- Constant Contact
- Visual Website Optimizer
- Authority Labs
[00:00] Mike: In this episode of Startups for the Rest of Us, Rob and I are going to be answering questions about tools for testing sales funnels, reseller strategies and integration marketing. This is Startups for the Rest of Us: Episode 154.
[00:18] 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.
[00:27] Rob: And I’m Rob.
[00:28] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made.
[00:30] Rob: So I have some good news and some bad news. The good news is Drip launched to 600 more people today, nothing’s broken so far. People are signing up for trials, things look good. The bad news is Google has announced that they’re going for 100% not provided keywords. They’re trying to go to 100% of not sending keywords to root to your website so that you don’t know how people are finding you organically.
[00:57] Of course they dropped some hint we want to protect everybody from the NSA but in fact if you actually buy the same key words through Google ad words, they will tell you the keywords that people are using to find you so sounds like more of a money grab than anything. The reason it’s bad for me is this impacts Hit Tail. Basically Hit Tail relies on those keywords and that’s part of the data that it uses to give you back suggestions.
[01:21] So what I’ve been seeing, I’m kind of panicked when I heard about this and I thought oh man, Hit Tail’s done. If they get 100% Hit Tail doesn’t have much value. But what I’ve noticed is there a steady slow decline over the past 6 to 12 months across all sites and my sites included of the not provided thing rationing up. So my turn rate hasn’t increased. With my own sites, we still get plenty of suggestions and we fill the blog with long tail keywords suggestions. So as of today even though I have sites that are literally at 90% plus not provided, I’m still able to use Hit Tail and get value out of it. It’s not much value as I got 12 months ago but as long as it doesn’t abruptly go to 100% I actually think that Hit Tail can stick around at least in the short term and potentially a little bit further out in that.
[02:10] So that’s been my day, launching a new one and then seeing another one kind of get hammered by that. It’s that third party integration right? It may not be an API that were using but for all intents, anyone of any time can kind of pull the rug out from under you if you’re relying on their data.
[02:23] Mike: Yeah. I mean that’s not even an integration. That’s just an outright reliance on them, so that totally sucks. And reading that, they started doing this back in 2011. I would think they’ve been heavily testing this a lot over the past couple of years and probably start shutting down some of the companies that are doing SEO. I can’t imagine any other reason why they would be doing it other than to basically make more money off of ad words because they want people to use ads. They want people to click on those things.
[02:51] And when people are doing all sorts of organic SEO, then they don’t need those paid advertisements anymore because their search engine is good enough that it’s showing people the results that they want that their algorithm has determined are the best results out there. So it makes sense that they would want to obscure that so that people start having to buy ad words because their traditional SEO “tricks” don’t work anymore.
[03:15] Rob: Right. And Google kind of at a one two punch and the second part of the punch is they went out and blocked all the scrapers. So if you’re doing SEO, you typically use a rank tracker, something like surf fox but it basically tells you enter a bunch of keywords and you enter your website and it tells you where you rank for those. And Google used to have an API for that and they shut that down a couple of years ago. Then these companies were scraping to figure out your rank and now they blocked them. So they’re really rabidly going after SEO and they also shut down I think another couple of blog networks like big link farms they call them.
[03:52] The death of SEO has been coming for a long time. It’s been a slow, slow plod forward. And if Google didn’t own so much of the search landscape I think others search engines would step up. As far as I know still being in the other search engines, they don’t do really any of this stuff. They don’t block this stuff but there just aren’t enough in the market to really make a difference.
[04:13] Mike: Got it. On my end they just finalized a massive upgrade of Audit Shark over the past couple of days. The servers are finally running windows 2012 at this point. Everything’s now on the .net 4.5 framework and all the bugs that I had talked about a couple of weeks ago are completely out of the picture. Basically all the ones that were associated with the upgrade have all been dealt with. So I’m really pleased about that progress and at this point it looks I’m going to be going to the early access customers and working through the process with them.
