In this episode of Startups For The Rest Of Us, Rob along with guest Ruben Gamez answer a number of listener questions on topics including current marketing tactics, scaling from 5 to 10 employees, SaaS longevity and more.
Items mentioned in this episode:
- MicroConf Connect
- Peldi’ s article about profit sharing
- Quiet Light Brokerage
- FE International
- Empire Flippers
Rob: In this week’s episode of Startups for the Rest of Us, I’m joined by Ruben Gomez as we run through listener questions covering topics like marketing approaches that are working today, moving from 5–10 employees, SaaS longevity, and several other questions. This is Startups for the Rest of Us Episode 484.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome in building, launching, and growing startups. Whether you’ve built your fifth startup, or you’re thinking about your first. I’m Rob and today with Ruben Gomez, we’re here to share our experiences to help you avoid the mistakes we’ve made.
It’s a Q&A episode, one of the listener favorites. We’ve got a bunch of really good questions today, and I’m happy to welcome Ruben Gomez back on the show. You may remember him from an interview we did a couple of months back, but he started BidSketch, which is a proposal software. It’s a SaaS app. He started that back in (I believe it was) 2009. He was one of the early SaaS bootstrappers, and over the past couple of years, he’s been building another product called DocSketch, which is electronic signatures. He’s experiencing quite a bit of success with that as well.
Ruben is a wealth of knowledge. He’s a very thoughtful founder, and he is just meticulous and disciplined. I say that in some of the intros here. He is almost the definition of those things. He’s detail-oriented, he’s very thoughtful about the direction and the moves that he takes with his companies, and he is someone who I would bet on any day because he does things in such a repeatable fashion and has a wealth of experience under his belt. I’m super excited to have him on the show today.
Before we dive into our conversation where we answer a handful of listener questions including several voicemails—I think we had three voicemails today—I want to remind you again about MicroConf Connect. Go to microconfconnect.com. It is MicroConf’s year-round always on Slack channel. We’re currently accepting applicants. It’s for founders, aspiring founders, and folks who want to be in the self-funded and indie-funded community.
In addition, we’ve had several new reviews over the past couple of months. I won’t bore you by reading them on the show right now, but if you have yet to give us a five-star review or to leave a comment, if the show has been helpful for you, if you feel like you’ve gotten value over the past many years we’ve been doing it, we would really appreciate a five-star or a couple of sentences. It helps us stay motivated and keep cracking the show up. With that, let’s dive into listener questions.
Ruben, thanks so much for coming back on the show.
Ruben: Thanks for the invite.
Rob: It’s going to be fun. I think you have some good insight on a lot of these questions today. Our first question is from Will, and it’s actually a question that I don’t think you and I have a lot of insight into, so I’ve called in a remote correspondence to help us out with that. The question is, “Are there any good places that you know of to pick up more stuff on affiliate marketing? One thing that came out of this past year is that I can write a lot faster and more effectively than I thought. I’m not convinced that writing code is even my strong suit even though lots of people tell me it is. I’d like to explore options in this area a bit more but I’d like to borrow your BS filter for a minute. The trouble with people teaching affiliate marketing is that they’re also affiliate marketers, and the signal-to-noise ratio is brutal. Thanks, Will.”
That’s been my experience as well, Ruben. Before we recorded, you mentioned that you haven’t been in the affiliate marketing area for a while.
Ruben: No, but I like that comment that most of the people selling courses are affiliate marketers as well, so it’s really hard to know what’s legit.
Rob: Exactly, I think you’re dead on, Will, so what I did is I tapped a friend and TinySeed mentor, MicroConf speaker, Taylor Hendrickson, who does exist in that space, a lot B2C stuff and affiliate space, and let’s turn it over to Taylor.
Taylor: Hey, thanks for the question, Will. Again, my name’s Taylor, and I’ve been doing affiliate marketing in one form or another since before the Panda update in Google, which for you non-nerds out there, it’s almost 10 years now. You’re completely right and that most people out there who are “teaching” affiliate marketing actually aren’t good at it themselves or just regurgitating the same information they’ve seen or have posted billions of times, that doesn’t actually help anything or anybody.
