Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to choose and test a paid marketing channel. They give you some criteria and discuss the mindset you need for choosing the channel that’s best for your business.
Items mentioned in this episode:
Transcript
Rob [0:00]: In this episode of “Startups For the Rest of Us” Mike and I discuss how to choose and test a paid marketing channel. This is “Startups For the Rest of Us” episode 288… Welcome to “Startups For the Rest of Us,” the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products. Whether you have built your first product, or you’re just thinking about it, I’m Rob.
Mike [0:29]: And I’m Mike.
Rob [0:30]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike [0:33]: You changed up the intro a little bit.
Rob [0:34]: I know, I added in some more stuff. Because we always talk about launching in the intro, but really, now often times we’ll talk about the building, and the growing, and the scaling and all that. Maybe I’ll update that actually in the doc. That was, kind of, off the top of my head.
Mike [0:48]: Well, of course, you know, there was the little flub there, which will thankfully be edited out.
Rob [0:53]: Indeed. So what’s going on?
Mike [0:54]: Last week, I had talked a little bit about how I had started onboarding people into Bluetick, and I recently just uploaded a spreadsheet into Bluetick so that I can have it automatically send out the emails to people to get them scheduled, so I don’t have to individually email each person. And of course the nice thing is that it will gradually email them out over time instead of all at once. So that’ll be helpful in terms of putting a little bit of spacing in between some of those. Obviously, they can choose anytime on my calendar, but it will be nice to not just use it in kind of production environment, but to also let people who are coming on to it see the app in action and what it will look like on their side of things.
Rob [1:31]: Yeah. That’s pretty cool. So, you’re at the point where you’re able to dogfood it, and use it for your own use.
Mike [1:36]: Yes.
Rob [1:37]: Yeah. You know, I remember when we first hit that moment where we could do it with Drip, and we started really using it for a lot of our email marketing. At that point it was like something flips, and you’ll suddenly — you already look at your product a certain way, because you have been building it. But something, kind of, shifts once you start using it, because you’re going to notice everything that’s clunky about it, everything that you need to fix. Even more so than you did before you started using it. So I think it’s really a plus to be able to use your own product, and to catch bugs before the people – or even to catch usability issues before the rest of your customers do.
Mike [2:11]: Yeah. I mean, I started trying to do this a couple of weeks ago, and as you said, it was clunky, and there were things where I ran into where I could do those functions and perform those actions, but it was a little painful. There was a few too many clicks, and there’s still a few places where we could optimize what we’re doing in the user workflow, and how they get to different places in the app. But we basically redesigned the entire navigation, and merged a couple of pages so that people don’t have to click around as many places. It’s a lot better today than it was even just a week or two ago. We just pushed out a new version of it this morning. It’s nice to be able to do that now, and as I said, it was working a few weeks ago, but it was a little painful. I think we are starting to turn that corner where the app – it’s not just inherently useful but – it’s nice to be able to dogfood it in a way that is not as painful.
Rob [2:59]: Yeah, for sure. I think there’s that quote that’s kind of over-quoted at this point about how, “If you’re not embarrassed by the first version of your app then you waited too long to launch.” I think that there’s two sides to that embarrassment. One, it can either be that you just don’t quite have the usability right yet. I think that’s one reason to be embarrassed. I think another one is, maybe it is really useable, but you just don’t have enough features to do what you want to do, and you feel like it’s sorely lacking. I think those two axes can either be off on one or both of them. But identifying which one, and kind of moving up market, or even just improving upon those axes, I think, is a big thing in the early days.
Mike [3:33]: What about you, what’s going on this week?
Rob [3:34]: Well, we had a pretty good response to a recent blog post on the Drip blog. It’s probably the post that’s gotten the most uptake in that last several months, and it was called, “Email Marketing Tips: 33 Industry Experts Share their best Strategies and Tactics.” It was an expert roundup, basically where really Zach on my team headed it up and did most of the legwork, although I contacted some of the people who I had contact with. But we got some really solid tactics from people like Devesh Khanal from Grow and Convert. We got Josh Pigford at Baremetrics, Joanna Wiebe at Copy Hackers, Dan [Norestelli?], Alex Turnbull, Brendan Dunne, Patrick Mackenzie, Noah Kagan – just this big expert roundup, and there’s some really interesting tips in here that people are using to improve open rates, and click through rates, and just overall just improve stuff. So it went to the top of GrowthHackers for a while. I think it went up to one or two on inbound.org, and at this point it’s got 300 social shares. If you haven’t checked it out, it’s a really good post, and I’m not just saying that because we put it out. There’s a lot of cool tips and tricks in here. We’ll obviously include that link in the show notes, but if you go to the Drip blog, or if you just search “33 Industry Experts Best Strategies and Tactics” you’ll find that.
Mike [4:44]: Awesome. So what are we talking about this week?
Rob [4:46]: Well, we periodically get questions from listeners about getting started with paid acquisition, and today we are going to be talking about how to choose and test a paid marketing channel. Most recently we received this question from Ryan Frank, and he said, “I’m sure this had been requested multiple times but I’d love to get some insights on the show regarding setting up and running marketing campaigns. What platforms do you choose to advertise on, and why? How much is a reasonably initial investment? How do you brand the campaign? How do you target? How many do you run at a time, etcetera?” He goes on to ask some more questions that we’re going to cover today. The interesting thing is we don’t tend to cover this topic specifically because—well, there’s a few reasons. One, this stuff changes so frequently. Even the ad networks that are going to work for bootstrappers will completely roll over in, let’s say, 12 to 24 months, and anything we say here about specific ad networks will be different then. In fact, with Facebook – for a while there – it was like every 90 days things were changing in the ad interface itself, and different ad types started performing better than other ones. You just had to be right at the cusp of it, and either in touch with someone who really knows what they’re doing and are constantly testing, or you have to listen to some really detailed, recent information. That’s why we don’t often dive into specifics. However, today we are going to talk more about like the mindset, and the approach, of testing and choosing a paid marketing channel. Another reason we haven’t talked about this a lot is it can get often to the weeds, and it can get a little too detailed and boring. We’re going to try to avoid that today. Then, finally there’s really this, kind of, factor of competition. And this has become more of an issue of late, with competitors kind of, I’ll say, borrowing heavily from some approaches, which has been a bummer, and it comes with a little but higher stakes now that I have ten people working for me, and we’re paying mortgages and doing that kind of stuff. So, kind of, giving away exact detailed information of exactly the wins that we’re having, and why, isn’t necessarily as feasible as it used to be when I was selling eBooks and beach towels. With all that said though, there is a really specific path that I take when I’m thinking about testing and choosing paid marketing channels, and picking out new networks, and how to test. And we really are going to dig in. There’s a lot of meat in today’s episode.
Mike [6:53]: Awesome. So, let’s dive right in.
Rob [6:54]: Yeah, so we’re going to, kind of, break it up into two sections. The first is the criteria for choosing, and the second one is really how to run a test on a paid marketing channel. The interesting thing is, it’s only getting more complex these days choosing a platform to test on. There are more choices, and within those choices there are more choices. There weren’t YouTube ads at all, and then there were YouTube ads. And now there’s YouTube Instream, and there’s YouTub- in-display, and there’s another type that I forget the name of it. And with AdWords, it used to just be the little text ads, and then there’s the display network, and then there’s the text display network, and the visual display network, and Gmail ads, and on and on and on. It’s just getting more and more ubiquitous. The nice part is that does give you more choices and more opportunities, but the negative is it makes it hard to choose. I think the kind of first thing I’ll throw out is that, these ad platforms, there the cheapest when they first launch. That’s also when they’re hardest to use, because the management tools are not very good, and there’s not a lot of insider info on how to, kind, of use them for optimum results. So you really are pioneering, and you’re going to just do trial and error. But as these ad platforms get more advanced, and they get more matur – like AdWords is an example – they become so expensive that there’s just no chance that you’re going to make them work. Whereas a platform like Facebook is probably in the middle right now, it used to be cheap. It’s not totally out of the range of being affordable, but it’s in the middle. Then somethings that’s really new – maybe Pinterest for example, or Instagram’s pretty new in terms of ad networks – those will be the cheapest clicks, but there are also maybe the hardest to use, hardest to target, and you don’t have a ton of information on how to do that.
Mike [8:29]: I talked to somebody – probably a year and a half, two years ago – about some strategies that they were using on Instagram for paid acquisition, and they showed me a graph and I looked at it. It was insane. They basically doubled their revenue almost overnight by doing Instagram marketing and just paid acquisition through that channel, and there was no mechanism for doing it. They basically built an entire system themselves. They had all these spreadsheets and data, and they were calculating all these different metrics on their own. And for themselves, they pioneered it. They didn’t really talk about it publically, but I looked at what they were doing and it was absolutely incredibly and insane. The results that they were getting, it was really, really hard to argue with the results, just because there was a point and time where they weren’t doing any of this type of advertising, and then they started, and immediately you could see the graph. It just doubled the revenue almost overnight. You are right, I think, about getting in when those platforms are new. I think the downside of that is that when these new platforms come out you can spend a lot of time and effort trying to get something working and running, and it may just not work. Because that’s one of the risks that you’re taking with those, because you are pioneering something completely new, there’s no benchmarks to go off of, there’s no guidelines, there’s really not very many people you can talk to, or ask about, in terms of being able to work on those channels. But if you can find something and make it work, it can be really, really cost effective.
Rob [9:51]: Yeah, that’s pretty cool. I remember that guy’s story, assuming it’s the same person that I’m thinking of. He basically went in before there were even official ads. There was no ad platform, and he was paying the more popular Instagram users X dollars to post the thing. It was in essence, ads, but he was so early that he got in when it was really cheap. I heard Noah Kagan talk about this – before advertising in email marketing newsletters was getting really big – he would just approach big email marketing newsletters and make them an offer. That’s a kind of way to get around the ad networks, because the ad networks are marketplaces, right? And eventually they kind of even out, especially once your competition is there, then your cost per click is just going to go up and up because there is competition for those clicks, and your cost required is going to be similar across competitors. So it is going to even out eventually at some type of norm, but if you get in way early then that competition doesn’t exist yet, and you can get the cheapest clicks early. There’s obviously a lot more danger there. That’s really the balance.
Mike [10:46]: Right. I guess one of the takeaways from that, that I just thought of off the top of my head, was that if you are getting in that early, and there isn’t a marketplace for ads on a particular channel then you could probably negotiate for some sort of exclusivity when you’re working with those people. And if you can get it, then you can, sort of, lock your competitors out of that as a channel. That’s something that also worked extremely well in that particular case. That’s something you might be able to take away from that.
Rob [11:14]: I think another question you want to ask yourself is, are you going to do this yourself? Like, are you going to test the channel yourself, or are you going to hire someone? This depends a lot on whether you want to learn it or not, whether you have time to learn it or not, and whether you have budget to hire someone. The nice part is, three or four years ago, hiring someone to do it was very, very expensive. These days there are knowledgeable folks who are managing AdWords, or Facebook ads, or Twitter ads, or I’m sure Pinterest ads – I haven’t used anybody for that – but that are not these big agencies that charge enormous sums of money – or a percentage of ads spanned – but that may charge per lead, or that just charge a lower monthly fee. There was someone that was going to manage Facebook ads and I didn’t wind up using them, but it was a few hundred dollars a month rather than several thousand like a lot of the old agencies. I think, keep in mind that running a test is not terribly hard, but it is time consuming to actually get this to work and then scale it up. So be realistic about how much time you actually are going to have to run these ads. To take a step back, I’m realizing we didn’t really cover when you should try to do this. Like, when should you think about running paid ads. I think that the two points are: really early on when you are maybe testing a value proposition on landing page, and you want to send someone, and you want to test that value proposition and get email signups. I think it’s very valuable then. I think in the interim – kind of between that launch and product market fit – when you are just trying to get more people to use it so you can do customer development, I think that’s a good time to run it. You don’t want to scale that one up. You just want to get enough people in there to get enough feedback to improve your product. That’s the second time. The third point, I think, is once you’ve built a product and you have a value proposition and things are really starting to scale up, that’s when you want to hit this really hard, and I would recommend actually getting the budget together and hiring someone. I think in the first two instances you only need such a trickle of traffic when you’re testing stuff, that I would guess unless you do have money at your disposal – like you’ve raised funding – that it’s not going to be worth going out and hiring someone for the small amount of clicks that you’re actually going to be buying.
Mike [13:10]: This is one of those situations where, as a bootstrapper, you’re kind of caught between a rock and a hard place, because in order to spend the time and effort to get the results that you want, it’s going to be time consuming, and you either have time or you have money; you typically you don’t have both when you’re doing this. It makes it painful to go in and start running some of these experiments. You have to pick and choose your battles a little bit in terms of where you’re going to try and optimize things inside of your ad campaigns, because it’s going to either cost time or money, and you typically don’t have both available to you. So often times you are trying to implement things, or run some tests, and they’re going to be less than optimal. I think that that’s an important thing to keep in mind, is that you’re not necessarily looking to optimize each and every single test. You’re looking to learn from the early ones so that you can scale things up and make them better in the long run. You don’t want to spend a lot of time and effort trying to figure out, “Okay. What is the single best ad that I can come up with?” Take three to five of them, throw them against the wall, see what happens and then measure the results and iterate from there. It’s not about getting things right on the first time. It’s about iterating over time and then enhancing your results.
Rob [14:20]: Another criteria to think about when you’re choosing an ad platform is, is it B to B, or B to C, or is it a mix? I’ve found that there’s a lot more B to C inventory than there is B to B. The B to C inventory tends to be really low quality, and so it can work, the clicks are really cheap, but if you’re not targeting something like weight loss, or online dating, or these really broad consumer interests, it can be hard to make money with those more B to C networks. And those are things like Chitika and Clicksor, and I think Infolinks is like that. I tested 10 to 15 ad networks back in the day when I was really trying to scale HitTail, and I found that most of the ones that I hadn’t heard of were just kind of junk traffic. They were super cheap clicks – five cent, ten cent clicks – but average time on site was two seconds or three seconds or something. So it was pretty noticeable that either the clicks genuinely were just bots or not real people, or they were accidental things, or they really were just looking for more stumble-upon content to hang around and be enticed with info market stuff, rather than actually trying to sell a product. You definitely want to think more. We’ill talk through a few networks here. My next bullet spells out several networks, and there still are a lot of B to B and mix networks that do have quality traffic, but you’ll want to think about this in terms of the product you are selling, and the type of scale that you’re trying to get to.
[15:43] The next criteria to think about is, does the ad network have enough volume to scale traffic? Early on, like I said, when I was running ads for HitTail, I actually ran ads on Bing and Yahoo and other search engines, and those were examples of things that converted for me, but I couldn’t get enough clicks that it was even worth managing the ad platforms. So, while you can look at all these kind of peripheral ad platforms, it often will be a waste of time even if you can get it to work. The majors are things that you’ve heard about. There’s Facebook, there’s Twitter, there’s Google AdWords. Then there’s the AdWords display network, which is basically what AdSense runs on. Then there’s YouTube with multiple different types. There’s a LinkedIn ads. Pinterest now has an app and network. AdWords has a Gmail ad section that can advertise on Reddit, and I got those to work for a short time. BuySellAds.com is a nice display network, and then we start moving in to the consumer stuff. I think there may be one or two more that are at scale and you can do B to B, but the ones that I have already listed are pretty much what I know about. Then there’s like Outbrand, and Chitika, and Clicksor, and Infolinks. There’s a good article summarizing these. It’s on monitizepros.com and we’ll include that in the show notes. The idea here is, if you can find an outlier ad network and you can make it work, the clicks are going to be super cheap and it’s going to be very, very lucrative for you. The trick is, I’ve never been able to do that, and I spent quite a bit of time and money trying to do that at one point, and I found that the ad networks today that people are talking about, there’s a reason they are talking about them. It’s because that’s where the real people who actually spend money are. So when you think of the Facebook, Twitter, the Google, the LinkedIn, and the BuySellAds, and maybe Pinterest and Instagram if that’s kind of your thing, those are going to be the mains that you’re going to have to evaluate and think – based on what I am selling – is someone going to buy email marketing software on Pinterest or Instagram? The odds are probably not. That’s not going to be at the top of your list if you are going to advertise. You’re going to want to stick more to an ad network where you feel like you at least have a chance of someone being interested in your product.
Mike [17:47]: You know, the fact that you had an ad budget for Yahoo means you probably could have spent enough money to just buy Yahoo outright of what they were worth.
Rob [17:55]: I know. Interesting. For real. This is back in the day. They were still worth something a few years ago.
Mike [17:59]: Are they negative now?
Rob [18:00]: Oh, it’s so sad to see a giant like that just go down the tank.
Mike [18:08]: Oh, well. So, what’s next?
Rob [18:09]: So, the next thing to think about is to take into account what the cost per click is going to be, verses your budget, and the lifetime value of your users. You’re just going to have to ask around, or do Google searches or whatever, but these days we know that Google AdWords is very expensive because it’s such a mature platform and Google’s really smart. Whereas Pinterest and Instagram – since there are early – the ad clicks are going to be a lot cheaper. You can get some cheap clicks on BuySellAds, and I have heard there’s cheap clicks on YouTube these days. Whereas Facebook, like I said, is kind of in the middle. Twitter, I think, is in the middle as well. They are both starting to mature, and they are getting a little more expensive. So this is one where I think that the most value can be had probably in the early to the middle section there, and I think a lot of the older – or the larger – enterprises are doing the more advanced, or the more mature, platforms because they are easy and more qualified clicks, but they are definitely a lot more expensive.
Mike [19:00]: I think one of the things we might want to touch on here is talking about the cost per click, or the cost per lead, that you are getting verses your budget, and that kind of ties back into what the lifetime value for your customer is as well. So obviously, if you have a one-time sale for a product, then your lifetime value is going to be whatever the sale price of that product is. So, if it’s 50 dollars to buy a WordPress plugin, it’s going to be 50 dollars. But if you have a SAS product, or anything where there’s recurring revenue – and it’s let’s say 100 dollars a month, and people are going to stick around for 10 months – you’ve got a lifetime value of about a thousand dollars. I think that the general rule of thumb that I’ve heard from most people is that you don’t typically want to spend, on a long term basis, more than about a third of what you’re lifetime value is to acquire a given customer. Now, that’s not to say that you can’t spend upwards of break even for the first set of them, but you’re going to drive your business into the ground very, very quickly if you do that for too long. The primary reason for that is because you’re going to be spending a lot of your ad budget now, and let’s say that you spend a thousand dollars to get a customer now. But the problem is that you’re not going to make up that revenue for any given customer until they are there for the entire time period. So you’re not going to get all of that money back until 10 months into it, so that makes it very difficult to do that. When you’re trying to go through and budget for this, make sure that you are very aware of how much money it is that you are spending, and keep in mind that the tests that you are running early on, you may very well run way above and beyond that, and it’s primarily just to go through and do the testing on those different channels and iterate and try and make your ads better. You’re not going to get them right the first time. You’re going to spend a heck of a lot more money the first time through, but as you iterate, if you can get that under about one third of your lifetime value then you’ve got, essentially, a sustainable channel that you can start pumping money into. Now, that’s not to say that you can do it on an unlimited fashion, because even if you are doing that, then you’re still not getting that money for at least three months. So you can’t just pump every dollar that you have into it. You do have to be careful. You do have to budget for those types of things. I certainly wouldn’t run the bank account down to almost zero with the anticipation that you’re going to be able to make it up within 30 days.
Rob [21:12]: That’s a really good point. I think the one third LTV is a good reminder, and then – typically if you are bootstrapped – I see most people not going more than about three month payback. I see some people edging up to like a four month payback window on your trial or sale cost. So that’s not a click cost, but that’s someone coming in and actually becoming a customer, and you want to get paid back within four months. In your example, if you were doing a hundred bucks a month then you could pay up to 400 hundred dollars to acquire a customer. But, then like you said, you need the cash to be able to do that. Funded startups, the rule I’ve heard is, no more than a third of lifetime value, and no more than a one year payback. They tend to raise enough money that they can cover out, but when you’re bootstrapped — I remember first starting out it was like I had like two month payback with HitTail. Then as I got more cash it was three month, then it was four month. Then once I really optimized it, and I widened the reach, and I knew that not only were the folks signing up and becoming customers, but I was watching them remain customers, I actually kicked it up a little higher than that. That’s kind of the range that I would think about. I think the last criteria for choosing a network is, are you going to need banners or fancy images? And do you have a way to do that? I know Bannerarchitect.com is a pretty good way to do that, and there are certainly people on Upwork these days that can create banners. But keep in mind, there are some text networks that work really well, and you don’t have to spend the time and money to develop banners, and banners burn out as well, so you are not going to have them made once and have then last forever.
Mike [22:31]: That’s actually a really good point about the fact that those banner ads will burn out, and the same images that you use today will not necessarily work the same even a week from now. I mean, sometimes they burn out very, very quickly. Other times they will last for a while. Again, every image I’ve ever used – or ever seen – in any of my ad campaigns, they inevitably burn out after a while. And what will happen is you will notice that the effectiveness of that campaign will start to decrease even after you’ve optimized it. So you will have to refresh those images, and use different ones, and play around with it. And the thing that sucks about that is that it screws with your stats, because even week to week you can’t necessarily guarantee, or look ahead and say that, “Oh, this advertisement is going to have this effectiveness.” because it will change over time as people see it, and they basically become blind to it.
Rob [23:22]: So moving into how to actually test a network. As a rule, the higher your budget the faster you can test. But you can test cheaper channels with a budget of, say, $10 a day. You’re not going to be able to test AdWords at that budget, but you could start running let’s, say, a Facebook test, or even maybe there’s some cheap clicks – like I said – on YouTube, or Instgram, or Pintrest. I’m sure you could do those for 10 bucks a day. I personally like to start with about 20 bucks a day so we can move a little faster. And I commit maybe around a couple thousand bucks to a full test, unless it’s either doing really well at the start, or it’s really tanking at the start, we’ll go in one to two thousand bucks; that’s just the scale we’re at right now. But you could probably make a call after a few hundred dollars. I recall doing that. I mean, some of these are just going to be so obvious that they’re not working that you don’t need to invest a huge amount of money in order to figure it out.
Mike [24:10]: I think one of the things you have to be careful about when you are doing these tests is that you have to be aware that the way that the advertising channel shows you those advertisements is not going to be identical to what is displayed to the user. So sometimes their interface is just blatantly wrong. I can think back to a scenario where I was starting to do some paid advertising for Bluetick through Twitter, and I was using their lead cards. And everything showed up in the Twitter advertisement interface just fine, and I put it out there, and I forget how long it was, but people started sending tweets back to me with screenshots that showed me that they were displaying just a link to the Twitter card, as opposed to the Twitter card itself. And people had to click through it. And at the time I was looking at my stats saying, “Well, these are abysmal, but they’re not costing me very much, so I’ll just let them run.” Because I was still getting email addresses, gnd going back and looking at the screenshots that people were sending me, my ads were just fundamentally broken. So I ended up stopping them at the time just because I was clearly spending a heck of a lot more money, and I didn’t want those images to burn out, and quite frankly it was kind of a distraction at the time. So just that said, you need to be aware that just because your advertisements are tanking doesn’t necessarily indicate that, “Oh, this entire channel is junk.” It could also mean that you’re doing something wrong. So you want to be careful to at least do some spot checks to identify whether or not, “Is it my advertisement that is wrong? Or is it just this channel?” And it’s sometimes difficult to tell the difference.
Rob [25:37]: Yeah, that’s tough. I haven’t seen that happen with AdWords or with Facebook; where the ad showed up different than the preview. But I have to imagine that happens. Especially with Twitter where all the clients are— not all the clients – but the third party clients tend to display stuff differently than the native Twitter things that they own. So I could imagine that there would be differences in display. It’s something you need to watch out for. The next step in how to test is that if you’re going to do this yourself is to educate yourself online. I would just start doing Google searches of “how to run Twitter ads”. And I would try to find like Growth Hackers links from growthhackers.com, or people who are actually doing it, kind of, in your space, because you’re going to find a lot of stuff of people running ads on this network, and they’re doing it for, again, like diet pills, or “make money online”, or just stuff that doesn’t apply to you, and it isn’t necessarily going to be that helpful. But I personally try to buy a course if I can. I try to find a podcast on the topic, and then I try to buy that person’s course – assuming that the podcast is reasonable. And obviously you’ll pay something for that course, but it can save you dozens of hours of trial and error. And maybe it’ll even convince you it’s not a good channel and it’ll save you the time all together.
Mike [26:44]: In terms of courses, there’s a lot of great resources out there that are free. And as Rob indicated you can also go out and look specifically for paid courses from people who are actively working in that particular industry. But there’s a couple of different resources you might want to check out. You can take a look over at Udemy, or Udacity, or at Coursera. And all three of them have courses that are available, either for free or for reasonably low cost, that you can just pop in, learn what it is that you need to learn and get out. And I think the one thing to keep in mind when you’re looking at these courses is that you don’t need to consume every single piece of information that’s there. Skip through, find the things that are relevant to exactly what it is that you’re doing, and then get out and start practicing with that stuff. Because if you spend too much time getting into the weeds, then you can spend forever there and not actually get your ads done. And I think that setting up your ads, and getting the images, and the text, and all that stuff all set up can be very time consuming. And if you’re spending more time learning – and we actually talked about this in a previous episode a little bit; how to balance your time in learning mode versus execution. So if you haven’t listened to that, go back and take a listen to it. I think it was episode 286 where we talked about that. It was “Five guidelines for balancing learning and doing”. So if you think that that’s an issue that you might need to contend with, go take a listen to that episode. But again, you just want to make sure that you’re getting in, getting the information that you need, and getting out as quickly as possible, so that you can start learning how that particular channel applies directly to the product that you’re selling.
Rob [28:09]: Yeah. That’s a good point. There’s a lot more resources on these topics – on ad networks and how to run them – than there were a few years ago. And those course web sites that you mentioned, I’ve actually had good luck finding decent courses on them, and have bought several for my own edification. So the approach I take when I’m testing is that I tend to try to go immediately from an ad to a sale, or a trial, or a demo, to see how that pans out. And then judge is my ad click through rate too low? Or is it the landing page that I’m sending them to that’s too low? Which should I optimize? And typically it’s going to be the ad at first, because your ads aren’t going to be very good. Then I split test images, headlines, and the audience, until I get to the point where I’m paying a reasonably small amount and getting a decent amount of traffic. By that time you’re going to find out that your landing page sucks. And then I’m going to use Optimizely to improve that. If I then spend several weeks trying to improve the landing page, and trying to get them to buy or to try, and that’s still not working, then my guess is that either the traffic is not qualified enough, or I’m just asking for the sale too quickly. So then I shift into this “Plan B mode”, where instead of asking for a sale or trial I ask for email opt-ins – either to a webinar or to an email course. Then nurture those leads, see how many convert, and this is where a tool like Kissmetrics or a Drip – because that’s what we use it for – where you have tags, and you can actually report on everyone who’s coming through those ads – because their tagged as their source is that ad. Then you can see, “Boy! Did they sign up for a trial? How many of them did? Did they sign up as customers? How many of them did? How much have they paid us?” It’s very, very big, because it’s hard to do that without a tool where you can actually see individuals and not just aggregate data. That’s a quick run through; the philosophy of actually running a test is to first try to ask for the sale trial, figure out what’s not working, fix the ad, then fix the landing page, and then – if you get that working – then it’s awesome and you can scale it up. And if that doesn’t work, then you switch into this plan B mode of getting the email opt-in and nurturing. So it sets you sale cycle out longer, it means there’s more steps between them initially clicking the ads. And, not only steps, but more time in them signing up and buying from you. But that’s what this is about. It’s about finding and reducing friction during this process.
Mike [30:23]: And I think something that that process kind of highlights is the fact that you’re going to have to go through this several times in order to find out whether or not a given channel even works at all. Because one of the first things we talked about was making sure that you had enough budget to go through and run these tests. And when you’re testing them, make sure that you’re taking a look at the statistics, and identifying your conversion rates, and how much you’re paying for the incoming leads, and whether or not those people convert to trial. And it’s time consuming to gather that information, and analyze it, and figure out where the leaks are in that particular sales funnel. Again, it’s just a matter of going through, gathering as much of that data as you possibly can, and then iterating through it multiple times in order to find where those leak points are. Because you’re not always going to find them the first time. Sometimes it’s misleading it best. I mean, you’re going to look at those things and say, “Well, this particular channel isn’t working.” And I think that that’s where a lot of the fear, uncertainty, and doubt comes about from some of these different ad channels. Because somebody will try them out and say, “Oh, well, I tried that and it didn’t work.” And your response to that should be, “Well, what did you exactly do? And why did it not work out?” And if somebody can’t explain why something didn’t work then they may not understand all the subtle nuances about it, or they just didn’t dedicate the time to it. A lot of these ad channels will work if you spend the time and effort to optimize them. Now that said, there are some that are not going to based on the type of product that you have. But if other people are advertising on those ad platforms, chances are good that it’s working for some of them, because if it didn’t work for anyone then nobody would do it. So nobody’s going to spend money to make nothing. That’s obviously a losing strategy.
Rob [31:57]: I think a final thought is that if this sounds complicated and scary, it’s not. But it does take work and it does take time. And just the dream of plunking an ad on to AdWords and paying five or ten cents a click, and then just having this amazing cost per acquisition is not—I’ve never seen that happen. It does take work, and it does take refreshing of the ads. So if you have the time to do it, invest, but consider it another marketing channel. It’s not anything that’s going to be easier than other marketing channels, or particularly less time. The nice part about it is if you get it to work then it tends to scale really well, and you can drive a lot of trial pretty quickly. I think the last thing I’ll throw in is if you’re not already doing retargeting, that is actually where I would start before I got into all this stuff that we’ve said here. I would consider using a tool like Perfect Audience, or going directly to Google AdWords, or to Facebook, and they have retargeting images build into them where you can get a pixel, and then essentially cookie people, and then retarget them with ads as they travel around the Internet or on Facebook. Those are going to be your cheapest clicks and your highest converting clicks. And so that’s actually pretty easy, and there’s not too much magic to it; maybe some testing of the ads and such. But you don’t have to get into all the targeting, which is nice, because you just have this audience. And that would be, I think, the low hanging fruit in terms of paid acquisition. But if you’re trying to get new visitors, that’s really more of what this episode was focused on. Because to do retargeting you need to have a nice bulk of existing visitors already. You can’t just start from zero, because there’s no one to retarget.
Mike [33:25]: I think that about wraps this up. If you have a question for us you can call it in to our voicemail number at 888-801-9690. Or you can email it to us at: questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. Subscribe to us in iTunes by searching for startups, and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, and we’ll see you next time.
Episode 287 | 5 High Leverage Areas Bootstrappers Should Focus On
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about five different areas bootstrappers should focus their time on. You’re not going to have time to do everything and some things should be a lower priority.
Items mentioned in this episode:
Transcript
Mike [0:00]: In this episode of “Startups for the Rest of Us,” Rob and I are gonna be talking about five high-leverage areas bootstrappers should focus on. This is “Startups for the Rest of Us,” episode 287.
Welcome to “Startups for the Rest of Us.” The podcasts help 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.
Rob [0:24]: I’m Rob.
Mike [0:25]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week Rob?
Rob [0:29]: Well, week’s going pretty well. I had about two and a half hours yesterday that I totally killed because of the way that Gmail forwarding works, and the way that it’s really smart and it knows if, like, another Gmail account can send as a certain email address, and if you try to send from a Gmail account to itself as a different address that it won’t send the email. And I had like two or three Gmail accounts and I was trying to troubleshoot all of it, and I won’t to the vast complexity of it, but it was this funny string of, “Man! These things are not forwarding. Google Apps doesn’t work the way I thought it did.” There was a certain forwarding setting that I had set and it just wasn’t working. And two and a half hours later I finally realized, “Oh, it’s because Gmail knows that the other Gmail account could send as that thing, and so therefore it wouldn’t forward the email along. And by the time I had someone else in my office send the email and then it all worked it was like two and a half hours later. So, it was kind of a bummer.
Mike [1:26]: That sucks. You could have asked me. I would have told you that.
Rob [1:28]: Yeah. Well, I knew how it worked with one account, but it was that there were these three accounts that were linked in this chain. To be honest, moving from DreamHost to Google Apps to manage our email has been a fairly seamless transition aside from the upfront work, but just not knowing the interworkings of how it’s gonna do some things, and there was an email that got lost, it instantly made me suspicious. I just hate being on new systems where like you don’t quite know how everything operates and interacts. They aren’t necessarily bugs, but they are like, features or odd behaviors that [crosstalk]
Mike [1:59]: Yeah. They’re little quirks.
Rob [2:00]: They are. That’s what it is, you know, just legacy of how they were built type of thing.
Mike [2:04]: Yeah, I’ve seen that myself. I think the way that I got around it was that what I did was I would send the email and, inside a Gmail, I would have it send through an external SMTP server that would then, basically forward that email back.
Rob [2:17]: That didn’t work. I did that.
Mike [2:19]: Really?
Rob [2:20]: Yeah. It’s exactly that. That’s why it took me two and a half hours, because I was like, “There’s no way it knows.” but it did. It’s crazy. There’s a bunch of technical detail that doesn’t make sense. The bottom line is I killed two and a half hours and I should have just assumed that Gmail was smart. Because that’s really what it is. I mean, when I actually look at it, they built it pretty intelligently. I just didn’t expect it to be that knowledgeable of a separate Gmail account and that it would know who was sending as.
Mike [2:45]: Yeah, I just don’t understand why they prevent you from doing that to begin with. That doesn’t make a lot of sense to me. I don’t know why. Maybe there’s some weird technical thing on the back end, and it might have been something that was early on and then at this point, they’re just like, “Well, it’s not broken so let’s not bother changing it.”
Rob [3:00]: And I also wonder if they’re trying to keep infinite loops from happening, where you like forward from one account to another and then if you were to forward back it would infinite loop back and forth or something? This behavior would avoid that, and so that’s part of why I think they might have done it.
Mike [3:13]: I guess, but at the same time those would be rules, not necessarily like an active send. If I literally send an email, or if I send it, it should send it. It shouldn’t matter what other rules and stuff are in place, and they should have stuff in there. Like if they’re smart enough to do that, they should be smart enough to detect whether or not there’s gonna be infinite loop of forwarding back and forth. It’s six to one, half a dozen the other. It’s like you can solve it in one or two different ways.
Rob [3:35]: Perhaps, but I know that the forwarding can get really complicated and have like custom rules and all that stuff. So they would have to evaluate those on both sides. That would actually be a lot more complicated I think, then just having –
Mike [3:46]: Google.
Rob [3:46]: – the flat. But do they want to waste their time on that, or do they want to be like be shooting rockets in other space?
Mike [3:52]: Or making us all live to the end of time.
Rob [3:54]: Exactly. That kind of stuff. How about you, what’s going on this week?
Mike [3:57]: I on-boarded another customer this week and I am unfortunately not gonna make my deadline of having everybody onto Bluetick by the end of the month, but I am at least making steady progress to it. And the app is getting more and more solid each week that goes by. So my self-imposed deadline of having the app completed was back at the beginning of this month –
Rob [4:16]: Right, and you hit that.
Mike [4:16]: Yeah. The thing is it was completed, and it was largely functional, and we’ve spent the past several weeks cleaning up a lot of the rough edges and double-checking to verify certain things; that everything’s working. And then anything that’s not working, we’re going in and fixing it more or less as I onboard people. Initially it was just, get at least one or two people onto the system, find out where they’re stumbling, and basically I’m just kind of watching over people’s shoulders as they’re going through. I watch them sign up for the app. I watch them configure everything, I watch them as they struggle through the interface and take notes about pretty much everything that they’re doing so that that way I can go back and log new cases and say, “We need to fix this.” or, “We need to move this over here.” or “Make this more clear.” or “Change this text so that if there’s any questions about how something works.” Some of it’s just very simple stuff that you wouldn’t necessarily think of, and it’s just adding some explanatory text is what will fix it, or changing a text on a button. All of that stuff is pretty simple to do. It’s just a matter of knowing that you have to do it. So watching over their shoulder really helps with that.