[04:44] But everything I’m looking at so far basically says that things are ready and good to go. It’s just a matter of hitting that early access list and working through people and making sure they’re getting the value out of it and to kind of iterate in similar to how you’re doing things. I’ll probably a lot more hesitant I’ll say. I’m certainly not going to be emailing 600 people at a time because there’s a lot of traffic that comes in from some of the different components and I want to make sure the infrastructure can fully support it because that’s one of the things that hasn’t been I’d say adequately tested. So I’ll be on boarding people at a much lower rate than I think you are.
[05:20] Rob: Yeah, absolutely. Well if you recall, I started off with one customer and then I brought one customer on at a time until we had 20 people using the system and that took me six weeks to do. So I think you’re at that stage. Then we fixed a bunch of stuff, added features based on their responses. By the end of that I had about nine paying customers almost $500 in revenue and then that’s when I decided to email that first 300 batch. We didn’t upgrade the data base server. We split the server into two. We did a little bit of scaling stuff that took literally 1 or 2 hours to do because with all the virtual stuff it’s easy.
[05:59] I think you’re headed towards that at this point because you’re right. I never would’ve emailed 600 people 3 or 4 months ago because I just didn’t have the confidence that we can handle it. I’d say to be honest I think that’s both from a technology perspective but it’s also just from your processes. You need to make sure you’re answering support emails in a timely manner, how hard is on boarding? Can you walk people through individually? Do you have your trial emails that go out or are you sending those manually because I did that manually early on. Do you have automated billing? There’s a lot of things that if you don’t have them in place yet, that’s another thing that doesn’t scale yet if you don’t have the code written.
[06:34] Mike: Yeah. That’s definitely right. There are some of those things that I got automated and some of them I don’t. So for the time being I have to send out things manually. The code for billing hasn’t been fully tested yet so I want to run those things manually for a little while until we get to a point where I’ve gone through them and said okay I feel like we’ve covered 80% or 90% of the different scenarios that could possibly come up or something could go wrong. And at that point just add in some extra error handling and make sure nothing’s going to go wrong or maybe even just set it up so that it sends me an email says here’s the summary. Please click on this link going to the dashboard and then click the run button to just go through and actually do the billing for everybody.
[07:13] But I do want to be careful about a lot of stuff like that. As you said, until you get to a certain point, I mean you don’t want to just blast a ton of people there because you’re going to overload yourself with either support or all these other problems.
[07:26] Rob: Right. Very good. Well congratulations again. So you have one paying customer and you basically said you’re done with remediation and the UI and now a technology upgrade so you’re going to start moving into contact and early access folks, very good. I subscribed to Patrick McKenzie’s email newsletter and he sent something out within the last week that relates back to a conversation that we had and that Dave had actually called in about and he left a voicemail and was basically talking about getting that payment upfront versus just getting a commitment to pay upfront.
[08:00] Patrick reminded me that Jason Cohen at MicroConf had said I think it’s going to cost $30 a month, will you write me a check for the first month right now to reserve your place? I won’t cash it until we deliver. So Jason had taken a slightly different tact which was getting a commitment upfront and actually getting a check but he wasn’t taking the money. That kind of goes back to our discussion of us saying the important thing is to get the commitment. I think if you actually need the money to build a product, this is not a good approach. Right? Because you’re not supposed to cash this check. You should have the money to build the product on your own and if you don’t, I don’t think this is the way to get it.
[08:39] Mike: My favorite part of that entire email was – and I’ll quote him word per word. Patrick says “My favorite symptom of an unmet need for software is any Excel spreadsheet which is ever updated by one employee, sent to a second employee, updated, and then sent back. Every time that happens a Saas angel gets its wings.”
[08:56] Rob: Very nice.
[08:57] Mike: That reminds me of a comment that we go on episode 138 from Sean who said as you’re doing your research, if you come across anyone that’s using a spreadsheet as attracting tool, that’s a big signal you’ve got an opportunity to build something that can do it better.
[09:08] Rob: Yeah. I heard this. I think this is a software a couple years ago. I liked this approach. I also like the approach which is another one I heard at a conference. Look at the big enterprise tools where there is no lower price Saas version and see what pieces of that you can break off and turn into a more lower price but self service version of it. So you don’t have the long sales cycles. You try to bring it down to the small and medium sized business market instead of the enterprise market and there’s a ton of apps that have done that.
