Show Notes
Transcript
[00:00] Mike: You know I haven’t paid a lot of attention to the discussions around the NSA the past month or so but I have a conspiracy theory I want to share. I think that the NSA is single handedly responsible for unleashing both Perl and Php around the world.
[00:11] Rob: And tune in next week when Mike and I answer hate mail from all the Perl and Php developers in our audience.
[00:16] Mike: This is Startups for the Rest of Us: Episode 152.
[00:19] Music
[00:28] 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.
[00:34] Rob: And I’m Rob.
[00:35] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
[00:40] Rob: Things are ramping up there. They’re starting to get exciting. Drip, I’m doing another small launch this time to about 25% of our list. So just cranking out a few last minute things before we go live next week. How about you?
[00:54] Mike: Part of the good news and bad news today because we’re recording a little bit early. So the bad news is there’s not going to be a lot updates. But I do have some good news to share and I know it’s only been three days but I have my first confirmed paying customer for AuditShark.
[01:07] Rob: Congratulations man. That’s awesome.
[01:09] Mike: So we’re still straightening out, things with the credit card but the agreement’s already kind of in place.
[01:13] Rob: This is like a momentous occasion. You have your first pay. How does it feel?
[01:17] Mike: Good. It was nice to get the email because I asked very directly. I just said now that the remediation information is in there because you said that was going to be a problem before, now that it’s in there and you could take a look at stuff, what do you think and is this worth paying for? And kind of want to get his thoughts on whether he thought it was valuable or not and whether he still found a need for it in his business and he’s like absolutely. This is what I was looking for.
[01:41] Rob: That’s great news man. Now to find 500 more people exactly like him.
[01:45]Mike: Yup.
[01:47] Rob: Congratulations again.
[01:48] Mike: Thanks.
[01:49] Rob: So I was wondering what your take was on Brecht Palombo’s suggestion for scalable content marketing for Audit Shark? So Brecht Palombo runs – with Scott Yewell, he has a podcast called Bootstrap with Kids and in episode 23 he outlined scalable content strategy.
[02:05] Mike: Well I listened to the episode and it’s funny because at first I was like I don’t think this would really apply to me because the stuff that I’m putting out there is ultra specific and it’s all remediation information so I wasn’t thinking it would be terribly applicable. It just wouldn’t be stuff that people were searching for.
[02:21] And then I got an email from Patrick McKenzie who basically said the exact same thing but he phrased it differently and it really made me think about maybe I could do this? So one of the things that comes to mind, if you haven’t gone over and listen to Bootstrap with Kids, definitely listen to not just that episode but the podcast. His podcast is pretty good. I’ve been listening to it all along.
[02:40] He lays out the strategy where he has something like 15,000 pages that are published to his website based on information that he’s gathering as part of his product. I can basically do the same type of thing within Audit Shark where all the different security control points that I’m looking for and not just those but also the steps that you need to go through in order to remediate them, I could take those, dump them from the database, add some metadata around it in order to address some SEO concerns and formatting and things like that. And then publish them through the website and make them indexable by Google.
[03:13] Rob: Yeah, and that’s the basis of that whole scalable SEO content marketing rather content – it’s not really content marketing because I consider content marketing to be more viral and sharable stuff. But it’s getting into Google and getting a large foot print and then as soon as you have any type of website authority, those pages, they start ranking for those long tail keywords terms and those are the ones that someone’s searching for some really specific searches. They tend to be more likely to have that pain point and more likely to convert.
[03:39] We’ve seen Patrick McKenzie use it with success on Bingo Card Creator and we’ve seen Brecht use it. We’ve see some other examples of it. But I definitely think if nothing else, it’s worth line item in your marketing plan and at least a trial implementation. But the thing is with scalable content I think once you do a trial implementation you might as well scale it up. Right? Because if you go to the problem of kind of defining stuff for 100 pages you might as well go to 500.
[04:02] Mike: Definitely. I think there’s going to be some work around the formatting side of it but in terms of the content itself I don’t think it would be very difficult to just – if you’re going to do it for one page, what’s the difference between 1 and 500? Because you’re already kind of automating it for a couple of pages.
[04:15] Rob: Right.
[04:16] Mike: You almost need to do a lot of them in order to figure out whether or not that’s going to be boosting the traffic because most of them are going to be very long tail things that aren’t going to get a lot of hits but the ones that do are going to be fairly targeted.
[04:28] Rob: Right.
[04:29] Mike: So definitely thanks to Brett and Scott and Patrick McKenzie.
[04:34] Rob: You mentioned you’re having trouble with your Nexus.
[04:37] Mike: Yeah. So it’s only a week old so I’m fairly certain it’s not the hardware but it feels like it’s just buggy. Whenever I open the browser, occasionally it will just crash on me for no good reason and I’ve had it shut down on me just randomly. So I don’t know what’s up with that but you know, I’ve read around a little bit. It seems like the Nexus’ got some bugs in it and it’s more operating system related. And also a lot of the apps that I download, I feel like every single app wants an always on connection to the internet so that they can phone home. And if you don’t have an internet connection they just don’t work.
[05:11] If it weren’t for those apps, I mean I could deal with the bugs. Yeah, it’s a brand new tablet. It’s probably going to have some bugs here and there. They’re going to issue same updates. I’m not real worried about that. The thing that bugs me is the apps always wanting this constantly on internet connection. That’s the part that bugs me because if I’m using it on a plane or something like that, I’m not going to have that. And what’s the point of having a 32 gig flash drive if it’s not even going to be used.
[05:33] Rob: Yeah. That makes it tough.
[05:35] Mike: I mean I’m going to keep it and kind of see how things play out but like I said it was an experiment so just kind of dip my toes into other realms of technology.
[05:43] Rob: Sure.
[05:44] Music
[05:47 Mike: Today’s episode is called strategies for loading up your prelaunch list. We got an email from Jack over at collabinate.com. He says hi guys, love the show. I’ve listened to every episode and was inspired enough to come to MicroConf 2013 which was amazing. I’m building a service called Collabinate which provides an API for hosted activity streams. It’s really all for building Facebook or Twitter style feeds into your apps letting you surface information for your users without making them dig.
[06:10] I’m writing because of something Rob said in the last episode. You mentioned you had 1400 subscribers to the Drip mailing list. My question is how the heck did you get that many sign ups prelaunch? I’ve had my landing page up for a few months now with ad words and Facebook ads pointing people to it for last month and I still have under 50 subscribers. Do I just need to spend more on ads or do you guys have other better strategies for getting more people interested to sign up? Thanks again for the great content you guys put out.
[06:33] So today what we’re going to be doing is we’re going to be talking about some of the different options you had for helping to scale up and build that list and then we’re going to also talk about some of the things to keep in mind while you’re doing that or in some cases before you go about launching into some of these different options.
[06:46] So the first one is to find websites that accept startup submissions. There’s at least a couple dozen places where you can do this. I’ve used a beta list in the past. I’ve got a spreadsheet that I put together with a bunch of them. So you can just go to Google and search for like startup announcements or software betas, things like that. There are a lot of different websites out there including reddit. I think reddit has a couple of sub reddits where you can go in and you can – I think one of them was called rate my startup or something along those lines.
[07:12] There’s tons and tons of places where you can post links back to your website and not just get signups but also get people giving you feedback and comments on either design or the product itself. You do have to be a little bit careful about some of that feedback because if they’re not actually interested in buying it then you kind of want to take some of their suggestions with a bit of grain of salt.
[07:31] Rob: With Drip I was able to get on several of this kind of beta, these prelaunch sites because there are two different types of these. There are some that only accept startups that have launched. I think like killer startups is like that and a few others but then you mentioned beta list and there are just some that are pointing more to like landing pages or startups that are in beta or are going to be launching soon.
[07:52] And the beta list in particular I’m pretty sure I got almost 300 email signups when it appeared on that site. So this is definitely something that’s worth sending at least a little bit of time on. All of the sites are not going to list you because they do get a lot of submissions and all of them are not going to lead to 300 signups but if in aggregate, you can either spend n hour or pay a VA to spend a couple hours and do this. It’s certainly something in those early days doing the things that don’t scale to kind of get the momentum going. It’s definitely up there.
[08:22] Mike: One of the things I did was I complied this list of different sites and then handed it off to somebody to go through all the different sites and get all of the required fields that they were asking for and just build a spreadsheet so that I knew all the information that they were asking for. And then either I will go through it or I’ll probably have somebody else go through it and just paste in the answers to all the different questions that they were asking.
[08:43] So there’s definitely ways to kind of scale us out and form out different pieces of it. But there are things like the description, the sales pitch, things like that, those are things that you’re going to want to kind of craft a little bit and put a fair amount of thought into it. It’s not like you can just say oh well, I need you to go fill out all these different forms because things like the founders name and your website and things like that, those are very straight forward but there are other things like the sales pitches and the URL’s and stuff, some of them you’re going to want to use tracking mechanisms for that kind of stuff.
[09:11] Another option for building your mailing list is use social media like Twitter or Facebook. I’ve been using Twitter to build out the following for Audit Shark and I’ve actually started getting large enough following that people from that are filtering into my mailing list. So basically there are certain tweets that are going out, specifically mention Audit Shark, hey check this is out and I embed different tags and they’re from Google to be able to do the goal tracking and identify clearly whether or not somebody clicked through from Twitter and then onto the landing page and then actually submitted their email address.
[09:43] Rob: Yeah. I think that’s a really good point. If you’re going to do this you should absolutely setup goals in Google analytics so that you can see which sources are converting for you. Because it’s not just about driving traffic. It’s about driving actual emails. And the nice part about this is if you vet these traffic sources early then once you launch and you’re actually going after paying customers, you already know which traffic sources you are going to focus on. So I haven’t done much with the social media angle, getdrip Twitter account and Facebook page but they’re just place holders at this point and I haven’t use them to really to drive leads at all.
[10:15] Mike: Third option is to ask to be a guest on podcasts. There’s a couple different things that this will do for you. The first one is typically it will get you links back to your website and drives them traffic and SEO a little bit. But the other thing is it gets you in front of more people. Clearly you don’t want to just blast out an email to tons and tons of different podcasts and just ask if you can be a guest on their show.
[10:38] What you really want to do is focus on the podcast that you believe are going have an audience that overlaps with whatever problem that your podcast solves. So if for example for Audit Shark I would probably go on to tech oriented podcasts or anything that has to do with dev opts, security management, those types of things. I wouldn’t want to go on to a podcast that talks about marketing and say hey you guys should lock down your servers. It’s not really applicable to the audience and when you start making those pitches, I almost feel like it would make you look bad by making a sales pitch to somebody to have you come on their show when it’s just totally not relevant to their audience because they’re not going to get anything out of it.
[11:12] Rob: Absolutely. And the thing to keep in mind when you’re pitching podcasts is you’re not pitching your product. You’re pitching a story. So what is the compelling story that you can offer to their audience? What is the way that you can make their podcast look good? So when I go on podcasts, I always make sure that I’m not on there to talk about Drip or to talk about Hit Tail but I’m there to educate their audience on how to market. And then I use maybe Drip as an example.
[11:38] or I’ll go on to talk about how to support an app or how to scale something and again it always gets mentioned because that’s the experience. It’s kind of mentioned on the side and that drives people to the site just because they become kind of curious about what you’re up to. So I found that it seems like the podcast listeners, if you’re in the right niche and you do get a nice lock-in with your core audience, you provide a lot of value to, then that works really well. But as soon as you stay out of that one, Mike said the conversion rates go down.
[12:07] Mike: Something else to keep in mind when you’re pitching to podcasters is you don’t want to send out those blank emails. As Rob said you do want to tell a story and you want to make sure you tell them exactly how your story is relevant to their audience.
[12:21] Rob: Right. I think we’ll have better luck talking about your podcast after it’s launched unless you already have a story to tell before it’s launched. Right? You need something interesting to talk about. And when I’ve pitched podcast I typically start with the people that I know because they’re just going to be more likely to let me on. And then once I have a few of them then you can start branching out because you’ve gotten better about talking about your product and your pitch gets a little better.
[12:45] But I hand send emails to every single podcast. I would never do a bulk send because you really have to hand tune that pitch in order for it to be anywhere near relevant. I will also, if I don’t listen to the podcast regularly, I would go back and listen to the previous three or five episodes just to figure out if in fact my information is a good fit for their audience.
[13:06] Mike: Great points. The fourth one is to use paid traffic on some of the various ad network. I did a quick search for ad network on Google and on the first page there was a search result named 25 ad networks for online businesses. So these different ad networks are very easy to find. Google ad words is clearly not the only one. LinkedIn isn’t the only one. Facebook isn’t the only one. There are a lot of them out there. Some of them are very niche ad networks so you can find some that only cater to certain audiences.
[13:31] And if you can find out that caters to the audience that your products solves a problem for, then you’re going to have much better results with that particularly ad network than within some of the others.
[13:41] Rob: Yup. I’ve done this every time, every time I’m going to launch something and I did it with Drip as well. This is a great way to find out which ad networks are going to work for yours and I absolutely got – probably in the several hundred and it may even be a thousand signs ups from this approach.
[13:56] Mike: The fifth one is something that I’ve started doing recently is I subscribed to helpareporter.com and I’ve been looking for any reporters that are doing stories that are related to security. And if you’re not familiar with helpareporter.com they have a daily email that goes out I think three times a day and it will include all these different reporters and a summary of what they’re looking for in terms of a story. They’re generally looking for sources of information.
[14:20] I got one today that was specifically looking for the security practices that you educate your new employees on in small and medium businesses. And they tend to spell out exactly what they’re looking for whether they want to do an interview. Sometimes they’ll say exactly who they’re going to be doing the story for. Sometimes they’ll just say it’s just an anonymous source or they’ll say it’s a podcast or something along those lines.
[14:41] I’ve even seen other startups that are doing this because they are trying to find content for their blog and they’re looking for people to interview. So that’s another way. It’s more SEO related. It’s not necessarily related to loading up your prelaunch list but that’s another avenue for marketing your startup.
[14:55] Rob: I used to use helpareporter. It became too time consuming at a certain point. If you have a bit more budget than you do time, there is a service that I use. It’s called bitesizepr.com. It’s $89 a month and you enter a bunch of info and they monitor helpareporter for you and actually write the pitches for you. You approve them or reject them and then if a reporter contacts and obviously you talk to that reporter but they basically take a lot of the grunt work. The three emails a day was a bit overwhelming for me.
[15:24] Mike: So the sixth strategy is to setup Google alerts and let Google search for new pages which match your search criteria. And in some ways this could be a little bit overloading just like you said that you found helpareporter.com to be because you’ll get emails from Google all the time. And typically you setup these searches and what you’re looking for is anywhere where people are talking about something that relates to your product. You want to go in, take a look and see if there are any non-salesly ways you can comment n whatever the topic is because a lot of these things will come back from blogs.
[15:53] Sometimes you’ll see things that are sales pages of your competitors, those you can generally safely ignore because they’re not usually going to allow people to just randomly comment on their site. But any blog articles that come up, what you’ll do I you’ll put a signature into the profile that you setup and then put the link back to your website and that will help drive some traffic back to your site.
[16:13] You probably want to use a VA for this kind of thing to kind of sort through and filter the data. I would say this is probably not one of the best sources for loading your prelaunch list because 1) it’s time consuming and 2) you’re going to have to put a lot of time and effort into it and you’re relying on traffic that you’re getting. So you’re also going to have probably some issues putting in any sort of tracking codes in and the URL’s that go back to your website. I would definitely rank this lower on the list on a lot of these other strategies.
[16:41] Rob: But I actually think there’s more value here than just building your prelaunch list. If you really are getting alerts and you’re seeing blog posts come up or forum threads or stuff of that nature and you go in and participate, you’re going to learn a lot about that audience and you’re going to learn about whether they are interested in your product. And if you actually post it into a forum or comment discussion and you come back and see what people have said, that alone could help you hone your value prop, hone your headline, hone a direction that your product’s going to go. You could really get into almost that customer development type discussion.
[17:13] I think there’s potentially more value here than just building the list. It’s obviously not scalable but I have definitely done this and spent many hours kind of pounding the pavement in this fashion.
[17:25] Mike: So the seventh option is to ask bloggers if you can write guest articles on their websites. Something to keep in mind here is this is very similar to approaching podcasters and asking them if you can be a guest on their show. Make sure that you’re making individual sales pitches to these guys but also, save your best material for these blog posts. You don’t want to be putting your best material on your own blog. You want to be putting it elsewhere. So that will help drive that traffic back to your website.
[17:48] Rob: I mean this is an entire art right? Of trying to pitch in and get guest blog posts. I get pitched probably once or twice a week for people to guest post in my blog and anyone that I don’t know or haven’t had some connection with almost always gets a no. If you follow me, if we’ve interacted at least once and you pitch a compelling story, you’ll see there are a lot of guest posts on my blog recently because people are doing exciting things and since we met at MicroConf or we’ve emailed in the past or I have some buy in or some interest in their story, it just makes it so much more likely that I’m actually going to say yes.
[18:21] So to be honest, there are some pretty good stories like on hacker news and some other marketing blogs about how to market your app through guest post and like I said, there’s a lot to it, a lot more than we can cover in this episode so I would go to Google and search for that and do some research because there’s a right way to do this and wrong way to do it.
[18:38] So the eight strategy or loading up your prelaunch list is it use SEO. A lot of people think why would I do SEO so early because doesn’t it take months and months to rank for a term? Is it really going to actually play out before my launch? There’s a couple responses to that. A lot of people think that their app is only going to take 3 or 4 months to build and it winds up taking 10 or 11 months. In that time, you can do a heck of a lot of SEO. And even if you don’t get a number one ranking and time to build your list you’ll be way ahead of the game than if you wait until you actually launch. So that’s the first thing.
[19:10] Second thing is I have seen using tactics that go after long tail keywords or giving away some pretty specific templates that are related to your business like Bid Sketch, when Ruben first started, he gave away web design templates and kind of stuff. That was way in advance of his launch and that was a big reason that his mailing list grew. I have seen people give away email templates. I’ve seen people give away all types of stuff that’s landing page templates, all types of stuff that’s actually actionable.
[19:40] So if you plug those two together where you’re doing some SEO for terms that other people aren’t doing a fantastic job with, and you’re giving something away and letting them know hey, if you do this, we’ll also let you know when we launch so that they’re aware of it, you can grow your list a lot faster that way.
[19:55] Mike: Yeah. I’ve seen people giving away different white papers or eBooks or things like that on their websites. A lot of times I’ll see this as a strategy post launch but I think you’re right. You can definitely use this prelaunch in order to start building your mailing list and getting people interested in it. You can also use that to start discussion and help guide the product direction before you launch so that when you do launch so that you aren’t just listening to crickets while you’re trying to wait for sales.
[20:19] Rob: And the ninth and final strategy is to pick some strategic early access customers. One thing that’s happened with Drip is a lot of the early access customers that have been using it and have been happy with it, they are bloggers themselves. They have large Twitter followers. And I haven’t even asked them but almost all of them written a post, a link to Drip, talked about it on Twitter, mentioned that they signed up. They’ve started to create a buzz which I really appreciated.
[20:42] If you are able to strategically pick some people who actually have audiences, the odds are that they always need fresh content and they always want to talk about what they’re doing, new things that they’re innovating. And if so you’re building something interesting and you do have the potential to let in people with audiences, I would always opt to do that early on.
[21:00] Mike: So those are nine different strategies that you could use for loading up your prelaunch list. Now as part of these strategies, there are definitely some things that you want to keep in mind. The first thing you want to keep in mind is that you want to use landing pages as much as possible so you can test what text is and isn’t converting. Because if you’re bringing that traffic to your website, and it’s untargeted traffic and by untargeted I mean it’s not targeted at a specific page, you’re not trying to pitch them on some of other website and bring them in, there’s a disjointed experience between the other site that they were on and the one that they’re going to if they click on I don’t know, something that say peaches and you show them a picture of oranges, that’s a disjointed experience. It’s just not going to jive with what their expectations are and they’re probably just going to bounce off the page.
[21:44] Rob: The other thing, I mentioned it earlier is definitely setup goals and Google analytics is the way I do it. There are obviously other options but if you don’t know which of your sources are converting then you’re leaving a lot of data on the table.
[21:57] Mike: Another thing to keep in mind is do not rely 100% on the vendor’s conversion stackers for some of the different ad networks. One of the ones I’ve been using pretty extensively lately is Facebook and their conversion tracker sometimes works and sometimes it doesn’t. It’s really kind of bizarre. Some things it does, it just doesn’t make a lot of sense and there are things that they do where they’ll count something and then I won’t see it on my website.
[22:21] What you really want to do is make sure that you’re using something that’s kind of a tried and true mechanism. I use kiss metrics. I also use Google analytics. But you want to use something in addition to whatever it it’s they’re offering so that you know that it’s working and you essentially get a double check on those numbers so that you understand whether or not they’re correct and you know whether or not to look for something else.
[22:41] Rob: Another thing I would do early on is install your remarketing pixels so there’s a bunch of providers for remarketing like perfectaudience.com or adroll.com I think Google does it as well. I have tried four different providers. And I found perfectaudience to be the best. It converted the best for me.
[22:59] But I have had the retargeting pixel installed on Drip since the first day I launched the landing page. Now the cookies only last I think for 60 days or 90 days so I won’t be able to retarget everyone who ever visited the site. But when I do launch I’ll have the previous 60 to 90 days worth of people who visited and didn’t give me their email address and I will be able to then show them ads and say Drip has launched or check this out because I know they’re at least mildly interested in the product.
[23:24] So before you start driving traffic to your landing page I would highly recommend it’s free to sign up for perfectaudience or AdRoll. Grab the tracking pixel and put it on your websites so that you can basically start cooking those folks as interested parties.
[23:39] Mike: And some of it kind of ties into that a little bit is if you are doing paid advertising to drive people through, if you don’t have time to manage and track that paid advertising campaign, shut it down because you’re basically just throwing money away, there’s a lot of little tweaks and stuff. You really have to be paying attention to these and put a process in place that allows you to understand whether or not it’s working and if it’s not, you either need to make the tweaks or just kill that particular one because there’s a lot of different things that you can try and if you’re not paying attention to those, you’re just basically flushing money down the drain.
[24:11] Music
[24:14] Rob: If you have a question for us, call our voice mail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. See you next time.
Episode 151 | Getting Paid Before You Build, Dealing with Entrpreneurial Angst, Figuring Out How Much to Charge and More Listener Questions
Show Notes
- The Founder Test – based on episode 133
- Study from Totango about asking for credit card up front
- Swell iOS app – Pandora for talk radio
- TweetQureet – top tweets from your timeline in a daily email digest
Transcript
[00:00] Mike: You know, I’m really irritated. Miley Cyrus goes out there and gets naked and licks a hammer and it’s called art. I do it and I get kicked out of home depot.
[00:08] Rob: This is Startups for the Rest of Us: Episode 151.
[00:11] Music
[00:19] Rob: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:27] Mike: And I’m Mike.
[00:29] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So aside from twerking, what is the word this week sir?
[00:35] Mike: I want to send out a thank you to Julian Corlett for putting up a website based on episode 147. Instead of giving you guys the long URL for it, we decided to just register foundertest.com. So if you go to foundertest.com it will take you over to the site. It’s a really good – I guess a summary of that episode. It takes you through all the different questions that you can answer and basically gives you a score at the end as to how well prepared you are to meet the challenges of starting your own business.
[01:01] Rob: Very nice. So last week I spoke about that I was going to be sitting with a glass of bourbon waiting for the Drip early results to come in, the trial conversions and things did in fact go well. I’m quite pleased with it. So Drip is now in the low four figures of revenue so that’s a good milestone to cross over from three to four. Then I think we’ll be doing another launch similarly. I say a launch, it’s basically an email to another small group within the email list.
[01:27] I originally planned to do 10% or 20% of the list basically send them an email and then send to the other 80% to 90% but given all the work that it took to do that first small chunk, I think I’m just going to kind of break it down into small pieces because since our on boarding is pretty intensive, I just can’t imagine trying to handle eight or nine times the load that we handled to get everybody up to speed.
[01:51] And so in order to not sacrifice people’s early user experience with Drip, kind of take it as it comes and then it will be nice because MicroConf Europe is in two weeks and so I’ll get another group in and before that, probably try to get someone in mid to late October once I feel like we really have it down.
[02:07] Mike: Very cool. I’ve got all the new UI code that we’ve been working on for Audit Shark out live. There’s a bug that’s in there right now that we know about that is not displaying the instructions for fixing problems that it finds and that’s just a problem with the angular js. It strips out all the HTML tags that we basically put in there used in mark down language and angular just strips it out just more for safety considerations than anything else. So we have to figure out a way to either put them back or to strip out that piece a bit.
[02:38] But the other thing that I’ve done is remember how you’ve been asking me if there were any other pieces that are essentially preventing people from moving forward and actually paying for it. And I’ve asked those questions. Right now I’m just waiting for the feedback from them to see where things stand right now with this new code in place is what they’re looking for or if it’s not and we’ve got more work to do.
[02:58] Rob: Very nice. So if I recall you had two things left to get done before you felt like you could start charging. One was the new UI, and you’re saying that’s live and the other is remediation and you said you guys just found a bug that you’re technologists, I’m sure you’ll figure that out in the next week here. Once remediation is done though that’s kind of where you think the line in the sand is drawn but I guess you’re going to wait to hear back. You’ve already asked the question and you’re waiting to hear back if that is in fact the line at which people will start paying.
[03:26] Mike: Yeah. I asked if that was the line and if it’s not then they’ll let me know. But I truly believe that it is and even without it showing some of that stuff right there, I can hack in a little bit. It just won’t look as pretty. It will still give them the information. It just couldn’t probably look a little bit better. That’s a fix. It can be put in on the next day or two so I’m not real worried about that. But really it’s just a matter of getting their feedback and I’m going to start putting more people onto the system regardless of what they say and start getting more than just a few people’s feedback on that.
[03:54] Rob: Yeah. I definitely think that will be helpful. I’ve noticed that the more folks that I get using Drip, the more data points I have and it’s hard to make decisions when you only have 5 or 10 people using your app because everybody’s just kind of all over the place and their specific needs come at you and you feel those are the most important things to do. But when you have 100 or 1,000 people using it, it’s actually easier right? There’s more data coming at you but it’s easier to pick out the things that are most critical and that you should tackle next.
[04:23] So I ran across a really interesting study. It was actually emailed to me by Ruben Gomez in bidsketch and the studies from totango.com and it has something to do with whether you should ask for credit card upfront. And we’ve talked about that time several times on the podcast and so we will link this up in the show notes but it basically supports the stands we’ve taken on the podcast of when in doubt, ask for credit card.
[04:46] But if you have a higher touch sales process and you have people in place, you have the labor force there to make phone calls or to actually close sales, then you can think about not asking for credit card and you will close more people if you’re doing it right. So that was the results of the study but it was nice to see it point out in numbers and totango just did a really good job of putting the study together. What else is going on with you?
[05:10] Mike: Well I bought a Nexus 7. It’s based on the Google android OS and it’s just a seven inch tablet.
[05:16] Rob: So what do you think about android versus IOS?
[05:18] Mike: I feel like it’s harder to find things in the android store and I’ve only used it for a day and a half so I probably don’t have a good basis for saying that just yet. But it feels like it’s a little bit more difficult to find apps that are like business related. It feels like the android ecosystem is trying to push pretty much anything at me like saying go over here for movies, go here for music and here for apps, here for games. And I’m not really interested in most of that other stuff. It’s just having to navigate around in the android store.
[05:58] Part of the reason I bought the Nexus though is because I’ve started to realize in some ways my knowledge of technology is starting to become a little bit obsolete because technology’s just kind of progressing so fast and I really haven’t taken the time to stop and update my skills or familiarize myself with different ecosystems and operating systems in quite some time.
[06:21] So I figured it would be a nice idea to kind of sit back and go through android a little bit because I don’t have an android phone. I’ve got an iPhone. I’ve got iPads and I got a Mac book pro and I also do a lot of stuff on the window side. And android is really just not something that I’ve delve into so I thought it would be a good idea to kind of invest in myself a little bit.
[06:38] Rob: Very nice. Yeah, I’m also taking a tack with that since Drip is written in Rubyonrails I’m actually going through one month rails which we mentioned a few episodes ago, about half way through that course, it’s been good so far. And I also have been working with Git in GitHub. Learning a lot there, just trying to get up to speed so that I know enough to be dangerous and make some tiny changes to Drip now.
[07:00] And again since it is technology that I have never developed in full time, the ruby on the rails syntax makes sense. It’s easy enough to learn now but it’s kind of the larger paradigms I think that are hard to learn when it’s not something you’re doing 30 or 40 hours a week.
[07:16] Mike: I think that learning that stuff is just it’s not just a matter of being comfortable with it but it’s also the matter of being able to make technology decisions for your business moving forward and that’s really the reason why I picked up the Nexus. I know that I think in a month or so there’s rumors that the new iPads are going to be coming out and I’ll probably pick one up then at that point just because the iPad that I have now is from several years ago. It’s the iPad version one. I haven’t bought a new one since then because it’s done everything that I needed it to do.
[07:45] But just from a standpoint of familiarizing myself with different technologies, that’s where I see it as kind of a necessity. Like I’ve said, I’ve looked at some of my skills and I feel they’re becoming a little bit on the obsolete side because I just don’t know enough about these other things to make decisions.
[08:02] Rob: Sure. And that happens fast. So our podcast is now inside an interesting app. It’s an IOS app called Swell and it’s basically Pandora for talk radio, that’s their tag line. So you have to apply to become part of it as a podcaster but as a listener you can just download it for free in the app store. So I’ve heard about it on this week in startups so I emailed them and they let us in which is cool.
[08:27] I’ve been using Swell for a few days and it is pretty good. It starts to hone in on your taste. I wish it had more podcasts. There’s a lot of NPR and like ABC news audio and BBC and stuff so it is definitely more geared towards talk radio at this point. I think they’re trying to keep the quality high. But if they make it a better discovery engine for podcasts, I would absolutely be listening to that a lot because frankly I seek out new podcast and if they do in fact crack this, make it the Pandora for podcasts instead of just for talk radio.
[08:59] Mike: Hey we’ve got another thank you from Joseph Blackman who says hey, I’ve been a listener for over a year and I’m thankful for the breadth and depth of your knowledge. I don’t code. I don’t have a Saas app and I don’t have a startup. I just like the core values and thought processes that you two have. I bought a business in the east bay area because I don’t have any cool ideas of a startup but I know once I get into the corridor it will start to flow. Thanks for being yourselves. Don’t change. Don’t conform. Joseph.
[09:22] So thanks Joseph. It’s really great to hear when people quit their jobs and kind of go down the road of being a bootstrapper.
[09:28] Rob: Yeah. On that note we should add him to the success stories page on the website.
[09:32] Music
[09:35] So today we’re going to be diving into a number of theirs listener voicemails, listener questions, some just listener comments helping other folks out who have written in the past. So we have some good stuff. We’re going to be talking about getting paid before you build a product, dealing with entrepreneurial angst, figuring out how much to charge and a few other things. So let’s kick it off on voicemail to comment on Mike’s recent explanation of Audit Shark.
[09:57] Voicemail from Dave: Hey guys! This is Dave from Ohio calling. Listen. Love the most recent episode. Mike, hats off to you. Hope you are feeling better. It takes a lot of courage to come out and talk about that on the podcast. And certainly hope you’re feeling better. Don’t worry about the Nay Sayers. Screw those guys. Second thing, I really loved the most recent episode because I really have a great idea now of what AuditShark does. I was in that camp of not knowing exactly what it did. It really really helped to understand all that work. And Rob would love to hear the exact same detailed kind of talk about Drip as well. So, listen love the podcast. Guys take care. See ya. Bye-Bye.
[10:30] Rob: Thanks Dave for the voicemail and certainly for the encouragement. I’m glad we did that explanation of AuditShark because I got a couple other comments that said it really enlightened them and gave them a better idea of the problem, the pain point that AuditShark is going after.
[10:43] So Dave asked basically what is Drip and I kind of have it boiled down to just maybe 60 seconds. In essence, so Drip is an email marketing app. It’s the easiest way to capture drive by website visitors and engage with them using an email mini course. So most of us know we should be engaging with prospects via email but it’s time intensive to do that. So Drip’s single purpose, the sole reason that I came up with the idea and then wanted to build this is to fix that time issue with setting up an email mini course and capturing email addresses on your site.
[11:16] So it goes all the way from capturing emails to helping you create a mini course and then to tracking your trial and purchase conversions from the mini course. It’s basically three steps. The first is you install one snippet of java script code into the footer of your website and then you have an email capture form that appears on every page of your site. So you don’t have to modify any code and you can go into the Drip web app and you can modify that headline, moving forward in the description and we’re going to be adding the ability to split test that form against itself. And you can go to hittail.com and you’ll see it in the lower right that’s an example. You can also go to planscope.io and getambassador.com to get an idea of it.
[11:51] So the next step, after you’re capturing emails into Drip is we offer what I think is the fastest way to get an email mini course live. We literally spent weeks building and honing and making it simpler and simpler and I think we have the simplest email sequence or auto responder management flow. So basically creating an auto responder is very simple and I’ve used mailchimp, I’ve used Aweber campaign monitor and I like to say we’ve turned auto responders into a first class citizen instead it being just a bolted on piece like it is with the other providers.
[12:25] So the kicker is so yeah, we’ve given you a tool but now we’ve put something on your to-do list. It’s to put together a five day email course. So for free originally I was going to charge for this but I figured out it’s just to our benefit to do it for free so no charge to people signing up. We will compile a five day email mini course for you if you have some existing content that we can pull from. So if you have five blog posts or an eBook or something we can grab, we have templates that we just put them into. Basically the end goal is to increase your conversions right? Either to trials or buyers, that Drip should pay for itself every month. And so we track those as well.
[13:01] So you can see if someone originally hit your site from say a Google search, searching for particular keyword, then went through your email sequence, clicked on a link and email number five and then converted. That’s another piece of function I haven’t been able to get out of any other – all my analytics tied together, I still can’t see that. And that’s what Drip has given me. It’s given me insight into hittail’s flow.
[13:24] And then yeah, the last point is we do offer split testing within email sequences which is not something that I’ve seen in any other product. So the most common question after I kind of – that’s the pitch right? And the most common question I get is should Drip replace something like mailchimp or does it add on? And it can do both. We have broadcast emails. We have all the basic functionally with something like mailchimp but we also integrate with mailchimp in case you want to – if you’re really invested in mailchimp or Aweber, sales force or something else. We have an integration where we push every Drip subscriber to your either system. Mailchimp’s done and then we’re working on Aweber and sales force and they should be done in the next couple of weeks.
[14:00] Mike: When I got started with Drip, it was very easy to set up an email campaign where if I want to be able to teach somebody and get them on a mailing list, it allows them to do that very quickly and it automatically builds all the codes to put that widget on my site to capture that information. So that’s not something I’ve seen from other email marketing tools that are out there. And then in addition, the sequencing that is in getdrip is I would say superior to a lot of the other things that I’ve seen out there. Not to say there aren’t things that are comparable but it was just very, very easy, very intuitive to get in, get started to do it and I wasn’t even asking for any help.
[14:34] Rob: Nice. So yeah, it’s at getdrip.com it’s just a landing page right now but we are letting people in slowly like I talked about earlier in the episode. Next we have a voicemail that’s about getting paid upfront before building your app and it actually refers back to comments we made a couple episodes ago.
[14:52] Voicemail 2: Hey guys! Love the show. At the end of episode 147 you answered a question about a listener who wanted to know about getting money upfront before a product was built. Your answer did a great job of explaining the options. And your thoughts on the viability of that technique but I would like to see you spin that in a different way. Maybe more in the way that this guy actually asked the question which was what he heard a lot at MicoConf. That means people were really a proponent of that technique. And also if it’s a needed avenue if you need the development money upfront in order to get the product created. And you really feel like it’s the best way to go. What are some of the things to consider as you actually enter into that strategy? Anyway, love the show. Looking forward to the next couple episodes. Have a great day. Bye-Bye.
[15:37] Mike: I think that’s a great question there. From my standpoint, what you’re really trying to do is you’re just trying to validate that people actually are willing to pay for it. When you ask your friends or your peers whether something’s a good idea, nobody wants to hurt your feelings. So they will probably agree with you in many cases when if you were some random person off the street, they may very well disagree with you.
[15:58] And when you’re talking to those types of people that you do have that relationship with, asking them for money is essentially that dividing line. It’s the red line where the rubber meets the road where they’re going to say is this something that I would actually pay for versus something that I just say hey, I think that’s a great idea. And oh yeah, I think you could definitely charge and make money for it.
[16:19] But if they’re not willing to put their money where their mouth is, that’s where it becomes different. I think that’s in many cases the dividing line between when you’re talking to people that you know versus you don’t know as to whether or not it’s a good idea. If you’re talking to just random people and they’re telling you that it’s a good idea and they would pay for it, then you can take them – I’ll say a little bit more face value because they’re not so invested in a friendship relationship with you of any kind that they’re going to say things that will in some ways appease you. And you don’t have that level of investment with people that you’ve just met I’ll say.
[16:50] The second piece of it is whether or not you want to ask for money when you’re trying to fund a product. I think that one’s a little bit harder for me to answer because I’ve never gone down that road. I would have to say that if you absolutely need some level of money to make it work because you need to invest in tools or what have you, I would be doubly sure that what you’re doing is actually going to be received by the market and there are people willing to pay for it and then if you can fund it through your own personal finances.
[17:18] Because really what you’re doing is you’re investing in your own future whether it’s tools or training or infrastructure what have you, those things are an investment of the future and it’s going to be difficult to get to where you want to go if you’re always looking at things as if they were expenses rather than investments.
[17:37] Rob: First comment that Dave made was about a lot of people mentioning about MicroConf, if I recall, only one person mentioned it and then some other people referred back to it. So I don’t take it as something that’s like super popular or that a lot of people are doing. I know Nathan Barry has done it. He’s the only one that I know who’s done this in recent memory and actually had success with it and got I think he had 1,000 in presales or 1,500. It wasn’t a huge amount. It wasn’t enough to fund the development of it for sure.
[18:02] The question that I have about is because I’ve never done this and I don’t plan to do it. I have some reservations about it. I think we mentioned that. But I’m not even sure it’s legal to take money that far in advance when you haven’t even built anything. I know it’s not legal to take money if you don’t have a physical product to send someone. Do you know if it’s even legal to do it if you haven’t built software?
[18:19] Mike: I don’t know if it’s legal but I’ve done it.
[18:21] Rob: Okay. Well, there you go.
[18:24] Mike: I mean it was for my alteria’s training product. I put it out there, had people – they were able to pay for it, they were willing to pay for it and people were actually making payments and then after they made the payment I had to go and refund their money because I didn’t actually had a product. But it was just because I wouldn’t to put that hard line in front of them to say will you cross this line? And if so, what is the bend for that?
