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Show Notes

• Tribal Leadership
• AuditShark is live. woot!
• Fflick

Transcript

[00:00] Mike: This is Startups for the Rest of Us: Episode 116.

[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 am doing good. I am on a campaign to get this t-shirt printed. Someone tweeted it out to me and it’s WWRWD. It’s What Would Rob Walling Do. It’s only 13 reserved out of and they need 50. It’s —

[00:37] Mike: Oh —

[00:38] Rob: I know, [Laughter] and I’m 13 of those.

[00:42] Mike: [Laughter]

[00:43] Rob: I thought it was funny. That’s at teespring.com/wwrwd.

[00:48] Mike: It’s too bad that they, you know, you have to get to the goal of 50 because I was thinking about getting one and then, you know, wearing around at MicroConf.

[00:55] Rob: I know that that’ll go over really well.

[00:56] Mike: [Laughter]

[00:57] Rob: How about you? What’s going on with AuditShark? You’re about a week after your early access launch.

[01:02] Mike: Yeah, so I had a couple of really, really good conversations last week with some customers who are trying it out and came across to a couple of I’ll say bugs that absolutely needed to be fixed in a short amount of time. So, I got those taken care of. But otherwise, I spent a lot of time on the phone talking to people and kind of getting their thoughts on what they’ve thought of the product, what they’ve thought of the UI, how things fit together, what things make sense and which ones don’t. I wouldn’t say it was completely eye-opening. It wasn’t, you know, a lot of the information wasn’t necessarily shocking but at the same time when you’ve worked on something for so long, you kind of I guess lose perspective of what is obvious and what’s not.

[01:39] Rob: Well, of course. Yeah, you get too close to anything whether you’re running a blog post or if you’re producing and editing a podcast like you listen to it 20 times as you’re editing and you just can’t…you can’t really tell if it’s good anymore.

[01:50] Mike: Right. So, you know, I definitely feel like I’m too close to it which is great to get some of this feedback. So, I’m going to go back and I made just a ton of notes about things that needed to change and some things that just needed to drop out of the UI like there are certain things that I left there because of the legacy way that things used to work and then it changed but I left it in the UI. And because it was in the UI, it just made no sense to the person. So, you know, some of those things they don’t really mean anything. The user doesn’t need to know that they’re there. I just need to rip them out. There’s a lot of good information though so I’m just taking that and going through and working some stuff out.

[02:24] Rob: Yeah, this step – I mean essentially you’re doing, nowadays we call it customer development, back in the day it was called just like your alpha test where you got with customers and started, you know, getting their feedback on it. I’ve always been surprise at how valuable that time is with actual people who are going to use your product. They just…they bring things to light that you could never possibly think of yourself as the programmer.

[02:45] Mike: Right, right.

[02:46] Rob: Well, I heard a Mixergy interview. I’d just wanted to raise that it irritated me and I want to bring this issue to life that I’ve seen happened before. And it’s – the interview was with Kurt Wilms from Fflick. It’s F-F-L-I-C-K was  his app. And the title is “How a Side Project Led to an Acquisition?” And how – you know, his app was acquired in like six months after they launched and I guess TechCrunch reported that it was acquired for $10 million and so it’s like, wow, how did this happen? And this kid was, you know, 24 when it happened. The problem is that when they get in to it in the interview, it sounds like it was nothing like that and that it was a much more of an acqui-hire. Have you heard that term before?

[03:26] Mike: Yeah.

[03:27] Rob: Where people like Google will acquire — “acquire” your company but really what they do is they hire you and then they give you like a signing bonus. So, they acquire your company for like a hundred thousand bucks or 200,000 or and most of it is in stock. It’s nothing like the big glorious, you know, TechCrunch acquisition that everybody talks about. And I’ve seen this several times actually listening to podcasts. So, I’m not slamming Andrew here at all because that’s not…that’s not what’s going on. It’s more of the way that that these acquisitions are reported and talked about and they’re actually not…they’re not the fairy tale exit.

[04:04] There are so few fairy tale lottery exits like the Instagram exit, the 10 million — $20 million exit. There are far fewer of those exits than…than are actually reported and once you dig in to the details, you find out that either it was just an acqui-hire and the amount was over reported or there was a tiny amount of cash upfront and the rest of it is in stock and the stock started losing value. I mean there are so many caveats to these types of the acquisition. So, I’d just I wanted to bring it up more as like as a listener or reader of these kinds of stories have a little bit of skepticism when you’re…when you’re hearing this news.

[04:37] Mike: Yeah, I love the fact that when Andrew started asking him how much money he made and asked if he made a million dollars from it because it’s a relatively small team and it was a $10 million acquisition and he just wouldn’t talk about it. He wouldn’t even confirm or deny that he made more or less than a million. He just said, “I made a good amount of money but I don’t really want to talk about specifics.” And he said, you know, Andrew said, “You’re not even going to say more than a million?” He said, “No, I’d rather just not talk about the money part of it.” I understand from a business standpoint why some of these companies go after these smaller companies in terms of the acquisitions but it’s obviously not something that the rest of us could pull off and it’s…you have to take the stories with a bit of a grain of salt.

[05:15] Rob: Exactly. Yeah, well, I definitely understand why Google would acquire them because they’re talented developers and that’s…that’s actually something Paul Graham has talked about where the…with these acqui-hires they are a major danger to YC companies because as soon as you see someone gets YC funding, well, you know they’re probably going to be pretty good product people, right? They’re going to be able to crank something out and they’re motivated and they have convinced the YC team to give them money. So…so there’s a lot of pluses going for them. And so, he said a lot of the YC teams get contacted within the first few weeks of being announced and they get in to these talks and they – it’s presented as an acquisition but by the time they get to the end, they realized that they’ve really got themselves a job with a like a small signing bonus like I said earlier. And so, I think this is …has been common and it’s certainly becoming more common as time goes by.

[06:05] Mike: So, hey, you know, we’ve talked about upgrading our machines in the past and I have reframe from doing so for properly almost six years now aside for my laptop. I’ve finally get broke down and decided to buy a bunch of new hardware for a new desktop.

[06:18] Rob: Nice. Wait, you’re going to build a new computer? Why not buy a new one?

[06:22] Mike: Mainly because I don’t want to pay for it but at the same time there’s also…there’s a former a hacker in me that just loves to build the hardware. So, to give you an example, years and years ago before anybody was really in to like the liquid cooling of computers, I went  through and I started building my own liquid cooled computer and this was, I don’t know, probably 2000, 2001 timeframe. One of the things that I did was I said, “Well, I want to build a custom case.” So, as a custom case, what I started to do is I started building a case made out of Lucite which is kind of like plexiglass. It’s clear but you can cut it and it’s a lot easier to cut than plexiglasses. Unfortunately, the whole thing never really turned out very well because of the fact that when you start cutting Lucite, it tends to generate static electricity and it was not somewhere I wanted to ultimately put my computer parts.

[07:17] Rob: Yeah, sure. So, are you going to buy parts and assemble it from scratch?

[07:21] Mike: Yeah.

[07:21] Rob: Okay. How long you think it’ll take?

[07:23] Mike: A couple of hours. It’s not very long. I’ve built tons of computers before. I mean I own the business for several years just building computers.

[07:30] Rob: Right.

[07:30] Mike: So —

[07:30] Rob: Now, I remember Dell was your…was your biggest competitor you said.

[07:34] Mike: Yup.

[07:34] Rob: What’s the advantage of doing it that way instead of buying it off-the-shelf because if I were going to do it, I would buy it off-the-shelf. But I’m interested to hear what…what you get out of it that way.

[07:42] Mike: There’s a couple of different things. One is that I can get a six-core processor which I couldn’t get off-the-shelf and without paying through the nose for it. It’d be really hard to find one and I probably have to go like Alienware to get it and at that point, I’m immediately looking it like 3 or $4000 to buy the new machine. You know, I don’t need to spend that much money on it I spent I think around 1800 and I’ve got like a six-core machine with a 500 gig SSD drive and 32 gigs of RAM. I mean this thing is just stack and it’s relatively inexpensive. So, even including the cost of my time which I don’t necessarily put that much of a price tag on it because I kind of enjoy doing this stuff anyway, it’s not something I’ve done in a very long time and I’m like, well, you know, it’s getting about that time. So —

[08:25] Rob: Right, yeah, very cool.

[08:26] Music

[08:30] Mike: Today we’re going to be talking about how to build a great team, The idea for this episode came from a book that I read recently called Tribal Leadership. There’s three different authors to it. I don’t remember all their names off the top of my head but the subtitle to the book is Leveraging Natural Groups to Build a Thriving Organization. And I’ve been given a lot of thought lately to how I want to structure my business kind of in the future because I know that AuditShark is not something that can be done alone. I mean there’s grand aspirations behind it and what it can become and the level of complexity of the products to such that it’s just not something that I can do alone.

[09:03] So, I’ve been looking around and just see if I can find good reading material around how to build a team and how to put one together, you know, who to talk in to, what traits to look for and the Tribal Leadership book is one that I came across. There’s a lot of great points in there about how to identify people who would be a good fit and who wouldn’t and how to structure a team such that they work together as a team and have the same goals and are going to work willingly towards those goals without kind of torpedoing one or another.

[09:32] Rob: All right, let’s dive in.

[09:34] Mike: To start off with, there’s five stages of people and by…five stages of people, people go through these five different stages in life and you have to go from one stage to another. At some point, you can’t just skip from stage one to stage three or stage four. And stage four is considered the stable stage. Stage five is for people who are building something great that is…that is kind of an outlier. But stage one is generally people have the mentality of life sucks and this is kind of the attitude where open hostility comes from people I mean this is the type of attitude that you see from people who are in prison. They just don’t like anybody. They’re not willing to help other people because life sucks so why should you go out of your way to help somebody else because it’s just…it’s not going to matter to them at the end of the day.

[10:19] Rob: So would you say that – let’s say someone who’s like hostile on an internet forum. Would you put them in stage one or would that be more stage two?

[10:27] Mike: I think that would be more stage two and —

[10:29] Rob: Okay.

[10:30] Mike: So, stage one is “Everyone’s life sucks. It’s not just mine. Everyone life’s sucks so I’m going to do the best that I can to make my life better at other people’s expense.”

[10:40] Rob: Got it but it’s like more physical anger and hostility and aggression and that kind of stuff.

[10:45] Mike: Yeah, I mean that’s kind of the way it’s portrayed in the book. I mean you could probably take it to different levels on the internet but with stage two, the attitude is more along the lines of “My life sucks” and people at this stage are generally surrounded by people who have some sort of power that they lack or at least that’s the view that they have. They feel that their life sucks and they’re the victim of circumstances or something that they don’t have that other people have. And that’s kind of where the internet troll kind of comes in.

[11:13] Rob: And I also knew some folks like this kind of stage two people at several of the jobs that I…that I worked out where we all go out to lunch and they would just spend the entire time kind of complaining about how, you know, they weren’t being paid enough or how their boss was this or that and it was always everybody else’s fault. Does that accurate for a stage two person?

[11:35] Mike: Yup. Yeah, that’s exactly right. And the other part that kind of goes with that is that if you ask them what they’re going to do about it, they never have any answer. They are like, “Well, I’m not going to do anything about it because there’s nothing I can do.”

[11:46] Rob: So, that old thing that I’ve said of employees complained entrepreneurs get it done, maybe that who links in here where I’m thinking more of like a stage two person as that complainer who just isn’t willing to kind of take the bull by the horns and make things happen.

[12:00] Mike: Right.

[12:01] Rob: Got it.

[12:02] Mike: So, moving on to stage three. The stage three person has an “I’m great” mentality. And there are lot of people at this stage and we’re going to be talking a lot more about moving people from stage three in to stage four in this podcast because the people who are at stage three tend to be more of the professional level and this is – and in unfortunate ways, it’s kind of encourage by the corporate world. When you go to a job interview, one of the questions that you tended inevitably to be asked is, you know, “Why should we hire you?” And then you have to sit there and you have to explain how great you are and you know, why they should hire you because of all these great things that you’ve done.

[12:37] And all they’re doing is really reinforcing your view that you are great and because of that it just promotes you to continue down that path and not seek to go beyond that, to include other people to in team efforts. And essentially, you become more of a lone wolf. You do a lot of things alone and you know, you tend to constantly complain that, “I’m really good at all the stuff and there’s all these people who aren’t and I can’t rely in them for anything. So, why should I even bother? I’ll just do it myself.”

[13:07] Rob: Yeah, in all of the interviewing I did because I was a hiring manager at or you know, like hiring developer where I interview incoming developers, I only remember there are being a couple out of probably maybe 200 interviews I did where they…they’d get the question of you know, “Tell us about yourself or whatever,” and it would lead in to…it will go beyond just them being great, right? They really would express that they had a great team, that they built a great team, that they got along with people and stuff. So, I remember actually being, you know, impressed with that. It was – and obviously, it’s more of stage four attitude but that is a unique attribute in an employee and it’s something that I…I don’t know that I ever had while I was an employee.

[13:46] I think if I was going to go on an interview even, you know, later in my salaried career, that’s kind of what I was – what you’re trained to do, right? So, that’s, you know, that’s a good tip of…if you have an interview schedule or you know, you’re thinking about interviewing for jobs to think more about less about “I’m great” and more about stage four which is “We are great”.

[14:05] Mike: Right and people in stage four tend to build relationships between others based on a common value and as I said this is an exemplified by the feeling of “We’re great” and in the background it says, “And they’re not.” And they is essentially another tribe according to the terminology used by this book and that tribe can be either in the same company or in some other company or it can be in an entire other company. So, if you’re competing in your company against another company, the other tribe tends to be that other company. And when you’re trying to build your product, you’re trying to compete against them, you’re trying to win market share. Obviously, you have to have a competitor in the stage and that’s really the differentiator between stage four and stage five is that stage four has a competitor whereas the stage five that you are collaborating for a greater purpose but you don’t necessarily point out to a competitor.

[14:55] Rob: How interesting, yeah. So, this reminds me of a stage four of we’re great and we kind of have this…this competitor, could be the bootstrappers versus the venture capitalists because every bootstrapper we know winds up, you know, whether it’s 37signals or us or Patrick McKenzie or Amy Hoy or something. I mean we always wind up talking about the venture “they”, right, the competitors to our bootstrapped companies. And so, I think…I think that’s an interesting way to think about it. And I’m wondering do you know of any stage five movements? Do they give examples of any of those?

[15:28] Mike: They do but as I said before, the stage four is considered more of the stable stage than stage five and the reason for that is because with stage four, you’ve got a competitor. So, think Apple versus Microsoft where they’re trying to win market share against each other and you know, operating systems and the tablet technology and things like that. Whereas if you start going back and you look at like the early days of Apple’s development, they were trying to just build something great. They didn’t necessarily look directly at a competitor and say they are competitor. Steve Jobs looked at the world and said, “I want to change the world.” So, his competitor he didn’t really have one. He didn’t have in mind, “Oh, Microsoft is my competitor,” it was, “I want to change the world.”

[16:09]  And that’s kind of where there’s no direct competitor where there’s another tribe on the other end of it and you can point to those things where if you’re in like a hospital, you know, or a medical organization where the people in there instead of saying, “Oh, our competition is this other hospital over there,” or, “These doctors,” or “That neurosurgeon or whatever,” instead what they say is, “Our enemy is cancer,” “Our enemy is declining health,” or “Our enemy is…” all of these things that aren’t necessarily people. It’s a disease that they’re just, you know, obviously there’s no person behind it but they’re trying to serve a greater purpose by eliminating that disease.

[16:47] Rob: Got it. So, we’ve talked to these stages and you know, I think we have an idea now of where a lot of people we know might fit or we can think of examples of folks we know who had been in 2, 3, 4 and 5. What are we going to talk about today?

[16:59] Mike: So, I think the primary thing we’re going to focus on today is how to move people who are from stage three in to stage four? And you know part of the purpose to that is for most of the people in the professional world tend to be in stage three. I think that the statistic is kind of sided less than 10% of people who are employed professionally are anywhere between stage four and stage five. But you really want to try and take those people who are in stage three especially once that you’re hiring or bringing on to your team whether it’s full time or part-time or is contractors. You want to make them part of your team. You don’t want them to necessarily be a lone wolf and it’s not to say that they’re not confident or talented, it’s just that you want them to start taking on larger projects. You want them to be able to contribute more and you want them to be able to do it without your…a lot of your interventions.

[17:47] You want them to kind of be able to think on their own, make decisions, do things that are appropriate and correct for the business without having to sit there and micromanage them because the more you micromanage them, the less time that you have to do other things and that and that just kind of eliminates productivity. And by doing the opposite, by encouraging them to kind of move in to stage four, what you’re doing is you’re increasing their productivity which decreases the amount of time that you have to micromanage them which increases your time to do other things.

[18:13] Rob: All right, so let’s dive in. It looks like we have eight tactics for encouraging someone to move from stage three to stage four.

[18:21] Mike: So, the first thing that you can do to help move a stage three person in to a stage four is to encourage them to form triads and what a triad is essentially a 3-person relationship. And in particular, if you convince them to introduce their own contacts to one another by pointing to share values or overlapping self-interest or specific opportunities to work together, what you’re essentially doing as you’re encouraging that person to exhibit the stage four behaviors. And the more of these things that you can do that to encourage the person in to more stage four behaviors as opposed to stage three which is do everything themselves and act more as a lone wolf to not include people, then by moving them more in to stage four behaviors, you’re going to change the way that they interact with people and as a result, change their…and change the way that they interact with your business.

[19:09] Rob: And the second tactic is to encourage someone to work on projects that are too large to accomplish by themselves. You’re essentially setting up limitations and in a way forcing them to interact and to form those…those triads or those 3-person relationships. You know, if someone starts working with another and they get along and they start doing good work, it’s almost inevitable that they are going to…they’re going to have to strike up a good personal relationship. Therefore, you know, starting to move them to the “We are great” rather than “I’m great” mode which is from three to four.

[19:39] Mike: The third tactic is to point out that their success has come through his or her own efforts but the next level of success is really going to require a different style because there’s only so far you can take, you know, yourself. Everybody has limits and some people’s limits are higher than others but that doesn’t mean that those limits don’t exist or that you can’t ignore them. You really need to be able to point out to them, “Hey, you’ve been …you’ve been successful to this point but what would it take for you to get to the next level and to be much more successful than you currently are?” And typically that’s just going to take a frank discussion to say, “Look, you’ve been doing great so far but in order to take this to the next level, you have to do something different,” and you know, you can make suggestions about what they might do and specifically point some of the things in stage four that are possible.

[20:24] Rob: And the fourth tactic is to find at least one role model that this person may potentially look up to and point out how they’re exhibiting stage four behavior. So, point out how that…that role model is, you know, essentially of the thinking that “We are great” instead of “I am great”. Hopefully, encourage them to implement those same…the same behaviors.

[20:46] Mike: The fifth tactic you can use is that when someone complains that they don’t have time and the other people aren’t nearly as good which are the two chief gripes that people have when they’re in stage three is that you have to show that they’ve crafted their work life such that no one can really contribute to their…to whatever it is that they’re doing. And a lot of times this means things like not sharing repositories or doing work on their own and then kind of merging in to the code late or just not involved in other people in the task that they’re doing or making it easy to follow documentation or processes or anything like that. So, all of those things, you know, are just examples of things that people may do to make it difficult for other people to contribute to whatever it is that they’re working on.

[21:27] Rob: Mike, when I was a salaried employee, I was totally the stage three guy because I would say all of these things. I don’t have time, you know, I can’t work with other people on this team. I want to hand pick my people and when I did work with people who I consider really good, I totally enjoyed it. So, I think for those projects I was stage four, but other than that, man, I was definitely a stage threer– and I feel like my attitude has changed now that I, you know, have folks working for me in different capacities in terms of designing, developing and handling support. I’m definitely much more about the team being great because I can’t…I know I can’t do everything myself. But for me, I think that moving from salaried employment to kind of breaking out of my own to realize that that I need the help of other people.

[22:09] Mike: Yeah, and I completely understand where you’re coming from. I was definitely a stage three as well and the problem is that until I kind of saw a lot of these things laid out this way, it didn’t…you know, I probably thought a lot of these things to some extent but that kind of relates to tactic number six which is telling the stories of your own transition from stage three to stage four. But there were so many times where I’m like, “Oh well, I can do this,” and you know, it’ll take me a lot less time to do it than it would to explain it to you how to do it.

[22:36]  So, there were just so many times where I would have gone off and done my own thing and not bothered to explain it or document it or anything like that. And you know, I’ve really gotten past that and it’s definitely helped my business. It’s definitely helped me to free up a lot of my time because I can hand these things off to other people and they do them granted they don’t necessarily always do them as well as I do but there are definitely times where they’ve come back with something and I’m like, “Wow, that is awesome,” you know, and it comes back better than I would have done it.

[23:01] Rob: Right, the two objections we hear most often when we talk about outsourcing in any capacity whether it’s outsourcing development or outsourcing e-mail support or handing off any tasks to anyone, the number one objection that I’ve heard is always, “Well, how do you get over that they’re not as good as you,” and “How do you trust them to do good work,” “Just how do you deal with that,” and so I think that’s a common place for developers to be in especially if they’re good developers and they’re talented and they have worked at salary gigs where they’re…people who are much less talented.

[23:29] I think it’s…it’s almost like you might be pigeonholed or forced in to stage three. If you really are the best developer at the company and you have been at several companies, I mean it’s kind of been taught that you can’t rely on other people. And so, it’s definitely a mentality to try to break out if you are going to make that leap. If you do in fact want to make the leap to stage four and you want to work with others and you want to, you know, become an entrepreneur like we’ve talked about, ultimately, you will have to relate to other people to get your goals achieved.

[23:57] Mike: The unstated part of that is that just because you’re great at something that you do, doesn’t mean that you can’t rely on somebody to contribute in a meaningful way. Do they have to do it as good as you? No. That’s not the point and in fact, that’s not the point of stage four at all. The point is to collectively do something great. It’s not about like all of the individual pieces and yeah, it’s great to have everything all at this topnotch level but not everything has to be like that and you don’t necessarily have to have that attitude in order to be successful. I would much rather have people who are gung ho about the business and being successful than having a couple of people who are really good at things but not paying attention or listening or focus on the whole product.

[24:40] Rob: The seventh tactic for encouraging someone to move from stage three to stage four is to instill in them the knowledge that real power comes not from understanding a specific technical thing or from being able to just implement but it comes from having a good network and that there’s much more leverage in wisdom and having other people to partner with than in just purely in information. This was actually a major revelation for me. Maybe it was three years ago when I first started outsourcing and that was kind of the first level up for my business that allowed it to grow faster.

[25:15] The next thing that happened was when I decided that I was going to form better relationships with…with other podcasters, with other startup founders, with other speakers at the startup events I went to and right away, things started generating for me. And it was, I don’t know, I was never a big – I’m a terrible networker. I’m not an extrovert. I don’t…I’m not in to that world at all but building a real relationship, a genuine relationships with people who have stuff in common with you and who you can move along with and progress with is invaluable and that’s something, I think I actually said it is as one of the biggest things I learned in 2011 perhaps was that you can’t do the stuff on your own no matter how much you want to because I definitely I wanted to do everything on my own but that’s just hasn’t been a reality for the past several years.

[26:02] Mike: And the eight tactic you can use to help somebody move from stage three to stage four is to encourage them to manage using transparency. And essentially this involves coaching them to not follow the stage three tendency to tell people only what they need to know. And this is about encouraging the person to over communicate if that’s even possible. I found over the years that telling people a lot more than they need to know to do a job helps because it gives them a lot of background about why they’re doing something.

[26:28] Throughout high school, I hated being told what to do not because I didn’t want to do it, because I didn’t know why I was being told to do that. And there were just so many times where they’re like, “Well, you know, here’s the homework assignment. You just do it.” And you know, you never really got an explanation. I found that even in the business world there were a lot of times where there were people who would say, “Hey, can you go do this for me?” And unless you understand why is that they’re asking you to do that, the problem is that you come up with the solution for them and you do the work but then they’re not happy with it and the reason they’re not happy with it is because they didn’t tell you why it was that you were doing it.

[26:59] So, they didn’t communicate effectively enough to tell you that there were certain things that were important because on Thursday as this thing has to run because if it doesn’t run and the CIO gets…gets to come down and scream at them. And then after that then, you know, the payroll person goes and cries and the payroll doesn’t get fund. So, because of all that extra information, you didn’t do the work and…or didn’t do it right and you know, all that stuff happens, then payroll doesn’t run one week. And then it gets blamed on you because you didn’t do it right and it’s not because you didn’t do it right, it’s just you didn’t know about all these other things and all these other dependencies. So, you couldn’t take them in to account when you were doing your job. So, this is really about over communicating, at least communicating enough information to people that they can make good decisions when they’re going through and doing the work.

[27:40] Rob: That idea of over communication ties in to this thing called commanders intent and it’s a concept on the battlefield of if your commander tells you and a group of men to go do something, they should…if they’re doing it right, they should spell out not only what you should do but the intent of that maneuver because if they tell you to go do something and then a bunch of stuff changes on the battlefield, you need to basically carry out their intent rather than the specific take a hundred steps in that direction and march towards the enemy that the actual specific steps that they told you to do.

[28:13] And I think this is very powerful. This is something that I’ve started doing with my screencast that I created for virtual assistant is I do tell them the steps when they’re doing something but I also take a step back and I say, “Look, here’s my philosophy. If anyone is unhappy, they always get a refund. Unless someone gets way out of line, we offer them this, this, that and this.” I mean it’s much more about the intent that we’re trying to achieve and the goals of the company, you know, rather than the…maybe specific policies that you might see if you worked at a…at a very rigid environment.

[28:44] Mike: So, I think the next question that comes up is how do you know if you have succeeded in going down this path? How did you know that you’ve succeeded in transitioning someone form stage three in to stage four? And the first sign of that is that the person is going to start substituting “I” language for “We”. So, when people ask about the secret of their success, they’re going to point to their team instead of themselves.

[29:05] Rob: And the second way you know you’ve succeeded is that the person will start actively forming triads and his or her network will expand from a few dozen to several hundred.

[29:12] Mike: And the third way is that the person is going to work less but at the same time get more work done.

[29:16] Rob: The fourth way is that his or her complaints about there are not being enough time and that no one is as good will slowly die away.

[29:24] Mike: The fifth way is that he’s going to communicate with a lot more transparency and explain why things are being done, not just what needs to be done.

[29:32] Rob: And the sixth and final way is that this person will communicate more information and they will communicate it more often for them just to have more open roads of communication.

[29:42] Mike: So, to recap a little bit the five stages are stage one is that the person believes that life sucks in general. Stage two, they believe that “My life sucks”. Stage three person believes “I’m great”. Stage four people say, “We’re great.” And stage five people say, “Life is great.” And to help move people from stage three to stage four, you encourage them to form triads. You encourage them to work on projects that are too large to accomplish alone. You point out that current successes come through their efforts but the next level of success is going to require a different style. You describe additional role models who are exhibiting the stage four behavior that you would like them to exemplify. You show them that they have crafted their work life so that nobody can really contribute to them.

[30:19] The sixth thing you can do is to tell stories of your own transition from stage three to stage four. You can also coach them that real power comes not from knowledge but from their networks and there’s more leverage and wisdom than in information. And the last thing you can do to help move them from stage three to stage four is to encourage them to manage using transparency.

[30:35] Music

[30:39] Rob: If you have a question for us, you can call it in to our voicemail number at 888-801-9690 or 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. 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.

 

Show Notes

“Proposition HN”: http://news.ycombinator.com/item?id=5037694

Transcript

[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I are going to be running through the pros and cons of Proposition HN. This is Startups for the Rest of Us: Episode 115.

[00:12] Music

[00:19] 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.

[00:28] 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. I think the word this week is AuditShark launch.

[00:35] Mike: Yes, it is.

[00:36] Rob: So, we’re recording this one day after the 14^th which was your planned launch for AuditShark. How did things go?

[00:42] Mike: So, everything is out there and people who have been given the access code to get in can go in and download it, you know, the early access people that I have been working with. So, everything is available to them right now. There’s a few minor glitches that I have to work out still which will hopefully be resolved by tomorrow. But everything is in place right now and functional and usable. So, we’ll see how things start to shake out the rest of this week. But I’m going to be touching base with people and walking them through things and getting any feedback from them about what makes sense, what doesn’t make sense and any usability, flaws that need to be flushed out or people looking for different reports or don’t understand how something works, I definitely want to get to the root of those issues pretty quickly so that I can start working on other things.

[01:26] Rob: Very good and in terms of marketing, when do you see yourself hitting that and kind of driving new…new customers to the site?

[01:33] Mike: Well, I put together a list of things that I wanted to do for the AuditShark launch and let’s see here, I used to have forty different things on here. I’m down to 31. The problem is that the number fluctuates up and down as I think of new things and as I knock things off. That process is currently in place and I’m working…just working through everything but obviously, some things take a lot longer than others to do.

[01:55] Rob: Got it, so you’ve already started marketing is what you’re saying?

[01:57] Mike: Yeah.

[01:58] Rob: And in terms of timeframe working with early access customers, you said you’re probably going to iterate on the product pretty quickly and do some minor usability and report stuff. How long do you perceive that taking?

[02:08] Mike: Well, assuming that I don’t run in to any show stoppers then I would anticipate that it’ll probably be three or four weeks. I have tentatively in the development schedule. I think it’s February 26^th or something like that for kind of a full-blown go live but we’ll see how that works out.

[02:24] Rob: I see. So, full-blown go live at end of February and so now, would you say you’re like at soft launch? Or would you say this is early access? What would you define where you are right now?

[02:33] Mike: I would say this is more early access. I think a soft launch to me is more you’ve got it out there publicly available. You just haven’t told people about it. Whereas what I’ve got, I feel like it’s more of an early access where it’s by invite only where I’m working with very specific people and trying to figure out what things work for them, which ones don’t and making sure that any issues that they have are resolved so that when I do go live with it to the public, then hopefully, all those issues are taking care of or at least as well as I can at that time.

[03:02] Rob: For my end, I’ve been running a couple of HitTail marketing approaches that I had mentioned in last week’s podcast. And one of them was very inexpensive and it worked out shockingly well. Just a lot of people coming in and then the other one was quite expensive and so far, not worked out very well. So, it’s one of those times when, you know, things would work out the opposite way you think it’s going to. But in the end if 1 out of 2 of my marketing experiments works, then things could be worse so I’ll put it that way.

[03:30] Mike: How did your info graphic goes so far?

[03:32] Rob: Info graphic is okay. Yeah, it’s not like a homerun but it’s, you know, it’s probably a single. We just launched it this morning. So, I’m 5 to 6 hours in. So, you don’t really know what it’s going to do yet but it’s decent to…it’s nice to get a good bit of content out there. I mean it’s definitely driving some users who are signing up for the e-mail list. We’ll see if that ultimately drives some trials down the line.

[03:52] Mike: Very cool. So, I’ve moved my blog to WP Engine and I’ve had my WP Engine account for, I don’t know, probably almost a year at this point but I haven’t move my blog over because up until now I just did not make it to the top of the list but it’s early on the year. So, I’m like, okay, I’ll move it and in about a quarter, my RSS subscribers dropped off in moving. So, I’m trying to figure out where the RSS feed is that they’re actually subscribed to and it’s just kind of a pain because I —

[04:19] Rob: Right.

[04:19] Mike: …obviously don’t see any of the 404 Error messages. [Laughter]

[04:22] Rob: Yeah. Oh, so did you had multiple URLs where people could subscribe then one of them —

[04:27] Mike: I think so. I’m not…I’m not absolutely sure because I don’t – like I said if I had access to the 404 messages on the server, then I’d be able to see that but I just…I don’t see that right now. So —

[04:38] Rob: Got it —

[04:38] Mike: I should…I should have looked at it before I moved everything over but I didn’t think about it.

[04:42] Rob: Yeah, that’s a bummer.

[04:43] Mike: Oh well.

[04:44] Rob: Well, I received my final videos today from that video training course I’d been talking about where I have my product manager interview me about how to hire a VA for startup. It’s about 50 minutes of video. And it looks good. I also have audio. I’m going to get it transcribed and I’m looking at a February launch for that. So, if folks are interested, softwarebyrob.com and sign up for the newsletter there in the upper right.

[05:04] Mike: That’s cool.

[05:04] Rob: Yeah, it’s exciting. So, it’s fun to do new things like the process itself stretch me because I’m not used to doing that type of the in-person set up with, you know, with the videographer and the whole set up in my living room. There’s a lot of fun and now watching the videos, you know, I can really see…I can see room for improvement but I also see a lot of value in the information that we put down.

[05:22] Mike: That’s awesome. So hey, did you…did you notice that Amazon’s kind of did a way with some of the things that they’re selling through Amazon Prime where now if you buy certain things they’ll tell you that it’s eligible for free shipping but only if you have it shipped with other things.

[05:37] Rob: Yes.

[05:38] Mike: But I definitely have noticed an up taken the number of things where next to it, there’s a little bit of text that says, “This is eligible for free shipping with X,” or you know, with something else.

[05:48] Rob: I think I went to buy a toothbrush and it said that and they have a little word for it. I can’t remember what that word is. There’s a little label on it that says, “You know, ships with others,” or “Ship free with the…” I mean it’s kind of a little tag so that you can see it pretty easily and identify it.

[06:00] Mike: Yeah, I think that’s what it is. It’s “Ships free with something else.”

[06:04] Rob: I can’t believe. I mean I’ve ordered things that are a couple of dollars that they’ll ship with Prime and I kept thinking to myself there’s no way they can be breaking…even breaking even on that. So, this is probably their way of trying to reduce that and for me, it’s worked out fine because I just…I order enough from Amazon that I can always just throw it in my next order.

[06:21] Mike: The interesting thing to me about this whole thing is that if were it another company that I didn’t necessarily care for or care about, I’d probably be more than a little bit upset about this but because it’s Amazon and I’ve had such great experiences with them over the years that it doesn’t bother me at all. I look at this particular move and I understand not only the business reasons behind it but I don’t be grudge to them for doing it, you know. If it was like the post office that did something like this, I’d be screaming bloody murder. But because it’s Amazon and you know, I’ve had stuff come to me where I’m like, “Oh, this hard drive is bad,” or you know, I plugged it in and it just doesn’t work and I’ll just send them an e-mail or use there support page and it’s like boom, you got an instant RMA, free shipping both ways. They’ll just take care of it. And because their customer service is so good, they’ve kind of established that great relationship with me such that I’m willing to cut them the slack whereas like I said if it was like the post office or certain other companies, I probably wouldn’t.

[07:14] Rob: There’s definitely something to be said for not only keeping your customers happy but building…building that relationship with them so that they give you the benefit of the doubt if you screw up. We saw this happen. It was last year when we were still have the Academy on DreamHost and we were having outages interment here and there and people really kind of slack, you know. I mean we…we notified people. We posted it in the forums. We apologized but we didn’t get a single angry e-mail about it and I know that there are people who can log in and that was a bummer and obviously, we eventually moved up to WP Engine but it was…it was a testament of people giving us the benefit of the doubt knowing that we are doing everything we could to try to improve the process.

[07:50] Mike: Yeah, the other interesting thing that I found was that LinkedIn has been starting to send highly-customized e-mails to people. And I got one yesterday that showed enlarged photos of 20 different people that I’m connected to and they showed a statistic that related to all of them. And I think this…I think the statistic was something like 16% of your network has changed jobs in the past year and I thought it was really interesting that they are mining the data to that extent such that they’re giving you personalized e-mails like that.

