The Startups For the Rest of Us Podcast

The startup podcast with more than 750 episodes to help you launch and grow. 16 million+ downloads. 1000+ five-star reviews.

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Episode 125 | Optimizing Your Productivity By Working Outside of the Office

Startups For the Rest of Us
Startups For the Rest of Us
Episode 125 | Optimizing Your Productivity By Working Outside of the Office
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Show Notes

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[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I are going to be talking about optimizing your productivity by working outside of the office. This is Startups for the Rest of Us: Episode 125.

[Read more…] about Episode 125 | Optimizing Your Productivity By Working Outside of the Office

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Episode 126 | Introducing Our New hosts, Dan and Ian

Startups For the Rest of Us
Startups For the Rest of Us
Episode 126 | Introducing Our New hosts, Dan and Ian
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Show Notes

What works:

  • Results based reporting on a weekly basis.
  • Uninterrupted times of work. (creative work vs. grunt work)
  • Buddy system
  • Frequent touching base sessions in-person to ensure wires aren’t getting crossed.

What you need:

  • Flexibility in your working hours as a manager
  • sliding time wigit
  • Google calendar sync’d with everyone + google invitations
  • Skype + gotomeeting

SOD – Strategic Operating Document

  • Strategic Objective
  • Operating Principles
  • Operating Procedures

Examples

  • Team Communication SOP
  • Phone call rhythm, plan, and results.
  • Weekly reports.
  • TWBI, NWBI
  • KPI
  • Projects / Notes
  • Boomerrang to reach inbox at same time.
  • Example of what they look like.
  • Open Projects with GTD Cues, ie:
  • @ Friday Call.
  • @ Waiting
  • @ Elisa
  • @ Dan

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Coming soon.

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Episode 124 | 8 Ways to Rehab an Application

Startups For the Rest of Us
Startups For the Rest of Us
Episode 124 | 8 Ways to Rehab an Application
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Show Notes

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[00:00] Mike: In this episode of Startups for the Rest of Us, Rob and I are going to be talking about six ways to rehab existing application. Welcome to Startups for the Rest of Us: Episode 124.

[00:08] Music

[00:17] Mike: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.

[00:25] Rob: And I’m Rob.

[00:25] 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?

[00:30] Rob: I’m doing well. I’m knee deep in MicroConf logistical details and I am super stoked about something we’re trying this year. We’re doing Attendee Talks where we’re inviting people who already have tickets to MicroConf to submit ideas for talks that they want to give. The talks are short. They’re 12 minutes and we have received 21 submissions so far and then we’re – I’m sending out e-mail today or tomorrow to allow attendees to vote talks. They have like eight votes that they can distribute among all the 21 and then the ones that that go to the top will be given during MicroConf. So, I’m kind of knee deep in getting all that set up and we’re surprised there’s no platform really designed to do that like no SaaS app I could just pay for so I’d hacked something to make it work. But I’m stoked about the idea, the talk ideas that came through and the quality, the folks who, you know, submitted them. I know a lot of them by name. It has me excited to hear what’s going to come out with the audience.

[01:23] Mike: Yeah, I think the only downside is that I looked through the list of 21 talks and there’s a lot of really good ones in there. So, you really have to pick and choose which ones that you really, really want to listen to versus the ones you’re kind of lukewarm about and even though you still may want to listen to them. So, it’d be interesting to see what shakes out of the top though.

[01:40] Rob: Yeah, I agree. How about you? What’s going on?

[01:42] Mike: I am neck deep in AuditShark changes for the Linux early access people.

[01:47] Rob: Shifting focus might be a strong word but do you feel like that’s what you’re doing from Windows to Linux or seems to be more of a need in a Linux community for this?

[01:55] Mike: Yeah, I’m kind of back pedaling from my initial thoughts about whether I could just launch with Windows only and it seems like because there are so many people who are out there who are using Linux that it seems like leaving them out would be a poor choice. I’ve got things relatively working at the moment that I added a couple of things in and one of the customers asked me for SSH key support so because before, all I could support was a direct SSH connection and now, I have to support the certificates and everything else. But that’s coming along well that should be done in the next day or so. So, I should be able to hand that off to him ad start running.

[02:29] Rob: And once that’s done, is that when you’re done with early access or is that – does that going for another week or two after?

[02:34] Mike: No, it will go on after that. So, that will —

[02:36] Rob: Okay.

[02:36] Mike: …just kind of be the start of early access for this customer and probably several others as well. Once I get that in place, then I’m going to really hit the e-mail lines and start talking to people and saying, “Hey, you know, now the support is not only Linux but, you know, the keys and everything else,” and kind of see what shakes out of that. I think with the product itself is in a good spot. It’s just a matter of getting people in there to see what things are really interested in finding out about their systems.

[03:01] Rob: Did you hear that Google Reader is shutting down?

[03:04] Mike: I did.

[03:05] Rob: I think there’s an opportunity there. I think there’s an opportunity for someone to do a really niche play and go after journalist or high end power users of Google Reader who are willing to pay for it. I think going for a free plan or a free Google Reader has already not worked. There are several replacement Feedly and a few others and they’ve already shut down their free plans because they were inundated. I think they got like hundreds of thousands of new signups and they just shut their free plan down which is once again it’s like “Don’t start the free plan.” They weren’t listening to us at Feedly I think.

[03:34] Mike: I think that there’s too many people who are already there that I think there’s going to be this gold rush mentality of “Oh, Google is shutting something down and there’s a great opportunity here and let me see if I can exploit it.” But the problem is that there is already a market here that is pretty heavily saturated and there’s people who do this particular thing pretty well and unless they do what you just said which was pick a very niche market and try to exploit just those people, then it’s not going to fly. And in fact is that they could have done that regardless whether Google was shutting it down or not. It doesn’t matter. I mean if you really have a product that is geared for a specific type of person, it wouldn’t matter whether the Google is still running Google Reader or not.

[04:16] Rob: Well, but I think a lot of journalists and a lot of power users of Google Reader just wouldn’t have had reasons to switch but now it’s the big switch where you have literally hundreds of thousands if not millions of people who are suddenly looking for an alternative and you’re right, it is a gold rush. I mean there is going to be this massive switching going on and there’s a lot of opportunity there for someone to take advantage of. The question is whether you could get something out quick enough, right? Because there’s going to be media buzz and there’s going to be people switching for, what, maybe the next few weeks. I bet if you could get something. I mean seriously do like Coding Binge and get something out in a week or two that could at least do the very, very basics but do it really well. Do it similar…very similar to how Google Reader actually does it because that’s a complain I’ve heard is there are these alternatives but none of them do it quite like Google Reader did and I just keep waiting for someone to say, “Ha, here’s the winning ticket, you know, here’s the system that actually is able to do this.”

[05:12] Mike: In many ways, I kind of see it like Microsoft Word where Google docs does an okay job but at the same time Microsoft Word does the job too and there’s this minimum feature set that you have to have and as long as you got that minimum feature set covered, the rest of it is kind of icing on the cake but isn’t necessarily enough to make you want to choose that unless somebody really does get something out there that has some sort of killer feature that is going to shift somebody in one direction or the other, I just don’t see it happening and plus because it is at gold rush mentality, there are a lot of other people who are going to be doing this kind of thing. There’s going to be a lot of competition and you need some way to stand out and I don’t know what that would look like. I think that for every person who does something well here, there’s going to be probably a hundred or 500 who don’t or who [0:06:00] – will make an attempt and it’s just doesn’t pan out for them.

[06:04] Rob: Right, you certainly would have an advantage if you already have an existing codebase that was at least kind of doing this and you could repurpose it because to start from scratch at this point would seriously behind in the race. I also think there’s risk that Google may — due to the public outcry may decide to open source it or maybe they don’t shut it down. I don’t know if that’s going to happen. It seems unlikely but there’s a lot of risk but if you did Binge for a few weeks and try to get something out, you could just be shut down if Google decides to do a 180 on this decision.

[06:32] Mike: Well, I’ve read in some places that the – part of the reason why it’s getting shut down was because they were trying to pull a lot of the features from their – a lot of the social features and put them in to Google Plus and because of that, you know, it makes sense to kind of shut down that project so you have to do something with those people and you can move them in Google Plus or some other things that allow Google to have that social presence and at that point, you’re right, it may makes sense for them to say, “Okay, well we’re going to open source this and if you want to, you can run it on the Google app’s platform but you’re going to have to pay for us for the subscription.” And so, maybe they could turn it in to a money maker at that point but I don’t know.

[07:10] Music

[07:13] Mike: Today we’re going to talk about how to rehab an existing application and taking an existing application that either you acquired or you’ve kind of let fall by the wayside. It can be well worth the effort to rehab that application back to I guess its original roots so that you can actually make money from it. But the key is to know what those things are. And today, we’re going to talk about how to identify the problems with an existing application and how to fix them and essentially break it down in to two main categories and those two categories are cutting expenses and growing revenue.

[07:45] Rob: And I think you touched on some important points there. This isn’t just for people who are acquiring apps. This can very well be for any app that needs to be rehab. So, if you have an app that you’ve either neglected or one that you have been working on but you just haven’t been making the progress you want,  it maybe a good time for you to take a step back, get some new set of eyes on this thing to evaluate the product from this – I think we’re going to look at seven or eight different angles and figure out which of this need improvement and then we’ll get to the rehabbing. So, it’s both for people who acquired and who are just working on existing apps that they already own.

[08:20] Mike: So, we’re going to talk about cutting expenses first. And the first way that you can start cutting expenses is by looking at your products and identifying whether or not it has a free plan. If it has a free plan, get rid of it. It’s essentially baggage that you don’t need especially if the product is kind of limping along and it’s not doing very well. The support cost that are related to a free plan can just kill you and unless you have a really solid understanding of how long it takes to leverage those free users in the paying users, you really need to reduce the distractions and concentrate on delivering value to people that they are going to pay for versus providing a free servers that people are going to use because they don’t want to pay for it.

[08:59] Rob: Yeah, I view having the free plan and anything get rid of it unless it’s a way of reducing expenses and more as a way of ensuring that you are getting revenue from people who value your app because it’s likely that if you do have a free plan and you have several hundred or in the thousands of people using it, that some of those people, a good chunk of them would pay you something for your app if they didn’t have the option or the free plan. And if your app is in need of rehab meaning you either considering shutting it down or it’s just not…not doing the revenue that you need or if you’ve acquired it, then obviously, you need to get it to the point where it’s making enough revenue to basically justify your time in to where you can keep the app up and spend time maintaining it and supporting everyone. And to me, it’s valuable to all the existing users like you owe it to your users who are getting value out of it to continue supporting the app and if you need to charge people money to do that, then that’s how this works. I mean that’s how SaaS apps and for profit software works.

[09:59] Mike: This isn’t  to say that free plans don’t ever work, it’s just that you need to understand all of the numbers behind in order to make something like that work. And if you have a product that is limping along, you need to understand all the underpinnings and make sure that it’s a successful product before you start doing a free plan which is essentially a marketing effort of some kind.

[10:17] Music

[10:21] Mike: So, the second way of cutting expenses is to identify excessive hardware or software cost. If it’s a web app that’s got 200 users that’s running at a dedicated server, you can probably move it over to a VPS. Make sure that you look at the actual consumption of that application and make sure that the hardware that it’s running on is not severely over spec.

[10:40] Rob: I actually got an e-mail question this week from a member of the Academy and he said that he’s heard you and I talked about difficulties we faced with DreamHost and how we’ve moved sites to DaringHost. And my reply to him was we do still recommend DreamHost. DreamHost is not actually a bad host and especially if you get a brand new account on a new server, it will serve you pretty well for quite some time. Eventually it gets older and the hardware starts failing and they don’t really replace stuff in time but the idea is that premature in the optimizing and going with an Amazon EC2 instance that costs 70 bucks a month or you know, going through Rackspace and paying 50 or a hundred bucks a month or like you said getting a dedicated server which is obviously many hundreds of dollars a month and getting that up for a landing page, to have a landing page to sit on it for five, six months while you build your app, it just doesn’t make sense if you have any type of cash constraints. Obviously if you have funding or if you have a ton of money and you’re moving really fast, then this doesn’t count but we’re talking about bootstrappers. So, we’re talking about people where $500 over the course of six months is actually a decent amount of money, right? Like it’s money that you can use to acquire customers to pay to have articles written and infographics built.

[11:49] You know, with all the troubles that we’ve had with DreamHost and you know, a little bit of downtime here and there and some of slowness of stuff, I still have more than 25 websites on it. I still have audio files and video files, this podcast, the audio files anyway are host from DreamHost. There’s a lot of flexibility that it offers that I still recommend and while shared hosting is not something I would run a successful SaaS app from, it’s absolutely a decent place to get started very quickly and inexpensively and to get your code running on a box that’s not your local machine, to start doing some testing on a real server. And then even running, you know, early access and a beta and that kind of stuff, completely acceptable like I could see doing that on shared hosting and from there moving to a VPS either on DreamHost or, you know, potentially if you’re going to move it, I would consider moving it to another host at that point. And once you have people paying money for it and you know that you’re going to be ramping up.

[12:43] Music

[12:46] Mike: So, third place that you can cut unnecessary expenses is looking at the subscriptions that you have that are associated with the application. And there’s a lot of different things that you may be paying for, you may be paying for data fees or customer support software or Analytics, make sure that you take a look at all these different things and add up how much it’s costing you on a monthly basis. Make sure that you really need that subscription that’s associated with the application and one thing that definitely counts in to this is a merchant account. If you have a merchant account of any kind, merchant accounts will run you 50, $75 a month and that’s generally bare minimum just to have the merchant account and on top of that, you’re paying for the transaction percentages on top of that.

[13:25] So, make sure that you take a look at all those subscriptions, add them up, find out whether or not you’re losing money on it because I have seen applications where you start adding up all the subscriptions that are associated with running that application and it turns out that it’s losing money. And just by kind of nitpicking through them and identifying the ones that aren’t necessary, you can save yourself quite a bit of money. And in some cases, you can turn an application that’s not making any money in to something that’s making a couple of hundred dollars a month.

[13:51] Rob: There’s definitely a balance here. If you’re a busy founder and you have a straight path that you can see to growing your app by several hundred or  a thousand dollars a month, then spending a lot of time trying to minimize smaller expenses is probably not warranted. But if you don’t have that path, the app is not growing, you’re still feeling around for the marketing approaches that work, then spending some time in reducing this ongoing recurring expenses like you said can definitely be worth the time. If nothing else, it’s actually an interesting morale boost that month where you break even or that month when you make that first 1, 2, 300 bucks. Down the line, if the app hits 10 grand, you’ll look back and you say, “Boy, I really did need to optimize and save that $50 on the merchant account.” But early on, you need those small wins to kind of build your confidence, get you to profitability.

[14:41] I, for one, have done a number of things like canceling an authorized .NET account that an app I acquired was running on because the thing was it was over 75 bucks a month just to have the account around and by signing up for something like Stripe, you have suddenly know, you know, you have $0 out of pocket per month and you add that up to a couple other expense reductions and pretty soon like you said, you can go from making zero to making 1 or 200 bucks a month and you just feel a lot better about the app at that point.

[15:08] Music

[15:11] Rob: So, the second category of approaches to rehabbing an app is growing revenue and it looks like we have five things outlined for this section. And the first one is if your app doesn’t have a lot of traffic. There are a lot of negative things about not having a lot of traffic. One, it makes it really hard to test. If you want to do any type of split testing of messaging or positioning, if you don’t have much traffic, it’s just – it takes forever to do or it’s nearly impossible. In addition without a lot of traffic, your numbers are skewed in terms of trying to get a percentage of people that convert to trials. If you only get a hundred or 200 uniques a month, you can get 5% converting to trials one month and you can get 0% in X month. And so your numbers are just all over the place until you hit that critical mass.

[15:55] So, it is important early on to focus on increasing traffic to a point  and then iterating through the other four things that we’re going to talk about. Bottom line is if your site has low traffic, there’s a ton of approaches. I mean this is that big question, right, how do I market my app? I would say if you’re wondering how to increase traffic to your site, put together a marketing plan, look at episode 122 where we talk about paid acquisition content marketing joint ventures and we outlined a lot of startup B2B marketing strategies and go from there. Get started. Turning that 1 to 200 uniques a month, you want to get that to 2,000 and then 3 or 4,000 and that’s when you can really start running some test and figuring out what you need to improve on your site.

[16:38] Mike: The key piece of this is that if you have low traffic, you need to identify that as being a problem for the application. It’s okay that if a particular website or a particular application has low traffic as long as it’s converting well. If you don’t have good conversions, if it’s not bringing a lot of revenue and you have low traffic, then you need to identify that low traffic is one of the problems and be able to address that issue.

[17:01] Rob: No, that’s exactly right and you don’t want an app with 500 uniques a month that has never been optimized that has a crappy funnel and that you’re not looking at the key metrics that your churn is high. All those things that has low lifetime value, that app is almost worthless. You’re just – you’re not going to get very many customers. But if you build that app up and you hone all those things I just said, you know, you really dial them in and you focus on them and improve them and you build it up to 5 or 10,000 a month and then eventually for some reason it falls back down to 500 a month, you are going to convert and keep so many more customers from that same 500. It can literally be 5 times more revenue just because your funnel is improved. So, that’s a good point. It’s not that having low traffic is a terrible thing, it’s that without enough traffic you can’t optimize and then cycle back and generate more traffic.

[17:54] So, the second approach to growing revenue is to optimize your customer acquisition process and it’s basically reducing  friction when your customers sign up for your app and when they’re getting on boarded. So, when they’re getting set up with your app, the steps they have to take to get value from the app. You want to minimize friction during that entire process. So, as an example, if you sign a process in multiple pages, look at how that can be trimmed down. There’s almost always room to shrink your registration form. Never ask for the password twice. Let just adds one more element and if they’ve missed enter a password, use the ‘forgot password’ link later. It’s not that important to reduce your conversion rate to make sure that they got it right the first time. Never ask for a user name. Always use their e-mail so that eliminates another form. Never ask for captcha unless you’re receiving 10, 15, 20 spam sign ups.

[18:40] It’s just one more form, so go through your signup process. Have someone else screencast through your signup process. You can use tool like UserTesting or Feedback Army or just ask a friend or colleague to go through it and give you brutally honest feedback. In addition, you can install a tool like CrazyEgg or Inspectlet and record what people are doing in your signup process and see when they’re canceling that has actually been a better help, you know, than Analytics are kind of tricky, right, because they’ll show when people bails but you can’t really see why and adding a better tool to do that will give you some insight.

[19:11] Mike: And as Rob said there are some clear cut ideas about what you should and shouldn’t be asking for in the signup pages. There’s a lot of research that’s been down around what sort of things should be on the signup pages and if you look around in the Unbounce has a lot of good articles and good information on their website about that kind of stuff but there’s definitely whitepapers out there as well. They show a lot of case studies around what changes have been made to a site and what it’s conversion rate was before or after and how well it produced results after the redesign based on some things that they added or took away.

[19:43] Rob: And if you’re on doubt and you don’t know what to put on your registration form, you should make it four or maybe five fields. It should be an e-mail address and a password and their e-mail address, also the services, their username and then you should, assuming you’re asking for credit card number which I would default to if you are a SaaS app to ask for the credit card number before  the trial, you ask for – so the actual credit card number, the expiration date and potentially the CVV and that will you put to five. Sometimes there’s reason to ask for other form elements but to be honest, I’ve seen registration forms like HitTail’s when I first took it over, I think it was 15 fields and it was all types of stuff, company and phone number and even like address that it isn’t actually needed to charge your credit card and unless you’re having problems with credit card fraud, you should enable AVS which is the fraud detection that then requires a zip code.

[20:33] If you are having problems with fraud and you have charged back and stuff and now, you know, that’s the time to optimize on that. But early on, it’s about you’re optimizing for reducing friction and that will help you get more people in to your form process. In addition, while I do default to asking for credit card upfront, it’s absolutely worth testing not asking for it. You know, if you can get more people in to your app and help you reduce some friction in the on boarding process that can be beneficial as well. But by default, people want to take the easy way out, new founders especially, the easy way out is to not ask for that credit card and hope people will convert later and typically, that results in very, very low trial to paid conversion rates.

[21:11] The third approach to growing revenue is to identify your key performance metrics and not just to identify the metrics but actually track them on a daily basis or weekly basis. And so these are things like your conversion rate from visitors to trial, conversion rate from trial to paid, the lifetime value, the customer, the average monthly value of the customer. Churn is the other one and you know those, what is that? Maybe five metrics and you know them cold and you really focus on them and focus on improving them, you’re going to get 80 or 90% of the way there. Don’t actually feel like tracking metrics is this overwhelming process. There are people who make entire careers out of it just like there are people who make careers out of SEO, yes, it can be a very complex thing. Take the 90-20 approach to it and get 90% of the value and 20% of the time by just looking at a few metrics.

[21:57] Mike: One thing to be really careful about when looking for this the key performance indicators is that there are certain types of metrics that don’t mean a whole heck of a lot and one of those for example is the number of people who sign up. That number should theoretically grow overtime the same way with direct traffic measurements. Some people will say, “Oh, well, my direct traffic is going up. So, it’s must be word of mouth that’s spreading my application,” and that’s not necessarily true. The fact is though that you want to concentrate on metrics that actually means something to the business. The number of new signups per day doesn’t mean a whole lot especially if those people cancel a week after they started their subscription. It means a lot more if they stick around for six months.

[22:36] So, you will know things like churn and lifetime value and those things are much more important than these, you know, I’ll call them vanity metrics where, yes, it’s nice to have the number of people signing up on a daily basis increase but what you really looking for is for those people who stick around because it means that the mechanism that brought them to your website means they are qualified traffic and what you really looking for is qualified traffic. And if you can back track from your lifetime value and churn and identify the sources of that traffic, you can double down on them later.

[23:06] Rob: Fourth approach to growing revenue is to reduce churn. Obviously, you have to be tracking churn and looking at it in order to reduce it. Churn is a huge deal and it’s actually really hard to fix. It’s hard to have a blanket answer on how to fix it. Reducing friction can be reduced to, you know, some basic rules of how to get people on board but reducing churn what I found is the best ways to ask people. E-mail everyone who churns for a week or two weeks or a month and you know, you can have a VA do it as I’ve done with HitTail or you can do it yourself. You need to get two groups of people. One, people who try the app but never convert to paid and then you’ll have a whole group, a whole list of why they didn’t convert. Then you ask customers who paid you and then canceled at some point after that and they’ll have a different set of reasons.

[23:53] And basically one by one, you go through and you might have 20 reasons in each of those groups and you try to boil those down in some action steps. And several other reasons will group together in to like the person not understanding how it works and not understanding the value proper, either just spend too much time setting it up or something like that, I recommend just putting together a bulleted list of points that you need to have action item essentially that you need to get done. I’ve called them operation retention in the past. We’re actually just wrapping up operation retention 2, once again to decrease churn with HitTail. What I found overwhelmingly is that there is often a feature or two that is having people churn but a big part of is really getting people to get value out of your app like it’s education. A lot of it is recording new screencast and e-mailing them at the right time.

[24:40] Life cycle e-mails are big win for this kind of thing and touching base with people periodically, you know, really getting them to get value out of the app because that’s going to be the best way to have them convert to paid customers and just stick around. It’s about the beauty of the SaaS model but it’s also the curse of it, right, it’s that someone can cancel at anytime. And so, you really do need to provide value for them and in order for them to get value out of it, they have to be using the app. That’s one of the big ways that I’d see reducing churn.

[25:05] Mike: One of the ways that you can leverage the data that you’re getting out of your application for this churn is to take a look and kind of categorize how long people stick around for it and see if you can aggregate them in to cohort where if people who have signed up, all of approximately the same time, see if they stick around for a varying amounts of time or whether they all cancel it around the same time because it may very well be that you’re introducing things in to your application that are causing them to quit and you happen to see that everyone from this particular point quit and if that may help you as your win on specific changes that are being introduced in to your application that are causing that.

[25:45] Rob: But if you look back at the four points we’ve covered, the first one was having low traffic, so increasing traffic and the second one was optimizing your customer acquisition process. Third one was identifying your key performance metrics and the fourth one was reducing churn. And those go in order like you need enough traffic so that you’re able to optimize your customer process, you’re able to get some metrics that are stable. So, you need enough people going through your funnel to figure that out, then you need to reduce churn to keep enough people there and once you’ve reduced churn to a point where I’ll say it’s reasonable and you aren’t just bleeding new trials or bleeding customers, that’s when you cycle back and you go back to number one and you increase traffic again.

[26:25] So, you take it from that 3 to 5,000 uniques that I talked about earlier. Maybe you try to double it to 10,000 and at that point, you’re going to learn more because your market is going to expand a little bit. And then you come through again and you optimize that acquisition process. You identify your key performance metrics. You reduce your churn again and it is the cycle in each time you go through and I mean this is can be a 6-month cycle, you know, of just stepping through these things. But a mistake that I see people make is they just focus one of this and they just focus on traffic, traffic, traffic but if you’re bleeding customers at the other end, it doesn’t help where if you’re always focus on reducing friction or reducing churn but you’re not driving enough traffic, then you don’t have enough data and you aren’t optimizing that whole cycle of it. And like I said, you can literally get 5X out of the cycle maybe even 10X because if you double each of this which is not that hard to do especially early on they multiple each other. It’s not additive. It’s actually multiplicative. So, a 2X improvement in 1 step is then times to 2X times to 2X, you’re looking at in 8X improvement, that is honestly it’s kind of trivial especially early on in an apps lifetime.

[27:27] Mike: It definitely helps significantly more and then overtime as you grow the application, you get more customers, you know, it multiplies in to a larger number.

[27:35] Music

[27:38] Rob: So, the fifth and final approach to growing revenue we’re going to talk about today is selling more to your existing customers and by that I mean providing more value to your existing customers that they are then willing to pay more for. And examples of this are building new add-ons to your app. I talked about this last year on my MicroConf talk but in essence with DotNetInvoice, we added a QuickBooks module that allows you to live sync with QuickBooks and it was at a lot of development time but on a $300 like DotNetInvoice, we’re able to charge another 99 bucks for that module. So we’ve, you know, increased our lifetime value by 33% in that case. With HitTail, talked about adding the one-click articles and that has created a lot of value for people and not only has that generated revenue but it is helped tremendously with retention because people feel like they’re getting more value out of the app and you can find an approach like that but actually gives you double value. It actually retains people and generates revenue even better.

[28:34] In my mind you should always be thinking of how to move up the chain in terms of providing that next level of value for customers. So, if I had an app that was to help people build documentation for their software, I would launch the app, have people using it and then as soon as people, I would try to figure out how to concierge service where we would actually write their documentation for them and I would find someone, contract them, hire them, whatever it took but have that next price point because there’s probably going to be someone willing to pay a pretty penny for that and it’s going to make a way, way more likely, you know, to use your app and to stick with it.

[29:07] Mike: One of the things that goes along with that is that it’s very difficult to move somebody from paying nothing for something to even paying a dollar. So, whether your price point is a dollar or, you know, a hundred or a thousand dollars doesn’t really matter. The point is that there’s this huge amount of friction that’s in the way between them pulling out their credit card and actually signing up for your service. Once they’ve decided to do that, then it is significantly easier to make upsells to them and that’s a lot of what Rob was talking about was providing them opportunities to buy more stuff. So, whether you do it right at the point of sale or whether you do it afterwards where Rob did that with HitTail where he’s providing value to customers with the keywords suggestions and then offering to write articles for them that will help them with their SEO.

[29:50] Those are two different ways to do it but at the end of the day, it’s the same thing. I mean you’re basically increasing the lifetime value of those customers and because they are already being charged for the service, because they’ve already made the conscious decision to move ahead and actually pay for it, they’re going to be much more likely to do that than if they were on a free plan or just trialing the software.

[30:09] Rob: The fact is a lot of it is about building trust. If someone pays you a few bucks a month to use your app and they are getting some value of it and then you add a new service that it may costs double, double what…what you’ve already provided them but they trust that you are solving their problem and that what you provided them so far has been relatively low friction, it has provided a lot of value for them, they either save time, they save money or they make money, then it’s kind of a no-brainer, right? It’s like the big trepidation with signing up from a new app is like you said it’s giving your credit card to a new company. It’s entering your log in credentials and figuring out your log in credentials. It’s just getting ramped up and figuring out, spending the 20 minutes to get set up.

[30:48] But if you already somewhere and you already set up and someone says, “Hey, with this one-click, you can get even more value out of the app and of course you charge something less than of how you’re going to get out it,” then hopefully, build the trust in your customers that it’s worth their while. And that’s the idea like I said going up the value chain. It’s like how can I provide my customers with more value and make a little more money in the process but really provide them with way more value than I’m charging them for because that always has to be the equation.

[31:17] Mike: So, just to recap the eight ways to rehab an existing application is that they fall in to two different categories. The first one is cutting the expenses. If they has a free plan, cut the free plan. Step two is to analyze excessive hardware cost and get rid of them. Step three is to analyze any unnecessary subscriptions and get rid of those. The second category is growing revenue. If you have low traffic, then you need to address that issue. Step two is to optimize your customer acquisition process. Step three is to identify the KPIs that are associated with the business and step five is to sell more to existing customers.

[31:50] Rob: If you have a question or comment, call it in to our voicemail number at 888-801-9690 or e-mail us at questions@startupsfortherestofus.com. Our theme music ] is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.

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Episode 123 | How to Sell an App, How to Run a Smoke Test, Mobile Game Marketing, and More Listener Questions

Startups For the Rest of Us
Startups For the Rest of Us
Episode 123 | How to Sell an App, How to Run a Smoke Test, Mobile Game Marketing, and More Listener Questions
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Show Notes

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[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I are going to be talking about whether to sell your app, how to run a smoke test and a question about mobile game marketing. This is of Startups for the Rest of Us: Episode 123.

[00:13] Music

[00:20] Rob:  Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.

[00:29] Mike: And I’m Mike.

[00:30] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?

[00:35] Mike: So, we have two new MicroConf sponsors we picked up PickFu and Tealeaf Academy. PickFu is a lightweight marketing polling software application for logo designs, marketing material, product ideas and the Tealeaf Academy is the online boot camp for learning how to develop web applications.

[00:52] Rob: Many thanks to PickFu and Tealeaf Academy. While we’re talking about MicroConf, we have a couple of speakers that had been on the works for a month or so have finally confirmed that Josh Kaufman who’s the author of bestselling book Personal MBA and he also runs a website personalmba.com, I really enjoy this book. It’s a long kind of compendium that covers a lot of topics and so some of the topics didn’t apply to me but a lot of them were very well-covered. So, we’re please to have Josh and he’s going to be covering like idea validation, vetting an idea and some processes for doing that. So, I’m super excited to hear from Josh and the other speaker is Joanna Wiebe from Copy Hackers. I bet a lot of people in the audience know her. She’s been on Tech Zing and Mixergy and Copy Hackers is a series of books that she wrote on copywriting for startups. So, excited to hear what she has to say as well.

[01:44] Mike: Very cool.