[09:38] I mean think of all the accounting apps, you think of the kind of CRM apps that only used to be a million bucks and now there’s SaaS versions. You see even email marketing apps at first were very, very expensive and in Constant Contact came with a $39 a month version. So I think there are still some fruit. I don’t know if it’s low hanging but those are interesting ways to generate ideas is looking at both enterprise apps and then ways that folks are using excels spreadsheets.
[10:03] Mike: Something else that ties into that is most people are very familiar with excel but I’ve seen a lot of applications written over the top of axis databases. So I think that’s probably another good place where if you find anybody who’s got an access program that has been customized or has been outsourced as some consulting company who came in and built something for them to track different information, that’s another place where you can probably look for a product to build.
[10:31] I think the one thing to be a little bit careful of is that when you get into those types of things it’s a much bigger commitment on the part of the company that brings somebody in to build that for them. So chances are the complexity is going to be a lot higher than they had with an excel spreadsheet but I still think it’s at least worth exploring and asking questions about.
[10:48] Rob: So you also had a little shift in your marketing focus this week. What happened?
[10:52] Mike: I actually cut back on my Facebook advertising just because I didn’t have time to pay attention to it. Facebook was they were sending clicks though but they weren’t necessarily converting as well as I would’ve liked. But because I didn’t have the time to follow-up on it, try and figure out exactly what was happening, I basically just killed it dead in the water for a little while until I could come back to it. Because as I said, we were working on that massive upgrade of the Audit Shark infrastructure and I just didn’t want to be throwing money away. So instead of doing that I just said okay, well I’ll kill this for a little while.
[11:20] Rob: Yeah. A little known fact about paid acquisition is there’s a lot of upfront time investment honing in to make it actually work and then even once it works you still need ongoing maintenance because the ads burn out. Some people call it ad rot but it basically the click through rates will go down over time. I’ve never seen a system where that doesn’t happen especially with visual ads like this. So it’d probably a good idea to cut back on them but you’re going to start them again. I imagine that there’s still a liquid of market out there. You plan to start it up in the next week or two?
[11:52] Mike: Yeah. I mean I’ll be doing it later this week. I’ve still got a bunch of different phrases that I want to try, want to swap out some of the images and just try some different mechanisms for saying the same types of things but in a different way, try to reach different audiences going into different target markets, that sort of thing.
[12:12] Rob: Very good. So we’re answering some listen questions today.
[12:15] Mike: That’s right. So the first one that we have is from Carl Falconer and he says hey guys, thanks for all your work creating the podcast. I’ve recently been attending a local lunch and learn series on financial literacy for startups. I’d be interested in learning how you both manage the business accounting not necessarily the tax accounting of your products. For example, things like balance sheets, cash flow etcetera. What’s the decision making process behind your financial models? With all of your experience, have you become better at predicting your breakeven point? Thanks. Carl.
[12:42] Rob: So with a software company I like to keep it very simple and in fact I don’t look at my balance sheet ever aside from cash on hand, that’s pretty much all I would look at as an asset. I like to keep things simple. I like to focus on the business rather than this kind of stuff, the business accounting aspect of it. I know that if I was running a business with inventory or with accounts receivable where you invoice and get paid net 30 you need to look at that stuff. You need to look at cash flow. But for me, the cash flow comes in virtually instantly. The biggest delay I have is with Stripe which is a seven delay from when I get paid. So as long as I have enough cash in the bank, it’s literally a rounding error and it doesn’t matter.
[13:20] So the thing that I look at with my business accounting is the income statement. All that is is all my revenue, all my expenses and I can just look top to bottom and see what came in that month, look at anything that’s kind of funky. I know the rule of thumb. I can set a budget physically in the accounting app or I know rule of thumb of where I should be if something looks out of whacko, go in and investigate.
