Episodes

Startups For the Rest of Us

Episode 225 | How to Run a Paid Advertising Campaign

Play Episode Pause Episode

Mute/Unmute Episode Rewind 10 Seconds 1x Fast Forward 30 seconds

00:00 /

Apple Podcasts Google Podcasts Spotify Stitcher

RSS Feed

Share

Link

Embed

Show Notes

Transcript

[00:00] Mike: In this episode of Startups For The Rest Of Us, Rob and I are going to be talking about how to run a paid advertising campaign. This is Startups For The Rest Of Us, episode 225.

[00:07] Music

[00:15] Mike: Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products. Whether you’re launching your first product, or you’re just thinking about it. I’m Mike.

[00:23] Rob: And I’m Rob.

[00:24] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?

[00:27] Rob: We had a nice tip from Josh Ayernov, and it’s about using Todoist, and email. This ties into a discussion you and I have had a few times, where I mentioned that I would love to be able to, basically, reorder my Gmail email, and make it a “to do” list. And he says, “Hey guys. Love the show. I’ve been using Todoist lately, and they have a Chrome extension, which lets you add a task from email, and append the email to the task as a url that goes back to that email. So if I have an email I need to respond to – that I need to postpone – I can just make a task, and click on it. So it essentially integrates the two. I figure if anyone is using Todoist, this would be a good tip, and if you’re interested in, kind of, being able to reorder your Gmail inbox, it could also be helpful.”

[01:08] Mike: That sounds really cool. It sounds very similar to what you’re, kind of, doing manually right now, with Trello, where you, kind of, send things over –

[01:13] Rob: Exactly. Forward it over, and then come back and search. Yup. Which is a little bit cumbersome – it works for me – but I can see, if I was not using Trello, I would consider using something like this. We had discussed the new EU VAT laws a couple of weeks ago, and Ryan Delk from GumRoad dropped me a link to an email. We’ll link it up in the show notes. It’s actually a blog post, and it says, “How we’re handling VAT at GumRoad.” The nice part is if you are using Gumroad, they basically handle it all for you, so you don’t have to worry about it. If you want to hear more about that, you can check it out in the show notes.

[01:41] Mike: Very cool. So this past week I went to a local photography studio, and had some new photos done. I took the time to update my social profiles – clean shaven, a little bit lighter, and no glasses.

[01:52] Rob: Yeah.

[01:53] Mike: It was like $130 for the sitting fee, and then $5 for each photo that I wanted. There were 10 that looked good, so I just grabbed 10, in different poses and outfits, and stuff like that.

[02:03] Rob: Yeah, every couple of years it’s nice to get a couple of head shots done. I’ve actually done it – the last couple of head shots I’ve gotten, one was when we did a big family photo shoot. We hired a photographer to come out to our property and do different location shootings here, indoors and outdoors. And I said, “Hey, can you just do a head shot while you’re here?” Then the other time was when I recorded that video course on how to hire a VA for your startup, which is startupvacourse.com. So, it’s nice to have a couple of different ones you can rotate.

[02:29] Mike: I figured I’d have something professionally done, that I can actually use in more of a professional manner.

[02:34] Rob: Right. So what are we talking about this week?

[02:36] Mike: Well, today we’re going to be talking about how to run a paid advertising campaign. But I don’t think we’ve ever actually done an episode on walking through what it is you should be doing, how do you compare different platforms, what sorts of things you should look at when you’re going through that, what things you should document. Things to pay attention to. Things to avoid. And I thought that what we should do is we should walk through a lot of those things so that people understand, kind of, the process that we go through, and learn from that, and maybe offer some insights back onto the comments of the podcast. Share the things that we’ve gone through, and what things we pay attention to because we thing they’re important.

[03:11] Rob: I think our intent is to make this, A, a little bit entertaining – so that you actually want to listen to it. And B, keep it high level enough that it’s something that is like “evergreen” content, so that you could come back to it in the future if you wanted. But it also gives you, like the mindset – if you’re going to start embarking on driving paid traffic – it gives you the mindset of how to, kind of, conceptualize all of this.

[03:31] Mike: So I think the first step in running a paid advertising campaign, is to know what your target cost of acquisition is. If you don’t know what your cost of acquisition is, you kind of need to guess what it is that you’re going to aim for, and use that as a guideline. Because when you start advertising on these different platforms, the cost of acquisition is going to vary dramatically between the different platforms. So, know what your target is, before you even start running the advertisements.

[03:57] Rob: I’m going to give you a couple of rules of thumb about how I would calculate – or ballpark – what I would use for my cost to acquire a customer. The first I’d start with is to figure out what is the average lifetime value of a customer. I’ll throw out three scenarios. One is that you have a one-time purchase product. Let’s say you have an ebook, or you have a WordPress plugin, or some downloadable software you charge “X” dollars one time for it. Now, some people may buy that, and then buy other things from you, but if you don’t have a bunch of data – that are easily at your fingertips – I would just ballpark it, and say, “My lifetime value is going to tend to be just the dollar amount someone would pay me for that.” Right? So if I sell four different pieces of software, for $40 each, I would say the lifetime value is going to be $40. Because I’m going to just say – unless I know for a fact “X” amount of people go and buy multiple items – I’m going to say, “My one-time purchase is $40.” And I’m going to start with that. If you have an e-commerce web site, I would just look at my average order value. Again, if you have the data, and you can go and say,

[04:55] “Well, this many people re-order, on average.” And if you can calculate it, that’s fine. But if I was going to ballpark it, what is your average order value. And if you’re a subscription service – so let’s say your SAAS, or your membership web site – I would tend to ball park – membership web sites tend to between four and six month, lifetime. So you can – to be on the low side – you might want to say, “Hey. It’s four times my monthly fee.” And SAAS tends to be between five and ten, until you’ve really hit product market fit. So again, if you want to be on the low side, and be more conservative, you can say five, and ten is not unrealistic for a reasonable service. So once you have that number – and if you’re selling a $19 ebook, then your lifetime value is $19. And if you have a SAAS app that’s $30/month, then maybe it’s $300 for that lifetime value. In general, you want to turn a profit, right? You don’t want to break even unless you have a back-end. And so, if I was going to be trying to scale up a SAAS app eventually, I would probably say, “To acquire a customer, I don’t want to spend any more than one-third of my lifetime value. And if I was going to try to acquire someone for a one-time purchase, you know, maybe you could creep up to 50% or 60%. But you don’t want to 80% or 90%, because then your profit margin is really, really low – unless you are trying to build that list and sell more things down the line. That’s a quick summary. There’s obviously a very large topic, to figure out what your target cost per acquisition should be. But that’s how I think about it conceptually.

[06:17] Mike: Yeah. I mean, you want your cost of acquisition to be as low as possible, but still at a point where you’re going to be able to make money. I think the other point to drive home here is, just because you have a target cost of acquisition doesn’t mean that over time you’re not going to be able to reduce that by optimizing some of your different ads. Because when you first start out, you don’t know what you’re doing. And that’s part of why you’re testing some of these different platforms and strategies. And when you do that, over time you will naturally get better at it. Or, at least, hopefully you will get better at it. Sometimes the platform makes changes, and they basically screw you over. Or there’s a lot of competition that comes in, and there’s really not a lot that you can do about it at that point. Your long-term goal is to get better at it, and thus drive your own cost down.

[06:58] Rob: Yup. The rule of thumb I use is, if I run ads and send them to a landing page, and do what I’m trying to do, and I can get within 3X of my target cost for acquisition, then I continue, right? Then I try split-testing, and optimizing ads, and doing other things. So that means if I can pay $50 to acquire a customer, and the first time I run an un-optimized campaign, it’s $150 or less, then I’m within target. But if I run it, and it’s $500 to acquire – meaning it’s 10X, it’s obviously possible that you could optimize into that, but that’s where I tend to just back out and say, “Boy, this channel is not going to work for me.”

[07:36] And I think this actually begs the question of like, “Well, what type of lifetime value do you need, in order to be able to support paid acquisition?” And it depends – B2C, B2B, and all of that stuff – but, in general, what I’ve seen is I don’t know anyone who’s making paid acquisition work, profitably, that doesn’t have a lifetime value of around $100. And so, if you are selling a $20 or $30 ebook, that’s hard. If it’s out of an ecosystem, you know? If it’s not a loss leader. If you’re actually trying to turn a profit on it, it’s pretty tough with a $20 or $30 lifetime value. There are exceptions. Patrick McKenzie with “Bingo Card Creator” has done it. He’s also very, very good, and he’s spent a lot of time – he’s one of the best people at AdWords that I know. If you are in a niche where the clicks are at all expensive, then you are going to be paying, easily, $100 or more to get someone to come and try your app, or turn into a customer. And so that’s where low lifetime value stuff doesn’t tend to be ideal for paid advertising. And you need to look at things more like SEO, content marketing by rally or word-of-mouth – kind of, the other marketing approaches.

[08:41] Mike: So once you know what your target customer acquisition cost is, you have to start identifying the platforms you’re going to use. And there’s a lot of different platforms out there, and it also depends on the specifics of whether you’re going after desktop users or mobile users. But, you know, there’s also like the standard ones that, kind of, cross into both mobile and desktop – like Twitter, Facebook, AdWords, Buy-Sell Ads, and a number of other ones. I mean, Rob, I’m sure there’s a list that you have taken a look at, and have leveraged as well.

[09:11] Rob: Yeah. Boy, I had a list that was like a mile long, when I was really hammering on this stuff with Hittail. And I ran on all types of crappy B2C networks. It’s like, there’s one called Chitika. To be honest, I don’t even remember the names of the other ones, because the ROI was so bad. I mean, I would pay $50 in ads, and you’d get all these 10 cent clicks, and no one would stay on your site more than three seconds. Like none of them. And so, instantly, that was just a non-starter, because I knew that if I spent $500 no one was going to stay on the site. There are a limited number of ad channels that you can think about if you are in the B2B space. You mentioned several of them. I would add LinkedIn. I would add AdWords, even though it’s very expensive – it can be expensive. The Bing ad network is reasonable. YouTube is actually something I’m doing right now, and I’m experimenting with. And then the other channel is re-targeting, which kind of spreads across all of these channels. But re-targeting is, while different from what we’re talking about – we’re talking about driving brand new traffic right now – but re-targeting is something I would want to have in place before I ran these paid ads. Because re-targeting gives you the chance to then advertise to them again, and your conversion rate on those is going to be a lot better.

