Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about the common mistakes people make when A/B testing.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of “Startups for the Rest of Us,” Rob and I are going to be talking about nine common A-B testing mistakes people make. This is “Startups for the Rest of Us” Episode 258.
[00:07]: [music plays]
Mike [00:15]: 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 [00:24]: And I’m Rob.
Mike [00:25]: And we’re here to share experiences to help you avoid the same mistakes we’ve made. What’s going on this week Rob?
Rob [00:29]: You know, at this point, it’s almost October 1st, and that gives us just about six weeks to get our stuff done before Thanksgiving happens here in the States. And frankly, the world goes into kind of holiday mode, it seems. So I’ve really been thinking about what the next six or seven weeks holds. I know by the time this goes live, it’ll probably be mid-October. So you only have a month, but think about that with whatever you’re doing. If you have another two to three weeks left to develop a big feature that you wanted to launch, you’re probably not going to launch it until January at this point. Maybe you could launch it first week of December, but it’s just so choppy from here on out. And I know there’s still three months left in the year, but it just starts getting touch-and-go here over the next few months as kind of the retail space – it’s great for eCommerce, not typically that good for B-to-B apps in terms of growth, and in terms of finding new customers. Because our heads are with plans of hanging out with family and doing other things. And a lot of folks are not necessarily like about, what’s the new app that they can sign up with and have a new trial running over your Thanksgiving break or your Christmas break. How about you, what’s going on?
Mike [01:35]: Well, I went on a personal retreat last weekend. And I found it really helpful. I came out of it kind of settled and at peace with myself on a number of different fronts, and more or less really raring to go and go after a couple of different key points that came out of my retreat. So kind of looking forward to the next six to twelve weeks and see what happens.
Rob [01:53]: When you say personal retreat, was it, you thought about work stuff or personal as well?
Mike [01:58]: Personal and work, so like I kind of dedicated some time to think about like things that were going on in my personal life and then also, in terms of like the business, and where I want to go and kind of what I want to do next. So I definitely sat down and analyzed a lot of things that have gone on over the past few years. Again, both on the personal front and on the business front. And then just helps me to make decisions on where to go next.
Rob [02:19]: And where are you going next?
Mike [02:21]: Well, it’s going to be validation for a couple of different ideas. And I basically went through a process that I had laid out in my book last year, and started ranking some of the different ideas and trying to figure out which one I should start validating first. So I kind of got it narrowed down a little bit. And right now, I’m going through the validation process with a bunch of people. I’ve had half a dozen conversations, and I’ve got at least half a dozen more scheduled over the next several days. And basically, like every day one of my tasks is to go through and start lining up more people to talk to for those conversations. So they’re going well so far. And I’ll just kind of see where it takes us. Until I get further through the process, I’ll probably just keep it quiet, I guess a little bit quiet for the time being. But I will talk about it probably a lot more on the podcast as things progress.
Rob [03:03]: Very nice. We have a slew of new iTunes reviews, and I won’t go through them all, but we had one from a couple of months ago, and it says, “I listen while I eat sandwiches. Really enjoy listening to the show, general candor and advice. Your knowledge is being used directly to introduce [Deli?] Empire, which includes a couple of different brands,” he says, “called Sandwich [Knob?] and Seafood [Dial?] to the world. Looking forward to catching up on the newer episodes. Another review says, “The last couple of months has been like watching Netflix.” And EA760 says, “Binged on all Rob and Mike’s past episodes and now have to wait a whole week for new episodes. Each episode is full of so much great info for the self-fronted entrepreneur. It’s the only podcast I listen to at 1x speed, because I’m constantly rewinding to take down notes. Thank you for the consistently invaluable advice and insight.” So thanks so much for your 5-star reviews. Even if you don’t want to write a full commentary like that, if you could log into iTunes, Downcast, Stitcher and plunk us a 5-star if you get any value out of the show, we would really appreciate it.
Mike [04:03]: One other thing to note: about a month ago, I did an interview with Matthew Paulson on email marketing demystified. And his book just came out, so it’s listed on Amazon right now, and we’ll link that up onto the show. But I just wanted to mention that because the episode did come out a little while ago. So before we dive into today’s episode, there is a listener question that we want to address. And this one comes in from Christian, and he says, “Blockers like Ghost Read, Privacy Badger, etc. are blocking third-party widgets like Qualaroo, Mixpanel and others. As content blockers grow in popularity, do you think this will kill Java script widget products?”
Rob [04:35]: So I think that the answer is no. I do think it can have an impact on them. I also know that some of these third-party blockers are getting a little, I’ll say ambitious, and they’re blocking things that aren’t exactly ad widgets. And that if you report – like at one point, the Drip JavaScript got blocked by an ad blocker. And when I reported it, they said, “Oh, you’re not an advertising platform. That’s okay.” And they unblocked it. So I don’t have experience with Ghost Read, Privacy Badger, to know if they’re doing this intentionally or if it’s accidentally, because technically most of these guys don’t want to block non-ads. They really just want to block ad networks and that kind of tracking and cookie stuff. I think some of them are getting, like I said, a little ambitious. And if they start to dive in and block things like Qualaroo or Mixpanel and other things, they’re going to start breaking the web at some point. Because people are relying on these services often to have some mission critical functionality. So in my estimation, number one, most people aren’t going to install these ad blockers. I mean, it’s a lot of people in our circles. But if you look at the total number of people on the internet versus the total number of people with ad blockers, it’s a tiny, tiny percentage. And then secondarily, I think that it’s kind of like you can go around the internet with cookies blocked and JavaScript blocked, but it breaks a lot of things. And that’s where these guys are going to have to find their line, because if they push it too far and it actually starts breaking things that require the site needs to do the fundamental functions, then they’re going to have to back off with that. And I think there will be backlash if they push it too far. So to answer that, the original question, I don’t think these are going to kill JS widget products. They may put a small damper on it on the short term as things adjust, but long-term, I feel like these things are going to continue.
Mike [06:17]: Yeah, I’m in agreement with you. I don’t think that they’re going to take over the world and get rid of every JavaScript widget product that’s out there. The fact of the matter is there’s a bunch of these products out there, and these types of products have been around easily for at least 10 years. And so like ad blockers of some kind, and this is really a variation of those, is like an ad blocker. But those have been out for at least 10 years and like I still don’t use an ad blocker. I can’t name anybody off the top of my head who does. I know that people do use them and I know that historically I’ve seen them advertised around and seen different places where they are present. But the bulk of the internet is not using them, and I just don’t think they’re going to become popular enough to make that significant of a dent in the businesses that they’re trying to I guess go against.
Rob [07:02]: So what are we talking about today for the main topic?
Mike [07:04]: Well, today’s topic is nine common A-B testing mistakes that people make. And this topic doesn’t come from any specific source, but I did use a bunch of different resources from Kissmetrics and kickSprout and ConversionXL to essentially put together this list. So some of the things are repeated on their list, but they have, I guess if you were to total up all of theirs, there’s probably 25 or so. It seemed like there was a bunch of low-hanging fruit that were highly overlapped between them. So I essentially concentrated on those for the outline for this episode. But the main gist of this is that a lot of people will advocate that you do A-B testing, but when you start getting into A-B testing, there is a ton of things that people will simply accept as true or fact. And unfortunately those things have a lot of subtle nuances to them. And I think that the main idea that will become a little bit more clear as we start going through these different mistakes that people are making.
Rob [07:54]: Let’s dive in.
Mike [07:55]: So the first one, is testing random stuff. And everyone’s probably heard about the 41 shades of blue test at Google where they were testing 41 different shades of blue to figure out which one would convert better on one of the Google buttons. And I would classify that as essentially random stuff. Because I look at something like that, it’s like, why would you even test that? What would possess Google to do that? And the fact is that they’ve got that kind of time on their hands to be able to do something like that, and they don’t know what else to do. And my question would be, is that really the best place in your sales funnel to be testing. And in their case, it may very well have, because they’ve only got a one-page website that they want people to click through on that button. So for them, it kind of makes sense. But if you’re going to start A-B testing, really figure out where you could make it the biggest impact on your sales funnel. Don’t just randomly test stuff on your website, changing buttons from one color to another. Really look at your sales funnel and try to analyze where could you make the biggest impact. So for example, if you have a 10-stage sales funnel, and you have let’s say 10 sales per month, and at the last stage of your sales funnel, you have 60 people. Well, if you can increase that last stage by just 10%, that conversion rate from the last stage to the paying customer, then you’re going to convert an extra six customers. Well, that just raises your revenue by 60%. That 10% conversion rate increase will raise your revenue by 60%. So your definitely key piece is where you can increase revenue, but knowing where to tweak those buttons is really, really important.
Rob [09:25]: Yeah, and I mean, to answer your earlier kind of ponderance of Google is I think the reason they test all the shades of blue is because they have such an enormous volume, that they can, and they can get definitive results and they can repeat them. Whereas, with someone, if you have 10,000 uniques a month or 20-30,000 uniques a month, you can’t test that many things, and it does become a waste of time. So the point you’re making here is don’t test things that aren’t going to have a really big impact on your numbers, on the numbers that matter too, right? It’s what’s going to have the biggest impact on revenue or on trial count, and look at those. Focus on those first, because that is your low-hanging fruit. And you’re not off wandering, trying to test button colors, which at some point may be worthwhile, but with our meager 30-40,000 uniques a month, it might take you quite a long time to get any type of result from that.
Mike [10:13]: Yeah, and all of that is about, just having some sort of a methodology that you’re following and knowing where you can get the most reward for the things that you’re doing or identifying whether you’re at a local maximum to do broad testing or if you really need to narrow down your focus on to those little things, like as you mentioned, the button colors. I mean, maybe that’s the best place for your time. But again, just testing random things, is not a good strategy. Like, you have to have a strategy going into this.
Rob [10:40]: And the second common A-B testing mistake is assuming that tests other people have run are going to turn out the same for your business. So it’s basically looking at a website, reading a blog post about someone who ran a test where the red button outperformed the green button, and then just changing all your buttons to red without testing. The point here is that you shouldn’t take the stuff as face-value that you read on the internet. Not that it would be fake, but it’s just not going to work for your audience. So good examples of this are, do you ask for credit card up front, or do you allow credit card without a trial, right? So that could be one thing that you might read about and you hear the rules of thumb. We talk about them here on this show for sure, and there’s other discussions. And you can take that as a default and then test it. Same thing with button colors. There’s all this debate about what button colors work well and orange and yellow are often cited as the best. So that’s kind of the design rule of thumb that I would start with a my control, and then I would test from there – even long form versus short form, landing pages or home pages, same thing. You’ll hear certain copywriters swear by long form, and then you’ll hear people run tests and have there be no difference and even have the long form perform worse. We actually had this with Micropreneur.com landing page, where we had a short form, a long form and basically a medium form. And the middle one outperformed the other two in repeated split tests, and that’s never something that I’ve heard in particular, kind of a mid-form page would work. But once we tested it, we realized that was the best result for us.
Mike [12:10]: The third common mistake people make is not running tests long enough. Your tests need to be run long enough in order for it to be statistically significant. And I’m not going to go into the math behind that, but essentially you need to be reasonably sure and confident that enough people have gone through that test that you can look at that and say, yes, this is statistically significant. I would say rule of thumb for using something like this, is if you’re not sure what that really means, then you should have at least 100 conversions coming through on the tests that you’re running. And that’s not 100 visitors, it’s 100 conversions actually going through in both directions. And then you also want to run those tests for at least one to two weeks. Don’t run a test like over the weekend or for a partial week. Running it longer is generally better. Obviously there’s exceptions to that, but you want to run it for at least one week, if not at least two weeks, so that you’re not dealing with any sort of variation where you get this influx of traffic from a particular website, and then it drops off very quickly, because those types of events that happen can radically alter the skew of the numbers and the percentages and how those number map out inside of you’re A-B test.
Rob [13:13]: Yeah, the formulas for A-B testing and getting the statistical significance are a little bit complicated. And there is a website out there, and I forget who does this, but he basically split-tested the same two pages against each other, and they will have different statistical significance, like one will outperform the other by 10 or 20% with statistical significance. And that’s just kind of a downer to think about it, that split tests are not, they’re not fool-proof basically, right? You’re not going to get the exact same response from the same page if you split the audience. It is fallible. And that’s how I kind of think about split testing, is it’s like a good guide, it’s the best we can do, but there’s always room for error, not in terms of the math itself being wrong, but just that the way the audience is split is not going to be identical. And there’s room for it not to be statistically significant, even if it looks like it should be. It’s kind of easy to trip yourself up on that, I think. The fourth common A-B testing mistake is not killing insignificant tests. What you’ll notice is that most of the tests you run are not going to show statistically significant differences. And if you have a bunch of tests running or even if you have one test and it’s running for a long time, and there’s not a significant difference, then it’s basically a distraction, right? It could negatively influence other tests. It could also be a waste of your time because you only have so many visitors and so much time to run these tests that you really want bigger wins. You don’t want marginal ones that are going to take forever to identify themselves, but still not be significant. The nice part about getting something drastically different in terms of results is those tests tend to run very quickly, and those are the kind of wins you want to go after. So if you start a test and things are close, I tend to shut them down pretty early and try to do something more dramatic to get a more dramatic result.
Mike [15:02]: The flip side of that is that you don’t want to ignore small gains if they are significant. So if you’re able to get a small statistically significant gain over the course of two weeks or four weeks or something like that, there’s no reason to not implement it. Because if you can get a 1% day over day gain, then over a course of a year, that’s a 37x yearly gain. So there’s clearly benefits to doing that, but only if it actually is statistically significant. The fifth mistake is to not consider the needs of your prospects. So when you’re looking to determine which tests you’re going to run, think about how this test is going to impact your prospects. When they’re looking at a website that you’re changing, what information are you taking away or adding to the site, and specifically why are you doing that? How is it going to help them or how is it going to benefit them? Is it going to move them closer to a decision faster or is it going to do so at the expense of making them feel tricked down the road and experiencing some sort of buyer’s remorse. So that’s something you have to be a little bit careful of. And you could recognize that if you have higher conversions, but also a higher churn down the road. And unfortunately you’re not going to see that churn until they get past the point of paying you, and they’re going to ask for refunds or cancel your service. So you will see those a little bit further down the road, and you may have to back pedal on some of your tests, especially if it showed that significant increase and you implemented it as kind of a permanent change, and then down the road you see that churn. You’re going to have to back that out. But those are the types of things that you need to watch for and be mindful of what it is that the person who is looking at the website are seeing.
Rob [16:33]: Our sixth mistake is trying to move too fast. What we mean by that is testing too many things at the same time on the same page is really hard. This is multi-variant testing, you need a lot of traffic to do this. And you kind of need even more of a plan because of the complexity you run into. Same thing with running too many simultaneous tests, right? If you’re testing headlines on the homepage and then something on the tour page and then something else on the pricing page, these things can interact with each other. And it’s easy to make a mistake and either misattribute something or, like you said with the fifth mistake, it’s easy to make a change and then not realize there’s a kind of a downward element to it that doesn’t show up for two or three months. So if you’re just starting out or you’re really not an expert in split-testing, this is always something I say, tell people to do, is not to jump into multi-variant testing, but to kind of run one test at a time until you feel comfortable with it, and you feel like you’re able to make progress and interpret the results before you jump in to try to do any type of multi-variant stuff.
Mike [17:30]: The seventh mistake is to not use any widely accepted A-B testing tools. And there are a lot of A-B testing frameworks and libraries out there. Some people will decide that they’re going to build their own. I would question whether or not that’s a good use of your time, because there are so many good tools out there. In terms of the A-B testing frameworks and libraries themselves, I would be somewhat cautious about using something that was an open source library or something that was freely available, just in case the math behind it doesn’t work. And I did run into a case where I started using a library and then realized after the fact that some of my results didn’t seem to quite be matching up with what I would have expected, and I started digging. And I found out that the way they had implemented the A-B testing framework itself, was actually wrong. It wasn’t a real A-B test, it was actually kind of, I forget the specifics of it, but it literally did not work right. So you do have to be careful when you start going out and doing those things. The common wisdom is to basically do an A-A test where you’re testing the same thing against itself to be sure that the tool you’re using is a valid tool to be using. But there’s a lot of different things that you can use like Google Analytics, Optimizely, Visual Website Optimizer, Unbounce, all these types of things make your life easier when you’re trying to do A-B tests, and make sure you’re getting statistically significant results.
Rob [18:48]: Our eighth mistake for A-B testing is that your tests should have a specific hypothesis. In other words, don’t run a test just to “see what happens.” Run it with a desired result in mind, typically this is to increase the number of people who click to the next page, or it’s to increase the number of trials that you get out of this, or increasing engagement with a particular page. The problem with running one just to see what happens is it’s hard to learn anything unless you actually have a goal in mind. So you might see the result, but you aren’t able to match it against your beliefs about what is actually going on. And frankly, if you’re just testing to see what happens, your time is probably better spent elsewhere rewriting copy on another page or just doing some other type of marketing activity.
Mike [19:30]: Yeah, I think the basic idea behind this is to really kind of challenge what your own beliefs are. To make sure that, one, you’re on the right track, and, two, that if you’re not on the right track, that you can be corrected. As Rob said, if you’re just running the tests to see what happens, the reason you’re not learning anything is because there’s no opportunity for you to be wrong. And that’s really what you’re trying to do is try to find those places where you believe something to be true and you can either verifiably prove it, or verifiably disprove it. If you just do it to see what happens, there is no opportunity for that to happen. And the last A-B test mistake that people make is to ignore the potential for skewed or broken tests. Don’t ever assume that all your data is correct. There’s plenty of opportunities for either bad tooling or things to be blocked sometimes within the communication framework. There could be seasonal shifts. So for example, if you run a test in the middle of December, for example, then there’s probably a very high likelihood that that test is going to be dramatically impacted by the amount of online shopping that’s going on. There’s definitely seasonal things that can happen throughout the year. Over at the summer for example, people are searching for different things than they are in the winter. You can also run into issues where if you’re sending out emails to your email list, then those subscribers are going to have a bit of familiarity of who you are and what your website looks like. So those people are going to have different conversion rates than a new visitor to your website. And then of course, you have to also deal with the fact that there’s sometimes parts of your website that are just going to be broken within a web browser. And you may or may not know that. So those are the types of things that you need to be at least mindful of and realize that A-B testing itself, it does generally work mathematically, but there’s always those things that you have to be careful of because it’s not a foolproof mechanism. It’s a tool, and like any other tool, it can be broken in certain ways. So you have to be careful that you just don’t accept everything as fact, and dig a little bit to make sure that nothing’s going wrong. So to do a quick recap, the nine common A-B testing mistakes are: 1) Testing just randomly instead of having a plan. 2) Assuming that other tests are going to be valid for your business. 3) Not running tests long enough. 4) Not killing insignificant tests quickly enough. 5) Not considering the needs of your prospects. 6) Trying to go too fast too quickly. 7) Not using A-B testing tools. 8) Not having a specific hypothesis in mind when doing A-B tests. 9) Ignore the potential for skewed or broken tests.
Rob [22:02]: 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 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 257 | Mistakes Founders Make in Getting Traction
Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Gabriel Weinberg, founder of DuckDuckGo, about the mistakes founders make in getting traction. They also discuss Gabriel’s new book “Traction: How Any Startup Can Achieve Exposlive Customer Growth”.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of Startups For the Rest of Us, I’m going to be talking with Gabriel Weinberg about the mistakes founders make in getting traction. This is Starups For the Rest of Us, Episode 257.
Mike [00:17]: 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.
Gabriel [00:25]: Hey, I’m Gabriel.
Mike [00:26]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Gabriel?
Gabriel [00:30]: Great. Thank you for having me come back.
Mike [00:33]: Yeah, no problem. So to give the audience a little bit of preview here, we’re going to be talking to Gabriel Weinberg about the mistakes that founders make in getting traction. We talked to Gabriel back in Episode 199 about a year ago, and for those of you who don’t remember or didn’t listen to that episode, Gabriel was the co-founder and CEO of Opobox which sold for ten million dollars back in 2006. In 2008, he started DuckDuckGo which is an internet search engine that emphasizes protecting searchers’ privacy and avoiding the filter bubble that is offered by personalized search that you would be most familiar with from Google. So you’ve co-wrote the book ‘Traction’ with Justin Mares and people can find that at either tractionbook.com or Amazon or Barnes and Noble. The new version comes out today. In that book you talk mostly about the bullseye framework that people can apply to help them get traction. Because the second edition of the book is hitting shelves today, can you give us a little bit of a refresher for those people who didn’t catch that episode about the bullseye framework and what the book itself is about?
Gabriel [01:32]: Yeah, sure. I actually started working on this book a long time ago, back in 2009, when DuckDuckGo was just starting to get traction itself. I was trying to figure out how do I get more traction, which is obviously what almost every business sets out to do once they launch their product. How do I get this thing traction? I found out that there was no great framework for getting traction. There was nothing like a procedure you could do to really think about how to pick the best marketing channel for your business at the time. So I went out just to investigate that myself. Then after interviewing lots and lots of people, really hit upon this framework, and extracted it from their successes and called it the bullseye framework because of all the channels that you can use, and we identify 19 in the book, you’re really trying to hit that bullseye, the right channel for you to grow your startup and meet your traction goal. So once I had the framework, I realized there’s really a need in the market for this book just so that startups can use this. That’s when I got my co-author, Justin Mares, to help really flesh out the book. From then, I thought I was 70 percent done, but I was really 20 percent done and I had to really write the book, edit it, and put it out last year. People started using it right off the get go and it starting working really well for people. We sold 35,000 copies, sold out our three printings. Then I started talking to people, doing events, and all sorts of things and really understood where people were getting it wrong and where people were getting it right. From that, I wanted to do a re-write that more crisply helped people get traction and that is what this second edition is. In that context, the bullseye framework in the first edition was a five step process and we simplified it in the second to a three step process. That three step process is simpler and it is the following: the first step is to go through all the 19 channels, these are all the different ways you can get traction, SEO, search engine marketing, trade shows, etc., there’s 19 of them, and really brainstorm a test in each channel where you could possibly get traction from that channel. Then the second step, and we’re talking about this, but the visualization of this framework is a bullseye, like a target, with three rings. So that outer ring is these 19 channels. Then the middle ring is you pick three that seem the most promising tests to run then you run those tests. Those tests are meant to be very small, simple tests, take less than a month and $1,000 to figure out how many customers you can really get through that channel, how much it would cost to acquire the customers, and are those the right customers you need right now to achieve your traction goal. So you run those tests in the middle ring. Then hopefully we assume one of those middle tests look really promising. One of those channels seems like it could be the channel to move the needle for your business. Then you go down to the inner ring, the bullseye, and you double down on that channel and focus on it and try to achieve your traction goal through it by running additional sets of tests within the channel to discover the best strategies to do that. So that’s why it’s called the bullseye framework is because you’re trying to hit that bullseye and find that one channel of the 19 that is going to make you hit your traction goal.
Mike [04:49]: When you went about this new edition of the Traction book, what areas were you seeing where people were making mistakes in implementing it? Was it a result of the fact that it was a five step process and it needed to be cut down to the three step process or were they just kind of misinterpreting different things? Is it the difference between optimization or understanding?
Gabriel [05:07]: The three step process really simplified it and people were a little confused by some of the steps that we had cut out. They were things that you needed to do, like ranking the channels and prioritizing them; really we combined into just one step. There was a little confusion around that, but the bigger issue was in each of these now three steps there are ways that people routinely messed them up. We tried to reorganize those parts to really make it clear to not mess it up in those ways. They’re non-intuitive ways and I can go through each of those. Besides, that’s all in the intro, the first five chapters. Then the last 19 chapters are a chapter for each of the channels. For those, we updated them and we really tried to edit down the parts that were kind of too fluffy. We just did better editing. We ended cutting out about 50 pages of the book even though we added two additional sections, a preface which explains kind of my history of getting traction and some of the mistakes I made, and then a testing addendum at the end which is one of the things people really wanted and were messing up of how to do cheap tests in each of the channels. We have a list of all the channels and we give you a way to do cheap tests in each of them.
Mike [06:20]: I think those extra tests are extremely helpful just because it may not necessarily be clear for some people, for example, offline ads or viral marketing and things like that. You kind of have a conceptual idea of what it is, but you don’t necessarily know how to go about doing it because you’ve never done it before or you’ve never considered it before. I think the addition of those things can certainly help a lot of people. What are some of the broad non-intuitive mistakes that you were seeing people make over the last year of talking to people that are pretty common?
Gabriel [06:52]: Right. There’s four of them. Three of them relate to each step in the new process. The first one is over-arching before that and it’s not starting traction early enough. People think that they need to, and we did say this in the book, but you know now it’s says a lot more crisply, people think that you really need to launch a product before you start going to get traction. The reason is the ‘Leaky bucket’ metaphor. We reuse that in the book and try to use that to explain it. The ‘Leaky bucket’ metaphor is when you start your product it has a lot of holes in it, right? It’s essentially a leaky bucket and if you pour customers on the top, and you can think of customers as money because it costs to acquire customers, then that money is leaking out. So the intuitive answer is I should not spend money on traction efforts until my bucket holds water. The problem with that is that what people do instead is they get beta customers and they get these beta panels and they iterate on the product just off these beta customers. Those beta customers, they’re too close to you. Not only do you become friends with them and you kind of know them, but they are not getting first impressions of your product at any time. They are seeing this evolution of the product and they are primed with what they previously know whereas if you have a steady stream of cold customers coming through, through some traction efforts then you’re constantly seeing real market feedback and whether your product is really going to resonate in the market. You want that so you can really figure out where the holes in your bucket are or else what happens is, this is what usually happens, you then launch your product, start to get traction, try to get traction, and realize, “Oh, I thought my bucket wasn’t leaky from my beta customers but it really is still leaky.” So you really want to start that traction effort right away, right at the beginning of product development. We try to argue strongly in the book that you should spend 50 percent of your time on it. Just to make it even more clear of why you should do this is you think that you might be getting a lot of this information from your product development methodology from your beta customers, but what you’re getting in addition to finding the holes is when you’re testing these traction efforts, you don’t have to spend a lot of money on it just to get a few customers coming through cold, you’re figuring out what messaging is best. You’re figuring out what niche to focus on when you launch. So when you do launch you can figure out the right channel to launch with, the messaging, the niche to focus on, and you can really hit the ground running with a real useful product launch.
Mike [09:27]: Yeah, as you were talking, and I’m not sure this is a good analogy to make, but the whole leaky bucket, I think that people have this whole conceptual idea of like all the holes are exactly the same size and I just need to put a patch over each of them, but the reality is that depending on your product those holes can be different sizes. They can be different shapes and the solution to patching each of those holes can be completely different. You need the customers going through that bucket in order to get the information you need to figure out what the patch is for that. So whether it’s a new feature or whether it’s a new marketing message, every single patch is going to be different. You can’t just take a blanket approach of, “Oh, let me create this product and implement all these features because I think that’s what people want.” Those customers coming through and leaking out of the bucket is where you’re going to get the information you need in order to patch those holes. You can’t do it in advance. If you try to, your patch is not probably going to be the right size or shape and you’re going to end up doing too much work or not enough work. In either case you’ve either wasted effort or not done the things that need to be done and you’re still going to be leaking things out the bottom.
Gabriel [10:31]: That’s exactly right. I think the real known intuitive piece is that you have a false sense of security with beta customers. That’s been the product development methodology for a long time and it’s a good one. You should have beta customers, but it’s just not enough.
Mike [10:46]: What are some of the mistakes that people make in terms of the different channels? Because obviously there’s 19 different channels that you can choose from but there’s going to be certain ones that people are much more familiar with. Shouldn’t people be focusing on those?
Gabriel [11:00]: Right. That’s the number one mistake in the first step. When you’re brainstorming all these channels, people navigate towards the ones they’re already familiar with. That’s just availability bias. We saw more and more that people just wanted to ask us and say, “Okay, which of the channels are great for my type of business. Which are good for SaaS businesses, which are good for this offline retail business. That’s the wrong question to ask because you almost want to ask the opposite question. This is the non-intuitive piece of which are the most underutilized channels for my industry or business. Often those are the ones that are greenfield that you can have huge traction opportunities in. Unfortunately, the piece that people mess up is they often ignore these underutilized channels because they’re not familiar with them because they’re from that industry. Say everyone in that industry is using search engine marketing so therefore they need to use search engine marketing. That’s usually a bad idea because that channel is very competitive because all your competitors are using it. If you could find something better to do, even offline, that would be a good choice. A good example of this is WP Engine, the Word Press and hosting company which we profile in the book. They are an online hosting company for word press. A very competitive industry. They ended up going for two very underutilized channels through different parts of their growth. One was offline ads. So they ended up a lot in magazines which no one else was really doing. Then two, they built a side product, a speed tester for word press which we call as a channel engineer and as marketing where you build this other tool that’s completely free on another website that’s complementary to your product. Then everyone started using their speed tester and then they could capture their e-mail and upsell them on the hosting product. If they had just focused on the regular channels, search engine marketing is what people mainly use and SEO, they would have had a much harder time growing.
Mike [12:53]: Now isn’t the risk of doing that also that you are choosing channels that your existing competitors have tried to make work and were unsuccessful doing? That would be my natural inclination. My fear would be, “Oh well, I’m not sure about doing offline ads because there must be a reason that my competitors aren’t doing it.” Is that a fear that people should be concerned about? Is that a real fear or is that more imagined than anything else?
Gabriel [13:19]: I think that’s a fear that people really have. It’s an imagined fear in the sense that almost everyone has the same availability bias and so, quite honestly, no one is really testing these under utilized channels for the most part. But, you make a really good point which is it’s almost the highest leverage tactic you can do. Go talk to other founders, not currently competitors, but failed competitors in your space who are very willing to talk to people usually. They’ll go tell you about all the things they tried and why they failed. It may be the case that they did try something five years ago that didn’t work for x, y, or z reason that may work now or you may discover they tried a bunch of things that for good reason won’t work now. This is kind of the other broad area where people fail in this first step of brainstorming is that they don’t really brainstorm deep enough. You really want to have a good sense of your competitive landscape, whatever you think, marketing channels everyone’s tried, go talk to people of things they haven’t tried, go talk to complementary industries to see what they’re trying. There may be some overlap there. Really spend a lot of time thinking about each channel and how it could be used whereas what mostly happens is people say, “Oh, I don’t know much about that. I guess maybe I could use that for something,” and they give it maybe a minute of thought. The problem with that is that underutilized, overlooked channel may be the one that could just jump you to success.
Mike [14:46]: But I guess how would you know? That kind of comes back to the question of how to test these different things. If you’re looking at a particular channel and you’re not entirely sure how to go about testing that channel, there’s, I think, this bias towards not spending a heck of a lot of money or time doing it because you don’t know what you’re doing. How do you come and get past that? How do you scope the tests that you’re doing such that you’re not wasting time and money, but you’re still doing what would essentially be a definitive test to find out whether or not that channel is going to work for you?
Gabriel [15:18]: Right. That’s exactly why in the second edition we added this testing addendum where we’re giving you suggestions of how to test these channels. In the scope of these tests, you’re trying to answer three things again. You’re trying to answer how many customers could I get through this channel and how scalable it is; how cost effective it is, how much does it cost to acquire customers through the channel; and are these the right type of customers that I want right now because each channel can bring in slightly different demographics and types of customers. You’re measuring those against your traction goal which is also a hard number, which in the beginning is often how much traction do I need to get to profitability or financing. Say I need 1000 customers and I run a test and this channel we only think it’s going to give 100 then that’s probably not going to be a good one to focus on whereas one of these that say, “Oh, it seems like I can get 10,000 if I really blew this out.” That might be a good one to focus on. So what you’re doing in that first step is really identifying tests you can run in each of these channels and then you look at them and you say, “Okay, based on my guesstimates of these tests, I think these three tests are the most promising to run.” Then you literally run them in the second step. The part that people mess up in that second step is trying to optimize too early, premature optimization there, and if Facebook ads are the channel you’re going to test, you run 40 ads. You really shouldn’t be doing that. You should be running four ads and what we say in the book now is don’t run a test longer than a month or more than $1000 except in extenuating circumstances. Then from those tests you can have data to dump to the next step. So to really answer your question is you need a good way to run a cheap test in these channels and if it’s cheap and short then it’s really easy to test these underutilized channels because you have a good sense of what you can do that doesn’t take a lot of time or money to really bear out whether that’s going to work or not.
Mike [17:12]: Now are there any guiding principles around that $1000 versus the month of time? Is that just an arbitrary cap or is that something that is helpful for a founder who is trying to boost up a company and they have much more time than money versus somebody who says, “Hey, I really need to find this out fast, let me just blow $1000 in a week to try to test out say paid advertising or something like that.” Are there guiding principles around striking that balance or is it more just kind of what resources are available to the founder?
Gabriel [17:42]: Well we look at all, we try to come up with good cheap tests for all the channels. We looked at them and we said, “Okay, that cutoff seemed appropriate and it encompassed all these test ideas.” Then where we saw people messing up was they were spending either too much money or too much time on these tests and not cutting them off sooner when they had the information they needed. So, yeah, it is a guiding principle. I think that particularly is guiding for early founders trying to initially find their traction channel. The caveat there is like DuckDuckGo or I Am Now, we’re running tests of much greater magnitude because our traction goal is so much higher and we want to get the error bars down on our estimates so much lower. So we’ll run bigger tests that take longer and take more money. When you’re first starting out or just going into a channel for the first time, I think you should keep it really small, even if you had a lot more money and time. There’s no more reason because you reach diminishing returns very quickly on these tests.
Mike [18:43]: Got it. So the purpose of those principles of $1000 or no more than one month of time are really for newer businesses that are just going into a channel and those limits can fluctuate between the different types of channels that you’re going into. So when you’re targeting blogs, for example, you wouldn’t probably be spending $1000 but it might take you several weeks of back and forth with the relevant blog owners in order to get your product mentioned on their site or to kind of get through their process of doing guest posts versus something like paid advertising where you may very well spend up to $1000 and you can do it within a couple of days, but those bounds are really to encompass all of the different channels that you might try.