[13:40] Realistically software companies tend to be especially Saas apps like this tend to be really cash heavy. You’re not typically at a danger of expelling more cash than is coming in once you reach profitability. Frankly I just treat it as kind of a simple cash in cash out business. And the packages that I’ve used are Outright, that’s typically the one I use for the simpler businesses I have and then I use Xero which is xero.com which and that’s for the more complicated scenarios. As Mike and I’ve talked about over the last couple months, we both have bookkeepers now and that’s actually been a god send because it just saves me quite a bit of time getting these things organized this month.
[14:17] Mike: Primary difference between me and you is that I use some different tools. I use Less Accounting for one business and then I use QuickBooks for the other. Just like you, I don’t pay attention too much to anything like balance sheets or accounts receivables or anything like that. The biggest thing is just how much money has come in over the past 30 days and how much money I’m spending on some of the different services. And that can vary from one month to the next. Occasionally I’ll go in to try and identify where all my money is going so that I know at least periodically review whether or not there’s services that I’m just no longer using anymore and whether or not I need to cut them.
[14:54] But I actually have some services that I’ve been using for a while that I just continue paying for them because it’s actually more of a hassle to go in and cancel those accounts than it is to just say oh well, it’s only $5 or $10 a month or whatever. In terms of predicting a breakeven point I don’t even think that comes into mind. Do you think about that at all or no?
[15:14] Rob: Not really. I basically set goals of where I want to grow revenue each month. That’s the one number that I look at. While keeping in mind that I want to acquire customers for substantially less than their lifetime value. As long as I’m doing that I know that the business is going to be profitable down the line. I don’t think that about breakeven. I think about I want revenue to be in X thousand dollars 30 days from now and those are the goals that I’m shooting to hit and the breakeven just kind of comes along with that.
[15:43] Mike: So thanks for the question Carl. Our next question comes from Henry Oswald and he says I’m currently trying to measure my sales funnels and could do with some technical guidance. I’m sure many are in the same boat. Could you elaborate on which tools you used to measure your funnel and or AB testing’s. How do you measure which traffic sources convert? Which three things would you recommend you’d measure for a new site? It feels like this is something everyone says you should do but rarely say how you should do it. Thanks in advance. Henry.
[16:07] Rob: Alright. So here’s how you should do it. In terms of which tools do we use to measure? I use Google analytics because it’s free. I use Kiss Metrics because it provides a little more detailed information but it’s quite expensive. I think it’s $150 a month is the low end plan. And for split testing I used what used to b Google website optimizer that now integrated it into Google analytics and you can get by if you don’t have a high budget analytics. There are solid tools for split testing like visual website optimizer and optimizely. Again I think those started around $100 a month. So it depends on where your budget is and do you have more money than time at this point or not.
[17:06] And then finally you said which first three things would you recommend you measure for a new website? I’m assuming this is a software or a SaaS website so here’s the three things I would look at. One is your visit to trial conversion ratio. Second is your trial to paid conversion ratio and the third is you should have a Drip email sequence running. I would look at visit to Drip email sequence conversion and then from that sequence into your trial conversion.
[17:35] Mike: But personally, similar to you, I use Google analytics and then I also use Kiss Metrics. So in terms of the tools I use I don’t think that there’s a whole lot different there. The other thing that I’ve used is it’s a C sharp framework for doing AB testing called FairlyCertain. Last I checked there was a bug in it. It wasn’t actually doing the AB test properly so if you did an AB test, the visitor would see the A and the A type test no matter which page they went on. So if you’re running two different tests, they would only see the A version of test one and they would only ever see the A version of test two.
[18:12] So as far as I know that’s a bug in there that I don’t know whether they fixed it or not. I actually went into the code and fixed it myself so that it was random between them. So if you were running more than one AB test on your site it just wasn’t necessarily giving you the correct results. And that’s something you do have to be careful about no matter what AB testing tool you’re using because you want to make sure those results are accurate. So do some testing on your own, make sure it is giving you the right results.
[18:37] In terms of the three things I would recommend measuring for a new site, a new site kind of implies it’s a new piece of software that you’ve unleashed and for those types of things you want to be careful about running AB test when you don’t actually have enough incoming traffic. I think Rob did a really good job of talking about the things that you should definitely be measuring but I would be very, very cautious about running AB test when you don’t have enough traffic to justify those AB tests. If you’re not going to get statistically significant result then you don’t want to be running those tests because they’re going to be giving you misleading information. So Henry thanks for the question.
