant platform for everybody to use.
Even after burning through $300,000 worth of investment capital, I was like, “How many paid customers do you have?” Of course, getting that out of him was like pulling teeth and he was like, “None.” Then I said, “Okay, so you haven’t made any money. How many users do you have? Like free people? Like people who are just using it?” and the answer was still none. I’m like, “Oh my God, I can’t even believe I’m entertaining this conversation.”
Rob: Yeah, and that’s a tough thing. It’s like I run into some entrepreneurs who wanted to start a startup and they don’t have any connection to the startups space. That’s okay, you don’t have to be part of the community and drink the Kool-Aid of any one person. You don’t have to be part of the MicroConf crowd or be part of the Silicon Valley crowd or the SaaS or whatever, but I do think that there are learnings and general knowledge that we all roll our eyes at, that are so fundamentally known within the circles, that if you want to start a startup, having some of that knowledge is just as helpful as some guard rails.
When you say that Facebook, Pinterest, Google, Apple combination or whatever the guy said, this is one that just breaks so many rules that you know that it’s probably a bad idea, but he didn’t know. He doesn’t know that it breaks the rules because he doesn’t know what kind of “rules” are in terms of trying to get some off the ground.
Mike: Yeah. I think even objectively though, you’re trying to build something that is that broad and it just struck me as odd. Delusional is really the word.
Rob: I don’t know the worst. It’s hard to nail the worst one. Probably some of the worst ever have been ideas that I’ve come up with myself. There is one. I was a contractor-developer years ago. It was during the dot-com boom. Of course, that’s when a lot of the worst ideas came out. One of them was—I won’t say the name of it—they had this system where you could come to the website—remember, there were no mobile phones, it wasn’t a mo-app—you could log into the website on your computer and if you have seen someone on the road that you wanted to get in contact with—I was assuming it was a dating kind of social network thing before social networks—if you’ve got their license plate number, you type it into the startup website, they would notify that person and say, “So and so wants to connect with you. Do you want to connect with them?” and it had to be a double opt-in. Then, there’s going to be a social network and people could chat back-and-forth and meet and talk. That was the idea.
I remember we’re building this and I’m like, “Wait, aren’t there privacy concerns? How are you going to get people’s emails from their license plates? What’s the network effect on this?” It’s just layers and layers of questions of like, “How will this ever work?” Again, at least we have a mobile phone or something and take a picture of their car and yours and they could see you. But if you suddenly got an email from this company that’s like, “Someone wants to connect with you. They database on your license plate,” and you’re like, “I don’t know who that person is. I didn’t see them while I was driving on the freeway.” Do you think it’s bizarre? Do you think it’s good? Do you think it’s gold?
Mike: I don’t definitely think it’s gold but I also will say flat out that it is hard to predict what the general population will do or will gravitate towards for certain types of social apps. Snapchat, for example. If you were ask me five years ago, “Oh will Snapchat ever be a thing?” I’ll be like, “No, that’s the dumbest thing I’ve ever heard.”
Rob: It was my idea and I asked you. You told me not to do it and look where that got us, Mike.
Mike: I know. But it’s hard to predict when those things come up, whether or not that’s going to go anywhere. Personally, would I ever use it? Heck, no. There’s no way. That’s like it’s got ‘stalker’ written all over it. I think that you would have a hard time getting traction with it but would nobody use it? I can see people deciding they wanted to use it if they were in a hit-and-run and somebody took off and they’re like, “I think have this license plate.” Although they’ll just give it to the cops. So, what difference does it make?
Rob: Yeah, that’s the thing. Then they’d contact him and be like, “Do you want to hear from this person about your hit-and-run?” and like, “No. Rejected” Its funny.
Last question of the day, Mike. What are the things that no one tells you about starting a startup?
Mike: I think the thing that comes to mind here is that there are there going to be days, possibly weeks and months, where you get up in the morning and you say to yourself, “I didn’t sign up for this.” It’s all going to be related to stuff that you thought you got into the business for one reason and you find out that you’re going over your books line by line because somebody made a mistake or there’s some API that’s coming in and hitting your app and you have to somehow lock it down because it’s like basically DDoSing your systems. There’s going to be things that come up where you’re like, “I didn’t sign up for this.” The reality is you kind of did but it’s too late to do anything about it. Everyone has those days. Those are the two things I would say about that.