[18:43] Rob: Got it. So that’s a good point. You took the money but then you refunded it right away and that’s different than what – Dave’s talking about doing it in order to fund the product so that you would actually be keeping it. I don’t think that’s legal. I’ve never heard anyone do it to fund a company. The other thing is it could get complicated. Let me give you an example. We started building Drip last December and I had emailed folks in like October, November and said here’s the basic idea of it. Would you pay X dollars a month for it and I gave them a specific price and some people said yes, some people said no.
[19:13] The people who said yes I said okay, I understand it has to have value for but I am going to hold you to that. I wanted them to make a commitment. And that’s the key thing you’re trying to get here is an actual commitment for someone to buy it when it does come out. I felt like since I knew these people, some of them anyway, that their commitment was worthwhile. And if I had taken money at that point for the first month or the first six months worth of the service, it would’ve kind of a crazy ride because I expected it to be done in 3 to 4 months, that was the original development cycle and here we are 10 or 11 months later and the product is just about to launch.
[19:45] I mean we do have paying users at this point so I guess early access would’ve gotten it a few months ago but bottom-line is if you take money from someone then you are really on the hook for something very quickly. Like you can’t say alright I’ll be back in a year, give me your first six months of payments. You need to turn something out quickly. So you’d have to have a pretty small product or be pretty sure about your development cycle.
[20:08] Again, I tend to be a little more risk averse than some people. Some people put $20,000 on credit cards and I won’t do that. And this is also an approach. I don’t think there’s as much value in it as some people might think. It might sound great to get this money upfront and be able to pay for it but I have I serious reservations until I see someone pull it off and pull it off well. I also think just doing it on a landing page which is how I’ve seen it done leaves money on the table. I think that you will get more people to buy if you just collect emails and you actually build a product that you have to show to them and then they can decide whether to buy it or not.
[20:37] If you force them to pay five months before the product’s done, you’re going to get less money upfront during your launch. I don’t know if that still answers the question. Thanks Dave for calling in and getting us to discuss it again.
[20:48] Mike: I think the real point is just getting that firm commitment. And when you ask them for money it doesn’t mean that you take the money. It just means that you’re asking them for money. That’s the very subtle difference I think that most people are kind of skipping over in their minds like oh you’re asking for money so you’re taking the money. It’s like no, I’m asking for money and you’re just trying to get that extra level of commitment.
[21:06] Rob: So our next email is actually a comment from MicroConf attendee Tim Kohl. He says hi Mike and Rob. I was catching up on old episodes of your show today and heard your listener Scott Underwood in episode 147. He described how he was contemplating doing a consulting engagement as basically a product development exercise. I actually did the exact same thing last December so thought I’d share my experience.
[21:29] Tim basically goes on to say that he found a company that approached him to make basically a plug-in and it didn’t have the money to pay his full consulting rates so he says so what I did was charge him 25% of my normal hourly rates with the understanding that I’d be building a mini product that I could resell at my leisure. I made sure to bill in my normal way with an invoice at the end of the month listing the full hour rate and then adding a clear 75% discount at the end.
[21:54] This way the client perceived a tremendous value in the work but didn’t have to pay more than they could afford. It had the added bonus of controlling scope while the discounted hourly rate wasn’t huge, it was still large enough to discourage scope creep and motivate the client not to want to add every little custom feature that wouldn’t necessarily make sense to have it when I resold it. The development portion worked beautifully and all told it took only 50 hours to build and I now have a super niche product for which there’s a real need ad no competitors. Mostly everything I developed is easily applicable to other businesses also in his line of work.
[22:28] So that part was a resounding success. But here’s where I messed up. I figured I’d need to resell the solution to 10 people to break even on the 75% hourly rate discount. And if I only count development time then that turns out to be accurate. But I didn’t allow for any time to actually make sales because users in this market are relatively on sophisticated lot. So they’re very hard to find on the internet and it sounds like it’s just much more of a high touch sales process.
[22:51] I spent almost as much time/money in gathering a list of a few hundred phone numbers and having an assistant prequalified leads as I did developing the software itself and now actually making those sales is held up on me finding the time to make those few hundred phone calls. Anyway if you’d like to forward my contact info to Scott feel free. I’d be happy to talk to him if he hasn’t already pulled the trigger. All the best.
[23:11] Rob: So thanks very much Tim for writing and definitely enlightening. I like the way Tim handled that. I also think a difference is Tim’s product only took he said about 50 hours of development where Scott’s if I recall it’s a Saas app and I imagined it’s several hundred hours worth. Our next email is from a listener in southern Indiana and he’s emailing us about dealing with the angst of being an entrepreneur with a good full time gig and he’s wondering how to get out of the 9 to 5 mindset and frankly whether he should.
[23:40] So he says hi Mike and Rob. I’m 33 years old, married, one kid and a nice house with a big mortgage and a full time gig as a systems consultant. The pay is very good for the area in which I live. I like everyone I work with and everything’s going well. There’s nothing to complain about other than it being mundane sometimes. I always say it’s the best job I could have if I liked working for someone else but I’m not happy. What’s wrong whit me here? I have a deep seeded desire to quit worrying about the mundane details that go on in my job and do something more important with my life.
[24:07] I’ve listened to your podcast and consumed a slew of other resources during this time about moonlighting, working for yourself etcetera but I’ve never made a mental commitment to actually seriously think about quitting my job. It’s comfortable, routine, easy and I have little responsibilities like on call schedules. I also have no real support from my wife, family or friends. My entire social circle is made up of 9 to 5ers that either think I’m “interesting” for running my side business or think I’m selfish and should spend more time with my family.
[24:33] I realize I should go out and meet others like me. They do exist in my community but it’s hard for me. I’m a major introvert and I really hate the schmooze sessions. I’d much rather be coding. It’s also hard because they’re outside of my typical social circle. Frankly I have no idea where I go this bug from. I know no one close by that has any desire to do anything else with their lives. I could go on forever but I’ll spare you. I appreciate any advice or assurance you can give me. I just hope I can get my mindset changed and actually take you up on it.
[25:00] Mike: Well there’s a lot there. Where to start? I think that if you look around the country there are probably tons of other places that would provide you with the same experience where there’s not many people who are in your social circle who are interested in doing those kinds of things. I think that unless you live in or around a major city then chances are really good that you’re not going to have friends who are also trying to build a software based interest business. So that’s the first thing. Definitely don’t feel like you’re alone in that regard.
[25:33] The second thing is that you have to really decide whether or not it’s something that you want to do or if it’s just something that you’re interested in. I’ve heard a lot of people who basically looked at different things that they were interested in doing in their life and decided hey, do I want to build a business around this? If you’re interested in let’s say golf, do you want to go out and become a professional golfer? That may or may not be realistic depending on your skill set but the same time, once you decide to do that full time, it becomes a job.
[26:01] So is that what you want to do to yourself? Is that the position you want to put yourself in terms of billing a product? It sounds to me almost like you might be in a better position if you have a co-founder who can do a lot of the customer development side of things and push on that side that you’re not necessarily comfortable with or that you don’t want to do because you’re going to find that when you own your own business, there’s a lot of things that need to be done and if you don’t do them, you’re going to have to find somebody else to do them or they don’t get done.
[26:30] So those are just some of the challenges that you’re going to probably run into going down this road. But I definitely feel like this is a mindset thing that a lot of people have. It’s very difficult to give up a 9 to 5 job that’s very steady, very stable and pays very well. I think if you don’t have the support of your friends and family, I mean your friends are one thing because they may not necessarily understand what it is that you’re trying to do but definitely if you don’t have the support of your family, is very, very hard to try and do anything substantial or make it into anything more than a hobby.
[27:00] Rob: I think the first question that you should ask yourself is how unhappy are you at your job? It sounds like you like your job but there’s some restlessness going on. But how burning is that restlessness? Is it just killing you? Because the people that I know who have left their jobs and made this work, they had to do it. Like in all caps, THEY HAD TO DO IT. It wasn’t a matter of I’m comfortable, I might want to do something – wouldn’t that be fun to do it? Because you’re just not going to make it. You’re not going to make it through the long nights, the weekends, the comments from friends and family, all that kind of stuff.
[27:33] If you have to do this you absolutely – you view it as kind of a lifelong regret if you don’t do this, if in 30 years you look back and said you know what, I had a good life as a consultant and you imagined that that’s going to make you happy then do that. But if it’s a burning desire, and it’s something that you absolutely cannot live your life without doing, then take this more seriously.
[27:52] Second question I would ask is really try to get down to the nuts and bolts of like why do you want to leave your job? Where does that come from? I think like Mike said, is it just an interest or is that something like a burning desire? Is it a hobby? Because I was into startups in the 90’s when I was in college and it was just this fun kind of diversion. It’s something like I don’t know, watching reality TV or reading a romance novel on the plane. It’s just kind of a fun entertainment thing and is that what it’s like for you or do you feel again this burning desire to kind of have a legacy that’s different than the path you’re traveling now.
[28:25] I know it’s complex. It’s not something that we can answer in a single podcast episode here but I hope that helps and definitely thanks for looping us in on your decision. I imagined that a lot of other listeners might feel this way as well. Alright, our next question is about how much this person can charge for their twitter digest service.
[28:43] This is from Andrew Bonnello and he says hi Rob and Mike. I wrote TweetQureet to scratch my own itch and we’ll link that up in the show notes because the name is hard to spell. He said my own itch is too many interesting people to follow, no time to monitor my timeline for top stories. Lists are manual and need maintenance. Tweet recommenders I’ve seen send to use social signals like retweets rather than subject and theme. Can daily tweet filtering based on the user’s own interest be automated?
[29:08] Once the user signs up, they get a daily email digest of up to 10 top tweets. If there are more they can explore a timeline page with the full list. I’ve completed the initial bare release and I’m looking to grow rather than branch the product in new directions. For enterprise customers I want to figure out how much can I charge individuals who get value out of the service. I’m not looking for exponential growth in user numbers or a high profile buy out. I just want a solid engaged user base and a recurring monthly revenue stream of three or four figures. Do you have any suggestions?
[29:36] And a little bit of background, he says I’m a software developer formerly at Google and DreamWorks animation. I quit full time work about three years ago to try and use my software skills to build a sustainable online business for myself.
[29:46] Mike: It sounds like this is geared more at the consumer market than at the business market. Twitter already sends out emails on a daily basis to say hey here are top tweets from people you follow or people you might be interested in hearing from. But it sounds like this is positioned a little bit different where they’re essentially data mining the people you follow to find out what stories are trending within that list of followers that you might be interested in hearing from or hearing more about.
[30:15] Obviously if you’re following a lot of people then there’s tons of tweets that fly by on a daily basis that you never see. So this is essentially a service that will help you filter those down a little bit. It’s hard for me to just generalize and say this is how much you could charge for but because it’s a consumer based product or at least that’s kind of the way that I see it, it seems like you probably could not charge very much.
[30:37] I think that probably $10, $15, $20 is probably the top range. I hate saying you should charge $5 or $6 for it because you start getting down to the point where one support call just blows your entire profit for the entire customer. I think that the $10 to $20 range is probably something you could pull off but again I look at something like this and I would probably not use it. I don’t know if I’m the best person to be asking for pricing advice on that.
[31:03] Rob: I think that’s the key is asking us, you can get our opinion but I probably wouldn’t use this either so I think you really need to find people who are willing to pay you for it. They’re the only people who can tell you what they’d be willing to pay because they get some kind of value out of it. If you’re trying to bootstrap and app like this, you need to find revenue. And in order to do that you have to provide value. So who do you provide value for?
[31:27] I can imagine this as a funded IOS app that’s given away for free when someone raises a million bucks, builds it and then tries to sell it to a twitter or raven tools or Google or someone. So I just don’t even know there’s a revenue model here until you have someone paying you money, I don’t know that I think that there actually is a group that’s willing to pay you unless you do go up into the B to B space. Right?
[31:51] You try to make this – I think we talked a little bit about on twitter but try to make it a brand monitoring or some kind of system that actually helps a company save some time, makes them money, saves the money that’s sold on value. Without that, I just don’t know. Without really knowing who desperately needs this, if it’s just all consumers can use it, then it’s not going to fly.
[32:12] Mike: Yeah. I think the biggest problem that I see with this is that essentially you’re showing people tweets that presumably they’re probably already getting in some way, shape or form and you’re aggregating them in some special way that allows them to see things that are most interesting to them which is very subjective to begin with. So essentially what they’re paying you for is a level of trust that you are searching through the tweets that they’re already supposed to be getting and presenting them with ones that you feel would be interesting.
[32:39] And because those things are already available to them, then you’re somehow saving them time of searching through these. But you’re bridging that gap between how much time are they spending on it versus how much effort does it take to find those. I think that in the consumer space people value their time a lot less than in the business space.
[32:58] Rob: Our next email is from Doug Martin. It’s on the value of consistency. He says I’ve been a long time listener. As I hit refresh on iTunes this morning I had to smile as I saw you guys have put up yet another episode. My podcast list is cluttered with shows that’s repeated out over the years. It is good to know I can count on you guys for great content regularly. Keep up the good work.
[33:18] I just wanted to read that not so much that it’s a compliment to us but it’s more of a testament to like putting something out every week. Remember that it’s easy to be great. It’s hard to be consistent. A lot of people come out and they put out a flurry of 7 or 9 episodes and then poof, they’re gone. And unless you have some kind of idea in mind, some kind of vision, some kind of revenue model, like you have to have things in place, just coming out and putting out a podcast for a week is a nontrivial thing. So definitely appreciate it when folks take notice. I think that’s the reason that we have been able to build an audience over these years is just showing up every week, every Tuesday morning right? Right in their iTunes feed.
[33:52] And our last email of the day is from David Lepont and he says hi guys, I have a comment about your episode where you talk about AB testing. He says I have a reaction to the part about calling customers which as he said is supposed to raise conversion rates. So he’s talking about if you asked for credit cards upfront, then you get a good conversion rate, but if don’t ask then you’re supposed to call customers. That’s kind of the rule of thumb. It’s what I see working with Saas apps who don’t ask for credit cards.
[34:17] He says personally I hate being called by a software company and I find that really aggressive and it would very likely have the opposite effect on me. Many people of my age in their mid 20’s really hate to speak on the phone and feel like every interaction originates from the web or the software world should continue as a communication method on the computer or on the internet. Emails with incentives are really more appealing to me. I don’t know your thoughts on that but that’s my opinion.
[34:39] Mike: David thanks for the reply in that. I do want to point out that just because that’s the way you feel doesn’t mean that that’s the way other people feel. There are definitely people that feel the way that you do and it would probably push them away. But when you’re looking at the numbers and analyzing them kind of independently of feelings, if you’re looking at those numbers, if you’re getting a 20% to 30% measurable increase in the performance of your sales campaigns by reaching out and calling people or if the average dollar amount of a particular sale is going up by calling people then it’s very difficult to argue. Well we shouldn’t do that because there are few people that we’re going to make angry or they don’t like it.
[35:19] Because at the end of the day, you’re in business to stay in business. You’ve got to make money in order to stay in business. And if you’re not making those sales calls and you have to let people go because you didn’t do it because it would make you feel bad to call people when the other side of the coin is you have to let people go then chances are good you should be making those calls. This just kind of continued upon you actually offering a product that has value and the fact of the matter is that you’re running a business and the number one goal of the business is to stay in business.
[35:47] Rob: Yeah. I think a couple of things. One is remember that you’re not your customer. So what you prefer isn’t necessarily what everyone prefers. In aggregate, numbers don’t like. So like Mike said, if it raises your conversion rate overall, that’s something to really keep in account of. I hate phone calls myself. I don’t answer my phone during the day at all. But I have noticed that when software companies have called me and at first, it does kind of put me off but it does remind me that I signed up for their trial and some of them have converted me not by talking to me on the phone but it reminds me to go back in and yeah, that’s right. I have to cancel that or I want to take another look at it. And frankly it’s probably worked more times than it hasn’t.
[36:27] So there’s kind of this fallacy. Developers fall into this a lot. It’s where they say well, I hate signing up for email lists and getting all the spam. So email doesn’t work so I’m not going to have an email signup form and yet we know that email is one of the best, if not the best marketing approaches out there today. And so don’t fall into the trap of thinking because you don’t like something that it doesn’t work.
[36:39] Mike: Yeah. There’s a lot of things that coming from the world of developers and then kind of moving over and doing marketing and sales, there are lots of things that as developers they always irritated the crap out of me and then in going over and seeing the other side of the world is not like everybody’s a developer. There are tons and tons of people who are not developers who don’t fall into that mindset. And you kind of have to keep an open mind when you’re looking at those things.
[37:13] Music
[37:17] If you have a question for us you can call it in to our voice mail number at 1-888-801-9690 or you can 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. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 150 | Ten Ideas for Things You Can A/B Test
Show Notes
- Follow @AuditShark
- Andy Brice – Successful Software
- Neil Patel – QuickSprout
- 7 Simple A/B Tests that can increase conversions by 10% or more
- Unbounce.com
- KISSmetrics
- Hub Spot
- ChatterLime
- CrazyEgg
- Inspectlet
Transcript
[00:00] Mike: This is Startups for the Rest of Us, Episode 150.
[00:03] Music
[00:10] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
[00:19] Rob: And I’m Rob.
[00:20] Mike: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
[00:25] Rob: Well a day or reckoning is here for Drip. Remember the prelaunch email I sent out to 300 something folks a few weeks ago?
[00:31] Mike: Yeah.
[00:32] Rob: Well, we got a bunch of them into trials. They got on boarded and late tonight, sometime after midnight a bunch of them are either going to convert or not convert to paying customers. It’s been exactly three weeks and we have a 21 day trial. So rest assured you can imagine me this evening sitting with very large glass of bourbon and waiting for the news and watching for the billing email to come in. Either way, it’s either going to be a great news and I’m going to celebrate or it’s going to be very bad news and I’m going to drown my sorrows in that glass.
[01:03] Mike: I see. I mean do you have it setup so that people can cancel before it gets to that point? Are they notified or…
[01:08] Rob: Absolutely. Yes. So three days before typically with like a 21 or a 30 day trial, emailing goes out three days prior and it says look, you’re going to be billed or if we don’t have their credit card on file because there’s a few folks that got a no credit card trial early on then we ask them hey, if you want to continue you need to enter your credit card. So everybody gets notification. That’s the idea.
[01:29] And as always, with all of my apps, if they do get billed tonight and they come in tomorrow and they’re like I meant to cancel, we refund them and we cancel their accounts. So it’s not about tricking people into doing it. It’s about letting them know and keeping them happy as customers.
[01:44] Mike: Right. But do you have any sense of how well it’s going?
[01:47] Rob: I do. I’m the cautious optimist. I am excited about it. I’m very pleased with the numbers that I have but I hate talking about things in public like that because if they don’t turn out I feel like I made a big mistake or I misjudge things and then be able in retrospect to talk about it in and the lessons I’ve learned.
[02:04] Mike: Cool.
[02:06] Rob: How about you? What’s the update with Audit Shark? After last week’s episode we’ve already gotten several comments and a couple emails. So I’m interested to hear what’s new?
[02:13] Mike: Well I’m labeling the new UI overhaul of Audit Shark as code complete enough. Essentially that means things are well enough that I can basically push it over the top of the existing version. I haven’t had time to do that. I just haven’t had time to try and push that out to the cloud yet. But there’s remediation steps are being added in to the database and should be done in the next week or two. I talked to the policy developer about that. There’s a few things that need to go into the dashboard but those can be added in over time so I’m not real worried about that.
[02:43] And then there’s other little things here and there like in app walk through, some documentation need to be added. But I think those are minor enough that I can push it out over the top of the existing version and just kind of be done with it and call it code complete enough.
[02:57] Rob: Cool. I re-listened to last week’s episode after the editing and there are a couple of things that I think I’d ask that wound up on the cutting room floor so I wanted to bring them up. One was regarding remediation and you know that customers want that but from what I’ve seen, you haven’t asked the customers who’ve used it if they will pay you at that point if it’s worth it or if – I talked about this is your biggest risk right now. Right? Is not knowing if they’ll pay you.
[03:21] So I guess in the back of my mind it’s like that being your biggest risk, it seems like if you asked them before you implement it then at least you have an idea of whether or not you’re going to be able to charge them for it once remediation is in. Have you thought about that?
[03:33] Mike: I didn’t because I looked at it from a perspective of some of the early feedback I got was okay I’ve done this stuff, now what do I do? It’s like if you used the application and you get to the point where it gives you the results and you just don’t know what to do then that’s a failure on my part. It essentially means that I need to present the information about how to go about fixing that stuff.
[03:55] And when somebody sent me a screencast it actually had some of that information in there. And they just said I’m trying to match these up between what the rules are and what the results are and it’s hard to do and it doesn’t tell me what I’m supposed to do to fix this. I don’t quite understand. I knew that was kind of a gap but I wasn’t sure if I’d b able to get away with it. But it seems pretty clear just from the – you know how you can hear things in a screencast or a video that are a little bit – you get the intonations and things like that you definitely don’t…
[04:22] Rob: Nuance.
[04:23] Mike: Yes. The subtle nuances about how somebody says something and it gives you the impression that’s really, really important. So I have not out right asked but my impression was yes, this is extremely important. It’s got to be there.
[04:38] Rob: Right. And I don’t doubt that, that remediation is something you have to have in advice, at least information on how people can fix their stuff. The thing that I’m wondering is is it that enough? Is that the point at which Audit Shark provides enough value that someone will pay you? Or in say two weeks to get remediation done, is it okay? Here’s my early access people. Now we have remediation. Now are you willing to pay for it? And they’re like well, not really because you still have to build out these other few things. And that’s where the launches just go on and on and on or you kind of never get to launch.
[05:07] So that’s what I’m curious about. I’d love to see you do either some emails or just some interviews, quick Skype calls with some of your early access people and ask them if Audit Shark had this in it, is that the point at which you’re willing to pay my price for it?
[05:22] Mike: That’s a great question. I definitely have to do that. That’s kind of next up on the docket. I mean I have to start reaching out to them and finding out more of that information. One of the things that has come up, a lot of the stuff in the news lately about the NSA spying on people and gathering information from them and there’s questions about sending data from their servers back to mine which are stored on Microsoft’s azure platform. So it’s like well if the NSA has access to those then do they have access to my data and it’s just kind of an open ended question that in some ways has to be addressed in a technical level but it also has to be addressed in a marketing level too.
[05:56] But it did give me an idea about if I can address it at the technical level, would that be a leverage point that I could use to get into additional customers. Hey do you want to make sure all of your stuff is protected from the eyes of the NSA? Not that it’s a guarantee but I can certainly help lock down those machines so that people can’t get in inadvertently…
[06:17] Rob: Very good.
[06:18] Mike: But I totally get where you’re coming from where like there’s certain questions that I have to start asking and that’s definitely one of them.
[06:23] Rob: So in other news, I’ve started doing a little bit of angel investing. It’s interesting. I looked back about 8 months at some goals that I have for 2013 and I really wanted to get more involved with just a handful of startups. I’m only going to do maybe four or five a year and they’re very small amounts like $5,000 to $10,000 certainly until I get the hang of it. But I don’t know, I just find it intriguing to be kind of part of other startups that I’m not running and to have some kind of stake in them even if it’s a small one, I really enjoyed being part of the WP engine investors just hearing the news and watching the growth.
[07:01] It’s that interesting thing of taking those steps up the ladder where you’re an employee and you’re self employed then you’re a business owner and then you’re an investor. Those are kind of – I think of Robert Kiyosaki. He did lay that out. And I liked that idea. So to me I see investing and being able to make money from that is really kind of a high tier of doing things. And I have some cash sitting around from all of my businesses and since I’m not acquiring my next one I feel like it’s just not working for me. Right? It’s not actually doing work. It’s not earning anything sitting in a bank account.
[07:35] So I’ve invested in one here locally that’s pretty cool, kind of a little tech hub software cluster thing that’s going on. And then I think about 3 or 4 others in the last couple of months.
[07:43] Mike: That’s really cool. Yeah, you have to let us know how that goes. I mean I understand there’s only so much that you can say about them or how it’s structured and everything but it’d be interesting to see how that progression goes because I totally get the idea of being a full time employee and moving up to starting your own company and building your own stuff and going on to invest in other peoples.
[08:02] Rob: You know I’m a bootstrap founder right? I certainly believe in raising funding and I think there are cases when funding is a good thing. I think at some point I’ll probably – once I get the hang of it and have any type of insight into it, I’ll probably talk about it on the podcast. But at this point I’m just such a newbie at it and it’s not even worth really hearing my thoughts yet.
[08:21] Mike: The only other things I have going on as I talked about before I was doing some paid advertising campaigns through Facebook and they still need some refinement. Last week I was getting a lot of noise because some of the links that I had pushed out there to some of the landing pages I wasn’t using the right query strings so now at this point I’m starting to get good data but one of the other things that I’ve tweaked was the twitter strategy that I’m using.
[08:45] In just the past week, the twitter followers for the Audit Shark account have kind of stalled out about 180 followers or so. And over the past week I’ve added another 75 followers. The traffic is – I can see it in the analytics its actually translated back into website visits for Audit Shark and a landing page sign ups and that’s nice to see.
[09:04] Rob: That is nice. Instinctively man, I would totally not do twitter at this point. I think it’s too early. Just the value of email, I would say it’s ten times more valuable but I really believe that and I know you’re saying it generated some people on your email list but I think prelaunch, I have a Drip twitter account but at this point it’s really just to kind of gather some followers. We’re not pushing anything out because I just don’t know the real value that’s going to get you at this point right? So early. Unless we’re going to do content marketing or you’re going to be really pushing a lot of stuff out which then gets really time consuming. I think focusing on building that email list is the way to go.
[09:40] Mike: Well the thing is dripping out that content on the Audit Shark twitter account is outsourced at this point. I don’t actually do it. I’m having somebody else do that. The other thing that I found is of the links that go back, about 30% of them are converted into emails.
[09:52] Rob: That is nice. That might be worth a thing. Yeah.
[09:57] Mike: So yeah. I mean it is worth it but there’s a question like how many twitter followers do I actually have and how many am I reaching? Right now that number is really small so that 30% I don’t put a lot of stock in it just because the sample size I think is too small. But it may turn out that if I’m able to amp this up over time, if I am able to kind of get a sustained following week in week out and scale this up then that could be a viable strategy moving forward and it could conceivably help take it to the next level.
[10:29] But because some of that stuff is kind of automated right now, I’m not too worried about spending my time on it. I obviously got a lot of other things to do but I’m just looking at the numbers themselves and making sure that I’m capturing all the information I need to make sure I understand whether it’s worth it or not.
[10:44] Rob: Right. And by automated you mean you have someone doing it. It’s not a bot.
[10:47] Mike: Yes.
[10:48] Rob: Right. Cool. Last point of discussion before we dive into kind of the main feature point of this episode, MicroConf Europe speaker Andy Brice, you might know him from successfulsoftware.net long time blogger he’s a solo founder and he has Perfect Table Plan which is his desktop software that helps people plan their seating charts at weddings. And he’s made a full time living off this for years, offers a lot of good insight on his blog successfulsoftware.net.
[11:15] He is hosting a two day training in Witlshire England in late November. I’m only getting up in the show notes. He has tested a ton of marketing approaches over the years. He has kind of that B to C desktop product. So if you’re anywhere within driving distance of Wiltshire, England, I would definitely consider taking him up on that offer.
[11:34] Music
[11:36] Mike: Today we’re going to be talking about 10 ideas for things that you can AB test in your business. I’m in the midst of working on a bunch of different landing pages for Audit Shark. In doing some of the landing page research, I started coming across a lot of AB testing sites which offer ideas on things that you can test that were not necessarily specific to landing pages.
[11:56] So in episode 148 we talked to Clay Collins specifically about some of the different marketing trends. We talked a little bit about the types of things that do and don’t work but I also wanted to discuss some of the specific tactics that I’ve come across. Not all of them are related to landing page design but some are just simply AB testing you can use to test out your marketing funnel or to use on your pricing page and things like that.
[12:18] I thought it would be a good idea to talk about some of these different things that you can try, not that anyone who’s listening to this is going to try all 10 of them but they’re just interesting ideas that may work in your business or they may not even be applicable but I thought it’d be interesting to just kind of highlight some of the different things you could use.
[12:35] Rob: Right. So these are 10 things aside from headlines right? Because the headlines are the first thing that you should start with. That’s going to tend to be set the messaging up and everything so that’s kind of like number 0 and then starting with number 1, what do we have?
[12:49] Mike: So the first one would be to test whether or not a free trial button is going to work out and we’ll link this up from the show notes because several of these come from a blog article from Neil Patel. But one of the things he highlighted was that if you have a free trial button there, try taking it out or adding one in and letting people know that there is a free trial and seeing if those people go through your funnel and covert. I think the example that he had shown, there was something like 160% increase in signups by adding in a free trial button.
[13:18] Rob: And is that oppose to like a download now button if you’re trying to get say get someone just to get their email and to download something or versus a buy now button?
[13:28] Mike: It was versus a buy now button in that particular case.
[13:31] Rob: And I’m curious about all these. Right? I mean I’ve seen people send – let’s take paid acquisition or SEO traffic. I’ve seen them send it to a landing page and just asked for the email with a download now button offering some type of template or report or something like that. And then track those conversions over time versus just having that try now versus having the buy now.
[13:54] The interesting thing is that depending on the niche, depending on how good your messaging is, there no rule of thumb that I know of the best way to do that. Right? It really depends on you price point, how well you pre-sold someone with an ad, how well your landing page copy is. I think those are maybe some variations that you can think about not just the button itself but actually the whole kind of message of the landing page.
[14:16] Mike: Yeah. That’s exactly right. And again you have to think about this list that we’ve got here are things that you can try that some may make sense for your business, some may not. In terms of the question that you pointed out, is it a free trial versus a buy now or download now or sign up for an email list. The specific example that we’ll link to as I said was a buy now, but take that into consideration about what it is that you’re exactly trying to get people to do.
[14:39] So obviously you’re not going to have a free trial for an email, when you’re trying to capture an email. Free trial versus buy now and even the text on that free trial you may have some other text other than a free trial, 30 day trial or something along those lines. You can try different things.
[14:53] So the next one we have is asking for credit cards upfront versus later on. I think my inclination is to believe that if you’re collecting the credit cards upfront it’s going to essentially disqualify or weed out the people who are not interested in your product or they’re just kind of kicking the tires a little bit. They see that there’s a free trial to sign up for it but they may or may not necessarily be engaged with the product.
[15:14] And depending on how you kind of walk them through the sign up process and on boarding process, it’s going to have a lot of influence over whether or not they ultimately become a customer of yours. That said, I think collecting those credit cards reduce this friction later on and it’s not to say that having friction upfront is a bad thing or having it later on is a bad thing. It depends a lot as you said on your product. But this is certainly something that you can try. My inclination is to believe that capturing them upfront is probably better but it’s something you should definitely test in your business to figure out whether or not it does make a difference and how much of a difference it does make.
[15:49] Rob: I know companies who make both of these approaches work. I’ve said on the podcast before many times that I always default to asking for credit card upfront but the companies who make not asking for credit card upfront do some very specific things. They’re very experienced. Just reminds me a little bit of having a free plan in the sense that free plans can work in certain circumstances if you’re an expert. I feel like credit cards are the same thing.
[16:13] If you punt and you say I’m not going to ask for credit cards then you have to do some specific things during the trial. Most of the companies I know who are making it work are actually getting telephone number instead of credit card and they are having people call them. So if you’re not going to do that or you’re not going to have a well crafted trial email sequence that provides a lot of value that gets people on boarded and then that encourages them heavily towards the end to enter their credit card then you have failed. I don’t know anyone who is not doing that who is making the no credit card approach work.
[16:44] So credit card eliminate tire kickers. They bring in more qualified leads. They bring in people who when they request a feature from you, you can say well at least this person was into this, the value prop of my app enough that I can listen to them. Let’s say you run an experiment and you didn’t ask for credit card and you get 100 people in your free trial. Then you run the same experiment a month later and you get 20 people. So it’s 20%.
[17:09] Who are you going to listen to when people ask for features? You should listen to the people that are more qualified as a rule. And so especially in the early days of your app when you really are not sure what your value prop is, keep trying to figure out what to build. You want more qualified people because those are going to be the people that are more likely to pay you and the people that are more likely to get value out of your app long term.
[17:28] Early on, you don’t need more feedback. Trust me. I’m going through this right now. I have a feature list a mile long and my biggest task these days is weeding that down to which one should we build for the very specific audience that we serve and it’s going to get value from my app. So that’s where especially early on I think asking for credit cards is critical and then testing later on is definitely worthwhile but only once you know what you’re doing and you’re able to handle it with some expertise.
[17:55] Mike: I think the important piece that I heard out of that was the part where if you’re not asking for a credit card, you have to ask for other information. I was at a business software conference a couple years ago where there’s a company and I won’t say their name but they had a software that you could download and you had a trial. As part of that, they would ask you to fill out this information and then you’d get your free trial.
[18:18] Part of that, they would ask you for your contact information and they would actually have developers call and talk to the prospective customers and find out what they liked about the software, what they didn’t, whether they were going to purchase it or not. And they find out that by making those calls, their conversion rate increased something like 60%. It was ridiculous. And their average price point for those purchases was something like 40% more than if somebody had just simply purchased off the website.
[18:45] Rob: Right. So if you have the expertise and the man power to do that, if you think of some of the big venture funded startups like at Kiss Metrics, they don’t ask for credit card upfront but let’s be honest, they have a lot of money. They have a lot of people and they have a lot of folks making phone calls. They’re really kind of working it exactly the right way. And yeah, take another example like Hub Spot. It doesn’t look like they ask for credit card before free trial but go to their free trial page. They ask for first name, last name, email, phone, company name, website URL, number of employees on and there’s like four more questions literally and they’re all required.
[19:17] So yeah you’re right. They’re not asking for credit card but they’re asking for that all information. They are pre-qualifying people because they don’t want to waste their time chasing after tire kickers.
[19:25] Mike: And I’d be willing to bet that they have probably AB tested the heck out of that page just because I know how Dharmesh is in giving his predilection for going after stats and statistics and measuring everything.
[19:37] Rob: Absolutely.
[19:38] Mike: So the third idea for something that you can AB test is to try using trust symbols such as hacker skin and icons or SSL certificate icons, maybe even an extended validation certificate so you get the little green bar in the website browser. And I think these are more applicable on a landing page or where your – to actually taking order information, you’re trying to get them to follow through with an action and you’re trying to inspire confidence and trust.
[20:03] Sometimes you can do that with text but obviously there’s all these different trust icons that you can use from different vendors that will help inspire trust and confidence in your company and in your website.
[20:13] Rob: This is something I’ve never tested. I have added trust symbols to my pages but I’ve never tested conversion rates with trust symbols and without – I heard they work and improve and all this trusted app but I’d be interested if someone has data. I was having dinner with one of the founders of Foxy Cart who sponsored MicroConf last year. They have hosted shopping carts software.
[20:35] And one of the things he said was payment preferences like offering PayPal versus Amazon versus just entering your credit card number and the major differences that they see and one of the things he said was having a buy with Amazon button when someone’s purchasing a product on an e-commerce definitely raises conversions. So I think that’s another thing that you should consider is offering – it’s that easy low friction ability to pay by clicking that one button since you already have your credit card on file with Amazon.
[21:01] Mike: So the fourth idea is to use a live chat widget. This is actually something that I’m testing right now. I’m working with a company called Chatter Lime and essentially what they have is they have a live chat widget and I haven’t integrated into the site yet but the time this episodes goes live, it will be out there.
[21:18] But essentially the idea behind having a chat widget is if somebody has questions about your product, they come to your website, they’re not really quite sure what to do nobody’s going to go to the FAQ page and actually read it. But if there’s a help widget there that either pops up dynamically and asks if they have questions or if it’s just off to the side that they can interact with if they decide that they want to, then they can go ahead and do it.
[21:42] And the difference with something like Chatter Lime is that they actually have people who are manning that behind the scene so I don’t have to do it essentially off loading the capabilities to them and essentially providing them with script. But they can provide me with transcripts to let me know what the conversation was like, what sorts of questions were asked and then essentially enhance whatever the database of answers is that they’re going off of.
[22:05] I feel like this is a huge win in terms of being able to interact with your customers not just for me in Audit Shark but I think in general, most people would find that to be very, very helpful. Obviously I’m going to test it. They’ve see 30% increase in conversion rates in some cases but it seems like it’s definitely worth testing.
[22:23] Rob: I agree. An interesting part is there are a lot of these widgets coming out that you can stick in your site. We were talking before we started recording that you could have a Drip widget in the main area of your site and then once you get into kind of a checkout flow you could add the chat widget. So right when people are at the decision point they have questions about your pricing or your registration page, that’s when you can add a chat window and bravo to Chatter Lime because they’re following this trend that I brought up a couple episodes ago about the DFY versus DYI. It’s like done for you versus do it yourself.
[22:54] And it’s going up market. It’s basically charging more but then they don’t just provide a widget like a bunch of other places do. They’re actually adding that concierge element. So as a founder of Audit Shark, you’re willing to pay them more so that you don’t have to man it yourself or have one of your people doing it. So I definitely think we’re going to be seeing more and more of that kind of business market where you’re going up market and doing the software and service as a single offering.
[23:19] Mike: So number five is to evaluate the number of form fields. As you mentioned before with Hub Spot on the free trial sign up, they’re actually asking for a lot more information and the general rule of thumb is to ask for less. I think that with Hub Spot, what they’re doing is they’re asking for a lot more and in some cases especially if you’re selling any sort of products that deals with sensitive information, it almost seems like asking for more information is going to inspire more trust from the person who’s making the purchase because they’re essentially giving more information.
[23:50] Their vendor is prequalifying you. Maybe they’re looking into seeing who they’re actually working with. They’re doing a little bit more to protect the information. And whether that’s true or not is kind of immaterial. The ideas that if you’re giving them more information, then chances are you’re checking it out. And I’ll give you a very specific example of that. How would you feel about going and buying let’s say an eBook where all they’re asking for is your credit card number and the expiration date?
[24:16] Rob: Well maybe I’d want them to get my email so they can send me the book.
[24:19] Mike: Right. But if they’re not asking for like the CCID number or your name or address or zip code or any of that stuff, wouldn’t that strike you as a little bit odd?
[24:30] Rob: It wouldn’t to me but only because I know that all you need is a credit and an expiration to charge most cards and then you need CVV maybe as some added validation. So I don’t actually ask for address often times like if you go to the HitTail registration from, I don’t ask for address. I don’t think we ask for zip because stripe indicated at a zip is not – if I’m not doing AVS it’s not needed to do just the basic charging and it’s not going to help me get more charges through.
[24:54] Mike: I can definitely see that from programmer’s perspective but I think that from the average user’s perspective they don’t necessarily know all that stuff.