Gabriel [19:27]: That’s right. Exactly. A lot of the tests will be free. Some of them you can do very quickly. Yeah, they’re more like guidelines of limits. If you see yourself going over these limits early on, you might be doing something wrong.
Mike [19:39]: Right. That totally makes sense. I just wanted to make sure that we clarified it for the listeners. So are there any other mistakes that people are making when they’re going into specific channels? If you’re testing a specific channel, what sorts of things should you be focused on? Obviously there’s also the potential to focus on multiple channels. Why wouldn’t you try to do more than one at a time?
Gabriel [20:00]: Right. So in the testing phase, the things that people really messed up are the premature optimization, going too deep while you’re just trying to get error bars around these numbers, and the second is not really doing it quantitatively which we really haven’t mentioned. You have these three questions you’re trying to answer and you really should be trying to get hard numbers against them and then compare those numbers to another hard number which is your traction goal. Once you identify the right channel that is really promising that seems like it might actually work in the sense that the numbers look good, and if it looks like you started to optimize it and scale it, it would reach your traction goal, then you’re doubling down. This is the other area people mess up. This is the inner circle now. You hit the bullseye and you’re working on that channel not getting rid of the other channels. It’s really non-intuitive because say you have three promising tests in channels. Say you did a little PR and you did some social ads on Twitter and you did some offline meet ups. All three, they were promising. They had a little bit of success, but the Twitter ads were just well and above the rest. The right thing to do in our framework is to double down the Twitter ads and really focus on that. What people often do is they still focus a bit of their time on the PR and the meet ups because they know they are going to get some results out of them. The problem with that is their marginal benefit of focusing on the Twitter is much higher and when you really focus on it, what you’re really doing then is now focusing your testing effort on that one channel so now you’re uncovering the underutilized strategies and tactics within that channel. The only way to do that is to really focus. The time you’re spending on these other channels that yeah, they get you a little traction, but that’s time taken away from uncovering the best tactics you could use on the main channel. That’s the other area that people messed up when they’re focusing is not really doubling down on the one channel and getting rid of the other tests they were running.
Mike [22:03]: It almost seems like by focusing on the one channel you’re getting exponential results versus some of these other channels where you’re getting incremental or multiplicative results which are not comparable if you go far enough into that one channel that you’ve dug into or that you’ve identified as the one that’s going to give you the most traction. Is that an accurate way to portray that?
Gabriel [22:22]: Yeah. Not everyone can get the exponential growth, but that’s what you would hope. To do that, what you’re doing or advocating is you are becoming a worldwide expert at that channel. If you’re really focusing on say social ads via Twitter and Facebook, you’re really digging into all the case studies, all the forums, what people are on the platform cutting edge, what they’re saying about their own platform. For example, so right now Facebook video ads are kind of outperforming everything because Facebook is really focused on competing there. That may not be the case a month for now, but you want to be first to those tactics because when you’re first to those new tactics, those are where that exponential stuff really happens, the really high click-through rates and things like that. You want to be on the cutting edge of those. This just goes more into saying that going to underutilized places in the world gives you great conversion rates both channels and then tactics within channels. The only way to really do that is to really be in optimization mode and that requires a lot of effort and all that other effort is distracting you from getting there.
Mike [23:30]: Now one of the things that you talked about earlier was that you have to be in each of these channels and before you even do that you go and you define what your traction goal is going to be so that you have some sort of basis for measurement. Now how do you define that traction goal? What should that look like? Are there some ideas that you can share about how to define what that is or is that more specific to the type of product that you have?
Gabriel [23:54]: Yeah, I totally agree. That’s basically step zero. The other thing we added to the book was a preface about a little more of my history. That’s something I messed up early on. To give you a good example, I set out early on to get traction via SEO because that’s what I knew from my last business. But it turns out that I was pretty successful at that and spent a lot of time doing it and so I ranked really highly for the term new search engine to get to duckduckgo.com. I got number one on it, but it was just not enough people to really move the needle for what my traction goal really needed to be which ultimately was like 100,000 searches a day, not 10,000 which is where that ended up getting me. If I had sat down initially and realized my traction goal should be 100,000 searches a day, then I would have looked at SEO and either changed my SEO strategy completely or not done SEO to begin with. So it really is important to take a step back initially and figure out what your traction goal is. What I think that should be is a hard number that really moves the needle for your business and achieves some kind of significant inflection point of your business. That could be a number of things depending on what your situation is. The number itself, of course, will vary depending on your business, but for most people starting out that number is often one of three things. It’s how much traction do I need to get profitability, how much traction do I need to get financing, or what do I need to prove that I have product market fit. Those are usually specific numbers like I can look in the market and see which companies are getting financed and see how much traction they have in terms of growth or revenue or whatever the metric is in your industry and say, okay that’s what I need to hit. Then you can back out from that from your pricing about how many customers I kind of need and that’s the number you should be evaluating against these tests. You should definitely start identifying what that goal is. It goes right back to what kind of business you’re running too because if you’re not concerned with high growth or financing and you’re really concerned with paying your bills at a certain level of profitability, then that should be your goal. You should say I need to take home x amount a month and from that I can back out how many customers I need to do that then that should be your traction goal.
Mike [26:10]: Yeah. So those traction goals can either be the revenue that you’re specifically looking at or could be tied to a piece of functionality in your product. For example, a search engine, number of users is much more important, or not even users but like searches per month is important versus if you’re in a situation where you need to be able to pay the bills, you need to have that revenue coming in and you need to be able to tie those marketing efforts directly back to those revenue goals. You can tweak the numbers in terms of the price and the number of people coming in and just do some multiplication there to figure out is this really working for me, is this going to be a channel I can leverage or do I need to go someplace else? Depending on which of those situations you’re in and which of those metrics is important to you, you can then find what your traction goal is.
Gabriel [26:57]: That’s right. That exercise, that’s basically saying what is your business model and trying to clarify that initially, which is really an exercise everyone should do because, like you said, you can think about the pricing of your product. There’s a good post, I’m forgetting who wrote it, about the ‘hunting’ metaphor, but like hunting deer and elephants and different things, but it’s basically saying how much it’s going to take to get to a million dollar business which is what most people’s goal is initially based on what your price point is average revenue per customer. There’s wide ranges of businesses that get $0.10 a customer to $10,000 a customer and knowing where you are on that scale really influences what your goals are in terms of how many customers you need, which then changes everything about how you’re going to get traction.
Mike [27:44]: That article that you just mentioned was from Kristoff Jans and he wrote the blog article on ‘Five Ways to Build a One Hundred Million Dollar Business’. It’s kind of a graph of the size of your customer and how much money they’re paying you versus the number of customers you have. Obviously there’s this graph that goes along with it. I think the two extremes that he uses are one thousand enterprise customers each paying you $100,000 a year or, on the other end of the spectrum, you’ve got 10 million active people who you’re monetizing at $10 a year by selling ads for example. The metaphor is essentially you’re hunting elephants or hunting mice and how many of them do you want to go after and what’s your business model look like? I think it’s an interesting metaphor he used.
Gabriel [28:26] Yeah. He’s got a follow up too. He adds three more things there and he goes down to hunting flies because people wrote him back and they are like what about some of these other businesses? So he has an addendum article. It’s even a wider range. It’s really interesting because each of those categories are very different businesses, but has very direct implications for how many customers you need and how much traction you need and what your traction efforts are. So it’s really good to think about that ahead of time and think about really which type of business am I in? Which category am I on the scale?
Mike [29:00]: I think that leads back to another interesting point about if you start bringing that type of model in and start looking at, for example, a SaaS business versus a services business. Services businesses fit into this model where you’re probably charging them a heck of a lot more because you have to, because you’re interacting with them. You have to sell them on an engagement and it might be five weeks, it might be five years, but the reality is you’re charging them a heck of a lot more and those are kind of your elephants versus a SaaS model where, I guess, traditionally you want to charge as many customers as you can smaller amounts of money. But the problem is that it takes much longer to get that mass of customers. That kind of leads back to the analogy that Gayle Goodman from Constant Contact called the ‘Long, Slow SaaS Ramp of Death’. Getting that mass of customers that you need takes a long time. You can get there faster if you can charge fewer customers more money, which lends itself more toward the services model, but a lot of people are trying to get away from that if they’re trying to build product. There’s this balance that kind of needs to be struck and, as you said, it depends a lot on the model that you have behind your business. I think it’s interesting how that should be what is the piece that’s influencing what your traction goals are. I think that sometimes it’s a little confusing because the type of business that you want does not necessarily match up to the type of business that you’re going to end up with.
Gabriel [30:23]: Yeah. Right. What you’re getting at is people end up going through this and not doing this early and then they meet with kind of that harsh reality a little later on. That’s why I think it’s good to do this early and really think about hard numbers, what your goals are, because that will inform everything. Maybe you want to change what you’re doing initially.
Mike [30:44]: I think that’s a super important point to make just because going through this process you may very well find out, hey this isn’t the business that I thought it was, maybe I should go do something else. So what startups have impressed you with their ability to gain traction and why? What is it that has made them so successful?
Gabriel [31:00]: So we profile a bunch of ones in the book and each kind of has an interesting story that they did something really cool with traction. This concept, I was talking earlier with WP Engine and this engineer and his marketing I really liked because we literally had to name that channel because no one else really had named it. HubSpot and RJmetrics are two other companies that have really embraced that channel and does it pretty well. Moz would be another one. They’re all making complementary tools and sites and they’re using some of their engineering resources. The reason why it’s so cool is it’s non-intuitive that engineer resources are so sacred in a company that everyone thinks they should always use their product, but this is taking a little of those resources and using them for marketing. Developing this other tool that then drives the whole business. So HubSpot recently IPO’d, did that with their site called Marketing Greater where you could go type in your domain name and it would tell you all about how you’re doing in online marketing which basically every business who goes online needs. So they got millions of businesses through there and then from that they had a great lead channel to do inside sales and sell them on their main product. Moz has done the same thing and RJmetric which is a kind of cohort analysis company in data analytics, has done it with a bunch of different sites where a lot of their target audience is in house data development and teams who independently need to do database queries and things like that. So they made all these database kind of tools for these developers and then on there they educate them about RJmetrics. So I really love businesses go after these kind of underutilized channels. Another good example of another under utilized channel is publicity stunts which most people completely shy away from because it seems like they would be unscalable and repetitive. To some extent that’s true. There’s been a lot of ones that happen just at launch. A great example, an old example, but I like it also because I’m in Philly, for example is half.com, Josh Kopelman who currently runs First Round Capital. When they first launched half.com they had a city in Oregon renamed to half.com, Oregon, which was Half, Oregon, and they gave two jobs to the of the people there. The whole thing cost maybe $100,000. Got them national TV across the board, 40 million impressions before there were any social media. So back in 1999 and immediately vaulted them up. Six months later that company was sold for 300 million dollar plus. Then another company who does publicity stunts, Grasshopper, they really have invested in this over time and they have two employees completely dedicated to thinking up these publicity stunts and things they can do, run contests and things like that. Half of them fail, but they’ve gotten most of their traction through this effort because when they do take off it’s such a great press story. They get so much press it makes up for everything.
Mike [34:05]: Now at what point do you start taking into account the ROI on some of these channels because some of the things that you just used such as HubSpot, they have these different website marketing graders and things like that, but their price point is also substantially higher than I think your average run of the mill SaaS application. I think that their pricing starts at $200 a month and if you kind of extrapolate and say, “Ballpark it, I don’t know what these numbers actually are.” If an average customer sticks around for two years with them, that’s $4800. So for them it makes sense to fill that pipeline with as many people as they can because each of those customers is going to net them $4800. It becomes this awkward situation, especially for the people who are running really small businesses where the look at that and say, “Well that sounds great, but I can’t really afford to have an inside sales team calling these people even if that is going to be successful because I just simply can’t afford it.” How do you take those types of considerations into account?
Gabriel [35:01]: This is where the testing really comes into play. When you’re running these tests you’re trying to assess those three numbers, what the scaleability of it is, how many customers, how much it’s going to cost to acquire the customer, and is it the right customer? The second one, how much does it cost to acquire the customer, is the key one here. In this scenario, say the engineer and his marketing, they don’t need to have an inside sales team necessarily. It could be an off the shelf product that you sign up for in some kind of signup flow and that’s the test that you’re running. Will people convert from this and sign up and then how much would it cost to get them? How much contact would I need to have with them. You’re absolutely right. If you’re a small SaaS company you can’t afford any kind of personal contact like that. It costs too much money. So you need to be testing whether it will just work for your regular signup flow. I think that all comes out in the testing. That relates back to your traction goal and kind of knowing how much you can spend to acquire a customer.
Mike [35:57]: I think that’s a pretty good place to wrap it up. This book comes out, I believe, today you said, correct?
Gabriel [36:02]: That’s right. Today. October 6th.
Mike [36:04]: So if anyone’s interested in buying that, they can go over to tractionbook.com. We’ll link it up in the show notes. They can also get it on Amazon or Barnes and Noble, correct?
Gabriel [36:13]: That’s right. We have a couple other retailer links like IndieBound. They’re all at tractionbook.com.
Mike [36:18]: Great. If anyone wants to follow up with you, where would they do that?
Gabriel [36:21]: Twitter is best. My handle is @yegg. Y-E-G-G.
Mike [36:25]: Awesome. Well thanks for coming on the show Gabriel.
Gabriel [36:27]: My pleasure.
Mike [36:28]: If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or e-mail it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re 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 256 | The 10 Elements of Highly Effective SaaS Landing Pages
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike put together a list of the most common things that are working and effective for SaaS landing pages.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of Startups for the Rest of Us, Mike and I discuss the 10 elements of highly effective SaaS landing pages. This is Startups for the Rest of us, episode 256.
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 [00:28]: And I’m Mike.
Rob [00:29]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So [what are this week?] sir?
Mike [00:33]: Well I caught a nasty virus over the weekend so I was hugging the toilet the other day. I could not keep food down. So it’s what? Wednesday now, and I’m just kind of getting back into the swing of things and trying to catch up from having not gotten anything done the past several days, but it was pretty brutal.
Rob [00:49]: Do you get sick a lot?
Mike [00:50]: No. I almost never get sick. I’ll get sick like once every couple of years and that’s about it. But when it comes, it’s just brutal. I’ll be in bed for a couple of days just because I just can’t get out of bed. I remember making fun of you a little bit because you said that you were sick once, and you were so sick that you couldn’t even listen to podcasts, I was that sick. I remember [?] it was like, “Oh, I shouldn’t have made fun of him.”
Rob [01:14]: I totally know what Rob is talking about right now. That is funny. So, we’ve gotten a lot of comments on last week’s episode, episode 255, where you talked about moving on from AuditShark and that whole decision. You’ve received Tweets, you’ve received DM’s, we’ve received several e-mails, there’s more than a dozen comments on the podcast blog with folks just talking about how they felt this was one of our best episodes and basically wishing you luck and appreciating that you put yourself out there with the vulnerability and were willing to discuss this. I think it really hits home with people to see, it’s not only vulnerability, that’s a big part of it, but it’s also just to see you or anyone come out and talk about mistakes that they’ve made and to basically help show other folks how not to make those mistakes. I think that was really the point of last week, was to kind of bring it all to the front so, A: You could kind of have a post mortem. But then, the entire listener base for this podcast can kind of peer into it and think to themselves, “Wow, am I doing that right now?” or “Am I going to do that with my next product?” And really take it as al lesson for the community rather than a single person hiding away in a basement making these mistakes and no one learning from it. How have you felt about the response?
Mike [02:29]: It’s been overwhelmingly positive. I haven’t really seen anything negative about it, just a lot of thanks and appreciation. I don’t know. I guess it’s humbling. It’s more than I could have expected or hoped for. I guess. I don’t know. It was one of those episodes where, it was coming and I knew it was coming for a while, and I was kind of dreading it at the same time.
Rob [02:48]: Very cool. So let’s move on to what we are talking about this week. We received an e-mail from Stefan at vividwebcopy.com. He says, “Hi Rob and Mike. How about an episode SaaS landing page design?” And Stefan is actually, it looks like he is a copywriter, vividwebcopy.com, if you want to go check his stuff out. But Mike and I have a lot of thoughts on this topic, and so we wanted to weigh in. And I specifically put together this list. I was trying to boil it down into the most effective elements that I see that go into these landing pages that work and I want to talk about the typical SaaS landing page rather than going outside the box. Obviously, if you know the rules and you’ve been doing this and you’re an expert, UX guy or UI woman, you can break the rules. You don’t need to listen to something like this. But if you’re wondering about the most common and most effective things in general that are working for SaaS landing pages, that’s what we’re going to be talking about. And this typically a SaaS home page, although it can be often you copy your homepage to make landing pages for, say, Facebook ads and other stuff, because your homepage should really be that landing page that gets someone acquainted with your product quickly. So we’re not going to talk about long form landing pages, like getdrip.com right now, is a long form sales letter in essence. We’re going to talk about that because we are going to talk about the more traditional SaaS landing pages and you could see examples of these at places like bidsketch.com, planscope.io, getambassador.com, hittail.com, all of those are the more traditional scene that we’re going to be talking about. So to dive in, the first element of highly affective SaaS landing pages are to design it for first time visitors, to get in the mindset that you really want a first time visitor to come, get acquainted, and go down a very specific path that you’re outlining for them. If you have customers who are coming to your homepage to log in, they will find the log in box. Don’t make that prominent, don’t put that right smack in the best part of the screen right above the fold, this is for first time visitors, trying to educate them, get their interest [peaked?], have them figure out if it’s for them, and then get them to take the next step in the action. So often times, I will see a log in or a sign in button right in the same top navigation that you’re trying to sell to people and I disagree with that approach. I think it should be a tiny link above or maybe far off to the right. Like, there should be a separation because your customers are going to find a way to log in, don’t worry about that, but your goal is really to get those first time visitors to follow this path that you have in mind.
Mike [05:14]: Yeah. And the essence behind that is just to not give them false paths that they’re going to go down and waste time because it’s very easy to, and I’ve done this myself, I’d go to a web page and you just land on it and then there’s a log in button and you’re like, “Oh well, I kind of want to see the pricing and see what that stuff is like” and maybe it’s not obvious where to see some of that stuff, so you click log in and then it’s just giving you a username and a password fields to have you log in and there’s nothing else. There’s nowhere else for you to go on that page so then you end up going back and you get a little bit confused about where to go. So the whole idea of this is to make sure that when somebody is coming to your page, and they don’t know anything about your site or your application that you’re essentially walking them through everything. So that’s why Rob is talking about designing it for the first time visitor. You have to make a blanket assumption that the person coming to your site knows absolutely nothing. So because you’re designing these pages for the first time visitor, you have to figure out what the goal of that page is, what is it that you want them to do, why should they care about your product, and what are the next steps that you want them to take? Do you want to ask them for a trial, do you want to get them to get into pipeline there, do you want them to come back to your website in the future? Rob, you had a great talk a few years ago at the business software which was – I forget the exact title but it was something along the lines of, “The purpose of your website is not to get them to buy your app, it’s to get them to come back to your website.”
Rob [06:33]: Yeah. It was called “The number one goal of your website” and it just talked about how returning visitors are between six and twenty times more likely to purchase from you. I mean, very few people purchase on the first try. There are exceptions to that. If you have a price point, I’d say starting between maybe $10 a month, we’re talking SaaS here right. But anywhere under, let’s say $15-$20 a month and you have a high curiosity factor where you’re kind of giving someone something that they kind of curious about trying. So an example of this could be like HitTail. HitTail has this promise of, “We’re going to give you keywords that you’ve never seen before.” There’s this high curiosity of like, “Wow. What are my keywords going to be? And I can get them right away?” So you’re very likely to be able to sign up to directly for a trial and not actually need to go through an educational process first. It’s a low commitment thing. Most apps are not like that, I’ll say. I mean if you have a proposal app or even a marketing app or affiliate software, that kind of stuff is less about curiosity and it’s more about, “Wow, does this fit me? Why is this better than other things that I’ve seen?” and getting [signed?] before a trial right away is just a lot lower, there are lower odds to doing that and that’s where you need to start thinking about, “Okay, I shouldn’t push this trial right away but how can I start educating and how can I bring them back to my site in the future?” And bringing them back, of course, these days, re-targeting is a big one, and then getting folks on your e-mail list. These are the two biggest drivers of being able to start to build a relationship and bring people back. So instead of having a few people signed up, you get that 6 to 20 times higher likelihood of folks signing up. The second element of highly effective SaaS landing pages is to have a gripping headline. And I have a pretty simple formula for this that I’ve talked about in the past, but it’s to just have three things in place. The first is to make a promise in the headline, the second thing is to have an action word, like a verb, and the third one is to either have a directly stated “You” or “imply you” meaning, that you’re talking to the person who is reading the headline. So as an example, I’ll come back to HitTail again, because it fits this well. The headline at hittail.com is “Guaranteed to increase your organic traffic” and the promise is that it’s guaranteed to increase traffic, the action, the verb, is “Increase” and then there’s a “You”, it’s “your, you, or you’re”. You rarely should be talking about your app. Here’s another headline for HitTail that wouldn’t work nearly as well, “The best long tail SEO keyword tool.” Because there’s no promise, there’s no action and there’s no you. So I’m not saying that this is a hard and fast rule that all headlines need to follow, but I’ve found that it’s a really good starting point for me. When I sit down to write a brand new headline, I say, “What can I write first that follows these three rules?” and then I start massaging and thinking of other headline ideas. So I think it’s a good solid framework to begin with.
Mike [09:23]: Yeah. When you’re coming up with the headlines, it’s definitely all about the person who’s visiting the site, and again, it goes back to who is coming there and what are they coming for. But when they’re looking at the page, they’re going to be thinking, “What’s in it for me?” And this simple formula really gives them a good idea of what’s in it for them. You’ve got that promise, the action and you’re talking specifically about them. You don’t want to be talking about your app or the things that it does or how it works or anything like that. You want to be telling them how it’s going to benefit them.
Rob [09:51]: If you want more information on headline writing, you can head over to copyhackers.com and they have 7 different e-books and book two is $19 and it’s called “Headlines, subheads, and value Propositions” and that’s definitely a decent place to start. There’s a lot of info on headlines but that’s nice because it’s specifically for software and startups. Third element of effective SaaS landing pages are to have at least one visual element here at the top of the page. So as Mike and I walk through this list, I want you to imagine it as going from top to bottom. It really is a prescriptive order of starting with that headline, having a visual element either next to it or below it. And then from there, we go to element 4, element 5. Again, these are not hard and fast rules, once you know what you are doing you can mess with these things. But when you are starting out as a framework, this is a good solid place to start from. So this third element which is visual elements, I’m thinking of something like a video, short video, less than 90 seconds for sure or an image. And if you go to the web page of hittail.com, you’ll see an image that describes what HitTail does just with a couple of circles and some arrows. So it’s almost like a video, it doesn’t move but it has enough text and some arrows that it shows you what it does in that image and I think that’s important. I think just having an image of a random person sitting there clip art staring at a screen, I don’t think it’s helpful because it doesn’t actually talk about your value proposition or talk about your benefits or demonstrates something. I think this visual element needs to serve a purpose. So either an image that actually serves a purpose, a short video that gives some high level benefits, or the third one that really is ideal but is a lot harder to pull off, is an e-mail capture form related to the functionality of your application. So I don’t mean something that says, “Hey, here’s some education about this topic of how to find more affiliates or how to be an e-mail marketer of SEO, but actually starts to demo the functionality of your app. So an example of this is if you go to the bidsketch.com homepage, and you’ll see that Ruben has a form there where you enter your e-mail and it doesn’t sign you up for a course, it doesn’t send you education, it actually creates a proposal, it e-mails you a proposal basically demoing the functionality of the app. And so, although, he will send follow-up e-mails after that, that first one you get is essentially your first [foray?] into seeing how the app actually works. And I think if you’re able to pull that off in a way that’s pretty elegant and actually shows people how your app’s working, I think that’s a big win as well.
Mike [12:18]: Yeah. If you look at the Bidsketch website right there on that homepage it says, “Get a sneak peak at a sample proposal” so that kind of meets the element two that you said, a gripping headline, where it follows that simple formula for promised action and then talking about you, and then has that email capture form which says, “Send it to me” which gives you that sample proposal. So you get a couple of different things there and those two elements are combined. And Ruben has been doing this for a long time, so he has been able to effectively put those things together. And it may take you a couple of times to do this sort of thing but again, the goal of this episode is to kind of lay these things out and talk about the different elements and how they can be added to the page and in which order they should be added in order to give you a starting point. Once you’ve done this and you start testing it and checking with your customers to see how well it’s converting, then you can start playing around with these things, but this is just the framework that we’re following through.
Rob [13:09]: And the fourth element is to provide a couple of benefits, not too many, typically use the rule of three here where I would veer on the side of having 3, 6 or 9. Probably, the fewer the better, it kind of depends. If you go to planscope.io, you’ll see that right down below his visual element which is a video, Brennan has three benefits, [?] more estimates, one sentence describing what that means, “deliver better projects and grow your business”. It’s a really nice example of, boom, having three left to right, three benefits of what you’re going to get using planscope. If you go to hittail.com, you’ll actually see it’s three sets of three and each set is aimed at a specific market segment that is using HitTail essentially gets value, it’s SEOs, it’s internet marketers, and it’s e-commerce folks, and those are kind of the key three core areas that use HitTail, so both of them work. I think the thing that I would recommend is, when you’re providing benefits like this, stay grounded. The biggest mistake I see with benefits is that people go so high level that it doesn’t even make sense anymore, like it’s so vague that any app could do it. So I really don’t like benefits like, “Saves you time, makes you more money” because doesn’t every app do one of those two things? I mean, really that’s the point today, is that every business application needs to do that. So I think if you find yourself saying that, like come down one or two steps to be a little more specific, and again, like Brennan says on Planscope, “Win more estimates.” If you went up a step you could say, “Make more money” but that isn’t helpful. You got to drop it down one level or two. Deliver better projects to grow your business. These are things that there is some tangibility to them. And if you’re having trouble thinking of these benefits, what I would tend to do is to- if you make a list of benefits and a lot of them seem like features, like actual features you have built into the app, then read that feature and say, “All right, we built XYZ feature so that” “So that” is the key phrase there and you complete that sentence. So we have built this keyword suggestion tool so that you will get more keywords that you can then get more traffic from blah blah blah. And that’s your benefit after that “So that” period of the sentence.
Mike [15:18]: When you’re describing these benefits, whether you’re going with 3, 6 or 9 it doesn’t really matter. The headlines are going to be I think a little bit on the generic side because they tend to be only several, 3 to 5 words for the title of that benefit. I mean if you have them separated out into 3, 6 or 9 sections, the words there are going to be relatively tight. But then underneath it, when you start talking about what the details of that benefit, you can be very specific about it. So for example on planscope.io, Brennan says, “Win more estimates,” and then underneath it, he says, “Our collaborative estimating features help Planscope customers close 2 to 3 times more clients. And that piece right there, closing 2 to 3 times more clients, is helpful in a couple of different ways. One, it tells you exactly what the benefit is and two, it is very specific. And the fact that it’s able to close 2 to 3 times more client projects, means more money for you and that is, in a way implied but it is also led from the “win more” estimates headline. So keep those sorts of things in mind when you’re putting together those benefits. Another thing that you can do is you can take those benefits and separate them out onto different pages and talk more specifically about those. A lot of times when people are building a website for a new SaaS product, it can be difficult to figure out what information needs to go on the different pages. So make it simple, just start out by outlining the different benefits and don’t talk too much about them. And then later on, as you start to grow the site and you expand the footprint of the website, then you can talk about those benefits individually on their own pages and then you can link to them from your homepage some place. But I don’t think that you need to do that from day one and you don’t want to overwhelm somebody on your homepage with every single piece of information you possibly have, because that becomes a long form sales page. And I don’t think that’s what you want to start out with. You want to start out with educating them about your product, and then if they start if they start drilling into your website and are interested in those other features, you can talk more about them and you’ll be able to get more information about them according to your bounce rates and how long people are staying on the different pages by looking at the analytics behind those pages as people are visiting them.
Rob [17:24]: I’d also like to point out, I just noticed on Planscope’s homepage, their headline is “Gain total control of your agency” and that fits right into the three elements I said before of making a promise, having an action and having “you or your” in the headline. Element five of highly effective SaaS landing pages is social proof. This one is very common and very necessary. I do not think this is optional. Social proof can come in many forms and actually believe that having all three of them is ideal. The first and most common one people think of are testimonials from customers. I always recommend you have head shots with those as well if possible. So you have a head shot of a person and the name linked to their website. You don’t want anonymous testimonials or just a first name or something. And then edit their testimonial down to just the core part, so if it can be 10 words or 15 words, you’re doing really well. Pretty much the best SaaS landing pages I see have testimonials. The next piece to have, press logos, whether you’ve been mentioned, whether online or offline press. If people are going to recognize that logo, have that in there. And the third one is to put a vanity metric in there. So if your app has analyzed a billion keywords, if you’ve sent out $100 million of proposals or your clients have through your app, if you’re a web host and there were 9 billion page views through your network last month. I mean these are very much vanity metrics. They are not business driven and they don’t help your bottom line, but they are basically bragging rights to show you that other people are using it and that you held up under the stress and that you have experience in this field, and all of this ties into basically socially proving that your app is something that someone should consider.
Mike [19:04]: Yeah. Part of the social proof is just all these things that you talked about, the testimonials and the press logos, those are essentially trust factors and people want to be able to trust your app but you need to give them a reason to, you need to give them proof of some kind. So the fact that you were mentioned on msn.com or CNN, or wherever, those are trust factors, the same with testimonials, especially if you start including head shots of the people who said the things about you. Those are also considered trust factors. When you start talking about those things that Rob just mentioned in terms of the vanity metrics and the number of keywords processed, the amount of money that is embedded in the proposals that are sent out or the page views last month, those are also trust factors but they are internally related. So there’s two types, there’s the external ones that you don’t necessarily have control over and then there’s the internal ones which you do. You could obviously fudge those numbers. But when somebody’s looking at that website, they are not going to sit there and think, “Oh, this person is pulling my chain.” And as long as the other things match up, they are just going to believe those numbers. They don’t have to be accurate, they can be incriminated on a daily, or monthly basis, or what have you, but there has to be some semblance of trust there for them to take those numbers and internally process them and believe them. And the same thing goes for those external loads, I mean if it’s something that they’re going to recognize, definitely use it and it’s essentially your piggy backing on the trust of that other website. So as I said, the logos of other major news outlets or anything like that. You’re piggy backing on their credibility to essentially enhance your own.
Rob [20:35]: And just to clarify, you said, the vanity metric doesn’t necessarily need to be accurate, you can update it once a month or whatever. I’d agree with that, I think as long as your low rather than high, you’re [airing?] on the side of caution, right. It doesn’t need to be an exact thing pulling from your database as a live feed.
Mike [20:50]: Yeah, exactly. That’s more what I meant than anything else. It doesn’t need to be up to the second. That’s really what it comes down to.
Rob [20:56]: All right. So our sixth element of effective landing pages. This one’s an optional one, its features. It’s having features on your home page. So not benefits, and this is further down the page, remember we’re going in order from top to bottom. I have seen this done really well with some very specific features that set you apart. And in fact, if you couch it like that, and you specifically say “No other app has this feature or these are the features that our customers like most” or something like that and just give a few of them. You’re not giving a whole run down of everything but you’re trying to call it out and show why you’re different. You have to be very specific at some point during this journey and if you feel like you can do it by putting some features on the homepage and then folks can click through at the bottom of the homepage and get to like a tour or a features page with more specific mechanics of your app, I think it’s not a bad idea. I think if you’re not sure, probably don’t do this step but I have seen it done really well. The reason that I like when people start getting into features, definitely, on the website somewhere, you need a features page. Because if you’re just talking about benefits all the time, no one knows what your app actually does. If you go to a website for like an IBM software product or some Salesforce product that each own [bazillions?] of products, it seems like all you tend to find is benefits with a lot of marketing speak and it’s really hard to just get a list of what does this app do. And it’s hard for folks to figure out what you do if you never get down to the features. So you definitely need a features page somewhere and I think a few that call you out on your homepage is not a bad thing. Our seventh element is to look at your top nav and have four items or fewer in that top navigation and that includes your home link. So you really only have room for a couple more. So I would typically have something like home on the left, and then either a tour or how it works, which is kind of the same thing. It’s explaining the basic flow of your app. Sometimes it depends on if you want to include a bunch of features on that page, probably another discussion but sometimes a tour is just- if your flow is fairly complicated and you’re trying to teach people what your app does, then you’d have a separate features page and that could also be in the top nav. And then you can basically have a pricing page. I’ve also seen it done well to have another page that basically says [why, app name?]. So if you’re base camp, it says, “why base camp” or why should you choose base camp. That’s if you have a ton of press mentions, social proof or just so much more to say. In fact, with HitTail, we have a “Why” page in our top nav and the reason is, there was so many press mentions because the previous owner was actually a PR firm. There were mentions on TechCrunch and in multiple newspapers and offline magazines, just all kinds of stuff. So there were so many quotes that I found that I didn’t want to stuff them on the homepage, didn’t want to stuff them in the tour. Although, I sprinkled them all over the place. We really needed a dedicated page. It’s just another way to build credibility and that someone can click to and think through and then offer social proof.