[08:19] Rob: Yeah, I can only imagine that it benefits them because you’re now talking about it. It was a surprise to you or it was shockingly revealing or just shockingly insightful about your own personal information. They told you something you didn’t know about your own professional relationships. So, that means the next time you get a LinkedIn e-mail and probably the next time I get a LinkedIn e-mail, I’m going to open it now because I’m curious to see what they pull out of to my network as well. You know, obviously this raises the…always raises the privacy concerns or whatever. But it’s like if you’ve give them information and you’ve linked up with people, it’s just data to them. They can mine it most ways that they see fit.

[08:52] Mike: yeah, I think I looked at it more from an interesting marketing standpoint where if you’ve got such a wealth of data about a specific item or specific person or a network of people, then you can do different things with it and it was just an interesting way of taking that information, aggregating it and then showing it to an individual and that individual being me, then it was personalized to me based on the other people. And I’m sure the other people got a similar e-mail. So, it’s not like I was the only person out of…sign up they have that got that e-mail but the fact that they went to that level and calculated it  for me, it appeared that it was just kind of a personalized bit of information about my network.

[09:30] Rob: I think it’s actually an interesting idea that, you know, even a small software or service operator could do to send out kind of a year-end summary of your customers either activity or just some interesting…it’s almost vanity metrics, right? It almost doesn’t have to be that interesting. It could be kind of a little info graphic or just a little HTML e-mail containing, “Hey, you had these many keywords last year and you know, these many clicks,” or  whatever. I mean that’s the HitTail example or you can look at anything if you have proposal software. You could say you sent these many proposals and you know, just too like a big…big recap of it. I’ve never done that but I would certainly would…I certainly received some from I think InDinero sent one and I think like when I used to have Mint.com, they would send out monthly and annual recaps. Definitely get you to open one of their e-mails.

[10:15] Mike: Very cool.

[10:16] Music

[10:19] Rob: So today, we’re talking about Proposition HN which is an anonymous post on HackerNews where someone with the username HMEXX. He says, “I will pay $8,000 for you to build your side-project or MVP.” And this post got 1,000 uploads. It had one of the most active discussion thread that I’ve seen in a long time. And there are people on both sides of it about the pros of doing it, the cons of doing it, whether it’ll work, all that stuff. So today, you know, you and I kind of batted around the e-mail a little bit and realized that this could be a good discussion topic just to talk about it from both founder perspective and also from his perspective. So, you know, I think we just…we dive in. I’m going to read a little bit about his initial proposition and then we’ll run through the pros and cons and bat those around. When he posted it, it’s…it’s only about four or five sentences long and we’ll post a link to this obviously in the show notes.

[11:13] He says, “I will pay $8,000 for you to build your side-project or MVP.

Premise 1: Investors and Incubators over-estimate their ability to pick good ideas and startups. Premise 2: An MVP built by a lone, but talented techie is almost as likely to turn into something ‘successful’ as a startup on AngelList that has: 4 founders, 9 advisors, 13 press releases, 600 followers, etc.

Premise 3: Most freelancers will not build and or follow-through with their ideas, because they perceive their opportunity cost to be too high.

Premise 4: HackerNews has a decent number of talented freelancers with good ideas.” Now, I don’t think either you or I agree with all these premises but that…this is what he’s laying out. And he says, “Based on these premises, I present The Proposition [Version 1.0]: I’ll pay you $5,000 to build the MVP of that idea you’ve been kicking around  in your head for the last year. Once you’ve done it, ideally within 2 months, you can go back to earning your full potential. At this point, I’ll take over. I’ll spend an additional $3,000 to acquire enough users or customers for us to evaluate the project’s likelihood of success. We split the resulting company 50-50, as equal co-founders.”

[12:18] So to begin, I want to give a hat tip to Scott Underwood who contacted me about this and we also e-mailed about this and it wouldn’t be on my radar without his e-mail. But now, you know, we’ve broken up some talking points in the pros and cons. I think it’s easy and natural to want to immediately jump to why this won’t work. So, we’re actually going to dive in to the pros first. So you want to kick this off? You know, talk through a couple of pros of, you know, why this might actually be a good and innovative idea?

[12:44] Mike: Yeah, so two that come to mind off the top of my head is that if you’re a developer and you don’t know anything about marketing or you don’t know how to market and find your customers, this is like an instant marketing co-founder. And in addition to that, it gives you an instant accountability partner. So, if you’ve ever had problems getting started or following through with the stuff, this is a great opportunity for you to essentially get it carried in front of you where someone is going to pay you to work on your own idea and then as you follow through with it, obviously, you get paid for it and then in addition to that, you get this 50-50 split of the company afterwards where you’re an equal co-founder and the whole thing.

[13:20] Rob: Right and I think that that segment of developers who don’t want a marketer, don’t know how to market is massive. I mean you and I know it from just in our dealings with people who are trying to do startups and trying to, you know, become micropreneurs. It is probably been number one hurdle that I’ve seen developers have to get over is to get that desire and build the skills of marketing. I think that might be the number one pro of this whole thing if you really are a developer who doesn’t want to get in to that side of it.

[13:49] Mike: One of the things he’s doing is he’s essentially hiring you as a programmer and somebody on the comments had mentioned that he’s hiring you as a programmer for $25 an hour and paying you with the equity to stay on as technical co-founder. In his initial post he says $5,000 for ideally completing this within two months and if you do the math on that 320 hours over the course of two months, that actually works out to more like $15 an hour. But still the fact of the matter is you’re still getting paid to do it at a rate that is in some ways manageable especially depending on where you live because if you live in a place where you don’t have a lot of bills or a lot of expenses, you could definitely make $15 an hour work. And being able to keep the equity afterwards as a technical co-founder is just awesome because chances are good that if you’re a developer, you probably want to concentrate on the code anyway and handing off the marketing side to him is kind of a bonus.

[14:39] Rob: Right. If you have a crummy job and you’re making minimum wage or a little more, even if you’re making decent money but you can live on, you know, a tiny sliver of money on this 5 grand for a couple of months, but you’re smart and capable, then this is the kind of opportunity that it seems reasonable that you would want to think about, right? I mean if you look at what Y Combinator pays, they do is it $6,000 per co-founder? I think.

[15:04] Mike: It is —

[15:05] Rob: Yeah.

[15:05] Mike: …but it’s also, I think they also add on another $6,000. So, if you have two founders, then it’s $18,000.

[15:11] Rob: 18 grand, right and it is three months. In essence, it’s 3,000 bucks a month per founder if you had two co-founders and from what I hear, they’re just basically coding like 15-hour a day is that whole time. So, if we break it down to hourly rate, this guy may actually be paying you more per hour. Now, there’s the…the con of that is that he’s not Paul Graham and they don’t have, you know, he doesn’t have all the investors on the other end of it. But when you really break it down like that, it’s at least an interesting thing to evaluate. I also think it’s just a gutsy idea, you know. It’s a nice experiment. I’m impressed that the guy is willing to put his money where his mouth is. I’ve thought of doing this on my own. You and I have thought of doing a similar kind of a micropreneur Y Combinator thing and it’s a lot of time. There’s a lot of money involved. I mean for him to come out and just do it is a bold move.

[15:57] Mike: Yeah, it’s funny you bring that up. It’s been a while since we even discussed that but you’re right. We did have that idea a while back where we’re like, oh, you know, what if we came up with the Micropreneur Academy funded endeavor where we fund the people to do something like that kind of a scholarship or something along those lines. But you’re right, I mean to actually come out and do it is just…I’ve never seen anyone else to actually do it.

[16:17] Rob: I think the last pro I can think of is that although this could be seen as like kind of an accelerator, you know, Y Combinator is called an accelerator now and TechStars and 500 Startups I think. I mean there’s a bunch of them around the country. His is different because you don’t have to move anywhere. So, it could actually apply to people all over the world. It could apply to you if you aren’t able to move and you live maybe in a middle of nowhere and don’t want to move to a major city where there are accelerators. So, I think that has one advantage. One thing he did say later on in the thread, he says, “If you can get in to Y Combinator, I can’t compete with that.” So and that does makes sense, right? He’s an unknown. He’s only giving you a few thousand bucks. He doesn’t have the…the clout that Y Combinator could bring or an accelerator like that could bring. But what he’s saying is there are also some pros to do it this way because then you don’t have to move to a new place. You don’t have to uproot your family. You really can kind of just if you have the flexibility to take these two months off of your freelance work, it could actually be a reasonable thing to think about.

[17:18] Mike: Two other things that I also came up with this is the first one is he’s specifically looking for single founders. So, if you are the lone wolf type of person, I mean he’s exactly who you’re looking for. The second thing is that he’s the only person that you’re actually going to be working with. I mean it’s not like you have to pass a committee or anything like that. It’s his decision upon, you know, accepting your idea and going forward with the funding, you don’t need to worry about this team people thinking you got ideas, good or bad, you can just go with his. And as long as you’re just incorporating feedback from one person, it tends to be a lot easier to work with one person that it is with multiple people.

[17:54] Music

[17:57] Rob: So, let’s dive in to the cons now. And I have to be honest, the cons list was very easy to come up with and it got long quickly. And so we actually edited a few of them out of this list.

[18:09] Mike: I think the number one is that who is this guy? [Laughter] Does he have any credibility or is he just some guy with $8,000 laying around? I mean the fact is that he’s only giving you $5,000 of it and don’t get me wrong. I think that it’s good on his part or at least, you know, it’s good in my eyes that he’s saying, “I’ll give you 5,000 and then I’m going to take $3,000 and I’m going to set that aside in order to market it.” But the fact is you have no idea who this person is. Does he have any kind of experience? Or is he just some guy with 8,000 bucks laying around that says, “Hey, I want to give this a shot.”

[18:40] Rob: I agree. The anonymity is really a big deal for me because if he can mark it, why is he concerned about people knowing who he is? And during this thread, a lot of people point this out and he says, “Well, you know, you’ll see who I am on our first Skype call.” I just don’t understand why he would do that. What the advantages for him to do that? Someone in the thread joked that it might be Jason Calacanis behind this whole thing. I don’t think that’s the case but it sure will be funny if it was a big name founder that we know and that’s why he’s being anonymous. But again, why would you do that? If you’re a big name founder, this would attract so many more people of higher quality because they’d be going after not just the money but they’d be going after you for your name and your guidance and your involvement in their startup. So, I can’t imagine he’s, you know, “famous” or a really well-known startup founder.

[19:29] Mike: But at the other side of that is that it could be and that could be exactly why he’s being anonymous because he wants to prove a point. Maybe he’s got some side that was with somebody or he’s just trying to prove a point to somebody else that, “Hey, I can go out and I can do something similar in a fraction of the cost.” And you can almost think of it like basically lean startup mode for angel investors. I mean maybe that’s who the guy is. Maybe he’s an angel investor and this is the kind of thing that he is doing or interested in doing and he wants to prove to another angel investor that it’s possible. So, they don’t have to shell out tons of money and putting, you know, tens of thousands of dollars. They can put it some ten thousand dollars work on at something that’s got a reasonable chance of working. And they get more equity as part of it because with the angles and stuff, you’re not going to get 50% and you’re…you’re going to be shelling out tens of thousands of dollars more. So, it could be that somebody is trying to test an idea and, you know, and use in more lean startup methodologies to try and figure out that stuff earlier rather than later.

[20:28] Rob: He does that more detailed about who he is in…in a FAQ later and he says, “I’m also a techie. I’ve had one moderately successful venture so far which has given me a comfortable life but not quite retirement amount. I want to reduce my coding time and instead help people get their ideas to market using my resources. Hopefully, we can build a few success stories along the way. You can find out more during our first Skype chat.” So, another con is that 8,000 bucks like we’ve already said and with only 5,000 of it going to you is not a lot of money for 50% of an idea especially if it’s a reasonably sized product or something that actually has, you know, a market that means the startup is going to grow. If you have confidence in your idea and you think it could be something that could grow beyond just a few thousand bucks a month, it’s just 8 grand…isn’t that much.

[21:18] Mike: You’re right, I mean as you said to top it off, you’re not getting 8 grand. You’re getting 5. So basically if somebody is paying you $5,000 for your idea and it’s not like you just give them your idea and you walk away, you’re still expected to work on it for the next 2 months. So, being able to use that $5,000 in, in many ways can be very difficult to make that money stretch especially if you have a fulltime job. And this is I think the other thing that really gets me about this is that if you have a fulltime job, how are you going to take two months off to work on this idea?

[21:50] Rob: Yeah, he specifically said that he kind of addressed that because someone raised it and he said you probably need to be a freelancer if you’re doing this and you need to take time off client work and that’s what the $5,000 is supposed to try to offset is some money, maybe not all, but some of the money that you would otherwise have made from freelancing. And I think that’s a tough sell for a couple of reasons. One, I mean most freelancers I know make more than 2500 bucks a month, a lot more. And so if they can just save up 5 grand over a few months, you know, why…why wouldn’t they take that approach instead of going this route. I mean I guess that he’s the marketing guy and if it’s his money, then all the better. I think the other demographic this could appeal to is if you’re a college student or like just out of college. You don’t have a job yet. This could be a great summer project and that’s what Y Combinator really started out as was originally going after undergrads.

[22:37] So, 5 grand is actually a decent chunk of change if you’re, you know, living with your parents or living with roommates and you do have two or three months off from school, it totally makes sense why you would…why this would potentially be a better deal. This deal is obviously not for…it’s not just not for everyone, it’s actually only for a pretty tight demographic and that’s probably college students or someone who’s out of work or someone who has kind of a low freelancing rate or someone who lives in the part of the world where $5,000 is several month’s salary.

[23:07] Mike: I wonder if in some ways that isn’t a self selecting group specifically design or intended to get those people who haven’t run in to issues with launching products because they don’t know what they’re up against. So, they’re going to basically beat their heads against that wall even harder in order to get through it because they don’t know any better.

[23:24] Rob: So yeah, you’re saying he’s basically self selecting a group that is more likely to persevere because of their lack of experience with this kind of thing.

[23:30] Mike: Right.

[23:31] Rob: I think another thing is if he really going to market it forever for just 50% of the company? I mean how much attention is he going to be able to give 10, 20, 30 of these ideas because he doesn’t talk about how many he’s going to accept? And I question if he…if he does even if he can fund…let’s say he funds 10 or 20 of them and you know, a good chunk of them come through, how is he going to have a time to market them and is he really going to be able to justify it himself to basically have you step away maybe just do minor maintenance but you walk away with 50% of the company. There’s no vesting, right? It doesn’t mean you have to stick around for three or four years. You keep 50% of that ongoing. So, that’s actually I feel like he could kind of get hosed on that long term.

[24:13] Mike: Yeah and the other thing that isn’t really mentioned here is that what constitutes done? What is considered done in this scenario or that could, you know, do you get your 5,000 upfront? Do you get your 5,000 after it’s done? You know, how many bugs are there? And those kinds of things because obviously, I think if you’re the type of person to go in to this, you want to launch the product and he obviously has an interest in launching the product. I mean he’s got at least $5,000 worth of effort invested in to it plus the other 3,000 so he wants to get it out there and get people using whatever that product ends up being. But in terms of done, I mean what…at what point do you say, “Well, I’m completely done with this and I’m not going to do anymore code on it.” Is it something that you’re going to continue working on? And maybe that’s part of why the equity is 50% split because if you only give somebody a 10% equity on it, then chances are good that they’re not really going to go want to come back and do bug fixes and respond to customer request and things like that.

[25:07] Rob: Yeah, someone mentioned that mobile apps would be a really good way to go with this and that actually makes sense, right? Because then there’s…doesn’t tend to be as much maintenance ongoing with them over that and you really could build a decent mobile app in a couple of months like this.

[25:20] Mike: Yeah, that does makes a lot of sense.

[25:22] Rob: One of the other cons that someone brought up is that is it possible this guy he’s staying anonymous because he’s trying to collect the best startup ideas to steal them. What do you think about that?

[25:32] Mike: I seriously doubt it. [Laughter]

[25:33] Rob: Yeah, I know. I saw that and I was like, oh grown —

[25:36] Mike: Yeah, here we go with…we’re trying to put evaluations on ideas because how do we know ideas are worth virtually zero. Implementing ideas can be really expensive and even if you steal an idea, you generally tend to lose a lot of the vision behind that idea. I mean you can look at any software product that’s out there or you could try and rip it off and you will do a reasonably decent job of making a clone of it but there are certain things that are going to be lost in translation when you’re trying to copy it. And some of those are going to be company related, some of them are going to be product related. You’re going to do things a little bit differently and a lot of times there are some very good reasons why software is designed in a specific way. The one thing that I had was a…I had a conspiracy theory about this. Maybe this entire post was just a hoax and an attempt to get HackerNews karma.

[26:21] Rob: Isn’t every post a hoax in to an attempt to get HackerNews karma?

[26:25] Mike: [Laughter] I don’t…I don’t know. I don’t read enough —

[26:27] Rob: Kind of. I’m interested to see if we’ll see a follow up from this guy.

[26:30] Mike: Yeah.

[26:30] Rob: You know, he said he got such an overwhelming responds from this that he…the e-mail account was overwhelming that he couldn’t even go through all ideas. I’m curious to see if there’d be, you know, he’d following with either the best ideas or just letting us know if this thing ever comes to fruition.

[26:47] Mike: You know, I just had a great thought. I could send him the idea for AuditShark and I could get $5,000 right away.

[26:53] Rob: Do it, do it. He specifically says, “I can’t compete with you if you’re earning a 150K a year or if you’ve already been working on your side project for a year. This may not be for you.”

[27:03] Mike: Oh.

[27:03] Rob: So, you know, he kind of specifically says that. I think the last reason that this may not fly very well is at 3,000 bucks is not a heck of a lot of money to test an idea unless it’s really designed, unless he picks them exactly to work with things that work well with paid acquisition, it’s hard to know in $3,000. I mean I have blown through that in a few days doing test marketing. The fact is your messaging could be wrong. I mean there are so many things that could go wrong with it. The product may actually be able to fly and you may just need to invest a little more time in to it. So, I think you could get a lot of false negatives if you caped your investment at, “Oh, I’m only going to spend $3,000 in, you know, one month or something to try to test this thing.”

[27:41] Mike:  think that related to that my biggest issue is that that $3,000 to test the market is not necessarily being done before you start building this because —

[27:50] Rob: Right.

[27:50] Mike: …I would think that you’re better…much better off testing that market first for the $3,000 and then deciding at that point whether or not to go through with the $5,000 investment to actually build it. At that point, why would you bother hiring somebody to give them 50% equity? Why wouldn’t you just go outsource the entire thing and hire somebody as an hour by hour basis and have them just build everything that you want.

[28:14] Rob: If you’ve listened to this, my guess is you stay in pretty firm on one side of the fence or the other. My guess is more people lean to the ‘no way you’d ever sign up for this’. So, if you think this is actually an interesting idea or it’s something that fits you and that you are going to apply for or consider applying for, I’d be interested to hear from you either in the comments for this episode or calling it in to our voicemail number or e-mailing it to us and that info is at the end of the episode.

[28:38] Music

[28:42] Mike: We do have a listener question to go through. This one is from Joe Rolenson [Phonetic] and he says, “Since you guys have already published a book or have been talking about it, how do you forecast a healthy sales volume? You could base it on conversion rates of those that buy on your own site but that doesn’t account for customers that find your book on Amazon.com or third party marketplaces. How do you know when your sales had plateaued or if there’s still more potential? Thanks. Joe.”

[29:02] Rob: With my book, I didn’t forecast recurring sales volume. I only looked at what is the minimum number of copies that I need to sell to justify me taking the time to write this book. And for me it was building a landing page and seeing how many e-mail addresses I could get and that showed me how people are interested in it. And once I hit a certain number and I think it was 600. It was somewhere between 6 and 700 e-mails, I figured I could close at least a third of them. I figured that they would, you know, be interested enough in the topic and as it turned out, 50% of them bought. And so I made…I think my goal is if I made 6,000 bucks, you know, with the initial launch that that would justify the hundreds of hours [Laughter] that you write the book because I really…I did want to write the book and I was just looking to kind of justify the time and be able to cover it with some type of evaluation.

[29:53] Now, I think in the first 72 hours, it actually made 9,000 but that was top line revenue and then there were printing cost. So, it was somewhere in the 7,000 and change was…was the net profit on that. And at that point, I was happy that the book had basically in my opinion covered the cost. From there, I had no clue what it would do and as it turns out, it did really well. It sold, you know, over the past two and a half years, it sold 10,000 copies. And I did not forecast that and I wouldn’t have counted on that. From what I have seen though, the volume from your own website and Amazon are the only two that really matter. The other third party marketplaces I have submitted to have…haven’t done much for me. But if you’re in a specific niche and there was a niche marketplace, I could imagine that that sales from that could be a little higher.

[30:40] Mike: I think on my end, I don’t really have any good advice to give on forecasting a healthy sales volume. I mean I like Rob’s approach where he just kind of decided, you know, what was the minimum number that he needed to sell and didn’t concentrate on any sort of recurring sales from that. The book that I’m looking at writing would be done through a publisher. So, they already have numbers on what similar books sell. So, for them, it’s more a matter of is this going to make it worth it for them and if it’s going to make it worth it for them, then it would probably make it worth it for me.

[31:10] Rob: Right and for you, you’re writing it more for as a marketing tool for AuditShark and probably as a personal goal or professional goal of writing a book rather than as a source of income because the…going through a publisher, the income is not going to be anywhere near what you even make on, you know, as an hourly consultant or what you’d make self publishing it or from your software apps for that matter.

[31:30] Mike: Right and that’s…that’s exactly right. There’s two real goals that I have in mind. One is bringing knowledge to people who probably need this type of knowledge and the other one is bringing some publicity to AuditShark. So, you know, I do see it as definitely a marketing thing but at the same time there are things that people, I feel like need to know about this particular topic that they just don’t have any idea about and it’s because there aren’t any real books about this particular topic. So, you know, we’ll see what the publishers will have to say though.

[31:57] Music

[32:00] Mike: So I think that wraps us up. 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.

Show Notes

Transcript

[00:00] Mike: This is Startups for the Rest of Us: Episode 114.

[00:03] 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. I feel like the new year is really starting to ramp up and people are back signing up for apps again and it’s exciting.

[00:33] Mike: Yeah, I know what you mean. There’s a number of things that were on my list of things to get done last year that never did but they tended to be more of the clean up nature and I’ve starting to bang through those kind of get them off of my mind and off my plates so that I can work on other things.

[00:46] Rob: Yeah, I had several of those as well. I also finally did my 2-day retreat just to do some thinking. You know, I walked like miles and miles a day and thought and looked at my goals for 2013 and how I wanted to accomplish those and what was going to take. And I looked both at for personal and professional and I just thought through them in-depth. I did mapped them out in quite a bit of detail in a bulleted list and then I put them in to my idea notebook where I’ll be referencing them throughout the year. It was a really good way to start the year actually. I recommend if you can…can take even just 24 hours and get away from kind of the hectic nature of your life to really sit down and think about what you want to accomplish in the year. I found it to be pretty valuable.

[01:25] Mike: Cool.

[01:25] Rob: How about you, what’s going on?

[01:26] Mike: So, I’m in the middle of finalizing things for releasing AuditShark to someone of my early access customers next week and I plan on giving them to access to everything that’s been built so far. And I’ve touched based with the couple of them but not nearly as many as I would like to. So, that’s something I need to work on a little bit more but fortunately, the contractors that I have doing some of the development work, they’ve been just concentrating on the technical side of things which freeze up a lot of my time for all the marketing stuff and that’s going really well right now. I’m really happy with all that’s going on. Hopefully, the trend will continue and my previously stated goal, I was thinking about it last night of not doing code. I decided I have to retract that just because I enjoy doing code on occasion. I think kind of touching things on occasion as opposed to digging in and actually trying to solve some of the down or dirty problems.

[02:19] Rob: Yeah, there’s a big difference between coding on major projects and just hacking your script out because I’m like you. I can’t get away from the code because I enjoy it too much. I really do love writing good code. It gives your mind a rest if you’re busy thinking about, you know, a lot of other stuff. So you just sit there and code for an hour or two can be pretty enjoyable. So, I’m with you. I don’t think I’ll ever get away from it and I don’t really, really have the desire to. But getting away from having to do it 10, 20, 30 hours a week, that’s definitely I can see that as an admirable goal.

[02:50] Mike: Uh huh.

[02:50] Rob: So, other stuff…other stuff that’s new with me, is with HitTail I have three small launches plan for the next probably 14 days. We have an info graphic that was ready in December and it’s about long tail SEO, trying to get some Twitter buzz and you know, wherever else it is, you do with an info graphic to generate some interest. And then we integrated with HubSpot which is a pretty big one for us. So, we’ll be talking to them trying to get the yeses, that integration marketing thing I keep talking about or it’s like you integrate with folks and then you get them to promote you and it gives you reason to talk about what you’re doing. My product manager did a bang up job on the integration on the code and everything. So, it’s pretty cool. It’s something I’m pretty proud of. Yeah, we have a joint e-mail going out as well over the next week or so. So, that’s why I feel like, you know, when I said momentum starting to build for the year, I have like lot of anticipation about these three things because we’ve been sitting on them for almost a month now. They were done in early December and it was like not going to, you know, I’m not going to spend a time to promote now while everyone is offline. So, I’m very excited to kind of kickoff 2013 with three pretty good little marketing efforts.

[03:53] Mike: Now are you doing any technical things on the code-based itself for HitTail to enhance the product  or they are just minimal things that you’re doing here and there? Is that mostly about marketing at this point?

[04:04] Rob: We are definitely still writing code. We’re adding…we’re doing integrations and when you…we’re also adding new stuff based on customer requests. So, there had been some request dealing with like the article work flow and or changing that code as well as some…there’s another piece of information called the Score that we have that is not in the UI and we’re going to be adding that soon. But it’s no…there’s no major features. I mean HitTail itself if you think about it is just one feature, right? It really just goes through the keywords and gives you the ones that you should be ranking for but aren’t…that’s all it does. And so we’re not adding another major section to HitTail at this point. We are still tweaking code and making things better. It’s not really a product-driven…or a product development-driven business because we’re not raising against another competitor who’s also building a bunch of features.

[04:50] At this point, there are still so many people who don’t know about HitTail who can use it features that having someone code on it 30, 40 hours a week is…is just a waste of time, right? It’s that building features for feature’s sake, we’ve already have…we already have brought a market in. So, there is…it’s more of a focus for sure on marketing for the time being. Although I do have, you know, I do have some…bigger features that we may look at later like in late 2013 that would actually change the nature of the product, make it a larger more complicated product. But I just don’t want to go there yet until we have more of a larger user base and just have more experience with it.

[05:24] Mike: You’ve kind of got the product market fit at this point so you don’t necessarily need to invest a ton of time in to new features and you can instead use that time to work on the marketing, maintaining and then expanding the user base.

[05:37] Rob: No, that’s right and that’s actually, you know, something more…what we’ll be talking about today. We’re going to be talking about five stages of a bootstrapped startup and in these phases, HitTail has kind of made it to that phase where it’s not just about building the product anymore. We are still improving the product but there’s that product maturity cycle, you know. Eric Sink did a great presentation about this where he talks about the toddler product and then like the pre-teen and the teenager and just as it gets older, eventually, every product after it’s been around 10, 20 years like it just you really aren’t adding that many features anymore. You’re just…you’re kind of maintaining and you’re trying to launch new products to fill the new cycle. So, HitTail is certainly not there. It has really, you know, it’s been around for seven years now. So, it’s more mature than a lot of products out there.

[06:20] Mike: Cool. So one of the other things that I’ve mentioned a few weeks ago was the e- mail marketing campaigns that I was working on for another company and those campaigns are doing really well. The primary focus of them has been to get people registered for some webinars that they’re doing and we’re up to more than 250 people registered for this webinars. And for me that’s kind of shocking more because the sign up form to these webinars is nine required fields plus four optional fields just to sign up for the webinar. It’s just that crazy the amount of information that’s being asked. And you know, it’s information that this company wants and really kind of needs to be able to follow up effectively with these people because it is not just about getting them to a webinar and then sending them e-mails later on. I mean they want to be able to call these people and talk to them on the phone and figure out who it is that they’re talking out to. So, they’re definitely giving good information but the fact that they’ve had 250 people sign up for these webinars and give over all of this information and just knowing the size of the e-mail list that we’re sending it to, the e-mail lists are not very big. So we’ve actually gotten a really big response to them.

[07:20] Rob: That’s really good. Yeah, you had mentioned before that, you know, maybe the e- mail list hadn’t been e-mailed to in a while. Do you feel like the 250 registered attendees you received, are those people that already have a relationship with the company that they already know, like and trust them?

[07:35] Mike: No and I went back and I looked at some of the early signups from the list and it looked like not one single person who we had e-mailed had signed up. So, I started doing some digging and found that a lot of our traffic was actually coming from LinkedIn groups. So the links to the webinar had been posted on the LinkedIn user groups for the people who we are targeting and the vast majority of those signups came [0:08:00] from that location as opposed from these e-mails. So, I don’t feel like the e-mails themselves helped significantly but I’m just happy with the…I guess the overall results.

[08:10] Rob: Wow, yeah, that is surprising. I wouldn’t think that…I just would never think of LinkedIn marketing like that.

[08:15] Mike: I wouldn’t have either but, you know, just looking at the numbers and the stats and I haven’t checked them in several days. I mean it’s gone up dramatically over the past probably three or four days in terms of the number of signups. But definitely early on from the first round of e-mails that I sent out, there was not one that was from somebody that we e- mailed. Now, they were some from companies that we did e-mailed. So, I don’t know whether or not, in all the people we targeted were managers of these companies. So, my impression is that these managers turned around and forwarded their e-mails to people that that work for them and said, “Hey, this is probably relevant to you.” I would not have expected any of the managers to actually show up.

[08:53] Rob: Right, right. So, do you think that given the success of LinkedIn that their client might actually advertise on LinkedIn now?

[08:59] Mike: I’ll probably recommend that we use LinkedIn but the fact is we didn’t pay any money for it. So, it was just in the user groups and in the user groups, there is some, I don’t know, 3 to 5,000 people who have essentially opted in to being members of these groups. I mean because in order to be a member of a LinkedIn group, you have to actively go say, “I want to be a member of this group.” So, they’re getting e-mails…a lot of them are probably giving digest e-mails and says, “Oh, this is the activity that’s been on this list.” And in there, there’s a link that basically says, “You know, here’s this webinar that you might be interested in.” So, a lot of the traffic has been coming from those locations.

[09:36] And the only reason I actually found this out was because there were somebody that had signed up that I knew I worked with before and I remember looking at the numbers and like, “Why did none of these e-mails that I‘ve sent to match up with the people who have registered?” And I saw this e-mail who had registered and I said I know that I have not e-mailed him and I know who he is and I’ve got his contact information. So, I called him and asked and I said, “You know, just trying to track this down. Where did you get this?” And he’s like, “Oh, I got it from LinkedIn.” And then I tracked it down and just  backtrack. It was obvious once I’ve found that and then, you know, because not all of us is just tracking that I would like to have has been set up but they were being sent to a different URL that I was not tracking.

[10:12] Rob: So last update for me Drip development is going well. I saw the first demo of the app and I also got the marketing design, this whole site’s design and it’s sliced now. Still, just have a landing page up at GetDrip.com and that’s…that’s actually doing well. I had a surprised…I went on a podcast, the Foolish Adventure with Tim Conley and talked about marketing software and that went viral. I think it went to the front page of Hacker News and in there I mentioned Drip. And so, I got a big boost of…of subscribers over the last couple of days. So, that’s kind of nice. I mean the conversion rate won’t…shouldn’t be fantastic, right, because Hacker News traffic in general doesn’t convert that well but it was kind of nice to see people hitting the side and I have a decent conversion rate to e-mails. So, it tells me the…the messaging is at least partially on and then finally decided on hosting. We’re going to go with EC2 which is Amazon, obviously, their Elastic Compute Cloud. And a lot of factors play in to that. There’s pluses and minuses to Rackspace and EC2 and Engine Yard and Linode and I looked at one other and we decided to go with it.

[11:16] Music

[11:19] Rob: Today, we’re going to be talking about the five stages of a bootstrapped startup. So, I was listening to an audio book called Brain Trust: 93 Top Scientists Reveal Lab-Tested Secrets to Surfing, Dating, Dieting, Gambling, Growing Man-Eating Plants, and More! The book is okay. It’s purely entertainment but one of the scientists does research in to the development of industries and how a technology evolves and he’s going to be writing a horribly academic book. I went and researched this. There’s no chance I’m ever going to read this book. It’s called From Art to Science in Manufacturing: The Evolution of Technical Knowledge but the cool part is he summarized the whole book in like this 5 to 10 minutes snippet and I thought it was fascinating and it actually applies really quite well to the model of a bootstrapped startup…and the phases that you go through as you’re…as you’re taking your startup from launch, you know, onto…on to being a successful venture. The stages that he outlines are for industries and so he basically says like take the healthcare industry or the firearm manufacturing industry or aeronautics. And industries evolve overtime and these evolutions take place due to market pressures.

[12:28] So, they might start off as a craft where early on to be, you know, in aeronautics to be a pilot, you really are an intrepid flier. You have a leather helmet and goggles. There is no processes. You’re building your own plane like no one build planes early on, right? Then from there to step two or stage two which is like rules and instruments and that’s where other people are doing it. You collaborate. You start actually having altimeters and instruments to do things and then there’s, you know, another stage where you get procedures and then one where you start automating things. And that’s where today just like autopilot in airplanes. And then the final stage is computer integration and that’s where like computer actually takes over the entire process and you really don’t need human intervention. So, those are the five stages of the outlines and he does a pretty cool walk-through of like how it’s…healthcare is just in stage two or stage three and firearm manufacturing is all the way, I think it’s in stage four but it took 200 years to get there. Whereas things these days like whether it’s like designing websites or you know, being some type of technical expert, they might mature…instead of 200 years, they might mature in 15 or 20 because of the pace…the pace of the world has changed so dramatically.

[13:39] But what we’re going to talk about is how the same five stages can be applied to a bootstrapped startup. Stage one is craft and that’s where you can only learn something by experience or preneurship. It’s where you’re a lone gunman. It’s basically the Wild West and you’re a pioneer of going out and doing something. And so if we apply this to a bootstrapped startup, this is where you are trying to find a problem to solve. There’s no rule book for this. There’s no guideline or no processes for how to do this. We do have frameworks and a vocabulary for speaking about it. A lot of that’s come from people like Steve Blank, Eric Ries, you know, the blog is fair who talks about these things. That’s where product market fit, problem solution fit and iteration and all these terms can help us talk about it. But really there is no predefined set of directions at this stage. And so this is where you’re trying to find a problem to solve, trying to find the market to solve it for and you’re trying to get to launch so that you can confirm that you are in fact solving a problem for that market. And if you aren’t, then you look back and you start again and you can actually iterate in this…this craft stage for quite some time until you, you know, until you figure out that you are solving a problem and can move on to stage two.

[14:51] Mike: So I think this is interesting. How do you know when you’re done with the craft stage?

[14:56] Rob: So the craft stage as I’m defining it is once you…you definitely have problem solution fit meaning you have found a problem that people have voiced and you are now solving that correctly. So, you have launched an MVP. People have tried it. You’ve definitely iterated on that and you’ve actually solved a real problem that they have.