[25:01] Rob: Right. And I’m the man behind the curtain in that scenario.
[25:03] Mike: Right. And that’s kind of my point. But until you actually try this you don’t necessarily know. I think it depends a lot on your product and the type of service that you’re offering and price point and all that other stuff. But again it’s something else that you can test.
[25:15] One thing that I found interesting and this is number six that I came across was adding a sign up form directly to your home page. Have you seen people do that before? Instead of having a call to action where they click through and go to a pricing page or something like that, they actually have their sign up for embedded right into the home page.
[25:33] Rob: I have seen that. You can see an example at outright.com which is an accounting package. If you go to basecamp.com at least the version I’m seeing, I know they split test quite a bit. That one has start your free trial form right on the home page.
[25:46] Mike: Yeah. That’s not something I actually thought about a lot but I did come across something that people are testing to find out whether or not that works and converts or not.
[25:55] Rob: I think it’s an interesting question. I would tend to not do that. I think it’s worth testing but to me I want to optimize the site for first time visitors or for maybe returning visitors who are thinking about potentially signing up. So for first time visitors it’s very unlikely they’re going to land at that page and know that they want to sign up. You have to give them some information about what you are, what your pricing is, what the app does, what the benefits are.
[26:20] I’m not necessarily convinced that having that form right in front is really going to be that useful now. If Basecamp is testing and it’s worked for them and maybe they have kind of a different market or if they’re sending certain types of traffic to it, I think this comes back to something Clay Collins said a couple episodes ago where he talked about the two step opt in process and he talked about like a giving page versus a taking page.
[26:42] And if you arrive at a page and it’s instantly asking you for information, it may put some people off. So actually not having the form there but having that sign up for free trial then you’ve made them click a button to get to that next page in order to – they actually initiated some type of action in order to do it.
[26:58] Mike: I almost feel like there might be other stuff that’s probably lower hanging fruit that you could probably go after and push this off to later.
[27:04] Rob: Yup.
[27:05] Mike: So number seven is to test your testimonials with or without photos and names and websites and company names. This one struck me as a little bit odd. I wouldn’t have thought to start removing some of those things. I would’ve thought that the most compelling types of testimonials would be ones that have pretty much everything. It’s got the name. I think put in a face and a name and a company or a title or something along those lines, giving prospective buyers the confidence that other real people are actually using your product would be the way to go.
[27:36] Rob: I would agree. In my experience, video and photos with testimonials have increased conversions. Adding all the other stuff, adding a bunch of text, name, website, company name, all that stuff, maybe. I mean if people will recognize the company name that it has a meaning but really just having kind of a first name in a website URL or giving them an indicator that they’re legit is one thing but then adding a bunch of text to, I don’t know how much that helps. I think you’re going to have much more impact when dealing with a visual element. Like having that nice headshot there versus not having one or even having a very short small video testimonial.
[28:13] Mike: Number eight is to leverage different types of directional cues and directional cues can be anything from giant arrows that you’ve actually put on the screen or people looking or pointing on different stuff on the page. You can find these in a variety of different places. And I’ve actually done this on the Altiris training website where’s there’s a picture in the lower right corner of somebody who’s actually looking at the view pricing button.
[28:38] I haven’t done a lot of testing to see how much that has really affected it but I have kind of learned over the years that if you use those directional cues, they can help. And because the site doesn’t get enough traffic it’s just not worth AB testing it. But if you do have enough traffic then that’s something that you can look at.
[28:55] Rob: The directional arrow is just kind of an old internet marketing tactic people have used for years. I did hear that Brecht Palombo over on distressedpro.com he said he’s sending some – I think it’s paid traffic to a landing page and it has a head shot of a woman and she’s looking at his button like the call to action button and that’s something that I’ve heard people do. I’ve never used the arrows or people looking at or pointing that stuff but that’s not to say that it doesn’t work.
[29:21] Mike: Yeah. I think for something like this you really need to have software installed that actually takes a look where people’s mouse pointer is going like CrazyEgg or Inspectet or something along those lines so that you can get a much better sense of whether or not that’s working. Because I think that just judging the numbers may be a little difficult but if you can pin point on what people are actually moving their mouse over then that would help give you a better indicator whether or not it’s working.
[29:45] Number nine is to display honest reviews of your product or filtered reviews with your product. And there’s obviously a difference between filter reviews essentially tell everybody the good things about your product. But if you notice on Amazon.com there’s a lot of reviews there that tell you how awful a product is and all the different things that are wrong with it. If you go back, I think it’s still on the MicroConf website but there’s a talk that was done by Jason Cohen of wpengine.com where he talked about honesty.
[30:17] There’s some pretty compelling evidence into here that suggested that if you’re providing all of the negative reviews along with the positive reviews then you’re going to increase sales. I think one of the example he used was Kodak. Another one was Amazon, I mean there’s a lot of anecdotal evidence that suggest that using those is going to increase the conversions. I don’t know whether that translates directly to just using filter reviews. I would think that in the beginning you want to portray your product as well as you can. But it almost seems like if you’re selling something, it’s much more of a commodity you would want to show the negatives as well as the positives.
[30:52] Rob: Yeah. I haven’t seen software vendors do much with reviews. I guess if you’re a B to C vendor, well certainly if you’re mobile then there are going to be reviews in the app stores. But if you’re a B to B vendor, unless you’re on a market place like Capterra or some larger market place, on your own marketing websites, if you don’t have enough volume of actual reviews, you do get emails from people who cancel and they may say your product needs this, it didn’t do this.
[31:19] But that’s not really a review it’s more of maybe this product wasn’t a good fit or it’s just a complaint or something like that. So it’s a little harder to translate I think in the kind of B to B Saas space that I think about.
[31:28] Mike: And the tenth thing that you can AB test is using videos versus text and images. Virtually on any website you can take the content that’s there and translate it into a video of some kind. I don’t see a lot of people doing this to be perfectly honest. Don’t get me wrong. There’s tons and tons of video out there but it’s pretty rare for me to come across information where people are actively testing video versus text. I’ve seen it done a couple of times but there’s not a lot of yes I’ll say case studies that I’ve seen out there doing this.
[32:00] Rob: Yeah. I’ve done this once. I did it what DotNetInvoice with a landing kind of a squeeze page with a video versus a standard Saas landing page which had more text and images. And the video site or the video page just got crushed. But there could be a number of reasons for that. It just happened to do that. I ran it twice and at the time even the number of people who watched the video was less than half the people who hit the page.
[32:25] So that just killed my ability to get people interested in a trial and that’s what I was surprised by. I thought that with a short video that it would be easier to get people to watch it but my rule of thumb is to do text and images, build a standard page, start with that and from there, iterate. Because it’s like you said. It’s pretty easy to go from text and images and create a video out of that like an explainer video, a quick screen cast, something like that without even having to pay a lot of money for it. Those two things are not difficult to test back and forth once you have that video created.
[32:56] I would be interested in seeing some data on this. And I am in talks right now with my growth tech intern started and we’re trying to figure out the best way to test this with Drip because I am interested to see how that test would react to this audience.
[33:08] Mike: Yeah. I’ve definitely heard of cases where it goes the other way. I think that one that I’ve heard talked about in the past is Fog Creek where they’re selling fog bugs and they’ve tested it with Joel giving a talk and a presentation of fog bugs versus one that did not have him doing that. And the one with the video, the engagement was really high and it just absolutely crushed the text only version. I don’t have the numbers for it. I don’t think they published those but I’ve heard anecdotal evidences suggested in that particular case, one of the thoughts behind it was well people just loved to hear Joel talk which is entirely possible. I think it does depend a lot on the video that you’re offering and the audience.
[33:46] So just to recap, the first idea is to test free trial buttons and see if including them or excluding them is going to make a difference in your conversions, asking for credit cards upfront versus later on, using trust symbols. Number four is to use a chat widget of some kind. Number five is to evaluate the number of form fields that you have. Number six is add sign up fields directly to your homepage or landing page. Number seven is to test testimonials with or without some of the different information on them. Number eight is to use directional cues. Number nine is display honest versus filtered reviews. And Number ten is to test videos versus text and images.
[34:23] Music
[34:26] Rob: If you have a question for us call our voice mail number at 1-888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 149 | AuditShark and Drip Updates
Show Notes
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I are going to be talking about launch dates for Drip and Audit Shark. This is Startups for the Rest of Us: Episode 149.
[00:09] Music
[00:17] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:25] Mike: And I’m Mike.
[00:26] Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
[00:29] Mike: Well I kind of wanted to address some comments that were on the podcast blog from episode 147. There was a lot of discussion there. Some of it was based on Audit Shark and what’s been going on with it. It said basically Mike and Rob as co-host is just ignoring what’s going on, pretending everything is fine when Audit Shark hasn’t even been launched after several years. 50 so I kind of wanted to take a couple minutes and address that issue. I think it’s only fair to address it for the listeners.
[00:56] Rob: Yeah. Fire away.
[00:57] Mike: I don’t want to go too far into the details just because they’re not entirely relevant but at the same time one of the things that I haven’t really been forthcoming about on the podcast is that there’s a medical issue that I’ve been dealing with for the past several years which has severely impacted my ability to work on the product. There are some things around motivation as well that are associated with this medical issue.
[01:10] It was probably about I’d say three weeks ago that I was actually diagnosed with it. I’ve been going to a doctor for a couple years trying to figure out what’s going on, finally switched doctors and it was probably only two or three visits and a couple of tests and they were able to pinpoint it. Right now I’m on treatment for it that is a radical change if nothing else.
[01:38] Rob: Right. It was all kinds of symptoms that have impacted your ability probably not only to work on AuditShark but on your consulting contracts I’d imagine to get a lot of stuff accomplished.
[01:49] Mike: Yeah. I mean it’s totally been severely affecting my life in general. You’re encountering the same symptoms over and over and the doctor you’re seeing says oh, I think you should do this, this and this and you do those things and it doesn’t help. And he’s like well you’re not doing them enough. You’re its like there’s something else going on.
[02:04] So, eventually I just decided okay I need to go see somebody else and I did and like I said, I figured out what the problem is and I’m on treatment for it already and things are going extremely well. I mean literally the very first day of treatment, absolutely radical change. I don’t think this is the sole contributing factor. I think it’s a major contributing factor but not the only…
[02:21] Rob: Right. I think that’s important. I mean specifically you emailed me and one of the things you said is I’m not sure I want to talk about it because I don’t want this to turn in some kind of pity party and I don’t want people to think I’m scapegoating this health issue. I would’ve launched Audit Shark years ago if I didn’t have this health issue going so I think we should be clear that’s not what you’re trying to do here.
[02:42] Mike: Like I said, I feel it has been a major contributing factor but it’s certainly not the only one. One of the big things is obviously with AuditShark it’s clearly a much bigger product or project that I would not necessarily advice people going after for their first or second time out but it’s a huge, huge product. There’s a lot of moving parts. It’s very complicated and it’s just hard to put certain things in to focus for everybody in general and make it understandable.
[03:08] Rob: Let’s throw out a couple of mistakes that you’ve admitted to me and I’m sure I will have no problem talking about on the podcast. Bit off, probably a more complex product than you originally thought it would be like I’d bet in your head when you first started you said I’m going to run some auditing stuff and this can take me a few months to cobble together and then if you spent 1,000 hours working on it, it’s probably larger than you originally envisioned.
[03:30]Mike: Definitely. One of the things I did was I built a command line version of it first and that did not take me all that long to do. I was like this is going to be easy. This isn’t going to be very difficult to put something together that I’m going to be able to push out and its going to be a short timeline to get it out to market. And that turned out to be completely not the case and I made several mistakes. I started delving into a bunch of different technologies that I just wasn’t familiar with, I’ve never worked with them before. Windows Azure was one of them, SQL Azure, WCF services.
[04:00] Right now we’re kind of steeped in the middle of MVC and all these other things that are associated with it. They’re all things that I’ve never worked with before and it’s hard to estimate how long something is going to take when you’ve never done it before, anything you’ve been remotely close to it. I’ll be honest, those were just huge mistakes I would say in terms of the implementation, are they the wrong decision ultimately? I don’t think so but they certainly contribute to the amount of time that it’s taken.
[04:25] Rob: Yeah. I think they contribute. You can look at that as maybe mistake number 2 is like you’re going to build a new product and then you’re also biting off the learning curve of multiple technologies at once. They’re probably the right technologies for the job. I think in the end like you said it’s the right decision but it just meant that you spent 2, 3, 4 X what you would’ve spend if you were using the tools that you already had experience with.
[04:46] Mike: Definitely. That’s probably an underestimate.
[04:49] Rob: Yeah. I think another misstep was kind of your early focus on banks and financial institutions. You had some leads there. You talked to a few banks but when it came down to it and you finally had an app that really worked, the sale cycle was going to be really long. There was just a lot of complexity and you needed a high price point to sell into them and so you needed a much, much – I’ll say a much more valuable app. You need an app that provides a lot of value if you’re going to sell it for $10,000 or $20,000 a year than if you do if you’re going to sell it for $500 a year.
[05:16] Mike: Right. Some of it was my own fault for not asking the right questions once I was in there but even in discussing with them they’re like oh well that sounds like a great idea and I’d be interested to see how it goes. But they were more interested I found out later, they were more interested in finding out about how my business worked and how I did it because I was a local entrepreneur. It wasn’t that they were actually interested in solving their own problems. It was they wanted to know how it went because I was a local entrepreneur in their area and it had nothing to do with solving problems.
[05:46] Rob: Right. So if someone’s out there listening now and they probably have heard a lot of the steps over the past few years that you’ve talked about AuditShark, I still get questions. People come up to me at MicroConf and other conferences and say what is Audit Shark and what does it do? Can you explain it in one sentence in a way that I would understand and someone who’s not steeped in security really understands what it does like the simple value proposition. Not the engine behind it, but the value prop.
[06:17] Mike: Sure. So AuditShark allows you to get a second set of eyes on your server that essentially looks at all of the important things that you should be looking at from a security perspective but you probably aren’t for two reasons. One is you don’t know what you should be looking at and two, there’s just so much stuff that you should be looking at that it’s just not worth becoming a security expert to go look at it.
[06:38] Rob: Right. So you sent me this document. The reason I’m asking these questions is you and I have a conversation offline hashing through all this stuff and you sent me a document from cisecurity.org which is like a self funded or a nonprofit that sets up all these agreed upon security checkpoints. So if you have a windows 2008 server, maybe there are 250 different things, knobs that should be checked and they should be set to a certain thing in order for that server to be secure.
[07:02] What AuditShark does is you install it on your server, you install a little client piece on your server and then AuditShark has a web admin that I can log in and I can look to see if everything’s setup correctly. And if it’s not, you’re going to show me, at least give me a little bit of information. This where the remediation part comes in that you’ve talked about. You’re going to give me at least a little bit of information about how I should proceed to go on and fix that.
[07:27] And you’re going to have an up sell where I should be able to subscribe at a higher level or pay you a one off thing to have you or someone like another security expert on your team come in and fix that. Is that correct?
[07:39] Mike: Yeah. That’s pretty accurate.
[07:40] Rob: Okay so that’s your value prop today. So this is the thing that I haven’t understood because you’ve talked about like building your rules engine – this is like 18 months ago. Talk about how you had to get your roles engine built. And that didn’t make sense in the context of just this kind of vague auditing thing. But now that we’re really talking about nuts and bolts of what AuditShark does it’s like oh I get it, the rules engine really just looks at your control points. That goes out and looks at is this bit flipped in the registry or is this port closed or whatever. Is this security setting appropriate?
[09:09] So not only did you build the rules engine, then you went to the cisecurity.org document and you took the things they recommend and you implemented those in Audit Shark. So that the value to Audit Shark to someone like me like the Numa group or another small Saas app is not that I can install an auditing tool. The value is that you’ve pre-programmed all of the specific checkpoints in so that I don’t need to know about security. I can run it, get a report and then either fix the stuff myself if I know how or hire someone to do it.
[08:39] Mike: Exactly and it will give you a score essentially. Let’s say that it runs 250 different control points and you pass 200 out of 250. Well there’s some percentage compliance score that you’re going to have based on that. And you may go trough those extra 50 and say well, this applies or this doesn’t and you can mark them as exceptions or something like that. But basically you can boil that down to a score that says I am 85% compliant according to this policy and over time, your goal is to raise that from 85% to 90% to hopefully close to 100%. I mean there’s certain things you’re not going to do for business reasons and I’ll give you a very specific example.
[09:18] One of the recommendations that they generally have is don’t install a web server on the servers on your environment. It’s like well if you’re running a web server you kind of have to install a web server on the machine. So there are certain things you’re going to just blatantly ignore and you’re going to say I don’t need to listen to this because it’s not important and I have business reasons for doing what I’m about to do.
[09:37] Rob: Okay. So you said you’ve figured out this health issue hopefully and you’re hoping kind of the treatment that you’re on is going to sustain you and your motivation is going to stay up. You’ve been cranking on it for three weeks. What have you gotten done on the past few weeks and where does AuditShark stand today like a realistic assessment of what needs to get done to get it launch?
[09:58] Mike: Sure. I’ll give you a rundown of the things that I’ve done over the past couple weeks. I started getting familiar with Facebook ads and is it just me or the more ads you run, the more they bump up the suggested…
[10:10] Rob: I haven’t seen that. I’m wondering if you run them with different times with the same demographic, sometimes you’ll have other competitors that will bump up or are you using the demographic or have you changed that at all?
[10:20] Mike: I’ve changed the demographic a little bit but on one of them I was running every time I went to save it and this was throughout the course of an hour or two. Every time I went to save it, they would bump it up.
[10:31] Rob: Yeah. I’m not sure to be honest. I’d have to look. Now if your click through rate is going down, every time you click through rate goes down as it decreases, the minimum bid will bump up.
[10:43] Mike: I haven’t paid attention to how much it went up or down. I think it’s actually gone up so I don’t know. I’ve started exploring the Facebook ads. I created a Facebook page so I could actually do paid advertising on Facebook and get it into the news feed area.
[10:58] Rob: The news feed ads are doing a lot better than the right hand side stuff.
[11:02] Mike: yeah. I got very, very little traction on the right hand side. It did show some of them but the click through rates were abysmal. So I didn’t even bother.
[11:11] Rob: So you’re running Facebook ads to do what? Are they going to like an Audit Shark landing page to collect an email address to build a launch list?
[11:16] Mike: Yeah. I actually have two different landing pages that I setup specifically for this and basically I’m funneling people in to those two. I’m testing a couple different marketing pitches kind of for the tag line to see what resonates with people. I tried targeting just computer programmers and that did not work out. That thing just tags hardcore. People click through but they wouldn’t actually convert. I literally got zero people converting to the point I was like well is there something technically wrong that’s preventing them and I couldn’t find anything so I think it’s just the wrong demographic. They’re not interested.
[11:48] So I targeted pretty much every single security related interest that you could find through their specific interest area. I’ve got about a 30% conversion rate when people hit that page so it’s doing I think reasonably well. I did an HTTPS redirect on the page which messed up all of my referral conversions for kiss metrics so I had to undo that. I was thinking well it’s a security product. I should probably make it HTTPS and then anyone who hits it, if it gets flipped over to HTTPS then it messes up the referral. So kind of small mistake there.
[12:25] I also got AuditShark featured on beta list a couple days ago. That drove in a bunch of subscribers on the launch list. I’d say in the past 30 days or so I’ve roughly doubled my launch list. I want to triple it again before the end of September but I haven’t quite figured out how I’m going to go about doing that.
[12:41] Rob: I think paid acquisition if you want to do it that quickly and I have some other ideas for you not Facebook that I think could work well with AuditShark.
[12:49] Mike: But I am committed to actually putting forth a good effort to try and make that happen. Right now I’m working with the new UI design with my lead developer and I’m cautiously optimistic that we’ll be able to actually have it not only in place but on the build server and being pushed out directly through the web by the end of this month.
[13:07] Rob: Right. And just to clarify them, you wrote a new UI because you’re using 3 or 4 year old technology that was clunky and the legacy code was making it very hard for you and your team to build new features so you basically re factored your UI and that’s done and you’re launching that.
[13:24]Mike: Right. The other thing is that over the past four weeks, traffic has consecutively every single week been higher than it was the previous week. Now it looks like it will be higher this coming week. I don’t know for sure but it depends on what other things that I do.
[13:37] Rob: Right. okay so that’s what you’ve done in about the span of three weeks which is probably more than you had done in maybe the few moths prior to that.
[13:42] Mike: Right. That’s an understatement I think.
[13:45] Rob: Okay you’re rolling again and you’re ready to get this thing going. Where does AuditShark stand? How soon can you launch it and what’s left to get people using and paying for AuditShark?
[13:57] Mike: So I have a signup page that’s in place where I’ve sent the URL to a couple people to sign in, install it on their servers. As I said before I got some people using it for early access. The biggest complaint that I’ve seen so far is that there’s no instructions on how to remediate things. So if you look at the reports and it says X is wrong then how do I fix that? The UI doesn’t give any indication of how to do that. You basically have to go back to the policy builder or you have to go back to the reports from the source of where these control points are from.
[14:28] It’s not going to work for the customers. Essentially what I did was I went back to the policy developer and I said hey I need you to start putting these in. He put a bunch of them in. It started working out and then something busted on the policy builder and it took a few days to get that fixed. Right now it’s fixed and I’ve told the policy developer he should be able to go back in and start adding those in. Right now he’s only got 5 out of about 500 done but I’m hoping he’ll be able to go back through the rest of them and put those in place such that when the policies execute against the machines that the customers are running then they’ll be able to see in their reports exactly how to fix these things.
[15:01] Rob: Got it. So that’s where you stand today. You need to get this new version out and do you think you’re going to have it done in the next week and then is that it? Are you all integrated with stripe like you have a sign in page where its going to put a credit card token and all that stuff. All that code’s written?
[15:18] Mike: All that code is written. We ran into a slight problem where somebody couldn’t sign up for early access because Stripe was denying it but it turns out that…
[15:27] Rob: I’ve seen that too. That’s not your problem. I’m seeing that not all over the place but especially with international cards, really get problems with Stripe.
[15:35] Mike: That’s exactly what it was. What happened was the card was entered and then the bank denied it. They just blocked it and the person in the early access didn’t really know what was going on. They said well I tried it and gave him another fake card to use and they were able to get in and actually install it and start working with it and it was probably a week or two later they said hey by the way just to let you know this is what happened and it turns out that their bank has locked the account and locked all other things that they were using it for.
[16:03] Rob: Yeah. We haven’t seen it that bad but I definitely seen one or two people trying to get in. It was our post early access. It was the actual mini launch and we’re still dealing with their bank trying to get them to approve the charge. So you setup on the payment side then. So is there much else to do? Could you flip the switch? Let’s say you get this version two UI live next week. Are you going to launch next week or what’s holding you back?
[16:29] Mike: I’m trying to get the marketing message right. I really want to try and figure out exactly the type of people who I guess would be the initial core market. What tag lines resonate the most with them is really what it comes down to. Because in between the two that I’ve done so far, one of them clearly resonated but I think that the other one was on the wrong demographic. Right now I got them both targeted at the same demographic and I want to test to figure out which one would resonate more so I can do more paid advertising and paid acquisition. But beyond that, there’s not a lot that’s stopping me from just kind of flipping the switch other than the marketing side.
[17:02] Rob: Right. You want to make sure that if you send people to the site that at least a few of them are going to convert into trials. Right? That you’re communicating it well. Now in terms of your early access list, I know you have a launch list and you have some people who you have let in and are using the app. Is it at the point where you think that people will be willing to pay for it as of next week when the new UI comes out? Or do you think that there still more has to be done with remediation in order for it to be worth X dollars a month to folks who are using it?
[17:34] Mike: The remediation information has to be there. I don’t think that it’s a viable product without that remediation information there and that’s reliant upon my policy builder putting that stuff in there. I can certainly talk to them. I probably will and say hey, can you really make an effort to get as many of these possible as you can in this week and next week? Then I’m sure he’ll be able to do that that’s not going to be too big a deal.
[17:55] But its going to take him time. I mean there’s 500 of these things and he’s got to go into every single one of them individually, look it up on the PDF and say okay well what is it that needs to be added in?
[18:06] Rob: Right. 500 control points. Right? 500 settings that you’re checking across two different OS’s like Windows server 2008, Windows server 2012 and you’re checking all these points so you have to basically have some simple instructions on how to fix that or at least resources.
[18:18] Mike: Exactly.
[18:20] Rob: Got it. So sounds like from what you’re telling me is you are honing in on a launch like a true point where people can sign up, use AuditShark and that you think you’re going to be providing enough value that some people will start paying for it very soon.
[18:34] Mike: Yes.
[18:35] Rob: Got it. So MicroConf Europe is coming up in just under a month. You think you’ll launch before then?
[18:41] Mike: I would like to. The question is kind of time…
[18:43] Rob: What are you big risk that are going to keep you from launching here in the next – it sounds like 2 to 3 weeks is the window you’re talking about. What’s going to keep you from doing that?
[18:55] Mike: Right. I think the biggest risk that I face right now is how long its going to take to get the build server to push the new version of the code because it’s a completely different repository. So I’m going to have to reconfigure a lot of different things. And I’ll probably have to basically build a new build script for that to push that out. It leverages all the same data underneath so I don’t have to worry about inconsistencies there because we didn’t make any structural change. It’s basically just a new GUI over the top of it.
[19:21] But obviously I’m going to have to touch base with the early access people and say hey, just letting you know all these stuff has changed a little bit. It’s just going to take time to verify that just because there’s so many moving parts. There’s a bunch of different libraries. There’s the policy builder to which is self updating. There’s the agent which is self updating. I need to make sure that all of the interactions back and forth between work as well as all the self updating capabilities because that’s one of the key pieces that makes AuditShark easier to use so that you don’t have to go in and constantly update the agents every time there been a new build.
[19:51] Beyond that, there’s also a risk with adding all the remediation information. It’s not really a risk so much as it’s how long is that going to take and I don’t know what the answer to that is because of m contractor. He’s not full time. It’s not like he’s doing this every single day for 40 hours a week. So he’s only been able to put in probably 10 to 12 maybe 15 hours a week on any given week and I don’t know how long its going to take him to do all of those.
[20:14] Rob: Kind of thinking out loud here because we haven’t talked about this part but there’s this interesting question of is it more important to get to launch to where people can publically sign up or is it more important to get to where people are paying you for something in private? You know what I’m saying? Because if you think about how I did Drip, I did the ladder. Though we still haven’t launched. And yet I have 100 people in there trying it out. I have a handful of people paying for it and so I would almost…
[20:41] It’s funny that in the comments that we’ve seen there’s always this push towards launch like when are you going to launch it? I would actually say not when you’re going to launch it but when are you going to get that first paying customer? When are you going to get that 10th paying customer? Those are more important than having a public web page that someone can come and sign in and download Audit Shark in my opinion.
[20:58] Mike: I totally agree. It’s definitely important for me to get to the point where people are paying for it because that means they’re seeing value out of it and if they’re seeing value out of it then I can essentially backtrack and say okay well why are you seeing value out of it? And then take the words and phrases of why they’re seeing that value and use those to get more people who would also see that value.
[21:18] Rob: Right. It sounds like you could feasibly – in theory, if you were to go crazy, you could send out an email tomorrow, dear launch list, you could start running ads tomorrow and you could just send people in. They could sign up. They could give their credit card and you’re all set up to do that. They could download it. They could install it and it would do something. It actually audits their server and it tells them hey these things are wrong. And you could say look at me, I launched. But what does that do? Right.
[21:43] It doesn’t do anything because you probably know those people are going to pay because you’ve launched without the value that you need to provide in order to charge someone. And so it sounds like getting the remediation piece in there, that information in there so that people actually hopefully at that point are willing to pay, and I think that’s maybe a bigger risk than anything else you named I think. You named getting V2 UI out and I think you’re going to do that. I have no doubt you get technical issues, I know you can handle. Less than a week that will be done.
[22:14] I bet that remediation stuff will take a couple weeks like you said. The biggest question mark in my mind is once you get remediation in and will then that be enough value for people to pay because if it still isn’t then you have to think about it more. That’s where you have a big question mark of what can I do? What can AuditShark do to make it worth the monthly fee?
[22:37] Mike: Right. And actually that kind of leads back to what I mentioned a couple weeks ago in an episode where I said I’m really thinking about going with a hybrid solution where I’m essentially offering security as a service or to people such that when AuditShark finds something I can go in and then essentially analyze to figure is this applicable to your environment? Is it going to be right for you to do? How do we actually go about remediating this?
[23:02] Because right now, AuditShark is really just an information tool. It tells you the information. It doesn’t actually do it for you but there’s this concern. Obviously these are production servers that people are using. Do you go in and you just automatically fix something? If you find something that’s busted, do you undo it do you bring into compliance and it’s a very hard question to answer because it depends a lot on what you’re looking at.
[23:27] Rob: Yeah.
[23:26] Mike: Even if it’s a new user, oh, well somebody created this new user so they could run a service account for this new software that they installed. And then if I delete it then it just breaks that software. And if it was something they were legitimately using, then of course that’s not going to be a good thing. I could disable the account but I’m still going to break that piece of software that they installed.
[23:43] Rob: Yeah. I don’t see any way that you can just automatically do things like that on a production server. I wouldn’t install something on a production server that did that, that actually made changes without me understanding what it was doing.
[23:56] Mike:And the question that I’ve actually talked to other people about it is would you feel comfortable with a system where it allows you to do that? So like for example there’s this thing that’s wrong and maybe it just gives you a big red button that says this is wrong would you like to fix it? Do you click that button?
[24:12] Rob: I think there’s got to be more info though because fix it, what does fix it mean? That means revert it to what this security doc says it should be but what if I have it that way so that my connection to XYZ, API works or so that a certain piece of software works. I just think there are too many exceptions.
[24:29] Now I get it and I hope if you listen to this, I hope you get the complexity of this and that your tool audits and it actually does something valuable and it shows you information but it’s probably not valuable enough as of today for someone to pay for. So you’re moving trying to push that bar forward and saying in a week or two then I’ll at least have remediation instructions into the app. Hopefully that will be enough for people to pay for.
[24:56] I think your biggest risk is definitely not the technical issues but the question about what point does AuditShark provide enough value that people will pay your monthly fee for it. And it sounds like your hypotheses is that it is having the remediation steps in there will at least convince some people to do it and then offering that value add of you to came in and fix it for an additional cost is maybe even another step up in the value chain.
[25:22] Mike: Right. There’s definitely other things that it have thought of that I think would add value to it and would help push people into the direction of saying yes this is valuable enough for me to pay for but some of them are complicated to the point that there are entire products built around just that functionality. So it’s not like I could say oh, well let me just throw this in there and I’ll wait for that to be done before I launch and so that I know its valuable enough because some people may not care about some of those things. I really need to just get it to a point where its I’ll say valuable enough and then kind of take things from there.
[25:56] Rob: Right. And to clarify, you’re marketing towards small software and Saas businesses is that right?
[26:03] Mike: I wouldn’t necessarily say that it’s just small Saas businesses. It’s more of the businesses who are advanced enough to actually be interested in looking to protect their servers because they have something to protect. One of the things that strikes me is the people who are really interested in AuditShark have been hacked before. The people who have gone through that experience and have gone through the pain to say oh well, what happened on my server? Why did this thing get hacked? Those are the people who have this burning pain to say oh well, I need to actually do something about my servers because my entire business rests upon having these things up and running and if I lose those servers, I lose my business.
[26:41] Rob: Right. People are going to have a dedicated server because they need to be able to install an actual EXE so it’s not shared web hosting or something but it’s a dedicated typically a web server I would imagine. Sure it doesn’t have to be but my guess is the people you’re going to find using the content marketing SEO kind of the online marketing techniques you’re going to go after are more likely going to be small businesses on the web at least to start with. And then it’s like you said, its people who are aware enough that they need to be secure that you can have the notion that they need to lock some stuff down and the willingness to spend the time to do it.
[27:13] Mike: Right. I’ve seen a couple show up on my launch list over the past couple weeks who are healthcare related or financial related whether they’re banks or loaners and some things like that which is interesting to see they’re the people who actually take it seriously. If you’re just looking for a scan of your servers because you want to do it once, probably not a good fit. But if you’re the type of company that’s a little bit paranoid but you don’t necessarily have a security expert on staff and that’s really what it comes down to is if you don’t have a security expert on staff or you don’t have tools that you’re already using to help lock down your machines, then AuditShark is probably a good fit because it can at least point you in the right direction.
[27:53] Rob: Right. Because its runs a scan everyday right? That’s the thing. You install it once and then it gives updated information because you can download – I’m sure I could go online and find like a $99 scanner or a free scanner or something that will scan my server for security holes but yours is as a service.
[28:08] Mike: Right.
[28:09] Rob: And what’s the pricing?
[28:10] Mike: On the low end for two servers, its $79 a month and it basically goes up from there if you get to eight servers a month that’s $199 a month and then for 20 servers its $399 a month. Those are kind of initial prices right now. There’s other functionality that I want to add in but I don’t think that bumping up the price point would be justified until I start adding those other things.
[28:32] Rob: Right. You got to get the first customers in there first paying you for it.
[28:35] Mike: To be fair, I’m not necessarily as interested in saying oh well I have all these people paying me $199 a month. What I’m really interested in is making sure that they are getting the value out of it to say hey $199 a month is a no brainer. So like okay, well what about $299? What about $399? And then trying to find the ideal price point, no that there really is one.
[28:55] Rob: You’re not saying you’re going to raise prices. I mean I would imagine you’d grandfather people in but it’s kind of as you find it’s a no brainer for people to do it then you want to potentially raise prices on future folks.
[29:06] Mike: Right.
[29:07] Rob: So we’ve kind called out a few steps that need to fall into place for you to get to launch. We talked about the V2 UI you’re trying to get out, that’s a technical issue. There’s getting remediation in and that’s a technical issue. Then there’s kind of the risk issue of with remediation, are people willing to pay for it, does it provide enough value and then you want to hone your marketing message right? You want to get like a headliner, a tag liner or a way to describe Audit Shark in just a couple sentences basically or a couple of words frankly because that’s all you have in a website headline or an ad headline.
[29:36] You want to find a pretty good one that converts well for you. Do you feel like if you get those four things dialed in that you’re ready to basically get people paying for it and asking early access customers for money and seeing what happens and then maybe releasing it to the world assuming that they say yes?
[29:54] Mike: Yeah. I think so. The remediation piece is big. I would like to kind of pursue figuring out how to work in services is kind of that hybrid model that I talked about but I haven’t really put any mental time or effort into figuring out how that might look.
[30:09] Rob: Anything else you want to add because I think we’ve kind of done a decent run down of basically the last three years as well as what we hope to see here in the next month or two.
[30:19] Mike: I don’t think there’s too much. I understand the sentiment from people that it’s been a very, very long time and I haven’t launched AuditShark and I’m not exactly a shining example here of how to launch a Micropreneur business but at the same time I do want to point out this is not a Micropreneur endeavor. I’ve said that upfront. I don’t want to scapegoat everything on to the medical issues that I kind of eluded to earlier. But it’s been about three weeks since I started the treatments and everything.
[30:46] So I think that things are going reasonably well and I don’t see any reason why they shouldn’t continue to go well. I can keep people posted as what the progress is. I don’t think it’s going to be very much longer though. So now what we’ve talked a lot about AuditShark do you have any updates of Drip?
[31:02] Rob: Yeah I have 90 seconds of updates. I’ll keep it short. Basically nothing has changed with Drip since we last talked because I’m in the middle of 1) waiting to see how many of our trial users convert because until I see that, I don’t want to send an email to the other thousands on the launch list. In the mean time we’re just building out stuff like cancelation logic and on boarding assistance and FAQ, email support snippets and it’s just trying to get Drip to scale up just a little bit.
[31:32] We’ve had our hands full for the past couple weeks and I just couldn’t imagine emailing ten times what we emailed a couple weeks ago. We couldn’t handle it. So we’re trying to get things like support and on boarding and cancelations automated enough that we can essentially move forward. I don’t have an exact date in mind when we’re going to email that. I’ve been kind of brainstorming of do we maybe just email another 300 in a couple weeks and see how that goes? It’s a super slow way to take it but I just don’t feel like we’re there yet.
[32:02] Development is – I’ll say it’s a bottleneck the most things that need to get done are in the development queue. Marketing is now moving forward. My growth hacker intern started this week and he’s in the ground running so marketing stuff is great. A lot of stuff in place for the launch. We’re stoked about it but we just have to get – there’s more features that have to have to get done that aren’t even features like parts of the app but it’s things that just have to be done in order to bring in several hundred trials all at once. So that’s really it.
[32:31] Next week will probably be boring too because we’re just going to be cranking away at this queue of things that people have asked about. There are also things, we are building a couple things that people have canceled for and I’m concerned that 10% or 20% of the new trials will also need that feature so I’m not building them just to build it. I probably have hundred features that we could build just to build but there are a handful that basically are deal breakers for folks so we want to get those done before I also let the masses in.
[32:55] Mike: Yeah. I know what you’re saying. There’s hundreds of features that I have are in FogBugz that I just have not decided to pursue at the moment. There’s just a huge list and it’s just not worth it right now. Nice to have.
[33:06] Rob: Yeah. They’re nice to have. I’m in a milestone that just says future. It says like V 2.0 future and they’re just all assigned to that.
[33:13] Music
[33:17] Mike: If you have a question or comment you can call it in to our voice mail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 148 | Online Marketing Trends with Special Guest Clay Collins
Show Notes
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, we are going to be talking about online marketing trends with startup founder Clay Collins. This is Startups for the Rest of Us: Episode 148.
[00:09] Music
[00:16] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:24] Mike: And I’m Mike.
[000:25] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week sir?
[00:30] Mike: I had a great weekend. I spoke at Behavior Con down in Stamford Connecticut. It was a really great conference. There were about 150 people there and they had a bunch of different researchers who came up. They had people who ran different online communities and sold information products and Hiten Shah was there Derek Halpern. I’m sure a bunch of our audiences has heard of those people. But there were a lot of people there who I’ve never heard of before but they had some really good speakers and some really good information to share. So it’s a lot of fun.
[00:56] Rob: That sounds cool. Was that mostly like a marketing conference? Is that the idea? Like to learn marketing techniques?
[01:02] Mike: Not really. It was actually more or less the study of how people buy things and why people buy things. Some of the different speakers did, was they would analyze behaviors that people were performing and then kind of backtrack a little bit, try to figure out why it is they were performing those actions. And then what sort of tweaks could they do or what things could they toggle to get people to do different things to modify or change the behavior that the people were doing.
[01:30] And naturally this really falls underneath the marketing umbrella because as a marketer you’re really trying to influence people’s behaviors to try and get them to buy things but you also want to be able to present them in a way that makes sense to people that is going to make them feel good about whatever that purchase is.