Mike [23:47]: These elements in the top navigation are probably going to get hit a lot more than anything else. We’re going to talk a little bit more about the elements at the bottom of the page. but at the top navigation, those are the things that people see right at the top of the page and they are far more likely to get the users to click through to those than anything that you’ll find in the footer. And I’ve used this strategy before where I’ve embedded links in the footer and I’ve used this strategy before where I’ve embedded links in the footer purely for SEO purposes to get Google to essentially spider other pages on the site. But the reality is, if you start looking at the analytics for that, the users who are coming to your website, virtually, never follow through and click through a lot of those links. So you want to make sure that the pages on your site that you want to get the most traffic to for people who are hitting your site and you want them to learn more about your product or what it is that you are going to do for them, make sure that those links are in that top navigation.
Rob [24:40]: Our eighth element is to have an exit path at the bottom of every page. In essence, this is a button that takes someone to the next step of your flow. You want to think of this as a specific journey that you are leading someone through. So when they hit your homepage, you don’t want a bunch of extraneous links, you want a few options at the top. If you even have a top nav, which is probably another discussion. I’ve seen folks run experiments that I’ve worked where you basically remove the top nav and someone really only has one flow to go. You can scroll down and read and at the bottom, there’s kind of a tour button that leads you to the tour and you’re basically leading them through a flow. But in this case, having an exit path at the bottom of every page is something I think you have to have and I think a lot of people don’t do this. It’s to think, “Boy, after they read this homepage, they get to the bottom, so maybe they’ve read the social proof and the benefits and maybe a feature or two, what is next? What do they really want to know?” And then take them maybe through a tour and then perhaps take them to features or you could start letting them know, “Hey, you can sign up for a trial,” there’s some options to think through. You really want to have one main and then maybe a secondary, call to action, down at the bottom there. But not having this exit path at the bottom, then makes your reader get to the bottom, and look around, probably click on something in your footer or scroll all the way back to the top of the page and you’ve lost them, you’ve lost control of their journey because now they’re just wandering around clicking random stuff and that’s not an ideal scenario if you want to lead them through a path of education.
Mike [26:03]: If you take a look at, I’ll use HitTail’s webpage for example, if you go in, right on the main page at the top navigation, you’ve got home tour plans and then why HitTail and you already explained why you have the “why HitTail” there. But embedded in the text in the middle of the page, it says “Increase your traffic” with the big orange button or take a tour. Well that’s the second link in your navigation. So if somebody does click that, they go to that tour page and then at the bottom of that, there is essentially this call to action which says “Your free trial awaits, grow your traffic” And then you click on that, that goes to the third thing in the top navigation which is essentially the plans and trying to get somebody to sign up for a trial. So there are definitely times where the call to action at the bottom of your pages is essentially going to mirror what they would see at the top navigation, but that’s not always the case. They may well be an extended set of tour pages, for example, or additional educational content that you’re going to put in front of them to help essentially walk them through the process of getting to point where you’ve educated them enough such that they are going to sign up for your product or at least sign up for and e-mail course or something along those lines to be able to bring them back. And it kind of depends on where it is in the sales funnel that those people are likely to be. The one thing that I have seen a lot of, and this is especially prevalent in a lot of word press themes, is that they have this “scroll to top of page” widget that will pop up. That’s not something that you want to put in there. If you can disable that, go ahead and disable it because the fact of the matter is, if you have a long enough page that it needs something like that, they’ve already scrolled through the page, they don’t need another thing at the bottom popping up to say, “Hey, would you like to scroll all the way up to the top to see all the stuff that you just scrolled past?” No, they clearly know how to use a scroll bar. So if you can get rid of those things, get rid of them.
Rob [27:44]: Element number nine is something I already covered when I was talking eight, but it’s to basically limit the number of links and buttons that you have on the page. It’s essentially limit the number of decisions that folk need to make as they’re reading though it. Be opinionated about where you vision should go. Think through this flow, it takes time. Think through the journey. But it will absolutely increase the number of folks get the proper kind of education that you’re trying to give them. And our tenth and final element is put everything else within reason into your footer. So typically we will see footers on homepages say something like about contact, terms of service, blog, affiliates etc., and I think that’s perfectly fine. I think having 6, 7, 8 links down there is fine. And something we’ve done with Drip, because we have a PI docks and we have like a press kit, I didn’t want a link out to all of those, we just have a docs link at the bottom and it links to kind of a nested page. So you can obviously start nesting things at some point. but I am not a believer in having 20 links down here, but I do think that having the basic pages that you’re going to have in a marketing side and basically linking to all of them from the footer when you’re starting, is the way to go. I would not put an e-mail sign-up form down here. I see people doing that and no one is ever going to submit that. If you really want folks to sign up for your course or whatever, I would not put it in the footer and frankly, I probably wouldn’t put it in the header either because that’s really your educational call to action of trying to get someone to learn more and click through to a trial. I would tend to use a little JavaScript widget like something you get from Drip or [Sumumi?] or OptinMOnster, instead of trying to plug this thing down in the footer and that will give you control to have it pop up at certain times or not and just a lot better control of when to make it visible and when not to.
Mike [29:24]: Something else that’s helpful to put down at the footer is some sort of a site map so that it’s easier for the search engines to spider your website and get to all of the different pages that are going to be embedded in your site. I think if you rely too much on dynamic html that essentially is put there through JavaScript or anything like that, to display based on who’s visiting your pages, that can be a little bit difficult to have the search engine spider your website. You could also submit a site map to Google but, again, having a site map there that is human readable and, I don’t mean by human readable xml, I mean a link that just goes to a site map where it lists all the different pages and all the different sections on your site. As your website expands and starts filling more pages, that becomes more important because sometimes people can get lost on your website. You may know exactly where everything is but again, your website isn’t for you, it’s for the people who don’t know anything about you and want to learn.
Rob [30:18]: I haven’t been building site maps recently as we build new sites. Definitely, we do this, the xml site map that search engines use and they’re pretty good at crawling anyways, but it’s always nice to help them out. The human readable one, I need to look. We still have one for HitTail because one existed when I acquired it. You know, when we update it and stuff, it’s been kind of a pain as we add new pages to have to add them there too. I’d need to look to see how many people actually use it because I genuinely don’t know how many visitors that page gets in a given month. I’d be curious to see if those are still used. I know it’s something that we did 10 or 15 years ago when you designed a site but it’s not something that I typically put in sites these days.
Mike [30:55]: Yeah. I find that there’s a lot of sites that I go to that if they are large enough, there is so much content there that you don’t necessarily know where you last saw something, for example, and the site maps can really help out with that, but it depends a lot on how mature the product is. I don’t think that, up front, you need a site map but I think that in longer term, as your product gets bigger and bigger, you probably do.
Rob [31:16]: So to recap, our ten elements of highly effective SaaS landing pages are; number one, to design for first time visitors; number two, to write a gripping headline; number three; to have a visual element; number four, to provide three benefits or to think it in the rule of three; number five, to provide social proof; number six is an optional one to provide features on the homepage; number seven, to have four or fewer items in the top navigation; number eight, have an exit path at the bottom of every page; number nine, limit the number of links and buttons; and number ten, put everything else within reason in your footer.
Mike [31:50]: Well that wraps us up. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can e-mail it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re out of control” by MoOt used under Creative Commons. You can 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 255 | Moving on From AuditShark
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about Mike’s decision to move on from AuditShark. They discuss events and reasons leading up to Mike’s decision as well as lessons learned along the way.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of Startups For the Rest of Us, Rob and I are going to be talking about me moving on from AuditShark. This is Startups For the Rest of Us, episode 255.
Welcome to Startups For the Rest of Us, the podcast 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 [00:23]: And I’m Rob.
Mike [00:24]: 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 [00:29]: Well, I’ve been diving pretty heavy into paid acquisition for the past few days. Just spending the money to look at different approaches to it, trying different images, headlines, optimizations, all kinds of stuff. And since I’m dipping my toe back in the water after having not done it for quite some time, there’s almost like infinite possibilities. So I feel like I have to rule them out one by one again because so many of the ad networks change over time. And so if you look at AdWords or Facebook, even from last year to this year, there are so many new options. And without knowing which one’s going to work, I just have to plug some money in, run some ads, figure out how it’s going to work and then switch the approach to see which works better. So that’s probably the next week or two of my workweek.
Mike [01:12]: Do you have a budget in mind for how much you’re spending?
Rob [01:14]: A lot.
Mike [01:18]: I always think the exact same thing when I look at paid advertising. It’s just like, I hate doing this.
Rob [01:23]: The optimization, especially, is painful because you don’t have the ROI yet. So last time I did this it took me about five grand to figure it out. And from then on, I had a positive ROI, I was with HitTail. This time, I don’t know how much it will take, but I spent between $1500 and $2000 yesterday testing things, and I’ll probably spend a similar amount today. The thing is as if you have a smaller budget, you can do this over a longer period of time. You don’t have to spend that much every day. But you learn so, so much faster if you have budget that you can work through because you learn very quickly what’s working and what’s not. And you’re able to leave it running for longer and get larger numbers, more impressions, more clicks, and it just gives you a more solid feeling for the data you have. It will definitely be a chunk of money but I absolutely look at it as an investment. Last time I was able to make it work. It [channeled that scales?] so well. It’s not cheap, but once it works, it’s pretty crazy how many trials you can drive using this approach.
Mike [02:26]: It’s basically printing money at that point, once you’ve got it working.
Rob [02:29]: Yeah, it really is. Yeah, it’s pretty insane.
Mike [02:31]: Cool.
Rob [02:33]: How about you? What’s going on?
Mike [02:34]: Well, a quick announcement to anyone who’s interested in going to, essentially [?] to a mastermind group and a ski vacation rolled into a business trip, you can head over to bigsnowtinyconf.com or to bigsnowtinyconfwest.com. The first one is going to be up in Vermont. It’s going to be in the winter sometime. I forget whether it’s January or February. But basically, they’re going to be selling tickets in the next couple of days and they have a mailing list put together. And then the other one is in Colorado, which is put together by a friend of MicroConf, Dave Rodenbaugh. The first one is put together by Brian Castle. He also has a hand in the bigsnowtinyconfwest with Dave.
Rob [03:09]: All right. So what are we talking about today?
Mike [03:12]: Well, I think today you’re going to be walking us through me moving on from AuditShark. So I’ll kind of let you drive the show today and we’ll see where it ends up.
Rob [03:21]: This is a big decision, man. I realize the magnitude and the gravity with which you’ve treated this decision. So there’s a lot to discuss, all the way from reasons to end results, to some of the marketing challenges you faced. I think I want to kick it off with giving some type of timeline. And it’s a pretty loose timeline that we tried to put together right before the show, to give folks an idea of what AuditShark is and where you’ve taken the turns over the past several years. So AuditShark is basically software, it’s a service and it is auditing software for servers and networks and client machines.
Mike [03:59]: Quick correction. It’s not actually software as a service. It was downloadable at the end of it. It started out as SaaS, but not –
Rob [04:05]: Okay. This is good to know. Yeah, you’re right. So it started out as Saas and then it was downloadable. You’re right. You started coding in 2010, you had a full-time consulting gig, and from what I recall, you had the idea and were starting to build it but it was a huge effort, like it was going to take a long time. And we, at some point, talked about how long you thought it was going to take and it was like a year or more of coding. I think you got kind of an alpha or enough to show your initial audience, which was banks, small banks. That was around 2011 at some point. And there was some mixed stuff that happened [right there?]. There was a mixed understanding. You had talked to a few banks and then when you actually revisited it there was like a misunderstanding in the discussion and, if I recall, some of the banks didn’t get back to you and then other ones said, “We didn’t really need this tool,” or there was a word that was defined differently, or something like that. That didn’t work. So then you started, in 2012, looking for other markets. You looked at SaaS. Eventually moved onto more looking at enterprise stuff. So it was 2012. And then in 2013 is when you were having the health issues and you had a big motivation block where you had months, if not quarters at a time, when you said you just weren’t really making progress. And in 2014 you finally quit consulting. You went full-time on AuditShark and you set yourself a deadline. You said by some point in 2015 you wanted to have revenue and you wanted this thing to be working, otherwise you were going to pull the plug. And obviously, that time has come.
Mike [05:33]: Yeah, that’s a pretty accurate depiction of what the timeline looked like. Early on I was actually, essentially taking the product and cloning existing functionality from other products that were out in the market. I’ll be honest, I feel like in some ways that held me back very early on because I was very scared or very hesitant to, essentially, show my work to other people or to go out and piggyback on those products. Even though they were being end-of-life, it didn’t matter to me. The reality is that I can be sued 10 years down the road and it doesn’t really matter whether those products were end-of-life or not. But there was that underlying fear in my head that I didn’t necessarily want to run into any sort of legal entanglements. I think that early on that affected me more. I think I kind of ignored it as time went on but it was definitely a factor early.
Rob [06:18]: Right. And my memory of the early days, again, this was like five years ago, was that you wanted to build it but that you didn’t have a lot of time. And I questioned how serious you were about it at that time. I didn’t feel like you were putting in 20, 25 hours a week at night, coding until two in the morning. It kind of seemed like you coded on it when you had time and that it was going to take a really long time at that pace.
Mike [06:43]: Yeah. That’s right. And I also hired some contractors to help me out with some of the coding. Some of them worked out and some of them didn’t. I think that the fact that there was a programming language built into it, that really threw some of the developers for a loop. They didn’t know what to make of it. They didn’t know how to use it. It was confusing to them because they had to not only know C# programming, but they also had to know how to deal with databases and they also had to know how to deal with a lot of the front end stuff and then the back end code. And in addition to all of that, they had to understand this programming language that was kind of like LISP. I think that that skill set was just really difficult to find and the people that I was finding couldn’t handle it. But I couldn’t necessarily afford to hire much more skilled people because of budgetary constraints.
Rob [07:31]: In retrospect, do you feel like you managed them well and delegated well or do you think you made mistakes there, too?
Mike [07:36]: Oh, I definitely made mistakes there. I’m probably not different than other people where you think that you’re good at most things. And I will kind of be blunt about it. I’m probably not the greatest manager in the world. I’d like to think that I am, and I’d like to think that I’m very well organized. But when it comes to assigning tasks, there are definitely places where I’ll write something down or tell somebody to do something and it’s difficult to get the idea across to somebody, especially if it’s a difficult concept. So that’s where things like the screencast and things like that come in. And they’re helpful, but I didn’t necessarily always do them either. And even sometimes when I did them, there were times when somebody would come back with something that was just blatantly incorrect and I was like, “I don’t understand how you could of misinterpreted this because I was very clear here.” So there were certainly cases where the fault was definitely on me and then there were cases where, for whatever reason, they just didn’t understand or didn’t figure out what it is that I wanted them to do.
Rob [08:30]: Let’s dive in here because we have a pretty extensive outline of kind of every angle of this decision to move on. And I think listeners will be interested to hear you’re reasoning, the roadblocks you hit along the way, who you’ve used as sounding boards, just all kinds of angles of this. Let’s start with the reasons that you’ve decided to move on from AuditShark. Obviously, it’s a huge decision. You have five years, on and off, invested in this as well as a chunk of money. This is not a decision that you’ve taken lightly. So talk us through what made you finally decide to move on?
Mike [09:03]: Well, last year, I kind of set a deadline for myself and I said, “Okay, in order for AuditShark to really do something substantial, I really need to dedicate more time to it.” Essentially, at that point, what I decided to do was, “Okay, if this is going to happen, I need to be able to just dedicate the time to it.” So I ended up quitting consulting and that was last June. So from June until now, I’ve basically been full-time on my own business and mostly working on AuditShark. Now one of the big problems that I was having while I was doing consulting, and essentially funding the development of the product, was that I couldn’t effectively do the sales and marketing. So like if I needed to be on a phone call, it was very difficult for me to arrange that because of my travel schedule. And I think that on our 200th episode, my wife had mentioned how there were some years where I was on the road 45 weeks a year. So that was definitely a problem for me in being able to carve out that time. Because if I’m on site with a customer, I can’t exactly step out to accept a phone call or step out every couple of hours to start making an hour’s worth of phone calls. It’s just not easy to do that. So quitting consulting allowed me to make those phone calls myself. I could have hired somebody, but at the same time, had I hired somebody, I wouldn’t necessarily have been the one learning how to do all that stuff or learning the subtle nuances of what people were saying. And that would have been difficult to get from a sales rep back to me. And in addition, I didn’t necessarily have the money to hire a full-time sales rep. And I’m really not comfortable hiring somebody on like a commission-based, especially for product that isn’t established and doesn’t have a solid revenue stream that’s coming in. I just don’t feel good about that.
Rob [10:43]: Right. I would agree. You never got to product market [?], so you as the founder/CEO really needs to be the first salesperson. So it was obvious that the sales approach wasn’t going to work. But at that point when you realized that, did you ever think, “Boy, this product is just not something that I can do as a single founder and I should pull the plug now?”
Mike [11:01]: The thought crossed my mind a bunch of times. It’s not to say that I didn’t think about it or it didn’t weigh on me but when you’re in the middle of it, it’s like what do you do? What are your options at that point? If you’re looking at that saying, well, this isn’t flying right now, it’s not going anywhere, what can I do about it? So I would say that it’s one of those situations where it’s the analysis paralysis, where you’ve got so many options you don’t necessarily know what to do so you don’t do anything. I’ll be honest, I just didn’t know what to do. So in many of those cases, I just didn’t do anything. I didn’t make a decision one way or the other, I just kind of let things ride the way the way that they were going and kept doing motion but not necessarily any forward progress.
Rob [11:39]: And I can imagine that with, essentially, the [?] costs that you had of a few years of work, because when you made this switch, and I think when you realized that it was going to be phone calls during the day and one-on-one sales, this might have been what 2012, 2013? So you were already two or three years into it. You were already tens of thousands of dollars into it. I imagine the sunk costs had to have entered your mind at that point, of like, I could just shut this thing down because this is going to be hard to sell or this is just a hurdle, a roadblock, and I can figure out how to get over it. Is that kind of your thought process?
Mike [12:12]: Yeah, but I mean, something else that factors into it is how do you know whether or not it’s going to be something you can get through unless you try it. If you look at the Dip from Seth Godin’s books, how do you know you’re there? Unless you try to push through it, I mean, if you give up right then, clearly you’ve failed it or whatever it is that you’re doing. But if you at least give it a shot and try and push through it, then you have a chance at making it through. And you won’t know until you try that. So it made it difficult to kind of make a decision one way or the other.
Rob [12:41]: Yeah. It’s hard because there’s the school of thought of you should get something out there in seven days and then let it fail really quickly. And there’s Lean Startup with just iterating and iterating and pivoting and pivoting. And then there’s the opposite school of thought that you need to sit there and hammer on things for six months or a year before you’re going to see if it works. And I think part of that is personality driven. Folks listening to this, I think if you tend to flit around and move from place to place, from project to project, you should probably stick with things longer than you feel comfortable with. And I think if you’re listening and you tend to be more bullheaded about it and you stick with things too long, then you should think about cutting your losses sooner. And having known you, Mike, for what- we’ve known each other for ten years, but known you pretty well for five or six, I would say you [?] on the side of pushing with things, of being more stubborn with it. And that is like a great strength in certain cases, but I feel like in AuditShark’s case it may not have been. It may have kept you doing it past the point where it made sense.
Mike [13:42]: I would definitely agree with that. And it’s hard to know, necessarily, in advance whether or not the stubbornness can be a pro or a con until it’s too late.
Rob [13:52]: That’s right. And if you’re company becomes a $100 million company and you were stubborn, then you’re a visionary and a genius. And if your company tanks, then you were an idiot. You know what I’m saying? It’s like it’s all in the outcome.
Mike [14:03]: Well, I appreciate that.
Rob [14:05]: Yeah. [?]
Mike [14:06]: That’s okay. No, I understand. I knew what you were saying. I knew what you were saying.
Rob [14:12]: So somewhere around late 2013, 2014, you kind of made the switch and moved into this enterprise market and you started talking to more enterprises and the sales cycle got long and challenging. So that was another factor, I think, in your decision to shut it down. Is that right?
Mike [14:26]:Yeah. The enterprise sales is just really hard. And I think that there are definitely cases where it could work and there are some people who are built for that kind of thing. I don’t know that I really am. I prefer things to move a little bit quicker. I’ve still got a customer in my sales pipeline who’s been there, going on 20 months now. And it’s an enterprise deal they’ve got between 35,000 and 70,000 end points. But the reality is that, even if that deal came in tomorrow, I don’t ultimately believe that it would change the long-term outlook or the sales cycles. So it would bring in probably $300,000 in revenue but I don’t necessarily have a good scalable way to get in front of a lot of other people like that. So that makes it difficult. And in addition, I had somebody who was basically asking me for information about AuditShark and we went back and forth a little bit and they’re like, “Check back with me in three months.” And then, “Check back with me in six months.” So I started doing some research, come to find out that this person was actually project manager for a product inside their company that basically does what AuditShark does. Of course that’s heavily depressing. It’s very demoralizing at that point. You feel like you’ve been strung along.
Rob [15:37]: Yeah, that’s tough. We had several offline conversations over the past kind of year, I think, as you’ve pushed into this enterprise market. And there have been stops and starts. There has been progress. There was a light at the end of the tunnel at a certain point where you thought that you were going to be able to make this work. To be honest, as an outsider looking in, the past 12 months has been your most focused and, I’d say, productive period of time, working on AuditShark, in my opinion. Because you actually sat down and you made the sales calls and you were doing demos and you were doing webinars and doing marketing and that stuff. It’s like the first three or four years you were working on the product and trying to figure out what to built and trying to- it was more product focused. A lot less marketing focused. But you really were dug in and executing this past nine to 12 months. But this enterprise sale cycle, and just enterprise sales in general, has really been an uphill battle, I think.
Mike [16:31]: Yeah, and just for some of the listeners who haven’t listened to some of the earlier podcast episodes or heard what AuditShark really was for or what it was built on, I was essentially taking an enterprise level product that had sold recently well in the market and creating a smaller version of it that would have a lower price point and would address the same types of needs but for smaller businesses. I wasn’t necessarily looking to go to the enterprise market. I was going to say, hey let me take this enterprise solution and re-work it a bit for small and medium sized businesses. And when the banks didn’t work out, and then as a SaaS offering for small businesses it didn’t work out, then I said, okay, well that worked before in the enterprise market. That’s probably where I should go with it. And ultimately, it seems like the enterprise market is just really not a good fit for me personally. And the last reason I have for walking away from this is that I feel that some of the people that I’ve been targeting and talking to, who are in positions where they are tasked with solving this problem, don’t necessarily care about the problem themselves. And that’s really hard to take. As a developer, as an entrepreneur, you’re trying to solve problems for people and make their lives better. But if they don’t care about the problem, then why should you? It makes it really hard to care about their outcomes when they don’t care about it either.
Rob [17:52]: And we’ll talk a little later about some lessons learned from that, right? Because I think trying to get more validation up front could have had you learn that before spending the time to build the product. Maybe it could have. I think it’s arguable. But it’s definitely possible. So what’s the end result really? What are your sunk costs?
Mike [18:13]: Neglecting the time that I’ve spent on it, and if you kind of add in profit versus the money that I spent, I’m probably down about $50,000 in sunk costs. There’s about a third of that that I paid to a contractor who kept promising to deliver and updated version of the product for, it was probably close to four months. And that was complete mismanagement on my part. And I talked to my mastermind group kind of at length about that because it had been going on and on. And finally, it just got to a point where I was like, look, I need something from you. I need to see something and what I got was not what I expected. And I was just like, all right, I’m done with this. This whole contract is done.
Rob [18:49]: Right. That’s a bummer.
Mike [18:51]: Yeah. Probably a third of that $50,000 was spent on that.
Rob [18:55]: Right. You mentioned your mastermind group. I know you’ve had a bunch of sounding boards, folks you’ve talked to about this. Especially over the past year or two as you’ve been trying to make a decision about it. Who are folks who you’ve relied on for that?
Mike [00:19:09]: Yeah, so Dave Rodenbaugh and [?] are in my mastermind group. So I talked to them pretty frequently about it every couple of weeks. And then at Microconf Europe, I had a number of conversations with different people. Like Steven [?] and Patrick McKenzie. Even as far back as Microconf in Vegas, I talked to Steli Efti for quite a while about it because, obviously, as CEO of Close.io, he has a lot of insight into sales cycles. So I felt like talking to him would, at least, help me understand whether or not I was going in the right direction or the things that I was doing or not doing that I should be. And the end result of that was that if you’ve lost motivation and the needle isn’t moving then it’s going to be an uphill slog. And somebody specifically said, “You’re a reasonably smart guy and there’s a near-infinite problems you could be solving. You should probably be working on something that you enjoy rather than something you don’t.” And it stung, but at the same time I needed to hear it.
Rob [20:04]: Yeah. It all depends on what state of mind you’re in. If you’re in the first couple months and you’re all fired up about something being a good business and someone tells you that, you’re going to tend to ignore it. All of us would tend to ignore that if you’re fired up about it. If you’re at the end of your rope and you’re frustrated and you’ve been working on it for multiple years and it’s not working, when you hear that it’s going to sting, but I think it’s good feedback to hear because it makes you reconsider continuing to invest in this product that just doesn’t have legs.
Mike [20:29]: Right. And obviously there’s all the mental challenges that go with it, but it’s something that I’ve talked about on this podcast before and there’s a certain amount of obligation to succeed, I’ll say. And not to say that everything I touch is going to turn to gold, because I certainly don’t expect that, but I really felt like I had the insight into this particular problem and how to solve it to be able to push my way through and solve the marketing challenges. And I felt like a lot of the marketing challenges that I ran into, especially in enterprise space. The enterprise space is really very much relationship driven. I do not like the mode of operation. I do not like that mode of sales.
Rob [21:10]: So with all the feedback in mind from folks you’ve spoken to and given your reasons above, I know that you had in essence, set a deadline for yourself at a certain point last year. Can you talk us through really the final straw or the final deadline and how that worked out? You gave yourself the freedom to really decide to move on. How did that all work?
Mike [21:29]: Yeah. I had this initial deadline that I had set up, which was a year from going full-time on it. And I got near the end of that deadline and I was kind of worried about it because obviously, things were still not going very well and I was trying different things. And one of the things that I had tried was the AuditShark lock down service. That allowed me to kind of push things out a little bit because as soon as I started doing that, I got some immediate sales from it and I was able and go out and do some security reviews for a couple of people. And I sold two of them very, very quickly, and then there was a third one that was supposed to come it and ultimately, they ended up backing out. But I sold several thousands of dollars of those services very, very quickly. So I looked at that and said, well, maybe this is the part that has legs. Maybe this is where the product is destined to go. So I gave myself a little bit of extra time. My mastermind group members were on board with that. They said, “Look, this got some revenue very, very quickly. You should probably spend a little bit more time on it, even it takes an extra month or too,” because a lot of the other things you haven’t tried so far have worked. And it’s like you’re at the end of that timeline and suddenly, boom, something changes. And it didn’t feel right to just pull the plug at that point. So I extended the deadline by a little bit. But ultimately, it didn’t seem like that really made much of a difference. And also, the initial traction that I got from that was from warm leads, not necessarily cold leads. And I don’t know how long it would take some of those people to invest in the lock down service. But at the end of the day, I don’t think that the lock down service is something that I would want to do long-term anyway.
Rob [23:00]: Right. Yeah. So the combination of it, it’s like if you go with enterprise you didn’t really have a passion for doing enterprise sales. And if you did the lock down, you could probably sell it to more smaller, medium sized businesses but didn’t turn into something that you wanted to do. And, like you said, you didn’t know how to repeat that and you didn’t want to spend another six months trying to find cold leads and convert them with lock down. Your time had come, your deadline had passed.
Mike [23:24]: Right. I mean, you can only pivot some many times before. You can technically pivot forever but at some point you got to call it quits.
Rob [23:32]: Yeah, there’s always more suggestions. We could sit here and say, “Okay, so lock down had a little bit of traction, Mike. How are we going to plan to get more people to the website? And then you can do webinars and you can do this and do that” but it’s like you’re done. When you’re done, you’re done. So what are your plans with AuditShark, what are you going to do with it?
Mike [23:46]: Well, I think, for the time being, I’m just going to leave the website up and leave things on “Autopilot.” I’ll probably add a pricing page in there with just some sort of [low ball?] price and some sort of upper limit on the number of machines that you can use it on. But the reality is I’m not going to do very much with it at all. I did talk to a broker who said that he thought that I could definitely find a buyer for it because there’s definitely people who would be interested in this type of product. But the other suggestion that I heard was that the site definitely gets reasonable traffic on some of the pages that are super competitive. So for example if you search Google for SOX Compliance, I actually rank higher than Wikipedia for SOX Compliance. And if you look in the Google keywords tool, it shows that it’s a highly competitive term. So I’m getting like more than half of all internet searches for SOX Compliance. And that page is generating between 15 and 20 leads a week right now, for me. So I think that there’s definitely value in terms of advertising. But again, it kind of goes back to this situation of like in a way I’m kind of done and I don’t want to put a lot of time of effort into it, so I’m going to leave the site up for the time being but I’m not going to do a whole heck of a lot with it at this point.
Rob [24:54]: Yeah. It’s tough, man, because, I think my opinion on this is that leaving it up, if you make one sale magically or two sales for a few hundred bucks, it’s probably not going to be worth your time to support them. And I think that if someone downloads it and uses it and runs into any bugs, then you’re now on the hook for fixing that. If they run into support issues getting set up, you’re going to have to help them. And since you’re not planning on building this business, I’d be kind of hesitant to keep it for sale, to be honest. Even if you leave the site up for now until you’re really done with it, you may just want to remove the buy it now button and either have just a “contact us” button or like no way to purchase on the site. Just to avoid having to get your code, which has not been heavily production tested on hundreds of installs. So it probably still has some bugs to avoid a customer buying that and putting it on their stuff and then having to support it. Because, you know, what’s worse than selling zero copies of a piece of software, selling two copies of a piece of software. Because then you’re on the hook to support it and it’s a lot harder to just shut it down and walk away at that point.
Mike [25:54]: Yeah. For me, I think, there’s this mental barrier to going into [IS?] and clicking stop on the website. I feel like that’s really what it is. There’s two sides of this. There’s the logical side which says, “Look, this is done. This isn’t going anywhere and all the paths that you have to success are paths that you don’t necessarily want to do.” So there’s really no point. But then there’s the emotional side of it which is like, “I’ve put all this time and effort into it and to go in and hit that stop button” so that website no longer shows up, it’s kind of painful.
Rob [00:26:26]: It’s too soon.
Mike [26:28]: Yeah, kind of too soon. Mentally, I feel like it’s there but at the same time, it’s hard to just do that.
Rob [26:35]: I think that will ease up over time. I think now that you’ve made this decision, it still hurts and then, in a few months, I bet it will be a lot easier to do that.
Mike [26:43]: Yeah. And that’s what I think as well. I’m just going to kind of let the website ride for the time being and for the most part ignore it.
Rob [26:50]: So let’s talk about lessons learned. I think you’ve learned a lot during this process. I think other folks listening to the podcast have too. There’s been a lot of heartfelt discussions and the comments over the past several of years as we’ve had episodes that have focused on your building and launching and decision points around AuditShark. Talk us through some of the things that you feel like you’ve taken away from this experience.
Mike [27:09]: Well, I think that I’ve definitely realized that there are certain cases where the answers are not so cut and dry. So, for example, when we talked before about the timeline a little bit, and in 2013 there were some heath issues that I ran into. But I almost feel like those obscured my motivation issues or maybe compounded them because I don’t think that, kind of looking back in retrospect, at the time I was like, oh yeah, my health issues. I’ve got these under control now and now I can get to work and I can actually get things done. And I feel like because of maybe underlying motivation issues were obscured by the health issues. I think that it was not necessarily as clear to me that there’s two different things going on here, not just one. And it’s not obvious until much later. I was talking to Patrick McKenzie and he said the exact same thing happened to him on Appointment Reminder, where the product wasn’t necessarily getting very much traction and he ran into health issues. And then even after some of those cleared up, it still took him a good year and a half or two years of a very difficult grind to get the product to where he wanted it to be. And he’s the one who actually told me that the heath issues very much obscure the motivation issues. I think at Microconf Europe he called this the [Peldi?] test.
Rob [28:22]: Right. Like do you really want to work on this thing?
Mike [28:24]: Right.
Rob [28:25]: Are you going to be happy working with this group of customers and working on this product for the next 10 years? That’s really his question. I think there’s also a big question around validation. You’ve made some calls and you had a couple of banks that you had spoken to, but talk us through something that you would do differently these days regarding the early validation of AuditShark’s need.
Mike [28:25]: I would talk to a lot more of them. I talked to five and I felt like because I walked in the door and sat right in front of the person who was running the IT and talked to them directly, that I had a good handle on it. And then in addition, all my background and experience at the startup a long time ago, building exactly this type of product. Because I knew all the subtle nuances and I did all the consulting around it, but at the end of the day, I did not understand the needs of the small banks. Because what I was trying to do was I was trying to take a large enterprise product and put it down into a very small niche market with banks. And I didn’t do enough validation around that piece of it. I still feel like the product itself and this particular problem needs to be solved in the enterprise space, but clearly, as I said, that’s not a place that I’m going to go or able to go. But I definitely could have done a much better job validating those banks before I went off and built code for 12 to 18 months. And I think that had I done a better job of that, I might have realized much sooner that the banks were not going to be a good fit for the product. And ultimately, I wouldn’t have had to pivot because I would have never built to begin with.
Rob [29:53]: Right. Yeah, and then something I’ll add, that we talked about offline is that, you took too long between the idea and talking to the banks and getting to beta, right? It was like 18 months or more and that’s a long time. There were reasons for it. You have contractors that fell through. You had traveling. And you had all of that stuff, but it just becomes too long and it makes the journey too long so that it’s not fun anymore. It’s hard to keep motivation up over the course of 18 months or two years working on a product with no real validation.
Mike [30:22]: Yeah. And it’s interesting. I’ve talked to some people where they’ve heard about some of the inter details and inter-workings of how everything has happened and they’re shocked that I was able to maintain, I guess, stay on course for as long as I have.