Rob [5:18]: Yeah, that’s really cool. I mean that’s the benefit to being so hands on in these early days. So, you said you’ve on-boarded another customer What’s your total customer count up to?
Mike [5:25]: I’m up to three and I’ve got another one scheduled for this Friday, so I’ll be up to four. I actually don’t know what my preorders is up to at this point. It’s somewhere between 16 and 20.
Rob [5:36]: Nice.
Mike [5:37]: I don’t know exactly. So that’s kinda where things are at, and I’m hoping over the next couple of weeks I’ll get everybody else on-boarded and start working through the issues. I mean, we’ve already redesigned a bunch of the navigation to make it easier to use, and easier to kind of pop through the screens and do what you need to do. And then a lot of the other stuff is just adding in little bits and features that people need. And one of the things that I really wanted to have operational on day one was Zapier integration, and the person I put on-board yesterday they were able to do that. We wired everything up, connected to a form on their website, sent everything directly through, automatically added them to an email sequence and made it so that they could start sending those emails, basically automatically. It was really kind of awesome to watch.
Rob [6:17]: Yeah, that’s fun. It’s fun to get some real people using it. Have the people you on-boarded actually started sending emails? Are they using it for production use?
Mike [6:25]: Not yet. That will probably be next week. So right now they’re just kind of going and putting it through its paces internally and testing it with just test email accounts, and then I think next week I know of at least one person who’s gonna start using it in a production capacity assuming that everything goes well this week.
Rob [6:40]: Cool. And are they on a trial basis where you’re gonna touch base and find out when they’ve got value, and then you’re gonna charge them for they subsequent month or is it a predetermined timeline, in terms of the trial length?
Mike [6:52]: Yeah, it’s not a predetermined timeline. It’s essentially when I brought them onboard I had them give me a preorder. I took their money and then said, “Look, I’ll work with you through the onboarding process, and if the very first day you can say it’s providing value, great. I’ll apply a credit for however much you gave me and then in X number of months, I will charge you again for that “first month of service” which is, in reality, like three or four months out. But if you can’t say that for six weeks, or for eight weeks, or 12 weeks, then we’ll just keep working with each other until you get to the point where you can say it’s providing value and then we’ll do that. So, they’ve kind of paid already, but I’m not actively charging them more if that makes sense?
Rob [7:32]: Yeah, no that makes sense.
Mike [7:33]: But I don’t have a specific timeline. I mean, I would be disappointed if it took like eight weeks for people to look at it and say, “Yes, I’m getting value out of this.” because then it would mean that there were a lot of things that I got wrong, and I don’t think that that’s the case.
Rob [7:45]: Yeah. That makes sense. That’s how we did it with Drip as well, when we on-boarded those first ten or eleven early access users. I was just so high-touch, and just so aware of what everybody was doing at that point, that at a certain point I was like, “Man, they sent a broadcast to 5,000 people, and got this open rate, I have a feeling they’re getting some value out of this.” So it was purely based on me just circling back every week and reviewing everybody’s activity rather than having a predetermined trial length. And then I went and used that data to then inform, “How long should our trial be? Does it need to be 30? Can we do 14?” And obviously we settled on 21-day trial, but at this point learning and just getting people using the app is more important than the money as long as the people are willing to pay you in the long-term, because you want the right people using it who have money, who aren’t going to be perpetual free users. I think you’re on the right track with that.
Mike [8:34]: Yeah, and that was the purpose of taking that money upfront. It’s more just to maintain an affirmation of commitment than anything else.
Rob [8:40]: It’s a token, yeah. So if listeners are interested in seeing what you’re up to they can head to bluetick.io, and I guess they would sign up for the email list there and you’ll be in touch once stuff’s ready.
Mike [8:51]: Yep. That’s right.
Rob [8:52]: So, how about today, what are we chatting about?
Mike [8:54]: So, today what we’re gonna talk about is different high-leverage areas that bootstrappers should focus on. And I kind of came up with this idea because I’ve been personally buried with just tons of different things that need to be done, and what I’ve realized was that I was kind of going down the rabbit hole in certain places. So, I kind of took a step back and thought about what I should be doing versus where I am spending my time, because I track my time using RescueTime so I’m able to go back and see exactly what it is that I’m doing, and how much, and things like that. It seemed like kind of an appropriate topic to talk about and to share with people. I did a little bit of research when I was taking that step back, and so this is loosely based on an article from Fortune magazine which we’ll link up in the show notes. It talked about five different ways that CEOs should spend their time.
Rob [9:40]: And before we hit record, we talked a little bit about how really these five areas are aimed at more full-time bootstrappers who are trying to grow a business. So right now if you’re nights and weekends, or you have something that’s on autopilot, this probably isn’t gonna be as relevant. It’s more for people who are gonna be hiring some contractors, potentially employees, at some point and who are really thinking of building something that they want to grow and are investing in it. And you know, it’s funny, I’m not sure that it needs to be full-time, but it’s like if you’re hitting it hard and you’re investing time and money into it, and are heading for growth, I think this is gonna be in line with what you should be focusing on.
Mike [10:15]: Yeah. I think the other thing that factors into it is making sure that you’re spending time in the right places and you’re not overworking yourself. I think that that’s an easy trap to fall into if you’re doing something where it’s just taking and consuming a ton of your time and you don’t really have a lot of free time to do other things to kind of wind yourself down. And what I found was I was spending just vast amounts of time working on some of this stuff, and quite frankly some of it I just didn’t need to be doing. It was better left to other people. But at the same time there’s this core group of things that just needed to get done that I’m kind of the only person who could or should be doing those things, and it’s just a matter of balancing those things and making sure that not only do they get done, but I don’t burn myself out in the process.
So before we dive into these, one of the things that I wanted to point out is that I think that it’s a mistake to think that as a small company you can do everything right that the big companies get wrong. I remember years ago when I started my own company I looked around and said, “Well how are they still in business? How is it that they can sustain themselves when they do this laundry list of things wrong?” At the time I remember promising myself that I would never act like that and just drop things on the floor. And with time comes a little bit of wisdom, I suppose, and I’ve realized since then that it’s very difficult to not just drop some things. You can’t always move everything forward. You’re not always gonna be able to pay attention to the smallest details, and there’s gonna be things that get dropped. And that kind of goes along with this particular podcast episode, because there’s gonna be places where you should be spending your time, and then there’s gonna be places where they’re gonna be lower priority. You’re gonna have to neglect them a little bit. So with that said we’re gonna kind of dive into these five different areas. The first one is strategic planning. Under the umbrella of strategic planning this includes things like: your business roadmaps, your product roadmaps, the vision of where the company is going and how it’s going to get there. And along with those things you have to have at least an idea of what it is you’re trying to accomplish, and what the timelines associated with those are, because if you don’t plan those things out and figure out how you’re gonna get there then it’s gonna be difficult to achieve those goals.
Rob [12:21]: There’s a concept from the E-Myth where the author says that, “A technician thinks about today. The manager, who’s one step up, thinks about this week. And the entrepreneur thinks about this month, or this quarter.” That’s where this strategic planning comes in. You have to be thinking out three to six months, and thinking about what features are going to need to be built? What marketing approaches you’re going to need to take? Do you have the cash? Do you have the personnel – whether it’s contractors or full-timers. And really where is the whole space headed if you’re in a competitive area? How you’re going to react to things that other people do? I mean, there’s a lot to be thinking about in this kind of umbrella of strategic planning and vision, and no one else is going to do it. This is really a founder level responsibility, because everyone else is focused on getting stuff done day to day. And this is actually hard to do in the very early days when it’s just you, or you and one or two other people, because you are so focused. You are a technician, and manager, and the entrepreneur. And those are the hardest days in my opinion, because you’re just trying to get the support tickets responded to, and get the next feature built, and get the next page of documentation written. But as you’re able to fire yourself from some of those roles, meaning that you hire good people to take them over – so suddenly you’re not responding to the support emails, you’re not writing the KB articles. This is all stuff I was doing two and a half years ago as we launched Drip, and I’m not doing any of that anymore. Once you do that you find that you free up more mental space to start thinking strategically, and this is where you spend time taking in outside content basically. This is why I do listen to a lot of audio books and podcasts, and I keep up on what’s going on in the email marketing space and marketing automation and marketing technology in general. And I have time to do that because I’m able to essentially delegate all the tasks I used to do, kind of the technician and more hands on stuff. So, you have to make a decision here. If you want to stay small as a one or two person, and you want to keep writing code, that is totally cool. But you do need to fit some time in your week to do some strategic planning even at that level. Then if you do plan on getting bigger, and becoming, let’s say, five, ten employees, you will want to start to move back from some of the more hands on roles.
Mike [14:35]: And I think that’s a difficult line to draw in the sand, and you eluded to it early on when you said that in the early days you are acting as both the implementer and as the manager. And it’s very easy to get sucked into all the short-term stuff and ignore the longer term stuff, thinking “Oh, it’ll just sort itself out.” and you won’t need to think about it, especially if you do really well on all the short-term stuff. And that’s not the case. I mean, because there are definitely times where you need to take a step back and look up to look to figure out whether or not those short-term things that you’re working on are even relevant. Do they even need to be done? And sometimes they just don’t. Sometimes the things that you’re doing short-term make absolutely not difference whatsoever, and it is better to leave them alone and walk away and essentially let them fall on the floor and do something else, because it makes more strategic sense to go do something else. The second high leverage area is to focus on communicating. And there’s three different place where communicating is applicable. The first one is talking to your prospects. When you’re talking to people who are looking at purchasing your product, or using your product, they are going to give you an indication of where the market is headed and where things are trending. The second place where you should be communicating is with existing customers, because they’re going to give you an indication of where they’re at with their business and how you can better serve them in the future. Presumably, those customers are growing, and if you are able to grow your app and meet their needs in the future, then that means that your customer base and the relevance of your app to that customer base – whether they are small or as they are growing – is also going to increase. So, it essentially increases the breadth of people that your app is applicable to and gives you essentially a wider market that you can tap into. And then the third place where communicating is really important is communicating with your team. And that is to essentially make sure that they understand the vision of the product, the business, and where the company’s headed, how you intend to get there, and all the timeline things associated with it; the roadmaps, the goals, the milestones, etc. They need to understand what the priorities are for the business, and if you can’t communicate those things to them effectively, in a way that they are going to understand and be able to relate to, then it’s going to be very difficult to get them to all go in the same general direct. What you’re going to end up with is a lot of people who are either going off into the weeds, or are working on things that are simply not relevant, and you’re going to get frustrated. It’s very easy to assume that because you’ve been involved on all these conversations with customers and prospects and all the different people that you have working for you, that other people know those things. And that’s definitely not the case, especially if they’re sitting there, heads down, writing code, and they’re not talking to the customers. They’re essentially relying on you to relay that information, and if you’re not communicating it with them how could they possibly know that information? So, this is where communication with your team is just as important, if not more important, than communicating with your prospects and your customers.
Rob [17:25]: Yeah. That third part is about communicating your vision. It’s the vision of the company and where it’s going. And, like you said, what the timeline looks like. And I find that thinking out 90 days, in a pretty concrete manner, and kind of having a pretty set up roadmap of where we’re going, is a good place to start. Things change so quickly that past 90 days, for me, it’s always murky. And I know as you get larger, if you’re a 20 person company, you probably need a roadmap longer than that. So, at this point, with Drip, we have ten people working for us. A couple of them are part-time. But, still, a 90 timeline has been plenty. And looking out beyond that it gets a little murkier, but I do have bulleted lists of where I want to see the product going. And what’s interesting is Derek and I will talk about it and come up with what’s happening, and then we have a weekly team meeting where we’re able to communicate that to everybody and give them an idea. And I feel like since everyone is doing their day-to-day job, and they’re busy just cranking out content or doing demos or cranking out new features, they aren’t necessarily thinking about the higher level of like, “What are we building?” And that’s where, as a founder, you need to bring that up to the higher level and summarize it to people. Like, “Did you guys notice that all we’re doing right now is a bunch of UX stuff?” or, “All we’re doing is performance?” or, “We’re building this big feature that’s going to take three to four months.” And communicating it back to them in the way that you see it so that it can lend clarity to them and they don’t just feel like they’re doing all these little tasks, but there’s a higher level strategy to it. And I think there’s a lot to be said for that. And it doesn’t need to be some big leadership ra-ra thing at all. It can just be getting feedback from everybody about what they’re seeing, what they’re hearing from customers – because assuming you’re not the only person talking to customers – and then communicating back to them the current vision for the company. So I think as you get bigger – like say you were a 30 or a 40 person company – you’d split these roles, and the person who’s maybe hearing from prospects and customers would be like the CPO. I think the CEO needs to keep communicating to the team because it’s just so important to keep that ball rolling.
Mike [19:23]: The third area bootstrappers should focus on is researching and testing marketing channels, or at the very least finding ones that are working really well and then doubling down on them. And again, this goes back to what we had talked about very early on in the episode about how not every business needs to go through fast growth. Or some of them just simply aren’t capable of it. But if you are in that situation where you are trying to grow the business, what you’re doing today may not get you to where you need to be, or where you want to be. And some of these new sales channels are going to be very critical to growing your company. Another thing that you have to keep in mind is that not all of these channels that you’re currently using are infinitely scalable. And, in fact, some of them are just going to dry up or go away, because they were – not necessarily fads – but they were not sustainable channels. And that could be because the channel itself collapsed, or it could just be that you have grown enough to the point where the things that used to work in that particular channel simply aren’t moving the needle for your business anymore. So as you get larger a given channel may no longer work as well for you as it did in the past.
Rob [20:25]: Yup. Especially, I’d say early on until you have several employees, this is going to be your key driving factor, because finding good marketing people and someone who knows growth is very, very hard, and they’re very, very expensive. And they’re just a handful who are going to be able to drive this like you will be able to. It’s one of the most difficult roles to fill, I would say. And so, definitely researching and testing marketing channels. At least getting them to the point where they’re working, then you could hand them off to someone else. But this is going to be a critical growth lever in the early days.
Mike [20:57]: The fourth area is what I’m going to call “moving the furniture.” And this is based loosely on an article that Joel Spolsky wrote a long time ago about the fact that what he saw was that the job of management was essentially to remove obstacles from the path of developers so that they could get their work done. And I think that this applies to a bootstrapped company as well. As a manager, or as the founder, your job is to really do the same thing for not just the developers working for you, but also the other people who are working in your company. So whether they are on the marketing team, or you have hired somebody to do copywriting, your job is to essentially remove obstacles for them so that they can become more productive. And whether you perform those tasks yourself in order to remove the obstacles, or you empower them to remove the obstacles themselves, either way that has to be done. You don’t want to have people who are going to run into an obstacle and then either be really hampered in their ability to get work done, and not have any mechanism for taking care of it, or not have somebody that they can turn to to get those problems taken care of for them. I think “moving the furniture,” also applies to allowing your customers to use your product more effectively. And this goes back a little bit into communicating with your customers. But you want to identify ways to get them better results, and those better results are going to allow them to do their job more effectively, they’re going to make those people who are users look better to their existing employers, and essentially want to use your product more. And they will talk about it. So those are all things that fall under this umbrella of “moving the furniture.” It’s more about making sure that everybody on your team is operating it at as high a level as they possibly can, and at the same time still not burning themselves out while doing it.
Rob [22:37]: It’s a really interesting duality where you have to both be removing obstacles and making decisions, but also being able and willing to ask for help and delegate to your team. So you’re both taking things from them and giving them out. And that’s a struggle, I think, that might befall you in the early days; you think that removing obstacles involves you doing everything and taking everything onto your list, or you might over-delegate the other way and not be removing enough. And I think that the idea here of removing obstacles tends to be making decisions, setting game plans. It doesn’t tend to be, “Well, give me that. I’ll just write the copy.” or, “I’ll just write the code.” It’s not taking the task over, but it’s taking over the decision process. Or if there’s like a key intro that needs to be made that you have, or there’s some roadblock that really you’re going to be the best at fixing without actually doing all the technical work, that’s really what we’re talking about here. Other interesting thing is my dad was an electrician, and then he became a foreman, and over the years became a general foreman, and then he was a project manager. So he was just rising up. Then at some point he was an executive project manager managing multiple project managers. And what he told me – because I asked him “What’s the difference?” – and, a, he said being a foreman was the most fun because you had this small team and you could think just out a week, and you were really building stuff and it was so cool. He said the higher up that you go all you hear about are fires. You hear about all the things that are going wrong. Because when things are going right, everyone’s doing their job and they’re able to move forward, you’re only going to hear about the roadblocks. You’re only going to hear about the problems and the trouble. And so that take some getting used to, coming from being able to build stuff with your own two hands, to then making that mindset shift of your day is just basically filled with your good people not being able to overcome things. So there are always going to be challenging problems that are brought to you if you have built a good team. You’ve got to start to enter into that mindset as you move forward, because as you said “moving the furniture,” removing roadblocks, it’s not necessarily always an easy job, because you have to make decisions without complete information. And that’s perhaps the best description that I can think of of someone who’s running a team. You almost never have all the information you need to make the decision, and you just have to learn to make it so that people can move forward.
Mike [24:50]: And sometimes “moving the furniture” is as simple as just making sure that people don’t have to stop to come ask you for a decision. Sometimes you can just say, “Hey, if a decision needs to be made here, just go ahead and make it.” And I’ve actually found that with contractors they have a very hard time with this concept, because I don’t think that most of them are used to being trusted in such a way. Most of them want to stop what they’re doing if they get to a point where they don’t know how to proceed, and they will basically stop all work and come to you and say, “Hey, what do I do here?” And it’s like, “Well, just make a decision.” And you have to set that culture, that expectation, with them. And then another instance where I’ve run into this is where if somebody needs something, whether it’s a piece of software, or they want to purchase a service that will help make their lives easier and more productive, then just giving them access to the company credit card is a mechanism to prevent them from having to come ask you for permission to use it. And you just give them a blanket statement: “If it costs less than X dollars, just go ahead and do it, and then I will reimburse you for it.” So, if you don’t want to give them access to the credit card, you can just say, “Hey, I will reimburse you for anything up to $50 if you just decide to go do it.” So that’s another mechanism for handling that.
And the last area where bootstrappers should focus on is finding good talent. And I think finding good talent is probably one of the more difficult pieces out of all of these, because it’s not just you doing it. When it comes to doing a strategic planning or communicating, you’re the one who is essentially doing that work. You’re pushing out emails, you’re sending instant messages to people, or you’re having those meetings. When it comes to finding talent, essentially you are searching for other people and trying to identify whether or not they’re going to be a good fit for, not just you and the way that you manage people, but also for your team. And are they going to be a good fit to integrate with the team based on their own working style? And that can be very difficult to figure out. And there’s a couple of different aspects to it. One is how they have essentially gone through their career? What their career arc has looked like? Are they early on in their career? Are they much more entrenched in the things that they’ve done? Are they able to pick up new things or not? And another thing that I think most people don’t really think a lot about is whether or not the person you’re bringing on is for a short-term need or for a long-term need? And I think, depending on which of those two things you’re hiring for – whether you’re hiring a contractor because you have a very specific set of things that you need accomplished and you know that it’s probably going to be a short-term need that they’ll be there for two, three months and that’s it – or you want to try and identify somebody that you can keep around for the next two, three, or five years. Those are two entirely different situations, and depending on which one you’re trying to do, is going to influence a lot of the different ways that you handle that particular situation and you go through the hiring process. And the other flipside of that is being able to balance the talent that you’re hiring with the cash flow of the business, because you’re not always going to be in a position where you have the money on hand to be able to hire somebody. And there are going to be times, probably, where you have to hire somebody and you don’t quite have the money yet. So you might be operating at a little bit of a loss for the business. Which, I think for most bootstrap businesses is kind of unusual. When we put this list together one of the things that we thought about including was the idea of cash flow as an element of itself. But for a funded company that tends to be more of a focus of the CEO, because they’re operating at such a huge deficit every month or every year. With a bootstrap company you typically don’t do that because you don’t have a lot to work with to begin with. But, still, when you’re going out and you’re hiring somebody, you still have to make sure that you have the cash on hand, because the last thing you want to do is lure somebody away from their current job, hire them, and then have to let them go in three weeks because you made a bunch of mistakes in your own business. And it’s really not fair to make them pay the price for your mistakes. But, inevitably, that’s what’s going to happen if you don’t pay attention to your cash flow.
Rob [28:43]: Yeah. Hiring’s a big topic. Obviously we could dedicate a lot of time to it. But the bottom line is there’s a lot that plays into hiring. It’s hard to find good people. When you find them, keep them around. The best folks that I’ve worked with I plan to work with for many, many years. And I think it’s interesting you brought up the cash flow aspect of it, because as a bootstrapper you do need to be careful. It’s pretty easy to hire ahead of cash flow and to suddenly have some bill that comes up. Like tax day comes and you get a bill for 20 grand or something that you didn’t count on, and suddenly you could find yourself in a pretty tough position. If you’ve hired right up to the point where- think about your revenue – if you’re making 20, 30 grand a month in revenue and you hire right up to that point, it can be tough if you do get any type of unexpected occurrence and you don’t have a backstop. Because you really don’t want to be laying people off, especially in the early days, because it’s stressful. So this is definitely one of the things that you’re going to need to spend a lot of time on, and it’s something that I have never seen delegated well. As the founder, as the bootstrapper, trying to delegate this to someone else I think would be a real mistake.
So to recap, our five high leverage areas bootstrappers should focus on are, number one, strategic planning; number two, communicating; number three, researching and testing marketing channels; number four, “moving the furniture”; number five, finding good talent. If you have a question for us call our voicemail number at 888-801-9690, or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control,” by MoOt, used under Creative Commons. Subscribe to us in iTunes by searching for startups, and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, and we’ll see you next time.
Episode 286 | Five Guidelines for Balancing Learning and Doing
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk through five guidelines for balancing learning and doing. They help define when learning and consuming too much information can actually impede the progression of your business.
Items mentioned in this episode:
- Drip
- BlueTick
- We Don’t Need Roads: The Making of the Back to the Future Trilogy
- The Snowball: Warren Buffett and the Business of Life
- How Star Wars Conquered the Universe: The Past, Present, and Future of a Multibillion Dollar Franchise
Transcript
Rob [00:00:00]: In this episode of ‘Startups For the Rest of Us’ Mike and I talk through five guidelines for balancing learning and doing. This is ‘Startups For the Rest of Us’, episode 286. Welcome to ‘Startups For the Rest of Us’, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products. Whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:00:27]: And I’m Mike.
Rob [00:00:28]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike [00:00:32]: Not too much going on. I took a mini vacation last weekend with the family and left around noon or so on Friday. And just got back last night. So I have not been doing very much this past week. Although getting out the door on Friday was a little bit rough because there’s all these things that were happening early in the morning. There were a couple of issues with my build server in the background. And I’m just like ‘Okay, you guys got to handle this.” Some things busted that probably shouldn’t have gone in when they did. But I couldn’t deal with it and I just threw it back at them and said, “You guys need to fix this.” Took them a couple days, but they got through it. That’s good to see
Rob [00:01:06]: Did the team make any progress while you were gone?
Mike [00:01:09]: They did. But I think I had mentioned this last week. One of the developers I have was getting married. He got married on this past Sunday. So he was out of commission. And then the other one was sick this past week. So that’s limited the progress. But there are things that are getting done. It’s just about two-thirds slower than it usually is.
Rob [00:01:26]: Right. And onboarding new early access customers is on your plate, right? So you didn’t get anybody new in the past week?
Mike [00:01:33]: Well I got that on Wednesday and Thursday of last week. I’ve turned people loose a little bit and then, of course, promptly left on vacation.
Rob [00:01:41]: Right. But you’re back in the saddle now?
Mike [00:01:43]: Yes. Things are going well.
Rob [00:01:44]: Cool.
Mike [00:01:45]: How about you?
Rob [00:01:46]: Well I finally pulled the trigger and switched email providers. We had been using just an old Web host—DreamHost. I’ve had an account with them for like a decade, and still use them for some less critical stuff. And for those who aren’t familiar with DreamHost, it’s a big shared host. And they’re massive. And over time a lot of their servers get slower and slower, and since they are so big they just have load balancing issues at times. So what we’d noticed is that over—it’s probably been on and off for like six months, we would see emails taking a while to be delivered to our inboxes. And so someone might reply and instead of getting it in the matter of seconds that you should, it might take an hour or two hours to come through. It was so intermittent though, and we figured a way around it with using POP to check our accounts instead of waiting for them to forward because I guess there’s some throttling going on that Gmail does with forwarding. We had worked around it but in the end, over the past several weeks, there’s been some massive delays within that POP hasn’t fixed. And it was really within the DreamHost servers themselves. Something about the spam filtering was just taking literally hours to run through emails. All that to say, it was just time to move. I’ve resisted it so long because it was quite a pain in the butt. The actual switchover was not a big deal, but I could not find a good email provider. I tried to work with Zoho and I got halfway through setting up all the emails and the domain and all this stuff, and it didn’t have several things we needed and the UI was bad. Google apps, I find to be catastrophically hard to use. It was hours and hours. It was very buggy. I would click save and it would say you saved. And then I would literally go away, come back and it wasn’t saved. And I had to do all [?] work arounds to get it to work. I don’t know of an ideal solution for this. But I do know Google apps has tended to be really solid. And since a lot of use Gmail as the natural client, it seems like the natural fit. But what a time suck that just did nothing for us. I probably, all told, spent 16 hours trying to configure it and then doing the switchover, and having bugs. It probably should have taken four to six. But there were so many rough edges that it is what it is. But I guess I feel good about finally being moved over and everything’s good as of this morning. Cross my fingers that that continues.
Mike [00:03:57]: That’s one of the downsides of all the different mail servers that are out there. There’s no universal mechanism for just saying I’m going to export everything here and import all my settings over to here. Then just toggle a switch and everything switches over. It just doesn’t happen that way. There’s all these little knobs and dials you need to fiddle with and make sure that everything works. And it sucks because you can’t test it quickly either. You have to make a change and then you have to usually wait a little while. And that little while might be as little as 10 or 20 minutes, and then there’s also times where it could take just hours. It sucks.
Rob [00:04:31]: You know one other thing on that email, the bummer is that DreamHost’s administration, the Web based administration of their email accounts is really, really good. The UI is good and they allow you to bulk update stuff. And they allow you to have a bunch of forwarding addresses just in a text area. And it makes it really easy and simple to administer. You see everything on one screen. And I couldn’t find another system that does it the same way. While learning a UI typically isn’t a challenge, when the UI is actually substandard and means you have to do four or five clicks to do what you could do with one click in your existing account, that was really the reason that I hadn’t wanted to switch away. It’s a bummer to take a step down and knowing that anytime I go in to administer it, if there’s multiple clicks with all this front end Java script code running and taking several seconds before the next page loads, it really is a drag that there’s not a better way to do this.
Mike [00:05:20]: So what’s on the schedule for today?
Rob [00:05:21]: Well we put out a call for podcast topics within Founder Café, which is our membership community, and we received a bunch of them a few months ago. And this is one of them. And the question was in essence, how do you balance learning and doing? And so I thought through it and I started pouring out all my thoughts, almost in essay format, which is not conducive to a podcast, right, because you don’t just want to read an essay. But I started seeing that there were these clusters emerging. And so I pulled them out into these distinct guidelines. I have five guidelines that we want to talk through today. I think the first thing that I want to clarify is the question was asked, how do you balance learning and doing, and what you and I realized pretty quickly as we discussed this in preparation for the podcast, is that learning and doing are not opposite things. They’re not mutually exclusive. I think what the person who asked the question was really asking how do you balance consumption, reading books, listening to podcast, learning from classwork, and that kind of stuff, with actual execution. And launching and getting features out the door and talking to customers, and that kind of stuff. How do you balance those because while you’re doing you’re still going to be learning, right? So while we do use the phrase learning a lot in here, what we actually mean is more like book learning or really consumption of material that’s going to educate you. And then doing is the actual execution of that and putting that into play and moving your business forward. And so with that in mind, the first guideline I want to talk about is to remember that learning is the fun part. So for probably everyone listening to this podcast, learning is like a siren song. It’s the fun part that you want to do. It’s the easy part. And the actual doing or the execution is where the rubber meets the road and that’s really hard to do. Especially since these days you can learn via audio when you’re driving, mowing the lawn, you’re doing the dishes, etc. So it feels like a good use of your time. You shouldn’t let that fool you. Learning can easily become a major time suck that masks itself as productivity.
Mike [00:07:13]: And I think that’s a really important thing to keep in mind, just because of the fact that when you are learning you’re going through the process of either reading blogs or you go out and buy an eBook or you listen to a podcast on a particular topic, it’s definitely fun and interesting, but at the same time it doesn’t actually do anything for you. At least not in and of itself. It’s very difficult to measure your progress when you’re sitting there learning stuff because you’re not moving the ball forward on your product, or getting new customers, or anything like that. And it feels like you’re doing stuff. It’s very similar to a lot of the launch activities that we talk about in the past, about getting business cards and a Web site set up, and things like that. None of those things really truly do anything for your business, but it feels like you’re being productive. So it’s very much a trap that you can fall into. And it’s especially true because of the fact that many of us are driven to learn new things and do new things. That’s what most people find enjoyable about being an entrepreneur. You get to learn and do new things. And it can be very much a distraction if you’re not careful.
Rob [00:08:15]: And I think we both say this, not as people speaking down from Mount Olympus who never fall into this trap. I think I say it as a person who falls into this trap way too much. And overconsumes and overlearns, and I have to remind myself to step back and focus on what is it that I’m trying to accomplish with this learning. And that actually brings us into the second guideline, which is to embrace ‘just in time learning’. Jeremy Frandsen, from the Internet Business Mastery podcast, has this phrase that he uses. And he calls it ‘just in time learning’. And in essence it means pick the task at hand. So if you’re running a marketing experiment and you want to try Facebook ads, then go out and learn everything you can about Facebook ads and run it. But don’t learn about those back when you’re still trying to generate an idea or to validate and idea, unless you really need Facebook ads to do it. And so live by this. Embrace ‘just in time learning’ because it is the way to keep your mind from filling up with all this information that A, clogs your mind, confuses you, distracts you, but it also fills it up with stuff that may or may not be valid in six or 12 months. By the time you get to the point where you do need to learn SEO or where you do need to find product market fit, or whatever, all of this advice is not evergreen. A lot of this changes fairly frequently. And the stuff that I think about in terms of the cutting edge learning, I think it’s good for between six and 18 months as a rule. And after that, things will often just be different enough that anything you learned before that, you’re either going to have to learn by experience or you’re going to have to relearn it from someone else.
Mike [00:09:48]: It’s not like when you go back to mathematical equations that you’re learning in college or even high school, where those things, you learn them once and they will never change. The reality is that when you’re sitting there and you’re working on stuff, you deal with so many different things that they will change often enough that it will bite you and you have to go back and relearn them. It’s certainly not that you have to learn them from scratch. But they, as Rob said, they’re different enough that it makes you sit down and dedicate additional time to it. So getting to the point where you know 95% of all the different things about a particular topic, it almost doesn’t matter. And the fact of the matter is that most of those things that you do learn, the practice of those things and the execution is a little bit different than what you’re going to read about. In terms of Facebook ads, for example, you can learn a lot about Facebook ads and general practices, and how to structure and arrange things, but the reality is once you sit down and do them, you’re going to find that there are things that are different enough for your particular business that you need to make some adjustments. So you can do all the learning you want from a book or from a blog or a podcast, and the reality of your product itself is going to be different enough that you need to make those adjustment. Those books are just simply not going to take that into account.
Rob [00:11:00]: And an aside here to compliment this ‘just in time learning’ idea, specifically for you, listening to this podcast, if you’re launching products, it actually depends on whether you’re prelaunch or post launch what you need to be learning about. So if you’re prelaunch what do you need to know? Well there’s kind of a nice little sequence of events that needs to happen. You need to generate an idea, you need to validate the idea. You need to build the product or architect the service if you’re going to do more of a product type service. And then you probably need to start learning marketing. Maybe one or two channels at the most to generate that interest list. And you need to be talking to customers in advance. So those things, in that order, that’s the framework that I used for prelaunch. And then post launch, I think about it as finding enough customers in the space to get feedback. And you do that via maybe one or two marketing channels at most. And you do it with a lot of hustle and by talking to a lot of people. And then you’re going to need to find product market fit based on their feedback. And then that means build something people want. If you’re not a fan or the product market fit terminology or don’t know what it is, it just means you build something that people are really willing to pay for and are willing to stick around if you’re a subscription service. And then, after that is marketing and growth. I feel like everybody focuses on the marketing and growth piece, but it’s like the sixth, seventh, eighth step down the line. And I think take this ‘just in time learning’ to think about focusing on this learning step that you’re at. And really focus on the people talking about that, giving advice on that that’s fairly current, the current market conditions, and devour that. And then execute. Change it up and execute. I mean there’s a recent example I have where I’ve had to do some negotiations. A couple different instances. And I am not trained in that. I don’t have a ton of knowledge in it or experience. I mean there’s all the trite advice people give you. Don’t name the first number, and always do this and do that. But I really wanted to dive into it. So I got two separate audiobooks on it that were highly recommended. And there’s podcasts about a similar topic and I went through and I listened. I took a bunch of notes and I thought through, and then I made real action notes that weren’t just the notes from the thing but it actually related to the specifics of the situations that I was in. And then I looked at those and then I dove in. So that was an example. I didn’t learn negotiating five years ago. And if I had I probably would have forgotten it, might have been out of date. But the fact that I’ve done that just recently has helped keep it fresh and it’s something I’ll know for the time being that I can refresh in the future.
Mike [00:13:16]: And what you’re really doing here is you’re optimizing both for your time and for your performance. Because if you sit down and you are just about to do, as Rob said, for example, negotiation, then you sit down, you read about it and you learn as much as you possibly can, and then you put it into use. Versus if you did it five years ago or you studied up on it. Even in just 12 months ago, you will have had a lot of things that have happened between then and now, and you’re going to forget a lot of those things. So you’re still going to have to go back and brush up on it. And if you didn’t use it back then because it wasn’t necessarily a need, then essentially what you’ve done is you’ve spent a lot of time learning something that maybe you get your skills to 80 or 90%, and then over the course of the next 12 months they taper off and you’ll have to relearn a bunch of stuff. You’ll have to refresh your memory. And it’s simply not a good use of your time. And then, in addition to that, the fact of the matter is that when you go through that your skills are going to get rusty because you haven’t put them to use over that time. So those are essentially two different things that are in play at the same time. You are optimizing not just for your time, but also for your performance in performing whatever that activity is that you’re learning about.
Rob [00:14:23]: And the third guideline is that learning will only get you halfway. That basically, at some point, you have to execute in order to A, actually get anything done. And B, get the full amount of learning. And halfway is an estimate. It’s not exactly 50%. Maybe it’s 40, maybe it’s 65 or 70. But it will only get you part of the way there. What you have to realize is that learning is the easy part, it keeps you in your basement or in the nice comfort of just consuming information. Fires those parts of the brain that probably makes you feel like you’re doing something. But once you start executing you’re going to crash and burn, you’re going to make mistakes. And you’re going to learn more in a couple weeks that you can in months and months of sitting there and consuming material.