[15:18] Mike: Oh cool, so what’s the second stage?

[15:20] Rob: The second stage is the rules and instruments stage. So, this is where…I’m putting a few goals in this stage. This is where you really are searching for that product market fit to confirm that you actually have it and then to just start scaling things up. But the goals for this stage are to try a lot of marketing approaches and figure out which one is working and which one is don’t. And it also helps you to define your positioning and how you’re going to talk about your product, how your customers, who eventually going to be trying to gather in groves, how they speak about your product. And you’re going to have to do a lot of things that don’t scale. So you’re going to have to do everything you can to spread the word even if you’re doing blog commenting and commenting on forums and things you would never do once you hit scale but right now, you’re just trying to find that group of people who really needs and wants your product and during this time as you’re moving forward, you’re looking hard at your funnel because that funnel, your conversion rates to trial, conversion rates to paid and you know, a little bit about your retention, that tells you when you’ve hit product market fit, right? That tells you when you’re going in the right direction and you’re starting to find a group of people who actually do need your app and are willing to pay for it.

[16:27] The last goal that I had that I’ve done many times and I really recommend people do before they get on stage two is to stop handling support e-mail and other admin tasks because at this point, you’re no longer that lone gunman, the intrepid flier you were in stage one and you need to get anything automatable in to the hands of another human being, right? It’s not time to start writing a code to automate everything yet but it is time to start giving yourself more time to build this business because you don’t have enough knowledge to start building some processes.

[16:58] Mike: And a lot of this relates to developing a product specifically versus building processes and stuff for your business because these five stages of bootstrapped startup, although it sounds like it maybe applicable to the company, you know, and the way that you’re defining it, it’s more applicable to building a product and building that product up and taking it through these five steps. And then if you want to repeat those steps, you can and you may apply some of these things to the business itself as you’re going through that process.

[17:25] Rob: Actually see as being for product development, for marketing and for support, all three of those pieces of your startup follow this process and typically at the same time. So, if you think about stage one which is craft, I’ll give you an example. When I first bought HitTail, I was building the product, did all the code. I was answering all the support e-mails and I was doing all the marketing.

[17:46] Mike: I think what I was thinking more along the lines of was accounting processes, how you’re handling legal agreements and things like that, business structure. Those types of things are not kind of covered in this because when you say five stages of a bootstrapped startup, and bootstrapped [0:18:00] startup implies the company not necessarily the product. That’s kind of what I’m getting at.

[18:06] Rob: Got it, yeah, that makes sense. I guess it depends on the type of startup you’re launching. If you have a SaaS app and you’re already have an accountant and a lawyer, I don’t think that your accounting and your legal stuff goes through five stages.

[18:16] Mike: Okay, cool.

[18:17] Rob: Can you…but can you think of a countered example where your accounting and legal and business like would go through these five stages?

[18:25] Mike: I think if you’re transitioning your business from a consulting business in to a product space business, you might go through this or if you have downloadable applications where you are selling them and then you transition in to like SaaS-based applications or you start transitioning in to the markets that are heavily financial or security-related where you need to start changing the terms of service and agreements and things like that you want to post on your website because those things, although they are related to the product, they definitely relay it back to the company as well. So, you have to make sure that all your bases were cover if you’re trying to gain revenue for those and you don’t want to be assuming additional liability for those types of things. So, I could see that those things that are business related would need to go through changes as you transition through different types of products.

[19:15] Rob: I see.

[19:16] Mike: So, I mean there’s…there’s all these things that I think are probably one offs for those types of situations that you probably wouldn’t necessarily have to go through nearly as many stages. I mean you sign an agreement with Apple to be able to distribute through their app store so there’s more to it than just signing an agreement. But my point is that there are much fewer stages that you have to go through for those types of things but they are required in order for you to be able to operate.

[19:38] Rob: Got it. So you’re right, five stages of a bootstrapped startup; marketing, product and support. That’s really what I’m talking about —

[19:45] Mike: Right.

[19:45] Rob: …because I’m not talking accounting and legal.

[19:47] Mike: Yup.

[19:47] Rob: Yeah. All right, so stage three is procedures and this is where you formalize how you use gadgets at least in terms of pilot and getting airplane. So, in 1935, the US Army Air Corp invented  a pre-flight checklist. So, they already have instruments but they sat down and they said, “There is an absolute checklist that you must do everytime there’s a process that saves a lot of lives.” And they just started making thing more procedural and in the startup, this is where I see you have all of your support stuff completely documented. You know, you have it handed off to one or more people. So, as the founder, you’re now not touching that anymore. You maybe tier two or tier three but you are done with the supporting everything anymore. You’re not the craftsman. Another thing that you should have is you should have like your deployment and your development process is in place. This is where you need to start standardizing and this is actually the part where a lot of like true blue founders who really love to run from one startup to the next start getting a little bored, right? This is where a lot of processes get put in place and you have to standardize because it just makes it easier as you start to work with more people but it can also constrain maybe creativity especially of early stage founders.

[20:53] And this is where in terms of marketing you start doubling down, tripling down on a marketing approaches that work and you really are getting to scale with this and in order to get to scale, you have to have processes and procedures in place and then you have to have marketing approaches that do in fact work during this time or also working on reducing churn and increasing your lifetime value since when as a bootstrapped startup, you start thinking about hiring someone to help you with marketing, hiring someone to help you with development and you really don’t have the bandwidth to do everything anymore. And this is not necessarily a stage that you have to go to. There are micro ISVs that micropreneurs who stay in that stage two and that’s not a bad thing but if you do want to grow past it, these are the types of things, the procedures you need to put in place in order to get…get to stage three and really start scaling it up.

[21:38] Mike: I think the thing to point it out here is that it really seems like in order for you to progress to stages three, four and five, you really need to have a product and a business that

is going to support the type of income to be able to bring those additional people on because obviously you can’t start formalizing these things and hiring people if you don’t have the revenue to justify it.

[21:57] Rob: Absolutely. Yeah, you either need revenue or you need funding. You know, we’re just talking about bootstrapped here because it’s what we’re more familiar with and I just think it’s more relevant to the audience. But if you have funding, they tend to jump around. They tend to jump straight to stage two and then they’ll often skip the procedures and put…do premature scaling so they’ll kind of part of stage three. And it’s a gamble, right? You can move faster when you do that but it’s also the reason that a lot more funded startups fail is because they try to move too quickly and they prematurely scale. Did you see that report? It was the Startup Genome Project and they said…I think it was the number one reason that startup failed was premature scaling.

[22:36] Mike: Yeah, I definitely remember seeing some of…some stuff from them but I don’t remember the specifics of it but I think you’re right. That was definitely high in the list.

[22:43] Rob: Yeah, the other was like founder disagreements-

[22:46] Mike: Yup.

[22:47] Rob:…was a big one and then premature scaling which means in essence you have too much money and you’re try…you just start hiring people and trying to market and spending money growing the business before you really know anyone wants your product. You know, you kind of leap through the stages too quickly.

[23:01] Mike: So one of the things that I think that’s interesting about stage three is that what you’re really trying to do is you’re really trying to make sure that you’re putting yourself in a position where the things that you’re doing are the most valuable to the business. And that includes making sure that the processes behind the business and behind the product itself are going to scale or that you will be able to scale them out by farming out some of that work to people base on a process that you have developed and your value that you’re providing at that point and in that stage is to build the processes and then hand it over to somebody else to execute.

[23:36] Rob: Exactly, everything in stage three is about leveraging you and about getting high leverage out of your time.

[23:43] Mike: I think that both Patrick McKenzie and I had touched on this at MicroConf in 2012.

[23:48] Rob: And if you’re a member of the Micropreneur Academy, you can see both those talks right now inside Micropreneur.com. All right, stage four is automation and this is in terms of aeronautics, this is where they invented the autopilot where it’s autonomous but it’s with human supervision. The goals for a startup in this phase are basically start writing code to handle things that are currently being handled by humans. So they go past it the human automation point and actually make it truly code automated and weren’t just supervised by people. So, this is where basically all of your working, marketing and support tasks, they are heavily documented and or as automated as possible. So, the step is just about continuing, pretty much continuing the work that you begun in stage three.

[24:32] Mike: I think without stage three, you’ll be very hard pressed to be able to make stage four work because if you don’t have those procedures formalize, it’s hard to automate things when you don’t really truly understand everything that’s going on and it really seems like you have to have been in stage three for long enough in such that the automation is made easier because you don’t have to deal with all these exceptions. So when you’re writing an automation code, one of the big risks I’ll say with writing an automation code is that if something changes or something is unexpected that happens, then your automation basically goes completely out the window and you’ll spend 10 to 20 times as long fixing it and make again things right as it was if you knew about that in advance and you were able to write in those exceptions in to your automation code. So, it really seems like you have to been in stage three for long enough such that you will have identified those exceptional cases and then you can program them in for the automation side and stage four.

[25:29] Rob: Exactly, and then that brings us to stage five which is computer integration and that’s where humans are removed from the functioning system that humans become technicians maintaining the machines. And so obviously aeronautics is not there yet. There are certainly a lot of manufacturing industries that have made it that far. And I kind of just threw some goals out here partially and jazz but the goals here are to, you know, if you want to or to hire a product manager or a CEO and then to either retire to Tahiti or to your next startup [0:26:00]. Alternatively, you can stick around and you can continue to improve and grow the business but if you reached stage five, you really have built like an awesome once and…potentially once in a lifetime bootstrap business because most startups will never make it to this stage. This is one that it is functioning at scale and you found a product that people love.

[26:22] I think with startups maybe like Squarespace and that’s a massive example but that was a bootstrapped startup that really has made it to a place where it is operating at scale. And you know, you can even think of maybe some smaller examples that may not all the way be in stage five but they definitely have processes in place and they’re growing. They have employees, places like WooThemes, Clicky, Grasshopper, startups that are really hit their stride and while they may continue to grow, as the CEO or owner, you could, you know, literally hire someone to…to kind of run it.

[26:53] Mike: This whole idea of removing humans from the system and the humans become technicians maintaining the machines really reminds me of the Despair poster called adaptation and it reads “The bad news is robots can do your job now. The good news is we’re hiring robot repair technicians. But the worse news is we’re working on robot-fixing robots and we did not anticipate any further good news.”

[27:16] Rob: [Laughter] Very nice. So, I’m at despair.com. It says, “At Despair, we offer the cure for hope.”

[27:20] Music

[27:24] Rob: Well that wraps up our look at…the five stages of a bootstrapped startup. And review, stage one is craft. Stage two is rules and instruments. Stage three is procedure. Stage four is automation and stage five is computer integration. And we have a listener question today.

[27:39] Mike: So, this one comes in from Ashkin and he says, “Hi, Rob and Mike. First of all, thanks a lot for the best podcast for startups. Your work is simply amazing. I have a few focus areas these days that I run concurrently; monitoring or consulting products, blogging about startups in my country, developing my own product to help with contractors and learning new stuff and new technologies. So, my question is how do you recommend splitting my time? Should I dedicate a single day to working on things or should I do some things each day and essentially multitask?”

[28:08] Rob: Well, I think the first thing. So he have four different tasks he’s working on. He says his monitor consulting projects. He’s blogging about startups. He’s developing his own product with the help of contractors and he’s learning new stuff. And I would start by taking a look at that list and figuring out what you can eliminate or automate more. Let’s look at the blogging. What is the purpose of the blogging? If that’s for fun and entertainment, that’s great but that should not be as high a priority as these other three items on the list. So, that’s the first thing I would look at is elimination. Learning new stuff and even new technologies, we all love doing that. However, are you at the point where you maybe need to stop learning temporarily and that doesn’t mean that you never learn a new technology or a new marketing approach but that is valuable time that you could actually be applying to things. So, if you took a 6-month hiatus on blogging and going out and specifically seeking new things to learn that didn’t directly apply to what you’re doing, then now you’re really down to two things. You’re basically building a product and you’re monitoring and consulting projects and that’s probably where I start.

[29:16] Mike: Well, he also mentions that he is not just monitoring the consulting projects but marketing for new ones and I totally agree with everything that you just said and that was my first thought as well. You’ve got four different things going on. Blogging, unless it’s directly related to your products, I would probably cannot outright because it’s not going to contribute financially to you because it sounds to me like the intent here is to transition from consulting in to products and if that is the intent, then blogging does not sound to me like it gets you there in any way, shape or form. Learning new stuff does not get you there unless it’s directly related to building your own product and you know, I agree with Rob. I would definitely get rid of both of those and then just focus on two things and the reality is you’re really focusing on one which is to develop your product so that you can get out of consulting.

[30:02] Rob: And then his second part of his question is should he divide up day to day or should he kind of stripe his calendar and do two hours of consulting, monitoring and then two hours of building his own product. I personally would divide up each day and that, you know, gives you…because basically monitoring, consulting projects and marketing for the next one, there’s probably work to be done on those everyday and there is probably work to be done developing your own products everyday. And so sure you could, you know, go one day and then flip back and forth but if something urgent comes up, it would in my opinion be nice to kind of…already have that on your calendar I guess.

[30:38] Mike: I think part of the problem with doing marketing efforts is that there is really no end to them. You can do them for an hour or you could do them for 300 hours straight and you will still not be done. It just does not matter. So, I think that for my stand point, it will probably make a lot more sense to block off amounts of time that you’re going to work on each and your focus shouldn’t necessarily be on the end goal. It should be focused on making sure that you have a process in place such that you continue executing that process. And if you look at setting yearly goals, if you’re trying to achieve some massive goal, the best thing to do is not think about achieving that goal. The best thing to do is think about putting the process in place that will put you in a position to achieve that goal at some point down the road. So, if you want to lose weight, don’t focus on losing 50 pounds, focus on going to the gym everyday because that’s the part that is going to get you to losing 50 pounds. And similarly with landing new clients and developing a new product, what will get you to having a finished product is dedicating an hour everyday of your time to building that product or two hours or three hours or whatever it is that you can actually set aside.

[31:49] One of the things that I’ve been trying this week is blocking out my calendar with the exact timeframes that I am going to be doing different things. So, yesterday I had my calendar set up such that from 7 o’clock to 8 o’clock I was going to be getting up and getting ready and then from 8 to 8:30, I was going to be traveling and then from 8:30 to 5:30, I was going to be at work for a consulting customer and then 5:30 to 6, I’d be headed back. And I literally blocked out my entire day and I was off by about 15 minutes for one piece of it and I stayed up a little bit later. I even blocked out time for me to read at night before I went to bed and then I blocked out time for me to go workout. And it really helped me to maintain focus on the things that I had to do because looking at my schedule, I knew exactly when I would have to stop something so I was hyper focused on making sure that I got as much under in that time window as I possibly could because I knew that I didn’t have any extra time to spare because my entire calendar was blocked out from 7 a.m. to 11 p.m.

[32:47] Rob: I think that’s a good point actually. If you look at the tasks that we’re kind of have left, assuming he…he is able to eliminate the ones we’ve mentioned, he really has to monitor consulting projects market for new ones and develop his own product. If…left unchecked monitoring and consulting projects will turn in to a fulltime job. So, if you need to time box to crap out of that one and if you can time box that to 30 minutes a day and basically have, you know, once a day meeting or if you can 30-minute…if you can time box it to 30 minutes three times a week or just as tiny tiny as it can be and still keep the projects going, that is a, you know, a great way to do it and then as you said, if you also time box the marketing and you keep those to just an hour or two per day, then you can spend, you know, a big chunk of the rest of your time actually doing what it…it sounds like your number one priority is which is developing your own products because you want to…you want to get out of the consulting hamster wheel.

[33:40] Mike: Thanks, Ashkin. I hope that answers your question.

[33:42] Music

[33:45] Rob: And if you have a question for us, you can call it in to our voicemail number at 888-801-9690 or e-mail it to us like Ashkin did 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 this podcast 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.

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 how to choose conferences and other live events, .NET versus Open Source, ideas for low risk businesses and answering more listener questions. This is Startups for the Rest of Us: Episode 113.

[00:17] Music

[00:25] 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.

[00:34] 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 for this, Mike?

[00:39] Mike: Well, I found out a short time ago that our good friend and popular MicroConf speaker Patrick McKenzie has an e-book that he published called Sell More Software: Website Conversion Optimization for Software Developers.

[00:51] Rob: Dude, yeah, I bought off of Hyperink.com the other day. I’m digging Hyperink. They turned a lot of blogs in to books.

[00:58] Mike: Uh huh.

[00:59] Rob: Did you see my tweet about it?

[01:00] Mike: Well, I definitely did see it on Amazon’s website.

[01:02] Rob: Oh, it’s on Amazon.

[01:04] Mike: Yup. That’s probably where I saw it. I don’t know exactly how I ended up there though. It might have been recommended to me through their Recommendation Engine. I’m not real sure. But it’s interesting. I mean he’s got…most of the content I think is primarily taken from his blog but there’s also some new articles that he’s written in there exclusively for the book about selling software and conversion optimization and SEO. So, I think for $10, you probably can’t go wrong.

[01:04] Rob: I’ve read most of the articles in the book as they were published in the blog but since I bought the book last week, I’ve only read a couple of them already. It’s like, yeah, no doubt. I am going to take enough ideas away from this that will be worth the ten bucks? Funny thing about Hyperink, did you know they’re YC funded?

[01:43] Mike: No, I didn’t.

[01:44] Rob: Which is weird because it’s such a non-scalable business in my opinion but they basically have done like two or three pivots from where they originally where they kind of just an online publisher and they have seemed to have some success doing this…this…in this niche of turning blogs in to books and they format them well and I think they do some copy editing and stuff. [0:02:00] There’s a number of blogs like startup and VC blogs that had been turned in to books and they’re all between maybe three bucks and ten bucks and they are all electronics. So, it’s a no-brainer if you need something read. I mean you can typically find a lot of the content for free but it’s like why not pay the money to have them in to an easy-to-read format.

[02:15] Mike: Uh huh, yeah.

[02:16] Rob: Yeah, one of my essays actually made in to one of them Dharmesh has his on startups Hyperink book. I wrote a blog post for that a while ago and it made it in to a book. So…

[02:25] Mike: Very cool. Well, what have you been doing this past week?

[02:28] Rob: Yeah, I have…basically, I had two weeks of kind of on again, off again downtime. I just…and I like to take these…these times to do that high-level thinking that I don’t get done much when I’m sitting in front of a computer. You find it when you’re in front of a computer, you always want to be niggling away like e-mail or Twitter or just, you know, kind of your monkey brain runs wild and it doesn’t let you sit there and like brainstorm and think about high-level things that you want to do over the next coming months or the coming year or whatever.

[02:57] Mike: Yeah, I find that being in front of the computer sometimes is distracting if I don’t have something specifically that I want to get done. You know, it’s kind of a time sink at that point I may as well be on Facebook or Hacker News or something like that because I’m not really being productive and I’m there to be there versus there to be productive.

[03:15] Rob: Right and that’s where I find this time where I’m kind of forced to be away from the computer, you know, because I’m typically with family or friends and often we’re, you know, eating, talking or watching movies and such or there’s even downtime where everybody is reading and just chatting. I mean that is like a good time to I think to relax and kind of center your mind and prepare it for, you know, for the deep thinking that’s required about high-level things about where the directions and the strategy that you’re going to take your…your business because again, I think sitting in front of a computer is not the right time to do that.

[03:46] Mike: Yeah, I think that just taking, you know, a couple of days even away from the computer, not touch the computer, not even check your e-mail, those time periods can be highly productible say for thinking about other things.

[03:58] Rob: So, you’re only two weeks away  from launching AuditShark. How are things?

[04:02] Mike: Things are pretty good. I don’t have this nagging sense of something is wrong but I’m not sure what it is. So, I think I’m feeling pretty good about where things are at. There’s tons of things that I would love to have implemented. There’s tons of things that are sitting in FogBugz that are just not done and they will not be done and I’m okay with that.

[04:21] Rob: Right. So, the technical side seems to be…to be zipped up. Are you feeling good about the marketing and kind of what your launch about getting people to use it, early access users and stuff?

[04:31] Mike: I feel like I’m going to get people to use it whether it is exactly what they’re looking for or whether there’s going to be tweaks and stuff. I kind of expect that there’s going to be some things that they’re going to look at and say, “I’d really like it if it could do this or it could do that.” And that’s fine. I’m perfectly okay with that. It’s…but I really need to get start getting it in front of people and getting feedback from a general market sense of what people are looking for and what they are really interested in seeing.

[04:55] Music 

[04:58] Rob: This week though we’re going to diving in and answering more listener questions. On our first question is about how to choose which meet-ups and conferences to attend. It’s from Felix Leong who is a long-time listener and Academy member and he sent us a number of questions but the one I really want to focus on today is he’s wondering what criteria we could recommend for which meet-ups and conferences to go to. And he said, “You know, do you use a selective approach like checking up the speakers, whether the topics suit in your interest or do you just go to every single free meet-up and kind of do a taster of buffet approach and see which ones do you like and stick with?” So, I think we kind of have two topics here, meet-ups versus conferences because meet-up is going to be more recurring either weekly or monthly things whereas conference is probably going to be a larger expense. We have to travel.

[05:45] Mike: I think with conferences you definitely have to think about “Are there going to be other people there who are in similar situations to me?” And if you are not thinking that question or you don’t have that question, you definitely needs to ask it and once you’ve asked it, the answer should be yes. And if the answer is not yes, then you’ll have to reevaluate why it is that you’re going. If you’re going with just because you want to hang out with those types of people, that’s fine. There’s nothing wrong with that. But if you’re looking to increase your business or figure out what source of things other people are doing that you’re not doing that you could be, then you know, you might want to start thinking about going to a different type of conference. That said, for meet-ups I think that with meet-ups, meet-ups tend to be…I think I tend to use the same type of criteria. There’s a lot of meet-ups here in the Boston area that I just don’t go to because I know that the types of people there tend to be the types of people who are focused on solving problems for which they will be using VC funding.

[06:42] And the approaches that they use are not the same approaches that I would use and they are generally not applicable because they have tons of money to throw around on all these different things to try and figure out what’s going to work and I can’t do that. And for me to even try to do those types of things, it’s just not feasible because I don’t have that money to throw around in my return on them just it wouldn’t be there. That’s not to say that I wouldn’t get something from them but it’s such that I feel like the value is just proportionate in terms of what I would get out of it versus what I would get out of going to some place where there are a lot of other people like me.

[07:17] Rob: Yeah, I definitely take different approaches for meet-ups versus conferences. Conferences, it’s fairly easy to just ask people within your networks. So, I would probably go in to the Micropreneur Academy as an example if I’d never heard of a conference and I would go in to the forums there and I’d say, “Who’s been here? What do you guys think?” Because since the conference tends to only happen once or maybe twice a year and they aren’t that many conferences in our space, you’re going to have someone who…who has gone and it’s going to be, you know, a longer process where you’re going to be able to really find out more details about it. And like you said, I think the big question that I ask myself is “Are there going to be other people there in my situation?” Because if you go to a conference and it’s a bunch of people, you know, even if it’s a startup conference, if it’s a bunch of people  who are freelancers, client services people and they’re thinking about launching startups and they’re there to learn about it, well, if you’re further along then it’s…it’s going to be a drag because the content is going to fit and the people you meet you just aren’t going to have enough to talk about. You aren’t going to take much away from it. The hallway conversations are not going to be interesting. So, that’s the first approach I take with conferences.

[08:21] And then in terms of…of meet-ups, whenever I move to a new place, I pretty much try to survey all the meet-ups in the area. Now, that wouldn’t be possible if you move to San Francisco because I think there are several hundred startup meet-ups within the 60-mile radius. Most other places around the world, you’re going to be able to check out all of the startup and even remotely tech entrepreneur meet-ups over the course of a couple of months. And since they are free or relatively not expensive, I tend to take that that taster approach that Felix talked about and attend all of them just to start seeing overlaps, seeing who’s involve in the community. I think that’s a great way to…to learn who is there in, you know, in your local area, who’s interested in startups because in general, it tends to be a small tight knit community, starting to meet the people who are in your niche. Like Mike said, you know, bootstrappers may be a niche depending on where you live and so one by one, trying to find those people and potentially even putting together at meet-up of just as bootstrappers would be something that…that I would consider. So, I hope that helps, Felix. Our next question is a voicemail question about the pros and cons of a .NET and Open Source.

[09:27] Voicemail 1:  Hey, guys. It’s Jack Colletti from Qula in Pittsburgh. And I love the show and finally got a chance to do a rating for you guys on iTunes. But my question is around .NET. I think it would be great for you guys…you have a pretty expensive .NET expertise. I’d love to hear or maybe a whole show on the topic or maybe .NET versus Open Source platforms, would love to hear more in depth. Thanks again and keep up the great work. Take care, bye-bye.

[09:53] Mike: So, I think that there’s a couple of different thoughts here. The first one is that when you start taking a look at the pros and cons of Open Source  versus something like .NET, you know, there…there’s going to be things for both of them. There’s going to be pros for each, there’s going to be cons for each. I think for .NET the pros list for me is relatively short just like it is on the Open Source side. I think on .NET the pros are that it’s very easy to start getting in to the .NET stock. You can sign up for any of the spark, I’ll say the asterisk spark programs for Microsoft. There’s BizSpark, WebSpark. I think they’ve got YouthSpark now and you can sign up for these programs and you get a lot of software for free and after three years, you get to graduate from these programs. And then you get to keep all the software that you’ve been using. In addition to that, you get to keep the production licenses for some of that stuff.

[10:41] So, for example, when you finish with BizSpark, I know that recently I went through the graduation process for AuditShark and they basically give you a Visual Studio ultimate addition for every developer you have working on there who’s registered inside the program and they gave me, I think what was it, four Windows server licenses and two sequel server licenses to use for however long I want. And then in addition to that, they give you upgrade discounts for buying in to their MSDN Premium Subscriptions. On the Open Source side, you know, pretty much everything is free from day one. You don’t have to sign up for anything. You’ve just, you know, go and you download it and you can compile it or not. For me, I think the biggest downside on the Open Source side isn’t so much that everything is free, it’s that you have to kind of pick and choose which immunity stacks that you’re going to be using because not all of them are going to be supported and if you run in to any problems, you will probably have to fix them yourself. Not always, but there are going to be times where you have to get down and dirty in to the code and to some deep-rooted bug that you didn’t want to and you’re going to spend a lot of time doing that stuff.

[11:50] On the Microsoft side, I feel like Microsoft tends to take care of things for you. That said, if there are problems that are deep-rooted, you may not get them fixed in a timely fashion  or you may not ever get them fixed. At the end of the day, it almost feels like a judgment call. It’s…it’s…to me it doesn’t necessarily make a lot of difference. When you start talking about cost, I think the one issue that a lot of people will bring up is that on the Open Source side, everything is cheaper and on Microsoft, it costs a lot more to run those things. At the end of the day though, you’re biggest cost of your business is employees and your salary and those are going to be exponentially greater than any of the software costs that are associated with it.

[12:31] And I think that that’s probably the biggest thing to keep in mind when you’re evaluating these things and what you’re comfortable with using isn’t so much the getting started cost, it’s the down the road cost. And that down the road cost should not…you shouldn’t be looking at your software for that because you’re going to start comparing, you know, Ruby to a Windows license and oh well, Ruby runs on Linux stack and you know, .NET runs on Windows. Windows is going to be more expensive. Yeah, probably a little bit but at the same time, the incremental cost between the Linux server and Windows server is not that much versus the cost between having no employees and one employee and that is a huge, huge step. So, I would look at those for the cost versus what the cost of the software is.

[13:16] Rob: Yeah, that’s it. That’s a good analysis of it. I think that most people do look at the free cost of Open Source and think to themselves, you know, why would I go with a more expensive platform like .NET and I think you’ve listed a few good reasons. These days if I’m looking at building a new project, I do tend to lean towards Open Source. There are just some really good communities out there that we’ve talked about before the Ruby community, PHP community. I think Python with Django is actually a really good stack to build on. Some of the draw backs I’ve heard of the folks building stuff on Python and then you can’t find developers for it or they’re really expensive and actually Ruby devs, really good startup Ruby devs are expensive. And they’re going to be potentially more expensive than .NET developers who…who tend to be…who tend to get paid well but  but I think just Ruby devs are in more demand in the startup circles right now.

[14:04] In terms of finding employees, since you covered a lot of the other elements, I was thinking about finding developers, finding contractors and my…in my experience, finding PHP developers has been easier than finding a good .NET or a good Ruby or a Python developer and so that’s something to think about. PHP developers are going to tend to be less expensive as well. On the flip side, you know, in terms of finding a .NET developer, they’re going to think more like maybe an enterprise consultant. Most people who develop .NET are not working for small startups because most small startups don’t use Microsoft technologies. And so, you’re going to be much more likely to find that kind of like a PHP or Ruby hacker who has potentially, you know, built and launched stuff before whereas in the .NET world, it’s much less likely that people have worked on small startups are going to have a bit of a different mentality there in general. These are all generalities and these are all based on our experience.

[14:57] But I think these days when I look at a new project like what I’m working on now, I lean towards Open Source and as long as I can find people at a reasonable price and the technology is proven and I’m not doing anything that that’s crazy, you know, that specifically requires hitting some Windows system API’s or that it requires a lot of scheduled tasks or any specific technology that, you know, that Microsoft .NET stuff would be more well-designed to handle, then I link…I do link towards PHP and Ruby for…for web technologies.

[15:29] Mike: One of the things that comes to mind in terms of the difficulty of finding .NET developers versus PHP developers whereas the PHP is really meant for web-based products versus .NET which kind of covers both desktop and mobile and web and you kind of have to pick and choose a little bit more because those people who are doing .NET, they may have done mobile but they haven’t done web stuff or vice versa. They’ve done desktop stuff but not web stuff and they can fall in to a number of traps  of saying, you know, they’re just trying to get a job and they’re saying, “Yeah, I can do that. I do .NET all the time,” and you run in to somebody’s issues about hiring them because they know .NET but they don’t necessarily know it in the context that you need them to know it.

[16:13] Rob: Right, so there’s added complexity and it’s a multi-used technology. Well, thanks for your question Jack. Our next question is actually a lightning round of questions about starting up and so it’s from Derek and he says, “I’m so glad I found your podcast. I’m going to go back and try to listen to most of them. I have so many business and technology questions on how to get my web app out of the gate. I like how you guys talk details. Many podcasts I listen to are good but I get frosted about the lack of detail. For example, here are some huge things to me that may be little to an existing startup.” And he sent over kind of a long bullet of list. I think we’re going to pick out a handful of this and just give some quick answers on our recommendations for doing these things. So, first thing he said is, “How do I find the right business name?”

[16:38] Mike: I think that the right business name is almost immaterial. The business that you have behind your company is it doesn’t matter to most people. I mean you don’t wanted to be offensive. You don’t wanted to conflict with other people who have trademarks on other names out there. But I don’t think to getting the right business name makes a whole heck of a lot of difference. There are certain things that you want to try and follow as generalities. So, for example, you don’t want to have too many consonants in a business name that’s going to make it hard to pronounce. You don’t want something that has a word in it that matches multiple ways to say in whatever language that you’re…you’re speaking for example. You want to have the domain name, the dot com available if possible. But again, most of these things are immaterial. The business name itself means almost nothing to your customers. It means something to you. So, I think at the end of the day, the business name doesn’t mean the heck of a lot. Now, your product name could mean quite a bit to you based on whether you’re trying to do things with SEO or you’re trying to make it memorable to people. That’s a little bit different but I think that the business name  itself just does not matters much.

[18:03] Rob: I wholeheartedly agree and the people who I have talked with lately who are selling multiple software products that you don’t even know what their business name is. It’s very rare that matters to anyone. Terms of finding a good product name I tend to just do domain searches. I spent two or three hours just packing together different parts of words when I was trying to figure out the name for what is now Drip and then I look for all the domain, you know, all the dot coms for those and almost none of them are available. I mean it’s crazy how hard it is to find a good domain. And so I based mine almost solely on being able to find a decent domain and find one that…that suits your fancy.

[18:37] Mike: One that I…website I’ve mentioned a couple of times on this podcast before is leandomainsearch.com which is a good website to go to if you’re trying to find a website name because it will search through…you give it a couple of keywords and it will search and give you  a number of different variations on those keywords for what is available.

[18:55] Rob: Yup and nameboy.com is another one that I’ve used. All right, so his next question is. “When should I become official and when should one incorporate or become LLC or something else?”

[19:07] Mike: “When to become official as a business and when to incorporate or become an LLC?” Those depend on your risk tolerance. If you’ve got nothing to protect then it doesn’t really make a whole heck of a lot of sense to incorporate and go through all the processes associated with getting it as corp or in LLC. In terms of your taxes, your CPA may feel completely differently about it but once you have kind of gone past the state of doing your taxes yourself, as soon as you get a business involved, you probably want to get a CPA involve because they’re going to know things that you don’t. They’ll be able to guide you in to what decisions to make for your business, what things can be written off, what things can’t and then an attorney will teach you about how to structure businesses such that they will protect you from being liable to your customers or from other entities who are out there. But if you don’t have anything to protect if you’re still just working on it , it’s probably not a big deal. I don’t even know as I would bother incorporating or filing a DBA or anything like that unless you want to start writing things off or you have something that you want to protect. So, if you already have a product or you’re acquiring a product, that’s probably a good time to start looking at it.

[20:16] Rob: Until you have someone willing to pay you money for something, it’s immaterial what form your business takes. Agreed that it’s a manner of risk tolerance, I also think that you can easily kill thousands of dollars and a lot of time and basically postpone the inevitable of actually asking people for their money. You can postpone the inevitable by worrying about this kind of thing. I just…it’s not nearly as important as the most people think. His next question is, “How and where should I open a merchant account for accepting e-commerce transactions. I got to be honest, these days, I just sent people to Stripe.

[20:52] Mike: I —

[20:52] Rob: I say unless you have a reason not to, go to stripe.com. It takes you 5 minutes to sign up. There you have the whole shebang.

[20:59] Mike: Yeah, my question would be why even bother opening up a merchant account? It just doesn’t seem to make sense to me to even try for a merchant account these days. I mean it’s a lot of paper work. It’s a lot of hassle and the amount of extra money that you’re going to get using a merchant account versus, you know, using Stripe or something like that, it just not worth it and in fact, many times until your volume gets above a certain point, having a merchant account does zero for you.

[21:25] Rob: He has a few others. I think the one other we’ll put out of here, he says, “I plan on releasing an MVP. I know my target market but how do I solicit them? How do I get them to know I exist?”

[21:36] Mike: I think finding people in your target market and soliciting to them and getting them to know that you exist is a massive topic that we probably covered quite a few times in previous podcasts and I know that you said you kind of new to this podcast. There’s a lot more information in the previous 112 episodes. So, definitely go back and listen to those. If you have follow up questions, definitely let us know but there’s…there’s a lot of other information there.

[21:59] Music 

[22:03] Rob: Our next question is from Justin Schemer [Phonetic] who has sent in several questions before. His question is, “I’m looking to venture in to the startup world a recurring theme that I’ve gotten from your episode is ‘Knowledge is power’ especially when building a startup. Being a developer, I obviously lack necessary business skills to maybe start with something big. My question is do you have any suggestions on starting out with a business that’s low risk and low profit just so I can maybe learn and hone skills needed to do something more involved. It doesn’t need to make money either. I was just thinking something like a simple t-shirt or hat business which seems to have a low initial investment but maybe a good arena to practice marketing, managing, et cetera. Thanks, guys and keep up the good work.”