[10:22] Mike: Yeah, that’s a good point. But the one thing you do have to be careful about with re-targeting is sometimes they have policies around, you have to have a product that people can reasonably buy. And sometimes if you’re sending people directly to a landing page, so you can’t buy from there, sometimes they get a little antsy about even allowing you to use their re-targeting capabilities on landing pages.

[10:43] So the next step is to run a series of tests on each platform for a specified amount of time. I’m partial to basically setting aside $100 and running the test for a week. And that’s a very small test. I understand that it’s probably not going to be representative, but at least it, kind of, dips your toes into the water. It gets you, at least a little bit comfortable, with how that platform operates – what things you need to make those things work. You know, there are certain platforms, like Twitter and Facebook, you can put images into those advertisements. But when you’re doing that, the requirements for those images are different sizes. And they will appear differently to the users, based on whether or not it’s showing up on the desktop or on a mobile device. You have to play around with those things a little bit. And when you’re first setting these things up, it can take way more time than you ever thought imaginable to like just tweak your images, and stuff like that, to get them to show up inside the advertising platform. So it can be, kind of, nightmarish process – in terms of the amount of time that it takes – but you do still have to go through that process to figure out, what is it you need to do? And then be able to take those things, and write them down, and say, “These are the requirements for this particular network.” And then hand them off to a graphic designer. Once you get through this, if you decide to double-down on a platform, you can then take those requirements, hand them off to somebody, and say, “Hey, I need you to build me images that go with this, this and this. And these are the different sizes.” It allows you to repeat the process in a way that is a lot more effective in terms of your time, as opposed to the first time where you’re just trying to figure things out. You’re trying to get familiar with it, get comfortable enough to be a little bit dangerous. And then from there you need to start optimizing. But from there you don’t want to go through the process of trying to optimize before you even get started.

[12:27] Rob: I second your surprise at how long it takes to set these things up. Every time I do paid acquisition I think, “I’m just going to go in, by a few ads, set up a budget, and be out.” And it’s always hours later, because I wind up finding images, and crafting headlines, and running all the split tests, and doing all of that type of stuff. So give more time to this than you think you’re going to need. There’s not a shortcut, like any other marketing approach.

[12:53] Mike: Yeah, like three or four times as much time as you think you need.

[12:56] Rob: Yup. Exactly. The other thing I would do – probably before I ran a test, if you haven’t done much paid acquisition – is to pick a single channel, pick one of these. And I would educate myself. I would dive deep into it. I would probably buy a course, either on Mixergy Premium, or Udemy, or from AppSumo. I have taken courses on all of those. There are some really nice experts who give you some good insight on how to work the system. Or you can even find an expert on it. So like Amy Porterfield, is an example, is a Facebook ads expert. So I bought a course from her on how to improve my Facebook ads. Or if you find a good blog, or a good podcast, on the topic, typically they are monetizing that by selling a paid course on whatever topic you want – Twitter ads, of AdWords. That’s what I would do, and that’s what I have done. So when I started really doubling down on Facebook ads with Hittail, I bought like four or five Kindle books. I listened to several podcasts, and I bought some paid video courses. And I went through all of the material quickly.

[13:55] I didn’t spend weeks doing it. I mean, I did this all in, like, one day. I skimmed through the books. I tried to find out the things that people were saying in common, and the differences. And you can find yourself almost becoming an expert by proxy, if you just immerse yourself quickly, and give yourself like an instant PhD in that technology, just by hearing a bunch of stuff. Then you go and use all of the best practices that you’ve developed, and then you hammer on a test. Now, you said do a small test, $100 in a week. I tend to want to move faster than that, and I will throw more money at it. I might budget $100 a day, and sit there and watch it. Because I want to know quickly if this is going to work or not. And if I get four or five days into it, and I’ve spent a decent amount of money, I can start to tell where the trend line is going. When I’ve made paid acquisition work in the past, it typically is an investment of a couple thousand dollars before I’m starting to become confident in my ability to execute on it. And sometimes it’s more than that. But that’s, in my head, kind of a mental marker that I use of like, “Yeah, I might get a few grand into this before I really know if it’s going to work.”

[14:58] Mike: Got it. Yeah, see, I run them, kind of, in parallel at the same time, on multiple channels. Maybe at some point I would get a little bit more confident and, say, dump $100 today into like three, four, or five different channels at the same time. But I also found that trying to flip back and forth between the different ones, and keep track of which ones were performing, and which ones weren’t. You could easily rack up a pretty hefty advertising bill, in just inside of a week, if you’re paying $100 a day on five different channels.

[15:25] Rob: That’s the thing. I only test one channel at a time, because I need to be an expert on it. Like, I can’t become an expert on five channels, and then try to run them parallel, or else I’m running around like a chicken with no head. When I do a channel, I immerse, I focus on that channel for maybe a solid week. And I don’t really do anything else, except for – I mean, I do my other projects and stuff – but I don’t try to scatter myself. Then if that channel doesn’t work, I can move on to the next one. If it does work, then you can start trying to figure out that repeatable process of, “How am I going to run this long term?” Because I’m not going to spend 20 hours a week on this every week, even though this week, getting it set up and monitoring every – I mean, I would literally monitor it every couple of hours. Like, log in, look at it, see what it’s going to do, stop ads, start new ones. You know, I was really into it. Again, I’m not saying this is the only way to do it. This is how I do it. I like to dive into things anyways, and be pretty intense about them, and find out very quickly if it’s going work or not, rather than taking a more hands-off approach that I think you’re talking about.

[16:20] Mike: Yeah. I think it’s interesting that you have a different approach to it than I did. Where what I did was, as I said, I would run several of them in parallel, and then after that week I’d basically look at that channel I thought was performing the best, and essentially double-down on that one, and optimize it. So I ran through an ad, and I compared Twitter against Facebook ads, and found out that Twitter was performing about four times better than Facebook was. And then I went in, and I optimized the Twitter campaign, and I essentially doubled conversion rate on the Twitter campaign. So at the end of the day I basically made eight times better than what I was getting on Facebook. Clearly, there’s different ways of doing it. I think it depends on how much time you have to play with, and how much your budget it, and how quickly you want to move forward with the paid advertising.

[17:04] Rob: Yeah. That’s a good point. There was a point where I ran through, I think, about twelve ad networks, in the span of maybe three or four weeks. Which means I obviously did do some of them in parallel. And what I did was, the bigger ones that had more information about them, and that I just had more confidence that they would work. Those were the ones that I dove into, and I only did those one at a time. Right? So that was like AdWords and Facebook. Whereas the ones – like the B2C ones I was talking about, 7-click and Chitika, and these kind of weird things, and Bing ads – I would set them up and let them run in parallel. Because it’s not like there’s a way to become a master at those. You just, kind of, had to throw it out and see what was going to happen. So I did do more parallel stuff with the things I didn’t think were going to work as well.

[17:48] Mike: Yeah. That totally makes sense. So the next step in this process is to document everything that you’re doing, so that you’re able to refer back to it later. I use a combination of things like screenshots, and spreadsheets, and Google Docs – pretty much anything that I need to be able to come back and recreate it, or ask questions in the future. I do that for a couple of reasons. Partly, is just so I can acquire information, and set it to the side so it acts as a true snapshot, and partly because I don’t necessarily trust the platforms to not change underneath me. So if I need to find something later on, I can do it. And some of them actually make it very difficult to go in and tweak some of your settings. I remember back when Facebook was still making a ton of changes to their advertising network. There were things that would just break every other day. So, I kind of learned quickly to just take screen shots, and make it so that you could go back and do it again. That’s not to say that you need to document everything heavily. Just make sure that you’re taking screen shots, so that if you take a screenshot of like the demographic information that you’re going to be targeting for one advertising network, it’s a lot easier to just go refer to the screenshot, than it is to go there, log in, and the try to compare it to another network that you’re trying to advertise on.

[18:59] Rob: Yeah, I haven’t done a good job at this step of documenting things.   I typically leave it in the system where it’s in. You know, if it’s in the Facebook ads system, I’ll refer back to it, and go and try to look for trends. And I’ll graph stuff, and I do review the data, and see who’s clicking, and optimize and stuff. But I don’t think that I have a single, external doc that documents anything, that is shared with anyone. Because I’ve pretty much done most of the ads stuff myself. Now, with that said, if I was going to be outsourcing this, or even having someone in my team do it, we would need some kind of a way to communicate and document the tests we were running, so that we could share our findings, right? There’s this concept of a “growth spring”, and it’s similar to the “coding sprints” with SCRUM. It’s like a one to two week, or it can be a 30 to 90 day, thing of trying to grow your company by using a single tactic. And so if you do a growth spring with Facebook Ads – however long that takes – you really want to document the experiments you’re running, and what you’re learning from them, so that you can share them with others. To date, like I said, I have not been very good at this, and I’ve kept it all in my head. So if I was going to pass it on to someone else, I would have a bit of documentation to do beforehand.

[20:09] Mike: Well, I think that also, kind of, goes back to the difference between how you have done it, and how I’ve done it. Whereas you do that really hard, deep dive into one advertising network, where I’ll step back and do things a lot slower, and compare the networks against each other. In that case, I kind of need those screenshots in order to make it easier for me to be able to compare between the two. Versus, if you’re kind of going deep in one particular network, it’s not as important, because you’re tweaking within that network, and you typically have all the information right there at your fingertips, and you can just look at it. It depends on how much you think you need to document some of that stuff, too.

[20:46] The other thing I like to do is compare the results from one platform against each other. And I think that the best way to do this is to make sure that your advertising is as similar between the different platforms as possible. But do keep in mind that there are going to be differences between advertising on LinkedIn versus on Facebook and on Twitter – partially because of intent, but partially because of the audience as well. So you might say one thing to the people in LinkedIn, and something different to the people on Twitter. And another thing I like to do – as I said before, comparing against like Twitter and Facebook – double-down on what’s working, or try to optimize it. I found that on Twitter I was able to do four times as well as Facebook right out of the gate. And I found that using the Twitter cards, for example, I could essentially double my conversion rate, by essentially eliminating steps by forcing people to click on the advertisement, and then go over to a landing page, and then enter their information. With the Twitter cards it’s literally one click. They can just click a button that says, “Learn more, and send my information over to Mike Taber for what he’s working on.” And I’ve found that by getting rid of those extra steps, it doubles my conversion rate on that.