Mike [00:15:02]: I think it’s really easy to fall into the trap of trying to consume as much information as you possible can to the point that you’re overconsuming and you’re not putting it into practice. And I know that historically, the reason that I’ve done that is because I didn’t want to make mistakes. So I felt like if I learned more than I would not make certain mistakes. Oh if I had only read that particular book, or if I had only seen that blog post and read it before I got this started, then I would have not made this mistake over here or that mistake over there. But the problem with that line of thinking is that there’s no line in the sand or guideline that says, oh, if you consume all of these things you won’t make that mistake. It’s very easy to forget some of those things or to only realize after you’ve made the mistakes that that particular lesson was going to be applicable to you. So just the fact that you’re sitting there learning, it can be very difficult and frustrating to dive into it when you don’t necessarily feel like you’re ready. I think that, myself included in this, a lot of people just don’t like to make mistakes. So you feel like if you’re going to learn more then you won’t make those mistakes. And I would say that that’s probably not always the case. In fact, it’s probably rarely the case that you’re going to learn enough to make no mistakes.
Rob [00:16:14]: Another thing to keep in mind with this one, tying back into bootstrapping a product, is that realize that learning will be different depending on the phase of your product. So learning’s going to get you halfway and it’s actually going to be a lot harder in the early days, unfortunately. And the reason is because when you haven’t yet built something people want, so you’re pre product market fit, there’s a lot of art, there’s a lot of mistakes, there’s a lot of flailing around, and there’s not nearly as much concrete advice for these steps because there really isn’t a path to finding it. As much as [?] startup, try to lay out a framework, it’s so much trial and error, and even people who’ve done it multiple times, meaning found product market fit and actually started to scale an app, really don’t have the exact formula for it because there just can’t be one. There’s so much trial and error. Which means that consuming more about it isn’t actually going to get you any closer to it. You just have to get to the trial and error. And this is interesting to think about. Back to the negotiation stuff that I was learning about, once I had listened to an audiobook and a half on it, I started to see a lot of overlap. And I actually had a third audiobook that I got, which was too much. And as soon as I started listening I realized I am overconsuming and I am hearing the same things. And I’m being overwhelmed with information. Which of these frameworks and paths should I use because now I’ve heard three different ones? And that’s where you need to step back and say, “Wow, I’ve made it halfway. I’ve made it to pretty much the extent of what I’m going to learn. I’m starting to see diminishing returns from that learning. Now I have to basically stop doing this, and I need to sack up and really kind of get out there and make some mistakes.” I got to be honest, I feel like it’s so much easier to learn about specific tactics after you have product market fit. Because this is where you have to line up marketing tactics, you experiment, you double down on what works. And that’s really the fun part. And there’s a ton of information out there about it. And it’s just so much more of a methodical approach. I won’t say it’s easy. I won’t say it’s fun for everyone. But it is a lot more well-defined than trying to learn before product market fit. And I think people spend too much time trying to get all their ducks in a row in that phase when, I’ll say, it’s impossible to do that at that point because there just is so much art involved in getting to product market fit. And the fourth guideline is to consciously cap your consumption. So keeping in mind this ‘just in time learning’ concept, if you’re focused on a problem, like validating an idea, I typically focus all of my efforts on learning as much as I can about that. I spend a few days. Sometimes up to one to two weeks. Then you have to stop and you have to execute.
Mike [00:18:40]: To me, this is really hard to do sometimes just because there’s so much that you can learn. And some of it’s going to be applicable to where you are right now. And some of it’s going to be applicable to you after you get to a certain point. So back to Rob’s point about the last one, about finding the product market fit for your product, some of the marketing and stuff that you learn and implement is going to be before you get to that point, and some of it’s going to be afterwards. And a lot of the learning is, I’ll say, somewhat generalized. Some of it is going to be applicable before you get the product market fit, and some’s applicable afterwards. And it’s not always clear when you’re learning it which is which. So, sometimes you have to tendency to overlearn because you think that it might be applicable, and it’s simply not. Consciously capping your consumption is a really wise idea because it allows you to learn enough, especially at a cursory level, so that you can start to recognize some of the patterns. And if you find that you are at a point where you’re implementing something and you realize hey, I actually haven’t learned enough to be able to implement this, you can always go back and learn more. You don’t have to continue plodding forward knowing that you’re going to be making these huge mistakes that maybe if you just learned a few more things then it would be better executed. You can always go back and learn more. But you can’t get back that time if you are learning things that are simply not applicable. So make sure that you’re putting a cap on your time that you’re spending on consuming this information. And I’ll be honest, I’m terrible at this. I have a hard time sitting down and scoping out I’m only going to spend X number of hours or days or weeks trying to learn how to do this. And it’s just difficult to do. And it’s partly because some of it’s time management and some of it’s also the fact that it feels nice to learn some of these things and to be able to talk to other people about it. But it’s simply not always relevant to you. So make sure that you’re capping that time so that you are optimizing for the things that you’re doing.
Rob [00:20:34]: And my fifth guideline for balancing learning and doing is to balance learning with inspiration. I feel like you need to strike a balance between these two things. You can only learn and focus on so many things at once. And so if you’re really focused on getting idea validation or whatever, when you stop learning, if you still want to consume things, you can turn your heads towards inspirational content. As an example, recently I’ve listened to a book called “Song Machine” that is about the hit factory that’s developed over the past 20, 30 years, of how all of our pop songs don’t tend to be written by the artist. They’re actually written by these factories. It’s this group of people that are manufacturing hits. There’s this great book called ;We Don’t Need Roads,” about the making of “Back to the Future,” that’s just really well told. “How Star Wars Conquered the Universe,” is a book I’ve read a few times. “The Snowball,” which is the biography of Warren Buffett. “Masters of Doom,” I’ve mentioned. They border that line between really inspiration and just kind of fun listening. They’re really isn’t a ton of this hardcore learning. You’re not learning tactics from these. And I really believe in this idea of getting more motivation, or this extradisciplinary learning that I think you need to get from broader sources. It’s not going to help you directly, but A, it takes your mind off of this focused problem, and it allows you to not get oversaturated with different ideas and confuse you. But it also provides inspiration. It can kill time if you really want to listen to audiobooks, podcasts in the car or while you’re doing the dishes or whatever. I tend to switch over to this once I’m oversaturated on a certain topic and I don’t want to get any more content in my mind. And the other bonus is it often gets me thinking about my business in a way that I normally would not consider. Hearing “Snowball,” hearing “Masters of Doom,” even hearing “How Star Wars Conquered the Universe,” it’s extradisciplinary. So it gets your juices flowing. And I find that little ideas and thoughts will sometimes resurface themselves later on that tie into that experience, that will help me in my business in ways that I couldn’t possibly have predicted.
Mike [00:22:28]: I think this is more of a focus on trying to figure out what sorts of things are going to help you without knowing what questions to ask. Let’s say that you have gotten product market fit and you’re trying to figure out what ways you can grow, you can certainly say, “Well, I’m going to do some paid advertising,” and you dig in and you learn about paid advertising. But what Rob’s really talking about here is that you are learning about lots of other things that are generally applicable to business versus solving a particular problem. So when you start doing that you’re able to get a wider view. And it’s much shallower, but it’s a wider view of business in general, and how different people have gone around solving different problems that they have encountered. And all it does is it gives you that hook that you can use later on in order to come back to later. For example, for “Masters of Doom,” or “The Snowball,” there’s a bunch of different data points that are in there, that if you were to go through and read those books, you’re probably going to remember bits and pieces but you’re not going to remember everything. And that’s not the point. The point is to anchor your brain to certain things where if you’re working on a problem later on in your business, if you remember that oh, I remember reading about this. Where did I read about it? And you can go back into maybe Amazon if you buy all of your books through there or through iTunes and their bookstore there. The point is to be able to go back and use those hooks to figure out where did I hear about that and where can I learn more about it? Versus I have this very ultra-specific problem that I need to solve right now. And that’s a very easy issue to deal with, it’s much more difficult when you don’t have that broad base of knowledge. And this is about enhancing your broad base of knowledge.
Rob [00:24:07]: And there’s a caveat to all this. You can’t just wander off into inspiration land when you only have five, 10, 15 hours a week to work on your product and you’re trying to get to launch. That’s where you have to be disciplined about getting work done and not using inspiration as a crutch or a feeling of productivity. Because it’s really not. If you only have those few hours then you have to focus on that problem at hand and just taking the next step towards getting your product out the door or growing it, depending on the phase you’re at. Mike [00:24:36]: So to recap, the five guidelines are, number one, remember that learning is the fun part. Number two, embrace ‘just in time learning’. Number three, remember that learning will only get you halfway. Number four, consciously cap your consumption. And number five, balance your learning with inspiration. If you have a question for us you can call it into our voicemail number at 1-888-801-9690. Or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control,” by MoOt, used under Creative Commons. Subscribe to us in iTunes by searching for startups. And visit startupsfortherestofus.com for a full transcript of each episode. Thanks you listening and we’ll see you next time.
Episode 285 | How to Make Your First Hire
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to make your first hire. They discuss how to decide if you need to hire full-time or part-time, the pros and cons of each, and some tips on the hiring process.
Items mentioned in this episode:
Transcript
Mike [00:00:00]: In this episode of “Startups for the Rest of Us,” Rob and I are going to be talking about how to make your first hire. This is “Startups for the Rest of Us,” episode 285.
[Theme music]
Mike [00:00:16]: 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 –
Rob [00:00:24]: And I’m Rob.
Mike [00:00:25]: – 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?
Rob [00:00:28]: You know, I’m pretty good. It’s nice to be a week away from MicroConf and kind of get my feet back under me. It feels like … you know, we’re done with queue one of 2016 already and heading into the midyear, so I’ve been looking out: what’s the next 90 days, what’s the next six months looking like, and revisiting the goals and the direction and the vision that I set out in my retreat, which was at the very beginning of January. There was both some personal stuff and some work and Drip-oriented growth stuff that I’m just revisiting and figuring out: am I on track for those? Do I need to adjust them? Are we ahead of schedule, or behind, or whatever? So, that’s been kind of fun, just to go back and review. I think that’s important to do, whether you do it monthly, or quarterly is to review those goals and figure out where you are with them.
And with that in mind, we’re trying to find new growth channels and starting to make some progress on a few fronts. Finally starting to get a little bit of traction with paid traffic, which has been something we’ve been working on on and off for a while with Drip, and seems like we’ve got our foot in the door with a couple avenues that I’m pretty excited about.
Mike [00:01:28]: Very cool.
Rob [00:01:29]: How about you?
Mike [00:01:29]: Recently, I kind of did the same thing. I looked back over quarterly progress because, as you said, it’s the end of the quarter. I look at that, and say it almost sucks because the last three months have just flown by, and it feels like my head is down almost the entire time. But at the same time, things are moving forward. I looked back at some of my annual goals for this year, and for revenue on Bluetick, already I’m to 17 percent of my goal. It’s, obviously, about 25 percent of the way through the year; but I also haven’t really got the product out the door to anyone beyond the people who are doing preorders. The fact that I don’t have the product out the door, really, and I’m still at that point, it’s not like I’m very far behind is really what it comes down to.
Rob [00:02:08]: Right. It’s not atypical. I think most of our goals are ambitious. Do you feel like your Bluetick goal was ambitious?
Mike [00:02:14]: Oh, yeah. It was one of those big, fat, hairy, audacious goals.
Rob [00:02:17]: Yeah. You don’t want to shrug it off and be like, “Oh, well, I just missed it.” I think now it’s like, “Okay, how can I make up that eight percent over the next month or two?” “How can I get to the point where I am actually back on track?”
Mike [00:02:29]: Yeah, and I think that that’ll come with actually launching the product publicly and getting it out there and making it available for people to sign up for; because right now, it’s just based off of what’s going to my mailing list and the little things that I’m doing there. Longer term, obviously, there’s a lot that goes into it.
Rob [00:02:44]: Yeah, and that’s the hard part. When you’re setting these goals, sometimes they are a shot in the dark, especially if you just have revenue goals. If you have milestones of like getting a launch by this date, then it’s a little more easy to quantify. But it’s like do you really know what your revenue is going to be until you’re at a sustainable, repeatable process where you know how many trials are coming in, you know what your conversion rates are? At that point, then you can project it out, but before then it is a bit more of a guessing game. So, I’ve always taken it if I’m ahead of my projected, then I figured I guessed too low. If I’m behind it, then I’m trying to figure out how to get there without letting it destroy me. You can’t let it beat you up or make you feel like a failure. It needs to be motivation rather than making you feel like you’ve dropped the ball.
Mike [00:03:28]: Yeah. The fact that I’m only eight percent behind a quarter of the way through the year, and the product’s just not out the doorm that, to me, bodes really well; because I didn’t expect to have it out there for public consumption until about halfway through the year. In some ways, I almost feel like I’m ahead. You could almost kind of fast-forward to say, “That revenue goal was really for the last six months of the year.”
That said, right now we’re going through, and we’re plugging away at trying to onboard people who’ve placed preorders. I have to be honest, some of the stuff that we’re running into is just flat-out embarrassing. The earliest thing that we tried to do when onboarding – the signup itself was just completely fundamentally broken. I had to do some things on the fly to get somebody on there. It’s generally working at this point. We’re just trying to work through any of the UI and UX issues with people. It’s coming along, but it’s obviously slower than I’d like. One of my developers is getting married on Monday, so he’s out of commission for at least the next week or two.
Rob [00:04:23]: Yeah, that’s always a bummer when you’re pushing hard and something comes up for anyone. Obviously, very important and worth doing, but it’s tough. I think we’re impatient as founders, and we want to hit the goals.
So, what are we talking about this week?
Mike [00:04:35]: This week, we’re going to be talking about how to make your first hire. This is a question that was asked by somebody inside of Founder Café. We’ve mentioned Founder Café before. It’s our online membership site. The question was really geared towards how do you decide whether you need somebody for part-time or full-time, and how do you approach those two, different scenarios; because, obviously, that’s going to be dictated by what your revenue is and what your strengths and weaknesses are in both your skill set and in the business itself in terms of the revenue that’s coming in.
Rob [00:05:07]: Yeah. In your early days, the advice I would give is stay with part-time and contractors for as long as you possibly can. There’s no reason to jump to W-2 employees until you absolutely need to, because it brings complexity. I think in our circles that’s probably pretty well known, but I think if you’re in doubt, part-time contractors give you the flexibility of being able to only pay hourly and flex up and down as you need. There are some pros and cons to doing it that we’ll get into in this episode, but that’s probably a thought that I would start the episode with in terms of thinking about your first hire.
Mike [00:05:40]: To start off with, I know that we’re going to talk about some of the differences and pros and cons for hiring part-time and full-time; but I think what we want to do first is to talk about some of the things that are applicable to both, because I think that there’s definitely a lot of overlap between hiring for part-time versus hiring for full-time.
The first one is to look for self-starters who can dive in and are going to find ways to improve the business and the products that you’re working on. I think this is really important, because you don’t want to hire somebody who is going to come to you and every time they complete a task, they come back to you and say, “What do you want me to work on next?” Then it turns you into more of a micromanager, and it’s very difficult to get away from that. There’s going to be a little bit of that, I think, up front; because they’re going to want to know what the general direction of the business is and the product and everything else, but you don’t want to be in the position where every, single time they finish something you have to find something else for them to do. You really want them to be essentially generating their own tasks and having some sort of awareness of what your overreaching goals are, and then be able to just go do those things without you telling them, “You need to do X, Y and Z.”
Rob [00:06:50]: Well, I think, in an ideal world, you would do this; but I think in the early days when your budget is tight, it’s hard to find people like this. These are the people that everybody wants. I think that there is, perhaps, an approach you can take, even if you can’t find self-starters, that can still work. This is what I did in the early days, and a lot of people who are cash-strapped in the early days do. It’s to find people are really good at a single skill and then slowly basically fire yourself from the jobs that you are doing. The example that I often give is to hire that first tier-one email support person. They may not be that much of a self-starter. They may not figure out ways to improve stuff, but just getting that email support off your plate in the early days with someone who is good at that single skill – there’s a focus lift. There’s a time benefit, and it’s a recurring task that happens every day, or every week. I think if you’ve never hired before and you’ve never even hired a contractor, that would probably be the simplest, little baby step that I would take.
This actually may speak to a point I was going to bring up, which is that hiring is a learned skill. The more you do it, the better you get. When you start, you’re going to be pretty bad at it, and you’re going to have a bunch of missteps. I don’t know anyone who goes out of the gate and hires really well the first time. In the early days, when I was first trying to figure out who to hire and what to hire for – you want to look at your recurring tasks, the ones that are going to be relatively simple to outsource, and then you work way up to the more complex tasks; and this is all based on your budget. The more budget you have, the better people, in general, you can hire; but in the early days, if you really are bootstrapping, then you have to cobble it together and limp along for a while, even if you’re not as efficient.
[00:08:26] That’s one of the reasons some people raise funding. If you did raise an angel round of a quarter million or a half million bucks, it can make this part easier, because then you do have the budget to hire better people from the start. But if you truly are bootstrapping, you want to self-fund this, that’s okay, too. Just know that you’re going to have some limitations in the early days in terms of the quality and the effectiveness of people you can hire.
Mike [00:08:47]: I think kind of a subtext to what you just said is that for something like support, it’s time-consuming, but doesn’t necessarily add a huge amount of topline revenue value to the business. It needs to be done, but it isn’t necessarily you that needs to do it. Because it’s time-consuming, it’s best to start with something like that for you to outsource.
Rob [00:09:07]: Yeah, that’s exactly right. Time-consuming and attention-grabbing. Email support is a bummer because it’s interruptive, and it’s really hard to just batch that because you can’t just do that once a week. Even doing it once a day is not ideal. In a perfect world, you would check every couple hours and take care of that stuff. So, I think there’s the time, and then there’s that focus or attention element. If you have recurring things that take time and attention, those are the first ones you want to look at hiring for.
Mike [00:09:36]: The next thing that’s applicable to both part-time and full-time hiring is that you should always be interviewing multiple candidates. Any time I’ve gone through and hired somebody and whittled it down to just one or two people and then only interviewed one person, it seems to never work out. I feel like that’s because you don’t necessarily have a good basis for comparison of gauging that person’s skills or abilities against the other people who, obviously, you haven’t interviewed. I think that’s one of those recommendations – that you have to interview multiple candidates. If you’re at a point where you don’t have multiple candidates, then that should be a red flag. You need to go find more, or there’s something broken in your hiring process.
Rob [00:10:17]: Yeah, absolutely. It’s pretty rare. I think in all the hiring I’ve done over the years, there’s probably been one or two hires where we knew the perfect person for the job, and it was someone we already knew or were acquainted with. We knew that they’d be fit and all that stuff, so we didn’t interview multiple candidates. But far and wide, the literally dozens of positions I’ve hired for, including – I used to be a development lead and a tech lead and a manager for some companies down in L.A. when I was still doing salary work. It’s got to be approaching, like, a hundred people that I was involved in the hiring process of. With all those, you just have to get a lot of candidates through the door, or at least on the phone. We used to do a lot of phone screenings in advance. Nowadays, you’d just do it via Skype, and you would never actually meet with people in person anyways. But interviewing multiple candidates is absolutely the way to go, and it’s the only way you’re going to get an idea of the skill level and what’s really available on the market at that time.
Mike [00:11:13]: The next thing that’s applicable to both is that a bad hire is orders of magnitude worse than no hire. If you hire somebody who is not a good fit for either the position or for the company culture – and you can have a company culture even if it’s just you and one other person – in those situations, if you’re not able to hire somebody, you’re better off than if you make a mistake in hiring, because those early mistakes are so incredibly time-consuming to deal with and difficult on the business, both in terms of revenue and time spent and opportunity lost.
Rob [00:11:46]: Yeah. The way that I used to combat this – I think over time, I’ve gotten better, naturally, at hiring just because you do it more. You get picker and know what to look for. In the early days, I would recommend that when you hire those first few people, you do all the training via screencast and/or in writing; because you want to have it repeatable. We had multiple situations where we’d hire a VA to help with support and setup and this other stuff, and then that VA wouldn’t work out. Sometimes it was them. They just flaked. Sometimes found out they didn’t have the skills, and having to repeat the training if you had just done it live on Skype or something would be such a pain in the butt, right? Makes it really time-consuming. So, try to make your training as repeatable as possible, especially in the early days; because you’re probably going to have to take a few swings at bat and get a few people through the door, get them trained up before you find that right fit.
[00:12:37] Another thing to keep in mind is that entry-level people are the least expensive, and you can find some pretty good deals, but you have to spend the time to train them on the tasks. Experienced people who already know how to do something – let’s say you’re hiring for email support, and they’ve already done it; or, you’re hiring to manage Facebook ads; or, you’re hiring to help handle integrations and help with stuff. Experienced people are a lot more expensive. If they actually have experience in what you’re doing, they tend to be two times, four times more expensive for the same task; but they can hit the ground running. So, it’s very important to keep in mind “how much budget do I have?” and realizing that trying to find a competent person at a highly sought-after skill set is going to cost a lot of money. You have to think through at what level can you hire.
This is a reason in the early days when you’re bootstrapping, you may need to invest more time, because you don’t have as much money. You may need to work more hours in the early days to get this thing going. That doesn’t mean you have to work the crazy, 80-hour startup weeks forever, but if you’re hiring people and you’re having to train them from scratch, you’re putting in your sweat equity because you don’t have the cash to put up. I see it as exchanging value there, and you have to weigh that out in your own mind.
Mike [00:13:41]: I think the next thing you have to remember is that going from zero to one employees is the hardest. I think this is applicable whether you are a solo founder, or whether you have co-founders. The fact of the matter is that you’re bringing somebody else into the mix that is not familiar with your company, or where it came from, or the roots, or maybe not even the problem space itself. Especially if you’re hiring a new developer and they don’t know the problems that you have been working on and are intimately familiar with, they’re going to have to learn some of those things. They may know their job very well, and they may be an expert in the things that they do, but they’re not necessarily an expert in not just your systems themselves, but also how your business operates and what your customer base looks like.
Rob [00:14:24]: The other thing to think about is as your budget grows, you can hire better people. I do think that you should stair-step your way up as you’re able to because, in general, when you have more money, you can hire better people, like I’ve already said. The other thing that I’ve realized is that in the early days, as a founder, you’re probably going to be the best at any given task because you don’t have the budget to hire subject matter experts. You’re going to have to hire entry-level people, and so if you’ve learned Facebook ads, you’re then going to have to train them. If you know how to do the email support, you’re going to have to train them. At a certain point, that flips. Then you’ll be able to hire people who are actually better than you at a given task, and that’s when things definitely get more expensive; but it becomes so much easier, because you can go out and pay a Facebook ad consultant, or someone who has experience doing this. Or, you can pay a professional senior developer who’s been building and writing code for years and is on par with you. Long-term, that’s the ultimate goal. That’s not your first hire – right – but think about that over the course of several years as your business grows, that you probably want to go from being able to train people and hire people where you’re the subject matter expert; but as soon as you can, get to the other one, because it’ll allow you to move faster.
Mike [00:15:39]: With those things in mind, let’s move on and talk a little bit about the differences between the part-time hires and full-time hires. I think that, generally speaking, as you said before, when you’re looking to hire and you’re first starting to do that in your business, you should probably start with a part-time person. When you’re doing that, if you’re looking specifically at people who are doing contracting, that’s probably the best place to start. I don’t think that you want to go out and look for people who are currently working full-time and then just picking up something on the side. I think there’s a big difference between those types of people versus people who are doing contracting full-time; because they might only work for you four or ten hours a week or something like that, but they’re used to that mode of working. They’re experienced at working remotely. They’re experienced at dealing with people over the phone, or via Skype, or Slack and email; and that’s just their primary mode of operation versus those people who are in an office environment, and that’s what they’re used to. For lack of a better way to put it, that’s how they’ve been conditioned to work. I think that it’s easier to bring on those people on a part-time basis who are doing contracting full-time, because they’re used to being treated like a contractor.
Rob [00:16:52]: Yeah, I can’t underscore this enough: a) someone who’s used to working remotely, and b) who’s not working around another full-time job, or a full-time job and contracting a few nights and weekends. I’ve never had that work out – ever. Every time, their job takes precedent, and they only have a few hours a week to do it, and they get behind on stuff, and they’re just trying to fit you in around other things. It doesn’t work, so I would never – that’s one of the early things I ask now when I go to hire: “Are you currently doing this full-time,” or, “Do you have a full-time job?” because it’s an absolute nonstarter. I think at this point, if I were to find someone who was really good and I wanted to hire and they had a full-time job, I would consider trying to have them leave the job and come on with us; but in the early days you can’t do that, because they might only have three, four, five hours a week where they can work for you. So, try to find people who are a full-time contracting. Upwork is a decent place to do this, because there are a lot of people that are taking that stance.
Mike [00:17:43]: The other advantage of hiring people part-time is that you can generally afford them a little bit better. You can hire experts, and you can get them for a few hours of their time. As Rob said earlier, you may not be able to get the best person in the world, but you may be able to get somebody who has comparable skills to yours or even better, and at a price that isn’t going to break the bank. If you try to hire those people full-time, chances are really good you just simply can’t afford them, and it’s because of your budget.
The other thing that hiring part-time allows you to do is it allows you to practice being a manager. Just like hiring, being a manager is a learned skill, and you need to be able to practice that in order to get better at it, because if you’re not a good manager, then the results that you’re getting out of people that you hire are probably also not going to be good; and it’s going to be due to miscommunication issues.
Rob [00:18:31]: Yeah, and there are pros and cons to hiring part-time contractors where their hours can flex up and down. Obviously, the pros are that you don’t need to have a fixed budget. So, if work slows down or whatever, you’re not paying out of pocket a fixed amount every month, when you may not have that because you’re bootstrapping. Then there’s also the flexibility that, as more work comes in, you can ramp them up pretty quickly. In the early days, you don’t have to worry, necessarily, about career advancement and annual reviews and all the stuff dealing with taxes and healthcare. There’s a time for that. There’s a time where that’s worth it, but in the early days when you’re just trying to get a business off the ground, it’s just so much to worry about.
Now, the cons of this are that – it depends on the specifics, but if you can actually find someone comparable who is willing to work for you as a full-time employee – in the U.S., it’s called “W-2” – there are some advantages to that. One is that, overall, it’ll probably be less expensive if you actually keep them busy full-time, because contractors tend to have a premium that they put on their pricing. Another advantage is there’s a loyalty thing. People who work for you tend to get more involved, tend to care more about the outcome, and they’re going to tend to stick around longer.
Those are the major things to think about when you’re comparing, “Should I hire contractors, or should I hire W-2 employees?” I think that, as we said, in the early days, by necessity, you’re going to want to stick with contractors as long as you can. Long-term, it is tough to grow a huge business solely with contractors. I know a few people have done it, but most of the time, getting that loyalty and that team camaraderie really only comes with a group of full-time employees.
Mike [00:20:06]: To kick us off on the side of full-time employees, I think that one of the important things is that you need to hire before you have a particular need for something. If you wait until the last second – let’s say that you’re working on something and you need a Facebook ads expert, and you say, “Okay. I want to kick that off in a couple of weeks,” and you wait around, and you don’t go through a hiring process. Then it comes time, and you say, “Now I need to hire somebody, because I need somebody by the end of this week.” It can be really challenging to get those people lined up for interviews in advance and go through the hiring process if you don’t do that in advance. Make sure that you are hiring before you actually need somebody to get started on that work. It sounds obvious, but I also think that it’s very easy to underestimate how long that hiring process can take in some cases.
Rob [00:20:55]: Yeah. I think there’s a balance here. If you have a lot of money in the bank, if you’re funded, then hiring well ahead of the need is what people do. They hire months ahead, because they know they’re going to be scaling up. If you’re tighter on cash, I think hiring before the need, like you said, which is really just weeks in advance – it’s kind of like looking out 30 days and realizing it’s going to take you a month to hire. I think that’s perfectly acceptable; but I think that, as a cash-constrained startup or a business, I don’t know if it’s as much as hiring before the need, or it’s as much as hire when it’s really painful. As a founder, you’re going to be taking up the slack with anything, and so as you feel stuff start to just get piled and piled on top of you, hire before it breaks you. Hire before it completely derails what you’re doing. I think looking out two to four weeks on what is going to breaking you soon is probably the way that I think you have to do it in the early days.
Mike [00:21:48]: Yeah, I think Peldi ran his business, Balsamiq, to the point where – he decided to hire when he felt like he was going to die because of all the work. That was really kind of the main point, but making sure that you have things lined up so that you can put a full-time offer in front of somebody if they’re the right fit? I think that it’s important to always be looking. It doesn’t necessarily mean that you need to make an offer to everybody, but at the same time, you also need to be aware that that process can take a while. If it’s a full-time hire, then chances are really good that they’re probably going to give two weeks’ notice to their existing employer, and you may need to not necessarily coach them, but be cognizant of the fact that they may use that as a negotiating tactic, or their existing company may use that to say, “Let me give you more money to keep you.”
Rob [00:22:34]: Yeah. To give you an idea, I think some of the fastest hires that we’ve done in the past couple years have been about two weeks from posting a job to having someone start working, and that’s when they didn’t already have another job already going on. The longest one was probably three months, maybe four, from the time we posted; and we had to post it multiple times. That was for a senior Rails developer, and we were very picky about that. We wanted some very specific skill sets. We actually looked local first, and when we couldn’t find anyone, then we went remote. It was a drawn-out process. That was actually over the Christmas and, I think, the Thanksgiving holidays as well, so that extended it even further. But that gives you an idea of the range when looking for someone.
Another point that we want to talk about is not to rule out remote workers. Obviously, there’s a movement of working remotely, and “37 Signals” talks about this in their book and all that. There’s definitely value in being able to find the best people anywhere in the world, no matter where they live. So, I think there’s a balancing act here, because what we found – I was totally remote for years when I had all the contractors. No one ever lived in the same city. Then as soon as Derek and I started working together in the same city, here in Fresno, it made me realize just how valuable that face-time can be and the advantages of it. So, I don’t think that either one is the best. Everyone going into an office five days a week is not optimal either because of the interruptions and just all the overhead involved with that. I don’t think being totally remote is the best either. The optimal approach, we’ve found, is to actually have an office where all of us are in it two days a week. So we tend to go in Tuesday, Thursdays; and then other people go in as needed, and they have a space where they can work.
All that said, I think the hybrid approach, personally, is something that I would love to have. I’d love to have everybody local, but only meet a couple days a week so that you can go into your home office and actually get all the work done that you need to; because we stuff the meetings, and there’s a lot of interruption and discussion on the other days, but that’s super valuable. That’s when we get a lot of the hard work done.
Mike [00:24:27]: Something else to look at when you’re hiring for full-time employees is to hire for the most time-consuming tasks that you’re already doing first. This is an effort to offload those things. It kind of goes back to what we had talked about earlier, and you pointed out that one of your recommendations for people is to hire for support first. It’s because it’s so time-consuming. If there are other things that are time-consuming for you, regardless of whether they’re really driving the business forward a lot or just a little bit, the fact of the matter is that if they’re taking up a lot of your time, chances are good that there’s probably other areas of the business that you could be spending that valuable time on. It’s probably best to be hiring for those positions first, assuming that you can afford it.
Rob [00:25:10]: Another thing when you’re hiring for full-time is, if you can, like I said earlier, try to hire people who are experienced, especially if you have the budget. It’s tough to burden yourself with intense training, like hiring interns, in the early days. I know they can work out. I’ve heard of them working out. I’ve never been able to justify spending the time to train someone who truly is intern-level. It’s just so much work, and in the early days of your business, you don’t have a lot of time. Time is such a limited factor. With that in mind, you want to look for people who can actually show accomplishments. They’re not just talking about experience. You don’t just read it on a resumé, but in what way can they show you? If they’re a developer, can they show you a source code? If they’re a designer, can they show you past designs? If they’re going to do email support, can you do a short test where you send them three questions about your app? You have them look through and figure out how they would respond to it. You want to be able to see what people have done in the past, not just who they have worked for and for how long.
Mike [00:26:04]: That’s one of the dangers of hiring – is just, in general, that usually their previous experience and the things that they’ve done on a day-to-day basis – your ability to see into that can be somewhat limited. You essentially have elevated the risk by not being able to see their work, and that’s why I think a lot of companies like the fact that there are developers out there who have public GitHub repositories, and they can go take a look at their source code. Then you have Stack Overflow, where you’ve got people’s reputation on there, and you can see questions they’ve answered and how they talk to people and how they answer deeply technical questions. That’s extremely valuable from a hiring standpoint, because you get that visibility. You get to see stuff versus you get a resumé, and everything looks great. There’s no red flags, but you don’t necessarily see any really good strengths either. That’s one of the downsides of going through a hiring process and not being able to see any specific work that they’ve done.
[00:27:00] That brings me to another point about when you are hiring, look specifically for the strengths of people, not just a lack of weaknesses. That’s, I think, a very easy trap to fall into.
Rob [00:27:11]: Another thing to keep in mind is finding really good hires. They typically aren’t looking for jobs. They’re hard to find, and so typically when we’re going to hire, I think through, “Who do I know who knows someone who would be a perfect fit for this?” Referrals and recommendations using your network are the best channel, in my opinion, because: a) it’s going to shortcut the process, but b) that’s where you’re going to find the best people. You have to be careful. I rarely think of, “Who do I know who I could hire for this?” because I don’t like hiring close friends and family. I’ve seen it happen, and I’ve seen it just train-wreck businesses. I’ve seen it train-wreck relationships, so my personal stance is not to hire friends and family; but to hire friends of friends, or colleagues of friends, or folks that your network knows that you don’t have strong ties to. Having a dual relationship where you’re both a friend and a co-worker, or both family and a co-worker makes things way more complicated than I think they need to be.
Mike [00:28:07]: The last item on our list relates to paying for this. I think when you go to hire somebody and you make a full-time offer, you need to think about how you’re going to pay them and whether you’re going to use a payroll provider of some kind. If you have access to Gusto, which is formerly Zen Payroll, I would highly recommend that, but it does vary state to state or country to country. But any larger payroll provider should be able to provide those services for you. In addition to that, you’re probably going to need to offer some sort of benefits, like health insurance and dental and things like that. Those things add up. They can be really costly in addition to the cost of paying for the person’s payroll. Most people don’t realize this, but in the United States, you also end up paying employment taxes, which adds even more on top of that. You could count on adding anywhere from 25 to 50 percent of the cost of an employee on top of what it is that you make them an offer for. So, if you make somebody an offer for 40,000 a year, it could be up to 60,000 or potentially even more, depending on where you live and what sorts of benefits you’re offering.
So, again, this comes down to, in some senses, risk tolerance. Can you afford that? Can your business afford that? You need the business to be able to support those employees long-term, so the revenue has to be there as well. I think that’s where this hiring process becomes such a challenge, because until you get to that point where the business is making enough money to be able to, I’ll say, quote-unquote, “easily hire” somebody, or at least easily be able to afford to hire someone, you might be riding the business a little bit on a razor’s edge in some cases. If the economy goes through a downturn that you didn’t expect and your business starts to go down, you could be in a position where you hire somebody and then three months, six months later, you look at your finances and say, “You know what? We really can’t afford this anymore.” And firing somebody after they’ve only been working for you for a few weeks or a few months is very difficult to do, because it’s not like it was a performance issue. It’s just you made a wrong decision, and I think that that’s more difficult for most founders to accept because they’re the ones who are at fault. It’s not the employee. It’s not as if the employee made a mistake, or is not pulling their weight or doing the job. It’s you made a mistake in the business, and you’ve screwed up.
Rob [00:30:21]: Yeah. I think in terms of the benefits – you know, you mentioned that – that’d be something else. I know a lot of early-stage startups, when you’re below five employees, they don’t offer healthcare; because it is such an administrative – not only an expense; it’s just a big time suck to get that going. So, that’s something to think about. You obviously want to take care of your employees as soon as you can, but it’s something to think about – that it’s not necessarily a need, and it can negatively impact your business if you try to compete with the big boys and get a 401(k) out and you’re under ten employees, and get healthcare for everyone when you’re under five employees. It’s something to weigh and think about both in terms of the cost and the time. And I think what you just said about risk tolerance and having either the cash in the bank, or the MRR coming in to cover is something not to be taken lightly, because having to lay somebody off after you’ve done all the work of hiring them – it would feel terrible, and it would be a very stressful decision that you’d have to make. The nice part about if you do have a recurring revenue business, rather than one-time sales, is that that revenue tends to be more stable; so, definitely a plus of the SaaS or the membership model.