[22:43] Mike: I think my take on this is that activeness and affiliate for any sort of t-shirt or hat business would probably be a good way to get started if you have ideas about what source of things can go on to those types of things. You can set up like a CafePress account or there’s several other companies that had popped up over the years. They’re the ones that I remember using in a while back but you can essentially create your own store and you’ll get a commission on all those things and you can drive people to your own website. Another one that I can think of is building something along the lines of an info product. So, any sort of informational or tutorial-based product where you are conveying information to people that they are going to find valuable whether it’s based on hobby that you have or on something that you’re just interested in learning more about and you want to be able to take that information and relay it to other people.

[23:35] If it…if you’re finding it difficult to find information about a particular topic, it’s probably a good candidate for some sort of an e-book and you don’t have to put a huge amount of time and effort in to it but you can set up a landing page try and get people to that website, see if people are searching for it, do some basic SEO on it, try and evaluate the need for people to purchase that kind of thing. And if there is, then you can go out and actually build the info product. You don’t have to worry about whether or not you can build it or not. The real questions behind it are “Are people interested in buying that?”

[24:10] Rob: Yeah, I think starting a t-shirt or hat business is probably not a good idea. I don’t know what that’s going to teach you that you’re going to then takeaway and apply to as software startup especially if you’re trying to buy equipment and print t-shirts yourself. I have a friend who runs a t-shirt deal a-day site and it’s an enormous amount of time just to fulfill orders and that doesn’t teach you anything. I think you’re going to be much better off with some time of digital product and like Mike said whether that’s an online course of some kind, an e-book or building some type of small app that, you know, you can build in a couple of weeks or building an affiliate for someone else’s software product and that’s something that’s often overlooked. People feel like being an affiliate, it’s not going to actually teach them anything or like it’s not being a real entrepreneur. But learning how to find a channel of traffic and how to get yourself in a way of that whether that is via SEO or whether it’s some paid acquisition or whether it’s using social networks, I mean there’s a number of ways beyond that to do it.

[25:07] And learning how to navigate those and actually having something to make a little bit of money, it will teach you a lot about everything. I mean about the e-mail marketing and dealing with customer support and how to drive traffic and how to optimize and how to monetize it and all that stuff. The entrepreneurs that I see who are starting out and they are doing smaller products that are not code heavy because you already know how to code, right?  So, learning to code is not the scary part, it’s all the other stuff. So, if you can build either a very small project and do like a show Hacker News and try to get people to actually sign up for a trial but then figure out a way to get some kind of money out of that, I think you’re way better off than just trying to either give something away for free which is really easy to do or, you know, sitting down for six months and writing a full software product. So, I hope that helps. Our next question is a voicemail question on outsourcing  marketing.

[26:01] Voicemail 2: Hey, Mike and Rob. I wanted to call and say that I really enjoy your podcast and I had a question for you. You talked a lot on the show about outsourcing various tasks. One of the things that I thought would be really nice to outsource would be marketing but it seems like it’s such a core activity that I question whether it’s a good idea to outsource it. On the other hand, I read another book recently Masters of Doom and it talks about how much further beyond his peers, John Carmack’s able to progressed as a programmer and developing engines for Doom and Quake and so on by just focusing on programming and not worrying about marketing or some of the business concerns that they pushed off to their distributors. So, I’m just curious what your thoughts on that are and I look forward to hearing your next podcast.”

[26:49] Mike: So, I think my first thought on that is that John Carmack is an extreme outlier. [Laughter]

[26:54] Rob: Yup and so as the video game industry. It’s totally different than the software businesses we’re talking about.

[27:00] Mike: Right, that’s my first thing that I just want to throw out there right away. The second thing is that I don’t believe that you can outsource your entire marketing effort. I think that there are certain things that there are certain things that you can outsource associated with your marketing effort but I think that the core ideas behind it the high-level vision, setting up the processes to do it, I think that that’s something you probably shouldn’t outsource because you’re not going to know what to expect. So, if you’re a developer, outsourcing your marketing is probably a really bad idea because you don’t know what it takes. So, when somebody comes back and says, “Oh, it’s going to take me three weeks to put together this e-mail campaign,” you have zero basis for comparison to say, “No, it doesn’t take three weeks. It shouldn’t take three weeks. It should take you 30 minutes or three hours or something like that.” But if you don’t have any sort of basis for comparison, then you just kind of have to shrug your shoulders and say, “Okay,” versus if you sit down and put together the processes that somebody else needs to follow and…for example, sending out e-mails.

[27:59] If you need to do something  within MailChimp or AWeber or whatever e-mail service provider you’re using to send out e-mails on a regular basis to get some of those things set up not necessarily to write all the content for them but to get those things set up, maybe you want to send out a specific e-mail for, you know, end of the year promotion that you’re trying to do. Something like that, you should have a good idea of how it should be done and if those types of promotions or things that you’re going to be doing on a fairly regular basis, then you’re going to want to document those things and you’re probably going to want to be able to outsource them because if it’s going to take you three hours to do it and you know what the process is going to be to have that done, you can outsource that but you have to put in the time and effort upfront to be able to set those processes in place to have somebody else do them. But once you’ve got them in place, that’s something that you can definitely automate. You could definitely outsource that but building that is not something I would advice.

[28:52] And when it comes to all of the strategic things behind your marketing efforts, you want to be able to track from initial customer contact all the way through to the complete life cycle of your customer, how many times your…you have to touch that customer in terms of your support cost, how many times they have to be contacted with your e-mails and you want to have all of that statistical information. And if you’re trying to outsource that to somebody else, I question how well that’s going to work out because they’re not going to be nearly as invested in the business as you are and they’re probably not going to be thinking of the high-level strategic things that you are because there are certain things that as a business owner you’re going to need know and you want to know versus somebody who you just hired to do that and they may know their stuff, they may know how to do that stuff very well but you’re probably better off hiring them on a consulting basis to help advice you about the different things that you can do and then you go off and do those things.

[29:49] Rob: I’d like to start by maybe defining terms because you can outsource tasks and you can outsource projects and it’s very, very different. You find someone on oDesk for 10 or $15 an hour and you write up a process, you can outsource the task to them and that’s one thing, right? So, you can either have them be doing support or just a basic step-by-step process. You can even create some content for an infographic and you can outsource the specific task of designing that to someone for a few hundred dollars. But to go to someone and say, “Here’s a project. I want you to do all the content marketing,” and that’s likely going to include infographics and blogs and articles and all that kind of stuff. That requires an entirely different level of competency on that person and they need initiative. They’re going to be astronomically more expensive. It can literally be the difference between paying someone $15 an hour and paying someone $3,000 a month to handle all of your content marketing. Those are actual numbers that I’ve received and you know, gotten quotes for them but the difference is that if you have enough money and you don’t have enough time, then you go with that project-base thing. I threw out $3,000. That was a cheap quote, by the way. There were many people who quoted 10 grand a month basically handle the whole, you know, content marketing aspect of…of like a startup business.

[31:05] So, you really need to think about the difference between those. I don’t think that outsourcing it to an agency, that’s what I’m saying is like the project-type, that’s actually can work for you and I know startups who’ve done it and I know that it works but those agencies are extremely expensive and I don’t think that’s what you’re talking about. Most bootstrap self-funded companies are not doing it that way and you can only afford to outsource tasks. Second thought is that marketing is absolutely core activity, that’s something I’ve talked about a lot and it’s very hard. In fact, I’ve never outsource my project-based marketing to anyone until I got…I found that product manager who’s now, you know, working with me on HitTail. It took a while for me to have confidence in him to do that kind of stuff but other than that, I only outsource task-based elements of it. If you have an infinite amount of money, then yes, you would hire experts in-house. You’d hire employees or you’d hire some kind of long-term contract and they would do both of your development and marketing, right? You’d hire employees to do it and that’s  what big venture funded businesses do and that’s the ideal situation. But when you have $500 a month of revenue or $500 a month from your salary gig and you’re trying to fund this, you just can’t do that and you have to make a decision which of these things am I going to outsource and in that case, I really do think that that the development side is easier to spec out. It’s easier to find someone who can give a product, good enough that people can use until you can build this business up and if you do in fact have product market fit and can market this thing.

[32:30] And I also think that the marketing side is the one that takes the vision and the expertise and if you, the founder and entrepreneur, don’t have that going in to a bootstrap startup, I genuinely do not see a way that you can be successful. I think that has to be your number core competency. Even if you love development, even if you’re going to do all the development yourself, you have to love the marketing too because if you don’t, then the business goes nowhere because no one else is going to drive that engine and that’s the engine that’s going to basically drive your whole business. So, thanks, John for that question.

[32:59] Music

[33:03] 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.

Show Notes

Transcript

[00:00] Mike: This is Startups for the Rest of Us: Episode 112.

[00:03] 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. We had a new addition to the Startups for the Rest of Us Drinking Game and it was submitted by Will Samuels and he said, “Drink whenever Mike says essentially. Toast a glass of eggnog and prepare to do some drinking in this episode.”

[00:38] Mike: Yeah, I’ve noticed I do that a lot.

[00:40] Rob: What’s going on? Did you get anything cool for Christmas?

[00:42] Mike: I got a Kindle Paperwhite.

[00:43] Rob: Very nice. How’s the screen? I’ve heard they’re nice, easy to read.

[00:47] Mike: It is very nice. I was actually reading it last night in bed. It was nice. It was not like the iPad where…and part of the reason I want it was because it was not an iPad because the iPad has got that LCD screen and the light is basically shining through it right in to your eye versus everything I’ve read about the Kindle and the Kindle Paperwhite was that it’s more or less backlit where the light shines down on the letters then reflects off of them as oppose to shining directly from the back. And it was a very nice experience. It’s very easy on the eyes. You can read it in little light and you can adjust the lighting levels. It’s just very nice pleasant reading experience. I feel like it’s a lot better to read in bed than an iPad.

[01:25] Rob: That’s what I’ve heard. Makes it easier to go to sleep and doesn’t mess with your realm. The Kindle Paperwhite is the next what is it like the fourth generation Kindle with the same price as the old one but you can read it in the dark without having an external light on it like the old Kindles.

[01:38] Mike: They still sell the ones that are not backlit and those are sold about 60 or $70. This one was about 110 or 120. It’s kind of in between the…like the baseline Kindle and then you have the Paperwhite then you’ve got the Kindle Fire and the LCD screen and everything else.

[01:53] Rob: Cool. I have to admit I have Kindle NV because I had an iPad one. It weighs I don’t know a pound and a half or something and  you know, if you get in bed, it actually is just hard to hold up. You need two hands. I really have thought about getting a Kindle as well because they’re so light.

[02:07] Mike: Yeah and that’s part of why I wanted it. So far it’s working out. Probably give some sort of an update in three or four months after. I’ve actually use it for more than what, two days. [Laughter]

[02:16] Rob: Sure, sure. Well, hey, I’ve had more credit card failures than usual. HitTail normally it charges X people per night for…for their monthly membership and there’s just been a substantial rise in credit card failures and you know what I think is going on I have no way to prove this but I think that either people’s cards are maxed out or the velocity of charges has flagged just a few more of them with the…you know, like the risk department of the credit card has flagged them and kind of shut them down until they can get it cleared. You know, again can’t validate that but it’s the only reason I can think of that, you know, that the charges wouldn’t be working all of a sudden because it’s not like it’s at the beginning of the new month, often times, you know, I’ll see things that…that expired from one month to the next but it’s the middle of December and I would expect that maybe at the start of next year. But…

[03:01] Mike: It could be. I recently got a new American Express card and it’s not like my old one was expiring. I just got a brand new one in the mail. I have no idea why. I think it had to do with…they’ve got some like new chips that they’re putting in to the cards so I don’t know how many of those cards or American Express versus something else but that might be what the issue is where people are switching cards and then because of that their old cards are being denied because they’re no longer valid.

[03:01] Rob: Got it. Yeah, good to know. How about you? Have you been doing any work on AuditShark?

[03:33] Mike: Yeah, I’ve had a bunch of articles written recently. I think I had mentioned last week that I was going to get that started. I tried…tried out a few different things. I’ve got about ten different articles on various topics written at this point. Most of the qualities had been pretty good. There has been one that was…it was off topic. We asked for false positives or false negatives. It’s basically a definition of it and we forgot to specifically state that it related to compliance so they gave it to us based on e-mail  false positives and false negative. So, it was more about spam filtering than about compliance and we try to go on back and forth with them but it was just going to be a nightmare. So, we’re just ordering a brand new one. And it was only I think 8 or $9 to have it written. So, it’s more cost-effective to have them rewrite it than it is to try and go back and forth with the original author.

[04:19] Rob: We’ve seen this happened from time to time with the articles that people order through HitTail and we’ve actually had to tweakour U.I. and add an extra required feel that forces our HitTail customers to add more detail to article request because they’ll just say, “Write an article about this keyword.”And often times, you know, I might say going to the Notre Dame but what they mean is going to Notre Dame the college in Indiana. You know, there are these things where people just get it totally wrong. There’s the same city names in like Canada and in the US, in England and they’ll say, you know, blank city name real estate. And so without an extra layer of specification of what you really want the article to be about, you’ll often get the incorrect subject matter. So, I can totally see what happened. You really can’t…can’t fault them because when I have false positives, I would…in technology, I would also think of e-mail false positives.

[05:13] Mike: We caught it before, well it wasn’t before I got to the person, apparently the writer had picked it up and we gotten in touch with the intermedia area. I’ll call them and say, “Hey, we just want to clarify and add some notes on here and it looks like we’re not going to be able to.” And they said, “Oh, yeah, once a writer picks it up, there’s nothing we can do. You can’t send them additional instructions or change anything, nothing.” I’m like, “You can’t even just forward this information to them,” and apparently not. So, whatever, what you do.

[05:39] Rob: Sure, I did want to cover some iTunes reviews we’ve gotten recently. I want thank Kyle MB [Phonetic] who said, “Real value and no fluff. I’ve listened to you guys for about 12 months. Rob and Mike share real life practical information that provides value.” And Scott Bartell said, “Great podcast. Awesome thought provoking content, offering some great advice that is typically actionable and applicable  to my startup.” So, I encourage you, if you haven’t go in to iTunes even if you don’t write a full review like that, you can just click the 5-star rating and you don’t have to do anything else and we really appreciate it. It helps us rank well in iTunes, helps us grow our audience and we obviously, you know, appreciate you taking the time to do that.

[06:16] Mike: You know, I…I reviewed a very interesting book over the past couple of weeks for O’Reilly. They got in touched and asked if I’d be interested in taking a look at this book. It’s called Lean Analytics for Startups and it’s all about looking at data trying to figure out what it is that you should be doing, talking to people and trying to figure out what it is that they actually mean versus what they are telling you and being able to read between the lines and then some of it I’ll say softer skills because you’re interpreting what people are telling you versus a lot of it is very hard core math about these are some numbers that you should be looking at and this is exactly how you should track them and how you should follow them. And it doesn’t give you technology specific things in terms of what…of how you should track them, just these are the data points that you need and these are the actions that people need to undertake in order for you to track that information.

[07:05] Rob: Nice. Did you take away anything that you think you’ll be putting in to place with your businesses?

[07:10] Mike: I did. I took a bunch of notes and I have to say it was part of the review process I had to send them back, filled out questionnaire they had and it’s probably two or three pages worth of questions that they had but then in addition to that, I sent them probably 8 or 10 pages worth of supplemental notes and stuff on different things that were in the book, things that I thought either they need to be elaborated on or just didn’t make much sense in the contexts of where they stood in the book. But there’s a lot of really good information in there. So, yeah, I definitely took some notes and made sure that I’ll be integrating some of that. But the one interesting thing that I found was that it almost seemed like no matter what the stage of your business, the book was going to be applicable to you or at least certain parts of it. When you start your business, there are certain things that are going to be applicable to you and then as you progress in to your business and you start building it up, there are other parts of the books that are applicable  to you. So, depending on what stage you’re in, it’s going to have something for you which just depends on, you know, where you’re at with your business.

[08:07] Rob: That sounds good, hope to check it out when it comes out. I just listened to episode 219 of TechZing and it’s called Confessions of an Overcommitter and Justin and Jason talked about overcommitting to doing too many projects and just their process…some projects they’ve had to abandon over the past couple of years. It’s really quite interesting. I recommend, you know, even the folks don’t typically…even if you don’t typically make it through the 90-minute TechZing Podcast every week, it’s an exceptional episode that I wanted to call out because I resonate a lot and I feel like the entrepreneurial ADD that a lot of people have will, you know, resonate with this episode. So, check it out if you have time over the holiday break.

[08:45] Mike: Speaking of those guys, are you taking funding from Jason? [Laughter]

[08:48] Rob: [Laughter] No, I’m not. Did you hear that episode?

[08:51] Mike: Yeah, he…he’s talked about it several times. He’s like —

[08:53] Rob: Yeah.

[08:53] Mike: “Oh, I’d love to just dump money in to whatever Rob’s way.” [Laughter]

[08:56] Rob: Yeah. No, I don’t think I’m going to take funding. Obviously, I told him, “You know, you’ll be first on the list if I decide to.” But there’s more…it’s more trouble than it’s worth to take a little bit of funding just with the structuring that needs to take place and all that. I don’t really need the funding. At this point, I have enough in the bank to fund this as fast as I can and I guess if I wanted to get, you know, Drip specifically, if I wanted to grow quicker, I would consider funding obviously if it was the right choice but I just don’t think. Without raising several hundred grand, it’s kind of not worth the effort to do so.

[09:25] Mike: Cool. So, I think in today’s episode we’re going to be talking about startup metrics for pirates. There’s an acronym that’s Dave McClure came up with. And Dave McClure if you’re not familiar with who is, he’s an entrepreneur and a prominent angel investor who’s based in San Francisco and he founded and runs a business incubator named 500 Startups. And he does public speaking engagements and works with a lot of different startups. And the acronym that he came up with is called Startup Metrics for Pirates because it’s AARRR kind of a play on aarrr for pirates.

[09:58] Rob: Yeah, folks who haven’t heard of Dave McClure, he’s more than just an angel investor. He founded a technology consulting company in ’94 and then he works as a consultant for Microsoft, Intel and other companies. He was a Director of Marketing at PayPal for some key years 2001 to 2004 then he launched and he ran marketing for Simply Hired which a lot of you probably heard of and he was also heavily involved in Mint.com. I think he chose to hire Noah Kagan to run the marketing. So, I think he was the marketing guy there before Noah. So, he definitely has experience, you know, with this kind of stuff and then as Mike said he started his seed accelerator in 2010 and he’s been doing…he’s been an outspoken and he, you know, large personality angel investor. So people…people either love him or hate him in general.

[10:40] Mike: So, the acronym that he came up with is there’s two As and three Rs. And the first A is acquisition. Second A is activation. The first R is retention. The second R is referral and the third R is revenue. And we’re going to talk through these five different things. There’s two different things that Dave points out about this and the first one is that these are explicitly for marketing. These things that you do apply specifically to the marketing not necessarily to the product itself because there are different things that you are going to do with the product versus the marketing behind it. The second thing is that these are not exactly sequential and one of the things that he would do is he would put an emphasis on activation and retention before acquisition referral because you want to make sure that people are actually using your product and you are retaining them as users before you go out and try to do a lot of acquisition and referral to try and scale things up. And there are certain things that are more important but it’s definitely important too that you make an attempt to go through these different stages in your startup and try to apply them to the marketing plans that you put in place.

[11:41] Rob: I see. So, when he says they’re not sequential and again, let’s run to the five. It’s acquisition, activation, retention, referral and revenue. So, they’re not sequential in terms of what your business should focus on and optimize but for the most part they would be sequential for a single customer coming through your business because first, you would acquire them through, you know, general means we’ve talked about different marketing approaches. Then hopefully, you get them to activate and then try to retain them and then he’s saying get them to refer others and then look at the revenue model.

[12:11] Mike: Right.

[12:11] Rob: It seems like for an individual customer, it’s probably going to be sequential but for your business in terms of what you should focus on, it’s…you may start with number three and four like you said.

[12:21] Mike: Right and again, because these are associated with marketing not necessarily the product, you have to remember that because number five comes in as revenue, that essentially ends the marketing pipeline because you’ve already marketed to them enough such that by the time they get to the revenue phase you are asking them for money or you have monetize them in some way, shape or form through either ads or lead gen or something else.

[12:44] Music

[12:47] Mike: So, the first one is acquisition and acquisition is essentially when users come to your website and they can come to your website for a number of different channels. They can come in through any SEO you’ve done, PR campaigns, social networks, direct telemarketing, TV, ads, et cetera. And this is essentially where you start measuring from and this is 100% all of the people who come to your website, all the people that you get in touch with, that’s where you start counting from and that is you’re hundred percent that you should start counting from.

[13:17] Rob: Right, so this is the top of the funnel, right? This is all of your marketing approaches, all the high level stuff and certainly, acquisition is probably talked about more than a lot of his other points than the other five points because the acquisition, the marketing approaches tend to be just the things where you can have little tips and tricks that work and can drive…it just sounds so cool to say, “Oh, I’m…I can drive 10,000 people to my website doing this.” So, 20,000 people by getting on Digg or Hacker News or some other, you know, social news thing.

[13:49] Mike: Right and that’s one of those things that if you look at that and you look at those raw numbers, “Oh, I got a million people to my website,” that’s great, you know, how many of them activate? How many come back? How many are going to follow through and do any of your calls to action? And getting a million people to your website is great but if you’re not doing these other things to essentially follow up with them, then it really doesn’t matter.

[14:13] Rob: He’s just saying it’s almost like visitor acquisition. It’s not actually acquiring the customer. It’s just getting someone to come to your website and step two then is activation.

[14:23] Mike: Correct. So, activation is when users enjoy their first visit. If they have some sort of a happy user experience, if they hit your home page or a landing page or they stay for more than a couple of seconds because a lot of people will come to your website and just at a glance, they’d said, “No, this isn’t what I want,” they hit the back button or if they start clicking around your website a little bit, if they view two or three pages or four, those are the people that you want  to start tracking. Again, you’re moving from that, you know, hundred percent people who are in the acquisition stage down to maybe you’ll get 25% of them or 50% of them in to the activation stage. And as you start measuring these obviously that funnel is going to whittled people down but you want to get as many people down to the revenue stages you possibly can. But again, this is just your marketing funnel.

[15:10] Rob: Yeah, I think the way I would think about activation in terms of maybe a SaaS app or you know, WordPress plug-in or some type of software product, I would think that activation will either be someone who signs up for trial or better yet is someone who signs up to hear more about the knowledge that you’re spreading basically through a like an e-mail follow up sequence something…the similar thing that I’m trying to do with Drip that we do with HitTail and I do with all my products. I think that getting a certain percentage of people to engage give you permission to contact them again is likely a good indication of activation. Do you…can you think of other aside from them entering an e-mail in a box but it seems like it’s a trial or them giving an e-mail is activation? Do you see other options for that?

[15:54] Mike: Well, that’s not really what Dave is talking about when he’s talking about activation. In terms of just marketing because what you’re talking about with users activating a subscription or signing up for a newsletter or something like that that is more about users coming back. That’s about retention. What he’s talking about with the second page which is activation is that they actually enjoy coming to your site and they stay there. If they view a couple of pages, maybe they look at the newsletter sign up screen. That’s essentially still looking at them in terms of being in the activation stage in your marketing. If they sign up for it, then they’ve entered in the stage three which is the retention but if they sign up for a trial, they’ve…they’ve skipped all the way to the end and you know, you’re trying to get them in to that stage five which is revenue. I —

[16:39] Rob: But the trial is not revenue, right? A trial is more…I could see a trial being retention like you’re saying step three but a trial is not revenue yet because of whole chunk of those people will never give you a penny.

[16:49] Mike: Right but in terms of the retention that Dave is talking about, he’s talking about mind share more or less and it’s getting people to come to your site and to think about you in the future and in terms of retention, users come back to your site. It doesn’t matter if they’ve signed up for anything, if they come back to read your website again because if you…if you look at the number of people who just come to your website once and then leave and never come back, then it’s an awful number to look at. I mean people don’t want to see that number but it’s really, really high. If they come back to your website for anything whether it’s because they signed up for something or if they start viewing other pages on your website because there’s a blog or additional content that they want to read, that’s what he’s talking about in terms of retention. It’s not about retaining you as a potential customer for product, it’s about retaining some sort of a mind share for you to want to come back.

[17:41] Rob: I hear what you’re saying and I think that could be done using let’s say you have a free trial of a SaaS app or you have a free version of a WordPress plug-in that is what’s going to bring them back to your site, right? Or if they sign up for a 5-day e-mail course is that…that’s what I’m thinking of in terms of the step three, retention. Would you agree with that stuff or not?

[18:03] Mike: No, I do, I do.

[18:03] Rob: Okay.

[18:04] Mike: It’s just that I guess morph in what you were talking about in terms of activation because —

[18:07] Rob: Got it, okay.

[18:08] Mike: …you had said activation they sign up for a trial, I’m like well that’s true —

[18:10] Rob: Jumping and be gone. [Laughter]

[18:11] Mike: Yes, it’s jumping all the way to step five. It’s not what —

[18:14] Rob: I see.

[18:14] Mike: …the same thing.

[18:15] Rob: So, activation and which is step two is pre…you think it’s pre them giving you anything. It’s pre…it’s just them having a good experience on your site rather than them actually giving you an e-mail or taking any kind of action.

[18:28] Mike: Correct.

[18:28] Rob: Got it.

[18:29] Mike: And then step three as you said they sign up for a mailing list or they sign up for a newsletter. They start reading the blog. They come back to it and you know, they start actively looking for a little bit more information.

[18:42] Rob: You know, imagine, Mike, someone might be listening to us and thinking how can I improve step two, the activation stage because I think we talked a lot about acquisition and retention but how do you make someone have a better first visit, have a better happy user experience?

[18:56] Mike: Well, you have to kind of walk them through what you expect them to do or what you expect them to understand from your website. You want to strip it down. You want to make sure that there this little information there as possible that is distracting and that’s one of those things where you look at a landing page and a lot of landing pages these days, they only have one or two links on them. They look like the rest to your site but almost nothing is clickable and they may rip out some of the navigation. They may rip out a lot of the additional images that are on the page and all of that’s in an effort to…to minimize what the user has to pay attention to.

[19:33] So, if there’s only two buttons on the screen and obviously, those are your only two options to click on anything. If you have arrived there from either a Twitter campaign or from Google AdWords or something like that, if it’s a true landing page and those are you’re only two options, you really make it simple for the person. Either they use the back button and they leave entirely or they move forward on one of those two options. They don’t really get around to the rest of your site and you can help drive them to do exactly what it is that you want them to do such as signing up for a mailing list or watching a quick video or signing up for the newsletter and things like that.

[20:08] Rob: Yeah, I think there’s a couple of really common mistakes made at this point like with landing pages. The first one I see over and over is giving way too much information. You should give the minimum, minimum amount of information and you should and need to be able to communicate your products, value proposition through that specific audience and realize that the value proposition may be different for different audiences you’re marketing to but you should send each of those through different landing page then but you should be able to communicate your value prop to that audience in one sentence or even shorter than that like six words and in complete sentence. And if you can’t do that, then your product is…is too complicated and you need to figure out what the…the single most valuable value prop…someone is going to be coming through that click to find, you know, that’s what you’re trying to do. You can’t have ten value props on the page thinking that you’re going to capture everyone because you’re basically going to capture no one, right?

[21:01] The second error that I see is doing the opposite of what you said which is putting a lot of links, giving people, you know, all the paths through your website and I think that the natural inclination is to think “Oh, you know, if they don’t want to give me their e-mail, then I don’t want to chase them off. I don’t want to lose those people.” And the fact is that if they don’t want to give you their e-mail, then they aren’t a good prospect. They aren’t interested enough in your product to type in their e-mail and to trust your, you know, your website hasn’t build enough trust to convince them that you’re not going to spam them and that you’re actually going to provide them with something valuable. If they’re not going to do that, then either number one, your offer is bad and you need to fix it or number two, they’re just not a good fit for you and you’re wasting your time marketing to them anyways.

[21:44] Mike: So, stage three in this process is retention and like you said getting people to sign up for a newsletter or e-mail list, walking them through to a tutorial or things like that making sure that you have plans at enough mind share such that they will come back to your website. Those are the things that you’re really looking for when it comes to retention.

[22:01] Rob: Yeah and retention can happen in a number of ways. You know, if you think five or ten years ago, retention was just someone came to your website and then remember to come back to your website and that’s a really poor way to play it these days. There’s much better tools for it. You know, before social media and blogging and all the e-mail lists and all that stuff, that was what most people did. And if you actually go in to your Analytics and you look at the number of the percentage of people who purchase that are first time visitors versus returning visitors, it’s typically anywhere between two and ten times more returning visitors purchase from you. And I look at this in my Business of Software talk a couple of years ago and I actually…I talked to Hiten Shah about it for Crazy Egg. I think Patrick McKenzie, I had numbers from him. I had numbers from Dave Rodenbaugh, from a number of my apps and they…across the board it was a minimum of 200% improvement from returning visitors and like I said I think with Crazy Egg it was like 14 times more people purchase who are returning visitors.

[23:00] And so you can always rely on people remembering but that’s a really, really pathway to do it. You want to improve you’re odds of having them comeback by doing things we talk about a lot on the podcast and you know, offering a 5-day e-mail course or some type of rewards that they sign up for your e-mail list so you can ping every once in a while. It is maybe having Facebook and Twitter and having them follow you but there’s just such a weak ties these days that they…it’s not something I really go after. I always go after the…the higher commitment approach like an e-mail or a trial. I mean when someone is actually trying your app, then you’re having more of an excuse to get in touch with them and they answer their questions to the e-mail and I think those are probably the top ways these days that I’d recommend looking at retention. And this is actually I mean as a little plug like that’s why I’m building Drip. So get drip.com. It helps with this stuff. It helps you retain more and be able to contact them more and work them, you know, turn them in to trial users and or customers.

[23:54] Mike: Right and all that’s more focus on actively trying to retain them versus passively just hoping that they will come back to your website or that you’ve provided enough information on your website to begin with that they come back on their own. Something else that I think we haven’t really mentioned yet about retention that I think would fall in to this is if you’re using Google or AdRoll or any of these other services that will market to them after they have left your website and essentially follow them around with advertisements when they visit other websites.

[24:24] Rob: That’s exactly right. Retargeting or remarketing —

[24:26] Mike: Yup.

[24:26] Rob: …yes, it’s called. Yup and you can do it both on other websites they visit or even now Facebook has remarketing. So, if someone visits your website, you can remarket to them on Facebook and that definitely works well.

[24:39] Mike: The next two, number four and five are referral and revenue. And I think that this can be interchange a little bit. It depends on the type of company that you’re putting together the type of product that you’re marketing as to whether or not referral comes before revenue or vice versa. But with referral, users like your products enough to refer other people and you can get them to help refer other people either through e-mail campaigns or things that you do on your website, contest, having widgets on your website that they can either download on to their desktop or on to their website. There’s a number of different ways that you can allow people to refer other people to your product or service.

[25:17] Rob: There’s a whole world that goes on this viral marketing type of stuff where if you’ve ever heard the term viral coefficient, you’re shooting for as high viral coefficient as possible and that means that every new user you get refers X other users. There’s a certain number when you write one viral coefficient it means that every new user refers one other user as a certain number that you hit that I think like Sean Ellis talks about which is when you’ve really hit product market fit and your viral marketing is doing well because imagine, let’s say every new users you got referred three other users. That’s an incredible viral growth. So all you got to do it just stuff as many new visitors in to the top of the funnel and then business is going to multiply. That is only achievable, again, from what I’ve read because I’ve never built a viral business like but it’s only achievable if the virality is baked in to your business. It’s not something where you have them sign up for a trial of a SaaS app and then there’s a screen that says, “E-mail your friends,” or “Refer your friends to, you know, to…to get a discount or something.” It’s just your viral coefficient will never get above one or very unlikely to get above one if it’s not baked in to product in terms of something like LinkedIn or Facebook or Twitter where you’re actually actively encourage and the product actually gets better the more people you refer, right?

[26:32] In order to use the product well, you need to refer a bunch of people and so there…there’s a difference here and it’s something to keep in mind forcing virality on the product is not necessarily a bad thing but you can’t expect it to dramatically grow a SaaS app or a WordPress plug-in or just a standard software business like it would a social network or you know, even e-Bay that kind of thing because it…they’re different piece. And so, while virality can work in all the cases, it’s something to keep in mind as you’re building your business to know what kind of business you actually run and how you can use referrals and thus the virality…there’s a several companies that offer this now but if you are a software type of company or you’re selling something even if you’re selling information, there are services like ambassador. They’re at getambassador.com and I think Referly is another one but they basically help engineer with this so you don’t have to build all the engines to do this. It’s kind of like having an affiliate program, someone who handles your affiliate stuff. But they offer more abilities. They offer the…they e-mail your friend forms, the widgets and that kind of stuff. And I do actually use that with HitTail. That’s a good way to think about doing it instead of building it yourself.

[27:41] Mike: And the third R in Dave McClure’s list is revenue. And in this stage, users conduct some sort of monetization behavior and whether that is they’re clicking on ads or they’re filling out information that you’re going to follow up on with them for example lead generation. If they’re signing up for a subscription or doing anything that is essentially going to generate money for you, that’s the revenue stage.

[28:04] Rob: Like Mike said earlier the revenue stage can come before the referral stage but in the typical Silicon Valley startup and the stuff that Dave McClure is talking about, that referral stage they try to put it before any type of revenue because that’s how you get that viral coefficient as high as possible whereas building smaller businesses where, you know, you are mode dependent on the revenue in order to grow since you’re bootstrapping, I would tend to put the revenue before the referral. You also need someone to be using it and be happy with it and willing to pay for it in my opinion before they’re going to refer someone to “more boring” business like these businesses that we do talked about on this podcast.

[28:43] Mike: One of Dave’s points about the referral is that your customer satisfaction for them has to be greater than 8 for to work anyway. If they’re not particularly satisfied with the experience that they’ve had with your website or with your product, that just not going to work at least an 8 out of 10. Well, that kind of makes sense. I mean if people aren’t happy with it, they’re not going to refer others and if you’re depending on that referral piece of it to help drive your growth, it just not going to work.

[29:07] Rob: Yeah, I think in terms of the step, the revenue step, this is harder than it sounds. I actually run in to quite a few entrepreneurs who do build that application or build that software product and they do get visitors to the website, meaning they get past the acquisition stage and they do get some kind of activation because people at least mill around on their website and they do get them to sign up for a trial. So some type of retention but then they either have a free plan and the person never converts to revenue or the trial expires and no one is converting to revenue. So, getting to this fifth stage with at least one or two percent of your overall website visitors is harder than it sounds and it’s something that requires that you’re solving a problem have, problem solution fit and that you’re marketing to the right people so that you have product market fit.

[29:53] And once you hit this and you can push a lot of the folks who are in step one all the way down through the funnel and actually get some revenue  from at least a small portion of them, that is when it’s time to scale the business and that’s where it actually does makes sense to sometimes to raise funding. I think a lot of folks take for granted and I think I did in early days as well take for granted that getting to revenue is just the natural next step. It’s like going to high school and then going to college and then, you know, taking the next step and that in that whole path, but it’s not. It’s actually a lot harder. The first three steps, acquisition, activation and retentions aren’t actually that hard. Getting someone to sign up for a freemium plan or getting them to sign up for a trial is really not that big of a deal. Getting someone to refer someone or getting someone to pay you money is a lot harder and turning that in to a repeatable process is even harder. But once you do, you basically meant taking money. I mean that’s where you just put money in one…you put a dollar in one side and you crank the handle and then $3 comes out the other side a month or two later.

