Mike Taber: This is Startups for the Rest of Us: Episode 1.
Mike: Welcome to Startups For the Rest of Us, the podcast that helps developers be awesome at launching software products, whether you have built your first product or are just thinking about. I’m Mike.
Rob Walling: And I’m Rob.
Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So Rob, exactly why are we here again?
Rob: I have no idea! We’ve decided to do some crazy thing and record a podcast; something that neither of us have ever done.
Mike: Well, that’s true, but I think that the important thing that we are really here for is to share the things that we’ve done in the past and, most importantly, share the mistakes that we’ve made over the past several years in building out our product portfolios and building up our companies.
Rob: Yeah, and I think along with the mistakes come the successes as well, right?
Mike: I hope so! [laughs]
Rob: I mean we’ve learned from both of them. Yeah, I guess if we didn’t have any successes, no one should listen to us.
Mike: Why exactly are we developing this podcast? I mean does the world really need another podcast about startups?
Rob: You know, like we talked about before, there is this obvious gap in the market. There are a lot of podcasts aimed at venture backed startups, high growth startups, but there are so few podcasts aimed at bootstrap startups. And frankly, the ones that I listen to, they don’t tend to have super practical information that you can apply to your startup or micro ISV right away.
There are a lot of interview podcasts, and there is a lot of information that is just floating around, kind of almost superficial stuff that you hear on blogs, and I am hoping we can go a little more in depth with ours.
Mike: Definitely. I mean I think that is the key point here is that we can try to go a little bit further than what you would find on a blog. I mean the point of a blog is partially for information, but some of it is entertainment as well. And to get the right information you need, you tend to go to a lot of different blogs or a lot of different websites.
And one of the key things we would like to bring to the table and share with our listeners is the experience that we’ve had, the things that we’ve done that maybe didn’t work out so well, and then the things that we’ve done in the past that did work out pretty well, and try to collectively show a lot of that information all in one spot.
Rob: We don’t intend this to be another show that interviews startup founders. There are a lot of those, and I think most of us probably listen to them. So we are not going to be duplicating that format. We may have an interview once in a while, but that is not going to be the gist of it.
Individually, you and I have been through a lot as entrepreneurs. And, you know, obviously our goal is to provide real world strategies that have worked for our businesses that ideally will help someone else who is listening to the podcast.
Mike: Right. That’s the goal.
Rob: OK. Let’s get started by introducing ourselves.
Mike: My name is Mike Taber and I am the founder of both Moon River Software and Moon River Consulting. I am based in the greater Boston area. I work for myself fulltime. And I have been self employed since around 2005.
I used to work for a company called Pedestal Software that got acquired by Altiris back in 2005 for somewhere around $65 million or so.
Rob: Holy smokes! I hope you got a fat check off of that!
Mike: I got 0.0001%, and it was actually a little less than that. I did the math on it.
Rob: Wait, 65…1, 2, 3, 1, 2, 3…
Mike: It was about $8,000, so you don’t have to do the math. But needless to say, somebody made out a lot better than I did. So the number sounds big, but that kind of pushed me over the edge and I said, “You know what? Why should I be doing all this work to let somebody else be reaping the rewards?”
And, you know, that is why I started Moon River software and eventually spun off Moon River Consulting out of it. I just didn’t want to be in the position where I was making other people loads of money. I mean I am a smart guy, or at least reasonably smart. My wife tells me otherwise. But, you know, that is what I wanted to do. I wanted to be master of my own destiny. And I’ve said that to several other people, and at the end of the day, that is just what it comes down to.
So what about you Rob?
Rob: Well, I followed a similar path, actually. Over the past 10 years, I’ve had a couple of salary positions, but mostly I’ve done software consulting. And whether that is for a firm that I was paid hourly through, or I spun off my own firm in 2002 that eventually went fulltime a couple years later.
And I realized pretty quickly that consulting is fun, but I had a tough time building things for other people. I enjoyed it, but it really wasn’t fulfilling me the way that I wanted my work life to do. So I started building my own products and launching them. And pretty quickly I found a couple other products that people had launched that weren’t doing well and acquired them. And I started learning the ropes of marketing software, essentially, on a very small scale, obviously. I am not Microsoft. I mean it is me, one guy, and a couple of contractors I have, or a handful of contractors, I should say.
But I found that I enjoyed it pretty quickly, although I blew through…Man, I blew through a ton of money early on! I don’t know if I ever told you, but I dropped $1,200 on Adwords in six weeks one time and I made one $99 sale off of it.
Mike: I blew like $1,500 in a month before, so I know what you are talking about.