[21:55] Rob: Yeah. The thing to keep in mind when you’re doing paid acquisition is that it’s a lot harder than you think it is. You don’t just set up and ad, and instantly have positive ROI. It takes work. It takes optimization. It takes comparison. I mean, we’re recording a whole episode here, and we’re barely touching the surface of the amount of, not only up-front optimization, but the ongoing work it takes to run an ongoing campaign. You know, because it adds burnout and that kind of stuff. So keep that in mind – as you’re embarking on this – that this is… The nice part about paid advertising is it’s very quick, right? It’s like instant ramp-up, instant ramp-down like a faucet you can turn on and off. And it scales really well, if you can make it work, because any of these channels that we’re talking about are pretty highly scalable. But the downside is that it often will not work for you. A lot of channels just won’t convert, and you will spend some money that you won’t get back, and you won’t have a positive ROI on that.

[22:49] Mike: So let’s talk about some general thoughts on paid advertising. One thing that you just mentioned was “ad burnout”. Why don’t you expand a little bit on that, on exactly what ad burnout is first.

[22:58] Rob: Sure. The idea is that ads have a certain lifetime, and over that lifetime you’ll see this gradual decay of click-through rates, and of results, because people basically get blindness to your ads. So if you use the same image for months at a time, over time that click-through rate will just naturally fall. So you can’t just – as a rule – post an ad, and expect it to work forever. There are some exceptions to this. AdWords is one where you don’t tend to need to renew your ads, because it’s intent-based, right? It’s search-based. So the people who are seeing it tend to be new people all the time, and that’s a good thing. If you’re on Facebook, and you’re targeting a demographic, then someone who’s interested in “email marketing” will see that same ad over and over, and over time – even if they’ve clicked it once – they’ll become blind. Your audience is so big, and you need to change it up. So that’s the idea. “Ad blindness”, “ad rot”, “ad burnout”, it’s all the same idea. It’s that the performance of your ads will decay over time.

[23:56] Mike: Going back to what I talked about, in terms of documenting things, one thing that I’ve seen is that the ad networks that I’ve worked with don’t tend to track what your conversion rate is over time. Because of ad burnout, you kind of have to do it yourself. Because all they do is they give you this raw number, and it’s within this snapshot of time, or it’s like the total amount of time that you’ve been running the ad, and it will just be a number. So, if you’re not paying attention to what that number is, yesterday, and the day before, and the week before that, then it can slowly drop over time, and you don’t notice. So that’s something else that you, kind of, have to keep in mind. As I said before, in terms of being able to drive people to a landing page, it’s very helpful. And if there’s any way to bypass that process, or shorten the entire time that it takes in order to acquire somebody’s email address, then that’s definitely an avenue that you should explore and look at. I mean, like I said, on Twitter I was able to double my conversion rate just by using the lead cards, as opposed to sending somebody to a landing page, and then they have to enter their information.

[24:59] Rob: Right, and Google AdWords has that same capability, where you can capture an email right there in the ad. I’ve never actually tried that, so I don’t know its effectiveness. But I imagine that if someone is interested, it’s a decent way to go.

[25:10] Mike: Another option you have is that if you have an email list already. So if you have an existing product – where you have customers, and you’ve got information about them, like their email address – then you can take those email addresses and upload them to some of these ad networks. What they use is something called “related audiences”. Essentially, what you do is – you’re going to be able to target people who are like that list of email addresses that you uploaded. I know that Facebook does this, Twitter does this. I don’t know if Google Ads does this or not, but –

[25:40] Rob: I don’t think it does.

[25:41] Mike:– what it does is it allows you to target other people, for advertising, who are like your current audience. And that’s extremely helpful.

[25:48] Rob: Yeah. So it’s similar to re-targeting, right? Where re-targeting, you are essentially targeting based on the action that somebody has taken – which is visiting your web site. In this case, you’re targeting a specific group because they are demographically similar to your audience – to people who have actually signed up for it. And “demographically similar” I’ll put in quotes, because that’s Facebook’s judgment call, right? They have these algorithms – so they have this social graph, where they can link people together and see similar folks. So it’s, kind of, a black box for you, but you get the recommendations based on that. I’ve used the “related audience” stuff on Facebook. I have not had luck with it, but I have heard that it is doing very well for some folks.

[26:32] Mike: It hasn’t worked nearly as well for me, but I do know some people who are making it work extremely well. Something else you can pay attention to is, any sort of related information you can get from the different advertising networks. So if you can get age, or location, or demographic, or platform information you can zero in on those particular things, and some of those are going to convert better for you. I haven’t figured out exactly why that is. So, for example, I’m running a Twitter advertising campaign right now, and the people who are using Android devices are converting more than twice as well as people who are using IOS devices, which is kind of bizarre.

[27:10] Rob: I’ve used this quite a bit, especially on Facebook. I found out that there was a certain age bracket that converted better. Absolutely. There are like 14 states in the U.S. that convert way, way better – like two or three times better than all of the other states. I didn’t notice anything with platforms, in particular, like you said. But you can get these out of the Facebook Ad platform, once someone clicks on stuff, once you run some ads, and then you can go back and see who clicked on it most, and narrow your demographics. Now this means you can’t scale this ad up, as well, because you are starting to exclude people. So you won’t get as much traffic, even once you ratchet your budget all the way up. But those will be your highest ROI clicks, and so early on that’s what you want to shoot for. Then later on, if you are exceeding your ROI, you can always dial those back a little bit. You can widen that age range, or you can go to those states that maybe don’t convert as well, when you’re really trying to scale it up and drive the maximum amount of traffic.

[28:02] Mike: So, another I’ve found is, do not trust the metrics that they’re giving you. You have to take anything that they’re telling you with a grain of salt. Especially when it comes to Facebook and Twitter, because they use what’s referred to as an “engagement”, which is not necessarily a conversion for you. The other issue that I’ve found is that their idea a lead, and yours, can be wildly different, depending on whether they’re counting it just based on a click, or all the way through your acquisition funnel to get an email address. Also whether or not they’re charging you for that lead, or not. There are some ads that can be shares, for example, and depending on whether or not it was showed to somebody – and then they clicked through it, and you were charged for it. Or if they shared it, and one of their friends clicked through and signed up for it – you might be charged for the first one and not the second one – and that skews your numbers. So be really, really careful about how you’re looking at a lot of those numbers. And make sure you fully understand exactly what you’re interested in. Whether it’s email addresses, or impressions, or actual sales all the way through the sales funnel. It really depends on why it is that you’re running these ads, as to the specifics of what you’re looking at.

[29:15] Rob: Yeah, I agree with this one. I’ve seen some folks touting the Facebook news feed ads, over the right-hand side ads – because you get more clicks, or the clicks are cheaper, I guess is what it is. And the click-through rate is higher. But if you actually look at what a click means for a news feed ad, it means someone clicking any link on that ad – and there’s like five or six links. So if you’re trying to drive them off site to your web site, half of those links – or more – don’t go to your web site. They go to like your Facebook page, or some other random place – completely not useful for you, and not going to contribute to your conversions. But they count that as a click, and you get charged for it. Then, on the right-hand side ads, any link there is actually going to lead off-site to your web site. So every click there is a real click to your web site. So like you said Mike, these things can be misleading, and I hope they’re not being intentionally misleading, but it has felt like that to me, at times, where the numbers don’t really add up because of the way they’re defining certain thinks, like clicks.

[30:14] Mike: It’s complicated because your perspective, as somebody who’s buying these ads, is going to be different than their perspective, as somebody who is creating the mechanism for you to run the advertisements. If any of the advertising platforms reach out to you, and offer any sort of a free one-on-one, to help you improve your advertising, definitely take them up on the offer. It gives you the ability to ask them in-depth questions about exactly how things work, and you can start questioning the numbers that you’re coming back with – or that they’re coming back with – and ask them, “Hey, what does this mean?” or, “I saw this, and these numbers don’t add up. Why do they not add up?” And you can start getting an in-depth description, or explanation – directly from them – about why some of those things don’t add up. Sometimes it’s very helpful, and sometimes you look at it – and they’ll look at it – and they’ll say, “Yeah, we know. We’ve heard that a number of times. This is how you can, sort of, get around it” So sometimes they do have work-arounds for you, but it’s always worth it to take the time to follow up on those things, and be able to get in front of them the questions directly, so you can get answers directly from the vendor.

[31:20] Rob: Yeah. I would agree with that. They seem like they might be a waste of time, but I agree. If there’s quirks in the system, these are the folks who know it, and these are the folks who can alert you to it. I did let Google, at one point – they wanted to like optimize one of my campaigns. So they copied it, and asked if they could create an optimized version based on their “best practices”. And this was three or four years ago, probably. It was an AdWords campaign, and I ran theirs along with mine, and theirs was awful. It was horrendous. It was spending a ton of money. The budget was high. It wasn’t getting many clicks. It wasn’t getting conversions. I eventually stopped it. And I don’t know what the story was, because I genuinely expected them to have the knowledge to be able to do this better, but the campaigns I had running were far superior to it. So, I think in terms of that – which is super-specific advice – I think, take it with a grain of salt. And if they do run or optimize a campaign for you, you just need to watch and compare, like anything else. But just in terms of meeting with them – like you said – and getting advice on the platform and all that, I think that’s a worthwhile hour you can spend on the phone with them.

[32:18] Rob: If you have a question for us, call our voice-mail number at 888-801-9690. Or email us at questions@startupsfortherestofus.com . Our theme music is an excerpt from “We’re Out of Control” by Moot, used under creative commons. Subscribe to us in iTunes, by searching for “startups”, and visit www.startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.

Startups For the Rest of Us

Episode 224 | Should a Non-Technical Founder Learn to Code?