[30:52] Mike: One of the other interesting things that I think Dave does with this is that he assigns an estimated value to people who are in each stage of this funnel. So, at the acquisition stage, you have a lot more people but their estimated value for each one is, you know, maybe 5 cents versus somebody who is down at the retention area because they’ve come back to your website a couple of times. They might be worth an estimated value of about a dollar and then if you get down to the part where they are entering the revenue stage, they may be worth $50. And again, these numbers can be wildly different based on what your revenue model is, how much your product cost, what’s your expected lifetime value is, those kinds of things. But from Dave’s point of view, the interesting things is trying to estimate the value of each of those people because then you can essentially extrapolate how much money you should be investing in to each of those phases.

[31:45] Rob: That’s a really good point. I actually wish I had brought that up. I have all of my funnels spelled out just like you’ve said. I have…I know the exact dollar amount and sometimes it’s the cents amount for all those change of the funnel and I know how much I can pay to acquire a trial, how much I can pay to acquire an e-mail address in to our 5-day e-mail sequence. I know how much we can pay to get someone on the 7-day long tail SEO crash course on HitTail. I know how much we can pay for in general for website visitors although that one tends to vary, right, because the source really matters a lot. But if you don’t know those numbers, then you have a couple of issues. First thing is you’ll never be able to do paid acquisition and while that’s not the end of the world, paid acquisition is such a large…it’s a large market that you could be reaching in to that you won’t be able to grow very fast, you know, without knowing these numbers. You can do things like content marketing and put out infographics and blog post and do a lot of, you know, viral videos and be on Twitter and Facebook and do all that and that’s okay. You can drive traffic fairly inexpensively but you still have to monetize your time and infographics, they are fairly expensive to get designed and they will often take a lot of your time to manage and to figure out the numbers.

[32:56] So, in my opinion, you have to monetize those as well. The entrepreneurs I know who are doing content marketing they won’t say an infographic is free. They will look and say, “All right, I’m paying a designer X hundred dollars and I’m spending X hours of my time that are valued at a hundred or $200 a piece and I add that up and unless this infographic or this blog post or this, you know, story that I’m trying to get placed on…on a guest post somewhere, unless that drives X number of trials or X number of e-mails, then I have a negative ROI even though I didn’t actually I’ll put that money I will put it in time.” And so I truly believe in…in basically monetizing and quantifying all elements even if you’re not cash out of your pocket, it’s really important that you know your numbers. That in my opinion is a way that you’re going to be able to monitor things and go after the things that work and double and triple down on and actually grow your business the fastest.

[33:49] Mike: So, just to recap that, the first stage is acquisition which is users come in to your website from various channels. The second one is activation and that’s where people enjoy their first visit. They have some sort of a happy user experience. The third one is  retention, users come back to your site and visit it multiple times. The fourth one is referral and again, the fifth one is revenue which can be interchange with the referral but referral is people like your products enough to refer others. The fifth one is revenue in which users conduct some sort of monetization behavior.

[34:17] Music

[34:20] Rob: If you have a question for us, you can 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. See you next time.

Show Notes

Transcript

[00:00] Rob: In today’s episode of Startups for the Rest of Us, Mike and I are going to be discussing co-founders and equity, personal branding, advice for a recent graduate and answering more listener questions. This is Startups for the Rest of Us: Episode 111.

[00:14] Music

[00:23] 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.

[00:32] Mike: And I’m Mike.

[00:33] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. Well, I recorded my first video training course last week. I had a videographer come to the house and I had someone interview me and we spent about…well it was about two hours behind the camera. I think he’ll edit it down to maybe 45 minutes to an hour of content. It’s about why startup should hire VAs and how to do it and the whole process and stuff. And it was absolutely terrifying but it was absolutely exhilarating at the same time to have all the cameras up there and just…I’m very comfortable now on podcasts and with screencast and that kind of stuff but it’s so different to be standing in front or sitting in front of an actual camera and knowing the people are going to watch later.

[01:15] Mike: Yeah, interesting. I hadn’t thought about like the lighting aspect of it. That would be I suppose a little bit intimidating if you haven’t really done it before or you’re not used to it. It’ll be almost be like being on TV all the time.

[01:25] Rob: Yeah, that was it and he…you know, he had a full lighting set up with all of those big white umbrella things that reflected inward and then he had a three-camera set up. So, you’re being watched from all angles and a microphone fix…I mean it’s just…it’s a different scene and he actually made it really professional. He made it feel a professional and so as a result, it was like, “Oh, man. I feel like I’m under the gun here with a producer or something.” But it was a lot of fun. Obviously, folks are…if you’re interested in hiring a VA and you want to know more about it. I probably will market it through…announce it through my e-mail newsletter at softwarebyrob.com. You could sign up for that in the upper right and that would be the main avenue that people can hear about that.

[02:02] Mike: Pretty cool. So, when do you think that would be out?

[02:04] Rob: I’m supposed to have the videos in the next week. I’m actually very excited. This is, you know, it’s different than any other video course I’ve ever seen because it is like two people in the same room. It’s not like a Mixergy interview where you’re over Skype. So, it’s two people in the same room discussing this topic and then it comes with the actual assets that I use, the job posting and some questions and a sample screencast. I mean it kind of all of that and I’m going to package it up and sell it as a video course. With these many things that are going on in January, this is lower priority. I mean you and I need to get MicroConf tickets sold. I have three marketing things that are completed for HitTail that we decided not to launch in December because things are slowing down. So, that will be in January. So, as a result, I think I’ll probably spend the time to write the e-mails and launch this course. It…either be late January or early February and then I have two more plans for the remainder of the year as time permits.

[02:56] Mike: Cool. Do you have a website and everything for that or no?

[02:58] Rob: I don’t and I don’t think I’ll launch a separate a website. I will probably host it through someone like Udemy and they have pretty cool deal for if you want to host courses like this. There’s no reason to go through or finding another domain and trying to market it separately and all that stuff. Maybe at some point but I think for now, I’m just going to do more of a low-profile launch and then I have some ideas on how I’ll market it past there and none of them require with setting up all the stuff that it takes to get a…being in process in place and the check out functionality and all that stuff.

[03:27] Mike: Cool.

[03:27] Rob: What else is going on?

[03:29] Mike: Well, I got a slightly depressing e-mail today from Verelo. If you remember Verelo was one of the sponsors at MicroConf. I had showed a screen shot of the server statistics of like ping times and things like that and how fast my server was responding and then I showed it after I had switched my website from where it was over to WP Engine. Do you remember that?

[03:50] Rob: Yeah.

[03:51] Mike: Unfortunately, they’re shutting down.

[03:52] Rob: What’s going on?

[03:53] Mike: It just sounded from the e-mail that I got those are funded company and things just were not progressing well enough. It seemed like they were behind some of their competitors and they just didn’t have kind of enough lead time in order to be able to do the things that they wanted to. So, there might have been some marketing challenges. There might had just been being late to the market and just not able to get enough traction because, you know, the people who would do that kind of stuff, they probably sign up for it and then afterwards, it’s like why are you going to switch from one provider to another because you’ve already went through all the leg work, chances are their pricing is not going to be exponentially better if you go some place else. Unless there’s this giant value proposition to switch what is it by you.

[04:31] Rob: Right. Yeah, that’s a bummer. They…because they were also in the Academy, right?

[04:34] Mike: I think they were, yeah.

[04:35] Rob: Do you know if they’re pivoting or if they’re absolutely like shutting everything down?

[04:39] Mike: I got the impression it’s completely shutting everything down. I think the —

[04:42] Rob: Okay.

[04:42] Mike: …founders are kind of moving on to another project to this point.

[04:45] Rob: Right. You know, if it’s slow growth, it’s always hard to justify that and if you have investors who want their money back, it’s maybe even harder.

[04:52] Mike: Right. Yeah, I mean maybe if they were…if they were self-funded, it might have turned out a little differently because they probably would have been able to kind of keep going. But, you know, it really depends on what their income stream was and I…I have no idea what that looked like. So…

[05:05] Rob: Right and that’s where to trip, right, if you have two people and you grow this business to 10 grand a month. It’s like, oh, that’s a nice…nice little chunk of change but if you have investors and then two founders and you’ve grown it to 10 grand a month, that’s…that’s nothing.

[05:16] Mike: Right.

[05:17] Rob: Like that a complete waste of everyone’s time, you know, because the returns are just so small.

[05:20] Mike: Uh huh.

[05:22] Rob: Well, I’m winding down. It’s…we’ve got about 12 days left in the year and every year, my wife and I each try to do a solo retreat. Stay in a hotel for one or two nights, no kids, no family and in fact, I don’t bring my laptop when I go. I might bring the iPad because that’s where my books are but I try not to do…trying to be online answering e-mails, any of that stuff, mostly pen and paper, mine’s planned for the first week of January. And that’s that time that I spend either planning my goals for the next year or I spend it really figuring out if I already know my goals like this year I do, right, because we actually did that in our goal’s episode. I really want to mark out  like month by month, how am I going to do them, whether or not I really want to do all these things, maybe even look out past a year but it’s just a day or two to really focus and think about, you know, clear my head and kind of have more than clarity to really gain energy and momentum as the year starts.

[06:16] Mike: Cool. So, I was up till 3 a.m. last night hacking away a code. And remember how I said I want to stop doing code?

[06:22] Rob: I do.

[06:22] Mike: Yes, Don’t get me wrong. It was…it was fun to sit there and do this but I was hacking away this code to do some integrations for the some e-mail marketing that I’m doing. And it’s going pretty well but I ran in to some problems with KISSmetrics and literally just before this podcast started, I finally realized what the problems were because I was doing stuff. I started on it probably last night at around 10 o’clock at night and then I was working on it until about 3 a.m. And some of the data was there and some of it wasn’t and I realized just before we started the podcast that the problem I ran in to which was I had thought was caused by the fact that they say, “Oh, well, we don’t process a lot of these things or a lot of the data for two to six hours. So, maybe a little while.” I realized that it’s because the date range was set to the last seven days versus this month. So, what happened is like all the data that was going in before midnight was getting there by virtue or the fact that it was last seven days versus this month with…which sort of also included everything after midnight.

[07:18] Rob: Right because last seven days means the last seven complete days. So, if you’re in the middle of a day, it won’t show any from that…from that current day.

[07:26] Mike: Yup.

[07:26] Rob: Is that right?

[07:27] Mike: Yup.

[07:27] Rob: Okay. That’s always a bummer. Yeah, I’ve done made this exact same mistake in advertising dashboards. It seems to last seven days or last 30 days should be from now but they…they do this completed day thing and that always screws me up.

[07:40] Mike: I understand why it’s like that but I just wish there had been something in the UI where you’re choosing the date range where it says, “Such and such a date, to such and such date or to midnight —

[07:49] Rob: Right.

[07:49] Mike: …or something like that.

[07:50] Rob: Right and once you’re using this for a while and you have data, that’s…it’s not going to make a difference, right? Because it’ll be a few hours a day that it doesn’t show up but when you’re doing this integration and you’ve written all this custom code and you’re trying to test it, it’s…it’s kind of a pain.

[08:02] Mike: Uh huh but other than that I’ve also been outsourcing a bunch of new articles for the AuditShark website and that’s going pretty well. I’ve got I think 10 or 12 that are on my lists to I have written and I’ve gotten probably half a dozen of them back. So, far I’m very pleased with what the quality is of these different articles because a lot of them are definitions for things around security or compliance and the things that I could write but it’s just not really worth my time to go ahead and sit down and write them.

[08:29] Rob: Oh, absolutely. Writing is not only time consuming but it’s that good glucose, you know, that you really needed to save for high…kind of high productivity and high value actions and writing articles to go and kind of an FAQ or an article section of your site is not one of those things. So, that’s good to hear it’s been working out well. Are…did you hire a single writer or using one of the…the writer marketplaces?

[08:51] Mike: So, I’m using one of the marketplaces. I’m using the content authority right now but there’s others that I kind of poked around a little bit at and I was…I just kind of evaluated this with two initial articles thinking to myself, well, if this works out, I’ll continue using them and if it doesn’t, then maybe I’ll try some place else. Because at the end of the day, there’s kind of a certain quality bar that you want to hit and as long as it’s above that bar, you don’t necessarily care whether you’re paying 4 cents a word or 4 and half cents a word. It’s just…it’s immaterial at that point. The first couple of articles worked out, ordered a bunch more of those seemed to be working out. There’s one article that came back out of like six or seven that we’ve done so far that it’s a little iffy. It refers to a lot of legal jargon that would be referenceable elsewhere but I just don’t have those references and you know, it kind of sucks that it has that but we did put a limit on how many words the article was supposed to be. So —

[09:41] Rob: Yeah.

[09:41] Mike: …I was a little leery of it just like on their main page, everything looks fine but then when you start digging in, you’re going to like the FAQ, all the formatting there is all so screwed up. And I don’t know why but the content I was getting back was recently decent.

[09:54] Rob: So, I have a little bit of a rant here. I don’t know…have you been following the news with Instagram and how they updated their terms of service?

[10:00] Mike:  Yeah, I haven’t followed it but I know that there was some little [Indiscernible] or something like that about it.

[10:06] Rob: It just continues to amaze me. These companies with no revenue model that just want to build mass audiences and then they’ve kind of figure out how to start making money and always has to do with advertising or with selling user created content or selling advertising around user created content. I don’t understand why they don’t have it in their terms of service from the beginning because that’s what Instagram did. They…they changed it and put language in that said they could like sell the photos that they have like an unlimited license to them or they have ownership even though you’re posting your photos. Facebook has done this, right? They do the privacy stuff. Twitter has screwed their API developers. I mean it’s just on and on and on these big companies with no revenue model just suddenly turn and do this.

[10:46] Now, the funny thing though is the reaction, it’s people who just become shocked by the fact that suddenly these companies do to make money that they…they think Instagram could just be free forever and that there was never going to be this. So, it’s kind of both sides of the coin are…are humorous to watch like really this is happening again, really there’s going to be another uproar. This is…it’s…it’s quite predictable and…

[11:07] Mike: Yeah, that’s just pretty sad.

[11:09] Music

[11:12] Rob: Actually, we have two voicemail questions for the day and then a number of text questions that came in via e-mail. So, let’s dive right in. The first one is from Justin Jackson and he says, “Hey, Rob and Mike. I love your podcast and I love the Micropreneur message. It seems like you have your hands in a lot of different baskets like you’re a jack of many trades and you don’t seem to be as stress out as some of these other entrepreneurs. I did some reading today by Adii who is the founder of WooThemes and he had an article that says ‘Passion will make you work more’ and then he has one that says ‘Jack of all trades, master of none’ basically saying that it decreases the quality of your work, your product or your services. I’m wondering if your experience as a micropreneur with no employees and multiple projects has been different or am I reading your life wrong? Have you found a secret to a balance life? Cheers. Justin Jackson.”

[11:59] So, there’s… there’s two main points here Justin is asking about. The first is about “Passion will make you work more” and the quote that he pulled out of there is “When you start a business, it’s fun at first but then it feels like you’re feeding the beast, daily you’re making a deal with the devil. You need to work more and more to maintain the business.” In my experience as a bootstrap entrepreneur, now, Adii is as well, right? He didn’t accept funding. But in my experience I’ve always felt like I’m able to work more when I want to and I think a lot of that comes back to really structuring my businesses around my life and around the kind of life that I want to live. And so outsourcing has been a huge part of that. Outsourcing, tier one, e-mail support and you know, hiring now most recently a product manager but having a number of folks hovers around between 7 and 9 contractors who work for me in any given month. I had been very deliberate about that and I know Adii has employees and so, you don’t know if he’s able to outsource essentially off load work from him to the employees he’s hired or if the employees are more of a burden, right, because that can also be the case.

[13:07] If you have 10 employees reporting to you, it’s different situation than if you have 10 contractors, independent contractors working on different things and they’re kind of set up to be more autonomous. That could be the difference here, right, is that Adii really is growing a startup that’s more like a traditional company and I’m not and I’ve never had that goal to do it. I want to grow my businesses as large as they can within these confines that I’ve set up and confines often have to do with as long as they don’t have major impingement on my life and they don’t require me to…to work ridiculous hours because I just…I don’t have it…I don’t know if my life structured to be able to handle that.

[13:44] Mike: I think my take on this is really it depends on what you’re trying to do and how you have decided to tackle the problem and part of it is…I see a lot of people who will try to build businesses and they’re trying to do everything either all at once or in very quick succession and they’re not taking the time to automate certain aspects of it so that they don’t have to do those things especially the things that they either are not good at or don’t want to be good at especially with developers. Developers have a hard time doing a lot of the marketing stuff and that’s really kind of the hardest part of them and part of it is because they procrastinate because they don’t want to do it because they don’t like it. And it just gets to a point where they’re not doing those things that they really need to be doing to make the business successful.

[14:26] So, they feel like they’re working a lot but they’re not actually doing the things that need to be done. I think that that’s probably part of it and you know, maybe that’s what their reference to feeding the beast and making a daily deal with the devil in order to get things done. The other part of it is being able to finish the things that you started because there’s a lot of people who are more than happy to start a brand new project but there’s that last mile that you really have to undergo in order to take a product to market and if you’re not able to kind of push through those challenges and get the product out the door, then you’re going to get to a point where things stop being as fun as they were in the beginning and you’re kind of give up before it’s time. So, I think that those are the sorts of things that play in to it. I think that it really has a lot to do with what your personality is and what your purpose behind making those decisions is.

[15:16] Rob: Yeah, I agree it has a lot to do with what you’re trying to build and bottom line, I mean Adii is a friend of mine. He spoke at MicroConf last year and you know, you can think of this, his single blog post here could have been just a snippet in time, right? He could have just been feeling this way on that particular day and wrote the blog post. It may not be the case for his entire startup. The other part of the question was about being a jack of all trades. So, the quote is “If you’re a jack of all trades, master of none, it decreases the quality of your work, your products and your services.” We do know a little lot of people hold this view point. And so, I think the implication here is saying should you not work on a number of different products at once, does that make you a jack of all trades?

[15:56] I would argue that I am not actually a jack of all trades because I don’t do design work. I don’t do…I do some copywriting but I also outsource a good chunk of that. I don’t do a ton of development. I do some of it. But for the most part, I focus heavily, heavily on being kind of the visionary for the entrepreneur role of my…my apps and my products. I focus on marketing. And that is really my core thing. I would say that I’m not a jack of all, I’m more of a master of, you know, the marketing and the vision stuff at least within…within my realm. I would agree that it’s a challenge to be a good designer, HTML, CSS guy, jQuery, developer, copywriter and founder, that does water you down because you only have so much good glucose in a day. You can’t spread it around all these activities.

[16:44] And so, as your business grows especially, you need to get people who are special, who specialized in something and who are masters of that area and I think you need to choose the one or two areas that you’re going to become a master of and not spread yourself all over the place. And so, well I may have ten products, I do kind of the same activity for all of them and if you put it under umbrella, it would be marketing like that’s where unachieved marketing guy at all of those area, you know, and all of those products and for the most part like the development, the support, these other areas are outsourced.

[17:19] Mike: Yeah, I was going to say something along those lines as well. I mean you’ve got, you know, all these different things that are kind of under your umbrella but when you start expanding things out, I would say that the two aspects you need to really kind of focus on and be a master of are one is marketing and two is project management. And if you can get those two things down, then the rest of it can be outsource because as a good project manager, you can make sure that the code gets done. You can make sure that the design work gets done and by people who are fully qualified to be doing it and because those things tend to be time intensive, you can outsource them and as a good project manager, you’ll make sure that they get it done in time and that all these different things are going in parallel and they get done in about the same time or in the time and frame that they need to get done and you can basically get all the work splice together.

[18:05] The other side of it is the marketing side which you basically need to be able to do that well in order to have a product that’s going to sell well and if you can combine those two aspects and become really good at both of them, then essentially it doesn’t matter how good a designer or how good a developer you are. I mean as long as you have the money to at least get started and the time to be able to invest in it, if you’ve got those two skills, the rest of it is largely immaterial.

[18:32] Rob: Next up, we have a voicemail call in question.

[18:35] Voicemail 1: I’m contacting you for some advice as somebody who’s recently graduated from a CMIS degree, the difference being between this and the Computer Science degree would be calculus. The whole reason I got the degree was to feel more confident both on the process of creating stuff online and hopefully, being able to do a majority of it myself. That said, I feel still stuck in the burning process. I live in an area where they don’t really have so many jobs to offer recent graduate. I support my wife’s military career and so, I’m kind of stuck. I can’t really move away.

[19:13] Am I deluded to think that I can learn to make online path while still supporting her career and being home for the kids. Would it better to gain experience working for somebody else regarding languages has giving inundated on which one to really focus on, maybe focusing on PHP since the servers that supported seems to be a lot cheaper than a .NET and I guess what can I be doing better? I’m on tutorial site Lynda.com net apps just…I guess practicing and honing and making up situations first. I…I just don’t seem to be getting past a hobby or skill level. Thank you so much for your time.

[19:53] Mike: So, thanks for the question. I think that the first thing you need to do is really decide what your end goal is because it sounded to me like you were unsure [0:20:00] whether or not you should go out and find a job doing fulltime development or whether you should be looking to build a business and you know, sell your own products online. And it sounds to me like there’s a lot of hesitation to do either one almost as if you make that decision and it’s going to be final and I don’t think that that decision whichever one you ultimately decide to do is going to be final. You can certainly choose one and then if things don’t work out or if you decided that you don’t like it, you can pivot later on and do something else. So, I would keep that in mind first and foremost because it’s not like you can’t change you mind later.

[20:34] The second thing is that you needed to decide what, as I said what your ultimate goal is, what you want to try and do. Start down that path. If you want to build products, then start building products. If you want to go out and get a job, go out and do that. Now, there are certain ways to find contract work online and some of them will pay well, some of them won’t but you definitely need to get started and get some sort of a portfolio if you want to go that route. So, if the local job market can’t support you, the internet is available to you. You can certainly go out and start looking there. In terms of finding a product to develop, that’s about talking to  people who have problems and just trying to solve those problems for them. Develop a marketing strategy to reach out to those types of people who are having that problem and make sure that you have a solution for them. The one thing I would caution you about is don’t go building a product that you think people want and then try and sell it to them. Find what people actually are having problems with and then build the products to solve that problem.

[21:29] Rob: In addition, the caller mentioned that he went to college. He got a CMIS degree and that he didn’t feel like he was prepared to…to now build apps and I would second that. If you actually want to build web apps, don’t go to college to learn that because that’s not the best place. People I know who have…have really know how to build web apps, build web apps, right? They had to buy a book and then build the sample project or build the project of their own. Some of them do like tech…technical schools that are training schools for to actually get a job. College tends to be much more academic. I mean I got a Computer Engineering Degree from UC Davis and I came out knowing languages that were 10 and 15 years old that hadn’t been used in industry in a long time. He also mentioned that tutorials aren’t enough that he still feels like he doesn’t know how to build web apps and I would say, yeah, you’re right. They aren’t enough. You have to go and start building something, building a project because you’re going to learn more doing that than anything else.

[22:26] The question of PHP versus .NET versus Ruby, you know, what language you should use, if I were you and I was learning from scratch right now, I would go with either PHP or with Ruby on Rails. They’re just…they’re open source. They’re inexpensive to get in to. You can build, you know, really great web apps with them. So, pick one whichever suits your fantasy and do a little bit of research and figure out which one is going to work for you. The last part that I’ll address is he mentioned whether you should try to teach yourself or you should start trying to make some online apps like get…get a job from someone else, right, to actually have someone paying you to build their app to get the experience. I would say it depends on how much time you have in a given week. If you literally are working fulltime and have a wife and kids and you have five hours a week, then I would say now is probably not the time to take on contract work because that’s just enough time to learn anything valuable.

[23:19] If you can figure out a way to get between 10 and 20 hours a week of time, I think that’s reasonable to go on a site like eLance or oDesk or Rent a Coder. Like Mike said, the rates are going to be abysmally low especially on your first few projects until you gain some reputation and then you can raise your rates. You’re not doing it for the money though. You’re doing it to hash things out and…and to learn and it’s going to take you a lot longer to build something than it should because you’re still learning about experience of actually building production things and getting them live on the internet is going to be more valuable than six months of going through tutorials, bottom line. So, whether you have the confidence to do that now or whether you want to just come up with a small project that you think might take 20 or 40 hours to build that you give away for free online that you post to Hacker News to get some traffic and feedback just to see how your stuff holds up, then…then maybe that’s your first step to build the confidence that then you can now have at least a little bit of a resume and a portfolio to go on like I said eLance, oDesk, Rent a Coder, any site like that. And then actually start making a little bit of money to justify the time you’re spending and that’s how I would do it. I would reiterate on that until you have the chance to potentially go out and work for someone else.

[24:28] And I do think that working 40 hours for someone else and taking a salary and hopefully being, you know, trained on the job is the best way and the fastest way to learn to code. That’s how I learn to code. Be careful that you don’t get in to a job or it’s like you’re a software developer but half of your time is in meetings and half of your time is spent doing maintenance coding because you’re not actually going to learn much from that. So, you will have to be picky about jobs that you accept but that’s kind of the path that I would throw out.

[24:57] Our next question comes from Scott and it’s about consulting a new contract position and a SaaS app. And he says, “I’ve been consulting fulltime since spring doing web development. I’ve been developing my skills and learning consulting as a side business over the past six years. So, I’ve been growing my consulting business and working on a SaaS product that will launch by the end of the year. I recently got the opportunity to take a fulltime hourly contract web development position. Contract position could last a month, six months or be open ended. So, I don’t have a good idea of how long it will last. I’m looking for advice on how to handle this so that when a contract position ends suddenly, I don’t have a gap between a contract position ending and obtaining new consulting projects. This month, I’m going to be putting in crazy hours as I already have my usual consulting work lined up and the fulltime contract position starting. But I’m wondering what your thoughts are in handling these next few months. One thought is to choose better consulting projects/clients during this time and try to increase my hour and rate for project. Thanks again. Scott.”

[25:52] Mike: So, this is really a good question and I’ve been in this situation before where I was doing some consulting and doing part-time projects here and there and then a project landed in my lap that was going to be a fairly long-term project or at least I felt like it could be. But the question was if I undertake this project and it is let’s say 30 to 40-hour a week project and then how long is that going to last and how do you go about maintaining other clients that you’re working with and working for while you’re doing that one such that if it ends or when it ends, you don’t have nothing to go back to. There’s two different ways that I would approach this.

[26:29] The first one is to essentially solidify how long it is that they’re going to actually have you on retainer for. So, ask them upfront to find out. Get it in writing so that you know when it’s going to start, when it’s going to end. The second thing I would do is ask them for a renewal clause of some kind that says that, okay, if it’s going to be a 4-month project, they let you know 4 weeks in advance whether they’re going to extend it and you have to put that in front of them. You have to ask the questions because you are in that position. You can’t wait until the day before the contract ends and find out, “Oh, we’re not going to renew this. So, we’re done.” Because that put you in an extremely bad position and you know, it’s not going to be your fault but you’re the one who’s going to end up suffering for it. So, those are the two things that I would keep in mind.

[27:13] Another option would be to instead of working for them fulltime, work for them part-time and offer instead of 40 hours a week, do 30 hours a week or 25 or something like that. If that’s a possibility, then great. If it’s not, then if you’re looking to expand your consulting business, this might be an opportunity to do it. But again, if you start getting in to a consulting business, then you’re getting away from products and it’s very difficult to expand a consulting business and at the same time transition in to products.

[27:41] Rob: When I was consulting, I was offered fulltime contract positions and I never took them. I always negotiated them down which sounds crazy, right? It’s like you’re turning down work but I never wanted to be in this position where someone basically held my livelihood in their hands because now you have a single point of failure and you kind of have to do whatever they want or you have to walk and you have to find other work before you walk. It’s a tough situation to be in. Not something I would necessarily recommend doing as a contractor. I mean I think that’s one of the beauties of being a contractor is, is that you can put together multiple clients and have a client base so that you’re not be holding to a single point of failure or a single client who can demand things of you that are unreasonable but you have to put up with because they are…are paying your mortgage. So, I guess I’ll start with that.

[28:27] Fulltime contracts in general are somewhat dangerous. The only time I would ever consider one is if they were paying a very high rate and I knew that I could bank money quickly so then in the first couple of months, I have enough money to have a cushion of a couple of months in case the contract  broke down. I definitely think during this time, you should make hay while the sun shines and you should continue pursuing other contracts and you should…this is not something I say often but I would consider putting the SaaS product on hold for now and building up a stash of cash from this fulltime contract and then from any other contract work you can put together and just talk to your…you know, if you’re married, talk to your wife and say, “Look I’m going to work hard for the next several months but it’s going to put me in a position to then shoo out of this once…once all this stops.”

[29:12] In addition, I would only look for those new contracts under a higher rate because there’s no reason that you should be accepting cheap contract work now. You’re in demand and you have…this is when you raise your rates. The third thing I would consider if it all possible is to hire some help. If you could hire a part time developer to assist you even if you have to review all their code and check all their coding yourself, it still could very well be worth, you know, helping during this time and if you take new projects on with the understanding that you are a lead developer and that you will…you have some help with it that you would be the point of contact but that you may hire and don’t say, “I’m going to outsource part of this,” say, “Yeah, I have someone who…who helps me with some things.”

[29:50] I definitely think that could be a good way. It’s like Mike said your tether [Phonetic] on the edge though of becoming a consulting firm, I don’t foresee this as going down the path. I really do see it as making some hay while the sun shines and trying to get money in to your account so that you have a cushion so that if this thing does suddenly end, that you…you don’t have to scramble for that next position. So, thanks for the question, Scott. Our next question is another voicemail.

[30:15] Voicemail 2: Hi, Rob and Mike. It’s Dave. Just want to call and make a quick comment. Just listened to episode 100. Congratulations on that. The…the sound bites from the founders were really great. I just really felt like you guys could have added a little bit after each one would have been really great to get your perspective on what they had to say. Second comment, Rob, I was wondering when I see you around on different kind of podcasts you seem to come across mainly as the startups guy. And I’m wondering if you prefer to be sort of the startups guy or if you’d rather be like the HitTail guy or what your thoughts are in terms of the two brands slash, you know, businesses that you try to run. So, I look forward to the next couple episodes. Congratulations again on 100. Take care. Bye-bye.

[30:57] Rob: So, I’m going to answer that part right now. Mike and I actually discussed this specifically and I remember Mike was like, you know, it’s a 100^th episode, everyone’s heard enough from us for 99 episodes. Let’s let some other founders talk. We did about back and forth but I think we just wanted to give…give it room to breathe, you know, allow these truly gifted founders who’ve done great things to kind of speak…speak on their own. So, do appreciate the feedback though. So, the…the question for me was whether I want to be the HitTail guy or whether I want to be startups guy. I don’t just have two products that I’m running. I have ten products that I’m running and some of them are online courses, a book. Mike and I run the Micropreneur Academy. We have MicroConf. I have DotNetInvoice, a number of other software products. And so, it wouldn’t make sense for me to be essentially any one of those things. It just…it doesn’t work. I know that some people, you know, when you look at Joel Spolsky and he was the FogBugz guy for long time and then eventually, he moved on but he was what FogBugz guy for 12 years or something. He was the CEO. But that makes sense for him and 37signals guys, they have multiple products. They aren’t the Basecamp guys. They are 37signals guys, right? They have the umbrella over all their products.

[32:04] That’s what I have as well. I have my company that no one care…you don’t care about the name. It’s called the Numa Group and it owns both startup-related stuff and it’s all of the courses and the writings that I’ve done and then I have these software products that are actually doing…they are actually where I do my laboratory learning. And it just wouldn’t make sense to tie myself to any of those because not only do I have multiple but I may have exits from some of them. I make acquire new ones at any given time. I may shut them down or sell them or, you know, just different things go with that. So, I do have two sides to my businesses. I have the actual software products and then I have the teaching. And mostly when you hear me on the podcast, I’m in the teaching mode and so, that’s where I, you know, that’s why I am the startups guy.

[32:48] And I feel like being a teacher is something that I really enjoy and in orders to do that, you do have to have like a personal brand around that, right. You do have to be the startups guy in order for people to care about what you do and they’ll listen to you and to care about your teaching. Whereas HitTail, it can sell without someone being behind it, right? It doesn’t need a personality or a face to get people using it because it’s a tool and it has utility and you use it for that purpose, whereas if you are selling knowledge and information and doing courses, you do really need I believe a face behind it to be the most effective.

[33:23] Mike: I think one of the dangers with kind of branding yourself as a specific person is that if that business ever goes away for whatever reason, then you’re still kind of tie to that. So, for example, a lot of people think that Joel Spolsky still runs Fog Creek and that you know, my…my understanding is that he doesn’t. He works in an office that’s right next to them but he stepped down as the CEO several years ago but people…and I’ve talked to some people. They still think he’s the CEO and I don’t believe he is. I think Michael Pryor is these days. So, the danger of course is that if you are associated with the specific brand for so long then it becomes difficult to step away from that and speaking from a different brand.

[34:04] So, now people may look at him and say, “Oh, well, he’s the CEO of Stack Exchange and the Fog Creek Software,” and that’s not necessarily true. Let’s say he decided to go off and do something completely different. Let’s say instead of working with developers, he works with accountants. Well, that persona is going to kind of follow him around. So, it’s really about what you want to be known as not necessarily just promoting your business but part of it is promoting your kind of personal brand. You don’t want to tie yourself to things that are going to weigh on you later on but you definitely want to be known for the things that you want to be known for versus things that, you know, people are going to associate with you that are going to have certain connotations associated with it. You don’t necessarily want to carry it around to every single audience that you speak with.

[34:47] Rob: So, thanks for that question. Our next one is about co-founders and equity. It’s from Tim O and he says, “Hi, Mike and Rob. I love the podcast. Thanks for sharing your knowledge with the world. I have a question that might be interesting to answer in the show. I’ve started a marketplace for recruitments agencies and freelancers in Germany. Since I don’t know how to code, I outsource the coding to multiple freelancers and I’ve been particularly happy with the work of one developer considering offering him equity to get him even more engaged and to get more of his time without paying more cash. I was thinking of offering 1% of the company each month over the course of two years. After 24 months, he would own 24%, in addition, I would still pay him a small amount every month but I would expect him not to count the hours. Of course, I do not expect him to be only working for me. What are your thoughts on this? What are the things to consider?”

[35:38] Mike: I think that the question here is really whether or not giving him equity would be something that motivates him. And it almost seems to me like there might be some sort of underlying question about whether or not he wants equity or whether he’s not involved as much as you would like, whether or not you can simply afford to continue paying him or pay him as much as you want. There’s a few different factors that are in play here and I think that if it’s because you want to reduce your upfront burden of paying him, I’m not entirely convinced that that’s going to work unless his goal is to have some sort of equity in the work because some people just don’t. Some people are just not cut out to be business owners or they don’t want to and that’s perfectly okay. There’s nothing wrong with that but there is a certain mentality that you kind of have to have in order to be the owner of a product and owner of a business and not everyone has that and that’s something you really absolutely have to understand because equity may not be something he wants.