Rob: Yeah. Totally, you just have no idea what you are doing. And looking back, I still have the campaign saved, and I look at it and I am like, “What in the hell was I thinking?” It is not set up very well at all.
So anyway, I own a handful of software products, and I build them, I acquire them, and I market them, and I really enjoy it. And that is what I do fulltime now. So I think it is like you: master of my own destiny or master of my own domain, as they like to say, if you have seen Seinfeld. [laughs]
Mike: [laughs] So I guess one of the things that we wanted to discuss son our first podcast was exactly what is a micropreneur, because that was one of the things that you and I had come up with a while back, and just came up with the idea and definition of a micropreneur. And it is not something I have heard anybody else really talk about. It is just something we kind of spawned off on our own. It sort of makes sense. So why don’t you kind of explain to everybody what a micropreneur is.
Rob: Sure. A micropreneur is a word that we made up, essentially. But after we made it up, we found out, of course, other people were using it in different contexts. But essentially what we focused on is a micropreneur as a technical individual, someone with technical skill, and that can typically be software development or web development skill, and someone who wants to launch small software businesses. And whether that is a downloadable software product, like something that you write and runs on a desktop, like time tracking, or an invoicing app, even a game, or it can be a software as a service application, or an iPhone app, a Blackberry app. I mean kind of anything that you can code up that someone will pay you for.
I have owned things ranging from an ecommerce site, to an e-book, to software products, to software as a service applications, a niche job website. I mean kind of all this stuff fits under this umbrella of a micropreneur-something that you can build and sell online.
And a micropreneur is the person behind that. Some people might be confused by: What is a micropreneur versus a micro ISV? And a micro ISV is a one person software company, whereas the micropreneur is the person behind that micro ISV.
We are going to be using that word a lot in this podcast and in the future. So today we are going to talk about six tenants that you and I put together that essentially try to define what a micropreneur actually is. Let’s get started.
Mike: So the first tenant of being a micropreneur is: a micropreneur is a technical entrepreneur who writes software that creates value for a niche market. You can choose to write games, you can make downloadable software that gets installed on somebody’s machine, or you can do software as a service. It could be something like building comic book creation software. It could be software that is used for creating bingo cards. Just about anything is game for a micropreneur to be creating.
Rob: Right. And I think the key part of tenant one is that it is a niche market.
Mike: You are not going to build a Microsoft Word, but you might build a word processor that is designed for people who need to write a master’s thesis or a PhD dissertation-something along those lines.
Rob: Yep. So it is finding and choosing a niche. Since we are only one person, you can’t possibly take on a huge company. And tenant two is: a micropreneur starts with a single product or website but may build or require more once he or she has learned how to market software.
And this is an interesting one, because a lot of developers don’t think in terms of having multiple products. And they think that they are going to find a niche and build a comic book cataloguing software, and that it is going to make 10 grand a month, or five grand a month, or whatever they need to live on. Typically, that doesn’t happen.
But often, you can build something that maybe generates a lot less than that. And if you stack enough of them together, then you can actually build up a reasonable amount of income. This is not for everyone. Certainly, some developers are going to just want to do one product, and that is going to be their goal, and that is totally fine. But we have really talked about the goal, for a lot of people, is going to be to do multiple products. And as a result, there will have to be some automation involved, because, you know, you can’t manage five products and do everything all by yourself.
Mike: And that is actually a good leading to tenant number three, because tenant number three is: a micropreneur is intent on staying small. Now, small is something you have to define for yourself. Is small a one person company? You are going to be a one employee company for however long you want to run the business? Or do you want to grow it out to two or three people? Or do you have a couple of friends who have jumped on board with you and decided to build out whatever the product or products are that you have decided to build?
But essentially, the micropreneur is intent on staying small. And that is in direct contrast to things like venture capital startups or Angel investor startups who want to build out a company and build it as largely as they can and as quickly as they can in order to make a lot of money and cash out.
Rob: And tenant four is: A micropreneur is a highly technical entrepreneur who values time, location, or income independence. Again, some developers, some micropreneurs, may value only one of these things. Some may value all three of them. And let me step through each of them.
Time independence is the ability to be in control of your own time. So as a consultant, even if you work from home, you tend to have to work between nine and five or nine and nine as a lot of us did when we were consulting. Time independence is if you have a software product that you really don’t have any kind of working hour constraints; that you can work weekends and you can work nights, and you can do all types of crazy stuff.
Location independence is when you can live anywhere you want. And then income independence, of course, is being much more in control of your own income streams. So it is not relying on a salary or even consulting clients.