Play Episode Pause Episode

Mute/Unmute Episode Rewind 10 Seconds 1x Fast Forward 30 seconds

00:00 /

Apple Podcasts Google Podcasts Spotify Stitcher

RSS Feed

Share

Link

Embed

Show Notes

Transcript

[00:00] Rob: In this episode Startups for the Rest of Us, Mike and I asked the question. Should a non-technical founder learn to code? This is Startups for the Rest of Us, episode 224.

[00:10] Music

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

[00:26] Mike: And I’m Mike.

[00:27] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So what’s for this week, sir?

[00:32] Mike: Well, we got an email from Aaron Weiner from Software Promotions. And he had a comment and sort of a clarification question about episode 223 where we had given some advice about when bootstrapper should start worrying about insurance and security and things like that. And he got a question what it was we were really trying to say when we talked about security because one of the things that I had said was that these companies have billions of dollars at their disposal. And they have large security teams. And if you’re being actively targeted, there’s absolutely nothing that you can do about it. His disagreement on that was that it sounded like I was saying that entrepreneurs shouldn’t spend any time on security.

[01:12] To clarify for everyone, the issue isn’t so much that you shouldn’t spend any time on security. But what I was saying was if you were being actively targeted. And so the difference between actively targeted and what I call more of a drive by is that if a hacker has a vendetta against you, there is absolutely nothing you can ever do that is going to stop him. So they can essentially go through your testimonials page, find out who your customers are, and then target them. Do DDOS attacks. Take down their servers and say, “Hey, if you don’t stop doing business with this person, I’m going to keep coming after you.”

[01:42] And it could very seriously and negatively affect your business. And they don’t even have to get your customer list. If they get your customer list and they have half of it or most of it, then you’re in serious trouble because then you’ll have very big PR problem to deal with. And they have the list of all your customers. They can go after them as well.

[01:58] But on the flip side of it, if it’s a matter where you have the ability to lock down your server and you’re not, those are the things that are more like targets of opportunities. So people who – I refer to them as script kiddies. They’re just writing the scripts against every IP address on the internet trying to see what it is that’s out there so that they can dig in and start pulling information out of those servers. And if you have a server out there that isn’t properly locked down or secured or there are cross-site scripting vulnerabilities in your code on your SaaS app, those are the types of things that they’re going to exploit. And it’s not because they don’t like you. It’s because they can. And so you do have to do the basics and the bare minimums just to make sure that those things are taken care of. But if they’re actively going after you, then you’ve got a really serious problem at your hands.

[02:41] Rob: It’s a judgment call. It’s like how much life insurance should you get? Well, you should get enough.

[02:46] Mike: All of it.

[02:47] Rob: You should get enough. Yeah. I mean there is a point of diminishing returns at a certain point. And I think that’s kind of how you have to handle it. You know how we answer a lot of questions with, “It depends.” This is a really it depends like it’s very heavily that your call, your risk tolerance, and how much you stand to lose. Thanks for the question, Aaron. I’m glad you wrote in to clarify that.

[03:07] So I want to announce the launch of my new podcast. It is called Zen Founder, and it’s myself and my wife. She’s a clinical psychologist. It’s at zenfounder.com. We have links there to get into iTunes and subscribe to email and such. We have four episodes live right now. One is called “Three Strategies for Staying Sane While Starting Up.” And then we have one all about retreats where we outlined how we’d structure our retreats because she’s kind of the one that got me started with annual retreats. We have one about procrastination. And then we actually interviewed Greg Baugues who did this talk at BOS about depression and developers.

[03:44] So kind of a gist of the whole podcast is like staying sane while starting up and it’s how to balance startup family and life. And so we plan to put out an episode every Wednesday morning. So if you like this show and you like the mental aspects of getting all this going, I think Zen Founder will be a good fit for you.

[04:04] Mike: Very cool. I’m looking forward to it. Something else related to MicroConf is that we’re in the process of looking for sponsors for MicroConf. So, if you’re interested in sponsoring MicroConf or if you know of somebody who is, feel free to drop us an email. You can send it to sponsors@microconf.com. We also have a pool of tickets set aside specifically for sponsors. Our expectation is that when people sponsor the event, they will be coming. And we do make tickets available for those sponsors. It’s not a huge pool of tickets, but there are some available for them. And so if you’re interested and weren’t able to get a ticket, you could also sponsor the conference and you’ll be able to get a ticket in that way.

[04:39] So when you’re sponsoring MicroConf, MicroConf sponsorship started about $1500 and they go about to about $6000 for the kind of top-tiered sponsorship. And depending on what level of sponsorship you sponsor the conference at, you get more tickets. So for example, the community sponsorship at $1500, you get one ticket with the master plan, the $6000 sponsorship that comes with four tickets. But one of the things that sponsoring MicroConf does for you is that it gives you additional publicity for the conference. We do call out our sponsors at the conference. We include information from the sponsors on the USB drives. We include information about the sponsors to the attendees. There are links back from the website over to the sponsors’ websites. And essentially, we will work with you to try and figure out what other ways we can be creative to help the sponsors get additional publicity and meet their goals from the sponsorship. So again that’s sponsors@microconf.com if anyone’s interested.

[05:34] Rob: So we’ve received a lot of feedback about the possibility of diving into more technical topics. And overall, it looks like there are a lot more downvotes than upvotes on doing that. But what’s interesting is the few upvotes have kind of said, “Yes, I’d like to hear more about technical topics.” But then they’ll say something that’s not really a technical topic. So it’s maybe the bare minimum you need to know about hosting a SaaS app or topics that are – I mean they’re semi-technical, but it’s not like digging into the nitty-gritty like a developer podcast would do.

So maybe we may want to look at doing one show where we kind of walk through because we’ve had several suggestions on some specifics of how to do that and to kind of make it non-technical founder friendly or at least just give it like a founder’s point of view, right? You don’t need to be at such detail to know everything about it, but as an example like I know that we use Honeybadger which is from Benjamin Curtis. And we use that with Drip and HitTail, and it shows us all of our errors.

[06:29] Now, I couldn’t show you every point of integration that we use or how Honeybadger gets our info, but I don’t think that’s what people need to know, right? I think people might just need to know, “Hey, if you’re going to be launching something, you have to have a way to capture your errors in a way that you can dig into them and then talk about at a perspective of here are a few services that do it rather than the nitty-gritty nuts and bolts to have to do it all.”

[06:50] So in today’s show, we’re going to be talking about whether a non-technical founder should learn to code. And this is actually spurred on by a question that I received via email from a friend of mine. And unfortunately, I didn’t get his permission in advance to use his name. So let’s just call him John for the sake of this. But he says, “I’ve got solid marketing chops, but there’s a part of me that wants to get in on the SaaS action. If I was going to get into software and wanted to bootstrap it, would it be worth learning to code myself? And if the answer is yes, where would I start?” So we seemed to have three questions going on here. The first is talking about starting a SaaS app at all. The second is, is it worth learning to code if I’m going to do that? And the third is where you would start if you were going to move forward with that.

[07:32] So let’s start off with the first topic here. John had asked, “I’ve got solid marketing chops, but there’s a part of me that wants to get in on the SaaS action.” And I have some thoughts on just that statement which isn’t even really part of his question. It’s kind of setting the stage. But it comes back to what we said a couple of episodes ago in episode 222 where we talked about the stair-step approach to launching products. I’m concerned with the idea of being a non-technical founder and jumping directly into launching SaaS. And I’m actually concerned about a technical founder doing it as well but for different reasons.

[08:05] So a technical founder is probably going to know how to build the SaaS, but they’re not going to know how to market it because marketing a SaaS app is more complicated than say marketing a WordPress plugin because it’s a multi-channel. It’s more expensive. It’s recurring. There’s a lot of complexity there. A non-technical founder may know how to market a SaaS app because they’re able to handle the multiple channels. They have that tool belt. But purely getting one built is maybe ten times more complicated. And be supporting it ongoing in terms of the hosting and the error stuff, all the stuff we’ve kind of talked about it already and scaling it for a non-technical founder is going to be a real challenge. So I think if you’re non-technical, you haven’t learned to code, or you’re considering, I wouldn’t try to jump to that third step just yet. And if you don’t know what I’m talking about, go back and listen to episode 222. It’s just two episodes weeks ago and we talked through kind of the progression that I think is best both for technical and non-technical aspiring software founders.

[09:01] Mike: I also think there’s a big difference between a SaaS app that’s simple versus one that is a lot more complicated. And I mean you’re kind of a prime example of this where you’ve got HitTail and Drip where HitTail is very – I don’t want to call it a simple app. But the concept behind it is the valuable proposition is very simple to explain. And the application itself has a lot less code than something like Drip does. There’s a very big difference between trying to sell something like HitTail versus trying to sell something like Drip where Drip has a lot more complexity to it not just in the application, but in all the marketing that goes behind it. And that makes it a lot more difficult to sell. And it’s not to say it’s not worth it or that it ultimately won’t be able to overcome those hurdles because obviously you’re making it work. But at the same time if you’re jumping right to that level 3 as you call it from episode 222 that makes it much more difficult to do that versus doing a much more simplistic SaaS app like HitTail. And I’ve actually heard a lot of people who are going after this very, very tiny niches where the only thing that the app does is keeps track of what people are doing. And I’ve done this and a half dozen other clones of that type of technology where all it does is send you an email every day. You reply to it, and it aggregates those things and then sends out an email as a team. And something like that is much more simplistic than something like Drip.

[10:21] Rob: Yeah. I think I’m torn on this one because even if you have a single feature kind of a simpler SaaS app, I guess if it doesn’t need to scale and it doesn’t have a lot of real time interactions with websites like a JavaScript you install because all those things just make it – they just make it so much harder. If you have a SaaS app let’s say helping someone edit an image or it’s helping someone build an invoice and it really is kind of a CRUD app, create, read, update, and delete. It’s just doing things in and out of a database and it’s not getting pounded by customer requests or API requests. Then it is simpler. And if it was only five pages inside plus settings or something, maybe, maybe you could convince me that if you have marketing chops and you know how to market it that you could start with that. But the problem is it’s hard to know until you’re in it how complex the app is going to need to be. It’s like there is this range of complexity and getting started in SaaS. And I think if you’re going to do it as a non-technical founder, you need to definitely start on the simpler side. But frankly, my recommendation would be even to start with one time sales. Get a WordPress plugin out there, Magento add-on. And start getting a couple of thousand bucks a month to kind of learn the ropes and learn how to support it and that kind of stuff first.