Rob: Yeah. Those are good answers, Mike. A lot of people will tell you that it’s hard and a lot of people will tell you it take a long time and such. I’ve said that a lot. The MicroConf and bootstrapper community is both big and small. In terms of the entire world, the startup community is pretty small even though it can have some influence on those folks. But just outside our community, I don’t hear many people saying, “When you’re starting up, try to get to revenue quickly and try to do that in the first whatever, the first six months after launch.”
I think that there is so much importance put on growth of user engagement or growth of numbers and daily actives in this kind of stuff. I even think there’s SaaS founders launching with pure freemium models because they just think that the number of people coming to use their app is important or is what counts or something like that. I think that focusing on revenue early is something that I don’t think is talked about enough.
Mike: Yeah, I would say I agree with that. I think it’s something of a common fallacy. I almost want to blame Steve Jobs for this, but people think that—I’m not immune to this—if you build something great, people are going to find it or you know what the customer wants. That’s really more of a Steve Jobs than anything else. It’s like you know what the customer want and you just need to build it and put it in front of him. Then you find out afterwards that you were way off base and there’s all these other things you need to do or that they want or need, subtle things that you need to now change. Whereas if you had just talk to the customer in the beginning, you had learned that those things weren’t true.
I think that there’s this aura or halo around Steve Jobs just like Saint John saying, “I know what these people want and this is how it should work.” All the stories that go around where he just was very intuitive about it, what should be built, and people kind of think that they can do that too. I think that there’s a big distinction between a multi billionaire who has been in that position than all of the rest of us.
Rob: Right and he eventually did that, I think. I think there’s myth around it. Some of it is exaggerated, but he didn’t do that earlier in his career. When was the last time you heard someone talk about, “The Apple IIe was designed by Wozniak and it was so far ahead of its time that when it did catch on, it was amazing.” But it’s not Jobs, aside from crafting the outside of it or whatever, he didn’t invent the Apple IIe, but he came up with the Lisa, which was a failure. He really pushed the Macintosh forward, which was a failure early on and eventually caught on. Then he launched NeXT and built a computer that was a failure. He had a bunch of failures. He thought he knew what people wanted and then actually didn’t.
If you read the book Becoming Steve Jobs, it talks a lot about his transformation and it touches on all those things. That’s what people forget. It’s like you and me and the person who thinks they’re Steve Jobs, we don’t have the decades and hundreds and millions of dollars to burn through, to learn the lessons that he ultimately did. By the time he did come out and do the iMac, the iPod, the iPhone, all the stuff that he eventually had wild, amazing success with, a lot of people forget that he lost hundreds and millions of dollars of his and other people’s money on the journey there and he spent decades of his life basically learning that stuff that most of us don’t have the luxury of it.
Mike: That’s kind of my point. We forget that piece of it.
Rob: Yup.
Mike: Interesting question for sure. But if you have a question for us, you can call 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 on iTunes by searching for ‘startups’ and visit startupsfortherestofus.com for a full transcript to each episode. Thanks for listening and we’ll see you next time.
Episode 430 | What to Look For In a Co-Founder
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about what to look for in a co-founder. They touch on different aspects of evaluating someone for the role including, honesty/integrity, skill-set vs. future skill-set, fixed mindset vs. growth and more.
Items mentioned in this episode:
- AppSumo MicroConf Giveaway
- MicroConf Starter Edition Scholarship Application
- MicroConf Growth Edition
- MicroConf Starter Edition
- Big Snow Tiny Conf
- TinySeed
- CartHook
Rob: I don’t know, Mike. Why was Pavlov’s hair so soft?
Mike: He conditioned it.
Rob: Damn. Not fair.
Mike: This is Startups For The Rest Of Us Episode 430.
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 build your first product or you’re just thinking about it. I’m Mike.
Rob: And I’m Rob.
Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob: I got so sick Sunday night. It was a stomach flu. My kids all had the prior week and I thought I had dodged it. I was doing all good and then it was one of the worst nights I can remember. I was up five different times during the night. I was delirious, stumbling around. It was nuts. I got up Monday and the kids are off school for a snow day. I was literally on my phone trying to just respond to email. I would write a sentence and then I would fall asleep.
Mike: Oh geez.
Rob: Yeah, it was crazy. I remember as a kid being sick a lot. I don’t know if that’s true or just my memory. Then as an adult, it’s pretty rare that I get sick now and to be that late out. When I get sick now, though, it knocks me out really good. I got a flu shot, I get one every year, all of our kids had flu shots but this year, it knocks through. I lost a bit of productivity and frankly I was dehydrated for two days after. It was crazy.