[19:14] Our next one comes from Dylan and he says hi Rob and mike. I’m trying to come up with a reseller strategy and would love to hear your thoughts. My bootstrap product’s called Activity Book, is an HR enterprise application which requires a private VM so it’s not strictly a Saas application. Sales are fairly high touch at the moment using cold calling and face to face. I have several clients on trial including HR service providers who want the product deploy for each of their clients to be used as an HR portal. The HR service providers will in effect become resellers. In addition to these, I’ve been approached by other companies who’ve asked for reseller programs. This is all great but I’m struggling with a reseller strategy that’s attractive to both parties.
[19:50] Pricing is confusing. Should I give a percentage of the lifetime in the client, just the initial sale or a depreciating percentage during the lifetime? Should I allow them to charge whatever they like as long as I get my fee? I’m also considering white label and allowing the reseller to run training courses in their own configuration services etcetera. What do you guys think? Do you offer reseller packages or know of anyone who has an attractive reseller package? And closing, I’m a long time listener and believe my product has got to the point it is right now due to the inspiration from you guys. If it wasn’t for you two and Seth Godin, I’d have no product. Thanks, Dylan.
[20:21] Rob: Gee. Thanks for the mention next to Seth Godin, that’s a very high compliment. So it’s a little different with the reseller and affiliate right? Because an affiliate typically is just directing traffic over to your site and you’re basically paying them a percentage. Resellers are often valued added right there. Actually doing some installation they should do support, upfront support for you and so they should tend it in general they will get a higher cut for doing that. The other thing the reseller brings is they have their own network of typically of clients either existing ones or new ones they bring in. So that’s typically how I think about the difference between affiliates and resellers in case you listen to this wondering what that might look like.
[21:00] So he asked a couple questions here. The first one was about pricing. He said should I give a percentage of the lifetime of the client, just the initial sale or a depreciating percentage during the lifetime. My thoughts on this and they’re not highly experienced is that I would give them a percentage of the lifetime of the client but not upfront. Assuming you are charging a monthly maintenance fee, there’s nothing more attractive to a business than having recurring revenue and most businesses don’t have that. So you can give a much, more much smaller percentage of that recurring revenue say 10% or 20%but that’s an annuity of that business. And if they’re not used to that, it really can be crazy. The lifetime value to them can be worth a lot.
[21:41] On the flip side if you were to say okay, all the upfront charges, the set of fees, they all go to you so maybe they get 100% of the setup fees in the first month and then you get everything after that. That’s an okay deal for them. Personally if I were in their shoes, I would prefer the recurring. So maybe that is something that you need to feel a couple of them about and figure out which way you should go but I would lean towards giving a portion of that recurring sale.
[22:09] Mike: I actually disagree with you and here’s why. You have to remember that when you’re dealing with resellers of the size that my assumption is these resellers are going to be – I mean they’re an HR service provider. So they probably have 50 to 100 to 200 employees probably even more. When you start getting into those types of companies, they have dedicated sales reps. So the problem you’re going to run into is I don’t know what your software actually sells for but let’s say that it’s $500 a month and you’re going to give them 20% of the sale like Rob suggested. The problem is that $500, they’re going to get 20% of the sale, that means the company is going to get $100 a month which to you and me sounds like a reasonable deal but at the same time they have sales reps to pay.
[22:56] So if that sales rep looks at it and says well why should I sell this software package for $500 a month to customer X when I can sell them $2,500 worth of consulting services and make my numbers for the quarter? Those are the things you have to keep in mind when you’re going to go down this path because it’s ultimately the sales reps that are going to be trying to resell your product, not the business. So although you’re giving them $100 a month in recurrent revenue, it’s not necessarily going to go to the sales reps. The sales reps is not adequately compensated to actually go do that. So that’s something I would be really, really careful about.
[23:31] Rob: Got it. So you would lean towards trying to have a larger upfront fee and basically giving perhaps a huge chunk of that, maybe even 100% of it to the company with the hopes that they would then split that with the sales rep and they’d have more motivation.