[11:33] Mike: The other thing just doing what you just recommended is that essentially what that does is it allows you to figure out what it is that people really want before you’re going through that process of building all of that stuff. I’m technical and my inclination would be to sit there and write the code and show it to somebody and say, “Is this what you want or do I need to tweak it a little bit,” versus someone who’s non-technical who has to do that first and kind of describe it and then take that and then translate into software. And you’re going to have to do it through an intermediary. And I think that that forces you to not only figure it out a little bit better, but also learn how to communicate it because you’re going to have to not only communicate it back to the person who’s explaining it to you, but then you’ll have to turn around and communicate it to the developer because they’re the ones who are building it. You’re going to become very good at that communication process.

[12:24] Rob: Right. And if you look at say building a WordPress plugin, I mean you could get a plugin built in a few weeks, maybe a month, that solves a pretty reasonable problem for a lot of people. There’s no chance you’re going to do that with a SaaS app. There’s a lot of low-hanging fruit that has been taken out of the SaaS market. Certainly, there are still small apps that you could launch and make a few bucks here and there. It’s not as easy as it was. I think that there’s more long-term sustainability moving into that more complex range of SaaS. I think the other thing we haven’t even brought up is human automation. Can you use human automation to do it temporarily? Meaning you’re a non-technical founder. Don’t go try to build any software. That’s the mistake that all the technical founders do. Don’t build anything. Find a pain point. Figure out how to solve it without writing a line of code. So you hire some VAs. You do it yourself manually. Instead of having a fancy SaaS interface, it’s all done with Excel spreadsheets over email. And can you do that via human automation for five paying clients? Figure out all the ins and outs of it. And then you know exactly what the software needs to do, and you can build it one piece at a time. And that makes it so much easier coming back to the translation process that you were talking about where you’re going to have to talk to a customer. Try to figure out what they need. Try to turn it into a requirement. Then try to communicate that to a developer when you’re not a developer. That’s a tough process to do. The odds of you getting that right the first time are almost nil. Whereas using human automation if you have some folks that are cranking up these reports and you’re getting feedback. You’re iterating on those reports very quickly because it’s just a different way to prepare the same report. That’s the kind of thing you can iterate on fast. And then you have so much more intimate knowledge that you can use to basically this is exactly what we’re trying to do. We’re trying to take this process and turn it into code.

[14:15] So then this brings us to the second part of Johns’ question. He says, “If I was going to get into software and I wanted to bootstrap it, would it be worth learning to code myself?”

[14:25] Mike: I think that generally speaking, trying to learn to code if you’re the non-technical person and you’ve got solid marketing chops is not necessarily the way that I would go about it. There is a little bit of a caveat to that. And I think that if you’re bootstrapping it, and again, this is the difference between bootstrapping and self-funding where self-funding you are funding the development of the products from previous things that you’ve done or from your own salary versus bootstrapping whereas you’re building it from scratch yourself. I think that if you’re going to do that and you’re going to bootstrap it, then you need to at least learn a little bit about coding. That’s not to say you need to learn a lot. You don’t need to necessarily build the entire application. But you’ll also need to be able to learn enough about how to code to be able to ask the right questions and to be able to see if somebody who’s working for you knows what they’re doing. And again, it’s a lot easier in most cases to read well-written code than it is to build it from scratch.

[15:21] And as a non-technical person coming in and you know the basics of code, if you can read their code and understand it and it makes sense, then that’s probably a really good sign especially if they’re putting in on all the comments. They’re following the processes and stuff that you’re putting in place. That will help you do that. So you do want to learn at least a little bit about code. Do you need to become an expert in it? Absolutely not. And again especially if you have those marketing chops that you’ve kind of said that you already have.

[15:50] Rob: Yeah. When I think about timelines for doing this from a standing stop how long would it take you to learn how to write software and be able to build a production X, where X — let’s say it’s a WordPress plugin or X is a SaaS app. And I think if you’ve never coded in your life that to learn enough PHP and server setup and the development environment, I mean there are so many concepts, HTML, even just all markup and CSS and that kind of stuff. I think that if you basically invested full time from a standing stop that maybe you could have a WordPress plugin out in three months.

[16:30] But I think it depends on your aptitude and how much you enjoy it. And I think it might take four or five months to get to the point where you release something reasonable that solves an actual pain point for people. Not just the Hello World thing or a minimal little WordPress plugin. But there are so many paradigms you have to get around. And if you’re trying to build a SaaS app, I can’t imagine it. You have to get something out in less than 9 to 12 months. And that’s really not doing much else. I’ve tried to do teach a few friends and colleagues how to code and train people from zero. And I always forget just how many things or how many steps there are that it’s not as simple as just learning a syntax. It’s not as simple as learning Excel where you could get in, you typed in some things in there. There are so many moving parts now with JavaScript and HTML and CSS and the actual back-end language and then learning the database. Remember those early days where you would kill six hours just trying to get your code to connect to a database. And it was some simple error. You have a semicolon instead of a colon. That kind of stuff doesn’t really happen anymore once you’ve been developing for years. But early on that’s like every day. So you lose entire days to these pretty simple things. I mean if you think about it that time frame like ask yourself. “Is that what I want to be doing for these next 3 to 12 months just to get to this point?”

[17:47] I think there are three types of people in terms of coding. There are people who hate it. There are people who do it, but they put up with it. I mean they don’t love it. And then there’s just the people who is their brain. It works exactly how their brain works. I’m in the latter group like I love writing codes. I actually get an endorphin rush from building a class and having the polymorphism work. And then the first times it appears on the screen, it rocks my world. You need to figure out which type of person you are because if you hate it, then you shouldn’t learn to code at all. If you can up with it, you should learn to code enough to be able to hire someone as you said. And if you love it, then it’s debatable, right? If you love it, should you put in the year to kind of get decent at it and the two to three years to become really, really good at it? Well, I don’t know. That’s a question you need to ask yourself in terms of where you want to go with your life.

[18:33] Mike: You know your comments about running into very simple things that take you six hours to figure out what the problem was. It brings me back to some of those where I did run into those problems. And running into those circumstances, they can be a huge, huge time sink and they are not productive at all. They actually make you start to hate what you’re doing.

[18:55] Rob: Yeah, a quick anecdote. I was teaching my son who’s eight now. But when he was seven, I wanted to start to teach him how to code. And so I was thinking he’s going to need to build games like mobile games like drag and drop and blah blah blah. And I had him start with codecademy.com. And it was basically some simple like HTML and CSS stuff that I was thinking this is going to be so boring and there were some Python as well. And the first time he did like print Hello World or What’s your Name. And then he replies with Hello, Your Name, it puts your name in there. I just thought he’d be really bored with it. But it totally fired off the endorphin. I could see it and he got really excited. And I found this kid is done for like he’s going to be a programmer because he loved just the whole mechanism. He was fascinated with the mechanism of how it worked. Whereas I showed that – when I was younger, I remember showing it to my mom as I was learning to code. And she just had really no interest in it like it just didn’t click with her mind. I think that’s to kind of illustrate what it’s like for people who don’t necessarily have an interest in code and those who it really works for.

[19:55] So I think to round this out, the third part of his question is if the answer is that I should learn to code where would I start. And the good part is there is this enormous push in the world today to teach people how to code. So that means there’s a lot of options out there for you. The answer I’m giving these days because I’m asked this question twice a week now. The answer I give these days is codecademy.com. It’s code and then cademy. It’s codecademy. That’s actually a different site. But codecademy.com is free. You can learn a ton of back-end web languages, HTML, CSS, JavaScript. And frankly, all things being equal, if you want to be in the web world especially if you’re thinking about maybe doing a WordPress plugin, I would start in codecademy. I would start with HTML and CSS, and then I would learn PHP. And I would kind of use this experience to figure out what type of person you are. You can move at your own pace. It’s free. It’s a nice ease into it. And there are several advantages of learning PHP versus something like maybe if you’re going to be a lifelong programmer and you’re going to build web apps and build startups, I’d say learn Ruby or Python. But if you’re kind of going to dabble in it and you want to learn just enough, I would lean towards encouraging people to do PHP. And there’s a number of reasons for that. The first is it’s pretty easy to learn like PHP is actually pretty simple language. It’s come a long way. I feel like Ruby and Python are there’s a bigger learning curve and there’s more technologies involved if you’re going to pick it up.

[21:19] Mike: I think there’s also lots more resources for PHP for people. But it seems like when you’re looking around and you’re trying to find just how do I write PHP, there are tons of examples all over the place. And anywhere you turn like if you have a particular question about PHP, there’s usually more than one way to do it. But there seems like there’s like one straightforward way to do it versus something like Ruby and Python where because they touch on a bunch of different technologies, the answer tends to depend a little bit on what it is that you’re trying to do. There’s a little bit more complexity to Ruby and Python just because of the fact that there are additional I’ll say abstract frameworks that you kind of have to keep in mind. There’s conventions that you have to keep in mind. And if you’re not the type of person who is going to look at that and look at it in a more abstract fashion, then PHP is going to be a lot more straightforward versus something like Ruby or Python. And it’s not to say anything about power or efficiency or anything like that. It’s if you’re coming at it from a strictly non-technical point of view. PHP is going to be more straightforward to understand because you don’t need to know anything about some abstract framework that’s going to be make assumptions about how stuff works.

[22:26] Rob: I think another advantage is that it powers WordPress, Drupla, Joomla, Magento. These are great plugin and theme ecosystems. And so if you do learn PHP, then you’ll know enough to be able to participate in those and be able to kind of hack some code there.

[22:43] Mike: Another advantage is that PHP developers can be found all over the world. And they tend to be a lot cheaper than Ruby or Python developers especially when you start trying to find experienced ones. And part of that is just the factor of PHP being around for so much longer.

