Episode 828 | Am I Building a SaaS?, Serving Both B2C and B2B, Pricing, and More Listener Questions (Rob Solo)

Rob Walling (00:00): Problem with being all enterprise is that it can be a slog and you might not close a deal for three to six months and so you’re just flat. You’re flat, you’re flat, you’re waiting. Why is my MRR not going up? And then boom, a big deal drops in. It’s like, hooray, celebrate. And then you have five more months of drought. It’s another week, and that means there’s another episode of Startups for the Rest of Us. As always, I am your host, Rob Walling, and in this episode I answer listener questions from folks just like you. Questions including, here’s what I’m building, is this SaaS? And I’m going to talk through the key three or four components that I believe make up a SaaS app. And in fact, when I ask ChatGPT what it considers to be a SaaS app, we do not agree. So it should be an interesting debate between myself and an LLM. 

Rob Walling (01:03): Then there are other questions about serving both B2C and B2B or serving very small customers and enterprise, but nothing in the middle, as well as a question about pricing. Great questions today. I’m excited to dig into them. Before we do that, I want to let you know that MicroConf Mastermind matching is closing soon. We only run matches two, maybe three times a year. And if you want to jump to the end, microconfmasterminds.com. But if you haven’t been involved in a mastermind, they have been a critical part of my development as an entrepreneur. And I’ve been a part of a couple masterminds over the years, one of which has lasted more than 15 years at this point. The idea behind a mastermind is you have someone along with you on the journey. So as you run into ups, you can celebrate. As you run into downs, you can get consolation and advice and camaraderie with other folks who are doing the same thing that you are. 

Rob Walling (02:05): These are other founders. This is not your spouse or your parent or your uncle who will probably never truly understand what it’s like to be a SaaS founder. And that’s the key ingredient of masterminds. Issue with masterminds is they’re hard to form. It’s hard to find people to be in your mastermind. And we got this question so often, where can I find people to be in a mastermind? Because I’ve been talking about this for more than 10 years. We started offering mastermind matching through MicroConf, and we base it on a ton of factors like revenue, location, experience. And we have a human look at every single application. We’ve matched almost 1,800 founders across 64 different countries. Applications close in just a few days on April 17th, microconfmasterminds.com to apply. And if you’re listening to this after April 17th, make sure you get on the waiting list for our next round of matching. 

Rob Walling (03:00): And with that, let’s dive in to my first listener question. 

Helen (03:09): Hi there. My name is Helen from England. I just want to find out exactly what I would be classified as if indeed I am a SaaS business or not. So I have a product idea for equestrian trainers, people training horses in an arena, and it essentially works like satnav to read out the next step of a dressage test or a schooling plan as you ride around the arena. So in effect, you’re getting a real time coach or caller. And it relies on obviously some plenty of software, which I don’t do, and also a little bit of hardware for some cases in the form of small BLE beacons. I’m doing it entirely on my own or together with a company I’m using. I’m paying a company in London to do the software for me in the engineering because there’s no way I could do that. I guess I don’t know whether that makes me a bootstrap startup. 

Helen (03:56): Whether a lot of what you say is relevant only to those who are coding them for themselves or whether or not I can listen to your audios and sort of absorb it as if it were directly for me. If not, would you be able to advise me as to exactly what I am and where the best place to start would be? Thanks. 

Rob Walling (04:12): Thanks for sending that question in, Helen. My short answer is I think you are SaaS. I have a pretty short description. It’s basically a one sentence explanation of what I think SaaS is, and I’m going to say it here. It’s subscription software where software provides the value. So let’s break that down. Subscription. That implies it’s not a one-time fee. And I would argue that the old model of Microsoft and Oracle, the on-prem software providers, where they would sell SQL Server or the Oracle database, and you would pay $10,000 upfront, and then annually you would pay what they call the maintenance fee. And it was usually between 20 and 25%. So another two grand, $2,500 a year for patches, updates and all that. I would not call that SaaS. We could argue, maybe it’s an edge case, but I don’t consider that because you are not charging the same every month or every year. 