For that reason, I actually really don’t have any good courses or resources to point to on affiliate marketing, who aren’t just hawking the same stuff everybody else is, but one of us did provide a little bit more perspective or way of thinking about affiliate marketing that I think will help guide you in the right direction you’re looking for.
The main core of affiliate marketing is the same main core as normal business you get into. It’s solving a defined set of problems for a defined audience. When you look at who’s doing that well in affiliate marketing, look at places like Wirecutter, all they’re doing is recommending the best version of whatever the problem people were coming to the website for in exchange for the commission. They know that the only reason they have an audience (were bought for untold millions of dollars by The New York Times) is because they provide amazing value to the people coming there, looking for solutions to their specific problems. I’d recommend the same thing for anybody looking to get into affiliate marketing.
How can you provide value to a very specific audience with very specific problems? By recommending things that you would actually recommend to a friend or a loved one, not just what pays the highest affiliate commission or just random things you’re trying to do to make a quick buck. People see through that really quick.
If anybody is promising those one-click riches, anything that seems a little too good to be true, or actually doesn’t stand the test of, “Will this last for another five years?” completely run the other direction because they are probably a charlatan. I know this doesn’t quite answer the question you are asking, but hopefully gives some perspective as to how to think about this industry better. Now back to you, Rob.
Rob: Thank you so much, Taylor, for being our on-site correspondent for the affiliate marketing question. Our next question is a voicemail around new modes and methods of marketing.
Donald: Hey Rob, waves to Mike. My name’s Donald, a long time listener. You both kept me going through tough times, so I really appreciate that. I’m a recent returnee to my home country of Ireland, but I’ve been in tech networks and security for a long time back at […]. I built my first self-funded SaaS app in 2018. It did live technical screening of engineering skills and engineer skills, but have failed to get traction for a ton of reasons. I somewhat intentionally did things backwards like built it first, as I was new to Rails and web apps, so is learning as I went. I failed at marketing, failed to get paying customers, albeit I did demo for some large and small orgs and experimented with a whole host of cold and warm methods to get leads.
After nearly giving up, I ended up pivoting pansift.com a few months ago to a SaaS GitHub app in the detection tech space. It now automatically honey tokens your deployed branches. Effectively, it’s kind of like a breach detection app for SaaS and infrastructure codes that enables the attacker detection in minutes rather than months. There is some customer education required for both security teams or engineering teams, and I’m trying to figure out positioning in pricing, but my traffic is currently almost nonexistent. As I restart my marketing efforts, I’m struck by the recent vibe I’m hearing on the podcast and elsewhere that an email list and existing audience doesn’t really cut it for SaaS any longer.
Apart from one-to-one, hand-to-hand combat, customer-by-customer, are there any other new or nontraditional avenues I should or could be exploring for marketing rather than content marketing SEO, PPC, giving talks, doing podcasts, or going to conferences, any help or guidance, much appreciated. I love what you’re both doing. Thank you.
Rob: Thanks so much for the question. I think I want to chime in real quick, Ruben, before I throw it over to you, I’ve heard a couple of people quote back to me that on the podcast, I’ve said that having an existing audience doesn’t help. I want to really want to clarify that because if you have an existing audience that is a B2B-focused audience, and they could potentially be a customer of your SaaS app, I think there’s a huge value in that, specialty of 10,000 or 30,000 on an email list.
When I talk about this audience thing not being the end-all-be-all of SaaS is that I’ve seen the kind of B2C marketers have a large audience of kind of wannapreneurs or folks who are just looking for that opportunity to make a million, to make money online crowd. They try to launch a SaaS app for them, and they realize that none of them want to pay. The churn is through the roof and it’s a bunch of mess with it. SaaS is really hard. It’s a lot harder than selling info products.
That’s more what I’m saying or trying to say. If you have an info product audience, you’re making hundreds of thousands a year, and you think that you can switch to SaaS and make hundreds of thousands a year, I’ve never seen anyone do that well. Does that make sense, and do you agree or disagree with that?