[22:58] Rob: Yeah. You know it was a kind of a hobby language early on. It came up in kind of a different form. And so there’s a lot of introductory stuff that makes it easier to learn. If you’re going to go this route and you do want to learn how to do PHP and go kind of the plugin route and work your way up, like I said, I’d start with codecademy to figure out if this is something you want to do and take all the HTML, CSS, JavaScript, and PHP stuff. And then the site that I’ve heard and it’s actually recommended by Chris Lima, which tells me that it’s good. It’s a paid for site and it’s pippinsplugins.com. And I’ve heard him from several of the WordPress folks that I know that Pippin knows what he’s talking about. And he has several production plugins in the store and he just has a great kind of framework idea and it’s super cheap to get into this. It’s a monthly fee of under $10 a month. So it’s a no-brainer. So specifically, once you have a kind of some basic PHP knowledge to dive into it, it’s specifically for plugins because you can go anywhere. You can go to Udemy and you can get courses on how to build just PHP database-driven websites, right? But you kind of want to start focusing pretty early on. It’s like am I going to build a WordPress plugin? Am I going to build a SaaS app? Am I going to build just a website and to really dive into that early?

[24:10] There’s also a teamtreehouse.com, and they have PHP web app course if you kind of want to go that direction. If you’re listening to this and you’re thinking there’s no way I want to do PHP. I know that kind of go into Ruby approach, Ruby on Rails approaches for me. And I’m going to jump straight to SaaS app because you realize if you learn Ruby, then you’re not going to be able to do the kind of the WordPress plugin approach. But if you decide if you’re convinced that’s where you want to go, the path I would see taking is starting with codecademy.com and doing much of the similar stuff, HTML, CSS, JavaScript, and then doing all the Ruby courses. And then onemonth.com is a nice introductory course to Rails, and it’s pretty cheap. It’s a one-time fee. I think it’s $50 or $100. And then gotealeaf.com, there’s some really good Ruby on Rails stuff. Go Tealeaf sponsored MicroConf a couple of years ago. I’ve heard a lot of good things about their course. And it’s definitely more advanced, more in depth than onemonth.com, a little more expensive as well. But I think you’ll come out of that with some pretty solid Ruby on Rails skills.

[25:10] This is the path that I’ve been meaning personally to go down since I basically started having all of our apps done in Rails because both HitTail and Drip now are completely in Ruby on Rails. And I know just enough Ruby to be able to kind of maybe read some of it, right, and I couldn’t code it at all. And this is the path that I have set out for myself when I have time. And that’s I think which you might find as an non-technical founder is that if you do this upfront, it will help you be able to hire and manage people. If you try to learn it well enough to actually build or produce SaaS app, it’s going to take a really long time, a year or more. And if you push this off and you try do it while you’re building the SaaS app while someone else is building, you may run out of time to do it, which is the situation I found myself in.

[25:52] Mike: Yeah. I think there’s a couple of differences I want to point out between something like codecademy and One Month versus Go Tealeaf. And that’s that codecademy and One Month are both more self-paced instruction. So you’re essentially going through them. It’s generally free, but you have to essentially teach yourself versus Go Tealeaf. It’s paid, but there’s an instruction there to help you. So depending on the type of person you are, you might want to lean towards one versus the other. But if you’re under a time crunch or you don’t necessarily do well with setting your own deadlines, for example, which may be a problem in and of itself later on when you’re trying to launch the SaaS app. But if you’re going to much better with an external company setting that deadline for you and setting that course schedule, something like Tealeaf is going to be a much better preparation for you because they have a set course schedule and an outline. And it only lasts for so long and you have to show up and you have to do the work. So it’s not like the other ones where you can push it off and push it off and push it off. Then eventually you still haven’t learned anything.

[26:56] Rob: You know, Mike, there are a lot more topics surrounding this to discuss. Kind of the next step is OK so I’ve done all that. Now what like how do I hire a developer? There’s thoughts of like OK. I’ve hired a developer. How do I spec this thing out? Do I try to do the waterfall approach? Do I try to do more of an iterative approach? I think there’s couple of different topics there. And if you’re listening to this and you’re interested in hearing about either one of those or both, hit us up on Twitter. I’m @robwalling and Mike is @singlefounder. Let us know what you’re interested in hearing about along these lines.

[27:26] Mike: If you have a question for us, you can call it into our voicemail number, 1-888-801-9690 or email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by Moot used under Creative Commons. Subscribe to us on iTunes by searching for “startups,” and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, and we’ll see you next time.

Startups For the Rest of Us

Episode 223 | What to do when your partner quits, defining success and charging more for a self-hosted app

Play Episode Pause Episode

Mute/Unmute Episode Rewind 10 Seconds 1x Fast Forward 30 seconds

00:00 /

Apple Podcasts Google Podcasts Spotify Stitcher

RSS Feed

Share

Link

Embed

Show Notes

Transcript

[00:00] Mike: This is Startups for the Rest of Us, episode 223.

[00:02] Music

[00:08] Mike: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products. Whether you’ve built your first product or you’re just thinking about it. I’m Mike.

[00:16] Rob: And I’m Rob.

[00:17] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week Rob?

[00:21] Rob: You know, a lot is going on. Things are moving quickly. Growth is kicking in for me again, and it feels good to be past that first part of the year. I have a couple more books I want to talk about. The first book is called “Innovators” and it is written by Walter Isaacson, and he’s the guy that wrote the Steve Jobs biography, the definitive guide, and he has written several other biographies, a very, very good writer. I love his journalistic approach. I recommend Innovators if you want to hear the history of computers, dating all the way back to the 1700’s, and then he walks through how each group influenced the next group so it’s fascinating. You know, again, it’s not going to help you launch your startup or anything but it’s a really cool story. I actually had to fast forward the Steve Jobs era and the Microsoft era, because I’ve read so many books about those specific time frames that it wasn’t interesting. I’d heard it all before, but I did like the way he tied that together with the whole computer age of basically the 1940’s to the present. So if you haven’t checked it out I would recommend that book.

[01:22] Mike: We got an email in from Phillip Dirkson and he says, “Hi Rob and Mike. As you mentioned in the last episode on the “Stair Step Approach” launching multiple WordPress plugins over the years has allowed me to finally quit my nine-to-five gig and go with this full time. It’s been a long and gradual process. Podcast listener since episode number one, four-and-a-half years in the academy, four micro confs and two and a half years since my first paid plugin launch. But I finally got there. I can’t thank you enough for the guidance during this journey over the years.”

[01:46] Rob: Yeah, awesome. Phil has been to every micro conf we’ve had in Vegas, and he’s actually here in Fresno and, so he and I hang out now and again. So it’s really cool to see him go on this entrepreneurial journey and eventually hit that point where he’s been striving for, right? It’s what we’re all looking for, the ability to quit our jobs. So a hearty congratulations to Phil.

[02:07] Mike: So I went to “Big Snow Tiny Conf” last week. It’s put on by Brian Casel and Brad Touesnard. Brad is out of Canada, and Brian is out of Connecticut. So what they do is they put on this conference. It’s a twelve-person conference, but they basically just rent out this house, a bunch of people show up and they are all entrepreneurs and looking to build businesses. And we went out on the slopes for several hours each day, and then talked business into the wee hours of the morning. So it was a lot of fun. It was really interesting, and there were a lot of great stories there and I’m going to be keeping in touch with a bunch of guys.

[02:40] Rob: That sounds cool. It’s really nice to have those small venues where everybody can really bond and it’s not a big room of people. So the other book I wanted to talk about today, it’s called “Essentialism” and the subtitle is “The Disciplined Pursuit of Less”. And in essence the author goes into talking about how to make choices and where to spend your precious time and energy instead of giving others the implicit permission to choose for you. I highly, highly recommend this book if you have not read it. Even if you are already into saying no a lot and being aggressive about your own time, and about not letting other people make choices for you and put things on your calendar. A lot was reinforced for me, and I think I may go back and listen to it a second time. I took some notes, about half of it, sixty to seventy percent of it, I’m already doing. But there were some edge cases that this author goes into and I think it’s a very powerful look at how you can be in control of all aspects of your life; your personal, your professional, your family. Yeah, I was really impacted by this book and I think you should check it out.

[03:45] Mike: Very cool. So what we’re going to be doing today is we’re going to be going through a bunch of listener questions that have come in. Last month when we put out a call for new podcast episodes we also caught an influx of questions as well. So what we’re going to do is we’re going to go through some of those. And the first one comes in from Greg Millett and he says, “Hi. I need some advice. I worked on a product with a partner. He’s the main expert with the product idea, and is also the sales person with contacts. I’m the developer. Our plan was I would build the product and he would sell it. Now as you might expect this was a huge mistake and a sad story follows. I worked three hundred hours on the product. Initially my partner was proving valuable. He even secured an initial customer. Then he got too busy and I’ve basically not heard from him since. This leaves me with a working product I can’t push forward. He has the contacts, he knows the audience. Without him I can’t find customers or be as convincing. So my question is this: Do you think I can learn enough about the audience to be effective at marketing it? The only thing I’ve tried unsuccessfully so far is messaging potentially interested people on LinkedIn. How would you approach gaining a foothold with an audience that you don’t know well? I’d hate to let the product go since I’ve put so much work into it. Thanks.”

[04:44] Rob: So, to begin, I think if you’re listening to this it’s obviously very painful to hear, because I can imagine being in this situation, and it sucks to have invested three hundred hours of time and then not be able to yield the benefit of that. If you’re going to go into a partnership like this, my biggest piece of advice is to have that partner be working the same amount of hours that you are on the product. Because this stuff happens, where you frontload it, and then the other person backs out. But if they’ve also sunk three hundred hours into it then they have the same sunk cost and they will be less likely to do it. So that’s kind of my advice, not for Greg’s specific question, but if you’re going to go into this the other person should be selling as much as you are. And there shouldn’t have been one initial customer. There should have been ten or twenty that are lined up. Now I know that takes a lot of work, but that would’ve insured — it would’ve been really quickly noticeable after maybe a month or two, if his partner wasn’t doing it, and then Greg could’ve stopped. But the fact that his partner bailed on him wasn’t noticed until everything was done and the software was there. To step forward and answer Greg’s actual question, the question is, “Do you think I can learn enough about the audience to be effective at marketing to it?” And the answer is yes. The question is do you want to, and do you have the motivation to do that. I mean, I think that’s the bottom line. If it interests you enough that you want to spend the next three to five years learning this market, learning who they are and how to market to them, then absolutely. I think you can definitely learn enough about a market. The question is do you have the motivation to stick with it?