[23:44] Mike: Possibly. I would go talk to these companies and find out exactly how their sales reps are compensated and how they’re going to be selling it and you may very well need to work out several different types of reseller agreements with your first several resellers to figure out what’s going to work best and which ones are going to do it because you can take our advice and do one thing and then find out 2 or 3 years down the road that it’s really just not working. What you need to do is try out a couple of different ones and figure out which one’s going to work the best and maybe you tell them upfront hey, let’s try this and we’ll reevaluate in 6 months and try and figure out from there whether or not this is appropriate, whether or not your sales reps are actually going to sell it and figure out what’s going to work for both of you.
[24:26] And I think that if you approach it from that angle and tell the company upfront look, we’re trying to figure this out just as much as you are in terms of reseller. The other thing I’d be cautious about is letting them push you into any specific way of doing things because they may ask you to do something that you may not necessarily be comfortable with but they say well let’s just try it and you get backed into a corner and it turns out it’s just absolutely fantastic for them. Maybe they’re taking all the top line revenue and they’re just sending you the monthly fee which may very well be what you want but just be cautious going down the road that they’re not pushing you around as well.
[25:02] Rob: Right. So you’d lean towards saying that you’re trying to figure it out as much as they are and that you want to do a short trial and maybe try to do one or two sales at this rate and then determine later if you need to adjust it, that kind of thing.
[25:14] Mike: Kind of. I mean I wouldn’t limit it to just one or two sales. I mean I’d probably give it a time limited basis like 5 or 6 months or something like that and then throughout the course of that 6 months, if you have let’s say five different resellers and one of them brings in 25 sales and the other one only brings in one, we have to go to the reseller that only brought in one sale and say hey, I have another reseller who brought in 25 sales. They’re about the same size as you. What is it you’re doing that’s different from them?
[25:41] And try and figure it out from that perspective and say I want to help you guys sell more but unless either I understand how you’re doing things or unable it compare them between you and another customer then it’s very difficult for you to help them and it’s a very non-confrontational way of addressing what eventually would be problem because down the road if they come to you and say we’ve got this huge customer we’re trying to land and they can just become a time sink for you. And if they’re not landing sales then you’re going to end up spending time with them waking through pre-sales things because it is an enterprise sale and you’re just not going to get anything out of it. So you want to be able to compare people and make sure you don’t end up in that situation.
[26:26] Rob: What do you think about the second part of this question? He says should I allow them to charge whatever they like as long as they get my fee?
[26:32] Mike: That’s a tough one because with larger companies, they tend to tack on services. I know that there are certain hardware providers out there who will – they’ll bundle not just hardware and software but they’ll bundle services into price quotes and it could be a little bit difficult to figure out how much of the cost is going to software? How much is going to hardware? How much is going to services? And you’re in a slightly different situation where there’s a private VM so it’s just a virtual machine that you deliver digitally so there’s no hardware directly associated with it but obviously the customer has to have the hardware to run it.
[27:07] I would definitely try to understand how it is that they do their services and what their general pricing looks like before you start making decisions about whether or not you’re going to just a take flat rate or not. The other thing to take into consideration is if you try to be too greedy, they may very well try to emulate exactly what you’re doing and have somebody else go out and build it as a platform for themselves that they can leverage basically for free. So you don’t want to get too greedy but at the same time you don’t want them overstepping their bounds either.
[27:39] Rob: I have a tough time at allowing them to charge whatever they like because then that means you’re leaving the price elasticity on the table. Your business isn’t going to grow. If it’s an enterprise product, the idea is that you’re going to make the most money, a big chunk of your revenue from the higher end sales and if other people are skimming that off the top then I just don’t think your business is going to grow as fast as if you were to kind of keep a control over the ultimate price. The last piece of his question he says I’m also considering white labeling, allowing the reseller to run training courses in their own configuration services etc.