Ruben: Yeah, I completely agree. That sort of the Internet marketing space where basically most of it is usually info products where it happens a lot. Selling in that way, selling to people, they’re trying to buy education courses and other info products is different from selling a SaaS. So yeah, I’ve never seen it. I’ve known several people have tried to do it that had big audiences that were successful with info products, and really usually struggle when it comes to selling SaaS just because it’s different.
Rob: Yeah, I agree. I think the one example that I can think of that work was click-on with Leadpages, but it was all annual plans, it was pretty high pressure sales if you went to their webinars. It was really marketed in a very specific way, and frankly, they struggled with that longer term. That’s the day they got big quickly but that had its own drag on the business.
Ruben: Yeah, there are a couple that have done it. It’s not everyone, but most people are not going to be able to do it. The other one that I can think of is ClickFunnels, what’s his name, Brunson something.
Rob: Russell Brunson.
Rob: So, Donald mentioned a bunch of stuff. He was saying content marketing, SEO, pay per click, one-on-one, I think he was meaning like cold email, speaking at conferences, going on podcasts. All that stuff still works, right?
Ruben: It does. Some of it is harder than it used to be, like paid ads are generally more expensive across the board, content marketing back in the day you could do a volume thing, just publish two, three, four, five posts a week. The more you published, the more traffic you got. In some ways, it used to be easier, but things have changed. I’m not sure that I’d say that it’s a lot harder. It’s a little bit harder, but it’s also different. It’s about just getting educated about what’s working nowadays, I think it’s part of it.
I think one of the things that he mentioned was that he was trying to figure out positioning and pricing, and things like that. I don’t know about you, but when I hear something like that, I’d be kind of hesitant to start looking at channels that a lot of people aren’t using, that aren’t proven because in my mind, I would need to figure out that I can sell this product, who the customer is, how does a customer buy, that this is going to work, that I have a funnel that works before I start exploring other channels, channels that are a little unusual or something like that. What do you think about that?
Rob: I think you’re right. It sounds like he’s in customer development almost. Maybe his product is to the point people can use it, but if you don’t have positioning and pricing down, I really wouldn’t start marketing yet. I would be doing a lot of sales. A lot of people equate the two as the same, but they’re very different. I see sales is really a one-on-one act even if you draw in all the leads through marketing techniques, then the sales becomes conversations, and that’s where in his case, I’d be looking to have a lot of conversations and try to pick out their language to figure out positioning.
Ruben: Yeah. You learn so much from those conversations that later help you do marketing in a better way. Otherwise, you’re just guessing. I don’t know this category, so maybe if this category has a lot of competitors, they’re doing really well, it’s pretty established, and you know that this type of product works, I think that’s a different situation where you can have a little bit more confidence. But it still pays to do that up front work, I think.
Rob: Right, and this is where if I were in Donald’s shoes a year ago, I would’ve been building an email list. I would have been trying to build that launch list of people who are interested in this product everywhere I went. I would speak about it when it’s a podcast, speaking in front of an audience or whatever. Whether that list is 200 or 2000 people, that’s your easy farm for customer development where you just have tons of conversations.
If he’s starting from a cold stop, that’s definitely not where I would want to be. But almost everything he listed still works today. Cold email, content marketing, SEO, pay-per-click, podcast tour, speaking, it’s less scalable, but it can get you in front of the right people. The only two others that I would throw in that are in my mental shortlist, and that I see working with MicroConf and TinySeed folks are integrations. Integration marketing where you get both sides to promote, which you were the first person I ever saw do that well way back in the day, probably a decade ago now.
The other one is (and it really depends on your space) is to be higher priced, be the enterprise, but its trade shows. It’s going and being in a booth. I know that a lot of us roll our eyes at that when we want to be self-service SaaS, but I will say there’s more than one company I am deeply involved with that is killing it with trade shows, and they’re absolutely worth every dollar they spend.
Ruben: I’ve always known people that have apps or that serve customers that are a little bit older school (I would say), and they do really well on those. I could hear that those are still doing good.