Mike: That’s rough. I remember getting sick as a kid, too. I think the difference is that you have less responsibilities as a kid. Your responsibility is just lay in bed, stay off the TV, and stuff like that. But it’s so much harder now because you’ve got all the different responsibilities, we each got businesses to run, and then you’ve got your own kids to deal. Hopefully, both parents don’t get sick at the same time.
As early as this week, my oldest got strep throat and then the past couple days, both my wife and I have been on the verge of getting sick. We’re not quite sure but neither one of us has strep throat yet. So, a little germ farm.
Rob: Yeah, that’s tough, How about you? What’s going on?
Mike: Well, I recently got back from Big Snow Tiny Conf. We can talk about that a little bit. The other thing I wanted to point out to other people is the AppSumo giveaway for MicroConf is still going on. That will end on February 11. You have about one week left from the date that this podcast episode goes live, so apply.
You’ll get a free ticket to each to the conferences, both Growth Edition and to Starter Edition, and the expenses for the trip are going to be paid by AppSumo. We’ll link that up in the show notes. You can go over there and get in on the contest. There’s a bunch of different ways you can get even more entries into it. Definitely check out the website.
You can link up your Twitter account or Facebook account, it’s all the MicroConf Twitter account and things like that. Each of those things will add to the number of entries that you get in there and you can get referrals as well. Check it out and hopefully we’ll see you there.
Rob: On my end, I’ve been working on improving this weakness I have. You know how everyone says I’m so bad with names? I don’t remember names, that’s the cliché thing. I’ve always actually struggled with that in a pretty big way. What’s interesting is that it’s not that my memory is bad. I’ve realized this over and over but it was called out to me again.
It was a couple weeks ago at a startup gathering here in Minneapolis. I talked to someone and I’m like, “Hey, I know we’ve met before,” and we’ve started talking, and I was like, “You know? I don’t remember your name name. I apologize but I remember that your startup is named X and I remembered that it launched on this date. I remember that your churn-up until this point was 2% and then I went to 1.8%.” I just rattled all the stuff and their eyes were huge. I was like, “No, this is my superpower.” I remember not just numbers but it’s the context around the concept, like in this case a startup. It all stuck in my head but I didn’t remember their first name.
It’s such an interesting model on how memory works differently in different people because my wife, Sherry, would have remembered the person’s name, their spouse’s name, and their kids names, and none of that locked-in for me. It’s such about relating to people versus relating to some other thing, concepts, or whenever.
So, I’m working on that because no matter how much, it’s an interesting parlor trick to be able to rattle off all the details of someone’s business. We had a conversation six months prior. It’s an interesting parlor trick but it still is not a good thing. I’ve been looking at […] ways to help me remember people’s names and/or to only go to events where there are name tags. I’m just kidding about the last thing.
Mike: Its funny you’ve mentioned that because I’m exactly the same way. I can remember lots of details and pinpoint exactly where we were standing at a particular event when we were talking about it, but I will just have a hard time with a person’s name. Maybe it’s just a matter of focusing on remembering the person’s name and just avoiding overemphasis of remembering all the details of the conversation. Maybe it’s just they stick in my head because those are pieces that are really interesting to me and I know that I can just look down at their name tag and see their name at any time.
Rob: Yes, probably.
Mike: I should have mentioned this a little bit earlier but the other announcement that I have is that MicroConf scholarship applications are going to start opening this week. We’ll open them up today, haven’t decided on exactly how long they will open but I’ll make sure that we put that on the application itself and we’ll link up the application in the show notes. We have a bunch of sponsors who have graciously offered to help fund these scholarships. The scholarships are all for MicroConf Starter Edition. We have at least 20 of them to give away. Last year, I think we had 14 or so and this year we have to least 20. I’m still working on a couple of different sponsors on that, so that number may go up but that’s what we have currently.
Rob: Love it. For me last update, you can back from Big Snow Tiny Conf East, which we’ll chat about in a second. I am heading to Big Snow Tiny Conf West out in Colorado. I think I’ll be there when is episode airs, actually, so this is my inaugural Big Snow Tiny Conf. Looking forward to hanging out with the people. This was your fourth or fifth, is that right?
Mike: Yes, it’s my fifth.
Rob: That’s cool. Any takeaways or thoughts having gone back that many times?
Mike: If it’s raining severely on the second day, just skip it. Just don’t even go out there. We went out on Thursday and it was just pouring. It was above freezing all the way up the mountain, it was raining, and we said, “You know what? We’re here. We’re just going to go skiing anyway.” By the third round were done and we’re just not going to ski anymore.