[28:13] Mike: Well I mean these ties a little bit back to the previous one. The thing is allowing them to charge whatever they like is probably not a bad thing because if they’re charging whatever they like, theoretically you’re offering the same product to reseller 1 as you are to reseller 2. The primary difference is that they are offering different services to their customer. Even if you have two resellers who go after the same customer, theoretically they’re offering your service on the back end and you’re going to get paid whether either one sells it. So it doesn’t necessarily matter and they’re going to try and compete on price to some extent.
[28:45] In terms of white labeling, white labeling is tricky. I think that I would get a good handle on just having them act as a reseller before I start going down the white labeling. Because with white labeling you really want to be charging exponentially more and until you know what you should be charging as a reseller, it’s very difficult to know what you should be charging as a white label provider. So Dylan I hope that helps and thanks for the question.
[29:10] Our next question comes from Marco Schwartz and he says hi Mike and Rob. I’ve been following your podcast for about 3 months now and I’m working on my own products and looking for a Saas app idea. I am personally passionate about the restaurant business so I’m thinking about building a web app of this business that would manage accounting, inventory, staff etcetera that would be priced for a monthly fee. I know it’s not really a niche like you would advise in your podcast but on the other side I didn’t find any Saas apps online. I only found some very expensive $1,000 to $2,000 software packages to buy. Am I missing something? I’d love to have your opinion on this idea. Thanks.
[29:42] Rob: I don’t think this is a terrible idea but know upfront that this is going to be high touch sales. You are going to be doing out bound cold calls in the evenings because that’s when restaurants are open or you’re going to be paying in person visits. I don’t know anyone who makes a lot of these kinds of sales directly online using paid acquisition and Facebook ads and SEO and content marketing and that kind of stuff.
[30:07] Now you mentioned a broad range of what your app might do. You said it would manage accounting inventory staff etcetera. That is huge. I bet those packages that sell for $1,000 to $2,000 are massive and probably have 5 or 10 year old code bases and that’s probably why they look so crappy because they’re written in an old technology. But I would bite off a much smaller piece of that and then try to expand outward at a minimum. But know that you are in for high touch sales that you’re going to be dealing with people face to face and I would personally go out and try to sell 10 copies of it first or 10 subscriptions to it first based on the idea or based on mock ups or based on some designs or just something just to see what that feels like.
[30:49] Even if you get 10 no’s, at least you’re going to know what it’s like to have a conversation with restaurant owners and you’re going to have an idea of how hard it is to talk to and potentially sell. I would also suggest that you consider getting in touch with Brian Casel and he has a podcast called Bootstrap Web and he owns a product called Restaurant Engine which is basically think of it like square space for restaurants. It helps them get their websites up and running. At least with Restaurant Engine you can imagine that there are a certain amount of restaurants actively looking online for a new website and looking for website templates and designs and stuff so he has things he can tap into.
[31:26] What you’re talking about is taking over their back office and handling accounting, inventory staff, that’s a more complex proposition. You’re going to need a lot more credibility. It’s going to be a challenge. You said are you missing something? Yeah, I don’t think it’s as easy as perhaps as you’ve presented in this email and I do think that before you write a line of code there’s a lot more feet on the ground research that probably needs to happen.
[31:50] Mike: Yeah. I’ll second what Rob said. I mean the restaurant industry is I’ll say technologically averse. So I’ve looked at this a little bit, there’s a website that came up on Flippa a couple years ago that was also in the restaurant space but they weren’t doing inventory or accounting or staff management anything like that. The only thing that it was intended for was for allowing a restaurant to take orders online. And I forget how much it was selling for but it was probably $2,000 or $3,000 and the price point was I think around $500 or $800 or something like that and they were not getting very many sales. I think they were only getting one or two a month.
[32:28] So the revenue was reasonable but what I am talking to the owner of it, it turned out that there was a lot of high touch sales that went into that because everybody wanted customizations. Everyone wanted it to look like their own website and then it came on to once they bought the software package they wanted all these customizations and then they wanted a whole website design and it tended to turn more into consulting engagements than anything else. The different things that you talked about, the accounting inventory, staff management, each one of those things could be its own software package because it’s such a large problem that can be solved.