Rob: I know, and there are obviously many others. I have a long list in a Google Doc, but I also refer people to the book traction by Justin Mares and Gabriel Weinberg for just a list. I think there’s 20 in there. The tactics that are in the book are a few years old now. They may or may not work specifically, but that’s a laundry list that I would start from if I had nothing in the chambers.
Ruben: One thing that I would mention for him, given that his product is technical, maybe looking at what some people are calling engineering as marketing. Free tools is a big one. We’ve had some success with that where we get a lot of traffic doing that. I’ve known other people that have done really well with that. The only thing that I would say about that is that a lot of developers might get excited about those and think that all you have to do is build a calculator or a free tool, put it out there, and you’re just going to get traffic from it.
It’s a product. Building the tools is maybe 20% of it, and then 80% is promoting and marketing. You have to figure out how you’re going to get traffic with it. For us, it was SEO. First figure out the keywords that we’re targeting, this is the traffic that we’re going to get from it, build out the tool, and promote it to start getting that traffic.
Bryan Harris from this company called Growth Tools—it used to be called Videofruit—has a lot of free tools. His approach is very different from mine. His approach is partnerships and paid acquisition to promote the free tools. It’s working really well. He’s written a lot about it. I recommend checking out his stuff.
Rob: That’s a good suggestion. If you are marketing to engineers, then working in public ala […] Derrick Reimer, basically on Twitter posting stuff once a day or twice a week with code snippets—developers love that kind of stuff—recording a short screencast if you’re you actually coding something up. I think that uniquely works in that space and almost nowhere else, maybe with designers or something.
Ruben: I think related to that, something that probably works with almost any product in any space, is basically look at who’s doing a good job attracting that type of customer. It doesn’t have to be just related products. I really like looking at things that are just different. I have a SaaS, but maybe I’ll look at somebody who’s running a podcast, who does a really good job of attracting that type of audience or somebody who’s running a downloadable tool, or a different type of SaaS that’s not competitive in any way, and see what they’re doing. It’s always amazing what you’ll learn from it.
Rob: Thanks for the question. I hope that was helpful. Our next question is a voicemail about the most common employment arrangements in early stage startups.
Sean: Hey, My name’s Sean. I’ve been listening to your stuff for a little while now. I’m not a founder yet, but I love everything you guys do on the podcast and through MicroConf. I’m hoping to find a project to start soon, but for the meantime, I’ll keep listening and thinking. Anyway, my question is, and you may have quoted this before so my apologies. If you haven’t, what are the most common employment arrangements with early stage, no or low funding startups that you typically see?
Rob: Good question, Sean. I believe we have discussed this before, but it is likely hundreds of episodes ago. Ruben, you have thoughts on this?
Ruben: Generally, when you’re starting off, you don’t have a lot of money. Most people that I know (including myself) start off with contractors, part-time then full-time, no equity even when you bring on full-time people, no health insurance early on. It’s being really efficient with the money that you have. Later on, a little bit later, when you start growing a team and stuff but still no equity, I think the thing that I’ve been hearing a little bit more nowadays is that some people are exploring profit sharing a little bit more. At some point, you had health insurance there.
Rob: Right, when you have enough money to think about it. I think for us, it was when we were maybe 3-4 employees. I agree with you, it was part-time contractors for me for years and then you hit a certain point where everyone’s full-time and it kind of makes sense to bring them onboard, they have a bunch of institutional knowledge. Start paying them W-2, it’s more expensive, and you do start offering some benefits. I think the profit sharing is what I’ve seen done most in the bootstrap space just because some bootstrappers are really averse to giving away equity or it just complicates things to have anyone else on the cap table.
Ruben: If I have an LLC, if I wanted to do that for my company, I’d have to change that, wouldn’t I?
Rob: No, you can giveaway units. You can give units. You can do an RS user to restricted stock units. I believe there’s restricted units of LLCs and the vesting just isn’t as straightforward as a thing. That’s the other thing, I really haven’t seen people who haven’t taken any funding. I haven’t seen anyone who’s done stock options versus just an equity grant that vest over a few years. Even though that’s pretty rare and most of it has just been either nothing or it’s been profit sharing, I think it is the general rule in our space versus with Silicon Valley. With a venture-funded startup, there are options everywhere. That’s the currency.