[01:44] Rob: What else is new?

[01:46] Mike: Well, I’ve got an early access customer scheduled for next week who is going to be going through some of the Linux auditing that I’ve got set up. I’d still need to implement SSH keys but over the past couple of days I’ve been working pretty hard on the Linux stuff and that stuff seems like it’s all working right now. So, I just need to implement the SSH keys that will allow them to essentially restrict how the application gets on to their machines and where it’s going to come in from because they have IP address restrictions as well. So, it will only be able to come in for my servers using these particular keys.

[02:20] I’ve had a couple of different conversations with two really large customers over the past two weeks who have auditing needs. One of them is a local municipal government which has 15,000 employees and the other one is a public company and both of them are having the exact same problem and it’s a long the lines of what AuditShark is intended to do. So, I hadn’t plan on implementing some of this functionality for a while but when giving customers demand you kind of do what needs to be done. So, I’ll be looking at how to add that functionality and pick up those guys as customers.

[02:51] Rob: And how do you hook up with those two big gorillas?

[02:53] Mike: One of them found the AuditShark through the podcast actually. So there was somebody who was working at the company and found it and kind of forwarded the information to his co-worker who said he definitely be interested in talking to me and then the other one I did some consulting work for them and they’d seem to be having this problem. I was just kind of talking to them in general about what sort of challenges and stuff they were running in to and the problem came up. I had a nice conversation about it but it turned out that after that one then this public company came and found me. So, yeah, it’d be interesting to see how that it turns out though.

[03:27] Rob: The early access going well, are you still looking at next week or so to end that? Have you gotten a feedback yet?

[03:34] Mike: I don’t think so. I’m still looking for more. I think that the Linux stuff is going to play in to it a lot more than I originally thought. There’s much more demand for the Linux side of things than there is on the Windows side. The Windows side is more of a take a second look at the machines but it’s not real clear what people are really looking for or what they’re interested in seeing whereas on the Linux side, there are a lot more distributions. There’s a lot more clean cut rules about what sorts of things you should be doing and should be looking at. So, I think that the Linux side is definitely going to be bring to light a lot more things.

[04:05] Rob: Very good. Yeah, on my end I have a couple of updates. One is that was originally hoping that I’d be able to launch Drip in early April but I knew that if it slip at all that I wouldn’t be able to launch it until after MicroConf because launching like the second week of April is just not possible given how much, you know, time is required and mental energy is required to put up MicroConf. So, over the last couple of months, we have either iterated on a few things or we have added enough features to kick it just over the edge. So, our code complete deadline like the early access deadline was April 1 for a while and it’s now April 10 and that’s just too far for me to be comfortable with it. So, we’re still going to start early access at that point. I’m probably going to have it installed on HitTail and HitTail is going to be using Drip within the next probably 7 to 10 days is the goal and then once we get through about a week, a week and a half of that and have all the kick sort out then we’ll start the first early access customer and then probably bring a few more on in April but the launch launch that where it goes public, goes live will be after MicroConf and – I struggled through this decision, you know, whether to push it off or not but it is absolutely the right decision now that I look at all the pros and cons of it.

[05:16] There are a very few reasons not to push it off. It gives us more time to handle things and we saw a very specific and spelled out project schedules so it’s not as if I’m saying, “Oh, we’re just going to push it off two months. It’s like we saw a milestones that we’re hitting every week and it’ll just be better for all of us involved because I was starting out to pull late nights and get stress out about things and I think like you I always underestimate how much time MicroConf is going to take. Third year you think I would learn by now but it just takes more time than, you know, than I think it’s going to prepare for it.

[05:46] Mike: Yeah, you and I were talking about it earlier and it’s only six weeks out at this point. So – [Laughter]

[05:50] Rob: Yeah, it’s crunch time.

[05:51] Mike: Definitely creeping up quick.

[05:52] Rob: Definitely. I also wanted to mention a correction and our editor actually caught this. She said two weeks in a row you had said that I was quoted in the Wall Street Journal and I corrected you and said, “No, it’s the New York Times.” Well, it is the Wall Street Journal. So, I shouldn’t have corrected you.

[06:07] Music

[06:10] Rob: This week, we are answering a bunch of listener questions. We had some really good listener questions in the queue. I’m excited about it. Our first question is from Dan Taylor and he says, “Hi, guys, a long-term fan here. Here’s a question for the show. My situation is that I along with the two minority partners developed Course Director which is a SaaS app for schools and colleges that integrates with Google apps and is sold via the Google apps marketplace. We’ve built it in to a respectable 5-figure income. We have a recurring revenue model charging a certain amount per use per year. The current reality is we have all now that too much going on with our main projects and the time we are taking to support our clients and add new features and in general it just getting to be too much.”

[06:53] “So, we’ve all looked at all our options and detail and decided we definitely like to sell our app which for someone currently in the education space that could easily be a 6-figure income. Someone based in the US pretty much easier – have much easier time with the business just for starters as a majority of customers are there. So, you’ve talked before about buying an app. I want to find out if you had any thoughts about selling an app. Cheers and love the show. Dan.” The thing I want to point out is that remember last episode we talked about one of the launch mistakes and it’s not growing your startup fast enough so that you lose interest. This is —

[07:22] Mike: Uh huh.

[07:22] Rob: …that’s basically what it looks like has happened to you, right? It’s like you have an app and it’s kind of successful and that actually sucks more than having an app is not successful at all because if you have an app that’s not successful at all, you can shut it down and move on and you don’t  feel bad. You don’t feel bad letting customers down. You don’t feel bad about the all of the revenue you’re leaving on the table and Dan – so Dan is in a tough situation. It’s almost – almost worse to have some success than it is to have none because now he’s in a situation of like what to do with this app?

[07:50] So, I think before I tried to sell it, I would look at automating this as much as possible and whether that means writing some code or hiring like a product manager or a general manager, someone to help run the app depending on how much revenue is coming in and depending on how much time it actually takes. I would look at that first because selling an app is not trivial especially if this thing is making 5 figures a year and you want 1, 2, 3 times annual revenue, that’s a non-trivial purchase price. And so, it’s going to take a long time and you’re going to need to find the exact right buyer. You could always throw it up on Flippa and try to get 12 to 18 months revenue but in this price range, it’s not going to be an easy sell.

[08:31] So, that’s the first thing that I’d entertain. It’s always easier – it’s like an easy out to sell and I know people just want to cut ties and walk away and it would feel really good not to have to worry about it at all but that’s not always a right choice. I mean you really have to ask…ask yourself the question, “If I could find someone who was maintaining this and doing a really good job and it was kind of throwing off a dividend for me, would I prefer to do that rather than let this go at probably a bargain basement price.” Because to be honest apps are bought not sold. What I mean by that is if you go to sell an app, the odds of you getting more than 12 to 18 months of net profit are pretty low. It does happen but in general, it’s just going to be tough going cold in to a market especially if you need a high touch sales and I’m not sure if you do it or not with this app.

[09:18] And if you decide you do in fact want to sell, it’s just a matter of looking at some good Flippa auctions that have done a good job and maybe modeling your post after theirs providing a lot of information, very honest upfront and not having too high expectation, you know, for what you’re planning to get in terms of price. In addition, the last chapter of my book, Start Small, Stay Small covers this. It’s just, you know, maybe ten pages but it covers in detail how I would go about selling an app and it actually has a sample listing from Flippa.

[09:46] Mike: Part of the challenge is you’re running in to is the fact that it’s not just him but it’s him and two minority partners. So, there are these other people who are involved and they probably have some sort of decision making ability in to it and the problem is that as you said it, it seems like it’s more like burnout than anything else but there’s a big gap in the 5-figure annual income and if you look at the average player’s point here’s $1500 a year, well, it doesn’t take very many customers in order to hit $1500 a year and if you go look on Course Director, there are 28 verified reviews and 39 regular reviews. So, you could probably guesstimate and say, okay, well, it’s probably got 60 customers or something like that but still about 75,000 a year. It’s not enough for one person to live on but with some effort and work, it could be. You know, how do you shake off those other partners? I mean maybe that’s another option is to find a way to have one of the partners buy out the other two —

[10:43] Rob: Right and even potentially using revenue from the app if you’re motivated to do so.

[10:48] Mike: Right and that could get around the potential problem of dragging out a sale for six months to a year or two years trying to find a potential buyer who would be a good fit.

[11:00] Rob: Right, I quickly jump to the conclusion that he should post it on Flippa but that’s probably not the first thing I would do. If you do in fact decide to sell, I would find your strategic, right? Find the companies who would benefit the most from this and reach out to them and probably do cold e-mails or calling and say, “Hey, I have an app and it’s for sale on limited market, you know.” And try to sell it to them first before you just go to the broader market because the broader market really is a more of a wholesale price and if you can find someone who actually has strategic value for this app and they could do a lot better with it.

[11:31] Mike: Yeah and to find people like that too you could potentially approach and sell. There are publicly available list of approved vendors for each state. So, what you would do is you probably go find one of those approved vendors. They are allowed to sell typically through like a bulk purchasing. So, for example, I’m in Massachusetts and I’m sure that there’s a publicly available list where I can go there and say, okay, well can the state or federal agencies who were based here buy from such and such vendor because they have to be listed there in order to use some of their pre-arranged purchasing agreements and you could just go down the list and see which of those in one or multiple states kind of fits the criteria for company that you might want to sell CourseDirector to. That’s probably where I would start looking for that kind of thing.

[12:21] Rob: So, thanks for the question, Dan. I hope that helps. Our next question is on smoke testing and this is from Alex. He says, “I’m an indie consultant getting ready to experiment with MVPs for some products of my own. According to the lean methodology I should or could set up a landing page with a “Buy now for 99 cents” button and have that redirect not to a Shopping Cart since there’s really nothing to purchase at this time but to an e-mail sign-up form. But what do I tell my potential customer on that e-mail sign-up form? Do I, one, tell them they’re part of a product experiment which is the truth? Two, tell them that the product isn’t done quite just yet, a half truth? Or three, we’re overloaded with business right now and if you give us your e-mail, we’ll put you online, a lie? What are your feelings, thoughts and experiences with this dilemma?”

[13:05] Mike: I think my first thought is where is the fourth option that basically says that you’re trying to validate the idea and with enough interest? I mean because the first one is pretty close I think. It says, “Tell them they’re part of a product experiment.” But when you’re putting content like that on a website, I think that by saying exactly that you’re going to turn people away and you’re going to get a much lower conversion rate to begin with because people don’t like to be guinea pigs. So, even though they are on a daily basis, they don’t like being told flat out that they’re guinea pigs. So, what I would do is I would say, you know, you’re validating this product idea and assuming there’s enough interest, you’re going to move forward with it. You don’t want to come out and say, “Hey, you’re part of a product experiment. Please give us your e-mail address.”

[13:45] Rob: I also question how you’re going to sell a 99 cent product or how you’re going to vet a 99 cent product using a landing page because I have never heard of that being done. I think that the minimum price to really do this or to consider using the marketing kind of the funnel approach where you drive traffic to a page and you convert it either to e-mails at this stage or to purchases eventually, I mean there’s just a minimum purchase price where that works because otherwise you need absolute free traffic.

[14:13] So, I guess if you had a bunch of SEO and resending people to it and you could convert one out of a hundred, maybe, you know, then you’ll make a 99 cents per hundred visitors which is just a tiny, tiny amount. So, I think in the last year, your lifetime value of your customers is a lot higher than 99 cents. I just question the value of a smoke test at all. I haven’t seen it done with price points that are this low. So, Alex if you do this and you know, you find out that it does or doesn’t work, we’d love to hear back from you.

[14:39] Mike: If you had to guess, what would your price point, your minimum price point be?

[14:43] Rob: Yeah, I was going to say 19 bucks one-time or like between 5 and 10 bucks a month SaaS. I think anything less than either of those. Unless you have extenuating circumstances like you have in-app purchases that actually mean, you know, you have a higher lifetime value, I think the rule start bending on the edge cases, right? It’s like if you have a $3 one-time purchase product or you have a $10,000 one-time purchase product, it just I just don’t think this approach works as well because one is high touch and one is solo touch that you can’t even really afford to test it.

[15:16] Mike: Uh huh.

[15:17] Rob: So, thanks, Alex. I hope that helps. Our next question is from Joe Hopkins and it’s a question about whether mobile gaming follows our marketing rules. He says, “Hi, Rob and Mike. I love your show. I discovered it a few weeks ago and have since gone back and listen to most of the episodes. I left my job about a year ago to focus on my bootstrap mobile game business and I found your podcast to be very helpful and much more applicable than other podcast that focus on larger VC back startups with no revenue. What are your thoughts on how your podcast relates to mobile gaming? Does your marketing advice apply to casual gaming that generates revenue by selling one dollar games? Should I look in the marketing funnels and acquisitions on episode 112 or am playing in a different game? Currently my business generates most of its revenue from one hit game that generates a humble $100 a day. Thanks.” And Joe is from doubletapsoftware.com.

[16:01] Mike: I’d have to say that most of the stuff that we talked about is probably not applicable to the mobile gaming environment. I almost have to go so far to say that most of the stuff that we talked about is probably not applicable to the majority of the mobile environment to begin with. I mean I’d certainly don’t have any experience, you know, selling mobile games and I would have a hard time giving somebody advice to say, “Oh, this stuff is going to work for you in this environment.” I mean you could certainly try it and if it works, great. If it doesn’t, then you at least tried something new.

[16:32] Rob: Yeah, the tough part with giving advice and being focus, the more focus your advice gets, the fewer people that actually applies to. And I think overtime if you look back to our early episodes, we really did include a big – so other people will include mobile and we included web and probably even desktop. But as time is going on, the audience I think had shaped around web apps and a lot of SaaS apps and some one-time download stuff. But for the most part, a lot of questions that come in really specifically are about SaaS apps and web apps. And so, a lot of what we do talk about absolutely applies to that kind of app and as you break out of there and get past the edges like you said, mobile I think a good chunk of what we talked about works but probably not the funnel stuff, the funnel optimization because it’s just – it’s sold in such a different way because the app store model is different.

[17:19] But if you think of optimizing for iTunes like optimizing for Google in terms of just getting traffic in and then if you think of your listing in the iTunes App Store or the Android App Store as your marketing website, then the fundamental stuff that we discussed still applies there but maybe not the exact tactic that we talked about when we talk about, you know, including a video demo or whatever, you know, on your website. Obviously, you can’t do that in the iTunes App Store but if you go one step further than a lot of you competitors and instead of just having some basic screenshots in your app, you actually have kind of a marketing website that you build within that little iOS App Store frame, people who just do a better job of marketing their app, right?

[18:01] So, the bottom line is I think in general what we say applies to both to mobile and web and desktop but there certainly are some specifics that won’t and I think these things you called out like having a marketing funnel and being able to pay for ads and that kinds of stuff, it just doesn’t work with 99 cent lifetime values. Gaming is another, like another animal all together and almost none of what we say applies to gaming because gaming is a hit-based business. You’re going to hear more important information if you talk to like a record executive or someone building movies or TV shows because they’re not bought on value, right? And we talk mostly about things that are bought or sold on value. That means that they save someone time, make them money or save them money.

[18:45] Mike: Yeah, one of the problems that I’ve seen as you said it’s a hit-based business but even with some of the games that I bought for my phone I mean I’ve looked through with some of the other games that been developed by the same developer and a lot of them I just don’t like. So, they’ll come out with a great game and then I look to see what other things that they have and a lot of the other stuff just isn’t as good or isn’t something I’m interested in. I mean the only thing that I can think of a strategy would be to find a hit game that you’ve developed and then build related apps around it that do similar things or have a similar type of game play but are not exactly the same thing.

[19:20] I think Rovio did a really good job with expanding their Angry Birds franchise and making all these different variations of what is essentially the same game and that might work very well in the mobile space. I don’t know how well it would work in like a desktop game space but obviously, there’s a lot of games that come out where you have sequels to them and they take years to develop. But I think with the mobile space, you might do a lot better churning out some of those games that are very much related, share a lot of the same codebase.

[19:50] Rob: Yeah and Patrick Thompson from Inkstone Software who has a QuickReader that I mentioned last week, he has built a portfolio, a nice set of portfolio of related apps. Now, they’re not games but it is in the mobile space and he did a talk at Portland Mobile Users Group that was fascinating and it actually linked up pretty well with a lot of what you and I talked about on the podcast. There were one or two places where we diverse and that’s because mobile is different from the web. But for the most part, a lot of the stuff that we talked about here, he basically confirmed as, you know, is true and works well within the mobile space.

[20:24] Mike: And there’s a link to that talk on the last podcast episode.

[20:28] Rob: So, thanks for your question, Joe. Our next question is from Mike Nava [Phonetic] and he says, “Hey, guys. I wanted to drop you a note and tell you how nice to stumble across your podcast a few weeks ago.” He has a long e-mail so, I will summarize. He says, “My concern is as a startup within I think a cool idea that solves a problem, how much do I put out there? I do not want someone to take the idea and start their own before I have a chance to develop it fully. So, let say, I’m at MicroConf in April and I talk about what I’m developing. Is that safe? I guess everyone is there to help one another and learn but maybe you can understand the paranoia as who knows when I will have another idea as good as this one. Anyway, keep up the great podcast, I’ll be listening.”

[21:05] Mike: I have a couple of different thoughts on this. The first one is nobody is going to steal your idea and the second one is nobody cares about stealing your idea. The reason they don’t care about stealing your idea is because it’s not successful. The second you’re successful with it, everyone and their mother is going to want to steal it but until you’ve proven it, nobody is going to care. You can talk about it for months or years on end and nobody is going to bother because you haven’t proven it yet and you know, you can look all over the web and ask how much my idea is worth and everyone is going to tell you it’s worthless. It’s the implementation of that idea that’s worth money and until you’ve proven that the idea is viable and the people are willing to pay for it, I don’t think you have anything at all to worry about.

[21:44] Rob: And I also think there’s a fine line between talking to a few people at a conference or a few people maybe online versus projecting it on a podcast live to thousands of people or blogging about it and detailing your entire marketing approach, right? It’s like you definitely need to keep some stuff under your vest especially what you have as a competitive advantage. You should have something as a competitive advantage and so, you don’t want to give all of that away but talking about an idea and just getting more feedback on it, I’ve never heard of anyone stealing an idea like that. We’re all way too busy with our own ideas that we think are great.

[22:19] Mike: Yeah, I mean how long have I talk about AuditShark in this podcast and I have yet to see anyone out there who has come to me and said, “Hey, Mike, somebody stole your AuditShark idea.” I mean it’s just – I haven’t seen that yet and I think it’s, you know, partially because nobody wants to steal an idea that’s unproven.

[22:34] Rob: Right and the value that you’re going to get from discussing it with other founders or hopefully, even other potential customers because they’re the real important ones, right? It’s like discussing with founders might get you some good feedback but if we’re not the target market, then there’s not nearly as much value as actually going and talking about it with customers. So, I would even err on the side of looking for customers rather than just talking about it with other founders.

[22:56] Music

[22:59] Rob: Our next question is from Leonard Teo [Phonetic]. He says, “I’m a big fan of your blog and a micropreneur of sorts. My small consulting side business has grown in to a 3-person company of Ballistic.com [Phonetic]. My question for you that is been in my mind since starting, what is your advice for micropreneurs wanting to take a vacation? For example, I built an app in my spare time earlier this year and I’m afraid to actually launch it because I also became a father and I’ve had to take extended periods of time off work. When I’m actually around I can provide support within 48 to 72 hours but what about when you need to take a week or two off, what do you do? I have two other friends in the same boat. They bring their laptops on vacation and find themselves having to work and burned out and depressed. I really appreciate your thoughts. Thanks in advance.”

[23:39] Mike: It sounds to me like there’s not necessarily enough automation to make going on vacation viable and you know, just the comment about, “My friends are on the same boat. They bring their laptops on vacation and find themselves having to work and are burned out and depressed,” that just strikes me as a situation where there is not enough automation such that it could be handed off to somebody else to take care of I think is a problem. I mean that’s probably the start of the problem and that’s where you got to focus some resources because if you don’t have processes and procedures in place for other people to follow, then you’ll never be able to take a vacation and it won’t matter whether that vacation is something that you planned or something that, you know, just came out of the blue and is an emergency where you’ve got to go, you know, maybe somebody is in the hospital or maybe you end up in the hospital. I mean what happens at that point? Is there any way for you to hand off the business to somebody else and say, “Hey, I need you to run this on effectively autopilot for a little while, while I go deal with this other situation.”

[24:37] So, I would treat a vacation as really no different than that but you really need to focus some time and effort and energy in to automating enough stuff so that that’s possible. I mean if you’re taking your laptop on your vacation just because you’re afraid of what can happen, there’s probably not enough automation or you’re just too afraid to take that vacation. To kind of test this out, what you could do is not respond to e-mails for two days and it doesn’t have to be, you know, a week just make it for two days and I don’t mean or a weekend. I mean in like, you know, a Tuesday to Thursday or something like that and not answer e-mails and see what happens. And I can almost guarantee that the world is not going to end. I mean you’ll at least be able to come back to those on Thursday and the reality is even for business applications, a lot of people do not expect a turn around time of two hours and they appreciate it but at the same time, whether you’re going to live your life, why are you building this business. And if you’re not building the business for yourself, then what’s the point?

[25:34] Rob: Yeah, my thoughts are hire a VA like hire a VA as soon as you can because what you built is it sounds like you built a job rather than a business. And if you want a job, you know, you can probably go make more money working for someone else. It’s not having a business that you can step away from even for a week or two. It’s – I just — I don’t even think that’s really a business. There’s a book called Built to Sell that I highly recommend you read if you haven’t already. It’s a little bit cheesy. It’s told as like a fable but the concepts in it are sound and it’s about building a business that is more automated that it has processes and it’s something that you can step away from and the funny thing is once you build your business up to where it’s actually saleable and it really is a solid business, you probably won’t want to sell it because at that point, then it’s basically it’s throwing off cash and you’re going to enjoy working on it so much more because you’re able to work on it rather than…than in the business.

[26:25] I just think that hiring a VA or hiring someone to handle the stuff that you’re doing day to day, it has to be your first step. It reminds me of – I remember the old MicroISV Movement and there were so many people in that movement who were taking about, “Oh, it’s, you know, it’s so hard because I work 12-hour days and as soon I started hiring VAs that’s where like I realized that you didn’t have to do that same old thing, right?” You didn’t have to do that same old thing of doing everything even if you are a one-person software company. You don’t have to do everything yourself. You need to get help in there so that you can step away and I know a number of micropreneurs, myself included who take a lot of time off, we take way more time off than when we worked full time. And I’ve rarely if ever worry about the business having any type of misstep during that time. So, I hope that answers your question.

[27:14] Our next one is about whether or not to move to a SaaS and this is from Robert Longley and he says, “Love the show. I have a software application for social services that I’ve sold to a few different organizations. It’s installed on their servers but I would like to start offering it as a SaaS solution. Most smaller agencies don’t have the stuff or the infrastructure to host it themselves. They also want to customize it beyond their ability to pay for it. A SaaS solution would solve part of the problem but getting people to standardize it is a pain. There’s also the issue of liabilities since there’s a lot of personal data. Any suggestions on best direction given some of these challenges? Thanks. Rob.”

[27:50] I have a couple of thoughts to start. I do think that SaaS is probably the way to go here because as you said I’ve worked for the city of Pasadena and I did worked with the Health Department and some other departments that didn’t have a lot of funding and didn’t have a lot of technical expertise and their ability to host things was – it just wasn’t up to snuff. I will think that SaaS is a really good option for these guys and I also think that their data would be more secure with you rather than less secure because you’re going to worry about it and you’re going to do the right things in terms of securing their data, definitely a lot of personal information. So, you are absolutely going to need to have this high security and therefore, you’re going to need to have a price point that supports that, right? You can’t charge 9 bucks a month and have exceptional security. You do have to be able to pay for that security and that includes doing it yourself which is a lot of time or hiring someone to do it which involves money. You do need to make it work because obviously, you don’t want to get hack and lose people’s information.

[28:43] Second thing you mentioned is people wanting to customize it beyond their ability to pay for it. What I would think about is if there’s a way to allow them to customize it within the app, if there’s a way to build the module and allows them to do mostly the customizations that they’ve asked for in the past because obviously, if you move the SaaS, you’re not going to have separate codebases from all of these agencies and my guess is that you will be able to find some type of middle ground that allows people to either configure their account and set up custom feels – I’m assuming custom feels and custom work flows is what they want. You can look at an example like FogBugz or you know, something that allows people to set up those custom types of things and see how they’ve done it because obviously they are SaaS app and they don’t have separate codebases for everyone.

[29:28] Mike: Yeah, I think Rob’s got a lot of good points. I think one thing you definitely want to focus on is going to the people who are using the older versions of your software and trying to upsell them to a newer version that is hosted by you and you know, you can start off those discussions by asking them why they didn’t renew or how things are working for them and try and find out as much information from them before you start pitching them on a new system because you know, you want to use it for two different things. One, you want to use it to find out whether or not they’re still using it. You can essentially use those yearly maintenance fees to say, “Hey, well, if you [Audio Glitch] get onto to this new system, you’ll get the full version of the software, you get everything that you needed plus it’s going to be continually updated. You’re not going to have to worry about upgrades or security or all of these different things.” And then you price all of that stuff in there and you should be able to gradually move some people over.

[30:20] Now, there’s going to be this subset of people who are not going to move no matter what and there’s not going to be a lot you can do about them. I would actually draw a line in the sand and try to move completely away from those people who have a hosted version. I think you have said that this is – it’s got a sequel server back end and it say web application. But if you’re asking the smaller organizations to host that themselves, I mean it seems like that’s just a recipe for disaster when it comes to support cost because you’re going to spend a lot of time and effort with that support that these people are not going to have that expertise and chances are good that they’re going to have to hire somebody to come in anyway. So, you can use all of those as part of your sales pitch to tell them, “Hey, well, you don’t have to do this. You don’t have to do that. This is the one price that you’re going to have to pay and that’s it.” And so I think that there’s a lot of good sales opportunities there. You’d just really need to work out with some of those customers exactly how you’re going to migrate them from their existing system on to the new system.

[31:16] Rob: So, thanks for your question, Rob. I hope that was helpful.

[31:19] Music

[31:22] Mike: If you have a question for us, you can call in to our voicemail number at 1-888-801-9690 or you can e-mail it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.

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Episode 122 | Four B 2 B Marketing Strategies for Startups

Startups For the Rest of Us
Startups For the Rest of Us
Episode 122 | Four B 2 B Marketing Strategies for Startups
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Show Notes

Transcript

[00:00] Mike:​This is Startups for the Rest of Us episode 122

[00:02] Music

[00:10] Mike: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.

[00:19] Rob: And I’m Rob.

[00:20] 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?

[00:24] Rob: I am doing great on my new MacBook Air. Good grief this thing is nice. It’s just an amazing piece of hardware. And I had messed around with it in the Apple Store for, well, for years frankly. It was when it first came out, I want to go down and see it and I used it and you know, it feels so slick in the store. And I kept thinking, “Yeah, but if I get it at home and really start working on it, it’s just not going to… it’s not goingto continue to feel like.” And sure enough, I’ve pretty much been on it nonstop since yesterday. And now, when I go back to any of my other computers that aren’t made out of the awesome aluminum and you know, don’t just have this…this gorgeous screen, everything else feels like a plastic toy now.

[01:01] Mike:  Uh huh. Yeah, I found the exact same experience and going from – actually I have a Lenovo and then I went to the MacBook Air and then every once in a while I go back and take a look at the other stuff and it’s just…it’s just a world of difference between them.

[01:16] Rob: Yeah and the thing that convinced me to really give it a shot is that I love my iPhone and my iPad so much and I use them all the time and I love the experience on them. I love the UI. I love the UX. I mean it’s just such a cool ecosystem and I bought…I bought in to it, you know, I mean I have a tons of apps. I wouldn’t switch to Android now purely because I just have so many apps and I just, you know, I have such an investment now in the ecosystem. And so I realize like why, what other reasons that I’m sticking with Windows because I use Macs all through college so, during the 90’s and then it was like 1999 when I switched to Windows and there were bunch of reasons for doing that. But I’ve used Windows now, you know, since then so for about 13 years.

[01:55] But there isn’t much actually keeping me using Windows anymore and when I looked at the Windows 8 UI I realized the learning curve of moving to that, I just realized why not go through a, you know, maybe a different learning curve and move over to what I think especially with the gestures and with all of the stuff they built in Mac OS or move over to what I think is actually a better OS. And I don’t know if it’s a better OS. Do you think it is? Do you use it enough to know?

[02:19] Mike: I don’t know. I alternate back and forth between them. I think that the kernel itself seems like it can handle certain things better than on the Windows side. So, like for multitasking, it seems like the OS X kernel handles some of that stuff a lot better but the vast majority of the stuff that I do is still in Windows. So, I still have a lot of stuff running in there. I don’t know. I mean I like the gestures as well but personally, I kind of like switching back and forth between the operating system because there are certain things I do in Windows and I have find that I’m much more productive there than I am on the OS X side and then same thing with OS X or certain things I do over there which I feel like I do a lot better over there.

[02:57] Rob: Yeah, if I’m going to do this, I’m going to switch 90 to 95% over to OS X and so there will definitely be a learning curve that already has been but I – although I have to have Windows up to do some .NET development, I’m doing so little of that anymore that I’m pretty much going wholesale over to the Mac side. And I got to be honest, the gestures have been pretty amazing. I’ve been really impressed with it. I have a question. Is it cheating to map the command functionality to your control key because that’s what I’ve done because the – you know, my keyboard shortcut hand has been doing this for 13 years having control everything instead of this command key. So, remap it but I’m wondering like, hah, am I really making a wholesale change if I do that?

[03:35] Mike: Like I said I switched back and forth between the two almost all the time because I run them side by side through VMware Fusion and one of the things that I kind of realized that – I used to be a very big proponent of just leave everything with the default settings, that way you don’t have to worry about it if vendor screws up an upgrade or if you move from one machine to another. But the fact of the matter is that like over the years, I’ve come to the realization that, you know, I don’t generally use other people’s computers  and I like my machine to conform to me versus me conforming to the machine. So, I just remapped a bunch of things to make things easier for me. So, I did remap some of the keys. I don’t think I remap the command key.

[04:14] Rob: What’s going on with you this week?

[04:16] Mike: So, I’ve been doing a lot of work with AdRoll lately. Their interface looks really topnotch but one of the things that really bugs me about using the AdRoll is the fact that when you’re doing things, it takes forever for some things to show up.

[04:28] Rob: So, what is – there is a delay between when your ads are running?

[04:32] Mike: I assume that there would be for that but like if you – when you first start out with AdRoll, there’s a few things that – or to me like when I first signed up, it has absolutely nothing about like what their media requirements are. So, image sizes or anything like that. You basically have to create an account and then you get in, then you go through the process of creating a campaign and they’re like, “Oh, you need images. There are these sizes.” Like, “Thanks. That would have been nice to know before my two-week trial started so that I could go to my designer and have that stuff ready.”