We’re probably about halfway down and I kind of pushed off to go down the hill. The front of my ski turned like it was supposed to and the back didn’t. Because I pushed off, my arms were basically kind of behind me because I was pushing myself forward. Of course, I just fall flat on my face and rolled down the hill little bit. I did a faceplant right into the slush. Not fun.
I hurt my shoulder a little bit, […] it about a few days later, jar right into the slush and twisted my neck a little bit. But both of those things is nothing major. A few days later I was still sore but at this point, I’m fine. Do you ski at all or do you snowboard?
Rob: I don’t, nope. Here’s the thing. I grew up 90 minutes from Tahoe in California but as kids we are always playing sports pretty intently. I played eight years of soccer and then track for nine years. Played football kind of cross country so we’re always super busy in the winter. Our coaches were like, “Do not go skiing,” because people would tear their knees up, they’d hurt their backs, they did all kinds of stuff, and we didn’t have enough money. We just didn’t have the money for ski gear and the rental and all the stuff. We’re a family of six growing up. I’m the youngest of four kids. People moved out and it just was never a thing even though it was obviously an option geographically. It’s just not something that my family prioritize.
I am going up there. Everyone else go skiing. I’m going to hang out. I’ll probably do a little bit work, I’ll probably do retreat stuff during the day. I have some things I want to get some pretty deep thought, too. I want to do that. I also like drinking hot cocoa and catching up on my reading. I’m looking forward to being up on the mountain hanging out with folks in the afternoons. I guess that’s how it plays out and then having some alone time during the day.
Mike: Yeah. The evening talks are really interesting because you get to hear in-depth details about people’s businesses. Some people come with questions and some people just come with a story. Some people just say, “Hey, this is a problem that I’m working on. Any help with it? What are your thoughts on it?” It’s pretty cool. You get a really good mix of things based on what the people’s businesses are. Some people to B2C, some people do B2B, and it’s just interesting.
Rob: Sounds good. What are we chatting about today?
Mike: Today, we’re going to be talking about what to look for in a co-founder. This came to mind because I’m specifically kind of looking around at my personal network and trying to figure out, is taking a co-founder on for BlueTech a path that I want to go down? If so, what would I be looking for in that type of person? What are the traits or capabilities? What’s their situation? How would that work for me and how will it work for them?
But I thought that it be interesting for the listeners to step back from that a little bit and more of an abstract fashion, think about what sorts of things you should look for in a co-founder and then from there, you can little down the list of potential options and how that would work. Obviously, there’s a little bit of putting the cart before the horse there because you have to decide, “Do I want one?” This is a qualification of, if you do then what would you look for?
Rob: And we recorded an episode about whether you should look for a co-founder, haven’t we?
Mike: I don’t recall. I looked back and I think that we talked about it in general. But I know as we went through and said like, “These are the things that you should actually look,” as opposed to, “Should I get one?”
Rob: There’s going to come a day when we record an episode that’s basically the exact same episode or at least the same topic as what we recorded years ago.
Mike: I know.
Rob: We’ve done that in real life. We’ve gone back and said, “Here are new thoughts on this topic,” but we’re going to do it unintentionally at some point. 430 episodes in, I don’t believe we’ve done that today, but this may be the day.
Mike: Possibly, but we’ll see. I’m sure somebody will remember it.
Rob: Let’s dive in.
Mike: The first one that came up on my list was honesty and integrity. For the person that you’re looking to bring on as a co-founder, what you want to do is be in a position where you know that the other person will always “try” to do the right thing, whatever that happens to be. What that happens to be has to boil down to what your goals in life are and generally how you address different situations or problems. Are they going to have your interest at heart or are they a little bit more selfish? I think you obviously want them to have your interests at heart whenever they’re making different decisions and then balance that against everything else.
You don’t want to sacrifice the entire business, probably, but at the same time there’s going to be certain situations where someone needs to make a decision that may not necessarily be you, and do you trust the other person to make those decisions? What you don’t want is a co-founder that essentially turns into someone you’re micro managing. You really want somebody who is on, equal footing is not quite the right way to put it, but somebody who you can at least respect enough to have a conversation about something, even if you disagree with them on it.
What I found is with contractors, for example, contractors are very loath to bring up stuff that is detrimental to the business or criticize work that you have done. They just don’t tend to give you an objective opinion about things in a way that is any way confrontational because I feel a lot of them are like, “Oh, I don’t want to rock the boat because this is my job at stake.” But at the same time, you need somebody to challenge you in different situations where you could be wrong or they perceive you to be wrong, so that you can talk through those things and say, “Is this the right decision for us and for the business?”