Ruben: Back in the day, and it’s still pretty good, Peldi wrote a good post about profit sharing. If anyone ever wants to explore that, I know a lot of people have used that as a model or the way that they’re doing their profit sharing.
Rob: That’s the one I refer everyone to as well. It’s kind of the best write up I’ve seen. Thanks for that question, Sean. I know you had another one, and we’re going to roll that right here.
Sean: Another question. I’d love to see what the number of hours per week worked is sliced by company maturity or age. I have some assumption about what curve for what that might look like, founders who are in the MicroConf community trying to also double lifestyle and maintainable business? Again, thanks for everything you guys do. I love listening to the podcast. I know you already said you get this a lot, but I love the variety. The variety is great. Thanks a lot. All right. Bye.
Rob: That’s a good question. In fact, I have asked the statistician and data scientist who analyze the data to do that analysis. Hopefully, maybe next week or in the next few weeks, I will have that data, discuss it on the show, and address it then.
Daniel: Hi, this is Daniel. I’m a long-time listener, first time caller. My question is about the transition from being a small team where I run everything to a still small team where I simply can’t do that anymore. I’ve been selling a Word add-in since 2009, took on the first employee in 2015, but this year we’ve completed our transition from being a one-off permanent license to being an annual license. Suddenly, in a space of 6 months, we’re going from a team of 5 to a team of 10, and this just changes everything.
We suddenly have a staff manual and suddenly it’s crazy that people send me leave requests, which they always did before, but now they have line managers now. It seems crazy that I’m still processing expenses and a dozen other small things like that. I’m finding it quite hard to get helpful guidance because everything I see is written for companies that are either smaller than us or larger than us.
My question to you is, knowing that this transition is hard (and you’ve mentioned on the show several times that it is a hard transition), what are the things you see that are mostly likely to break? What systems should I be looking to put in place? And how do I avoid just becoming a glorified admin person? Thanks for your help.
Rob: Thanks for that question, Daniel. Daniel also sent an email where he said, of the ten people on the team, the breakdown is him, six engineers, one customer success, one part-time QA, one part-time growth marketer, and one admin. With that, I’m curious to hear your thoughts.
Ruben: I know a lot of people struggle with the people side. It’s not something that I struggled with a lot. Maybe because before I had my product, I managed a group of people and I went through all the stages from it just being myself to 3 people, 5 people, 10, all the way up to past 30 people. And I studied a lot throughout all of those stages.
Thinking about it more, I think it can be a little bit tricky when you get (let’s say) from 5–10 versus 5–15 or 5–20. When you’re at 15–20 people, it’s a lot more clear that you can’t do everything yourself. You can’t be as involved yourself. You have to depend on others. When you’re in that 8, 9, 10 zone, maybe it’s a little tricky because you can technically do it. You can have most of those people reporting to you directly, but it gets tricky because you’re so busy feeling like an admin doing all the stuff and just managing people.
I would probably say, mindset is one of those things that I would think about your team being bigger than it actually is because it probably will be bigger soon, and the things that you need to do to manage effectively, to have it, you can’t be managing everybody directly. Breaking your people up into small teams, having other people on your team lead and own their positions, are really big. It’s hard to run a team of that size without doing that, and then be having time to do other things. Those are just some of the things that I’d think about.
Also, read. I see a lot of people in our space, it feels like they’re constantly figuring this out for the first time, but there are decades of information about managing teams and a lot of it is useful. It doesn’t have to be specific to startups or a certain size. A couple of books—Traction—I forgot the other author. Not the marketing one. I’ve heard it’s pretty practical and a lot of people seem to like it.
Rob: […] I forgot that author, too, but here it’s the Entrepreneurial OS or EOS. If you search that on Amazon, it’ll get you to the book.