[01:45] Rob: Very cool. Sounds like fun. Well, last week when you were going to Stamford Connecticut, I was doing the Drip prelaunch. So we basically emailed about 12% of the Drip launch list. It was a lot of fun, a lot of work. Derrick and I came in the day the email went out. We were sitting here as it went out and of course nothing happens because nothing happens right when it goes out. But then the following day and the next several days, that’s when all the onboard and the support request come in.
[02:13] So overall, the conversion rate from the email went well. It went better than I expected so I’m happy with that. We tested out all the basic functions of getting people signed up in an automated fashion. So instead of me creating their account, they’re actually entering credit card, signing up through a form and then we also have steps, I call them on boarding steps but it’s just steps for them to get setup and start to get value from the app.
[02:38] We just broke the 100 registered user mark. So that includes paid customers and trial users. Obviously the majority of those are trial users at this point because we have a 21 day trial so more in a few weeks. But as I said in a tweet a couple of weeks ago starting line. Now the real work begins.
[02:53] Mike: That’s awesome. And you still got a huge list to go back to for the rest of the launch right?
[02:58] Rob: Yeah. And that was the idea is I’m taking it slower than maybe if we had our backs to the wall or we’re running out of funding or really need to get out for some specific deadline, it’s a little bit of a luxury to be able to do that because we already saw some things that didn’t go as well as I would like. I’m going to tweak some copy on the landing page some copy in an email that I realized. We had a tiny little numbers mistake on one thing that we tweaked. We’re writing some extra features that people have said that they’re going to cancel because of that.
[03:28] So if we can hone that and kind of move the app up just one more level and really remove the friction then my hope is that once we email this couple thousand personal list that it will be an even better conversion rate. It’s just kind of one more layer, one more iteration before really going live.
[03:45] Mike: That’s really cool. Today I pushed out some code in the vein of getting things done and moving things forward. I pushed out some codes live today that will help address some of the problems that I heard back from people who could blame that when they got results back from Audit Shark they just didn’t know how to fix things that were there.
[04:01] There’s still a fair amount of work to do but what we’ve got so far is we’ve started putting in the remediation info so the people know what needs to be fixed and how to fix it. And then that is being now displayed on the results that people are looking at after the audits run, it pulls back all the results and it will show them right in the UI. It will show them exactly how to fix the things that need to be fixed. And the next step will be to put some sort of a report there that they can actually click on and get a downloaded PDF or something along those lines to make it easier.
[04:32] Because right now it’s just available when you hover the things but I really want to make it so that they can download it and take a look at those things and either hand it off to someone and say hey can you do this or can you do that?
[04:41] Rob: Very nice. You know, I ran across a site. It was actually referred to me by a friend of mine, was in the most recent YC batch. He actually has an interesting startup. It’s a crowd funding commercial real estate site. It’s called realcrowd.com so if you’re an accredited investor and you just want to put in a small amount of money say $10,000 and own part of an office building in San Francisco, it’s a really interesting idea and I’ve been in there looking at what they have to offer.
[05:07] But he referred me to this site called onemonthrails.com it’s a YC company. It’s designed to teach you just enough rails to be able to build like super stripped down prototype of something. So it’s designed for people who are not developers to learn just enough to build kind of a product that maybe they could then use to either recruit a developer or to get some funding so that they could hire a developer that kind of stuff.
[05:30] Now you and I were talking offline and one of the rails is $49 and there’s 5 to 10 hours of training in it, of video training. I see this as that very first step. If you just want to figure out – if you even want to kind of experiment this because the cost is so low. But then that next step after it I think would be Tealeaf Academy. They teach you rails but they take it to another level. They teach you how to build the right production code where you could actually – I think they have a full four month curriculum that you could do one month at a time and pay for them. It’s a little more expensive but it’s a lot more rigorous and there’s a lot more to it.
[06:04] So if you’re out there, you’re non technical and you’re like I just want to learn enough code to kind of tool around, I would consider looking at onemonthrails.com and then if it really drives with you and you want to keep going and get a little better I would recommend Tealeaf Academy. They’re actually a MicroConf sponsor last year. I just want to throw that out because we get that question so often from people who don’t know how to code, should I learn to code and how would I do it?
[06:24] Mike: So have you seen the Chromecast devices that Google quietly started selling a few weeks ago?
[06:30] Rob: Indeed. I bought one the day it came out and it came a couple weeks ago.
[06:35] Mike: what do you think of it?
[06:36] Rob: I like it. I have watched – I’ve never had a way to watch YouTube videos on TV because I have a Roku and they don’t have a YouTube app for Roku. So that’s been really neat to be able to just pull out my phone and basically sling YouTube videos up to the screen but it would be the ideal travel device because it’s as big as a thumb drive and that’s all you need, is a Wi-Fi and a thumb drive.
[06:58] We have a small little apartment that we go to near the coast and for that it works really well. I just plug it in the back of the TV and it can play Netflix and YouTube natively without really much interaction.
[07:10] Mike: I was a little disappointed. I wasn’t terribly impressed by it.
714 Rob: How are you using it?
[07:15] Mike: Initially I was just trying to get the thing working and the instructions just didn’t really seem to make sense. I got it installed and up and running on my Wi-Fi and then I’m like okay, now what do I do with it? I was in the chrome browser trying to add it as a device. It wouldn’t let me and it turns out it’s not a supported device. You can’t add it to chrome browser. I’m like are you kidding seriously? And it turns out it really isn’t. You have to be using it from some sort of a mobile device. It doesn’t work from your chrome browser like a desktop.
[07:45] Rob: No, it works from my Macbook air. I mean it’s not a desktop. It’s a laptop.
[07:48] Mike: That’s the problem. Because you’ve got Wi-Fi on there. Because I don’t have Wi-Fi on this even though it’s all connected in the same network, I couldn’t do anything.
[07:54] Rob: I see. It’s only over Wi-Fi. Yeah, that actually makes sense. Dude, who plugs in anymore? I haven’t plugged in to a cable for years except for when we do the podcast.
[08:05] Mike: What was really odd to me was I was able to do this like its walked me through the process of setting it up and I was able to kind of initialize it through my desktop browser and then it just stopped. It wouldn’t work after that. I got everything setup and then like I was trying to send stuff to it through the browser and it says you can’t install the Netflix app because you don’t have any devices. I’m like I just set it up. What the heck’s going on?
[08:30] Rob: It sounds like you had a weird news case to be honest.
[08:32] Mike: Maybe. Could be right but it seemed really awkward to me that there was nothing anywhere that said you need to set this up on Wi-Fi.
[08:41] Rob: Right. For me it was seamless because I was on Wi-Fi and I’ve had the setup process, it worked for me so it was just easy enough. I thought they did a good job with it. And then I was able to frankly – I watched a bunch of movie trailers because that’s what on YouTube that I’m going to be interested in.
[08:55] Mike: You can’t get it on like a hotel Wi-Fi because they have the pop-ups and stuff. I’ve been able to get my Kindle on a hotel Wi-Fi before because I think there’s something in the routers that recognizes when a device can access those types of things and when it can’t. And like the Kindle just logged in and it just kind of bypasses those things even though all the other devices that I have, it’ll pop up like my iPhone, laptop and stuff. They popup and say hey please enter such and such and log in but I’ve had my Kindle and put it on the hotel network before and it didn’t even ask.
[09:28] Rob: That’s weird because I brought my Roku to many hotels and I’ve never been able to get it on. You have to buy a device – basically it’s a small travel router that you get that travel router onto your laptop and then you use that Mac and the rest to hook into your Roku. It’s like a pole production that I never went to but I found that’s the only way to do it. I wonder if the Kindle has some kind of work around or fancy logic to be able to do that.
[09:50] Mike: It might just be that it says it’s a Kindle and doesn’t have a browser when it connects to the Wi-Fi and maybe there are certain ones that are able to insert and ones can’t.
[10:00] Rob: So we got a pretty cool email this week from Jordan Sherer. He said I’m a Micropreneur academy member and recently full time boot strapper. I wanted to drop you a note today and let you know where the Micropreneur academy has taken me the over the past six months. I’ve been bootstrapping small software products on the side since 2007. It’s been a lot of fun and was the perfect avenue for me to explore things outside of my day job. And of course learn a bit about building products that solve problems and marketing to customers that need a solution.
[10:24] My main desktop app had done well over the years and I was finally able to pull the record and jump out on my own. This is where your podcast and the Micropreneur academy came in and I finally took the leap back in February. Thanks for all your support (even though it wasn’t directed directly to me). After February I tried to figure out where I wanted to take my business. After evaluating a couple of ideas I finally hit a sweet spot with a landing page describing my perfect Google reader replacement called Minimal Reader and that’s mnmlrdr.com.
[10:59] My offering resonated with a lot of people. I had thousands of people sign up and say that they would for my offering. This was definitely encouraging so I pursued development and brought it to life. The product has been complete since June and been an early access since July and I’m finally launching publicly this week. Just wanted to say I really appreciate what you’ve done with startups for the rest of us, Micropreneur academy and MicroConf. It’s been encouraging and a big help in pursuing my dream of growing a software academy.
[11:24] I actually bought a lifetime membership. He has a limited number of lifetime membership to minimal reader. Because I haven’t been widely into RSS for a few years so when Google reader shutdown I wasn’t really disappointed. But I have realized I do want to keep tabs on a few blogs still. They’re kind of these key blogs. What I like about minimal reader is it is super minimal. It’s just black on a white background. It’s got enough features to make it work but there’s not a lot of design to it and it’s responsive. So I log in using the exact same log in through a browser both on my phone and my laptop.
[11:55] I don’t know how long he’s going to have that. It’s like $99 for a lifetime and then he’s going to do a few of those to raise some money to get started and then shut that down. And after that its $36 a year that he’s asking for.
[12:05] Mike: that’s really cool. Great job Jordan.
[12:07] Rob: Yeah. Thanks for writing in and letting us know. And I’ve actually already added Jordan to our success stories page that you added to the website. I think we have a handful of folks on there. This is basically people who’ve listened to the podcast and or attended MicroConf and or have been in the academy and have quit their jobs. I guess we only have four right now but I can list another probably 20 off the top of my head so maybe I’ll email those people and start getting permission and expanding the success stories page.
[12:33] Mike: yeah definitely. That’s would be great.
[12:35] Music
[12:38] Rob: Today we’re going to be talking about online marketing trends and tactics with a guest named Clay Collins and Clay has his own podcast. It’s how I heard about him. It’s called The Marketing Show. And he was gracious enough to spend a half hour with us really diving into several different tactics that he’s learned. I love his unique insight that he has into conversions landing page because he runs a company that’s essentially a Saas business that is a landing page provider.
[13:05] And so he has access to a lot of data that the rest of us don’t have. So we really wanted to bring him n the show and both enlighten us and the audience on online marketing trends for 2013 and 2014.
[13:12] Music
[13:18] So I’d like to welcome clay Collins. He is the founder of Lead Bright which is a software company that makes web applications to help you grow your audience. Their flagship product is lead pages. It’s a Saas app and it’s the easiest way to create landing pages online. I first heard about Clay from his podcast. It’s called The Marketing Show. And in my opinion its one of the most underrated marketing podcast I know of. It’s super tactical. Is it your co-founder clay that you’re on there with?
[13:44] Clay: It’s actually just one of the people that we work with here internally. His name is Andy. Super sharp guy, runs a number of different business. We’ve decided to do a show together.
[13:54] Rob: awesome, yes. So they have just kind of open conversations about online conversion and Clay is just steeped in the world of landing pages, email marketing. I think he comes out of info marketing background and he’s in software now so he has a lot of skills that a lot of software people don’t. It’s a real pleasure to welcome you on the show today clay.
[14:12] Clay: Rob and Mike, it’s great to be here.
[14:15] Rob: Awesome. So what we’re going to do today, we’re going to be talking about some online marketing trends. What I’ve done is I’ve gone through a number of Clay’s older episodes from probably the past 4 to 6 months. And I had notes in my notebook of things they have talked about. It’s a real kind of poignant lessons and some interesting tactical things.
[14:33] So I’m going to throw out a topic. I’m sure you’ll remember talking about it already and then probably ask some questions around that and Mike and I will just bat it around. The first thing is you made a statement you said design is the new copywriting. Basically indicated in an episode you said that design is more important today than it has been in the past for conversions. Tell us a little bit more about how you’re seeing that and what that means to us.
[14:57] Clay: Yeah. So there used to be this phrase in direct sales marketing and people would say if its ugly as hell, it will probably sell. And what they meant then was that you really didn’t need to focus on design, that if you focus sort of the bulk of your efforts on copy writing and making sure that you really nailed the messaging and nailed the hooks and the bullet points and hypnotic NLP wizardry what not that that is what was going to drive conversions for you.
[15:26] I think for a long time that was actually true until we started developing sort of as an online culture the sense of what looks scummy and what didn’t. And then at that point, design kind of took over. I don’t know exactly when that happened. So I was listening to guy I know, this acquaintance Vishen Lakhiani who runs a publishing company called Mind Valley and he was telling me about an experiment that he did. He went out and hired a top flight copy writer. I believe he paid around $25,000 to have a sales letter created from scratch so you have that person rewrite their sales page.
[16:05] And then he took his existing sales page and he had a top flight designer redesign that page. And what he found was that the top flight $25,000 copywriter showed no notable improvement when they split test sort of the old version versus the new version. So he spent a lot of money, didn’t get an improvement. However, when he took his sort of in-house minimally trained copywriter that I guess started out as an intern and rose through the ranks and had hat page redesigned by a top flight designer, conversions went up about 30% on the sales page.
[16:40] I started thinking about that and what was going on. It was around that time that we in our own company hired a designer, a full time in house designer and we just found him on 99 Designs. It’s a best way to interview a designer and anyone who’s bidding for a job on 99 Designs just like necessarily looking for work. Like why would you subject yourself to the whole process of 99 Designs if you weren’t somewhat willing to put yourself out there in order to get some work.
[17:06] We got a designer and we started just systematically going through all the pages in our business and redesigning them changing no code, doing nothing else. And we had just a huge growth in our business as a result of this and a huge lift in our conversions. What was funny is that the designer, I had to communicate almost nothing to them other than here are four other pages that I think look good. Can you make ours kind of look like those?
[17:33] So I did that and I had hired copywriters in the past and it just took a whole lot of just going back and forth with them about the way things are communicated and the subtleties of language. I just came to this conclusion that is far cheaper, far easier and just far more effective to grow your business by focusing on design rather than conversion and good designers now on this global market place are just like incredibly easy to find relative to copywriters and relative to developers.
[18:02] Mike: Do you think a part of that is just that there’s a – I guess I’ll say a minimum barrier to doing the copy versus design where it’s very easy to look at design and this design looks just positively scamming versus this other one which looked really sharp and professional. And when you get into copywriting it’s very difficult to differentiate between somebody who came in and has a lot of education and has a lot of background in doing copy versus your Joe off the street because at the end of the day English words are English words. But there’s a huge difference that’s very visual between a good designer and a bad designer.
[18:40] Clay: Yeah. I think that you can almost immediately tell almost in a deep gut level whether or not someone is a good designer. With copy, a lot of times you can’t tell until you get the split test data back. So even being able to iterate and judge the fruits of someone’s work it’s very difficult with copy and a lot of times, even the best copywriters don’t create a notable result even though they’re charging quite a lot. It takes a lot more domain expertise to nail the copywriting and certainly it takes a lot of training in order to be a developer.
[19:19] But a designer can be a designer for a whole number of industries and it doesn’t necessarily require domain expertise for them to create lift in conversions. They simply need to make it look better. I’m not undermining what designers do. I’m doing quite the opposite. I’m emphasizing it. So yeah, I think what you’re saying is spot on.
[19:36] Rob: I’m curious about the redesigns you mentioned that you hired the designer and had him do and saw some increase in conversions. Were those on the landing pages that you have or was that inside your app itself?
[19:50] Clay: It’s actually both. One of the things we found both with copywriting and with design is that good marketing is often merely a matter of highlighting the things that are most important to highlight. And one of the things that copywriters do is they’ll make sure that things that are bold are bold and things that should stand out are in some cases annoyingly highlighted and bold and underlined and italicized.
[20:18] So what you’re doing with the design is you’re merely highlighting things that are advantageous for you as a business to highlight. And so for example inside of our apps, we highlight things that differentiate us. We highlight things that are advantageous for us to highlight. For example with lead pages we handle, we make it very easy for someone to deliver a lead magnet.
[20:42] So someone opts in and we will deliver that lead magnet. Someone doesn’t have to go in and create a new form and then create a new list then upload the file and then create a new auto responder for that list. Like you just uploaded to lead pages and we just handled delivering it and you can send everyone to your central house list and we’ll handout the bribe. And when you do that or the lead magnet and when you do that at the very bottom of the email, it says digital asset delivery provided by lead pages like at the very, very bottom.
[21:08] So whenever anyone uses that, we kind of get a mini little – there’s not a link or anything but we get a little mention there at the bottom of the email. So it’s advantageous for other people to use our digital asset delivery service. So we do do things like highlight that feature not only because it saves people a whole lot of time but also because it helps us out quite a bit as a business. That’s only something that we’ve recently started doing.
[21:34] Originally what we were doing was – sort if it’s all in our landing pages and it was simple things like I’ll just give you some topics. A call to action should be above the fold. They should be visible without you having to scroll down. That’s a big one. The color of call to action buttons should be yellow. We’ve tested a whole bunch of different colors. When you have an opt-in box or some sort of action you want people to be taking, those just do much better like time and time again when the call to action is on the right side of the page as opposed to the left side of the page, just some basic things like that.
[22:09] We also experimented with hiding the opt-in box and only showing it when someone clicks on a button and then a pop-up shows. So there’s a lot of design things that we did that I just created some style guidelines around and rather than having to explain some complicated series of messaging and branding metaphors and instructions, I really reduced it to use two separate opt-in boxes. Use this color for calls to action. Have things on the right side instead of the left side if you do need to put the call to action on side versus another.
[22:42] It was super easy to communicate these things to a designer and getting the same level of effectiveness out of a set of rules. That would be so much more difficult to do that with copy.
[22:52] Rob: Thanks for dropping that awesome tactical knowledge there.
[22:55] Mike: I have a question about the color thing that you were just mentioning having yellow call to action buttons. Is that specifically related to your site because of the color scheme you used or did you test it against a variety of backgrounds and find that in general yellow works better than say orange or blue or whatever.
[23:11] Clay: So it is a mixture of yellow and orange and it works better provided that it’s not ugly. So if it clearly conflicts with everything then it doesn’t work because it doesn’t look good. But provided that it does work with the color scheme in some way, that it doesn’t out right conflict with the color scheme, we found that yellow works better than red, than blue, than green. In some cases these changes are 2% to 3%. In other cases it’s more like 15% to 20%. But we have found this as a consistent result.
[23:44] Mike: I was kind of curious because I’ve seen a lot of call to actions which are either yellow or orange and I just wasn’t sure whether that was an across the board rule or whether it really depended a little bit more on the color scheme that you’re already using.
[23:58] Rob: What else is interesting is you look at Amazon.com and you look at their add to cart button and that’s always been some type of orange. They’ve changed the shape of it now but it’s still like a yellowish orange. And even their wish list, add to wish list button is a lighter – it’s almost grey but it’s yellow in some places. I haven’t even thought about this because I never did split test button colors on Hit Tail but all of our buttons there are an orange. It does fit on the color scheme. It’s a blue and orange color scheme but that’s something good for me to take home.
[24:28] Clay: Yeah. I think there are findings like this that are really more stable than others. For example, for a long time, the best opt-in lead magnet was like free reports or white paper something like that. So everyone was giving those away. And then at some point when online video was big and sort of the average person could produce a decent video, people realized that if they gave away some sort of video course or series of videos or a video lesson that actually people would be much more likely to opt-in for that. So then everyone was giving away videos and that was working better than free reports.
[25:07] And then someone found out that if you just write something on a piece of paper by hand like a flow chart or some kind of diagram and scanned it and it just looked kind of jenky and handwritten that actually would work the best because it was a pattern interrupt. It was different than what most people were seeing so it’s unique.
[25:25] In marketing, there’s times when there’s like arms races when people are just jumping from thing to thing and everyone becomes immune to the new thing until someone figures out something else that’s different that works and everyone jumps on that bandwagon. And so far, the button color thing seems like it’s not one of those bandwagon things that it’s actually a stable consistent finding that isn’t a subject to marketing fads.
[25:50] Rob: Awesome. That actually leads us really well into the next topic we’re going to talk about which I’ve titled opt-in rewards that work and this is again from another podcast episode you talk about. Talk to us a little bit about what used to work and what isn’t going to work moving forward and then maybe trends you see of what is actually working better from now in the future?
[26:09] Clay: It seems to be – we look at a whole bunch of different landing pages and opt-in bribes and things like that and we’re fortunate with lead pages that we can actually see platform level data. So we can for example with lead pages test button colors across the entire platform and run like across platform split test. We haven’t been able to do this with lead magnets justly yet because it’s kind of hard to figure out how to run this test but it’s something that we want to do.
[26:36] But individually and certainly in our business, we found a shift in what works. When it comes to lead magnets, people are wanting tools and resource lists and things that require very little amount of effort but get a maximum amount of result. So things like spreadsheets where you can plug-in something and get something out of it that’s useful. If I ran a cooking site, I would want to give away a list of recipes right? Because you don’t have to read a lot. You don’t have to process a lot of content. You don’t have to synthesize much. There’s just sort of a list of things on a page and you look at them and you make the recipe, follow the instructions.
[27:18] What’s working really well right now are resource lists. So lists of resources you need to get results in your specific area. I sort of realized this when I was looking at the best selling issues of magazines like back packer magazine and golf digest and photography magazine and reliably with these magazines the best selling issues of these magazines are the gear guides right?
[27:43] So the guides where they’re telling you the top golf clubs to get if its golf magazine to hit a long drive or the best cameras to get or the lenses to get and the tripods to get. People love this stuff. It’s because as humans we have this belief that if we only have the tools the pros had then we would get the same results that the pros have. And in a lot of cases that’s actually true. So what we found really works is just a page or two listing the top resources that a new person or someone approaching a topic should acquire to help them get results as quickly as possible.
[28:19] So life if you’re at a yoga website, you might want to list for a man and a woman what shorts should you buy, what shirt, what yoga mat to get. If you don’t have access to a local yoga studio sort of what DVD set to start with? Because this is really just what people want. They don’t want to have to figure out all this stuff and if you just give someone a list of resources that give them a reliable proven starting point and it’s based on your research and your expertise, that kind of thing can get an insane opt-in rate compared to some like 50 page long eBook that someone has to pour over and carve out time to read.
[28:56] So generally things where people can consume a very small amount of information and get a fairly significant result but software lead magnets do incredibly well. I remember back in the day when I was blogging quite a bit, I remember writing a series of 1500 word blog post where I would painstakingly make some point that I thought was so important. I would get a whole lot of comments but I wouldn’t get a lot of people opting in.
[29:27] Once I spent an entire month writing an eBook and I spent three weeks once making an entire video course showing people how to do something and yet a WordPress plug in that one of our developers made over a weekend blew all of those away in terms of list growth and the number of opt-ins we got because people just value tools. People are sick of long winded eBooks. They’re sick of 15 minute long talking head videos and they just want something that’s going to give them immediate value and isn’t going to require a whole bunch of their time.
[30:02] Mike: That sounds a lot like giving people the information versus giving them the actual tools to do something. Obviously if you give them the information they can do it themselves but if you give them the tools to do it then not only are they a lot more likely to do it but its going to take them a lot less time and effort to do it. So it seems like those things would be much more valuable to them and would therefore convert a lot better.
[30:24] Clay: I think you hit the nail on the head. I think done for you just really out performs do it yourself and I think that’s part of the reason why developers are in such high demands right now is because we are craving as a society tools that automate the information we’ve been given about how to do things. So whenever you can automate an instruction set, that just has a much higher value than just giving someone the instruction set. I think you’re absolutely right.
[30:55]Rob: The next one is email on mobile devices. You mentioned in an episode that over 1/3 of emails are opened on mobile devices. I looked it up today and Litmos is saying of their emails that it’s about 44% so it’s growing. Its going to overtake the majority of emails certainly within a year or two are going to be opened on mobile devices meaning tablets and mobile phones.
[31:17] What are the implications of that for those of us who have been basically been doing email marketing and know how to do it, I’ve been doing it for years. We’re used to larger screens and used to the same basic strategies. What do we have to do differently for mobile devices?
[31:32] Clay: Yeah. A few things. I think the first is you have some big huge complicated template, don’t. If you want some sort of graphical branding or HTML branding on your emails, kind of have something thin and minimalistic and that’s at the top and that sort of establishes whatever you want to establish by having a graphical email in the first place but make that sort of limited because its affecting your screen real estate so that’s one thing.
[31:58] The second thing is that just like you want calls to action to be above the fold, make sure the calls to action in your emails are above the fold that they are clearly visible without anyone having to scroll down on a mobile device. Right? Usually you want to get the click without someone having to move through the email. They should be able to do that without reading a whole lot of information.
[32:22] So don’t have huge overly graphic email templates that you use to send out your newsletter. Make sure the call to action is above the fold. Those are sort of the two rules of thumb and make sure that when someone does click on the link that they are sent to a landing page if you’re looking to get an email address or get someone to take some kind of action, make sure you are sending them to mobile responsive landing pages and that those landing pages don’t require them to input a lot of data.
[32:49] So if someone’s coming from a mobile device, maybe you shouldn’t ask for a first name last name phone number address, email address, location, zip code, nobody’s going to fill that out from their mobile device. Maybe just ask for an email address and then you can follow-up over time by asking for more information or you can move that to a phone call. Maybe just ask for their phone number but I would encourage you to not ask for more than one piece of information when someone’s coming to a landing page from a mobile device.
[33:20] Rob: Awesome. This is especially relevant. My newest product is called Drip and it’s at getdrip.com and we’re launching next month and one thing we really focused on is putting together a single template. We don’t even offer fancy templates at this point. We may never offer them because this is focused on email marketing, not email newsletters. And so it’s good to hear you say that. I’ve always despised that fixed width newsletter templates that have the fancy border around them and now I’m on my iPhone, my finger is over the delete button when those things get there because you try to resize them and the text stretches and it doesn’t wrap right and so it looks really goofy on a small screen.
[34:00] Mike: One of the things you brought up was about having things up above the fold. I’m just curios what your thoughts are on how much that applies to mobile devices and also to desktops general. I was just at a conference called Behavior Con this past week. And one of the researchers who had presented essentially said that at this point, having things above or below the fold doesn’t matter nearly as much because people are doing things on their mobile devices and when they’re browsing web pages they basically expect to have to scroll up and down.
[34:29] So they’re much more comfortable and much more sued to scrolling up and down. I was just curious what your thoughts were and what you have kind of seen out in the field.
[34:38] Clay: Yeah. I think there are a lot of opinions out there. I can tell you that our data has consistently shown that generally speaking and there are huge diversions on this. The more work you require of someone to do something, the less likely they are to do it. Unless you’re being very intentional about requiring more work and its sort of a strategic component of your marketing. We found that when you’re in the context of a trust relationship that you have with someone on your email list, you’ve built up a relationship with them.
[35:09] So given that they’re sort of a context of trust, you are an effective copywriter so you know how to communicate the value of what you’re providing in a very short period of time if you have the links above the fold you’re going to do better. It may or may not be true that people expect to do more scrolling. I think that’s probably true. I don’t think it’s accurate to say that it doesn’t make a different what so ever whether or not the links are above the fold. Certainly in our experience it does make a difference.
[35:36] Rob: Yeah that’s been my experience as well. That could be changing. I guess Mike was saying that the person at Behavior Con was saying that now that mobile is around, people are so used to scrolling but in the past as I was testing it, to me it’s a rule of thumb at this point until I see data otherwise I’m going to have a hard time moving my calls to action below the fold.
[35:54] Clay: We’ll often times do both. So we’ll have a call to action at the very top sort of below the headline and the core messaging and sometimes we’ll have a bunch of bullet points and we’ll have a call to action at the bottom. It’s not really in my opinion one or the other often you can do both. I think generally speaking most businesses have a variety of personas on their website.
[36:17] There’s been this debate like should I give away a free course or an eBook, something like that or a webinar opt-in and we’re like do all of them. Address the variety of psychological profiles that could end up on your website and do various things. I think it’s the same with calls to action. I think it’s the same with the emails. Have a call to action at the top of the email and have one at the bottom so when they’ve scrolled to the bottom and they can no longer see the top that they don’t have to scroll to the top again to hit the link.
[36:46] So I think when in doubt, put more calls to action in your marketing pieces provided that it isn’t overkill and it doesn’t become obnoxious and so in your face that it actually repels people.
[36:57] Rob: Alright. Good advice. Clay, well we’re getting close to wrapping up here. I have 4 or 5 more topics in the outline. If people want to hear about those, these are things like whether you should ask for first name in your opt-in forms. I’m betting a YouTube URL in an email and why that’s a really good way to get a lot of YouTube views as well as a definition of a never ending sales funnel. If people want to find out about those, that they can subscribe to the marketing field podcast and I’d say go back 6 to 12 months and listen through those and you’ll hear all about that stuff.
[37:27] We only have time to tackle one more thing and that is a two step opt-in process. I have never heard of this. You mentioned that you’ve been doing it. Tell us what it is and why it’s working so much better than traditional one step opt-in?
[37:40] Clay: Yes. So I have this realization and I have these hypotheses that when people go to a website or to a landing page for example, they’re making a determination about whether or not it’s a giving page or a taking page. And when all they see is front and center is an opt-in box and they probably never been to that site before, they’re probably going to assume this is a taking page. So how can we change that?
[38:08]And one thing that I tested that ended up working incredible well is taking that opt-in box and only displaying it after someone clicks on the call to action button. So let’s say you’re doing a webinar. Rather than having the webinar opt-in box right there front center on the registration page, have a button that says sign me up for the webinar and when people click on that button you immediately show a popup that allows people to opt-in.
[38:40] I was at a farmer’s market the other day and someone was selling t-shirts at the farmers market. They didn’t have my size. I wore a medium. I went up to the guy and I said hey do you have the shirt in a medium and he immediately reached below the table and handed me a medium shirt. And I was a little shocked at how quickly he did it but because he gave it to me immediately when I asked for it, I ended up buying somehow. It was almost like this hypnotic response. It’s kind of the same way with a two step opt-in form.
[39:10] It creates a yes ladder. If you say yes to clicking on the button that says sign me up for this event, then the probability that you’ll say yes to opting-in as soon as the opt-in box appears is much greater. If you can get someone to commit at a low level of commitment by clicking on that button, the likelihood that you’ll commit at a greater level by opting in when that opt-in box appears as a popup is much greater.
[39:36] Usually when you’re on a landing page, you have to fill out the forms and then you click the submit button. But what if you added an additional step of having someone click a button that triggered a popup that allowed someone to opt-in right? It just puts a really easy step before a more complex step or a more sort of difficult and I guess emotionally taxing step.
[40:00] So there’s a variety of reasons why this works. Another reason why this works is that when you click on a button that says register me for this event and a pop up appears where you can actually fill out a form and opt-in, it really brings the decision to a head. Usually when you’re just looking at a landing page, you can browse the content on the page. You can look at different things and you might leave the page or click on a header link and leave that page.
[40:27] But when you click on a button that says register me for this event and a popup appears with two or three fields that you fill out and then submit, you have to make a decision one way or another about whether or not you’re going to opt-in. you have to make a decision. You can’t just ignore that all together. And by getting a much greater percentage of people who visit a landing page, to make a decision one way or another about whether or not they’re going to opt-in you get a lot more opt-ins.
[40:58] If everyone in the entire world had to make a decision about whether or not they were going to opt-in to your landing page, you would have the world’s biggest email list. But because most people don’t make a decision one way or another when they end up on a landing page, you lose a lot of people. So there’s a variety of reasons why this works we found with our pages we’ve gotten huge bumps in opt-in rates just by adding two step opt-in processes. And sort of the average that we’ve seen is about a 30% relative increase in conversion rate by taking one step opt-in processes and making them two step opt-in processes.
[41:33] Rob: So let’s say someone has a Saas app or a website selling software of some kind. We’ve encouraged them on this show is they should have email opt-ins on their blog and sometimes on their homepage and all that kind of stuff. For a software company, more of a Saas business, what kinds of upfront question or upfront thing would they put on that button? Or what would they be asking to get that first step of the opt-in.
[42:00] Clay: So you’re asking what would be the text on the call to action button.
[42:04] Rob: Yes.
[42:05] Clay: So if you’re doing webinar and I encourage everyone who’s in the Saas business to be doing webinars to drive sales. It could just be like quicker to secure my spot. But if you’re offering a white paper, the best text we ever have found is just the phrase download now. It used to be the winner of all these split tests was the phrase free instant access. There was something about the phrase about combining the word free and instant and access and yielded the highest opt-in rate for a white paper whatever you’re giving away provided that its downloadable.
[42:41] But recently we personally found a doubling of the opt-in rate by changing the words free instant access to download now for white papers and such. It all depends on what you’re giving away. I prefer things that are downloadable because we have this psychological need as humans to possess stuff. If it’s in the cloud and it’s not on our hard drive, we’re not possessing it.
[43:04] If you can give something away that someone can just have tucked in a folder somewhere like even if they never opened it in the rest of their lives, the fact that they can download something and put it on their hard drive to keep and to hold and to hoard or whatever they’re going to do with it, that’s just really powerful. So if you can put the phrase download now on a button, please put that on a button. That’s just working incredibly well.
[43:27] Rob: Yeah when you said there’s throw phrases, free instant access to me sounds just so overplayed now. I feel like I saw that on buttons for years and download now absolutely, I would be much more likely to click on that. That’s awesome. Thank you.
[43:40] To be honest Clay, this has been a real pleasure. You’ve brought a lot of very actionable – that’s what I like about the stuff I’ve heard from you is its super tactical. It’s very focused and some people could say these are like little things, little tweaks you could make but I think they’re big tweaks. These are the things that really once you get a business going, can really take you up those double digit conversion rate increase type things. So I really want to thank you for your time. Mike and I, we know you’re busy running your company Lead Bright. How would folks get in touch with you?
[44:10] Clay: I would encourage people to go to blog.leadpages.net and about once a week we give away a tested and proven landing page template that folks can download and add to their website and do whatever they want with. All of these templates that we give away are ones that we’ve tested internally. We’ve used on multiple client and customer site and that we’ve sort of proven to work.
[44:36] So we provide kind of a free downloadable lead magnet to people on a weekly basis via our blogs. So that’s a good place to find the latest of what we’re doing in terms of our conversion lab. So that’s probably the best way to find me.
[44:51] Rob: Awesome. Very cool. Well thanks again Clay for coming on and yeah, I guess we’ll be chatting with you soon.
[44:58] Clay: Absolutely. Thanks Rob. Thanks Mike.
[45:59] Music
[45:03] Mike: If you have question for us, you can call it in to our voice mail number at 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. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 147 | SaaS Pricing, Segmenting Customers, Selling Before Coding, and More Listener Questions
Show Notes
Transcript
[00:00] Mike: This is Startups for the Rest of Us episode 147.
[00:03] Music
[00:11] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
[00:19] Rob: And I’m Rob.
[000:20] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
[00:24] Rob: The word is Drip is in prelaunch. I have 310 emails going out and it’s basically kind of a chunk of our launch list and we’re doing as a test just to make sure that everything works and all the sign up and the trial emails and billing and all that stuff works but it’s pretty exciting. I have a four email launch sequence that I use often and two of those emails of have gone out. So tomorrow is the email that actually lets people in and gets them start using Drip. So it’s kind of the first time that we’re launching to a group of people rather than doing one off stuff.
[00:54] Mike: Yeah, that’s really nice to see.
[00:57] Rob: I want you, AuditShark here like next week or two weeks from now, that’s where I want you to be.
[01:02] Mike: Because I’ve been thinking a lot about how to deal with the issues for remediation. Just because doing things on an automated basis to like remediate them is kind of a scary thing and I’ve actually been looking at putting together kind of a hybrid model where the software does some stuff and then on the back end, there isn’t software that automates it but I can go in and do things myself. So essentially have the software cost one price and then if you want remediation in addition to that, I can charge you an additional fee on top of what the software costs and we’ll go in and manually take care of that.
[01:35] I’ve got a couple people who – there’s one guy that’s really good at operations stuff. He’s worked in a lot of larger production environments and so have I. So either one of us could actually go in and make those fixes and understand the implications of all the fixes that we’re doing. Of course that becomes something of a hybrid offering where you got some software and some services. But I think that because there’s a combined services and software offering, I could actually charge a significant higher price to do that because people are going to understand oh well here’s the cost of the software. Here’s the cost of the remediation effort beyond that and it does bring up the price of the overall offering.
[02:12] You know as well as I do when you first start launching a Saas product that the ramp up is going to be slow and I think adding in services like that is going to ramp up that revenue stream very, very quickly.
[02:21] Rob: Yeah. I think that’s a really good idea. For those who are listening, if you don’t know what remediation means, AuditShark finds problems or confines security issues and remediation means fixing those. And you’re talking about doing some manual work where a person has to be involved and you’re right. It raises your price point but it means you provide so much more value because if you think about what AuditShark probably does is it will add items to my to-do list as a server owner.
[02:46] And this is the same problem I saw with HitTail. It’s the same problem you see with a lot of apps that will cause churn like people feel guilty about it. They don’t want to pay for something that is not actually fixing something. It’s just telling them something needs to be fixed. There’s a big, big difference between those two end points.
[03:01] So I mean I’m doing it with Drip. We have a concierge service where we will write someone’s’ entire email sequence for a fee. We did it with HitTail where we automated the article publishing. We have writers who write articles for people to take that off their to-do list. It’s adding human powering your Saas app basically and it’s taking up the next level both in price point and in the amount of service that you’re able to offer.
[03:24] So yes I fully support that and I think is the future trend because so many of the low hanging fruit Saas apps are being built and they’re done. How much more can you do with invoicing and accounting and these other things? I think that over the next few years we’re going to see these hybrid approaches because most software developers don’t want to do them because they’re messy. We want everything to be code. We want everything to scale.
[03:47] So adding that human powered side to it, you just have such a chance to grow revenue faster and to offer so much more value like exponentially more value to your end customers than you can just do with code.
[03:57] Mike: I think the other significant advantage of doing something like this is the fact that you may not know upfront what its going to take to do all that remediation at least from my product there’s obviously different problems that needs to be solved for other products but for those, there’s going to be a different manual process in place. And you’re not going to necessarily know how to handle that in every situation automatically. So you’re going to have to go through those manual steps.
[04:20] You sometimes have to do things, they just simply don’t scale. And then once you get a handle on how to do them, then you try to automate them and I think this is just a natural extension of that is to be able to do these manually, try and figure out what sorts of things we going to regularly check to make sure we’re not breaking other stuff. And then make those changes, test everything, make sure everything’s still working and figure out what those additional things are that need to be done to make sure it’s still working and automate those down the road.