Rob: Yeah. I think this is a big one, being able to have the trust that your co-founder will do two things. One, that they will have your back in a way that, I think you brought up, the kind of the selfish or the self-centered, and I guess honesty and integrity is part of that. But it’s almost like they’re not always going to be thinking about themselves. We all know people who do that and people who don’t come across that way in the first meeting, can later you find out that they just really have an issue. Maybe it’s from childhood or maybe it’s part of the personality, but they really have an issue when talking about money or they have an issue when talking about time. There’s certain triggers that you need to pick up and be aware of because each of us has our own things that sets us off. I feel that’s something that is hard to evaluate in one or two conversations. It really needs to be done over an extended period of time, I think.
Then there is this integrity piece, kind of honesty, ethics, morals that your compasses align. Obviously, there are different ways of viewing the world and you don’t, as you said, want to have to manage this person’s every decision that they make and be like, “Oh, I feel like you kind of screwed that vendor with that decision,” or, “I feel like that was a disingenuous offer you made to that employee,” or, “You certainly didn’t do anything illegal and probably not unethical, but was that really morally the right thing to do?”
Those are hard conversations to have because that’s such a fundamental value that if you don’t share with someone, it’s going to be a constant conflict. Again, not something as super easy to evaluate upfront but it is nice to kind of a must-have, I think, that you do find someone where, in general and 80%-90% of the things, the two of you are going to rely in these hard decisions.
Mike: I think the point that you just brought up about this being something that you may not learn right away and I may take time to get there. I think that’s one of the things that doesn’t bug me but it strikes me as odd when I see people looking around and saying, “Oh, I’m trying to build this business and I want to get a co-founder. Does anyone know where I can find a co-founder?” It almost feels like people are looking for a co-founder in a very, very short period of time. But because of this exact thing that we’re talking about, honesty, integrity, and trust, it takes time to get there.
In some ways you can look at it and say, “Well, are there proxies that I can use for this? Are there people that I know that trust that person?” You trust their experience and then by proxy, trust this new person that you’re looking at as a co-founder. I think that’s a good way to approach it. It’s not perfect but I don’t think that there’s any perfect way to analyze that. It’s not as if you’re cloning yourself and you can’t always know what the other person is thinking.
Rob: Yeah and I think evaluating this in the short term is to know yourself and know how kind of trusting or suspicious you are of new people that you meet. You and I talked about this a little bit but that there’s this test called the Enneagram. It takes about 15 minutes to take. It gives you a number from one to nine. It’s like a Myers-Briggs personality thing. My personality is like creative, introverted, I forget like visionary or something. There’s typically two or three things that are good and two or three things that can be detriments. One of mine is just naturally suspicious of new things and new people.
I know that as a rule, I tend to say I’m a good judge of character. What I actually mean is I really don’t trust people upfront and they tend to have a really good character to get through my defenses early on. I am a very discerning person, which is both good and bad. Sometimes, it’s to my detriment and I write people off too soon. I know that about myself and I will be having internal kind of self-talk or conversations about, are they really coming off the way that I think they are or is that just in my head?
I have known people, my relatives and friends who are on the opposite side. They are too trusting, they get in friendships really quickly, and get pretty deep with people who, it’s pretty obvious that person is not going to be a good friend. That person is going to treat them poorly. Maybe this co-founder relationship is a romantic relationship or maybe it’s a friendship. It is hard for me to watch that because it might end poorly and frequently it does. Those people, I think, are too far on the other side of the spectrum. They are not suspicious enough. I think it’s knowing where you lie and just trying to do your best, frankly, to figure out what you think of someone after few meetings.
Mike: The next trait that I kind of came up with was more or less a current skill set versus ability to learn new skills. You’ve talk about this in the past that comes from like a fixed mindset versus a growth mindset. I look at it in terms of what does somebody bring to the table now versus what could they learn in the future to bring to the table later.
I think that there’s the short-term aspect and then the long-term aspect. The short-term aspect, you’re really looking for somebody who can complement your current skill set. In the long-term, you’re looking for somebody you know what it is that they want to do and it’s not necessarily or directly overlapping with the things that you want to do long-term, because you probably don’t want to have two people who both want to do sales, for example. Long-term, you probably don’t want both to be doing sales. You probably need somebody to be doing technical stuff and the person to be doing more of the business, marketing, and the sales side of things. But if you both want to be doing development long-term, that may not necessarily be a great fit because then, who’s going to be doing the sales and marketing stuff long-term?