Now, you are never, of course, completely, 100% in charge of your income, because it depends on the market and what is selling. But if you have a product and it sells to 20, 30, 40, 50 people a month, you are really not controlled by any one person anymore. And that is really the crux of income independence, is you are not beholden to a single entity for the majority of your income.
And as you build or acquire more products, you become less and less beholden not only to each individual customer, but to each individual product. So you just have a lot more diversification.
And as I said before, some people will value one or two of these and others really will make it a goal to achieve all three of them.
Mike: Tenant number five is: A micropreneur merges existing technical knowledge with online marketing knowledge. In order to succeed as a micropreneur, you really need to be able to combine technical knowledge with that marketing knowledge. And if you don’t, what is going to happen is you are going to build a great product, but nobody is going to buy it because you are not able to market it effectively.
And the opposite is true as well. If you have great marketing knowledge but no technical ability, it is very difficult to build a great product that people are going to want to buy. So if you are able to merge both of these things, then what you have is a very, very powerful combination that not a lot of developers or marketers are going to be able to match, because it is very difficult to build up both of those silos of knowledge, I will say. And most of us went to school for development and we know how to develop software, and we could do it in our sleep, but it is really the marketing side that is a lot more challenging because there are many things that are just not well defined in terms of the problem space.
So, for example, if something is wrong in your code, if you got a bug, you know what the parameters are around that bug. You know exactly what is going on. And you may not necessarily know why, but you can step it through the debugger and figure all that stuff out.
If something is wrong on your website and you are just not getting traffic, it could be a million different things. And it is just as bad, if not worse than a technical problem, where, you know, you have a finite space of where this problem could be. With a website where the entire Internet could be hitting it or, in this particular case, is not hitting it, you have to figure out why, and it could be just about anything.
And being able to clearly identify what those sources of problems are is really what is going to separate a micropreneur from the average off the street developer who can certainly code his way out of a wet paper bag, but isn’t necessarily going to be able to figure out those problems.
Rob: Yeah. I think this is a really important tenant, and I think it is one that a lot of developers don’t think about. We totally underestimate how important and how difficult it is to learn the marketing side of things.
Tenant six is: A micropreneur is a cross between four things: a software developer, a webmaster, a marketer, and an entrepreneur. We all know what a developer is. A webmaster, the reason you have to have this in your blood, or learn it, or learn to outsource it is that we are talking about selling online. And even today, iPhone, Blackberry apps that don’t run on the web need some type of sales site or sales information. So you are going to have to know or learn something about getting a nice website up.
And the last two are a marketer and an entrepreneur. And these are the ones that take a lot of time to learn and a lot of trial and error. And, of course, Mike, that is what you and I have spent the last 10 years learning, right?
Mike: Oh yeah!
Rob: Those are the ones that cost you money.
Rob: Time. Tons of time. Yeah. And you can learn some of it from books. It is like coding, right? You can learn some of it from books, but you need to have a lot of experience doing it as well.
And so the marketing part is learning how to get the word out and get people interested in your product. And the entrepreneur is the person with the vision, and it is the person who can kind of make everything happen, whether they are doing a lot of the work themselves or whether they are just being the visionary and outsourcing them as they go along.
So those are the four things that would be great if they were four different people each gifted in those areas. But realistically, as a micropreneur, all four of them-one person.
Mike: So now that we’ve kind of talked about exactly what constitutes a micropreneur and what it takes to be a micropreneur, one of the things that we also wanted to talk about was what a micropreneur is not.
Rob: You know, the first thing that a micropreneur is not at all is not an Internet “get rich quick” scheme. A, you are not going to get rich, B, you are not going to do it quickly, and C, it is not a scheme at all. So it just has nothing to do with any of that stuff. I mean it really is a long term mentality of taking technical knowledge and applying it in an intelligent, formatted manner, and learning from experience, and, over a long term, building up one or more viable businesses that hopefully generate some income for you and provides some level of independence.
And again, whether that independence you want is just to have a couple hundred bucks a month to help make a car payment, or if ultimately you want to quit your job, that is going to take a couple of years, right? But it is not anything like an Internet “get rich quick” scheme or a work from home scheme or any of that stuff that you hear about online or on late night TV.
Mike: A second thing that we wanted to point out that a micropreneur is not about is being a micropreneur is not about venture backed startups or very high growth startups. It has absolutely nothing to do with any of these large or high competition niche markets. If you wanted to try and create the next word processor, going about it in as a micropreneur is really not a…I don’t even think it is a viable option, to be perfectly honest. I don’t even know how well Google is doing at it with their Google Docs against Microsoft.