[04:46] Rob: Or you have a Saas app, you’re thinking about one, ask yourself this question. What can I do to do more for my customers? Even completely non-scalable requires manual labor. What can you do for them to provide them more value and therefore give you the ability to be better than your competition and to be able to charge more. And so you’re going to have a higher revenue for growth.
[05:06] Music
[05:10] So we both hired bookkeepers.
[05:11] Mike: Yeah. How was yours going?
[05:13] Rob: Mine’s going really well. I’ve been happy with him. He’s been doing all my Numa group Books for about two months and he has me setup in Xero which is xero.com and I’m pleased with the software. It’s easy enough to use and finally I’m not like dreading taxes in next year because he actually went all the way back to January and did InDinero, manually migrated my books. He charged me for it which was fair and then now he’s keeping it on a monthly basis. How about you?
[05:41] Mike: Yeah. My book keeper’s been really working out as well. She came in, I think she was here yesterday and worked through the rest of the stuff and all the bills and stuff that I had to pay for the month and I just walked her through the process. So far it’s working out great. I mean it was really nice to just hand her everything and just kind walkway and say let me know if you have questions. I just didn’t even have to think about it. It was awesome.
[06:01] Rob: Yeah. It’s definitely a way off my shoulders. It was reasonably easy when InDinero work but once we started having bugs I was spending a lot of time on it. So it’s nice to know it’s taken care of. It’s like too expensive to outsource in my opinion when you have good software that can do it or if you have a simple solution. If you have a pretty simple scenario where you have one product that’s generating revenue, I would recommend using outright and you can probably do it almost completely automated. If you setup a few rules, even with Xero, you can setup a lot of rules. You can probably most automate it and don’t need a bookkeeper. But once you get more complex or I think like you Mike, you have a lot of paper that you process.
[06:35] Mike: Yeah.
[06:36] Rob: That’s a point where your time is more valuable than sitting there. You’re doing something basically that’s not pushing your business forward. We have two congratulations, two new product launches over the past couple of weeks from long time Micropreneur Academy members. The first is Ivan. He not only launched his split testing plug-in for WordPress but he saw his first sale within a day or two of launching and that’s at abpressoptimizer.com and he gave us a coupon code for our listeners. If you use Startups25 that will get you 25% off.
[07:14] And he dropped us a little note. He said the Micropreneur Academy gave me a realistic outlook and the tools I needed to launch my first product. Having the support of the academy community gave me the motivation to finish my product and made me accountable for my progress. He says out of everything I’ve built in my career, nothing has been this gratifying as when I got that email for the first sale. So definitely, congratulations to Ivan.
[07:36] The other launch is Nitesh Singh also been with the academy for several years and he launched auctionplugin.net it’s also a WordPress plug-in. it enables you to launch an auction site in a few minutes.
[07:48] Mike: I’m just getting a lot of people going to the WordPress space and launching a lot of different plug-ins.
[07:54] Rob: Lot of opportunity there. And it’s like we’ve talked about on the podcast now for the past six months of kind of getting that early win. Because these are the first products that these guys are launching and you launch it and you get – even if it’s a few thousand a month like it shows you that you’re capable of it. It gives you that early win. It gives you confidence and it also teaches you a lot about the different elements that you need to then grow and kind of a more – maybe a more complex app or a complex market. And it’s a stair step approach right? Of starting small and kind of moving up. I think it’s really cool.
[08:26] Mike: I think what I find really interesting is I’ve seen some people launch in these WordPress plug-ins and they don’t know anything about WordPress development. They’re essentially outsourcing the entire thing to other people and then they’re simply attacking the marketing side of things to understand how to sell it, how to put the site up and everything else and really focus in on the marketing and letting somebody else deal with all the code behind it. Even though they are developers and they could theoretically figure out if they wanted to but they’re just not…
[08:53] Rob: Right. I think that’s the nice benefit of something like a WordPress plug-in over Saas is that it’s so much less complex that you can hire a developer and more easily outsource it. There are also a lot of decent WordPress plug-in developers around and they’re not super expensive. Again, building the Saas app can take four to six months of pretty heavy development whereas you can get a plug-in developed in a month and kind of what you see is what you get. There’s just a lot of fewer moving parts and I still maintain that. Right now it’s still a good strategy for someone just getting started.
[09:26] Music
[09:30] Today we are going to be answering some listener questions. Going to the back log. Our first listener question is a voicemail about the best pricing strategy for a B to B Saas app.
[09:41] Dan: Hey my name is Dan and I am representing Chart Breeze. That’s chartbreeze.com it’s charting for your Trello projects. I want to know what’s the right strategy to take when trying to price your Saas project and specifically when trying to price for potential businesses to buy your product not necessarily consumers. Thanks. I’ll listen to your answer. Bye.
[10:06] Rob: So I think Dan really has two questions. First part, he’s kind of asking what’s a general approach for it but I bet he also may appreciate some advice about his site specifically which he said is at chartbreeze.com. In terms of general Saas pricing, I think almost all Saas apps are going to be business to business. There are very few B to C Saas apps that I’ve seen actually work because consumers don’t really love subscriptions.
[10:31] I think in general when you are talking about Saas pricing, just assume that its B to B. There’s a bunch of different approaches you can take. I think that I always like to price on value meaning if it saves someone money or makes them money or saves them time, then you can somehow justify the price that way. Now I know there’s argument about whether or not that kind of pricing actually works but it helps at least shape the thought whether you use that in your marketing or not, it helps at least shape it in your mind of what could this potentially be worth to someone.
[11:00] The second approach that I think about is like a gut feeling of what I’d be willing to pay and I will also ask a handful of people what they think it would be worth. You run the risk – if you’re trying to do both do customer development and develop the product as well as ask them about what they should pay then you kind of have two conflicting things going on. Right. So you can’t do that. I feel like you need to figure out your feature set first, figure out what solves the real paying point and start building that and then ask a separate group of people here’s what I’m building, would you buy it? And how much would you pay?
[11:30] And then, once you get a number that you start feeling comfortable with, like these things are like $29. $29 a month might be a lower number, then go back to the first group and say alright, I’ve solved your problem and I’m going to charge $29 for it. Are you good with it? And then you’re going to see reactions all over the board. Some people will say that’s a no brainer and some people will say it’s way too much. And then try to figure out what’s the different between those guys. Are they both Saas companies buying your app? And is one of them just makes so much more per lead so they’re willing to pay more for it?
[12:03] Try to figure out the point which you can segment and that’s the trick. Its figuring out is it the number of emails sent per month or the number of subscribers that they have or the number of documents they upload. There’s these things to pivot on. You’ve really got to dig in to start figuring that out. It’s not a trivial process. There’s been a lot written on this. I actually like sixteenventures.com which is Lincoln Murphy’s site and he’s written a lot about Saas pricing so if you want to go deeper I would definitely check out sixteenventures.com.
[12:32] Mike: I think for chart breeze, one of the things that strikes me is the plus plan for example is listed at $29 a month and for anyone who’s not looking at it, there’s basic plus then enterprise priced at $9, $29 then $59. If you look at business class Trello, its $25 a month or $200 a year. So to me it seems a little odd to charge more for an add on than for the product itself.
[12:58] Rob: Got it. And for people, Chart Breeze is charts for Trello. It says create gorgeous charts for your Trello boards.
[13:05] Mike: The Trello business class only cost $200 a year. So to me it seems a little odd to charge more for charting capability than it does for the product itself. It’s not to say you can’t pull it off. The other end of the spectrum is that you also have to understand that this is being built on a product that could theoretically be free. So people could be using the free version.
[13:26] I have a hard time coming up with a pricing plan that is an add on for something that’s theoretically free. You can kind of look back at WordPress and say well that’s free. You’re paying for the plug-ins that extend the functionality. And that’s one way to look at it. I don’t know with chart breeze how you would justify that. I really think you need to start digging and find out what people are using it for and then try to come back with a pricing scenario that makes sense for the problems that they’re trying to solve.
[13:52] The other thing you could do is find ways that people are using Trello and build something around that such that your add on product really addresses those needs in a way that leverages the Trello back end and uses your front end. And then essentially what you’re doing is you’re using the Trello engine to power your application as a value app.
[14:10] Rob: Yeah. I think Chart Breeze doesn’t really have a pricing problem. I think it has more of a value proposition problem because I use Trello and I manage. I have now several Trello boards and I’m using it to manage some different things. But I don’t know why I would use Chart Breeze. The homepage headline says Trello plus charts, so that’s what it is, not what it does for me. And it says create gorgeous charts for your Trello boards and my next question is okay, but why?
[14:37] So then there’s three benefits listed on the homepage. See the bigger picture. Work smarter not harder and clearly communicate victories. But none of those freely apply to me or they feel so vague that I don’t understand. I almost need like a case study or multiple case studies specifically how would I use this today? How is it going to save me time, make me money or save me money? That’s really what I want to know when I come to you as a business.
[15:00] Mike: And that’s kind of why I was pointing to finding out what people are using it for and then building a front end that is going to leverage the Trello back end to specifically solve those problems and use it as their value added. Because obviously, you could use Trello for I’ll say bug tracking if you really wanted to but is it really setup for that? The answer is no. But could you build a front end that would leverage that Trello back end using the API’s and make it into a great drag and drop bug tracker and you probably could.
[15:28] So those are the things I’m thinking that would probably be applicable but I think it goes right to the heart of the matter what you just said as why would I use this? I don’t know why anyone would want to chart things in Trello and I think it really depends a lot on what they’re actually using Trello for.
[15:45] Rob: Right. And so if its only software development companies that give you an agile development using Trello then that’s it. Chart Breeze becomes are you on agile development, are you a developer? You want all of that verbiage and you want to tightly niche it to them. If it turns out that realtors want charts because I know there’s a continuum of realtors who are using it then book, that’s when charts becomes in realtors Trello charting app.
[16:08] So I think there’s more digging to be done here to really find out the value prop that you’re offering, very, very specifically boil down into one sentence and to find out the audience that needs that the most. If you don’t know that yet, that’s okay. You just have to do some digging and continue to look for it because I think at this point if you launch with this app, I don’t know if you’ve already launched I don’t think you have a pricing problem. I think you have like I said a value problem and you need to dig deeper to find that before you’re going to be able to really start attracting customers and solving a deep paying point. So thanks for the question Dan.
[16:40] Our next question comes in from Brandon Crocket. He says hey Mike and Rob. My partners and I have been listening to your podcast for a while now and find it very informing. Our company is called Qdaptive web based truly adaptive question generating app that uses class notes to generate study material. Our question is what do you recommend for a small business checking account? We have an LLC formed and we are finding tons of fees associated with the business accounts. Do you have any recommendation for us?
[17:08] Mike: Having recently gone through this process of finding a new bank for my businesses, I’ll give you the one that I think is probably the best for anyone who’s starting out and they’re essentially in a pre-revenue state. Look for local credit unions. And the reason I say that is because if you go to any of the big box banks like bank of America or Wells Fargo, what’s going to happen is you’re going to sign up with them and get an account with them. But the problem is because you’re not carrying a large balance, they’re going to start charging you monthly fees and those fees can be anywhere from $15 to $30 a month.
[17:39] And if you don’t want to be charged those fees then you have to carry this minimum balance which is probably in the neighborhood of $10,000, $15,000 or $20,000. Now when you go to a smaller bank, those smaller banks probably have a little bit more flexibility but it’s really the credit unions where you can start to leverage their business banking side which they don’t necessarily concentrate on. The smaller credit unions concentrate on consumers but they do offer business banking accounts.
[18:04] So for example near me there’s a bank called DCU and they’re digital federal credit union but they have a lot of business services and they actually have some substantial backing on the business side because they take all the stuff that they offer their members and also offer them to businesses because many of the members own businesses. So in order to offer their members more options in terms of banking let’s offer these to our members who own businesses as well.
[18:32] And they’ve kind of grown that so they will offer stuff to a business even if you don’t have personal accounts with them. But because it’s a digital credit union, they are trying to move everything online so for someone like me, that works out really, really well. But you can leverage that too. You go to a local credit union, find out what sorts of business options they have. I did a search in Massachusetts and found half a dozen credit unions that offer business banking and almost all of them were no fee. Almost all of them did not have a monthly minimum that you had to maintain. $5 is a small price to pay to be able to get that business banking account and not have to pay any fees.
[19:08] Rob: I was going to answer this with a BofA (Bank of America) account. I’m not a huge fan of BFA but they do have a nice online banking and you can deposit checks through their mobile app and I don’t pay any fees on any of my accounts but then you pointed out that it’s because I keep a minimum balance. So when you’re first starting out, you’re right, a big bank is always going to charge you fees until you get to that point of having whatever the minimum balance is typically $10,000 to $20,000 for a business checking account in order not to not pay the fee.
[19:36] Mike: Thanks for the question Brandon. Hope that helps.
[10:38] Rob: Our next question is from Sean Walberg about segmenting customers. He says hey Rob and Mike, I enjoy your podcast each week. Thanks for taking the time to share your experiences. I created a tool over at isithacked.com that checks a website for hard to find spam and it’s been doing a great job at catching infections that other tools have missed. People have been asking me to add a subscription feature that will notify me automatically rather than having to go to my site to check their own sites.
[20:04] I’m not sure how I should build pricing plans to segment my potential customers. I’d like to have some way of making product available to micropreneurs but also make sure I have higher price plans that cater to larger customers. Any guidance you can offer will be appreciated.
[20:16] Mike: There’s to different ways that I can see of kind of segmenting the market. The first one would be for those people who only have a limited number of either websites or servers. I don’t think it would actually be all that difficult to figure out whether or not somebody has one website on the same server or 15 different websites on the same server. What I think you’re going to have to deal with is of somebody has 10 websites are they a large business or are they a small business?
[20:43] It can fall either way and I think that’s going to be the challenging part is trying to figure out whether or not they fall into more of a higher tier business plan versus somebody who just has 5 or 6 small products that they’re trying to work and they happen to all be on the same server but they’re just trying to figure out what is going to work for them and that’s what’s not and they just throw away the other ones.
[21:05] Because the problem that they’re going to have is even if they’re making a fair amount of money from one of their products maybe let’s say its $500 or $1,000 a month and the rest of them are making almost zero, you still want those other ones protected if they’re on the same server because if something gets on to one website, it could theoretically cross infect all the other ones or infect the entire server. So you may need to do a little bit of leg work on an individual customer basis and set up pricing tiers to say okay, well based on this number of servers or this number or this number of websites, you’re going to end up in a different tier.
[21:36] You can also combine those a little bit and say one server or up to five websites and kind of say they’re the same thing. I think WP engine talked a little bit about in a podcast I heard about how they segmented their customers and they realized that if somebody had 10 websites, chances were really good that only 2 or 3 of them have a lot of traffic and the rest of them had virtually none and that was applied primarily to bloggers but it has to do with the distribution of how those are spread out.
[22:03] Another way that I can think of to segment the market a little bit is to identify how many times you’re going to hit their website in either a day or a week or a month to say okay we’re going to check it on this time period to see if it’s been hacked or not. Multiple business are going to say I want to know at least once a day or maybe I want to know every hour because I want to make sure that website or the web server isn’t getting hacked. And if it is, I want to know immediately versus somebody who’s just doing it on a more casual basis once a day or once a week is probably fine for them especially if they’re not making any money from it. So those are kind of my thoughts on how to monetize the site.
[22:39] Rob: I think those are all good thoughts on it. The other thing I would look at is I would go to pingdom.com and look at their pricing going to I’d go to sucuri.net because these are related services. Pingdom checks your up time and some other stuff frankly and then Sucuri is malware detection alert and clean up for websites. So they’re more of a competitor for you. And I imagine when you said that you pickup stuff that others don’t, it might be Sucuri whose not because I think they’re kind of the leader.
[23:07] If you look at how they do it, they say one website is $90 a year. Two to five is $190 a year and then six to ten is $290 a year. They kind of do all inclusive plans. I think it’s a reasonable way. You can think about having a one website. If you really want to help out micropreneur you could have a one website tier that’s a little cheaper and then as you get more websites realize well they’ve probably have more revenue so kind of increase the price accordingly as they go up in bulk from as an enterprise that has many websites should be paying more.
[23:38] The other thing, but they’re all these things that Mike said you can pivot on and Pingdom has them as well its like how many SMS alerts do you get? How many email alerts? Do you multi user capabilities? Because if you want multiple users to log in, you have a team of people, then you should definitely be paying more. And these are things you probably don’t have built yet and may just be on your feature list but those are ways to start segmenting your audience.
[24:04] The other thing is if you start doing integrations with anything whether its reporting, pulling in data or pushing data out that in order to use your API you can move that into like a middle tier or a higher tier because just the basic person who simply wants the basic scans might be willing to forgo that in order to pay a lower price. So good question Sean. Thanks for sending that in.
[24:24] I also like the website I have to admit. I think he did a good job here because the headline is “is it hacked?” and then you can enter a URL and they’ll take a look to see if its hacked. And then below that he has want to know more about keeping your site safe? Subscribe to our mailing list. I bet by now he has a decent mailing list of people that when he does go to launch a Saas version or subscription version of this, he actually has a head start.
[24:47] If he hadn’t had that in, I mean you basically have – you’re starting from scratch and even though you site’s been up all this time you don’t have assets. So even though he’s basically doing a free model at this point, Sean is still getting something out of having this site live. He’s basically building a list of people who may be interested in his subscription service down the line.
[25:04] Mike: The other thing I can think of is this type of service just in general I think is aimed more at business than it is at consumers anyway. So I would think that most people are going to be willing to pay for it. I almost feel in many ways if you start down the road of looking at security then changes are good that for somebody to be interested in paying for security, they have to have something that they’re willing to protect or that is on the line that they want to protect.
[25:32] So once you get to that point, changes are good that you probably have money to spend on that anyway. So I don’t know as I would worry too much about the pricing. I understand if you want to try and give back to the community, there are certainly ways to do that. I mean you could have regular pricing plans and then after that, underneath you can say are you a single founder or do you run a small business with one employee? Click here and let us know and we’ll work with you with special pricing or something along those lines.
[25:58] Rob: Our next question is about building a Saas app for a client and turning it into a product. It comes from long time listener Scott Underwood who his emailed before. He says I have a client who requested a proposal for a web app. I have a feeling the bid to develop the app will be higher than he’s expecting. It’s in a niche that I think I might have some promise to market the app as a Saas app.
[26:17] The client has three similar businesses that he would like the app customized for. The apps will be similar but will apply to three distinct business types. So I think it would appeal to a wide market and could be further customized for other similar businesses. My thoughts on how to work these are 1) provide the client with a proposal to create the app for a fixed fee with a monthly maintenance fee and I would retain the intellectual property rights to use the code, to resell it, create a Saas app etc.
[26:42] Option 2) offer to create a Saas app providing him with the functionality he needs and he can be customer 1. I would require him to commit to a minimum 12 month subscription paid monthly so he has an initial lower upfront cost and I have a customer for 12 months. I would also utilize his input and his industry knowledge to improve the app by getting feedback from him and his employees.
[27:01] Option 3) try to get an initial payment of 50% of his first year subscription and then give him 50% off the monthly fee for the first 12 months. There are only one or two similar Saas apps out there in the space and they’re dated so there is room for improvement. The price points for plans are $99 minimum for one location. $600 average for six locations and a high end of about $1,000 for ten locations. I don’t have industry experiences in these businesses but the initial client could provide a lot of feature request and improvement so that the app provides more value.
[27:30] I’ve emailed 10 similar businesses to get their feedback and whether they would be interested in it, benefit from and subscribe to this web application. I’m leading towards option 2 where he agrees to subscribe for one year minimum to the app. The app isn’t overly complex so I think it’s something I could create the initial version of it in a reasonable amount of time to get them up and running and then use his monthly payments to cover improving the app over time. Looking forward to hearing your thoughts.
[27:52] Mike: I think the first thought that comes to mind for me is in your question, there are a couple different ways that you’re trying to get the customer on in committing them to 12 months and paying you on a monthly basis. I would think if this customer really has three different businesses that they’re trying to get this application built for, then it would probably make a lot more sense to charge them upfront a year fee for the entire thing. And that way you don’t have to worry about monthly recurring payments that collections process. You don’t have to worry about it. It makes things a little bit easier. You can probably just get them to cut you a check and be done with it.
[28:24] That does alleviate a lot of the issues with providing them with a price quote that’s going to be well outside of their price range and I think I would first go to them and say flat out look, I think this price quote is going to be far outside your price range. What do you think of this as an option? Let’s just kind of talk through that. So you can kind of float that to them without bringing together a full blown proposal and that’s probably where I would start.
[28:47] In terms of going through and actually making it work I would definitely just try and get them to pay the 12 months and commit upfront to the whole thing. The problem that you’re going to run into that you and the customer are going to need to decide on is when does that time period start? When does that day one of that 12 month contract start because there’s going to be a lot of things that you do that you’re going to try and put these things into the program and you’re just not going to have time for all of it on day one.
[29:15] So there’s going to have to be a line in the sand that you draw to say look, at this point we’re going to pull the trigger and this is when the time period is going to start otherwise you’re going to run into problems down the road as to when the customer thinks that the time should start versus when you think it should start. And you may want to go down the road of having a deadline set at some point. So let’s say right now it’s August. Let’s say you decide December 1st that’s when you’re going to pull the trigger and that’s when the time period is going to start. At some point before then you collect the 12 months.
[29:42] So those are my thoughts on it like I said I would lean towards that initial 12 month subscription and try to get them to just pay all of it upfront and then you can provide them a yearly plan from then on.
[29:53] Rob: My initial thought is this is complicated. While I don’t think it’s a bad idea, I think it’s a last resort. And I think if you could possibly fund this yourself for doing on off hours it’s just going to be easier. It’s going to be less complicated. Because while you’re not technically taking on a partner who has equity, you are going to have someone who maybe thinks that they can dictate every aspect of the app. What if they request a feature and you don’t want to build it? It doesn’t apply to anyone else. It takes a long time to build it. There are a lot of potential conflicts that could come up here.
[30:29] And so I think dealing with the right partner who has an open mind and is willing to work with you on this and is pretty easy to deal with, I think this is realistic. But I think if that person is demanding and or entitled and thinks that by paying you an upfront payment of say $600 a month to about $7,000 for an annual, if they think they could suddenly dictate every aspect of your app that would have otherwise cost him $50,000 to build then that’s a real problem because its going to sideline you. Its going to cost you a lot of time. And potentially a lot of money.
[31:04] If you think about it, building this app, it would be good to have this person’s input because they do have the industry knowledge but frankly marketing it and trying to find that next market, because if you build three versions, I don’t know if you’re going to own all three of those, how you’re possibly going to market all three of those, that’s the real concern. That is an enormous amount of time. If they really are Saas apps that need full on kind of marketing and scaling and all that. It’s not something that one person could easily do.
[31:33] Mike: I think what he’s trying to do is solve the same problem for three different businesses and he’s charging the person for three different subscriptions.
[31:42] Rob: Yeah. That is the thing. You would need to charge for three subscriptions because although you may not have to write the code three times you are going to have to support three different apps, three different instillations, three different deployments, all that stuff. If your client thinks that he can basically pay once and then get three versions out of it, I think that’s another thing to think about is that there’s always a lot more with having three apps than just writing that shared codebase. So in general, I’m not wild about this idea. I don’t think it’s terrible but it’s not an ideal situation. It’s not a scenario I personally would embark upon.
[32:14] Mike: Would you be more comfortable with it if he built the whole thing first and then basically work through the issues with the person and then said okay, if this meets your needs then I’ll charge you for those? Because it seems like that’s really the sticky issue is getting the customer involved so early on the they feel they’re involved in the development effort and its really being customized for their environment.
[32:36] Rob: That’s right. That’s my big concern is you have kind of a marriage there that needs to be well defined as to what their role is and your role is in the specific ownership and who can dictate what gets in the product. Because if stuff goes down in the middle and they request a feature and you say no we’re not going to build it and they get really upset about it and what are you going to do? How do you resolve that? So thanks for the question Scott.
[33:00] So our last question today comes from Brian Donahue. He says hi guys I’m a newbie academy members and I attended my first MicroConf in April. I was very glad I was able to attend. There was one idea that was espoused repeatedly that I’m struggling to understand how to put into practice, the idea that you should sell your product before you’ve written any code. That sounds great but gives me all kinds of anxiety just thinking about it. I’m wondering how the looks in practice.
[33:25] What is the sales pitch? What promises do you make? Are you promising a delivery/lawn schedule? If they actually give you their credit card and you take their money, how long can you reasonably wait before they have something usable? If you have any experience or stories you can relate about this was done successfully, what things need to be in place and how to pre-launch customers engage in and get value from the process, I think that would make for a great show. Well if there’s some info you can point to me that I missed that explains in more specifics, I’d love to find it. Thank again for all your hard work. It’s usually inspirational.
[33:54] Mike: I think one of the things you have to keep in mind when you’re asking people for money or you’re asking them to commit is not necessarily that you’re asking them for the money. It’s asking them for a commitment to at least give the product a fair shot. When push comes to shove and you deliver the product or you’ve handed it to them, put it in front of them and said hey this is what I built. Let me know what your thoughts are. Is this something you’re willing to pay for? And that’s really what you’re trying to get. You’re just trying to get that commitment.
[34:20] It’s not about the money. That money could be a dollar. It could be down payment on a house and to the actual dollar amount in some cases are somewhat immaterial which you really just want is them to give it a fair shot and be in enough pain that they’re willing to come back to your site later on based on an email to actually follow through and sign up. And that’s what you want. You want that commitment. It’s not about the dollars. It’s not about them saying yeah, I want this and I want it in three weeks or three months. Chances are really good if they have this problem now they’re still going to have this problem in three months. They’re still probably going to have this problem in six months.
[34:54] And depending on how painful that is, if the problem is so incredibly painful that they need a solution immediately, there are going to be other people out there like them. So I don’t know as I would worry too much about them finding another solution because if they do find another solution that’s market validation for you. It means there are other products in the market that are solving that problem and you’re going to be able to carve out a space for yourself in that market.
[35:17] Rob: I think Brian’s talking about – a few people pointed out that you should actually get a credit card and charge their card or get a check from them maybe and don’t cash it. As a true commitment that until you have that, you don’t have a true commitment that they actually are going to value what you’re building. I’ve never done that. I don’t think it’s necessary. I do think it’s probably better or I know it’s better than getting a list of emails.
[35:43] But I find that asking someone for a purchase commitment upfront before you’ve built it will – if you do it online in pages in example, it will substantially reduce the number of people who you’re actually going to be able to engage with later on because you have to really sell hard on that page in order to get them to put their credit card number in. Whereas if you promise what the app is going to do and then you get email addresses, you then have a way to contact them and a way to explain what you’re doing and give them updates and get buy-in on the process and hopefully convert them by engaging with them over time and showing them what it is you’re building.
[36:18] So if I was going to do a solely online, that’s definitely how I’d do it. That’s how I’ve done Drip. And for an example you can go to getdrip.com right now you can see the landing page and that’s the promise that I make to people. That’s how I sell before coding. On the flip side, I do know there are people who cold call or get in face to face conversations and then do actually ask for the credit card. I think if that feels odd to you, if it feels scary then maybe don’t do it this time around and wait until you have your legs under you or wait ‘til you have an app that you’ve launched you feel more confident about it and consider at that point.
[36:51] I don’t think that there’s only one right answer to this question. I don’t think the end all be all way of doing it is to always get credit cards because again I think it limits the number of people – not only limits the number of people who you can kind of get in to your early access but it means you really have to flush out early on exactly what you’re building. Because if you explain kind of a vision or a value prop, it’s hard to get someone to write a check for the first month or the first six months of that. It’s really hard.
[37:17] But once you have something to show them then you can say alright, does this do it and how can I chance it so that it does provide you with the value to write that first check? There’s a range here of things you can do and what you feel comfortable with is probably what’s going to work best for you and I do think multiple options are viable here.
[37:34] Music
[37:37] If you have question for us, you can call it in to our voice mail number at 1-888-801-9690 or email it us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. See you next time.
Episode 146 | Product Companies Vs. Service Companies
Show Notes
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I discuss product companies versus services companies. This is Startups for the Rest of Us: Episode 146.
[00:08] Music
[00:17] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re 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. What’s the word this week, Mike?
[00:31] Mike: Well I just got back from vacation. Naturally because of that, I’ve gotten nothing done over the past week or so but other things have still been moving along as the different contractors. I have been working on things here and there. And because of the way some of the things in AuditShark work, I can just make things up and they’re like I didn’t know I could do that and I’m like well, it can now but only because I designated that role case.
[00:52] Rob: Nice. Because you were like off the grid for a few days.
[00:55] Mike: Yeah. We went over to Niagara falls first and spent some time out in that side of New York and then we went to the Adirondacks. From the beach I had 4G wireless access which is kind of awesome.
[01:07] Rob: Awesome. Yeah that is cool, so you could go down there and watch the kids play and get some stuff done.
[01:11] Mike: No, I got nothing done. I sat in the beach and got sunburned.
[01:15] Rob: But you said hey look, I have 4G and I’m not going to do any work.
[01:19] Mike: Exactly. That’s really what happened.
[01:20] Rob: Because whenever I come back from vacation I find that I’m either totally charged up to hit work really hard or I come back and I’m completely unproductive because I would want to stay on vacation. Do you have a typical mode that you come back or does it vary? And how do you feel coming back off of this one?
[01:36] Mike: Because it was such a long drive on Friday and when I got back, I wanted to do nothing for the rest of the day but then on Saturday I spent 5 or 6 hours doing work and I actually got a lot of work done on Saturday. But the past two days, because today’s Tuesday, I really haven’t gotten very much done because I just haven’t really felt like it. I had that burning desire to get things done when I first got back and then it just completely went away for a couple of days.
[02:02] Rob: Yeah. Well we want to send a congratulations to Josh Pigford. He’s a MicroConf attendee this past year and he runs pop survey. He just launched a new app called temper and it’s ate temper.io basically it’s a way to survey your customers on an ongoing basis and to find out how your customers feel about every aspect of your business. So it’s kind of like a little mini survey tool. It’s pretty neat. And he’s basically created a little coupon code for our listeners. It’s a SAAS product so it’s a monthly subscription.
And if you used coupon code podcast, you’re going to get 50% off forever, for as long as you are a customer. So if that’s something, and I’m definitely going to be looking at getting something like this into Drip especially in the early days to figure out how frustrated people are. There’s a bunch of different options but the one I like is kind of the multiple faces and there’s like a sad face, a medium face and a smiley face. And then you can prompt them from their based on what someone clicks when they log in.
[02:55] Mike: Yeah. That’s really cool. I really like the way he’s kind of built the website on and the design and the product itself looks really interesting. It’s very crisp.
[03:03] Rob: I feel the same way about pop survey. The other thing I like about this is I’ve seen it, this functionality custom built in several apps that I use and I’ve never wanted to custom built, and I am so willing to pay for something like this that allows me to – I’m assuming it’s just a snip of a java script that you drop in. I’m so much more willing to do that than to have someone, one of my developers taking off the core app to build a little off shoot product like this.
[03:30] Mike: Yeah, so congrats to Josh on that. Have you checked out the Gmail tabs at all?
[03:35] Rob: Yup. I’ve disabled them after about three days. It was like I had three inboxes to check and I hated flipping through the tabs.
[03:42] Mike: Yeah. I’m kind of in the same boat. I’ve been using it for two days now and you’re right. It feels like I’m flipping through different inboxes and its just like why am I doing this again?
[03:53] Rob: Yeah. I understand the gist of it. I think it depends on how you use your inbox. I actually stuck with inbox zero for 6-8 weeks and just last week I got an inrush of emails and I probably have 20 in my inbox right now but I’m trying to get back to inbox zero. And since I do that and I put things in my Trello list instead of trying to keep in my own inbox. Having the three inboxes – it just didn’t work with my workflow.
[04:18] Mike: I think what bugs me about it is it doesn’t seem that you can customize it be on the tabs that they give you. They give you these certain tabs and that’s it. But I don’t really see them as any different than the labels and stuff that you can apply to things as they come in. You can just say oh well, if it matches these criteria then mark it with this label or that label. I just don’t see it as any different because those labels all appear on the left for me as opposed to the tabs which go right along the top.
[04:43] Rob: Right. I think they’re supposed to learn a little more than your filters. Your filters are static when you set them but…
[04:49] Mike: Yeah. And you can drag and drop things. It will learn but I just don’t really see the point. As you said, I mean if you got one inbox that you’re trying to keep to inbox zero, you feel like you’re switching between 3 or 4 different inboxes. And it kind of sucks.
[05:04] Rob: so I was on the bootstrap web podcast came out a day or two ago and its by Brian Casel. He launched sweetprocess.com we’re actually putting together your SOP docs, your standard operating procedures and other ways of organizing docs for VA’s and other processes. So he interviewed me about scaling a portfolio of software products and it was a pretty fun interview because it wasn’t stuff that I – it was some specific questions that I haven’t answered in the past on other interviews.
[05:31] It’s nice we spend almost maybe 50-55 minutes going into this stuff that we don’t have time necessarily to cover on this podcast and never going to talk on it. So I’ll like that up in the show notes and if you go to casjam.com you can check out that episode.
[05:48] Robert Graham who’s a lifetime academy member, been to every MicroConf, he posted a really insightful comment on episode 144 and it was regarding Dave Ganoe who has sent us a question. And he was considering building an expense tracking apps for engineers and construction firms. So Robert’s comment, the full comment is there. You can read it but I just want to excerpt that.
[06:11] He basically said if you’re serious about the engineers/construction niche, I have a few pieces of advice. There are professional organizations with local meetings for civil engineers in particular. They’re always looking for speakers. Be a speaker. Additionally, go talk to some engineers out there. It’s not hard to send out some hand written emails after researching some promising targets. 5-10 in person meetings will change a lot about how you approach the niche. You can get that done in less than 4 weeks without any trouble. I validated an idea for consulting engineering firms and I built a list and did this in the Austin Texas area.
[06:41] One thing that Rob and Mike did not mention about outbound sales but I think is really important to keep in mind is you may have to do it to get jump started. Jason Cohen’s MicroConf talk included an anecdote about scratching and clawing to get your first 50 customers. You do need a repeatable and affordable channel to build the business but you shouldn’t quit until scratching and clawing and totally unscalable ways doesn’t work. Also happy to chat by email, Dave.
[07:03] So Dave, if you’re listening to this and you would like to get connected with Robert, you can click through to his site. He’s at coldcallingbook.net or you can drop us a line and we’ll connect you with him. So thanks Robert for the obviously good comment and for offering to help out with Dave.
[07:17] Music
[07:21] Mike: So this week we’re going to talk about some of the differences between product and services companies and kind of contrast them a little bit, talk about where the overlap is, talk about some of the pros and cons of where they might be jealous of each other I’ll say.
[07:35] This particular episode is inspired quite a bit by Patrick McKenzie’s blog article where he actually – there’s two different blog articles where he does products versus services and then services versus products. And discusses some of the pros and cons but he also talks about how each of them can learn from the other.
[07:51] Rob: So the purpose of this episode is so product companies can realize that they might not have it as good as they think and service companies can realize that the grass is not always greener on the product side. Is that the idea?
[08:05] Mike: Yeah, that is the idea. And especially when you’re first getting started on the software side, I mean there’s a lot of pressure to go move more towards the services side just because it’s so much easier to build your business in the beginning when you’re doing services because services, it’s very easy to customize those things. Whereas when you build a product is its very much set. It’s trying to solve a very, very specific problem.
[08:27] But with services, you can talk your way around those things. Say well this can’t do that right now but I can make it do that and here’s how much it’s going to cost and how much time etc. When you’re offering a product, it’s very much pre-packaged. It’s hard to do that unless you’re doing an in-person sales. We’re going to talk about some of the pros and cons of each of the different types of companies.
[08:46] So why don’t we start with the pros of being a product company? Running a product company. I think the first one is with the product company, you can typically scale it a lot higher with less people. Usually when you’re trying to scale out the business in terms of the problems that its solving, you use automated resources like you’re throwing additional servers at the problem or you’re writing more codes to solve additional problems or to do it for more people.
[09:10] This is one of those classic draws for product companies where you don’t have to hire more people to process more data from your customers. You simply write more code or you distribute it among more servers and you’re paying for more servers as opposed to paying for more employees to process work.
[09:26] Rob: Right. So when you say scale higher you mean in terms of revenue right? Growing company?
[09:30] Mike: Well both in terms of growing revenue but also in the size and scale of the problems that your solving. Let’s say that you’re analyzing data for customers and whatever that analysis might be, let’s say that you reach this tipping point where one server isn’t enough to solve the problem. You can add another server.
[09:50] Versus if you’re running a services company, somebody gets to the point where they’re overworked, you have to hire somebody else. Well the problem with hiring a new person is you’re doubling your cost which is fairly substantial for having an employee. But when you’re adding a server, the cost of adding a new server to you infrastructure is monumentally less than it is to hire an employee.
[10:13] Rob: Right. And this is I think the holy grail of product companies and why anyone who’s doing services are – I’ll say most people who are doing services do have their eyes on doing products. My eyes were first opened to this when I was reading Joel Spolky’s blog back in probably 2001-2002. He just talked a lot about the economics and product companies and now something takes off, you get a product that really does start scaling up. it can be just astronomically different in terms of having to hire employees.
[10:41] You can just have a much smaller team and yet still like you said, solve bigger problems or have a lot more revenue which I think is probably been the goal for most of us.
[10:52] Mike: Another pro of having a product company is that you’re typically a lot less dependent upon a single customer. When you have services companies, obviously you have to deal with selling those services to the customers and there’s a lot more revenue involved. However, you’re trying to spread that revenue out amongst multiple customers as a product company because you don’t want all of your eggs in one basket. You want lots of people paying you smaller amounts of money so that there’s not one single source of revenue if they decide oh, I don’t need your services anymore, then you’re going to go out of business. Whereas with a product company its really the opposite.
[11:26] Rob: Yeah. This is a big one. I worked with a couple of confuting clients back when I was still doing it who yeah, they just weren’t that easy to work with. And since they were either 50% or 100% of my revenue, I couldn’t really turn them down. It’s so hard to fire a client when you only have one or two of them. I really do think perhaps one of the biggest perks of owning a software company that’s building products is that you really shouldn’t be reliant on any single customer or even any small group of customers.
[11:58] And if you are, I’ve heard of some folks who do this who get this really big contracts and there might be one customer who is 40% or 50% of their revenue and that’s something to get out from other as soon as possible if you find yourself in that situation because at that point, that customer has a lot of control over you. So that’s something like I said, definitely consider trying to solve if you find yourself in that problem.
[12:20] Mike: Yeah and that kind of lands into the next positive thing about having a product company is you control the direction. If a customer wants something out of their products, you can just say well no, it doesn’t do that and it’s not going to ever do that. Very similar to what you just said, if a single customer is locking up 75% or 80% of your revenue then it’s very difficult to tell them no, because then they can just turn around and walk away.