[36:34] And on the other hand, if it is something that he wants, then you can certainly offer that but you need to talk to him and find out, you know, what his goals are, whether or not he’s working for other people and if so, what sort of other commitments he has. If right now you’re just having problems of getting hours out of the person and you know, you raise the rate and you’re still not getting the hours out of it, then to me, it seems like there is some other sort of commitment and it’s not necessarily financially-driven. Maybe this person is just doing it because they enjoy it or they’re just learning new things and they just want to learn those things. But you really need to find out what his motivations are versus what yours are and that really takes an honest discussion with him to figure that out. I mean you can’t just guess at them and throw something against the wall and hope that it sticks. You need to ask him or talk to him to find out what his motivations are and find out whether they match up with yours are and then work to find some sort of a middle ground. I think that the idea of offering equity overtime is a wise decision, whatever those percentages work out to be if as long as they fit with what you want, that’s fine.

[37:39] Rob: Yeah, the vesting is key. I think you need to do that. I also agreed with Mike about talking to this guy and figuring out if it’s one of his goals to own part of a company. I think 24% is way, way too much to give. Typically like a founding engineer might get 5% and sometimes it’s even less. Sometimes it’s…with a large company that’s already raised funding, it might be like 1 or 2% and then, you know, CEOs might get 5 to 7%. You’re in a little bit of a different situation because you’re much smaller but I think 24 is too much and maybe a third of a percent or half of a percent a month is probably as high as I would even think about going. The real issue here is what is that equity actually mean because are you planning on selling? Because that’s what, you know, equity in a venture-funded company, they either going to have an IPO or you can get your money out or they’re going to sell it to someone so you can get your money out. But unless you plan to sell the company and have a reasonable chance of doing so, equity isn’t actually that helpful.

[38:38] If you plan to give dividends meaning that everytime you take some money out of the company that’s not your salary, you plan to give him his appropriate percentage, then maybe you can do that. But this…it’s weird. Equity is weird with small businesses. It just doesn’t work out the same way that it does with large venture funding companies. So, I don’t really have a good answer to this other than to…to really think this through and to document everything in a contract whatever you decide. Probably give him less than…than you think you need to upfront. If he wants a huge amount of equity, then he may need to go start his own thing like it’s just…it’s not going to work to give hired or hand a developer a quarter of your company over the course of two years.

[39:22] Mike: Equity in a small business is a completely different animal than it is in like, you know, a large business or public company where, you know, the expectation is that there’s going to be some sort of exit for it.

[39:32] Music

[39:36] Rob: Our next question comes from Tenveer [Phonetic] and he says, “Do you recommend that a non-developer with no real understanding of this field get involved in owning software. My day job is an SEO and marketing so I had focused on that while outsourcing development and support. I’d love to hear your thoughts about this and if you’ve ever met any people who are trying to do this.”

[39:36] Mike: Honestly, I think that it’s a great idea. I don’t think that you need to know a lot about software to hire people  to build software for you. Now, it obviously needs to work and you want to make sure that you have some sort of mechanism to make sure that you’re not getting code that is unmaintainable in the future but if you can vet the developers that are coming in to do the work for you, I don’t see anything wrong with this. And if your background is in SEO and marketing and that’s the primary focus of what you’re going to be doing in the business, then I feel like that would be a great opportunity. It would certainly be helpful for most people to know a lot more about SEO and marketing before they’ve start in to a business where you’re selling things online as oppose to beating your head against the wall a lot trying to figure out what works, what doesn’t and not having the experience or background doing that because you’re going to end up making all these mistakes versus someone like you in your position where you’ve already got that background and experience and what you need is you need a product.

[40:51] The other thing that you might consider is buying something. So, if you go out to either a marketplace or you find a product online where they’re not doing very good with the SEO and marketing, then you buy the product outright and then resell it and you know, find some engineers who can kind of tweak the product to make it fit your own brand and then you do your SEO and marketing magic to get it out in to the marketplace and sell it better than they were.

[41:16] Rob: I think if you’re going to get in to software that you should make your first app small so that you can have an early win and learn how it’s really going to be because if you try to tackle a big app like let’s say a SaaS app, there’s so many things to think about in building and maintaining and deploying and keeping the hosting up, the 24/7 aspect. There are so much to know that it’s hard to learn all of that in one swing and you’re going to be much more likely to fail. But if you pick a small problem, then you work with the software developer for the first time and you build, say a WordPress plug-in or you don’t need to handle all of the aspects, all the technical aspects but you really need to spec it out. You’re going to learn how to do that and then you’re going to, you know, learn how to work with the developer. Then learn the elements of the marketing. You  can then take that with you and ramp up in the more complex products as you go and I think that early win will help built some confidence in your, you know, in your ability to manage these projects because Mike is right, you don’t need to know how to code to do it but t does help.

[42:13] And I would encourage you to whatever language you’re going to have something built in to buy a book or go through some kind of online course on this just so you know enough to know how hard things are, what it takes to build them. You don’t have to write all the code. You don’t have to write any of the code of your product but to understand what it takes to connect to a database and display something dynamic, you know, in a web page is really important when it comes to managing developers. Well, thanks for all the questions. As always you can e-mail them to us at startupsfortherestofus.com or call in to our voicemail at 888-801-9690 and we really hope that our answers were helpful.

[42:51] Music

[42:54] Mike: 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.

 

Show Notes

• Drip
• Basecamp
• FogBugz
• AuditShark
• HitTail

Transcript

[00:00] Mike: This is Startups for the Rest of Us: Episode 110.

[00:03] 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 are you doing this week, Rob?

[00:24] Rob: I am doing good. I’m winding down for the end of the year. I’ve already noticed a lot of my ads are not being clicked any longer [Laughter] the ones that that worked for the last several months, just noticed lower traffic, lower engagement, lower trial sign ups even on the traffic. I mean it really is a noticeable down turn.

[00:40] Mike: Uh huh. That’s interesting because I’ve…I’ve seen sort of the same thing with some of my sites but interestingly enough, I’ve had a couple of different customers contact me about the Altiris Training site that I have. And one of them told me flat out, “Hey, I’d like to look at your enterprise plan and if it looks good, then I’ll sign up and I’d like to issue purchase order for the full…for a full 12 months.” And I was thinking about it. I’m like, huh, I bet he’s got money to burn in his budget and he’s got to get rid of it before the end of the year and he’s looking for a way to dump it.

[01:12] Rob: That’s exactly what it is and that was the other thing. It’s both for budget and for tax purposes and I’ve already seen a couple e-mails of people saying, “Hey, can I pre-pay for a year in advance of this or that?” People asking about just some of the specials. I mean I did run some…we’ve…you and I ran some specials and then I ran some on my own and I got a better response that I thought I would. I like to think of December as kind of B2B stuff dying down. But there is definitely an angle here in terms of like you said budget and tax reasons. So, I’ve actually made a note to think harder about this next November.

[01:45] Mike: Well, I wonder if part of it is because the whole Fiscal Cliff here in the U.S. were tax rates are set to go up next year and nobody really knows what’s going to happen. So, because of all that uncertainty, they know how much they have to pay on their taxes this year. At least they know what the rate is but almost across the board, it’s going to go up in many cases by at least 5%, if not more.

[02:06] Rob: Right.

[02:06] Mike: So, I wonder if that has something to do with it. I wonder if you would see the same thing next year and I suspect you wouldn’t.

[02:11] Rob: Yeah, that makes sense because I’ve run a special…pretty much every December, I run specials almost across the board with all my businesses and I do like a prepaid special or you know, something where you can buy out ahead specifically for the tax reason and it hasn’t been as…I wouldn’t say it hasn’t been as successful as this year but it certainly hasn’t…there haven’t been as many people asking for it outside of that. So, I think you could be right because they all have been U.S., you know, U.S.-based companies or people who’ve been contacting me.

[02:38] Mike: Uh huh.

[02:38] Rob: How about with you? What’s going on?

[02:39] Mike: So, lately, I’ve been looking at Basecamp and FogBugz and trying to not necessarily integrate them but make sure that I’m using both of them effectively, to coordinate people who are doing on…doing different things for me and it still really early on it. I’ve been living…brought Basecamp in to the fold probably about a week ago. So, it’s still kind of a learning experience. Things are coming along. I bought its specs. I mean it’s a little bit slow. I wish things were going a little bit better. But I have seven different projects in there that I’m trying to manage and different people are involved and different projects on various levels. Right now, I’ve got five different people who are involved in the AuditShark launch projects. So, they’re still kind of counting down for that. But things are looking good for it so far. I mean I’m really happy about how things are progressing to kind of get it out the door and get it in people’s hands to really see what people are thinking of it.

[03:27] Rob: Right and that you’re still looking at mid January for that?

[03:30] Mike: Yeah.

[03:30] Rob: All right, cool. Now, we look at using…I already use FogBugz to navigate and coordinate and track features and tasks and such, someone suggested…someone on my team suggested we should look at Basecamp which I’ve used in the past and it’s okay. I mean FogBugz is not outstanding but it’s just…it’s what we use, right? So, it’s like the…the shifting cost is high so really has to add a lot to it in order to move to Basecamp or to use two tools. And we looked at it and decided that we could get done what we need to in FogBugz or with…with the new project with Drip, we have the…it’s the old Joel Spolsky project tracking spreadsheet. Remember? It’s genius. And I’ve…that’s what I used as a consultant when I was coding for years. I mean even with multiple teams we would share an Excel spreadsheet which is kind of kludgy but now, it’s a lot easier with Google doc. We decided not to use Basecamp. We’re using these other…these other avenues and so far, they’re working really well. So, I want to find out what you’re doing in Basecamp that you can’t do with FogBugz?

[04:26] Mike: Part of it is about just the cost of giving everybody access to FogBugz because, you know, I have people who are using Basecamp who are not developers and it seems a little excessive to be having them…to give them access to FogBugz when I have to pay for both Kiln and for FogBugz. So, it’s…you know, it’s $30 license per month and not everybody is working all the time.

[04:47] Rob: Right.

[04:47] Mike: And that’s the other issue is like, you know, sometimes I’ll have one developer, sometimes I’ll have five and it’s like the fluctuations are kind of pain in the neck. With Basecamp, I don’t have to worry about it. It’s just like, oh, you get 10 projects for 20 bucks a month. All the people who are doing stuff that is non-developer related, they basically use everything that’s in Basecamp and the people who are doing all the developer stuff are using FogBugz. So, there is kind of that…the lineation between them and it might be nice at times to be able to kind of tie them together but the thing that I like about using Basecamp is that I can upload files and have them they’re available. I can have discussions. I can put text documents that everybody is going to be able to see and it’s…I’ll say it’s a little bit more visible there than it is on the Wiki and the other thing is that you can put things in there that are highly visible to multiple view. I said, “Look guys, these are our top five priorities for example and these are the things that we’re going to work on and you’re going to work on this, you’re going to wok on that.”

[05:41] And I don’t know, I feel like in certain ways, it’s easier to see the to-do list and you just check them off instead having a process in place where you’ve got, oh, you got to open this up and you’re going to review it. You’re going to mark this result, you’re going to close it and I know that there’s work flows in the background with the FogBugz that you can use to kind of address some of those issues. But it just seems like there are certain cases where just using Basecamp for some things work better because it’s just like a to-do list. “Hey, I need an article for this. I need an article for that.” And you’re just got like ten different articles and it’s like, okay, well how do you track in FogBugz? Typically, you’d have ten different cases for that or you could have one case where they just have to edit it up with time and it’s like, okay, well, is it done? Is it not done? Then you’ll have to drill in and figure it out, oh, he’s got 4 of it, 19 done. You know, it‘s just not as easy to see some of those things.

[06:23] Rob: Right, it sounds like you’re saying Basecamp is less cumbersome for the task you’re doing and it’s less expensive. So, it’s kind of a no-brainer and it’s sounds like if…if you are just a team of three or four developers and you are all coders that you are just bite the bullet potentially and just do all FogBugz because you guys will all get the work flow. But —

[06:43] Mike: Right.

[06:43] Rob: …since you have some non-devs, it kind of makes sense. There is some complexity involved in FogBugz that’s where you’re introducing Basecamp.

[06:49] Mike: Right, right.

[06:50] Rob: Yeah, that makes sense.

[06:51] Mike: So, like I said so far it’s been going reasonably well but, you know, we’ll see how it goes. I mean who knows, maybe I’ll decide to ditch in a month and  it just doesn’t work out.

[06:59] Rob: Very good. Any other updates?

[07:01] Mike: The e-mail marketing campaign that I’ve…I’ve mentioned a week or two ago is starting to get interesting. I’ve got the KISSmetrics account set up. I’ve got a MailChimp account set up. I’ve got the template for the e-mail all straightened out and hopefully, e-mails will start flying in the next 48 hours.

[07:16] Rob: Very nice, that’s for a client, right?

[07:18] Mike: Yup.

[07:18] Rob: Okay, cool. So, you’re…you’re kind of rehabbing his old list that that really hasn’t been utilized very well. So, you’ll get to see if anyone has actually have receiving them pretty soon and what their responses and all that.

[07:23] Mike: Yeah, apparently, they have been sending them but they’ve been sending them through their Outlook online account. So —

[07:34] Rob: Yeah.

[07:34] Mike: …it’s not through their local ISP but they’ve been limited to, I think 500 e-mails a day.

[07:39] Rob: Right.

[07:39] Mike: So, they’ll send a few hundred one day and then a few hundred the next day and it’s just they’re not able to get them to the users on a specific time of a day unless they do it themselves and they can’t really schedule that stuff in advance. They have no metrics about who’s opening it and receive rates. You know, they know when it gets bounced and they know when somebody replies and says unsubscribe but beyond that, they really just have no idea what’s going on. So, hopefully, this will turn out well for them but I’m hoping to just having the statistic there and being able to measure that stuff will give them a better idea of what sort of things they should do. And I’m also doing some split testing based on the original e-mail that they gave me versus an e-mail that I’m tweaking to kind of show them and highlight some of the results and some of the differences between us through e-mails.

[08:21] Rob: Nice, well, I look forward to an update from that.

[08:21] Music

[08:26] Mike: So, today we’re going to talk about our goals and predictions for 2013.

[08:30] Rob: So, let’s dive in. What’s your first one?

[08:32] Mike: So my first goal for next year is to stop writing code.

[08:35] Rob: Gasp. Stop writing code, Mike. [Laughter] So, what’s the impetus behind this one?

[08:41] Mike: Well, I mean the fact is that I’m trying to engineer a business and building a business is not a lot different than building a product. I mean it kind of is but like when you’re building code, you’re building it to provide some sort of functionality and I’m trying to step back from the code because although it is important, as a developer, I realized how important it is to certain things work correctly. As a business owner, I also realized that the business is more important and I can replace myself in writing the code. So, if I can find somebody I trust to handle the code and handle those responsibilities, then I can step back from that. And things are getting to the point where I feel like I’ve got the development team in place that I need who can actually handle it and I trust them to be able to make the right decisions and be able to come back to me with stuff to say, “Hey, this isn’t working. That’s not working. We should do this or that.”

[09:27] And you know, I can just trust their judgment and that they’re going to make those right decisions and come to me with ideas and thoughts about how to do that stuff and I can turn them lose on it and they’ll go implement it in a way that makes sense that it’s going to be good for the business. And at that point, it gives me the opportunity to step back and concentrate on all the other parts of the business that need additional help.

[09:49] Rob: I would like to get to learn Ruby on Rails because that’s what Drip is going to be built in.

[09:54] Mike: Ah.

[09:54] Rob: So, I have a big ramp up [Laughter] period going on there because I just haven’t done much with it. But no, I totally hear what you’re saying and it sounds like you’ve been over the past three to six months, you’ve been hiring and vetting several different developers. So —

[10:08] Mike: Uh huh.

[10:08] Rob: …it feels to me like based on what you said that you’re kind of on way to doing this if you’re able to keep these guys around and that they do in fact perform for you. Do you think your current stock of developers will be the ones that’ll stick around or do you think you might need to change up probably through the year if you achieve success kind of…kind of scale it up and get some…I’ll say some better developers.

[10:29] Mike: I think the guys who are doing work for me right now can definitely handle it. I don’t feel like there’s any weaklings I’ll say, you know, availability and scheduling and things like that are always kind of, you know, an issue that it has to be dealt with but if things start to go well then it’s not like they don’t have the talent. The talent is not my concern. It’s, you know, can I afford to continue to make sure that they’re busy at a rate which they will not have to go look for other work.

[10:55] Rob: So, I have four goals that I have written down for 2013 and my first one is to grow HitTail by 2.5 X. So, 250% and I’m actually basing that on the October revenue. So, it’s about, you know, month and a half ago and that’s just because of that times two and a half makes a nice round number and I figure if I get there around next October potentially at the end of next year that I will be please with it.

[11:19] Mike: Very cool.

[11:19] Rob: Yeah, I’m excited. We have a plan in place and so —

[11:23] Mike: Yeah.

[11:23] Rob: …I’m assuming it’s going to change dramatically as the year goes on but things weren’t executing on right now or have us on pace to do that. So…

[11:29] Mike: I will say you’re cheating though. You’re giving yourself like a 6-week head start.

[11:34] Rob: At least, yeah, about two months it looks like. So hopefully, I mean in the ideal world, I’ll hit before the end of the year in which case it really will be a year over a year thing.

[11:42] Mike: That’s cool. So, my second goal is to launch AuditShark publicly. The January 14^th date is really kind of my…my soft launch to get it in people’s hands and work with them a lot more to make sure that they’re using it, gets to incorporate some of that feedback and then I’ll have another launch date in mind where I’m actually going to go public with it and say, “Look, you know, here it is,” kind of open up the floodgates and see what happens.

[12:04] Rob: That’s exciting. The day is finally coming.

[12:06] Mike: [Laughter]

[12:08] Rob: My…my second goal is to launch Drip which I mentioned on our last episode and that’s a new…it’s an e-mail marketing SaaS app that I’ll be launching, hopefully, in the spring, that’s the goal and I also have a 6-month revenue mark that I planned to hit based on the marketing plan and stuff I’ve seen working with…with my other apps. I’m excited about that. If folks are interested to hear about that, it’s at getdrip.com. And it’s one of those things where you just have no idea, right? If…let’s say the launch list is thousands of e-mails, I could hit that revenue mark very quickly or if the launch list is thousand of e-mails that don’t convert very well, [Laughter] then that later it’ll take me, you know, the full six months to get there.

[12:47] So, there are somewhere in between but I just…and like to have…I found it when I have some specific goals to shoot for as long as I don’t let them overwhelm me like I did early on with HitTail where I…where it actually started…it started impacting my performance in a negative way because I was so burden with…with the goal, the revenue goal I had. As long as I don’t do that, I find it that it drives me and you know, it makes me focus on that single metric that I’m…that I’m trying to hit in a certain period of time.

[13:12] Mike: Cool. So, my third goal is to grow to a fulltime team of at least three people. And by a fulltime team, I mean myself and at least two others who are essentially underneath the umbrella of Moon River Software.

[13:24] Rob: Got it and is that working on AuditShark or is that include Altiris Training and others?

[13:28] Mike: It include…it includes the other things as well but I think enough to keep at least three people, if not more busy on AuditShark. As I’ve said before I’m trying to back off from writing the code so I don’t have as much to do there which means I can start pointing at things and say this needs to get that and that needs to get that and I’ve started really doing that over the past month or two. And being able to outsource those tasks so that I don’t have to spend 20 or 30 hours coding three or four different features, I can just say, “Hey, I need you to do this, I need you to do that. And these are the things that need to get done.”

[13:58] And being able to hand those off and have them spend the 20, 30, 40 hours doing those, has really been helpful in terms of overall productivity. And I think that there’s definitely enough work there to keep people busy. I mean I still have 500 open cases in FogBugz right now that need to be fixed in some way, shape of form on various projects. So, it’s not like there’s not work there. It’s a matter of getting the work done in the right order such that it brings in the revenue as quickly as possible in order to be able to scale up the business a little bit.

[14:27] Rob: Where did you come up with the number of three? I guess three includes you.

[14:31] Mike: Uh huh.

[14:32] Rob: Okay, so it’s two other devs. So, why two devs instead of 3, 4 or 5 or just 1?

[14:37] Mike: Part of it is financial reasons because I don’t know and it kind of relates to one of my other goals which is to cut 75% of my travel consulting which essentially means getting rid of all consulting revenue.

[14:48] Rob: Yup.

[14:49] Mike: So, part of that ties in to the fact that I have to essentially replace that revenue with other revenue and in addition to that, I need to be able to fund other people to work on the products. So there’s kind of a huge growth margin there just in terms of shifting from consulting to product revenue but I think that the way things are aligned and the way things are starting to turn out that that’s entirely possible, I just don’t have a good feel for what the timeline of that looks like because there’s a few different things that are in the pipeline that haven’t launch, haven’t gotten out the door yet and until they do, it’s hard to measure what the impact to those are going to be because as you said with the Get Drip, I mean it could be widely successful on day one, it could take a while to get there, really kind of depends on how those things turn out.

[15:34] Rob: Do you also have a revenue goal for AuditShark in mind?

[15:37] Mike: Not specifically, I mean I haven’t sat down to kind of go over all the numbers because the people who are doing work for me right now are doing it more on a part time basis so because of that I just haven’t sat down and do it.

[15:48] Rob: Well my third goal is to have another MicroConf that changes the way that people launch their companies. I felt like the last two years of MicroConf have just been an amazing success and it’s because in the interim year between the conferences, I’m seeing tweets. People hash tagging with MicroConf that say, “Hey, I just launched,” “Hey, I just got this partnership,” “Hey, we started a mastermind group based on MicroConf,” like it impacts people’s business, lives, their professional lives and it’s making a difference in how they do things and it absolutely makes a difference in how I run things based on the people that I meet.

[16:26] There are relationships that…that I’ve been able to build and just the inspiration that I take away from my MicroConf. So, my goal is obviously always to improve the event and to make the, you know, next MicroConf better than the last one but beyond that, I really just want to continue impacting this world of bootstrappers. And I don’t mean this to sound like High and Mighty like oh, we’re changing the world or anything but I really do feel like we’re changing the lives of, you know, the hundred and fifty people that attend. And so that is absolutely a goal high in my list for 2013.

[16:58] Mike: Yeah, I totally agree. I didn’t specifically write that down but that’s definitely entered my mind as well as something, you know, with my MicroConf is just being able to provide an environment for everybody to kind of come together who has similar problems, is in a similar situation and just, you know, providing that environment for them benefits us. I mean it’s…but it’s just really nice to be able to talk to other people who are in the same situation as, you know, myself and yourself and be able to get feedback from people and say, “Hey, I know you had a problem with this. How did you guys deal with it?” Because it seems to me like you can run your business and live just about anywhere you want but when you do so, it tends to be difficult to run in to other people who live in the same area who also have those same types of problems. You just don’t get together with them very often.

[17:41] Rob: Yeah, the…the conversations that I’ve had at the last couple MicroConfs have stuck with me the entire year in terms of both motivation and just changing the way that I…that I operate the new things I try with businesses, new directions that I take and they really are like, you know, I’ve said on air before like that recording this podcast is actually one of the highlights of my week, like it’s one of the best hours of my week to do this. And MicroConf is one of the hardest three days, five days [Laughter] whatever it winds up being but it is definitely one of the highlights of my year and part of that is because of the way it impacts my businesses but the other part is the way that everyone gets together and then I feel there’s like this brief glimpse of time where everyone is on the same page and people go away from it and do awesome things that they wouldn’t have done if they hadn’t shown up.

[18:29] Mike: And one of the next things on my list is to help my wife’s fitness business becomes stable and profitable. I think I’ve mentioned before, she’s a certified Zumba instructor.

[18:38] Rob: Right. Does she work at a gym like she rents a room or she’s an employee of the gym or a contractor?

[18:38] Mike: She’s an independent contractor right now.

[18:46] Rob: Okay.

[18:46] Mike: But she doesn’t have a formal business or anything like and she’s done a lot of certifications around various things so there…she’s done Group Fitness Certification, Zumba Certifications. I think one of them is called like a Gold Certification where it’s designed for people who are older and then she’s also done like high intensity training which is for people who really want to stress themselves and push themselves to the limit. So, she’s kind of all over the map in terms of what she has the capability to do but she’s always going in to these places as an independent contractor. And what she’s trying to do is she’s trying to develop in to more of a business so that she does it fulltime as oppose to somebody who just does it on the side.

[19:25] Rob: And how are you going to be able to help with that?

[19:27] Mike: Right now, I actually…one of the projects that I have that I’m running on the side is to build a website for her and get all that stuff up and running. And then once the first of the year comes around, she’s going to essentially take over that website. She’s going to file for a business. I’m going to be doing some of the e-mail marketing and website marketing for her.

[19:45] Rob: Very nice, well, good luck with that. My fourth and final goal for 2013 is to release three knowledge products also known as information products.

[19:53] Mike: It’s just funny hearing that from somebody who has their background in developer…is a developer and it’s like you look at that and you’re like, “Oh, no.  Not another info products.”

[20:02] Rob: Yeah, Well, I mean my goal is for it not to be another info product, you know. The stuff that I’ve done in the past has been different from the standards and that’s certainly the goal. I’m not going to release something that’s not going to help people. I put it that way.

[20:15] Mike: I’ve seen the stuff that you work on. It’s topnotch. It’s…it’s great quality. It’s just that when…when people think info product or when you say info product, the very first thing that you think is like sleazeball marketer who’s selling stuff that’s just…just not work.

[20:27] Rob: Right. So, I’ll call it a knowledge product and is that as…is that clearer or does that just make it…make you not know what heck I’m talking about?

[20:33] Mike: I’m not sure. I think it just needs a different name as —

[20:36] Rob: Yeah.

[20:36] Mike: …oppose like an info products.

[20:38] Rob: So, I want to release three-short training courses.

[20:41] Mike: There you go.

[20:41] Rob: Yeah.

[20:42] Mike: That’s it —

[20:42] Rob: So, that are delivered via…[Laughter] like the first one is going to be a video training course and it’s going to be all the resources and all the info I have on hiring managing virtual assistants. So, it’s going to include sample training screencast, the job posting that I use on oDesk. It’s going to include e-mails and questions and dadadadada so, which is all the info. I actually have a professional videographer showing up here tomorrow and doing a video interview of someone who’s going to interview me about it and I’m excited. For me, it’s a…it is much of a learning process to produce it because it’s such a new thing. I’ve never, you know, done a knowledge part or training course like this in this format. It’s always typically been screencast and or written, an audio.

[21:23] So, I’m excited to tackle this one. The second…third, I don’t…they almost don’t fit this format, the interview format, so I’ll probably do them a little differently but I always like keeping my toe dipped in multiple baskets. The software is fun and that there’s a lot of learning that takes place there but I also really love helping people right in the training is something that I’ve done since, gosh, since I started my blog in 2005. I mean that’s why I started it. It was to pass on knowledge and so…sort of I hope to do with these courses.

[21:50] Mike: Seems like you kind of thrive on publishing or producing different products that are different enough that the marketing challenges are a completely different from one another.

[22:02] Rob: Yes, that’s probably…that’s actually a good summary of it, right, is it that I won’t market this in the same way that I market HitTail or that I market Drip and that’s exciting to me and interesting and it’s interesting for me to enter…I’ll probably sell some of these training courses to different people who wouldn’t buy Drip or by HitTail and that’s interesting to me as well. It’s like helping a new audiences dealing with a new group of people being able to contribute there. But I do like your suggestion. I don’t know if you…I just updated the outline because info products has a certain ramification and training course is…I think I’m going to start calling them that from here on.

[22:37] Mike: Yeah, I think it’s just the connotation associated with the word info product and that’s what…that’s what got me. It was…it was not that, you know, you’re building a training courses that you called it in an info product and it’s like, ugh, I feel like this should be on TV or something, you know.

[22:50] Rob: How about you? Do you have one more goal?

[22:51] Mike: Yeah. So, the last one I have is to write a security book. I talked previously about possibly writing a book and kind of solidify my ideas around it and really think that writing a security book to assist with the marketing behind AuditShark is a good way to go. It’s, again, it’s one of those long term goals. I don’t expect to sit down and just hash it out and bang it out over the course of like a month or six weeks or something like that. I really think that it’s going to take a fairly significant chunk of time to do it but it’s going to be a little bit here, a little bit there. It’s…I view it as more of a long term project. I think it’s going to take a while to get done.

[22:51] Music

[23:27] Rob: Should be diving to some of our predictions?

[23:29] Mike: Oh, yes. This should be fun.

[23:29] Rob: Okay, I’ll jump in with my first one. Last year around this time, we made a couple of predictions. I think threw out that I thought 2012 would be the year of Pinterest and when I name…when I said that you said, “I’ve never heard of it.” Ain’t that funny? Do you…have you heard of Pinterest now?

[23:45] Mike: I have heard of it. I don’t remember when I last heard it though.

[23:49] Rob: So, it seems to have really resonant popularity with the mass audience and then it seems like with my wife’s circle of friends who kind of first introduced it, all of them have stopped using it a lot. They still use it as kind of as a tool or as a resource but it’s not the social network they were once using it as. They’re…they’re now back to using Facebook for most things and for certain specific niche uses, they use Pinterest. I see there’s a lot of value for designers, for photographers, for things where…where…and travel websites where pictures are really important. I know it drives a ton of traffic for certain large niches, I don’t know.

[24:26] I think 2013, I’m kind of revising my Pinterest or updating the Pinterest prediction. Pinterest just going to continue to grow and I think it’s kind of widely popular and it offers opportunities for tying in to it, you know, with in terms of developers. I think they’re probably going to have an API that comes out that kind of stuff. So, there’s definitely going to be opportunity there but I don’t think Pinterest has the potential to be as big as say…a super large network like Facebook. I do think that it’s going to grow a little slower than that. But as I said I do think there are going to be opportunities in 2013 if…if you’re a developer and you want to start building add ons to something that is growing quickly, Pinterest is going to continue to do that this year. All right. How about…how about another one?

[25:05] Mike: I feel like Google is going to continue to host people for using marketing techniques that they have advocated that people use for years and they’ll do that basically by introducing various Algorithm updates which tweak things that they told people that they should be doing these things and now, they’re going to turn around kind of stab them in the back.

[25:23] Rob: Yeah, probably. I think we’re in general because I have a prediction as well that basically says more Google changes are going to come that are going to hammer SEOs and I don’t just mean Algorithm updates, I actually mean they have tool updates they’re doing to keyword tools. They shut down part of their API that SEOs were using. There’s all manner of things that even with Google, the suggest when you type in it, auto completes your queries, that’s taking stuff away from long tail SEO which scoops it in to, you know, paid acquisition. I mean it really is just an…they have a big anti-SEO stunts these days. So, I would agree with that, nothing shocking there. I imagine they’ll be naming them after some other animals. So, we’re going to have to go for update, the Zebra update.

[26:05] Mike: The Honey Badger update?

[26:06] Rob: Honey Badger update. Okay, so let’s see, another prediction I have is that WordPress is going to continue to become more and more prominent. And this is a no-brainer, right? I think it’s like 17% of all websites were on WordPress right now. It is just 300-pound gorilla and so, there are definitely opportunities there in terms of plug-ins and tie ins, the themes and add ons. I don’t think that market is over. People thought a couple of years ago that starting the podcast was too late. They thought three years ago starting the blog was too late. It’s never too late to get in on these large fast growing markets. And so, I definitely think 2013 will continue to be the year of WordPress.

[26:44] Mike: Well, I have a couple of anti-predictions.

[26:46] Rob: Okay.

[26:46] Mike: So, the first one is I don’t foresee Apple releasing any completely brand new products this coming year. So, what I’m thinking of more along the lines of is this year they released the…the iPad mini…I see them making a lot of tweaks to existing products but I don’t see them coming out with something that is I’ll say revolutionary in the way that they would look at it as revolutionary. I see this incremental updates to existing products but nothing that’s going to make a giant splash the way the original iPhone did or the iPod or the iPad or anything like that. I just don’t see that happening.

[27:20] Rob: Yeah, people are talking that the future is with wearable devices. So, it’s like wristwatches, glasses, other kind of wearable tech that integrates with your mobile devices and such. And I don’t know…I think Google is going to release their Google glasses or Google glass or whatever it is. This year it’s slated. And so, I could see Apple coming out of the woodwork with something like that. Otherwise, they are going to be a little…little behind the curve in that stuff. Now, I don’t know if that’s just going to take off. That all sounds kind of goofy to me. I don’t really want to wear a wristwatch or glasses for that purpose. But you know, I didn’t think I’d want to use a tablet either. I pooh-pooh the iPad before they release it and I didn’t think it was going to fly. So, but I do think there’s possibility that Apple will release an Apple TV this year beyond just a little pock that they’ve released.

[28:07] Mike: I don’t think so. I really don’t and the reason…and here’s the reason I don’t think that they will, I think that…and it’s not to say they won’t take the Apple TV and make it in to more of a media center but when you say an Apple TV or you’re thinking of like an actual television that has like Apple software and hardware built in to it.

[28:24] Rob: Yeah, here’s what I think they’ll do, I think they’ll take like a Mac mini and they’ll use the 35 inch cinema display or 40 inch cinema display or something and that…it’ll be a media center that won’t just be the little pock. It won’t be some TV manufacture by Toshiba either which there are rumors of that and the rumor is actually came up today that Apple is talking with Foxconn in getting quotes on a…an actual television…television like you and I think of, like a 60 inch display, you know, just a TV. All right? If that happens, I don’t think it’s going to happen in 2013 but I do imagine the Apple is going to…going to cut some…some content deals this year and that the…the pocks is going to get revamp. They’re going to have apps to go on that the pock and potentially that software within run on like a Mac mini that drives your large cinema display for…probably for, you know, bedroom use or office use to start with and then they’ll slowly move in to like the living room market where you need the larger displays.

[29:19] Mike: Yeah, I just don’t see them moving in to that living room market because if they can build a device that cause exponentially less that plugs in to the hardware and an infrastructure that you already have as oppose to forcing you to shell out 2 or $3,000 for a TV which unless beyond some I mean Apple that that’s the kind of price range that Apple likes to look at. And I think if the margins that Apple likes to get, I don’t think that they’re going to do anything like that in this coming year. I —

[29:47] Rob: I —

[29:47] Mike: …I can see them doing something with the retina display. I can see them doing something significant there and put it in to like a 27 or 30 inch monitor or something like that and saying, “Okay, well, here’s our giant monitor  that has the retina display built in to it.” But beyond that, I just don’t see any new products coming down the line that, you know, because it’s almost like the kind of the end of Steve Jobs’s visions for the company, you know, the pipeline of products that he had in place. I would imagine that it’s probably that that well is almost dry at this point.

[30:17] Rob: Yeah, I agree with you that building large cinema display is kind of a shaky production because the…what is it? The replacement time on there is typically 10…5 or 10 years where we buy a new…whereas Apple likes to have a…something new every couple of years. The replacement cycle is a little shorter. So, anything that has a longer place in cycle, I don’t see Apple getting in to. My next prediction is that this will be the year that some subscription WordPress plug-ins start making the splash. Up until now, it’s been tough for WordPress developers to get recurring revenue and I know a lot of them that are…that are doing well because the market is growing, a lot of people installing new WordPress sites all the time but really getting that…that sustained revenue where you can build a large business is tough. And so I think someone is going to crack that nut in 2013 and hopefully, others will follow because I do think like with my previous prediction that there’s just a lot of potential in this market.