Rob [30:37]: Yeah. And that comes back to that strength of being stubborn. I think you have that strength of being able to continue plugging away at something for a very long time and I think that’s why you stuck with it, and it’s both a strength and a weakness depending on the context.
Mike [30:51]: Yeah, the other thing that I think really was a big deal was when the banks, I was initially targeting, did a 180 on me. That should have been a gigantic red flag for me to reevaluate the entire thing instead of just simply pivoting. Because I had this product that I had built, I took it to them and they said, “Oh yeah, we must have misunderstood” or there was miscommunication. This is how we’re solving that. We don’t really need this. It’s an interesting thing but we don’t need it. And I think at that point, I probably should have done a complete reevaluation rather than simply trying to pivot. And I think that was big mistake that I don’t think I realized until recently. I can’t really remember ever hearing that lesson from anyone else before, but I think if you get to the point where you need to pivot, you need to evaluate everything at that point instead of just is this going to work or what’s going to be the most likely place for this, because it’s entirely possible that all the research and everything else that you’ve done before that point is essentially irrelevant at that point.
Rob [31:48]: Right. And you were in problem solving mode of like, “I’ve run into a problem, the banks didn’t pan out. How do I fix this problem in the context of this product? So how do I find different customers? How do I find customers for this app?”Whereas, maybe you shouldn’t have been evaluating how do I fix the problem but should I fix the problem and should I even continue with this product at all?
Mike [32:09]: Yeah. That’s a very subtle distinction, but extremely important, too.
Rob [32:13]: Yeah.
Mike [32:14]: I think there was also a certain amount of obligation that I felt because I had talked about AuditShark on the podcast. I almost felt obligated to continue. And I feel like looking back on it, that was also a mistake that I made. Sometimes the right decision is to call it quits and move on.
Rob [32:28]: Right. And I think that obligation probably extended beyond that and maybe even tied into the amount of money you invested and certainly the amount of time you’d invested. It just comes back to the sunk cost.
Mike [32:40]: One other thing I want to bring up is that I think when you’re looking for a channel for your product, and I think that on this podcast we tend to err on the side of telling people go for SEO or paid advertising, all these online mechanisms, and I think that once it gets to offline stuff you have to do a little bit more research on it. Because what I didn’t realize in going after the enterprise market was that the enterprise market is much more relationship driven than it is anything else. And I didn’t realize that up front and I should have. Because I’ve done enterprise sales before but probably not to the extent that an enterprise sales rep would have. I’ve been in the capacity as like a sales engineer and working through problems with people and doing proof of concepts and things like that, but when it gets into the part where you’re actually selling the software and getting to the point of purchase orders and things like that, it’s very, very relationship driven. And sometimes people will just ask you for proof of concept or a demo for the sole reason that they want to pit you against another vendor. And I’ve run into that. It’s a hard position to be in but those relationships that those larger businesses have, they’re there for a reason. So when I big business runs into a problem, they’re going to call up their large value [added?] reseller and say, hey, we have this problem, what do you have for us? What tools do you know of that can solve this particular problem? And they’re going to rattle off two of three and usually the top one that they come out with is going to be the one that gives them the best margin that they’re reselling. And I don’t have those relationships and I don’t really want to sell a product that is more sold on relationships than it is sold on technical merit.
Rob [34:15]: I think there’s a roadblock or a pretty big uphill battle if you’re a single founder bootstrapping a company and you’re trying to enter this market. I don’t know of any single founders who are bootstrapping, selling into the enterprise. I’m sure there’s one or two. There’s probably a counter example. But for the most part, the folks we know are not doing that because of the amount of time investment that it takes, the amount of cost, the lead time, and the sales cycles. There’s just all these reasons. So, I think when you initially launched or were going to start building back in 2010, you weren’t planning on going after enterprise. But there was a point in 2013, 2014, when you said this is what I have to do, and I think that if you had known what you know now about the enterprise sale cycle, that would have probably caused you to, hopefully, rethink the decision.
Mike [35:02]: Well, that’s another pivot point where I should have reevaluated much more than just where is this going to work. When I pivoted from banks to small businesses I should have reevaluated a heck of a lot more than I did. And then when going from there to the enterprise, I should have evaluated whether the enterprise is a good place for me to be in. I didn’t do it in either of those cases. And I think both of those were mistakes.
Rob [35:02]: So what’s next for you? You’re moving on, but what are you moving on to?
Mike [35:28]: I’ve kind of talked about this offline, but there’s a ton of stuff that needs to be done on the Micropreneur Academy and Founder Cafe, so I think I’m going to take some time to revamp some of the guts of that stuff over the next couple of months. And then right now I’m also testing out a couple of different ideas to see if they have any legs. Two ideas I’m testing right now. One of them is more of a one-on-one email follow-up. Because one of the issues I ran into when I was trying to do the enterprise sales was there were people who I would email them or I would call them and they just would not get back to me. And it would take a number of emails or contact attempts to try and get them either on the phone or get some sort of response. There was one, I think I talked about it were it was eight emails over the course of 16 weeks, or 16 emails over 16 weeks or something like that. It was a very long period of time. It was a very high number of emails to me and phone calls. And finally I got a response on the 16th one. I forget the details of that but it was a lot. And it was all with no response of any kind and then suddenly, kind of out of the blue, they’re like, “Oh, yeah. By the way. We’d love to set up a meeting for Tuesday.” It was weird the way that that works. And I’ve talked to a couple of people about this. There’s definitely some opportunities there where they want some sort of automated sequence for people who, not fall off the bandwagon, but fall off the radar or kind of move away from the negotiating table, to just help bring them back. So I’ve got an idea that I’m testing for that and I’ve talked to a few people about it, but I’m not so sure I want to go in that direction. And then the other one, this one’s a little bit fuzzier. It’s sort of an idea around spreadsheet automation. So there’s lots of people out there who build reports from spreadsheets or take data from different sources, kind of aggregated together, or imported into databases. And I think that some sort of spreadsheet manipulation product or something that builds reports from multiple spreadsheets and splices things together, or even just something very, very dead simple that takes spreadsheets and imports them into a database might be something that people would be interested in. Again, I’m still working out details on those things. I haven’t started writing code or anything like that, beyond some very, very brief prototypes that’s about it. But I’m kind of sifting through about 5,000 keywords right now to see if there’s an SEO play for that and then talking to people about that. I’ve already had a few conversations. One of them didn’t. So, we’ll see how it goes. But I’m not going to do anything until I get to probably 20 or 30 people.
Rob [37:49]: Well it’s been a long journey, sir. I know this is a big decision for you. So it’s cool that you’re willing to come on the show and kind of detail all the decision points and what’s gone on over the past several years so folks can get a better idea of what was going on at what point. And frankly, so we can all learn from the mistakes that we’d made, like we say in out intro.
Mike [38:10]: Yeah, I’ll be honest. This is a fairly painful set of mistakes. It’s not even just one mistake, it’s a bunch of them, not necessarily sequential. There’s definitely some things that went well and there’s some things that didn’t. I learned a lot along the way. Ultimately, it didn’t necessarily turn out the way I wanted it to. But not everything does. But at the end of the day I want to be doing something that I enjoy and have fun doing and am helping people who legitimately want to be helped. And there were a lot of things that just didn’t necessarily fall into place along the way. So, as I said, it’s kind of painful. I know logically that it’s the right move, emotionally it’s still a little painful, but hopefully that will go away over time.
Rob [38:51]: I imagine there’s also a bit of a weight lifted off your shoulders.
Mike [38:55]: Yes and no. There is and there isn’t, I guess. I’ve got all the technical cruft left around that it’s going to be there for a while. It’s almost like you break up with somebody and their stuff is still in your house.
Rob [39:07]: Yeah. You just can’t get away from it.
Mike [39:10]: I don’t know how else to put it other than that.
Rob [39:12]: Yeah. Well, I think that probably wraps us up for today. So if you have a question for us, whether about this episode or another one, call our voicemail number at 888-801-9690. You can e-mail us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Out of Control,” by MoOt, used under Creative Commons. You can 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 254 | Planning Your Move from Day Job to Product
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about planning your move from day job to product. They give you seven milestones to follow to help you get closer to working from your business full time.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of Startups For The Rest Of Us, Mike and I will discuss planning your move from day job to product. This is Startups For The Rest Of Us, episode 254.
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 [00:28]: And I’m Mike.
Rob [00:29]: We’re here to share our experiences to help you avoid the same mistakes we’ve made. [What are this week?], Mike?
Mike [00:34]: I’ve only been back from MicroConf for a couple of days now, so I haven’t gotten a whole lot of work again. But aside from that, I bought a new car and it’s been the most painful experience I’ve had all year.
Rob [00:44]: All right.
Mike [00:45]: That’s like two or three years. For whatever reason, like they don’t make it easy to get a price quotes, and I kind of get the reason, but it’s just painful to get price quotes from anybody without having to actually walk in the door. It just sucks.
Rob [00:57]: Even on this day on age of the internet, car buying still not solved.
Mike [01:01]: Like I said, I understand why they do it because they don’t want you to go around to like 10 different dealers and get a price quote from them and then shop it around to them. But still, it’s just like you think it would be easier.
Rob [01:12]: You’ve done a lot of enterprise software sales, now you know what it feels like to be on the other end of that. Am I right?
Mike [01:19]: I appreciate that.
Rob [01:20]: Totally. Me as well, I’ve been back to work essentially two days. I did some work over the weekend to try to catch up on e-mail. I had a big backlog, but I spent the last two days kind of cranking though and getting caught up and really figuring out the focus of the next couple of months because it’s kind of time to continue building what we started during the summer with Drip. We’ve been doing webinars. We ran a contest. We have the content [?] going. We have a ton of integrations going. There is just a lot going on. While I was away in Europe, I was able to keep pretty close tabs on that.
What is nice is with [Slack?] and e-mail and get GitHub with Codetree on top of that. It was just easy for me to keep an eye on and figure out what was going on, to kind of keep up [the tabs?] with it. The nice part about being in Europe for that month was that I was able to do a lot of thinking and I had enough space because I was separate from the office, that I wasn’t kind of caught up in the day to day as much.
I made a bunch of notes about some entirely new projects that I want take on, some new angles about marketing and on the sales side. We actually need some inside sales help and I’m going to be looking for someone part-time to help with that. There is a lot of interesting stuff that’s on the dock and I’ll probably talk about it once more if it’s implemented. But, kind of planning right now about the next 60 to 90 days of what I see the marketing and sales winding up and then also working with [Derrick?] on figuring out what the next 60 to 90 days of the product is going to look like.
Mike [02:51]: Do you have an idea of how you’re going to go about planning that stuff? Is it going to be based largely on, I guess, interpretation of what customers are asking for or do you have specific things in mind that you know need to be done and it’s just more matter of prioritizing at this point?
Rob [03:06]: It’s the ladder, yeah. We have a couple of hundred feature request, additions, tweaks, some of which have come from internally of how we want to make the tool better for our own use. I use Drip- we use it for MicroConf. I use it for my book. I use it for the podcast. I use it for Drip and HitTail. I use it for ZenFounder and Startups For The Rest of Us podcast. I have a [?] of use cases on my own and we use it internally. Everybody in there is kind of putting feature request in.
Then we have customers constantly asking for stuff so the list is long. The challenge is prioritizing and figuring out what is the next thing that is going to either retain the most customers or get us the most new customers, and that’s really the evaluation process we are going through.
Mike [03:54]: Cool. What are we talking about this week?
Rob [03:57]: This week, we got an e-mail from [Casey Collins?] and he asked a question that spurred me to basically outline an entire episode, and his e-mail reads, “I’d been interested in hearing an episode on how and when to make the leap from the day job to working for your business full-time. I’m working a standard full-time job and just starting to build my SaaS app. What goals or milestones should I set to gauge whether or not I’m ready to make that leap.”
We’ve prepared seven milestones that I think you should target along this path. It may not be the same in every case, but this is a nice general framework to kind of get you going. Under each milestone, we have some action items you should take to kind of make sure that milestone is accomplished or to help you get to that milestone.
To kick us off, the first milestone is preparation, it’s really pre-milestone. There is a couple of things here that I think are key if you are going to embark on this journey and try to get from salary gig to making a living from product or even a productized consulting service. The first thing I think you want to keep in mind is that having a runway of some kind, some type of cash runway is amazing.
If you can get three months of living expenses, awesome. If you can get six months, even better. Because, even once you make the leap and you have an app that’s covering a good chunk of your income, it is so nice to have that comfort and the lack of stress by knowing that there is a chunk of cash in the back that you can turn to if you need to in like a dire situation or in case anything goes wrong as you make this jump to living off your product.
Mike [05:33]: I think something that kind of goes along tightly with that is making sure that you don’t have a lot of debt when you are trying to start a business. Debt itself can be crushing especially if you are floating a lot of money on credit cards or different debts that you’ve accumulated, whether it’s student loans, or mortgage, or car payment, or even just things where you have refinance something. Or you have financing on something for like your house, whether it’s like roof or siding or anything like.
Any of those debts, they basically weigh you down and they can make it much more difficult and much more stressful to start a business because you have all this interest in extra debt that you’re paying on a monthly basis. Yes, in some cases, it’s very valid, but it also hurts a lot because you have to pay attention to that and there is mental [?] associated with all that stuff. It’s not just about reducing the cost of your day to day living expenses, it’s about reducing the outgoing cash flow on monthly basis as well. Not just [?] cash itself, but the interest associated with it too.
Rob [06:31]: If I were in a position where I had $10 or $20,000 of credit card debt and I was considering going and start a product business, I would not start a product business. Instead, I would take my evening and weekend hours and I would do freelance work and I would pay that debt full before I did it. That’s just my style. I think that’s probably the best advice in most situations.
But, as you said, it’s just like anchors it, like sucks the cash out of you and it’s really going to be that much harder to start to make a full-time living off a product. It’s not hard enough without having that as well. I think the second piece of this preparation milestone is to get buy-in from the key people in your life. That’s most likely a significant other, whether it’s a girlfriend, spouse, husband, kids who are old enough, maybe it’s them, maybe if you still live with your parents, it’s them. But it’s someone around you who is going to be impacted by this. I think that’s the biggest deal, right, is are they going to be impacted by taking this leap?
If you share finances with someone else that someone who kind of needs to do the buy-in, and I think a husband or wife is a perfect example of this. Without getting their buy-in, A: you’re not really treating them with respect, like you’re going to be making financial decisions that could negatively impact the partnership and could negatively impact both of you and that person deserves a say before you do that.
Then the other thing is it can cause a real rift. I mean, businesses can cause divorce and it cause people to split up and that’s not something you want to do. I think having that conversation really before you start building this app and going on this [?] pretty tough journey is a good step to take.
Mike [08:11]: I think sometimes it’s difficult to explain exactly why it is that you want to do this. Because, building your own business is a heck of a lot harder and more involved than just going out and getting a full-time job, and you get the income from that full-time or the consulting revenue fairly quickly. Trying to relay that information about, “Oh, this is why I want to do this” and if you’re looking down the road a long term fulfillment or the monetary rewards down the road, it’s not always clear cut to most people.
I find that my brain tends to be wired a lot differently in terms of how I look at things like that than other people I know who are not entrepreneurs or not doing their own thing. They have a 9 to 5 job, they go to it, and they come home and they don’t really see how, “Oh, why is it that you’re working on this thing that you’re not seeing any benefits from it right now” and it could be very difficult to explain that kind of stuff.
You really do need to be on the same page, not just in why you want to do it, but what are the long term benefits of it. Let’s assume that you are successful and that also goes along with making sure that you’re relaying information about how things are going to your significant other, because they need to know how things are going, because they are invested in the relationship, maybe not necessarily in the business they want you to be successful, but as a by-product like it does affect your relationship and it really can hurt it over time.
Rob [09:30]: Yeah, I agree. I also think that I would consider giving someone who had a lot of questions about this and really wanted to begin with, give them the book “The End of Jobs.” Taylor Pearson came on the podcast awhile back but it helps explain why entrepreneurship is actually a logical choice and can be as good as or better than employment, especially moving forward, and it makes it kind of logical argument around that.
Last step for preparation is to put together a spreadsheet with estimates of how long it’s going to take to build what you need. At this point, it’s going to be more of a guess because I’m assuming you’re just starting conversations with customers or future customers at this point so you may not know exactly what you want. But a problem I see with some folks who are building products, actually, many of them, is that they don’t have any concept of how long it’s going to take them to build what they are building, and they just sit down to build the next page in the website, really, without a spec telling them what the overall scope of things is and no concept of when they will be done.
When I say spec, I don’t mean that you write some type of full functional spec like you would if you’re a consulting firm, I mean, a few lines on an Excel spreadsheet or a Google Doc that basically says, “Here are the high level” whether you want to do it from database up or top down from the UI element.
I’d typically go from UI stuff and you say, “How much each page is going to take you” and then you add some leeway time and you add some database architecture time, and some deployment time, and you can get a reasonable estimate, even if you’re not that great at estimating. If you’re within 30%-40%, that will help you know, is this a true year development project you’re tackling or is this a 3-month development project you’re tackling. Knowing that from the start is huge, and I think doing that, I feel like you’re flying blind and you have no concept of what it is you’re building and how long it’s going to take.
My other kind of final act for this is there is this cool function in Excel and in Google spreadsheets, called Workday. If you put all the numbers in, forget how many hours it is, you could put workday in and you can figure out what date that you’re going to complete this project, and it will give you the date as of today if you work certain amount of hours per week.
Then, if you don’t work in a week, that date pushes out and so this is a very tangible and real way to watch your date slip, really, without any work acquired on your [?]. Every time you log into this thing, you’re going to see, “Oh man, I’m not going to launch until February of next year” and you really need to get on this thing.
I think this is a key component to preparation as to have a concept of the scope of what you’re building, even if that changes, you’ll be within a month or two of it and when you’re working part-time like this nights and weekends, having this is I think a big kind of sanity checker to be able to have an idea of how long you’re going to be working on this on the side.
Mike [12:14]: Yeah. I think that’s a great suggestion. I didn’t know about the workday function, I use FogBugz and Teamwork and couple of other tools. But the interesting thing about that is that it’s almost like if you’re using a GPS and tells you that you’re going to arrive at 5:10 PM or something like that and you hit traffic, and suddenly it’s taking you longer and it continually pushes out.
At the end of the day, of course, when you’re 30 seconds away, of course, it’s going to be extremely accurate. But the further you are out, it is less accurate and that helps to give you an idea of how far you’ve realistically are from it. Because the further you are away from something, the more difficult it is to estimate it and I find that when you have a lot of test that you’re not necessarily as familiar with doing because you don’t do them on a regular basis, you can be wildly inaccurate by as much as 10x of how close you are with just your initial estimate.
Then even the things that you are familiar with, those things are very often inaccurate as well. I’ve seen developers who are like, “Oh, this will only take a couple of hours” and inevitably, it takes two or three days. I think I saw something recently where it basically said, “Take any estimate you have in order of magnitude in order to make it accurate.” I wouldn’t say that that’s necessarily far-fetched in many cases.
Rob [13:26]: That was our first milestone preparation. Milestone number two is to have one person commit to paying you for your product, and this is standard customer development, right. It’s getting that commitment and trying to validate the idea [?]. Notice no one has written any code yet, don’t go often build your product. In fact, Casey had said, “I’ve just started building my SaaS app.”
Casey, I would advise you to stop building your SaaS app and go do this instead. I say one person committing to pay you, that’s the first milestone and really, the next one, we will kind of combine it with this, is to get 10 people to commit to paying you. Name a price, get 10 people to commit and this is going to happen in person conversations, either in person, via Skype, or via e-mail, but it’s going to be one on one conversations. You can do this with split testing and sending bulk e-mail and using surveys. Right now is the time to dig in and really get 10 people, and don’t write a line of code until you have those 10 people.
That’s what we did with Drip. I’ve refused to get started on it until we had some commitments and I knew that we had enough interest that it was worth digging in and starting to write code.
Mike [14:32]: I think that step is really hard for a lot of people, because they don’t have anything that they can really show to people, yet, you’re kind of asking for people to make commitments to pay you for something that just simply doesn’t exist. The term that comes to mind is [vapor?] [?] “Oh, you’re selling something that just doesn’t exist.”
In some cases, the advice is, “Oh, you should definitely take somebody’s money and there is a counter advice which says that you shouldn’t, at a very least, get the commitment. But those two things are just kind of a natural progression. If you get somebody to commit paying you money, that’s only one more step to get them to actually give you the money. If you don’t deliver, if you don’t follow through, then give the money back. It’s not that big of a deal.
I was talking to a couple of entrepreneurs who deal in the real estate space and they were having a hard time doing this and I kind of put it in perspective for them because I was like, “Well, how much are they paying for some of their leads and how much are they making from some of the different things that they are doing” and of course, it’s thousands and thousands of dollars because it’s a percentage of the real estate transaction.
I was like, “You’re asking them for a commitment of $100 to $200 which is not a big deal and later on, few weeks later, we talked and they are like, “Oh yeah, I went out and I did that and I got three people to give me a $100.” And they are like, “Oh yeah, it was no big deal at all. The other person just didn’t even blink.” They are like, “Oh, $100?” “Sure, no problem, whatever.” Because in the [grand scheme?] things to that business, that $100 does not make a difference, but to an individual, it might.
It does depend a little bit on the type of business that you’re talking to. But getting that commitment means a lot and it helps you really determine, whether or not, it’s something that people are willing to pay for. Whether you ask for the credit card or you just ask them for that commitment, each of those things are a step that takes you a little bit further and it really just depends on how far you want to go.
Rob [16:14]: I agree with you that this is hard for most people and most people don’t do it actually, and this was very hard for me when we were getting Drip started because we wanted to build the thing. We just knew that everybody was going to throw money at us when it was done, and these conversations are hard. They are uncomfortable because you have an idea of what you want and you feel like when people tell you that they don’t quite understand what you are really saying, they don’t really get what you want to build.
But this is when the iron meets iron and the sparks fly and you have to figure out your vision for your product is correct, or if you need to make adjustments, or if you’re just not describing it well enough. This is where- I didn’t have anything to show. We had no screenshots. If I were to do it again, I would probably try to produce a screenshot or two or a flow diagram or something to demonstrate it, but all I had was a list of bullet points and it was just a value proposition.
You don’t need to walk through and say, “These are all the screens that are going to be in there and then you’re going to click this button and then that.” That’s not the point. The point is would you pay for something that does this, that gives you this end result, that’s what you’re selling here. You’re really selling a solution to a problem rather than an actual piece of software at this point, and you’re just finding out, “Is this enough for a problem that you would pay X dollars to have it solved.”
If you can get commitments for that, then you have to solve the problem, and maybe the software you have in mind right now, solves that problem and maybe it doesn’t, but at least to just start. If you launch that version 0.5 and it doesn’t quite solve it, then you iterate on it until it does solve that problem. But if you valid that this problem has a need, and people are willing to pay $100 a month for this thing, that’s a really good start, that’s 10x better start than most founders I know have these days, when they start writing code.
The second piece of the second milestone, which is basically to get 1 or 10 people to commit to paying you is to start building your launch list. It’s what to do right after you do get those commitments or as you’re going about getting those commitments. The traditional advice that I would give is to get a landing page up and start collecting e-mails from day minus one before you start writing any code, but you and I had a discussion offline, and doesn’t have to be an e-mail address that you ask for, it’s going to depend on your market.
If your audience is online, then yes, an e-mail address and a first name is fantastic, super helpful. But maybe you could ask for phone number instead if you feel like that’s going to be a quicker or an easier way to get in touch with people, or maybe you can just have a button right there that says, “Hey, if you want to hear about it when it launches, if you’re all in, give us your e-mail or otherwise, click this button right here and this will call me on Skype.”
There is like click to call services all over the place where they can click and they can either have a phone conversation with you right now, or they can schedule one. I can imagine some developers listening to this might think [you?] I don’t want to be talking to people, right, you just want to go in a basement and write code. I’m not saying you’re going to have to talk to people every time you sell every copy of your product. But at this point, this early in the game, if you’re trying to build something that people want, you have to get into conversations with people in order to figure out if what you’re building is going to solve their problem.
Mike [19:13]: I think that’s probably the most painful part of this is because we are so used to writing code that like that’s all we want to do and it does make sense because that’s kind of your comfort zone. It’s what you’re familiar with and you’re trying to talk to people about something that is very nebulous, it’s an unknown, you’re just trying to get to the heart of, “Okay, well, what is it that you would actually pay for as oppose to solving a problem” that somebody came to you and said, “I have this problem, solve it for me and please write code to solve this.”
What you’re doing is you’re kind of going at it from another angle which you’re just not comfortable with, trying to say, “Well, what problems do you have and are they painful enough that you will pay me for them or pay for a solution to them.” It’s just because of that, I’ll say, that awkward angle of approach, it makes it difficult for most people that are trying to make that mental leap.
Rob [19:57]: The last piece I’ll say about this building your launch list is we get this e-mail a lot saying, “How do I drive traffic to a pre-launch landing page?” and frankly, [?] you would do it after launch, you can do it pre-launch. There is SEO, there is pay-per-click that was mentioned in forums, there is in person conversations, there is called e-mails, and there is all types of stuff.
The point is not to get hung up with figuring out the silver bullet that’s going to drive this. The point is, at this point, really trying to validate the idea, make sure some people will pay you for it, and trying to build as large of an interest list as you can. Milestone number three is to get that first paying customer and this is that point, you’re still pre-launch, right?
But let’s say you’re approaching launch. I think this is when you probably have a beta version that does something and it does something well enough that some person says, “Hey, I’m really willing to kind of take a leap on you.” You give that credit card form, maybe you’ve let him use the app, you’ve let him tried out, get some value out of it, and then you ask him the big question [?] getting enough value out of this to pay X dollars for this app, whether it’s one time or monthly, and this is a big milestone. It’s milestone number three, which is basically to get some amount of money in your bank account from someone who is willing to buy your app.
Mike [21:14]: You’ll notice that this kind of comes before the full launch for the product. I think the last thing you probably want to do is to launch your app and have a ton of people using it, and only to find out that there are major problems with it, or there are things that you hadn’t considered in solving the problem that other people are having. I’m kind of a big fan of like the slow launch, where you take the product, you put it out there to like one or two people and get that feedback from them that you need in order to help make it better, but to also help flush out the bugs because you’re not going to have a perfect product from day one, and you want to start getting that feedbacks, so you can have conversations around some of the deficiencies of the product. Because there will be deficiencies, it’s not going to be perfect out the door.
The other thing that that does as kind of a side effect is that when somebody comes to you and says, “Hey, I like this and all but it would be great if it did this.” If you’ve already had those conversations, you kind of have a ready answers for those types of objections, and you can use that to help push people in one direction or the other, either that’s to say, “No. We are not going to do that because it just doesn’t make sense, it’s not in the road-map” or you can kind of twist that and say, “Well, yes, it is. That’s something that we are going to do and we are putting it in next week. Can I call you then or can we talk about it and revisit this conversation at that point?”
It puts you in a position such that you can have those conversations, you can have intelligent answers immediately at your tongue so you don’t have to sit around and agonize over what should I do here because you’ve already have the conversations, you know what the answer is.
Rob [22:44]: Milestone number four is to actually launch. Obviously, we can and have devoted entire podcast episodes to launching so I don’t think we should [?] this point. But what I do want to call out is that launching is maybe your halfway point. It might even be your third of the way point, because you barely have any revenue at this point. You kind of know that you might solve a problem for a small group of people.
I mean, you are really, really early in the game, so don’t feel like the launch is the finish line. The launch is when you e-mail your whole list and you try to convert as many as possible, you should have a really good launch day in terms of how many people you convert because this is your biggest interest list, make sure not to [conf the app?] to everyone on your interest list. It’s like the catastrophic mistake I’ve seen folks make. [You have?] 500 people on your list, it’s the most interested people you’ve gathered over the past six months while you’re building it and then you just give it away free to everybody on the launch list just to try to get them to use that and that’s not a good way to go.
If you actually want to make some revenue and get to the point where you can quit your job. This is milestone number four. It’s essentially getting to launch, getting through it, and getting some paying customers. Milestone number five is getting that first paying customer post launch from a cold lead. This is really starting your marketing after you’ve gone through your e-mail list or I should really say, continuing your marketing, because you should’ve already started it when you’re building your launch list, but it’s continuing to do those things and getting that first paying customer who signs up after launch.
This is really getting that first paying customer after you launch and now you’re building up towards that point of your quit my job income. I really should’ve added one more point to the preparation milestone, something you should’ve done before this is to figure out what is that number that you need to quit your job. It’s not your salary replacement, right, you might make $15,000 a month in your salary. But if you can cut your expenses and live on $7000 or $8000 a month, then that’s what you’re looking to do.
That should’ve been up in step one, is figure out your number, figure out the number that you need to hit. Right now, we are at milestone number five and you have your first paying customer from your cold lead after your launch, and you should be working your way towards that quit your job number that you figured out.
Mike [25:01]: I think part of the process that you go through after getting this first customer is to identify ways to make acquiring that customer or that type of customer repeatable. It’s really difficult, I think, mainly because there is such a small sample set here that you’ve only got one, what is it going to take to get another or should you go off in a different direction?
I think that most cases, you really want to try and figure out, “Can I repeat this?” and if not, “Are there adjacent areas where I would be able to easily get more customers?” so it’s about trying to expand from that one customer that you have into other people who are also cold leads, how do you go about [?], can you set up e-mail campaigns, how do you drive traffic, should you work on paid advertising.
These were all questions that you kind of have to answer and figure out which channels are going to work for you and which ones aren’t, and that’s not always easy to do, but there are definitely great resources out there like the Traction Book from Gabriel Weinberg and Justin Mares, that talks about all the different marketing channels you can try, and how to go into those and start testing them to see what will work for you, and what will not and what are the kind of the low hanging fruit for your type of business based on where your business is today.
Rob [26:13]: This is what I like to call, the scratching and clawing phase, because you’re basically doing anything, even stuff that isn’t repeatable to try to get to your number. As you said, you might be doing things that aren’t repeatable but you’re trying to figure out how to make them repeatable. The ones that work so so, you kindly leave behind, and the ones that work the best, even they are very time consuming or require a lot of manual effort, you still need to do them.
This is where your [?] things that are not going to scale at all. Because they don’t need to scale, they just need to get you to that $7, $8, $10,000 a month mark where you can quit your job. The last two milestones are really very similar. I put milestone six as hitting an arbitrary 50% of your income and this is having a net profit after expenses 50% of your income number that you need to quit your job.
Frankly, it’s just a milestone to celebrate more than anything. I don’t think there is any action items to take care other than to high five yourself and maybe have a nice sip of scotch on your way to reaching this income. This might take a few months, this might take a year. It depends on so many factors, but it’s when your heads down and you’re hustling, I find that having these milestones that you can celebrate with your mastermind group or with your significant other become a really big deal on your way to milestone seven, which is hitting that full income number that you need to quit your job.
As I said before, don’t try to replace your salary, just figure out how much it is you need to live and focus on that. The other thing I would look at is just decimating your expenses. Mike, you talked earlier about getting rid of debt, I know a friend who like sold a rental house that he had own for a long time and I think it was like upside down, so the rent wasn’t paying the mortgage and he went to this whole process of selling that before he tried to do this. I sold thousands of dollars of stuff on eBay and Craigslist as I was trying to make this transition. I mean, talk about scratching and clawing and doing things that weren’t going to work long term.
This is when you really have to kind of go to the mattresses and figure out what is it that I need to do, it’s not you’re responsible in order to kind of push me pass this point to where I feel comfortable, that I can leave my gig for the product income I have. Because, it’s never going to feel fantastic, right, it’s never going to be like, “Oh my goodness, I have so much income and I have so much free time and I’m just going to leave when I want to.”
You’re not going to have enough time before you have enough income, if that makes sense. I mean, you are going to be working 40 hours during a week for your day job and then 30 hours a week at night way before you have enough income to actually leave the job. You really have to kind of maximize this thing if you want to leave the job as early as you can.
Mike [28:51]: This is one of those situations where it’s unclear early on but as your income from the side project becomes much closer to your full-time income, this is where that runway becomes super important. Because, if you have that runway and you’re able to reach, let’s say, the 50% of your income, well, suddenly, if you had six months of runway before you started this process, once you’ve reached that 50% of your income mark, you now have 12 months of runway, not just six. Because, you essentially have all this money in the bank and the money that you have coming in on a monthly basis, essentially, extends that runway for you.
As your monthly income goes up, your runway gets longer and longer. Obviously, there is subtleties in there where the business starts to tank or things aren’t going so well, your runway can decrease as oppose to increase. But it’s helpful to have that, it really helps from a piece of mind standpoint and being able to, as Rob just said, decimate your expenses and get all of those things off the table. They help to avoid eating away your runway, and getting rid of those expenses that you just simply don’t need.
Rob [29:56]: Last thing I will add about reaching this seventh milestone of kind of your full income that you need is to think about how stable that income is, is it going to fluctuate? Because obviously, if it is a bunch of one time sales and you know that you’ve started zero at the start of the next month, then maybe you need more margin, maybe you need more runway. But if you have something that’s pretty consistent, even if it’s not a subscription, but let’s say it’s a WordPress plugin or it’s a website that has nice, solid, organic SEO and it’s pretty consistent month after month, then I think that you have a little more reason to be confident in that.
Obviously, if you have true subscriptions like SaaS apps or membership website or something like that, then maybe you need a little less margin and can leave as you approach that number. I don’t necessarily know that you need to hit that number if you can see your growth number is going up and you have a trajectory that you know within a month or two you are going to hit it all together.
I stopped doing consulting when my product income hit somewhere around 70% to 80% of my number, and remember, my number was way less than what I was making consulting. But when I got to that 70% of that number that I knew that I needed to make a rent and take care of the family and such, I knew I probably make it work for the next three or four months and kind of grow the revenue to get there because I was pretty desperate to get away from work and for other people.