[04:58] So, it took me about a week to kind of get through that process and then once I got through that process, then they said, “Oh, well, you got to install the smart pixel.” So, I go to install the smart pixel and it doesn’t work and I try all these different things, still doesn’t work. I get on the phone with support and they’re like, “Oh, well, your JavaScript is indented. It’s not copied exactly the way we sent it to you.” One, that seems ridiculous. I mean as a programmer that just seems absolutely ludicrous that my JavaScript is indented differently than you indented and that’s why it’s not working. But aside from that, I asked them how long it would take for things to show up and they’re like, “Oh, yeah it would take about a day for us to see that you’ve got this pixel installed.” I’m just like it’s just frustrating as all hack.

[05:37] Rob: Right because you want to get rolling on it quick?

[05:39] Mike: Well, yeah because I’ve got – you know, I’ve got, you know, deadlines that I’m trying to meet. I’ve got certain timelines that I’m trying to do things in and it’s just – it takes forever to get some of the stuff done and then they try to say that for them to recognize like different visitors, they batch it up and it could be in 16 hours or so before they recognize at any given visitors come in and they force you to have a minimum number of visitors before they’ll start running  any of your campaigns.

[06:01] Rob: Right.

[06:02] Mike: So —

[06:02] Rob: Yup, so it does take a while. You know, you should ask them to extend your trial.

[06:05] Mike: Yeah.

[06:06] Rob: Yeah, I mean you need more than 14 days because you’re — it sounds like you’re already eight days in to it and you don’t even have ads running. So —

[06:11] Mike: Right, right.

[06:11] Rob: …I would – I’d probably ask for…for 14 days from the start of the ads. I think when I did – for I don’t use AdRoll anymore but when I did, that’s what we did because I went through a similar thing whereas like a week before I was up and then they started my trial then.

[06:23] Mike: Got it.

[06:24] Rob: Hey, I wanted to bring up another Micropreneur Academy member who has a lot of success. His name is Patrick Thompson. He’s a lifetime member. He’s attended both of the MicroConf these last couple of years and he’s coming to this one as well but he has a whole suite, a portfolio of mobile apps. And he started off with QuickReader and he also has an app called MegaReader. You can check him up by going to quickreader.net and he has links to all of his apps there. He has multiple languages and all kinds of stuff quicker that teaches you how to speed read. It’s a pretty cool app. I’ve used it and then MegaReader is more just like an e-book reader that you can get access to a bunch of free public domain content.

[07:01] The thing I like about what Patrick did, he’s had great success and he’s, you know, been living off his apps for a few years now and he’s just starting to do some talks in his local area up in Portland kind of his experience and things he’s learned but he made this great viral video. He hired some guys to do it and it didn’t actually generate that many sales for him but we’ll link it up in the show notes. It’s pretty funny. It’s just kind of like a humorous commercial of someone using his…his QuickReader app. So, wanted to congratulate Patrick on, you know, all of his success.

[07:31] Mike: Speaking of MicroConf, I realized that we haven’t really thanked any of this year’s sponsors for MicroConf on the podcast yet or even mentioning anything about them. So, this year we have Ruben Gamez from Bidsketch as being a sponsor this year again. We also have Red Gate, FoxyCart, Balsamiq and SoftwarePromotions and then Microsoft and Constant Contact are both coming in with big sponsorships this year. So, just want to definitely say big round of thanks to those guys for helping out. And we also have a WePay, Koombea and Dashable who are signed on as sponsors. So, we’ll be talking a little bit more about those guys in the coming podcast. We’ll definitely link to those guys in the show notes. But if you’re interested in any of the services that they have to offer, definitely check them out. We’ve been trying to concentrate on sponsors who would be able to kind of contribute to the community itself and have things that will help people with their businesses and launch them —

[08:22] Rob: Our sponsors are such a critical part of MicroConf both of the first two years. We wouldn’t been able to pull it off without the sponsor money. You know, we rely a lot on our sponsors and so we definitely want to give a big thanks to those guys.

[08:33] Music

[08:37] Mike: Today we’re going to be talking about some B2B startup marketing strategies. And this podcast idea came from Adam Clinckett who lives in Brisbane, Australia. He’s also a Micropreneur Academy member who runs a website called BookingTimes which is a SaaS-based practice management software for health, dental and medical providers. And he wanted to know some more ways that he could get in front of small business customers. So, his product is I’ll say just about launch – he’s more or less doing beta testing, early access but he’s really looking for ways that he can start scaling up some of his marketing efforts and getting in front of more small business customers that are specifically in search of the type of problems that he’s having.

[09:16] Rob: It’s a big question, right? We actually get this question or at least I get e-mail fairly regularly of, “Hey, I’m about to launch. How do I market my app?” And it’s like, wow, that is a huge, huge question. Literally, you could write books on it, right? There had been literally books written on this but specifically what’s nice about Adam’s question is he had a few things that he threw out that he was asking for more information about and knowing specifically what his app is, actually, you know, kind of corrals the conversation so that we can spend 20, 25 minutes on here and actually get…get some realistic information out.

[09:50] I want to start by saying we could come out with a hundred different approaches from marketing, right? We could just – we could threw out AdWords and SEO and info graphics and all the stuff but you can’t just go on those directions at once. You have to find approaches that work since most of the approaches you try are not going to work. And I think that’s important to realize is that most of the stuff you try is not going to work but a few anomalies that you pull out and that you’re able to capitalize on and scale up, that’s what’s going to be the flywheel that grows your business.

[10:17] And so the two steps in doing this to find the approaches that work are number one, to put together a big list of ideas. And most people don’t do this. They skip the step. I’ve taken the time with both of my last couple of apps to put together a Google doc which is the big bulleted list in different categories and such. In HitTail, it’s 14 pages and for Drip, it’s 10 pages. And this is just single space bulleted list of all these thoughts, these ideas, these – they come both from me as well as podcast I’m listening to and audio books and overtime, I’ve gathered this huge corpus of essentially marketing ideas. And you obviously have to pair this down and you prioritize them, use your best judgment. I mean you basically take your best guess at which one you think is going to have the most impact. Start at the top and then start implementing them.

[11:00] And that’s why you have to track everything, right, because you’re just – you’re kind of throwing darts. You have educated guesses but you basically…you basically taking a guess of what’s going to work. And so step two is to track everything, see what’s converting, see what’s repeatable and shut it down if it’s not.

[11:15] Mike: And I think those are great points to follow and you said people aren’t putting together these lists. So, when they get to the point where they’re working through a set of early access customers and they’re really identifying and zeroing in on the issues that people are having, they turn around and they say, “Okay. What’s next?” And they don’t necessarily have a good idea of where to go and this list that you put together can definitely help point you in the right direction because then you can use it to prioritize that list and say, “Okay, I want to try this next and if that doesn’t work, maybe do some tweaks with it, readjust and then continue working through that list.”

[11:47] Rob: So, we’ve broken down this marketing strategy in to four different categories.

[11:52] Mike: The first one is inbound marketing and there’s a few different things that fall in to this category. There’s concept marketing, there’s blogs, you can use info graphics, head term SEO on marketing pages, forums, all these different things that you can try. And for content marketing, you can either use a blog or an e-mail list, specifically what you do depends a lot on what your primary goals are. So, if you’re trying to drive traffic to your site, you’re going to do one thing. If you’re trying to educate the users, you’re going to do something slightly different. So, you really need to try and determine what your primary focus is before you start going and implementing some of these things.

[12:28] So, for example, if you wanted to drive traffic to your site, an e-mail campaign is probably not the best way to do it.You’re probably going to want to lean more towards using blogs or info graphics. And if you don’t know where your business is at, if you’re not tracking ay of the metrics associated with this, it’s going to make it hard for you to measure how well you’re doing with any of these things.

[12:48] Rob: Yeah, with the inbound marketing, there are some really great resources. The HubSpot provides a ton of fairly detailed reports. You can also find a lot of people doing inbound marketing at inbound.org which is a joint venture between SEOmoz and HubSpot. The thing to keep in mind when you’re doing inbound marketing is this is a lot of what most startup focus on or even just most online products. This is a lot of aside from paid acquisition, this is kind of the main thing that people doing internet marketing focus on. And it’s easy to get caught up in the flavor of the week. That can work in certain niches or “Hey, there’s a Facebook page marketing strategy that does this and that,” but the thing to keep in mind is that the fundamentals that had worked for years, they’re going to continue to work and that is things like blogs, info graphics and choosing head terms of SEO and going after them with your…your main pages.

[13:38] I think in terms of blogs, it’s kind of overhyped or just over talked about. A lot of people when they start their, you know, start their marketing side, they launch a blog and they don’t even really know what to put on there. And you got to think this through because you can’t just sit there and write about your app or write about how to use it or write about anything because no one cares about that. What you have to do is educate them. If to educate them on a topic that somehow relates to your app. So, if you look at the blog of KISSmetrics which is a blog.kissmetrics.com, they do a fantastic job of actually creating that’s content marketing at its best, right? It’s actually creating articles that people want to read and that they are drawn two or three in social media and they share it through Twitter and Facebook. Buffer did a similar job. If you go to bufferapp.com I think it’s slash blog.

[14:23] One of the founders, you know, just blogged per about a year. He also did a lot of guest posts as well but that is one way to use a blog as a true social media content marketing thing and you could also add info graphics guides, tutorials, pocket guides, et cetera to that and it just draws in traffic. But it draws in waves of traffic. It’s not – doesn’t tend to be a super long flywheel.

[14:41] The other way to think about it is to think about a blog as a long tail SEO tool and that’s where a tool like HitTail comes in as that you would – you pick certain keywords and you just have someone cranking out articles. And so, as an example with the HitTail blog, I have a writer who is writing – I think she writes four articles a month. Right now, about to kick her up to eight articles a month. And she logs in to HitTail and looks at the terms that are suggested for our site and then she turns each of those in to an article. And so, these are not big blockbuster top 10 ways to do this, you know, awesome articles like you see on KISSmetrics. They’re really – they are smaller articles and they’re building a snowball of traffic overtime. It’s long tail SEO and its traffic that has – doesn’t have a lot of competition and it’s very consistent but it is not huge burst of traffic. So, there’s really, you know, two pretty different ways to approach blogging and that type of inbound marketing.

[15:32] Mike: Something else we haven’t really talked about is some of the mainstream media. So, press releases, newspaper articles and getting listed on news websites like CNN or you know, various blogs out there. And one of the issues with getting involved with those or getting links back from those places is that it’s very – you get a lot of traffic. It comes in huge waves. You’ll get a lot of traffic very quickly but then it will taper off just as quickly because as a new site, things are important [0:16:00] on the day that they’re released and they are heavily promoted, maybe they get to the front page of that website and then they fall off and they end up in obscurity where nobody ever goes to look at them. And you will still get some of the backlinks from that stuff but it won’t be nearly as much as you would from as Rob mentioned some of the other types of blog and strategies that you want to look at.

[16:21] Rob: Yeah, the traffic also doesn’t convert that well. Mainstream media may send you a lot of traffic but you’re going to just get a tiny, tiny amount of those people who are actually interested in your app. And when I have that quote in the New York Times, I got more trials that week from a mention on a WordPress blog. It was a popular WordPress blog but obviously, the readership of that WordPress blog is a lot less than the New York Times but it’s just so much more targeted. So, it would – given that it’s really, really hard to get in to mainstream media and to get mentioned in a large publication like that, for now, unless you really know how to do it, I would say forget it because it’s so much easier to target the smaller niche blogs and podcasts and the pitch is easy.

[17:06] If you pitch a podcast, they’re almost always looking for content, they’re looking for people with interesting stories and as long as you can come up with an interesting story, you say, “Hey, let’s chat. Here’s the story. I’m not going to plug my app. I’m a developer. I, you know, I’d love to share my knowledge and educate and blah, blah, blah.” And I mean you just get a good pitch down. When I did kind of – the podcast towards HitTail about 15 months ago, I e-mailed 12 podcasts and I got 11 yeses and I went on all of them. And that was in early stage inbound marketing approach that I used.

[17:32] In terms of blogs, going out and pitching guest posts to blogs, you have to do it right but it can absolutely work well. This was a technique used by Buffer. I’ve actually used this as well with a couple of my apps. It is very time-consuming and in fact, all of these inbound marketing strategies are fairly time-consuming but they’re free, right? Unless you’re hiring the writing out and at a certain point, you will need to because you just won’t have enough time to do it but these are the strategies that can drive a lot of traffic and that don’t  require a huge amount of money to get started on. So, these are definitely the early stage kind of foundational things that if you’re a bootstrap startup and you don’t have a ton of money invest that I would recommend that you…you start looking at.

[18:10] Mike: I think the last one that we also haven’t talked about is forums and [Laughter] forums are one of those things that have really fallen by the wayside in terms of I’ll say mainstream developers that I talked to and associated with. Most people don’t think to go look on forums but it’s just mindboggling the number of people who still go to forums and still use forums. There’s all these niche websites where they will have their own forums for different things.

[18:35] And LinkedIn I think is probably becoming one of the places where a lot of people are – at least in the professional community are gravitating towards because they have all these different forums and communities where you can subscribe to different groups and as a member of that group, you can post in their “private forums.” And then they send out e-mail to everybody who’s in the group saying, “These are some of the new topics that have come up,” which draws people back in to the website and obviously that benefits LinkedIn. But if you’re talking about things that are relevant to that community, then you can use that to help drive traffic to your website. And it’s not just limited to LinkedIn. You can definitely use the strategy on other websites where they’re discussing particular problems that are associated with that niche.

[19:16] Rob: One of the best ways at least long term when you’re first getting started and you’re just trying to get every user to come to your site to check out your app, it’s cool to just hang around at some forums. It totally doesn’t scale but you hang around. You get known. You don’t want to be the spammer guy who comes in with a commercial everytime or you actually want to be in some way involved in these forums. It doesn’t scale long term but it’s something that you can think about. Long term, set up Google alerts and look for some key phrases on the internet. Google will find these forum threads and you can pop in and at least check it…check them out and if they’re asking something specifically about your product name, you can always step in and say, “Hey, I’m the owner and here’s the answer to your question. Here are my thoughts, whatever.”

[19:51] I still do this with HitTail, by the way. It gets mentioned on forums and I pop in and say I’m the owner and people have never had a problem with it because you’re not – you’ve already been mentioned so it’s not like you’re coming in [0:20:00] to pitch your app. And then if they have – if they’re talking about something else related to your apps. So, you know, with HitTail might be long tail SEO or long tail keywords or something, you have to use your judgment of whether or not you can pop in and just offer suggestions or thoughts and then include your link in the signature or you can just mention that, “By the way, I’m the owner of this tool. So, I take my name with a grain of salt.” When I do this, I’m very careful not to – to try not to come off as being like a sleazebag guy because you see the people on the forums who do that and it’s irritating but this is definitely a way to take the pulse of people because these are actually people discussing your app or your topic.

[20:35] Aside from one-on-one conversations and e-mails, this is a really good way not only to, you know, to get people interested in your product but also to figure out their pain points and to figure out the issues that they’re having perhaps with competitive tools.

[20:49] Music

[20:52] Mike: So, the next approach that we’ve came up with is outbound marketing and with outbound, you’re really talking about reaching out to people through the phone, you’re using direct mail, e-mail, outreach to people. One of the things that I’ve found is that e-mail is a proverbial gold mine and there’s a lot of different reasons for this. And the first one is that it’s almost free to send these e-mails. Obviously, if you’re sending them through your own ISP because you’re sending direct one-to-one communications, there’s obviously no issues with that. But even when you start sending out, you know, hundreds or thousands of e-mails is very, very cost-effective to send these e-mails out to people.

[21:26] And using things like MailChimp or AWeber or Constant Contact, you can get in front of people who want to hear that information especially if you built up a mailing list because these are people who signed up for that mailing list and they have essentially said that they want to hear from you about this topic that you put together for them. So, for whatever reasons that you put in front of them to convince them to sign up for the e-mail list, those are the reasons that you continue sending e-mails to this list and promoting whatever material it is that you want to send to them. So, whether it’s security information or in the case of Adam if you’re sending information about how as a small business they can deal with specific problems that are in that industry, so if there’s new legislation that’s coming out or if there are new tools that they might want to be aware of, these are all great things to share with them. And as long as you’re sharing information as opposed to giving them a sales pitch every week, it’s going to go over really well.

[22:18] Rob: I think there’s two ways to look at e-mail outreach. The one that you said is building up your mailing list, right. People come to the website and then you build the list and you educate and offer insight and you help them out and then overtime you just kind of become a trusted advisor and they might check out your app. The other way that I’ve seen donepretty well is – I’ve actually had it done to me by several companies and I become their customers is the CEO or the founder or someone e-mails with a short e-mail. It’s out of the blue and unsolicited and – but it’s a compelling pitch and it’s like, “Hey, here’s what we do for companies like HitTail or you know, like Drip.”

[22:52] And these have been from a variety of different startups that are basically catering to other startups. And so I get the e-mail. It’s a plain text e-mail. It’s not so marketing e-mail because if it was a marketing e-mail, I’d mark it as spam right, because you can’t do unsolicited commercial bulk e-mail to just a list but these people are actually seeking people out and this has worked well. As long as it have a compelling value pitch and it’s not something that they’re just – it’s not a bulk e-mail. It’s not a copy and paste thing. They mentioned me by name. They mentioned something specific about my app. They mentioned how their app can help and it’s just maybe two to three sentences and not all of them are kind of well for sure but I at least investigated when someone reaches out that way.

[23:27] And this is similar to the phone or direct e-mail. Obviously, those are more time-intensive or expensive approaches. All three of those can work and I think if you’re considering this approach, you really need to read the book Ultimate Sales Machine by Chet Holmes and he talks about putting together your dream 100 which is the top 100 clients that you would like to have and then, you know, you can use these approaches in tandem, in a sequence contact the same dream 100 multiple times work to get them to try out your app. In addition, you have to have a high enough lifetime value to make this worthwhile. You can’t  sell a product for 9 bucks a month or a one-time $20 fee and do these approaches. They’re just too time-consuming and too manual. So, you really need to have a higher and other subscription app or a high upfront price point or to justify the time and or expense of these outbound approaches.

[24:16] Mike: And in terms of direct e-mail outreach like you had just mentioned, you can try to templatized that approach where you create an e-mail template and then you have a couple of sentences where you’re going to essentially insert personal details about that person. So, maybe there’s one or two sentences in there say, “Hey, I heard you on such and such podcast,” or “I heard you on Mixergy and you were talking about this. And I’d just want to let you know this is what we do.” And those are ways that you can cut down on the amount of time and effort that it takes to build those but as Rob said you really do have to make sure that you are being personable, you’re relating to them directly and you’re letting them know that it isn’t just them part of this massive mailing list that you bought from some place.

[24:59] Rob: So, the third marketing category we have is paid acquisition. And paid acquisition is something that scales really well but it’s really hard to get right and it’s hard to find a channel that you can actually scale up. The typical approach to getting started with paid acquisition is to try a number of different ad networks, number of different headlines. Hopefully, you already have an idea of your customer demographics or where they would be or what they would be searching on. And the interesting thing to think about is that most ad networks are not going to work for B2B because they’re catering towards consumers. So, ad networks like AdBrite and Chitika and Advertise.com. There’s a bunch of them that I specifically tried out about a year ago. They’re just – they junk traffic if you’re trying to sell B2B stuff.

[25:43] So, the ad networks that I know of that probably have the most volume are Google AdWords and now, Bing Ads since they have the inventory of all the Yahoo searches. They actually have a reasonable amount of volume. LinkedIn Ads, Facebook Ads and BuySellAds. I’m sure there are others out there but those are the ones that can provide  enough people that if they actually do work that they can scale up. You can also buy clicks through StumbleUpon but those do tend to be people that are kind of wasting time rather than wanting to buy stuff. So, I’d use that as more of a viral market approach rather than a paid acquisition strategy for a B2B app.

[26:15] And the thing to think about when you’re doing these paid ads is you really have to go on with a small budget do a trial and see if the cost to acquire a customer is less than your lifetime value and it should be a lot less. A typical rule is it should be a third or less of your lifetime value. And if you can make that work and scale this up, you have found an amazing flywheel and really have. It’s a lot harder than it sounds. People think when they’re starting these apps that they can just buytraffic and it’s going to convert and it’s actually quite hard to do that. And even if you find a source that will convert, it tends to be really hard to scale it up because as you try to expand your ad span, the quality of your traffic goes down and so then you start having to pay higher and higher amounts to acquire customers. That’s really the high level overview of this. There’s obviously a lot of details to this topic that certainly are more in-depth course is wanted.

[27:06] Music

[27:09] Mike: And the fourth marketing strategy is to leverage partnerships and what’s referred to is OPN which is Other People’s Networks.

[27:16] Rob: OPN is from Dan Martell. I want to give him credit MicroConf 2012 his talk. He talked about OPN and how you can, you know, build your startup through using other people’s networks.

[27:26] Mike: So, with partnerships, what you’re really looking for is either joint ventures or integration marketing or affiliate programs. Any of these things can be mechanisms to help scale your business up and obviously, you need to know what your sales pitch is going to be and what resonates with your customers because that’s what other people are going to want to know. They’re going to want to know what sort of market you have, what sort of audience, what do they respond to, how is there an overlap between your users and their users. Those are all important things and one of the things you have to be really careful of is it you are not going and [0:28:00] approaching people who’s networks are I’ll say worlds of magnitude larger than yours.

[28:06] So, if you have a network of users that is a hundred or 200 people, you don’t want to approach somebody who’s got a network of hundred thousand people and ask them to do a joint venture because it’s probably not going to work very well especially if you’re saying, “Hey, you can promote something to your users and I’ll promote something to my users.” That…that just not going to work really well because one of theirs questions is going to be “How many users do you have?” And when they find out that there’s this giant disparity between them, it’s going to reflect very poorly on you.

[28:33] So, what you really want to do is you want to find out if there are ways that you can sell your product through them and essentially give them a cut. It’s a slightly different way of doing a joint venture but you have to know what those numbers look like before you start going and approaching people because you want to know what’s going to be in it for them.

[28:51] Rob: Yeah, I’ve had some joint venture e-mails that have gone really well and I’ve had others that have just beentrain wrecks but luckily, you do enough of this and it kind of evens out. The key is to really know your audience and know that you’re going to have overlap with the potential partner’s audience. That’s the bottom line. The nice part is once you get an e-mail or two and you’ve send them out and they worked, then approaching new joint venture partners and saying, “Hey, e-mail your audience and I’ll e-mail mine. We won’t do any affiliate stuff. It’s just kind of one for one, our list are similar size.” That actually doesn’t take that much time.

[29:22] And I was surprised I was doing this last year for HitTail and I e-mailed nine potential partners. They are like SEO rank trackers just affiliated tools, right, people who would use that – would use these tools but also probably use HitTail and I got nine responses within about three days of people who were like, “Yeah, absolutely, let’s do that.” And I was overwhelmed and I’ve only done two of those because, well, because I want to space them out. I was surprised at the…at that response and I dothink this is, you know, an underutilized approach.

[29:49] And then the second part of partnerships you touched on was integration marketing that I have also mentioned in the past and that’s things like HitTail, we integrated with Basecamp. We have a HubSpot integration we’ll be launching here next week or so. Well, we have a WordPress plug-in. And not only you’re trying to get the partner to tweet out, potentially blog about you and get you some traffic but you also want to be on their integration’s page because those pages do get a nice chunk of traffic both from search engines and from, you know, the people who are actually using the app. I’ve seen integrationmarketing worked quite well and we’re going to, you know, continue to invest in that with both HitTail and Drip.

[30:24] Mike: So, those are the four B2B startup marketing strategies that we came up with. The first one is inbound marketing. The second one is outbound. Third is paid acquisition and then fourth is partnership. And sort of a bonus, we also thought about how to improve word of mouth. And one of the things that I’m not really convinced of is that you can effectively do this as a small business as a scalable level to make it worth it because how many times do you have to hear about a product before you decided to look in to it or seriously look in to it. If you look at some of the research behind how many times when someone hear something before they start investigating it, what you’ll find is it’s like half a dozen to a dozen times.

[31:02] And the unfortunate part of that is it means that you need to get in front of them half a dozen to a dozen times before they even start considering you as an option or decide, “Hah, I’ve seen that before. Maybe I should look in to it.” And as a small business, you can’t do that effectively when you are so small. Companies like Microsoft and Dropbox can do that because they will get in front of people dozens and dozens of times and it’s very easy for them to do it because they’ve got billions and billions of dollars to spend on marketing. You don’t as a small business. So, you’re going to run in to problems trying to leverage word of mouth to get in front of more people.

[31:36] Rob: Yeah, I agree with what you said. I also think that, you know, building a great product is probably the best way. Solving…solving a problem really well is a good way to get people to talk about you but as you said when you only have 50 or a hundred customers which when you’re getting started that’s what you have, people aren’t going to be talking about you. You don’t have the scale. I think another aspect to this that can be helpful to get people talk…to talk about you is to try to be everywhere. That means beyond blogs and be running ads and pipe in on forums and be on podcasts and be in the conferences. As long as you’re within that small enough niche, you’re not trying to target the entire world, you can pretty quickly cover the landscape of a lot of places where people frequent.

[32:15] If you look at the web design niche I mean if you…if you guest posted on five web design blogs to very specific ones, within a month and were also on a couple of web design podcasts, you would cover a huge amount of territory and people would start to feel like, “Wow, this guy really is everywhere.” So, that’s another way to get people kind of thinking you’re at top of mind and if they feel like you’re more legitimate. I mean you are. You are actually out there especially if the stuff you’re sharing is interesting and educational, it can really get people more excited or more interested and willing to talk about your app.

[32:44] The idea that you’re going to just have your existing customers go out and promote your app, it’s not – I mean yeah, it can get you a few extra customers and you can use a product like Ambassador. If you go to getambassador.com it’s actually what I used on a couple of my apps, that’s actually a great way to do it. They give you some forms and some other ways for your customers to share your product with, you know, other people and actually to get a cut off the price if that’s what you want or just out of the goodness of their heart. I mean however you want to set it up is fine but – so there are definitely tools out there to do it. I haven’t seen this done to scale to really starting, you know, getting aside from viral loop applications which are typical B2C apps, I have to see an example of one before I believe that word of mouth can really be use in and be a repeatable process to grow a B2B app.

[33:30] Mike: That’s right and I think that in terms of focusing on improving word of mouth for your application, I think that there’s a lot of other much lower hanging fruit that it’s probably warranted to go after than to concentrate on “How do I improve word of mouth for my application when I’m just starting out?”

[33:47] Music

[33:50] Rob: If you have a question or comment, call our voicemail number at 888-801-9690 or e-mail us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control”  by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.

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Episode 121 | Seven Catastrophically Common Launch Mistakes

Startups For the Rest of Us
Startups For the Rest of Us
Episode 121 | Seven Catastrophically Common Launch Mistakes
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Show Notes

Transcript

[00:00] Rob: In this episode of Startups for the Rest of Us, we’re going to be discussing Seven Catastrophically Common Launch Mistakes. This is Startups for the Rest of Us: Episode 121.

[00:09] Music

[00:18] Rob: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.

[00:27] Mike: And I’m Mike.

[00:28] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What is the word this week, sir?

[00:33] Mike: So, I have suffered from a nerd injury.

[00:35] Rob: You e-mailed me you said, “I think we need to push off the podcast by a day.” And you said, “I tripped over my headphone cable and when I was getting up, I think it pulled something in my headphones.”

[00:47] Mike: The USB connector bent that’s when the cable got yanked. So, I don’t know. There is something in there where the Windows recognizes that it’s connected to the machine and it sees exactly what kind of headphones it is. There is no sound coming out of it. And the microphone doesn’t work.

[01:01] Rob: Well, so you bought new headphones and I bought a MacBook Air.

[01:04] Mike: Do you want to trade?

[01:05] Rob: Yeah, mine is – it’s pretty beefy. It’s got a 512 gig SSD drive and 8 gigs of RAM.

[01:11] Mike: Actually the extra space is really not that big of deal to me because mine has 256 gig SSD and let’s see, I have half of it allocated for Windows. The other half allocated for OS X and you know, I still have plenty of free space on it. So, that’s not a big deal. It’s the 8 gigs of RAM would be nice to have but I’d exchange that for a better screen anyway.

[01:31] Rob: Yeah, that makes sense. Hey, I’m finally going Mac. I mean partly because you’ve been able to pull it off well and I know you do. You probably do a lot more Windows development than I do. I’m down now to just a very small amount of some .NET console apps that I maintain. Everything else I could do on a Mac with a good text editor. To be honest, there is no other hardware that I can find that anybody makes that runs a Windows that is all comfortable to Mac hardware. It’s just like crazy that no one has been able to catch up with them but then I really I was playing with the MacBook Air in the Apple Store and the gestures look really – I was just flipping around. It sounds like, wow, this is a nice OS. It’s really impress. So, I’m going to give it a shot but I look at Windows 8 and I’ve gotten on a couple of machines with that on and I’m thinking I know I can learn this but why – if I went go through a learning curve, I might as well just take the time now and jump to Mac, you know.

[02:19] Mike: Yeah, I think that the things that I would say about switching from regular Windows desktop to a MacBook Air is that if you want to run Windows on in too just go at VMware Fusion. So, it costs you like, you know, fifty to a hundred bucks or whatever to buy the software. And then in OS X because it allows you to have virtual screens, you can have that full screen on another window, basically, on another – on a virtual screen and you just three-finger swipe between operating systems and it’s completely seamless.

[02:45] And then the other thing that you’ll probably have to do because you’re a Windows user and you’re used to the function keys actually acting like function keys, you’ll want to remap those so that you have to hold down control function, whatever the function is to get to the OS X shortcuts. So, like for example if you hit – there’s one of them where you can turn the brightness up or another one where you can hold turn the brightness down. But when you’re in Windows, those things typically you’ll do like control F5 to compile in visual studio, that doesn’t work. You have to hold down control function F5 in order to do it. So, the key mappings are a little bit messed up. So, I would advice switching over those key mappings so that you have to hold down the function key in order to get that top row to work in OS X.

[03:26] Rob: Very nice. So, that’s what’s going on in my world. How about you?

[03:29] Mike: It’s tax time. Somebody needs to just kill me. [Laughter]

[03:32] Rob: Yeah, and you know, remember last year, you said your tax date was March 15th?

[03:35] Mike: Yup.

[03:35] Rob: And I was like, “Oh, mine’s April 15th because I’m an LLC and you’re a corp.” And then my accountant gets in touch and like “I just filed an extension for you.” So, this year, I’m trying not to do that. I’m actually going to try to file the LLC stuff on time on March 15th and then do the personal stuff by April 15th.

[03:50] Mike: Uh huh. So, what else you got going on?