Rob: Venture capitalists have portfolios of products, so they can afford for 10 or 20 of them to fail because they have the one that returns such a huge return for them. But when you are an entrepreneur, your portfolio is one company. Or, in our case, maybe it is a few small companies. But realistically, if you are going to go for the venture backed route, you are going to have one company at a time, and it is going to take you 3-5 years to do it, and it is going to take a lot of work and a lot of passion and effort out of you.
So how many of those are you going to be able to do in your whole life? You know, maybe two or three tops? And if the first two fail, you may not come back for a third. So it really is an odds game, and the odds are just stacked against you too far for us to consider the venture world viable.
So that is why, when we look at micropreneurship, the odds of you succeeding, if you do it right, and if you do it smart, are very high.
Mike: I almost look at a micropreneur as essentially a mini VC or mini Angel who has all these different products in their portfolio. And if one of them does great and five of them do bad, no big deal, because you have got that one product that is doing well.
And if you make these products that are small enough that address a problem in the market, something is going to do well. All it takes is doing the research, doing your homework. And essentially, what you are doing is you are spreading out your risks among all these different products. And if you get a product that only pulls in $25 a month, well, OK. Well, no big deal. But for every product that you have like that, how many others is it going to take before you find one that gets $1,000 month or two or three thousand dollars a month?
And the more of these small applications that you crank out, the better your chances are. And essentially, you become that mini VC of your product portfolio.
Mike: One of the reasons that Rob and I started to put together this podcast was because, individually, we have gotten a lot of questions over the years about: How do you go about finding a market? How do you go about selling your products? How is it that you have gotten successful and been able to do the things that you have done?
And today what we have is a question from somebody who asked us. Here is his question.
Aaron: Hi guys. This is Aaron. I have a question about competition today. I think a lot of people, including myself, get caught up in the discovery phase. At least for me, it has a lot to do with wanting to find that slam dunk-that product that is almost guaranteed to be a success.
What I am finding out is if there is a market for some kind of software product, chances are someone else is already out there offering a solution, and an even greater chance that there are multiple solutions.
So my question is: How much competition is too much competition? And in a related question: How do you compete with free, or do you? Thanks.
Mike: So Rob, why don’t you take a first crack at that one?
Rob: So the first part is: How much competition is too much competition? In my experience, there is too much competition when the cost to acquire a customer is more than you are going to make from that customer.
So if you have a 1% conversion rate, meaning you sell to one customer out of every 100 that come to your website, and your product is a $100 product, that means that every visitor to your website is worth $1. And if it costs you more than $1 to send people to your website, that means there is too much competition in the niche.
Mike: I think my take on it is that determining how much competition is too much competition is more of a judgment call based on your own personality as well. There are cases where going into a particular niche, there is a lot of competition and there is substantial competition. But if you feel that you can overcome the hurdles to garner attention from the people out there searching for whatever that solution is, by all means, go for it.
But you do have to do your homework. You do have to do the research and make absolutely sure that you are going to be tolerant of the risks that you are undertaking in that particular market.
Rob: Right. And I think a key point that both of us made there is neither of us emphasized “if you can build a better product.” That has something to do with it, but not a ton. Right?
Mike: [laughs] Yeah.
Rob: Really, the key factor is the marketing side of it-getting people to your website. Because you can build a better product and, frankly, no one is going to care. No one is going to hear about it. You have to look at the economics of the marketing.
To get a little more specific, Mike, you and I have talked about the cost of acquiring a customer. And it is like if you are a developer and you don’t have a site, you don’t have a product, how do you figure that out? And there are a couple of tools that you and I both used. One is the Google Adwords keyword tool where you can search on a term. And then you have to go to the exact phrase match. A lot of people go to the broad match. You go to the exact phrase match and kind of peek around and get a relative idea, although this thing can be off by an order of magnitude. But get a relative idea of how many people are looking for particular search phrases.
And the other tool that I’ve used that works really well is SpyFu.com. It helps you not only at…If there is competition in a niche, it helps you look at the keywords that they are ranking for and pulling in traffic for. It also gives you an idea of the Google AdWords they are running and the cost they are paying for them. So you can pretty quickly see: “Oh, they are paying $5 per click because they are in the wedding niche. So I really need to have a high conversion rate and an expensive product in order to make it viable.”
There is a lot more math to it, obviously. Maybe we can get into that in a later podcast. But those are some key tools that you will want to check out.
Mike: So the second part of this question was: How do you compete with free, or do you? And I think that that is a much more difficult question to answer, mainly because it depends so much on who you are competing against and what the specific product is.