Mike [31:16]: Yeah. All of this is about risk tolerance at the end of the day. I mean, that income stability and being able to cut your expenses, it’s a way to help mitigate the risks of going off and doing your own thing and not being reliant upon an employer for W2 form or 40 hours a week or what have you. You want to be able to being control of your own destiny and sometimes that means taking a little bit of risk. That doesn’t necessarily mean that you should put it all on the line and take an extended amount of risk. But there are certain cases where it does make sense to do that and it’s all about risk mitigation.
I’ve talked to people before where they think, “Oh, you’re an entrepreneur. I can never do that. It’s too risky.” The reality is that almost every entrepreneur I’ve ever talked most of them don’t like taking huge risks. They like to figure out what the risks are and do whatever they can to minimize or mitigate them or make sure that it’s not going to be a problem. It’s not about having high risk tolerance, it’s about making sure that the risks that are there that you are aware of, you try and do as much as you can to get rid of those risks. The reality is like that’s what this entire outline is about, it’s about how can I minimize the risk of going out on my own.
Rob [32:23]: I’m glad you brought that up. I’m actually listening to an audiobook right now, called The Self-Made Billionaire Effect. It is that small group who researched and studied a bunch of self-made billionaires. They had a list of 600 and then they randomly narrow it down to 120. They tried to do a scientific study of them and their predispositions and distill some of the characteristics and the behaviors and one of the things they said is that they did tend to have lower risk tolerances.
They were not these crazy risk takers like the world mythologizes and the press talks about. Not that we are trying to build billion dollar businesses here, but I do think that the sentiment is shared. That most of these successful founders I know are pretty methodical and consistent and they don’t tend to just jump around and take these massive risks like I think people think they do.
Mike [33:09]: That wraps us up for today. If you have a question for us, you can call it in to our voice mail number at 1-888-801-9690, or you can e-mail it us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re out of control” by MoOt used under Creative Commons. You can 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 253 | Key Takeaways from MicroConf Europe 2015
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about their takeaways from Microconf Europe 2015.
Items mentioned in this episode:
- Microconf Europe Recap
- Microconfeurope.com
- Product People
- Bootstrappedweb.com
- LeadFuze
- ZenFounder
- Jitbit
- Drip
- How DNS Works
Transcript
Rob [00:00]: In this episode of Startups for the Rest of Us, Mike and I talk about our key take aways from MicroConf Europe 2015. This is Startups for the Rest of Us Episode 253.
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 [00:27]: And I’m Mike.
Rob [00:28]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So [where this week?], Mike?
Mike [00:33]: Well, with the exception of the loss of my phone in Barcelona, I think it’s been a pretty good week.
Rob [00:38]: Is that right? Yeah, so MicroConf Europe- this is our third European MicroConf, it’s our eighth MicroConf in total, and the last two years we did it in Prague. This year we did it in Barcelona, and you left your phone in a cab.
Mike [00:51]: Yes. It was one of those situations where there was a series of unfortunate events like leading up to it, and as I got out of the- had any of those things not occurred. So for example, if my SIM card had not like needed a password reset because the phone itself died and I needed to put in the PIN code again, but then I lost the card that has the PIN code on it so I couldn’t activate it. So I was walking around with a phone that couldn’t actually connect to anything, and I could have remotely said, “Hey, go do this.” But my phone is floating around in Barcelona some place and as I got out of the cab, I had my phone in my hand and I pushed off, and I must have opened up my hand and I closed the door, and then I realized. I was like, “Wait, where is my phone?” and as the cab is going away I was trying to run after it. I could not catch it.
Rob [01:30]: [?] Well, and the funny thing is is our conference coordinator, Xander, did the same thing two days earlier and left it in a cab, and he wound up getting it back, right? Somebody picked it up and took it to a cafe and he wound up getting it. So it’s a bit of a bummer, man. Hold on to your cell phones in the cities.
Mike [01:43]: Yep. I was so close. Like I said, it was a bunch of things that happened, and they just all happened just right, and that’s how I lost it. I know exactly where it is actually. It’s in that cab.
Rob [01:53]: So we got a lot of comments this year that kind of indicating that folks who had been to at least one of the prior Europe conferences. Some people had been to two prior- saying that they felt like this was the best European conference we had held. And I don’t want to get too far into inside baseball, but what do you think about that? Why do you think that’s the case?
Mike [02:14]: I think there’s a lot of reasons for it. I don’t think there’s one thing you can point to and say, “Oh, that’s the reason.” I think it was a lot of little things that added up. The first thing is obviously this is the third time we’ve held it over there. So we get a little bit more experienced over time at hosting a conference in Europe because we hosted in Vegas but we kind of have feet on the ground here so it’s a bit more difficult to do it over there. But at the same time, we kind of upgraded. I feel like the location of having it in Barcelona, it was a better option than Prague partially because it’s at the end of August and it’s warmer. The climate there is just better, it’s more conducive to having things outdoors. There was a lot of stuff kind of readily available in terms of being able to go out and go to dinner and things like that. And then the returning attendees, as you build up a conference and more people are returning, I think that that lends a certain atmosphere to the conference itself. And I think even if you held it in the same place, it would get better naturally over time because of the attendees. But as more of those people come back, it lends itself to a better atmosphere.
Rob [03:15]: So we want to talk through some key take aways that we brought away from the conference. We also heard from a lot of the attendees some of the key take aways they had, and I think we’ll kind of integrate them here. If you’re listening to this and you’re interested in reading through a full recap and the detailed notes from each of the talks, you can head to microconfeuroperecap.com, and that is our designated note taker for the Europe Conference, Christoph Englehart, and he has published a detailed note section on each speaker. So if you wanted to dig into any one of the talks that we mention, that’ll be the place you’ll want to go.
So to kick us off on day one we had Justin Jackson from Build & Launch podcast, Product People podcast, and he talked about marketing for developers because he’s writing a book on the topic right now. And he had, I think it was ten different recommendations for getting your first hundred customers.
Mike [04:07]: Yeah. There was a lot of actual stuff in there, and I think some of these were just completely non-intuitive, and he had these really neat examples. One of which he was using Google Images, not to manipulate, but basically gain attention for images on his website. The proof of concept that he used was if you go to Google and you search for “nerd mullet” in the images, it’ll pop right up, there’s a picture of him from high school, and it’s just really fascinating these little tidbits that you can use that I don’t think most big companies are going to do those types of things, but small companies have the capability and, I guess, the desire and need to do those things in order to stand out from those bigger companies that have a lot more resources. So it was really cool to see all the different tactics and things like that that Justin had put out there for people to take away that they can implement, and none of them were terribly difficult to do. It was just, “Oh, that’s really insightful; let me write that down.” I heard a lot of people saying, “I’m going to go do this” or “I’m going to go do that” based on some of the things they heard from his talk.
Rob [05:08]: Yeah, there were a couple of things that I liked about his talk. Number one is it was ten discreet tactics and you could kind of pick and choose which one you felt might work for you. The second thing I liked is he used the example of a MicroConf attendee. He actually used their website or their business in each of the points to say, “This is how he could specifically apply it.” And so it wasn’t just throwing out tactics, but it was actually trying to weave it into a story. If anything I would have liked to have seen more examples because there was the one website. But if he had picked maybe two or three, and he would have had time to do it, right, to give examples for each of the tactics for two or three websites it would have been, I think, even more valuable.
Mike [05:45]: Yeah, and I talked to him. He actually has each of those examples going into his book so I think they just didn’t make an appearance more than anything else. I’m almost positive that he has them.
Rob [05:53]: Got it. Yeah, I would agree. So our second speaker on day one was Brian Casel, and he was talking about productized services and the reason we wanted to have Brian out is because he has a productized course, it’s a video course, and ebook and a Facebook group and stuff, and he’s from the Bootstrap web podcast, and now he writes Audience Ops. The reason I wanted people to hear about productizing is I think folks often want to make the leap directly to software, and I think if that’s really what you want to do, that’s okay. But I think that knowing that there’s this alternative step that you could take to basically productizing a consulting service is really valuable. And Brian has experience with that because both his previous startup and his current one he’s working on are both productized services, and then he had a bunch of examples from people he knows including yourself, including Justin McGill, who’s running LeadFuze, and there were several others. And so it was cool that- I liked that he outlined the concept and then he just started throwing out examples of exactly how you guys have done it. In your case, it was like building the software first and then turning around and adding the consulting services later to make it more valuable. And in Justin McGill’s case with LeadFuze, it was doing the productized service, it’s outbound e-mail, doing that first, and then going back and launching the SaaS later, which he did just a few weeks ago. And there were other examples like that, so I really liked the structure of his talk, and I liked the concept was well communicated to the group.
Mike [07:13]: Yeah, I heard a lot of good feedback from different people who were thinking about launching something or building something, and his talk kind of shifted their focus to, “Huh. Maybe I don’t need to write any of this” “Maybe I can essentially just offer to do it as a service for people and then build tools to do the automation afterwards as I learn how to do those things myself and I understand exactly what it is that the customer wants and needs.” So it’s definitely a fascinating concept about how to build something complicated that customers have a need for and are willing to pay for and instead of building first and doing all the customer development, you just work with them directly and essentially do it as consulting and move on into building something after you’ve kind of worked out exactly what it is that they need.
Rob [07:56]: Yeah, and I don’t think productizing a consulting service is for everyone, but I don’t think everyone has heard about it. I want to continue spreading the word so that people can make their own decision based on whether they really are dead set on getting the software first or if they really just want to quit their job or quit the hamster wheel of consulting, I think productized services are a faster way to do that for sure.
Mike [08:19]: Yeah and that’s specifically because you can charge so much more for the services because people understand, “Oh, there is a person behind it who is doing that” and they expect to pay more for that kind of thing. So it gets you to a revenue faster.
Rob [08:31]: Right, instead of a SaaS that’s $20, $30, $40 dollars a month, productized services tend to be $500, $1,000 or $1500 a month. They are kind of the price ranges I often see. So you don’t need to have any customers to be able to quit your job at that level.
Our next talk was Sherry Walling, who talked about limits and liabilities and how to get to know yourself and how the limits and liabilities that you carry with you, like in your personality and psychology, can apply to both great things you can do and the things that are going to trip you up with your startup. And she talked about how your past and your origin story can really shape where you’re headed and can really help you understand how you react to stress and when you’re going to function well and when you’re going to probably fail under pressure. And she used specific examples from these founder origin stories we did over on the Zen Founder podcast over the summer. She pulled out specific examples of their stories and how you can tell your own story and apply that to where you are and how to get where you’re going.
Mike [09:32]: Yeah, I liked that she pulled all those different examples out and most of the examples she never said any of the names of them upfront. She just basically said “Oh, this person from here or that other person from there, and these are the experiences that they had early on in life and how they affected them.” And she went through some studies that basically said, “Oh, if you had these different things that happened earlier in life, this is how they affect you later in life.” And it was just fascinating that it had such a profound effect on you. And it was nice that she went through those stories and then afterwards, she revealed who those people were. They’re all names that you would probably recognize if you’ve listened to this podcast before. But it was just fascinating that she was able to take those, and because she presented them in sort of an anonymous way, you could just relate to them. You’re like, “Oh my God, that person went through this” after you heard who it was. So it was nice to see those things because it made it, I feel like more relatable. I think when you hear stories about a high profile person, you almost mentally project what you know about them now into that story. But if you hear that story first, and if you don’t know it that well, if you heard that first and then are told who it is, I think it makes a difference in how you perceive this story and the journey.
Rob [10:43]: Our next speaker on day one was Alex Yumashev from JitBit software, and he talked about bootstrapping to a $1 million a year software company. And Alex runs JitBit. I think JitBit helpdesk is really kind of their prime product at this point, their flagship. And I thought he had a good talk. I heard a lot of positive feedback about it. He offered a lot of his tactics and a lot of his own thoughts on things. Some of the things he said was controversial in terms of talking about some SEO and grey hat and other stuff. But he certainly has experience growing this business and has been doing it many years and has had many products so I think that his expertise was appreciated at the conference.
Mike [11:23]: The part that I found really interesting was the “Did this work or not?” and he put things up there like retargeting and SEO and stuff like that, and it was fascinating that the audience got some of them right and some of them wrong. Because, I think that some of them you would just naturally assume, “Oh, that works.” But, it doesn’t always work and I think that was his point. It wasn’t that this particular technique never works, it’s that it didn’t work for me. And I think that we just tend to naturally assume, “Oh, this worked for somebody else so it’ll work for me” and that’s just not always true.
Rob [11:52]: And rounding out day one, I spoke about the inside story of self-funded SaaS growth. It was basically the story about the last 18 months of Drip and growing that and it was very similar to my Vegas talk. I did make some adjustments to it, some things that I learned while doing it in Vegas. But overall, I felt like it applied to folks over there, it got a good reception. I had a lot of good questions about it, and overall, just felt good about how I’d given it.
Mike [12:18]: Yeah, I think there were a lot of people who were kind of surprised that there was this period of really low months kind of early on in Drip where things were kind of level and you weren’t really sure what to do, and then it was very obvious that at some point along the way, you got the product market fit and you were able to essentially overcome that problem. And I just don’t think that people realize how important that product market fit is. And I think the specific things you talked about were that your number of trials were going down but your revenue was going up because your conversion rates were going up. And as you focus on getting that right, the only reason the trials are going down is because you’re spending less time on the marketing side of things, so you’re getting less leads in but those leads are converting more, you’re getting more money. And at that point, you know that that’s when you’ve hit product market fit.
Rob [13:05]: And kicking us off on day two was Peldi Guilizzoni from Balsamiq, and he talked about a reluctant CEO growing up, and it was basically the growing pains of building a company that he really wanted to be a solo founder, and he reluctantly hired a couple employees, and then he said, “Well, no more than five ever,” and then when he hit ten he said, “No more than ten ever” and he’s actually at twenty employees now. And he had just fascinating tales of a potential acquisition that didn’t go through and just the stress and having to rethink he management structure because he didn’t want to have one, and then he found out he needed one [?] process, and he found out he needed some. And he was super vulnerable and really engaged the audience at a certain point in his talk. It was actually, both his and during Sherry’s talk. I looked around about halfway through and everyone was just wide-eyed, pencils down, no laptops clicking, and just super invested in the tale that was being told.
Mike [14:03]: Yeah, that was an amazing talk. It was just all the stuff that he talked about was stuff that you never see publicly, I don’t think, because most people are either acquired or not and afterwards, they’re just generally not able to talk about it. But he did go and get permission from them to talk about his experience and what went right and what went wrong and how it affected him. And I thought the thing that was really interesting was how badly his health suffered during that process because he was so stressed out and it was so difficult for him. It’s one of those things that most people don’t talk about, it’s like how your mental state can affect your physical well-being, and it definitely affected his physical wellbeing.
Rob [14:40]: The next speaker was Dave Collins, and he talked about the most sincere form of flattery, which of course is imitation. And he spoke about how you don’t have to try to reinvent the wheel on your website. If you want to improve conversions, if you want to improve your website, look to others who are already doing it well, and he had a bunch of examples of how to do that well and how not to do it well. And in talking to attendees afterwards, I actually got mixed reviews on it. I think some people didn’t fully understand what he was saying or didn’t agree with it or something, but then there were also people who took a bunch of notes and are going to apply it to their website. So in a sense, he kind of had a polarizing talk where I think some people really latched on to it and then others maybe had mixed feelings about what he was saying or didn’t follow it, one of the two.
Mike [15:21]: Yeah. I think that when you’re in different states of your business- because there’s kind of a life cycle to your business. There’s when you’re really early on and then you become a middle stage and late stage, and depending on where you’re at different things are going to be relevant. And I just feel like some things were more relevant to certain parts of the audience than others but I liked it. It was definitely interesting some of the things he put out there.
Rob [15:41]: And then we did a bit of an experiment with John Ndege, who has come to I think all three of MicroConf Europes, and he is a self-funded non-technical single founder of a SaaS company, and he has grown it to six figures, and he’s working with a non-technical audience, so it’s all medium and high [touch?] sales. And in essence, he did about a 20-minute talk, but it was him preparing slides and then he led through the slides and then I actually asked him questions during the talk to clarify some points. So it was kind of an on-stage interview mixed with a presentation. And so far, I’ve seen mixed reviews about it. I think some folks really liked the interview approach because it answered a bunch of questions upfront that you might have. I think some folks said since they were technical founders, it didn’t really apply to them which comes back to your point you made earlier. But to be honest, the non-technical founders who I talked to, there were maybe four or five who I talked to after his talk, loved it and said, “His was their favorite” because it related so much to their situation. And I think that’s an interesting thing to remember about these talks is as an individual you can rate the talks, but it’s always based on where you are and your personal biases and your personal thoughts and feelings. Going with John’s talk, it was a bit of a risk to go with a new format and to dive into what a non-technical founder has to do, but I think it was totally worth the experiment, and I think it’s likely something we’ll do in the future.
Mike [17:05]: Yeah, I’ve been going through it to see specifically from the feedback what people thought of it, but I thought it was an interesting format to have onstage, and I liked the fact that it was kind of like a 20-minute talk or so, so it wasn’t a full 40 minute and it wasn’t an attendee talk, which was only 12, it was kind of that sweet spot in the middle. But there was a lot of actual stuff in there. But again, as you said, specifically for a non-technical founder and as you said, there were a lot of those people in the crowd. So it was nice to hear from those people “Hey, I got a lot out of it and it tells me how I can approach things.” But we do get a lot of people asking us on this podcast, “How can I do this as a non-technical founder?” And one of the things that he said that I hadn’t necessarily realized before was that when he’s on-boarding his customers, he talks to every single one of them. And I don’t know what his price points are, but I think they’re like $100-$200 a piece, but because he talks to every single one of them, he gets all of that customer development and feedback he needs to help guide the development of the product itself. And I think that’s the important piece for those non-technical founders. Like, they need to know exactly what their customers want.
Rob [18:09]: And then we had Rachel Andrew from Perch who is a returning MicroConf speaker, and she talked about no exit plan. She talked about how she and her husband have launched their business and they stopped consulting, and everything’s going well except for they don’t feel like they can take a vacation, and they feel like they’re tied to this business, and they feel like they haven’t had enough money to hire someone who can help them with it. So the talk was really her thinking through how to do this, and she wanted to kind of talk to folks out there who are just thinking about getting to the point of quitting their job to maybe think past that and to not just focus on the short-term goal but to be thinking, “Once I get there, what am I going to do after the next step in order to not be tied to this thing” and basically not build yourself a job because that’s not what you want, right? You want to build a business that you can certainly make money from but that you can also be free of when you want to be.
Mike [19:02]: Yeah, that was something else that’s probably not talked a lot about. She was talking at one point about how she was answering support emails on Christmas, and it’s kind of a typical day that a lot of people take off and she’s sitting there answering support e-mails. And there, she talks about how she was working essentially 365 days a year, but on the other hand, she loves what she does. And I think that’s why most of us do what we do is because we really enjoy not just this mode of business but the things that we’re working on. That’s why we do what we do. It’s because we want a job that we love, not just because we want a job. If you want a job that you don’t love, that’s why most of us have those regular 9 to 5s. But if you want something that you really want to work on and you’re passionate about it, it’s okay to make less money if you love what you do.
Rob [19:49]: And rounding out our 10 mainstage speakers at the end of day two, it was Patrick McKenzie. He was talking about leveling up in essence stair-stepping his way up from bingo card creator to appointment reminder through consulting and then to what he’s doing today which is Starfighter, his current startup. And he actually tweaked the presentation. It was very similar to his one that he did in Vegas four months ago, but he tweaked it based on some feedback there, and he pulled out the part about selling an app, and he added some more things that I think were more relevant to the European audience where there’s slight more bend to being at the beginner end of the scale and kind of having just launched or being close to launch rather than being further along.
Mike [20:30]: Yeah. Some of the people I talked to had some interesting things to say about Patrick’s talk in terms of where he was with appointment reminder and how interesting it was to see that I’m actually further along than appointment reminder is or where I thought it was. Or it’s interesting to see how he had a very rough spot in the middle there because you see super successful people and just assume pretty much everything they do they knock out of the park, and that’s not always the case. Different businesses are harder than others. Some things are a lot easier, some things are a lot harder, and it’s difficult to know without seeing all the data and obviously a lot of that information is not necessarily public information to see. But yeah, I really liked how he tweaked a lot of it to make it applicable to those people who are earlier on.
Rob [21:14]: Yeah, and I think in Vegas and in this talk really was the first time he talked about appointment reminder revenue in public because I had not heard him say or maybe he had published a blog post at some point.
Mike [21:23]: Yeah, I think he talked about it in Vegas.
Rob [21:26]: Okay. That was his first time. Yeah. And it was, it was eye-opening for everyone just to see where it was at certain points as he’s cranking along and just how long that slow SaaS ramp up path is.
So we also did something for the first time in Europe this year. We did attendee talks. And we’ve done these in Vegas for a few years, but I think the last three, were basically folks who already have tickets can submit talk ideas and then they get voted up by the other attendees. They get a certain amount of votes, and whatever rises to the top, we do that many talks. And so we did six attendee talks. It was our first one in Europe. And while we don’t have time to go through all of them, I did want to call out, I thought Anders Pedersen’s talk was pretty cool. He basically talked about how he had tripled his revenue, and that was the clickbait headline, he said, that he used but in essence, he had tripled his revenue by raising his prices. And it was based on some other feedback that Dave Collins had given him in a teardown a couple years before in Prague. So it was nice for him to loop it back and basically talk about some of the health struggles he had had and some of the emotional struggles and how MicroConf Europe, the first year in Prague, was the first time he had ever kind of found his people and realized there were other people out there doing what he was doing. And it gave him this great sense of belonging and so he really paid homage to that and was thankful and said, “The reason my revenue tripled in essence was from being around all you people and I’m still learning but I want to now give back to you guys.” So I was inspired by his attendee talk.
Mike [22:49]: Yeah. The other interesting part about his attendee talk was how quickly that turned around. Wasn’t it that he implemented all the changes or most of them within 48 hours and one week later after he’d implemented those things, that’s when he realized oh my god, I just tripled my revenue by doing these small tweaks that I learned at MicroConf? So yeah, it was just fascinating to see that change of revenue based on solely marketing. Because he didn’t change the product really, it was all about the marketing stuff that he did.
Rob [23:16]: Yeah, because it was something like getting rid of a free plan or a free version of it so it was only charging for it and then actually going after the sale and it was tripling his price. I think it was those three things. When I say “Go after the sale” I think it was sending a single follow-up automated e-mail or two after someone downloads it. So it was just some basic stuff, but he said that instantly kind of flipped a bit and has been making that triple revenue ever since. So that’s good.
Mike [23:42]: Yeah. And we had a bunch of sponsors from MicroConf Europe as well. Anders was one of the sponsors who happened to be given that attendee talk through his Time Block application which is something new he’s working on. But there was also Teamwork.com, they had four people come over there, and they’re getting to be a really big company, 30 to 35 employees- that’s I guess really big in our circles.
Rob [24:01]: Yeah. I don’t know how you qualify this, but I’ve heard that they’re the largest bootstrapped startup in Ireland. That’s pretty cool and whether they are [?]
Mike [24:10]: Yep. I think in all of Europe.
Rob [24:12]: All of Europe? Wow. Yeah, it’s really impressive.
Mike [24:15]: [Peldi?] was also a sponsor with Balsamiq, and we had Craig Hewitt from Podcast Motor. The other sponsor is DNSimple, and they called out a URL from the stage for a comic strip that they put together basically on how DNS works and the URL was howdns.works. So if you go there, you can download their comic strip. It was really interesting having every single sponsor was essentially a bootstrap company, and it’s something we haven’t had in the past. But it was really amazing to see, not just people from the community, but just bootstrappers in general saying, “Hey, this is something we really believe in and that we want to be part of.”
Rob [24:49]: Yep. That’s what I liked, and big thanks to all the speakers who came out. They have busy schedules and they still came out and spoke, and of course, to the sponsors because we really couldn’t pull this off without them.
Overall, I feel really good about this year, man. I agree with folks, I think this was probably the best one we’ve done in Europe, and I guess we’ll see in the feedback once that comes back whether it holds true. And now we’re already working on MicroConf Vegas, it should be next April-ish in Las Vegas.
Mike [25:20]: Yeah. I think that Xander said that our contract is signed, so.
Rob [25:23]: Oh really? Oh that’s good.
Mike [25:24]: I believe it is. A couple days before MicroConf Europe started I think he said that he got the signed contract back so I think we’re good there.
Rob [25:32]: Very good. And so if you’re interested in rubbing elbows with 150 to 200 other bootstrapped software founders, who are either just getting started to having launched or have employees anywhere in that range, that’s what MicroConf is about, and we hold it, obviously, in Vegas in April and then we hold it in Europe some time in the fall. Head to microconf.com and enter your email address and we’ll notify you when tickets are available. Tickets really don’t make it to the open market anymore. They sell out before the e-mail list is exhausted. So if you think you might want to come, get on the list. Otherwise, we’ll see you back here next week.
Mike [25:32]: And If you have a question for us, you can call it in to our voice mail number at 1-888-801-9690, or e-mail it 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 in iTunes by searching for startup and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 252 | The Unconventional MVP with Jesse Mecham
Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Jesse Mecham about the unconventional MVP. Jesse talks about his background and company as well as his first product he put out in the market.
Items mentioned in this episode:
Transcript
Mike [00:01] In this episode of Startups For the Rest of Us I’m going to be talking to Jesse Mecham about the Unconventional MVP. This is Startups For the Rest of Us, episode 252.
Welcome to Startups For the Rest of Us, the podcast 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.
Jesse [00:25]: I’m Jesse.
Mike [00:26]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Jesse?
Jesse [00:30]: I’m doing very well.
Mike [00:32]: Excellent. Well, I wanted to have you on the show today because I wanted to talk to you a little bit about your story and share the background of your company with the listeners and talk a little bit about the MVP that you essentially put out in the market and the product that you started with. But before we get to that point I wanted to let people know exactly who you are and a little more about your business. The company that you started is called You Need A Budget, and when did you start this company?
Jesse [00:57]: Back in September of 2004.
Mike [01:00]: Okay. And today you essentially sell personal budgeting software for, I believe it’s $60 per license, correct?
Jesse [01:08]: It is, yeah. It still does top software for the time being. 60 bucks, one time and then we’ve sold upgrades over the years to keep the revenue going.
Mike [01:16]: Right. So you call the company You Need A Budget. It’s kind of colloquially known as YNAB. Where does YNAB stand today? Like how big is the business, what’s your approximate revenue look like? How often do you do software releases and how many employees do you have, that kind of stuff.
Jesse [01:31]: Yeah. Software releases, we haven’t done one for a long time because we’re right in the middle of a big, completely from scratch re-write, moving to the web and changing our business model into a SaaS model. That part has changed quite a bit. We’ve been just heads down on that for a couple years. Size-wise, employees, I think we just hired our 30th or 31st. She starts next Tuesday. Her name’s Carrie and she’ll be managing our customer support team. So pretty good size team. A mix of part-time and full-time people. About two-thirds of them are full-time. We’re engineer heavy and we’ve got a couple designers. We need another designer here pretty soon. I always say we won’t hire anymore and then we hire again.
And then revenue-wise, last year we did about four and a half million and this year we’re looking to do maybe a smidge more. But just around there again.
Mike [02:24]: Right. So essentially 30 employees, four and a half million dollars in revenue. And this is a downloadable, one time purchase software.
Jesse [02:32]: Yeah, that’s kind of funny. But yeah. Just recently, Intuit, who’s our main competitor, they sell Quicken and QuickBooks and Mint. They own all those properties. They just mentioned that they were going to sell off Quicken, which is a good signal for us that we’re doing the right thing, getting out of the desktop software business as well. Little step.
Mike [02:56]: Okay. So, as I said, I wanted to focus in on the big picture first to give people an idea why you’re on the show because I think that the backstory behind YNAB is extremely important because essentially of where the business came from and where it started. So let’s start walking backward a little bit. What were some of the major milestones that you hit along the way? Were there specific software releases that you had that were extremely beneficial to you or certain things that happened in the market that really took you to the next level? Kind of give us an idea of what major milestones there were.
Jesse [03:25]: Yeah. There were some interesting ones along the way, maybe a handful. Our software- like our releases, which we’ll probably dig into a lot with the MVP, but moving from my original product into our first bonafide software product, that was monumental relatively for us, early on. Each new release we then moved into the Mac platform a couple years later. And as that platform grew in popularity over the years, we rode that. The app store, the whole mobile thing, we rode that with phones that sync up with your data and everything. And that’s also standard now, but back at the time, it was a big deal. So that wave we rode. We had a funny one where we would sell the software on the Steam gaming platform from Valve. And that was –
Mike [04:09]: Really?
Jesse [04:10]: – yeah. So we didn’t even think it would work but we were one of a few titles that they let in as kind of a little test to sell non-games. And we did really well in like their Flash sales and other things like that. That was a significant boost to our revenue back two years ago. The gamers, they buy compulsively. It’s a hilarious side story. It’s funny that you’re selling budgeting software and people are impulsively buying it and not considering the purchase. So there was some irony. But that was a big one. It got us out in the market quite a bit more. There were a lot of new users. So that was another big- there are tiny ones all along the way, but those are kind of big highlights.
Mike [04:52]: Right. When was this business founded? It was back in what, mid-2000’s? Something like that?
Jesse [04:57]: Yeah, I officially did the paperwork for it in 2007. So like three years later.
Mike [05:02]: Okay.
Jesse [05:04]: Where I started making money, very, very small amounts of money, was end of ’04.
Mike [05:12]: Okay. So you basically operated it probably as a- did you even file for a DBA yet or just run it through –
Jesse [05:17]: No way. I didn’t even think about that. I wanted to make rent with the money. It was like totally- nothing official about it, you know.
Mike [05:25]: Got it. I didn’t realize that. I thought you at least had a DBA in the early days.
Jesse [05:30]: Yeah, I don’t even know if I knew what that was at the time.
Mike [05:33]: Yeah, that’s okay. I guess you filed for the business back in 2007. When was it that you had hired your first employee? Was it after that or before that?
Jesse [05:40]: It was after that. I had been working with Taylor, that originally built our first piece of software. He and I worked together in ’06 for the first time. And then middle of ’08, I was able to convince him to jump ship from the video game industry and come over and build budget software.
Mike [05:57]: Got it. Okay. I guess take a step back a little bit. Where was the business financially when you decided to start hiring people?
Jesse [06:05]: That one’s tough. Every hire is scary. And early on especially. It’s not as scary now. Taylor, he and I originally worked out a revenue share because I couldn’t guarantee a salary. And I remember he took a significant pay cut from what he was making. No benefits. And I could probably back into it actually. Let’s see. The year that he came on we probably did maybe half a million in revenue. That’s a pretty good guess.
Mike [06:34]: Okay. So it wasn’t as though the business was struggling but at the same time, probably when he first came on, you didn’t necessarily know how well things were going to go with him on staff?
Jesse [06:43]: Yeah.
Mike [06:44]: You were kind of making an educated guess in looking back for your sales and kind of looking forward and doing some projections. But you still weren’t quite sure. It was still a risk in your mind.
Jesse [06:55]: Yeah. He took the bigger risk, in my opinion, because he left this career with the cash flow, a dip in cash flow and all that. I’m happy that it paid off for him later on. But it was an educated guess. It still was super scary, which I’m really conservatively wired. So where I feel scared, most people don’t feel anything. And I think anyone else would have probably hired quicker than me and it would have been batter. I just would drag my feet.
Mike [07:19]: Right. Okay. Let’s talk about your shift into the business. Where was the business when you finally decided to go full-time on it?
Jesse [07:26]: I was working as an accountant. I got a Master’s degree in accounting and I was working down in Dallas for a big accounting firm, working 80 hours a week for months and months. It was getting old. I had two little boys and a wife in this new city. It was rough. I had big, personal incentive to not do accounting. And also it’s really boring work. But to highlight how crazy conservative I was, I was making about twice in profit from YNAB what I was making at my day job. And I was working on it maybe an hour a day, if I could squeeze it in. So it took me so long to jump. When I was at about 15 grand in profit per month, that was where I felt comfortable, where I said, “Okay, I can start working on this more as a full-time endeavor.”
Mike [08:18]: Got it. So the business was hitting that 15,000 a month, which is ballpark 180k a year. And that’s when you felt comfortable leaving your full-time position and coming over and doing this full-time.
Jesse [08:29]: Yeah. And I still actually did other stuff on the side because I didn’t want to raid the coffers of YNAB. So that 15 grand in profit, you can look at it and you can eat it and feed your kids with it or you can reinvest it back in the business. And I was definitely more inclined to reinvest than to consume it. So I really tried to built up other things on the side as well and try and reinvest that profit as aggressively as possible.
Mike [08:54]: Right. Now you said at this time your day job was essentially as an accountant. And you have a Master’s degree in, I think you said, finance for accounting.
Jesse [09:01]: Yeah.
Mike [09:02]: You’re not a software developer.
Jesse [09:02]: No.
Mike [09:04]: What was your first product?
Jesse [09:06]: The very first one that we sold and made money was a spreadsheet. I originally built it for me and Julie, my wife, when we first got married. And it worked well for us. We were super poor but the budget seemed to be working well. And then I wanted to Julie to be able to stay home and be a stay-at-home mom when our first baby was born. That was a big deal to her so I was pretty motivated to try and make extra money. And about 350 bucks a month was my target. If I can make that on the side, selling this spreadsheet, we’d be good. We could get out of school. We would have to borrow money for it, that type of thing.
Mike [09:40]: So how much were you selling the spreadsheet for?