[06:13] Mike: I think there are two things that strikes me that specifically came out of what he said, and the exact line is, “without him I cannot find customers or be as convincing.” I think it might be a fallacy to think that you can’t find the customers, but I think you can definitely learn to be convincing. As Rob said, it boils down to whether or not you want to. In terms of “cannot find customers”, the only thing that you’ve tried so far is messaging people on LinkedIn. There are probably a number of different other ways that you can try and find customers. There’s tons of different ways you that can try to do that. But. you know. we’ve talked about a bunch of them on the podcast. I mean there’s SEO, outbound emails, cold calls, all kinds of different things. But as Rob said “it just boils down to whether or not you want to.” One thing I would also keep in mind is that it may be possible to sell this product, but you might not be the right person for it. So it may very well be a good product and a viable product but are you the right person to do it? And I can’t answer that, that’s something that you’re going to have to answer yourself.

[07:14] Rob: Also, he could potentially look for another partner in this space. Because it does seem like finding a developer is always the hard part right? When a marketing guy wants to find the developer, or the sales person wants to find the developer, going the other way I imagine you could have some luck if you come and say look, “I built this whole product. Here’s the situation. Do you want to come on as a partner?” I think that’s another option to consider.

[07:35] Mike: Yeah, I mean a lot of it boils down to whether or not it’s actually solving a real problem, because otherwise you’re back to the position – where a lot of developers find themselves in – where they built a product and then they go to find a market for it, and it almost seems like this product was built and initially there was some collaboration and then suddenly that collaboration went away and you end up in a position not by design or anything but you don’t have the customers lined up that you were going to go after. So Greg, I hope that answers your question and good luck. Keep us posted on how things go.

[08:07] Our next questions comes in from Anders and he says, “Hi Mike. I saw a tweet from Patio11 and I thought it would be a good question for you too so here goes. What is success? How do you define it and how do you know when you are successful?” Anders I think is a really good question. I think that when you are trying to define success for yourself it’s a matter of what your long term life goals are. So, for some people they go out and they try to build a business, and they go out and get funding and hopefully are shooting for that hundred million dollar exit. And there are some people that that is what is important for them, and that is going to signify success. I think in the circles that Rob and I travel in, and a lot of the people who listen to this podcast, having a hundred million dollars is not necessarily the definition of success, although it is a marker of success. I think that in many cases, especially for me, success to me means that I have the ability to make decisions about how I spend my time in a way that makes me happy. If you’ve ever been in a position where you had a full time job, and you were essentially going through the motions because you hated it so much you just showed up because it gave you a paycheck, and that was the sole reason why you showed up, is because you’ve got a wife and kids and family and you’ve got to support them. So you go to work every day and you get that paycheck, and you do what it takes to get it. But if you’re lucky enough to be in a position where you don’t have to go through that and you actually enjoy what you do – to me that’s success.

[09:33] Rob: I like that. For me I have these three parts that I’ve distilled it down to. And actually I took part of this from the “Internet Business Mastery Guide”, it was an episode I heard years ago. It really struck me and I wrote it down in a notebook. But in essence for me being successful for me requires three things to be in place. The first is freedom, the second is purpose, and the third is relationships. So freedom is basically being in control of my head space and being able to work on what I want, and when I want – so that I don’t have a salary gig. I don’t have a client telling me what to do. Now that’s typically the first thing that you need. So if you are working a salary gig and you don’t have the freedom and you want it, that’s all you need to focus on now, because purpose and relationships can come later but right now you need to get to freedom as quickly as possible. What I found is that once I did achieve that freedom, and I had products that were providing enough revenue that I didn’t need to work, then freedom wasn’t enough because I got bored. And that’s when you need to start thinking about purpose and relationships and so purpose can be many different things right. Purpose can be, “I just want to have as much time as possible to spend time to spend with my kids, or to homeschool my kids. or to travel full time or anything.” What is your purpose? I think that’s a deep, deep question. Like Mike said, you kind of have to ask yourself.

[10:53] I have kind of an overall purpose that’s to help other entrepreneurs, and to bring people together, and to use startups and entrepreneurship to provide a good life for as many people as possible. I have a very well-worded version of that in my notebook – that’s my purpose – but that is the gist of it. It’s to provide abundance for my family, and those around me, and those who interact with me. But every year I find that my purpose shifts a little bit, and it happens during that retreat that I take in January and so I do think that you might have slight changes in course there. And then relationships. I just don’t think a person can be happy if they don’t have relationships. It doesn’t mean you need to have a family or to be married but I think you need close friends. I think you need people that you can talk to and have a conversation with, and who know who you are. And if I had freedom and I had purpose and I was traveling the world and I had no friends and no relationships, I would be sad, and I think you would be too. So those are the three components that I believe that you need to be successful. And it’s always a balancing act because you never get there. You never arrive. You can get there and have all three of those in balance for a while, but then eventually it gets out of balance and you find that even though you think you have freedom, you’re actually working on stuff you don’t want to work on. So you have to reevaluate that, and you have to get back to it, but those are the criteria that I look at when I’m deciding if I’m successful today.

[12:10] Mike: And another question comes in from Adam Clinkett, which is very, very much related to this. So Anders’ question was “How do you define success?” and Adam asks “How do you measure success?” How do you know if you’re really succeeding? There’s a subtle difference between those, because defining success is what you ultimately want to achieve, but measuring it is sometimes a lot more difficult, because you don’t necessarily know where on that continuum of success you fall. Are you really close to meeting your goals? Or are you much further away? And sometimes there’s not a numeric value for that. Are you happy or are you sad? And it’s like, “Well, I’m a happiness level of eight out of ten.” And sometimes those are just really hard to measure. To answer Adam’s question, “How do you measure success?” I think it depends on what it is that you’re trying to achieve. Do you feel like you’re succeeding? Because you can be the poorest person in the world, but if you’re happy with what you’re doing then chances are you’re leading a successful life, and the success should be measured internally not by external factors. It’s not about how much money you make. It’s not about how many people view you as a success. It’s how do you view yourself? Do you feel like you’re succeeding? Are you happy with what you’re doing and how your life is progressing?

[13:21] Rob: Yeah, I measure success typically by looking back at the previous year. But I measure it by how much I’m enjoying what I’m doing. There are times when you’re not going to enjoy it, right? There are times when you have to work late nights, and times when you have to work too many hours in a week. There are times when you can’t be around your family or you have to do stuff that you don’t enjoy. But when I look over a longer swath of time – so maybe a ninety day period or a six month period or a one year period – that whole time should not be filled with those memories, right? It shouldn’t be filled with, “Boy that really sucked.” You know “That year really sucked.” Like I probably made a wrong turn at some point if that’s where I am. If a thirty day period really sucked, or I’m going into it and I’m saying “This is going to be hard for the next sixty days, then when I come out of that of course it’s going to feel bad. But over the longer term I measure success with that freedom, purpose, relationship stuff. But you have to do a rolling average, rather than look at it every day, because some days are going to be better than others. There’s like micro and macro, to be honest, because if I’m working on a single business – let’s say I’m trying to grow Drip – then my success metric tends to be month over recurring revenue growth. And I think that’s pretty easy to measure. And then you step back and it’s like, “What is your life success metric?” And that’s the criteria that Mike and I talked about earlier. So I think it depends on what scope you’re looking at when you do ask about success.

[14:41] Mike: So thanks for the question Adam. Our next one comes from Calin Jordan. And Calin asks “When should a bootstrapper get insurance?” And second question is, “How much time and resources should you put into security?” Good questions. When should a bootstrapper get insurance? I think the answer to that is when you have enough to lose that the likelihood of a bad event happening is getting more and more likely to the point that it makes sense to get that insurance. I know that talks probably around the issue a little bit, but let me throw together a couple of examples. If you’re making, let’s say, a thousand dollars a month from an app, the chances are good that going out and getting a ton of insurance for that is probably not wise. But if it’s your full time employment and you’re making, say, ten thousand dollars a month from it, it probably makes sense to go out and get some kind of insurance, especially if you’re touching other people’s machines or you could negatively impact their business or lose their data. Those are the cases when you might want to start looking at it, but there are businesses out there that operate with no insurance for years and years at a time, and they don’t get insurance until after they’re five or ten years into it. There are some businesses who never get insurance. The purpose of insurance is if something happens then they will cover it or at least cover some of the damages. And this comes down to risk. Are you comfortable taking that risk? How likely is it that something bad is going to happen? [16:06] Onto your second question, “How much time and resources should you put into security?” This ties back a little bit to the insurance. I think you definitely want to do the bare minimums in terms of making sure that people’s data is secure. So that doesn’t necessarily mean you go in and encrypt all of the user data. There are certainly cases where that makes sense, if you’re dealing with any sort of personal or private health insurance information, or anything like that. Or credit card numbers which you probably shouldn’t be storing anyway, those are the things that I would probably keep in mind but the reality is that you want to put time and effort into security when it makes sense, and it won’t make sense until after you have something to protect. If you’re spending a lot of time building a product, and building all this security mechanisms into a product when for the product itself it doesn’t matter, and people aren’t paying you for it yet, then you’re focusing on the wrong thing. You’re doing optimizations for something that it may not matter in three or four months because you may have very well ended up shutting it down because people are not buying the product.

[17:03] Rob: This is a tough one, it’s kind of like “I’ll know it when I see it.” You spend the minimal amount of time possible to feel confident that you don’t have any gaping holes or don’t have any holes as much as possible that you’ve locked stuff down. There are best practices, and you can of course dive in and try and do credit card or bank level security on everything and, like you said, it’s premature optimization. So you kind of don’t want to do that unless you do have social security numbers or really, really important critical information. But then there are just the best practices of web development; of salting and hashing passwords, and of having all your ports closed, and not allowing or using multiple passwords and having strong passwords for everything. That’s the kind of stuff where that’s the accepted best practice and that’s as far as I would go today.

[17:52] Mike: Yeah, there’s companies out there that have billions of dollars at their disposal and they still get hacked. You look at companies like Adobe and Home Depot. These companies have billions of dollars at their disposal and large security teams, and they still lose data and they still get hacked. The reality is that if someone is actively targeting you there is absolutely nothing you’re going to be able to do to stop them. They will get your data if they want it.