[03:52] Rob: Well, you know, this week actually I have two pretty cool stories, success stories from some Micropreneurs. We have one is from Brecht Palombo. He’s a lifetime Academy member and he e-mailed me this week and he said, “Your Academy got me started and I now have a SaaS. It’s three years old and it broke six figures last year and it’s tracking the low five figures monthly for the last few months. I left my consulting business behind last October.” That was really cool. This is why we do this. I love hearing stories like this. His URL is distressedpro.com.

[04:21] And the other congratulations I want to send out is to co-founder of Light Point Security. It’s Zula Gonzalez. She’s also a lifetime Academy member and they were — Light Point Security was recognized as one of the top ten most innovative security companies by RSA, the RSA Conference I guess in 2013. And she said that they’re going to be presenting at the RSA Conference in February for a chance to win most innovative company. She also got in to the Launch Festival with Jason Calacanis but they got in to a local Maryland startup festival that had like a higher prize and a higher possibility for them to win. So, they bowed out of Launch and they’re doing the one in Maryland instead but lots going on for them. So, I’d just wanted to give both of those guys a shout out. That company again was Light Point Security and it’s at lightpointsecurity.com. So, congrats to both of you guys.

[05:06] Mike: You know, the only other thing I have is that I’ve been working on the documentation for AuditShark because I’ve been talking to people and they’ve looked at how AuditShark works and they say it great what it does but I don’t necessarily understand how to put anything together. So, I’ve been working on the documentation a lot more to kind of help solve that problem and put it – writing documentation for a technical product that’s, you know, when all of the product documentation also is technical, it’s just a nightmare.

[05:31] Rob: Yeah, true is. So, are you doing that yourself?

[05:33] Mike: Yeah, so I decided to just do it myself. You know, it’s coming along and I’ve got  a lot of the documentation out on the website then there’s a development area where I’ve got more documentation that I’m trying to find tune in before I push it live to the website. But it’s getting there.

[05:46] Rob: Any news on the early access, any changes or are you still looking at couple of weeks to end it and going to launch?

[05:51] Mike: No, I’m going to actually do one more round with some early access people. I got to identify. I want to identify about eight people to send in to this next round and once I’ve identified those, I’ll kind of turn them all loose at the same time and kind of see what they think. Get some feedback from them. If there’s anything that I can fix quickly, I will. Otherwise, I’ll just kind of plow forward and push it out there and fix things as needed.

[06:12] Music

[06:15] Rob: We’re going to be talking Seven Catastrophically Common Launch Mistakes. I feel like I’ve been saying the same thing for years. I guess I started blogging in 2005. That’d be eight years but I really started harping on the startup stuff and started to learning and talking about these mistakes that I’ve made. Share insights about putting up landing pages and tracking key metrics and all the stuff and yet, at least a couple of times a month I either hear a podcast or read a Hacker News story, I see something where people are making – they’re still making these exact same mistakes. And I almost feel – I sent an e-mail the other day to a colleague and I said, “I feel like we’re not moving forward like the industry is still making the same mistakes that has been for years and like I want us to push forward from that.” Do you experience the same thing?

[06:55] Mike: Yeah, and it’s usually because you’re being introduced to new people or there’s new people who are kind of coming in to it. So, three years ago, somebody who wasn’t interested in doing a startup is now interested in doing one and three years ago, there was this great idea about building a SaaS-based business and recurring revenue and all these things, and now they’re getting in to it, they’re like, “Hey, did you hear about this new SaaS-based business and recurring revenue.” And I was like, “Well, I heard about it three years ago but you weren’t here then so you didn’t hear the conversation.”

[07:23] Rob: Yeah, so I guess that’s really what this episode is. It’s a collection of mistakes that I’ve heard basically within the last two weeks from a number of different blog posts, podcast discussions and other things. And some of these, personally actually I called it out like “I made this mistake” and other times they just said a quote that made me like smack myself in the head and said, “Oh, man, like how are you running a business? Like how – no wonder it failed.” You know, a lot of these are postmortems on why they failed and it’s like, “No wonder it failed. You made some basic fundamental mistakes.” And we’re going to cover seven mistakes.

[07:55] The first one is not putting up a landing page before you start coding. We talked a lot about putting up landing pages and there’s a number of different reasons for them. Even if you’re not trying to test the market and do a smoke test and validate the idea, even if you’re just going to charge in and code it anyways, not having a landing page is a huge mistake. It’s a huge mistake. I will say it ten more times, it is a huge mistake. You get so much information out of having a landing page up because as you talk to people about it whether it’s on a podcast or whether it’s at a conference or whether it’s just one-on-one as you’re talking them about it, you can always say, “Hey, check out the landing page and it gives you a little more info and enter your e-mail if you’re interested.”

[08:34] And so you get huge benefits from this. One, you get a short, even if it’s just a small list of e-mails, you have people who might be interested in beta testing the thing and getting beta testers who are interested in your app who are in the niche that you’re serving is a non-trivial task. So, that’s – it’s a really big deal. The other thing is allows you to test verbiage and positioning and figure out where traffic is coming from, figure out which sources are converting. There’s so much information you could get before you write along a code or before you launch your app. I’m in the middle of this right now and I’m realizing once again, the intense value that you can get from a simple landing page and running some split test and tracking who converts. I already have a much better picture of who my ultimate customer will be for Drip than I did two months ago before I had this landing page up.

[09:19] Mike: I would add a lot to that but I think that it leads a lot more in to mistake number two which is not tracking key metrics from the start. And really you start with that landing page because not having a landing page is mistake number one and but mistake number two is not tracking the metrics for that landing page. If you’re not figuring out who’s coming in to that landing page, what keywords they’re clicking on to get there, how they’re getting to the landing page, what words on the page are making them convert versus which ones are not. So, if you’re not doing A/B testing on there, you — that’s another mistake. You have to be looking at these things and tracking the right data because if you’re not tracking the right things then you’re not ultimately going to be successful with it because you don’t know what’s working and what’s not.

[09:58] Rob: Right and you don’t have to be a complete data analyst and not focus on building a really good product, right? You don’t have to sit there and analyze data all the time and build your whole business and base it all on this data that’s coming in. That’s not what I’m talking about that. What we’re talking about is just getting a little more information about who’s getting value and who’s interested in your product and especially early on in your product, this information is way, way more valuable than the money that a customer will give you because the money even if it is a subscription, it’s just a tiny little piece of this puzzle whereas getting more inside in to who is actually using your app, that’s a leverageable point, right? It’s something that they can open up an entire new markets or entire new marketing approaches and ideas and it’s just carries itself through. It’s a flywheel on its own to learn that, “Hey, it’s just so happens that women 20 to 40 years old are my key demographic and there are the ones who this is really clicking with.”

[10:54] Mike: Yeah, I mean if – in any given case, if you could give away ten subscriptions to whatever your product is in exchange for a 5% boost in revenue because you have boosted the conversion rate for that, hands down no questions ask. Go ahead and do it because in the long run, you’re looking at that 5% and on day one, yeah, 5% of $10 is 50 cents but when you start looking at a thousand dollars or $10,000, I mean that adds up very, very quickly and that is repetitive and it accumulates overtime.

[11:23] Rob: Right. I heard a comment on a podcast where the guy said, “I don’t know where the traffic came from to our landing page but I think it converted pretty well.”

[11:31] Mike: [Laughter]

[11:32] Rob: And I was thinking to myself how, like how did you do that because don’t you realize that whatever traffic came there that all of those sources are now – depending on how they convert in to actual e-mails, those are your market like those are the people you’re now going to approach to write guest posts or to publish an info graphic or to advertise on their blog or to just something, you know, just network with because they are your people. They’re – if someone is blogging about designers and you build a tool for designers, then that’s it, you know. If it converts, this is your market and learning the stuff upfront early on is critical. So, if you want specifics about what you should track, obviously, put Google Analytics on there, that’s your first key.

[12:09] The next one is spent two minutes to set up a goal in Google Analytics so you can track which of the traffic sources actually convert in to e-mails like actually provide your e-mail and then beyond the landing because this whole thing about tracking metrics, it doesn’t just apply to having landing page. So, that once you get your marketing set up, you should track them as well. I track trial to paid conversion percentage. I track churn even if it’s in approximation, even if you can’t get an exact number. There are — yes, there are five, ten different ways to calculate churn. Pick one. Even if you don’t know what exactly, just pick one and go with it because you will notice the relative change overtime. I mean you look at your churn and it’s catastrophically high about 30% of your subscribers are leaving per month, you’re going to know that you need to fix something. And if you’re not measuring it, you just have no insight in to that.

[12:52] And the last thing I would always look for is, you know, where conversions are coming from. I got to be honest, if you don’t want to track metrics, if this whole discussion feels like a burden, it feels like something you don’t want to do, then I genuinely think you should not be launching a product. I think that one out of a hundred people ho had success with the product, don’t track their metrics and I think the other 99 look at the stuff that we’re talking about and that’s how you build a true sustainable business.

[13:18] Mike: You know, speaking of metrics, remember when we had a podcast when we’re talking about pirate metrics?

[13:22] Rob: Yup.

[13:22] Mike: So, Tyler Moore has a website called piratemetrics.com where he has a product that’s designed to do a lot of what you just talked about. It’s designed to measure acquisition, activation, retention, referral and revenue. So, if you hate doing metrics, then go sign up for that service and take a look at it and see if it’s something that’s going to meet your needs. And it can help you do some of that stuff.

[13:43] Rob: Nice. It’s a really cool site. Yeah, I agree. I think Pirate Metrics is a good option and KISSmetrics can be another one. It’s a little more complicated. There’s a lot to it. That’s the thing is people hear discussions about metrics and it’s like it feels too complicated and so they just don’t anything. The thing is if you measure just two or three key metrics, you are 80 to 90% of the way there. And so, take the advice and go to piratemetrics.com.

[14:09] Mike: And I think that’s a good point is just measuring two or three because you have to start somewhere and until you start digging in to those things and start really understanding what they mean for your business, then it’s hard to figure out what other metrics you should be looking at. So, starting out very small is probably better than starting out with a ton of metrics because a ton of metrics is going to be overwhelming and you’re not going to know what you should be looking at or what is important to pay attention to. Starting with just two or three metrics, you’re going to have a good idea of what those numbers mean after a month or two and then you’re going to say, “Well, based on this information, I need to know that. How do I get it?” And then you start building those additional things in and overtime your metrics dashboard is going to grow to the point that it’s going to support all of the different things that you need to figure out.

[14:50] Rob: So, mistake number three is assuming or saying that people are finding you through word of mouth because what this really means is “I don’t know how people are finding us.” And this ties in with not tracking metrics but everytime I’ve talked to a founder who tells me that their app is selling via word of mouth and I’ve actually been able to go in to their Analytics, everytime I found out that it’s not word of mouth that’s selling the app. Either they have something misconfigured with the Analytics that isn’t showing refers. I’ve seen that happened. I’ve also seen people say, “Well, my direct traffic is growing and I can’t explain why and so, it must just be people talking. It’s word of mouth.”

[15:25] The thing is if you have a SaaS app or any type of app where people come back to it to log in and you don’t figure out a report and figure out a way to exclude those people, then your traffic is going to increase overtime naturally. That’s not word of mouth. That’s just having a thousand customers when you used to have ten and your traffic is just a lot more. So, word of mouth really is not as pervasive or as common as most people think. Most people think, “I’m going to build a great product, great design, app is going to work and everybody going to talk about it.”

[15:52] Now, people telling each other by blogging about it or by tweeting about it or by saying it in some trackable form because if they put it on a blog post and they link to you, then you’re going to see that as a referrer. And that’s not what I’m talking about here. I’m talking about this when people say, “Oh, my direct traffic and I have all this traffic coming in that I just can’t describe and so that must be word of mouth,” that’s the stuff I’m talking about. I think it’s a dream of developers we think that that marketing and sales are scammy that just building an awesome product is going to be enough to do it and the bottom line is you really is not in almost all cases. I’d say one out of a hundred it is and all of the other people actually know where their traffic is coming from and they just don’t assume it’s word of mouth.

[16:31] Mike: I think part of that is just a misinterpretation of the data by someone who is looking at it and saying, “Oh, well, you know, I don’t know where this traffic is coming from. It looks like it’s direct and most of it is direct. So, it must be word of mouth.” And then they parrot that out to other people and people read it and if you’re not thinking about it in this way to understand that that’s probably what’s happening in this original person just misinterpreted the data and then that turns around and gets parroted out because, “Oh, well, they grew their business based on word of mouth. That’s all I need to do.” And that’s kind of how that myth of by word of mouth gets started and that’s how I guess continues to grow and be out there because nobody will kill this myth because there’s no definitive evidence to say, “Well, that didn’t exists.”

[17:13] Rob: I heard someone who wants to be an indie developer. He’s like a freelancer but he was talking about how he didn’t want to do marketing because he thought, “I felt like marketing was scammy or something.” And there are always these examples that are thrown around that they’re like to hear these companies that just all they did was build great products and they didn’t market like everybody else. They just went and did their own thing and focused on the products. And examples thrown out are like Apple, Dropbox, there’s a new app called Mailbox that has 700,000 people on an…on e-mail list. That’s an iOS app. And I think Sparrow is another one. The thing is…is brilliant marketing is invisible and all of these companies have world-class marketing and PR talent. They are machines and they do it so well that you don’t even see it. You’re not seeing behind the curtain. They are so good at it that it’s invisible to you. The fact that everyone is “talking about it” is a carefully orchestrated and constructed PR and marketing campaign.

[18:04] Mike: yeah, I’ve heard a lot of people compare what they want to do to like Apple and just say, “Oh, I just want to build a great product and people will love it and they’ll tell their other friends about it.” And it’s just like that is such a pipe dream. It just does not happen. I mean there are certainly rare cases where it does but by and large that doesn’t happen and the chances of it happening to you are infinite test and really small.

[18:26] So, mistake number four is running an open beta. And you really don’t want to run an open beta because you want to be able to tightly control who is seeing things and you want to be able to directly solicit feedback from people. Now, if you run a beta and you just open it up to the world, what happens is people come in. They’re going to sign up for it and they may check it out, they may not but chances are really good that they’re not going to give you a feedback and they’re not going to give you the feedback that you need because they’re not vested in the product. You’re not putting them through your marketing pipeline. You’re not talking to them in the way that you would to a prospective customer and therefore, you’re not pitching them on the product.

[19:03] So, when they just sign up and just get dropped in to your application, the problem is that they’re just not seeing all of that stuff. So, you don’t get the feedback that you need in order to tweak it such that is going to be effective when you get to the point where you start charging for people. And the second thing is charging people. You really want to charge people as early as you possibly can. You don’t want to give accounts away free to people because you want them to pay for it to help validate your ideas so that you can determine whether or not it’s something that you need to continue with or whether you need to continue to refine your message until you find the pain point that people are having that they are willing to pay for.

[19:40] Rob: Right, imagine that you put yourself on a launch list. You’re a potential customer of an app that you hear about and their e-mail on a landing page. And then two months later you get in a single e-mail that sent out to everyone that says, “Hey, everyone. We just launched. Click here to get in to our beta and give us feedback.” You’re very unlikely to do it whereas if instead you received a personal e-mail from the CEO that says, “Hey, so and so,” addresses you by first name or says, “Hey, you’re on our launch list.” It’s a plain text e-mail that obviously came directly from him. It’s not a list. Him or her. And they say, “You know, hey, we really need – we’d hand pick a handful out of our massive launch list and we would love for you to come in. Have a look at the app and if, you know, if you’d like to test it out, we’d love to have you do it.” And that way you really go – get in to the people who have a dire need for your app, who have desire to actually give you a real feedback. They’re going to take the time to walk through it.

[20:33] And then like Mike said you can make the decision. You’re – let’s say you do like five beta testers and then they gave you a really good feedback. Maybe you do comp them. You know, maybe you comp five people but you don’t comp your all 500 people on your list because these are your best customers. These are the people who are most excited to hear about it and they are the people who you spent months getting on to your e-mail list, getting them to your landing page and getting them to sign up. So, to basically just open up to everyone and comp everyone, I didn’t even realize people were doing this anymore honestly until I heard this a couple of weeks ago. And I was like no, you can’t do this because this is how to start on day one with zero revenue. You’ve heard all this time you go to the launch and then you basically just take your launch list and you throw them in a trash because, yeah, you have a hundred or 200 or 300 users but now you’re supporting them and you have no revenue and people are actually happy to pay. If you provide them value, they will value the app more if you charge them something for it.

[21:26] And then this shows you can already start getting information about who’s using it and why and when people do cancel, you want to know that and you want to know why and if it’s a free plan and they just stop using it, you don’t know if they would have canceled or not. It’s just…it’s just a much more opaque process to do this. It’s not just about leaving money on the table but it is about getting paid for your effort to be honest. It’s about starting off after all of this work and getting at least a little bit of money that can help you bootstrap this app and grow it because it’s hard enough to get this thing off the ground without taking, you know, four months of your pre-launch marketing efforts and just…and throw them away.

[22:01] And mistake number five is launching with a single launch e-mail. In an ideal world, you have at least two e-mails. You can have up to four in my opinion. Your launch is an event. It’s an event for you and it’s an event for people who are actually interested in your app. So, imagine this. You’re on a launch list. You haven’t heard from anyone for two months and suddenly you get this e-mail and it’s like, “Hey, App-tastic has launched and come and see our new app. Here’s the link.” I get this all the time and I don’t remember what list I signed up for. I don’t remember why I’m on this list. I don’t even know if it’s spam or if I actually did sign up for it.

[22:35] So, that is epic fail. Do not do it. What you want to do is send out an e-mail a week or two before your launch and tell the people right on the start, “Hey, you’re receiving this e-mail because you subscribed at this URL and this is the product. This is probably why you subscribed and this is the app – what it is and what it does.” And build a little bit of anticipation. Either send a screen shot they haven’t seen before, short screencast. Send them a link to something they couldn’t have access to before and what this does is it starts building some anticipation with people who are actually interested in the app. If people aren’t interested in the app, put right there at the top, “If you don’t want to hear anymore about this, unsubscribe here,” and include a link and let them get off your list because there will be a core group who’s really excited about or there should be or else you’re not doing a very good job of you know, vetting your product.

[23:19] But what this does is it starts getting you a little bit of data about, “Hey, who’s clicking on this thing? How many people click on that? Are they interested in this app and you know, what can I do to engage with these people a little more?” And so you e-mail them a couple of weeks before hand and then you can either e-mail them the day of the launch or e-mail them a couple of days before and say, “Hey, everything is set and here’s going to be the ultimate pricing and you’re going to get a small discount for being on the list. Thanks a lot. You have a couple of days to take advantage of that.” And then, you know, you can send them an e-mail the day that that expire.

[23:48] So, somewhere between two and four e-mails but make it a little more of a process. It’s like you’re not bothering people. You’re not spamming people. They signed up for a list to hear about your app. Give them something to be excited about. This approach alone can seriously take you from closing 1 to 3% of your list up in to the 15 or 20%. It can easily do that at least getting people to try the app out. Maybe not full purchases but it’s just night and day.

[24:13] Mike: So, mistake number six is having a free plan. And unless you really know what you’re doing, you do not want to have a free plan. And there’s a bunch of different reasons for this. The first one is that it skews your metrics. It makes things way too complicated to try and figure out whether it’s people who are on the free plan are canceling and chances are good that those people are not going to cancel. So, what’s really going to happen is you’re going to have this metric that shows you that your cancelation rate is only 2% when the reality is all the people who are on your free plan, they’re not going to cancel anyway because it doesn’t costs them anything. So, now you’ve got the skewed percentage that in no way, shape or form accurately reflects what your churn is going to be for that application. So, unless you have experience and some very specific knowledge of how you’re going to convert these free users and the paid users, don’t even bother. Rob, you said it best in the – was it at Wall Street Journal where you were quoted as saying free plans are like a samurai sword?

[25:08] Rob: Yeah, it was in New York Times.

[25:09] Mike:  New York Times

[25:10] Rob: And yeah, it was free plans are like a samurai sword. If you’re a master, you can do amazing things with it. But if you’re a beginner, you’re more likely to cut your arm off. I really believe that. It’s just what you said. It’s like having expertise and there are people who can use free plans to fantastic results but it is way, way harder than it looks. You need to look behind the curtain and see how much experiences people have and precisely how they use that free plan that’s very specific uses in very specific ways that they tried to get people to convert from free to paid. There’s all these things in place that if you don’t do these things, you are just screwing up and you’re just seeing the façade of how or it’s on the outside.

[25:45] The other thing is you need a good chunk of money to be able to outlast the free plan because I’ve heard like Dropbox and Evernote, they convert X percent after a year of people using their app. So, do you have the money to support all of those users for a year, you know,  all those free users without getting revenue? If you don’t, then in general it’s not a good idea.

[26:05] Mobile apps are likely they’re different, right? Having a free version with an app purchases or having a light version, I’ve heard these things work very well. The free versions do not really support burden with mobile apps like they are with web based software and in my opinion they can actually can work as a really good marketing channel but that’s not what we’re talking about here. We’re really are talking about having a free tier. Again, unless you know what you’re doing or I mean even look at MailChimp, they didn’t have a free tier when they launched. They got very big and now they just – they know their numbers right? Inside and out, they know all of their metrics. They track everything and now, they introduced a free product.

[26:39] Obviously, they have the knowledge and the expertise to be able to make that work but on day one, when you’re trying to launch, it’s just too easy of an option for everyone to pick and that’s, again, it’s kind of like – it’s kind of a kindle throwing your launch list in the trash because you don’t get people actually using the app and actually paying for it which means they have to commit to it and actually commit to using it and you know, which will ultimately make the app better because they give you feedback and they’re more invested in it.

[27:04] Mike: It can also be a distraction especially when you’re first launching because you might start getting feedback from people, “Hey, I’d like it if it did this,” or “I’d like it if it did that.” But these people aren’t paying for it. So, they’re not seeing enough value in it to pay for it yet you’re going to accept advice from them and that’s really just not a good path to go down because you’re taking advice from people who have a vested interest and not paying for it. What you really need to concentrated on is those people who are paying for it and by eliminating the free app or the free plan for your app, then you eliminate that possibility of bringing in that input from those types of people. And then down the road as Rob said like MailChimp did once they got to a point where they knew what their numbers are and they were able to offer the free plan and measure it and they’ve tweaked it several times over the past 18 months to try and figure out what’s working or what’s not, at what point will we be able to convert people in to a paid version of the application.

[27:57] Rob: Right and I can name a number of people off the top of my head who have launched  with free plans and who close them down or make them extremely hard to find within a few months of launching. Over and over it’s the same pattern. Launch with the free plan because look, Dropbox did it and then you just – you wind up getting 600 users and no one converts and you don’t know what to do and you don’t have the time to figure out or you don’t have the experience to do it and you just kind of bail on it. It’s very common.

[28:22] Mike: You know, I would add a mistake 6.1 to this which is offering a low priced plan which is probably going to be more of a support burden than its worth. And I’ve seen a lot of people where they’ll have – they’ll launching new product. They’re like, “Well, you know, $10 or $20 a month seems right but I’m going to have this $5 plan or $8 plan,” because people, you know, have this mental hurdle about paying more than $10 for something. That’s totally ridiculous. You really need to be charging people what the product is worth and what they’re wiling to pay and not trying to get people to use the product and then in an effort to have them upgrade later. Offer them value upfront. Make sure that it’s going to be at a price point that’s going to support you and the support burdens that you’re going to undertake.

[29:04] Rob: It is a usage-based thing where like Dropbox, your usage is naturally increases overtime and so as you use more space than you would upgrade tiers, I could feasibly having a little price tier but boy, it’s really – I would default to not doing that, you know. I just – I would say that’s a one time where you may consider doing it as if someone is naturally just to be using the product, got to naturally upgrade to those higher tier things and you will lose them otherwise if they’re not going to sign up.

[29:32] Mistake number seven is not growing fast enough. And I know probably what you’re thinking here and say, “Wait, Rob and Mike? They’re like – they’re not all about growth startups.” The thing is well and we’re not, right? [Laughter] You can…you can start a startup and – or start your app, launch your app and not grow it and just grow it to a place where you’re comfortable and that’s okay. It’s not all about growth. The problem is that you need to grow your app fast enough to keep yourself interested in the project or else you’ll abandon it. The number one reason that bootstrap startups fail is because they  don’t make enough money to keep the person interested, bottom line. Not growing fast enough it will kill your app because you either get bored, other things come up. If you launch an app and it’s making 10 grand a month, by month 2, you are much, much less likely to be bored with the thing than if you launch it and you’re making $300 by month 2.

[30:19] Mike: Something else that factors in to that is having the application be able to support all of the costs to that is essentially causing you because whenever you launch an application, typically, you have to pay for hosting, you have to pay for any Analytic services, all these other things that you’re probably using to help promote the app and run your software and all the infrastructure that’s in place, your bug tracking, your source control, everything else, it’s going to costs you at least some money. And it’s not to say you can’t get open source solutions but the fact of the matter is that your time is worth something. So, you have to take those in to consideration and if it’s not covering its cost, unless it’s a real labor of love, you’re going to find that it’s very difficult to continue that for a long period of time.

[31:01] Rob: So, those are the Seven Catastrophically Common Launch Mistakes. Mistake number one is not putting up a landing page before you start coding. Mistake number two is not tracking key metrics from the start. Mistake number three is saying people are finding you through word of mouth. Mistake number four is running an open beta. Mistake number five is launching with a single launch e-mail. Mistake number six is having a free plan and mistake number seven is not growing fast enough to keep yourself interested in the product.

[31:27] Music

[31:31] Mike: If you have a question for us, you can call it in to our voicemail number at 1-888-801-9690 or you can e-mail it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.

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Episode 120 | Growing Your Business Past Employee Zero

Startups For the Rest of Us
Startups For the Rest of Us
Episode 120 | Growing Your Business Past Employee Zero
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Show Notes

Transcript

[00:00] Mike: This is Startups for the Rest of Us: Episode 120.

[00:02] Music

[00:10] Mike: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.

[00:18] Rob: And I’m Rob.

[00:19] 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?

[00:23] Rob: I got a call Sunday night from one of my developers. We almost never speak on the phone. I picked up the phone and I said, “Uh oh.” And it’s Sunday night about 7 p.m. and he says, “Do we have a backup of the database?”

[00:34] Mike: Oh no.

[00:37] Rob: I was like, “Ah, yeah. What happened?” And as he’s talking I’d said, “You forgot the WHERE Clause.” He forgot a WHERE Clause on an update statement.

[00:46] Mike: Oh.

[00:47] Rob: I’ve done this twice in twelve years where you just you say update the table set this column equals that and you know, for those non-developers out there, then you’re supposed to say, “Where the I.D., customer I.D. equals 123.” So, you only update one row. But if you leave that WHERE Clause off, you update the entire table every row to the same value. And so, if you only have 50 rows, that’s fine. If you have 5 million rows, they all get updated. Now, it turns out it was a small table. It’s 4,000 rows and luckily enough, it was not a table that’s used in real time. So, it’s something that’s used in [Audio Glitch] on billing process. So, I was able to just – we stopped the billing process.

[01:26] I was going to run a few hours later and then I got in touch with our DBA and that’s one of the benefits of having a DBA is he has all – I’ve asked him just to have up-to-the-minute backup since so he could basically restore to a point in time. So, I said restore to like 7:15 p.m. Pacific Time, you know, because he ran the query at 7:20. He’s on UK time. So, it did take a couple of hours because I don’t want to wake him in the middle of the night for something that wasn’t basically wasn’t taking down the app. But once he got the message, it was like 20 minutes later, everything was restored and it was fine.

[01:57] Mike: Yeah, I’ve done that in the past at least once or twice myself and I’ve learned if I have an update statement that I’ve written, what I’ll usually do is I’ll comment out just like the update part of it and I’ll do a select first to make sure that I’m selecting all the rows that I actually want to update.

[02:11] Rob: Yeah, I’ve seen professional like DBA, you know, 24/7 DBA guys do that and that’s what I do now too. Like I said, I’ve done this twice and the first time I did it was through an Oracle database and has the rollback capability because you have to commit. And so, I saved myself for the rollback. The second time I did it, there was a way to reconstructing the data and I’d just had to spend about an hour doing some manual stuff. And realistically as we talk through, there’s only, you know, myself and these two…two other people like production database access so – as we talk it through, they’re were ways, you know, if we didn’t have a backup or the backups had failed or something, there was a way to manually reconstruct this data that would had been a pain where we had to pull it from a couple of different sources. But it was like always not lost and realistically the app, you know, wouldn’t have been sunk. So, but it was a funny – it’s such a funny quote, “You know, do we have a backup of the database?”

[02:59] Mike: Yeah, those are words that you just never want to hear? Did you put that out on Twitter because that would have been a great quote?

[03:05] Rob: What’s been going on last week?

[03:06] Mike: I’ve been doing some more work on AuditShark for the self-updating policy builder and that is finally working. It’s taken forever to get it working but it got to the point where we had to read through the source code. I didn’t read to the source code but my developer did in order to get the installer working because we were using a WiX toolset which is open source but it’s not documented real well. So, he had to restore it at one point to just reading through the source code to figure out what different pieces he did and how to make it work and do what we wanted to.

[03:33] So, at this point everything seems to be working. You can just install it and then everytime you run it, it double checks to verify that you have the latest version. If you don’t have the latest version, it just doesn’t self-update which is pretty awesome. It seems to work even if you have like UAC running. It just asks you if you…if you’re okay with updating that and just go through and update it and everything seems to be working pretty flawlessly.

[03:54] Rob: Nice. And this was a little bit of a hang up for your early access.

[03:58] Mike: Yeah. It kind of – it put the whole early access on hold for much longer than I would have liked. I mean it didn’t seem like this should have taken as long as it did but because of all the issues that we ran in to with it, I am not real happy about where the early access is right now. So, I feel like I’m behind schedule on a lot of it and I haven’t talk to nearly enough customers to understand what’s really important to them so far. So, I’m really considering just kind of extending the early access to get more of that feedback and bring more people on to it because that was really just holding me up and until that was done, I couldn’t really add more people to it.

[04:31] Rob: Right. Yeah, I definitely think you need to get more feedback from more people because it doesn’t sound like you have talked to enough at least when we’ve talked in the podcast. It sounds like you have a few people who have given you feedback but not…not enough that you’ve made like drastic changes if needed. I mean in the interest of accountability like the original early access was supposed to start at September 10th I think and you started it in and then there was something wrong and you – I think you spent about six weeks fixing it. And then I don’t remember what happened in October-November but I don’t know if the holidays got in the way or what but – so you’re now, you know, you’re several months in to essentially early access. You kind of started one and then stopped it and then restart it again in January. Do you have a tight timeframe for this one for like extending it or what…what are you thoughts at this point?

[05:14] Mike: I wouldn’t extend it by more than a couple of weeks I don’t think and not must something drastically serious comes up where people are trying to use it and just doesn’t – it out right, it doesn’t work. The other question is whether I release it without the full-blown Linux support which I probably would. I would probably just launch it and there are pieces that my developers built in which allow me to turn on and turn off different functions based on whether flags are set on their accounts so I can say, “Okay, we’ll turn Linux support on for this account and not that one,” for example which is kind of a neat function to have.