Ruben: Right, and just from talking to people that have read it, a lot of the stuff that they’ve implemented based off that book is stuff that I’ve implemented over the years. It sounds really in line with a lot of the way that people (especially in our space) operate their businesses at these sizes, so check that out. I also like One Minute Manager. That one is one that I really like and I read every once in a while.
Rob: And it’s Traction by Gino Wickman. I agree with everything you said. Actually, I made notes as I was listening to the voicemail, and one of the first ones I said when he said, “What systems should I put in place?” is to have managers that are not just you because you cannot have 12 direct reports. Right now, you have nine or maybe you do have line managers, I don’t know. A mistake that I made with Drip is that everyone reported to me the whole time. There were a bunch of reasons. There were excuses why I didn’t do it, is really the bottom line. It took a toll on me and it’s something that I wouldn’t do again.
I think something else that I noticed is that when I look at your line-up, it’s very product-heavy. You have no sales people and you only have a part-time marketer out of 10 people. To me, that feels off. I would consider, can you grow the business a little faster if that growth marketer was full-time or if you had a salesperson?
The reason leads are still coming to you is because you don’t have anyone else doing sales. I would consider (in a short-term) typically customer success people are often pretty good at sales. Without a quota and all the stuff, they may not be as good as if you went the full process, but customer success people know your product. They know how to talk to people. That is what we did when we only had one customer success person. She did both those roles, and I think that was a good move we made.
Another I would think about, specifically to the phrase of, “How do I avoid becoming a glorified admin,” I would seriously consider at what point here do you need to hire even a part-time Director of Operations or Director of HR? It seems really early to that, but if you’re running your own payroll, you’re thinking about your own books and your accounting, you’re dealing with the state or local governments with the taxes, there’s always unemployment, there’s like three different accounts in every state where you hire someone, and it’s so hard to outsource. It’s like Gusto or any of these payroll providers. They say they do a lot of it, but they don’t do that stuff. You need a PEO (at least in the US) to do that, and that becomes very expensive.
Another mistake I made is that I wished I hired someone to handle a lot more of the day-to-day ops. In the old days, they called them an office manager. They did all of that stuff, kept the personnel files and did a lot of the payroll, the bookkeeping, the accounting, the invoicing, accounts payable, accounts receivable, all of that. Everything was under their purview.
We don’t have all those things necessarily if you’re selling software, but I do think finding someone really competent, who you can hand that off and completely delegate it. Not someone you’re telling what to do day-to-day because you already have an admin, but is that admin competent or experienced enough to really come in and take charge or do you need to go out and find that ops person to get yourself out of that role?
Thanks again for the questions, Daniel. Hope that was helpful.
Our next question is from long-time listener, Mr. James Kennedy. He’s also spoken at a couple of MicroConfs. He says, “It’s clear from the number of people writing into the show with a million-dollar or more SaaS businesses that the community has really come a long way.” I’d like to hear your thoughts on where to go after you’ve replaced the day job. If it’s become a grind, then selling your apps seems obvious, but it’s not a grind, what’s next? There’s always the fear that it all goes south. Most are probably over-invested in a single startup that works. Who have you seen that has handled managing this risk while still running their company and how do they do it? James.”
And he says, “PS, the podcast has never been stronger. It’s still great to hear from Mike, but the extra TinySeed tales and variety of new guests has invigorated the whole thing.” Thanks for that, James. To his question, your thoughts on that, Ruben?
Ruben: Yeah. He said after quitting the day job. I’m assuming it’s way after because right after you quit the day job, it’s still pretty early, and it’s basically at that point, grow the company. But after growing the company maybe for a couple of more years, good revenue, getting people on board (or not, depending on that company). Some people sell, and this has really always been interesting to me. People run their companies, like they’re going to be around forever.
It’s really interesting to me that there’s that mindset in our space where things are changing all of the time and companies are dying. Like in that question, I don’t remember exactly how it was phased, but something about that it can all go away at some point. I have that. I know a lot of people that also have that thought, but I do know other people that it’s not even a thought for them, which I find really interesting.