[00:31:24] I think that wraps us up for the day. If you have a question, you can call our voicemail number at: 888.801.9690. Or, email us at: questions@startupsfortherestofus.com. Our theme music is “We’re Outta Control,” by MoOt, used under Creative Commons. Visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening, and we’ll see you next time.
Episode 284 | Key Takeaways from MicroConf 2016
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike discuss several of their takeaways pulled from talks at MicroConf 2016.
Items mentioned in this episode:
Transcript
Rob [00:00:00]: In this episode of “Startups for the Rest of Us,” Mike and I discuss our key takeaways from MicroConf 2016. This is “Startups for the Rest of Us”, episode 284.
[Theme Music]
Rob [00:00:18]: Welcome to “Startups for the Rest of Us”, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and scaling software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob …
Mike [00:00:29]: And I’m Mike.
Rob [00:00:29]: … and we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
Mike [00:00:34]: Well, last Thursday, I added my first customer to Bluetick.
Rob [00:00:38]: Just shortly before MicroConf, huh?
Mike [00:00:39]: Yes, the day before my self-imposed deadline.
Rob [00:00:43]: Nice. So, what does that mean [?], then? They’re in early access, and they’re clicking around and sending emails – that type of stuff?
Mike [00:00:50]: Here’s the issue. I had them create an account, and we were kind of pressed for time because they were traveling on Friday, so I knew that we had to at least get them into the system so that I could take a look at stuff on the back end and make sure – because there’s a bunch of jobs on the back end that do a lot of data processing. I put them on. All of those things worked, but here’s your public service announcement for the day: don’t go in and change a bunch of things that are working perfectly well the day before you do that [laugh].
Rob [00:01:15]: Yeah, I was going to say – as soon as you started saying “…he created his account”, I almost completed your sentence, said, “And then everything broke?” because early access is always like that. All the stuff that worked two days ago totally breaks on them.
Mike [00:01:26]: I went in, and I had a bunch of changes made because I was going through and testing things. I was like, “Oh, this is a little bit clunky. It would be nice to make these changes here to make the flow a little bit easier”, and, unfortunately, we busted a couple of things. Of course, since it’s all based on different routes and stuff inside, the [rest?] API, you break one thing and the whole thing kind of falls down. There were a lot of things that worked, and then there were just certain things where there were core features that we ended up breaking which unintentionally. We got everything back and working within 24 hours; but, of course, I was leaving for MicroConf on Saturday, and he was traveling for the next couple of days. But we’re revisiting it this week or early next week, and we’ll go from there.
Rob [00:02:07]: Very nice.
Speaking of MicroConf, we just spent the last – what – three, four days in Vegas. This is our sixth conference in Vegas and our ninth overall, including the ones we’ve done in Europe. This was the first time we’ve had it at The Palms, and The Palms was – I’d say, cost-wise and décor-wise, it’s maybe a slight step up from the Tropicana, where we’ve traditionally had it. I really enjoyed the time this year. I feel like it was a good mix of – we had a lot of returning attendees, as we usually do. We had quite a few new attendees, and that was neat, a lot of first-year attendees. We even had a lot of first-year speakers. We didn’t have a lot of returning speakers from years past, a lot due to scheduling and other stuff like that, and also just wanting to have a fresh year to kick it off.
How did you feel about it overall?
Mike [00:02:50]: I agree. It was nice. I really liked some of the features that The Palms has versus where we had it at the Tropicana; for example, the food court and the fact that you can walk around a little bit more. It feels like you’re actually getting somewhere rather than just walking down massive hallways that almost have no end and seemingly no purpose [laugh]. Did feel like a slight upgrade. I liked the conference areas better; but, you know, it’s not necessarily all about the conference area either. It’s about the people that you’re meeting, the people that you’re talking to and things you’re learning.
Rob [00:03:20]: Yeah, that was the thing. As always, the hallway track as valuable or more valuable than the notes I took from the talks. It was great to see everybody who came. We had about 220, 230 people, and then we sold some “better half” tickets where folks bring their spouse and significant other, so I got to meet a lot of those. That’s always fun, because MicroConf – it’s not like other startup conferences where you’re there to talk about grinding away 90 hours a week. Our families are intimately involved in the startups that we’re doing, because many of us have significant others and/or kids, and it’s kind of cool to meet that person in a startup founder’s life and be able to have them have some glimpse into this crazy conference that that person goes to and maybe meet a few of the folks from it.
Mike [00:04:01]: Yeah, I had some interesting conversations with a bunch of people’s husbands, wives, boyfriends, girlfriends – that kind of thing. It was definitely interesting talking to the “better halves” and seeing what they thought of not just the conference, but the things that their “better halves” were working on as well.
Rob [00:04:16]: Sure. So, let’s dive in. We have several takeaways that we pulled out from the talks. I think we’ll go kind of in chronological order. There’s not enough time to cover every talk, so we’re just going to pull out some highlights. The speaker that kicked us off was actually Des Traynor. He’s the cofounder of Intercom, and he talked about building and scaling products, his lessons learned from four years and 8,000 customers. He had a lot in there. He’s done a lot of talks for Jason Calacanis, like their launch incubator. You hear it on the TWiST podcast, and he just always has such brilliant insight. He’s such a product guy, right? He knows what to build, how to build it, when to build, how to communicate that. He’s really focused on product and how that ties into, of course, marketing and growth.
I’d say the key thing, probably my number one thing – I took several notes from his talk, but one priority list that I really liked – he said it’s these priorities from the top down. The first thing that you should think about in your development cycle is improving a feature. The second one is getting more people to use that feature. The third thing is getting people to use that feature more. So, first it was more people to use it. Now it’s getting people to use it more, like more often. The fourth one is building new features. It’s in that priority order, which is contrary to what most of us do and how most of us think about product development, right? Most of the time it’s build new features, build new features, and that’s what customers and trial users are requesting when, in fact, Des is saying you need to think about improving existing features, getting more people to use them and more often.
Mike [00:05:38]: I really liked there was a grid that he put up that essentially showed what you should be working on and what has the most impact. There were a couple of different columns that he had there, and it was all based around how many people are using a particular feature and how often. You could see things like, in the top right, if everybody was using it and it was very often used, those are the places that you should be concentrating on.
He also talked a lot about how you are divvying up your team and assigning them to different parts of the project, where most software development teams will say, “Okay, we’ve got these 35 feature requests. Let’s put five people on each of them,” and that’ll take up everybody’s time. The reality was that he talked about bringing a bunch of test customers in, or existing customers, or prospective customers and saying, “Here’s $100 virtual dollars. Please vote on what it is that you would like us to implement.” Inevitably, what you find is that most people will vote for a couple of features, and a lot of the rest of the ones are completely unimportant, and you’re wasting a lot of time and effort and resources building those things that people just, quite frankly, don’t care about. His main point behind that was that you care a lot about implementing certain new features, and your customers don’t care at all.
Rob [00:06:51]: Another talk that I think had an impact on the first day was Claire Lew’s talk. She’s with Know Your Company, which is a spinoff of 37 Signals. Her talk was titled “An Unconventional Business,” and she talked about having a business without recurring sales. It’s a software company that allows other companies to learn more about their employees and what they’re thinking and that kind of stuff. It’s a one-time sale up front. It’s $100 per employee, and then there’s no recurring. She talked about how that is unconventional in today’s model of monthly SaaS charges, or even annual charges. She also looked at the sales process and how there’s only two of them. It’s not this big team of people doing stuff.
What were your thoughts on Claire’s talk?
Mike [00:07:31]: What I thought was interesting was the sheer number of demos they do and their focus and emphasis on gaining customer trust versus optimizing for revenue. Obviously, there’s the idea that you could charge a subscription model, or you could raise your prices, or charge some sort of annual maintenance fee or something along those lines. But when you look at what they’re doing, they’re really optimizing for the trust of the customers, and in some ways that reflects on their future revenue. I think Lars called it “expansion revenue,” because as those businesses grow, they will continue to pay the $100 for new employees. Or, if an employee leaves and they hire a replacement, then they’re essentially responsible for that extra hundred dollars, but it’s because they are so focused on getting the trust and buy-in of the CEO and the company executives and many of the employees that it makes a heck of a lot of business sense for those businesses to continue using their product and their software. So, it’s not necessarily recurring revenue but, as Lars said, it’s that “expansion revenue.”
I think that that’s an interesting take on it. I don’t think that most businesses, especially the ones at MicroConf, certainly don’t focus on, “How can we gain trust?” rather than, “How can we get more money?” More money is typically the focus, because it’s commonly easier to get more customers than it is to gain absolute, 100 percent trust of the existing customers that you have; but I also think that that’s probably true because of the way that their product is sold. You really need to be well-trusted by the company in order to just hand over contact lists and contact information for every employee you have.
Rob [00:09:08]: Yeah, and there was some discussion. There was a question during the Q&A and then that evening of folks questioning that one-time sale and wondering how they can make it a subscription business. I would guess long term that Claire’s got to be thinking about how to do that, because it is just so hard to grow a business when there’s a one-time sale; but all that said, I did like her principled rationale that the reason it’s a one-time sale is because they get that commitment from the company to implement this, and they don’t want them to cancel it in three or six months. She believes that once they do this, she wants them to have it forever. It’s a tough balance; and I think, perhaps, they’re in a bit of an edge-case scenario where – you know, personally, I don’t like one-time-sale businesses. I wouldn’t own one myself, and I think most businesses are moving towards recurring; but I wonder if hers could be in that realm of an acceptable exception.
[00:10:00] Another session we had on the first day that folks enjoyed was our Q&A session with [Stelle?] and Heaton, which turned out pretty good. An hour of Q&A is a bit long, and I think we made a little bit of a mistake in the schedule with that. I think I’d probably cap it at 30 minutes. That’s not saying anything about [Stelle?] and Heaton. It’s just too long to do a full hour of someone answering questions. But it was cool. It was like a live version of their podcast, and I thought that it was pretty valuable for the audience.
You were actually moderating that. You essentially read the questions and asked them the question from the audience and stuff. How did all that feel?
Mike [00:10:32]: As you mentioned, I was asking the questions initially, but we kind of primed the pump by having people submit some questions in advance and asked, I think, five or six different questions and then went out into the audience and started taking questions from there. I absolutely agree with you that it may have been just a little bit too long, but I think there’s good reasons for that. When you have a Q&A session like that, I think what tends to happen is that you get the people who are asking the questions who are the most vested and interested in the questions and the answers, and there’s probably a sizable chunk of the audience that isn’t necessarily as interested in that particular one. If you have too many of those in a row, then it’s difficult to maintain your focus and interest in the discussion. You and I have seen this especially with questions that come into the podcast, or when we’re doing internal, worldwide Founder Café calls where, if you don’t necessarily do any sort of moderation on the questions that are coming in, or filter them in any way, shape or form, then what you end up with is a lot of random things that come up that are difficult to maintain everyone’s interest for a long period of time.
So, I think that that’s probably what we ran into. For the podcast, when we do Q&A episodes, we typically decide which ones to manually respond to and do just one-off answers back to people versus ones that we think that are generally applicable to a wider audience. Those are the types of ones that we end up reading on the air in Q&A episodes.
[00:11:57] The one thing I do think is that, for the people who are asking those questions, they’re hyper-interested in those, so after the day, Heaton and [Stelle?] did an “office hours” after the first day, and they had so many people attend and so many questions, that they actually had to do a second day of them. It was only probably 20 or 30 people or something like that; but, still, that’s enough people with that hyper focus that it worked out really, really well for them.
Rob [00:12:22]: Another talk that had a lot of good takeaways was Patrick Campbell from Price Intelligently. He runs essentially a 20-person consulting firm focused on SaaS pricing. One thing -there were many, many takeaways from his talk, because he’s very tactical and he dove into a lot of stuff. He’s such an expert on the topic that it’s actually a little daunting when he says what you need to do in order to really get a good handle on your pricing. It’s a lot of steps; and I think he said it took him, like, eight hours to do it. There was a case study he did with his mom in a business she was starting, but I think that would take a long time for someone like myself, who hasn’t done the extensive pricing research that he has.
One thing that I really liked about his talk is – we’ve all heard of buyer personas, where you take a certain persona. If you have SaaS users, you might say SaaSsy Sam is your SaaS user persona. Then Billy Blogger is your blog user persona, and then you talk about their feelings and the decisions they use to buy and the factors they think about and if they’re price-conscious and all this kind of stuff. He took it a step further, and I hadn’t seen this. He actually added cost to acquire customer, so CAC values and LTV, lifetime value, to each of the personas. That was a real mental shift for me. I have all this in my head, and we talk about it internally about how we serve these three or four pretty tight verticals. With Drip, really it’s three verticals. Then there’s these other ones floating out there. Actually pulling out the CAC and LTV and all the other metrics by vertical is a pretty interesting idea, right, and it’s going to show you who your most profitable and least profitable are. In addition, he talked about you have to write all this stuff down; and that’s something that, while we have a bulleted list of the verticals, we don’t have the full-on list of all the buyer personas. That was a big takeaway for me was to sit down, draft this up and then do some data mining and figuring out some numbers to put to each of these.
Mike [00:14:14]: Next on our list, you talked a little bit about some different, unfair advantages, specifically, four different unfair advantages for faster SaaS growth. Why don’t you talk a little bit about those four unfair advantages?
Rob [00:14:25]: Sure, yeah. I did a shorter talk this year. It was a little bit a retrospective where I looked back and was trying to figure out at a higher level why has Drip grown faster than any of my other software products, like exponentially faster. Then I started looking around and saying of all the self-funded SaaS I know that has grown quickly, why have those grown faster than just the run-of-the-mill SaaS apps. I made a big list and did an analysis, and I talked to a few people and figured out that there really are four unfair advantages in order to have this 2X, or 5X, or 10X growth that we’re seeing in apps like Edgar, or Basecamp in the early days, or maybe Bytes Kits in the early days, or Drip, or like a SumoMe. There were these examples that were pretty obviously growing faster than everybody else.
I started with a long list of unfair advantages and, one by one, I realized that a lot of them actually didn’t make a difference. The four that I narrowed it down to – and you can have more than one – are, number one, to be early to a space. Second one is who you know, so it’s your network. Third is who knows you, so it’s your audience. The fourth is growth expertise; it’s how much expertise you have growing a company. It was fun. It was a little short, 20-minute talk; and I felt like, hopefully, it gave people ideas of stuff to be working on even if they don’t have a product yet; if they’ve already launched a product, how to try to get one of these in the space they’re in; or, to prepare for a future product that they’re launching.
One thing I meant to say, or I should’ve said, is that growth is not the end-all, be-all. Everyone doesn’t need to want to grow all the time. Of all people, we are the lifestyle startup crowd, right, where it’s like – I don’t build these startups just so they can grow. We build them so that we can have fun lives and we can have these great lifestyles. Even having faster SaaS growth in the title, I debated whether to do that, but that’s really what the talk happened to be about. If you’re out there and you’re thinking, “Well, I don’t really want super-fast SaaS growth,” that’s okay. This is just something that was there to help folks who maybe don’t want to travel a ‘long, slow SaaS ramp of death,’ or at least want to move along a little faster.
Mike [00:16:31]: Our next speaker was Tracy Osborn, and I think Tracy’s story was pretty interesting, because she has run both a funded and a non-funded startup. She ran WeddingLovely, and I think she called it something else earlier on. She had gotten funding from 500 Startups and was working on it then, and then later on – did she say that she took it private, or was it a spinoff of what she was doing based on that?
Rob [00:16:55]: It was the same company, so it was still funded, technically, the whole time; but she basically tried to run it like a bootstrapper, yeah.
Mike [00:17:02]: Right.
Rob [00:17:02]: So, once the funding was gone, she didn’t shut the company down. She was then just trying to make it profitable, which is not what people who give you funding really want.
Mike [00:17:09]: Right, yeah. I got the impression that the people who had given the funding, initially they were just like, “Okay, yeah. We’ve decided this is a failure, and we’re going to write it off at this point,” but she still took it forward. It was really interesting to see the contrast between how she approached it before when she had money versus when she didn’t later on.
Rob [00:17:29]: Yeah, I agree. The real takeaway from her talk wasn’t that funding is bad. It’s that flip-flopping between funding and bootstrapping with the same company is bad, because the priorities and the way you build the business is just so different. To be honest, I liked her talk in terms of the narrative. We go for about an 80-20 breakdown of actionable/tactical versus inspirational and narrative-driven, and hers was definitely in that 20 percent. Maybe we’re 90-10 in MicroConf most years, but hers was definitely in that 10 or 20 percent of a good story and seeing a lot of mistakes that she made. Just her perseverance. She kept calling herself in the talk. She’s like, “I was the cockroach that would not die, and I just have kept the company going.” It was an interesting story to hear and kind of a cautionary tale in terms of figure out if you’re going to be funded or bootstrapped and then go that direction.
One thing that I would add, though, is, again, there’s this in-between of fund strapping, where you can raise a small amount of funding, but it’s from people who understand you’re not going to go for that $50 million idea; because WeddingLovely is a wedding marketplace. In that case, you really do have to get big. You have to hit scale in order to make it work. She had just started, let’s say, a B-to-B SaaS app; and she took some funding, then decided to go bootstrapped. I actually think it could’ve worked a little better, but it’s neither here nor there. I just think it was an interesting story and pretty well told on the stage.
Mike [00:18:53]: Yeah, I think the two, main takeaways that I got out of it was, one, her references to being “the cockroach that just wouldn’t go away,” and saying, “Look. I’m going to buckle down, and I’m going to make this work, and I’m going to make this happen. Even if I get slapped down, I’m going to come back, and I’m going to do something else and try and figure out something to make it work.” I thought that level of sheer tenacity and perseverance was very admirable, because I don’t think that you see that a lot. I think that most people tend to throw the towel in just a little too early. Obviously, there’re times where you can take that too far, but it was interesting to see the level that she went to just to even be able to meet people. That was the other thing, the lengths that she went to in order to meet certain people that she knew would help make a difference in her business.
Rob [00:19:38]: Another session we did on the second day was kind of the surprise session that we had not announced. Patrick Collison, the cofounder of Stripe, showed up. He was just there for about 24 hours. He had said that he’d been following MicroConf for a couple years and that he really wanted to come check it out, which was obviously a big compliment to us, given that Stripe is a $5 billion company. They raised $260, $280 million. He’s just a powerful dude in Silicon Valley, even as young as he is, so it was neat to hear that we were on his radar at all and that he would take the time to come down. He met with a bunch of attendees. He got feature requests, ideas and all that stuff, but he did a 30-minute Q&A up onstage about the early days of Stripe.
I really liked how he talked. They bootstrapped that thing. That’s what probably none of us remember. He said they bootstrapped it until it hurt, and then when they eventually hit the point where they could not go any further, then they raised their first round.
Mike [00:20:30]: Yeah, I really liked the focus of them on their early days about what their customers were doing and how they were using the product. One of the things that he talked about was that, because Stripe is essentially an API that you make calls into, what they had very, very early on was they had it wired up so that whenever somebody made a call to one of their APIs, it would actually email them. Obviously, that is not going to scale long-term. Obviously, it can’t at this point. There’s no possible way that it could do that; but early on they were watching what people were doing, what data they were receiving and what sorts of errors people were getting and what data was being returned to them. It helped them focus in to figure out where people were having problems, so that they could determine, “Is the code bad? Do we need to fix that?” or, “Do we need to go back and update the help documentation?” “Do we need to update some example APIs, or example code that’s on the website?” and things like that. It was really interesting to see some of the technical engineering things that they were doing to essentially help them do that product development.
Rob [00:21:33]: As day two started coming to a close, we had Peter Coppinger from Teamwork.com, and he basically talked about their eight-year journey. It was even more than that, because they were a consulting firm before that, but it was about an eight-year journey of their SaaS app Teamwork, which is project management. They were doing consulting at the same time as they were launching it. Then they made a lot of mistakes. He said that, as a developer, really he still wants to code even though he’s the CEO of a 63-person company, and that he still does write some code for it. He talked about just the mistakes that he’s made over the year and how he thinks that they could’ve gotten to their present level, which is 12 million in ARR – he thinks he could’ve gotten there years earlier if they had started marketing sooner, if they had started sales sooner. He said, basically, if you have your head down for too long and are just pounding away at features and such and not looking outside, that you’re going to hurt the business.
Mike [00:22:25]: Yeah. I think that it was interesting to see the number of mistakes and the types of mistakes that they were making. The fact that they were still able to make it work is a testament to the type of product that they were building. I hesitate to say that everybody can make those types of mistakes and still be able to get to where they are. Obviously, there are different types of products and different markets, and they will naturally break out into varying levels of success, but it’s interesting to see the path and the growth curve. Then looking back at it, they can say in retrospect, “Oh, had we done X, Y or Z sooner, then that would’ve seriously helped us.” I think the one big thing is just the marketing side of things. They just paid so much attention to the code, because they were developers, and that’s what they were comfortable with. It wasn’t until they really started focusing and buckling down on the marketing side of things that things really started to take off for them.
Rob [00:23:17]: Yeah, I agree with you. I think a lot of folks, if they made the same mistake, would probably tank. Teamwork had that advantage of being in a big space, and they were there really early. I think it was like 2007, maybe, when they launched the SaaS app, somewhere around there.
Mike [00:23:32]: Yep.
Rob [00:23:32]: And being a SaaS project management product at that point, there was really – what – Basecamp? That’s the only other one I knew. I’m sure there were more, but I think that they did have the wind at their back, and I think Peter’s right. I think they’d be further along at this point if they had made the right choices, but even making those mistakes, they still survived; and not every business could do that. You’d probably need one of those big four, unfair advantages, if you’re going to make all those mistakes, in order to get to where they are.
Mike [00:23:58]: One thing that I thought was really interesting was the fact that they acquired the teamwork.com domain for – I think it was like $675,000. You look back at their growth curve, and you could see this definitive inflection point at about the time that they got that. I don’t think that a domain name is going to be the turning point for most businesses, but I think that in their specific situation, because of the type of software they were – and the previous domain, I think, was teamworkpm.net obviously, kind of an awful domain. They knew that. That was not even a question, but when they got the teamwork.com domain, it really gave them a level of validity and, I guess, authority that people looked at it and said, “Oh, you have teamwork.com. This must be a legit website and a legit app, so let me give it a shot,” versus previously, you look at teamworkpm.net, and it’s like, “Meh, I’m not so sure about this.”
Rob [00:24:49]: Yeah, I get the feeling – there were a couple questions during the talk, and then someone asked me about it later that evening. There was kind of some folks who I don’t know that they believed that the teamwork.com acquisition was the actual reason that the curve spiked up like that. What made it even muddier was that, like the slide – I think when the slide was converted, something happened where he had an arrow to where teamwork.com was acquired, and it was in the wrong place. So, it was hard to tell exactly the inflection point, if it was before or after the domain acquisition. If it was, that’s pretty crazy. That’s a huge deal, and if just getting the dotcom for your business did that, it really is kind of a vote for maybe ponying up some dollars for a domain name.
Mike [00:25:33]: But I also think that that’s just a matter of looking at the website and being able to explain, “Oh, this is teamwork.com.” If it’s a one- or two-word domain, it gives it that, I’ll say, air of authority –
Rob [00:25:45]: Yeah.
Mike [00:25:45]: – you know what I mean – for the larger enterprises, and you’re able to attract larger customers based on the name alone versus, as I said, teamworkpm.net. You’re not going to get Johnson & Johnson saying, “Hey, let’s dump a lot of money into this and sign up for a ton of accounts.” It’s just not going to happen.
Rob [00:26:00]: Right.
Rounding out our conference, the last speaker was Lars Lofgren. He ran growth for Kissmetrics for many years, and he’s spoken at MicroConf Europe in the past, actually. This year, he was talking about the three SaaS growth levers. I’ve seen parts of his talk before, and I really like it. I took a ton of notes from him. It was definitely one of my favorite talks of the two days, because it just reminded me of so many things that we should be doing at Drip, things that I’ve had in mind, or are on a list somewhere. It reminds me of how important they are.
The levers are: fixing your churn and then getting cohort expansion to work, which means expansion revenue as people are upgrading; and, finally, getting acquisition going. So, a lot of lessons from Lars. One of them that rocked people’s worlds is he talked about if you’re really going to try to grow this fast, have world-class churn before you scale. That means that you have product market fit and that you want your churn in the 2 to 3 percent range. He used this expression if you’re above 10 percent, your business is “on fire.” I’ve always liked that expression when he’s used it.
Mike [00:27:03]: And not in a good way either [laugh].
Rob [00:27:05]: Exactly. Exactly.
Mike [00:27:07]: Yeah. Some of the parts of his that I really liked was the fact that he looked at churn, and he said, “Here are all the different reasons why somebody might churn out.” Or, not all of them, but a bunch of them. Then he listed a bunch of churn reduction ideas. Then he categorized each of those and said, “These are bad. They’re just not going to help you.” Then, “These are marginal wins, and then these are major wins.” The things that fell under the “major wins” category was fixing your product onboarding; improving the value of the product; and then 30-, 60- and 90-day onboarding programs. It was really interesting that he broke those down. Then he said things like removing self-service cancellation. That just does not move the needle for you. But if you fix the product’s ability to onboard people, that’s a major, major win; and you’re going to be able to scale up very, very quickly because of that.
Rob [00:27:53]: Yeah, that’s what I liked, is that he called out these tactics that a lot of us might think to reduce to churn, but he said that basically covers up your churn problem. It doesn’t actually fix it. So, things like down-sells, or forced annual plans, et cetera, are not things that you want to do if you want to grow to this scale; because it just covers up the issue, and it will hurt your credibility long term. It hurts your brand, and people start thinking about you as just more of a fly-by-night company rather than someone who’s building something valuable for the long term.
Mike [00:28:22]: The other thing I really like that he pulled out was the fact that there’s a big difference between marketing and sales, and they can be at real odds with each other if you get to a point the marketing team is able to bring in a lot of people into the top of the funnel, but if sales can’t close those because the product is bad. He called it the “alligator funnel,” because you’ve got that top of the funnel, which is increasing, and then the sales are just flat and they’re not going anywhere. Then the marketing teams and the sales teams are essentially pointing the blame at each other, and you have this internal problem. The root cause is essentially because the product itself is just not able to do what the customers need it to do. That was a very interesting thing. I’d never heard that before.
Rob [00:29:03]: Overall, it was a nice ninth conference. I feel like we’re just starting to get the hang of this thing now.
Mike [00:29:07]: Yes. Only nine or ten more, and we’ll be good.
Rob [00:29:10]: We’ll be [laugh] – exactly. No, so it was good. A big thanks to everybody who attended. Obviously, thanks to our sponsors, and thanks to Zander for all the help in pulling it off. I don’t think we’d really still be doing MicroConf if we hadn’t found someone to help us put it together each year, because that takes a lot of the burden and the time investment off our shoulders.
Mike [00:29:29]: Yes, definitely a big thanks to Zander and everyone else who helped out. It’s very nice to have people like that on the team.
Rob [00:29:34]: And if this sounds interesting, we’re throwing another MicroConf in just a few months, July 31st and August 1st of 2016. We’ll be in Barcelona, Spain. If you’re interested, go to MicroConfEurope.com. There’s a little Drip widget in the lower right where you can enter your email address, and you’ll be one of the first people to hear about it.
Mike [00:29:53]: I think that about wraps us up this week. If you have a question for us, you can call it in to our voicemail number at 1.888.801.9690; or, you can email it to us at questions@startupsfortherestofus.com. Our theme is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. Subscribe to us on iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening, and we’ll see you next time.
Episode 283 | Stair-Stepping Into a Different Audience
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to stair-step into a new audience. They define what the stair step approach is, ways to get into a new market, and how to utilize your existing strengths on your new audience.
Items mentioned in this episode:
Transcript
Mike [00:01]: In this episode of Start Ups for the Rest of Us, Rob and I are going to be talking about stair stepping into a different audience. This is Start Ups for the Rest of us, Episode 283.
Welcome to Start Ups for the Rest of Us, the podcast that helps designers, developers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob [00:24]: And I’m Rob.
Mike [00:25]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Rob?
Rob [00:28]: I’m doing pretty good. I got an interesting little hack that I heard about on a podcast where if you’re sending your new trial signups into Slack — like we send it into a signups channel so we can see whose signing up. If you’re already doing that, you can wire [Zappier?] up to essentially monitor that channel and pull a domain name, or an email address, out of the Slack chat and then push it into FullContact, and it gets the information so you can actually figure out, ‘Hey, does this person or company have a lot of Twitter followers? Do they have big social media presence? What’s their LinkedIn bio and their Twitter bio?’, just to get more information about them. It was surprisingly difficult to set up. It seems like it should be pretty easy because [Zappier] tends to be pretty easy to use, but there was a bunch of finagling I had to do to get it set up. And then, in the end, it seems to work for less than half the trials that come through and actually retrieve any information from Full Contact. So, it’s an interesting hack if you have an hour to set it up and you’re interested in finding out more about folks who are signing up and can do a lot of follow up. But, to be honestly, in the end, I’m a little disappointed with the amount of effort I had to put into it and the results that I’m getting.
Mike [01:34]: Yes, I’ve looked into those services before and it seems like that, in a way – I’ll draw an analogy with something like ReportOf – where ReportOf seems to gather some of the information from LinkedIn as well, and I don’t know how well FullContact is able to do that? I think there is probably a huge discrepancy between people who are using their work email addresses for their social presence on Twitter or Facebook or wherever, versus people who are using their personal email addresses inside of LinkedIn and you’re able to kind of match that up. A lot of times, people will add in their work email address, for example, into LinkedIn because then it makes it very easy for other people they know, or work with, to find them. I think ReportOf is owned by LinkedIn now, if I’m not mistaken?
Rob [2:19]: I think you’re right. Yup.
Mike [2:21]: Yes, so they probably have all the tools and stuff they need to be able to get that information, versus something like FullContact which is probably a little outside of the box.
Rob [2:30]: Right.
Mike [2:29]: But that’s cool. I think these types services where they’re able to gather additional metidata about people based on their email addresses is nice to have when it works. But obviously, when it falls down it’s a little disappointing.
Rob [02:45]: For sure. What’s going on with you? You have a deadline coming up in the next couple days.
Mike [02:47]: Oh yes, hard at work trying to get all the code out the door. There’s a few–I’ll say minor–sticking points we’re still trying to work around, but I’m pretty sure that we’ll be able to finish this off in the next couple of days and hopefully get it in the hands of our first beta customer that is outside of the four walls of my office, and hopefully see what happens.
Rob [03:05]: There are always a few minor sticking points two days before launch, so no one would be surprised by that.
Mike [03:10]: You mean, getting 90% of the work done so you can work on the other 90 percent?
Rob [03:14]: Exactly. Exactly. Well good for you.
Mike [03:16]: We have an interesting question that actually came in from [ArmonMesic?] and it’s actually a little bit on this topic. He says, ‘ Hi guys, really like your show. You’re providing so much value, and after listening to an episode, my motivation is always going up. I’ve got a question for you. I’m launching my first product, and right now I’m sending cold emails to people. Do you have a suggestion of how I can track open rates on individuals? I didn’t find an easy way to do it. Thanks for any help in advance.’
I’ve done this before; there’s a couple of different tools that you can use. One of the things that I’ve used before is Sidekick–and there’s a Chrome plug in for that, and they, I believe, have a free plan which allows you to just see who is opening emails and who isn’t. But actually, your question actually leads a little bit more towards what I’m actually working on now with BlueTick, which is not only tracking how many people are opening those emails, but whether or not you’re getting replies to them and then managing that follow-up process beyond it. Hopefully that helps to answer your question. I would probably start with Sidekick, see if it does what you want it to do. There’s other options out there that kind of operate in this space though, and there’s probably a dozen of them. But hopefully that at least gets you on the right track.
Rob [04:17]: Yes. The other two that I’ve seen are Tout, which is at toutapp.com, and YesWare. I think Tout is web-based. It’s a full web interface. And then YesWare integrates with your Gmail account. Those are other ways you can trap opens on cold emails. So one other thing I wanted to toss in. Last week I mentioned listening to ‘Masters of Doom’. I found out this week that there’s not a sequel to it, but there is a book called ‘Prepare to Meet Thy Doom’ and it’s basically a collection of magazine articles. Most of them were published in Wired and maybe some gaming magazines. And it’s actually a collection of different stories about gaming. So there’s a 10 or 15 minute version. I’m listening to this. I’m sure you can buy it, and it’s 10 or 15 pages, band the audio version there’s one of Flappy Bird. There’s the story Atari. There’s a really good story of Gary Gygax, the inventor of Dungeons and Dragons. Then there is an update around 2004 – 2005 with the guys from ID Software. I just discovered this. It was published maybe six months ago, so if you have listened to ‘Masters of Doom’, or read it, and you’re interested in more like that, the same author has published a book called ‘Prepare to Meet Thy Doom’.
And then on another front, I’m listening to the Snowball audio book again, and that’s called ‘The Snowball” It’s the story of Warren Buffett, and it’s a very thick book. It’s a biography, but it’s was as-told by Warren Buffett to a writer. He said he’s never going to write his autobiography, so he wanted someone else to do it. I found this book fascinating in terms of someone who had this unique talent, this unique advantage. And he really, really likes financial reports, and he figured out how to read them better than anyone else. And then he figured out his investing philosophy and the dude just showed up every day for like fifty years, and he calls it “the snowball”. He just built the snowball over the course of that time, and started with a tiny little bit of cash and managed — I think it was parents and friends when it started, and he just built it up, built it up; a fascinating story of being in it for the long haul, and then playing long ball and looking out decades in terms of building wealth, instead of being in a big hurry for it.
Mike [06:15]: Yeah, I’ve caught bits and pieces of his story over the years, and it is kind of fascinating the way he started out with virtually nothing and then he decided to move away. I think he moved out to Omaha and then I’m pretty sure he moved from New York, if I remember correctly?
Rob [06:30]: Yeah. I think you’re right.
Mike [06:31]: It was just like people would say, ‘You’re crazy for leaving New York, because this is where everything happens!’ And he was still able to manage the business and do everything from a completely different location. And he hasn’t really changed his habits. He doesn’t live in this extravagant house. He runs business in order to play the game. iIt’s not because he wants money or needs money. It’s just he likes it.
Rob [06:52]: Yes. That’s the cool part. I like when folks who are in it for the long haul, and who have this one outlier trait, just double down on that and stick with it for so long. When that turns out well it’s a cool story to hear. And what I’ve heard is–I haven’t read the physical book – but there is an unabridged and abridged audio version, and I’ve heard that the abridged version is just fine. Because even the abridged version, I think, is like 20-something hours. I think the unabridged version may be like 35 hours. Personally, I’ve listened to the unabridged and I don’t feel like I missed anything. And folks who reviewed both of them said that the abridged was just fine. So what are we talking about today?
Mike [07:30]: Today what we’re going to be talking about is a thread that came up inside of Founder Cafe, which is our private-user community. It was a question about how to stair step into a different audience. So, essentially going from an existing business that you have that serves the particular niche, or a particular audience, and trying to leverage that audience, or the things that you’ve learned, into a completely different audience. And I think that there’s a bunch of different reasons that you might want to do this, but let’s do a recap approach to what the stair step approach looks like.