Jesse [09:42]: I tried at $9.95. Nine dollars and ninety-five cents. So like Bic Mac pricing. But I tried it at $9.95 and I couldn’t get any traction. For about two weeks I was paying for visits through Pay per click way back when it was cheap and easy and no one bought it. I had enough visitors hit the site where you should have seen some purchases just from the law of numbers, right. But no one was buying it. So then I had chatted with a friend one day on the bus and he said, “You ought to double your price. People aren’t buying it because it’s cheap.” And so I doubled it to $19.95 and saw my first sale that first day.
Mike [10:19]: Interesting.
Jesse [10:20]: I had to refund that sale but it was still a good thing. So still good.
Mike [10:25]: It’s ironic that you doubled your price and then you immediately had to refund that first sale.
Jesse [10:30]: I was at a negotiations class the other day. It was fascinating. This guy’s major negotiation work with countries and things. He was giving us this clinic and there was one little bit that jumped out that would apply to every single person listening. He said, “You never want to bargain with yourself.” And when we go to price our own services we always bargain with ourselves well before we’re bargaining or negotiating with someone that’s actually going to pay us. So you’ll bargain with yourself and just talk yourself down. And when you bargain it’s always about price. It’s never about value. So he was trying to get us to say, “Don’t bargain. Always negotiate.” And then do not bargain with yourself, especially. I think it’s applicable for anyone just getting started. We’re so quick to talk ourselves down to this barebones price and it’s not helpful at all.
Mike [11:20]: Yeah, that’s fantastic advice. And I think it especially applies to software developers who tend to undervalue what other people are willing to pay for their work. Especially given their average salaries, just to be honest.
Jesse [11:32]: Developers are wizards. They’re like magic people. How do you place a price on that? You got to think of yourself as a wizard and then maybe you could price more appropriately. From my view, I just see magic happen. And where people that are in the know, you have the cursive knowledge where it’s like I could build that. I could do that. That’s the worst place to be.
Mike [11:53]: So your first product, it was just this spreadsheet. You were selling it for $20 per download, I guess. And you said that at some point you got it to the point where it was making what, $15,000 which was when you decided to make the leap –
Jesse [12:06]: No, by that time the spreadsheet really capped out at making about five, six grand a month. Where I started making about 15 in profit was when we had launched our software, about two years later. That was the big jump.
Mike [12:22]: Got it. So there was this time period during which you were only selling the spreadsheet.
Jesse [12:25]: Oh yeah. About two years just selling the spreadsheet.
Mike [12:29]: And how long did it take you to build the spreadsheet?
Jesse [12:32]: When you’re building it for yourself you don’t really count that time, but if you were to start from scratch and build it and knew what you wanted and had a clear spec on it, it took me a couple weeks. Of course I tried to make it fancy first and then I pulled back as it got complex, which is a classic trap we all fall into. But over time I actually simplified it, stripped things out of it. But it wasn’t a huge endeavor. I mean two weeks, that’s not long.
Mike [12:54]: And that’s something you said you were making what, five, six thousand dollars a month from?
Jesse [12:58]: Yeah, toward the end when I learned how to market, that was the ticket. But I pulled up some stats while we were chatting. My first full year – so I launched in September of ’04. It didn’t really do anything. And then in ’05, by December of that year, I’d made in profits, 2500 bucks. And that was when I was in school as a college kid. I was working a 30 hour job, going to school full-time and doing this little business on the side. I wasn’t investing tons of time. And I was learning a ton as I went along. So I’m trying to paint this picture that even for someone to get to a grand or two with the information that we have available now, it’s totally doable. And the product, it was a spreadsheet. It’s a spreadsheet.
Mike [13:42]: Right. So you said that you launched the software product in 2006, right?
Jesse [13:46]: Yeah, end of 2006, right at the tail end there.
Mike [13:49]: How long did it take to build the software product itself?
Jesse [13:52]: It took Taylor, he was the sole developer, it took him nine months. We just worked over the phone. We didn’t beta test it, which is funny. I kind of used it a little bit but we did not do anything formal. Yeah, nine months with just a solo developer. And we were basically porting the functionality of the spreadsheet over into a Windows application.
Mike [14:13]: Right. And I think that’s the part that is really interesting because you start out with this MVP, which is nothing more than a spreadsheet which takes you about two weeks, and then you make this leap from – you’ve got a market, you’ve got people paying for this spreadsheet, and they’re clearly willing to pay for it. There’s a demand there that you have proven with this spreadsheet –
Jesse [14:30]: Absolutely.
Mike [14:31]: – and then you say, “Let me take that information and I’ll predict the future a little bit. If they’re willing to pay for this spreadsheet, I bet they would pay for this software product that I could build based on this demand.”
Jesse [14:42]: Yeah. I felt confidant enough about it that even risk adverse as I am, I had been saving money up to that point to put a down payment on a house, because in the U.S., if you think back to like ’06, ’05, real estate’s going crazy, right. So Julie and I are going to graduate in ’06 and we’ve got this baby, another one on the way, and I’m thinking we’ve got to get a house because everyone’s buying houses. So I’m saving for this down payment. In the meantime Taylor comes along and says, “I could improve your spreadsheet,” and I said, “No, I’d rather have you build separate software.” So he just agrees to like a project rate and it was a lump sum, milestone payment. Pretty standard stuff. And we do that over nine months. But I was confident enough in the move, I knew people would pay more for this software. And I knew that the software would also be, obviously, more attractive to more people. So I could charge more and appeal to a broader market. And I used our down payment money, for the house, that we had earmarked for that. I came to Julie and was like, “Hey, what about this thing instead? I have this stranger down in Texas that wants to build this.” She was game. But I felt confident enough because I had market knowledge. It was priceless. I didn’t feel like it was risky at all.
Mike [15:57]: That brings up a separate point. Because you’re not a developer, you didn’t start by building a piece of software because, quite frankly, you just didn’t have the skill set. How do you think that affected the evolution of the product? I think most software developers would immediately jump into building a product, but you went in a different way, I think, because you were forced to. How did that impact, not just the financials of the business, but how did it impact your approach to the future of the business?
Jesse [16:22]: It’s been a huge advantage for us that we started with that spreadsheet. When you think about building a piece of software, and it was fairly complex, that we had built in nine months, but because we were riffing on an MVP built on a spreadsheet, it naturally constrained the normal desire we have to add, add, add, and make more complex. Because it was just like listen, take this, make it so it can run without Excel. And it was like, okay that’s good. So how should the UI act? Well, let’s just have it kind of look a lot like the spreadsheet. Okay, that works well. Taylor and I both aren’t designers and weren’t designers back then even more so. So it forced us to just recognize we’re going to do still kind of the minimum, but take this obvious next step. I feel like a lot of times when you build first, with this grain-like open field in front of you, you have a hard time making decisions because you have so many options. Where we just didn’t have the advantage. It would be interesting to think how we could, as a budding entrepreneur, as this developer, how you could create artificial restraints for yourself to try and control that.
Mike [17:33]: Right. And I think that’s the problem that most of us as developers face is that we’ve got this open-ended problem that we’re trying to solve and we say to ourselves, “I could do this or I could do that,” and “It’d be really cool if I added this other thing over here,” and you end off into the weeds trying to add some stuff in that ultimately you don’t even know whether or not anyone is going to use it or going to care, unless you’re doing a lot of heavy upfront customer development. But because you had that MVP already in place and you knew what people were paying for, it was really just a process of replication so that you could produce incremental improvements on it and increase the price and do lots of other things.
Jesse [18:10]: Absolutely. Like just to give people an example, we launched the software end of ’06, that is supposed to compete with Quicken or Microsoft Money at the time. And it’s a check register with a budget laid on top of it, essentially. We didn’t even allow you to have multiple accounts in the software that we originally sold for $40. So we would just tell people every transaction goes in one big register. And we sold it and people bought it and it worked. It really worked. It wasn’t like we were selling them something broken. But you didn’t import from your bank, we didn’t handle reconciling to any accounts. We had very rudimentary reporting. It was so barebones and it still just gave us that much more knowledge to keep heading down the path. And that’s what you want. You don’t want to know the end goal. You just want to know that you should stay on the path you’re on and be content there. So we try to build, a lot of times for the destination and then who knows where that ends up.
Mike [19:13]: You mentioned Microsoft Money just a few seconds ago. Didn’t they go out of business or didn’t they shut that product down?
Jesse [19:19]: They did. They shut it down. Several years ago, actually.
Mike [19:22]: And now Quicken is being spun off. How does it feel to basically have run them out of business?
Jesse [19:27]: It’s hilarious. I feel really good. I feel like we conquered them. No. Intuit’s revenue for consumer non-tax revenue is like $340 million a year. They’re a four and a half billion dollar a year company. There’s such a far distance between them and the next guys it’s crazy. I don’t even know if they’ve heard of us. But maybe they have. That would be fun. It is cool to see that we’re headed in the same direction as the big guys because I think they obviously have major market knowledge with all the exposure they have.
Mike [19;58]: There’s a lot of benefit to having hindsight when you’ve gone through this process –
Jesse [20:00]: That’s true.
Mike [20:02]: – are there other products that you can think of that in hindsight you could have potentially come out with that were also not software related or were not directly pieces of software that either could have done well or had the potential, maybe not quite as much potential as what you ultimately ended up with or maybe something that could have exceeded it. Are there anythings that you can come up with that fit that mold that were non-software?
Jesse [20:26]: They’re all kind of related to YNAB and its core business but we’ve tested all sorts of different monetization strategies over the years. We’ve tested partnering with companies that we like. Like Betterment is one that we like. We don’t take commission from them anymore but we still refer them. We were kind of going like a blogger route early, early on where it was like affiliate relationships. I found that to be fairly distracting from the core. We did some servicing around, literally over the phone type work, coaching with business owners to try and teach them how to manage their cash flow better. And I actually ended up selling that off to my friend Mark who was running that for us anyway. And he now runs that Budget Nerd. But for us it was working, it was just I felt like we were losing focus.
Mike [21:17]: It was a distraction.
Jesse [21:18]: Yeah, it was a distraction. I’m very, very susceptible to the new shiny and so I really have to check myself and make sure I’m focused on just a few very core things, and then obviously drive that to the whole team.
Mike [21:32]: Now I think that focus is probably something that all software developers who are starting out and trying to find that product that they want to invest a lot of their time in, maybe it’s the next six months or maybe the next ten years. But what sorts of other advice do you have for people who are specifically looking at building software first? Because as we discussed, you had the spreadsheet first and that’s probably more of a non-traditional MVP. What other shortcuts could people come up with that would help them get to the point where they have a product that people will pay for?
Jesse [22:04]: I like the idea of utilities. So if you’re thinking software specifically, I’m trying to go that route. I like the idea of looking at a very, very concrete problem where the MVP, where the problem is so small and so specific that you can’t add too many features on top of it. I know the open source is a great solution for a lot of these, but I think you could not do the open source route potentially, and just say what is this utility that does this one thing that people on Stack Overflow are constantly asking about or that I’m constantly having to do again and again? Whatever it may be, and just release something very small, very concrete, one off, no subscription, only so that you can cut your teeth on the transaction, the marketing. And so the smaller the problem is the smaller the solution, super niche, the easier it is to market it, which means then you can- it’s tough to find the pain when you’re trying to sell financial software. It takes awhile. It’s complex as far as marketing goes. But when you’re solving this very, very concrete problem that like a little utility solves, suddenly it’s very clear. What I want to do it get people to a very clear value proposition and a very clear solution and get them to be able to build it quickly, release it quickly, have a defined market, just to practice that aspect. Once you start making money, the desire to build, it’s minimized a little bit because you realize this thing that I was procrastinating to selling, isn’t as hard as I thought it was. But all these developers, you guys don’t find it easy to sell but you find it easy to code so you procrastinate the selling and just keep coding and coding and coding. That was a long answer.
Mike [23:59]: No, that’s okay.
Jesse [24:02]: That’s like if I were to coach someone on, I’d be like find a smaller problem. Find a smaller problem, really, really small, and then see what you can do. Like a little ruby gem or whatever it may be, but just something super small and then go for it.
Mike [24:14]: Well I think the natural inclination for developers is to look at stuff like that and because they minimize the value of the particular problem that they’re trying to solve, and they say I could whip up something to fix that in a week or a month or something like that, they minimize how valuable that is to a base of people. And I think the other mistake that they make is that because they try to make something that’s a little bit more generic or bigger, it makes the marketing, as you said, a little bit more difficult because it’s not so well defined. Selling financial software, it’s not abstract, it’s just there’s no concrete pain point that you’re solving. It’s just, it’s financial software. But what specific thing are you doing that somebody might have a particular problem with? And it doesn’t allow you to focus in on the marketing.
Jesse [25:02]: And so that’s the- you can do it. Like in our field we know a lot about the market and how you talk about money. It’s basically around stress. But the idea if I were a developer releasing some little thing that I said could supposedly whip out myself for two weeks, that’s the value proposition right there. You talk to that developer and you say, “Listen, do you really want to spend two weeks doing this? I’ve done it for you and it will cost you half and hours wage.” And then suddenly you get some traction, the value proposition’s really clear, and then you can start to test the waters. I like the WordPress plugin market. I like it for that reason. Those can also totally metastasize on you. But I like it for that reason that you can do small little solutions and get used to the marketing. It’s not a slam dunk but it’s some – I’ve just had some thinking along those lines lately.
Mike [25:51]: Yeah, I think the other thing that that also helps people with is it helps somebody starting small because they don’t have to think about creating 30 or 50 pages on their website. They only need to create one that says, “Hey, this is this exact problem I’m solving,” and they tend to get very specific, highly targeted traffic, which somebody else or a competitor would treat as long tail traffic so they don’t care about it. So you’ll rank higher for it. And then over time you gradually increase the size of the product and it’s capabilities and what it does. And eventually ten years down the road you end up with youneedabudget.com, 30 employees and four and a half million in revenue.
Jesse [26:26]: Yeah, that’s not how I started, right? So you start super small and you don’t worry about how did Jesse do this or that because the answers are obvious when you’re in the moment. I know where we’re going now. I’m hopeful our decisions are solid. But it feels just as obvious to me now as it did six, seven, eight years ago because you just deal with the information you have on hand and you don’t try and predict the future, you just try to keep things small and concise and tight. And then when you’re deciding should I start a new product or should I keep going whole hog on this one, I would tell you to not start the new product.
Mike [27:04]: Something else that you brought up early was that you were doing marketing for this spreadsheet. And I know that there’s a lot of techniques that were probably highly applicable back when you first started this process, like for example, you mentioned Google AdWords were much more cost effective at the time. What other types of things were you doing to market this spreadsheet?
Jesse [27:25]: I was trying to get in with- blogging was just starting up and financial blogs were one of the first because people were pretty intrigued by the idea that you’re sharing finances online. That took off. And I would try and get in the blogging space and it worked to a degree. I tried to recruit affiliates for a while and have people be paid commissions to push YNAB. And I had some that were great but 98 percent of them were horrible and would sell one copy a month and then they would want the world from you as far as “Can you do this, can you do that?” So it was just kind of a time sink and we shut down the affiliate thing. The best thing I did marketing wise was an email course. It was no comparison. The absolute best thing I did early on was I wrote a ten-day budgeting, I think I called it a bootcamp back in the day. And it just taught them my four rules, my method for how you should think about money. And it was super soft sell. And it, I think, quadrupled, actually I have it right here. It doubled our revenue month over month and then doubled it again the next month. It was insane. It still works, too. We still use that as a marketing technique.
Mike [28:36]: Right. And I think that that actually illustrates a gap that a lot of people who are getting into entrepreneurship face also is where the initial expectation is I’ll create this product and I’ll create a website and then I’ll put a buy now link on my site and people will search for it. They come to the site, they click the buy now link or they download a trial and then boom, they’re a customer. But it doesn’t really work that way. The email course that you put out there, that’s basically building trust. It’s not just website, click the button, payment. There’s this time period in the middle where you have to build some level of trust before they’re going to give you money.
Jesse [29:12]: And you’ve got to recognize they’re not all ready to buy right away. They’re in different stages. And the email course does a good job of keeping its arms around them while they’re moving through those different stages.
Mike [29:23]: Right. And that’s something that in some cases re-marketing helps with that where you’re cooking people and then you’re advertising to them later on to help bring them back to your website. But the basic idea there is they’re not ready to buy today, they might be tomorrow, they might be six weeks from now but you still want to be able to maintain some sort of open line of communication with them to help bring them back when they are ready.
Jesse [29:45]: Yeah. Absolutely. Yeah, the re-marketing didn’t exist back then but it would have been gold. Works for us now. It’s the nature of the beast. And in our field with financial software people just aren’t ready. They’re in research mode and things like that. So it’s critical that you recognize that they’re in different phases. And some markets aren’t. Some are like I need to book a hotel, and if you can capture that, you behave differently. But most there’s a long process. I’m thinking about buying a new car, right. Guess how long it’s going to take me. And those marketers know that. You just got to make sure you understand what your cycle is for your buyer and respect that and keep in contact.
Mike [30:24]: Yeah, all great advice. Are there any parting words of wisdom that you want to leave for the listeners?
Jesse [30:30]: Enjoy it while you’re doing it, like enjoy the whole process and make yourself uncomfortable. Do things that you are procrastinating. There was a good book called the War of Art. I didn’t really like the second half of the book but the first half it’s about overcoming your resistance to really doing your best work. It’s been a book that I’ve thoroughly enjoyed. The creative types and developers are extremely creative, designers, obviously extremely creative. That is a book for you. You want to make sure that you’re overcoming what the author calls “Resistance,” and I think that’s just part of the battle. But enjoy the whole process. Just be in the moment with it.
Mike [31:12]: Thanks. So Jesse, it’s great having you on. If people want to learn more of the different you have to say, if anyone’s interested there is a video from Jesse’s talk from last year over on the MicroConf site. You go to microconf.com and then check out the videos there. His talk from 2014 is there. We’ll probably have the 2015 video up there because you were a speaker this past year as well. Where can people find you online and where can they specifically learn more about You Need A Budget?
Jesse [31:37]: So youneedabudget.com if you’re interested in the software specifically or if you just want to look at how we market and things like that it’s good to visit and see what we do there.
Mike [31:47]: I’ll second that. It’s actually very fantastic the way that you have a lot of information there and you do a lot of educational stuff around personal finance and helping to draw them in and kind of tell a story to them about this is what your life could look like if you follow this process.
Jesse [32:02]: Yeah, I have a good team there. And then the software’s excellent so there’s that as well. If you want to follow me online, I don’t tweet a ton but it’s @Jessemecham. I occasionally will tweet something trite. I go to MicroConf so if you ever want to meet face to face. That’s kind of the only conference I regularly attend. Just hit me up at email if you want. It’s Jesse@YNAB.com and I’m happy to chat or give unsolicited advice.
Mike [32:34]: Excellent. Well, thanks for coming on.
Jesse [32:35]: Yeah, you bet. Thanks, Mike. It was a lot of fun.
Mike [32:37]: 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 Out of Control by Moot, used under Creative Commons. You can 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 251 | Email Marketing Demystified with Matthew Paulson
Show Notes
In the episode of Startups For The Rest Of Us, Mike interviews Matthew Paulson, founder of marketbeat.com, about email marketing. They also discuss his upcoming book “Email Marketing Demystified”.
Items mentioned in this episode:
- MarketBeat.com
- GoGo Photo Contest
- Email Marketing Demystified Book
- Mattpaulson.com
- Drip
- AuditShark
- AWeber
- MailChimp
Trancript
Mike [00:00]: In this episode of Startups For The Rest Of Us, I’m going to be talking to Matthew Paulson about Email Marketing Demystified. This is Startups For The Rest Of Us 251.
Mike [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.
Matthew Paulson [00:24]: And I’m Matt.
Mike [00:25]: And we’re here to share our experience to help you avoid the same mistakes we’ve made. How you’re doing this week, Matt?
Matthew Paulson [00:29]: I’m doing well. How are you Mike?
Mike [00:30]: Pretty good, pretty good. So, I want to introduce Matt to the audience. Matt is the founder of MarketBeat.com. He’s also the co-founder of Go Go Photo Contest and he’s a partner at US Golf TV. He’s also the author of 40 Rules for Internet Business Success. And we’re going to be talking to him today about a book he’s writing called Email Marketing Demystified and that comes out in a couple of months but that’s kind of the main focus for our topic today. Is there anything else you want to add to that? Did I miss anything?
Matthew Paulson [00:58]: The book called Email Marketing Demystified, it’s coming out October. We’ll get the details at the end but it’s myemailmarketingbook.com to get a free copy when it comes out.
Mike [1:05]: Matt, could you tell listeners a little bit about MarketBeat.com because I think this is one of the interesting reasons why I wanted to have you on the show because of the size of the email list that you have and that you manage on a monthly basis and the sheer volume of emails that you sent. It’s not just about oh, you’re writing this book on email market. It’s like you’ve got a lot of serious experience to back this up as well.
Matthew Paulson [01:25]: Yeah, so we published and invest newsletter to about 242,000 stock investor as of the data we’re recording this. Today, the newsletter we sent out, it’s freemium so most of the people sign up for the free list and we have 3,000 or 4,000 people that pay us 15 bucks a month to get the freemium version of the newsletter but it’s basically away for stock investor to keep track of the companies they own and kind of what’s going on with them. We send out probably about 10 million emails a month but I think we’re on track to do about 2 and a half million in revenue in 2015. We’ve been doing it for about five years now. It’s grown over time and figured out it’s a marketing channels that have really worked well for us and we’ve really been able to just kind of blow up the size of the list in the last 18 months.
Mike [02:05]: Yeah, I mean that’s an incredible size list, I mean not just in the sheer number of email addresses that you have and that you send emails too but like 10 million emails a month is a massive amount and I don’t think that most people can even kind of wrap their heads for.
Matthew Paulson [02:17]: Yeah, I think that’s a big, big number and then I go to the trafficking version concerts in February and Ryan Dice goes on stage and says, “Yeah, we sent out about a billion emails a month.” And it’s like, “Oh, crap. I got a whole another level to be at.”
Mike [2:30]: So, I wanted to talk to you about this because I think the email marketing itself is one of those marketing channels that people look at and they say, “Oh, yeah. I should do that but they don’t necessarily do it.” And, I think part of the problem is that email marketing, they don’t necessarily realize the ROI on it or they don’t realize the benefits and they start looking at all these other things and it kind of gloss over the fact that that is probably going to be the single biggest differentiator in their business long-term. So, can you talk a little bit about why is email such a compelling marketing channel over a lot of the other options that are out there.
Matthew Paulson [03:04]: Yeah. You see people today talking a lot about Facebook and LinkedIn and Twitter, if you add up the user base of all of those combined, it might be 1.4 billion people. Twice as many people use email marketing as all of the biggest social networks combined. So we got 1.4 billion people on Facebook, Twitter, LinkedIn. You’ve got 2.8 billion people on email. So it’s just a massive channel and people just don’t realize how big it is.
Mike [03:27]: So just because of the size of it is different though doesn’t necessarily mean that like if you spend $10 on email marketing, what about the same $10 spent on social media advertising either Facebook or Twitter or various other avenues, I mean is there a different between the email marketing versus the social advertising?
Matthew Paulson [03:43]: I think there is. I’ve seen a few studies. Some of them say that have query marketers and the responses that they got say that about 75% of people are happy with the results they get from email marketing and only about 60% are happy with what they get from social media marketing. There is a lot of data out there, there’s a McKenzie study that said email is 40 times more effective at getting customers and Facebook and Twitter just in terms of total volume. So the direct marketing association said that business were earned in an average of $43 for every dollar invested in email marketing, I don’t know what the logic behind that study was but if that number is anywhere close to crack, it’s a pretty great ROI compared to just about anything else that you can do.
Mike [04:21]: Yeah. And I think the tendency for a lot of entrepreneurs is to look at studies like that and be extremely skeptical of them because they depend on so many different factors, I mean I’ve done my own stuff where I’ve done advertise on Twitter and Facebook and tried to get those people to either buy directly or to get onto an mailing list and then have them buy after joining the mailing list, and what I found is that you can acquire Twitter followers for example relatively straightforward fashion. There’s documented processes that you can go through and follow to get those people onto your Twitter following. But to get those people to buy from you is a completely different ball game than sending email because you can send those emails week after week, month after month but it’s a little bit more difficult to get directly in front of them on Twitter because they may be following 5,000 people or 10,000 people and them seeing your message, it’s kind of hitting mess. I mean just by raw numbers for the first 24 hours in the day, how long is that message going to be in their feed? It depends a little bit on how many people they’re following but for my initial estimates is like five to ten minutes, it’s not very long.
Matthew Paulson [05:29]: Yeah, I think if you look at the [?] that Twitter has, maybe 2%, 3%, 4% of the people will actually see any given twit if that and on email you’re going to get an open rate if you have an engaged list of somewhere between your 20% and 40% so you could send 3 emails and make sure that everyone sees that or you could send 3 Twitter messages or Twitter post and maybe 5% or 10% your followers will actually see it.
Mike [05:52]: Yeah, so that makes it a little difficult so like compare those things because it’s no longer an apple to apple comparison. Email becomes a much better channel. One of the things that write in your book was it was such a profound quote that I have to call it out. You said every now and then I’ll hear someone that runs a website say something like I hate pops out and I hate marketing email. I would never use them in my business. What they’re really saying is I hate making money because email marketing is an incredibly effective marketing strategy and it’s so funny because you look at that quote and it stands and start contrast to like the raw numbers that we pointed out earlier to kind of justify what the ROI is. Why is that you think that entrepreneurs are so resistant to using email marketing?
Matthew Paulson [6:31]: Sure. I think tech people and entrepreneurs and kind of people in the communities that we hang out with, we kind of think we’re immune to marketing and we also think that kind of marketing is annoying, I mean how many of us are on a million email list from a million of different things and we get email, we don’t remember what it was and we just want off the list and we want to receiving email from people. So we think that our customers are just like us. We think that our customers hate email marketing just as much as we do. We think that they also think they are immune to marketing and it turns that we are not our customers. Our customers might actually want to get email from us because they are interested in our product and want to hear from us. You can’t assume that your customers are just like you are and your customers may behave in a very different way than you do with email. Like we might be inbox zero people and want to clear the inbox everyday but if you look at the email of my wife or a lot of other people there’s just a ton of different messages from ton of different brands and it’s more of a stream and they’re okay with having just content from a variety of people in there.
Mike [07:26]: You know, I know exactly what you mean. I mean I tried to maintain inbox zero as close as I possibly can so anything that goes in there is a little bit of extra stuff that I have to deal with but I’ve also seen people where I kind of glance at their phones and the little icon over there email says that they got 14,000 emails in there. I’m just like how do you even deal with that? And of course you think to yourself, well they just must not read any of it but it doesn’t necessarily mean that they don’t want to receive those emails either.
Matthew Paulson [07:51]: Yeah, yeah, I mean if you have a business and you provide helpful information to people and you send out over email, you’re going to have to assume that people want it because they’re not going to sign up for your email list if they don’t want it. If they sign up for your email list, that means hey, I want to receive email from you so you should probably send them some email if they want it.
Mike [08:08]: So seems like that’s one of those helpful hands I guess for getting over the fear of clicking on that send button when you got whether it’s a 100 or a 100,000 people on your mailing list because that’s one of those things that I think that a lot of people get hung up on is they get everything ready. They write the email and then there’s just like, “Ah, I don’t know if I should send this. Maybe I should wait. Maybe I should think about this a little bit more. Maybe it could be worded better.” And so they either delay on hitting that send button or they just don’t put it on their system yet. I feel that’s a very helpful hint for that, I mean there are other things that you can think of that would help people through that.
Matthew Paulson [08:42]: Yeah. I think that the two keys are one is to understand that no email is going to be perfect because not everyone all respond to in marketing email or a piece educational content in the same way. Every email will interest some of your subscribers but not necessarily all of them. So, you just have to know that depending on who the subscriber is and email is going to be hit or miss and you’re not going to hit everyone with every email and that’s totally okay. The second thing you can do to mitigate some of these fears is just to have systems in place. So before we ever send out a broadcast email that says I write my assistant has an SOP to follow so she checks the spelling and the grammar, she make sure how the links work, she checks all the prices and the numbers to make sure everything is correct in that email before we sent it out so that way we don’t have to go back later and say ops we made a mistake or anything like that, we know that an email is correct in the first time because there’s more than one set of eyes on it.
Mike [09:32]: Now that brings up another objection that I hear from people where they’re tracking the analytics behind some of their emails and once you go through and you click on every single one of those links, what it does is it starts adding numbers to every single one of those. It seems to like if you have a mailing list of 100,000 people then those 1 or 2 clicks may almost no difference in the analytics but when you only have a mailing list of say 100, those 1 or 2 clicks make a big difference I mean it’s a couple of percent. What are some strategies you can think of to kind of get around that particular fear?
Matthew Paulson [10:02]: Okay. So, I think a lot of entrepreneurs and marketers think that the emails that they send have to be perfect and I don’t really think that’s the case because a good email now is going to be better than a great email never and you just kind have to get over that and decide hey, every day or every week that I’m not sending out any email is the day that I’m losing sales. So even if your first message or your first several messages aren’t perfect, mostly your first messages are going to probably be pretty terrible that’s okay. Sending out an okay email is much better than sending out no email at all.
Mike [10:33]: Right. It’s about improvement over time versus getting things perfect.
Matthew Paulson [10:37]: Absolutely. I mean if you’ll look at some of my first emails or probably my first seven emails Mike sent out about Audit Shark forever ago, they’re probably not going to be anywhere nearly as good as anything he would write or I would write today.
Mike [10:47]: Right. Okay. So, let’s talk a little bit about like the basic email marketing strategy and I think the first step to that is talking about email service providers themselves and there’s kind of three different categories that they breakdown into is the transactional emails, the bulk emails, and then kind of true marketing automation and there’s different service providers who kind of addressed each of those different needs. Can you talk a little bit about what situations you would use each of those in and why?
Matthew Paulson [11:13]: Yeah, so transactional is just for brought email delivery. You connected them via an API and sent say, “Here’s my message. Please deliver it for me.” So that’s like [?] Amazon SPS, those are great if you’re writing custom software and have to do like a notification email, a welcome email, or anything like that. If you have a SAS app, you’ll probably need a transactional email service provider in there somewhere. It might not be the main thing you have but it’s way for people who are writing custom software and have account notification emails and stuff like that. Bulk emails are the mail chimps of the world, stuff like that. They’re really for managing an email list and sending out messages to that list. They’re weaker in some of the more advanced stuff like marketing automation and auto responders and some of those things. They’re okay for some types of list that are small and/or even big but just don’t have a lot of custom functionality that’s needed. They don’t need marketing automation, any fancy emails or anything like that if you’re just going to send a single email to your list or to check if things are okay. So the marketing automation platform, I think it’s really worth that right now. These are the companies like [?] and Fusion Software and a few others but these really have some advanced functionality that allow you to send specific types of messages to specific people at the right times. So if somebody buys a product, you could create a custom auto responder, send them email to on-board them or if they send for a lead magnet, you could to a special auto responder series just to them and there’s just so much that you can do with the marketing automation platform. If you’re really going to down to the road of – if you need to do email marketing, I think you are better off to starting off with point infusion software or something like that from day one because you hate to sign up for something simple and then have to switch ESPs later, that can be a big pain in the butt to do. So, I recommend start up with something of high level of functionality even if you’re not going to use it right away, it’s good to have down the line.
Mike [12:57]: And I think that’s one of those things where people look at that and say, “Well, I don’t want to pay for that now. Let me do what I have to do with this other provider and then grow into it.” But the reality is they’re just basically creating work for themselves down the road when they are successful with their products.
Matthew Paulson [13:11]: Yeah, and if you look like what a starting Drip account costs, 50 bucks a month or something like that, in any business that makes any amount of money, that’s just a very tiny business expense and I think it’s worth forking the money for that.
Mike [13:23]: Yeah, and I think to differentiate here a little bit more between a bulk email provider and something that does true marketing automation, I think one of the things that people don’t realize is that they look like for example Mail Chimp and what you just talked about there was the idea of oh they signed up for this and then they get a series of email, well, Mail Chimp does that and I think the differentiating factor is that with marketing automation software, things are event driven, so when somebody takes an action of some kind, then it is essentially an event in the system and that event triggers a series of other emails that it is essentially a sequence of emails but it is based on that event and you can kind of do it in Mail Chimp but I think those marketing automation platforms make it significantly easier to do and their designs to operate off of those of that.
Matthew Paulson [14:10]: Yeah, and if you look at Infusion Software or anything like that, you can have just kind of a nice visuals [?] how it actually works kind of tell them do this better than others but just nice to be able to see like what the different processes or if somebody does this lead magnet and then they get this email series and then they buy this and then they get this email series. It’s nice to have a more visual way of representing that.
Mike [14:30]: Right. And I’m in a complete agreement with you in terms of email marketing, if you’re going to do anything around email marketing, you really should invest in marketing automation platform of some kind. I’m hesitant to even recommend Mail Chimp at this point I mean not because they don’t do well with what they do but because email marketing can be such a critical component of the business that it almost seems like you have to have that in placed as opposed to trying to do with something like a free or $15 Mail Chimp account now only to have to switch over later.
Matthew Paulson [15:00]: Yeah, I absolutely agree with that.
Mike [15:02]: Well, the other thing that you can kind of add to it is that once you get involved in a marketing automation platform, your eyes are open to all the different possibilities where if you’re in Mail Chimp, you don’t necessarily see all the different options that are available to you because they don’t exist, but once you get into an email marketing automation platform like all of a sudden you see all this different possibilities that were just never there before.
Matthew Paulson [15:23]: Yeah, and if email marketing is going to be a big part of your business, these things aren’t really optional. You would really need to have good marketing automation in place and have different series and campaigns driven by events and you might be able to get away with that 10 or 15 years ago but email marketing has just gotten so much more advanced. You need to have the technology stacked in place that will let you do those kinds of things.
Mike [15:43]: So, now let’s talk about the different email service providers. Let’s talk about collecting email addresses and we’ve talked about this a few different times on this podcast but what are the different ways that people can go about collecting email addresses on their website?