Rob Walling (05:15): You have this big upfront fee and then this maintenance fee. So it’s subscription software, meaning that someone is paying on a monthly or an annual or a quarterly basis, generally the same amount for not only access to software, but where software provides the bulk of the value. Why do I add that last part in? Because every time that I go onto social media and say that there are approximately zero B2C SaaS companies that are successful at scale, I get people chiming in with, “What about Netflix and Disney+ and Spotify?” Aren’t those subscription? They are. Isn’t it software that I download to my phone or my laptop or my iPad? Yes, it is. Does software provide the bulk of the value? It does not. What is the value that you get from Netflix or Spotify or Disney+ or HBO Max? The value is the content. So this is content as a service. 

Rob Walling (06:22): The way to think about it is if there was no software involved with Netflix and all they did was mail me every month a huge hard drive with their entire library and I could just plug that into my TV and watch it. That’s the value I would receive. I would receive the value of the content without ever needing to be involved with any kind of software. In fact, in the old days, Netflix didn’t mail out a hard drive, but they mailed out DVDs. So Netflix, Disney+, HBO Max, they are not SaaS because they provide most of their value from their content. Then there are a bunch of edge cases. One could ask, “Well, what if I don’t have a user interface at all?” And I am like Newscatcher, which is a TinySeed company that is generally an API for getting up-to-date information about news stories and really current things that are happening in different industries in a way that search engines can provide. 

Rob Walling (07:20): They’re generally an API. Well, my definition is, is it software? Yeah, an API is software, right? It goes down, hits a database, probably crawling the internet to pull in a bunch of stuff. Is it subscription? Yes, it is. People pay on a monthly or annual basis, and does software provide most of the value? It does. No one could say, “Well, what if they could just mail you a hard drive of all their news articles or whatever?” The difference here is you don’t just want to point and click and watch a movie. On the backend, the Newscatcher API is doing all kinds of processing and all kinds of querying and filtering for you to provide you essentially almost real time data about… I’m getting deep into the weeds. The idea is that it’s much more than just raw data. The software itself is providing a ton of value. 

Rob Walling (08:11): So in my opinion, an API that charges a subscription and where software provides most of the value is still SaaS. ChatGPT does not agree with me. ChatGPT says that SaaS has to have a UI, and I guess that’s fine. What if you are a mobile app only, but you charge a subscription? This is one where I would probably include it as SaaS because it is a subscription software. And if software provides most of the value, I think that’s probably it. I could see an argument where someone says, “Hey, mobile apps are not traditional SaaS” and that’s fine, but I’m not picky. You can tell I’m not picky about it having a user interface or how it’s done. I see the value in building an incredible business that is scalable based on it being software and it being the best business model in the world, which is where it’s recurring revenue. 

Rob Walling (09:02): So those are the components that I look at. When I think about this question, I think about would TinySeed fund your business if you were… And would we fund you if you were Netflix? If you were a company that is creating content generally, for the most part not. Now, if you were doing the content for compliance, there are some exceptions where we’ve considered it because you can build a great business there. But if you were doing B2C content like films and music and stuff, that would not be in the wheelhouse, probably more the B2C versus our B2B thesis. That would be there. If you had a mobile app and it was net negative churn and it was doing incredibly well with monthly and annual subscribers, heck yeah, I’d want to invest. API only, we’ve invested in several companies. So to me, those are included in SaaS. 

Rob Walling (09:51): Now, something else ChatGPT said is getting into the weeds a little bit technically is like, oh, it has to be multi-tenant, meaning the single code base and more importantly, the database has to serve multiple tenants. I also think that’s an edge case because would I invest in a company where you needed to have, you were deploying on-prem even? It’s not even cloud hosted, but it’s on-prem and you have that individual database for that customer and you’re charging a quarter million dollars a year, but it is a monthly or an annual subscription. I would say that’s SaaS. The bulk of the value is software. Now there’s also some services being added to that, but you get the idea. Software, that’s a subscription where software provides most of the value. So back to Helen’s question of having an app for folks learning how to be amazing at equestrian events, I would say if software provides most of the value, even if there’s a hardware component, you can obviously have sensors and things that are feeding stuff back to your software, but the software generally is charged a monthly or an annual subscription, even if it is B2C, right? 