Rob [08:02]: Sure. So, the stair step approach is something that I developed over the course of several years. Eventually, I published a blog post on it, and did a talk on it. If you go to — we’ll link this up in the show notes – but it’s at softwarebyRob.com, or you can search on my name plus “stair step”. It’s not been mentioned in a couple of books, and people quote it in articles and stuff. The idea is that I’ve laid out these three steps–and you could call them stages or whatever, but it’s steps of your entrepreneurial journey as you’re trying to launch a product. I have a couple different versions of it, but the one I’ll really stick to today is the one about launching software products. Step one is really thinking about launching a software product with a one-time sale and a single sales channel. So, think about a WordPress plug in or maybe a mobile app, a Magento add on, even an E-book–yes, I realize that’s not software, but that kind of stuff. And you have a single sales channel, which is typically going to be like the WordPress.org plug in repository, or it’s maybe SEO, organic traffic, or maybe the Amazon store or the Android app store; YouTube; you really optimize and you learn that single channel, and the idea here is to get experience and to get some money under your belt and really just learn the game. Step two is to just repeat step one. Because the thought here is that you’re doing step one on the side, right, while you have probably a full-time job or you’re doing consulting. Step two is to repeat step one multiple times until you own your time. So you have multiple plugins. That’s an example; you can have multiple plugins, you can have multiple e-books, you can have e-commerce sites, or whatever it is. The reason that you just repeat those is because you’re just trying to get more experience and trying to get better at all aspects of it, like the copy-writing and the marketing, and once you have multiple then you have the diversification that you’re going to feel okay about quitting your job, and you’ll also have a lot of experience. You’ll have experience on multiple fronts. It’s you’re a single channel, it’s building a product, it’s launching a product, it’s copy-writing, all this stuff. Once you get to step two you also have a bit of experience, you have a lot of time, you have a bit of money coming in. So then you begin moving to step three if that is something that is interesting to you, and that is basically a recurring sales; typically, in our space, that would be SAS. And the reason I have these three steps is because you don’t just want to jump into SAS on day one and try to build it, because it’s complicated, it’s very competitive, it’s hard to do on the side; there’s a number of reasons, you don’t have the experience. Since SAS is competitive a lot of people will out-market you and out-build you. So, step three is to launch that SAS app and get the golden ticket, which is recurring sales.
Mike [10:23]: So now that we’ve talked a little bit about the stair step approach itself, let’s talk about why you would want to do this. Why would you want to move into a completely different audience, especially when you’ve already worked so hard to build up one or several small products such that they are making a full-time income for you. I think the first one is boredom. I mean, some people just get bored with working on the same thing and they get to a point where the money is not insignificant, and they don’t want to lose the money, but, at the same time it’s not it’s not necessarily bringing in the level of revenue that they want it to. So they look around and they say, ‘Well, I could probably do something better or bigger and in a different market, but where I am right now is probably not going to get me there.
Rob [11:05]: Yes, and this is really common. Especially if you’re starting with a step one idea, they tend to have a natural plateau once the sales channel is tapped out. Let’s say you’ve built something for pet sitters, or just a small niche–salons or barber shops or something. Obviously. those niches can be large, but the amount that you can reach through online marketing means is fairly small in those instances. That’s at a point where you should probably start thinking, ‘Huh, is there a larger market online that I want to reach online that I want to switch to for my next step.
Mike [11:36]: Another reason that you might want to switch is that higher lifetime values for your customers might not even be possible in a particular niche. That comes around a lot from products where there’s this one time sale or I would also say in the WordPress business as well. There are a lot of plugins where you can get the one-time sale and it’s not a stretch in order to be able to do that, but getting people to pay on a recurring basis for WordPress plugins right now is, I would say, a little bit difficult. It’s really not common for WordPress plugins to have a subscription model of any kind. I have seen them, I have paid for them myself, but it’s not common. And, for certain types of customers, they’re just simply not willing to spend a lot of money. So what happens is your lifetime values for those customers tends to be low, and it’s very difficult to increase it without going down the route of bundling, or providing completely different products that possibly overlap.
Rob [12:32]: Yes, I think there are a lot of reasons why high lifetime values aren’t going to be possible in certain spaces. If you think about lifetime value, if you have a subscription business then the lifetime value gets higher the longer people stick around. And if you have a one-time sale product, then you really need to either increase the up-front price–and there’s always a natural limit to that. Again, coming back to the example of pet sitters, they just aren’t going to be willing to pay $500 up front for a piece of software, It’s very unlikely. Their price point is going to be more like a consumer or prosumer. Photographers, I would say it would depends on if they are truly a professional studio running a studio. or if they’re, kind of, doing it on the side, that’s another niche that a lot of folks go after, and they are pretty price sensitive. So the lifetime value in these niches can have a cap. Now if you have enough volume, and if there are a ‘bazillion’ of them online, then the LTV has less of an impact because you can just get so many folks signing up, but that’s pretty rare. It’s a pretty rare niche that you can come in and find enough people that a low LTV, in essence, will work for you because then you have to go after the organic traffic, and you can’t do much in terms of paid marketing in that instance.
Mike [13:38]: Let’s talk about a couple of the really bad reasons for switching. You and I discussed this offline a little bit. Trying to come up with a absolute ‘This is a bad reason for switching’ was a little bit difficult. I think the best one that we came up with was the idea that the grass is always greener someplace else. So, if you’re looking around, and you’re looking at your product and you say, ‘Well this is difficult, and I think over there if I try and develop a product in this market with these particular types of people it’s going to be easier.’ I think that that may probably be the most, or I’ll say the worst, reason for trying to switch into a different audience. But at the same time, if you double down on the things that you’re doing now, in many ways, that is a competitive advantage, because it’s going to be difficult for other people to get into your market and replicate the things that you’re doing. So it kind of cuts both ways, which makes it difficult to come up with a lot of reasons that are just absolute and say this is a bad reason for switching. But there are a lot of places where there’s multiple caveats. For example, if you think that another company is going to come in and shush you out of a particular market. Let’s say your product is reliant on Twitter APIs, or reliant on data from Google. There’s this idea of a perceived threat from them doing something that is going to shut you out, versus how likely that is to happen. I mean, if all of your revenue is based on that one product, they have the ability to shut you down and it looks like they’re headed in that direction then it could just be out caution that you say, ‘Well, let me go and do something else in a completely different market so that I don’t have to worry about this problem.’ But, at the same time, you have to weigh that. It’s not a ‘this is absolutely going to happen’. You do have to take those into account, and there’s mitigating factors there.
Rob [15:19]: Yes. I think that certain people – and hopefully you know who you are. Certain people have the personality where they like to start a lot of things, and when things get hard they jump to the next thing. And I think that’s, kind of, what you’re kind of saying with ‘the grass is always greener’. Some folks are good finishers, some folks are good starters. But I think if you have the tendency to jump around, that’s probably a bad reason to just bail on something. If you feel like you haven’t stuck around to grow something to fruition, and you keep bouncing either from idea to idea or from market to market, that’s probably a bad reason. With that said, there are a lot of good reasons that we have outlined here with higher LTV’s, not an ability to grow, difficult market to reach. There are some good reasons to be doing that. I think a good example of this is what Brian Castle did. He had RestaurantEngine, he had Hotel Propeller, and he built and grew those things, and he put in the time, and he grew them for years. And he hit a point where he realized, ‘You know, I have a lot of skills. I now have an audience and a new space.’ He had the podcast and the blog and such. And he, in essence, moved on to AudienceOpps, and that has grown way, way faster, and there’s a number of reasons for that. But he wasn’t jumping around. He wasn’t bouncing from one idea to the next. He had put in his time, he had learned a bunch. That was really, kind of, a step one idea for him, and now he’s moved on to where his AudienceOpps is growing a lot faster, and it’s already larger than the other two combined. I think that’s an interesting case study of thinking about stair stepping your way not only up, but kind of a horizontal move into a different audience as well.
Mike [16:51]: So let’s talk about some of the options for moving into a difference audience. I think there’s three basic mechanisms for going into a different audience. The first one is to move an existing product that you have horizontally into a different market vertical. Essentially you are using the same technology but you’re marketing it towards a different user base. So there’s a couple of different places where you might be able to do this. So if you have a CRM package that is for web designers, you might say, ‘Well, let me try and take this and repackage it a little bit and put a spin on the marketing, and I’m going to market it towards software developers or freelancers, or something along those lines. It’s a slightly different market, or maybe even a radically different market, but the majority of the technology base is going to stay the same. Most of what is going to change is your market positioning, how you do your customer development, gathering the language that they’re using, and the new website that you’re probably going to use for selling that product.
Rob [17:48]: There’s obviously advantages to doing this. I mean, there’s less technical heavy lifting you have to do. You don’t need to build something from scratch. Faster time to market, because your software is already built, in essence. You need to make tweeks to it but you have the bulk of it. The negatives to this are it is a completely new market. You’re going to need to start from scratch. You’re going to have to do customer development. You’re going to have to build a support pipeline and the website from scratch. It could also be really confusing for some customers unless you pick a completely new name with new domain, and in that case, you are looking behind your SCO, your organic inbound links and your reputation, your brand. You leave a lot of stuff behind. So it depends on if you take the code base and move it over, or if you actually shift everything. Because if people are reading every article that’s saying, ‘Hey, this is CRM software for XYZ audience’, and they come there and it’s for a difference audience, that could be confusing. But, all in all, there is this old marketing saying that says, ‘Try and avoid selling a new product to a new market.” What you really want to do is you want to sell a new product to an existing audience that you have, or you want to sell an existing product to a new audience. But doing new to new is really bad. So this is a way to counter that; to take this existing product and migrate it into a new audience.
Mike [18:57]: And that leads us directly into the second one, which is to buy an existing product. This cuts down on your time to market, because there’s going to be less inherent risk with a business that already exists and is paying customers. But the downside of something like this is it does tend to be expensive. And the growth of that business can be something of a gamble, because you don’t have a good handle on what those customers want or what they asked for. You didn’t develop the product with them, so you don’t have a history of what those conversations looked like. You were essentially starting a lot of that marketing from scratch. So similar to the previous product where you’re taking the existing one and moving it to a different market, if you’re purchasing an existing product, hopefully it has some level of overlap with the existing customer base that you have, or the existing email marketing list that you have. But that’s not always going to be the case, and sometimes when you’re buying products you have to take what you can get. It’s something of a lottery when you’re trying to identify a product that’s out there, that’s available and on the sales block, or even if you’re making unsolicited offers to the people who have a product out there which seems to be neglected. You can make those offers. They may or may not take them. But obviously it’s something of a lottery when you’re trying to find a product that is going to overlap with your existing audience. Sometimes you don’t have a choice and you end up going into a completely different audience regardless of what it is that you’re actually looking for.
Rob [20:19]: Yes, and this has historically tended to have been my approach. I’ve acquired a lot of products, a lot more than I have built and launched from scratch. I like the model because, as you said, it does cut down that time to market. It reduces risk, assuming that you do have an audience that was already interested in it, and you do have some type of product-market fit. But these days it is getting more competitive the more folks learn about the opportunity to buy. And so I still think it’s a viable option, especially if you’re in the position where you do have a little bit more cash than you have time. A lot of our consulting friends, or folks who are doing well in their careers, are in exactly that position. So if i was where I am today – as someone who is 41 years old – and I was doing a high-end consulting, and I didn’t have time to build a product, I still would buy one. That would still be my approach for upping the stair step given the situation.
Mike [21:11]: And the last option for moving into a different audience is to create a completely new product from scratch. Obviously, the pros of something like this is that you start with a completely clean slate. You don’t have any previous baggage, there’s no previous customer support problems you have to deal with. But obviously, the downside is that because it’s all green field you’re building a new product from scratch and it’s going to take longer than you think it will. You’re not only just building the product itself, but you’re building an entirely new business from scratch. So there’s probably a lot of things that you’re going to have to learn, not just about the customers but about the space itself, the competitors, all the stuff that goes with it. It’s not just the technology stack and all of the code and the product itself. It’s all of the customer development as well. Which you’re going to have to deal with that stuff anyway, regardless of the previous options you chose. But with creating a new product, it’s going to be compounded by all the technical stuff you have to worry about as well.
Rob [22:05]: And this comes back to what I said about how you really don’t want to do this too many times in your career. When you’re first starting out, you tend to have to sell a new product to a new audience, because you don’t have a unique or unfair advantage that you can utilize. But, if you can help it, try not to build a new product in a new niche where you don’t already have some reach into it, because that is when it takes literally years to get that snowball pushing up the hill.
Mike [22:29]: So now that we’ve talked a little bit about some of the different ways to get into a different audience, let’s talk about how to leverage the existing strengths that you have. The first one is that some of your existing business processes that you’re already using for your other products can generally be duplicated. These types of processes include : how you handle your support, and some of the software development mechanisms and processes that you have in place. Many of the marketing processes that you have in place. So if you’re doing something like marketing Monday, and you have a checklist of things that you go through on a weekly basis, a lot of those things can be reused and just copy-pasted and then tweeked. So it really helps you to move things forward much faster than if you were to try and create them from scratch, because creating them from scratch is going to be extremely time consuming and a lot of times you don’t need to. You can already take the things you know and that you’ve used before and tweeked, and I wouldn’t say perfected, but I would spend a lot of time and effort making better for your existing products, and then translate them over onto the new product and the new audience, and just tweek the things that need to be tweeked. You don’t need to start from scratch for a lot of those things.
Rob [23:36]: Another way to leverage your existing strengths – your existing knowledge – is that a lot of tools, especially marketing tools, they tend to overlap from one business to the next. So an example is if you’re using Drip to send an email, and you already know how to use it, then when you move into this new audience, you can use it. If you’re pretty good at running AdWords and making those profitable using Facebook ads, using Twitter ads, that’s something that you can absolutely leverage because those are “can-be” audience agnostic. Now, you’ve got to make sure you have reach into that audience on that platform, but that’s definitely something you can use. And tools–like [Kismetrics] and [MixPanel?] and [Intercom] and all that staff, it’s like, well, why would you reinvent the wheel? You already have knowledge of them, you know how to use them, and you know that those work for you. So, just moving those into that new space would be worthwhile.
Mike [24:18]: The next way to leverage your existing strengths is to remember that your network today is bigger than it has ever been in the past. You know people today that you didn’t know when you started, and you should not hesitate to ask those people for help. Now, whether those people you’re asking for help are people that are colleagues, or existing customers, or prospects that you have on your mailing list, you can ask those people questions. You can use those lists to help generate questions and help identify additional opportunities that may be in either related or unrelated spaces. So if you’re looking to move into a completely different market, that doesn’t mean that the people who are currently on your list don’t have those types of problems. Let’s say that you’re serving web designers, again, as an example. Well, web designers may overlap in some way with software developers; they’re people who have both sets of skills. So if there’s a subset of those existing customers, or people who are on your list who may have a problem that you’re trying to target, definitely go talk to those people and try and engage with them to ask them questions about what it is that they need, and whether or not they’re currently paying for specific services, are they happy with them, what other products they use? Use those as customer development opportunities, because you already have the list. You’ve done the hard part of getting those people on your list. Make sure that you’re leveraging that.
Rob [25:35]: Odds are pretty good as well that you have practice being a manager, and delegating, probably outsourcing. As we know, if you’re going to be leveling up, you need to take on more responsibility, and the ideas are probably going to be larger, perhaps more competitive, perhaps more complex. And the better you’ve gotten at outsourcing, delegating and essentially being good as a manager – like having skills and being productive at that – that’s totally something you’ll carry with you from niche to niche, even if you decide to move.
Mike [26:08]: And that actually lends itself to using your existing base of contract or outside help that you’ve leveraged for assistance on your existing products. If you hired someone as an SCO as a contractor, if they worked out, definitely go back to them and use them for the new products that you’re trying to leverage into the new audience. There’s nothing that says that you can’t use those same resources for a new product that you’ve used, and have worked for you, in the past. That said, if they did not work out, or if things weren’t going well, you could also use this as an opportunity to find somebody else for a completely new market, without necessarily hurting people’s feelings as well, if you have personal relationships that you don’t want to burn.
Rob [26:45]: Another way to leverage existing strengths, I touched on earlier, but it’s essentially your marketing skills. If you’re SEO skills, PPC skills, content marketing, email marketing, if you’re a speaker and know direct sales, etc., They all lend themselves to certain types of businesses, and I think something to keep in mind here is not to pick that next niche or that next business because it’s interesting. Pick it because your existing competence in these marketing spaces gives you an advantage. So you can actually be deliberate about choosing that next idea, or that next market, based on skills that you’ve already developed and whether or not they’re going to work in that new market.
Mike [27:22]: Something else you can do there is to use that experience to actively avoid any businesses, or markets, or audiences, where the learning curve for it seems exceptionally steep. You are already starting over with a new audience. You don’t want to make it harder on yourself solely for the prospect of making it harder on yourself. There’s no good reason to do that if you don’t have to. So if there are places where your experience, or the relationships that you have, are going to give you the ‘ins’ into that particular market or audience. Make sure to use those, and to avoid the places where it’s going to cause problems for you
Rob [27:58]: Another tip to keep in mind is to take a long-term view. This is obviously going to take a long time, and any time you switch – whether you’re launching a new product or whether switching markets – it’s going to take a long time. And if you’re doing both, it’s going to compound and it’s going to be even longer than you want it to be. So take a long-term view and make sure it’s a direction that you’re going to enjoy, and it’s not something you’re trying to do to get out of your current situation, like we talked about earlier. If it’s just a ‘grass is greener’ mentality, then you’re signing yourself up for a lot of work. This is not something you’re going to be able to just pivot into in a month or two. This is months and months, if not multiple years, depending on how complex the idea is and the market you’re trying to penetrate, and how much of an audience you actually do have in that new market. So think about it long term and don’t just, ‘Ah, I can turn this thing around in 90 days and have this new product and it’s all going to be great.’
Mike [28:46]: And I think the last strength that you can leverage when trying to when trying to move into a new audience is to leverage your experience with the existing products and do not forget the basics of what got you where you are today. There’s all these things that when you look in a new market it’s very easy to forget where you came from, or the things that you learned very early on, or just gloss over certain details of how to do the basics of SEO, and how to optimize different parts of the sales funnel, or email marketing funnel, or anything like that. Don’t ever forget that those things are the pieces that got you to where you are today, and those are generally transferable from one product to the next just because the process of developing a product tends to be the same. The markets are different. The actual context of the marketing and the copy writing and all that stuff is different when you get into the details. But generally speaking the process tends to be very, very similar.
Rob [29:39]: Well that wraps us up for today. If you have a question for us call our voicemail number at 888-801-9690, or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Out of Control’ by MoOt used under Creative Commons. Subscribe to us on iTunes by searching ‘start ups’ and visit startupfortherestofus.com for a full transcript of each episode. Thanks for listening and we will see you next time.
Episode 282 | The Long, Slow SaaS Ramp of Death
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike discuss the long, slow, SaaS ramp of death. They define it, tell you how to recognize it, share their own experiences with it, and give tips on how to get out of it using tactical and mental coping mechanisms.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of “Startups for the Rest of Us,” Mike and I discuss the long, slow SaaS ramp of death. This is “Startups for the Rest of Us,” episode 282.
[Theme music]
Rob [00:18]: Welcome to “Startups for the Rest of Us,” the podcast that helps designers, developers and entrepreneurs be awesome at launching software products, whether you’ve built your first product, or your just thinking about it. I’m Rob –
Mike [00:26]: And I’m Mike.
Rob [00:27]: – and we’re here to share our experiences to help you avoid the same mistakes we’ve made. What is the word this week, sir?
Mike [00:32]: Well, we’re making a final push to get all the development work done for Bluetick before the end of next week because, obviously, at the end of next week, right after that, MicroConf starts up. So, we’re trying to get everything out the door and just doing some testing on different things, making sure people can use it end-to-end; and then, hopefully, by the end of next week, I’ll be able to start onboarding people a little bit in advance of the intended release date; or, at least the private release to the early-access people. I’ll start onboarding people, and I do have a volunteer to be the first person on it. So, I’ll start working with that person, and we’ll go from there.
Rob [01:05]: That’s exciting, man. How does it feel?
Mike [01:06]: Good. There’s obviously little jitters about, “Well, I know that some of this code is” — I wouldn’t say it’s janky or anything, but probably hasn’t been tested a lot. I think there’s a big difference when you’re first rolling something out versus something that has gone through thousands or tens of thousands of iterations and you know that it’s pretty solid, and that it’s got a lot of the edge cases taken care of. But because I’m reading mail from people’s mail servers, like the iMap protocol, there’s a lot of edge cases. So, there’s all these things where things could go wrong. And I went through over a hundred thousand emails in my own mailbox, so I’ve mined those out and got all the edge cases out of there; but who knows what else is out there, you know?
Rob [01:54]: Oh, yeah. Once you get into this stuff, kind in the wild, where you have emails; or, you have data that may not be as well-formatted as, quote-unquote, “in a laboratory,” or in unit tests that you might write, there’s always going to be edge cases. We’ve seen such crazy stuff with Drip, whether it’s on the reply-tracking side, or just something wants is to send. You send tens of millions of emails a month, and suddenly you’re just going to find edge cases. So, I would guess that right off the bat, you’ll catch a few as new folks sign up, and then there’ll be a nice lull where you’re okay. Then once you hit scale, where you start really doing a lot of iMap stuff, you’ll probably see even more weird edge cases. Like, emoticons or emojis won’t work, or there’s just tweaky stuff that different mail servers do.
Mike [02:29]: Yeah, then there’s also places where, in the RFCs for the iMap protocol, there are ambiguities, and different mail servers handle those things differently. Some will follow the letter, and some will just ignore what the RFC says. So, there’re places where, for example, you’re not supposed to have nulls in certain places; and there are emails that do it, and they just ignore the protocols. Then especially when you get into things where people are sending spam, for example, or you’re looking in a spam folder and saying, “Okay. Well is there an email in here that got miscategorized that we want to validate whether or not someone replied to it?” Any of those could be really screwed up just because who knows where those things came from, or what mail server they could have originated from? They could’ve even just come from a Perl script or something like that. Who knows?
Rob [03:16]: Yeah, I like to think of it kind of like if you had code raw JavaScript without a jQuery, right? All the browsers handle things differently, and there’s all these edge cases. And ten, 15 years ago when we did code bare-bones JavaScript, it was such a hassle. There is no jQuery equivalent for mail servers, and you have to deal with all the nuances and the product differences and, as you said, the ambiguities of the spec.
Mike [03:38]: Yeah. We’re already separating out some of the code where we are trying to identify what the mail server is in order to start handling some of those edge cases just because we know that this particular case is handled very well in this mail server, and this other mail server just simply doesn’t handle it at all.
Rob [03:55]: That is the worst! The worst is when you start having ‘if’ statements, and they’re, “If mail server is XYZ…” Aw, that’s terrible, man.
Mike [04:02]: Yeah.
Rob [04:02]: Well, it’s good to hear you’re still on track, and excited to hear an update once you have that first early-access person in and then when you get to your milestones of getting five or ten people in there, using it. First paying customer – it’s all coming quickly, man.
Mike [04:16]: Well, technically, all of them are paying customers at the moment.
Rob [04:20]: Oh, nice, nice.
Mike [04:21]: Everyone who is on my early-access list of these initial sixteen people, they’ve all paid me for it. So, it’s really just a matter of making sure that it’s working for them. Obviously, if it doesn’t work or it can’t work for them, then I’ll issue refunds as needed; but everyone that I’m putting on it over probably the next six weeks or so is essentially a paying customer already.
Rob [04:439: Right, but when I was saying “coming on board,” I meant subscribing –
Mike [04:44]: Oh, yes.
Rob [04:44]: – because they paid you up front for the privilege of early access, and that’s obviously cool for both sides; but at a certain point, you’re going to have to prove enough value that they’re willing to pay that every month. And that time will come once they’re using it. Cool.
We have a whole slew of new iTunes reviews. I won’t read them all, but Jerry Weir from Luxembourg said, “A great show. Value in every episode. If you’re at all into starting your own business, alone or on a team, you shouldn’t miss out on ‘Startups for the Rest of Us.’”
We have [Prof.?] DuChamp from the United States. He says, “Listen, or miss out. You choose. If you’re doing anything related to startups, you would be plain silly to not listen to this podcast. Mike and Rob do a really good job of explaining the minutia of building your platform. It’s not about interviewing the biggest names in the industry, or even talking about trending topics. They get into stuff that really matters.”
So, thanks, guys, for the five-star reviews. We got seven or eight other new ones, 475 worldwide so far. If you want to help us on our push to get 500 worldwide reviews in iTunes, please log in and give us a five star.
Mike [05:42]: A few minutes ago, I mentioned that we were working on getting Bluetick finished before we MicroConf, and one of the things we’re doing this year is that – we usually do giveaways for a lot of the different sponsors; and then as part of “Startups for the Rest of Us” and the Micropreneur Academy, we give away a couple of different things. This year, we’ve just decided to give away an Amazon Echo, so that’ll be one of the grand prizes from Micropreneur Academy this year.
Rob [06:05]: When the Echo first came out, I almost bought it. I think it was, like 99 bucks if you were in the early access program, and I decided not to because I kick-start so much stuff as it is, that I have stuff laying around my house and stuff that I’ve given away, or sold, or whatever; and I just didn’t really want another device. But there’s buzz building around this thing, and I’ve heard that it’s really cool. You have one, right?
Mike [06:25]: Yes, I have one. It’s very interesting. There’s a lot of different voice commands that you can give it. I ended up on a mailing list. I don’t know whether it was part of registration process or anything like that, but what they’ll do is they will email me as they start adding new features, and they’ll tell you in the email, “Hey, say this to the Amazon Echo, and it will start responding to you in this way or that way.” Or, you can play games with it. They’ll tell you about new games that came out, or new things that they’ve integrated into. There’s a few, different, other devices you can get that will automate different things in your house. You can integrate it, I think, with Nest at this point, but there’s also other thermostat controls that you can use. Then there’s a device that you can plug into your car, for example; and because your car is probably close enough to your house to get Wi-Fi and connect through that. You can ask Echo information about your car based on what it is feeding back through that interface. So, there’s a lot of other devices that they’re working on, but in and of itself, it’s pretty interesting the types of things you can do with it. My kids will use it for a few different things here and there, too.
Rob [07:24]: I think Amazon is sneaking in the backdoor, and I they’re going after, eventually, the home automation market. Right? I think they’re going to try to be the hub for all of that, which was not apparent when they first launched this. I thought of it as more of a media device and a to-do list management device and a timer or something; but it seems like they’re making inroads. I guess with – as well as the speaker and the voice recognition work, that it’s getting legs. I’m hearing people talk about it, so it’s on my wish list right now. I would guess I’ll be getting one in the next month or two. All I really want – I want to be able to set a kitchen timer verbally, without having to use my hands. I want to be able to start a Spotify playlist, start Pandora, audible books and put stuff on to-do lists. If I could do all that verbally, and it was seamless, and it worked almost every time, it’s a no-brainer for me.
Mike [08:08]: Yeah, I’d say the voice recognition is pretty good in it. There was a few times where it will obviously fall down. If you happen to say a name, for example, then it will just pick it up. Or, if it even thinks that you did, then it will try and interpret whatever it is that you said. So, there’s obviously those types of issues, but you’re going to get that with any device, I think.
Rob [08:26]: Yeah.
Hey, I’m listening to the book “Masters of Doom” again. The last time I listened was probably a couple years ago, and it’s a story of id Software. It’s John Carmack and John Romero, who built Doom and Quake and Wolfenstein 3D; and I can’t get enough of this story. This is either the second or the third time I’ve listened to it and, to be honest, I just kicked it on. I was going to listen to the first ten or 20 minutes, just to refresh my memory of some things; and I’m three or four hours in now. It’s such a compelling book, and it’s one of those complete outlier stories where they just happen to hit a few, big changes in videogames and computer games. They hit the cusp right in the late ’80s, early ’90s as PC games are just starting to come into fruition. They were also working 90-hour weeks and loving it. There were a lot of extenuating circumstances. They were kind of the perfect age to do it. They weren’t older with families and kids and everything, so there’s reasons that what they did resulted in the success that it did. Nonetheless, the story is so compelling and well-told. It’s just fun to go on the ride with them.
Mike [09:25]: Very cool. Yeah, I still have that on my list of things to check out at some point, and I just haven’t gotten to it.
Rob [09:31]: Yeah, it’s purely a fun startup read. It’s obviously not a true story, but it’s not something that you’re going to take away actionable business tidbits or anything.
Mike [09:39]: Right, and that’s probably why it hasn’t really made it up the top of my list yet.
Rob [09:43]: Totally. Yeah, you’ve got other things on your mind.
So, today we’re talking about the long, slow SaaS ramp of death. This top came from a thread in Founder Café, which is our private membership community. We asked for topics for the podcast, and someone said, “I’d love to hear you guys talk about the long, slow SaaS ramp of death. What is it? Did you experience it? How do you recognize it? How do you get out of it? Tactical, as well as mental coping mechanisms to help you get through it would be interesting.” Two or three people chimed in about elements they wanted to hear about, and so I figured we’d start. We’d define it. We’d talk about what it’s like to experience it, how you recognize it, some ways to basically cope with it, both tactically and mentally.
Mike [10:20]: Yeah, I first heard this term several years ago at the Business of Software conference, and it was a talk given by Gail Goodman, who was the CEO of Constant Contact. I think Constant Contact got recently acquired by somebody for – I don’t know. It was a billion dollars or some ridiculous number like that. She talked about the very early days of Constant Contact and how, when they launched, they weren’t getting a lot of traction, and the growth was incredibly slow. They were one of the – I wouldn’t say the first SaaS company out there, but they started back in I think it was around 2000 or something like that, and that’s about the time where her talk picked up. She showed an example of what the growth was like, and it was a very, very long ramp of very low growth. Of course, you know over time that the growth compounds, but it seemed like the growth levels that she was expecting were significantly lower than what you would expect for a SaaS company.
Rob [11:19]: Yeah, and since they were so early in the SaaS space, they had a hard time even convincing people to use web-based software. Everybody wanted to download the stuff on their desktop. As a result, the growth was lower than you would see today, but the interesting thing is that this concept of a “long, slow SaaS ramp of death” resonated so much with everyone who has ever been involved in a SaaS app; because although the pitch or the slope of the ramps these days may have a sharper curve because we can grow things faster and people are more used to paying for SaaS, it’s still stands that we all still feel this. So, even if Gail talked about a specific growth rate, and nowadays we can do five times that, or ten times that, it still feels like a “long, slow SaaS ramp of death” if you compare it to people who are starting consulting firms or productized consulting firms; or someone who maybe gets a hit, a mobile app in the App Store; or, someone who’s doing big enterprise sales and doing those that are 100,000, 200,000 a pop. They can start and grow a business. All those can start and grow a business a lot faster than SaaS. SaaS is essentially the tortoise in the race, right, where it just plods along, plods along, and it grows. The particular growth rate isn’t what’s important here; it’s that it will always feel slow. That’s really why this phrase resonated with so many people. It’s very, very rare that someone’s not going to feel this if you’re starting a company.
Mike [12:41]: I think that’s probably an important point to come on and talk a little bit about – is the fact that it’s always going to be slower than you want or slower than you expect. I think that’s part of a human inclination to want more; or, to just want something to be faster, or better; or, to expect that you’re going to do better than you’re currently doing, because there’s always higher expectations that you put on yourself, rather than those expectations that other people are putting you.
Rob [13:08]: Yeah, we’re all impatient. We’re entrepreneurs, and that’s the point, is that we don’t like systems that don’t make sense, and we don’t like things that move slowly; and that is what makes us founders. That’s what makes us start things, to try to change things; and we want to change things now, not in six months, not in two years. Unfortunately, SaaS apps take a lot longer than we want them to. I was trying to think of any exceptions that I can think of in recent memory of actual SaaS apps that have had such steep growth curves that the founders might not feel that they went through the “long, slow SaaS ramp of death,” and I can only think of a couple. One is Slack, and Slack is one of the fastest-growing SaaS apps in history, as far as I know. I think Xero is another one. They raised $170 million. According to a recent podcast I heard, they are claiming to be the fastest-growing SaaS app, so maybe those people don’t feel that way. Also more within our community, I think Buffer has grown very quickly; and Laura Roeder’s Edgar, they all had good growth curves. I wonder if you went and asked Leo from Buffer, though – Leo or Joel, to be honest – if they felt like early days didn’t have a “long, slow SaaS ramp” – because now they have traction, right? Now they have a name and that mini brand that Jason Lemkin talks about, which we’ll discuss a little bit later. But, the early days of getting that boulder moving up the hill, I think, is always going to feel like the “long, slow SaaS ramp of death.”
The problem is that this feeling is exacerbated by the massive success stories that surround us, because we hear these outlier success stories. We hear and we see Buffer’s metrics and Laura Roeder talking about Edgar getting to 100k and MRR in five months, or however long it took. And, frankly, while those are great stories, they are Cinderella stories. They are one in a thousand, or one in 500. They’re very rare, and they set your expectations to unrealistic levels. Same thing with Peldi in the early days launching Balsamiq. He had great success. It took off like a rocket ship, and he got to a half million dollars. It wasn’t a SaaS app, but it got to half a million dollars in revenue in the first year. I remember someone signing up for the Micropreneur Academy right after that and saying, “Yeah, my goals is to get to half a million dollars in my first year.”
[15:12] We had to say, “Whoa, whoa, whoa. No, that’s completely out of the realm of possibility.” Not literally out of the realm, because it could obviously happen; but it’s just not going to happen. Peldi hit just such this unique culmination of things: right place, right time, right idea, right person. Everything matched up for him, and I would say the same thing for the Buffer guys and for Laura Roeder with Edgar and for Slack. Of the thousands or tens of thousands of startups that have launched in the past few years, there’s literally a handful that have had that.
So, I think the idea here is don’t let these unrealistic expectations make you think that you have to be growing as fast as everyone else, because it’s not the case. Hundreds and thousands of other startups are growing a lot slower than those other guys. They really are outliers. We can be happy for them, and we can look to see what they did to succeed and try to adopt that, but we can’t have the expectation that our startups are going to grow like theirs.
Mike [16:03]: Well, the other thing to keep in mind is that it’s more about what is right for you and what’s appropriate for you and what you want to get out of it. Just because you have this idea in your head that you could grow the startup extremely fast or extremely big in a very short time period, the other question that I don’t necessarily think that most people think about is, “What is the cost of doing that?” And I don’t mean the cost in dollars. It’s what’s the cost on your mental sanity, your health, your relationships and all the other stuff; because unless you’re running a high-growth startup that you have investors that you report to, that you really need to be able to show massive growth in order to even justify your own existence – if you’re running your own business, the only person you actually have to answer to is yourself. So, I think there’s a different matter of the expectations and scenarios for a lot of these things as well.
Rob [16:53]: Another part of this question that the original poster asked – he said, “How do you recognize the ‘long, slow SaaS ramp of death’?” My sentiment is that you’re just always going to experience that. That’s the default, right? It’s going to be the rare, rare outlier case. And you’re going to know if you’re not experiencing it, because things are going to be blowing up like crazy, and you’re going to be growing 50 grand a month in MRR or something. Then you’re not really experiencing it. But, to be honest, I don’t personally know a SaaS founder who hasn’t felt this as they’re going through it; because no matter how fast you’re growing, you always want to grow faster. Today, if you don’t have a SaaS app, or you’ve just launched, I bet you’re thinking, “Boy, if I could grow at a thousand dollars a month, that would be amazing.” But as soon as you get there, then you’re going to want 2,000, and when you get to 2,000 a month, you’re going to want 5,000. It’s really the arrival fallacy, right, of you’re never going to be happy with it. It’s always going to feel like you’re on the “long, slow SaaS ramp of death,” so I think recognizing it isn’t even an issue. I just think accepting that it’s going to be there is the way to go.
Mike [17:49]: With all of that said, there are some things that you need to keep in mind in terms of being able to cope with that, and what we’re going to talk about now is some tactics for coping with those particular feelings of either an inadequate growth rate, or you just aren’t getting to where you want to go as fast as you want to be.