[33:04] So I might look at some of those. Maybe you’re looking at a time tracker for restaurants or something like that because you want to be scheduling people to come in and work and that might be something that you want to translate into an online solution. But as Rob said, go talk to them, see if there are ways that you can figure out how they manage that problem now whether or not they do use spreadsheets or just call people up and ask them what their times are. Maybe you can put together a package where people can say this is the hours that I work. These are the hours that I don’t work and have the software package basically take the store hours and manage staff in the business based on who’s going to be available and when they’re not going to be available. So Marco hope that helps, thanks for the question.
[33:50] And the last question of the day is from Frank Anderson and he says hi guys, thanks as always for the inspiring and informative show. I’m building a Saas app and been looking at the various B to B app stores such as Sales Force and Mail Chimp. Do you guys have any experience or perspective on how helpful these can be in terms of getting traction with a new app? Would love to hear this discussed on the podcast. Thanks. Frank. Rob, I think you had a specific term for this. You called it integration marketing?
[34:16] Rob: That’s right. Yeah, I mentioned this in my MicroConf talk this last year. So the answer is it depends. The real key to making this kind of thing work is that you get an upfront buy in that if you build something cool you build a nice landing page that they will do an email blast for you or a blog post or something like that. A tweet, maybe you build it, maybe you don’t but just to build it to be in the app store and get a small trickle of occurring traffic every month, I tend to not do that. I’m not saying it never works out but most of the time that doesn’t work out.
[34:51] What’s really nice if you’re actually looking for establishing a sales channel and trying to get some early traction from early customers, you need that initial blast to all of their customers. And so think a little bit smaller than Sales Force and Mail Chimp because those are the ones that you can apply to and submit your app and you’ll get in. They’re not going to email their customer base about you because you’re a small fish compared to them.
[35:14] So as an example with Hit Tail when I started doing some integration marketing I contacted some smaller SEO Saas apps, some you may never heard of like Authority Labs which is a rank tracker. I actually contact SEOMOZ and wound up on theirs. You’ve probably heard of them. But the larger ones, we’ve integrated Hit Tail with Basecamp. That one didn’t do very well for us. And there were two reasons for that. The first is that they wouldn’t agree upfront to do any cut type of blast because they’re just too big and we knew that. But the integration itself wasn’t very hard and it was the first one we were doing and we kind of just wanted to do it as a trial.
[35:48] The second reason it didn’t work out super well is because the audiences don’t exactly line up. So you’ve named two services, Sales Force and Mail Chimp. Unless your audience really closely aligns with people who are using Sales Force and Mail Chimp, just because they have a lot of people using doesn’t mean a lot of them are going to come use your app. So with Basecamp, I mean it’s like a fraction of percentage of people who come over who actually sign up for trial whereas with SEOMOZ and Authority Labs, those are at least 10 times the sign up rate of the Basecamp integration.
[36:21] So that’s the first thing to think about is who can I find who’s small enough that I can talk to the founder and it’s not some big committee and I can say if I do this and do a really good job at it, are you willing to kind of email the audience and give you that initial kick? The second thing is to think about which apps are out there whose audience is really closely aligned with the customers that you’re seeking. So thanks for the question frank. I hope that’s helpful.
[36:46] If you have a question or comment for us, call our voice mail number at 1-888-801-9690 or email us at email@example.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.
Hey Mike & Rob, thanks a lot for answering my question in this episode ! It was really precise and inspiring, and I will definitely update you on this if I decide to build a SaaS/software product based on what you said in that episode !
I spent 4 months earlier this year unsuccessfully selling mobile web and marketing services to restaurants. Granted you don’t plan on selling this – but Mike hit the nail on the hit when he said restaurants are technologically averse. And I was selling products/services that are easy to demonstrate the need for – yet still so many restaurant owners have their head in the sand when it comes to technology. If your going to be planning to sell products to help a restaurant with their backend systems, I can only imagine how hard it might be! Seriously after my experience earlier this year I vowed never EVER to try and selling anything to restaurants ever again. Period! The restaurant market looks tempting because there are so many restaurants and technology services that could improve them but based on my experience – never again. Anyway good luck with whatever you do 😉