Matthew Paulson [15:56]: Yeah, so obviously you need some opt-in form, you need some kind of offer and then a sign up box. So it’s typically a title, a subtitle, a textbox and a button and to sign up. There are different types of opt-in forms you can do. You can do an entry popup, an exit popup, a welcome gate, something in your sidebars, something below the post. I’ve tried a lot of different opt-in forms on my websites and I found that nothing comes close to doing the popup form welcome gate, just having something that people can’t miss right away. It tends to work very well to get email opt-ins. If you only show the people once a week, they’re really not that annoying so I think if you have scoop those box, it’s not easy to pop up on your website, I think it’s time to just maybe get over that and put it on your website anyway and see how it works. And then another good place I found is pretty one directly below the post of an article, so if you’re reading article, typically you’re looking for the next step to do. And if your email opt-in form is right there, it’s a really good way to get opt-ins. I like to use a combination of both the popup, like an entry popup and an entry form below the post and that does pretty well with opt-in rates.
Mike [16:56]: And I think that’s interesting what you said about getting over in the idea of putting in that welcome popup because personally, I’m not a big fan of those type of things and I don’t tend to put my email address in them but there’s also times where I’ll go to a website where even if I close it three or four times, if I find myself going back to them, I have a tendency to put my email address [crosstalk]
Matthew Paulson [17:14]: Yup, and again, that’s just a matter of we aren’t your customers so if even though we might not prefer our email address into a popup form, that doesn’t mean our customers won’t. So, it’s really a matter of trying it out and saying, “Hey, how many opt-ins am I getting from this versus whatever I’ll say and do from getting a lot more than maybe it’s just worth to leave it there even if you think it’s a little bit annoying.”
Mike [17:34]: Yeah, and that’s something you can even just try for a week. What’s the worst thing that’s going to happen? The people who came to your site are not going to come back? That’s not the end of the world, I mean your business is still going to keep going.
Matthew Paulson [17:43]: Yeah, there is a local coding boutique that does e-convert that is helping out a while back and they had email list and they have a list of maybe 500 people and their email stuff was so hard to find and I just – hey try popup for a weekend and see what happens. The guy was pretty resistant to it but when they did it, they went from having 500 emails on their list total to adding 500 emails every month and the popup is still there a couple of months later so clearly, it’s working for them well enough that they want to keep it even though the guy thought it was a little annoying to begin with.
Mike [18:13]: So let’s talk a little bit about how to entice people to actually sign up. In episode 248, we talked about 14 different ideas for high impact lead magnets. Are there lead magnets that either appeared on that list or that you can think of that worked really well or do you think a lead magnet is not necessary?
Matthew Paulson [18:30]: I think the lead magnet is absolutely necessary. You can’t just say, “Hey, give me your email address so I can send you email.” Nobody cares. You need to give them something to care about in order to get them to give you their email address. I think the format of the lead magnet matters less than the content in the format. So like, I don’t care if it’s a video, a guy, the PDF, whatever, but it should just be very relevant to the content on the page so that might mean that if you have five or six different topics that you talked about in your website, you might have five or six different opt-ins or a lead magnet that show up on each page based on the category that it’s in. So to me relevance is a lot more important than just the medium of whether it’s video, audio, or text whatever. It just is the content in your offer relevant to the content on the page.
Mike [19:13]: And I think that’s probably an important distinction to make for people because there are different types of lead magnets that take different amounts of time and effort to create. So, something that is very simple even though it’s relevant and it’s very quick to create, it can have just the same impact to something that takes 10 or 15 hours to build in terms of getting people onto your [crosstalk]
Matthew Paulson [19:33]: I absolutely agree with that. I don’t think that your lead magnet is something you should spend a lot of time on when you’re first getting started. Don’t let that be something maybe comes a 10-hour ordeal, just take some content you already have and make it into a nice format that’s makes for a nice PDF or something like that and makes it a nice download but I would spend a whole bunch of time doing the original content for your lead magnet.
Mike [19:52]: Yeah, that kind of brings up the idea of premature optimization if you’re spending too much time trying to figure out what is the best thing to do here, you are wasting time and you’re not actually building something to click through.
Matthew Paulson [20:02]: Yeah, I mean if you’re not getting many opt-ins every month, like if you have 100 opt-ins on a monthly basis, you’re not going to have enough people coming and to create a statistically valid split test anyway. So, it doesn’t really matter if you to think that the lead magnet that you have now wasn’t perfect because you couldn’t even test something else out to know whether or not it’s better or not. You just need to do something that’s good enough for an hour than once you start getting a ton of opt-ins every month then you can test out something better.
Mike [20:26]: Right. And it’s about optimizing down the road instead of now. So now that we have somebody on your email list, how do you go about marketing to them? What types of emails should you be sending to them and at what times should you be thinking about sending those emails?
Matthew Paulson [20:38]: Yup. So the first email that you send is probably the most important, that’s called your welcome email. And inside your welcome email you want to accomplish a few different things. First you want to set expectations about what kind of emails you’re going to receives, you might say, “Hey, I send an email every Monday about SAS news and applications or whatever. You can chat us.” And say, “This is what we do. This is what to expect.” The second thing you should do is try to get people to whitelist you or add to your their contact list. So if somebody replies you a message and adds you to the contact list, whitelist you in whatever way that you can, your messages are almost always going to automatically go to the inbox. So you want to ask them to do that right away and then at the bottom of your welcome email, like the PS of your message, you can do some kind of promotion for a product if you want to. So you can say, “PS, hey, do you want to learn more about whatever I do? Check out our cool product here so you could do that in your welcome email as well.” There are two other types of emails you send, one is that auto responder series. So that is 30 to 60 to 90 days the first however many days somebody is on your mailing list, you send them a series of emails, one every other day, one every third day, whatever you want to do. Those emails are designed just to get somebody familiar with your content and familiar with your products and services. So you might have say 15 emails in your auto responder series 1 every 3 days for 45 days, 7 of those might be sales emails for your product and either those just might be contact emails that teach people how to do things or provide people information that isn’t trying to sell something to them but just trying to help them out and establish a relationship and finally there’s broadcast emails so after someone is done with your auto responder series, don’t need to email them so you make a broad cast count every month and you send a mix of content whether that’s just new blog post, new podcast episodes or more product ads or this content whatever you want to do, you still need to send out. You need to keep email in people that are done with your auto responder series because if you stop emailing somebody, then they’re just going to forget about you and forget that they opted and did it in the first place.
Mike [22:29]: Now, one of the things that you just brought up there is that during the auto responders, not every email is essentially a sales emails. You’re not always pitching them a product. Can you talk a little bit about the contrast between establishing a balance of engagement versus generated revenue because obviously there are certain types of emails that are designed to engaged the user and essentially provide value to them and then there’s others that you send them that you’re essentially giving them a sales pitch, you want them to buy something from.
Matthew Paulson [22:57]: Yeah, it’s a lot like somebody that’s a fan of a podcast, person listening to the podcast thinks they have a relationship with the host of the podcast even though they don’t just because you hear them all the time, the same is true for email list. If I’m sending you email all the time and you’re reading it, like I might think that I have a relationship with Kathleen because I get her email all the time even though we’ve never meet. So, you have to think about it like you’re starting a relationship with somebody. You can’t just sell them all the time where you’re going to make them mad at you and they’ll go away and unsubscribe or report your messages and spam, you can’t do that all the time. So you really need to have a mix of content that is relevant to your audience or a stuff that’s entertaining, educational, helpful and stuff that generates revenue as well because that’s the point of being the business. So, a good balance I think is ever other or some people are more conservative than that they might do two content email for every sales email or and it kind of depends on the makeup of your mailing list.
Mike [23:48]: Now, in terms of the sales offers themselves, what are the different ways that you can use an email list to generate revenue for the business? What types of products can you offer? Obviously, there’s your own products if you have them, but what are the other ways that people can generate revenue from their list?
Matthew Paulson [24:03]: Sure. Obviously, you sell your own products and then you can sell other people’s products, through affiliate marketing kind of like what Kathleen does with his mailing this. He promotes a lot of other people’s products and gets a large commission check from [?] and lots of other places every month, people can do that. There are some other ways. There are advertising companies and networks and agencies that work with people that have email lists. I work for [?] investing media solutions that’s specific to finance but they will sell our newsletter ads in my newsletter so people will pay or advertisers will pay on a cost-perfect basis to getting them a newsletter. I’ll get revenue from that. They also sell [?] but they rent it so somebody can pay $50 APM or something like that to email my list, and that’s pretty good money if you can get it. That’s kind of the advertising method for the advertising strategy. That’s also on your thank you page, you can place ads called co-registration ads. So if somebody signs up for your mailing list, they might see offers for somebody else’s product and then if they check those, you might get a couple of bucks for whenever somebody checks those and signs up for a product. Co-registration advertising can be a good revenue source that people don’t realize exist that we do about 40 grand a month in [?] and your thank you page is just a very valuable, a place to monetize because somebody is just taking action and then they’re very likely to take another action if you give them an opportunity to take an action. So, if your thank you page says thank you, you should change it and put it in a co-reg ad, an adsense ad or just even try to sell one of your products in your thank you page because people are very willing to take action right after they signed up for your mailing list.
Mike [25:33]: And I think that this an area where people are also very averse to kind of sharing the fruits of their labor in terms of the emails that they’ve acquired but at the same time these are people who – they’re the ones making the decision about whether or not they’re going to sign up for one of these co-registration ads and I think that the other thing that you mentioned which I thought was very interesting was putting advertisements in your own emails to your own list, can you talk a little bit more about it because I think you very briefly mentioned it about sharing your email list itself, but I don’t think that it was probably clear the specifics of what that really means?
Matthew Paulson [26:06]: Yeah, so you don’t ever give out your email address or your email list to anybody else, that’s a big no, no, but what you can do is talk to an advertiser and say, “Hey, what’s an email from our list for what your product for the set amount of money. They might want to email 100,000 people they’ll pay $50 APM, that’s 5 grand they would pay me to send the email out. I usually work with an advertising agency that sells out stuff for us so I don’t have to really worry about it too much but it can be a good money when the advertisers are available and in season and that kind of stuff. Newsletter ads, that’s also I think the same agency but those are typically done on a cost perfect basis, so there are other financial publishers that people start talking on financial products that have ads they want to get eyeballs for they all put that in my newsletter and they’ll pay me a dollar or two for a products just to get somebody to go to their landing page. So much of that though is you worry about handling over your email to somebody else and a lot of that depends on the industry that you’re in, in the financial industry, people sign up for a lot of different crap. So I don’t care if somebody signs up for my stuff and then I get them to sign of two other stuff. If you’re a co-reg ad or through an email ad or anything like that but if you’re Ruben and you have got BidSketch, you’re only going to use BidSketch or you’re going to use somebody else. So in that case, you probably don’t want to do that, so it just kind of depends on what industry you’re in and if it’s a zero some game or not.
Mike [27:20]: Interesting, so let’s talk a little more about after the person has made a purchase from you. So you generated revenue of some kind from a specifically through these direct product sales or through the affiliate marketing or co-reg ads or the newsletter ads or anything like that, but after somebody has actually purchased a product from you, what sorts of things you do? How do you interact with them after you’ve made the sale? Because I’ve purchased products from people before where I’m getting all this email marketing and then I make a purchase and then I never hear from them again. What are the best practices with that?
Matthew Paulson [27:52]: Yeah, some of it depends on your business model. If you have a SAS app, you need to get them to keep buying every single month or every year. So you have a strong incentive for them to keep using your service array of program or whatever it is. After somebody buys, you should have some kind of consider an event in your marketing automation system and then you have a sequence that goes after that that really helps people use your products or you should remind them that they bought the product, remind them what’s your name, give them the link to go access it, just have two or three weeks’ worth of content that shows them how to use a product, how to get the best value out of it, all of that kind of stuff so that people will actually use your product because if they used their product, then they are more likely to buy a stuff from you in the future. If it’s a SAS app, they’re more likely to go up. The goal is to get people to engage with your product and actually use them because people that buys something and never use it which happens a lot more than you think, they’re going to bounce and they’re going to be somewhere else and never think about you again.
Mike [28:42]: So let’s circle back a little bit. We’ve talked to about how to choose an email service provider and collecting the emails and using lead magnets and then generated revenue from these people and kind of what to do after you’ve made the sale to them but what about the sales funnel itself, so there’s always different pieces that you kind of string together. How do you look at this from the kind of global standpoint. You’ve got this top level view and you want to say, “Okay. Over here we’re going to do this. Over there, we’re going to do that.” Are there any general strategies you have for kind of mapping out what this looks like? In the past I’ve used graph papering, you draw little boxes and point little arrows to different things. But are there other strategies you’ve used or seen people use that could help with this?
Matthew Paulson [29:22]: Yeah, I mean you really have to start what’s the end goal that I want people to buy my product? Do I want them to do who knows what and then you work backwards from there. So what needs to happen for people to want to buy my product, they have to become familiar with it, they have to learn about it, they have to understand why it’s better than anyone else and here I’ve done all these steps and then you have to convert them into an email sequence of some kind. You can do pen and paper like you do with graph paper or you can use [?] to make some fancy parts. Some ESPs has some of that stuff. I just work it out on the Word document of what kind of emails I need to send. I figure out okay, what’s in a welcome email that leads to this? What needs to happen in the auto responder series? Let’s say they get to the end of the auto responder series and then they don’t buy then, what do I need to do in my broadcast emails every month to try to get them to buy after that fact? So, it’s more about knowing the steps and less about knowing the specific emails right away. You have the steps and then you try to figure out how do those steps translates into the specific emails that will help people get down to fact?
Mike [30:20]: I find it interesting that you use a Word document because for me I’m much more of a visual person so having kind of like I said a graph paper map kind of helps me with that, is that depending upon the type of person that you are or is it just are there certain techniques that you think work better?
Matthew Paulson [30:34]: Yeah, I’m a pretty left-brain person. So I think it’s just how I think about things and how things connect together in my mind. For me, that’s how I do an auto responder series and then a broadcast team around, I print out a monthly calendar on paper and then just kind of fill in what emails I think I should send and what they so that it’s based on appropriately and there’s a good mix of everything but there’s not a whole lot that goes in. It’s not as complicated of a process as it might seem.
Mike [31:01]: It’s not that it’s complicated, there’s a lot of steps though, at least there can be and I think that that’s where people get hung up is, “Oh, I have all this work to do.” And then they just don’t it.
Matthew Paulson [31:09]: Yes, that does happen, because I think people will expect results from email marketing right away or results from email marketing right away and then they look at all of the stuff they have to do and then they get overwhelmed by it and just don’t do it.
Mike [31:20]: With the email marketing, it’s not just one or two emails that you need to send, I mean there are cases where you need to send 15 or 20 or 30 emails before you convert somebody to a custody, right?
Matthew Paulson [31:28]: Well, absolutely, I’ve got people that subscribed my free newsletter for two years before they finally upgrade whenever we sent out like a sale email. It can take a long time for somebody to finally get a sign that they want to buy you product.
Mike [31:39]: And maybe that’s part of the hesitation for some people to kind of invest in this is a channel because they look at that and they say, “Well, I sent out three or four emails and I only get a handful of sales.” So, email marketing isn’t working and they kind of [crosstalk]
Matthew Paulson [31:52]: Yeah, it’s a ramp, I mean it takes a long time to build up a list and to start figuring out how to actually make emails at sales because we print opt-in form in your website, you get 1,000 emails for a month even which would be good for a lot of people. At first month you only have a 1,000 people to email and that’s not a very big list to generate sales from because if you think, if I get open rates of 20% that means 200 people open an email and out of that, if 5%, buy it, 5% buy the thing. That’s maybe 10 sales I will get in the first month and that’s probably optimistic even, but once you get down to 2, 3, 4, 5, when you get 2,000 emails next month, 3,000 on your list for third month and so on down the line, then it only starts to get bigger and you start to get more results as it grows over time.
Mike [32:37]: So it’s more about the iteration process and the incremental improvements or the month over month improvements that you’re getting from it?
Matthew Paulson [32:44]: Yeah, I mean my first month that I did the freemium newsletter, I sold maybe 10 premium subscriptions. So I made $1500 that first month then I made nothing for like the next two months because I didn’t send out any emails to promote the product, so it was not just a matter of time to learn and try stuff and see how it works and not to list grow. The results aren’t going to happen overnight but 2 or 3 years down the line, the results are going to be probably a lot bigger than you could imagine right now.
Mike [33:08]: Well, this has been great so far. Where can people find out more about the book that you’re writing called Email Marketing Demystified?
Matthew Paulson [33:14]: Yup, so the book is going to come out October 1st, 2015. It will be available in Kendo, Paperback, and AudioBook formats. It will be in Kendo version for the first week, so if you want to be notified about that, I’ll go to my myemailmarketingbook.com, again that’s myemailmarketingbook.com. Type in your email and I’ll send you an email when the comes out and you can get a free copy. And if you want to follow me on Twitter, my user ID is MathewDP and you can follow my personal blog at mattpaulson.com and Paulson is P-A-U-L-S-O-N.
Mike [33:43]: Or if you got a chance to go to MicroConf, you’ve been attending to get MicroConf.
Matthew Paulson [33:46]: Yeah, so I went to MicroConf for this year in Vegas. I had a great time. I’m going to go back next year. I’m going to try to do an attendee talk so if you guys see that in the voting, actually vote for it if you’re going to come to MicroConf this year, I did one last year but nobody voted for it so we’ll hope I get in next year.
Mike [34:00]: Okay. Well, great. I just wanted to say thanks for coming on the show.
Matthew Paulson [34:04]: Thanks, Mike.
Mike [34:05]: If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or email us to 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 for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 250 | 10 Ways to Use Engineering as Marketing
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about 10 ways to use engineering as marketing. They define engineering as marketing and discuss how it can help generate awareness of your company and product.
Items mentioned in this episode:
- The 8020 Manager Book
- MailChimp
- SumoMe
- Bounce Exchange
- speed.wpengine.com
- Hubspot’s Marketing Grader
- Pingdom
- DontTrack.US
- DuckDuckGo
- Baremetrics
- DotNetInvoice
- Dropbox
- Kissmetrics
- Drip
- Bingo Card Creator
- Tractionbook.com
- Themakerscrew.com
Trancript
Mike [00:00]: In this episode of Startups For The Rest Of Us, Rob and I are going to be talking about 10 ways you can use engineering as marketing. This is Startups For The Rest Of Us episode 250.
Mike [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 [00:24]: 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. What’s the word this week, Rob?
Rob [00:29]: Well, this is my last episode for a few weeks because when this comes out I’ll be in the middle of France or Spain. I’m taking a month with the family and going to Europe before MicroConf Europe in Barcelona in a couple of weeks.
Mike [00:42]: Very cool. Yeah, we’ll have a couple of Gaston for a few weeks until you return but the show must go on and on that note, we are on episode 250. So, I just wanted to say thanks to everybody who’s been listening to the podcast, been going on for around five years now. I think we had the five year anniversary a couple of months ago but 250 episodes is a pretty big milestone so I just wanted to say thanks to everybody.
Rob [01:02]: Yeah, it is indeed. Our five year anniversary was a few months ago but in early days we didn’t put out a weekly show. Yeah, it’s been good to be on there all this time. The other thing I wanted to mention is we have kind of a secret drip project going on. We’re in the midst of the biggest single feature edition that we’ve added since automation last year and automation if you recall was the big game changer that allowed us to pivot from email marketing and the marketing automation. And so, I don’t know that I’m going to be as lame as to say. That was Drip 2.0 and this is Drip 3.0 but it’s cool to embark upon this and sometime in the next month, I think we’ll have a pretty big announcement so stay tune on the podcast for me to talk about it or you can obviously go to [getrip.com?] send it for the mailing list if you’re interested in hearing about what we’re up to. The only other thing I wanted to mention is I just finished up a book called the 8020 Manager and I don’t tend to listen to a lot of management books just because that’s not necessarily something that I want to dive too far into. But, I like books that talk about 8020 even if it’s a little overly used but they talk about how to find kind of a maybe a core competitive advantage or a thing that you can focus on in yourself that will allow you to do things better, and that’s what I like about this is that it wasn’t all about being a manager. There were things about being a leader and there were things just about performing better in your job, in your company. So even if you’re not really managing people, there were some good and interesting suggestions in this book for how to key in on are you a really good networker, do you have a lot of people that know that can trust you then use that as your advantage. Are you really good at like researching, digging things out, then use that as your advantage. And if I recall there’s maybe 10 of them, 10 different suggestions and the author says, don’t try to do all 10, pick one that for you is going to be your 8020 because it’s not going to be for everyone. And then he said master that one, raise your game, and then pick another one. So, I found myself taking a lot of notes as I listen to this book which is typically a sign that I’m getting a lot out of it and so I wanted to mention it here in case folks haven’t heard about it, 8020 manager.
So what are we talking about today?
Mike [03:07]: Well, today we’re going to be talking about 10 different ways you can use engineering as marketing. So let’s talk a little bit about what engineering as marketing is and the purpose of engineering as marketing is to help generate awareness of your company and products and it’s also a way to provide incoming leads. So the basic idea is that you create or build something that you’re going to put out there and you’re going to do some marketing efforts on it to drive people to the tool or website that you’re building and you’re going to get them to use it because it’s going to be applicable and valuable to them. Now, it’s probably not something that you’re going to charge them for, it could be something that’s a bit of a strip down version of something you already offer or just a click little utility that somebody may find some value in but the basic idea is that you build something that it has some peripheral focus around your product. So, we’re going to talk about 10 different ideas that you can leverage to using your marketing efforts to help drive people to your products. So to startup with, the first question that you can ask yourself is, is there a competitive advantage that I have over my competition that I can highlight? What you want to do is you want to find something that your product offers that your competitors either don’t or simply don’t measure up to and then find a way to be able to highlight that to your perspective customers. And the examples I have for that is WP Engine Speed Test. When WP Engine came out with their WordPress hosting, one of the key advantages that they really focused in on was speed and being able to make WordPress faster. So, what they did was they built the speed test application where you could go, you could plug in your website and you go over the speed.wpnengine.com and you can see this example. But you plug that in and it will tell you how fast your website is. And what that does is it essentially helps to highlight how fast your current hosting is versus what they offer. And the basic idea is very simple, it’s very straightforward. They want to show that they are faster than their competition and by focusing in on at speed, they’re also able to highlight other pieces of information that might be relevant to you such as if your website is slow by X seconds, then you’re going to lose Y percentage of people to your website because they’re just going to say oh, this is too slow and they’re going to leave.
Now, in the case of WP Engine, by making your website faster, they’re actually helping you to attract customers and to keep those customers on your site rather than they click through Google, your website kind of hangs because it’s WordPress and it just happens to be slow on whatever current host you have and they say, “Oh, heck with this. I’m going to go back. I’m going to go someplace else.” And what WP Engine is able to do is capitalize on that fact and help you to gather more customers.
Rob [05:42]: And I think there are a lot of opportunities here to figure out if your unique selling proposition really is that you are faster or that you do things better than other people, then getting this free tool out there. Basically, you don’t just build a tool, you allow someone to enter their URL and then you ask for an email address so they can get the results. And I’ve seen this done like you said with WP Engine, Ruben did this with BidSketch where you enter your email and you get like a personalized proposal. And so he’s basically trying to show that their proposals, how nice they actually look and how simple it is and that’s the kind of thing you could customize. If you were on SEO company, I mean you could crawl someone’s website looking for broken links so you could crawl it and just look for SEO improvement opportunities, some things that are kind of low-hanging fruit. There’s a lot of ways to think about building a tool that really kind of captures your competitive advantage and I think if you sit down and give a little thought and you have some engineering bend with, you can put some together.
Mike [06:40]: The second way is to look at your product and see if there’s a free version of a report from your product that you could offer in exchange for an email address and that email addresses will essentially help get somebody into your sales [?]. But an example of this is something like HubSpot’s marketing creater and you can go to marketingcreater.com where you’ll be able to put in your website and they will give you a grade for your website based on all of the internal algorithms that they have and they’ll analyze it and essentially email you a report that shows you what your current marketing efforts look like and maybe some places where you can improve. Now, that doesn’t mean that they need to give you the entire report, they could give you let’s say the top three or top five different things in each of those categories. And oh, by the way, if you want to get all of these different things that you could be doing better, sign up for our service we’ll be able to give you all this stuff on a regular basis. We’ll give you daily reports, et cetera. But essentially, it’s used as an upsell opportunity to get somebody into your sales funnel and then be able to market to them on an ongoing basis and convince them to use your full-fledged product.
Rob [07:40]: Yeah, I actually have several points in my idea notebooks where I’ve gone through this exact exercise for several of my products including DotNetInvoice and the HitTail and Drip and I always find it fun to kind of think of what is something that someone would A like to see about their website but also potentially be like to share about their website, right, or about their business because just getting them to view it as one thing, and that’s cool, but if you have a Twit button or a like button there, and there is even a little bit of a viral thing of like, “Hey, these are metrics. What are your type of thing?” There’s another element there of marketing where you’re not just getting that one person but potentially getting them to share it to. And if you know your product pretty well and you know the most popular reports, it’s not too hard to realize which of these is probably going to be the most popular if there are any that are applicable.
Mike [8:32]: The third option is to see if you can show a demo of your product capabilities. So, if you go over to Pingdom’s website speed test for example, you can go to tools.pingdom.com and there’s a textbox there where you can just enter in the URL for a website and it will go through and it will do a complete speed test on that. Now you can use that for a variety of ways as an end-user but what Pingdom is trying to do is show you that hey, by the way, we can do these things for you and we can help you and drill in and analyze all the different ways that your website is slow, we can alert you when it starts to get slow and help you to make sure that your website is as fast as possible. Now, this is a little bit more generic than WP Engine Speed Test where that was specifically for WordPress hosting versus Pingdom’s options which is primarily intended for any type of webhost.
Rob [09:16]: Another interesting example of this exact thing I’m showing a demo of your product, I’ve seen some SAS apps that have an actual visual piece, maybe let’s say Drips that will opt-in widget where you can enter on a form, you can enter your website and the site reloads with your site in an eye frame and they’ll actually show you what your website is going to look like with that opt-in form down in a lower right or with the light box covering it or whatever. And so it’s a nice way to get someone just one more step involved, and this actually doesn’t require an email opt-in for that one. It’s just a tool to get someone to maybe enter their URL so that you could certainly reach out to someone later if you wanted, but I’ve always liked that idea of kind of showing them how it might feel to be using your product just to get them one step closer. I mean I think realtors, when they’re showing houses, they know that folks are thinking about making an offer when they start to imagine themselves in the house and maybe even start talking between spouses about, “Hey, would the couch go here? Would the table go there?” You start to get the mindset of, “Hey, we could actually be here.” And I think that’s a similar thing. It’s like showing a demo of you using your product and giving you actionable information about your own website, your own business because more value than just talking in generalities like we typically do on marketing websites.
Mike [10:32]: It’s kind of like showing the benefits without forcing the commitment.
Rob [10:35]: That’s right. And it’s reshowing not telling, because you can tell the benefits that my product will bring your more traffic and it will blah, blah, blah. But when you actually show them on their own website, there’s just more value there.
Mike [10:46]: The fourth idea for engineering as marketing is to advertise your product through your own customers, and I think that there’s a really creative way that Rob has actually done this through Drip and they get Drip which is that he put “Powered by Drip” at the bottom of the different email captures and there’s a pricing tier where you can remove that particular branding but I think that it’s very effective and I’ve heard from other people that doing similar things on various website widgets is extremely effective for gathering new customers because anyone who goes and takes a look at that is going to see that powered by logo. So, if they see that and they are interested in any way, shape, or form in doing that kind of thing and capturing that information, they’re probably going to click through that and also take a look at the product that’s behind it.
Rob [11:28]: Right. And there’s a bunch of companies that do this; Olark does it, SumoMe does it, Bounce Exchange. I mean this is a pretty common thing for folks who have any type of UI widget I think Hellobar does it as well. And to be honest, I was at MicroConf a couple of years ago, it was two or three years ago right as Derek and I were building Drip, and Heaton Shaw mentioned this specifically that if you have a visual component, you should mention and have it powered by and I ran back to Derek and said, “Oh man, you’ve been noting this down?” Because I was making notes, and he’s like, “I’m quoting this up already.” Like we were adding it as a conversation because we knew this was a no-brainer to do. And the other thing that I recently did is actually, originally we were the powered by link straight through to the homepage of Drip, but I realized that people clicking on it didn’t want a homepage. They really should get a specific landing page. So if you haven’t clicked on that powered by link in a while, I recommend you click it and kind of see what we did there with the copyrighting and how we couch the landing page and how we approached trying to link up with eth mindset of the person reading it.
Mike [12:26]: The fifth idea is it’s sort of a variation on this but it’s essentially embedding your company name or URL on different reports that come out of the product, and obviously you want to offer a pricing tier of some kind that allows removing this, but this is especially helpful in situations where people are using your products on behalf of their customers. So any product that serves agencies and spits out reports on behalf or their customers, it would be really good to be putting that type of information directly into the product. I’ve seen a bunch of downloadable applications that do this as well. So, when they dump things out to PDF, they embed their own company logo onto those reports and oh if you want the professional version of this product which will cost you an extra $200 or $500 more, then we’ll remove all of that branding from those reports.
Rob [13:10]: And you can see MailChimp does this not with reports but with the actual emails they send. If you’re on their free tier, there’s a little badge at the bottom, that’s a MailChimp badge. I think if you’re sending out any types of emails on your customer’s behalf and you have a free tier or a very, very low-priced like a cheap-mium tier, as [Dormesh?] calls it, where you’re basically charging your cost for the tier, I think that you should have some type of badge or link back or something in emails that are sent out on customer behalf in any type of visual UI component. And as you said, to offer pricing to your folks that want to remove it.
Mike [13:45]: The sixth way to use a microsite and I like microsites because they’re used for telling a story and it allows you to create essentially a marketing angle that for a current new story that might even be publicized or just a general feeling about that people are kind of going through and the example is that if you go over to DontTrack.US, you’ll see that DuckDuckGo has created a microsite that talks about tracking for website searches and they go through essentially what has become a giant privacy issue based on the US governments tracking of all internet communications and intercepting phone calls and things like that. So, they’ve essentially capitalized on this idea that hey, the privacy and security for just something as simple as website searches is important, so let’s create a website, we’ll talk about that particular story and then at the bottom they talk about not just DuckDuckGo but a couple of other sites that they have that kind of revolve around the same type of story but obviously, in this particular case, DuckDuckGo is kind of founded on the principle of hey, we don’t track you and we don’t store information about the people who are searching through our search engine. So it’s extremely relevant to create a microsite around that particular story and publicize that.
The seventh idea is for using a public demo and I think that most SAS applications are going to have probably some sort of a public demo available but the problem with public demos is you don’t necessarily have data to go into them and I like if you go over to demo.baremetrics.com, you’ll see that Baremetrics put together a demo that shows a completely working system and it included their own live data in that. So, this kind of combines two different things. One is the marketing angle of leveraging public transparency but it also shows real live data that’s going into the system and you can see that stuff track overtime and how it changes from day-to-day. And I think some of the issues that some people run into with a public demo of some kind is that demo, the data inside of it tends to be relatively static and maybe it gets refreshed once in a while but it doesn’t change overtime and if you go in today, and then you go in three months from now, that data is largely going to be the same. So it can look pretty barren unless somebody went through a lot of time and effort to make it look like a real functional application that somebody was in the middle of using.
Rob [15:57]: Yeah. I think we’ve largely moved away from the idea of kind of public demos or places where you can click on a demo version and see it all populated and we move more towards these free trial models, that I mean that’s kind of how SAS is done these days. But I think there is still room for public demos in certain spaces. I think that if it takes a lot of time to set anything up, like if the onboarding really is intense and it’s complicated, that I think seeing your app full-fledged working in the flesh can be helpful. Now, there’s also a drawback to it. If your app is so complicated that it’s hard to set up, it might be so complicated that you’re just overwhelmed when you log in and that’s not a good thing. But I also think that if you have any type of downloadable product certainly like a one-time sale piece of software like Perch or DotNetInvoice, then I think having some type of demo to at least be able to click around and feel how it feels, screenshots are good but I think that demo can help especially if you do ask for an email address before people can really click through and try it, you’re going to get the folks who are really interested in entering real emails and you’re going to get the ones who just kind of want to want to poke around. They tend to enter fake email address just do to it, so there’s certainly the roof of it and I think that with Baremetrics, they’re really good example because there are reporting tools. And so having reports that you can see really easily, and kind of explore the product is kind of a no-brainer because even if they just want to hook up to your data, it’s still interesting and relevant to see someone’s data in there and to see all the reports put together. It’s a little harder if you have an app that’s a backend cred app that’s supposed to taking a bunch of data and do stuff with it, and if it’s not catered to your specific data, I’d say it’s less interesting.
Mike [17:32]: The eight idea for engineering as marketing is to implement a referral program of some kind, and you can do this on a variety of ways but the basic idea is that customers who refer other customers get a bonus of some kind inside of the application and I think a primary example that most of us are probably familiar with is DropBox, and if you sign up for DropBox, you’ll get a certain amount of extra free space for inviting or referring other people to use the product. And in addition, that person also gets that free space as well. There should be a cap on it of some kind because you don’t want people running around in inviting everyone under the sun and they get basically the world handed to them for free, but at the same time, you want to be able to use some sort of a viral component to that to get people to share it amongst their friends especially if they’re getting value out of it. And in the case of DropBox, the value of DropBox is pretty evident when you sign up for it and people are encouraged to go out and ask their friends, hey, do you want to sign up for this? This is really awesome. We can both get a benefit if you sign up. I think affiliates kind of fall under this umbrella as well but not as much.