Rob Walling (10:51): I know I talk a lot about B2B. That’s mostly my focus because B2C SaaS is brutal and churn is high. And you’ve heard me say, “Don’t do B2C too much on this podcast. I’m not going to rehash that here.” But based on what Helen has described, she didn’t say whether she’s charging a subscription and whether software provides most of the value, but I think so. I would say based on that assumption that it is in fact subscription software and not a one-time fee that Helen’s app TekItTrak, I think it’s pronounced, is in fact SaaS. One of the things that ChatGPT said is SaaS is hosted and centrally managed, right? And yeah, kind of. But again, back to my on-prem example, if you’re charging a bunch of money, that can be the benefit. If you think about HelpSpot, which is Ian Landsman’s startup and they still have on-prem versions, he came on the podcast, I don’t know, two years ago maybe. He has on-prem and the true SaaS version. 

Rob Walling (11:48): If someone’s paying a full subscription for that on-prem version, I don’t think hosted and centrally managed having to be in the cloud. I just don’t think that should be a requirement. So thanks for that question, Helen. I honestly have never given the definition of SaaS as much thought as I have in answering it, so I appreciate you sending it over. My next question is about serving both ends of a market, solopreneurs and enterprise. 

Tibo (12:21): Hey, Rob. My name is Tibo. I’m the co-founder of Colib.io, practice management software for mental health therapists and adjacent professions. We serve counselors, psychologists, social workers. Really love your content. I’ve been listening for over four years now and really like the community that you’ve started. I actually became a local ambassador for MicroConf in Vancouver, Canada. We’ve had two successful events of eight to 10 people. Your community doesn’t disappoint. My question is about serving different customer segments. We have a clear ICP and strong product market fit with solo therapists and small clinics. Most of our competitors are shooting for the juicy middle of that market, which would be clinics of 10 to 15 practitioners. They usually take the software, onboard, use it, no questions asked. And recently, we’ve been approached by what we could call enterprise clients. So those would be 50 to 200 practitioner groups. 

Tibo (13:16): They need customization and they tell us, our competitors are not really willing to have those conversations or consider customizing things. So that’s something we can do. Our system fits what they need and we are willing to have those conversations. Of course, we cannot have an unlimited amount of them, but just to start, it feels like a good idea. Of course, the willingness to pay is much higher. We could expect churn to be very low. The question really is, have you seen companies do this where they serve the lower end of a market and then jump to the complete other end, which is enterprise and obviously the sales cycle is much longer. We’ve been in conversation for a few months already and it’s going to take proof of concept and several steps. And is it possible to adapt? And if yes, how much more resources does it take and does it divide our focus? 

Tibo (14:05): So really love to hear your thoughts on this question. Thank you. 

Rob Walling (14:10): This sounds like a really interesting opportunity, actually. Sounds like almost a textbook dual funnel where you have that low end of the market. The solopreneurs, the one to five person teams, and then at the top end, kind of more enterprise, as you said, what 50 to 200, I believe. I think there’s a lot of opportunity for you here. The danger usually is that the same product will not work for both. That’s the biggest thing that I’d be concerned about is that the enterprise often and usually wants features that no one below them, no smaller players want. And so you might wind up having to spend six to, frankly, 18 months building things out, reporting and permissions and SSO, on and on and on, building features out to satisfy the enterprise. Now, if that’s not the case, and the product as it stands today, or with a month’s worth of work or whatever, can literally do both your one to fives and your 50 to 200s, this is an opportunity. 