[05:46] So, I’ll probably just kind of plow forward without having full-blown Linux support in there and you know, with the — on the Window side just, you know, move forward with what I got. But I really like to get some more feedback from people as to what they think of how it operates or certain reports they want or things like that. So, I don’t think that would extend it by more than probably three weeks or so. But I do want to get some more people sign on to it and get some feedback from them.

[06:08] Rob: So, coming back to that Drip landing page split test I was running last week. If you recall, I had kind of a stripped down minimalist version and then I had a heavily designed drop shadow which is going to be the final marketing version and they are split tested against each other. And so far, the minimalist version is just trouncing, absolutely trouncing. I think it has 500% more conversions. The highly designed version which almost makes – that’s such a big difference that it makes me think there are might like either someone is messing with me because they know that I’m doing this or there’s like a cookie issue because I was running a split test right before this one and there’s somehow the cookies are overlapped or something.

[06:49] So, I think I’m going to like totally restart it and see if I get the same results. If – and if I do, then I need to seriously look at like what to do in terms of the marketing side because I don’t just want to turn on a design that’s not converting.

[07:00] Mike: I might either go ahead and put either Inspectlet or Crazy Egg on there just to see where people are actually going through and measuring it for a couple of days to see what people are doing when they get there.

[07:10] Rob: Yeah, that’s a really good point. Actually Inspectlet where it records the mouse movement, that would be a really good one.

[07:16] Mike: Cool. So, what else you got going?

[07:18] Rob: Last thing I’ve been working on is over the past week, I’ve migrated about five more sites to WP Engine and you know, DreamHost is – man, I’ve been on there since 2005 and for the first probably five or six years, they were solid. I mean they were really just a great value for the money. I always need one a high end host but they have just had at least with my server I’m on a really old server, right, because I’m eight years old and it’s – the stuff is getting slower and slower and slower and I’m needing to pay more money because I’m on a VPS and I have to crank up all the usage, the bandwidth and stuff. There’s no sites I even have left on DreamHost that are using many resources. They’re just not high volume sites. The one thing I can think of actually is our podcast episodes are on there, like the actual mp3s and I know that it’s like what is it? A terabyte or something a month?

[08:08] Mike: Yes, something like that.

[08:09] Rob: Like a terabyte a month of download but geez, it should be able to handle that, you know. You know, as a result of all these, the MicroConf site is now stable. It’s up on WP Engine. It had two outages within a week. Knock on wood, I shouldn’t have that again because WP Engine is a much, much more stable and faster environment. And then I also got several blogs and some other kind of more critical sites. I think now all of my really critical sites are off of DreamHost on WP Engine.

[08:34] Mike: Yeah, I started to move over. The – the podcast site, I haven’t quite done that yet.

[08:38] Rob: Yup and then once you do that, we’ll need to think about moving the actual audio, the mp3 files as well because they’re on my DreamHost account.

[08:46] Mike: Cool.

[08:46] Music

[08:49] Mike: Today, we’re going to be talking about how to bring people in to your business so that your business can move to the next level because obviously, it’s extremely difficult to do everything yourself. You need to bring people in who you can plug in to different areas your business and depending on what level your business is at and what you need done is going to kind of dictate the types of people that you bring in. So, that today we talk about the different types of people that you can bring in to your business, what sort of roles they would play, when is it appropriate to bring them in, when is it not appropriate, how to find these people and what they can do for you that either you can’t or shouldn’t or that other people couldn’t or shouldn’t do for you.

[09:24] Rob: Right and there are some people probably listening right now that are thinking I don’t want to bring anyone on. I want to stay the solo founder that I am right now, the solo-preneur and I don’t want to hire people because I don’t want the responsibility. And obviously, that’s a perfectly legitimate point of view and both you and I have done that or are doing that presently. Even if you’re doing that though, there are still a couple of these roles like I’m talking about advisers and virtual assistants that I would encourage you to think about doing because let’s stop believing that you really can do it really well all on your own. You can do. You can get halfway there. You can get most of the way there but if you want to achieve your full potential I’ll say or you want to grow faster or you just want some guidance and support, there are some of these roles even if you’re not going to hire an employee, you’re not going to hire someone fulltime or a part-time on a regular basis, there are still help that you can and should bring in to outsource certain tasks and there are still those roles of like advisers or mastermind fellows that I think are critical even if you truly do want to stay that solo-preneur.

[10:24] Mike: So, the first one we’re going to talk about today is the intern. I think that when you’re talking about an intern, you can do either a paid internship or an unpaid internship but at the end of the day, I mean you’re still talking about somebody who’s essentially an entry level employee. I think the real draw back to interns is that because they are low level, because you have to spend a lot of time training them, it may not necessarily be worth of your time because of all the extra time that you have to spend doing that training and training is very time-intensive.

[10:52] It’s very mentally-intensive to make sure that you’re on top of what they’re doing and making sure that they’re doing the right things because if they’re doing the wrong things, then not only are you spending that time with them trying to train them but then you have to go back and you have to still do the work in anyway in – whether that’s having them redo it or correct them, you’re going to basically sink a lot more of your time than you would if they just did it right the first time or if you paid somebody who was much more skilled or experienced to do that work.

[11:20] Rob: Yeah, I think defining interns as someone who’s entry level but has an interest in learning about the field and I guess probably a pretty good way to define it and I’ve always been hesitant to hire an intern. I’d say over the past three years, I’ve averaged two requests per summer college students or grad students who are in like digital marketing or you know, majoring at something dealing with online marketing who have e-mailed me and wanted to intern. And I’ve really struggled with a decision and everytime I got the e-mail because the person A) is taking initiative and so I know that they’re probably going to be someone who gets things done and B) it’s just – I just like to help people out like to give back and teach. I’ve decided not to do it after a lot of thinking and talking to people.

[12:06] The other thing is I almost feel like if someone is going to come and work for free or work for a really, really low stipend which is typical – I think all the ones who have offered have said they’d work for free. Its just kind of – it doesn’t seemed right to me like it seems like I’m getting something – I know they’re getting training but it’s like if I’m trying to do it to save money, but I’m just having to invest a bunch of time and that equation…that equation doesn’t work for me, you know because my time is – I value my time really highly. And so I’d almost rather find someone who is already experienced and pay them like fair wage for their time and probably have more time for my business and then give back to the entrepreneur community through these other avenues.

[12:46] So – but I do know people who have hired interns and have had great success doing it. I know founders who’ve done it. I know that Dan Andrews has his Tropical MBA Program where those people who have a little more – tend to have a little more experience than what we’re talking about but the cost is not very high and they do come in with the attitude of learning. So, I know that it can definitely work. It’s just not something that, you know, has work for me personally in the past. I’ve opted for one of these roles that we’re going to talk about.

[13:11] Mike: Right, I think that the situation where interns would actually work really well is if you’re trying to grow your business and you are looking in to intern program as if it’s a method of bringing people out of college and vetting them before you hire them because you’re going to get a lot better view of what somebody is like as an employee when they’re an intern than you will in like a 45-minute or a 3-hour interview. I mean you just get a much better idea of how somebody works, working next to them or having them report to you for two, three, four months than you do in just going through the regular interview process because there’s a world of difference between those two things. So, the next one we’re going to talk about is virtual assistant.

[13:54] Rob: I’m actually down to three virtual assistants right now. I don’t include developers, designers, product managers, any of those technical roles in virtual assistant bucket but I have three working for me down from I think at my peak, I had six. I’ve hired about 15 over the past probably four or five years and some have they just not worked out and then others have had to move on like one went to grad school and so couldn’t do VA stuff anymore. And then others I’ve, you know, decided to let go or just kind of wound down the projects that they were working on.

[14:25] But I’ve always found a lot of value in finding someone. I mean the nice part about a VA is you can typically find someone who has experience in the area that you need help with, right? So, you have someone who’s already trained. I mean they may not be highly technical person or a highly, you know, design-oriented person but you don’t hire them for that kind of stuff. You hire them for admin work and research and responding to e-mails and other tasks that are just hard to get done and you kind of just need a jack of many trades, like a non-technical jack of many trades. I am putting out a video course on how and why to hire VAs if you have a startup and if you’re interested in that, you can go to softwarebyrob.com and there’s an e-mail newsletter signup in the upper right and that’s where I’ll be mentioning that.

[15:07] Mike: I think the biggest advantage that I’ve found with the virtual assistants is using them to as more of a human filter to whittle down vast quantities of information in to something that’s consumable. So, I’ve used VAs to go out and search for like themes, for example, if I’m putting together a WordPress site and I need a theme for the WordPress site. I’ll point to several of them and say, “These are kind of what I’m looking for. Find me 10 or 12 other options that are close to this one,” because that’s something that you can’t have a computer do it and even if you could, it would take forever to build a program that would actually go out and be able to do that for you.

[15:43] So, having a human sit there and look through those and use their brain to kind of figure out what it is that you’re actually looking for and then present you with those options is a great way to use a virtual assistant to cut down on the amount of time that you’re spending on something. And that way, you’re going through a pre-filter list as opposed to searching through tens of thousands of themes that are out there.

[16:02] Rob: Yeah, that’s a really good example. Ways that I’ve used a VA in the past, couple of months have included, you know, we have people cancel HitTail, right and during the trial and then we have some customers cancel and I wanted to e-mail all of those over a certain period of time and say, “Why had you cancel,” you know, because they didn’t give us – they didn’t have give us a reason or didn’t give us a full enough reason in the cancelation form. And I wanted it to be personal and come from someone on the team and I also wanted someone to just be able to hit reply when they get the e-mail and send it back to us.

[16:31] So, yes, I could write a script to send a bunch of e-mails, you know, but by the time I do that, I had a Google doc spreadsheet that I sent to the VA and I just said, “E-mail them all and here’s the form. It’s short. All they have to do is hit reply.” And then he gathered up those responses, put them on Google docs and he actually arranged them. He didn’t just spit them in there as a big chunk of data. He actually said, “You know, three people said the similar thing.” And so, it’s like you said, he took a large volume of manual information and did something that wouldn’t have been easy to write a computer, to sift through all the responses and we’ve gotten a less responses and send them through a form instead of just saying, “Please reply and just let us know in one sentence, you know, why you’re responding.”

[17:09] And so, that was super helpful and actually, that’s where we did operation retention based on putting all of those responses. And that’s how I do. I view virtual assistants as a form of human automation. It’s a way to automate things that you may down the line want to do and code or that maybe just a little too hard to do with software but that having someone’s help can just help save you as a founder so much time. Hopefully, on a recurring basis as someone you should have at first or for these one-time projects like you and I just mentioned.

[17:38] Mike: The other thing is it’s faster to write down a process and hand it to a virtual assistant and have them go through it and than it is code up any sort of computer program to go through it automatically and although it may be less expensive in a long run to do that depending on what the actions are, you’re going to get somebody sit in there and looking at those things and you’re going to be able to hand them this process. They’re going to be able to execute it within five minutes after you hand it to them as opposed to computer program which might take you weeks or ever months to put together.

[18:05] Rob: Right and you know, a founder, a friend of mine who has a successful SaaS app, he was still answering e-mails like all the support e-mails. He was doing tier 1 e-mail support up until – it was probably three or four months ago, he said it wasn’t taking him enough time for week – per week that he didn’t think it was justified to hire a VA to help him out with tier 1 support. Now, once he did, he was just like, “I cannot believe I didn’t do this sooner,” you know, because it’s not about the sheer volume, it’s like, “Oh, it’s only three hours a week,” but it’s all the little interruptions that you get along the way and it’s having to wait of those sitting in a queue somewhere, they have to come back to five, six days a week, you know, several different trigger points during the day, you want to check in because you don’t want to be 24 hours before someone hears back. And if you can just get someone on board to help out with you even if they are only spending a few hours a week to start, it’s invaluable towards removing that mental burden.

[19:00] Mike: So, the next one is a contractor. And I think that both you and I put contractors in basically the same boat where contractors are a technical step up from a virtual assistant. So, whether they’re doing video editing, audio editing, software development, design work, copywriting, those kinds of things, that’s generally the role that a contractor fills for you. And I think the differentiation between a contractor and a consultant which is the next thing we’ll talk about is that a contractor is somebody who’s coming in on an hourly basis and you put together an idea of what it is that they’re going to be working on and if you need them for one hour a week or you know, 25 hours a week, they’re going to come in and they’re going to do that work for you. But the expectation is that it’s more on demand than anything else.

[19:47] The difference between a contractor and a consultant is that a consultant tends to come in as a highly specialized person in one specific thing. And I differentiate between contractors and consultants because consultants come in for a very short period of time, you have a very specific problem that you want to solve and they tend to be much more expensive. Now, you might hire a contractor to come in and do some graphic design work or design some e-mail templates. And I kind of put that person in to a contractor role even though it is a short term gig but the fact is that they’re much less expensive whereas if I wanted to hire a high-end SEO consultant or a high-end SEO contractor, the ideas that, you know, that person is there only for a short period of time and the value that they’re going to be delivering is extremely high to you and that is why you’re paying them, you know, these vast quantities of money as opposed to a contractor who is still providing value to you but it’s not necessarily the same level as a consultant comes in.

[20:44] Rob: I think the point that what you start to think about bringing contractors or consultants on are if you have a little bit of money and if you have, you know, either from your day job, if you’re bootstrapping or from the product revenue perspective, if you’re actually launched already. That’s a thing with contractors and consultants is they’re more expensive than virtual assistants and interns but they free up your time assuming you can afford someone that’s reasonably good and you hire well, this is where you really start leveraging someone else and freeing up vast quantities of your time.

[21:15] Virtual assistants are great first step for that but as soon as you can bring someone in the help with development or to help with, you know, even if you’re good at design to help expedite data and get something done quicker, that’s really when I think about bringing contractors on. And consultants, I’ve always brought them where it’s like I have a task and I don’t know how to do this or it’s going to take a really, really long time for me to do this like a huge chunk of my time.

[21:37] Most recently, when I acquired HitTail, I brought a DBA on basically as a consultant to help migrate the database, you know, that was 2 or 300 gigs, to migrate it from one datacenter to another. We had an overnighting of a hard drive and all types of crazy set up to keep stuff in sync and real time. Now, the cool part is that he then came on board on a regular basis to do all the database maintenance and the backups and the point in time restores when I need him to do so. And so, he actually made kind of the transition. I still consider him as a highly trained expert and experienced consultant but it’s nice that we now have that relationship that I can tap in and say, “Hey, you know, we have this one big thing. Can you…” I mean he’ll write queries for me sometimes, right? He’s just billing hourly but all the pretty complicated query on a pretty gnarly set of tables that I want to do join on I have him run it through to make sure, you know, is this legitimate.

[22:29] But the thing is as if HitTail wasn’t a profitable app, I probably wouldn’t have dropped the money to bring him on board in the first place. And so, I think that’s the point. Money shouldn’t, you know, it can’t be the thing that keeps you from bringing on someone experienced to help leverage your time but at some time you have to be realistic and you can’t just go out and spend 5 or $10,000 on a website design when you really should be using that for other marketing tasks.

[22:54] Mike: So, now that we’ve talked about a lot of, I’ll call them more temporary workers, why don’t we talk about the next one which is the employee. Bringing in an employee in to your business I think is a huge step. It’s a world of difference between a having contractor or consultant who comes in and doesn’t work for you and if you don’t have any work that you have to send them or you don’t want to send them any work because you’re trying to conserve money, then you can totally do that. But with an employee, you’re making a lot of commitments and there’s an obligations that you’re undertaking in order to pay that person’s salary and you have to be able to meet the revenue targets in order to support that employee.

[23:29] I think one of the big things that most people don’t think about when they’re hiring an employee is all the additional overhead cost that come in with hiring an employee because you have to pay employment taxes. You typically have to cover health benefits. There’s all these things especially when people start to get further advance in their career and they start thinking about things like, you know, planning for retirement like, well, do you have a 401(k) plan or a 529 college savings plan and things like that and those are things that, you know, kind of the overhead of having an employee.

[23:58] Rob: I think the role of employees in tech startups has been changing and I think it’s going to continue to change. Most of the startups that are early stage that are hiring employees, they either have funding or if they’re bootstrapped, they just have to be really, really strict about who they’re hiring and bring people on slowly and do their healthcare costs in the U.S. Most of like the tech startup workers I know don’t have healthcare unless they work for a large company like a Facebook or Google, someone who has a lot of funding. The mentality of I’m going to work for the startup in exchange for, you know, I’m going to exchange kind of those typical benefits of the 401(k) and of the medical, dental insurance and I’m going to instead get stock options and I’m going to get this exciting and fun job.

[24:43] And so, I think that puts pressure, you know, a downward age pressure for sure on the startups that I see hiring in terms of, you know, you can’t get – it’s going to be really hard to get someone who’s 40 years old and married, has two kids to come and work for you if you can’t offer all that stuff. But at the same time, you know, if the expenses is too overwhelming then that’s probably the reality for them as well.

[25:04] Mike: So, the next step from an employee is a co-founder or a partner in the business. And with a co-founder or partner, most of the time I think that when you get in to this situation, you’re doing it upfront, you’re probably working on the business on the side until it gets off the ground and starts getting revenue. And you’ve – hopefully, had those conversations about, you know, how to structure things, ownership, vesting, those kinds of things before you start making any real money or you start running in to any problems where those discussions that should have been had are going to become a problem because you didn’t have them. And you know, a co-founder or a partner is completely different than having an employee or contractor or visual assistant because they are complete vested in to the business or hopefully, vested in the business.

[25:46] Rob: Yeah. Didn’t Paul Graham said that one of the top two reasons that startups have issues from what he sees on Y combinator is founder issues, founder disagreements?

[25:54] Mike: No, it was on the top ten. I just don’t remember what number he used for that.

[25:58] Rob: Yeah. So, it’s – as always it’s like it’s – there’s never – a never or – I never have a co-founder, I always have a co-founder. It’s just finding the right person and finding the right fit both with the business idea and finding complementary skills. I have seen over and over founders get together who are both developers and that just doesn’t make a lot of sense to me, you know. It’s like you need to find someone who can do the marketing stuff, someone who can do the design stuff or someone who can do this, the development stuff, someone who can do, you know, the sales and the admin and manage a VA. I mean there’s all these skills that need to get done and so if you overlapped heavily on a single skill, you really are not multiplying your gene pool there and covering the basis that need to get done in order to actually launch something.

[26:42] Mike: Right but I think that there’s another side that you have to look at as well. I mean if you don’t have overlapping skills, it’s very difficult to take over responsibilities from somebody else. I mean it’s so – for example, if you get a marketing guy together with a developer, they may work very well together by separating their duties but what happens if the marketing guy needs help or the developer needs help? I mean at that point, then you have to start looking out side of those two people because the other person just didn’t have the capability. I think there’s got to be enough of an overlap but not too much as you said.

[27:14] Rob: I think I would err on the side of having less overlap.

[27:17] Mike: So, okay. So, we’ve talked about interns and virtual assistants, contractors and consultants, employees and co-founders. And I think the last one that we came up with was an advisor. And I think there’s a couple of different ways that you can have an advisor. You can have an advisor who is strictly high level person, somebody who you go to and just talk to as more of a mentor. And then I think that there is other advisor who you look at, somebody who owns their business, who is also an entrepreneur, kind of more of a peer than an advisor who has, you know, run their own company in the past.

[27:49] Rob: I’ve seen this structured in many different ways. I mean with funded companies often someone to bring on an advisor early and then they’ll actually give the advisor half a percent or 1% of the company and they’ll have the contract, I don’t know if they put in writing but they’ll say, “You know, I expect you to – I expect that we’ll have a 1-hour phone call each month and that you’ll answer my e-mails every week.” I’ve also seen some informal relationships where you, you know, just say, “Hey, will you answer my e-mails,” or “Can we do a call when needed?” And you’re just kind of doing it to help the person out. You probably have a relationship with them of some kind or you just know they’re going places so you want to be a part of that.

[28:27] And then like you said, I’ve seen mastermind groups where like you said it’s more of a peers giving each other advice and then encourage them and help. And I would encourage you that if you are going to get in to mastermind, to try to find people who are ahead of you in that process rather than someone who is either behind you or at the exact same level because it’s just – it winds up being hard to actually get actionable advice if you’re all just stumbling around kind of doing the same things, you know. Whereas if someone six months or a year ahead of you and they – it tends to be pretty fresh in their mind and they’re going tend to have some really good suggestions for when you hit road blocks.

[29:06] Mike: I was reading something recently that heavily advocated for if you’re going to be giving any part of ownership of your company, any equity at all to an advisor then you should definitely have a written contracts and a vesting schedule that goes with it because some advisors just simply don’t work out.

[29:22] Rob: Yeah, that totally makes sense. I mean I would say any time you’re giving anyone equity for any purpose unless it’s a tiny, tiny amount of equity for a very specific task they’re doing that they should…they should vest overtime because otherwise, you can sign this agreement and now they own this thing and if they disappear, they still own that part. And that’s a major problem. So, I have a question, Mike. So, should everyone have an advisor? Do I need to go seek someone out? And if so, how do I do that?

[29:48] Mike: I think if you’re having specific issues that you are fully aware are issues that are going on right now that you need assistance with, then I would definitely go talk to somebody. Do you need to have that person come on as a full-blown advisor? No, not necessarily. What I would say is that if you happen to stumble across somebody who you think would make a good advisor, then definitely leverage them and try to use them as an advisor. But I don’t know as I would go out and consciously seek an advisor. And the reason for that is that I think that when you start looking at advisors and you’re trying to evaluate different people for advisors, I think that it takes your eye off of the product that you’re developing or the marketing that you’re doing.

[30:28] And it’s not to say that having an advisor couldn’t help you with some of those things but at the same time, if you shift your focus from building your products and talking to customers and doing all the things that are associated with building your business, then you’re no longer doing that and you are – you’ve kind of shifted in to – I almost think of it like a situation for companies that are looking for funding either they’re building the product or they’re looking for funding. And if you’re not – if you’re looking for funding, it’s kind of an all-consuming task and you’re doing that instead of building your product and making a business.

[30:57] Rob: I also think you need some kind of traction with your product before you can basically do a cold intro and find an advisor because you can’t just e-mail someone who’s well-known and say, “Hey, be my advisor,” because they get e-mails like that all the time and there are too many products out there that they…they can’t possibly advice everyone. And so, if you have a network and you actually do know some people who could be advisors, that’s one thing, right? And then it’s an easy one-shot email, “Hey, I’ve finally decided to launch my app like we’ve talked about before. Would you, you know, answer a few e-mails if I send them over the next few months,” and started off informally and then accelerate it if needed.

[31:33] Now, if you just have no contact and it’s all cold, then you are going to need something more than that. You’re going to need an e-mail that’s like, “Hey, I launched. I have traction and I have a couple of sticking points. Right now I’m looking for an advisor, could I send you some e-mails?” And that time, at that point then you actually like you said, you have something that you’re trying to deal with.

[31:55] On the flip side, I’ve found a lot of value in there being people who on an ongoing basis are kind of almost sharing in my journey because they know – they’re really sharing in the journey of the product I’ll say because you don’t have to give them rims of background. You don’t just say, “Hey, I have a SaaS app and here’s what’s happening,” because they’re probably going to tell you some suggestions that you’ve already tried. But if they’ve gone through the journey of the app with you, then they already know what you’ve tried, what you have and it’s just way easier to get that feedback.

[32:23] And that’s where I don’t have advisors as much as I have the mastermind groups that I’ve talked about where people every two weeks, I meet with them either in Skype or in-person depending on the group and they get to hear an update on my app. Even if I don’t have a major issue that week, they get to hear where it’s going, some things I’m thinking about. I’ll always ask for some feedback but even if there’s not a major point of guidance, at least they’re now updated and so, in two or three months when I do have that major point, they know the history cold because they’re heard it, you know, in real time as it’s happened. And that’s been my avenue for finding kind of filling that advisor role with my businesses.

[32:59] Music

[33:02] Rob: If you have a question for us, call us at our voicemail number at 888-801-9690 or e-mail us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt. It’s used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.

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Episode 119 | How to Solicit Feedback from Your Customers

Startups For the Rest of Us
Startups For the Rest of Us
Episode 119 | How to Solicit Feedback from Your Customers
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Show Notes

Transcript

[00:00] Rob: In today’s episode of Startups for the Rest of Us, Mike and I are going to be talking about how to solicit feedback from your customers. This is Startups for the Rest of Us: Episode 119.

[00:09] Music

[00:18] Rob: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.

[00:27] Mike: And I’m Mike.

[00:27] Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?

[00:32] Mike: So, last night I got Linux support working for AuditShark.

[00:35] Rob: Very nice. So, now you have a component that installs on Linux servers that – you can audit Linux boxes instead of just Windows servers?

[00:43] Mike: I can do Linux boxes but it has to be remote. So, I don’t have a native Linux agent yet. Down the road, I’ll be looking to see what I can do with Mono to take the agent that I have and be able to direct him —

[00:53] Rob: I see —

[00:54] Mike: …put it out on to those machines. But for the time being, this is kind of an intermediate stuff. You know, I expect that some people are going to look at it and say, “Well, no. I’m not really comfortable with that.”

[01:00] Rob: Now, is this something that was built by customer request?

[01:04] Mike: I look through the people who were…who would basically wanted to be in as part of the early access who I’d essentially ruled out because they’re specifically asking for Linux support and concentrated on just the people who are looking at Windows support and realized that there’s a fair number of them that want either Linux or Windows and Linux. So, I looked at it and just said, “Well, just based on the numbers alone…” and it wasn’t like I didn’t know that I needed to go in this direction eventually anyway but I kind of wanted to take a look to see how much effort it would take. And it really didn’t take very long to do. I had to refactor some code but it wasn’t too bad. So, I got some basic Linux support working. It works at the command line right now. I still have to make some of the hooks with the UI to make the rest of the work for the customers and it really wasn’t nearly the amount of effort that I thought it would be.

[01:48] Rob: Nice, yeah. If you have a good architecture, I guess that speaks to that, right, if it’s easy to add code or functionality to it.

[01:55] Mike: Yeah, I mean I planned on doing it eventually anyway. So, there were a lot of places where I just kind of let hooks in and said, “Oh, well, if it’s a Linux machine do this. If it’s Windows machine, do that.” And all the stuff for the Linux machines, we’re just kind of commented out or it didn’t do anything. So, all the hooks were there. There were just wasn’t the actual mechanism to connect in into a machine through SSH.

[02:13] Rob: So, you now have support Windows and Linux and you have essentially an e-mail list of people who need your product, need AuditShark for either Windows or Linux. But what are you looking at in the next couple of weeks in terms of wrapping up your early access and everything is public and you’re officially launched and marketing, so what is that look like?

[02:31] Mike: So, there’s one hang up right now and that’s the installer for the Policy Builder and it’s basically to auto-update it right now because everytime I spin a new build, you have to update that locally which is a royal kind of a nightmare because you have uninstall it and then you have to download the new version and reinstall it. The developer I have working on it has been running in to a lot of problems because he’s using the WiX code base from CodePlex which is an open source package but unfortunately, there’s no documentation for it. So, in order to figure out how its work, he’s had to go in and actually read the source code for it which is apparently just a nightmare.

[03:03] So, that’s been an ongoing struggle for the past couple of weeks. I would hope that he’ll be done in the next couple of days but I can’t say for sure that that’s going to happen. So, it’s kind of wait and see how that turns out. But if that turns out well, then the rest of the stuff should fall in this place pretty quickly. You know, I should be able to hand it out to people who are running either Windows or a Linux over the next couple of weeks.

[03:22] Rob: What have you learn from the early access? I think you’re about a month in. Have you received a lot of feature requests or UI improvements or things that you’ve now wrapped in to the product to make it so that it’s better than it was a month ago?

[03:34] Mike: I’ve got a list of things that I’m looking at making changes too and most of it is around, I’ll say user experience because people looked at it and they said, “Oh. Well, I don’t understand this,” or “What you’ve done here implies X or Y and I don’t quite understand it.” So, I really just need to rework some of that in the UI but otherwise, product functionality is there. It’s just how it’s presented is a little bit off, it’s a little bit misleading in some cases. And obviously because I don’t have as much documentation as I need that makes it a little bit more complicated because people have to look at it. They draw their own conclusions or interpretations about what something means or they look at and they have absolutely no idea what a particular term means and have to guess. I have to either reel them back in through e-mails or you know, talking to them on the phone and saying, “No, that’s not what I mean. It means this other thing over here.”

[04:21] Rob: Very good. Well, I started something I’m excited about. I have a new split test going on at the homepage for Drip, so at GetDrip.com. What I’ve done for the past couple of months is I’ve had a single design of a landing page and then I’ve had three different versions of it with different text, different headlines. Just testing up the value proposition to see which one resonates the most. And right away, one of those just failed miserably which is great because it shows me that I shouldn’t use that particular verbiage to describe Drip and the other two have  been battling back and forth. There was a longer form one and a short form one. They’ve been battling back and forth and they’re actually very, very close in performance. Well, it’s a bit of a bummer I guess [Laughter]. We’d prefer that…that one of them be a clear winner.

[05:01] But what I did today is I actually rolled the ultimate design for the marketing site is all done in slice and we converted the homepage of that marketing site into the landing page. So now, I’m testing two completely different designs against one another. It’s the original landing page that Derek did, he’s the product manager for HitTail and he’s working on Drip as well. And he threw it, you know, that one together in a day and then the marketing site that had a designer design is a much more in-depth, you know, exhaustive kind of marketing design. So, it has a lot more design elements to it and I’m really curious.

[05:36] This is kind of a – it’s maybe a David versus Goliath thing, right, where it’s a nice minimalist landing page versus a heavily designed, heavy drop shadow, lots of textures in the landing page and so, I’m curious. I know which one I like visually but I’m curious to see which one converts because they have in general, they have the same content. It’s all just a visual change and are both just asking for an e-mail address.

[06:00] Mike: Interesting. Do you have any inclination about which one is going to do better at this point or no?

[06:04] Rob: It’s really – this is one of those that’s really hard to say because it’s like I know that the professionally designed marketing app looks more professional. We just spent more time. We spent more money because we know we’re going to have this site for a few years, right? But at the same time, it’s often the simple minimalist designs that do better because they get out of the way of your copy and of your message. And so, I’m actually I really am curious to see which one I don’t really have a leaning at this point. It’ll definitely take a few weeks to figure that out because the site doesn’t get a ton of traffic. I haven’t really started much marketing to it. I think I will resume some paid acquisition sending some traffic there so that can maybe help with the split testing as well.

[06:43] Mike: Very cool. So, the other thing that I’ve been working on is a new Twitter strategy for AuditShark and basically outsourced the actual implementation of it but I kind of wrote down exactly what I wanted to be done and when I wanted it to be done. And so, I’ll be measuring the progress of that over the next two months or so and the basic ideas to follow a bunch of people who seem relevant in the security space and then go out and continuously find links that are relevant to the security world about what machines are being hacked and why they’re being hacked and going in to different communities like, for example, the Rails community and finding information that’s relevant to the security in the Rails community and then tweeting that out. And following people who are members of the Rails community and just kind of identifying different clicks of people who would be interested in that type of information.