Rob: Yeah. This is a mistake I made in the early days. I think a lot of people make this mistake when hiring and finding a co-founder is similar. It’s not the same but it’s similar to evaluating a potential hire. The thing is not to look at their skill set because things are going to change. In startup, they just change so fast.
If I were to look back at myself 10 years ago, I didn’t know 80% of what I know now. You could have looked at me and said, “Wow, this person knows how to write, and he knows SEO, and he knows how to write code. That’s an interesting skill set. What is his potential someday?” You know what? I don’t do much SEO anymore and I don’t write any code anymore. I write a lot less that I used to, actually. Everything that made me who I was 10 years ago, really has have to adapt. I’ve had to learn to build relationships better. Even just speak in public which was something that terrified me early on, and to speak on the microphone which is something that terrified me early on, all the things that you just have to get over.
I have watched other people do the same thing. You look at Derrick Reimer, my co-founder with Drip, you look at Ben Orenstein and you see how they’ve adjusted and adapted over time. And you know when you look at people who are really sharp and who are getting […] done, something you’ll notice about them is they don’t stand still for long. They don’t have the same skill set for very long. They are constantly adapting to new things.
If I’m hiring a team member, if I’m looking for a co-founder, if I’m evaluating a startup founder as I’ve been doing for the past several years but more intensely over the past 11 days since TinySeed applications have been open, a lot of this is not what do you know. It’s what can you learn, how quickly, and it’s trying to be able to evaluate how they can do that. So my question to you is, how can you evaluate that?
Mike: I think if you look at the history of what people have done, whether it’s launching small apps or working for different businesses, I feel like if you’re looking at somebody’s experience and they’ve done consulting at a bunch of different companies, that right there says that they have the ability to adapt, change, work in different environments, and presumably be productive. Otherwise you’re probably not going to get a lot of consulting gigs that way.
I have mixed feelings on somebody who’s doing consulting work for the same business for like five years or ten years or something like that. I would question how much adaptation there is there because you’re not adapting to different business environments and changing conditions. Going from one company or customer to another, it’s a very, very different experience between those two and there’s a lot of different things you have to manage. Whereas, if you stay in the same company or within that, the sandbox there, it’s not going to change a lot or dramatically.
I think in those cases, it’s a little less clear cut as to how to measure that. But I would definitely say, if somebody’s hopped around a little bit, then you can give them the benefit of a doubt in terms of their ability to learn new skills. The thing you have to be a little careful of though is, is it like entrepreneurial ADD where they just can’t focus on something and that’s why they switch so often? I think that many people suffer, I myself included, suffer from the shiny object syndrome where you hop from one project with other because something interest you and you’re not necessarily finishing things. That’s something that kind of comes into this. That’s something you have to balance that against.
Rob: I agree. That’s what you have to dig into. You touched on it exactly is was the person running away from something? Like, “Oh, this got too hard,” or, “Oh, that boss was dumb,” or, “They didn’t value me there,” or, “Oh, I got bored of that.” Or is it ambition? Ambition is not the right word because it’s this weird thing. I’m not that ambitious but I love creating new things. But I also finish what I started. I think that’s something to look at when your evaluating.
I agree that hopping from one thing to the next can actually be a good and a bad trait and it’s determining what their reasoning, logic, and motivations for doing that are, then I agree. If someone’s been working the same job or the same contract for years on end, it can be hard to gauge. You almost have to like, “I don’t know what else I would look at to figure out.” It just makes it harder to evaluate if someone hasn’t been tackling new challenges. I think that that’s kind of the thing that I’d be looking for.
I think the four axis that I look for when I think about someone as a startup founder, like skill set, I think of technology skill set, like are they developer or do they speak developer? Marketing, can I actually get stuff done, drive traffic, optimize a funnel, convert people, trial to paid? SaaS experience which is pretty unique. Most people don’t have it but do they know all the metrics and the numbers that churn the LTVs? Do they think in terms of SaaS numbers? This is one thing you can certainly learn but if someone already has that experience, whether they worked in-depth for one or whether they start at one. The fourth is kind of hiring, managing, and delegating of people.
There are certainly more more axis but those are honestly the four that, when I’m evaluating a startup founder, do I think they’re going to succeed? I look along those axis and they don’t need all four of them. Again, if they can learn stuff, you can start with one of them and branch off into the other three. But if you have two co-founders, I really don’t want two co-founders who both have a ton of tech experience and both want to write code. You want one of them who’s willing to know the marketing or to learn the marketing. Or one who’s willing to do the hiring and managing because assuming that you are going to scale up at least a little bit, you need to learn all these skill sets.