[12:46] But with products, because that is distributed amongst different customers, if one of them comes to you and says hey I want you to build XYZ, you can just tell them no, that doesn’t fit in with our product strategy and you can essentially just move on right there.
[12:58] Rob: One of the big perks of being able to control the direction I think is you’re able to express some of your creativity. You’re able to come up with unique ideas, interesting approaches to solving a problem within your app. You just don’t have to do what a team of people or some committee is deciding. Again, back when I was consulting, it seemed like there were always five people that had to be notified of making any type of decision. So we’d go on to do something what I consider like an innovative or a cool approach to doing something.
[13:28] By the time you get to all these people who just want to keep their jobs and really want to do the same thing, then they’d say well we’ve been doing it this way forever and you’re basically just – you do more or I wind up doing just more boring stuff. that wasn’t not only not creative but I actually think it wasn’t as good a way to solve the problem. And so if you’re able to control that direction, I think like job satisfaction goes up because you’re just able to build something that’s more interesting to you that you can be more proud of.
[13:56] Mike: The biggest pro that you can take away from a product company is that you can take time off and customers generally don’t notice this especially if you have already built your marketing funnels and your sales funnels. And you have most of the product pipeline automated customer support has to be dealt with in some way, shape or form.
[14:12] But that again is something that you could potentially outsource as opposed to when you’re doing services and providing services, if you take off for three weeks, the customer’s probably going to notice and they are not going to be happy about paying you for those three weeks. Whereas if they’re using a product that you’re making available from your website or you’ve already sold them, then they use that and whether you’re around or not, they’re still going to be able to use it and things should still work properly.
[14:37] Rob: Yeah, taking time off is way easier than when you’re consulting. In addition, your mobility tends to increase and your ability to work when you want even when you are working. So if you’re a night owl, you can work then. You can kind of wherever. With MicroConf Europe happens in October, I’m actually bringing my wife and my two kids and we’re going to be in Europe for a month.
[15:00] I’m going to do some work from there. I’m going to do maybe 1-2 hours a day to keep up on things but that’s a lot of flexibility that I really wouldn’t have if I was consulting. A lot of consultants have to be on site and even if you don’t have to be onsite you tend to have to work certain hours even if you’re working remotely so there’s definitely a lot of time and location independence that products can bring.
[15:23] Mike: And if you’re a services company you wouldn’t be able to put in one or two hours a day and still expect to be able to be compensated for the entire day or the entire week. It’s a completely different story. So let’s talk about some of the cons of running a software company. I think that most of these cons tend to be much more front loaded.
[15:44] So if you are starting up a software business and you’re just getting started, you don’t really have a full pipeline of sales. You haven’t really quite hit the product market fit. I feel like these problems are a lot more pervasive into people’s thinking. The first one is that your software tends to solve a very fixed problem.
[16:03] Again if your software solves just one problem but it does it really well for lots and lots of people, that’s great. But when you’re first getting started, you don’t have the revenue to be able to rely on it. So because it just solves a single problem, you’re looking at the services company saying man, I wish I could just turn this a little bit so I could use this in addition to maybe doing consulting and charge them extra for this and do more of a scope of work where you’re reliant on the product but you’re also bringing in your skills to solve the problems that the customer has.
[16:33] Rob: Maybe a sub point to this is since you do solve that fixed problem, if you get a couple of years down the line and your app has become mature and its really solving the problem well, you can find yourself not feeling as creative as you did before, maybe not being as interested in the work you’re doing. I think that you’re less likely to get bored if you’re doing services, if you are a consultant and I think product companies at a certain point when you hit a success level, they do become a little mundane.
[17:01] You have a lot of legacy code to maintain. There are certainly some drawbacks that you wouldn’t see with services companies in terms of it moving to new projects all the time because its often learning new technologies and really being challenged typically with Greenfield development.
[17:17] Mike: Another problem with product companies is it really takes time to hit scale and you’ll read about a lot of these product companies that feel like they come out nowhere but the reality is they’ve been at it for a very, very long time until they got to the point where you even heard about them. And suddenly they’re wildly successful because you didn’t hear about them until yesterday. Reality is most have been working at it for 3, 4, 8, 10 years before they really achieve that level of success that they are more well known by the general public.
[17:47] Rob: Yeah. We talk a lot about that 4-6 month timeframe just to get to launch which is kind of when the journey begins and I would say at least another 4-6 months to kind of learn about your customers and just learn about who gets value out of it and tweak. So now you’re 8-12 months is a reasonable estimate. That’s just about the time you can maybe start figuring yourself out and get to product market fit and actually start doing enough marketing to scale your business.
[18:13] So that’s on the low end. That’s when you’re just starting. And then if you nail everything, maybe it’s another 6-12 months after that, then things are really picking up. So it’s a multi year time frame to hit some that brings in as much as say a consulting firm even if you’re just a one person consultant could bring it on day one.
[18:31] Mike: The next major problem with a product company is there’s no statement of work that clearly tells you what the customer wants. So this is a problem for every product company. I almost don’t think that it is limited to the smaller ones or the ones that are just getting started. Even when you’re trying to make big changes or you’re trying to offer new things to the customers, it can be very challenging to figure out what those are even if you are talking to them because you’re not always on the same page with them. You’re not always using the same terminologies for customers.
[18:58] So it can be very, very difficult to figure out exactly what it is that they want and to be able to present it to them in a way that’s completely understandable such that they’ll look at and say yes that’s exactly what I was looking for, heres my credit card.
[19:10] Rob: Yeah. There is a challenge coming from both being just a software developer or as a like a developer who’s also a consultant is that coming into products is a different game since there isn’t someone there telling you what to do and how to do it. It’s a learned skill and it takes a lot of – there’s a bit of luck in it, of actually getting something that people want but there’s a lot more of talking to a large number of people rather than being able to just sit down with a client who’s writing a really big check and saying what do you want me to build? How should we build it? And working with them to do that, so that’s definitely one of the challenges of building products.
[19:42] Mike: the next problem that product companies usually run into is that when their customers are looking at the product that they’re selling, they are usually going through a lot of comparisons that you as a software vendor not probably to and you can’t talk your way around them because you’re not in those conversations. So you essentially have to build the marketing material on your website in such a way that it addresses those objections that the customer might have and is able to present them at the right times when the customer is making those evolutions.
[20:10] Because they’re going to be looking at not just your product but some other products as well and any of your competitors products, they’re going to take a look at those too. And they’re going to be evaluating pricing, they’re going to evaluate features and possibly even support. Maybe they’ll call up the competitor and find out how quickly their support gets involved. Or they’ll send emails, things like that.
[20:28] I’ve seen customers do this where they’ll – in order to figure out which vendor is the best vendor, they’ll send out emails and contact their support before they actually follow through with the purchase in order to figure out which ones are going to be the better vendor for them moving forward. Sometimes it’s not all about the products. It’s not all about the features. It’s about the support that you provide. And if you’re not providing that timely support, they’re going to walk.
[20:50] Rob: It’s hard to sell a product when you’re not talking to them face to face or when you’re not involved in the conversation that’s going on in their head and that is definitely one of the drawbacks of running products the way that we do like doing the more low touch scalable model you really need to know you customers well and you didn’t know how they think about your product because your copy everywhere will find your website, and your emails, just anywhere they see it, in your app, your help, everything has to be perfectly honed because as soon as you lose someone, you don’t have a chance of explaining something twice. As soon as you lose someone, it’s just so easy for them to wander off and try a competitor.
[21:29] Mike: I think the last major obstacle that product companies have is growing monthly revenue is extremely hard. And although you’re running a SAAS company is really the kind of Holy Grail of software companies, it is notoriously difficult and if you doubted it in any way, shape or form goes take a look at Gail Goodman’s talk from the business software from last year about the long slow SAAS ramp of death. And it’s an hour long but it’s very good. Watch that and you’ll see just how difficult it was for constant contact to get to where they are. And although they’re wildly successful, it was not an easy road.
[22:06] Rob: It can be kind of a crap shoot. We know that there are ways to improve your odds but consulting, you tend to go sell a project and the odds are good that you’re going to get paid, you’re going to get paid well. You’re going to know in a few weeks if you’re not going to get paid. Whereas building a product, you can spend months, years toiling away and still not have success. Its way easier to fail when building a product than it is when you’re just consulting one on one with folks or even starting a small consulting firm.
[22:35] Mike: So now that we’ve talked a lot about the different pros and cons of running a product company, let’s talk about services companies and what sort of things they bring to the table. With a services company, you’re essentially selling consulting services. It can be anything from custom programming to systems management. It can essentially even be as little as outsourced systems administration for example.
[22:56] I mean if somebody could pay you to go to their website everyday and do the same thing day in and day out and essentially what you’re providing them is a service that you have to manually go in and you have to execute them. But you’re really relying on human resources at that point to execute on whatever those tasks are.
[23:14] One of the biggest pros of having a services company is that you typically charge more per customer. And in fact you tend to charge exponentially more per customer. And the reason for that is because everyone knows that when you’re buying professional services, it doesn’t matter who you’re buying it from, there is a human on the other end of that who has to deliver those professional services and that human is going to be expensive in terms of what it cost to keep them employed and all the different benefits that go along with it.
[23:41] There’s an expectation that the customer has that they’re going to generally pay more for that than they would if there was just a pre-packaged off the shelf solution that they could buy, that would execute that process.
[23:53] Rob: The nice part about this is you can actually have a pretty low traffic source, something like even a blog that just gets mildly popular. If you get one lead a month, one consulting leads a month that you’re able to close or one every 2-3 months, you can make a full time living from that. I actually back in the early days, software by Rob where I was one more about coding and that kind of stuff, I would get 1 or 2 inquires a month for consulting services and that was it.
[24:23] Some of them were for $50,000 and $100,000 projects. I didn’t need many of those to kind of fill out my year. Whereas when you’re trying to sell a product for a couple hundred dollars or $20 a month, you just need so much more volume. There’s just a bigger challenge there.
[24:39] Mike: Another nice thing about running a services company is that in some ways it can be easier to avoid working with problem customers. The way you can take a problem customer that you have and you can essentially push them out is to either charge more or fire them. If all of your revenue or the vast majority of your revenue comes from 1 or 2 customers, it could be very difficult to fire that customer but you can always go to them and start charging them more.
[25:02] And essentially what you’re doing is you are justifying the pain that it takes you to deal with them by charging them more. That’s one strategy that you can use to essentially deal with some of these problem customers. And it doesn’t make the problem go away. It just makes it more palatable.
[25:16] Rob: Yeah. With my experience, I actually find it easier with products to not work with problem customers. They’re just easier to fire, to let go off, because the revenue is such a small percentage. But I will say that I found there are a lot more problem customers. A lot of people paying us $20 a month have higher expectations of what we should be doing than the people who used to pay me $20,000 a month for consulting. It’s pretty funny.
[25:42] Mike: Yeah, I was talking more in terms of avoiding working with problem customers like you can tell when you’re talking to somebody when you’re trying to work through the terms or the scope of work or something like that. You can tell when you’re talking to somebody whether they’re going to be a problem customer. And it’s usually fairly obvious. There are a lot of red flags that people send up.
[26:00] You can just tell sometimes that somebody’s going to be a problem customer and then you can just say oh well, other things have come up. Versus – I think that’s a different position than if you are already working with somebody and then they essentially turn into a problem customer or they already were and you just didn’t notice.
[26:16] The next pro for a service company is that it’s easier to customize your service offering on a per customer basis. One of the nice things about running a service companies is if you have a standard set of things that you’re doing for a customer, you can pre-package your service offerings as if they were product.
[26:30] And that allows you some flexibility, allows you to do a lot more standard marketing through SCO and a lot of things that you would do for a product company. And you can essentially have this off the shelf package that somebody can buy and they know what they’re getting. You’ve already essentially laid it out for them but in addition to that, if there are things that somebody wants that aren’t in there, you can customize that for them and say hey, you know what, I know that we said we would do these 17 things but you’ve expressed interest in these four other things that our service offering doesn’t do, I‘m willing to do those and this is how much extra it’s going to cost.
[27:06] Versus if you’re selling an off the shelf product, you’re not involved in those conversations. It’s difficult to say oh well we can also do that for you or we can add those into the product and its gonna take an extra amount of time. You’re not involved in those conversations; it’s difficult to let them know that.
[27:22] The last pro for services is that people understand paying for services. They get that if they’re buying consultant services for software development, they’re paying for a software developer to go and build software for them. When they’re paying for a product especially something like a SAS application or even something that goes into a database and documents it. It can be very difficult for somebody to get a sense of how much value is this providing to me, how much value is this providing to the business? Is this price that I’m looking at paying justified? What does the pricing that the competitor is charging?
[27:57] And they’ll go and try and figure out those things but it’s still very difficult for most people to understand them. And that’s why when you go to some of the different product companies websites and they’re able to lay out all of the different value propositions for the software that they’re providing. Those are the ones that tend to do really well versus the ones that don’t really have those comparisons and its difficult for them to essentially justify their own existence.
[28:22] Rob: And I think especially if you’re dealing with more consumer oriented markets like the mobile app market. The pricing there has just been devastated by the app store specifically apple’s launch of the ios app store. So that people expect to pay $1 or $5 per software now. And I’ve heard from some developers I know that people are paying 99 cents for something they’d be super demanding about like specific features they want built and they would actually like basically try to extort them or blackmail them by saying I’ve going to leave you a one star review unless you do this.
[28:57] Its 99 cents like it’s crazy. Whereas most people pay for someone for some service at some point whether its lawn person or someone to come do your plumbing or your mechanic or something. So you’re right, it is just a little more palatable even in the consumer space for doing that and then definitely any type of B to B situation, people know the cost of developers and that kind of stuff. So there’s going to be so much more flexibility with pricing and then you’re sitting on a five figure bill in front of someone makes a lot more sense if they’re actually getting a specific human being to do something rather than just having an off the shelf software.
[29:33] Mike: So now that we talked about some of the pros of a service company, let’s talk about the cons. I think there are a lot of them who kind of filtered out the list a little bit. One of the first things is if a customer asks for something that can be done you usually end up doing it even if you don’t want to. The primary reason for this is they’re footing the bill.
[29:51] So if the customer puts their foot down and says hey I really want this, then you generally have to do it because you’ve agreed to work for them for whatever the amount is per hour per week and they’re basically calling the shots or making the rules and they’re saying I want this done and this is how much I’m paying you for it.
[30:07] And a lot of times, if you’re under some sort of a contract like that, you really don’t have a choice. I mean you really need to go through and get those done versus a software company where you’re selling off the shelf stuff you can essentially tell the customer look, that’s not in our roadmap or it’s not going to be useful to other people. It’s not something that we’re going to follow-through and do because we never committed to doing that. It was never part of the long term goal or the current implementation of the product.
[30:29] Rob: Yeah. When you’re building a product like I said before, you just have a lot more creative control and when you’re working for someone as a consultant, you need to be a little bit political about things. You often need to be very diplomatic. And sometimes that works and sometimes it doesn’t and so like you said, sometimes you wind up doing things you don’t really want to do but maybe you can’t. You just kind of can’t say no because they are the client after all.
[30:51] Mike: The next major downside to a services company is that cutting costs generally mean firing people. I’ve had to go through this before and its absolutely awful. And it’s not so say that’s going to happen with every single consulting company or even most of them. You can certainly structure the business in such a way that you’re hiring subcontractors yourself and at that point those people are responsible for their own salaries and you don’t have to worry about it.
[31:17] But the reality is you do have to worry about it because if you’re not paying them, they’re going to go elsewhere and you’re going to lose them to either competitors or they’re just going to go off on their own and you’re not going to have access to those resources. You really want to be able to provide the same resources to people over and over again as if you were a product company even though you’re not because you want at least some form of consistency between one offering and the next. You want to be able to leverage the feedback from one customer to help you land the next engagement.
[31:44] Rob: Yeah. I think the other part of this is I found my revenue when I was consulting to be fairly erratic. If you have long term arrangements, obviously that’s different but even with some of the long term gigs I had, they would end abruptly and then I didn’t have other relationships so I’ve kind of scrambled to find other people. And since you only have one client or two clients often that are paying, such a big percentage of your revenue, it does make it more of a challenge than if you have some type of recurring revenue with a product or even if you have one time sales from a product, those, they do tend to be what I found a bit more stable than consulting income.
[32:19] Mike: I also think in general if you take aloof at services companies versus product companies, I think services companies tend to have lower margins than product companies. And part of the reason for that is as we said before, as part of the pros of having a services company, people understand what they’re paying for. They understand paying for somebody’s time. And the problem with that is they also know how much that person’s time is worth so it can be very difficult to charge exurban amounts of money for spending an hour or three hours with somebody unless you’re able to justify that with a solid marketing value and proposition.
[32:52] Next, if you or your employees are not working as a services company, you’re generally losing money. Also once you get to a certain scale as a services company you tend to have middle management. And because those middle managers are not actively working for customers, they’re essentially managing the people underneath them. They’re not contributing to your bottom-line.
[33:11] So especially you have a lot of additional overhead there anytime you bring in middle management and then in addition if you don’t keep those people busy and even if it’s just yourself, if you’re not working as a consultant, you’re generally losing money. Using a subcontractor will shift the overheard burden to them but at the same time, using subcontractors cost more.
[33:31] But in some ways it feels like it hurts less when you’re using a subcontractor and you just don’t have them booked versus having to pay for an employee and they’re not booked for let’s say two weeks at a time and you have to pay for that person even though they’re not working and they’re not contributing any billable hours to the company.
[33:47] Music
[33:52] So I think that about wraps this episode up. I think one of the points Rob and I want to make is there are pros and cons to each different type of company and although we run software companies and that’s kind of the direction that we’re going it’s not necessarily that running a product company is the best decision for everybody. There are perfectly valid reasons to go down the road of building a services company.
[34:12] But I think it’s important to understand there are pros and cons to each of them and it’s not like going down the road of product companies is going to magically remove all of the problems that you could’ve ever possibly thought that would happen to you as running a services or a consulting company. In short, the grass is not always greener on the other side of the fence.
[34:28] If you have question for us, you can call it in to our voice mail number at 1-888-801-9690 or email it to us at question questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 145 | Does Lean Startup Work for Bootstrappers?
Show Notes
- WordPress Digital Signature Plugin
- Nice slideshow overview of Lean Startup Tenets
- Lean Startup Wikipedia page
- Lean Startup book on Amazon
- Lean Startup website
Tenets discussed:
- #1: Startup Defined
- #2: Validated learning
- #3: Build-measure-learn feedback loop
- #4: Minimum Viable Product (MVP)
- #5: Innovation accounting
- #6: Pivot
Lightning Round
- #7: Customer development
- #8: Problem-solution fit & Product-market fit
- #9: Continuous Deployment
- #10: Split testing
- #11: Actionable metrics (vs. vanity metrics)
Transcript
[00:00] Mike: On today’s episode of Startups for the Rest of Us, Rob and I are going to be talking about lean startup. This is Startups for the Rest of Us: Episode 145.
[00:07] Music
[00:14] 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.
[00:22] Rob: And I’m Rob.
[00:23] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
[00:27] Rob: I noticed that you have a really cool email opt in widget on auditshark.com as well as a nice email mini course that looks like you launched this week.
[00:36] Mike: I did. Did you like that?
[00:36] Rob: I did. Mike is now using Drip. I logged into the Drip dashboard and I noticed that his account was all setup went to Audit Shark and it looks like your conversion rate is going really well. Your subscription rate is going well and your course is frankly one of the better ones that I’ve seen. Yours has a lot of data and a lot of research and I’m looking forward to the rest of it. I‘ve only seen the first email at this point.
[00:56] Mike: Yeah. I’ve sent it out to a few different people and they forward it on to some other contacts in the industry. I think that might be influencing the conversion rate a little bit but you and I did track through and it looks like the conversion rates are pretty good anyway but it’s nice to see that – and just in talking to a couple of people, the information they’re seeing in there is really good so far.
[01:15] So I kinda want to wait ‘til people get through the entire course to give me feedback on the entire thing but I’ve re-read everything a couple of times, gone back and forth through some of the emails and the sequence, just to make sure that I’m not repeating myself too much and that it naturally leads from one email into the next.
[01:32] Rob: Yeah. Very good. What’s nice is every subscriber you get to that would’ve just come and left the site even if you get 20 or 30. I mean there are some people getting a few hundred a week, yeah, just nice to be able to follow-up with them later. It’s kind of building your early access or your beta list depending on the stage you’re at.
[01:47] Mike: And of course the obvious benefit since I’m seeing their email addresses is to be able to track them back to see the types of companies that are taking a look at it. Obviously you can’t really do that with Gmail account. But when you start getting corporate domains in there for the email addresses, it’s really nice to go in there and say they’re a PCI compliance company. Maybe they’ll look and use Audit Shark for their customers or they’re a health insurance company and it looks like maybe they want to lock down their servers and do HIPAA compliance on those machines.
[02:13] Rob: Yeah I’ve been doing the same thing. So Drip is continuing to move forward there at the point where I frankly don’t even have account on the number of people who are in there using it. It’s in the low to mid 20’s at this point. Another paying customer this week, the trial ended. Like I said, I’m doing trial period based on I log in and I say hmm, I think they’ve received enough value from this and I’m going to email and say do you think you’ve received enough value? Are you interested in paying? We’ve got one more this week and think I’m going to email another guy today. It’s cool.
[02:42] So revenue’s in the mid three figures, that’s the SAAS ramp. That was in July and I’d expect to double or triple that this month and then move on from there. The plan is in the next – we have about 2-3 weeks left of features that we need to get in because to this point I’ve been doing so much stuff one off in terms of on boarding people and the trial emails and just all that touching base. So we need to get all of that automated because I want to email a couple hundred people on the launch list. And before I do that, I’m going to need to get stuff in place to automate it because I just can’t do that part manually. So that’s about it.
[03:19] So hopefully it’ll probably be a couple more weeks before things really start to move with Drip. Busy behind the scenes building a lot of features but nothing new to report for a couple weeks until that email goes out. And then I’ll be running frantically.
[03:30] Mike: Yeah. I’m probably a bit behind you. I’ve been going through – and there’s about a little bit more than a dozen machines that are currently being audited through Audit Shark. It’s good to see that those things are going in there. And I’m talking to two different people that have been added in this week. It’s kind of funny that there are sections of Audit Shark that I spent just a phenomenal amount of time and effort and making sure that they would work and that they were simple because they are far from simple by any stress of the imagination.
[03:57] And both of the early access people who went in this past week, both of them just kind gave it a hand wave or one liner and said “oh, well I did this and then now what do I do?” And they just completely glossed over all the complexity of that. And on one hand it’s like “oh, I can’t believe you didn’t notice how hard that is” but at the same time it’s also a really good feeling to say the time and effort that I spend on that was justified because it’s so incredibly simple to use that they didn’t even notice how hard it was.
[04:24] Rob: Right. You don’t want them to notice how complex it was.
[04:26] Mike: Right. Going the big things I’ve gotten back is that they’re interested in immediately skipping to the remediation pieces which is not something that I had really planned on tackling right away because remediating people’s servers is kind of a risky thing anyway. But it seems to me like they’re really looking for that guidance and input and to what they should be doing, how they should be prioritizing things and what their next steps are once they get the information back.
[04:52] So it looks like I’m going to have to go through and start implementing those remediation steps that I was thinking that people just would not be interested in because they’re production level servers and it turns out they are interested in that. So I’ve got my work cut out for me there.
[05:04] Rob: Right. And by remediation you mean your auditing software finds that these things are wrong and now how do we fix them right?
[05:10] Mike: Yeah.
[05:11] Rob: I received an email from a listener this week. He had just kind of a success story to tell. He’s building a SAAS app and then he decided after reading my book and kind of fall in love with you to build a WordPress plug in to get an early win. He said “here’s a short back story about how you guys have altered the course of the project.”
[05:28] “Initially I started building a SAAS app for approval management and that’s at approveme.me” he said “but after $1,500 and a development cost and not knowing at the end of the day if anyone actually wanted what I was building I came across your writings, the chapters about…” he calls out specific essays and then he says “I immediately put the brakes on the development of the SAAS and I started brainstorming about a better way to build a list in the same market space before trying to tackle the goliath of SAAS.” He said this is how WP digital E signature was born. So it’s a WordPress plug in to help people do digital signatures.
[06:00] He says “per your advice, I outsourced the programming, built the marketing landing page alongside my team, ones who got the very first premium release with bugs and all. I setup the store just to see if anyone was interested. One guy emailed. I gave him a 50% discount and he’s been super helpful. Just the other day we received our very first real order from start to finish on the product without any direct human interaction. It’s the best feeling in the world to know that someone somewhere was willing to pay money for a product that I’ve created. Taking your advice has helped save thousands of hours and brought us much closer to the starting line.”
[06:31] That was from Kevin Gray thanks a lot for writing in Kevin, definitely good to hear. Like I said, his SAAS app is at approveme.me and from there he has a linked to WP digital E signature.
[06:41] Mike: That’s a really cool idea for a WordPress plug-in. I hadn’t even thought of that.
[64:45] Rob: Yeah I know. I’ve been seeing a lot of web apps that are then being encompassed or built into a WordPress plug-in. So there’s like kind of an event registration system that’s in a WP plug-in. You can take almost any SAAS idea and put it into a WP plug-in. It’s a pretty interesting concept for finding new businesses I think.
[07:02] Mike: Definitely. The only there news I have is MicroConf Prague is now sold out.
[07:07] Rob: Yeah that’s very cool. It was by 8 or 9 days. So sold out house at this point. We’ll see you in October if you’re going to show up otherwise maybe you can make it Vegas next April.
[07:16] Music
[07:19] This week we’re going to be giving our thoughts on lean startup. This topic has been requested in the past but I think since we just talked about Dan Norris’s stuff about his article of is startup validation bullshit, we received another email. We received a voicemail basically saying you guys commented on lean startup. We’d love to hear your thoughts on. I guess the pieces that we feel that apply to our businesses, the pieces that maybe we feel are less applicable to bootstrappers, less applicable to people launching small apps.
[07:48] The challenge with this and the reason we’ve never done this before even though people have requested it is that lean startup is huge and it’s getting bigger all the time and its changing constantly. So lean startups started with a few key concepts and its now – frankly its more than we could define in a podcast episode much less, actually give our thoughts. And so this makes it hard not only because it’s a big subject but it just seems to be a moving target.
[08:10] So basically, what we’ve done, I went through all the lean startup principles and tenants and try to boil them down to the ones that we know the most about. Frankly since it is so big, neither you and I are experts in it. You’ve read most of the book. I read the book. We’ve both seen Eric Riese speak and give his overview of it and certainly you just hear people talking about it and all that stuff.
[08:33] So we know the concepts of validated learning and minimum viable product and the buzz words in that. But I think we want to get into giving our thoughts on specifically on some topics and some will have to define and then others will just kind of run through.
[08:47] I guess to start off with, if you’re only kind of familiar with lean startup, it basically started in 2008, Eric Riese standing on the shoulders of people like Steve Blank who came up with customer development, Marc Andreesen who coined the phrase product market fit, agile software development practices, lean manufacturing which is used by Toyota, lean management which was morphed off lean manufacturing.
[09:10] Eric Ries took all of that and complied it into kind of a single methodology and so he started blogging about it and then it started picking up steam. He knew Steve Blank. I think he was a student of Steve Blank. So Steve Blank encouraged him to push this forward. So he was blogging about it then he did a lot of speaking and then finally he wrote the book.
[09:30] Mike and are going to be talking about 11 topics lean startup topics and giving our thoughts on them. The first six we’re going to define because we think some people may not what they are. The last five were just going to run through them in a lightning round and kind of give our thoughts. Now the challenge here is that if you work in – let’s say you’re in a huge enterprise and you’re trying to launch a new product, well lean startup says it can apply to you.
[09:54] If you’re launching Brick and Mortar lean startup says it can apply to you. If you’re launching a bootstrap startup or a venture funded startup, lean startup tries to apply to all of those. So we are going to give one point view on each of these topics but I would never go out and say well validated learning never works or it’s a dumb idea because maybe it just doesn’t work for this specific group of people or in my specific experience.
[10:14] The first thing I want to talk about is how lean startup defines a startup. The quote is “a startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.”
[10:28] Mike: If you take a look at that exact definition then sure it can apply but I almost feel like when you start talking about startups, you’re really talking about – I guess my world is more of the software startups but it just seems so incredibly overly broad. I think that’s my big issue with it. And pretty much anything is when you’re building a new product or service, doesn’t a new product or service kind of define itself as being under extreme uncertainty. I mean how can you have a new product or service that doesn’t have a lot of uncertainty that goes along with it?
[11:02] Rob: I think that’s what the definition is saying though. I think this definition in particular is clever. I think he encompassed a lot of possibilities with this single sentence and in a way that no one had done before. I like the definition. I agree with you that it is brought by saying human institution because he’s covering his basis and saying well, it could be a nonprofit. It could be someone doing it within Proctor and Gamble or another Fortune 500 company or it could be you starting a new bar down the street.
[11:28] Lean startup principles have been applied to all of these business types and their examples given in different books on customer development and they do cover all those businesses. I think that would be my one quip. Maybe not what this definition itself, but with lean startup is that by being so broad and by trying to encompass every potential thing of anyone launching a new product, I think it actually provides less value.
[11:51] Mike: So topic number two is validated learning. The idea here is everything that a startup does should be an experiment and whether that’s marketing campaign, your ability to feature, the entire product itself. Any effort that’s not absolutely necessary for learning is wasteful and needs to be eliminated. And really what you’re trying to do here is you’re trying to ask questions about what are we trying to accomplish? How are we going to measure whether or not that was successful?
[12:18] What you’re really trying to do is make sure that when you’re doing stuff, so move the product forward that you’re making the right measurements that need to be made so that you could repeat those and scale them up and things will not fall apart on you later on because you are measuring the wrong things. You’re not making assumptions but you’re using hard data to make decisions that are going to move you forward.
[12:38] Rob: Yeah. I think the key sentence here is the effort that is not absolutely necessary for learning is waste and should be eliminated. This is an insight that I hadn’t heard. I wasn’t aware of before at lean startup and I’m pretty sure this came from lean manufacturing. I think that Eric did a really good job with this, that validated learning was it was always present in startups and that’s what a lot of the lean startup stuff is. It’s just putting a label. Its putting a name to something that already existed but that we didn’t quite know how to talk about.
[13:07] I think that maybe the number one thing that lean startup has done well is its accomplished something, it’s given us a common vocabulary for a lot of things that didn’t have names before. So take something like validated learning, problem solution fit, product market fit are two that I use all the time on the podcast. And MVP is another. All these concepts existed before lean startup but now I can say two words and most people in our world know what you’re saying. Lean startup accomplished that and I also think that validated learning as a concept and the fact that it now has a name I think for me has been helpful.
[13:43] Mike: Yeah I think one of the things you have to keep in mind when you’re thinking about validated learning is that let’s say you’re building a new marketing campaign and its going to be email marketing. Well if you don’t necessarily know what you’re doing then you’re going to have to try a bunch of things.
[13:58] The key to this validated learning piece is to figure out what your theories are, what your hypotheses are. figure out how to go about testing them. Make sure that the results that you’re getting back can be quantified and that you’re learning something from it. And anything that you’re doing that you can’t quantify or you’re not going to be able to learn from or that you are not learning from, just get rid of it.
[14:19] And the fact is that this doesn’t apply to scaling the business. this just really applies to finding out what works and what doesn’t. Once you figure that out, then you can basically blast it out to the masses, scale it up and do it very, very quickly. But this is kind of the fundamentals that you’re working on here with validated learning. You need to identify what works, what doesn’t, and then you start throwing resources at it.
[14:42] Rob: So topic number three is the build, measure, learn feedback loop. This concept basically says you should build something. You should build the minimum that you need to build in order to learn. Then you should so something and measure it. So if it’s a landing page then you launch it and you send traffic to it and you split test it or if it’s a new feature then you see how many people use and see their reactions and see whether they like it.
[15:05] Then you learn from that and you look back and build again. I like this topic. I have kind of mixed emotions about this. I literally have this exact diagram that Eric Ries uses in my notebook that I had written in like 2007. So it was before lean startup was around at all. I didn’t use build measure learn but I was thinking to myself what were the systems that I’m doing over and over? What is this cycle? And I realized I was basically building something – I think I put build, test, adjust or something like that but it’s the same concept.
[15:35] It’s like you build it and then you get someone to use it and then you adjust and tweak and come back in a circle. I’ve done it, a lot of people have done it and this is another place where I think Eric did a job of putting a label, a common label on something that already existed and that people were doing a lot I startups already. So not a new insight, maybe just a new label for it.
[15:56] Mike: Yeah I almost feel it’s a new application of that terminology because if you go into any sort of electrical engineering there’s all these feedback loops. I mean the one most people are going to be familiar with is like cruise control on a car. If you go too fast and there’s a feedback loop that says hey the car needs to slow down a little bit and if you’re going too slow there’s a feedback loop that says hey you need to speed up a little bit in order to get to that steady state speed.
[16:20] And this is really just the exact same thing. You’re saying build something, put it out there, measure, figure out what needs to be done to fix it or improve it and then go through that process again. I think the thing that Eric has done that’s really important is that he’s takeng those concepts and ideas and apply them to startups where I just don’t think that’s really been quantified or codified in terminology before.
[16:42] So our next topic is minimum viable product. The minimum viable product or MVP is the fastest way to get validated learning so you can make it through that feedback loop. You need to be able to have a product that some software or whatever your service is in place in order to get that process started because you can make all the theories in the world. You can make all the assumptions that you want and talk to all these different people.
[17:07] But until you actually have a product or a process or service in place and start implementing it, you’re not going to know what the deficiencies are. You’re not going to know how things actually workout. So just for example, let’s say that you’re trying to sell something for – you think its going to cost you $60. Well until you build it and you start going through and the process of building it and figuring out oh, you sure it only cost $60 to build one but 1 out of every 10 is a bad widget and we have to throw it away. So it actually increases your cost of production by 10%. So it’s no longer $60. Its $66.
[17:42] But until you go through that process you wouldn’t know what your defect rate is. So those are the types of things that are really important to find out but you don’t know those until you’ve built your minimum viable product.
[17:50] Rob: So minimum viable product is interesting because some people think that the MVP is as simple as putting up a landing page and figuring out if people want to buy your product. And that is like the way over simplified version of it. Really what lean startup is saying is the MVP is the minimum step you can take in the next week or two weeks to get more validated learning.
[18:12] So depending on what phase you’re at, the minimum viable product can be just a single feature or it can be just a single adjustment or it can be something that you do manually. Actually there was an example I heard the other day on Steve Blank himself who basically came up with customer development was saying that your MVP isn’t a prototype. It doesn’t have to be a prototype of what you’re trying to do. It can be a manual version of the same thing.
[18:38] And we’ve talked about this on the podcast in the past of like don’t build a whole SAAS app to do X. Go ahead and do X manually or hire a VA to do it. Send out emails manually. I mean that’s basically what you and I are doing with early access right now. We haven’t built all the trial emails and the on boarding emails unless we’re sending them manually. And that essentially is a minimum viable product and for Drip to have 20 something people using it right now but really to not have a billing engine built but I’m still billing people. And then not have trial emails going out but they’re still receiving them means that I took that minimum step to get there.
[19:41] So again, the interesting thing is I was doing this before it was named right? Before MVP, a lot of us were doing that. And so I don’t think this was some – it wasn’t a brand new concept, however him putting a title to it that we can all talk about I think is something that’s very valuable and I also think that people who weren’t doing it have started to do MVP type stuff and I think that’s helpful.
[19:37] On the flip side, this is what maybe gets people in the most trouble is your judgment of what an MVP is, putting out a crappy product and sending your entire email list to it and seeing who converts is not the right way to do it either. Right? That’s a big mistake and it can cost you a lot of money and a lot of time if you do it that way. And there’s nothing in lean startup that says don’t do that. There’s no explicit kind of warnings so people I think are making a lot of mistakes with this concept in particular.
[20:05] So I think it’s a pretty dangerous concept if you don’t have a high standard of what you need to deliver and if you don’t take it pretty seriously and really understand what an MVP is rather than read the ones in this description and then go off and think that kind of building a crappy product is enough because you can call it an MVP.
[20:21] Mike: I guess the confusion and the mistake that people make is the word product is in the name so they think oh well I have to create a version of the product that needs to do X,Y and Z and that’s how I’m going to put this out there and that’s how I’m going to be successful. And if you read the definition which from Wikipedia’s page, it says a minimum viable product is the “version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.”
[20:49] Really what that can mean though is you’re just building a single feature and that’s the next version of your product because its different than the previous one. And adding this new feature is really the key to that new product and that’s what you’re testing. It’s not you’re testing the whole thing. You’re just testing this one little piece of it which is why terms like minimum viable feature have come out of lean startup because minimum viable product itself is just kind of confusing people, what constitutes a product. And as you said, that’s where people just get into trouble especially if they don’t have this minimum quality bar that they’re adhering to.
[21:23] Rob: Right. I think that’s one of the tricks with lean startup is it is quite academic. This might be one of the negatives of it. It comes out of academia which is different than actually being in the industry and building startups. So a lot of the stuff is complex, its nuanced and it’s hard to take complexity and nuance and turn that into an actual piece of code or an actual decision of what then do I build? So the nature of it being high level almost allows it to avoid taking responsibility for the actual steps you take.
[21:53] Lean startup, I mean I guess I’m going into a con here. Its not super actionable and I think that’s probably a side effect of it being created more by academics rather than people who are actively day to day launching startups. Because most of the writing, most of the books that are being written on lean startup and lean entrepreneurs and that kind of stuff are being written by people who aren’t launching startups now. For the most part they’re not as experienced as some of the people who read day to day who are just blogging about startups.
[22:20] Our next topic is innovation accounting. Innovation accounting refers to the rigorous process of defining impeccably measuring and communicating the true progress of innovation such as customer retention and usage patterns whether for startup companies, for new products or business units within established companies.
[22:38] Basically, typical accounting metrics often don’t work for startups. You have to adapt different metrics and make sure they’re not vanity metrics. So that’s the concept of innovation accounting.
[22:48] Mike: I was one of the reviewers of the Lean Analytics book by Ben Yoskovitz who was also a MicroConf speaker this year. This topic is very well covered in that book. There are tons and tons of different ways of measuring things and based on what if you’re trying to gather, what the underlying purpose of gathering that information is, I mean you can look at the same data and slice it 10 different ways and have 10 different – even 15 different conclusions that come out of that set of data just because of the types of things that you’re looking at or you’re that you’re trying to do.
[23:22] So innovation accounting I would recommend just going out and getting the Lean Analytics book to figure out how it is that you go about measuring things but I like the idea of innovation accounting because you’re not looking at these vanity metrics. You’re not looking at things that they make it feel like you’re growing your product but you’re really not.