Rob Walling (15:13): I would jump all over this because dual funnels are so incredible because you get the small players that are signing up and mostly self-serving. I’m guessing maybe you do a demo or something, but they’re mostly onboarding themselves. They’re a small team and you get a little bit of revenue growth from each of them and “Hey, I’m growing a thousand dollars. I’m growing $2,000 a month.” And that’s nice, keeps motivation up. And then you also, whatever, every quarter, you can close one of these enterprises and then it’s like, “Oh, we just grew 5,000 or $10,000 of MRR and that’s a huge win.” And that can really be a shot in the arm for your MRR growth. The problem with being all enterprise is that it can be a slog and you might not close a deal for three to six months. And so you’re just flat, you’re flat, you’re flat, you’re waiting, why is my MRR not going up? 

Rob Walling (15:58): And then boom, a big deal drops in. It’s like, hooray, celebrate. And then you have five more months of drought. And so this dual funnel, it evens that out. It smooths out the curve and it keeps the motivation going. As you hear me say all the time, funded startups fail when they run out of money, bootstrapped startups fail when the founders run out of motivation and our motivational runway or our emotional runway is a real thing to be thinking about and dual funnels help with that. So in addition to product, I’m mentioning that the product can be a hangup. The other thing oftentimes is, okay, I’m servicing one to five, one to 10 person companies in this space, but I don’t have any marketing that’s driving leads in the enterprise space. But if the enterprises are already approaching you, check that one off the list. 

Rob Walling (16:43): And maybe later you do some outbound or you do more SEO for it as you onboard one or two of these enterprises and realize that it’s a viable option for you. But for now, you’ve checked off two of the three boxes, which is product and basically leads is your marketing working for them. So then the third thing I think about is the sales process. And that includes, that’s all the way from first touch to the demos to having to provide collateral for them for the champion inside an enterprise to get everybody on board and rally the team. And then, okay, maybe we decide and three months later they do decide. And now you go through procurement and you sign up in their janky invoicing app that is totally custom and takes eight hours with a bunch of bugs to… I’m exaggerating, it’s not eight hours, but validation, verification that you’re a this, that entity, paperwork, redlining your terms of service and on and on and on. 

Rob Walling (17:38): And that’s the sales process. And so as I often say on this podcast, you just have to charge enough to make all that worth it. If you can close these deals, I would do it. It can be a bit of, obviously it’s a bit of a slog. And some, especially like bootstrappers, don’t want to do the enterprise sales process. Frankly, as a founder, I didn’t want to either. The only time we did these larger deals that required a lot of headache was once we had salespeople who were willing to do that for, of course, their commission. It was a cut of the deals. So I guess to kind of package all that up, in your shoes, I would do this. I think the biggest drawback is maybe it can take a lot of your time and not wind up closing, and therefore you have spent time doing something that didn’t result in any new revenue, and that’s a bummer. 

Rob Walling (18:30): But if you think you actually have a chance of closing them, this could be a very interesting additional growth channel for you. It’s not a channel technically, but it is just a growth lever to start taking enterprise in. The bigger question I have though is, can you also serve the, what is it, the 10 to 50, the mid-market that you were talking about? Because now whether you want to or not is another question entirely, but on your pricing page, if you have your… I’m not going to come up with a great name for it, small business plan. You call it solopreneurs, I think, but one to five is not a solopreneur, right? It’s just like your SMB plan, your mid-market plan, don’t call them that. Those are internal names. SMB, mid-market, and enterprise. Enterprise says starts at $35,000 a year, includes your SSO and permissions and blah, blah, blah. 

Rob Walling (19:20): You don’t have to say starts at two. You could just say nothing. And then at least if there are mid-market folks interested and you do want to serve them, if they do stumble upon your site and you feel like your product can service them well, I wouldn’t be turning them away. So that’s probably the only thing that I would update in terms of, you had said, “Can I just do solopreneur, the one to fives and the enterprise?” And it’s like, yes, you can, but if your product can service the middle too, why not have that on the pricing page? What you have to be aware of is you’re going to get some chucklehead who comes in with a team of 20 or 20 seats and they’re going to want an enterprise sales process and that’s not okay because the 20 person company is going to be paying you. 