The first tactic is to try and establish some sort of virality around your product. I don’t necessarily mean go out and try and identify some mechanism for making sure that your product is in front of every, single possible person it could be in front of. It’s more about trying to find ways that you can scale the app using mechanisms other than yourself or the things that you’re doing. So, when you talk about virality in general, what you’re usually talking about is other people talking about your product on your behalf so that you don’t have to do it, so that you don’t necessarily have to be present for every conversation. You don’t necessarily have to be driving every little bit of traffic. If there’s people talking about your app, then, in essence, what ends up happening is that you benefit from that traffic. So, whether it is other people writing up articles about your product, or you doing a podcast tour and talking about the product, essentially you’re leveraging other people’s networks and other people’s influence. What that can do is that can help drive growth for your app without you being directly involved in all those various aspects of it.
Rob [19:08]: Yeah. True virality is really hard to get into a product, and try to fit it in retroactively is not easy. Very, very difficult. You tend to have to design the product itself around a viral loop. So, thinking about something like, when you sign up for Facebook, how they ask you to invite friends and that you really can’t get much out of it until you’ve invited those friends. That was an early viral loop. That’s been overdone so much that it doesn’t work as well as it used to, but people first started doing that, it was pretty clever. Even having a “powered by your app’s name” link in something that is customer-facing, so we have the “powered by Drip” link at the bottom of our widget. MailChimp has “powered by MailChimp” at the bottom of their emails, of their free plan. I think Hotmail did that in the early days, where they had “powered by Hotmail,” or something like that; and that really helped drive a lot of viral growth early on.
So, the idea here is that your “long, slow SaaS ramp” is always going to be there, but the way to make it more palatable so you can deal with it is to have growth; because growth really does solve most problems. I think I should couch this. We’ve said this many times, but you’re really not going to grow until you find product-market fit. You have to build a product that people really, really want. Then grow from there. The first step is to basically find product-market fit as quickly as possible. During that part, you’re going to have just a flat growth curve, pretty much. It may take you months. It may take you longer than that, but that’s going to be the really hard part. Once you have product-market fit, growing is a fairly repeatable and scalable process. There’s a lot more detailed and specific information about growth than there is about finding product-market fit, because finding product-market fit is so much more about art than it is about science; whereas, growth is a lot more about the science of it. So, getting this growth going is what can help you feel better and get you out of the long, slow SaaS ramp. Obviously, baking virality – that could be an entire podcast series just doing that, but that’s one thing to keep in mind as you’re getting started.
Another tactic that works pretty well is to target a community of users that has strong word-of-mouth; they talk a lot online. An example of a community that doesn’t do this is folks who own construction businesses. They may talk once a year at trade shows, or they may talk amongst themselves with industry trade publications; but the word-of-mouth for your product is not going to be strong until you have the vast majority of that market. Whereas, in the designer community, or the agency community – the consultants, the SEO and marketing consultants – or, the founder community – all these communities, they have really strong word-of-mouth because they’re always constantly sharing with one another what they’re up to, new tools they’re finding. Just picking an audience can be a big part of helping you grow faster. Because, again, if I build accounting software for construction firms, versus accounting software for startups, I’m going to be so much more likely to get that early strong word-of-mouth with the startups, because they’re just talking to each other more often. And so, this won’t cure your “SAS ramp of death,” but if you really do build an amazing product – you can think about how Zen Payroll and Zenefits came on the scene, and they targeted startups first. Then once they got that strong word-of-mouth and the mini brand, then they were able to spin that up into faster growth.
Mike [22:16]: One of the interesting pieces of what you just said about targeting communities that have a strong word-of-mouth is that this is an area that I think a lot of people discount, or don’t think about when they’re first looking at building a product, because they’re more interested in the problem itself and how they can solve it and how they can do better than the other things out there. They don’t necessarily think a little bit further down the road about, “How are people going to find this?” “Is there going to be either a viral loop that I can tap into, or an existing market of people that are going to be easier to get in front of than other people?” “Are these people talking to one another?” What you just said about the word-of-mouth – I hear a lot of people saying, “I’m going to go after the real estate market,” or, I’m going to go after the attorneys market, because they’re under-served, and their software is terrible.” I’m not saying that either one of those things is an untrue statement, but at the same time, if you completely discount the fact that a lot of these people don’t necessarily talk to one another outside of those trade shows on a yearly basis, then it makes getting that word-of-mouth growth loop very, very difficult.
Rob [23:20]: Right. We’re not saying that you can’t grow without these things, but these are the higher-growth approaches. These are things that are not content marketing and paid acquisition. Those are great, standard, long-term approaches. SEO is another one. Those are your standbys. Those are your blocking and tackling, right? You’re going to implement those, and that’s going to get your growth curve going over time; but you will ride on the long, slow SaaS ramp if all you’re doing is content marketing, paid acquisition and SEO; because that stuff just takes a long time to do. Right? There’s this phrase “grinding it out” that I think about. A way to try to short-circuit that and not feel like you’re grinding it out as much is to use one of these faster-growth approaches. And that’s virality. That’s targeting the community with strong word-of-mouth that we’ve talked about.
Another one is to try and get to a million dollars in ARR as soon as possible. I realize we’re all trying to do that, but there’s this thing called a “mini brand.” I think this term was coined by Jason Lemkin from SaaStr. I really like his stuff. He basically says once you hit a million, you will tend to have this thing called a “mini brand.” You’re not a brand that everybody knows, but you’re a brand that enough people know that you will just start having strong word-of-mouth even if you didn’t have one before. You’ll start having an audience and fans, even if you didn’t have one before. That’s actually when it gets easier to grow, once you cross into the seven-figure range, because you’re just on the lists. When the people write the blog posts about the “Ten Best XYZ Accounting Software,” you’re on every one; because once you hit that rate, you have enough users that people are talking about you, and you just have a footprint. That’s another kind of hack – is to get to that point and to get enough customers using you that people are just naturally talking about you.
Mike [24:54]: The last hack that you can use to leverage a higher growth rate is to look at an audience or a community that you might already have access to, so whether that’s one that you’ve built yourself or one that you’re familiar with or involved in. You look around at a lot of these stories about people who have a really high growth rate. “Oh, I posted on Reddit or Hacker News, and I got 300, or 400 subscribers on the first day for my app.” They talk about these large growth rates. It’s because they were already plugged in. If you’re not plugged into that particular network, then it’s very difficult to just walk in and on day one you have the credibility from people to be able to attract that type of user base or that community. A lot of times, if you’re not already involved in that community, they have no idea who you are. So, when you approach them from the outside, they say, “Oh, well, you’re just self-promoting and self-advertising, so I’m really not interested in listening to what you have to say, because you’re not here to benefit the community. You’re here to benefit yourself.”
So, if you’re already involved in some of those communities, look to those to tap into; but if you don’t, again, you can also build your own audience. You can build your own community over time before you get to the point where you launch. And having that built-in audience before you launch can be really, really helpful, especially if you’re targeting that audience with your product. If there’s not a lot of crossover or overlap between what your product does and the community, it’s not going to be very helpful. It’s very similar to a lot of these stories you hear about entrepreneurs who have these massive audiences. It doesn’t have to be a hundred thousand or a million people. It could just a mailing list of a couple thousand people that are following them on their blog. A lot of times, what you find is that when they launch a product that’s not applicable to that, they might get one, or two, or five sign-ups out of it; but they’re not going to get the hundreds or thousands that you might expect if they had 20 or 30,000 subscribers.
Rob [26:44]: Yeah, and it’s interesting. Obviously, being part of a community is one thing, but it’s so much more valuable to really have your own audience, to basically have your own email list where you’re communicating with people. The hard part with that is, as you just said, you can have a mailing list of 20,000 people who were listening to you talk about design, or entrepreneurship, or something. Then if you actually go and launch a product, like a SaaS product, especially, it’s going to be really hard to get them to buy from you. It’s not just going to happen magically. I’ve seen it happen over and over where people have personal brands, and they have a sizable email list – let’s say 15 to 30,000 range – and they start a SaaS app, and it just doesn’t resonate because: a) you didn’t have a product-market fit from the start; b) if you haven’t already been selling these people something, directly – aside from info products, because info products are exceptionally easy to sell to audiences – but if you haven’t really had a specific brand name in a specific space – Laura Roeder is actually a good counter example to all this, right? She did build an audience, and they were buying from her. They were buying social media training from her for years and years, so she was selling really solid stuff. Then she essentially launched a tool to do exactly that. Everything she’d espoused, she launched a SaaS app called Edgar that does all of that. That was such a perfect fit, and it’s such an example of how to do it.
Rather than having that blog where you have, “Alright, designers and entrepreneurs are buying stuff from me about how to launch products,” and suddenly you just go and launch your SaaS app that isn’t a SaaS app that helps people launch products. It’s a SaaS app that does their accounting, or helps them do – I don’t know – landing pages. I’m just trying to come up with ideas here. You will get a few who sign up, but since it’s not directly in line with everything you’ve been talking about, your uptick to your own audience is going to be a lot lower than you think, unless it’s directly in line. So, I think having an audience can be super powerful, but it can also leave you to have higher expectations than you should, of how many of those will actually convert. When we were launching DRIP, I valued the leads that I got through Facebook ads and through organic traffic and through these other means, podcasts that were higher than my own audience; because I knew that, while I would get some hardcore folks who wanted to use Drip or to use a product that I built, I knew that the conversion rate on my own list – my Software by Rob list – would not be as high as these other traffic sources that had come truly to see the product and to get the value proposition that I was preaching.
Mike [28:58]: I do want to clarify one, little, tiny piece of that because we glossed over it: the fact that what we’re saying here is not that you can’t use your own personal audience that is unrelated to find specific people, or to mine it for people you can use very, very early on in the process to make sure that you’re building something that people want, and that it’s something that they need, and that they’ll pay for and all that stuff. What we’re really focusing on here is the fact that that list is not going to be as applicable for high growth rate. It’s not that you can’t use it for a lot of the early customer development and stuff like that. That’s absolutely what you should be using it for and what you can, and it works really well. We’re just saying that you’re probably not going to get giant growth rates out of it is all.
Rob [29:41]: That’s a good point. Exactly. That’s what you should use it for, is the early days, getting to product-market fit. But once you tap that list a few times, you’re done. You’re not going to keep growing from it.
All right. So, let’s dive into the last section here. We’re going to talk about some mental coping mechanisms, because there’s obviously a lot of stress that goes along with this, and there can be frustration when things aren’t growing quickly. In fact, if you go back and listen to my MicroConf talk from last year, I talk about how frustrated I got after we watched and just kind of plateaued between 7 and 10,000 MRR, and we weren’t able to get past it for another four or five months, till we actually found product-market fit and started growing. So, I have a few tactics here of ways to get you through that and some thought processes to think about it.
The first one is just to have realistic expectations from the start. Realize that if this is your first-ever SaaS app, it’s going to grow really slow. You’re going to make a lot of mistakes, and don’t look at the examples that we mentioned above of people who grew really fast. Look at examples of people in your community, whether it’s the MicroConf community, Founder Café community; and ask what realistic growth rates are. I can tell you that when you’re at a thousand MRR, and you’re growing at a few hundred dollars a month, that’s a perfectly realistic growth rate, and you should actually — I won’t say you should be happy with it, because you should never be happy with anything, right? As a founder, you want to be pushing it further, but that is not a terrible rate if you’re just trying to figure out your early marketing approaches. So, 10, 20 percent growth when you’re doing a thousand or 2,000 bucks a month isn’t very much, right? It’s a few hundred dollars a month. And while you shouldn’t be striving in these early days to kick it up ton 50 percent or 100 percent growth month over month, and while that is totally possible, that’s not something that you should expect or be disappointed if you’re not achieving. I think that’s something that gets people stuck – that they see these outsize results, and their expectations are not realistic.
Mike [31:25]: One of the points that Rob just made about having realistic expectations from the start of it is that a lot of times, you’re still really trying to figure out what that product-market fit looks like. Early on, you don’t have it. Chances are really, really against you that, out of the gate, you have product-market fit and you know exactly what it is that people want. And even if you do know what people want, sometimes it’s difficult to put it in words that resonate with those people. And those are two very, very different things. Just because you’ve built what they want and what they need, it doesn’t necessarily mean that it’s easy for you to convey that to people in a way that makes it easy for them to not only understand, but to attract their attention. So, keep that difference in mind and understand that when you’re going through this process, a lot of it is about figuring out exactly what those things are that resonate with people, because those are the things that are going to drive your growth. It’s not having the best product, or the product that hits all the check boxes that somebody has. It’s about being able to relay that information to somebody in a way that attracts their attention.
Rob [32:27]: The next tactic I have for mentally dealing with this is to have a mastermind group. This is advice we give a lot, but that is going to be something that’s going to be able to give you a sanity check on your growth. I think that’s probably the third tactic I’d mention – is to get a sanity check on your growth, whether that’s through your mastermind group, looking at normal SaaS metrics, just asking around, asking in Founder Café. Look at normal growth for the vast majority of these apps, not these one-in-a-thousand outliers.
Mike [32:55]: The next coping mechanism is to celebrate some of the different milestones that you meet, whether that’s a thousand dollars a month, or $5,000 a month, or even if it’s just those numbers in total, in aggregate. One of the episodes previously, in episode 268, we talked about setting annual goals; and one of the recommendations was to concretely define some different milestones and make sure you celebrate them, whether that’s going out to dinner some night, or buying yourself something. Just make sure you’re setting aside time to pay attention to those milestones and realize that each one of those is a stepping stone on the way to something bigger and better, because obviously you don’t go from a dollar a month to a $100,000 a month overnight. It just simply does not happen. That said, you do have to be mindful of the different steps that you’re taking along the way, because there are going to be a lot of those steps.
Rob [33:46]: I think lastly, take some time to reflect. Look back six months, 12 months and compare your revenue to this month’s. It’s surprising how you can get to a point where it feels normal to be at X revenue a month or X growth rate per month; but if you look back even just a few months, you were way less than that. You forget the progress you’ve made, and you forget how hard you’ve worked to get where you are. So, this isn’t celebrating milestones as much as it is just look at how far you’ve come and think about the work that you’ve put in and the results and the benefits that you’re reaping from that, and just celebrate and be happy with that. Then, the next day wake up and be pissed off at how slow you’re growing and try to do five more marketing approaches, because that is the roller coaster of doing this. That’s the roller coaster of startups, and it’s the roller coaster of SaaS, for sure.
Mike [34:31]: Yeah, and I think it’s important to look back at that past revenue, because chances are really good that – especially if you’re not making a full-time living from your app – that most, if not all, of the money that you’re making from your app you’re probably putting right back into it. So, you look at your bank account, and it hasn’t changed. Or, maybe it’s even lower than the previous month because you spent all of the money that you made this month, plus all and then some of the money that you made the previous month. So, it’s very difficult to just look at the dollar amount in your bank account and recognize what your accomplishments actually are. You really need to go back and look and compare your revenue over time in order to get a better understanding of that, because you probably are spending as much money as you possibly can in order to drive that growth, and it’s not obvious through just looking at that bottom line in your bank account where that growth is, or even that you have growth.
I think that wraps us up for the day. If you have a question for us, you can call it in to our voicemail number at 1.888.801.9690. Or, you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. Subscribe to us on iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening, and we’ll see you next time.
Episode 281 | Tools You’ll Need for Your Bootstrapped Startup
Show Notes
In this episode of Startups For The Rest Of us, Rob and Mike talk about tools you’ll need for your bootstrapped startup. They discuss the different options to choose from pertaining to the pre/post revenue stages of your business.
Items mentioned in this episode:
- Conference Notes Podcast with Mike Taber
- Gusto
- MailChimp
- Drip
- BlueTick.io
- Ontraport
- Infusionsoft
- Quickbooks
- Less Accounting
- Baremetrics
- Google Webmaster Tools
- Clicky
- Mixpanel
- Kissmetrics
- KickoffLabs
- LeadPages
- Skype
- Google Hangouts
- Join.me
- GoToMeeting
- WebEx
- SproutVideo
- Vimeo
Transcript
Mike [00:00]: In this episode of Startups for the Rest of Us, Rob and I are going to be talking about tools you’ll need for your bootstrap startup. This is startups for the rest of us episode 281. Welcome to Startups for The Rest of Us, the podcast helps developers, designers and entrepreneurs to be awesome at launching software products, whether you’ve build your first product or you’re just thinking about it. I’m Mike.
Rob [00:24]: And I’m Rob.
Mike [00:25]: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What are you doing this week, Rob?
Rob [00:29]: I’m getting excited for MicroConf. It’s just a couple of weeks out in Las Vegas and we have a pretty cool speaker lineup I’m excited about. A lot of new names this year, names that folks may not have heard of but that either you or I have seen speak elsewhere or we have been highly recommended by MicroConf attendees that we trust. There’s folks like Claire Liew from Know Your Company who did a Believe at BoS Lighting Talk. We have Amir Khella from Keynotopia who has spoken in several places and Scott Nixon from Happy Herbivore recommended him and I’m excited about his story the more I talk to him on Skype. A lot of people haven’t heard the story Keynotopia but it’s pretty fascinating. We have Tracy Osborn from WeddingLovely and Patrick Campbell from Price Intelligently and of course Des Traynor from Intercom, which is cool. There’s several others and some names that you’d recognize as well. It’s cool because I feel like it’s a bit of a sleeper year in terms of brand new big name folks. I’m excited about the possibility of the quality of these talks that I think people will come across with.
Mike [01:30]: I think it’s interesting how at some conferences you look at the lineup especially early on and either you are attracted to it or you really notice it. There’s a bunch of standout names that you’ve heard before and they’re high profile names. I totally agree with you. A lot of the names we have on the docket this year are not probably as well know but the speaking quality is still there, the stories are still going to be interesting. It will be great to see how things turn out this year and what comes out of that.
Rob [01:59]: I think of it in terms of Joanna [Wylde?], when she first spoke at MicroConf, she was an up and comer at the time in this space. Brandon Dan was at the time. He first spoke; it was like four or five years ago maybe. It was a while ago. We’ve had several folks like Josh Pigford was still running PopSurvey. Samuel [Hullick?] before he was doing – there’s a lot of folks who are now more prominent in our space, who have graced the stage before they were big names and that’s how I feel about several of the speakers here. I have a feeling that they will be becoming well know partially from taking the stage at MicroConf. You get some name recognition there. There’re headed on that trajectory and I think we’re just helping them along. How about you? What’s going on?
Mike [02:42]: A couple of days I signed out what I hope is going to be my final to the people who have prepaid for Bluetick before I start on-boarding them in the next couple of weeks. Right now we’re testing and trying to work out some of the different kinks and the application and make sure that the basic usage scenarios and the basic workflow that people will go through to use the product are in line with not only expectations but everything’s working and we’re properly handling everything. A few minor issues here and there and we’re dog-fooding it internally but it’s looking good so far.
Rob [03:13]: You’re deadline that you’ve set for that is April 1. Is that correct?
Mike [03:17]: Yeah. Unfortunately, there’s a lot of things that play into that unfortunate part of it but at April 1st obviously is April Fool’s Day and it wasn’t intentional. It just happened to be Friday of – I think I counted out a certain number of weeks that was either 12 or something like that. I said, “Okay, I want to have it done by this time,” and that it just happened to be the day. It’s also two days before MicroConf.
Rob [03:38]: I know. You picked that day before we scheduled MicroConf, I think?
Mike [03:41]: Yeah. I did. That’s not exactly true. We knew what the dates were going to be for MicroConf but it was leading up to it. It was like I just did the calculation and I thought to myself, well, it would either be the 12 weeks or I could try to rush things so I’d have to do it in less time, which I didn’t think was all that feasible. I knew that I’d have to start cutting things and making concessions or whatever. If I pushed it, I would have to push it by probably at least two weeks. It’s just because the way that MicroConf fell. It’s like, “Well, I’ll try and get it done before hand.”
Rob [04:13]: But you’re on track right now?
Mike [04:14]: Yeah, so far. There’s still two and a half weeks to go. By the time this episode comes out, it will be a week and a half.
Rob [04:19]: That’s cool. For folks who don’t know what Bluetick is, what’s the one or two sentence explanation of what it does?
Mike [04:27]: It’s essentially a sales automation tool that allows you to follow up with people in an automated fashion. The system follows up for you so that you don’t have to, as opposed to other tools like Boomerang or followup.cc. You can have them ping you and remind you that you need to follow up with somebody but this will do it on your behalf so that you don’t have to. Obviously there’s very distinct places where you would use it in your sales workflow but the idea is to help move somebody from one stage of your sales funnel to the next.
Rob [04:59]: Very nice. As for me, I’m on the Drip front. February was a good month. In fact, in [?] it was the best month we’ve had of growth and that followed up the launch of workflows in January. All the trials or some of the trials converted then and that seems to have kicked us up to a next stage of growth which is good. We also, coincidentally, didn’t have anything to do with that growth but we hired two people in the past couple of weeks. I’ve been trying to hire a Senior Rails Developer since November, December and it just happened that we happen to find him right towards the end of February. We also figured out we needed another person in customer success, hopefully, it’s the last hiring that we’ll be doing for a while because it is time-consuming and not necessarily – the goal of drip is not to have a lot of people. We’re not going for headcount, like funded startups are but it is nice to have finally because those were open loops. They were continually in my trailer board to find a person to help with this and find the next developer and stuff. Now that that it is closed out, it feels good to have that behind us and we can all move faster, able to handle the workload, get more features built and more people on-boarded. Things are going good.
Mike [06:03]: Earlier, we were talking briefly about MicroConf. James Carbary from Sweet Fish Media had me on the conference notes podcast that you can check out. We’ll link that up into the show notes. He was interviewing me about MicroConf and what the takeaways were from MicroConf 2015. We talked a little bit about that and if you’re interested, we’ll link that up in the show notes.
Rob [06:22]: Sounds good. What are we talking about today?
Mike [06:24]: Today what we’re going to be talking about is some of the different tools that you’ll need for running a bootstrap startup. We want to talk a little bit about what’s reasonable, what’s not and essentially how to allocate your money in your startup. The major focus here is mostly on tools, not necessarily things like the cost of doing business and getting insurance or office space or other physical things that you need to run your business or maybe computers of whatever. What we’re really trying to do is focus on the things that you’ll need to use on a monthly basis. That cuts out a lot of those different things I’ve just talked about but we’re also actively cutting out things like software tools because depending on your tech stack, that’s going to, pretty dramatically, between different startups. We decided to avoid that as a matter of choice.
Rob [07:11]: Software development tools. The actual stuff you need to build software like maybe source control on your editor and if you need Microsoft licenses to IDEs and stuff like that. But we will be talking a lot about software that you need subscription to SaaS apps and stuff like that.
Mike [07:25]: Exactly. We also divided these into two different phases, I’ll call them. The first one is a pre-revenue and the second one is post-revenue. In the pre-revenue, we’re going to be talking about some of the different tools that you’ll want to look at or some general guidelines that you can follow in deciding which tools you use for your business and then there’s also the post-revenue stage, where we talk a lot about the different categories or classifications of tools that you might be interested in using for your startup and what some of the different options are.
Rob [07:54]: Cool, let’s dive in.
Mike [07:55]: In the pre-revenue stage, the emphasis here is making sure that your business has enough money to get through to the point where you have a source of revenue for the business on ongoing basis. If you spend, let’s say $100,000, to try and get your startup off the ground but you only bring in $5,000, then clearly that business is not probably going to fly. The idea here is to spend as little money as possible yet still get your products out the door so that you can make more money, so that you can feed that back into the business. But if you’re spending far faster than you’re able to acquire money, chances are really good that that business is just never going to go anywhere. At that point you’re probably better off finding a different business to use, a different product to offer, a different service to offer. In this case, in general what we’re looking at is the idea that if you’re spending more than $50 a month for any individual tool or any individual service, then you might want to take a hard look at that and figure out is that really necessary for your business pre-revenue.
Rob [08:55]: A good example of this is a tool like a Mixpanel or a CaseMetrix that start around 150 bucks and obviously there’re free plans and stuff but if you were start paying for them. I haven’t installed either one of those when I bring out a pre-revenue product. Once you get 1,000 or 2,000 in revenue, it becomes easier to justify spending that kind of money. There’re great insights you can get out of that software. But if you install that for months and months and you don’t have enough revenue to pay for it, that one always feels like an iffy proposition. All these comes back to how much money do you have to start the business because let’s say you raise an inch round. This probably doesn’t apply to you as we said in the title. We called this ‘Tools You Need for Your Bootstrap Startup’. These guidelines may apply less to that. If you’re self-funded and you do have 20, 30 grand in the bank that you’re using to get this thing going, that could also be an exception to this.
You may want to use faster. If you recall when we were building and launching Drip, I had other apps that were able to bankroll it. We wanted to move faster. We did spend more money than maybe these guidelines suggest. If you truly are working a day job and launching something on the side in your nights and weekends, a good guideline is about a $50 topper for any individual tool or service that you’re going to use. Getting started on day one of your writing code, the only couple of things that I can think of that are absolutely critical, aside from your development tools, are some web hosting and payment processing. A lot of other stuff you can get by with [?] essentially with the free stuff like the Google Analytics and the Webmaster Tools and the basic things, especially as a one person shop, which will probably be at this time. There’re a lot of tools that have a free plan for a single solo founder or a single user. You’re going to want to take advantage of those in this early stage.
Mike [10:46]: Another example or a very specific example of one of those things is being able to collect e-mail addresses and signing-up for $200 e-mail marketing platform when you don’t have any revenue and you’re really not getting enough traffic to drive to that to be able to collect those e-mail addresses. You can get by with a free MailChimp Account, for example. That will, at least, get you started. You don’t need to spend a ton of money on these tools especially when the free plans will suffice while you’re trying to figure out whether that business is going to work at all. The second guideline for a pre-revenue company is to not spend more than $200 a month across all of the different tools that you’re using. The idea behind this is that if you are really launching something on the side and let’s say you’re a fulltime employee at some place else, you’re just doing this on the side, it can be difficult to go through all of those tools and pay attention to all of them or give them the attention and care that they need in order to make them work for your business.
Chances are you’ve got a lot of other things going on, you’ve got all the development going on, you’re still trying to figure out what that market looks like. If you really have that many tools that you’re looking at, chances are good that you’re probably not focusing on the right things. You really need to be talking to the customers and spending a lot more time in those areas and building what it is that they want as opposed to trying to use all these different tools to optimize something when, quite frankly, you don’t have the traffic or the level of interest or attention from people that you really need in order to get to make that optimization work.
Rob [12:16]: I think that’s a good point, that tools can and will be a distraction if you want to chase down the next shiny object. It’s like stop breathing product on and parker news and looking at all the shiny new marketing SaaS or development SaaS that’s coming out. Focus on you building what you have instead and just use the basics like we’ve already said. Hosting, payment processing, maybe a landing page provider. That’s probably about it. I’m thinking back to Drip. We had revenue from other products that were being able to back it. But we had hosting; I had WP Engine Account for the blog and the knowledge base, payment processing and maybe one or two other things but it was very minimal. We’re talking on a recurring basis. What we’re not talking about here, let’s dive into the exceptions. It’s still with pre-revenue. We have three exceptions. One of them is paid ads. That’s not what we’re talking about at all here. We’re talking about tools on a recurring basis.
Paid advertising to gather information or you get in front of people is an exception to this because I believe that spending money to learn things is so valuable at this pre-revenue stage. Ideally, you’ll be able to run a reasonable test for about $100 to $200 per test. Long term, as it gets bigger, some tests may require several thousand dollars before you try to scale it up. That’s not what you’re trying to do at this point. You’re trying to find cheap clicks, split test value propositions and learn more and build a small list and that kind of stuff. For a few hundred bucks, you should be able to do that. This will let you figure out what you’re doing right and what you’re doing wrong so you can leverage that information as you’re building the product.
Mike [13:51]: The second exception here is also the legal or accounting fees to get set up as a business. Quite frankly, you can get by without setting up a full blown corporation or doing any of that stuff before you even have a product that’s out the door. You can do a lot of things and depending on who you’re working with, whether your CPA, you may be able to write off a lot of those development costs once you have gone down the path of getting an official corporation or officially filing a DBA or something along those lines. A lot of things, you can just backdate those. Again, you have to talk to your CPA about how that would work for your business. But the reality is a lot of those costs are minimal anyway, especially in the long term of your business. Over the course of your business, you’re probably going to be spending hundreds of thousands of dollars and not being able to write off $1,000 or 2,000 from the very beginning is probably not going to break the bank for you.
Rob [14:45]: We’re not lawyers or CPAs obviously but I will tell you that every business that I’ve started and every product that I launched, I have pushed off the legal and the accounting stuff as long as I possibly could. In terms of accounting, I may have done the book-keeping using tools like Xero that we’ll talk about later or Less Accounting. But the legal stuff of actually getting that as corp set up or whatever it is, the LOC, it all depends on your risk tolerance. Boy, I’ve always tried to push that off as long as possible because if you don’t have revenue and you’re spending money and time setting all that stuff up, you’re detracting from your ability to grow. The third exception, in this preliminary stage, is contract labor. If you’re hiring work, you’re hiring folks, let’s say on UpWork or even just contractors through your network, it is harder to do this one on the cheap. You can find cheaper people but you’re going have to spend more time managing them and correcting their work in general.
Realistically though, there has to be a limit on these contractor cost. If you’re seeking 20 grand in the product development for something that doesn’t have any customers or pre-launch lists, you’re probably going down the wrong path. But if you have interest, you have that launch list and you’re in communication with people, that gives you the confidence to spend more and more money. When people come and ask, we’ll often get the question of like how much does it cost to build a mobile app or how much should I pay to build my SaaS MVP or that kind of stuff. The loose range that I typically throw out is 5 to 10K and obviously it depends on what you’re building and how much software development and management experience because that dictates the level and the seniority of the developer you’re going to be able to hire, which is going to impact the cost of it and all that.
But if you have a lot of marketing skills and you have a list and you know what you’re doing then of course, dropping a lot more money than 20K might make sense. But if this is your first time and you’re doing on nights and weekends, you really need to keep a tight constraint on these things and especially in the early days. I was in the single digit thousands. That was my comfort level of how much I would drop before I would get someone in and at least paying me something for the product.
Mike [16:50]: I guess what those things said about the pre-revenue stage. Let’s move on to post-revenue. One of the differentiations here that I feel like we really need to make is the fact that when you’re talking about a pre-revenue business, there’s a very finite time window during which that pre-revenue period is sitting. It’s easy to look at a lot of different examples of those types of businesses because it’s all in this very tightly defined range. When you’re talking about post-revenue, that could mean anything from one dollar a month to a million dollars a month. Most of the time when we’re talking about our listeners or the audience that we’re referring to is generally businesses that operate up into the five, six or seven figures a year. With that kind of stuff in mind, it’s also very difficult to generalize and say, “Well, you should only be paying $25 or $30 a month on this particular thing because depending on whether you’re closer to $1,000 a month or $100,000 a month, you may be paying significantly more based on the requirements for your business. Most of the guidelines in prices that we’re going to throw out are entry level but you could also extrapolate those a little bit because some of them are based on per-user pricing and you may have one user or you may have 15 or 20. Those prices can fluctuate a little bit but will at least give some guidelines around starting points.
Rob [18:09]: Let’s kick it off with probably the most important tool for a startup that’s obviously going to be doing stuff online, it’s your hosting. This cost is going to depend a lot on your app, your infrastructure requirements but I like to ballpark between 50 and 200 bucks a month. This is post-revenue so this is when you’re not on shared web hosting anymore. At this point, you’ve beefed up and you have some type of virtual machine, whether it’s on Rackspace, on Amazon EC2 or you’re on a Heroku instance, that’s when I feel your post-revenue, you feel more comfortable outsourcing some of the management of this and paying a little more to get a couple of servers, at least, to have high availability and good performance. I think that a decent ballpark, when you’re ramping up is between 50 and 20 bucks a month.
Mike [18:57]: I think that $50 to $200 a month could also be per server as well. If you have 10 servers, you might be paying $2,000 or $3000 for the servers that you have. It comes down to what your app is. Something else that falls under this bucket is whether or not you’re running your sales website at the same place as your app is. Those are two probably different things. You might run your sales website on WordPress and have it hosted at WP Engine. One site of a WP Engine is going to run you $30 a month but you can also upgrade your plan to the next level, which is $100 a month. These are round about numbers but they do give you an idea of what the starting points look like and what’s reasonable.
Rob [19:40]: In pre-revenue you can be – a lot of stuff have launches on shared hosting for 20, 30 bucks a month. As you get towards launch or maybe after you get 5 or 10 people paying you for it, then you move to this better hosting basically where you have your own servers. If you’re a hardcore developer and you have a little bit more money in the bank, you probably going to start with this level of the 50 to 200 bucks. It’s a bummer when you’re sitting there coding for four, five months and you want to have a landing page up and you’re paying 50 or 100 bucks a month just to do that. That’s never made much sense to me.
Mike [20:12]: The next category is payroll. If you have gotten to the point where you are post-revenue and let’s just assume you’ve even gotten past the post-revenue part, you start to go fulltime; one of the things that you need to look at is payroll. I’ve looked at payroll providers over the years and tried out a couple of different ones. The one that I settled on recently was Gusto. They used to be called Zen Payroll but they changed their name about five or six months ago. I have no idea what the rationale behind that change was but they did change it. Something like this should probably run you around $40 to $50 a month. Some of the larger, I would say more entrenched players, that if you’re not eligible for Gusto based on where you live, you might have to go with someone like [?] or Paychex. Those are U.S. based companies. I don’t know what the options are in other countries but either one of those is probably going to run you anywhere from $50 to $75 a month. What I have noticed about those types of companies is that they have a tendency to quote you a price and then they will tack on additional fees for doing things like, “Oh, we’re going to over-night your paperwork so that it’s there on pay day.” It’s like, “Well, everything’s direct deposit. I don’t need you to over-night it,” but they’ll do it anyway and it’s an extra $10 or $20 per pay period and that’s how they do that. It can get pricy, which is why is why I gravitated much more towards Gusto because it’s just a flat rate. Everything’s taken care of on line. They also take care of 1099s for you so you don’t have to worry about that as well, especially if you’re going through contractors that are outside of a platform like UpWork.
Rob [21:47]: Don’t do your payroll yourself. That’s insane. I’ve known some small businesses that do that and there’s no reason to do that anymore. I used Paychex for several years. Eventually, their payroll started having a lot of errors. They did a really good job early on and it was great. I think I was paying about 100 bucks a month and it was totally worth it and then more and more errors as we scaled up and it was all via phone. It was like you could have some reports online but it was junky. You couldn’t update anything online so I would have to be on the phone all the time and it doesn’t work into my workflow. The fact that Gusto, formerly Zen Payroll, is fully online and is as good as they are. They’re cheap. It’s like 24 bucks a month and then 5 bucks per employee and it’s unlimited payrolls or something. If you’re one of two people, it’s in the 20s or 30s. This is a no brainer.
Mike [22:30]: They recently updated their pricing too. They went up a little bit.
Rob [22:34]: Oh, did they?
Mike [22:34]: Yeah.
Rob [22:34]: Did they grandfather us?
Mike [22:35]: I don’t know. I’m grandfather, I think.
Rob [22:39]: The next category is video hosting. Obviously you’re going to have some demo videos. You’re going to have some marketing videos. You’re just going to have a need for videos as you scale up even a little bit. YouTube is free but you have so little control and the player is not very nice. It’s not very attractive I should say. At the end of your video, they pop up 20 related videos that are from other people. It takes you out of what you’re doing. It’s not very professional. To me, again it’s post-revenue. As soon as you have some revenue, you’re going to want to go with someone like Wistia, which is about 240 bucks a year or Vimeo, which is 200 bucks a year or SproutVideo, which is in that range. They might have a $10 or $15 a month plan because you’re going to get so much more control. You’re going to get better metrics. A lot of them have e-mail capture built in, where you can gait a marketing video at a certain point or a valuable video that you want people to watch.