[23:39] One of the things for example is how many people are coming to my website? People say well my product is growing I’m getting a lot more people to my website and the fact is you may not be because as you add customers to your product, if they’re coming to your website to log in then they are indirectly counting towards your statistics towards your new visitors. And that’s just not accurate at all. It’s not accurate to include those people who’ve already been to your website and are actively using your product in your website to visit your account.
[24:07] Rob: I have mixed feelings about innovation accounting. I like the concept that if you’re in a Fortune 500 company that maybe you shouldn’t be held accountable to the standard accounting principles for the first 6 months or a year because you’re looking at different metrics and that you should avoid vanity metrics. That I all agree with.
[24:24] The problem is this doesn’t help anyone who is starting, trying to bootstrap a SAAS app today. If you’re going to bootstrap a SAAS app, don’t try to understand what innovation accounting is. It’s basically an astronaut’s view of what are the key metrics that you need to look at? Like Mike said I’d recommend buying Lean Analytics and reading it but I’d also say let’s say you’re going to launch SAAS app, here’s what I would look at. Not unique visitors to website but I’d say what’s a percentage that that are converting to your email list? What’s the percentage that are converting to trial? What’s the percentage that you’re converting to paid? What’s your lifetime vale per customer and what is your return rate?
[24:59] With those five things, if you could show that to me, just those five numbers, I would have no idea about your business, I can tell you whether or not your business is doing well, whether its going to do well, whether you should drive more traffic or less traffic. So that in my opinion is the short version and that’s where a more specific laser focused resource that’s actually talking about these individual things I think could be more helpful because for bootstrappers, bootstrapping, a SAAS app, that’s what they need to know.
[25:25] What about someone with venture fund and go after a B to C app? There’s a different list. Well what is that list then? You can define innovation accounting but that doesn’t help the guy who’s sitting there trying to figure out what things do I need to look at. And if you’re in that Fortune 500 company trying to launch a new product out of Proctor and Gamble, what is the list that I need to look at because I bet you could get pretty close.
[25:45] I bet you could define a short list of things that everybody needs to know and that’s where I wish innovation accounting had actually taken that next step and gotten more specific for people who actually want real actionable answers rather than a high level definition of something.
[25:59] Mike: I think the other problem with innovation accounting is the fact that because of the way that its phrased, it makes it seem like if you’re following lean startup principles then you should be doing innovation accounting. And there’s this massive chapter in the book about innovation accounting and how to use it, how to leverage it. And the fact is depending on where you are in your business, it has completely different meaning. It has a completely different application and a scope of application in your business.
[26:28] In the early stages you’re just trying to figure out what works, what people are interested in so that your minimum viable product will actually get some traction. But when you’re much, much further on, it’s a completely different story. You’re going to be measured all these different things. As you said, when you’re first launching a SAAS app there’s like five things that you’re looking at. When you get to the point where you have hundreds of thousands or millions of dollars from revenue, you’re looking at probably 30 or 50 different things and they all mean something different.
[26:55] There’s a scale that you have to take into account from when you first get started to when you’re much further down the road and you’re trying to scale the business. I don’t think the lean startup book really covers that or explains that very well and says hey look, if you’re in your early stages, you don’t need to worry about most of this stuff. Know that it exists but just kind of ignore it for now until you get to this stage.
[27:15] Rob: Yeah I think that’s an issue. Lean startup is so big and has so many concepts but some of them are completely not relevant for bootstrappers on the web or bootstrappers doing mobile stuff and others are and there’s no real place that designates that that I know of. So you kind of get information overload with all these concepts. Maybe I should call it concept overload where you’re just trying to get your head wrapped around them and it can be more of a distraction for someone.
[27:40] If you’re really boots on the ground and you’re trying to launch something tomorrow, I would go to the Wikipedia page and I would read through these concepts and I’d listen to these podcasts and maybe read like a summary of the concepts but just getting deeper into them than that doesn’t help you take that next action of what you actually need to get launched.
[27:56] Mike: So topic number 6 is to pivot. This really is based on validated learning. It really requires somebody to take a look at the information and you need to be able to decide whether or not you’re going to pivot or whether you’re going to continue down the path you’re on. It’s a very hard thing to quantify into a book and say well if you’re in this situation, you should pivot. If you’re on this other situation, you should persevere. It’s really kind of a gut feel and I think that’s one of the things I don’t like about this is because there’s no real hard rules around it.
[28:28] I think part of the reason I went into computers because there’s 1’s and 0’s and its some very easy to define when you should do what. But when you get into other subjects like this, it can be very, very difficult to make those decisions especially because you don’t have a lot of information. You’re making a decision based on incomplete information and sometimes that’s very difficult and sometimes you’re going to make the wrong decision but most of the time it’s really just the gut feel of where you want to go and what the data is telling you.
[28:54] Rob: Yeah. I’ve heard the phrase pivot or persevere and that’s your choice at any given moment. As soon as you do that build, you measure and you learn. At that point you choose to pivot or to persevere. And this reminds me of the concept of The Dip that Seth Godin had a book called The Dip. And the number one question he’s asked about that book is when is the dip? How do I know that I’m going to make it through the dip or that it’s not a long term thing? And that’s the question I see asked about pivots.
[29:18] How do I know if I should pivot or not? And so I think that’s a challenge of a concept like this. I think the introduction of this concept I was intrigued by it. I liked that it was basically defined that you could be actually going along with a certain business model or you’re building a certain app that you expect people to use a certain way. And then when they don’t, what do you?
[29:28] I’m not sure that I had ever actually talked about wow I could take this app that’s going to be a time tracker and suddenly turn it into an invoicing app or an expense tracker instead because everybody wants to use it like that. And so the concept of a pivot, my mind was opened when I first read about it. So I do like it and I think it expands your thinking but I also think like anything, this gets over used and people are talking about starting a game.
[30:02] I think the story is that Flickr started as some game and then became a photo sharing app and they’re completely different. I totally don’t see that as a pivot. It’s more like it can be used as an excuse for yeah, we just failed at one business and we started another one under the same shell company name with the same funding and we’re going to now call it a pivot.
[30:21] So I’ve also seen I think this has been used by venture capitalists or people who are starting VC backed companies as kind of a reason or as an excuse for you being able to just abandon the idea all together and go to another direction. The pivot is supposed to be based on validated learning and that you’re only supposed to pivot if you have data pointing you in that direction. There is a gut feeling component to it but I don’t think everybody’s doing that from my observation and what I’m hearing called pivots.
[30:46] Mike: I know exactly what you’re saying. I mean you hear a lot of these VC backed companies and they pivot into some completely different direction or its kind of tangentially related but there’s no clear evidence of why they would have gone in that direction. A lot of times just the plug isn’t pulled on them because the VC’s have invested in the team not necessarily the technology or the product and they’re investing the team to say hey, we trust you guys to make the right decisions to go in the right directions that you feel are appropriate and that’s what we’re investing in. We’re not necessarily investing in technology or the software that you’re building. it’s what you guys think is best and in you guys.
[31:24] Music
[31:28] Rob: Alright, so right now we’re going to dive into the lightning around where we’re going to cover five topics and we’re not going to define them because we’re going to assume that you can either go look them up or that they’re common enough that you know what they mean. We’re basically just going to give our thoughts on what we think about them. Do we think they’re valid for bootstrappers and so on.
[31:44] So topic number seven is customer development originally developed by Steve Blank and included the umbrella of lean startup. I am a big fan of customer development. I think it’s very hard to get right but I do think there are resources out there that you can buy that have more specifics, that have those tactical things like what interview questions should I ask?
[32:02] You can look at Running Lean by Ash Maurya and you can look at coldcallingbook.net by Robert Graham who we’ve had on the show. I think both of those are exceptional resources for learning how to do in person customer development. There’s also some pretty good examples on the web of how to do email customer development. That’s something I’ve done a lot with Drip and maybe I’ll wrap it up at a later point. This may be my favorite concept in all of lean startup. This is the idea of customer development.
[32:26] Mike: I really love the idea of customer development but I also see a lot of people who are doing it wrong or just not doing it or thinking that they’re doing it when they’re really not. I think there’s a lot of misconception around how to do it right and I think one of the big issues that most people run into, when you get into customer development, it’s very easy to look back into the past and say oh I should have asked that.
[32:50] And unfortunately when you’re in the position of trying to ask the questions, you don’t always know what questions to ask. So you do the best that you can and then in retrospect, hindsight is 20-20 so it’s obvious that you should have asked a specific question because you went through this process and it failed miserably and you say oh, I didn’t realize that this was important. I should have asked that. And it’s really hard to figure out what questions you should be asking upfront.
[33:16] And the types of people who are successful are the ones who are asking those questions who are kind of insightful and I don’t know if there’s a good way to teach that. I really wish there was or I wish there was some material out there that I could find that says these are the types of questions you should ask based on these types of businesses but that’s just a giant matrix and obviously product types are changing all the time so it’s not feasible to come up with that kind of a list.
[33:37] But I do think there are probably different types of questions that people could ask or you can put together in a spreadsheet and say this is why you would ask this question and it will help you avoid this particularly situation. And then based on the type of business you’re building, you can look at those and say okay I’ll ask this and this but not that one because the end result of that is not applicable to me.
[33:57] Rob: Our next topic is problem solution fit and product market fit. After customer development, these might be my next favorite concepts. I’m a big fan. You hear me talk about them a lot on the podcast. The steps of starting with a problem that a group of people have and striving for problem solution fit meaning you’re trying to solve a problem and at a certain point you know that you’ve done that, that’s a milestone. Then the next phase you’re trying to do is you now have a product and you’re trying to find the market for that.
[34:27] So I love thinking of that as steps and I think the 2 and 3 phase idea of solving a problem and then moving onto marketing and learning during that, really reshapes the way I thought about how software products are developed when this concept was introduced.
[34:43] Mike: I really like this as well but the problem I have with it is its very difficult to do both at the same time and I would be so nice to be able to shortcut a lot of the time that you waste if you can do them both at the same time.
[34:55] Rob: Yeah. I think you’re supposed to do them in sequence. That’s my understanding. But it takes a long time. That’s why there are Audit Shark early access and the Drip early access are months long because you’re still trying to figure out how we’re really solving a problem.
[35:07] Our next topic is continuous deployment. And you remember this one? This one was a big part of lean startup early on and now it’s almost nowhere to be found. I see it on the Wikipedia page but it’s really downplayed in a lot of the places that I looked.
[35:20] Mike: I remember hearing Eric talk specifically about continuous deployment and how they would go push things into production and how its jarring as a developer to you write some code and then you check it into the repository and it just gets pushed out into production. I can see that as a developer being a little bit schizophrenic about that especially if you’re a product manager saying okay who pushed that feature out and why did they go out today? We wanted to really push that out as part of this marketing effort.
[35:49] And I think that’s one of the things that makes continuous deployment a little difficult because there’s certain types of things that you want to push out and you don’t want to immediately deploy it because you want to build a marketing buzz around it. You want to be able to solicit feedback from people and have things go out on a specific schedule.
[36:05] You launch a new feature or a new version or something like that solves this new problem and you want to tell everybody about it. But if you’re doing continuous deployment it gets pushed out there and then hopefully nobody makes a big deal out of it and you don’t lose control of the story. I think that’s why this has been downplayed a little bit.
[36:23] The other reason I think that it’s been downplayed is that it’s actually very difficult to do continuous deployment and it’s a significant engineering task and it’s not something I would probably do in most cases just because of the fact that you have to do a lot of engineering effort to be able to make it so that things can get pushed out and do all the tests such that if it fails, then you are able to automatically roll back because that’s where continuous deployment to me kind of falls on its face is because that engineering effort is so incredibly complex and difficult, I mean you’ve got enough problems just building the product and making sure that it’s what people want.
[36:58] Do you really want to add in all the complexity of creating all these unit testes and everything else? I mean it slows down the process. I think that’s where it falls short is it’s so hard. It’s so complicated. It slows down your iteration process. If you push things out and they fall in their face, you have to rip them out of production, fine go ahead and do it. Do it manually. But the idea would be if you’re pushing things out on a regular basis, hopefully you’re making things better over time and you don’t have to resort to completely ripping them out of production.
[37:27] Rob: Yeah. I think some would argue that continuous deployment is intended to speed up your cycle rather than slow it down.
[37:33] Mike: I agree that’s the intent but I don’t think that it does because as part of continuous deployment and Eric Ries specifically talked about this was writing unit tests such that it would detect whether or not let’s say you push out some new code that affects the sign up process. Well as part of that you’re going to have code in place that measures the rate of signups that you’re getting. Well if the rate of signups drops from 50 per hour to 0, then the code that you pushed out probably broke your sign up process and it needs to be rolled back.
[38:02] So you have to take those things into account when you’re pushing that out and you have to build all of those cheeks that will verify whether or not a number of signups in the past hour drops to 0 or drops by some significant margin. And that’s the other piece of continuous deployment is being able to make measurements to say is it making the product better? Is it increasing performance? And if it’s not, then roll it back. And because of all these things, it just makes things more difficult.
[38:27] Rob: I think continuous deployment is a nice theoretical idea but like you I’m not a fan of it in practice. When I first heard it I was very skeptical as a software developer. I’ve never done it myself but I have used a couple apps from two startups that were doing continuous deployment and maybe it’s just selection bias but both of the apps were really crappy like they were very buggy. These were funded startups with teams and they were doing lean startup stuff.
[38:53] There were just bugs all over the place and I was like this is really crazy. I think a big part of that is they were pushing, they were moving so fast and they were trying to really espouse the MVP and the containers deployment. So that point I kind of wrote this off. I agree with you. I think the amount of instrumentation and reporting and testing that you need to make this work is probably impractical.
[39:15] So our next topic, second to last topic is split testing. I’m not sure this is even a tenant of lean startup as much as it was included in a lot of the talks and the books and such. I’ve been split testing for 10 or 11 years and even doing the manual, the poor man split testing of modifying something from one week to the next before we had good tools to do it. But lean start did include this in their concepts of validated learning and the build measure loop.
[39:40] Mike: I think split testing is a good idea. If you have any questions about split testing, I would go to the guru of split testing which is Patrick McKenzie. Check out his blog. He has a lot to say about it. He’s got a ruby gem out there that will help an AB test. And there’s all these different frameworks out there for doing AB testing and there’s very clear research and results that show the AB testing provides measurable improvements in a business. So I don’t think there’s any question that split testing is kind of a fundamental thing that everyone should be doing whether you’re doing lean startup or not.
[40:12] Rob: Indeed and to know we just launched split testing inside Drip which I’m very excited about. I already have a test running right now on some subject lines. Our last topic for today is actionable metrics versus vanity metrics. I think it’s a valuable concept and I think it helped a lot of people when it came out that realizing that certain metrics are what he calls vanity metrics that they’re just things that are useless like page views how often times its like time onsite, really aren’t that actionable.
[40:41] Whereas actionably seeing your churn rate or your trial to paid conversion, that kind of stuff, something that’s much more actionable. I would give this concept, this idea a thumbs up.
[40:51] Mike: Yeah, this concept just talked about a lot in the Lean Analytics book that I talked about earlier. They do devote some time to figuring out what is an actionable metric versus what is not. One of the things that really comes out of that is the rate of change of something. So just knowing that your number of website visitors this month or this week is 1,000 and next week say that its 2,000 that’s not necessarily important in it of itself that you went from 1,000 to 2,000. It’s just really the rate of change over the course of that week is what she should be looking at.
[41:23] So rate of changes become very, very important when you’re talking bout action ability because let’s say that you went from 501,000 to 502,000. Well grant it you’re going up and you went up by 1,000 visitors on a weekly basis but the rate of change over the course that week with regards to how much traffic you had is almost insignificant. So those are the types of things that really become important. I think this is a very important concept.
[41:48] Rob: So we’ve covered 11 topics under the lean startup umbrella. I feel we’ve kind of scratched the surface and gotten into it a bit. Hopefully it’s been helpful if you’re listening that it gives you an idea of how we think about it from a bootstrapper’s perspective. I think we raise a lot of things that we like about lean startup. I think overall, lean startup has moved that higher understanding of a startup and thinking of it as you can’t do a blue print for it but you can start putting these words and concepts in place that make it easier to understand the moving parts of it.
[41:28] I also think we talked about some things that we don’t necessarily like about lean startup like that it’s not focused enough and that it tries to cover bootstrappers, venture backs, dry cleaners, new product launch inside a Fortune 500 company. I think that’s a real drawback to it.
[42:34] I was actually put off by the first 3 or 4 examples in the lean startup book were like Intuit and other massive companies and I almost stopped listening because I tend – in general, if it hadn’t been this book, I would’ve turned it off because at that point, I typically bailed and said this book is not going to have anything insightful for me.
[42:50] We also talked about the language feeling maybe high level and academic and that it can’t quite be laser focused and provide action for people. I also think anything that gets this big, certain people want to rebel against it and when you hear the word like MVP and pivot and these concepts that are thrown out so much, it does get a little irritating. It’s like a hit song that you hear too many times. And you kind of want it to stop.
[43:12] I think the other common criticism in lean startup is that it pulled together a lot of existing stuff, maybe some things that were already obvious and just pulled them together under one roof, I don’t think that’s necessarily a bad thing but it is lean startup itself. the concept is unique but most of the concepts underneath it were not original. But most of them existed maybe under different names before this.
[43:35] So certainly I’d love to hear your feedback as well. Feel free to send us a voicemail, email or post a comment on this episode. And you can do that by calling our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 144 | The Viability of Inbound Marketing, Challenges for Non-Technical Founders and VOIP Options for Entrepreneurs
Show Notes
- TryCelery.com – Take pre-orders
- BehaviorCon – Conference on consumer psychology
- InternshipWithRob.com
- Trak – Expense tracking for the Enterprise
- Grasshopper – Phone system for Entrepreneurs
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I are going to be talking about the viability of inbound marketing techniques, hidden challenges and non-technical founder phases and the best service provider for VoIP Line. This is Startups for the Rest of Us: Episode 144.
[00:15] Music
[00:22] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:31] Mike: And I’m Mike.
[00:32] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
[00:37] Mike: We’ve got a listener who commented on episode 142 around startup validation. He pointed us to an app called trycelery.com which allows you to accept pre-orders for a product. So instead of just asking people if they would buy it or trying to put them on a mailing list, that allows you to completely accept pre-orders and it will charge them and it integrates with Stripe and everything. So looks like it might be a good way for somebody to do additional startup validation.
[01:03] Rob: That is very interesting. I could see using this as a second step after a landing page where you collect emails based on just a simple value proposition. Then a few months later once you’ve had enough emails, then trying to flush that out more with some comps and some demos and sending out and an email and then saying if you’re really interested in this, if you want to be on the early access list, you have to commit to paying.
[01:27] And then using it as a two-step rather than making this the first thing because I think if someone comes to a landing page and they read a two sentence description and then you ask them to pay, I don’t think it will work as well but I think this could be a really nice piece of that multistep arsenal of trying to find out who your true early adapters are.
[01:45] Mike: The one thing I really like about this is that because its integrated with Stripe and they charge you an additional percentage on what Stripe charges so you don’t have to pay them anything or at least it looks like you don’t have to pay anything until you’re taking those pre-orders.
[01:59] Rob: Yeah. That’s really cool. Even with an extra 2% so Stripe’s like 3% and these guys are another 2% and that’s still way cheaper than all the junk you’ll pay if you get an authorized .net account or a merchant account. Cool, so that’s at what? trycelery.com
[02:13] Mike: Yup.
[02:14] Rob: We have a bunch of iTunes reviews. We haven’t talked about them in a while. This was my favorite. I was dying. It’s by a guy named Bricksky from Australia and his review is much better than Techzing so that’s a shout out to Jason and Justin. He says “love the podcast. You guys are focused and professional but with enough personality to keep it light. Well prepared and will give you actionable info every time. Keep up the good work.”
[02:34] And then from Adam, no9to5callo in the UK, he says not just for geeks. Says I wanted to get the point across with his no9to5 nickname there. This podcast helps everyone. I am non-technical and get so many actionable points from Mike and Rob. Thanks guys. Keep it up.
[02:52] The other one is from DwebOttawa from Canada. He says simply amazing. I listen to this podcast everyday on my ride to work. I don’t think I can articulate the amount of values being provided. Rob and Mike pack a ton of useful advice, information and tips into each podcast. So thank you guys so much for the reviews and if you have not left us a five star review, we really encourage you to log into iTunes. You can search for startups and we will be in the top couple there and give us a review please. Even if you don’t do an entire written out review, a five star rating is very helpful to us. I heard you’re speaking at a conference soon?
[03:25] Mike: Yes, so in a couple of weeks at the end of August I’ll be speaking in Behavior Con that will be the August 23rd and 24th and that’s put on by Ramit Sethi he’s got a lot of interesting speakers there. He’s got BJ Fog and Michael Norton and Michael Fishman, a few others than our audience might have heard. Hiten Shah’sgoing to be there as well as Derek Halperon from socialtriggers.com
[03:48] It’s mostly a conference about how people think and why people buy things, things that make people – psychologically make the decisions that are somewhat marketing related but it will be interesting to get up there and hear what they have to say and contribute my own thoughts on it.
[04:02] Rob: For those who are interested its Behavior Con and it’s Stanford, Connecticut August 23rd and 24th.
[04:08] Mike: I hear you’re looking for an intern.
[04:11] Rob: I am. So I’m looking for like a marketing internet/growth hacker intern and basically you can work from anywhere in the world, learn what I know about growing SAS apps. So I have a job description and an application form at internshipwihtrob.com it’s basically a Google doc that I shared, I made public, linked to a video of me talking about it and give a better idea of the position. I won’t go to all the details here but it’s a pretty unique position so I’m looking for a unique person.
[04:42] I don’t expect to get that many applicants but so far I’ve gotten just a couple applicants and people are bringing their game so it’s very interesting to see the people who are interested in this.
[04:54] I mean the idea here is Drip is launching in the next 4-6 weeks and there’s a lot of marketing work to be done and I realized that I’ve done a lot of it before and I know that I can execute on it but you can learn so much doing this yourself. I can definitely use the extra help. So there is a stipend. It’s not a free internship. I am paying you something. So I feel like everybody can potentially win from an arrangement like this.
[05:21] Mike: Very cool. I have a little bit of AutoShark news and AutoShark is actively auto in about a dozen servers right now in a daily basis. So it’s pretty exciting to see its actually active in production and I’m getting some feedback from people. It’s nice to see that it’s on production servers and as I’m doing updates, everything’s updating properly. Its sending out emails at the right times and letting people know what’s going on.
[05:45] And there’s only been I think a couple of sticky points where things are just not quite running the way that they are supposed to. So those are kind of in the queue right now to be fixed but it’s nice to be able to go fix them and then everything just straightens itself out on the rest of the environment. It’s really cool to see that stuff’s working again.
[06:03] Rob: Yeah, after your two steps back week that you had a couple weeks ago where you’re like everything’s going wrong, it’s good to hear that you’re up and moving forward with this. Would you call this early access?
[06:13] Mike: I would. So right now I’m looking through the email list that I have and trying to do more identification of people who would be able to get value out of it in terms of where it is now. And I’ve also got an email campaign that you were kind enough to let me into early access for Drip and I’m adding all that stuff into Drip right now and hopefully that will be live within – maybe even by the end of the week.
[06:36] Music
[06:42] So today we’re going to be answering a bunch of listener questions. The first question we have is from Dave Ganoe and he writes – I’m going to paraphrase here but he writes this about an application, it’s a SAS app he’s putting together called get tracked.
[06:52] Its essentially for expense reporting and time tracking for companies that are under 100 employees and the employees spend a lot of their time roughly up to an hour a week submitting their expense reports. And having done expense reports I can tell you that submitting expense reports for a contractor is just a real pain in the neck. It takes forever. But it’s nice to see somebody going out and trying to address this.
[07:17] One of the things that Dave asked in his question is what is the viability of inbound marketing techniques and what price point would justify the time involved in doing some outbound or direct sales techniques?
[07:28] One of the challenges that he has is the product is very rarely going to be used by the person who’s responsible for buying it so how does he get in front of those types of people and he also says I know Rob has .net invoice but it seems a little enterprisey. Would you describe your customers as enterprises or is this mostly used by freelances? If enterprises use it, how do you sell to them?
[07:46] Rob: So .net invoice is a little enterprisey. I would describe my customers as the developers who work for those enterprises. Since .net invoice is priced at $300 they don’t need some massive PO approval from a VP somewhere. They can basically put it on a credit card. That’s typically what happens. We don’t charge enough to do enterprise sales whether it’s outbound or even some people want to do Skype chats and all that stuff and we’re not able to support that.
[08:16] If we were to do that, we could have an enterprise version that was $1,000 or $2,000 and that would then justify at least some upfront effort. Selling into enterprises is not something I do or that I really have any desire to do. You know Dave, I might recommend you go back and listen to episode 16 of this podcast. If you come to the website you can find it but it’s called selling to enterprise customers.
[08:36] The other thing I have in looking at your landing page is I’m wondering what your unique value that you offer is because there are a lot of time trackers and they could all claim the same value that you are. His headline, Dave’s headline is time wasted tracking expenses is costing you thousands. Let’s fix that.
[08:52] Mike: Not a time tracker, it’s an expense tracker.
[08:54] Rob: Or an expense tracker, sorry, I misspoke. But there are a lot of expense trackers as well. So I’d want to know – I do agree that time wasted is costing you thousands, let’s fix that. But there are a lot of other apps that could do that as well. So I’m wondering is he going to market it differently than other people are marketing or is he going to have a unique feature set or a unique way of doing it? So that would be something that I’d be interested to know right here on the landing page.
[09:17] Mike: One thing I think I would do is kind of zero in on your specific target customer a little bit more because let’s say you’re a consultant or you run a consultant company and your consultants are out there billing for their time. You don’t necessarily care whether your employee spends an hour doing an expense report on the customer’s time. You also probably don’t care if your employee does that expense report outside of the time.
[09:42] So at that point, it becomes questionable why do I even need this software? So I think you to zero in a little bit more and try and identify the type of customer that this type of software really addresses a problem or a need for because in those types of companies and I’ve worked for them before, they don’t necessarily care when you do the expenses because either the company’s getting reimbursed for the time that their employees spend or the employee is not getting reimbursed for it because they’re independent contractors or they’re employees on salary.
[10:11] So at that point it’s a question. Just why would I even pay for this? And I think that’s a question that you need to answer and identify the type of company a little bit better that would pay for this type of thing. Where is it going to become a problem? When is it that they are actually losing that $1,500 a year for every employee because of all the time wasted?
[10:30] Rob: Yeah. I think selling into the enterprise as a single founder, the product that’s basically competing with existing products that are already selling into the enterprise and already have experience doing that is going to be a real challenge because you can build a better product than them but that’s not what counts in the game. It’s knowing all those rules of enterprise sales.
[10:49] So this is tough marketing going to. I like the idea of making a really nice expense tracker, doing a better job than other people but I’m not sure the enterprise is going to really respect that. If you go in there and say yeah, mine’s much easier to use, they’re not going to care. They’re going to need more than that basically because that’s just one element of a long checklist of things you’re going to have to look at.
[11:09] Mike: The other thing I would point out is when you start looking at customers or the types of customers who would use something like this. It tends to be a feature of functionality that is bundled into like enterprise project management software. I can’t remember the name of the software that we have used but there was a product where what it did was it was intended for arranging consulting engagements and managing them through the process.
[11:32] So you could almost use a kind of like SharePoint where you’re putting documents into it and you’re communicating with the customer almost like Basecamp for consulting companies. And there was also a module in there that did expense tracking. And as a consultant, when you’re on a project, you would go in there and you would enter all your information and stuff.
[11:48] But that was all lumped in as part of that functionality. So I think that there are probably other products out there that you’re going to be competing with indirectly that just already offer this feature and functionality that they won’t even look for this type of software because they don’t need it. Its ready built into whatever their already using. And it’s hard to justify paying for something when you already have access to something for free. And maybe it’s not as good but customers have a hard time justifying buying an additional product that already does something that they have in place already.
[12:18] Rob: You know, the one other thing I noticed is in his email he said his dream customer is an engineering/construction firm with less than 100 employees. Basically, that part, if you’re really building it for engineering and construction firms then that should be on your landing page. Like you should say this is the best engineering/construction firm expense tracker in the market because that’s how you’re going to do it unique is only compete against that small sublet. That’s actually a way to win.
[12:45] Then you niched it. And that was one other suggestion I was going to give but it seems like you’re already thinking about that. You’re just not representing it well on the landing page and I think that’s something I definitely consider doing is calling out – if you are going to pick a niche, then call that niche out specifically because then if I’m in that niche then it makes me feel good like you’re actually going to have some unique features that are going to correspond to my business.
[13:04] Mike: Another question that he has is what price point justifies time involved in doing outbound or direct sales techniques. Is it $5 per employee per month or $10 and I think what’s he’s really asking is in terms of the people using it, let’s say they have 50 employees and I’m charging them $5 an employee then that’s theoretically $250 a month.
[13:25] And I think for you and I, it really depends on what that total number is going to be and you don’t necessarily know until you call them and ask well how many employees do you have? So it’s almost a crap shoot I’d say in terms of calling them and doing that outbound marketing but if you are specifically targeting the engineering or construction companies of less than 100 employees, you have to figure out what your maximum price is going to be.
[13:47] And then understand that there are going to be companies out there that are only going to pay for it for 10 employees or 15 or 20 even though may have 100 or 200 or 300 employees
[13:57] Rob: There’s a difference between outbound and just high touch sales right? High touch is when people come to you and then you nurture them and you do talk to them and you do demos and all that stuff. Outbound is truly outbound like to me, that means making phone calls and cold emails ad really going from cold leads. And with high touch sales I think you will get killed if you’re not charging at least $99 a month per account and I would try to get to $199 per account.
[14:24] And then with true outbound stuff, that’s where you need to be in the $200 to $500 a month range. And that’s why enterprise products are expensive. The stuff is not attributable cost. They’re absolutely enterprise SAS apps that are almost four figures a month. If not into four figures a month then it’s strictly excuse of all the leg work and stuff involved and making these kinds of sales.
[14:47] Mike: So Dave we hope that answers your question. Our next question is from Denny and he says hi guys I love your show and I’m super interested in starting a SAS app myself soon. I was wondering what your thoughts are on non-technical founders. I don’t know anything about coding and I’m a big fan of Dane Maxwell who teaches a method for building SAS apps for non-technical funders.
[15:03] Obviously you guys are super technical so I’d love to hear your thoughts on the challenges people will face, trying to have apps built for them rather than building them yourself. Do you have any advice for finding or working with developers? Keep up the great work. Denny.
[15:15] So I think we’ve given a lot of advice on finding developers over the years and in fact in our last podcast episode with Laura we talked a little bit about it. But in terms of the types of challenges you’re going to run into as a non-technical founder, I think the biggest one is that its going to be very difficult for you to estimate whether or not the times that you’re getting from the technical people who are implementing things for you are accurate enough or they’re reasonable.
[15:40] Something else that you’re going to have an issue with is that if you only hire one developer to work for you, you have to rely on the fact that developer is going to have to be an expert for you. You can’t spread out knowledge between 2 or 3 different people on a team who may all have insight into a particular problem.
[15:58] If you’ve got one person runs into a problem they at least have a couple of people they can ask. Whereas if you’ve only hired one person, they tend to not have other people that they can ask for help on that problem because that’s their job. That’s what they’re working on for you.
[16:09] And if you’re hiring them on an hourly basis, they may not necessarily even care how much time they send solving that problem. You have to stay in constant communication with them and find out when they’re running into problems and figure out whether there are shortcuts you can take or whether there are certain feature implantations that you can just axe from the entire product if they start to become a problem or time sync.
[16:30] Rob: Yeah, finding develops as a non-technical founder is really hard. I think it’s hard as a technical founder because development work, there’s more under the covers. There’s so much complexity that you just can’t see. Like when you hire a designer or a copywriter, we can all judge. We may have our own opinions but you can all judge by just looking at something or reading a couple paragraphs whereas code, there’s so much complexity there.
[16:53] So someone could write a working app but it might not be maintainable or it might use five year old standards or they can just easily stir you wrong. You won’t know. So my advice is try to work your network.
[17:06] To be honest, if you really are a non-technical fonder. Just anytime you’re going with someone cold ad you’ve never worked them before whether they are a designer, copywriter or anything, you’re always going to have more points of failure or potential points of failure that they’re going to be reliable, they’re going to do crappy work. So the more recommendations, that’d probably where I’d start.
[17:23] Right now I’m trying to hire a developer. It’s a challenge. It’s a lot of work and I’m either looking at code or I’m having one on my team do that and so if didn’t have that ability, there’s not really a one word or a single tactic answer to get around this challenge. It’s similar to me trying to hire an accountant or trying to hire a lawyer. You don’t really know how good they are upfront right?
[17:45] I mean all you can do is get a referral and go with them and try them out and then you’re going to know your – or many down the road whether or not they worked out because you can’t really judge – it’s not like they can give you a contract you can read through and say wow that’s a really good contract. You can’t actually judge the value of their work. Because they’re doing something that’s more complex. They’re an expert in the field that you’re not. I guess no issue answers start by trying to find out from people you know who they’ve used.
[18:08] Mike: I think one thing you might be able to do to help you out is figure out how well they explain things because if somebody – if you ask them for a code sample and then ask them to walk you through that code sample then they should be able to explain to you why it is that they made certain decisions and talk about those decisions, talk about the complexity of what it is that they were doing and explain any edge cases that they were encountering and the code that they were writing.
[18:34] Just by working through that with them, figuring out and watching how they explained it to you will give you a good sense of how well they understood what they were doing at the time. And they should be really relatively familiar with their own code sample but even if they’re not, they should be able to at least read it if they wrote the code in a well thought out and easy to understand manner to begin with. And you want to be able to find those people who can explain those things to somebody who is non-technical.
[19:00] And if you could do that, I would think that you’re probably in a much better situation than you get a code sample from somebody and they just say I don’t know what I did here. I just don’t remember. And if they can’t explain it to you well when they’re looking at that code sample then chances are good that down the road when they’re trying to explain something else to you that is more complicated, they’re not going to be able to do it then either and you’re going to run into problems and misunderstandings.
[19:22] Music
[19:26] Andrew: Hey Rob and Mike, my name’s Andrew Erickson. I’m a healthcare company and I’m actually getting into the app space now and the product space really because of you guys. Its sort of – have much employees to manage and constantly fighting for that next skill basically as a bunch of people like me, consultants trying to manage that and it’s been challenging.
[19:46] I’ve had an executive assistant for about a year but paying her about $15 $16 an hour. Recently she’s moved to another role in the company and I watched the training video for hiring a VA. I have a few good candidates now that I found on Odesk.
[20:00] My question is actually what is the best service provider for like a VoIP Line, Skype, or are there some other options that I should look into? Any help will be greatly appreciated and by the way, your wife did an awesome podcast on bootstrap with kids. Huge shout out to you guys. Thanks again.
[20:19] Rob: Okay, so Andrew’s asking about not a VoIP Line like for your house, like a physical line but I think what he’s saying is the new VA he’s going to hire will probably need to answer inbound calls and essentially be like kind of a front desk receptionist type person.
[20:33] The way I’ve heard the most people do this is using Skype because you can get essentially a US telephone number and you pay for it through Skype and you pay a monthly fee and then it rings to your Skype installation. So as long as you have Skype open and you’re online, it will right through and the person will never know that they’re calling to your Skype account. And if you have your headset ready, you can answer calls.
[20:55] That’s the way I’ve heard people do it and that’s what I’d recommend. I don’t know if there are fancier approaches or something more exotic than that but I’ve definitely known a lot of that approach.
[21:05] Mike: I would probably recommend Skype as an option as well. The other one that I can think of that might be useful is if you look at grasshopper.com, what they pitch is the entrepreneur’s phone system and it allows to have a bunch of different phone numbers. They can be local or toll free or do call forwarding and things like that.
[21:20] Essentially it allows you to configure it online and you don’t necessarily have to buy hardware and software to use their website and their tools to redirect calls and have call queues and waiting and things like that.
[21:34] So that’s probably a step up from what Skype offers. I think the only problem I’ve run into Skype on occasion is that if you’re using Skype for extended periods of time for a specific account I think you’re limited to a certain number of hours per day for a non-commercial account. I don’t know whether there’s commercial versus non-commercial accounts within Skype.
[21:52] But they basically say oh well if you use it more than X number of hours per day then essentially with happens is they cut you off for I think it’s a full 24 hours and you’re not able to use your Skype account at all if you go over that timeline.
[22:05] So that’s something I would definitely be a little bit careful of. I’ve tried to use my own Skype account for long conference calls or remote engagements and stuff like that and if you hit that limit, you’re done for the next 24 hours. So then you’re reduced to basically creating a second Skype account and kind of alternating between them.
[22:20] So Andrew I hope that answers your question. Our next one is from Keith James and he says any thoughts on an annual versus monthly pricing for a SAS startup? It seems like a no brainer to charge monthly for a SAS ad versus annual. My target price is $9.95 a month and my annual price is $49.95. There’s a lower barrier of entry and a 240% increase in revenue. What concerns me is return rate. The other concern is initial cash flow.
I bring on 200 initial seat customers at $49.95 a year, our initial users will generate $9,900. Using the monthly model it would generate $1,999 a month. This amount is fine for proof of concept. There’s barely enough to cover infrastructure cost. Thanks a lot. Keith.
[23:00] Rob: So first question is if you charge – he says $9.95, let’s just say $10 a month to make it easy. If you’re charging $10 a month, your annual price shouldn’t be $50 a month. It should be either $100 or $110. That’s kind of the standard is that you do 10 or 11 months for the annual contract. So I think you’re discounting it way, way too heavily to do an annual that’s basically 5 months of payments gets you the whole year.
[23:24] Second thing is when starting out I’ve always done monthly. I focus on monthly recurring revenue. That’s a big metric for me because I want to see that number growing every month. And if you move to annual pricing, you can definitely get a big spike in revenue but that goes away as soon as you stop marketing because you’re kind of killing that flywheel effect that a SAS app gives you that it does bring in the revenue every month.
[23:46] However, there’s a big cavvy up to this. Exactly the reason you’re mentioning it is if you sell annual upfront, you do get that big influx of cash and it will help you fund development and employees and early on you really need that money. And Jason Cohen also talked about this in his Micro Comf talk that if you get to the point where you’re actually collecting annual from everyone, then you have essentially like a negative customer acquisition cost that you can acquire an infinite number of customers because you’re spending…
[24:14] Let’s say send $100 to acquire a customer but you make $400 or $500 from them right when sign up, then you have this infinite bucket of money in with which to acquire them. So all that to say, I’ve always been a fan of monthly but I think that annual definitely has its place.