[07:32] Going back and looking through at the number of people who follow the AuditShark account back and see who’s actually kind of interested in it because obviously, it’s just following somebody else is going to get them to kind of know about that particular account. And if they follow AuditShark back, then it shows that they’re interested in that kind of information. I’ll be measuring the progress of how many followers the account gains over the next probably six to eight weeks.

[07:55] Rob: I see. And are you doing that to see which niches this resonates with? Or are you actually looking at this as a lead gen, as a way to get clicks back to your website?

[08:04] Mike: I haven’t followed that thought – pattern through yet. So, I’m still kind of working out in my head exactly what the end goals of it are. The reality is it didn’t take me a lot of time to put together that marketing strategy itself but mostly it’s around providing awareness that the product is out there and then giving it kind of a social presence in Google and Bing and whatever other search engines that are out there that are spidering through Twitter’s content. And assuming that there articles that the AuditShark accounting is retweeting or tweeting out there that people are then retweeting, then that should hopefully lead to some people finding out about AuditShark who would not have found out about it otherwise.

[08:42] Rob: Got it. So, I have two thoughts on it. One thing is if you could potentially put your picture instead of your logo on it, it makes people more open to following you. I don’t tend to follow most company accounts that have logos as the picture because it’s just as not as personal. I think you’ll probably get less interest just because it feels more like a corporate thing rather than, you know, they’re following AuditShark versus Mike Taber. It’s just less appealing.

[09:05] The other thing I would think about is to put a short timeframe on this experiment. Obviously, we’re all for experiments but in the experience of marketing HitTail as well as my other apps, Twitter has really not been that helpful. The only time it’s helpful is it’s really helpful for personal brands stuff and like with the Academy and MicroConf and the podcast. I mean all that it makes sense because it’s all are conversation but just marketing B2B apps has been less successful. If you’re actually doing content marketing like KISSmetrics and Buffer app and Bidsketch and that kind of stuff, then that’s…that’s really when Twitter comes in to play because you get followers and then they actually click through to your website and then you either get an e-mail to follow up with or they just become fans and subscribers of your website.

[09:47] So, but just doing Twitter as a strategy and just to aggregating content, I don’t know if I  have seen anyone do that successfully in the beat of the space without having enough really in-depth content marketing also going on.

[09:59] Mike: Right, yeah. I mean content marketing is something that I’m going to be looking at down the road a little bit. It’s just that it’s not this week. It’ll be probably, you know, two or three weeks out. I’ve been trying to evaluate what my content marketing strategy is going to be and I’m still trying to figure that out. Part of it is try to find out which of these, you know, niches are responsive to the things that the AuditShark account is tweeting out. The other thing is in terms of following people, there’s kind of I’m putting essentially an artificial cap on the number of people that is going to be following on a weekly basis. So, it’s not like it’s going to go out and follow like 30,000 people and then wait to see who follows it back. That’s not really what the intent of it is. The intent is really kind of established that two-way communication between people and find people who are interested in the product and the type of problem that it solves.

[10:46] So, part of it is doing that and then the other part of it is as you kind of diluted to was going after kind of a content marketing strategy. I’ve put a timeframe of 6 to 8 weeks to say okay, let’s re-evaluate this to see where this is at after that 6 to 8 weeks and then take a look at it then and say, “Is this something that’s going to continue or is it something that should just kind of fall off to face of the earth?”

[11:08] Rob: So, long-time friend of the show Michael Frankland, he launched a theme site for RapidWeaver mac web design software and he actually dropped me a line and said that he was basically kind of the way we preached about finding a tight niche and going after it. And so that’s, you know, RapidWeaver mac web design software is pretty small and so far, you know, it’s going pretty well for him. So, I’d just want to give him a shout out and his URL is yuzoolthemes.com, yuzoolthemes.com if, you know, RapidWeaver space probably worth taking a look. Last update for me is, remember the t-shirt that WWRWD that we talked about a few weeks ago?

[11:44] Mike: Yeah.

[11:45] Rob: That was not printed. It did not meet its goal.

[11:47] Mike: Oh.

[11:48] Music

[11:51] Rob: So, today we’re going to be talking about how to solicit feedback from your customers. Now, we had answered a question from a listener a few episodes ago on this topic and he had specifically asked on the HitTail website why I didn’t have some type of form or something prompting people to send feedback in and to ask for a new feature and such. And we talked briefly about the best ways to solicit feedback but I felt like there’s more to it than we are able to get in to in that Q&A episode. I’d just wanted to go in to a little more and you know, talk about some of the options and some of the things to weigh when you’re looking at soliciting feedback.

[12:25] The outline today looks like we’re going to talk about when you should solicit feedback, when you shouldn’t solicit feedback, some different services and approaches for doing that and then the options for actually distributing the forms or the surveys or whatever to your customers in a way that gets them to actually fill them out.

[12:41] So, to kick us off, we’re going to be talking about when you should solicit feedback from your customers. And I have two points in the outline. The first one is when you’re in your early days of your product, when people are still canceling and drove because you don’t have enough features, you should absolutely be soliciting feedback from everyone who cancels even if that means sending a personal e-mail and or getting on Skype or over the phone with them. This is the time where you need to iterate very quickly and start figuring out why people are canceling because at this point, you are just plugging a hole in your funnel essentially. You’re plugging a whole in your churn rate and you’re trying to get to the point where you have a stable enough customer base that you can actually start growing your customer base and growing your revenue.

[13:26] Mike: I think the important piece of that that you just said is that it is about plugging the holes in your funnel and the really important piece of how you want to plug those holes is that if you are able to prevent 15 or 20% of the people who come in to your application from leaving through that, that’s 15 or 20% who were going to stick around and contribute more to the bottom line of your product which means that your lifetime value for those people is going to go up rather that down.

[13:51] Rob: Right and even beyond thinking about it in terms of numbers and churn and lifetime value, you want happy customers, right because happy customers stick with you and happy customers talk to other people about your product. They spread the word. And so, I find it that that there’s this race to just build features. I guess as developers we always want to rely on just building more and more and that is almost never the right solution. If your product isn’t catching the attention of customers, it’s typically more of a marketing issue. But if you have customers using it and they are canceling, that typically is a lack of features.

[14:27] So, there’s a big difference between those two things and that’s why when people say, “You know, I have a SaaS app and it’s not doing well,” that’s not enough information to know how you should troubleshoot this and the next question I always have is, “How many customers have come through and actually either sign up for a trial or paid you some money and then not continued with it?” Because if the answer is five, then the response is you need to…you need to get more people using it, right? And once you get those people using it as they cancel, then you should follow the directions in this podcast to solicit feedback from them as they do.

[14:57] Mike: Well, I think the important piece to keep in mind there is that is exactly what you just said is for your SaaS app and I think the things are significantly different when you have a downloadable app that people have paid for because they paid for it once and then maybe they talk to your support team, maybe they don’t but you have a lot less data to work from if it’s not a SaaS app.

[15:18] Rob: That’s true and the interesting thing with one-time product downloads is you basically have two groups of people, you have customers and you have prospects. And often the customers who have paid you with that one-time fee want different things that your new prospects do and that’s always a push and pull as well. And so when you solicit feedback from customers, if you have one-time downloadable software, you also want to solicit feedback from prospects and you should have a prospect list like an e-mail list, hopefully, been gathering e-mails from people who come to your site. If you’re not, then you should go to GetDrip.com right now and sign up to be notified because that is absolutely a way to not only figure out from your customers what you can do to get them to continue upgrading, but it’s a way to talk to the prospects and figure a way to get more of them to buy.

[16:07] But there’s a big difference between prospects and customers when it comes to downloadable software with SaaS apps, the difference is not so big because if you have a customer and they can cancel anytime and stop paying you, then realistically, they’re – about as valuable to you as a new prospect, right? There’s more of an equitable relationship there where customers and prospects are almost the same because either one if they paid you next month, they’re going to pay you the same amount of money. While I do still think you should differentiate between them. I don’t think there’s as much – it’s not as critical to talk to prospects when you have a SaaS app and you already have people paying you.

[16:38] Mike: Yeah, I think that’s one of the downside in the enterprise software space is that they can leverage their marketing and product managers to tell you which you want to hear in order to get you to buy it. And then once you’ve bought it, they don’t care. [Laughter]

[16:50] Rob: Exactly because they’ve already delivered it and they’ve already made their money. That’s actually advantage for customers of why SaaS and an ongoing subscription model can be better.

[16:57] Music

[17:00] Rob: The second point in time when you should solicit feedback from your customers is when you’re essentially moving in to a new market. So, if you already have a successful app and selling well to a certain group of people and you’re basically moving your way in to a new niche or perhaps you’ve even going horizontal and you’re backing out of a niche and trying to takeover an entire horizontal market, that’s when you need to re-solicit prospects and customers. It’s a big unknown, right? If you have a known product but you don’t know the little tweaks that you’re going to need to make in order to satisfy that new group of people and what you will notice if you have a recurring billing app is as soon as you start moving it to new markets, you’ll notice your churn will go app and typically your conversion rate will go down a little bit because it’s just your marketing to this unknown factor and you don’t have all your pieces optimized yet.

[17:48] And so, that’s a really good time to go and solicit feedback from those people in your trial sequence who you know are from this…this brand new market and trying to figure out how do they refer to your product, how do they talk about the benefits because often they will actually phrase things differently. It’s the same benefit that your existing customers get but they’ll use different words for it or they want to communicate it in a different way. And so, that’s why you don’t actually going out and soliciting this feedback can be helpful.

[18:13] Mike: And that’s very helpful for segmenting your market and in terms of your marketing strategy because you’re going to want to build a different landing pages that are designed for different keywords that either you do paid advertisements or tweets or you know, very short bits of information out there where they drive people back to your landing pages and those specific features you’re going to want to call out and different marketing collateral. And based on that that you called out, you’re going to want them to drive them to one landing page or another based on which of those segments that you’re trying to market to.

[18:44] Rob: So, now we have a couple of points in time when you shouldn’t solicit feedback from your customers.

[18:49] Mike: So, the first time that you should not be soliciting information from users is when you’ve stopped learning anything new. And if you gone out there, you’ve asked a bunch of questions from people, you’ve learned a lot of information and then you start hearing the same things over and over again, it’s about that point that you should stop trying to do that yourself. I mean it’s not to say like if somebody cancels, you should never ask them, “Hey, why is it that you canceled?” But at the same time you might want to back off from doing it yourself at that point because you’re the one who’s going to make the judgment call as to whether or not you learn anything new. And if you stop learning new things, that’s the time to pull the plug on it and that’s the time that you outsource it, that’s fine but you shouldn’t be going back to those people and continually asking them when you already know what the answers are probably going to be.

[19:33] Rob: Yeah, I’m a believer in short burst of soliciting customer feedback. Compiling all that feedback, making a roadmap, putting a feature list together, prioritizing everything and then attacking it and iterating on your product, adding features to it. I am much less of a fan of having this ongoing feature requests coming in via e-mail and just constantly having to deal with them, reprioritizing things. There’s a certain amount of agility that has to be there and especially on a very early days, you’re just going like crazy and you are reprioritizing. But once you get at least a little bit stable and you have that customer-based, kind of running around and just constantly having new feature request and all that stuff coming through, it actually scatters you.

[20:15] I feel like it’s counter productive. And so the approach that I recommend is if every maybe four months or six months, put it on your calendar and you do an outreach to solicit this feedback using them as we’re going to talk about rather than having this ongoing, “Hey, I want to request a new feature type of thing.”

[20:31] Mike: And which you just said kind leads in to the second time when you shouldn’t be soliciting feedback is if you’re already converting visitors to customers and they’re sticking around. So, if you’ve gone through that process of soliciting the feedback, you execute that roadmap and then you start seeing your churn rate go down, then those people who are visitors are converting in to customers. They’re sticking around. They’re contributing to your lifetime value and at that point, it’s probably not worth going back and saying, “Okay. Well, you know, how much further do I want to optimize this?” Because there’s a sealing on any of these optimizations that you can do, so there’s always going to be low-hanging fruit elsewhere.

[21:05] So, you can squeeze as much as you want out of, you know, trying to plug the funnel but at some point, there’s going to be such an insignificant return on the amount of time that you’re putting in to it that you’re much better off going to look at other parts of your product, just trying to figure out where those things can be improve, where other marketing efforts can be improved so that you’re not wasting your time spinning your wheels for like a tenth of a percent gain when you could just spend 20 minutes or 30 minutes some place else and get like 1% or 2% gains.

[21:32] Rob: Yeah, that’s what I was trying to say. You know, I’m not trying to imply that I’m a fan of like every six months and get this big feature list and then just build it and not listen to your customers.

[21:40] Mike: It’s almost like space invaders where you got the guys that are coming down and they’re really low at the ground and those were the low-hanging fruit. You want to kill those guys first because the guys are up at the top, they don’t matter so much.

[21:51] Rob: Exactly. I do think that developers and founders and people who are building their apps, they overcompensate. They tend to lean too heavily towards the “I need another feature” that if my app is not selling, if my app isn’t where it needs to be, if I don’t have the revenue I want, then I’m lacking features. And most of the time, that’s an excuse, that’s the resistance talking because you want to go back in to your basement and build more features rather than get out there and figure out what is really going on with your positioning, your marketing, the way you’re selling it, your niche, your channels. There’s all these other things that people I think in general avoid and you can – getting this constant feedback, you’re constantly going to be getting new feature request but going in to…in to your tunnel and sitting down and building them is counter productive. So, I think you should lean way from that, not to say you should never do it but I think by nature, we lean towards it too heavily and so, I think you should lean away from that and lean in to doing more marketing.

[22:50] Okay, so we covered when you should do it, when you shouldn’t. Let’s talk a little bit about options for distributing, essentially distributing the surveys and distributing the feedback solicitation mechanism, right, a form of some kind. Now, the two options that I’ve used that have worked the best are e-mail and a splash page, when someone logs in to your app. This assumes that you’re targeting people either prospects or customers, you know, who you’re having some contact info for. Now, far and away, a well-drafted e-mail typically coming straight from the CEO as plain text, not using the fancy template that you might have paid the designer a bunch of money to design but just a plain text e-mail asking sincerely for feedback but not just that saying, “How would you like to improve the app? How would you like to improve your user work experience?” And actually putting it on not on the customer but making them realize that they are going to be improving it for themselves, that has always converted extremely well for me. And if you have a nice list, a 4-figure list, you’re going to get way more feature requests and you can handle just by doing that.

[23:54] And then the second option I mentioned is to have like a splash screen when someone logs in to your app and you can use a tool like intercom.io. They’re pre-built SaaS app to allow you to message your customers. At HitTail, we just have like an if statement when someone logs in and we do a little mod, mod 2, mod 3 and you know, if there’s a remainder of one for all you programmers out there, then we display a certain welcome screen or splash screen or whatever and I can just set that up pretty easily. It does require modifying some code though. So, if you’re a non-developer an intercom.io might be a better option for you. Both of those work. Now, the issue with the log in is it takes a long time. Unless someone is logging in to your app everyday, it could take you weeks to get enough feature requests. That by definition, you’re going go get your most active user first responding to that rather than everyone who’s on your e-mail list.

[24:42] Mike: Yeah, I was going to point out that the downside of that is that the active users, you’re going to hit them multiple times and that is as a user, that’s incredibly frustrating to get bombarded with the splash screen every single time you log in. And —

[24:56] Rob: So, just for a note, we don’t — either cookie someone or since they are logged in, you know who you are —

[25:01] Mike: Oh, I know —

[25:02] Rob: And —

[25:02] Mike: But I’ve seen the ones where you log in and every single time, it’s – I’m just – it’s just a warning to people who are going to implement these themselves to make sure that you don’t bombarded people every single time they log in.

[25:13] Rob: So, those were the two options, to e-mail your list or put a splash screen on log in.

[25:18] Mike: One more option is to directly reach out to people based on some criteria that you put together. So, if you’re going to say, “Okay. Well, these people who have not logged in for more than a week or two weeks, I’m going to reach out to them and I’m going to start asking them some questions to try and figure out why they’re not logging in and learn what it is that’s preventing them or causing them to not log in.” And that’s helpful for you to determine what level of engagement is typical for your users. But in addition, you can find out if there are ways to help bring them back in to use your software more often, to make them more dependent upon so that they will use it more often, so that they don’t cancel down the road because a lot of times there are ways to predict who is going to cancel and who isn’t based on the usage of your software. And that may very well be that if somebody hasn’t logged in for 7 days or 14 days, that could be an indicator that they’re going to cancel soon.

[26:10] On the other hand, it may not. They may only need to log in once a month or twice a month or something like that. It really depends on what your application is but those are the types of things that you’re going to want to be able to find out from these people and calling them and talking to them directly to the phone versus through e-mail or through having them send you a feedback through a splash page. There’s almost no substitute for talking to somebody on the phone and asking those questions directly.

[26:34] Rob: Absolutely. Now, in many of my apps, we don’t even ask for phone number when people register so we don’t have them. But I think that long term, if you have customers who do stick around, collecting their phone number over the course of your relationship with them will help with a lot of things. It’ll if they have billing issues, it’ll help if you want feedback from them.

[26:53] Now, let’s take a look at four different options kind of services that you can use for collecting the feedback in an intelligent way because the wrong way to do this is to set – tell someone to, “Reply to this e-mail with your feedback,” or “Just send us a e-mail at feedback@ your domain name .com,” because what you get is this big mass of e-mails if someone then has to go through and try to pars out what people are saying.

[27:18] A better approach is to have some kind of lose – at least loosely formatted form that feeds in to some type of spread sheet or database or an app or something. And so that’s what we’re going to look at now are four different approaches to doing that. The first one and it’s probably the one that I use most often because it so amazingly simple to set up. It’s fast. It’s free. It’s pretty cool. You go in to Google docs. You create a new spreadsheet and then in the menu, you can just create a new form from that spreadsheet. And so, you create several columns in the spreadsheet and when you create the form, you can just put a text box and say anything someone types in to that, put in to that column of the spreadsheet. And literally like 5 minutes, you can get a reasonable looking Google spreadsheet form up on the web, on the public web. You just share it everybody and then, you know, has long URL and you just include that URL right in your e-mail or in you splash screen, you know, ask people to go and check it out and give you some feedback.

[28:14] Now, you have to be careful here. You don’t want to constrain the feedback too much. If you have specific feature options that you’re thinking about and you want people to rank them or you want people to select one of the five or something like that, then you can definitely ask them some strongly type of questions but I also encourage you to have a text box or a text area where people can do an open ended feedback and open ended suggestions because that’s only going to provide kind of new ideas that might this person creativity. It’s more of a brainstorming session.

[28:40] Mike: So, one that I’ve used before is Wufoo and I really like Wufoo for putting together the surveys because you can tightly define what it is that you’re asking the users and then on the output side, you can export those spreadsheets. You can then take those spreadsheets. You can load them in to the Google spreadsheets or you can just take a look at them and you can use them inside Excel and you can filter them in any way that you want. Wufoo is actually what I use to solicit a bunch of people initially as my early access users for AuditShark. So, I took all those people and you know, had them fill out Wufoo surveys. I posted a link on my blog and just have people fill it out. It’s very quick, very easy to do. The surveys themselves are pretty easy to format. Obviously, Wufoo is a paid piece of software as opposed to Google spreadsheets.

[29:22] Rob: Right but Wufoo allows you so much more flexibility and you know, it is free up to looks like three forms and a hundred responses per month.

[29:30] Mike: Right.

[29:31] Rob: So, give a fairly – user base that could use, you know, you could use it for but it’s also 15 bucks a month if you want to go beyond.

[29:36] Mike: Yeah, it’s not that expensive.

[29:38] Rob: Yeah and did you know what Wufoo is named at? So, it’s a combination of Wu-Tang clan and the Foo Fighters.

[29:44] Mike: [Laughter]

[29:45] Rob: This next one is a service called Qualaroo and it used to be called the KISSinsights. And you know KISSmetrics, right? They also own the KISSinsights. They sold it to Sean Ellis.

[29:55] Mike: Oh, really?

[29:56] Rob: And Sean has since – he already had an app going that was dealing with like rating of free apps. It was called CatchFree.com or something. He was doing customer development. He learned about what these apps actually wanted and so, he went and acquired KISSinsights and renamed it to Qualaroo. And what it does it essentially allows you to put a really simple pop up survey. You can put it on the public website. You can put it inside your app but it’ll just sit there with a little plus thing and it’ll bounce up after a certain amount of time and you can ask really simple questions.

[30:26] The nice part about this, how it goes beyond what like Google spreadsheet or Wufoo does is you can put a different survey on each page and you can give all different types of configuration variables, right? So, you can make it pop up only once per customer, once per customer per week or whatever and you can get specific feedback about that page, how they’re using it, what they’d like to see improve, any feature request, that kind of stuff. So, this might actually be something that you could do more of an ongoing basis. I think you might get too much feedback if you do that like more feedback than you can use. It’s something to think about using. It’s definitely not cheap. It used to be free and I think it’s like 80 bucks a month now. So, it’s a non-trivial amount of money for this kind of thing but if you’re looking for surveys where you can ask specific questions about specific pages, I do…I do think it’s a good service.

[31:10] Mike: I’ve definitely seen this particular type of form before. So, it looks very familiar and I can definitely see signing up for this for like a month or two months just to get the data that you need and then cancel the service because you’ve already got that information. I mean I think you’re right. I think going and taking this to an extreme is just not going to help you very much. But once you’ve got that information that you need in order to improve your product or improve your website, then the software has served its purpose.

[31:35] Rob: And rounding this out, the last couple of services I want to talk about are UserVoice and Get Satisfaction. There wouldn’t be a podcast episode about soliciting feedback if we’re not going to include these. So, I’m not a huge fan of UserVoice and Get Satisfaction. I think they do a very good job of getting feedback and if you have a massive user-based. I mean 10,000 customers/users or more who are going to give you feedback, it is – these are both good options for you because they allow up voting and I think down voting. There’s a lot of options for it. It’s for amassing a lot of data in to a useable format.

[32:09] However, unless you have that large audience, it can seem like a ghost town like if you get your UserVoice thing up and you put a little tab on left side of your website whichever one was doing a few years ago, if you only have a few hundred or even in the low thousands of users, a lot of them are going to participate and you’re going to have some feature requests that are on there but not a lot of votes. I really question the value of something like this trying to have it up there as an ongoing thing because as we said earlier, when you stop learning anything new, you should stop asking for feedback. And pretty quickly, you’re going to watch the features move to the top that you should implement and you’re going to watch the other one just kind of flail. And once you have that information, in my opinion, the UI distraction, the noise of having that that little tab on the left-hand side goes away as well as people who log in to your site a lot of times are going to start tuning that out visually.

[32:56] And so, these aren’t necessarily something I recommend. They have been popped for options for a long time. Actually, if you’re listening to this and you have use this ongoing and you just love UserVoice or Get Satisfaction, I’d be interested to hear your take on it because at this point, I have great success with, you know, e-mails and splash screens and the other options we’ve talked about.

[33:14] Mike: Yeah, I totally agree with – basically you want to have this critical mass of people who are actually using those services because if they’re not, it does look like a ghost town. If they don’t see anything like this, they’re going to assume that lots of other people use it. But if they see that you’ve put up UserVoice and you’ve only got, I don’t know, 10 or 12 different comments on there, they’re going to rightfully assume that, “Oh, well, maybe he’s only got 20 or 25 users. What are other people using instead of this particular product?” And then at that point, you could have this mass exodus. I’m not saying that, you know, using UserVoice is going to cause that but you have to be careful about what the perception is of the users who are using your product and the information that are going to glean from these types of services.

[33:58] Music

[34:01] Rob: Now, we’re going to look at one listener question and this one is about going moving from contracting to consulting products. It’s from Vlad and he says, “Hello. Thank you for all the experience you guys share. It makes me really evaluate what I do for a living. I have a strategic question and I’m hoping you can help me find the answer.” Basically, Vlad is working as a contractor and he works through recruiting agencies and ultimately, he wants to get to selling products. The issues he says that he works a lot of overtime. For instance, this month, he booked 201 hours.

[34:34] So, that means moonlighting becomes really problematic. He can’t build a product because he can’t allocate enough time to it. He says taking time off is not really a possibility as the client’s attitude is usually that everyone should work as much as they possibly can. So, he’s considering moving to consulting. He hasn’t done it yet but he says he’s looking at finding his own consulting clients, charging a weekly rate that’s roughly two times over his current rate is and during an inevitable gaps, he would have enough money that, you know, would cover that and he would work on the product.

[35:02] But he says, “What I don’t know is if this is actually better than contracting. The idea sounds good on paper but I’m curious is I’m not accounting for some things that will not allow me to allocate enough time for my product. Finding client is an obvious unknown for me. Presently recruiting agencies do all the footwork and I just have to give them a cut. So, my question is would finding and closing the deals actually take so much time and effort that building a product would become impossible?” So, there are few other questions after this but why don’t we tackle that one first.

[35:32] Mike: My view of this kind of thing is that finding new customers can be extremely time consuming and if you find one customer who ends up being an extremely long-term customer, then you’ve got it made. I mean that’s a golden opportunity at that point but you know, if you start finding because of your rate, you end up finding all of these much shorter term contracts that don’t last nearly as long partly because your rate is so high, then you’re going to run to this issue where you’re going to have a lot of down time. And during that downtime, your primary focus is not going to be working on your product, it’s actually going to be finding your next contracts because you don’t know how long that’s going to take and that’s one of those problems that is never going to go away. It cannot be solved by spending a little bit of time on it. It’s an all consuming effort to try and find those new customers because you don’t know when it’s going to be. It could be one month, it could be a week, it could be a day, it could be six months. You have no idea and because of that uncertainty, you’re going to have to sit there and you’re going to have to devote the time to finding those new customers rather than spending that downtime working on your products.

[36:39] So, my advice would probably be to stick with the people who are feeding you that work and kind of go by the rules that we’ve kind of talked about in the past episodes of this podcast where you basically have to have it at least a couple of things you either have time, money or expertise. And obviously, you have the expertise. You don’t have the time but you probably have the money. So, you could probably outsource the development of other product as long as you know what that product is going to be and that way, somebody else is building it for you versus you spending your time doing it. And then you can do code reviews in your spare time which admittedly is probably not a lot of time but it really doesn’t take a lot of time to do a code review of somebody’s code on a daily basis as long as you stay on top of it. If you wait a week or two weeks or three weeks to do code reviews, it’s going to be a lot of time and effort to do it. But as long as you allocated a little bit of time each day or each week to go ahead and do those code reviews, you should be fine.

[37:30] Rob: Yeah, one thing I left out – Vlad’s e-mail is pretty long so I summarized it but one piece that he mentioned is that most of his contracts are six months to two years long and so that’s why he’s looking at moving in to what he’s calling consulting which is the shorter geeks. I was in quite a similar situation maybe 6, 7 years ago. The thing to think about is if you have so much work, you’re working 200 hours a month, then you can be pretty picky about the work you accept and that’s a situation I found myself in was I had more contracts than I could possibly do and that allows you to start dictating some of your terms. As Mike said, the first thing is you either have time on your expertise. You obviously have expertise and I bet you have a lot of money because you’re working so many hours and you’re billing contract or rates.

[38:15] So, the outsourcing is a great idea. I think acquiring an app that someone else had built to give you a head start is another good idea. I don’t think if you’re billing, you know, a triple digit rate that you should spend several hundred hours building some SaaS app that you can hire someone to build for much less cost. This is a common situation for people to be in. The second piece is that you can kind of start dictating what you want to do, right? If you’re working 200 hours a month, think about talking to the clients that are hiring you. I know that I did this. These aren’t necessarily easy conversations to have but letting them know that you can stick around but you can’t keep working – what is that? I guess that’s 50-hour a week. It’s not the end of the world. But if you have a family and that can be a problem.

[38:56] And ultimately, moving down to part-time which is something that I did. I’ve moved down to four days a week and then three days a week and this was all as like a contractors/consultant. That allows you time to…to build your product. But I would think about it before doing that because if you are billing all this time at this high rate, then why give that up? Why not look at getting an app out there, getting it launched, getting it marketed and outsourcing as much as you can. At least getting it to a point where it’s making enough money that it can fill in those gaps. So, even if it’s bringing in a thousand bucks a month, well, you can back off, you know, maybe to 40 hours a week. And then once it’s making a few thousand bucks, you can back off a little more.

[39:34] So, it’s much more of a gradual approach. I agree with what Mike said, moving from contracting to a more short term freelance work, double the price, I really question that approach. I think you’re going to spend so much time finding the work and handling all the business aspects of it that you’re going to be better off in basically in the situation you are and figuring out how to make that situation work for you. Hope that answers your question, Vlad.

[39:56] Music

[39:59] Mike: So, if you have a question or comment, you can call it in to our voicemail number at 1-888-801-9690 or you can e-mail it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.

 

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Episode 118 | Anti-piracy methods, HitTail, AuditShark and other madness

Startups For the Rest of Us
Startups For the Rest of Us
Episode 118 | Anti-piracy methods, HitTail, AuditShark and other madness
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Show Notes

Transcript

[00:00] Mike: This is Startups for the Rest of Us: Episode 118.

[00:02] Music

[00:11] Mike: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.

[00:19] Rob: And I’m Rob.

[00:20] 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?

[00:24] Rob: I’m doing good, Mike, aside from the fact that I don’t like anti-piracy code in DRM. Yesterday morning I wake up and I have an e-mail from our virtual assistant Andy who’s trying to log in to the Academy, micropreneur.com. He’s doing a little admin work and the WishList plug-in that manages our membership just keeps telling him, “You need to validate your product code. You need to click this button and validate the product code.” We’ve had this thing installed for four years, right? And although we’ve moved servers a few times, I mean we’ve never had to go through the step again. And it turns out that if you try to log in, it wouldn’t let us do anything in the WishList admin and then if you log in as a user to the Academy, it was deathly slow. It was like 20-second page load times.

[01:04] And so I’ve e-mailed WP Engine. I’m trying to run YSlow. I eventually e-mail WishList and as it turns out, they have piece of anti-piracy stuff in their plug-in that calls back to their server and if it can’t validate it by hitting their server, then it slows your site down. And their server was down. They told me the next morning that it had been hacked but that’s new to hearing there [Phonetic]. It was, you know, I tried to hit their server. I couldn’t hit it and so, I figure that that was the issue. And sure enough, when they come back up, everything worked again but it was just, ugh, it was like slap to the forehead, you know, like who does that? I mean honestly, I’ve heard of maybe one or two other vendors doing this and to me it’s such a single point of failure. It’s such a way to piss off thousands of your customers.

[01:50] Mike: I understand the mentality but it’s – I don’t want to say it’s the amateur mentality but it’s the mentality of people who feel like they’re probably not necessarily offering enough value or they’re too scared of pirates to understand that the people who are building real businesses are actually going to buy licenses for it.