You can feature-gait it to where in essence they have to enter an e-mail to get past that. That can go directly into a provider like a Drip or MailChimp or something. This is when I hadn’t really thought of earlier on because it slipped under the radar. But as soon as we had video that needed to appear on our website, which is SSL, we could only use a few providers. Since I didn’t want to use YouTube, it became expensive pretty quick. I remember we started off with a $20 plan and then by the time we had a few videos it was up to 50. I pay either 100 or it might be a little more than that like 120 a month to Wistia because of the volume of bandwidth and the features. We needed some specific features that are feature-gaited up to that point. It’s not outrageous for sure but when you can start at 20 bucks a month, it’s a pretty good way to go.
Mike [24:18]: I will point out that I think both Wistia and Vimeo have free plans that you can get on if you want to get started with those services on day one. If you are pre-revenue, you can use those services obviously if there is feature-gaiting. If you get to a point where you’re scaling and you’re using a lot of bandwidth or there’s other features that you want to be able to use, you may have to start paying for it. But again, the pricing isn’t completely outrageous either. The next category is e-mail marketing tools. By e-mail marketing, really what I mean is capturing e-mail addresses from people and being able to send out bulk e-mails. A lot of different tools fall under this bucket; MailChimp, AWeber, Constant Contact, those types of tools. The idea here is that you want something that is going to allow you to send out mass e-mails to your mailing list.
Rob [25:06]: This is actually one of the others that if you’re pre-revenue, this was the other thing that we had. I talked about hosting and payment providers. E-mail marketing would be the other one. In the very early days, if you’d collect e-mails and send a broadcast once in a while, MailChimp is not a bad tool for that. It’s only once you segment the list and try to do anything of any complexity that you might run into problems and need to outgrow it. That’s when you move into these e-mail marketing automation tools, which are going to run you 50 bucks a month and up. That’s like a Drip, [?] and Infusionsoft and when you’re post-revenue, this is a necessity. It’s rare that you’re going to grow and scale on a basic e-mail marketing tool that doesn’t have the automation stuff baked into it.
Mike [25:47]: The next category is cash management software services. In virtually every case if you’re looking for any sort of book-keeping software, I would go Xero. They have an online subscription. You go out there and it’s very easy to use. It generally follows accepted best practices for accounting. If you know anything about accounting, you can do anything that you would probably need to do inside of Xero. There’s also other options out there. QuickBooks Online is probably the big player in this particular space. They do have QuickBooks Desktop Edition. There’s also other tools out there like Less Accounting and Outright. There’s other ancillary tools that I would probably put underneath this category such as Baremetrics or FirstOfficer.io, that allow you to analyze the incoming payments. I might also throw PayPal underneath this and I would also put something like FreshBooks or Expensify for doing invoices and receipt tracking. Generally speaking, most of those tools should not cost you very much, $20, 30, 40 a month at the most for each individual one. Being able to know how much money is coming in and how much is going out is going to save you a ton of time at the end of the year especially if you’re post-revenue and you have to start tracking how much did I spend? How much did I make? How much can I write off? All the reports and stuff that you need out of that. If you don’t have it tracked, it can be very difficult. If you have a very simple business, you can do it in Excel. But once you start getting complicated with anything, you get lots of transactions. It’s hard to track all that stuff outside of excel.
Rob [27:16]: We live in the golden age of starting a business. The fact that you can get all the power of the tools you just mentioned and you don’t need to install a server because it’s all SaaS and you can pay, like you said, 10, 20, 30 bucks a month for these, is just amazing. 10 to 15 years ago it was so much of a hustle, you install desktop software and then you had to back the files and the desktop software wasn’t very good. When you change computers, you had to try to remember to get the files. It was so much of a hustle. This is a much better approach. The next category, we have it as two items but I’ll lump it into one. The first is Website Traffic Analytics and the next one after that is Advanced Analytics. For just basic analytics, Google Analytics is great, Google Webmaster Tools, Clicky, which is at getclicky.com is 10 bucks a month. Those show you your unique visitors and aggregate data.
These are a no brainer for getting started and you should have them if, for nothing else, to have the historical data, you should have these installed. The advance side is going to be a tool more like a Mixpanel or CaseMetrix and that can often give you a per visitor insight. You can identify people and know what individuals did. You can analyze funnels with more advanced precision and all that stuff. They have free plans but they get expensive quick. It goes from free to 150 a month. For business generating even a few thousand bucks, it’s probably worth it because the insights you can pull out of that on how to optimize your funnel are a big deal. It’s scaling up if you’re doing 20, 30, 40 grand a month. You should be using one of these tools
Mike [28:42]: The next category is dashboarding software, which if you are running a business and you have a lot of different tools, sometimes you have to go to multiple tools in order to find a lot of different KPIs or Key Performance Indicators that you’re looking for. Sometimes it’s more helpful to have a dashboard of some kind. There’s different options out there like DigMyData or Cyph. There seemed to be more and more of these types of tool popping up all the time. What I find is that I like the idea of having a dashboard and being able to look at that data at a glance. But what I find is that if I see some piece of data that I want to drill into, I then have to go over to the tool anyway. Having a dashboard itself probably doesn’t do a lot for me except for give me the ability to publicize some of that data to other people on the team. If you’re just using it for yourself, if you’re a one person company, my guess is dashboards are probably not going to help you very much. They look nice and they sound great in theory but as a business owner, you’re probably going to be digging into that data anyway.
Rob [29:39]: Landing pages is another category here. That will cost you, let’s say, between 20 and 50 bucks a month. There’s KickoffLabs, LeadPages, Unbounce, Instapage. There’s a lot of players in this space. ClickFunnels is another one. It’s funny because I never used landing pages when I was hacking away solo on everything because I would just copy to HTML and I’d modify it and I’d do all that. But now that we’re working on a team and we’re moving fats and there’s a bunch of people doing stuff and we have a marketer who, just fulltime, is running experiments, it helps to have something where you can just crank out a landing page in 10 minutes and not have to worry about deploying and having it in source control and is it on the main website or is it WordPress and do I have a plug in. it is simpler to have one of these providers. You’re mileage may vary and each company may do it differently but I have definitely been sold on the value of using one of these landing page providers, if for nothing else, for some of the templates are nice. The speed of implementation, the speed of iteration has accelerated by using one of these platforms.
Mike [30:38]: The next two categories, I’m lumping these together but they’re both sales tools. Essentially you have your basic entry level CRMs. These will run you $10 to $20. Sometimes that’s per user, sometimes it’s just a flat rate. This is for a basic CRM or a basic sales tool of some kind. In this category I would put things like Pipedrive, Highrise or Zoho and many of the basic sales or CRM tools like that. The next level up, once you start to get a lot of information in there and you start to do more advance things or you want to do any sort of automation, it’s almost very similar to e-mail marketing, where you’ve got basic e-mail marketing and you’ve got the advanced stuff. In the advanced category for sales tools, you’re probably looking at $50 and up per user. I would say that Bluetick falls into this category. You’ll also find tools like Salesforce or Closed.io. The basics of most of these tools is that it helps to automate or improve your sales process and because of the increased efficiencies that those types of tools provide you, they do cost quite a bit more.
Rob [31:39]: Our next category is demo software meaning software that helps you give demos to your potential customers. Some free options are things like Skype, Google Hangouts, join.me, all of which we tried at Drip and they all had one hang up or another. They’re other unprofessional or a lot of people aren’t on Skype or you have to get approval from their username in order to contact them. It just feels like you’re running a junky service. We have since moved on from those. GoToMeeting and WebExpo have free plans. I haven’t used either of them but I know they’re popular. We’ve settled on Zoom which is 15 bucks a month per user. It’s working out quite well. There’s a lot of tools available for this. You just want to find something that is A, professional and B gives you a lot of control and allows you to demo whatever you need and frankly you may also want the user, depending on whether if you’re also using this sometimes for on-boarding or some high end support, you may want the user to be able to share in their screen and that’s a nice benefit of a tool like Zoom and GoToMeeting. These should be in there. They’re anywhere from free up to about 15 to 20 bucks per user, depending in the features you want. You can find something that’s like $50 per user per month. You should be able to get by with 15 to 20 range.
Mike [32:51]: Now that we’ve talked a lot of those different categories, we want to talk about two different exceptions that we came up with for this. The first one is that in general spending money to learn something is worth the investment. You’re looking at a specific channel and you’re spending money there to try and figure out whether you can use that channel to acquire customers or you’re trying to learn things about your audience. It’s very difficult to give guidelines about what specifically you should be spending on these things because if you are making $1,000 a month, clearly you don’t want to be spending $1,000 a month on your advertising or $10,000 a month on your advertising to learn something. But if you’re bringing in $100,000 a month, spending $10,000 to try and figure out whether or not a particular channel is going work for you to acquire customer, that could be justified. It’s difficult to provide specifics in this particular area because of that but we do want to point it out as something of an exception to this. It’s hard to give guidance about exact numbers for that.
Rob [33:48]: It’s also hard to give guidance. Your pre-revenue is a pretty finite space and there’s not a lot of room there. You can be specific about it. Post-revenue is anywhere from a dollar a month up to hundreds of millions a month. It’s hard to give all of these ballparks. Generally, we’re talking about businesses that are doing up to in the seven figures a year. Once you’re in the eight figures, a lot of stuff changes. With that in mind, the other exception to all of this is headcount. Salary for one employee is going to eclipse everything in this list combined. But we just wanted to talk about tools today and the software tools that you would need to get started up.
Mike [34:27]: We’re running a little short on time here but we do want to live you guys with two tips in general about looking at the different services that you’re using in your business. The first one is that you should buy tools that do the job that you need done not tools that you have seen other successful people or businesses using. A lot of time just using that particular tool that somebody else is using isn’t going to make you as successful as they are. It’s more about how you use the tool and what jobs you’re accomplishing with them as opposed to the tools that you’re using.
Rob [34:54]: The other tip I’ll throw out is to buy what you need now not what you’re going to need in the future because otherwise you’re going to be paying for something that you can probably upgrade to at the point when you need it. There’re some minor exceptions. If you think about a Mixpanel or CaseMetrix, the more historical data you have the better. Unless you do have a lot of budget that dropping 100, 150 bucks a month from the very start is a dubious proposition if you’re trying to bootstrap a startup. In general, the best advice is to buy what you need now and not something that you think you’re going to need in the next six months. That wraps us up for today. If you have a question for us, call our voicemail number at 8-8-8-8-0-1-9-6-9-0 or e-mail us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Out of Control’ by MoOt, used under creative comments. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 280 | The Productivity Project with Guest Chris Bailey
Show Notes
In this episode of Startups For The Rest Of Us, Rob interviews Chris Bailey, author of The Productivity Project. They discuss aspects of the book and Chris shares some of his personal experiences with productivity techniques both successful and unsuccessful.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of Startups for the Rest of Us, I interview Chris Bailey, author of ‘The Productivity Project’. This is Startups for The Rest of Us Episode 280. Welcome to Startups for The Rest of Us the podcast helps developers, designers and entrepreneurs to be awesome at launching their software products, whether you’ve build your first product or you’re just thinking about it. I’m Rob.
Chris [00:26]: And I’m Chris.
Rob [00:27]: We’re here to share our experiences to help you avoid the same mistakes we’ve made. Mr. Chris Bailey, thank you so much for joining me today on the show.
Chris [00:34]: I am honored. Thank you for having me.
Rob [00:36]: For folks who don’t know, you are the author of a book called ‘The Productivity Project’ as well as the man behind alifeofproductivity.com.
Chris [00:44]: That is me.
Rob [00:45]: I first heard about you on Unmistakable Creative Podcast that Srini Rao hosts. He raved so much about your book that I had to check it out. I’m really glad you have it up on Audible. That’s how I consume almost all of my material. To be honest, I’m really not a fan of productivity books in general. The reason I don’t like them is because I feel like they tell me the same thing over and over like don’t multitask and other stuff, get up early, exercise.
Chris [01:13]: That’s just bullshit. I don’t know if I’m allowed to swear but it’s such BS getting up in productivity.
Rob [01:18]: I know and I wanted to get into that in the interview. That’s what I liked about it, is that I bought it on a lock because Srini raved so much about it. I was probably a chapter in and already I realized, “Oh, man. This is the change in my game.” I started taking notes frantically. I have a Mosca Notebook that only when stuff is really that I want to take with me, I write in this notebook. I already had a bunch of notes scribbled. This was about two and a half weeks ago maybe three weeks ago I started listening. I have a bunch of things that I have adapted and adopted from it. That’s saying a lot because as much information as I consume, I don’t tend to necessarily move as much into my daily routine. Your book has already had an impact on me. I’ve talked about it on this podcast a couple of weeks ago. I wanted to have you on the show just to talk through a few of the things because I feel like you experimented on yourself and that’s the cool part of this, right?
Chris [02:07]: Yeah.
Rob [02:07]: You don’t come off as some expert who has this theory that everyone should follow. You basically say, “I tried this. I failed a bunch of times but some of it worked and here’s what I found.”
Chris [02:16]: I’m personally not too big a fan of those people. That was one of the things I found in this productivity project, is a lot of people call themselves gurus. That’s a good sign by the way. When somebody calls themselves a guru or my pet peeve is a thought leader. When somebody prescribes themselves as a ‘thought leader’, that’s a pretty good sign that they’re not. You hit on one of the things that I think is crucial about productivity tactics is that spending time reading about them is great. They’re entertaining. You can look at productivity porn as long as you want but if you don’t make all that time back and then some, you’re basically just wasting your time. The idea behind the productivity project was to spend a year and experiment with everything that I could find under the sun that had to do with my productivity to see if it helped me get more done or get less done and whether I actually earned that time back. So much of the stuff out there simply doesn’t.
It’s this productivity porn of becoming busier or just doing more instead of achieving more. It might sound corny but I have this idea that productivity isn’t about how much we produce. We can produce e-mail all day long and not accomplish a single thing. We could spend all day on Twitter and not accomplish a single thing. What we’re left with though, at the end of the day, the residue of our day is what we accomplish. That’s what productivity is all about, I think.
Rob [03:40]: Yeah, well said. I have some notes here and one of the points that you make in the book is you say, flat out, most productivity hacks didn’t work. Most of the things you tried didn’t work. Do you have a theory on why that is?
Chris [03:51]: I think because the idea of so many changes is way sexier than what you have to actually do to make the change happen. Waking up earlier is one of my go-to examples as something that just doesn’t work. It depends on your situation because if you have a family, kids, maybe waking up at 5:30 will help you in your productivity because it will give you this bubble of clarity and focus after you wake up. But it depends on what your life is like. The studies out there, at least, show that there is zero difference in socio-economic standing between somebody who wakes up early and somebody who wakes up late. It’s what you do with the hours of your day that matters. You think of the idea of being an early riser that wakes up at 5:30, waking up at 5:30 to meditate, get a cup of coffee and catch up on the news and social media and start a writing ritual maybe. A lot of people have a sepia tone fantasy of what they want to do and what they want their life to become.
It’s so easy to focus on that fantasy instead of what you have to actually do to make that change happen. Everybody on the planet wants to become a billionaire and get a six pack but in the moment, you want nothing more than to play hooky and grab a cheeseburger. It’s the idea of these changes that is so much more attractive than what you have to actually do to make them. That’s another thing. You got to make that time back but you also invest energy and willpower into investing in your productivity. There’re big costs to investing in your productivity which is why it’s so crucial to figure out whether a change is worth making in the first place.
Rob [05:33]: You conjecture in the book, you say, “I believe that I’ve made a 10 X improvement from any of these productivity acts because it takes time and will power to manage and implement.”
Chris [05:42]: Oh, yeah. It’s so easy to look at the idea instead of the cost or something.
Rob [05:46]: In the book, you talk about how you, yourself, tried to become an early riser and didn’t really work for you. I’m a night owl like yourself. My wife is an early riser and I have this phrase, when she gets up at 5:30 and does all these stuff and I say, “The smug superiority of the early riser.” It didn’t work out for you. Why was that? Is it body clock thing? What do you think?
Chris [06:10]: I think it is. We all have different chronotypes, which is how our energy naturally fluctuates over the course of the day. One of the things I did for this project was I conducted research with all the books and academic journals I could get my hands on. I talked to the biggest productivity experts out there, big in reputation not in physical size and I also conducted these productivity experiments on myself where I used myself as a test tube to experiment with things like working 90-hour weeks, watching 300 Ted Talks in a week, becoming a total slob for a week and gaining 10 pounds of muscle mass living in isolation. Getting up at 5:30 was one of the first experiments I conducted. I struggled with shoehorning this habit into my life for three months. After that, I learnt a lot about habit formation along the way if that one. After I had finally done it, I had this routine that productivity dreams were made of or at least I had imagined they were made of.
But then I realized that I absolutely hated the ritual. I had to go bed at 9:30 in order to get a full night sleep, which I absolutely hated. It was either that or struggle through the next day on a low tank of energy. One of the crucial findings I made from this experiment is that just as not all tasks in our work are created equal. We accomplish a lot more doing certain things like engineering a new product or working on a report for whatever it is that the highest return [?] the new job are than we do checking e-mail, social media or attending a meandering meeting of some sort. Just as not all tasks in our work are created equal, not all hours of the day are created equal. Depending on our chronotype, which is when we’re naturally wired to have the most energy, we have varying amounts of energy depending on the hour of the day. The go-to example that a lot of people use for this is if you’re a morning bird, you’re going to have a crazy amount of energy so your wife has a crazy amount of energy at 5:30 in the morning or at least more than what I consider clinically sane in humans.
People like myself and yourself, we have more energy late at night and so we bring more energy to what’s in front of us later on in the day. A change like waking up at 5:30 might not necessarily work as well for people like us. But we can take advantage of this idea, though, that our energy fluctuates over the course of the day. One of the main findings from the productivity project was that everything I researched, throughout the year of productivity, fell into better management of one of three categories; managing my time, attention or energy. The better we manage all three of these ingredients, the more productive we can become. It’s so easy to look at time and this is what we’ve done for hundreds of years. When we work in an office-type environment, it’s simply not as important as it once was. When one person brings twice the amount of attention to their work and they shut off distractions and they can focus deep around their work, they’re going to become more productive, than somebody who is constantly distracted and can’t focus, and accomplish more in the same amount of time.
Energy is the same way. If you don’t burnout at one in the afternoon and instead you cultivate having a lasting energy level throughout the day, likewise you’re going to be able to bring more of yourself to your work so you don’t burnout. When you rejuvenate your energy levels by taking more frequent breaks and doing tactics along those lines, you bring more energy to your work which allows you to accomplish more in less time. Managing your energy is a crucial thing. That goes to when you’re naturally wired as well. Another one of the experiments I did shortly after waking up at 5:30 every morning was charting how much energy I had every hour on the hour for three weeks. Every hour I had an alert on my phone telling me, “Chart how much energy, focus and motivation you have right now.” I charted those and I found that between the hours of 10:00 a.m. and noon and 5:00 and 8:00 p.m. in the evening and onwards, I had more energy than any other hour of the day.
That was when I brought the most energy to what was in front of me. The more important tasks I worked on during that time, as an example writing for my website, doing tedious research or after that writing this book, the more I accomplished in the same amount of time. This is a central idea I think it’s crucial to think about when it comes to your productivity is that productivity isn’t just time anymore. If you don’t cultivate your energy properly, you’re going to burnout. Your productivity will be short. The same is true with our attention. You probably know this better than anyone. Attention is the rarest commodity that we have but it’s not the most limited commodity that we have. Time is. Because it’s so rare, when we cultivate more attention to bring to what’s in front of us and spend it intelligently, we can get that much more done. Man, that was a long answer. I’m so sorry.
Rob [11:02]: No, that was a good one.
Chris [11:03]: You got me going. That was like a trigger question.
Rob [11:06]: You touched on two things that I was going to bring up. This is really good.
Chris [11:09]: This is good.
Rob [11:10]: Probably my favorite concept from the book, one of my strongest takeaways was your framework of time, attention and energy because most books are more about managing time. I’ve always seen, in my work career, there were two things is what I’d imagine it had. There was time and energy. I would strategically use caffeine and other things to help me have the most energy when I needed. But I was missing an element and that’s what I liked about your book. Everything you said lined up with my experience and then added to it and gave it deeper understanding of topics I didn’t quite have my hand on. Adding that third element of attention made me realize why, when I get a bunch of e-mails, if someone’s saying, “Hey, I just need five minutes of your time,” that doesn’t sound like a lot. It’s not the time that’s the hard part. It’s the switching the attention.
Chris [11:54]: I find this way. One of the things I do more and more is speaking around the book, around productivity, around whatever the hell people want me to speak about. It’s weird that people want me to talk at all. I find that if I give a half hour talk somewhere, that’s a half hour of time and that’s a half hour of energy. But I’ll worry about that talk for days leading up to it. It takes days of attention to just do that one talk. It’s an idea like switching to e-mail. E-mail is the pain-point that so many people have. We might not spend a ton of time on e-mail over the course of the day but when we switch between e-mail and every other context of our work 30 or 40 times, which is the average for most people according to Rescue Time, I believe the number is 41 times a day, that’s 41 times than when we have to perform a conceptual shift from one element of our work to another. We never perform that shift productively because it takes energy, willpower, so many things for our minds to switch from one context to another. That’s why you have some days where you repeatedly check your e-mail where you don’t have much to do and you’re exhausted by the end of it. It’s because you burn so much mental juice switching between these different contexts.
Rob [13:09]: Touching on that, during your answer, you mentioned but didn’t name the Biological Prime Time which is your concept of where you stopped consuming caffeine and alcohol for three weeks and you tracked which hours of the day were your, what you call your BPT. Now I’m assuming you must structure your work schedule to do your high energy high attention work around those times. Is that the idea?
Chris [13:35]: For sure. We’re talking, right now, in the middle of my Biological Prime Time. I’m having some [?] to boost. It allows me to bring more of myself to the elements of my work that are more important, like talking to you right now is more important than a lot of the things I’m going to do later on in the day. Why not schedule your day around when you have the most energy? Productivity, at the same time, is so often a process of understanding our constraints. If you work for the men or any one of these things, you might have more constraints than someone like you or I would. But still when you do have that flexibility, it’s crucial to not squander it. Biological Prime Time, by the way, I don’t want to take credit for that term. It was coined by Sam Carpenter who wrote a book called ‘Work the System’ I believe. This was the golden nugget I took away from that book is this idea of thinking about it in those terms.
Rob [14:31]: I’ve read that book but I didn’t remember that term so I’m [?]
Chris [14:35]: Credit where credit is due.
Rob [14:36]: Indeed. Right within, I think it’s the first chapter of your book. You do challenges during the book. It’s not every chapter but where it’s appropriate where you say, “Look, put the book down, grab a pen and paper, spend 10 minutes and do this.” Your first challenge is called The Values Challenge. You ask the question, “If you had two extra hours in everyday, in every work day or in everyday period because you’re more productive, what would you do with that time? Sit down, think about that and write it out.” What’ the importance of answering that question?
Chris [15:08]: It’s thinking about what you want productivity to do for you. Everybody has a different purpose for productivity. Some people see it as a way of doing more and more and cramming more into the day. But I see it as a way of making more times for the things that are actually meaningful to me. In a typical day, I like to think I’m pretty productive. It would be a surprise if I wasn’t productive after dedicating a year of my life to improving that side of myself. On a typical day, I do my work in six or eight hours; before investing in my productivity, that would have been 16 hours worth of work. I see it as a way of doing everything I have to do in less time so I have more time for the things that are actually meaningful to me like spending time with loved ones outside of that. I’m a pretty big nerd like I would imagine you are and a lot of the audience is. I like soaking in cosmology lectures. I’m learning to program. I totally suck at it right now but I’m putting my [feelings?] out for that.
If anybody knows any good resources, I don’t want to get flooded with stuff. If you want to e-mail me on or two places to learn that, just anything that takes my curiosity throughout the rest of the day. I see it as a way of carving out more time for the things that are actually meaningful. Those challenges, by the way, I’m not a fan of challenges after chapters of a book. I decided to put these in there because they prime your mind to think about ways of implementing the tactics in the book. They’re very simple and they reduce what I talk about in the individual chapters down to something that you can action at the end of them. What do you think about challenges at the end of chapters? What are your thoughts?
Rob [16:51]: I tend to ignore them and skim over them. In your book, I did maybe two or three of them, which is saying a lot because I tend to do zero of them.
Chris [17:01]: Me too. I wrote the challenges for people like you and me who don’t do challenges.
Rob [17:09]: The way I’ve been summarizing your book to people and you can correct me if this is an incorrect summary. What I basically say, “Look, this guy took like 100 productivity hacks and approaches and tried them out on himself over the course of a year and then he basically wrote a book about the 20 or so that worked for him.”
Chris [17:28]: Yeah. That’s a good way of framing it. What I really did is I looked at all the productivity books, the research, the neurological books out there, books about the brain and workplace performance. I also conducted these weird experiments on myself to tell some stories along the way so it’s not boring as hell. I looked at all of that stuff and thought how did these – I think they were more than 100. I’ve never actually counted with everything I experimented with. There were a few hundred things, there must have been, that I tried out; keeping sticky notes everywhere from finishing stuff I had to get done, all these different organizational systems for managing my work and my life and compartmentalizing everything. This is about the 25 things out of those hundreds that actually work and most importantly that actually stuck with me because change the idea of something can be so powerful. But, again, you have to actually do it for it to work. I like that idea.
Rob [18:29]: That summary of it?
Chris [18:30]: Yeah. It’s a good summary.
Rob [18:31]: Cool, even though it’s hundreds instead of a 100 but for some reason I had remembered the number 100.
Chris [18:35]: You just got to put the number u a little bit, make it sound a little bit more impressive. He experimented with tens of thousands experiments.
Rob [18:44]: One of the things you experimented with that I really liked because this is something I’ve long held, it’s like a value, is you tried working 20 hours a week and then your tried working 90-hour weeks and you compared your productivity and you found …
Chris [18:58]: It was about the same.
Rob [18:59]: About the same but you said it was a nominal increase in productivity in your 90-hour weeks. Why is that?
Chris [19:07]: The thing was I felt so much more productive and I think it was because –
Rob [19:14]: Working the 90-hour weeks you did?
Chris [19:15]: Yeah and it was because there was no guilt that sipped into my work. I think so often the less guilty we feel about our work, the more productive we feel. Guilt works hand in hand with busyness. It’s an idea I’ve been thinking a lot about. When you have more work to do than you have time to do it in, the natural incline is almost to dedicate more time to your work instead of more focus and energy and leave those by the wayside, burnout, multitask and try to take on too much stuff. It doesn’t work in practice. Working 20 hours a week, when I looked at how productive I felt, I felt four times more productive in the 90-hour weeks. I felt like I had accomplished that much more. But when I looked at how much I actually accomplished in those weeks; that was the most surprising lesson I discovered from the project by far. I only accomplished a bit more working 90 hours a week. I think it was because of two reasons.
The first is because of Parkinson’s Law, which says that our work tends to expand to fit how much time we have available for it. This is why you feel like you’re living at capacity in your home life but then the new season of House of Cards or orange is the New Black comes out and you suddenly, this magical 10 or 15 hour window opens up over the course of a few days and you find time to watch the entire season. It’s because what we do tends to expand to fit how much time we have. Our work is no exception. I did the same amount of work, it’s just that I expanded and wasted so much more time in the 90-hour weeks. I also didn’t manage my energy properly. A deadline is one of the most powerful things on the planet. Everybody on the planet knows this. Let’s say it’s Monday and somebody tells you, “Dude, you just won an all expenses paid trip to Australia but it leaves tomorrow evening.”
Chances are you would find a way to do most of the week’s work in those one or two days so you could accomplish as much as you need to in order to get on with the imposed deadline. Our work hours are the same way. The 20-hour weeks were the exact same way because I shrank how long I worked for in general, I forced myself to expend more energy over that shorter distance of time so can get it done and it filters down to the individual tasks in our work too; if you have a big project to write, code or whatever it might be. If you, instead of scheduling an entire afternoon to do that and burning some time and attention on Twitter, e-mail and all these different things, you schedule a one and a half hour block of time and you force yourself to stop at the end of that. You’ll force yourself to expend more energy over that shorter distance of time so you can get everything you need to do done. Managing and shrinking how long we’ll work on something for is also a gateway to managing our energy in that way too.
Rob [22:14]: Nice. My most recent blog post I published is called ‘How to Force Yourself to Ship (Even Though it’s Hard)’ and it’s all about how at Drip, the company I run, we don’t set many deadlines but we did have to set one for a recent feature we launched and it just kicked us all into high gear. I’m definitely a believer in that.
Chris [22:35]: Shrinking how long you do something for, it’s a way of imposing a deadline on yourself, whether it’s for a task or your work in general. This is why; I think it’s in Sweden that they’re going to a 30 or 35-hour week. If you have people who are motivated, that’s going to work because they care enough about their work to expend more energy to get it all done. They’ll waste less time. If you have people who aren’t that motivated, chances are they will just slack off for 30 hours.
Rob [23:03]: You mentioned that research suggests that the ideal work week is between 35 and 40 hours?
Chris [23:09]: Yeah. That’s what the research seems to suggest. This is not to say that crunch time doesn’t work because it absolutely does. When you work consistently long hours, your productivity after a few weeks begins to fall off a cliff and become obliterated. It’s not that one 90-hour week is terrible for your productivity because if it’s once a year, it’s really not. Sometimes projects have to ship; sometimes you have to work insane deadlines. But most of the time if you work consistently longer than 35 hours a week, your productivity is going to begin to plummet. That’s a side note, a little Ted debate on working hours. As a rule, people usually work fewer hours than they think they do. You can get this insight when you track your time. One study, I have it here in front of me because I’m weird like that. People who claim to work between 60 and 64 hours a week actually work an average of 44.2 hours; from 60 down to 44.2. People who claim to work 75 or more hours, they actually average 54.9. There’s often a huge gap and it’s because when we think we work longer hours, it’s as if the world needs us twice as much. So often we work fewer hours than we think we do.
Rob [24:32]: Yeah, that makes sense. One of the other things that I took away from your book and I actually started and put my name right away was this rule of three daily tasks or three daily accomplishments. Earlier on with your research, you said on your website that you have this stats page where you tracking how many words you had written that day or how many – you’re trying to quantify it and you realize that was focusing on efficiency and that was a mistake. You started asking yourself, “Did I get done what I intended to do today?” That was your new measure or productivity. I feel like the three daily tasks ties heavily into that. You want to talk a little bit about that?
Chris [25:09]: Yeah. Intention lies at the heart of productivity. This deliberateness, I would equate productivity on so many levels with deliberateness. Being more deliberate about what we spend our time on in general, everyday or every hour in the case of working more mindfully in the moment because it’s in the moment, like we were chatting about earlier, that we want to have a six pack and we also want to grab a cheeseburger. If we can bring the idea of deliberateness down to the moment, that’s where the magic is made as far as productivity is concerned. The idea of managing everything you want to spend time on, it’s something so many people talk about. But so many of the systems out there won’t make you care about what you have to do. The best rule I found for that is, as you’re probably well aware of, it’s almost stupidly simple how easy this idea is. That’s where its power lies; is in inserting these intentions each day.
The idea of the rule of three is this; at the beginning of the day, you fast-forward to the end of the day in your head and then you ask yourself, “By the time the day is done, what three main things will I want to have accomplished?” Those become your primary focus throughout the day. The idea behind it is that it only takes a few minutes, first of all, which makes it so powerful. You don’t have to spend hours organizing everything on your plate. It allows you to insert this intention because it’s hard to remember what’s important throughout the day. When everything hits the fan over the course of the day, these serve as the guiding light for what you want to accomplish over the course of the day. My three, as an example today, I am writing six articles for my website. I am putting together a list of all the places I’m speaking at to coordinate them in one place. My goal is to finish making two talks. It’s a lot of work. It doesn’t include everything, like it doesn’t include our chat right now, the other miscellaneous [poparia?] of the day.
It includes the three main things you want to accomplish. It aligns what you work on over the course of the day, not to what you have to do, like a task list does, but what you want to accomplish when the day is done. That’s really what you’re left with. It works because it’s in that deliberateness that you decide not only what you do and not only what is the most important to spend your time on but also what you don’t spend your time on. You take the time to separate what’s important from what isn’t. I mentioned earlier that productivity is so often the process of understanding the constraints that we have. Some days they’re stocked with meetings. You’ll have less freedom and flexibility to determine what you actually need to accomplish or want to accomplish. By taking the time to understand those constraints, you can become more deliberate about your work over time. At first when I implemented this rule, I learned about it from J.D Meier, who’s Microsoft’s Director of Business Programs.
A lot of people have talked about it before. It was his book ‘Getting Results the Agile Way’ that turned me on to this idea. At first I way overshot the three things and so I would say, “I’m going to write 1500 words today,” and I would write 3000 or 4000 or I would undershoot them. The next day I would say, “Okay, I’m going to write 5000 words,” and I’d write 2000, just as a very simple example. Over time, you begin to settle into this place of understanding the constraints that you have. How much time, flexibility, energy, focus and attention you’ll have, how often you’ll have to switch between these different contexts so that you can get a grip of not only what you’re going to accomplish but how much potential you actually have to do that.
Rob [29:06]: As I said, this is one of the things that I’ve adopted and it’s helped me focus on something I should have been doing anyway. When you say, in the book, it is such a simple thing, thinking of the three things you want to get done in each day. I think you said to do it for the entire week as well.
Chris [29:22]: Yeah, I forget that point. That’s a pretty big point.
Rob [29:26]: Yeah I know.
Chris [29:26]: I do it and I should have been cued because I have the three weekly things I intended to accomplish right above that on the big ass whiteboard in my office. The idea is every Sunday I usually do this. I set the three main intentions for the week. The three daily ones won’t always fit into the three weekly ones but often times they do. It reminds you of what’s important throughout the week when you’re carving out those daily intentions too because that’s the process. You figure out what’s important in general but it’s on a weekly basis that you set these very short-term milestones that fit into those ideas. It’s on a daily basis that you execute on them. It’s on a moment by moment basis that these challenges come up with actually working on them which is why ideas like single-tasking, stop multitasking and shutting off distractions can be so powerful.
Rob [30:23]: It seems to me that the idea of this rule of three on a daily basis rule, rule of three on a weekly basis and shutting off the multitasking and all the alerts and stuff. It’s not that they take time to do but it requires deliberate discipline and it’s almost like a certain level of attention and energy that you have to devote, which is step back, clear your mind and say, “What three things do I want to accomplish today and this week?” That’s the hard thing to do, I found. I find that it takes energy and attention to do that. My mind tends to want to resist that and wants to flip into my e-mail inbox because as you called it, that’s the Netflix of the work world, right?
Chris [31:02]: Yeah. That’s why it’s crucial to do it at the start of each day. You only have so much willpower throughout the day and once that’s depleted, your productivity, your focus is toast and you’re going to be working on autopilot. It’s important right at the start of the day, before you jump in to do these things because that’s when your energy is the greatest. That’s when you have the most cognitive juice because you haven’t burned too much glucose in your brain from working on other stuff too.
Rob [31:29]: I think that’s one of the points that I took away from your book; is that these things, like the low return tasks you call them, which are the checking your e-mail, checking Twitter or Facebook or all that stuff that beckons to you that feels productive, that fires with [?] your brain, it’s quite unproductive in general.
Chris [31:51]: I would challenge people if they want to try out the tactics that we’re talking about. Let’s be honest, most people aren’t going to buy the book so let’s make this conversation as valuable as we can. Try these things out but observe how much they allow you to accomplish compared to how you were working before. That’s where the money is mad because these tactics become self-reinforcing once you realize how much more they let you get done over the course of the day. The rule of three is great gateway one to start with. If you start by defining the three daily intentions that you have and then observe whether you actually accomplish them, how you’re working differently, how your working towards those three things, it will become self reinforcing. You can make the connection between getting more done in less time and the tactics that you’re experimenting with. One of the worst things you can do, and this is what I found in the productivity project, is blindly accepting blanket productivity advice because you’ll fall into so many traps, pitfalls and so much stuff that frankly doesn’t work.