I think that’s not so good. It’s cool if you want to run the company for a long time but at some point, I think it’s really important for the founder to take some money off the table in some way, shape, or form. If you don’t sell, then sell part of the company or what I’ve done at periods of time is basically use the company almost like a cash machine. If it’s really profitable and you’re efficient with how you’re acquiring customers and all that stuff, I know a couple of people that are currently doing that as well.
I think being in that stage where you’re not that profitable, you have a lot of employees for the amount of revenue that you’re bringing in, running that company in that way for a long time, and expecting it to be around forever and not taking any money off the table, it’s a really risky way of doing things. What do you think?
Rob: I was going to say the same thing. There’s selling. It used to be that it was really hard to sell these small apps. There was no market for them. There was no Quiet Light, FE International, Empire Flippers. It was person-to-person. You’d go on a website and you’d get 1X your annual revenue of something. It was great for buyers, but really bad if you wanted to exit. But there’s so much money coming into the space now. Both through these brokers but also just strategic acquirers where they actually do come in. Strategic or private equity buyers if you’re over a million, where they will pay you revenue in multiples now. You sell a business doing a million dollars for $2 million or $3 million, that’s crazy.
It’s doing a million dollars, and after payroll and all your expenses, you’re making $100,000 or something because you’re growing so fast, and yet, you sell that for $2 million or $3 million, I have seen this happen now. Josh with Baremetrics. We talked an episode or two ago about how he got an offer for 3.75 revenue. It was a $5 million offer. That certainly doesn’t happen every day, but it’s a lot more common than people would believe, I’ll put it that way.
Soon as you go above north $1 million is where that happens. Obviously, I’ve sold a bunch of companies. I’ve either sold or shut down every company I’ve ever had, so I’m not saying you should or shouldn’t sell, but it wasn’t an option. Then it became an option, and now, we know what you just said is selling part of your company, selling 20%. Obviously, look for similar evaluation to a partner who is still a minority partner, doesn’t have control, and it’s not venture capital. It’s for you to literally take the money off the table.
A founder running a million-dollar app that (let’s say) is worth “someone might be willing to pay $2½ million for it.” If you could sell 20% for half a million dollars and put that half a million in the bank, personally, I would’ve slept way better at night when I was running any of my companies, and I wish that that have been more of an option. It is now becoming more of an option. There are folks who have set up funds. Now, there’s only a handful. It’s still an emerging thing. Much like into that VC tiny seed stuff, that’s still this emerging frontier. There’s also this partial cash-out equity that I’m seeing happens. I think it’s an intriguing idea.
Ruben: Yeah. It makes a lot of sense and I’m glad that those types of options are available nowadays. This is still good for people who are in the VC space, getting funding at ridiculous amounts. Mainly because the founder is taking money off the table as well.
Rob: Yup. Typically, it’s like oftentimes, the second round, the Series B founders will take money off the table to be able to sleep better at night. It over-invested in one startup is a good way to think about it.
The last thing that we haven’t discussed is—I’ve seen some folks—find a CEO to run the thing. You couldn’t do that in the stages but if you’re north of a million, is there a budget there? If you decided you did want to step away, can you find someone who is really good enough that you trust to keep the company going while you step away to do something else? I think this is a little bit like the model.
When we look at the folks who have run SaaS apps for really long periods of time, like the Basecamp guys, they’re not still working on that first product. They would be bored out of their mind. We get too bored with stuff. They’re rewritten it multiple times now. They’ve launched Haystack. They launched a bunch of stuff over the years, so that’s how they stay invested. If you think about it, they’re just starting a bunch of companies, but really, they’re not. They’re just starting a bunch of products under the umbrella, the company.
That’s a dream scenario, and I think most of us can’t do that, but if that’s what you need, if you feel like, “Well, I have these companies running really well, and I can find someone good to run it,” there’s obviously huge risk here, right? You find the wrong person and the company tanks. Maybe you sell part of it to take money off the table, you find someone to replace you, and then go on to do your next act. Is that something of interest?
Ruben: Yeah, I’ve known several that have done this. I’ve actually known people that have had success doing it, then basically ended up with the wrong person and had to come back.