Rob Walling (20:08): I’m making up numbers, but let’s say they’re paying you $500 a month or $1,000 a month. Well, that’s not worth all the stuff I said earlier, the procurement and redlining terms of service and all that. So if you do have procurement, redlining terms of service in the enterprise call us plan as a bullet, that means the moment that someone says, “Oh yeah, hey, we’re 20 people and we should pay you 500 bucks a month, but you have to do all this stuff to fill out all these security questionnaires and blah, blah, blah.” You can instantly point to the pricing page and be like, “No, that is only included in our enterprise plan. Happy to do that, but that starts at $35,000 a year.” So thanks for that question, Tibo. I think it’s a really interesting one. And the answer is, yes, I’ve absolutely seen companies do this. 

Rob Walling (20:50): Now, have I seen them skip the mid-market? Not really. And I’m not sure why you would, but I guess if… Why not? If you can close the lower end deals and the upper end deals and are willing to deal with the headache of enterprise, I think it could be a great lever to grow your business. So thanks for that question. 

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Rob Walling (22:07): My next question has a similar bent. It’s more about having a B2C and a B2B offering and how to think about that. 

Vance (22:20): Hey, Rob, longtime listener, second time question asker here. My question revolves around businesses that have a B2C aspect and a B2B aspect. I launched my business called BudgetSheet, which is just a Google Sheets and bank account integration. A while ago, I’ve been growing it. It’s a B2C business. I am getting some requests for some B2B-like features, some financial planners and smaller accountants asking to link sub accounts and stuff so they can pull their client’s finances in and analyze it. I’m wondering how you think about either layering a B2B like offering on top of the existing B2C offering, or if you would think about splitting the business. My concern is that it would kind of bifurcate the UI and the experience, so it wouldn’t be as targeted to the use case that it is right now with managing your own finances and financial data. There are some ways around that, but I’m kind of in this spot right now where I’m not really sure whether to try and layer B2B features onto my existing B2C business, which is growing well and doing very well. 

Vance (23:27): Probably hit 10K a month, first of the year. And I’m thinking about either doing that or starting something new. I like a different offering for B2B and then doing cross promotion with my B2C. If you need business, you can go over here and use this other B2B tool. So yeah, that’s the question. Just businesses that may have both a B2C and a B2B component and how you would think about when to split those or how to keep those in one product. Thanks. 

Rob Walling (23:57): First off, congrats on building a B2C SaaS up to almost 10K a month. That’s impressive. And I like how you’re thinking about this of certainly going B2B or adding a B2B offering is going to help with a lot of your metrics in terms of churn and growth. Similar to how I answered the prior question in this episode, I think there are three dimensions that I would look at this through. There’s product, there’s marketing and there’s sales. So in terms of the product, you are the best person to know whether you can add B2B features to the current iteration or whether it needs to be a completely separate code base. And you know what I mean by code base? Maybe it lives within the same repo, but it’s like really a separate app because you feel like the two serve such different problems that they shouldn’t be combined into the same app. 

Rob Walling (24:56): And I can’t tell you honestly what to do there, but what I’ll say is I don’t think that matters. Whether you include it as a single code base with a bunch of flags to include the B2B features or not, or whether you have two separate apps running independently of each other, maybe they share the same database, maybe they don’t. I don’t think that impacts the other two, the marketing and the sales. Because if you already have a brand name and search traffic and domain authority, and folks are hitting your website and you’ve already had, as you said, these financial planners reaching out to you, the B2B side, reaching out to you without you advertising that you have those features or that you are B2B, that’s a great signal. And in the business, we call that market pull. It’s where the market starts pulling you in a direction and you get to pay attention to that or not. 

Rob Walling (25:49): So whether you combine the product and the code and the techno, that’s all tech implementation details. Let’s ignore that for now and think about marketing, which is your website, your copy, your positioning, traffic sources and visitors that are coming to your site each month. I bet that there is a way, unless your app is named something that is so B2C that it’s just never going to work for financial planners, which I don’t think it is, I think that you can tweak your current marketing copy and positioning to support both. As long as it’s serving… It sounds like it’s generally the same product. It’s just going to have more on the B2B side, but the end result or maybe the job to be done is the same, but it’s for an individual versus someone’s clients. And the job to be done is the same. So the core of the app is the same and the name could be the same. 