[31:10] Mike: Yeah, I can definitely see that as well. I mean there’s companies out there that are making money hand over fist and at some point, they essentially saturate the market that they’re in and they have two options at that one point either see as growing or move in to other markets and that recurring revenue stream for them just hasn’t really been there and I can definitely see people starting to charge either on a recurring model for updates to the products or maybe taking a step further and start supplying content updates not necessarily just the plug-in itself but content behind the plug-in which I think would be an interesting model because let’s say that you could buy an SEO marketing plug-in for your website where you pay them not just for the plug-in but for a subscription service that will do X on your website.

[31:57] Rob: And some people are doing this now. It’s just no one has achieve massive success that I know about. It’s funny you mentioned SEO services because with HitTail, we have a free HitTail plug-in and if you pay for the HitTail service it, you know, allows you to do some…actually all it does is help with the install right now but we have plans in 2013 to have it provide suggestions right there in your WordPress dashboards so that you can describe blog post base on it. So, that’s the kind of thing that I, you know, I could see…see people doing even potentially without the SaaS web interface at all. Just having it everything be interface through the plug in. Maybe that’s a hope more than a prediction but I certainly hope someone cracks that nut.

[32:36] Mike: My other anti-prediction is I don’t think that Windows 8 is going to completely take the world by storm.

[32:41] Rob: Yeah, this is a tough one because I think it’ll be fine. I mean Windows 8 on a desktop, Windows 8 on the tablet, you know, like on the Surface and others Windows 8 on the phone and it’s Windows Phone 8 but it’s very similar interface. So, which of those are…are you saying it’s not going to take the world by storm, all of them?

[32:58] Mike: I think that they’re all do reasonably well but I don’t think that it’s going to be this giant splash that turns Microsoft around. I mean Microsoft to me feels like it a ship that is kind of drifting. It’s got a good general direction but they’re not making any real head way in the search market or not really making any head way in the mobile market. They’re doing reasonably well. I mean they’re holding their ground but it doesn’t to me like they’re getting the growth, let’s say, they’re looking for. And I don’t think the Windows 8 is really going to change that. Now, that may change down the road but I just don’t think that it’s going to be this year.

[33:34] Rob: So, I think Windows 8 on the desktop is going to do just fine. Windows sells a bazillion copies and then what does it sell…it averages million copies a month right now approximately and I think that’s the pace that…that 8 is on. So, I don’t think it’s going to revolutionize their business but I do think it’s going to keep doing just fine on the desktop although the desktop is becoming a less and less relevant, right? Desktop sale have declined and they’re going to continue to decline because mobile is…mobile and tablets are where people are really spending the money and where the units are being moved. In terms of the tablet, I don’t know, that’s a tough one. I don’t think the Surface is going to take the world by storm because the iPad has such a lock on it but I do think they’ll gain some ground this year on Apple and Android.

[34:14] The Windows phone I think has a chance, a real chance to do some damage this year because the UI is awesome. It works really well on the phone. The Windows phone that I’ve seen and held, they work really well and I’ve had some non-developer just straight up consumer friends who have been…who have love their Windows phone and love the Live Tiles and all that stuff. They…they really have innovated in a unique way, in a way that Microsoft is not known for in that…that phone interface and if they can get enough people liking that, they could feasibly ride the back of that and improve on their…their tablet sales and actually, you know, make a dent as well.

[34:50] So, my fifth and final prediction is that this year in 2013, the startup bubble is going to become more evident and what I mean by that is inflated valuations of startups and I am hearing from angel investors, venture capitalist, this is both people I know as well as just podcast that I listen to that valuations have risen so much that it’s becoming more and more difficult to invest at all that people are holding their money because you’re getting these companies that have just launched and they’re asking for 5, $7 million evaluations when they don’t really have any revenue and you don’t even know if they’ve…if they’ve found a market yet. But they’re so much money that they’re getting funded anyways. And so the…the knowledgeable VCs who’ve been through this a few times, knowledgeable angel investors as well are starting to pull back.

[35:37] And so, I think 2013 is either going to have a burst where, you know, that the non-eligible angel investors and VCs start realizing that their investments aren’t panning out. These companies start crashing and then they have kind of a little panic which is a little bit of a burst. I think that could feasibly happen as soon as 2013. Now, it may think till 2014. The good news is that that doesn’t matter for us. And if you’re building a business where you don’t need a bunch of funding where you don’t need someone to acquire you, then all of this is just a side show. You know, we can…we can listen to podcast and redo the magazines and watch panic ensue. I just don’t think it’s going to have that much of an impact on people like us who are building profitable bootstrap businesses.

[36:18] Mike: Yeah and that’s honestly quite nice. They not have to worry about that thing. I do question though if there is a…if there is a bubble and ends up crashing, what the fallout is going to be for the rest of the market though.

[36:29] Rob: Yeah, well, I mean I think the stock market could take a tumble because it’s so emotional. So, it could feasibly I mean given the tenuous financial situation in around the world right now, you’re right it could impact the markets and people could have a bunch, you know, a whole reaction, a chain reaction of people pulling their money back, stopping their spending so then your and my small bootstrap business can get more contracts. That could feasibly happen. I don’t know that it will. I wouldn’t predict something that dire. I would more predict that it just becomes a heck of a lot harder to get funding over the next 6 to 18 months and that we see a lot of those businesses who’ve been funded during this last 12 months where evaluations have been high that they…they can’t get off the ground, they can’t get the revenue quick enough to meet those evaluations so they wind up having to either do massive pivots, not return the money to the investors or…or just shut down out right. My hope is that it won’t cascade any larger beyond that outside of the tech sector.

[37:27] Mike: So, one other prediction that I want to threw it out there is I think that one of the major PC vendors is either going to go under or have to declare bankruptcy or merge with another vendor.

[37:39] Rob: I could see that. Yeah, because that market is absolutely becoming less relevant and it is in decline. And whether your prediction comes true this year, if it doesn’t, I bet it’ll be in 2014.

[37:50] Mike: The thing is about that prediction. I’m hesitant to actually put a bet on which vendor it would be. I don’t think it would be Apple, I’ll tell you that but —

[37:59] Rob: They’re not a vendor anymore, man. They’re…I mean they’re a consumer electronics company now.

[38:02] Mike: Right —

[38:02] Rob: I would think HP, Dell so…I mean there’s maybe a top five and I…I could easily see one of them merging or shutting down like you’ve said.

[38:11] Mike: Uh huh. So, the one question we have left unanswered though is that will Twinkies make a reappearance?

[38:19] Rob: Very good. So, my prediction is that they will and they’ll obviously be owned by someone else and just be a brand name on a new recipe that’s as close to the old one as they legally can get.

[38:29] Mike: I think that somebody will…as part of liquidation of the company, I think somebody is going to buy that asset. I don’t know who but somebody is going to. I mean and Twinkies are one of those things where it’s kind of an iconic thing more than anything else and I could see a company stepping up to the plate to buy them just to own that icon.

[38:46] Rob: Absolutely. I have no doubts about that. The brand value they say is…is it hundreds of millions? It’s not just Twinkies, it was all the hostess line was in the hundreds of millions and someone compared it. I think it was MPR compared it to the brand value of Circuits City when it went out of business sold for, I think $6 million, somewhere on that realm. So, it’s just that…such a timeless brand that really, you know, has a positive place in people’s mind as oppose to something like Circuit City.

[39:12] Music

[39:15] Rob: If you have a question or comment, please 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 this podcast 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. See you next time.

Show Notes

• MicroConf will be April 28-30, 2013 at the Tropicana in Las Vegas
• Get on the MicroConf Early-Bird List
• MicroConf Promo Video

Show Notes

• (Book) Your Brain at Work

Transcript

[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I are going to be running through six facts about your brain chemistry that can help you achieve peak productivity. This is Startups for the Rest of Us: Episode 109.

[00:12] Music

[00:21] 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.

[00:30] Mike: And I’m Mike.

[00:31] Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What is the word this week, sir?

[00:36] Mike: The word of this week is Brooklyn because I’m back there again.

[00:39] Rob: Is that where you are?

[00:39] Mike: Yup.

[00:40] Rob: And you’re meeting with a few entrepreneurs while you’re out there?

[00:42] Mike: Yeah. So, I’m meeting James from The Whicher and Corey from the Birdy for dinner on Thursday night. I don’t know if anyone else is going to show up but, you know, we’ll see how that goes. I think we put out some fillers to some people who might be interested and you know, hopefully, we’ll get a small gathering for Thursday night. We’re still kind of deciding on where to meet up. But it should be fun.

[00:59] Rob: So, did James and Corey live there in Brooklyn or in the area?

[01:02] Mike: They live in the general vicinity.

[01:05] Rob: Well, good. So, I have an announcement to make this week. My new product that I’m starting to work on right now is called Drip and you can check out the landing page at getdrip.com. The goal of Drip is to make your website visitors sign up for a trial or to buy, if you don’t have a trial, using e-mail follow up. And it lives in it…the first segment of e-mail follow up, you know, there’s like e-mail follow up during trial, e-mail follow up post purchase but then there’s that pre-trial thing. It’s getting people who just come to visit to get a little more engaged with your product and it’s something…it’s been highly effective for all of my products. And so we built the little engine to…nice little engine to do it on HitTail and we’ve realized there’s a lot of limitations to it. We built and it’s already taking a lot of time.

[01:44] And so, we’re going to start with that and expand it out in to a full-blown SaaS product and the test I’ve done with all my different products I get anywhere between a 5 and a 20% increase in conversion rate. So, that’s from visitors to trial and increases it by that that much. So, it’s something that if you’re only making… I mean for apps making a thousand bucks a month, it’s probably not worth doing because a 5, 10% conversion rate, just it doesn’t move the needle enough. There’s more important things to worry about. But as soon as you get up to, you know, you’re making 5 grand or more per month, this is one of those things where the ROI becomes very, very attractive quickly.

[02:18] Mike: Very cool. So, we have a lot of podcast love this week and I wanted to share a couple of…first one is from Matt. And he says, “Hi, Mike and Rob. I’d just wanted to give you a big thanks for all the podcasts. I’ve just launched my own SaaS app called Icon Practice which I doubt I could have done without your help. I’ve listened to all your episodes and got something from each one. Thanks again, Matt.” We’ll link to that in the show notes. And the second one is from Ryan who says, “Mike, Rob, you guys are awesome. Your show is compelling listening. It’s a gold mine for us all around the world striving to make it online,” and I did not in any way, shape or form modify…modify this. This is word for word from what he says. He says, “Every show delivers. Startups for the Rest of Us is perfectly balanced with delicious tips, wicked insight and practical actionable advice and inspiration for every aspiring digital entrepreneur and I had to write a personal thank you for helping me and thousands like me on the journey. It is truly appreciated. Best. Ryan.”

[03:07] Rob: We should change our podcast synopsis to be that very phrase. That is so well-crafted.

[03:12] Mike: You think so?

[03:13] Rob: Ryan, you are a wordsmith, sir. I tip my hat to  you.

[03:16] Mike: And our third one is from Chris who says, “I’ve been podcasting since 2005 and I subscribed to about 70 podcasts. But you had a number in your list that I think I’ll enjoy. Thanks for the list. I’ve now written down my list in a couple of years before I discovered your show which is definitely become one of my favorites.” So, we’ll link to his list in the show notes. But just wanted to say thanks to Matt, Ryan and Chris who sending all that podcast love and want to say we really appreciate it.

[03:38] Rob: Very nice. Now, we also have a listener question we’re going to get in to before we get in to the facts about brain chemistry. Do you want to read that?

[03:44] Mike: Yeah. So, this one is from JT and he says, “Hi, Mike and Rob. I’ve been listening to your podcast for about a year now and I love it. It’s been very helpful. Keep up the good work. I recently developed via oDesk a personal finance iPhone app called MoneyWYN which is Money Within Your Needs. I’ve had a couple of people tell me that I should create an Android version or they don’t have smart phones at all. So, I began looking at turning it in to a SaaS app so that more users can access it. That actually was part of my end goal anyway. I put up an MVP site at withinyourneeds.com to gauge interest. I have a couple of issues going about this. First, I know what I want the app to do but I’m not very creative so I don’t think I can design the app myself and make it look good. I have the same issue with the iPhone version. The app does its basic level what I want it to do but I think it can look a lot better. So, do I hire a web designer and then pass the design to a developer to code everything or do I create my own mockups so probably I want everything to look and pass that to a developer? Second, what is an appropriate level of interest for my MVP site? I’ve started to get ad clicks in the day since I put the site up and not sure what point I can gain there’s an appropriate level of interest. Any thoughts would be appreciated. Thanks.”

[04:43] Rob: Wow, this is a tough one. This kind of app is personal finance app is…it’s a super competitive market. There are so many of these apps out there and typically to take any kind of control of the market, you’re going to need to go free and because you’re aimed the consumers and then try to have some kind of paid upgrade or make money like Mint does where you get to scale and you have…you obviously have to raise funding to get there and then they make like recommendations of credit cards and they basically make affiliate money. So, I guess that’d be my first inclination. Now, I understand MoneyWYN, the iPhone app could feasibly make it work because the iPhone app still provides ongoing sources of traffic that are really inexpensive and so even  at 99 or 4.99 price point, you can do it. But I don’t know. My initial inclination just with the idea is like wow, why would I use this over the literally 20, 30 others of this that I’ve seen launched within the last two years that are SaaS apps.

[05:39] Mike: Interestingly enough, one of the guys I’m meeting with on Thursday his name is Corey and he runs the Birdy and the Birdy is also a personal finance application which is a SaaS app. It’s on the web and what he did for his differentiating factor was that he makes it accessible vi e-mail and the application e-mails you during the week and I’m not familiar with all the details of exactly how the app works but it…it is heavily, heavily reliant upon e-mail communication with the user because that interaction with people who use e-mail is so high that if it’s a SaaS application that’s just sitting out there, you might not necessarily think about it and his application I believe it e-mails you and ask you what you spent money on that day. So, people use it as kind of a to-do list and then he parts it with the e-mails and does a lot of things with them. And he, you know, is doing recently well with it. I think its pricing is around 495 a month for but with an iPhone version, obviously, you’re only going to get the people who have iPhones, first of all. Second of all, the recurring revenue is just not there and as you pointed it out having lots and lots of competition is this…in the space is one of those overwhelming things that you have to come out with some sort of marketing strategy that is going to overcome all of that.

[06:48] One of the questions I would have is just how do you overcome that marketing challenge and I don’t think that it’s about getting people to use your app and say, “Yes, this is a good app that I would use.” It’s more or less how do you identify the people who you want to come use your app and then get them to your website such that they will actually use it. I see that as more of a marketing challenge versus what I think that you’re concentrating on in your first question is “How do I make the application look better?” And I don’t think that’s your problem at all. I think that you’re focusing in the wrong place. I think you need to focus on how do I get traffic to my site such that people would use it and I think that’s a much bigger problem than making it look good.

[07:25] Rob: Yeah, I would agree. Let’s just say that you are able to answer that. You want to move on to the, you know, the question of “How do you build it?” Your question was, “Do I hire a web designer and then pass the design to a developer to code or do I create my own mockups and let it pass to a developer?” Well, if you’re not a designer, you’re going to need someone to design the app to create the look and feel because otherwise you’re going to wind up with a very poor UI because developers has a rule do not have design skills. Some of them obviously do but most do not and I’m one included [Laughter] that I have no design skill. So, when I used to code things even when I was building my own apps, I would have a designer create mockups, create HTML, send it to me and then I would code it up. So, that’d be my answer to your question of being creative and making things look attractive is that you would find the designer who’s reasonable and depending on your budget and then you would describe either the pages that you want or even the high-level functions and then pay that designer to create basically an individual mockups of each of those pages, make sure that that everything is in there and then have them create photoshopped files and either have him then create the HTML or have that go to a service and you know, find someone on oDesk basically to create the HTML then hand that to a developer and have them build it out.

[08:37] You could also, you know, the developer may be able to do HTML. I mean it all depends on overlapping skill sets but in general, that’s the process that I follow is I try to find people who are experts at design, experts at cutting to HTML and experts at development and then going through those three steps. In terms of your second question, it says, “What is an appropriate level of interest for my MVP site.” And what…what he has is a landing page and it just has a couple of bullet points and then kind of the thing to sign up for mailing list. I mean I think at this point, I think the page needs some work because it does look…it looks rudimentary. I don’t think you’re going to get much interest here. I think you want to design or to mock something up but it’s a tough question to answer because it depends on your revenue model.

[09:17] If you have a SaaS application that’s going to charge $50 month, then you need a heck of a lot fewer e-mails, then you do if you’re going to have something that’s a freemium model and I know we can have 1% of people convert to a very low paying, you know, or low revenue plan. It’s huge. I mean it literally can be a hundred X difference between those two. If you’re sending using ads and sending people to the site and you’re not getting at least 15 to 20% of people to opt in, then I think you’re going to have a problem long term because I think you’re just going to have to pay way too much for people to sign up for your up unless you have a really good revenue model. You’re not going to make enough money to pay back the acquisition cost.

[09:54] Mike: So, JT, hopefully, that helps answer your questions and give you some idea which direction to go.

[09:59] Music

[10:02] Rob: This week, we’re diving in to six facts about your brain chemistry that can help you achieve peak productivity. And I created this outline based on a book I recently read. It’s called Your Brain at Work and it’s written by a psychologist named David Rock and he studied brain chemistry, brain functioning. And he’s just gathered a community of psychologists and neuroscientists and all types of people who study the brain and he’s had a few conferences and then he’s kind of put all his knowledge in to day to day application. And so the book Your Brain at Work is really interesting because it’s not written…he has a lot of really deep research content in it but it’s written using day to day scenarios. It’s written about this husband and wife who are both professionals and the husband is like a software consultant and then the wife I think organizes conferences. And so it’ll give us scenario where like the wife is in a meeting and this happens and everything goes bad because of it, you know. And then it’ll go in to what the brain chemistry and how that works and why things went bad and then here are the things you can do to help your brain chemistry adjust and how you can perform better in that meeting and then it will redo the same story with her making different decisions.

[11:11] So, when I first heard the premise of it, I thought it was pretty cheesy and I figured I’d be skipping around a lot. But the author actually does a good job of mixing what…what otherwise be very dry material, very academic material and enters this person with interesting stories. And then you start liking the characters in the story. You know, it just takes you away. So, there is a ton of information in this book and I just picked out six tidbits that I thought were most applicable to our audience. So, the first fact about your brain that can help you achieve peak productivity is that everytime your brain works on an idea consciously, it uses a measurable and limited resource. So, in other words, doing really hard thinking, doing really hard tasks like writing or outlining a podcast, something that’s intense thinking, it actually depletes your mental energy for that day and you’re going very fine at that amount. And it actually burns more sugar from your blood stream when you do that.

[12:05] So, long haul truckers, they can drive 16, 20 hours a day. I mean they eventually get tired but it doesn’t actually attacks them mentally because it’s a row…like muscle memory task. You don’t have to think actively to do it but no professional writer…if you ever hear Stephen King, Steven Pressfield, someone who does professional writing for a living, they typically write 3 to 4 hours tops at a stretch and outside of that and basically waste that resource on things that aren’t important.

[12:31] Mike: I’ve seen a couple of studies on this as well that indicate the same types of thing and it’s funny because I’ve noticed the same thing myself when I’m working if I…if I have an extended amount of time off, the pressure is kind of there for me to sit down and work for 8 or 10 or 12 hours straight because I have that time available to me but if I’m sitting there working on stuff that tends to be very difficult to do like certain programming task, then I can’t just sit there and do it because what ends up happening is I’ll get 3 or 4 hours of solid work time in and it will be really good and then after that my brain just sort of shuts down and I just don’t seem to get nearly as much done.

[13:07] Rob: Yeah and that’s why thinking about your conscious thinking as like a precious resource to conserve can be helpful for trying to identify that time of day when you have that optimum functioning because if you pair your optimum functioning time of day with short burst. So, say you just block out your calendar for 2 hours and you say, “Turn the phone off. Turn the e-mail off and I’m going to write copy or I’m going to write this intense piece of code just for these 2 hours, you can get enormous amounts done, literally 2 to 3 times what you would get done if you had an interruptions and you are working, you know, at a non-peak time like if the afternoon time is not your peak time.

[13:43] So, I think there’s a lot to be said here. What’s interesting about each of these points as we go through is some of them I think you’ll probably already know intuitively but you may not have actually said this out loud before and not realized it. I’ve already started doing this one here without knowing it and in the mornings, I drink some coffee. I work very intently and then the early afternoons, I just find they’re not peak times for me and then late…like in the evening after the kids go to bed, another peak time. And I find that I get a lot work…of work done then and I focus really intently on those times and I think you can actually…that’s why you can work, you know, a 20 or 30-hour a week and actually get more done than if you were sitting in an office somewhere in a cubicle getting interrupted all the time just with the…noise around the office and it’s just a lot different working arrangement allows your brain to function as its optimum level.

[14:31] Mike: Part of those 40-hour work weeks that a lot of people end up working is more because, you know, the companies kind of force you to put the time in versus put the work again because they’re paying you for your time and it’s really when it comes down to but at the same time they’re not necessarily paying you for productivity.

[14:45] Rob: Our second fact about your brain chemistry is the less you hold in your mind at once, the better. So, this comes back to the brain being a measurable and a limited resource but in this sense, it’s decluttering your mind. And so this is actually, you know, if you read Getting Things Done, the GTD method, he talks a lot about removing that…that mental stress of holding a lot of things in your mind at once. And I think that the answer to this or if you’re not already writing things down and having to-do list and anytime you think of something you need to do, e-mailing it to yourself or somehow capturing that in a way that is not sitting in your mind basically, you know, slowly stressing your mind out and making your mind tired, then you need to start doing that because this absolutely is one that will impact your peak productivity overtime and people who try to remember things and carry more in their mind, you just…you never give your mind a rest even when you’re not thinking about those hard things. And so when you need to think about hard things, your mind is tired from carrying this weight around.

[15:50] Mike: Yeah, I do this a lot myself. I mean just writing things down all the time and what…regardless of whether it’s stuff that I’m writing down to create a list of things to do, just the very act of writing those things down so that I don’t have to try and remember them, I found that that’s to be very helpful. And it’s funny because this reminds me of Joel Spolsky’s comments on his Painless Bug Tracking post from years and years ago where he basically said that he was…”At any given time I can only remember two bugs. If you ask me to remember three, one of them will fall in the floor and get swept under the bed with the dust bunnies, who will eat it.”

[16:23] Rob: Yeah, I remember that post as well. You know, I’ve taken a lot of away from both his writings and just other writings on getting organized and what you’ll realize is it starts…they all kind of start to say the same thing under the covers and that’s because there is some science to it and we do all kind of, you know, as humans work in similar fashions the deeper you dig. So, the third one is performing multiple conscious tasks at once results in a big drop off in accuracy or performance. So, this is the multitasking myth. Now, the interesting thing is that they’ve done research and they’ve actually found that 5% of people can actually multitask and they actually do get more than faster but that 95% of people do not. And so the odds are that you are not one of those people that can multitask and I know for a fact that I am not and most programmers who I know who are very good at programming are not good multi-taskers because if they tend to be really focused and that is a gift onto itself, right, to be able to focus and to be able to hold large numbers of things in your mind having that in multitasking does not…they don’t tend to go together.

[17:28] Mike: Now, is there anything in there that kind of indicated how to identify yourself as somebody who could multitask effectively or no?

[17:36] Rob: No, it didn’t and in fact that 5% number came, it didn’t come from this book, it came from a book I’ve read last month that talked about this topic as well and either of them said how you would identify by yourself. I do know a couple of people. Actually, women are more likely to be in that, in that 5%. I do know a few people who are actually just from experience from working with them.

[17:56] Mike: Cool.

[17:57] Rob: Number four is that switching between tasks uses energy and if you do it a lot, you will make more mistakes and you won’t get things done as quickly. There’d been studies done in offices where they say if you’re working in a cubicle or office that you on average you work on a single task for eleven minutes before an interruption and that is catastrophic especially if you’re trying to do long…you know, creative tasks like programming or copywriting or designing or anything. The interruptions like I said before if you can block out two hours of time and what I was…I came up with this thought today. I call it striping and I’ve started doing this to my calendar where I’m doing thought intensive work, I’m going to put a one or two-hour block in my calendar and color it with a certain way and then the next one or two-hour block is going to be, you know, the opposite kind of the low mental energy mode of thinking. And so I can let my mind rest for that and so it will kind of look like a stripe pattern because it’ll be every other.

[18:54] But I think that’s not only something I’m going to start doing but something that that I think we need to be more more deliberate about doing and about during those schedule of  blocks of the intense time, that’s when you shut everything down. You shut your e-mail down. You shut your phone down the whole deal and I think we’re learning to be aware of your levels of alertness and your…kind of your interest throughout the day really leads you to find the time of the day where you’re going to get your best work done. And if your mind begins to wonder, then you need to ask yourself, “Well, am I just too tired, mentally tired to do this right now or do I need to, you know, to kind of refocus?”

[19:26] Mike: So, are you saying that in a run about way Microsoft has killed millions and millions of hours of productivity because of that little ding that Outlook plays —

[19:33] Rob: Oh.

[19:34] Mike: …[Laughter] when an e-mail comes in?

[19:36] Rob: Yeah. I mean I don’t know. I do not get a ding or notification when e-mail show up on any device of mine.

[19:42] Mike: Yeah —

[19:42] Rob: And —

[19:42] Mike: And I don’t either with one exception and I don’t know how to turn it off but I just…I have an exchange account whenever I have the web interface open and I get an e-mail, it dings. So, typically I have the sound turned off on my computer when I’m working. So…

[19:57] Rob: Indeed. You know, I have the G-mail tab open quite bit in Chrome and I turned that off several times a day now for stretches of, you know, between 30 minutes and an hour just because I find myself naturally wanting to go back to it because when I get in to kind of a hard thinking time and let’s say, I am writing some copy or writing some really intense code, your mind wants to shy away from that because it is so exhausting. And so that’s what procrastination is, is it your mind trying to sneakily give itself a rest. I’m not making this up. It was like —

[20:27] Mike: You’re making it sound like, you know, our brains are slackers or they want to be slackers.

[20:30] Rob: No, it says like your brain tends towards the lowest risk and the highest rewards and the least output of energy like it just naturally goes to those areas and so what that means is that it really does when you’re taxing it and you’re thinking intently, any chance you give it, it will wander away and it will say, “Oh, Hacker News, oh, this is so much…so much more appealing and so much fun.” It’s like a brain’s trip to Disneyland instead of, you know, sitting there trying to write two pages of intense copy or deal with some…some complex coding. So, fact five that can help you achieve peak productivity is that peak mental performance requires just the right level of stress, not minimal stress. And this comes back to there’s something called the Yerkes–Dodson law and those were two psychologists that studied peak performance, the ability to focus and think. They uncover that when you have minimal, minimal stress that you actually don’t perform as well because there are certain things in your blood that are required in order for your mind to really hyper focus and you actually need to have a little bit of stress about it.

[21:33] And that’s why a lot of people work better with some deadlines and a lot of people work better if they are concerned about something like if you’re going to do a talk tomorrow, then that can intend to motivate you to do really good work and to be pretty focus, right, and to actually crank out some pretty good stuff. I have to be honest with my experience, caffeine helps this and this was not in the book. Now, the flip side to this is if you get too stressed, you hit a level where your performance starts degrading because you get too much stress and your brain starts to shut down. So, there is a careful balance there.

[22:02] Mike: I think the caffeine and alcohol kind of go hand in hand as well. I mean both of them acts to help you kind of cut down on outside stimuli and focus on whatever it is that you’re actually looking at. So, I can definitely see how caffeine would do that. I don’t know the scientific explanations behind it but you know, in the morning when I have coffee and I’m sitting there working, it definitely helps me focus on whatever it is that I’m doing. If I’m sitting there doing a programming task, you know, late in the afternoon or whatever because I would not admit to drinking before noon but if for any reason sitting there working on stuff, it seems like my focus tends to be much higher. I don’t know if that relates back to the…to the productivity but it definitely seems that way.

[22:41] Rob: And our six and final fact about your brain chemistry that can help you achieve peak productivity is that focused attention changes the brain. This is something that the author harped on a lot in the book and I really took it home. He basically said that the brain, the internal structure is constantly changing and adapting. That’s why habits are relatively easy to form. They may not be as easy to break but you can get in to patterns and thinking patterns relatively easy because if you focus a lot of attention on something, your brain changes fairly quickly. It’s surprising how quickly it can adapt. So, what that means is that if you spend a lot of time being distracted, checking e-mail and moving to Hacker News and always listening kind of to your brain and letting it be lazy and pull you away from your important task, your brain will actually not totally lose the ability but it will severe away. It will slowly…it will make it easier for you to continue in that pattern.

[23:35] Whereas if you make very deliberate choices and you start whether it’s doing the striping technique I mentioned or just forcing yourself to be really focus, turning off distractions, your brain changes. It will actually change the chemistry of it so that you will be more likely to get in to focus, to get in to flow quicker just to perform at a higher level. So, this is actually both good news and bad news, right? It’s easier to fall in to that patterns but it’s easy to get out of them if you’ve very deliberate, if you know yourself, you learn to monitor your levels of alertness and interest throughout the day. If you’re just deliberate about performing and keeping the six things we mentioned to you in mind.

[24:09] Mike: In a way that seems kind of bizarre to be able to do that because you’re trying to trick your brain in to doing certain things in a specific pattern but it’s your brain that’s tricking your brain that just seems very inception-ish.

[24:21] Rob: It’s a dream within a dream for sure. So to recap, our six facts about your brain chemistry that can help you achieve peak productivity are number one, everytime the brain works on an idea consciously it uses a measurable and limited resource. Number two is the less you’re holding your mind at once, the better. Number three, performing multiple conscious tasks at once results in a big drop off in accuracy or performance. Number four is switching between tasks uses energy. If you do it a lot, you make more mistakes. Number five is the peak mental performance requires just the right level of stress, not minimal stress and number six is that focused attention changes your brain.

[24:58] Music

[25:01] Rob: We have some extra time here, Mike. Do you want to answer a couple listener questions?

[25:04] Mike: Sure. So, the first one we have is from Søren Jacobsen and he says, “Hi, guys, loving your podcast. I have a question for you. In an episode recently, you talked about level one apps and that was a good way to start. Can you give us some real examples of what level one apps can be? I don’t want to go in to iPhone apps. I was thinking more like web apps with recurring revenue that would not cost a fortune to outsource. I cannot code it but I’m a good marketer. I have some level zero websites with AdSense and affiliates that bring in around $2,000 a month but I want to step away from that “sleazy market” overtime and focus more on my own applications. Thanks. Søren.

.

[25:37] Rob: So, to start with I…I don’t actually think that all level zero apps are sleazy but you can certainly be in level zero which is kind of like AdSense and affiliate stuff without…without catering to just the…the dating and weight loss niches. But your question was about level one and that this one reference us back to episode 102 which was four levels of income generating web apps. And level one web app is a low competition niche app. So, typically this is something that has autopilot marketing. So, you either have a nice stream of traffic, very low cost. Typically from either Google, can be from YouTube, it can be from Amazon, WordPress, iPhone apps store. You have to find a source of traffic that’s fairly consistent and that it’s not paid acquisition strategy. So, you just get in the path of that traffic and as long as it converts, it can generate some income.

[26:28] And the examples that I…I threw out a few in that episode but a good example is like a WordPress plugin, iPhone apps. which you said I guess you don’t want to get in to anything that ranks four in niche term, something like apprentice lineman jobs which is one of my apps is like that already, has good SEO rankings and so. It has good rankings in Google and so that’s…that’s where it gets a good chunk of its traffic. Even like a wedding website builder like WeddingToolbox that could also be in these low competition level one niche areas. So, I hope that helps.

[26:59] Mike: The next question we have is from Tom and he says, “Hi, Rob and Mike. I got a question for both of you. I’ve been doing development for 10 years and I’m ready to go out of my own. I want to create software products and going to consulting preferably PHP custom business application to help bootstrap my business. Shall I create two separate business entities for both businesses? I know Mike has two different companies for both but I know companies like 37signals do both consulting and create products or does not really even matter. Again, thanks for your time. Tom.”

[27:24] Rob: So to start, 37signals doesn’t do consulting. They used to and they turned it to a product business. So, as far as I know they haven’t done consulting for five or seven years. It’s been quite a while. There are some companies that still do both but most that I know as soon as they’re able, they…they leave consulting behind. I think there’s really two questions there, Mike. There’s a question that he asked which is whether he should have two different companies for this but the bigger question I have is are you leaving salaried employment to start a consulting firm and to try to lunch products? Because that…that’s a lot to take on all at once. And if you have a decent salary job or you’re not working a bazillion hours a week and you’re reasonably happy, I would say stay at your salary job for now. Don’t take on all the headaches of getting in to consulting and trying to build that business because that’s going to take all your time and you’re not going to have time to build products. So, if ultimately where you want to go with these products and you do have that job thing kind of dialed in, I would stick there and launch the product. Now, if you don’t have a salary job, you already…you know, delved in to consulting full time and then that’s the way it is and then, you know, I think we can answer the business entities question from there.

[28:28] Mike: Yeah, I totally agree with Rob. If you have that salaried employment and things are going reasonably well, definitely, stick around until you can get your own products launch and launch them on a side and I think that you’ll find that you’re probably a lot happier and will probably work a lot better for you in the long run just because you’ll have that stability behind you versus when you dive in to consulting, you generally have to pick up all the pieces, all the paperwork of, you know, things like payroll and insurance and all the other things that go with it and it can be a real nightmare to deal with. So, if you don’t have to deal with all that stuff, I wouldn’t do it. That said, if you’re in that other situation, then you have to deal with the question of, “You know, do I open up a second entity for a business or not?” And I think for that, the primary reason that I had two companies was because the businesses were radically different enough that I didn’t want them inter tangled. I didn’t want people to come in to the website and try to figure out, well, are they a product business? Are they a consulting business? And part of it was also just the fact that —

[29:32] Rob: You had a high liability, right?

[29:33] Mike: Yeah.

[29:33] Rob: High exposure?

[29:34] Mike: And part of it had to with insurance. So, I had a lot of legal liabilities associated with the consulting. I mean if you’re doing custom programming and development, chances are pretty good that you are not going to incur a lot of liability and there’s just not a lot of risks for things going wrong. What I was doing was I rejected going on site with clients and I was working on their production system, so, like production databases, production servers. Typically, I was directly on their network and was touching, you know, thousands and thousands of computers and environments. I mean there were…there were some companies I went in to where I would literally install software in some way, shape or form on more than 50,000 computers and when you get in to a situation like that, you really want to be able to limit the liability and part of having that second company was so that I could put a dividing line between the two companies and I can work on my products, have them under the software business. I could do the consulting under the consulting business and if the consulting business ever got sued in to oblivion, then I didn’t necessarily have to worry about it taking down my software business as well and I could, you know, have that very clear dividing line between them. For me it was more peace of mind than anything else.

[30:43] Rob: Whereas I did consulting under a single company. First, I was a sole proprietor. So, it wasn’t even really a much of a formal company and then I’ve eventually moved it to an LLC. And when I launched products, I didn’t really want to go to the headache of managing two entities. There is both cost with it as well as in the paperwork. There was more paperwork because I had despised all the tax filings and all that stuff. And so, I just kept it under the umbrella of that LLC and then I stopped doing consulting and all of my products are, you know, are essentially under that now. So, there was never…there’s never been a reason for me to change that. I mean I guess I did that several years where they overlapped, you know, the consulting and the products but it does depend on risk tolerance. If you really want to be all buttoned up and yeah, you have a different…realistically, you have a different company for every one of your products that earns more than thousand or 2,000 a month or something but that would…there should be a lot of paperwork and headache in that. So, I think you just have to way that out. A lot of people I know do the…the single company and put everything underneath it and you know, that can work for as well as long as you don’t have…a lot of liability involved.