[24:34] I know some apps are doing annual only. They’re actually SAS apps and you could only do an annual plan. I would definitely consider that. I don’t think that’s out of the question. I have not done that with any of my apps to date but it is on some to-do list essentially when we have time to rewrite the marketing and redo the billing and change all that stuff. Because you have to have different trial sequences. You have to have a lot of changes from monthly to annual.
[24:55] So I would think it through. But if you’re in a position where you can do annual, I would not rule that out. I would think about doing it early on at a minimum as an option and maybe as the preferred option for people because it gets you that cash flow upfront and then it can really help you build your product.
[25:10] And then at some point you could go annual only if it’s really working out or if most people are picking monthly then you know that maybe your audience isn’t resonating with a larger upfront purchase price and they want a smaller price overtime so you can always vary to that but this is it. It really is an interesting question. I actually feel like my thoughts and I think other people’s thoughts on it are changing overtime.
[25:30] Mike: Yeah. I was going to point out the difference or the discrepancy between what he had lifted as the annual price and the fact that only comes out to the five months of revenue. The other thing I would point out is that this question becomes a little bit clearer once you get to the point where you have people coming into your funnel and you know what your customer acquisition cost is when you’re first starting out and you don’t know what those numbers are is really, really difficult to tell whether an annual plan or a monthly plan is going to be better off for you because you don’t know how much it costs you to acquire a customer.
[26:01] So you’re still kind of working out the pricing. And because of that, you may say I’m going to charge $10 a month and then you start charging people $100 for an annual plan let’s say and then you go trough and then you start finding out that its actually costing you $110 or $130 or $150 to acquire a customer.
[26:20] Well if you’re only making $100 a year from that customer and they’re canceling right after that because the service is not valuable to them, then that becomes a very, very big problem because you’re going to essentially stunt the growth of the business. And you’re going to have to increase the price point at some point along the way but you won’t know that until you’re so far in that its actually going to hurt you to do that.
[26:44] So those are the types of things that you need to take into consideration and knowing your cost of customer acquisition is a really, really important metric. And if you don’t know it then doing the annual plans can be risky. So thanks for the question Keith.
[26:57] Our next one comes from Mike Truman and he says hey Mike and rob, I have a question about email courses. I’m having trouble coming up with a subject for a course that is applicable to my business which is an online in and out board at blilo.com how closely should the subject matter of an email course be tied to what a business actually does in order to successful generate leads? Thanks have a great day. Mike.
[27:18] Rob: So what’s interesting is I don’t think your course needs to correspond with your app in order to get people to subscribe. But in order to get them to actually do a trial after they’ve gone through the mini course, there has to be some kind of tie in because as an example, blilo.com is an in-out board and the question it asks on the homepage is who’s going to be in the office today?
[27:44] So this is a very horizontal product which means that it’s kind of a challenge. You don’t really know who your demographic is per say. I guess its small business owners, medium business owners. I guess it is only with offices. So its small businesses only with offices, so maybe you think of a way to provide value like how to run a more efficient office or how to encourage more people to come into the office or why you should study some numbers on the benefits that people get when they work together in an office or maybe there is no benefit.
[28:13] Just do research on that and try to offer something around the concept of coming in versus remote work ad that kind of stuff because now actually at least keep people’s interest and even if you only do with 3 or 4 day course if you don’t have enough content at this point, just giving them some type of education and showing that you are actually an expert in the field even if you’re just researched it but you are more of an expert than they are.
[28:36] I agree with a horizontal product is more challenging than let’s say something that’s catering to dentists or only to tech companies because then you’re going to have a much better idea of what provides value for them.
[28:51] Mike: Thanks for the question Mike. Our last question is from Pralie and he says hi there, I just started listening recently and love the show. I was wondering what your thoughts are on when the right time is for a college graduate to start their own company? I graduated over a year ago and I’m worried that my student loans are going to get in the way of my plans of funding a startup in the future. Should I focus on paying off my student loans before starting my own company or do you think I’d be able to go ahead even with the debt? Thanks for the help.
[29:15] I would say the sooner you start the better. I don’t know as I would wait for paying off your student loans. I mean student loans tend to be pretty hefty and its going to talk you a long time to pay those off but I would probably also kind of caveat this with the underlying assumption that you have some sort of a revenue source and you aren’t just dipping into your savings and living off of credit cards to try and get a business off the ground.
[29:39] If you’re working or have a consulting engagement or something like that where you’re getting revenue of some kind and making a living and starting something on the side, you’re going to be in a much better position and its going to be a lot less stressful than if you try to just do everything solo.
[29:53] And since you’ve been graduated for over a year, I would guess that you’re probably working full time or at least part time at this point. So starting a business now is probably a better bet but I don’t know your full situation. The way I would lean is definitely towards starting sooner rather than later because the best time to start a business was yesterday and the best time before that was the day before and it just keeps going back. So there’s no better time to start a business than there is today.
[30:18] Rob: Yeah, I agree. Most student loan terms are like 10 years. Are you going to wait 10 years to start your business? Because in 10 years you’re probably going to be married with a mortgage. Maybe a car payment, all that kind of other stuff comes up. It only gets worst the older you get.
[30:32] So like Mike said, with showing some restrain and not just throwing it all to the wind and losing all your money or whatever, spending it all on you startup but taking a bit more conservative approach a lot like we talk about that Mike and I followed when we started ours as well as they approach – we kind of – a spouse here on the podcast, there’s no reason I can see to wait on this. I don’t think student lands should be reason to not start a business.
[30:54] Mike: So Pralie for the question.
[30:55] Music
[30:59] If you have question for us, you can call it in to our voice mail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 143 | How To Hire Like a Bootstrapper With Special Guest Laura Roeder
Show Notes
- Rob’s email marketing web app, Drip
- Mike’s security auditing app, AuditShark
- Laura Roeder
- Social Media Marketer membership site
- Creating Fame course on personal branding
- oDesk – for hiring contractors, VAs
- Double Double (book by Cameron Herold, mentioned by Laura)
- Authentic Jobs – a good job board
- Fiverr – Hire people for small gigs for $5
- Rob’s Growth Hacker Internship
Transcript
[00:00] Mike: This is Startups for the Rest of Us: Episode 143.
[00:03] Music
[00:10] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
[00:19] Rob: And I’m Rob.
[000:19] 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?
[00:24] Rob: It’s been a good week. The very first dollar came through for Drip this week.
[00:30] Mike: Congratulations. We should have like applause music or something like that.
[00:32] Rob: I know, yeah. It feels good. It feels like another milestone. I think there are 15-16 users in the system now and there’s about a third of them that are really super engaged and have already paid. So revenue is in the – I don’t know, it’s about $250 to $300 right now. That feels really good to have that down.
[00:50] And then another third is still getting setup, probably just got them onboarded in the last couple of days so they’re working on it. And then there’s another third that I’m working with. They’ve been on for a week or two but they’re still struggling to get their mini-course setup and kind of getting the time for their team to create it.
[01:06] But it’s as always been a fantastic learning experience and I love hitting milestones like this because it just keeps me and Derrick motivated to move forward because it feels like we’re making progress.
[01:18] Mike: Now are you billing people as soon as they sign up or you got like a 14 day trial period for them?
[01:22] Rob: Yeah. At this point, everything is manual and so it’s still early access. I haven’t even emailed the main list and so I’m basically working one on one with people via email and sometimes via video Skype. And once they get setup, then I monitor their account and I email them and say they are you happy with the results? Are you happy with the conversions?
[01:43] Like one guy’s been setup for three or four weeks but he’s not getting the conversions he’s looking for so he and I are kind of working out how he can improve that and it’s not until he sees value in it that I am going to bill. I email everyone before I bill them and I say hey are you getting enough value out of it to pay $49 and then I get their credit card info and do it from there.
[02:02] So it’s totally one off, totally manual. At this point I really wouldn’t have it any other way. Before we email, I have 100 or 200 people I’ll be emailing. Before we do that, that’s when I’ll need to get a trial in place and I won’t bill them upfront at least to start. I have to. I really think that they need to see some value in it before they get billed.
[02:20] Mike: Yeah. I’m working through some of the sign up code for auto-shark right now. Last week I was complaining about how everything just seemed like it fell apart and over the past seven days I’ve really gotten things – so everything’s back together again. And it actually is solid now so I don’t think things will fall apart in the way they did before.
[02:39] Part of it had to do with code merges. I found there were some code that have been merged and it broke some things so I’ve got most of that straightened out. There’s a few last minute tweaks that I need to get straightened out in terms of a sign up for the early access. I’m really close to having that all squared away and then touching base with a few people and have them sign on.
[02:58] And when to bill them is actually a question I kind of had in my mind. I was kicking it around a little bit trying to figure out do I bill them upfront or do I wait a little bit? I think I’m going to hold off of it. I’ll take their credit card information stuff as part of the sign up process because that’s already in there. But I probably won’t bill them for a couple of weeks. I’ll just kind of give them some time and let them see what they’re getting out of it, get some of the feedback that I need to make the tweaks and then touch base with them just the way you did in terms of saying hey, is it alright if we switch over starting to bill you.
[03:27] Rob: Right and that was the cool part is when I emailed folks. Most of the people who I emailed I only emailed because I knew that Drip was working for them and if they’re actively using it and they’re getting subscribers and conversions and all that. It still feels weird. It still feels weird to email someone say hey can I bill you $49 or one guy’s actually on a mid tier plan so can I bill you $149 for the next month of usage?
[03:51] And all of them, when they came back, it felt really good. They were like absolutely. This is definitely worth it. It’s like it gives you that rush of adrenalin of like we’re really doing something that works here. I’ve enjoyed this approach. I think trying to make an arbitrary trial length this early in the game or to bill people upfront when they’re basically – if they’re not doing you a favor per se but kind of. Its going to take a little more time than just signing up for a traditional service. I think that’s probably pretty mature right now.
[04:19] Music
[04:21] Today we’re going to be talking how to hire like a bootstrapper and we actually have a guest Laura Roeder. So today, Mike and I have the pleasure of having Laura Roeder on the show. She’s calling in all the way from London. So Laura we appreciate the last minute scheduling and the fact that you’re 8 or 10 hours off of us.
[0:04:40] Laura: Yes, super happy to be here. You even recorded it during the daytime for me instead of the middle of the night which is very nice.
[04:46] Rob: So Laura is an expert. She’s social media and personal brand building person. She was a 2012 MicroComf attendee and she is here today to talk about how to hire like a bootstrapper? And in typical startups that the rest of us fashion, this will be much less of an interview and more of a panel discussion as Mike and I pipe in with our experiences as well.
[0:05:07] Laura brings a unique viewpoint on this topic because she’s a non-technical person who has hired technical people. So we’re going to look at elements of how that was difficult or challenging for her. Laura has been on – she’s appeared on Mixergy twice. She’s all over the press, forbes.com, CNet, L.A. Times, fast company. She’s had a course on AppSumo. She also runs…
[05:30] Laura, correct me if I’m wrong this is where you kind of got your experience of hiring is you have a membership website called Social Media Marketer and then you have a course on its called Creating Fame which is more of a personal branding course. Is that where you got your initial experience hiring folks?
[05:47] Laura: Yeah. I have a team that helps me run the business and the business is those two courses.
[05:52] Rob: Very cool. Alright, so we have an outline that Laura’s graciously provided. We’re going to start popping through a few of these points. The first item we’re going to talk about is how hiring or outsourcing is different for a bootstrap startup versus a funded one. You want to talk a little bit about that?
[06:08] Laura: Yeah. I mean I think a lot of bootstrappers are completely and totally overwhelmed especially with how to do their first hire because traditionally when you look at hiring you look at the team you need and then you look at your budget, how much can we afford for everybody and a bootstrapper, your budget is zero.
[06:27] And you’re often thinking I know, I thought this in the beginning “well I can’t afford $60,000. I can’t even afford $30,000 to pay someone a yearly salary.” So how can I have and be one? I think the bootstrappers have to get a lot more creative in how they hire because you don’t have that. You never have $500,000 in the bank that you can just use to pay people huge salaries. You often never get to that point as a boot strap business. You’re just going a little bit by a little bit.
[06:57] Rob: Right. What’s interesting about that, I remember hearing Peldi talk about it early. He said he was questioning when to hire that first person and he said he waited until he had six months of that person’s salary in the bank before he would hire them because it just made him feel more comfortable that he wasn’t basically going to have to let somebody go so quick. So you can imagine how much slower his growth was than someone who as you said half a million or a million dollars in the bank to do it.
[07:24] Laura: I think that’s great if you can get there. I certainly have not been at that point for most my business and also if you’re starting out hiring freelancers they kind of know and it could be good motivation. We need this work to work out so we can keep the business growing and so we can keep paying more. You know?
[07:42] Rob: Right. So what? Have you had a rule of thumb for yourself or do you just – when you need to help if you have $1 more than the project then you’ll hire like freelancer?
[07:52] Laura: Yeah. I guess my only rule of thumb is just always to put money towards hiring first. I think a lot of people are willing to do things like spend a bunch of money going to conferences or buying like training various sorts but they won’t actually spend the money hiring people to do the things they’re learning at the conferences. They get so stuck in learning mode and not doing mode.
[08:16] So I haven’t had a certain amount of money in the bank or anything but I do try to say okay if I have an idea, there’s such cheap ways to get things done. If I have an idea that I know is going to grow my business, what’s the most down and dirty way that I can spend $100 even to get this idea started going?
[08:33] Rob: Right. You know the way I’ve done it for the past several years was to start by hiring essentially freelancers or contractors because there’s not such a commitment and you can hire them for a few hours a week and you can slowly ramp them up and then bring them on full time if needed. Is that how you’ve done it as well or did you kind of just plunk down and said I’m hiring someone full time from the start?
[08:54] Laura: Now I have people full time, now that I’ve been doing this for about four years but I definitely started with everyone as a part time freelancer because I couldn’t afford anymore than that. So I’ve had a few people that started part time and then have become fulltime. Now I try to hire out fulltime roles unless it truly is a onetime project. But even – we just added someone new for customer service. My company customer service is not a full time job. There’s not enough emails for eight hours a day every day.
[09:26] So we’re starting someone hourly. We’ll probably move her to flat rate part time assuming that all goes well. So if I can think that there’s going to be enough work for them, now I do full time but if its anything short of that which it often is, yeah I think starting with a smaller project is the way to go.
[09:44] Mike: I think the one thing that I hate about taking the leap from going directly to not having somebody work for you at all to hiring somebody full time for a position is that you don’t necessarily know how well that person is going to work out because you’re in the position where you’re on occasion you have to hire people who are technical and that obviously creates some challenges but it doesn’t really matter whether you’re technical or not.
[10:07] Hiring other people is just difficult. I mean you can look at all the studies and research you want and even Google has tons and tons of research which basically shows that nobody in Google knows how to really hire good people. And I’m serious about that. I mean if you look at the things that Google has published, they say flat out we don’t know how to hire good people.
[10:24] They have all these statistics that they’ve done and tried to identify who’s hired good people? Who hasn’t? And across the board, everyone is mediocre which basically you can translate that out to everybody else in the planet and say well if nobody’s good at hiring, how do you go about making sure that you do hire good people? I think the only way to really do it is to try people out. I mean you have to go down that contractor consultant route first and work with people in order to figure out whether you work well with them or not.
[10:52] Rob: I think we live in a time where this is possible and 15 years ago, I didn’t know of anyone anywhere who was trying to start a business like we have, the location independent business with a single founder who was able to find someone skilled who was willing to basically freelance and work part time. And so I just think it’s critical that people keep in mind as you’re getting started you don’t just think the old mindset of I need to hire someone 40 hours a week to do something.
[11:22] Because Laura the point you brought up about it as someone doing customer service, I agree. Even with all the businesses that I run, I still don’t have a full time customer service person. It’s been years that I’ve had these things running. So I think that’s a main takeaway of kind of this first discussion point. If someone’s not already thinking about the two benefits of being able to hire someone part time is 1) you don’t have the major commitment and 2) that you do get to try them out like Mike said, those would be the things I would try to take away from this.
[11:50] Laura: I think a little side bonus to what you’re saying that’s really interesting is that you often get more entrepreneurial people which I think is really essential for running a small lean startup. I need everyone to be entrepreneurial thinkers and the way to tap into this location, independent more freedom lifestyle without starting your own business is working for another company that has that lifestyle already. Everyone who works for me works from their own home.
[12:19] Yes they still have a somewhat boring normal job that they have to do but they can do it on their own hours. They can travel and do it from wherever so I think you attract the type of people that you want in your company too.
[12:33] Mike: Something else I found with contractors and consultants is that they’re very much the type of person who looks at specific problems and tries to find ways to solve those problems as opposed to when you get out – I’ll say it in a corporate world where people get hired and they know that they’re getting paid to be a butt in a chair and they will sit there and whether they’re being productive or not, that you’re getting paid for it.
[13:00] So they see it as basically they’re just trading off their time versus a contractor who’s brought in to actually solve a problem and that’s what they’re paid to do is they’re paid to solve the problem and yes they’re getting paid for the time that they put into that problem. But their primary goal, their primary motivation is to solve those problems.
[13:17] Rob: Let’s move on to point 2 which is to talk about the first folks that we each added to our teams, our first hires so to speak. Laura you want to kick this off?
[13:26] Laura: Yeah. When I started the business that I do now, it was just making online courses which is a very homemade thing and I didn’t need to hire a developer anything like that. It’s all very DIY. So the first person I hired was really a VA, a virtual assistant type of person who kind of helped with a little bit of everything.
[13:48] Customer service is something that I’m especially terrible at so I knew I needed someone doing that. So she did customer service. She also put on emails into our email marketing program to basic tweets and edits on wordpress website just kind of general admin help. And she was part time. She’s a stay at home mom. I found that there’s this huge un-tapped workforce. There’s all these parents out there that want part time jobs because they want to spend time with their kids.
[14:15] And that’s not a thing in the normal workforce to have any kind of part time job where you get to use your brain so she was a mom looking for a part time job and I’ll talk numbers because I know everyone always really, really wants to know. I’m pretty sure I started her out at $1,000 a month. 20 hours a week-ish flat rate.
[14:34] Rob: Nice.
[14:35] Mike: Yeah, I think one of the first people I hired came on as a contractor. I think it was hiring him at $1500 a week. He actually came to me through an agency and it was more because I needed somebody there who could do scripting at the time. I kind of got away from bringing people in like that just because it was so expensive compared to what he was getting paid from the agency. So having that middle man in there really ramped up the cost but then I switch over to using contractors.
[15:00] And the first contractors I found were through Odesk. I think I was only paying $10 or $11 an hour and I was able to essentially afford having them 30-40 hours a week and that seemed to work out pretty well but you do have to go through interviewing process to make sure that you’re getting the right people. And you need to be able to cut people loose and know that you’re making the right decision because it’s more important to have the right people than it is to just have people working for you.
[15:28] Rob: Yeah and for me it was a virtual assistant. This was probably 2007 I think after I read The Four Hour Workweek and I just had a couple small products that were ramping up and I realized that doing all the support myself and all the admin tasks just wasn’t the right way to go. I haven’t even realized that you could get hire people for a few hours a week around the world and it was a big light that came on for me after reading that book.
[15:53] Hourly rate was probably $5 or $6 an hour. I think they were in the Philippines. I don’t even remember at this point. I worked with them for a year or two and they’ve moved on and I’ve since found a number of virtual assistants and developers and designers like Mike said mostly on Odesk these days.
[16:09] I think something for folks to think about, if you’re at the point where I guess I feel like people wait a little too long to hire that first VA. I mean I wished I had done it earlier. I think there’s a longer learning curve than a lot of people think when you hire someone because you have to learn how to be a good delegator not to micromanage, not to throw a fit if someone doesn’t do it exactly the way you want it or how well you want it to be done.
[16:35] And so that takes time and if you want until the very last minute and you’re totally overwhelmed that then you hire someone then you now have this 1-3 month kind of learning period that is tough to do if you have this crunch time going on. But I think that hiring a virtual assistant earlier especially if its variable. I didn’t hire someone for 20 or 30 hours a week. It was more of an as needed basis which can be real benefit for you if you don’t have the money. I was in a situation where I didn’t have much money that I wanted to spend on someone on a monthly basis.
[17:06] Laura: I agree that people wait way, way,way too long and people get really overwhelmed by what the training process is going to be like but it’s one of those things that you’re just putting off the inevitable. I mean if you want to grow your business you’re going to have to do it sooner or later and I think it’s one of the top shortcuts for making a business more successful adding on other people.
[17:29] The training is really not – all the tools for screen sharing and recording what you’re doing and Google docs, I mean just the basic stuff, it actually makes I think a lot easier once you just force yourself to do it.
[17:43] Mike: I think sometimes it’s just a mental hurdle of trying to figure out what source of things you can hand off to somebody or hire somebody for. And there’s lots of things that people do on a daily basis or a weekly basis that they don’t even think about sending that off to somebody else or hiring somebody to do that for them. They don’t do the mental calculations of how much time it takes them to do X when they could pay somebody $10 an hour to do it for them. And they’re saving themselves that much time to either spend with their family or to do other things that are going to move their business forward.
[18:13] I think that’s a main thing that I see people doing or the main mistake that I see is people aren’t doing those calculations to figure out where they’re actually adding value to the business and where they’re basically just spending time building themselves a job.
[18:28] Laura: You know, something that really hit me on that topic, this guy Cameron Herold who I really admire, he has a business book called Double Double. He said go through all of your tasks and weight yourself at how good you are at them and the highest is let’s say E for excellence. And he said the lowest is I for incompetent and for some reason that really got me.
[18:51] I’m like I went through and I said where am I actually incompetent at doing something because we do tasks that we actually are literally incompetent at. We could just barely figure out how to do them and it really illuminates like why am I spending my time doing something that I’m actually incompetent at? I’m going to screw up my business.
[19:10] Rob: Something that I’ve taken to do is about a couple times a month I would go through my to-do list and I look at items that I’ve continued to push off that I have kind of a mental block against doing and I try to figure out if I have someone on my team who can do that or if I can hire someone to do that group of tasks?
[19:29] Because if I have a big chunk of them that I’m continually kind of skipping over then know that it’s just not ideal that I actually handle them. And whether it’s because I feel I’m incompetent at them like you said or whether I just don’t really have the desire to do them, those things sticking around on the list and not getting done typically isn’t advantageous. I either hire someone or I just mark them off the list and I say these don’t need to be done. They’re not important enough and that’s why I’ve been skipping.
[19:54] So we’ve talked about why someone should hire perhaps a virtual assistant earlier than they think and lets talk about some of the best ways to find help. And whether that is a virtual assistant or a developer or designer, we know that traditional job boards are not going to be the source for what we’re looking for because as bootstrappers we tend to just have to grow it slowly, organically, find people to work hourly and be flexible and work with us.
[20:17] So Laura maybe you can give us some insights on how you’ve done in the past? What’s worked for you and what hasn’t?
[20:23] Laura: Odesk has already been mentioned. That’s the really obvious one but I actually don’t realize I kind of had it in my head that Odesk was for people overseas like a lot of people in the Philippines and in India. I was a little behind the times on my Odesk. For this customer service role, we wanted someone in America and there are tons of Americans on Odesk working for $8 to $20 an hour and there’s plenty of Americans that are super psyched to get a work from home job, a few extra hours a week $10 or $15 an hour.
[20:57] Odesk goes way beyond even what I realized it was great for, beyond just developers but admin people, customer service people so I definitely love Odesk. If you’re going for a true fulltime person or even a true part time person, authentic jobs has been amazing for me. I found really, really good talent there and just posting to my own network always gets good people. So posting on my social media accounts, posting to my email newsletter, we always get people that way as well.
[21:24] Rob: Very nice. I have not had heard of authentic jobs. I’m looking at it now. I will be referring this later. Yeah, I’ve been n Odesk. I mean everyone on this podcast knows that Mike and I hire a lot of people through Odesk. I actually put together a course on hiring VA’s if anyone’s curious. That’s at startupvacourse.com but I recommend Odesk throughout that.
[21:42] I had tried bestjobs.ph I was on the Manila Craigslist, eLance, rentacoder, guru.com and there were all these sites and this is back really before Odesk came into the picture. And I tried all those and I had mixed results and you’ll still get mixed results even with Odesk there’s still a large hiring process that has to take place but in general I just haven’t found a better source of people especially the kind of hires we’re looking for which is kind of not a lot of hours per week and maybe some flexibility in how much they’re working as well as I love Odesk’s project management stuff – maybe not project management but kind of the time tracking, the work diary aspect of it.
[22:24] Mike: I mean like you I’m still a big fan of what you can get off Odesk and its primarily because you can see what people are working on and making sure especially if you’ve never met them or talked to them on the phone, you can see what they’re working on and making sure that they’re on track.
[22:40] Lately I’ve actually gone down the road of hiring people through my personal network. I’ve got two different people right now who are working for me. One of them’s putting in about 20 to 25 hours a week. The other one is putting in between 10 and 20 and both of them are hired through people I knew or a friend of a friend type of thing. And they’re both working out extremely well so I think that those personal introductions or if you know somebody, even if you just reached out to people you’ve worked with in the past, it seems to me like that is an exceptional way to get really, really talented people because you already have people who are essentially vouching for their skills and vouching for their abilities as somebody who gets things done.
[23:23] Laura: I just remembered. I also have actually used Fiverr which is kind of weird but I found people to do just really random tasks. Fiverr has a lot of really scary scammy stuff on it but one that I did – I wanted a list of all the Facebook pages for local chamber of commerce’s to do Facebook ads on. I paid someone $5. They gave me a really good list and the recently for a blog because design has been a hard thing for me to hire. It’s one of those where we have intermittent need. We don’t have ongoing need but when we need it, we need it. So we don’t have a designer on the team.
[24:00] And we have a blog post and our editor for our blogs are like “oh it would be really cool if we had a graphic that looked exactly like this to illustrate what we’re saying in this post.” So we went to Fiverr to have someone make a graphic and that worked out really well.
[24:14] Rob: Yeah, that’s a good one. I’ve actually used Fiverr quite a bit as well. I really like the thought of using your personal network. I don’t know that I’ve really done that much. I think I’ve done it with one hire but I have an item right now on my to-do list. I’m basically going to start looking for a marketing intern for Drip and HitTail, someone to help out with a lot of the tasks that are kind of sitting on my plate right now.
[24:36] My first points that I’m going to look at before I post to authentic jobs or go to Odesk is I’ll probably tweet it out. I’ll mention on the podcast and see what I get from there because Mike as you said, it seems like not only do you get people who maybe understand your situation a little more but you just have a higher likelihood even if you only get a couple of people who are interested, such a higher likelyhood that they’re actually going to be a fit for the position.
[25:00] Laura: I think especially for an intern, it’s so great to go to your network because a fan would actually do a really great job as an intern. My old project manager for my business, when I first hired her, I actually could not wrap my head around hiring a project manager for my business. It just seemed like an insane idea so I kind of talked myself down and thought okay maybe I could get a project management intern which doesn’t really make sense for project management.
[25:25] But I put the listing out there and I got an email back from someone who had taken my courses, was working on starting her own business and my community and she said well I have a lot of experience in production and project management. I’m not really a typical intern but I’d really love to learn from you and work with your company and then she ended up becoming fulltime and playing a huge role in the growth of the company.
[25:47] Rob: Yeah and that’s great because she already kind of knew your deal. She’d taken your courses. She knows how you work and knows the kind of projects that you work on and I think that’s a big benefit. I think I’m going to take it in stages of I’m going to work the network first and then only if that doesn’t work then I’ll explore everything else. And kind of go too to the masses so to speak.
[26:07] I’m interested to hear and I’m sure the listeners are too. Just a brief description of what your team looks like. How many folks do you have working for you? Is everybody part time, full time? Are they distributed around the world?
[26:18] Laura: Yeah. So they are distributed around the U.S. and Buenos Aires currently. So we have a full time project manager and that’s what someone would call operations, basically runs the day to day of the business. We have a full time content manager and she also does social media because content marketing is how I market my business. So she managers our newsletter and our blog and our internal newsletter and managers our social media posting and our social media schedule, basically our content marketing strategy.
[26:51] We also have a full time developer/tech admin so he does everything from writing custom wordpress plug-ins to the really boring stuff like loading up our emails in Infusion Soft and doing all the super boring Infusion Soft technical stuff. We also have the newest person on the team is a full time copy writer/data person which is a bit of an odd combo but it’s all under that marketing umbrella.
[27:20] So she writes copy for a blog posts, also marketing copy of emails and stuff like that ad she also does data analysis of which promotions are working. She does Facebook ads, analyzes which Facebook ads are working. Definitely a small team. You end up with those positions where people do a random mish-mash of stuff. And then we have part time customer service and next we’ll be adding on an SEO intern to help with some of our kind of overflow ground work type of SEO tasks.
[27:51] Rob: Nice. What I like about your description is you have the copywriter/data person and you’re right, that is such a random assortment but I found the exact same thing that when you’re working on such a small team that if you find someone who is good at something and you hired them for a specific thing and you start giving them more random odds and ends and they’re good at it and they execute it and they enjoy it, you want to put these kind of bizarre job titles that you never have in a big corporate environment.
[28:18] But if the person is happy, they’re doing good work and it works for you and helps the company then it’s like why not? There has to be that flexibility.
[28:26] Laura: Yeah and I’m a huge believer in the idea that whatever people love the most is where they’re going to do their best work. So I’m constantly looking at what people enjoy and what they don’t and trying to give them more tasks they enjoy and see if it makes sense to move around the stuff that’s not as much fun for them.
[28:44] Rob: Let’s talk a little bit about your hiring process, writing a job description, that kind of stuff.
[28:50] Laura: The best tip in the world, I learned this from Ramit Sethi is to do a form the people have to fill out instead of sending in a resume. So in that form you ask them questions related to the job. So when I was hiring a project manager I asked her questions like two people have this conflict, how do you handle it? You need to mange scheduling this. Like what’s your strategy? What’s your plan of attack?
[29:15] Don’t let people send in resumes. Don’t let people send in cover letters. They can link to a resume as one of your questions, that puts the onus on the applicant instead of putting the onus on you to dig through hundreds of thousands of resumes that which is definitely the worst and most painful part of hiring. So most people will never make it through your initial survey. So you filter out tons of people there.
[29:40] And then just reading the survey answers, you actually get a really good idea of who you want to talk to. So by the time you get to the interview stage, it’s very few people. I’ve even have positions where I’ve only interviewed – this is a bit unorthodox I guess but I’ve had positions where I’ve read the answers, interviewed just one person, felt like they were it and then I just went ahead and hire them.
[30:00] Rob: Yeah. That’s a really good tip. That isn’t something I’ve done and I’ll probably think of doing it on this round as I look for this intern. Something related and I think I don’t remember who I took this from. I think it’s probably Dan Andrews from the lifestyle of business podcast. I asked for a two minute video of them explaining – I’ll explain the job and say why you’re a fit or I have a couple questions they should answer.
[30:23] And it’s like you said, that eliminates a lot of people in a good way because I want someone who’s willing to – depending on the job of course. If it’s a developer I may not ask for that. But if its someone who I’m going to be interacting with and who I need maybe to be a good writer or to have certain skills, then I will absolutely ask them to sit in front of your webcam and just give me a two minute spiel.
[30:45] I will also record typically in my job descriptions, I will link out to a video of me like a one minute video of me talking about here’s who I am getting an idea of a little bit of personality and here are some projects that I’m working on and stuff that you’ll probably be involved in. I found that that some people don’t like that. Some people are kind of like whatever. They’re put off by that but they’re not a good fit for what I’m looking for.
[31:09] Mike: One of the things that I find is a lot more important than the skill set is just the ability to work with somebody. The survey questions that you talked about, the video that Rob you talked about, those tend to be really good for filtering out people who aren’t going to be a good – for lack of a better way to put it, a cultural fit. I don’t think that’s quite the term that I would probably use most of the time.
[31:31] But you really want to be able to find people who are going to follow directions and do exactly what it is that you want them to do rather than go off in the left field and just kind of do their own thing or do things that they think are going to be helpful but are not really in line with the vision of what it is that you’re trying to accomplish. And just finding those people who can do the right is a lot more important than people who may spend the least amount of time doing something but if they’re not doing the things that are right or that need to be done then it’s not nearly as helpful.
[32:02] Because then they’ve gotta go back and do it over again or you’ve got to fix it for them and those types of things just create problems and friction and if you can avoid those types of frictions even if you’re paying a little bit more to have somebody spend more time on it, I think you’re in a much better position than to have somebody who’s fantastic in a particular job that doesn’t quite always do the things that are need to be done or do the error checking that needs to be handled and those types of things.
[32:27] Laura: Well I find it interesting that you bring up – why don’t you like that word culture?
[32:31] Mike: I don’t like the world culture because its kind of hard I think to have a culture when you don’t really have an office or nobody’s meeting each other. I think that’s more than anything else. It’s not that culture is the wrong word. It feels awkward when you’re not in an office with people. Culture is not the word that I think of as a way to describe it.
[32:51] Laura: I bring that up because I actually had a huge mindset shifts in believing that my company does have a culture. Because I used to feel like you did and I thought well a culture – because when you read those articles, how to improve your company culture they say put a ping pong table and a break room. That’s going to be so much fun.
[33:11] And I never felt like it applied to a virtual company but I kind of realized whatever word you like to use for it, every company does have their own – your philosophy, your beliefs, how you do business, how you interact your personality, my company does have a culture. And like you said finding people who fit in with that culture is really, really important. I totally agree. It’s even more important than their skills.
[33:36] And I actually took my business a lot more seriously when I thought yeah, I do have a culture and my culture is awesome and my company is a great place to work and there are a lot of people that are working jobs they don’t like that would love to work for an awesome company like mine where people are nice to each other which is a lot more than you can say than a lot of jobs. So I actually love the idea of having a company culture and thinking about how that applies for a virtual company.
[33:59] Mike: I don’t think that it’s wrong. it’s just that the word feels awkward to me and maybe it’s just the stage that I’m at and you’re a little bit ahead of where I am mentally in that respect.
[34:08] Rob: What I like about what Laura just said is basically to find the best people you’re going to need to actually do a reasonable job of selling your company in the job description. You can’t just be like the old guard. You see the big whatever, the big banks or credit card companies and they have these job descriptions that are just horrendous.
[34:28] You read the job posting and its like I feel like I’m applying to work for the government or like I’m signing up to go to prison. It just really doesn’t sound like fun. That’s something I typically – if you’ve never written a job description before, I would say forget everything you have ever learned about any job you ever applied for. Throw them out because that is not the way that you as a bootstrapper want to hire your first, second or third employee or freelancer.
[34:54] You want to convey a sense of something that what you’re doing is exciting. It’s interesting because that’s how you’re going to find the people that are going to jive with kind of the small company culture whatever word you want to use for it. So yeah, I think that’s something that the people should take away from this. Let’s look at our last point which is micromanaging. Laura you want to talk to us about why micro managing makes hiring pointless?
[35:19] Laura: Yes. Micromanaging is the worst spin of working with other people. It’s so bad because it really makes all that work that you’ve spent money on kind of useless because you’re just doing it again yourself. I think most of us have been micromanaged.
[35:38] I remember I used to work as a designer and I understand that attitude of why am I going to spend a lot of time on this? You’re just going to redo my work? Because that’s how I felt. I felt my boss would just come and redo everything I did her own way. And you really are training your employees not to try hard. Because they know that you’re going to come do their work over again and it’s just a huge waste of time.
[36:03] I’ve heard about people doing things like reading every email that one of their employees sends out before they’re allowed to actually send it live. It’s just a huge waste of time. Why would even hire someone to do it if you’re going to take your own time to read every single thing? Most of us have been micromanaged by others and they’ve trained us to be micro mangers so I think getting rid of this habit is a big key for success for running an effective team.
[36:29] Rob: Yeah there’s an expression. Its building a $10,000 fence around a $1,000 piece of property and the idea is you’re basically misusing resources. So if you’re going to hire someone and then you’re going to read all their emails before they’re sent out, you’re right. You shouldn’t hire them. I think that for the first week or two that I hire someone, I am vigilant about what they’re doing. I mean you have to make sure things are going right.
[36:53] It’s obvious that if you have that much of a need for control then either you’re not ready to hire someone or you have some really bad habits that you have to unlearn before you’re going to be ready to do.
[37:03] Laura: I think one of the biggest things is trust. A lot of people struggle with how much do you trust your employees? How much do you trust your freelancers? And it’s definitely something everyone has to figure out for themselves with what you feel comfortable with. I air on an immense amount of trust. I figure if people are going to steal from me or screw things up on purpose, I obviously did such a poor job of predicting that.
[37:31] It would be totally unexpected if that were to ever happen. So to base everything around hedging for that not happening, I would just rather give people full trust from the beginning and it allows them to do better work.
[37:42] Mike: Part of that is your trust in yourself that you made a good hiring decision because you have to just accept that you made this hiring decision and you’re putting them in charge of thing so that you don’t have to be that person making I totally agree with all of that. But what I mean by listening to people is that if you’re those decisions.
[37:57] I mean that’s what you hired them for. You hired somebody to make decisions on your behalf and you need to trust yourself that you made a good hiring decision that they’re going to make the right decisions. And there’s going to be occasions that they won’t make the same decisions that you would’ve. It doesn’t mean that its wrong or that you need to go through and redo their work.
[38:14] What you really need to do is make a conscious effort to never go back and redo somebody’s work because I think that just creates some sort of friction between you and the person you hired because they will get to a point where they say everything I do my managers is just going to redo it anyway so why should I bother to do a good job?
[38:31] Laura: Mike I think that is so important. I think that’s really the key what you said that they’re going to make different decisions than you’re going to make. I think that’s why a lot of good people go bad in hiring. That’s why a lot of good people micromanage because they say they’re willing to let go but they still want everything to be their preference.
[38:53] And your way is not the only right way. That’s why you hired someone else. So I think seeing that difference between okay what’s really important to you, what’s a real guiding value and philosophy and strategy of how you want to run your company versus what’s just your personal preference that actually doesn’t matter so much and someone else’s personal preference is just fine. Just let them do it.
[39:12] Music
[39:15] Rob: So to recap, we’ve covered how to hire like a bootstrapper for today. The first thing we talked about was how hiring and outsourcing is different for a bootstrap startup. Then we talked about the first folks we added to our team and next we talked about the best sources that we’ve used to find help, the websites that we’ve used. Fourth, we talked about the hiring process and a little bit about writing a job description and then lastly we touched on micromanaging.
[39:38] So Laura, if people want to get in touch with you, where would be the best place for that?
[39:43] Laura: You can find me on twitter as @lkr or find me @lkrsocialmedia.com.
[39:51] Rob: So yeah, Laura thanks again for taking the time to come to the podcast and help share your experience of hiring like a bootstrapper.
[39:57] Laura: That was fun. Thanks for having me as a guest.
[40:00] Rob: Yeah, absolutely.
[40:01] Music
[40:03] Rob: If you have a question for us, call our voicemail number at 888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