I would say that more things don’t work than the things that do. I tried to pick the best ones but maybe not all of these will work for you too. Maybe you’ll resist them more than you’ll feel comfortable with and so you don’t end up doing it. That’s cool too. But when you look at the difference in how much you accomplish when you do the tactics and whether or not you get the time back that you spend reading about these things because that’s where productivity becomes crucial. I think that’s so important.
Rob [33:26]: I would agree. If you’re listening to this, the way I’m approaching the book is not to take all 25 of these and try to integrate them into my work life or my personal life for that matter. I read through it and I took away things that I felt like would work for me, given what I do on a daily basis, my personality, what I know about myself. The notes that I took instead of all 25, it looks like I have 9 or 10 that I feel like are really going to jive with me. I’m not trying to adopt all of them at once. I’m tackling two of them to start with. It’s the five minute meditation in the morning and embarrassingly pretend to do that in my car in the parking lot once I get to work and I just sit there.
Chris [34:05]: That’s cool. At least you’re now driving then.
Rob [34:06]: Yeah I’m now driving. I clear my mind. The fact that it’s only five minutes has made it an easy one or me.
Chris [34:13]: This is a good tip to give people. When you want to make a change, find how resistant you are to the ritual. If you say, “Okay, I’m going to really try and meditate,” and then you meditate, I’m going to say, “Okay, I’m going to mediate for half an hour each day.” Eventually you’re not going to have half an hour or you’re not going to feel like doing it for half an hour and the habit is going to just collapse in on itself. You can combat this though by shrinking how long you’ll do something for until you don’t fell that resistance anymore. You say to yourself, it works for going to the gym, meditation, going of a walk around the neighborhood, for pretty much anything. You say, “Okay. I don’t feel like meditating for half an hour today. Could I do 25 minutes?” The thought of it still puts me off, “What about 20 minutes?” It’s getting better but, “What about 15 minutes?” Getting better, “10?” Yeah, I can meditate for 10 minutes. You meditate for 10 minutes.
When you get to that 10 minute mark, because you’ve overcome that initial resistance because things are never as intimidating in practice as they are in ideas, chances are you’ll want to keep going. The same is true for the gym, going for a run, for pretty much anything; doing your taxes, cleaning up the basement. By overcoming that initial resistance, you can keep going after that. So many other things are intimidating that we want to do. When we shrink and be kind to ourselves in the process and we’re not a total hard ass on ourself for trying to make our life better, we can do that much more and make them stick.
Rob [35:45]: Indeed. I like the way you couch the meditation. I’ve never been a meditator, never really been done it. Your instructions were just be aware of your breath. That’s it. Nothing more complicated than that. You can set a timer for five minutes. Close your eyes. All you want to do is think about your breathing and you’re trying to clear you mind. As thoughts come in, like distractions and such, which they will, don’t judge them. Watch them pass through you like you’re on a freeway overpass, I think, is what you said. Watch them just float away and let them go to the next thing.
Chris [36:15]: Because that’s what you realize when you start to mediate, is that no thought is permanent. No sensation in your body is permanent. No emotion is permanent. That’s what I find entertaining while meditating. You find the weirdest things entertaining after a while. It obviously doesn’t take much to entertain me. I find these emotions that come up in meditation to be so informative in a weird way because I’ll go through a period of boredom and then I’ll go through a period of restlessness and then I’ll be really worrying about something or other that I have to do or a big talk that I have to give, whatever the hell it might be. Then I’ll go through a period of happiness. You experience so many emotions but every time you do, you simply refocus on your breath. It sounds stupid, doesn’t it? Meditation is so stupid in practice because of how simple it is. You’re focusing on your breath. What could be the benefit of that?
The research out there is conclusive around how helpful meditation can be for us. I don’t want to come off like I’m a hippy like, “I have a business degree and I’m more into productivity than anything and so meditation should be the furthest thing from my interest.” The research that’s been conducted around how we manage our attention shows that in an average moment, we dedicate 53% of our attention to whatever is in front of us. We basically leave half of our attention on the table. I don’t really have to talk about this because it’s obvious and everybody’s experienced this. We’re trying to work but then we remember that we forgot to close the garage door when we left in the morning or we begin to worry about what we have to do next or we begin to think, “Oh, crap, I have to focus on this now,” or we begin to worry or we get distracted. Because of all these things, most of which are internal, we only bring about half of our attention to what’s in front of us.
What the neurological research and the attention research around meditation shows is that we can up that number. Instead of brining 53% of our attention to what’s in front of us, we can bring 63% and then 73, 83, 93. I don’t like the word ‘efficiency’ especially as far as productivity is concerned. It reduces the idea down to something’s that really cold and corporate and it’s all about a spreadsheet. There’s no better word to use. If you have two people, let’s say the average person who brings 53% of their attention to what’s in front of them and then you have somebody who brings 93% of their attention to what’s in front of them. The second person is going to accomplish twice as much in the same amount of time. They’re going to get eight hours of work done in four hours because they manage their focus that much more intelligently. This goes to the idea that our work benefits from all the attention and all the energy we can possibly bring to it.
We used to work in factories doing simple and repetitive work that didn’t take much brain power. But when we moved from the factory to the office, suddenly instead of making widgets all day, we could show up hangover if we really wanted to, we could be distracted all day long, we could chat with people all day long and still crank out those widgets. When we went from the factory to the office, suddenly our work benefits from all the focus, attention and energy we can possibly bring to it. This idea – and you can tell that I get a bit excited by it. Excited might be not even a generous term. The idea that building up how much attention we can bring to the moment is something that belongs in a cave in India with some skinny iyogi meditating all day long. It’s bullshit frankly because our work benefits from that focus. One of the things that turns people off about meditation is that that the process is so simple it seems like you’re wasting time. It does take time to meditate but you get those five minutes back 10 times over throughout the day because of how it allows you, not only de-stress, which allows you to bring more calmness, more focus to your work. It also allows you to bring more of yourself to your work, which is a crucial.
Rob [40:33]: That’s a good way to say it. A lot of us focus on time management, blocking out our time and making sure that we’re being fairly efficient with things so that it doesn’t expand. That’s one of the three aspects. The second is energy. I always think about that as maybe turning on some music loudly or using caffeine strategically, which I’ve done for years. The third piece that I hadn’t really sunk home with me until I read your book is that there’s this third element and it’s this attention/focus. That is what you’re talking about here. If you’re able to clear your mind and get a harness, get a hold on all the threads going on, you can improve that third element. With all three of those in check, that’s when you’re absolutely your most productive and when you’re going to get the most done in a day.
Chris [41:16]: Exactly. It seems so simple, right? You just sit. It doesn’t matter where you sit. You don’t need a fancy meditation. You can do it on a chair if you really want to; just observe your breath. That’s it. Observe its [?], its flows. I like to focus on the sensations in my nose. The thing about meditation is that you attention always wonders off. That’s what it does. That’s the way your brain is wired. We’re wired to perceive threats in our environment. We’re wired to think of any mental threat that might come up and be distracted and derailed by that. But we don’t have many sabre-toothed tigers walking around us anymore. Instead, we stresses of the office. We have to bring more focus to the work that’s in front of us. The idea is that every time your mind wanders off to thinking about something else often times like any fantasy. It will wander to any and every fantasy, threat whatever you can think of. It will go there.
The idea is that whenever it does, you gently bring it back to your breath. I like to laugh a little bit at myself at how much my mind wanders off. You can’t be hard on yourself when it does. Gently bring it back and see it as the natural tendency of your mind. Every time you bring that attention back, the neuro signs behind meditation show that it heightens your executive functioning. It heightens the amount of control your brain has over itself. You might think like, “Doesn’t my brain already have a ton of control over itself?” But it doesn’t. You’ve probably experienced that feeling where you’re trying to fall asleep and your mind won’t shut off. There is the mind that’s always churning and always working away and won’t shut up and shut down for the night. But then there is the part of the mind that looks at the brain – maybe I’m sounding like a total hippy now – your mind observes your brain doing all these stuff. You can step back from your thoughts, de-clutter them a little bit, make them a bit calmer and allow them to not get the better of you. I fall asleep very quickly these days, often times within minutes. I’m usually not all that tired when I go to bed. My mind is calmer than it used to be.
Rob [43:36]: Mr. Chris Bailey, your book is ‘The Productivity Project’. Your website is alifeofproductivity.com. You have any other ways you’d like folks to keep in touch with you?
Chris [43:46]: Those are the two main ones. I always hate being selly about these stuff that I do.
Rob [43:51]: No, don’t sweat it.
Chris [43:52]: On Twitter.
Rob [43:53]: All right, what’s your handle?
Chris [43:54]: @wigglechicken.
Rob [43:56]: That’s nice.
Chris [43:58]: The business one is at @aloproductivity.
Rob [44:01]: Your book is available of Amazon and obviously it’s an audio book on Audible, which is how I’ve consumed it.
Chris [44:06]: Yeah, anywhere fine books are sold.
Rob [44:08]: Indeed. Thank you so much for taking the time to come on the show, Chris.
Chris [44:12]: Thanks for having me.
Rob [44:13]: If you have a question for us call our voicemail number at 8-8-8-8-0-1-9-6-9-0 or e-mail us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Out of Control’ by MoOt, used under creative comments. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 279 | How Google’s New Search Results Will Affect You
Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Dave Collins, SEO and internet marketing expert about Google’s new search results. They discuss how these recent changes will affect small business owners and what you should be doing to stay up to date.
Items mentioned in this episode:
Transcript
Mike [00:000]: In this episode of Startups For The Rest Of Us, I’m going to be talking to Dave Collins about how Google’s new search results will affect you. This is Startups For The Rest Of Us episode 279.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products. Whether you built your first product or you’re just thinking about it. I’m Mike.
Dave [00:25]: I’m Dave.
Mike [00:26]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How’re you doing this week, Dave?
Dave [00:30]: Hi. I’m fantastic. Thank you, Mike. How are you?
Mike [00:33]: I’m good, good. So I want to give you a quick introduction everybody. If you’re not familiar with who Dave Collins is, Dave is a SEO and Internet Marketing expert from Software Promotions, and he’s a frequent MicroCom speaker. He’s been doing this since 1997 or so?
Dave [00:48]: Yeah.
Mike [00:48]: Which is a really long time. I think I was still in college, and probably many of our listeners had not even gotten to college yet. So just to make you feel old there.
Dave [00:56]: Thanks very much.
Mike [00:57]: So I guess to get started with, let’s take a little bit of a step back and talk about some of the recent changes that have come up that Google has pushed out. First of all, why does it feel like everything is always changing in the world of SEO?
Dave [1:09]: So really it depends on who you ask. Every SEO question, that’s how the answers always start, so we can’t be proven wrong. But everything’s changed. It’s very, very fluid. Google has to keep moving and redefining the goal post.
It depends how cynical you are. Personally, I believe that Google keep changing everything, basically to provide their users with the best experience. But this isn’t with their interest in mind. It’s perverse. It’s with their interest in mind. As in, if every time we go to Google we don’t find what we’re looking for, there’s a limited number of searches that we can carry out before we start thinking about looking at Yahoo or Bing or DuckDuckGo or wherever. So there’s this constant cat and mouse game, in a way, between the people who are trying to trick Google, and the people who’re trying to manipulate the results, and Google who absolutely don’t want to be manipulated.
Mike [02:05]: I can’t imagine anybody trying to manipulate the Google search engine results.
Dave [02:09]: No, must be some sort of, I don’t know, science fiction type of thing, but there’s nothing to gain. Why on earth would someone want to do that?
Mike [02:16]: Right. So let’s talk about a little bit of recent history. What’s happened over the past couple of years? Obviously there’s been various updates. Most of them have been named like Panda, and things like that, that have come out, and for the most part, it seemed like these changes were good. It seemed like what they were trying to do was they were trying to identify the people who were trying to game the results, and modify things such that they would get rid of those people, or at least remove those people from the search engine results by identifying them in certain ways. Clearly they mishandled some of that, and there were certain people who got dropped completely, and then got added back in after some complaints and everything. But they at least had some basic ideas of what it is that they were trying to accomplish. What else has gone on recently that we need to be looking at?
Dave [02:58]: The trend. It all goes back, in a sense, is cat and mouse. That in a sense, days gone by, Google more or less came up publicly and said, “One of the ranking factors that we take into consideration might, for example, be how many websites link to you.” So all these scammy SEOs all over the world got very excited. A whole industry was born, and up to a point it’s still running, of products and services that will simply get you links.
So then Google changed the rules a little bit and said, “Well, actually, it’s not all links. It’s more about the quality of links.” But people didn’t listen. So then, they effectively said, “Okay, if you have too many really horrific links pointing to you, we’re going to penalize you. We’re going to slap you. And it hurts.”
So this game is constant and ongoing. People have a theory, “This makes a difference. Doing X results in an increase in traffic.” Everyone does it. Google stamped down on it. So they’ve stamped down on links. They’ve stamped down perversely on over-optimization. So depending on how you look at SEO, I looked at it as helping Google understand the content of your website. So if you do too much of helping Google to understand your content, you get penalized for it. And yeah, it’s ongoing. But the most recent of all is what we’ve seen in the last week or so with the total change with what’s happened to the ads on the right-hand side of the search results.
Mike [04:27]: So really, what we’re talking about is this giant cat and mouse game between people who are trying to game the system, and Google, and the rest of us who are caught in the middle of it, where there’s a lot of us who aren’t necessarily trying to game those search results, but because we’re caught in the middle we’re affected by them. So it seems to me that that’s part of the reason why Google is doing this. It’s not to directly hurt us or help us. It’s because they want to make the search results better, and they’re trying to basically fight these types of people who’re doing these gray hat or black hat strategies that they are not comfortable with and they don’t like. Are there any other reasons that they’re doing it?
Dave [05:03]: Well, all things lead back to profit when it comes to Google, which will surprise absolutely no one. So there are two things they’re trying to do. They’re trying to give us better results, which in turn feeds that profit. And they’re also trying to make more money out of people who are clicking on the ads, which is obviously where most of their revenue comes from.
But you touched on a really, really important point. That this whole idea of collateral damage, that you today don’t need to have done anything horrible black hat to get hit by one of these penalties. Like I said, Google redefined the rules of what’s good and bad. They don’t just move the goal post. They completely, sometimes, make them invisible and put them in different ends of this stadium. But you don’t need to have done anything wrong to get slapped. It’s just that, a, you might have inadvertently done something that Google have now decided, after the fact, is not a good thing. Or you might actually just be collateral damage. You’re caught up in it, and you’ve not actually done anything wrong, but Google have decided for whatever reason, you fall foul of their invisible unknown rules, and you take a hit, and it can be devastating.
Mike [06:10]: There’s a term that gets thrown around a little bit called, “The Google Slap,” which is essentially, somebody looks at your site and says, “We’re going to basically ban you from Google search results.” Is that different than this type of collateral damage that we’re talking about, where they’ve just changed the rules and you happen to be affected by them, versus they went in and they said, “We’re taking you out”?
Dave [06:30]: Yeah, there’s very much a difference. What they both have in common is when you see that your Google organic traffic has fallen from 120, 150 a day to 1 or 2 a day, irrespective which rule you’ve broken, or which type of penalty you’re experiencing, it feels the same. But they are very different. So in your Google Search Console – what used to be Google Webmaster Tools – you can see a “manual penalty”. And that’s exactly as the name implies. If Google have decided, for whatever reason, for instance, you have far too many horrible links of low quality this or that purely to manipulate them, they’ll apply a manual penalty, which is more or less someone in Google typing it into the Google PC – if they use a PC – and basically saying, “We don’t’ like this site. Let’s remove it from the listings.”
The other type is they change the rules, they roll out a new filter or a new algorithm, and you just fall. It’s not that they’re penalizing you, it’s just that they may have decided that your website isn’t as relevant for the people searching for these terms. So instead of, let’s say, having an average position of three or four, you’re suddenly on page two. So you’re going to plummet. But you’ve not actually been hit by a penalty, but you are very much a victim of these changes.
Mike [07:49]: So how much of this is based on their own self-interest, versus them wanting to help people be recognized for providing good content and providing great links out to the community?
Dave [08:01]: So, in a way, it all goes back to the same place. If Google provide you with a good user experience that means you’re going to continue using Google, which means that you’re going to click on some of these ads and they’re going to make more money. So they’re all very much interchangeable. But nowhere have I ever heard anyone from a senior position in Google saying that in some way they’re motivated, or driven, by the desire or the wish to make the world a better place. I’m not sure. I think Reddit used to have some sort of goal about making the world a better place, or making the world less sucky – something like that.
So Google’s great aspirational goal was – in days gone by – “Don’t be evil.”, or “Do no evil.” I can’t remember the exact wording.
Mike [08:45]: It was, “Don’t be evil.”
Dave [08:46]: “Don’t be evil.”
Mike [08:46]: They don’t still subscribe to that is what you’re saying?
Dave [08:48]: Well, it seems to have vanished. It’s a big company. There’s a lot of data, and it’s quite tricky to find references nowadays. But I’ve always thought of all the goals to set yourself, I have all sorts of personal and professional goals. And actually a little bit of me wants to make the world a very slightly better place by raising my children to be nice, good people with good values. But having a goal to do no evil, don’t be evil, what is that? They’ve drawn a line between bad, very bad, and evil. So they can do something bad, or they can even do something very, very, very bad. But they’re not going to quite cross that line into pure evil. So as we discussed earlier, does that mean murder, an act of just killing one person? That’s very bad, but not necessarily evil.
So if that’s what you’re about, if you were at least in the early days driven by not being evil, surely they could’ve set the bar a little bit higher?
Mike [0:09:47]: You would think. You would think.
Dave [09:48]: There’s room there, isn’t there?
Mike [09:50]: I suppose yeah, you’re right. There is definitely a little bit of room there. I don’t know how much.
So with all these changes that are going on, as I said before, it seems like the people are trying to do the right things, and trying to at least pay attention and help Google and provide them some guidance around what your website is doing and how it’s laid out and things like that, but not be overly helpful, because quite frankly, most of us just don’t have that kind of time on our hands. How is it that we’re supposed to keep up with changes like this? Are there resources that we can use? I know that Mark Cutts puts a bunch of stuff out, but it’s hard to stay up on top of all of that stuff. And there’s obviously tons of different websites that you can go to that are doing nothing but constantly talking about different tactics that you can use, and different strategies. But is there any resources out there that you can use – newsletters for example – that just, kind of, distill things down a little bit for you?
Dave [10:42]: So, again, you’ve touched on a really good point that – for want for better phrase – “normal people” don’t have time for this sort of thing. And even if you do — let’s say next week as an example, you carve out three hours and you’re going to do SEO. So Monday morning 9:00 till 12:00, you’re going to do SEO. It’s written in the diary, in the calendar. Well, once you get there, the very first thing you’re going to think, most likely, is, “Where on earth do I start?” And if you go searching for what people are saying, the SEO industry has no shortage of; let’s say, “opinionated people with questionable values”. Let’s put it that way. So a lot of people are going to say a lot of things, but the signal to noise ratio is absolutely horrific.
So Google have a whole load of amazing resources. I already mentioned Google Search Console. This is free. You just set it up. It takes a minute to set up, and it’s way better than a whole lot of SEO tools that actually a lot of people pay for. Then they also have no shortage of their information and resources for webmasters. Only a month or so ago, I think, they issued their latest webmaster guidelines. Trust me, this is not a document that you want to be reading. It doesn’t help.
But there is again – I’m going to be off Google’s Christmas card list forever by the end of this – but there’s a certain level of hypocrisy, because I always feel that up to a point, Google are kind of saying, “Don’t optimize. Don’t do SEO. We’re brilliant. Our spiders and robots and our coders, developers, we are brilliant at figuring out what’s on your site.” But then they also give you some information, and it’s like every time someone from Google opens their mouth and says something -=- you mentioned Mark Cutts who’s been out of that side of Google for quite a while – but they had the Mark Cutts version too. Every time he says something everyone quotes and it goes back to that cat and mouse. People go frantically to change this, or add this add-on, or put this in their agenda, or look into the latest thing, and it doesn’t really end.
There’s some really good information out there. There’s SearchEngineLand.com, which I think they do daily email summaries. But there too, to be honest, there’s so much speculation in the world of SEO, so much, that it’s really hard to find a trusted source.
We got a newsletter called Google Demistifier. It goes out every Tuesday, only covers one topic, and we try to be completely biased, because we’re looking at a lot of data, a lot of people’s accounts, so we get a good idea for what’s out there.
But doing SEO is incredibly difficult today. It’s become a lot more complicated. It’s become more time consuming. And I think probably a fair number of people who listen to this podcast will relate to the fact it’s pretty scary doing SEO, because we have this fear of, “If we do this and Google don’t like it, what’s going to happen?” And I think that’s part of the problem for the industry, or for the area of SEO that we all face. But I do believe that nowadays we’ve got to the point where you can’t sit there and do nothing anymore. You actually have to more or less proactively start doing this, even if it’s scary.
Mike [13:57]: Now one of the things you mentioned there was the Google Search Console, which is not the same as the Webmaster Tools.
Dave [14:03]: It is the same. They just renamed it, just to confuse people a little bit.
Mike [14:08]: Because it looks completely different than the Webmaster Tool.
Dave [14:11]: They’ve done it up. You see if you log in to Webmaster Tool, it just redirects you now to Search Console.
Mike [14:18]: Oh, I see.
Dave [14:18]: They’ve done it up. It’s a seriously useful resource. It’s quite incredible the information they give you.
Mike [14:22]: Got it. Got it. Okay, because yeah, that makes a little bit more sense. Because when you do log in – I have come across that page before, and it obviously lists out a bunch of different web properties that you have, but it’s not necessarily showing you things that you have not verified through your DNS records, for example.
Dave [14:41]: Exactly. It’s not a be all and end all. But there is something so useful in there, which there’s a section in the Search Console called HTML Improvements. And ultimately, what HTML Improvements is, is Google pointing at your website and saying, “This is what we would suggest you fix on your website.” So there’s a lot of hype and there’s a lot of misleading information, but when Google basically say, “Fix these five issues on your website, because this can only help your SEO,” in my opinion, that’s worth paying attention to.
Mike [15:15]: Got it. So we’ve got things like some of the different Webmaster Tools, the Google Search Console, the newsletter that you guys have, but a couple of other resources that we just talked about – we’ll link some of those up in the show notes. So those are some of the places where a small business owner can go to at least learn some of these things. Now let’s talk about one of the main things that we really came onto the show to talk about, which was, what are some of the recent changes that they have done? What are the biggest changes that Google has made recently that is probably going to affect most of the listeners here?
Dave [15:46]: So this is something that’s happened just in the last week – very, very recent. And basically what they’ve done is they’ve taken away all the ads, all the text ads that are on the right-hand side, that were on the right-hand side. They’re gone. This is obviously on the desktop; mobile is a completely different ballgame. But on desktop, there are no longer ads on the right-hand side. Before, they were up to three ads on top, while now they have up to four ads on top. Usually it is four ads on top. And up to three at the bottom. So what this means is when you carry out search on Google, instead of seeing the standard couple of ads at the top, organic listings, and all down the side the actual paid ads, it’s totally, totally different. It looks different; it feels different. I’m actually pretty amazed, in a sense, by how little fuss has been about this. This is, in my opinion, the biggest change that I’ve seen Google roll out, ever, since possibly – maybe since introduction of AdWords. Maybe it’s even bigger than that. And it’s going to affect, not everyone, but almost everyone.
Mike [16:49]: So we’ve talked a little bit before about why Google has made some of the previous changes. Are there any specific reasons why they made this particular change?
Dave [16:57]: Well, obviously, it’s all speculation, but the only possible incentive that I can see for Google displaying four ads at the top instead of potentially no ads at the top is revenue. I can’t see any other reason whatsoever. It’s certainly not about quality of the results that are shown, because as we all know, we’ve all experienced searching something in the ads that we click on aren’t necessarily relevant to what we’re looking for. So this is not a quality update. This has to be driven, in my opinion, solely by revenue.
Mike [17:31]: So we talked a little bit before about a lot of us being collateral damage. What are the downsides to this particular change that they’ve made?
Dave [17:38]: To be honest, I don’t want to be all “doom and gloom”, but there are a lot of negatives. So what we’re now seeing is potentially 11 ads on the first page’s search results is now at best it’s 7. That’s going to have a major impact; more than half of them at the top. And it’s safe to say that, with time, those top four slots are going to start costing a lot more. But ultimately, if have an ad with an average position of eight, that’s on page two. And you can probably – it’s safe to assume most people don’t even get to page two when they’re looking for something. They refine the actual search. So that’s one thing.
The actual organic results – the SEO results, if you like – they really got pushed down. So the typical format, if you carry out search at Google, you now see four ads, you see the knowledge graph, which is effectively Google scraping websites and just pasting that information in, that can still be on the right-hand side. But quite often it’s below the ads that you have, ads knowledge graph.
And on a recent blog post that I wrote I took a screenshot of the search results for things to do in London. And you had four ads, a load of knowledge graph information, and right at the bottom – this is at pretty high resolution on my monitor – at the bottom there was one single organic listing being shown. And sure I can scroll down the page, but if I’m going to find what I’m looking for, why would I? There’s all sorts of theories out there, but ultimately no one knows what’s going to happen. But this is definitely going to have an enormous impact on SEO, and I don’t think it’s going to be positive.
I think the biggest ramification that we’re going to see is some AdWords account holders – if they’re especially with let’s say low margin products or high competition, or both – they’re going to be squeezed out. They’re going to be squeezed out by companies with budgets that actually can justify, make sense, or perhaps they’re just oblivious to how much they need to spend for these top four. And I think that’s going to hurt them quite badly.
And the other negative I can think of is I can’t see how this is actually going to be positive for the user, for the person going to Google and searching. I just can’t really see that happening.
Mike [19:55]: So it doesn’t sound like there’s any reasons for Google doing this other than basically making money. It’s not really because it was for the end user experience. It was basically because they want to make more money from this. And obviously, us as website owners, we are in an unfortunate position where Google has such power over the traffic on the Internet that there’s really just not anything that we can do about it, except just deal with the aftermath of it. We’ve talked about a lot of the downsides for us. Are there any upsides to this change that they’ve made?
Dave [20:24]: Yeah, there definitely are some positives, definitely. I think one, I think when you advertise on AdWords, you’re going to see hopefully some more meaningful and accurate average positions. So the days before these changes where you could get three ads at the top and let’s say seven or eight ads on the side, adding fourth position could be the very top at the right-hand side and that could actually sometimes be more effective than being in position one, two, or three, because you appear to be the top. So number four could most likely do better than positions two and three. So that gets a whole lot simpler, because now we know top four means exactly that. There is no right-hand side. There’s going to be better clarity there.
I also think – potentially, it’s all theory – there may be more consistency in ads as well; that they’re starting to look more familiar. Things like the side links aren’t jumping out, so that sort of evens things out a little bit.
Definitely, if your ad in position four for the most part, you’re going to be happy. Then there’s also – I should’ve mentioned this already — the other thing that could be on the right-hand side, as well as the knowledge graph – in other words the Google scrape – Google shopping ads are showing up on the right-hand side still as well. So if you’re using Google shopping ads, you’re probably going to see quite a significant increase, and you’re probably going to see that working quite well for you. But I have my own issues and reservations with Google shopping. But yeah, it’s not all bad.
Mike [21:56]: Right. But again, most of these push people down the path of spending money with Google in order to get to some of those top rankings, with the exception of those situations where you end up in the long-tail search results, and you happen to be at the top. But you’re still going to be below paid listings at that point.
Dave [22:14]: Exactly. So irrespective which viewpoint you take, and which stance you take, it seems every direction you look it’s all about an increase in revenue.
Mike [22:24]: Right, right. So based on that, where is this headed? Is this the only change that you can see them making in the near future, or are there other things that they’ve, kind of, announced that they’re going to be rolling out in the near future that are things that we need to pay attention to, and take a look at, or at least be aware of?
Dave [22:41]: So all of this is very new. So right now, there’s some noise about this on, for instance, the WebmasterWorld Forums. And some people are seeing an increasing click-through-rate, for instance. Some people are seeing a decrease in cost per conversion, which is all very well and good, but it’s all new. So it doesn’t mean anything. New behavior isn’t the same as what you’re going to expect to see in four, five weeks, six weeks down the line. So Google are in no way putting their feet up on the desk now and saying, “We are now done. Our goal to not be evil, and to maximize our ad revenue is complete. We’re finished. Everything’s done here. Now we’ll just let the internet run itself.”
There are some predictions being made already, which is beyond insane, but no one knows what’s going to be ahead. But one thing that’s guaranteed, Google are not going to – first of all, they’re not going to finish to try and maximize their ad revenue – which I don’t have any problem with. They’re certainly not going to finish trying to provide better organic results, so that we find what we’re looking for, so that we keep coming back to Google.
And you see that touches on the aspect of this that I, personally, find most interesting. This is the first update that I’ve seen by Google that’s actually left me scratching my head wondering, “Aside from revenue, why would they do this?” I wrote this in this blog post that they wrote about it. This is the very first time that I actually started to do the unthinkable, which was look at options like Bing. I actually went to Bing and DuckDuckGo, because there’s already – for some searches – it looks like the results are very ad-heavy. And they are. I can’t even imagine what it’s like at a low resolution, where really you are only going to see ads on your screen without scrolling the mouse. And we’re all lazy. We only scroll the mouse if we have to.
So as we touched on when we were discussing this, I have to wonder how many people are going to want to go to a search engine when the results that they see are primarily dominated by ads. If they keep going in this direction and become mainly, if not solely, ads that are on display, I can’t see people wanting that experience. I mean, would you?
Mike [24:59]: No, probably would not.
Dave [25:00]: No. It’s a strange, sort of, future that they’re potentially carving out for themselves. But I do have faith in Google that they’re smart people; they will have thought about this. I’d love to hear Google’s response. But, yeah, I’m completely baffled and I’m pretty much certain that what’s ahead of us is more change. I can’t overstress it. It won’t even be the first move in something. It’s not even really starting. It’s all rolling out. It’s all new.
I think another interesting aspect of this brings it more in line with the mobile experience. So for a while now, you could have four ads at the top of the mobile result. You know, search on your mobile phone. And I think, again speculation, but I think it’s very much about this convergence of devices that there are blurred, more blurrier maybe, blurrier lines between desktop, PC, smart phone, tablet, laptop, and so on. And I think Google want to give this consistent experience across all devices. So I suspect, I do think that’s probably part of it. But, again, it all goes back to profit.
Mike [26:08]: So, I guess we’ve talked a lot about what they are currently doing, what they have done, what it means for us, but we haven’t really talked about the one issue that I think is probably most important to the people listening to this is, what is it that we should be doing? Because obviously what we don’t want to do is sit in the middle of that game of cat and mouse between Google and people who are doing black hat SEO tricks, and end up – we don’t want to spin our wheels, we don’t want to do things that don’t matter – but we want to maximize our time and the return on the investment in that time. So what do we do?
Dave [26:40]: So the first thing to do, I think, is if there’s ever been a good time to put SEO and Google on your – let’s say, take it off your “to-do” list and put it on your actual radar – so this is something you start to pay attention to. Now is a really good time. I’ve heard a few people express this, sort of, helplessness along lines of, “Well, if organic is going down there’s nothing we can do about it.” But I’m a big fan – a big believer – in staying informed. And I think more than ever we have to stop paying more attention. We need – especially if you’re spending on AdWords – you really need to pay very close attention to, for instance, average position. Which I think a week or so ago, before this change, your average position was an indicator, but not as important as a lot of people thought. Whereas now it’s vital. If you’re consistently getting your ads in average position five, it’s very, very safe to say you’re going to see a huge drop in performance, and you’re going to have to market his informed decision whether it’s worth doing what you can to either try and get the ad higher by, in a way, gaming the system, getting a better quality score, or if you’re actually going to simply pay for it to get in that top four.
So, more than ever, you’re going to have to know your numbers with your AdWords accounts. And same with SEO. I can’t even begin to guess right now what effect we’re all going to see in our organic data, other than, say, it’s going to be very big. But the one thing I definitely want to know is I’d want to know what’s happening. I’d want to know if my organic traffic is dropping, by how much – if that’s a really vital channel for me.
If I’m a business and, let’s say, I don’t know, organic traffic accounts for 60% of our traffic and let’s say 50% of our sales, it could be time to diversify into other channels, and start spending a bit of time – maybe money – in some of the other options. But it’s really about being informed. And I think one strategy that will actually work for both – for AdWords and organic – is long-tail keywords. I think these are a potential – I won’t say a life-raft, but let’s say a lifebelt – in that, AdWords for instance, you’re not going to have as much competition with the long-tail keywords. So these are the keywords that aren’t so obvious, that aren’t getting quite as many searches as the big obvious ones, but add them together and they can be very sizeable. So I think in AdWords, long-tail keywords could be a very good strategy right now, because you’re going to have less competition meaning, you can make sure that you’re in that top four throughout.
And long-tail keywords’ always have been a good SEO strategy, but bearing in mind that the SEO results are getting squeezed down right to the bottom of the page, I think more than ever this has to become a more or less a standard SEO strategy from now. Well, I won’t say forever, but from now until the next major update.
Mike [29:36]: And just to be clear, one of the things that you’ve alluded to, but didn’t directly call out, is that there’s a very big difference between what your ad placement ranking is – whether you’re third or fourth position – versus your search engine result ranking. Those are two entirely different things, and you would monitor them entirely differently using different tools.
Dave [29:53]: Yeah, absolutely. There’s a huge – it’s almost impossible to pin down the differences, they’re so many – but it’s most simple obviously for AdWords you get to decide if you want to go up, either tweak the system or spend more. With SEO, sadly, it’s never quite that simple.
Mike [30:11]: So essentially, all the things that you’ve talked to boil down to what amounts to four different things that we need to be doing. First one is to monitor the placement of your ads and keywords. Are you number one, number four for ads – or in terms of your keywords – are you on the first page or are you on the fifteenth page? So that’s the first recommendation that we can take out of this.
The second one is monitoring your traffic levels, and making sure that you know where they’re headed based on other things that you’re doing. The third one is using the Google Search Console to identify things that you need to do on your website to either fix usability issues, or improving your search presence. Because Google will tell you directly what it is that you have to do. And then the last one is to really just stay, at least peripherally, informed about what’s going on, either using your newsletter, or the WebmasterWorld Forums or a variety of the different things that Google has provided. Is there anything else that you want to add to that list?
Dave [31:06]: Yeah, I’d say and the other thing is hidden number five is most businesses have SEO on their to-do list. In other words, we all mean to get round to it at some point, but there are always more pressing things to be done. And I think we’re now are at that time where it’s become, I’d say, pretty close to mission critical. It doesn’t mean you need to invest ten hours a week. We don’t have ten hours a week. But if you can be keeping an eye on this, and if you can just schedule 30 minutes a week – just to keep an eye on these things – and at least respond to the most pressing issues, in my opinion, that’s seriously time well-spent.
Mike [31:41]: And that could be something incorporated into “Marketing Monday” of all days.
Dave [31:44]: Absolutely. Exactly. Or Mocking Wednesday.
Mike [31:48]: Well, thanks for coming on, Dave. I really appreciate you taking the time to step in and help our listeners understand a little bit better some of the changes that they’re going to be seeing from Google, or what Google has already rolled out.
Dave [31:58]: Thank you very much. I love the show and I’m delighted to be here again.
Mike [32:02]: And if you have a question for us, you can call it into our voicemail number at 1-888-801-960, or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under creative commons. Subscribe to us on iTunes by searching for “startups” and visit StartupsForTheRestOfUs.com for full transcript of each episode. Thanks for listening and we’ll see you next time.