Mike: And that kind of leads directly into the next one which is difficult to measure resources. There’s certain types of resources like time and money which I think are directly measurable. But when you come into things like your personal network or your experience and your skill set, I feel like those are a little bit more difficult to measure in terms of what it brings to the table and what it means for the future. I think every situation is different. Those things are going to mean different things for different businesses.
Let’s say somebody brings a lot of domain knowledge and expertise to a particular problem that you’re working on and you want to involve them. The stuff that they know and that they have experience is going to be valuable. Is it stuff that you could learn on your own? Yes. The other side of that is perhaps and perhaps not. You have to take those things into account some way because they do make that relationship a little bit more valuable.
It also depends a lot on how long it’s going to take you to acquire that knowledge, like have they already tried to do a startup in that space and they either succeeded or failed? Those things can make a huge difference in terms of whether or not want to add that your team.
Rob: And then there are the measurable resources that each co-founder might bring. How much time does a person have? Obviously, a lot of us start by our products by working on them part time. What I’ve found in my experience is that people have a lot less time on the side than they think they do. A lot of times I have hired contractors—this probably happened six or seven times to me—where I’ve gone through a full interview process, done video interviews with 6-7 people, narrow, narrow, narrow, get somebody it’s like, “You’re sharp. Cool. You have a day job as a marketer and you want to run Facebook ads for me on the side. Love it. How many hours a week? Okay, you’ve got 15 hours, 20 hours. That’s great.” Then we’ll start and they’ll work four or five in a week. I’m going to, “Hey, what happened?” “Yeah, I just have a lot less time that I thought I did.”
This is something that I think you really need to dig into. If someone tells you they have 20 hours a week to work, I honestly think you should try to get a schedule and say, “Carve that time out because if you have kids, you probably put them to bed at seven or eight or whatever. So you’re working three hours a night during the week and then some on the weekend. If you don’t have kids, what does that look like?” Again, everybody seems to overestimate the amount of time that they have. I think it’s kind of human nature.
The other thing to think about in terms of a measurable resource is money. Does having some money help you get to escape velocity quicker? How much money does each person have to contribute? If you have an even amount, then cool. You can be 50/50 partners. If one person has more, that probably should buy them more equity, I think, unless time is out of whack. There is a bunch of things to think about but certainly someone bringing money to the table can be a bonus. I would say with caution, money is a very short-term thing.
In the early days of a startup you can think, “Oh my gosh. This person is bringing $20,000 to the table but they don’t have much time so they should get this huge chunk of it.” That makes sense for about six months. It makes sense until you get to the point where you launch and suddenly you start growing and $20,000 just isn’t that much money anymore. There’s the balance here because money in the early days is more risky. It is a big deal for someone to bring $20,000, $30,000, $40,000 into a startup that may never work. I would say consider all of these other factors. I would probably put above the value of just pure dollars invested.
Mike: Yeah. I think time and money tied together to some extent as well because if somebody has money set aside and the business isn’t quite making enough to pay the founders of reasonable income, can somebody extend the runway to some extent by living off of less? You may be able to command a salary $150,000 a year but do you have to? If the business can’t support that, then obviously you can’t pay yourselves that. How is that going to work? Is somebody essentially taking a massive pay cut in order to be able to contribute time? Do they have other sources of income?
That’s kind of really what I was getting at in terms of the measurable resources. Not so much can they dump a bunch of money on it but are they able to be somewhat self-sustaining and still contribute to the business while it’s getting further along? Nights and weekend project is a very different story. I think you brought up a lot of great examples and points about the fact that people have probably a lot less time available to them than they think they do. Some of that comes into motivation and as you commented earlier, whether they’re running towards something or away from something.
Rob: I think another big thing to think about is, talking about long-term goals a big deal because startup had a lot of connotations. Startup may mean you just want to start a really nice lifestyle business. It’s going to get you collectively $200,000-$300,000 that you guys split and that’s a good goal to have as long as you both agree on it. But if one person wants to raise venture funding or they want to go seven or eight figures and stay bootstrap, these are all different paths and it’s going to impact a lot of things along the way.
This is something that I would at least have a conversation. You may not need 100% everything ironed-out upfront, but to say, “What really is your goal here? Is your goal to work as little as possible and for both of us to make six figures? Okay, let me think if that’s what I want to do.” If you don’t, there’s going to be this constant tension as you’re growing your product.