For example, there are a lot of products that Google offers. I would not want to be in the business of trying to resell email at this point.
Rob: Run away! And an online office suite…I mean any of these things. Yeah, if Google has online calendaring, like, you are hosed. So if you are talking free like Google, then just consider it case closed.
Mike: But at the same time, there are also tons of email providers out there that are still making money because they actually have value. And this is the key part that I want to drill into, because I think that in the vast majority of cases-we can use email as a great example-you really are going to have a hard time competing with Google trying to offer email services, because theirs are free.
However, personally, I outsource my email. And I actually have a hosted solution that I pay for because I get Exchange Server with it. And it has all these advanced features and functionality that I like to use. And I honestly like having Exchange Server running behind my business.
So, for me, it works. And for the company that I am purchasing it from, they are obviously making money off of this, and they are reselling Exchange Email to me and making money off of it, and are successfully competing against Google.
Rob: I think that there are niches around where there may be a free provider that isn’t doing a very good job, and that you can come in and compete with them. I think the way to tell the difference is that if there is someone with venture capital in their back pocket and they are offering a free service, you don’t want to enter that market, because they have deep, deep pockets and you are not going to outgun them on features. You are one person and they probably have a team of developers. And they are using a freemium model, which is very difficult to get to work for micropreneurs. You have to have massive scale.
So competing with them, they are probably going to put out a good product, and I would say not to compete with them.
Mike: There is also the other argument. I saw Eric Sink from SourceGear answer basically the same question from a college student: “Well, why should I purchase a license for SourceGear when I can go out and get Subversion or any of these other open source version control systems for free?”
And his answer was basically that because buying SoureGear’s…you know, whether you are buying Vault or whether you are buying Fortress, that saves you time and money. And the reason it saves you time and money is because your time as a developer is worth something. And the only time that going after those open source solutions where it is going to benefit you is if your time is “worthless”. And I forget whether he actually used the term “worthless” or not.
But I mean he makes a very valid, worthy point. It can take time and effort to get some of these solutions up and running. And if you are working at a company where they are paying their developers $100,000 a year, they don’t want to have to deal with that stuff. They want to be able to call somebody and say, “Hey, your software isn’t working. How do I fix it? I’ve paid you for whatever the license fees are.” And they expect support. They expect somebody to stand behind that product and fix things when they are broken.
Rob: I can see the flames now. “Mike Taber says open source software is terrible! He says it’s worthless!”
Rob: Now it’s time for This Week’s Tip. So a little bit about this segment since it is the first time we are doing it. The idea of This Week’s Tip is that we are going to try to make this portion of the program about tools and tips that Mike and I actually use day to day. And we are going to try to relate our unique experience with the tools and tips. So Mike, what is this week’s tip?
Mike: The tool is called RescueTime. You can find it at rescuetime.com. And what this tool does is you install it on your desktop and it will track the things that you do while you are doing them. If you go to a website, or if you are playing games, if you are using Word or various parts of Office, or Skype, or writing email, what have you, this software tracks and categorizes all of the different pieces of software that you use. And it assigns values to them to say how productive it thinks that you are being.
And it keeps track of how much you have been working. You can have it set for 24 hours a day usage or only between working hours, etc. But because, as a micropreneur, you only have a limited time, typically, as you start, you have got maybe 10 or 15 hours a week that you can dedicate to being a micropreneur and to building up your products. So you want to maximize the effectiveness of that time.
So by measuring your efficiency, you can essentially help yourself to be more productive. And looking at my most recent efficiency rating, your efficiency can be rated anywhere from negative two to positive two. Email tends to be neutral-it tends to be a rating of zero. Games, I think, are negative two. Something like your IDE’s for development, those tend to be plus two. And you can customize each of these.
But my efficiency for this past week, based on 42 hours of work, was .81. The average user efficiency… which, I get an email every week, so my RescueTime weekly summary that tells me how productive I am being in relation to other people who are using the product.
The average user efficiency of everybody else was 0.10 for 43 hours and 12 minutes, on average, of work. Granted, this past week was a holiday week, so I wouldn’t put too much stock in the fact that I was eight times more productive than other people. But it at least gives me a benchmark to shoot for.
But you can find it, again, at rescuetime.com, and that is this week’s tip!
Rob: If you have a question or comment, please call it into our voicemail number: 1-888-801-9690. Or you can email it in .mp3 or text format to firstname.lastname@example.org. Feel free to include your name and your URL if desired. A transcript of this podcast is available on our website: startupsfortherestofus.com.
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