Rob [18:34]: Yeah, and this is less about engineering as marketing and more of a virality I think which is fine but I think anything that contribute to your virality kind of like the “powered by” logo is pretty powerful. Building up a network of affiliates and a referral network, and a referral program actually takes quite a bit of work to do and to manage it properly. I think you really have to have someone that people are stoked to share. But obviously, with something like DropBox which was a kind of a new product and like you said they gave both people the bonus, I think that can work. But I think their numbers also were, they’re B2C product when they started and so, B2C is going to have a better luck with this kind of stuff. I’m not saying it doesn’t B2B but it takes a little bit of I think a longer term to do it and I just think that the viral coefficient is going to be a lot less than when it’s B2C.
Mike [19:24]: The ninth way to use engineering as marketing is to leverage some sort of daily report email and show progress towards the goal and the daily e-report emails can show that progress but the core piece of this is showing progress towards whatever the goal is and for different applications, they’re going to have different goals. So for example, with Kissmetrics, you can get a daily email that shows you some of your KPIS with codeschool.com, you can get a report card that shows you how far along you are in inside of the school and showing you what sort of progress you’ve made. Anything where you’re showing progress towards that goal is something that you’re going to want to be able to highlight to people and use that engineering effort to say, “Hey, you’re making progress towards this goal. Don’t quit now.” And you can go in and implement additional things that look at that and analyze to figure out are they slowing their progress down, or they’re not making as much, are there ways that you can essentially draw them back into the application to help them move forward.
Rob [20:17]: Yeah, I think daily or weekly reports are powerful when like you said with the Kissmetrics I’ve seen perfect audience to a really good job of this. Some of these emails that I get are really irritating and I don’t actually care. To be honest, one that it’s not irritating but I never look at it it’s the one from [?] I just don’t care about the activity. I use it as a tool and I have no interest in it and I should probably just unsubscribe from it but I haven’t yet. Whereas something like Kissmetrics or email marketing software or Perfect Audience which is ads, that type of platform to me it’s a no-brainer and this is in our feature list we trip to actually build one of this but I think having a daily or a weekly report is a really key part of keeping your customers engaged.
Mike [20:58]: And the 10th idea for using engineering as marketing is to essentially leverage the content from your application for SEO, and primary example of this is bingo card creator has a ton of automatically generated webpages that are based on different bingo cards that were created for the application and some of these bingo cards are for either holidays or animals, bingo card creators designed to create bingo cards and from those there were all these different webpages that can be generated to essentially help fill out the website and the larger the footprint for your website, the higher the likelihood is that you’re going to start ranking for some of these very obscure search terms especially if you engineer it in such a way that you’re doing all the right things in terms of the H1 tags and the titles and all the different meta tags that go with it or the URLs, I mean there’s a lot of different things that factor into that. But most of that can be automatically generated especially if you have a large base of content that you can generate it from.
Rob [21:55]: And Bret Palombo also did this with distress pro, and I’ve heard of a few other folks doing it as well. Oh, Zapier, that’s the other one I was trying to think of. They did a good job with kind of linking up all of the things they integrate with. And so if you search for [linktrelo?] with Gmail for the longest time, Zapier will rank number one for that, I don’t know if they still do because they link them and they figure out how to create enough content to link all 150 of their incoming with all 150 of their outgoing. When you do that multiplication, that’s a lot of pages that they spit out and they kind of cover the nice surface area in Google. So, this is definitely something to think about and this is something that you had done I think about a year ago with AuditShark as well. How did that turn out?
Mike [22:36]: It went pretty well. The initial uptake on the traffic was pretty good and then it leveled off pretty quickly and it bounces a lot. It depends a little bit on how much Google is kind of searching around and finding pages that are not relevant for some of those long tail search terms but they are extremely long and most of the pages maybe only get like a couple of visits a month, but at the same time, I mean it does amount to thousands of visits every month because I’ve got I think well over 1,000 pages that are created for that.
Rob [23:06]: And it probably fairly targeted since they’re searching for such a specific thing.
Mike [23:10]: It is, but the problem is that they are searching for that specific thing and they’re not necessarily looking for a product to solve that particular problem. They’re looking more for information about what that thing does. So it’s not quite as targeted as I would like or at least I kind of found that out after the fact it does draw in traffic but not nearly as targeted as I would like, I mean those pages are definitely lower converting the most for the rest of the site but I think that your mileage in that particular situation is going to vary based on what type of information it is that you have.
Rob [23:39]: Right. So for some closing thoughts on this, obviously, it’s reasonable to ask for an email address and email people the results of most of these things. If you let them use the tool and you don’t get an email address in front of that, you’re losing a lot of value especially if you can get it into a system where you can actually tag them as the fact that they did the specific thing and not just dump them into a random list or dump them into a list of people who have used this tool but actually have them in a big bucket and just being able to tag, then you can see who are the people who have never visited, who’ve done this, and who were the people who are already trials and customers who are using and then kind of exclude them from that. It can really see your metrics really well, and then you can engage obviously just the people who have never use their tool that a lot differently than you would if the folks are already familiar with your tool.
Mike [24:24]: And we’re going to link it up in the show notes but there’s a couple of links that you might want to take a look at for additional examples of how people are using engineering as marketing. One of them is over at discuss.tractionbook.com and the other one is over at themarkerscrew.com and they both talk a little bit about engineering as marketing and have some examples there that are a little bit beyond what we talked about here. Some of them are I’ll say are a little bit less relevant in our particular space so they talk about Facebook and Twitter and some companies like that how they were leveraging some engineering as marketing but you still might find it useful and you might be able to pick some ideas out of there.
Rob [24:55]: If you have a question for us, call our voicemail number at 888-801-9690 or email us to 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 for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 249 | Finding Your Competitors’ Customers, Pre-validating a WordPress Plugin, How to Hire a CTO, and More Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about finding your competitors’ customers, pre-validating a WordPress plugin, how to hire a CTO, and they answer more listener questions.
Items mentioned in this episode:
- Restaurant Engine
- MicroConf Europe
- Appear.in
- Endo Creative
- SendOwl
- Easy Digital Downloads
- BuiltWith
- Datanyze
- GroupAgree
Transcript
Rob [00:00]: In this episode of Startups For The Rest Of Us, Mike and I talk about finding your competitors’ customers, pre-validating a WordPress plugin, how to hire a CTO, and we answer more listener questions. This is Startups For The Rest Of Us episode 249.
Rob [00:23]: 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 [00:31]: And I’m Mike.
Rob [00:32]: 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 [00:36]: Well, we’re ready to announce the final two MicrConf Europe speakers. We’re going to have Brian Castle, the former owner of Restaurant Engine and he’s off working on Audience Opposite at this point, and we’re also going to have Justin Jackson who is in the midst of writing of a book on Marketing for developers. He’s the podcaster behind Products People and Behind Build and Launch. So it would be great to see those guys. I think both of them were on the stage over in MicroConf Vegas so it’ll be great to see what other things they come up with.
Rob [01:04]: That’s right, yup. Some more folks who have made the lead from coming and doing an attendee talk at MicroConf and stepping onto the main stage. So, we’re looking forward to hearing from those guys. Yeah, we’ve been getting a lot of really interesting listener comments on the podcast blogs so it’s at startupsfortherestofus.com and folks are commenting on individual episodes. We have a comment from Mathew on Episode 243 where we discussed the tools that we used to run our startups and we mentioned Skype and Mathew commented, he said, “We switched from Skype to Appear.in which seamlessly integrates into Slack. You can start new video chat by typing /appear and then a roomname. It also makes sharing screens easier and we can have multiple people on the same call. We’ve also started using Appear.in. It is nice that it integrates with Slack. It’s also HTML5 so it just goes right in your browser. You don’t need to download a [?] or anything. The drawbacks that I found to it are A, none of us can get it to work in Chrome. There’s no audio to it and I’ve emailed back and forth and done run diagnostics and all types of stuff with the Appear.in guys and it just won’t pick up any of our audio even though our audio works with whatever approaching that we use. In addition, Appear seem to, I don’t know if it’s an HTML5 where it renders in the browser or whatever, but it just hammers through processors, processing cycles. So, you run away like my pancakes on as soon as we started chat and it makes all of my internet browsing really slow. So if you’re going to try to browse and talk, it’s kind of tough. I have like almost like a brand new MacBook Air with a nice processor and everything. So, I like it for quick chats but it we’re going to do anything more involved, we turn to switch over to Hangouts or Skype.
Then we had a comment in episode 244 which is where we interviewed Josh Pigford and we talked about a number of things in that episode but one of them was transparency and Simon from [Small Farm Central?], he says, “I like the idea of “point in time transparency” rather than this level of sharing that only seems to help competitors. If the story of your business is important and you are targeting people who would care about revenue, then this point in time really makes sense because it allows you to craft a story and release only the metrics that are important for the story, rather than baring everything to the world.” So, I enjoyed that comment from Simon and it was kind of a summary there were a lot of folks who Twitted and emailed about kind of the discussion about transparence in that episode so I appreciated it. And the last one was on episode 247 where we talked about whether you should focus on people versus process and Jeremy Green posted and he said, “I just gave a presentation at WordCamp Boston on this very subject. It’s at http://www.endocreative.com.” And we’ll link it up on the show notes. He says, “In creative work, the most important thing is to have a process in place for the tasks that are the same for every project. That leaves you more energy and brain power to focus on the creative side of the project.”
So thanks everyone for your comments. There are more there than we can obviously read but I wanted to call at a few of those because they seem to really kind of hit the nail on the head and add something to the conversation.
So today, we’re answering a number of listener question. We have a pretty nice backlog right now. So, I had to call through those and pull out the best that I could find. The first one is about which niche should I focus on first and it’s Hylton from GroupAgree. And in that, I’m going to summarize because the email is further long and so Hylton is working a GroupAgree which he summarizes as a drama-free group decision making. And he says is that during his alpha, he’s found that his users identified a number of different context for making surveys. And so I’ll start to read his emails from here. He says, “Casual, such as what movie should be see, what restaurant should we go to, what game should we play at our land party. And then the second one is academic, what should our book club read, when should I reschedule my class so most students can make it and what should the topic be for our final project. And the third is business. How should we prioritize our customer’s feature request, when should we meet with the client, what should we do for our offices at summer activity.” In Hylton’s words, he says, “My question is this, with a product so broadly applicable that my users have successfully taken it lots of different directions, how do we identify which of these three niches to focus on first? This may sound like a good problem to have but it’s definitely stressful because it will define the direction by initial marketing campaign and I’m worried that choosing incorrectly now will send me back for to six months.” What do you think about this Mike?
Mike [05:07]: Well, I think even those three different niches that he identified. To me, it seems pretty obvious as to which one to go after and the three options were casual, academic, or business. And to me, I would go for the business because they are much more likely to pay you than any of the other ones. Like I could see myself using an app like this with my friends to find out like what restaurant we should go to or what movie we should see but I can’t possibly see myself actually paying for it. And then in terms of academic use, I can definitely see some uses for it but again, I think that it would be difficult to identify places where there’s like a business justification for actually showing out money for it. So to me, it seems obvious that you really need to go to the direction of the businesses because they’re going to be more likely to pay you than any of the other groups.
Rob [05:50]: Yup, I agree. And how to make a statement that having a broad appeal seems like a good problem to have and I disagree, I think it’s the exact opposite. I think having a great appeal is a bad thing early on when you don’t have a ton of money, a ton of staff, and you have to focus. You really want that narrow, narrow focus so that you can get a small group of people in there who just love, love, love using the product and then we’re in town from there and go broad later.
Mike [06:14]: One other thing that comes to mind though about this given the broad appeal in those other spaces, it might be possible to come out with and I wouldn’t do this right away. But down the road, when you kind of have things locked in, come up with something of a free plan or a free model where it’s like free for personal use or casual use only or something like that, it’s definitely not for businesses but to help essentially expand the footprint of the product and get it in people’s mind so that when they go to work and they start seeing places where they could use it, then it almost becomes an upsell opportunity or a lead generation engine for you. Again, I wouldn’t do that upfront because I think that freemium right off the bat is probably going to hurt you a lot more than it’s going to help but it might be something to consider down the road.
Rob [06:57]: So thanks for the question, Hylton. The next one is about licensing and delivering a downloadable product and it’s from Brian Wall. He says, “Hi, Rob and Mike. Thank you for your podcast. I’m a 14-year faithful employee for a software company in Fresno.” Which is funny that I’m never run into Brian. He says, “After all these years, you’ve opened my eyes and inspired me to take the plunge. I’m taking the stair step approach that Rob talks about and my first product will be a downloadable plugin for a product that runs on Windows and Unix servers. I expect it to be fairly low-touch in terms of sales. My question is, how to license and sell a downloadable product like this? Is this a good candidate for something like Gum Road or would you build your own dedicated storefront? I’m not so worried about activation keys but I do need a way to manage licenses, updates, renewals, cancellations, et cetera. What do you recommend?”
Mike [07:40]: This is hard because I don’t think that there’s a good option, but I don’t know as I would go about building my own dedicated storefront. There’s a lot of different options out there that allow you to do payment processing and I think that it feels to me like the underline assumption here is that you’re worried about too many orders coming in and having to process them all, and I don’t know as I would worry about that problem just yet. I would worry about it once you find that you’re getting a lot of updates and renewals and cancellations and things like that. I mean as long as you can issue a license to somebody, it doesn’t really matter. The other things, you’re not going to have such a high volume of them for the first probably 6 months or 12 months and it’s going to be a big deal.
Rob [08:19]: Yup. I would probably do it pretty manual at first, just with a stripe account is what I would start with. And I totally agree with Mike. I would absolutely not build my own storefront. There are a couple of ways to deliver digital products that you might want to migrate to after you’re getting more than, what purchase a week that you’re manually fulfilling. One that I’ve heard a lot of good things about is SendOwl, it’s send, O-W-L, and it’s Gum Road A in the little more at technical folks and I think it has more API stuff. So you might want to take a look at that. It’s a SAS app. The other one is a WordPress plugin. So you’d need a WordPress as your frontend but it’s called Easy Digital Download and I’ve heard a lot of good things about that. It’s written by a WordPress developer named Pippin who sells his own WordPress plugins through it. So if you have a onetime download and you want to manage license keys and annual renewals and all that stuff, it’s kind of baked into that. So if you’re willing to put WordPress as kind of the storefront, I think Easy Digital Downloads is probably what I would go with. But this is a good question, thanks for sending over Brian.
Our next question is about how to find people who are currently using your competitor’s products and it’s from Ryan@builderbuilt.com. He says, “Hey, guys. Great podcast. You continually provide well-thought out actionable content in today’s episode about why people might not switch to your SAS and provide some good tips on how to convince them to make that switch by removing barriers. My question is, how do I actually go about targeting companies who use my competitors’ solution so I can market to them?”
Mike [09:41]: I think there’s a few different ways that you can go about this. The first one is to find where those people are hanging out and talking about the competitors’ products online. And now, if this is on your competitors’ forum, you probably don’t want to overtly go in there and start pitching your own products. It’s not going to work. It’s not going to go over well. And the people who are currently happy with that products are probably not going to take kindly to you going in there and kind of pitching your own products. I would answer questions but I don’t necessarily think that I would say, “Why don’t you try this to solve your particular problem instead of trying to work within that competitors’ solution?” Another option would be to go over to core and see if there are people asking about what types of alternatives there are for specific products. So, if let’s say somebody is using unbalancing, go over to core and start looking around for people who are talking about unbalance and looking, actively looking for people who have offerings that are in an adjacent market or a competitors’ to unbalance because they’re looking to switch. They’ve already kind of made up their mind and they want to move away. Another thing that you can do is you can use SEOs. So, if you have a specific webpage you set up on your website where you talked about those other competitors and present them directly as competitors to your own products, you can essentially create your own story about those things. So, those are a couple of different things that I would think about in terms of ways to get in front of those people and then depending on what your personality is and how much time you have to go about that and the type of products you have, it may makes more sense to do one versus the other.
The last thing I can think of that you might want to do is offer what’s called a competitive upgrade. So if somebody already has the competitors’ products, you can offer them discounts for essentially turning in that products and switching over to yours and you could offer like onboarding [?] services and move to your data over and all kinds of different things. But again, that can be more of an enticement than something that actively convinces them to switch products.
Rob [11:30]: There are two services I know that actually crawl websites and they can actually figure out what stuff is Built With. The first one is called builtwith.com and these are both SAS subscriptions and they’re not cheap but builtwith.com is the service that I know that several of the kind of outbound legion guys use and they’ll say, “Well, my competitor is X, Y, and Z and it’ll give you a list.” Now, Built With crawls certain amount of websites every so often. The second competitor is more expensive but they crawl daily. So they cannot only tell you who’s using what, they can tell you someone started a trial of this yesterday, like they just installed the code. So it’s much more powerful but they are more expensive. That service is called Data Nyze, it’s data, N-Y-Z-E.com, both of those if you’re willing to put down the money are going to be good services to find out who’s using your competitors and for full disclosure, I am a small angel investor in Data Nyze but I have seen and used the interfaces for both of those tools. So thanks for the question Ryan.
Our next question is on validating a WordPress plugin before using and it’s from Dave Bush. He says, “Hey, guys” one of the things he mentioned on our recent episode was to avoid building before you validate a product idea. One of the things I still can’t get my head around is how to validate a WordPress plugin without actually building the free version first. There’s so many WordPress plugins out there, how can you get away with testing your idea for WordPress plugin without actually building an initial free offering?
Mike [12:54]: I think the misconception here is that in order to validate something, you have to go out and specifically talk to people or have a free version available. I think that there’s multiple ways to do can go about validation, and I think the bottom line is that validation is about gathering information and being relatively confident and what’s your analysis of the situation is. So, in this particular case, you sure getting a working prototype built and put it in out there and driving traffic to it and having people go through is going to give you that validation, but at the same time you can also get that validation by looking at what people are already doing today. So, instead of driving people to your own plugin and looking at those download numbers, take a look at the existing download numbers of other plugins that are doing similar things and measure those overtime and it should be fairly simple. You can go into wordpress.org, just take a look at the download numbers and it will tell you flat out like whether somebody’s downloads are increasing overtime or are they decreasing, when the last updates were, all that kind of information. And you can get a sense from that information alone as to whether or not it would be possible to put another plugin that offers similar functionality that it also going to get a some level of attraction from people who are looking for that type of plugin.
Now, it’s not an absolute guarantee but at the same time nothing is. I mean unless you have people giving you credit cards saying, “Hey, take my money,” that’s probably the next best thing that you can get without building something.
Rob [14:19]: I take it a step further. I think that is the initial validation. I would agree that I would poke around and look at what people are talking about, what the download numbers are; with a WordPress plugin, in my opinion, you can’t validate it until you’ve built that free version. WordPress is so much different from SAS and that with SAS you need some customers paying you a decent chunk of money and spending a lot of time validating that upfront is worth it because to build your SAS app might take you a year, I mean tremendous amount of time. It might take you more than that if you’re doing it part-time. Whereas with a WordPress plugin, you can build it yourself at nights and weekends in a month or two months, I mean you can build it full-time to get a kind of a prototype free version out there, probably in a lot less than that, you can hire developer. WordPress plugin developers don’t tend to be that expensive. WordPress plugins are not that complex to maintain. You don’t have to get servers up and running and do dev up stuff and there’s just all the stuff that makes is so much simpler to validate that after I did some initial look at numbers and other downloads, if I knew it was for a specific niche mark and then I knew that it fixed a problem for them, yes, I would reach out to some people I know in that market. But to do cold calling and do the interviewing and the other stuff that you would consider doing if you’re going to do customer development for a SAS app, I don’t think it’s worth it because the WordPress plugins that I see are making in volume, right. They’re doing $20 for a one-time thing or $40 or $50 for a one-time thing.
So going and trying to find 10 people who are willing to pay you for that, I question if you shouldn’t just go and build the thing, get it out there fast. And now, if you’re trying to build some super exotic that WordPress plugin is going to sell for $1,000 license, then yes. Now we’re talking about enough of a lifetime value where it’s worth really doing a bunch of upfront research. But if you’re sitting there, trying to think about how to validate something that you’re going to sell for 30 bucks one-time, I would say just go do it like go build the thing, go hire somebody to build the thing. Get it in the store, you’re going to learn so much by doing that and it’s really not that big of a risk compared to actually building a full-fledged app.
Mike [16:17]: And I think that’s the key point here which is the risk versus reward versus the investment that you’re taking and if it doesn’t take you very long to do it, you may as well just do it. I mean if you were going to build a plugin that literally only took you two or three days to build, would you go out and do the customer development? And the answer is no, why not? And the answer because, well, it’s going to take you more than two or three days to do the customer development. You may as well just build it and see if you can sell it at that point because your investment is so incredibly small.
Rob [16:42]: Right. I feel like this ties in to Dan Norris’s idea of the 7-day startup of if it’s going to take you less than 7 days to build the thing, then just go build it. I would say seven days collectively like if you would work let’s say 10-12 hours a day for 7 days, so what is that? Maybe 80 hours, if you can build it in less than that, even if you don’t have the 7 days and you have to do it 80 hours nights and weekends for the next month or two, I’d be more of the might get the code out there and will validate. So I appreciate the question, and I hope that helps.
Our next email is actually not a question, it’s some advice on hiring a CTO, it’s an audio recording and it’s from Ben Cole. And he says, “Hi guys. You briefly touched on hiring a CTO to help find and manage a development team in episode 242. I’ve had some experience in this base and a particular quick audio response with some tips for your listeners.
Ben Cull [17:28]: Hi, guys. First of all, I just want to say thanks for such a great show. I can’t wait for each new episode and you really got me hooked. Thanks for all the great info. I just wanted to talk about a topic that came up recently about CTOs for hire. Now, I’ve been in this position myself a couple of times recently and I think I’ve got some great advice for your listeners. My name is Ben Cull. I’m a senior .NET consultant for a company called SSW in Australia. And first of all, what you going to want to do is to find yourself a senior developer. Try and get them in as early as possible and get them into the meetings with your potential development teams because they’re going to ask the right questions and know what kind of team is going to work for you. Second of all, find a CTO that understands process because about two-thirds of what you’re going to be doing is ensuring the process is going smoothly. Now personally, in SSW, we use the scrum methodology but you don’t have to be that formal. My advice is just to ship small, ship often, and ship all the way to production. It really forces you to get your process together by even shipping your very first feature even if it’s a registration page. Ship it to production and you’ll understand that you need all the environments, and all the automation to get things running smoothly.
My next tip is to use video to describe your requirements. Now, as a product owner, you can get across way more information in the video than you can with just pictures and text. And on the flipside, get your developers to put together a video to demonstrate the functionality that they have just developed. This lets you give feedback a little easier and you can pick up on more of the problems quicker.
Finally, have retrospective meetings. This is probably the most important tip. And for people that don’t know a retrospective meeting is where you ask three questions; what went well, what didn’t go so well, and what can we improve. Now, you include the development team, the CTO, and the product owner in this and you’ll come up with things like, what went well. We had meetings at 10:00 AM instead of 8:00 AM because everyone has had their coffee and they’re raring to go. What didn’t go so well was support tickets took a while to answer. What can be improved, well, I think that the moment database development is a bit tricky. Maybe we should have one person in charge of that. Let’s try that out this week.
These are just a few tips to managing your remote development team and hiring a CTO to help with that. If anyone has any questions, you can catch me on Twitter. My name is BenWhoLikesBeer. Cheers guys.
Rob [19:44]: So thanks a lot, Ben. Thank you for that, and hopefully that’s helpful for folks out there who are considering doing kind of that CTO approach where instead of managing a develop for yourself, if you’re looking for an intermediary because you might not have the technical experience to hire someone yourself.
Our next question is about conversion rates from a launch list to paying customers. It’s from [Percaush?]. And he says, “Hi Mike and Rob. My question is about conversion rates. Is there a general conversion rate to keep in mind to translate from a beta signup list to a trial signup to paid subscriber. Put differently, how many in a range of beta signups lead to one paying customer?” Here are two additional pieces of information in case they matter. Number one, these beta signups are coming from a landing page and not necessarily from friends and a network so they are not well qualified. And number two, it’s a SAS product costing between $100 and $300 per year. Thanks in advance, you guys rock. So, this is a really hard question because having cold signups and trying to convert them to trials is hard enough but if you don’t have a product that someone wants to pay you for, meaning if you don’t have product market fit yet, then your trial signup to paid subscriber ratio is very likely to be somewhere within the approximation of zero, literally zero. I’ve seen people with launch list of 1,000 get one or two paying customers right out of the gate and then lose them within a month or two because they turn out. So, there is literally no number that I could throw on this that could give you an idea. Now, I can tell you that if you have a beta signup list of let’s say 1,000 people, if you mark it really well and you build anticipation and you’re sending them screenshots and the product looks good, and it solves the problem that they want, and you send a sequence of launch of emails instead of a single email, I think that you can get upwards of 30%-40% of your list to sign up for a trial. I think that’s your range. I think the low end is literally zero if you fumble a ball in all respects and if you did everything really well executed, I may even rich and say if you get 50% into a trial, but I think a reasonable performance is somewhere between about let’s say 20%-35% to trial. Then the number of trial folks who convert to paid and then who stick around, it’s all a bunch of other numbers, right? If you don’t have product market fit, then that number say from trial to paid, if you ask for credit card upfront is going to be between 10% and 20%, and if you do have product market fit, when you ask for credit card upfront, maybe it’s between 40% and 60%. If you haven’t asked for credit card upfront, then it’s going to be between 0% and 10% or 15% depending on if you have product market fit. Then insurance is going to kick in and you’re going to lose somewhere between 5% and 25% of your people per month depending on how well they like it, how much of a problem this solves for them.
So, that gives you an idea of how wide ranging these numbers can be, and if you multiply those numbers, those ranges that I gave you, it can give you literally anywhere from out of 1,000 people, it’s like anywhere from zero to several hundred paying customers. So, I think that’s the answer is not to try to think of what is the number that’s going to become paid. It’s the real question is how can you optimize every stage of this funnel and just wild up hands off of people so that they really want to stick around to the next page especially if you have a new product be listening to what their requesting so that you can actually build something people want because that’s the goal with this launch, right? Is to get to the point where you have something people want so that you can then continue on from here and scale it up. Thanks for the question Percaush, that was helpful.
Our next question is from David Sandbrand. And he says, “Hey guys. In the context of your listeners, when is a startup no longer a startup?” So of course if someone stops pushing forward and essentially folds, that would count. But I’m wondering more on the side of success post launch. So is it the number of clients, is it time since the launch, is it revenue based? I’d love to hear and extend the discussion on when is the startup no longer a startup? Is it Eric Ries’s or Steve Blank’s definition? Is it a startup is in search of a repeatable and scalable business model? And so once you’ve achieved that, then you become a – you’re not a startup anymore. So like HubSpot would not be startup right because they kind of raised funding when we need a product market fit, and then you figure out how to scale your marketing and sales, now you’re scaling and you’ve less startup, that’s a fair definition of it.
Mike [24:06]: Right. Yeah. I guess from my standpoint, it depends on how you classify yourself. I mean there’s different points of view that you can look at. It’s like, is your business no longer a startup by your definition or by somebody else’s? And at the end of the day, I almost wonder like does it actually even matter? And I think in most cases they answered that as really no. I’ve almost feel like when company’s self-identify as startups, they’re hungrier. They do a lot more things and they’re much more aggressive about taking a different path as they go down. But once a business kind of stops referring to itself as a startup, then it’s much more of a mature company, double quotes around the mature part, but really they stop going after things hard because they don’t necessarily have to anymore, they get comfortable. And I wonder if to some extent, somebody might look at that and say, “Well, that’s no longer a startup.” And it could be very early on.
Rob [24:54]: Yeah. I think it’s an interesting question. I wonder if it really matters. I guess I’ve never been at the point where I have not thought of myself as a startup, so I guess the companies I’ve worked at that sees being startups like you said become a little more maybe process-driven, they become bigger, they become – they’re trying to scale up. They’re not hungry. What’s a good word for it?
Mike [25:12]: Yeah, I mean I just remember when I was a pedestal and we were required, we had like 60 or 70 employees or something like that and we got acquired but to us, we were still a startup. We just raised like $8 million or something like that and then even before we got a chance to really start spending it, we got acquired. So, I don’t know.
Rob [25:29]: Yeah. I think the lean startup, or I don’t remember from Steve Blank’s definition or link startup where they say it’s a scalable, repeatable business model where it’s a company in search of a scalable, repeatable, business model. I like that definition in terms of summarizing what a startup is but I think in terms of what David is asking about, I think I would go beyond that because as soon as you find that scalable, repeatable business model, then you have to execute. You have to find hungry people. You have to motivate yourself and them, and in my opinion, you’re still a startup there. You are scaling revenue up but you can find that business model and only have 10 grand a month in revenue and I think you’re still a startup at that point because you’re still kind of clawing your way forward. So I think there’s a certain point where I don’t know, I don’t think it is just headcount. I don’t think it is just clients. I definitely don’t think it’s time since launch because that’s going to depend why learn if you built something people want. I definitely think that it’s way pass product market fit. It’s like product market fit, then scaling things up and I think for me personally, I would call something not a startup when there’s so much process in place and such a headcount that it’s now feels like kind of a big company. And even for me like working, I worked at a company that when it hit 100 employees, it felt like a big company because I’m not a fan of organizations that big. And so that was when I was kind of like I started thinking about taking my exit because it really didn’t feel like a startup any longer, but I think that certain companies could still feel like hungry startups even with more employees than that.
Mike [26:53]: Yeah. I mean I’ve been looking at over at the leanstartups.com right now and the quote that I think that you might have been referring to was that Eric Ries said that, “A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.” And I think that last part right there is really the key, it’s like “extreme uncertainty”. So, if you haven’t fit product market fit yet, then you’re probably still a startup and you should still be classifying yourself as a startup because you’re still hungry, you’re still trying to figure things out. And because you don’t have it figured out yet or you got that uncertainty, you need to keep going. You need to keep moving forward because you don’t know specifically what is going to work for you moving forward and what’s not. But once you figure that out, yes, you can be radically hit the product market and continue to grow, but once that I think starts the level out or once you’ve got it figured out, maybe you’re no longer a startup at that point.
Rob [27:42]: The quote I was actually referring to is Steve Blank’s quote from January 2010 on his blog, and he says, “In this post, we’re going to offer a new definition of why startups exist. A startup is an organization formed to search for repeatable and scalable business model.”
Mike [27:57]: Yeah. Tough question though.
Rob [27:57]: I agree. It’s a good one to think about. Thanks for tossing that to us, David. All right. We’re going to wrap up with one final question and it’s about client work versus the uncertainty of working on your own product, and this is from Joe Robinson of greenflagdigital.com. He says, “Hey guys. Have you seen any research or discussion topics about how when working for clients, your brain just clicks and does the work, but when you’re trying to work on your own products, there’s often too much resistance to fight through. Does this mean that fear of a client dropping you is way more than an incentivizer than the vague idea of success on your own product?
Mike [28:32]: I haven’t seen any specific research on that part of it, but I think I can talk generally around the kind of the concept of working on your own product versus working on something that somebody else is paying you to do. So, if you were working on a project that you’re getting paid to do, there is a very concrete and definable ROY on that time versus working on something of your own where you don’t get that. You don’t necessarily know if things are going to work out. So, it can be demoralizing to look at two different sets of task, one of them which you may or may not get paid at the end of the day versus one of them where you know you’re going to get $125 an hour. Most of us are going to gravitate towards that one that pays us $125 an hour unless we absolutely hate it and we will do anything to get out of staying on that treadmill and we will work on the other stuff on the side in the hopes that it will turn into something that gets us off of that treadmill. The other thing that I think comes into play really heavily is the fact that when you’re working on your own stuff, you don’t necessarily know what you have to do. There are a million and one things that you could be doing and you’re not quite sure if any of them has the right one to do. So, with client work, you know what you have to do and you know what you have to get done because the clients already told you or they’ve given you a problem and you have to solve that problem. You’re working towards kind of a known goal. But with your own products, yes, you have to build the products but at the same time, there’s all these other things going on with SEO and marketing, and code, and process, and SSL [?] and all these other stuff that’s kind of thrown in your way, that’s really hard to kind of sort out sometimes. So, you don’t know which you should be doing first. You don’t know what problems you should be prioritizing over others. And it makes it that much more difficult because you don’t necessarily have the experience to deal with any of them either because theoretically, you’re probably in a position where you haven’t really launched very many products of your own. You’ve launched them for other people but those people have kind of set the timelines and deadlines and things like that versus your own where it’s kind of on your own time, you’ve got a million different options and you’re essentially in a position where you have so many options, you don’t know what to do.
Rob [30:37]: Yeah. And for me, I think the latter one has a lot more impact. I think both of them are valid reasons but I think the indecision and the analysis paralysis of your own product, and not knowing what to work on next is what keeps a lot of people from working on their product, and also feeling like maybe their throwing their time away. But the fact that a client basically typically tells you what feature to build next or at least you can ask them and they have to make the decision, that makes it a lot easier because then you can go in, you can design, you can write some code. Whereas if you have to decide what you’re doing next, and that’s always a hard point. That’s always a sticking point in your schedule is any time you have to make a tough decision.
Mike [31:15]: I think some of that also comes down to the ability to self-regulate as well and I think that some people are more inclined to do that from a younger age than other people. There are specific studies that I’ve seen are about little kids who were given us option of getting a candy bar now or getting two candy bars if they wait, and it’s about that delayed gratification and whether or not they can handle it and I think that there are certain people who are predisposed to taking that instant gratification versus looking much longer term and being able to go down that road instead. It’s not saying that you can’t fight it and go against it, but I think there is a certain amount of predisposition of one towards the other.
Rob [31:51]: We appreciate the question, Joe.
Mike [31:52]: Well, I think that wraps that up for today. If you have a question for us, you can call it into our voicemail number at 888-801-9690 or you can email that to 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 for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