Mike: And sometimes, these things don’t always work out and you may think upfront that your goals overlap. Those goals may change over time. I read an article from the guys over at Buffer where there’s three co-founders and initially, everybody was kind of on the same page. They all wanted to do the same things. Over the past couple years—I forget the exact timeline of that—they ended up kind of going in different ways. Two of the co-founders left the company and there’s one still there that’s running everything.
It was interesting to see that they laid out the different types of conversations they had and how it took a long time for them to get there. There are ways out of the situation if long-term you find out that your goals have diverged. But I think it’s important to keep in mind that if you have that conversation early and they don’t overlap right then, it’s possible they could kind of come in alignment but it’s probably not a good place to be starting from.
I think one of the last important things that you should be looking in a co-founder is, do they work well with others? Specifically, by others I mean you. But in general, are they easy to work with? Are they, not necessarily focused and driven, but can you hold a conversation with them and not get angry with them about how they’re doing things? Or vice-versa. Are they going to critique your work all the time and if so, is that something you can deal with?
There’s only so many ways that you can figure this stuff out. I think probably the best way to do it is just work together for a little while. I think you’ll very quickly see whether or not you’re going to be able to work with them long-term or not. There’s soon going to be some things that jump out of you very quickly and then some things that you’re going to learn six months, two years down the road that you didn’t necessarily pick up on right away.
It’s not necessarily good or bad but I think that hammering out what those things are that really irk you or the things that you do that irk them, if you know those upfront you can at least have the conversations and talk about it, and figure out whether it’s something that you can both live with or not. If you don’t do that then you could head for trouble.
I haven’t found any other good ways of doing that other than actually working with somebody. You can ask friends or colleagues or people who have worked both with you and that other person but sometimes those recommendations are: (1) hard to come by, and (2) people don’t really want to throw other people under the bus. It’s difficult to get that information from a third party.
Rob: That’s right and when I’ve done these reference checks, I tend to say, “Tell me about the hardest part about them. Tell me their biggest weakness. Tell me where did their plans […] are like.” I try to dig into this stuff. I try to just prove my theory that they are someone that I should work with. Or even not even just prove it but just to know. I can work with blind spots as long as I know what they are, like this person tends to give a very direct feedback, so be prepared for blunt feedback. It’s like, “Okay, that’s not a deal-breaker for me,” but when this person says something that shocks or offends me, it just be like, “Cool. That how they roll.” That’s also a big plus for a number of other other reasons.
I think a good story of this is like Jordan Gal with Ben Fisher and the founding of CartHook. They say they dated as founders and they really tried it out for quite a while. A couple months, I believe. They went and co-worked in one location and then another because they lived across country from each other. But they really got to know each other. I’ll even say with Einar Vollset and I, co-founders of TinySeed. I asked some folks who knew him better than I did. I know him through MicroConf but he and I never worked together. I asked a few folks, “Hey, you know him better than I do. Tell me about him.”
Then we started just working on a deck and that’s all it was. He said, “I don’t know. What you think? Should we do a deck?” “Cool.” Then I get to see not very much skin in the game. He and I are both saying, “Well, we’re not sure we’re going to do this.” I knew we’re going to do it but it was both of us kind of sizing each other up and saying, “Is this person going to be fun and complement my skills and are they going to work well with others?”
That was the big thing to just sit and hammer something out, to agree on certain things, disagree on other things, be convinced by the other person because you’re like, “Wow, this guy’s smart.” That’s the thing that I think you want to get to. So, even doing one or two smaller projects together before you do a full commit, I think can really be helpful.
Mike: In the beginning of this episode, you and I have chatted briefly about whether or not we’ve actually covered this particular topic before. I went back and looked in episode 408, evaluating whether or not you should take on a co-founder. That’s where we talked about that. This is more about what to look for in a co-founder.
Rob: And that was only 22 episodes ago and we had already forgotten? That is like six months.
Mike: We we were pretty sure. We knew we’ve talked something about it. We just didn’t remember the specifics.
Rob: I total did. It was vaguely. I knew we’ve talked about co-founders a number times. I just don’t know what the specific episodes have been.
Mike: That’s okay. We’ll let it go this time.
Rob: All right. If you feel like you’d like to add something to this list of what to look for in a co-founder, including how to evaluate that, you can either post at Startups For The Rest Of Us episode 430. You can post a comment there, or you can email us at questions@startupsfortherestofus.com, or call into our voicemail number and 888-801-9690. Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.