Rob: Yeah, and it’s something I have never done. It always seems really scary to me, like I couldn’t find the right person and on, and on, and on. Insert a bunch of excuses here about why I didn’t do it, but it is something I wish I had potentially evaluated earlier with some of the apps that I’ve had. Thanks for that question, James. I hope that was helpful.
Our next question is about starting with no audience and selling at higher price points. The person says, “In two previous podcast episodes, I’ve heard you talk about startups having no audiences and selling their product with significant MRR. I’d love to hear more about this. I started my own SaaS product early this year and I’m doing the cold outreach route with some success. However, apart from what Steli Efti writes, there are very few other resources as to how to get going when you’re first starting out.”
This was another one where I wasn’t saying don’t start with no audience. I was saying taking that B2C audience and trying to transition. Yeah, we already covered this, but the idea is I think having an audience would be great but if you don’t, how do you start selling at higher price points? To me, it’s like cold email is the one that everyone does because it’s worth doing.
I think AdWords is another one that’s really expensive, but if you have any type of cash to pour into it, you don’t need that many leads if you are selling at higher price points. It is going to be so consultative anyway, that you’re going to be getting in demos and conversations with folks. What are your thoughts on this, Ruben?
Ruben: I’m wondering what people mean when they say “no audience.” You covered it a little bit, but are they thinking just any sort of audience at all or more like the personal brand type of thing?
Rob: I think she means no reach, really no audience.
Ruben: Nothing? Starting from the ground?
Rob: Yeah, kind of like no launch email lists, because if you have an email list that was interested in hearing about the product when it launches, then you would just do that, but I think she does mean like, “I’ve made a traditional developer mistake. I built some stuff maybe, I was having conversations, but I did know marketing.” Start marketing the day you start quoting. Start marketing before you start quoting. Just take my advice, please, so that you don’t wind up in this position, but it’s obviously very common for people to wind up in that position.
Ruben: Yeah. Even if you’re not in that position by the time that you launch, everybody starts off that way or most people do. You start with nothing then you build it up. Really, it’s just marketing. It’s just in the earliest stages when you don’t have anything, kind of going back to the first question. It’s about figuring out who your target customer is. How do they buy? Where do they hang out? Then, doing things that will lit up their work that take time to build up. Some things are a little bit faster, like paid acquisition if you can make that work.
Most people that I know don’t make that work very early on. Maybe there are just too many unknowns at that point. Partnerships which work really well at any stage, I’ve seen a lot of people make those work. They’re good because you can get in front of a big audience really quickly. It does take some work but I like those. And I really like SEO, which takes time. I tend to start SEO and content marketing before launching the product because I have experience with it, and I’m confident that I can do the research to get the right keywords and do the work to start ranking for terms.
By the time that the product is released, I think for a lot of people, before investing a lot of time in SEO and content marketing, I probably just get more confidence in the product, in what I’m selling, and that it’s going to work before really investing heavily in that. Investing some time in that is always good but I’d probably start with some of the other things first.
Rob: I think that’s a really good answer. I don’t have much to add to that. Ruben, thanks again for coming on the show.
Ruben: Thanks for the invite. These are fun. I like the Q&A. I once listened to them, and now actually participating in one.
Rob: That’s great. Folks want to find out more about what you’re up to, they can go to docsketch.com, which is an electronic signature app—you’re killing it over there—as well as bidsketch.com, which is proposal software for everyone now. I think back. You did such a good lead and expand. Proposal software made for designers. That was the first year or something, and then the next 9 or 10 years has been proposal software.
Ruben: Yeah, now that’s like 10% of the customer base.
Rob: Yeah, but I got you traction in the early days.
Rob: Thanks again. Talk to you soon.
Ruben: All right, thanks.
Rob: Thanks again to Ruben for coming on the show. If you want to find him on Twitter, his username is @earthlingworks.
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Would you be able to add a link in the site notes to the profit sharing blog post you’re referring to in the episode? I couldn’t quite hear who you said wrote that. Thanks!
Here it is: https://blog.balsamiq.com/profitsharing/