[02:08] Rob: Right and actually you’re one of the first people who I had heard say that. This is like maybe 2005, 2006, you had a couple of blogs post on it and we’ll link those up in the show notes but you basically said because I always of the mindset, you know, like in the Shareware world, the MicroISP world, people would always have the license code and you know, in order to use it, you needed the specific license thing and you basically came out and said I don’t think that’s the right way to go and I think that hurts your customers, your paying customers more than it stops the people who are trying to pirate your software.

[02:35] And that was where we’re at the decision for our DotNetInvoice and we were looking at doing some type of registration code anti-piracy thing and we decided not to after reading your post and doing a little more research. But everytime I run in to this now and when I’m the customer and it causes me a great deal of pain and or a lot of angry e-mails from users, I totally think back to that argument of if you’re really a small vendor, the anti-piracy stuff is typically not worth it.

[03:02] Mike: That’s totally correct. I mean even the other way to look at it is how much time are you – and effort are you going to spend as the vendor supporting those people who are legitimate customers who really did buy your product and all you’re doing is you’re…you’re pissing them off and you’re making their lives miserable. And on top of that because they’re talking to you for a support help because your anti-piracy mechanisms aren’t working or there are something, you know, going on that’s making things slow or your server got hacked, it doesn’t really matter what the issue is. Every minute that you’re spending time working with those customers is a minute that they’re pissed off at you and a minute that you’re not getting worked done. So, you’re basically killing time on multiple people because you want to implement stuff that will theoretically help you but at the end of the day, it really doesn’t.

[03:48] Rob: Right and I think your argument in the blog post if you want to defeat pirates, keep releasing new versions of your software because nothing discourages someone from pirating your software more than seeing that they have an old version of it and that they can’t get the new version.

[04:01] Mike: That kind of came about because I had some software that I was publishing back in probably 2002, 2003 and I was selling it and I had put copy protection software on it and it gotten cracked and then we released a new version and then that got cracked and then we released a new version and then that one didn’t get cracked. And I don’t think that it was because somebody couldn’t crack it because it was the exact same encryption code, it was just the new version. I think that whoever was doing it, they just got bored and they said, “Ugh, I’m not going to bother.”

[04:28] Rob: So, I started the day off with a rant, you’re going to start it off with some positive news. Did you get an e-mail from someone?

[04:33] Mike: Yes, I did. So, last Thursday, I was having an absolutely horrendous day. There were tons of stuff that was just going right. And I got an e-mail from Bob Ropp [Phonetic] who said, “Just want to let you guys know that I really love the show. I found it searching through tech podcast about six months ago and I’ve been a loyal listener ever since. Thanks, guys and give up at the good work.” And as I always said, you know, it’s just kind of made my day.

[04:52] Rob: Very nice. I realized we haven’t mentioned our Twitter handles in quite some time. So, if you are a listener to the show and you’re not following Mike and I on Twitter, check us out. Mike is Single Founder and I am Rob Walling.

[05:05] Music

[05:08] Rob: Have an update on AuditShark? So, what’s the news?

[05:11] Mike: Based on your previous comment about Twitter, I started working on the AuditShark Twitter account and following a bunch of different people and just trying to get a small following there and I’ve got it up to around 40 or 50 people in three days or something like that, four days. I haven’t put it any extra time in to it since then but I’m starting to work on the process that I can hand to somebody and say, “Hey, I want you to start tweeting out links and stories and news articles to help grow that following a little bit.” And then in terms of the website itself, I roughly doubled traffics since November and December levels. So, I’ve been doing some content marketing and SEO that is kind of starting to pay off at this point. I got to go back and take a look at some of the inbound links and some of the different keywords that I was looking at as potential targets to go after for SEO but it’s a matter of kind of prioritizing those and putting up some new articles.

[05:59] Rob: And what’s the AuditShark Twitter account?

[06:01] Mike: Oh, it’s just AuditShark, @AuditShark.

[06:04] Rob: So, people who are interested in hearing about security world, is that what you’re going to be posting links about?

[06:09] Mike: Yeah. So, I haven’t kind of fully fleshed out my strategy for it yet but what I’m thinking about doing is kind of going to a bunch of new sources and trying to figure out what links would be relevant to the people who would be following the account and what sort of security things are happening in the world. So, for example, recently, there’s been a lot of problems in the Rails community because there’s been some pretty significant, I don’t want to say backdoors but security vulnerabilities that have kind of come out where you can take control of a server and basically run arbitrary code on that server even if the application is designed in a secure way because it has a problem to do with the framework itself, not necessarily the way that people are using it.

[06:49] And of course, it’s a problem because if your Rail server gets compromised, it means that they can get access to anything that’s on that server including the database and, you know, your customer data and then they can use that to go in to other servers. And just by doing a little bit of matching between different Rails applications, you could start whittling down to figure out, okay, well who between these two applications is using the same password on pretty much all their accounts. And then you could use that to launch massive attacks against some pretty major sites on the internet, you know, anything from Amazon or you know, Microsoft, Oracle, et cetera.

[07:21] I mean if these people are truly using the same e-mail addresses and passwords on all those websites, it would be very easy to go in to them and do different things and especially when it comes in to the things like banking. I mean because people use — if you’re reusing those usernames and passwords or the e-mail addresses, it can be a huge problem. So, I’ve been looking at that a little bit and trying to decide. I’ll say in how far in to that rabbit hole I want to go and I’ve actually reached out to a couple of people in the Rails community and see if they would want to use AuditShark to audit their servers to help monitor for changes of any critical system files. So, for example if the new user show up or a new software gets installed or if some of the code libraries are out of date, et cetera and I’ve gotten some responses from that [0:08:00] so I’m looking at those right now.

[08:02] Rob: Nice. So, if folks are interested in that kind of stuff, I see that’s what you’ll be talking about on your Twitter account.

[08:07] Mike: Yup.

[08:08] Rob: So, on Sunday morning [Laughter] I got an e-mail from both you and my HitTail product manager saying, “Your SSL cert is expired.” And what it have – this is totally me dropping the ball. When I acquired HitTail, it was maybe 18, 19 months ago, the previous owner had a 2-year SSL cert and she had bought it on February whatever two years ago and I don’t know if you can transfer ownership. I should had just bought a new one to be honest but it was on the server I’m working and I was able to export and re-import it when I moved servers and just never thought about it and so bam, right in the middle of – it was probably early Sunday afternoon Pacific Time, the thing just stops working. So, at least the website was up, the marketing site worked but you just wouldn’t, you know, when you click to register that’s SSL because they ask for credit card number and I wasn’t getting any trial.

[08:56] So, the kicker is I went in – I knew it was a GoDaddy SSL cert and of course, I go to GoDaddy to try to just renew the cert and I realize – that’s when I realized, I don’t actually own the cert so there’s no way that I can just renew it. So, I generated a new request on the server and I go to GoDaddy to try to fulfill the request and they say, “You can’t take out a cert for – a Wildcard cert for this domain name because one already exists in our system and it hasn’t been purge, doesn’t get purged for weeks after that.”

[09:23] So, I had to then call GoDaddy and I have to tip my hat to GoDaddy. I’m shocked at how good their customer service was over the phone on a Sunday afternoon and they – the guy I got on with their SSL Department and they purged the old one. I sent in the request and they turned it around in like 10 minutes. For a Wildcard cert, I was really impressed and oh, total time taking was about an hour from the time I heard, you know, from you and my product manager but it was a little stressful for sure. I didn’t know because I kept imagining back in the day, you’d wait 24 hours to get an SSL cert back and I was really hoping it didn’t laying in to Monday.

[09:57] Mike: It depends of what type of SSL cert is you’re getting. So there’s [0:10:00] this thing called an EV cert which is Extended Validation which gives you the – it’s not just the little lock icon in your browser bar but it also gives you the name of the company itself. So, if you like go to PayPal or Bank of America, they tend to have those Extended Validation certificates and it’s supposed to signify to the end user that, “Oh, we have done an extended background check on this company and that will take you several days or even a couple of weeks to get through.” But with yours, I mean it’s not an Extended Validation. So, you don’t have to worry about it and they can generally turn those around pretty quick. I get most of mine through either the SSL Store Comodo or GeoTrust and their turnaround time on most of them is, you know, minutes. It does not take fairly long at all.

[10:43] Rob: Yeah. So, that was good news. It was just a minor…little minor hiccup for Sunday afternoon. Luckily, it got resolved quickly. But Derek is my product manager for HitTail and I just start calling him by his first name. He e-mailed and then texted me and that’s what I needed was the text because I hadn’t check the e-mail that day.

[10:58] Mike: Cool. I just finished up writing an e-course. It’s an introduction to how to use Altiris for my Altiris training site and I’m working on building a landing page for it but I’m also touching base with some of the Altiris sales engineers to see if they’d be willing to tell people about it because they’re in the field all the time and they are talking to customers. So, these customers are obviously asking…going to ask them questions about where can we get resources and they will tell them but at the same time, if they knew about my site and they will probably tell them about my site and get more publicity for the site just because the sales engineers tend to have a lot of clout when they’re talking directly to the customers. They take their thoughts and opinions on whether or not a site is a good resource. They treat it as if they have some authority.

[11:38] So, I think that if just by touching base with some of my old contacts through that network, I can definitely get some more people to the website because the traffic is pretty much kind of leveled off back to where I had originally thought it would be. I don’t see it going significantly back up without some extreme measures [Laughter] just because the site doesn’t give very much traffic for the keywords that I’m targeting and there’s not much else I can target [0:12:00] for those keywords.

[12:01] Rob: Right, small organic SEO market which makes sense. What’s the e-course for? Is it to get SEO traffic? Is it going to rank for keywords or is it to give away and exchange for an e-mail?

[12:11] Mike: Yes, it’s to give away and exchange for an e-mail address and that because I’m getting a lot of people to the site or I’m getting, you know, enough people to the site but my conversation rate isn’t as high as I would like it to be. So, what I’m trying to do is first I want to get e-mail addresses from those people. Send them some valuable relevant content that they’re going to read hopefully on a daily basis and then try to draw them back to the sites who in an effort to get them to buy or to maybe sign up for other e-courses or something along those lines.

[12:36] Rob: Got it. Yeah, in terms of getting e-mail addresses, our landing page at GetDrip.com, I started sending some my paid traffic to that purely as a test of a couple of things, I’m split testing some different headlines and body text of the landing page. And that’s worked out well. There’s already one variation of the test that had just completely flopped and so that tells me that that particular, you know, that verbiage that I was using is suboptimal for this market. And what I like about the paid acquisition is it’s not that I’m trying to actually make money out of it, it’s just that it’s just so easy to send a bunch of traffic to it really quick and kind of see how it behaves.

[13:11] At this point, I’m getting around 20% of the traffic that I’m sending from these two niches to provide their e-mail address. So, I’m fairly happy with that. It’s not like outstanding but it’s definitely, you know, these are cold e-mails, people who’ve never heard of me or heard of the app or anything. So, the fact that they’re willing to type an e-mail in to our landing page is a good sign at this point.

[13:33] Mike: Yeah, that’s cool.

[13:34] Rob: I want to go back and update folks on my Trello versus paper competition, right? I’ve always use paper for to-do list and I moved to Trello a couple of months ago and although I’m still using – I have a Moleskine notebook, the black notebooks that I use for all my long-term items in my big thinking and you know, anything that’s like goals and such. But I got to be honest, man, I have not going back to paper for the to-do list since I wet to Trello and I have the iPhone app [0:14:00] and I have it on the iPad and I have it on my desktop and I loved that it’s all synced and then I can just pull it up anywhere and add stuff, move it around. It’s just – it really is someone finally cracked that nut. You know, Fog Creek finally cracked it and I really – I have not found a reason not to use Trello still. It’s pretty crazy.

[14:17] Mike: Yeah, it is. You know, it’s funny because…it’s funny that you bring up Trello because I was trying to think of how to move some of the UI for AuditShark in to the Cloud just because I was talking to the developer that I have working on AuditShark and we were trying to hash out where would be the best place to host all the stuff because right now everything is kind of split between the Cloud and then you have to have this policy builder and it gets kind of complicated for the user and it’s like well the easiest thing to do would just be have everything in the Cloud.

[14:44] So, we were discussing how to kind of rework the UI and make it easier to use and one of the things that I thought of was the way that Trello allows you to kind of drag and drop things between the different columns and I was thinking that will actually might make a very good UI for putting the policy builder in to the Cloud because I was trying to figure out how to do that, you know, using like grids and tables and adding things back and forth between different columns and within the policies and control points. And it gets…it gets a little bit complicated and hard to explain unless you’re kind of familiar with some of the different terms and how the policy builder works but basically the idea of being able to drag and drop objects on the screen, that right there would solve like 95% of those issues.

[15:26] Rob: Very nice and I wonder if…if Fog Creek use the framework or somebody you could piggyback on and say you don’t have to build it from scratch. You know, I imagine that you use jQuery or something that makes that easier.

[15:35] Mike: Actually, they…they posted a couple of links on their blog that tell you specifically what the Trello stack is. So, it started out – let’s see here, they say that they’ve got CoffeeScript, Backbone.js, HTML5. They have this thing called Mustache which is a templating language and then they also have Socket.IO and WebSocket, Ajax Polling. They’ve got MongoDB, Redis and a couple of other different [0:16:00] things in here. And I probably wouldn’t necessarily need all of these things but the fact is that they tell you basically what the use for that. So, if I wanted to build something that was similar that was specifically designed for AuditShark, then I could probably do it. It would be significantly better than putting much any other security product that is out there on the market right now. So, you know, it’s definitely something for me to think about. I just don’t know how much effort it would take to build something like that.

[16:26] Rob: Yeah and if you haven’t build something like that before, the learning curve will certainly be steep on the initial implementation. It’s nice that they – that’s why I like about software companies. There’s a lot of them will just say, “Here’s how we did this.” You know that Fog Creek published that so that other people can go build cool stuff is really neat and that’s not done in a lot of industries. You don’t see manufacturer showing you their process as a rule. I mean that’s pretty cool.

[16:48] Mike: You know, with software – I mean anybody can make it. It doesn’t matter whether you tell everyone about your idea or tell nobody. I mean the fact is as soon as you launch it, everybody is going to take a look at it and say, “Oh, well, I could build that and you know, this is probably how you did it.” And you can kind of reverse engineer most things. It’s just you kind of to have to put any effort and do the work in order to rebuild something like that. It’s not exactly a big secret.

[17:09] Rob: Oh, I have a couple last updates and then maybe we’ll dive in to a few listener questions. Regarding HitTail, January was the best month ever. It actually had – not only that but I had more trials than any month in the past and previously, June of last year had the most trials because it was the year or the month that the AppSumo deal ran and it sent a bunch of traffic. So, it’s a good kickoff to 2013 and what’s nice is since it’s a 21-day trial, February should actually look good too. We got an unexpected write-up in Search Engine Watch. The head editor had seen a HitTail ad and had been familiar with HitTail from years ago and so, he wrote us up and then invited me on their Search Engine Watch Podcast and obviously, that traffic would convert really well.

[17:50] And I guess the thing I realized, man is it’s like the more you’re out there, the more you have ads running, the more you’re just being written about, the more we’re getting contacted by joint venture partners, people who say, “Hey, we want to e-mail our list, you e-mail your list, you know.” Search Engine Watch finding us – I mean it – it just increased that, you know, that lock surface area like Justin and Jason talk about. I mean just being out there creates more exposure and more area free to expand your business. So, it’s definitely working out or at least it did work out in the month through January for us. So, trying maintain that growth and hit our growth goal of 2013 and on track for that so far.

[18:25] Last two update, one is I watch a movie on Netflix streaming. It’s called Indie Game: The Movie. I highly recommend it. It’s about some software developers who are building indie games and it’s – Indie Game is like it’s just one or two developers. So, they’re not associated with a studio. It is really cool. It captures the emotion, the struggles, the anxiety, how long it takes, how the internet can be really cruel if you put out a game and people don’t like it. I mean it’s very closely parallels what we do as developers also theirs world is a little more subjective, right, where people can just say your game is cool or not. At least with software, if we try to sell on value, we have a bit of, you know, a different measuring stick but if you’re all in to the software development stuff, I really recommend Indie Game. It’s nice because it’s free on Netflix if you have a subscription.

[19:11] Mike: The other problem with selling game is either people like it or they don’t and if people don’t like it, there’s not a lot you can do to save it. It’s not like a business application where it doesn’t meet somebody’s needs and you can tweak it until it does. But with the game, it’s really hard to tweak a game so that people like it if it was just a complete dot or bust from day one.

[19:33] Rob: Right. It’s much more hit-based. It’s like writing popular music or making a movie rather than building software for businesses.

[19:40] Mike: Yup.

[19:41] Rob: All right, last thing is our editor had a comment about last episode. Someone wrote in they were talking about the organic delivery idea in New York and she said that she – there is a grocery delivery service in New York City that delivers organic as well as other fresh food and it’s called FreshDirect. She said it’s a huge operation and it’s hard to imagine one person being able to coordinate that. She said FreshDirect is been around for a number of years and she sure they started out small but now they have a giant warehouse, thousands of trucks and drivers and deliver thousands of items within 24 hours of ordering them. There’s no subscription fee. There is a delivery fee at a minimal amount you can spend.

[20:18] You know, we touched on that a little bit just because there’s competition doesn’t mean that you shouldn’t do something if you can figure out a better way to do it. But if you are going to go head-to-head with a big incumbent player, you do need to figure out how are you going to be better or different than they are and obviously, the logistical aspects of handling all the perishable food is quite a big thing to bite off, if you’re wiling to do that and that’s the kind of thing that interest you, by all means.

[20:40] Mike: The problem with fruits and vegetables and things like that is you run in to a lot of what’s called shrink in the retail industry and shrink generally refers to any goods that are lost but when you’re talking about produce, what you’re generally talking about there is stuff that just could not be sold because it wasn’t any good. So, whether the…the apples have bruises on them or something just went bad, you know, the milk expired, things like that, there’s a lot more shrink in the produce industry than there is in the…the general retail but general retail does have shrink as well. I mean if clothes or something like that get ripped or if a TV set – nobody wants the TV set where the box is kind of destroyed a little bit or mashed in on the side. I mean that’s why in…in the past grocery stores used to take can goods and if the cans had dents in them, they would sell it to you at a discount. And now, they don’t do that anymore because people would take the cans and they just drop a whole case of them and say, “Oh, well, I get 50 cents off of each of this.” So – but shrink is definitely a big concern in an industry like that.

[21:39] Music

[21:42] Rob: Let’s answer a few listener questions.

[21:44] Mike: So, the first one comes from Glen Lawson [Phonetic] and he says, “Hi, Rob and Mike. Once again, thanks for continuing to produce the podcast. It’s been my favorite for several years now. Rob, I have a question for you. You’ve mentioned that you brought on a friend to be product manager for HitTail with the hope that he’ll one day take up more responsibility with allowing you to focus on new products. Once you’ve launched or acquired a product and built it up to a stage where others can manage it with little direction from yourself, how do you maintain growth and encourage your staff to be passionate about the business and have a desire to grow it? Would love to hear your thoughts. Regards, Glen.”

[22:12] Rob: There’s a couple of ways to do this for sure. First thing is you need to hire the right people, right? You need to hire someone who is generally going to be passionate and excited about whatever they work on because if they don’t have that, if you just hire someone who’s kind of ho-hum about any job they do, then you’re not going to be able to instill that in them. The second thing to think about is you want to hire someone who’s specifically excited about startups or about growing startups or about being a startup founder. It’s not something that I think can really be taught but if someone is naturally excited about this concept of being a software entrepreneur, then it’s awesome for them to learn on the job and that’s…that’s what I found with Derek is just that he has such a thirst for knowledge and had such a desire to learn all the [Audio Glitch] of the business that I mean I remember, you know, being this back in the day, right? It’s like you’re a kid in a candy store because you’re doing what you really enjoy everyday and you’re getting paid for it and you’re just learning all these awesome stuff.

[23:05] And so, those are the first few things that I think will carry you a long way and then at some point, I think if you’re looking at long term, you do have to think about putting your motivations alongside the person that you hire. In other words, if you make out really well in the businesses well, then you guys should both do well. And so that product manager should ultimately either get a share of profits or equity. And that’s again, may not be the first year or two that they work but if you’re thinking long term, that has to be something in the back of your mind because someone is not going to work forever just to put a bunch of money in your pocket and they are always going to work harder if there is some more motivation to do that either again make more money in terms of equity or a profit sharing?

[23:46] Mike: Well, I mean I think a lot of what you said rings through for most people but the other…the other side of the coin is I used to think this exact same way as well. You know, what’s in it for the people that you’re hiring? And the fact is not everyone wants to run their own business. I mean some people just want [0:24:00] to be able to go to a job and do that job and it doesn’t mean that they’re not passionate about it. It just means that they don’t want to have to think about it when they’re not working. So, those are the type of people who are perfectly content to work for you. They’re not going to actively be looking for the next ride to catch, you know, the next business to jump on to. I mean they want a job. They want a steady income and they want to be able to enjoy their career and as long as you’re providing them with an environment where they are actually enjoying what they do, then you don’t necessarily have to worry about that too much. And again, it depends on what type of person you hire and what they’re interested in. But you can definitely run in to those people who are more entrepreneurial in nature and want to go on and do their own thing. But there’s definitely contingent of people who don’t want that.

[24:48] Rob: Yeah, that’s a good point. And I think I have a…I have a hard time giving advice in this area because my end is one, right? I have only done this once and I found a certain type of person who works in a certain situation and at this point, I don’t know if I could replicate it yet. With a lot of the stuff that I give people advice about, I have done it many, many times in a repeated fashion, all the marketing, the starting, a company they’re growing, you know, the product revenue and all of that stuff, it’s something that I feel confident that I have done it enough times that I do have, you know, an end of 10 or an end 20. My sample size is just larger and so with this one, I have thoughts on it about how I would proceed, but to be honest with, you know, really I only experience to one person. I have lesson I like [Phonetic] to stand on in terms of giving others advice in my opinion.

[25:31]Mike: The next one is from Brian and he says, “I’m currently struggling with the decision whether or when to hire employee number one. My dilemma is I don’t quite have the revenue yet to support this but I’m also very bogged down in task that I’d like to hand off. So, it’s the chicken or the egg thing. An employee will help free me up to focus on growing revenue but without the revenue, I can’t afford an employee. Should I grind it out as I’ve been doing mostly solo with study but slow growth and hire someone later on when I can afford it or should I hire someone sooner and think of it as an investment just for a faster growth? Thanks, Brian.”

[25:59] I think that the thing that you have to do here is take a look at the tasks that you have that you are spending a lot of time on and try to figure out which one is you’re spending the most time on and which of those tasks could be outsource to somebody at a part-time rate. I don’t know as I would go down the path of hiring somebody fulltime yet but you can definitely find people who are looking for part-time work and especially if you’re doing things like support tasks where those types of things can be scripted and you can give somebody some general guidelines and say, “This is my general blanket policy. If somebody asks for a refund, give it to them. If somebody wants you to help them out, go ahead and help them out.” And you’re paying them on an hourly basis. You can kind of have them touch base with you if they have any questions about that stuff but what you’re really looking to do is free up some of your time without having to pay for them to do it fulltime for you.

[26:47] And that allows you to kind of slowly get in to it and the one thing I would caution against for most people in general is if you’ve never been a manager before, it’s very hard to jump in and just take on somebody as a fulltime responsibility and have to manage their workload at all times. If you’re having problems trying to makes end meet and pay their salary, the best suggestion that I would have is don’t do that. What you need to do is take them on a part-time basis and gradually move in to that role and if it doesn’t work out, then that’s fine. I mean you’ve only taken them on as a part-time employee as a opposed to a fulltime employee because once you start taking someone on as a fulltime employee, that’s a huge responsibility because especially if they’ve left another job to work for you and if it doesn’t work out and a lot of these situations do not work out the first time because you – people are notoriously terrible at hiring people.

[27:38] So, you’re better off hiring somebody on a part-time basis kind of testing the water and see how things go and then move on from there if things work out. But if they don’t then, you know, cut the cord. Move on to the next person and at that point, you’re not really torpedoing somebody’s career or taking them away from a job that they realistically could have stuck around in for a while.

[27:59] Rob: That’s exactly what what I was going to say. That’s why we talk so much and we have done this over and over. We did it with support and in the Academy, with support with HitTail. I could go on and on literally, five, ten times I’ve done this, hiring someone who starts off maybe only at 2 hours a week and they’re purely on as needed basis and that’s where nice project management tool like oDesk that actually tracks their time. There’s things that can really track someone’s time accurately and then like you said, you’re only on the hook for the time they work. They can linearly scale up as the time expands and in fact at this point, I now have multiple people working over 20 hours a week and I have one person working 40 hours a week but none of them started at that point. They all started working a couple of hours a week and allowed me to have the free cash flow to then go invested in other things in marketing approaches or in development cost. There’s no reason to tie up a bunch of money in a fulltime employee. I really don’t see any reason to do that.

[28:57] Music

[29:00] Rob: Our next e-mail is actually not a question. It was…it has a subject cool stuff found. It’s from Carl and he says, “A film is in the making that I thought might interest you and your listeners.” And so if you visit startupkids.com, you can see a trailer for a movie, that’s a documentary about young web entrepreneurs in the U.S. and Europe. Did give them my e-mail address because I’d love to hear when it comes out but it has interviews with the founders of Vimeo, SoundCloud, Kippt, inDinero, Dropbox, Foodspotting and several others. So, he said it should be out in March of 2013. I’m in to this type of thing, right? You know, I love movies that observe, you know, all the stuff that we go through and to see other people talk through it is just fascinating. So, thestartupkids.com.

[29:40] Mike: And I think our last question for today comes from Ricardo and he says, “Hi, Rob and Mike. Thanks for the show. We’re a small SaaS company from Brazil with nearly 250 customers. Obviously, we love to get new customers and hate it and I really mean hate it to lose them. I hate it to the point that I’m disappointed with the whole business and mad with anyone who crosses my path for a few hours after each cancelation. I know I should be doing more marketing to get more customers more quickly. What I want to hear from you is what is your strategy for when you lose subscribers from the moment someone request a cancelation to subscription to the moment you actually let them go, how do you deal with it? What sort of metrics do you think? At what point does it start to concern you and more personally, how did it affect your mood in the way you treat your products? Thanks very much, Ricardo.”

[30:19] Rob: First thing to think about is to look at your product and figure out are you past the point of product market fit meaning have you built something that people want to use, that solves a problem that they have and that you are marketing to the right market that really needs it. So, if you are at 250 customers and they are happy and they love what you’re doing and you are able to find new customers and bring them in to your app, then the answer to that would be yes. You know, if your churn rates relatively low, you know, typically when your growth starts going up, your churn goes down, then you know that you “hit” product market fit, okay? If you’re before that, then every cancelation is an opportunity to talk to that customer, find out why they canceled, find out if they just are never going to use your app or if you’re missing a single feature, if you’re marketing to the wrong people. You know, there’s a bunch of stuff that you can find out for them and that’s a whole another conversation but that’s the kind of pre-product market fit discussion.

[31:10] Once you’re scaling and you’re marketing and bringing new people in, churn is a fact of life, period. You’re going to have people that cancel every month and with 250 customers, I hope that number is not a lot of people but in fact in early days of a SaaS app while you’re trying to hone your funnel and hone retention and get all your features in to keep people happy, you can easily have churn of 10 or 20% a month. Now, you can’t have that for very long. You’re obviously losing a lot of customers. 20% churn with 250 customers is 50 customers a month and you’ll essentially be at zero in five months. So, realize that but no matter how well you hone that and how good you get that number, how low you get it, you are always going to have a few people that cancel.

[31:51] So, I think there’s kind of the mental aspect of it. You said you get, you know, angry when people cancel, I would take yourself out of that loop so that you are no longer  receiving that e-mail and having to cancel them. If it really does impact you and impacts your productivity in the way that you’re working with other people, I would say give that to an assistant or a tier 1 support or something and let them handle that because you don’t need to know about every single cancelation if they’re comments given in the cancelation which you should always ask why are you canceling and require, you know, at least X characters. If their comments given in that, then yes, maybe you should see all of those every week and be able to read through them but in terms of you getting angry everytime they cancel, then you should probably remove yourself from that process.

[32:32] Second thing I think is you have to look at them in aggregate and that actually takes away a little bit of the emotion from it and what I mean by in aggregate is look at the percentage. So, tracking churn percent which is the number of customers who canceled in a month divided by the number of customers you have at the beginning of that month is, you know, an absolute key SaaS metric. So, you need churn. You want to calculate the lifetime value and of course, the monthly average revenue per customer. But in terms of churn, you also want to break it up in to multiple durations because with SaaS or with any kind of subscription, you’re going to have higher churn in the first period that there are customers. So, for some businesses, it’s the first 30 days has really high churn and that can be 20 or 30% and then after that, it’ll settle way down and by down, I mean it can be 2% or 5% like really low areas. In other businesses, your first 60 days have high churn and in other’s first 90 days.

[33:28] So, you’d just have to calculate yours and you see, you watch and look when that churn drops off and then I would look at your first X days, So, for you it’ll be 30, 60, 90, probably. So, I’d say, you know, look at your first 60 days churn and then look at your post 60-day churn. And those are really the numbers you want to track on an ongoing basis and you want to either have a graph of those that you can look at so you can easily see the change in churn or you want to have a table, you know, worst case, you have a table of your current month plus all your previous months so that you can eyeball it and see is my churn going up or down. When your churn is too high [0:34:00], then you have to implement a bunch of stuff to try to bring it down and again, that’s probably an entire podcast or maybe a MicroConf talk that needs to happen, talk about specific ways to bring churn down. There are a lot of different ways to do it. Those are my initial thoughts on it. Mike, do you have anything to add?

[34:16] Mike: I like a lot of the things that you said regarding what metrics to take and you know, when it should start to concern you. Those are good things. I think the number one point that you said was to kind of remove yourself from that feedback loop if it’s really affecting the way that you work and the things that you’re getting done. That I would say is probably the single most important thing to do.

[34:36] The one other thing that I would point out is that this is definitely a situation where it seems like you’re taking these cancelations personally and the one thing that I would point out is that while you’re getting these e-mails and somebody is actively telling you, “Hey, I’m really not interested in your product anymore,” it’s not a lot different than somebody coming to your website and looking at your products and saying, “I’m not interested.” And that 98% of those people who come to your website are not interested and they leave. But for some reason, those people are not irritating you, it’s these people who have actually gone through that extra stuff, have looked at your product, have probably made a couple of payments and at that point, that’s where, you know, you’re getting these feelings of anger from these people who are saying, “Well, you know what? I’ve tried it out. I really don’t like it. It’s not for me. It’s not going to fit for what my needs are.”

[35:24] And my point is that there is not a lot of difference between those two and there’s this much larger group of people who are telling you no and the only reason you’re taking it personally is because you don’t get that feedback loop. So, again, just kind of going back to what Rob said, definitely take yourself out of that, have somebody else e-mail them back, ask them why they’re canceling. Get the information that you need and then just give it to you and aggregate.