[31:46] Mike: So Tom, hopefully, that answers your question and thanks for writing in. If you have a question or comment, you can call it in to our voicemail number at 1-888-801-9690 or 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 this podcast 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.

Show Notes

• Mount Shasta
• AuditShark
• TheBirdy.com
• MailChimp
• Constant Contact
• Social Engineering

Transcript

[00:00] Mike: This is Startups for the Rest of Us: Episode 108.

[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.

[00:18] 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’m doing good. I’m coming back for a week off for Thanksgiving feeling rested. I went to a cabin near Mt. Shasta in Northern California and I did a lot of thinking, a lot of thinking about what 2013 is going to look like, dove deeper in to those topics I mentioned in the last episode about growing HitTail by a certain amount, looking building some – a couple of info products and launching a new app. So, I kind of sort of diving in to those in creating some specific like outlines, plans, dates, that kind of stuff. There’s a lot of fun. I actually – it was so super relaxing to me because I feel like it lays out what, you know, now I know what to expect over the next 12 or 13 months.

[01:00] Mike: Very cool.

[01:01] Rob: How about you? What did you do for Thanksgiving?

[01:02] Mike: I stayed home. My parents came over to visit and had turkey and mashed potatoes and you know, the whole nine yards and I’ve got some more worked done on AuditShark and got all the tasks together to send off to my new contractor for AuditShark so —

[01:15] Rob: He’s a developer and he’s here in the state, is that right?

[01:18] Mike: Yup, so he’s working on the cloud side of Audit Shark which I haven’t put anybody else on that piece yet and I spent probably two or three hours working with him to not only get us some development environment setup but to make basically walk him through everything and I probably would have done that. It’s like a screencast that you just send it over to him because honestly I would want to reuse that in the future but I needed to help him get his environment set up because I hadn’t documented exactly what needed to be done to do that. So, now, I’ve actually got some of that information because I’ve go everything set up on my laptop and my desktop but I haven’t done it for anybody else. It’s been a long time so I’ve had to do it so I couldn’t quite remember exactly what needed to go in to it.

[01:55] Rob: So, he’s working on the cloud side which is like you said it’s more green field development that just kind of plugs in to AuditShark. What does that mean in terms of are you still looking to launch the second week of January to —

[02:04] Mike: Uh huh.

[02:05] Rob: And any updates since last week early access customers using it, have you made any progress on that?

[02:10] Mike: I talked to one early access customer and I had him go through and run a policy. I basically gave him a set of instructions and said, “Hey, why don’t you go through in to this and let me know what your thoughts are?” I made sure to phrase the e-mail on a specific way and not lead him and his response back to me he said, “Wow that was really easy.” “What exactly do you mean by that?” And he explained it a little bit and he’s a like, “You know, usually the stuff is a lot harder.” He’s like, “I expected it to be a lot harder.” So, it was really nice to see that because that’s exactly what I was going for because I worked with a lot of this type of software before in the past and I know how complicated it can be and it was just extremely easy for him to just go in and run an audit and literally, he clicked the button and within two minutes he had his results. It was – it was awesome.

[02:53] Rob: Well, cool.

[02:54] Mike: The real big thing is that now that I have – I’ve had a developer who’s been working on the client side policy builder and now I’ve got a developer who I’m putting on to the cloud side of things. I’m hoping that this works out. We’re going to do a 3-week trial to see how things go and then from there, we’ll make some decisions and talk a little bit more to see where each of us wants to go with it. And what I’m hoping is that I can basically hand off all of the technical stuff to these two guys and you know, I’ve already got all the client side stuff handed off technically and now, I’m looking to get all the cloud side stuff handed off, all that technical stuff handed off so that I can focus, you know, solely on the marketing and customer development and everything else.

[03:29] Rob: All right, well, good luck. So, are you still looking at getting the AuditShark out the door launched in public on January 14^th?

[03:35] Mike: Right around that time, yes, so I know that there are certain things that are just not going to be working and you know, in terms of the policy, I know that I’m going to have to go back and forth with my developers over the next six weeks to make sure that everything kind of works from my end and I expected that there’s going to be things that fall a little bit short from where I would like them to be but that’s the goal right now is to have the product out there and launch publicly by the 14^th of January.

[04:00] Rob: Oh, let’s move on to some iTunes reviews then, shall we?

[04:03] Mike: Sure.

[04:03] Rob: So, we got several new iTunes reviews, one is from Gerald Dees [Phonetic]. He says, “Excellent advice for any entrepreneur. I’m not a programmer and I don’t have a software or service business but as an author and entrepreneur, I get an incredible value out of the podcast. I love learning from the trials and successes that Rob and Mike share about their business.” Also, we have one from T Nguyen 444 [Phonetic]. He says, “Very informative this podcast and This Week in Startups are my two favorite. This Week in Startups is a high level and Startups for the Rest of Us helps with lower level attention to detail type information.” We got a few more I won’t read but the other one I like is from Eric Foster and he says, “Awesome, awesome, worth listening to every single minute.” Really appreciate your reviews and even if you don’t write a full review, would love a – just a 5-star rating in iTunes. What else is going on with you?

[04:51] Mike: Couple other things. So, next Thursday, I’ll be meeting up with Corey from the Birdy because I’ll be back in Brooklyn and I’m trying to get together a couple of people to meet up for dinner somewhere in Brooklyn. So, that would be fun. Hopefully, we can get some other people. I’ve had a couple of meetings around the country with other people just through the various travels that I’ve done. I had a meeting last night, actually. Some of my consultant work is going to be changed a little bit. And typically, I’m going on site and doing customer work for people but one of the customers that I work with wants me to start doing some of their e-mail marketing campaigns. So, that would be an interesting change of phase I’ll say because I can do it on my own time. I don’t necessarily have to be at a customer site and we’ll see where that lead. I think that there’s a lot of potential there. They definitely have a severely mismanaged e-mail campaign I’ll say. They’re not measuring anything. They have no idea, you know, who’s clicking on what. They’re not even using an e-mail service provider. Everything is going out through their ISP.

[05:42] Rob: Right.

[05:42] Mike: So, I’d suspect that not a lot of it is getting through it —

[05:45] Rob: Getting there, yeah. Well, it’s unfortunately a common mistake.

[05:48] Mike: What I’m concerned about is taking all those e-mails and putting them in to like MailChimp or ConstantContact and then sending out an e-mail and then having most of them actually get through and then flag to spam because previously they – have just never gotten there because a lot of the e-mail vendors, they will just automatically send it to spam if it comes from certain IP addresses and their IP address may have gotten flagged as a spammer so then they’re just going straight to the trash whereas if I move it over to like MailChimp and then send them out, suddenly, they’ll get through because it’s coming from a different IP address and then what’s going to happen. Am I going to get ban from MailChimp?

[06:23] Rob: So, I’ve done this before with a list I inherited and the first in a big paragraph at the top or a big first sentence that just say, “Hey, you’re receiving this because you signed up to receive them or you either a paying customer of X, you signed up on this URL to receive it. If you prefer not to receive any more of this, simply click this link right here to unsubscribe,” and give them the unsubscribe link right at the top because if they are going to click it, then let them do that rather than mark you as spam. I’d also set up a separate account. I wouldn’t use your MailChimp account. I set one up for this – this guy’s business. So, if it does get banned, that you don’t – you don’t also get banned.

[06:58] Mike: Right, I was definitely going to do that. The thing that I remember reading though was that I think that MailChimp also measures the number of unsubscribed and if it’s really high for a list, then they – I forget how they flag it but basically they take note of it.

[07:13] Rob: You’ll get an e-mail. They do but it’s not nearly as bad as spam marks. You definitely want people to unsubscribe rather than spam – rather than mark it as spam. We had a list that did get more unsubscribed than they liked and it was like – it was like if it goes over 1% unsubscribed, then it get upset and that’s fine but they basically e-mail. And I reply back and I said, “Look, here’s what we’re doing. We’re reviving an old list, blah blah blah.” And they were just like, “That’s fine, you know, just don’t – kind of don’t want to happen again. That was just a warning type thing.” So, that’s all they did because people unsubscribing, I mean that really doesn’t hurt anyone, right? It doesn’t knock their IP, you know, whereas when they mark it as spam, it actually like is a ding against their IP address and that’s why they don’t – I can — and that’s why they’ll ban you.

[07:53] So, the only reason they’re looking at people unsubscribing it’s a danger sign that people may start marking it as spam in the future is the thing. So, I wouldn’t worry too much about that. The other thing you could do depending on how big their list is, is you could break it up in to chunks. If it’s 5000 people, you could send like the first 500, the most recent 500 as one list and send it and see what happens and then work your way backwards because by the time you get back five years or [Laughter] you know, however long it’s been, the really early guys probably are going to – there’s going to be a bunch of bounces. They’re probably are going to be a bunch of mark as spam no matter what you do. So but if you kind of work your way that gradually, then you don’t really, you know, pollute the list right from the start.

[08:32] Mike: Got it. They have two different lists. One of them is about a thousand e-mails which is I’ll say much cleaner and they’ve been e-mailing that or at least they’ve e-mailed it at least once that I know of and the other one is around 5000 and I don’t know where it came from and they can’t really tell me. So, I’m really – I don’t know if I’ll even use it to be perfectly honest. I just don’t think it’s worth then.

[08:51] Rob: Well, the good thing is if you set up the MailChimp account, you put the 1000 safe — “safe” e-mails in there and send them a few e-mails over the course of several weeks or a month or whatever, then you can at least get that MailChimp account, get it some credibility, you know, so it doesn’t look like this is your first mailing out of that account. You at least had some successful non-spammy sense. Then if you go to the other list and just do the recent most 500 and see what happens, you at least have some – some credit in their bank of credibility so to speak. So, hey, I received probably the most sophisticated phishing attack via e-mail that I had ever seen. It was an e-mail comes and I’m checking on my iPhone. So, it’s mostly text. It has the exact subject line and all the text from an e-mail that I get from WordPress when I get a comment on my blog at softwarebyrob.com.

[09:42] And so, I’m seeing this comment and I’m seeing the post name and all the URLs and it says to mark it as spam, click this link. To mark it as, you know, approve it, click this link and the comment was junk, right? So, I click on mark it as spam and it opens up Safari on my phone and you know, you know, I just glanced through and haven’t really look at URLs but it sent me to a fake URL and it was all customized for my blog like someone made a specific, very specific attempt. This was not a mass attempt and the only reason I noticed it because they had an image wrong on the thing it was a broken image and I started thinking, “What is going on here?” But I almost like entered my credentials when I —

[10:19] Mike: Wow.

[10:19] Rob: It’s crazy and I went back to the e-mail, it was like list-9.com/rob/ and that’s what all the e-mails where. So, I think it was list-9 or something like that. So, it’s some funky URL and someone really went to – I’m assuming they scraped blogs from some list and then customized it but there was – I was shocked at how close it was to the e-mails that I get. You know, you get every – kind of everyday as you get comments, you need to mark. I mean it was identical because no way I wouldn’t – wouldn’t be fooled like some – by someone like that.

[10:50] Mike: How close for you to actually click in and putting in your credentials?

[10:53] Rob: Well, there were two reasons I didn’t. One was that broken image just made me a little suspicious and that made me look up at the URL because normally if I’m on my computer, my laptop, I’m going to see the URL. That’s like the first thing I look at but on my iPhone I don’t because they hide the address bar pretty quick.

[11:06] Mike: Right.

[11:07] Rob: I didn’t glance up. The other reason is that I don’t really know my credentials by heart and so, it wasn’t in Safari so I was going to have go in and get it out and I was trying to think do I really want to do this right now. So, that gave me pause and enough pause to sit there and work at it. So —

[11:22] Mike: Wow, that’s an – that’s impressive. I think that’s the way that a lot of these types of security attacks are going to go. I mean the password hacks and stuff have kind of fallen by the wayside just because it’s so much easier to get somebody’s credentials through a phishing attempt.

[11:35] Rob: Yeah, it’s that social engineering, right —

[11:38] Mike: Uh huh.

[11:38] Rob: … rather — run a correct password they get you to do that. It’s pretty crazy. So, any listeners, I would just keep your eyes out for stuff like that. I imagine that that has worked with people. It’s a different URL and that should actually raise a flag, right? If typically you’re able to just click and log in, that’s another thing to think about. So —

[11:54] Mike: I don’t know as a lot of people would catch that though because sometimes your browser cashes it and then sometimes it expires so you have to put them in again but if you’re using something like, you know, a password manager then typically you would not have to type it in. It would just cash it there and would allow you just to go right in and then when it didn’t work or didn’t do that, then you’d have to go look up your password and that probably will put you in the same position where that you were in where you said, “Oh, well, why is this not working,” or – then you start to look at it a little bit.

[12:25] Rob: Yup.

[12:25] Music

[12:29] Mike: Today, we’re going to be talking about eleven software startup myths debunked. So, I thought that we’d take some time and talk about it to people and kind of share what our thoughts were.

[12:37] Rob: Let’s dive in.

[12:38] Mike: So, the first one is if you own a business it mean you can never go on vacation and I think that part of this thought comes from a couple of different areas. One is looking at people who own companies like restaurants or brick and mortar businesses where there’s always customers who were coming in and out and you almost have to be there if you don’t have a manager and this is especially true for any sort of restaurant. You know, restaurants are notorious for like having these mom and pop shops where people don’t go on vacation for years and years at a time because if they do, the entire thing shuts down. And because software businesses are completely different because you can sell software from your website while you’re not actually there, it’s a completely different model. And this whole idea just does not apply.

[13:17] Rob: Yeah, I think with software, it’s so much easier to implement some process to systematize things obviously something we talked a lot of about on the podcast but if you – if you’re able to work on your business instead of in the business and you’re constantly thinking week to week what do I not want to be doing, what’s the most repetitive task here, you know, revisiting that and handing them off to either virtual assistant and just doing all the process stuff that we talked about. It is – I mean I got to be honest, I’ve taken more vacation than [Laughter] ever since owning a business than I did before. It’s a dramatic difference to not have the dollars for hour’s thing. Once you decouple – it actually takes a mindset shift once you decouple the hours you work from the money you make because I still have the mindset of like, “No, no, I need to work 40 hours this week,” but you really don’t and you can start cutting that back either on a week to week basis or you can take a lot of vacation. This is a good myth to bring up.

[14:10] Mike: Well, one of the things that I find is that even when I take a week off or two weeks off to work on my own products while I’m not doing consulting, what I find is that I’m not productive for eight hours even if I’ve got eight or twelve hours on a day to work, I’m not productive for eight or twelve hours. I’m really productive for like four or five but beyond that, I’m not necessarily as productive and it feels like I end up wasting quite a bit of time. So, unless I really buckle down and make a consorted effort to be super productive then I’m not going to be as productive and what that tends to do is it tends to essentially kill my productivity somewhere in the future.

[14:45] Rob: Yeah and the cool part about owning your own business is that you are then able to basically hyper focus on those times when you are productive. So, if you are a morning person, you can make that your work day, you know, you can work three hours a day, five days a week and that can be your whole thing. I mean if you literally get twice as much done in that time, then it’s like working 30 hours a week but you do it in – in half the time. Or if you’re more of a night person, you can do that, you can really structure a time and again, the entrepreneurs I know who – who do this well and who run businesses and are really have a good like work life balance, they understand when they’re – when they’re optimum working hours are, what causes them to be in that optimum working zone and when they find themselves and this something I do, when I find myself on HackerNews or Facebook, I just say, “I’m done,” and I’m going to walk away from my computer because there’s no reason for me to sit here acting and thinking like I’m working when I’m not actually getting anything done, you know, I want to actually rest and rejuvenate during that time.

[15:38] Mike: Cool. So, number two is that mailing list don’t work and are nothing more than spam and this is so false that I just don’t even know where to begin.

[15:46] Rob: Yeah, this is the classic developer mentality, right? It’s like, we, as a developer, we don’t like getting a lot of e-mail or we have this stigma against it but a lot of the biggest online businesses in the world are built purely because e-mail exists and they have massive, massive e-mail list. And so if you look at Groupon or you look at Facebook, even Twitter, the startup Foursquare, on Quora and any of these things, I mean they are constantly when you sign up for them, they are sending you updates via e-mail. It’s what engages people. This is the reason that my conversion rate on many of my apps has gone up substantially like by double digits both during trials as well as retaining customers, even taking visitors and getting them in to trials, all of those things are dramatically increased by getting an e-mail address and engaging customers in a nice way. It’s not about hard selling. It’s not about market, market, market. It’s about educating, providing value and engaging them and setting themselves that they actually want to see and want to open, you know, and even this is one of the reasons I spend more time now creating content for my mailing list, my Software By Rob mailing list than I do for the blog. I actually put more articles out on that in the last six months than I have – I have on the blog because there’s something just more personal and more engaging about e-mail.

[17:00] Mike: This kind of comes back to the conversation I had with the business owner a couple of nights ago where we were talking about this mailing list and I was like your entire marketing strategy behind this is completely mismanaged because people actually do want to get these e-mails and what you’re doing right now is you’re just not measuring anything and that’s got to be turned around in some way, shape or form and I’m like and I can help you do that if it’s something you want  help with and he’s like, “Yeah, you know, I’d like you to take a look at it.” So, you know, we’ll see how that goes but that’s definitely I think something that people look at and they say, “Oh, I don’t want to send people e-mails because I don’t want to bother them and you have to bother them because you have to get in front of them but if you are providing them with something that they want, you’re not actually bothering them. They want to see those e-mails and it’s just a mental hurdle that I think a lot of people have to get over.

[17:43] So, moving on the third one is that I’m going to make either billions or nothing and a lot of people think that when they start a business and I think there is a realm of difference between these two and I think you have either one or the other you don’t necessarily have both. You either think you’re going to make absolutely nothing and it’s not worth your time and effort or you think that you’re going to make billions and it’s going to be an over night success and when it’s not, you kind of flip flop over to the other one where you’re like, “Oh, this is just totally not worth it.”

[18:09] Rob: The first time I realized it there was an in between where starting a software company didn’t mean I had to have a hundred million users was just completely shocking to me where I realize, oh, you mean, I can build a business that generates $10,000 a month that’s just software company that I can just be a, you know, solopreneur and kind of do what I want to do and as long as I keep these things in check and build an app that people want, that I can just build a business that – but basically is more of like a small business but as software as the core value of it. My mind was completely blown. This is not the impression that’s in the press, right, of any Fast Company, Inc. Magazine, Entrepreneur Magazine, all these things, they’re not talking about these businesses. These are the small niche B2B stuff that we talk about. I mean there’s a whole movement behind it and actually what’s cool is that there’s so much more to talk about these today, these in between businesses, these niche businesses, niche software businesses than there was even five years ago and there’s just so many more people exploring that and that’s exciting to me and a lot more developers are getting, you know, financial freedom and being able to quit their jobs and because of it, because there’s just so much more education and information available about this.

[19:19] Mike: Yeah, that’s absolutely right and it’s interesting to see those dollars just show up in your account when you’ve got something that you’re selling online because it’s not like you actually put in the time and effort, you know, that leading up to that check being deposited in to your bank. It’s no to say you didn’t put the time in to build the products and put it out there and do everything but it’s not as if there was a direct correlation between the time that you spent doing it and the time that those dollars showed up in your account.

[19:44] Rob: Yeah, it’s that decoupling of hours worked for dollars entering your bank account and it really does blow your mind the first several months of it.

[19:51] Music

[19:54] Mike: Number four is that “I have to do everything because I’m the one who understands how everything is supposed to work.” And I think this issue can be addressed by setting up various processes and procedures for others to follow. And I think part of this mentality comes from thinking that something that’s either too complicated of it’s going to take too long to explain to somebody else how to do it or you just don’t want to give up the control of it and definitely mental hurdles here to getting over this but I think the key is to find the right people for doing this type of work for you and if they’re not working out, then you need to find somebody else. You can’t afford to act like a full-pledged business that has lots of money to burn. If you’re trying something out and you hand some piece of work off to somebody and it doesn’t work out, cut your losses and move on. But that’s not to say that you should never try that again because it may just be that it didn’t work out with that person. You really have to test the waters a lot in order to figure out what is working and what’s not and if somebody else is making it work, then chances are really good that you can too.

[20:55] Rob: I really enjoy the story that Glen Germaine told us last year when he came to MicroConf. If you recall he had e-mailed in about having really struggling with the idea of hiring a developer. He said he didn’t have the money to hire a fulltime developer and he has a system that I recall it’s like medical – sort of medical billing or medical admin office automation type of stuff. And so it’s a pretty complicated software and he was concern that he would spend more time telling a developer had to do something than – than, you know, actually the time it would take and sure enough, he wrote in and we gave – we designed the whole podcast around it which I think was about – it was about hiring and managing remote developers and then he went and he hired one and it turned out really well. He was very detailed and did an excellent job evaluating but he hired someone through oDesk and since then, he’s just raved about it and he gave us the full story at MicroConf and then we – we talked about it later. But that’s the kind of thing. He did it right. He spent the time and found a right person from the start. The thing to remember is if you do pick the wrong person, it’s a learning process.

[21:54] And so, like you said Mike, if it doesn’t ring up the first time, it doesn’t mean it doesn’t work. It doesn’t mean that it won’t work, it just means that you have to give it another shot and you have to learn from your mistakes and get better the next time because this is the only way that you will actually be able to take that vacation we talked about earlier and that you will be able to grow your business is if you let go of these simpler tasks or the lower end tasks I guess I’ll say and I don’t – I’m not to say that development is a lower end task but it is something that’s easier to outsource than the visioning and you know, kind of the entrepreneur mentality of really directing the business. That’s the thing you can’t outsource. For everything else, I think slowly overtime, if you own a business 3, 5, 10 years you are going to want to slowly outsource more and more pieces of it. It’s a learning process like anything else learning how to do that effectively.

[22:43] Mike: And the one piece that you touched on there that I think is really important is that you can’t outsource the vision of what the product is suppose to become. You can outsource all the things leading up to it but you can’t outsource the vision itself because nobody else is going to have that insight and that’s why it’s so difficult to copy somebody’s idea because if there are actually visionary about it and they have in their head exactly what needs to be done, you can’t just look at somebody else’s business and copy it and expect to get the same results because there’s little subtle nuances that you’re going to miss.

[23:13] Rob: I think the one other thing I’ll add is early on in your business, at least this is the way I did it, I didn’t have a lot of money to pay great people. And so, I started off with cheap virtual assistants, cheap developers. They were inexpensive but that’s what it took to get the business off the ground. They were okay. I dealt with some headaches. I dealt people who were, you know, not ideal but it’s what it took to give me —  I bought myself enough time that I was able to leverage these businesses and grow them up but what you can do is overtime you then – you can trade up so to speak. So, I had a VA who is – I always knew she was average but she was good enough and then I found someone who’s almost three times the cost that she is but this person is almost three times better. So, now, I have everything going to him and I’m just funneling all types of stuff. Now, it’s more expensive but I have the leeway to be able to do that and I’ve done the same thing with developers and designers and everything. It’s like you trade up overtime as you have the luxury of being able to do that and it then buys you even more time because you get better people who not only provide better results but they are just more reliable, they’re more consistent that answers many questions and that kind of stuff.

[24:21] Mike: So number five is saying, “I don’t know where to start,” or “I don’t have any good ideas about anything that’s never been done before.” And part of that is finding something that’s never been done before. If you’re looking for something that’s never been done before that is just an outright mistake because if something has never been done before, then how do you know that anybody is willing to actually pay for it and that’s one of those things that you really need to find out early on when you first start building something is to make sure that there is going to be people who are willing to pay for it. In addition to not having the ideas, it’s a matter of just asking people and you don’t want to ask them in a way that says, “Well, do you have this problem,” or “If I gave you X, would you be willing to pay for it?” What you really need to do is start focusing on what people feel are their own problems because when you talk to somebody and you say, “Would you be interested in a product that does X, you know, and solve such and such problem for you?” Well, of course, they’re going to be because you have phrase the question in such a way that is very leading.

[25:15] If instead you ask them, “You know, what sorts of problems are you having with your business or with your environment or with this or that just to describe some pinpoints. You start looking at the individual things that they’re saying and the subtle nuances of things that they might talk about. So, they may say, “Oh, well, I’m having a problem with my billing. I’m doing everything and sell and it’s kind of a pain.” And you may think oh well, this person needs a, you know, some sort of software that will do their billing for them but that may not actually be the pain. You have to drill in a little bit deeper and you may very well find out that it’s not that their billing system is a pain. It’s just that the person doing it is difficult to work with. So, unless you’re asking those in depth questions, you might start making assumptions about what the problem is and going down the wrong path.

[26:01] Rob: Yeah, I think there’s a progression of questions you have to ask because early on, you’re right. You want to ask – you want to find a customer group. You want to find out a common problem they all have, right? So if there’s 20 of them that you talk to, 10 of them or whatever, then you try to group that together and say what’s this common pain they have, then though I think you get in to the customer development side where you start saying, “All right, my hypothesis is they need an app that does this and in order for this to work, I need to charge 50 bucks a month for it.” So then you come back to that group and then you find others and you say, “Would you pay 50 bucks a month for an app that does this,” and if they say, yes or no then you say why. You know, you try to figure out what the salient points are, the feature it needs, you know, maybe something it’s lacking with the prices and all that kind of stuff. We definitely agree with you there’s that early space where you really need to just throw it out, throw up in here and say, and don’t lead them yet because you’re just trying to – you’re almost trying to do a brainstorming session where you don’t want to – you don’t want to introduce, you know, impurities in to the conversation.

[26:35] Mike: And that kind of leads us in to number six which is to build something that people want. Why don’t you talk a little bit about that?

[27:01] Rob: Yeah, so you know, I won’t say this is as much of a myth as it is only half of the equation. It’s a myth that this is all you need to do. This is to build a better mouse trap theory and we know that just building a product that’s better, it isn’t enough. You also have to be able to acquire customers for less money than they give you over their lifetime and I think that’s a key part that’s really missed in the discussion of building something people want. I love the quote because Paul Graham wrote an essay and it may – it was out there titled Build Something People Want and that was the salient point from it and now that’s thrown around all the time on Hacker News and in other startup circles. And I think it’s important but it’s half of the equation. There’s the entire marketing side that people ignore when they say this phrase.

[27:42] Mike: Number seven on our list is that passion is a competitive advantage and this is just not true at all either and the reason is because everyone has passion for the products that they’re working on especially when it comes to their first product but the fact is that passion for your product is just not enough. You have to be able to get over your fears. Be able and willing to go talk to people that you’re not necessarily comfortable talking to and that’s something I think a lot of people miss.

[28:06] Rob: Yeah, I mean there are a lot of ways to have a competitive advantage. I like to think that each person has a competitive advantage that – that really is something that they should leverage, just kind of their number one skill and so some people are awesome networkers. And if you have just a fantastic network and that’s what you’re really good at, then that’s your competitive advantage and that’s what you should totally leverage to build your app. If you have a real like an engineering mind and you enjoy marketing, you should combine those two and become, you know, an engineer-driven marketer and that’s more of like Patrick McKenzie is, that’s kind of stuff that I do, a lot of testing, conversion, improvements and I think you died head first in to that. And the other – other people just have a gift for product, right, design UX, that kind of stuff and that’s kind of their whole thing. They don’t really know a lot about the metrics and the analytics and they don’t care because they can build such a gorgeous product and they have at least some way to market it. And so, I think you really need to think about more practical things like that in terms of competitive advantages rather than something that is as ephemeral at passion because like you said everyone who’s building an app is passionate about it. So, it’s just not enough to propel your app in the success.

[29:15] Mike: Number eight is that you have to raise funding to launch a startup. And I think that the word startup has been seriously abused over the years. I read something recent from Paul Graham where basically he said, “The definition of a startup is this…” So, I think that there’s a lot of fighting about exactly what it means to launch a startup but at the same time, I mean the stuff that we’re doing on and working on I mean we consider them to be startups whether you want to agree with the definition or not. I mean you’re working on a software startup because it’s a — it’s an – basically a new software company. So, but raising funding is not necessary to launch a startup. You don’t need any money or whatsoever. Didn’t Patrick McKenzie say that he launched the Bingo Card Creator with $60?

[29:56] Rob: I think it was, yeah.

[29:57] Mike: There are definitely ways to launch a product and a company with very, very little money. You definitely don’t need to go raised funding and the fact is that raising funding is not necessarily going to be answer to all your problems anyway. In fact, it may very well create more problems.

[30:13] Rob: Right and I mean I want to be clear, we are no anti-funding, right. We’re not anti-venture capital. I’m anti everyone thinking that you need to raise angel fund and venture capital in order to do a startup, in order to start a software company, in order to launch B2B website. Now, I do know that there are cases where the only way you’re going to grow that and the only way you’re going to be scale it quick enough is with funding. What I’ve seen is that the more money you have at your disposal, the faster you can grow, period because you’re not waiting for your revenue to come in to then reinvest in a business. Once you have a flywheel in place, a marketing flywheel and you know that you’d just need to dump a bunch of money in to it and more will come out at the other end, then you really do want as much money as possible. And so if you’re waiting for one in $2,000 a month to come in to stuff it in to there, you would grow a lot faster if you had 10 or $20,000 a month to put in to that engine. So, once you are ready to scale, I absolutely think funding is an option for people but it’s not necessarily and if you don’t want to go that route and you want to maintain control, this is such, you know, something we espoused so much on this podcast is you don’t need it to get off the ground and certainly not to build a business that will support you and your family and your lifestyle in the way that you want.

[31:23] Mike: Yeah, and I totally agree with everything you said. I mean the one thing that you brought up was that we’re not anti-funding, it’s just that you don’t necessarily need funding and that leads in to number nine which is you need a co-founder. And I have the Single Founder blog but at the same time, I’m not anti-cofounder. I’m just anti the idea that you need a co-founder in order to succeed. So, I know a lot of people out there who are building these one-person companies that they’re the single founder of that company and they’re doing quite well and some of them will bring employee, some of them don’t. It really depends on what their goals are but you don’t need a co-founder to succeed. And in fact a co-funder, I mean I think that Paul Graham wrote an essay where he basically said that that’s actually one of the risks in having a co-founder that somebody you can fight with. He’s like one of the number causes of a startup failing is fighting between the co-founders. I just think that it’s very important to differentiate between having a co-founder is in some way is nice and some way it is not versus that you absolutely need one in order to succeed.

[32:25] Rob: There are obvious benefits to having co-founder, right? It gives you that ongoing mastermind group, it’s the ongoing support from someone you keep each other’s morale of and as long as you’re on the same page and you share the vision of the startup, then it tends to be a good thing. Now, it does mean you have to grow that thing twice as large to get the same type of pay out. So, if you’re going after a hundred million dollar evaluation raising funding, it’s kind of here nor there, right, because it doesn’t actually matter if you take home 50 million at the end of the day or a hundred million because you’re not going to be able to spend that in your life but if you are building smaller niche apps and you’re bootstrapping, it becomes a lot harder to be because you have to then pick a market that’s twice as big. You have to build your app to twice as much before you’re going to be able to quit your job. Well, it add some complications at the lower end, frankly of in common app size, you know, startup size. So, there are definitely positives and I can understand why people want to take on co-founders but in general when people ask “Should I,” I tend to say, “You know, if you’re asking that question and you don’t have someone already in mind, then I would basically stop this through this point if you can get it done on your own, then do that.”

[33:32] Mike: Number ten is that you just need one big break and your business will be huge. And this is another one of those fallacies that people think, “Oh, just if I get listed in TechCrunch or if I do this or if I do that, if I get on that podcast, then I’m going to get a lot of press and that would be the end of it and that will kind of push me over the edge.” And it’s really not about that. I mean what you’re really looking for is this incremental wins that build upon each other. I mean there’s a reason there’s a hockey stick growth curve and it’s there because there’s all these other previous wins that have to happen in order for you to start making up that growth and as you make those incremental wins, they build upon each other. There’s no one single thing that you can do that is going to just make your business huge.

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[34:17] Mike: And number eleven is to scratch your own itch. And this really means building an app that you need and by definition, other people are also going to need that. And again, this is another one of those things that is not necessarily true and there’s a lot of people who’ll say, “Well, don’t sell to developers because they don’t pay for stuff,” “Don’t sell to designers because they don’t pay for stuff.” And that’s – those things aren’t true either. I mean if you’re selling something that solves a problem, people are going to buy it. That said, just because you have a problem does not necessarily mean that every one else has that problem as well. And it may be true but it’s not necessarily true. So, you really have to start looking at those types of problems that you’re having and ask other people if they have those problems as well. And if they do, then you may very well have viable products but and this also works in the reverse as well. Just because you don’t have a problem, it doesn’t mean that other people don’t see it as a problem.

[35:06] Rob: Yeah, this one the “scratching your own itch” I’m pretty sure it’s popularized by 37signals because they just built software internally and then started releasing it and other people needed it as well. That worked great for them. Obviously, they have a great niche business, people estimate brings in 20, 30 million a year, that’s awesome. The thing is though as overtime, you know, over the past 7 years since they launched Basecamp, everyone has taken that mentality. And so, you know, every business process that I can imagine for designers and freelancers and developers and small software shops and small, you know, small design shops, whatever has been built internally and released it with Fog Creek, right with FogBugz, with was the SourceGear did with their plug in to Visual SourceSafe back in the day. So again, you’re right. It’s not to say this does or does not work, it’s just it has been espoused as something that that’s what you need to do and that’s the only way you should build software.

[36:00] And if you’re not scratching your own itch and you’re not customer number one, then you’re doing the wrong thing. It’s just – it’s incorrect. I do believe that if you are customer number one, you do have an advantage because you do know your customers and you do know what the product should do. It gives you some insight but it’s absolutely possible and I’ve seen many people do it successfully to build an app that doesn’t serve you, yourself, you know, as you stand today. So, it’s like you said, you need to take this with a grain of salt and look in to it more. Then if you do have a need, that’s great but you need to then do more research to figure out who else has that need, how expensive are they to market to, what can you charge for this, is this then a viable product option just because you have a need in solving your pain, doesn’t mean it’s actually a viable product.

[36:44] Mike: And I think what you said there is – also important because if you are customer number one and you have already validated that other people need this product as well, being customer number one definitely helps you. I mean that’s – that’s a definitive advantage over a product where you’re not necessarily going to use it. That doesn’t necessarily mean it’s not a viable product. I mean you can certainly market and sell a product that you don’t use internally. It’s just that it’s probably not going to be as good as if it was designed by somebody who does use it internally in our regular basis. So to recap to eleven software startup myths, number one is owning a business means you can never go on vacation. Number two is that mailing list don’t work and are nothing more than spam. Number three is “I’m going to make billions or I’m going to make nothing”. Number four is “I have to do everything because I’m the one who understands how everything is supposed to work”. Number five is “I don’t know where to start or I don’t any good ideas about anything that’s never been done before”. Number six is to build something that people want. Number seven is that passion is a competitive advantage. Number eight is you have to raise funding to launch a startup. Number nine is you need a co-founder. Number ten, you need just one big break and your business will explode and number eleven, you should scratch your own itch.

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[37:54] Rob: If you have a question or comment, please 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 this podcast in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll find a full transcript of each episode. Thanks for listening. See you next time.