[18:16] Our next one comes in from Kevin Taylor and he says, “Hi Rob and Mike. I’m a long time listener and fan of your podcast and a lifetime member of the Micropreneur Academy. Keep up the good work. I’d be interested to know how you’re planning to deal with the EU VAT rules?”

[18:28] Rob: Yes there were some EU VAT rules that were passed. The interesting thing is if you’re in the U.S. nothing changed for us. This only impacts people who are in the EU. And if you’re in the EU then you need to research this because it’s not trivial, right? It makes things vastly more complicated. Obviously we don’t give advice, either way, on if you should be paying this or not. But if you haven’t, and you continue to not, then really nothing changed with this law. It only impacts EU based businesses.

[18:55] Mike: Yeah, the thing I would point out is that, because we’re based in the US and this is a tax law it does make it pretty difficult for us to answer or give specific advice. What I’m going to do is I’m going to post a link in the show notes to www.EnterpriseNation.com. They have a “Five Steps to VATMOSS” infographic that you can take a look at, which kind of walks you through whether or not you need to register, the dates that you have to register by, and additional information about it. It’s pretty high level, but it’s at least a starting point. And again we’re not CPA’s, we’re not attorneys, we can’t give specific advice along those lines, but we can kind of point you in the right direction in terms of helping you find the information you need. So Kevin I hope that helps out.

[19:36] Our next question comes in from Chris Willow and he says, “Hey guys. I have a software product in the SEO niche with two options: self-hosted or hosted. This is cheap for bigger SEO shops who get a lot of value from the app, so I’d like to charge them more for self-hosting. Say I add pricing tiers based on the number of clients they have, which is common for SAAS apps? The problem is there is no real reason for limiting a self-hosted app besides getting more money, so it could be hard to explain why we’re doing this. What’s your take on pricing plans for self-hosted apps, and does it even make sense to add limitations? Thanks, Chris.” I think in my mind it does. If you take a look at just about any server based application software, there are limits on the different tiers of that product that you get based on the amount of money that you pay for. Let’s take a long-standing example of like a mail server. I remember buying a mail server software a long time ago, and if you wanted five users it would cost X dollars. If you wanted ten users it would cost X plus whatever. [20:32] So there are definitely reasons and justifications for charging people more for a product that is going to offer them more value. The trick is finding out what those tiers are. And I think what you can use is if you have your SAAS app, and you are giving them an option of some kind say for the number of web sites they are able to manage their SEO for, you can limit it based on the number of sites, or you can limit it based on the number of accounts, or the types of reports. There are lots of different ways that you can segment that customer base to figure out what is important to them, and then charge the people more who are going to fit a criteria that would fall into that bucket. So let’s say that it integrates into something like SQL Server. Well, there are different editions of SQL Server that will have advanced reporting options, and if you hook into those chances are really good that they have an advanced version of SQL Server. So you can use that as a justification that says, “Hey, if you want to hook into this it’s going to cost extra.” Because you can reasonably assume that if they were paying that much extra for that version of SQL Server then they have the money to pay more for your application.

[21:39] Rob: Yeah, I agree with Mike. Chris mentioned in his email that there is no real reason for limiting a self-hosted app besides getting more money, so it could be hard to explain why we’re doing this. I would see how it goes, personally. I think the limitation is that they are a bigger company. This has been done since the beginning of software sales, right? This is how every enterprise software sale is done. So you’ve got to see how it feels, but this is the way to maximize revenue on that. I would almost take it a step back and ask, “Why do you have self-hosted and a hosted version?” How critical is that self-hosted version? I would move toward SAAS personally, just because of the maintenance, and then this question doesn’t even need to be asked. Or if the self-hosted one provides the vast majority of revenue, then why have the SAAS version? Why not just double down on self-hosted? If you have a fifty-fifty split I’d be surprised, but I would tend to lean towards hosting infrastructure itself, so that support is so much easier. You don’t have to deal with everyone’s crazy server configurations, helping them install on their own servers, and all that stuff.

[22:33] Mike: Our next question comes in from Chad, and he says, “Hi Rob and Mike. My app, “Pint Track”, is a loyalty program tracker specifically for bars. I’m in private beta with one bar and about a thousand users right now and gearing up for a public launch next quarter. Your podcast has already given me tons of ideas for both marketing and development. Here’s my question, I’ve recently finished reading Slicing Pie by Mike Moyer. It describes a system of dynamic equity split that founders can use to compensate employees and co-founders based on work invested, rather than using static equity grants. Have you guys seen this book, and if so what do you think of the plan or of the dynamic equity splits in general? Have you ever done anything like this before and if so how did it go?”

[23:09] Rob: This is a really good question actually. I had seen the “Slicing Pie” book, I hadn’t read it. Mike and I have researched and looked at an infographic and an explanation of kind of how this split works. I’ll say a couple of things. One, this is non-standard, so it’s going to be hard to find pre-done documents that can define this. I know that, as an example, Y Combinator has released what they have called their “SAFE” documents, S A F E, it’s an acronym for something and they’ve basically released those documents. So if you’re going to do standard equity splits, where you have vesting and that kind of stuff, then you can use their documents. But if you’re going to do something funky like this then you’re really going to need to hire a lawyer. There’s no chance I can imagine you writing this up and having this working because it’s complicated. That’s the other thing is the complexity of it. If you ever wanted to raise funding, even an Angel Round, I think you might run into issues because this is non-standard. When you tend to step outside of the lines on these things you are running a bit of an experiment right? If there haven’t been hundreds or thousands of companies that have done this – much like have done the standard four year vesting with the one year cliff of stock options – you’re kind of being a “canary in the coal mine”. And so I think it’s an interesting theory. I question if I want to be the “canary in the coal mine” on something like this, because it is pretty serious. The big objection I see on the home page of Slicing Pie dot com is you and a friend go fifty-fifty on a new business, you do all the work, he still wants fifty percent for doing nothing. Now what? Well the way you tend to get around that is you tend to have stuff that vests, and if that person is not working on it then their employment ends and they don’t get the stock. And they have to work a year to get twenty-five percent, and then every month after that they get a certain percentage. So, you know, it’s interesting. I like the thought of it as a thought experiment. It does seem perhaps a little complicated. But if you showed me ten companies who had done it and it had worked for them. I’d also be curious if employees like this — because if you have folks who have worked for startups in the past then they are going to know this whole stock equity thing, that the way that everyone else does it, and I think you’re going to have to explain this to every new employee you hire because no one is going to understand it.

[25:15] Mike: I agree with Rob. I think this is an interesting way of dividing the company, and it’s an interesting way of thinking creatively about it, but I think my issue is not necessarily with what this process is, or how it looks, but how do you define when somebody is no longer working for the company, especially if it is something that people are doing on the side. Because let’s say somebody hasn’t done something for two or three months. Does that mean they are no longer working for the product or the company? How do you define that? Are there specific rules about that? Is there a minimum number of hours that they have to work? And if that’s well defined great. If it’s not, then that’s when these types of things can start to kick in. The example that’s used on their website, if you do all the work and you’ve split the company fifty-fifty with somebody, do you have to give them fifty percent of whatever the benefits are? The problem, I think with that is, when do you define that they are no longer working for the company, and no longer entitled to benefits. Part of that goes with vesting, but even with vesting you can say, “OK, well you’re going to vest after one year of being involved.” But what happens if six months in they stop being involved, and then six months later they say, “OK. now I’m fully vested.” How do you define whether or not they are still working is really the fundamental question, and I think as long as you can answer that then things like this will come into play and you can get creative about vesting options and everything else. But until that question is answered, all of this stuff is kind of immaterial.

[26:43] Our last question comes in from Tom and he says, “Hi Rob and Mike. My little software company is growing and we’re hiring our first QA Engineer. In a past episode you both spoke about the testing tools you use for your products. I wanted to know what tools you’re currently using? Thanks, and I love the podcast.”

[26:57] Rob: So I’m not sure that we’ve ever spoken about our testing tools. Did we talk about unit testing frameworks? Because I had to ask my developers, because I don’t know anymore. But we use MiniTest, using Shoulda matchers – which is a gem – and Mocha for stubbing and expectations – which is also a gem. So that’s our unit testing framework, but we don’t actually use any type of QA or automated testing tools.

[27:22] Mike: Yeah, I haven’t used anything other than unit tests to be honest. I know there are different frameworks for testing UI’s, and hooking into it so that you don’t have to code directly against the code – so you don’t have to have your code arranged in a certain way, but it’s a little bit more fragile, because if you change the UI then you have to go in and rework those tasks versus hooking directly into like MVC frameworks so that you separated out all the different components that make up the application. But all I’ve ever done, really, is just rely on unit tests, and make sure that the inputs and the outputs of various things are working properly. And then do something more of a system test, where you’re not just testing a single function, you’re testing a string of functions that are supposed to work in a certain way. And then you set up your unit test to basically make sure that that system – or that set of components – is working properly together. But that’s all we’ve ever done. I haven’t really gone into the UI testing, or anything like that. Do you guys do any UI testing – aside from the backend code itself – or do you find that the UI tends to change subtly too many times to be able to add those things in.

[28:32] Rob: Yeah, we don’t. We don’t have any automated UI stuff, because the UI changes so quickly. I mean, Drip is still in such an evolution, and we’re adding stuff constantly. I think if your product was mature, and you weren’t constantly adding new things, you could think about doing some UI click-throughs. But we have thousands of unit tests. We have very extensive test coverage for our apps that we’ve built from scratch, and that takes a lot of the burden off of it. Obviously you can have UI issues and we do manually test those, basically we do not have an automated test suite that hits the UI.

[29:02] Mike: So Tom, sorry we couldn’t be a little bit more help in that. Maybe you’ll be able to find some people at Microconf who can fill you in on what sort of things they do.

[29:09] Rob: Today’s episode was filled with listener questions. And if you have a question and would like us to answer it on air you can call our voicemail number at 888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Out of Control by Moot used under Creative Commons. Subscribe to us in iTunes by searching for startups and visit www.StartupsfortheRestofUs.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.