[35:45] Music

[35:48] Rob: That wraps us up for today. If you have a question for us, call our voicemail number at 888-801-9690 or e-mail us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt [0:36:00], used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.

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Episode 117 | Door to Door Customer Development, Courting Feedback from Customers, and More Listener Questions

Startups For the Rest of Us
Startups For the Rest of Us
Episode 117 | Door to Door Customer Development, Courting Feedback from Customers, and More Listener Questions
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Show Notes

Transcript

[00:00] Rob: In this week’s episode of Startups for the Rest of Us, Mike and I are going to be talking about hiring an offshore developer, how to court product feedback from customers and using content aggregation and curation as a business model. This is Startups for the Rest of Us: Episode 117.

[00:15] [Music]

[00:23] Rob: Welcome to Startups for the Rest of Us, the podcast that helps designers, developers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.

[00:33] Mike: And I’m Mike.

[00:34] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike two weeks into your AuditShark early access?

[00:41] Mike: So, things are going pretty well there. I guess over the past week or so we’ve had some minor set backs because both of the primary developer that I’m using and myself decided to upgrade our computers and he went the route of migrating his machine from Windows 7 to Windows 8 whereas I’d just wanted to upgrade the hardware and debated going to Windows 8 but I didn’t want to spend all the time associated with finding drivers and dealing with all the headaches of reinstalling everything. So, I just took a backup of my machine and then migrated it to the new hardware and just restore everything and I was done. [Laughter] Meanwhile, he spent I think three or four days trying to download all the software and get everything kind of back to where things where.

[01:19] Rob: Yeah, everytime I get a new machine an upgrade, I typically budget myself about 16 hours start from just a barebone instance, install Windows and install everything. But last time I got an SSD drive probably two iterations ago and that time dropped to between 6 to 7 hours because the installs are so much faster. I think Windows now installs in what, 10 minutes or something on an SSD. So, it really cuts a lot of that time out. But with yours, you just did a backup. So, you still have the – because you know how Windows develops that craft over years. I mean if you run Windows for five years, it just gets slower and slower as the – what is it called, the registry? It’s more bogged down than all that stuff? So, at some point you’re going to upgrade [Phonetic], right?

[01:58] Mike: Maybe, I mean I was able to just dropped it in to a back up and then do a complete restore on to the new hard drive and I had an SSD drive that I was going from. So, like my old set up was one SSD drive as my primary partition and that was my C drive and then I have another drive that – or two drives that are mirrored so that I can do my, you know, basically have everything else on RAID and that’s like one and a half terabyte drive. And then I have a third one that I have all my backups get dumped to. So, what I did was on my new machine, I just took my backup drive, popped it in, restored with the backup of my primary drive on to my new SSD drive and then pulled the two drives over out of them and as a mirror and then restore the secondary partition on to that so that my second drive came up in mirror is hardware mirroring instead of software mirroring and everything was pretty much fine. I mean everything is back to the kind of the way it was. The only difference is that now I have six cores instead of two and I’ve got 64 gigs of RAM instead of I think 10 it was. Things are going well.

[03:00] Rob: So yeah, I know that’ll make sense but oh – did you get what I’m saying like overtime if you let a Windows install, there’s run and running on 5, 6, 7, 8 years even 2, 3, 4 years, it just gets slower and slower that’s I —

[03:09] Mike: I know what you’re saying but I don’t really run in to that problem as much because I don’t install like tons and tons of stuff that I just know that I’m never going to use or that I’m going to use minimally. I tried to keep my system relatively clean. But I mean the thing is with an SSD drive, all those performance problems tend to go right out of the window.

[03:25] Rob: Yeah, I’ve still seeing them with the Dell. I have a Dell laptop and I built SSD and yeah, it’s definitely better than it used to be but when I upgrade to a new system, I make it a habit. I feel like I want to start fresh with the brand new OS install. You know, that gets rid of all that junk that’s been lying around. I only install maybe a dozen programs at this point because I’ve — so much as web-based. But it’s still – I don’t know. Maybe that’s an old school way of thinking. I’m interested if other folks still feel that way or if they also just kind of move their stuff as a backup, you know, or if they start from scratch.

[03:55] Mike: I think one of the issues you can run in to is there’s a lot of stuff that runs in the background on startups. So, like if you start  using Evernote and Dropbox and all these other tools and services, eventually, they’re going to be starting up when your machine starts up. And what I found was that there are certain things that with an SSD drive, you’ll run in to problems where a service tries to start but there are other dependencies that haven’t quite loaded yet or haven’t finish loading so you have to change some of those services to start up as a delay of start instead of automatic start when the operating system heads. The other thing that you can do is I think you’re on a MSConfig and what that will do is that will allow you to see everything that’s starting up when your machine boots up and you can just go in and disable anything you want.

[04:39] Rob: I do all that. That’s my standard install procedure. On day one when I install a brand new OS, I do both of those things and I actually have two or three other steps that I go through to optimize it but still, over the years the stuff just gets slow. Windows is not Linux and or you know, or Mac OS and that’s why I like starting over from fresh.

[04:55] Mike: I get it. I just haven’t run in to those problems. I mean my old machine was a lot slower than this one just in general and then switching over I got a state of three SSD drive. So, it’s 6 gigabit instead of 3 gigabit and then the processor as I said is significantly faster. I’ve got three times as many cores in it plus it’s just a better architecture in general. So, I don’t see any of those performance problems that I was seeing before.

[05:20] Rob: If anyone out there runs in to or doesn’t run in to that problems Mike and I are talking about, I’d be interested to hear from you in the comments for this episode 117. So, for the second time in a little under three weeks, I found myself on the Central Coast of California. So, I hit Pismo Beach the last couple of days with the family and then the kids and the wife went home and I’m in San Luis Obispo for a couple of days. And what I love is it’s off-peak time, right, because it’s now…it’s a low season and then the week in that hotel rates are really good. So, you can get serve right on the beach for less than half. And I’ve found that this change of scene for me, really ignites creativity like I find myself wanting to dive in to new projects and thinking a different way about the projects that I’m already working on.

[06:00] So, Steve Blank says get out of the…out of the building and go talk to customers, I think you need to get out of your town or just get out of your space every once in a while and give yourself time to — even if you’re just working from cafés and you’re not even doing kind of the vision questing that I talked about where you take a retreat, I just feel rejuvenated and like totally psyched up right now to work on my projects.

[06:19] Mike: You know, one thing we forgot to mention on last week’s podcast episode was that MicroConf sold out in just between 51 and 52 hours.

[06:27] Rob: That was really cool. So, first we did an internal launch to the Academy and we sold more tickets than we thought we would. And then when we actually did the launch to our early bird e-mail list which really wasn’t even a public launch. It was just sending out e-mails to the list. We sold out like you said in just over 48 hours. It was…it was pretty crazy. That gives us a lot of time and flexibility to focus on the event now, you know, to like spend the time recruiting speakers and adding elements to the event that otherwise, in past years we haven’t had the time to do because we’ve been consumed with marketing it. And in fact, we’ve actually added a couple of more speakers since you’ve talked…you and I have talked about it lately. One is Erica Douglass from Whoosh Traffic. She had a web hosting business that she sold for a million bucks when she was, I don’t know, 26 or 27 and now, she’s on to a new startup. Dave Collins from Software Promotions who’s been doing SEO and AdWords for like 10 years and he’s going to be talking about SEO and then mostly confirmed.

[07:17] And I haven’t even talk to you about this but Josh Kaufman who’s…he’s a bestselling author of the book called The Personal MBA which I’m actually – I just finished listening to the audible.com. He has agreed to come but we just haven’t worked out all the details but he – I saw him on the attendee list. He actually tweeted out and said, “Hey, I’m going to be there.” And I’m just thinking, “Wait, I’m just reading your book.” There’s a bunch of stuff in that I took notes on that I’d love to hear expanded on. So, you and I agreed to invite him. So, I’m pretty excited about to have a line up shaping up. Those – because they’re an addition to Jason Cohen of WP Engine and Hiten Shah of Kissmetrics and of course, you and I.

[07:49] Mike: Yeah, that’d be really cool to hear from those guys. Obviously, some are the ones who were there last year but definitely looking forward to hearing from both Erica and Josh. That would be interesting.

[07:57] Rob: So, last thing before we dive in to several listener questions we’ve lined up is  I was listening to last week’s episode which we had talked about the stage one through five and had to move people from stage three to stage four. And in my mind, I wanted to clarify kind of the discussion there but I think both of us made it sound like you could only find success if you’re in stage four, if you’re a stage four person and I don’t believe that’s true. I think that you can move faster if you’re stage four because you work better with people. I also think you can grow bigger because you work better with people.

[08:27] But I know a lot of people who are stage three and who truly are doing that microISV micropreneur, you know, not hiring contractors, not working with other people. It just takes you a lot longer to get there and eventually, you hit a ceiling. And in fact, if you talk to me maybe two years ago, that was – I was still in that mindset being my own person and just wanting to…to work alone and do everything on my own and that’s not a bad thing. It just matters where you want to go. Once I’ve made the decision that I wanted to go bigger, then…then the ideas that I was working on and I wanted to go faster than I was currently moving, that’s when I really made that switch through the “We’re great” mindset rather than the “I’m great” and trying to build up a small team to help move things along.

[09:09] Mike: Yeah, that’s absolutely right. If that was an impression that we gave, then I apologize for that. It wasn’t necessarily the intent because you can definitely be successful in stage three. You can definitely be successful in stage four. It’s just that with stage three, you’re limited by your own capabilities and success primarily because you are not willing to give out tasks to other people because you don’t feel like you can rely on them to get the results that you want. So, you really in essence self-limiting at that point. It’s not that you can’t be successful because you won’t be successful, it’s just that there is an upper limit to the size of the projects that you can undertake because you…because of that inability to hand out work to other people or to involve other people in your processes.

[09:48] Music

[09:50] Rob: So, today we’re going to be running through several listener questions and we’ll tackle as many as we can within our time constraints. Our first question today is about door-to-door customer development and it’s from Jeremy Frederick. And he says, “I’m currently involved in an investor-funded startup. It’s at learneverywhere.com but we are really struggling to sell the product and I’ve started other projects to hopefully have something else catch on. I launched the website called marketplacedeliveries.com. It might not be the typical site you talk to people about because the really work isn’t the website or software but the execution of the business which is online grocery delivery that focuses on local organic produce. This is definitely a cold market for me but I run an ad campaign in only the Orlando area that converted $100 to 67 page views.” So, 67 clicks I’m assuming.

[10:37] “…and 10 people adding their e-mail to the mailing list. I then printed 130 flyers which was $40 plus two hours of time and went door-to-door in my own neighborhood to pass them out and converted 26 of them to visit the website, 24 of them entered their zip code and 15 entered their e-mail. What I wanted to ask you is if you’ve ever done door-to-door advertising and if these conversion rates are reasonable. Do you think there is a market here and your personal advice on a business like this one? Thanks, I’m looking forward to listening to more episodes.”

[11:05] Mike: To me this is extremely interesting because of the fact that I don’t think that most people when they are trying to build a product of any kind go door-to-door and ask people if they’re interested in, you know, buying. And I mean I understand this is more of a B2C type of opportunity but still, I think that it’s very unusual. I know Patrick McKenzie did it when he was trying to build his appointment reminder software. You know, his is also more of a B2B product than a B2C product. So, I find that just in general very interesting.

[11:35] One of the things that I’m looking at here is that, you know, it says that there are 67 page views. I don’t know what the conversion rate on that is. Is it – was he paying a dollar per click or something like that? I might look at the percentages there to see if it’s a reasonable conversion rate but beyond that – I mean some of the other numbers that you threw out passing out flyers and getting 26 of them to come to the website, 24 of those people entered in their zip code, that to me seems like there is extremely high interest there because if they’re going to come to the website and then you’ve got 90% of them entering their zip code and then 15 of those of people entering their e-mail, you’re talking 90% conversion rate and then a 50% conversion rate. I mean those to me seem really, really high.

[12:16] The question is what type of margins can you get out of it and what is it that you’re actually going to be selling to them? To me, this is definitely worth exploring more. It’s kind of hard to give the specific advice without some more specifics to the numbers. But I would definitely pursue this a little bit more and really, what you’re trying to do is to verify whether there is not a market to be had or whether there is not a viable product. And that’s what you’re really trying to prove is to…is to disprove your theory about is there a market and you’re working theory should be, “I believe that there is a market.” You’ve gone around. You’ve done a lot of these things and to me, it just looks like you’re trying to disprove that but all the numbers are coming back and saying there are people who are very interested.

[12:53] So, I think you’re definitely on the right track and I would advice proceeding forward and start looking at the numbers and what sort of profit margins you can get and what it is that you’re actually going to be offering them and work from there.

[13:04] Rob: Jeremy did mentioned a bit of the conversion or you may had missed that one when I was reading it but he said it was a $100 for 67 page views and 10 people added their e-mail to the list. And so that comes out to about a buck fifty of click and then he paid a $100 for 10 e-mails. So, that’s $10 per e-mail. Now, the conversion rate is about 15% of visits from those cold ads to e-mails. They’re not – 15% is not bad. What is not great is paying $10 to get an e-mail at this early stage because from that list, when he actually launched this, my guess is he might convert somewhere between 10 and 30% of people to customers. So, you’ve essentially paid up to a $100 to acquire a single customer or you may have only paid, you know, $33.

[13:46] Well, that’s not terrible. I mean you can totally build businesses on that type of cost to acquire a customer. I think the next step I would take is figure out what – how much profit you think you’re going to make over the lifetime of a customer and take a guess — obviously, this is a recurring thing, I’m assuming you’re setting them not for a subscription. And these types of subscriptions of physical goods are really popular right now in terms of, you know, you think about manpacks.com. There’s a bunch of what — paleopaks.com. This space is hot but physical goods are – especially perishable goods like you have like you’re dealing with organic stuff, obviously, it’s going to come with a lot of logistically headache and it’s going to be tough to scale really large.

[14:26] So, I would take a serious look at just in the Orlando area, getting this up and going. Hiring people to do these door-to-door deliveries, cost of gas, cost of insurance, all of that stuff, how much you really think you’re going to be able to make per delivery and then say if a customer sticks with this on average for four months or six months kind of just pick…pick a number out of the air. And if you find someone who is doing something like this and get a better lifetime estimate even better. But for now, just take your best guess of what you think it might be and then look, “Wow, do I think I’m going to make enough money from each customer to actually make this worth all the effort of basically ramping up a warehouse and logistical delivery type stuff,” because that’s…that’s a non-trivial thing to do for sure. But I certainly admire your ambition, you know, way to go going door-to-door and setting up ads. I mean, you know, you really taken that the customer development stuff to heart and I think…I think you’re doing a good job with it.

[15:13] Mike: Yeah, I did miss it and kind of eluded to what the conversion rate is in there. I do understand where you’re coming from. I don’t necessarily disagree with anything that Rob just said. The…the other thing that I thought of that I would just want to mention is that the conversion rate that you’re getting from the people that you went door-to-door to and talk to them, my inclination is to believe that by explaining to them exactly what the product was that you’re offering, you probably give them a much better idea of it and then they would get from coming to your website. So, your conversion rate there is going to be a lot higher because you have the time to sit there and talk to them and explain everything to them as oppose to relying on them coming to your website and you know, looking at it for 3 seconds and making a gut judgment call as to whether to give you their e-mail address.

[15:56] Rob: Right and then the thing you have to think about is obviously, as the owner of the business, you’re not going to [0:16:00] do that, right? You’re not going to walk door-to-door but could you hire people on Craigslist either for a cut of, you know, you can give them – unique URL that they hand out and then they get a certain percentage or they basically affiliate or that you pay them, you know, 8 bucks an hour or 8, 10 bucks an hour just to walk around and pass out flyers. And from there, you could also figure out cost to acquire customer based on your success and you know, you’re now training kind of a – it’s a door-to-door sales force and again, that’s nothing I would – I have any desire to do personally but if that kind of thing excites you, it’s certainly a creative approach to acquiring customers and most people, you know, wouldn’t have the guts to step up and try to do it.

[16:37] Mike: Well, I think the other thing to mention is that we kind of titled this question as being door-to-door customer development and that’s really what I would take this as not necessarily looking at this solely as an effort to acquire customers but using that door-to-door experience to kind of figure out mentally what it is that people are actually looking for and you can kind of guide that conversation when you’re talking to people and I believe that obviously that, you know, Jeremy did do this because he got a significant number of those people who actually came to the website to put in their zip code and then entering their e-mail address.

[17:11] Rob: Right and my hope is, Jeremy, is that when you went to those customer’s doors that you also ask them, you know, not only, “Would you be interested in this,” but “How can I make this offering better,” or try to determine from them like Mike said actually doing customer development and not just doing pre-sales because there’s a difference, right? Pre-sales is when you say, “I have this product. It’s this price,” bam! You know, “Will you buy?” And that’s a good question to have sometimes but also customer development is that next step of saying, “How can I improve that? If you won’t buy, then why not?” And figuring out if you can slowly change your…your offering to make it something that appeals to…to more people and is perhaps more scalable for you. So, thanks for the question, Jeremy.

[17:47] Our next question is on hiring an offshore developer. It’s from Anthony Robson [Phonetic] and he says, “Like most, I want to start off the e-mail saying how much I love your show. I’m non-technical but web savvy and you guys still provide quality advice for founders like myself. Although  non-technical, I know plus have learned a lot about marketing my product. I have also found several unique ways that I will try to market this idea. Now, let’s get to the meat of the burger. I want to hire an offshore firm to develop version 1 of my website. I’ve listened to your podcast regarding outsourcing to sites like oDesk. However, do you guys know any resources that can teach me how to hire an offshore development firm?”

[18:23] Mike: So Anthony, the first thing I would say is you should probably go back and listen to episode 64 which is titled Hiring a Managing Remote Developers. And this episode we talked a lot about hiring, you know, remote developers, what you should be looking for. I think that one of the issues you might run in to is the fact that because you’re non-technical, you don’t necessarily have a firm grasp on how to tell the difference between whether a remote developer is going to be good or not or just – or developer in general because, you know, they can blow smoke and you won’t know one way or the other whether they know what they’re talking about.

[18:54] What I would probably advice in that situation is come up with a simple task, ask three or four different people to do the same thing and then just look at the results. Kind of gage how well they get back to you and what the quality is of the stuff that they’ve delivered. So, if you ask them to build a very basic web app that allows somebody to register and log in. It shouldn’t take terribly long for people to do that and the more responsive they are to your request, I would go with the person who is more responsive and is willing to work with you and you know, provide those deliverables quickly as opposed to somebody who, you know, you think maybe really good but they take a little bit longer. They’re trying to fit you in between other projects and you farm this work out to, you know, 3, 5, 7 different people at the same time, you know, to kind of depending on what your goals are and whether or not the first couple of people work out. And you get those mini projects back from them and you just figure out who is most comfortable to work with and that’s probably what I would advice as a good starting point for hiring somebody who’s technical when you are not technical.

[19:57] Rob: Yeah, I also recommend checking out Codecademy, Codecademy.net I think it is. And basically, it’s a free online tutorial of kind – that gives you an idea of how to code and they have a few hundred thousand people have gone through it. But just to get an idea of what it takes to code will really give you a bit of insight in to how to hire a coder. And I think if you’re hiring it for a specific technology like PHP or Rails or .NET or even mobile, but if you learn that technology at least a bit, you’re going to have way more insight, you know, in to how to hire someone.

[20:29] Our next question is about how to court product feedback from customers and it’s from Paul. And he says, “I’m just setting up a new SaaS app. My question is how do you court product feedback from your customers especially around enhancement request? I was thinking of using an enhancement tracking tool to allow people to have visibility. I noticed on the HitTail website, you just have a contact this box and providing feedback on enhancement, et cetera is not necessarily promoted. Your thoughts are appreciated.”

[20:54] Mike: So, I think there’s two different things that I can think of here. One is using something like Olark and other one is using something like UserVoice and you can integrate this in to your products to help gets you direct feedback from your customers. The other thing you can do is you can build something yourself where, you know, you have this built-in customer feedback loop or you just have like a contact or something like that that they can e-mail you and maybe a little dashboard where the user can ask you questions and your replies will be there.

[21:23] But really, it seems to me like it might be a much more efficient use of your time to use one of these third parties that just has an integration component where you just plug it in to your software and it allows them to directly interact with you and they handle all that legwork because you don’t want to be building things that are not going to directly contribute to getting your product out the door right now. Your primary focus should really be getting the product finished and then working with the customers to, you know, make sure that everything is okay, what’s you…you’re building is, what they want, et cetera. But you also want to have some of these conversations up front so that you’re not building something that nobody is actually going to pay for.

[21:59] Rob: Yeah,  I’ll start by saying regarding HitTail and the reason were not asking for customer feedback right now is because we’ve…we’ve hit a sweet spot where we have found a need that we filled with our product and we’re not doing major feature development right now. We already have a list of my long of different customer requests and we have those in a big Google doc and at some point, I’m probably going to pull them out. We’ve decide that, you know, for the further development and do maybe a Reddit style social news thing where – I think UserVoice allows you to do this. You just put a bunch of issues in there and I would probably just e-mail all of our existing customers, send them there and say, “Which of these are you, you know, interested in.” Vote up, vote down type of thing. That’s why I would handle that.

[22:39] We just been pulling them in via e-mail and what I found is that there are people who really want something build, they will in fact e-mail you and let you know even if you are not encouraging it. But if you want a higher volume of those – of that feedback which we, at this point, I don’t want a higher volume, but if you do, then having a splash screen when someone first logs in that they see this screen that says, “You know, we want your feedback.” That’s a great way to do it. Sending an e-mail during your trial sequence or shortly after the trial sequence ends to every customer and asking for feedback will also do that and then having like Mike said having a little UserVoice tab on the side of your website or the side of the app that basically is kind of pinging them all the time to give you feedback.

[23:17] That can work okay but it won’t, you know, people become blind to that, right? There’s the banner blindness where you just kind of tune it out but that at least help you manage the feedback certainly. So, if you’re really looking at to develop your product quickly and you want a lot of feedback, then those are three approaches I would look at implementing. So, thanks for your question, Paul.

[23:34] Our next question is on content aggregation and curation as a business model and it’s from Derek Kuntz and he says, “I look forward to each new podcast like a child waiting for Christmas. Thanks for your time and effort. You’re both are really a gift. I would love to hear your thoughts on content aggregation or content curation as a business model. Let me explain. I’m in a very early stages of launching realcardio.com, a workout app for busy people that allows you to get a workout in less than 20 minutes. Users build their own workout playlist based upon what types of workouts they want to do i.e. cardio, strength training yoga or even a workout mix. Right now, all of the video content is coming from YouTube and it’s only a small sample set. Eventually, much more content will come from YouTube and other sources like Vimeo, Dailymotion, et cetera. It’s much easier to pull content from existing sources like this rather than try to market original content and then host the data myself. Besides, almost every video eventually find this way to YouTube and anyone can embed a YouTube video. What are my potential pitfalls from monetizing a site like this? Derek.”

[24:33] Mike: Wow, I think that your major pitfall would be some sort of problems with legal problems. I mean I don’t know what the legal agreements are around a lot of those video sharing sites but I would be curious to know whether or not embedding them in to your application would be accepted or approved in their eyes. Now, you may be able to give around that, you know, with the technicality by saying, “Well, I’m not embedding your content in to my application, all I’m doing is linking to it.” But that doesn’t necessarily mean that they’re not going to turn around and sue you anyway.

[25:05] So, I would be really cautious about that kind of thing just because you don’t know what those legal issues are. You may want to approach them and ask them questions about it but, again, you may just find yourself in the same boat. They may say one thing, you know, the developers may say one thing and then the lawyers may say something different.

[25:22] One of the things that I can think of is that this seems like a very crowded market and I feel like the problem that people have is not necessarily finding music or videos or something like that to entertain them for the 20 minutes, it’s more of the fact that it’s a problem getting them to the gym. The whole market just feels very saturated to me.

[25:39] Rob: Yeah, in addition to kind of the Terms of Service stuff that Mike talked about, I questioned how much value you’re actually providing at this point. Basically, you’re in a non-business niche so it’s – I know it’s a fitness niche which is fairly popular but it’s still dealing with consumers basically and consumers are really price sensitive. So, it almost feels like a YouTube channel could do this. If someone has a good YouTube channels of yoga workout videos and someone who could just go and get all their yoga from their and if someone, you know, wants to get a different type, they can go to cardio workout says an example and get it from there. So, I won’t feel like I would – if I was working out that I would want to go and manually build a playlist like you’ve shown, right?

[26:15] I think that maybe a better value proposition is to think like Pandora where someone can enter an interest or enter a single video and get a bunch of videos just like that that are really good aggregated workout list that you build automatically. Even then, I don’t know of any consumer that’s actually going to pay a recurring subscription for that. I really think you’re going to need to be ad-driven which is a challenge because there are already ads in the video. From what I know the terms of service you can’t strip ads out or…or add…ads over them. Yeah, I – this is more of a challenge. It’s more of that raise some funding and get really big type idea. I don’t see that there’s going to be enough – that you’re going to be able to generate enough traffic and provide enough value to people who aren’t just going to go to YouTube and maybe put together their own playlist or just, you know, pick a few of their favorite channels and use those if they want to.

[27:04] I just thought of one other interesting angle. If you made a mobile app and it was basically a mobile workout app of aggregated videos, that could – or that may already exists but that’s another interesting thing but, you know, again, you’re going to make 99 cents or 499 or something off that single sale and I guess you could have, you know, in that purchases like we’ve talked about to expand it later on. Yeah, mobile maybe the way to go with this, mobile and iPad and you know, to kind of tablet driven.

[27:27] Music

[27:30] Rob: Our next question is about paying affiliate income on recurring payments and this comes from Will Claxton [Phonetic]. He says, “Hi, guys. I listen to every single episode and I thought it was about time I send in my own question. I was wondering if I could ask your opinion on something I’m struggling to get my head around. I’ve had about a million ideas for SaaS apps and always figure out a reason or two not to go with them but that’s okay, I know I’ll eventually find one that has all the right ingredients. The question I have is more to do with how to pay referral/affiliates on a monthly recurring revenue model. In all honesty, I don’t want to be paying someone forever for a percentage of the monthly income from a customer they referred to me once. Is that something I’m just going to have to bite the bullet with and do or is there a better option of paying them a higher percentage for just six months to a year then cut them off? I wouldn’t want to pay them a one off lump sum at the start because say the app is 10 bucks a month and I pay them $50 and obviously I’m going to get scammed big time. Hope the question makes sense. I absolutely love the show. Keep up the good work. Regards, Will Claxton [Phonetic].”

[28:26] Mike: I have a couple of thoughts on this. I know that Will seems to think that he’s going to get scammed big time but the fact is that if you have an application that you’re selling for $10 a month and you’re paying somebody $50 a month, then realistically, your lifetime value for those customers has to be at least $50. You’re not going to offer somebody $50 if you’re not going to make $50. So, that’s the first thing. The second thing is that you’re not going to pay an affiliate the second that they send you a customer. What you’re going to do is you’re probably going to wait 30 or 60 days for those customers to stick around and not only just to make sure that they are going to be a customer but to start getting revenue for them and to make sure that they’re going to be around for the long haul because you’re right, I mean they are going to be customers who sign up and they’re going to drop out that first 30 days or within two weeks or something like that. So, you almost might want to put something in there that says, “You get paid an affiliate if the customer stays around past the first month.” So, at the very minimum, you get at least one month revenue from them. So, that way what you don’t have to deal with is you don’t have to deal with all the problems associated with the people who are kind of dropping out of your funnel at the very beginning because they aren’t a good target market for, you know, the type of product that you’re offering.

[29:34] The second thing that it does is it essentially forces the people who are on the other end because they’re not going to be get paid for 30 or 60 days, it forces them to send you good traffic. And that’s really what you’re looking for at the end of the day. You want people who are qualified leads to come in to your sales funnel and as long as you’re managing that sales funnel well enough, you can pay people upfront. Now, the one problem that you could run in to is that what happens if somebody does start sending you large numbers [0:30:00] of qualified leads? What’s going to happen is that because it’s a SaaS-based business, you’re going to run to this cash flow deficit where you have going to have to start paying your affiliates mounts and mounts of money before you accrue enough money to be able to maintain your status as cash flow positive.

[30:18] So, if let’s say that you have a thousand people sign up, well, that’s a $50,000 that you would have to pay out, you know, about 60 days later but you’re not going to make that $50,000 until six months in. So, you’re going to have this gap between month two and month six where you have to basically have $50,000 cash on hand. Now, there’s ways to manage that. You can limit the number of people that an affiliate can refer to you at a given month. There are probably ways around that if you work with the affiliates and say, “Look, you know, you brought out enough people that I’m going to have to push this back. I can afford to give you the $50 upfront. I’m going to have to make a payment plan with them or something along those lines.”

[30:56] But those become cash flow issues and with any SaaS-based operation, when you find a traffic source that is working well, you’re going to have to have the capital. You’re going to have to feed that source of traffic and you know, with the affiliates, this is definitely a big problem when you are, you know, paying that much money upfront for them. It’s not to say that it doesn’t work. I think that WP Engine does this but they also have funding on the back end. So, they have the cash flow on hand in order to be able to fund this type of operation and do it effectively.

[31:24] Rob: Yeah, I agree with what Mike said…that sounds, you know, sounds a bit complicated. Unless you have someone fulltime managing that program, you’re going to have a lot of little details to think about and to keep people from gaming the system. I think overall, you need to think about what your version is to paying someone an ongoing monthly commission. Commissions for SaaS apps can be for a lay low like 15%, 20, 25%. I mean that’s typical, right? It’s not like the 50% e-book commissions you typically see. So, if you are charging 10 or $20 a month, 15% is only a buck fifty or $3 and that is in my opinion a completely reasonably enough  to pay someone if they are referring you a paying customer because you should have a very high margins on your customers.

[32:06] In addition, you’re not going to be paying this person forever because customers don’t stick around forever. Your average lifetime is not going to be very long unless you have a very solid business like a hosting platform but average lifetimes are one year or less. And so, I would seriously consider either going with a 15 or 20% commission and just paying it for the fulltime their customers stays with you or giving the affiliate 100% of the first one or two months payments if you feel more comfortable with that.

[32:38] Now, someone could obviously come in and try to game that system but what do they get out of that, right? If you’re not paying them any more than a customer has paid you. So, it’s not like them sending you a hundred say customers does them any good that makes them any kind of profit. So, those would be the two, kind of the two simple suggestions that I look at doing. With HitTail, we offer a 20% affiliate commission and that is for the lifetime if that customer stays there and for us, that is totally worth. It’s just worth paying that much money because the profit margins are high and that’s enough incentive that we do actually have affiliates now working and sending us customers. We’ve actually had quite a few new customers created in January alone from our affiliate program.

[33:18] Music

[33:21] Mike: If you have a question for us, you can call it in to our voicemail number at 1-888-801-9690 or you can e-mail it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.

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