Rob Walling (26:42): And then now you have your H1 that it does this thing, and this is for individuals and financial planners. And on your homepage, do you have your two selectors of, are you a consumer, are you an individual or are you a financial planner looking to implement this for your clients? Boom. On your pricing page, you have the same thing, right? You have the individual plan and you have your financial planner plan and you have your call us plan because you should always have that because you never want to have someone come who should be paying you $35,000 and they sign up for your financial planner plan, which is a thousand a year or 2,000 a year or whatever the pricing is. So for marketing, I think it’s totally doable. But really, I think of this as it’s kind of just two tiers of the same product. 

Rob Walling (27:26): Even again, even if technically it’s not the same product, only you know that, no one else will care. So can the marketing work? Yes. Can the sales do both? Well, you don’t offer any type of sales process for B2C, right? It’s all self-serve. They click, they sign up, because I’m guessing you’re charging $9 a month or $5 a month or $60 a year or something. They don’t get a demo. They don’t get the handholding and the custom onboarding and a customer success person who will probably be you in the early days. They don’t get any of that. And so there is the free trial, sign up now, whatever you have right now for your B2C offering. And then you do have the requested demo, financial planners only. Are you a financial planner? Request a demo now. So can a sales process, even if it’s a one call close, can a sales process be implemented for just the B2B side? 

Rob Walling (28:15): It can. So when I hear you ask this question, I think yes, yes, and yes. And again, whether the technical implementation of splitting or not, I just don’t think that matters. That’s a decision you can make based on your evaluation of those requirements. But similar to the prior question, this in a way, it gives you a dual funnel. Now it’s not the full on enterprise at the top yet, but it could be a way to get into those higher ACVs and lower churn customers. So thanks for that question, Vance. I hope it was helpful. 

Leanna (28:52): Hey, Rob. This is Leanna, founder of Just a Job App. I’m a developer behind a job search management tool that integrates with Gmail to give users a dashboard of their job applications, their interviews, and referrals. It’s open source currently in beta with a 100 user limit until I finish a CASA tier two security audit in the next couple of weeks, hopefully. I’m not marketing it really at all, but I somehow have one paying user at $5 a month, and I’m definitely rethinking that price point before launch, but I’m also exploring a B2B angle with career coaches who can pay to monitor their client’s job search activity. My challenge is how do I price this fairly so I’m not gatekeeping access for people who genuinely need help with their job search, but I also want to make this sustainable as a side project. At the very least, cover costs. 

Leanna (29:45): I’m a developer working full-time elsewhere, so I need to keep this lean. What would you suggest for a pricing structure that balances mission with sustainability? My goal is to go full-time with this project in a few years if it lasts. Thank you. 

Rob Walling (30:00): One of my favorite topics, pricing. And another question about kind of having a B2C offering as well as the B2B side of things. So I think that we have a theme this episode. So one of the challenges of talking about mission driven anything is that means different things to different people. And it also means that you might just build this, make it open source and give it away because it’s mission driven and it’s going to help everyone. And if you feel that strongly that it needs to exist in the world, you should do that, make it free, let people do what they’re going to do. But then on the flip side, someone else might say, “Well, my mission is to make this sustainable for me first, such that there’s enough revenue coming in that I can justify the time I’m spending on it and that my emotional runway keeps me going because if I lose motivation, the project goes under, well, then I’m not really accomplishing my mission.” So someone might say, “So I’m going to charge what I think I can, what I think it’s worth and the value that it creates.” I’m going to charge that to everyone possible. 

Rob Walling (31:05): And maybe one of my pricing plans is a student, nonprofit, or need-based pricing plan and it’s free. So you have that free and it’s on our system. But by default, and maybe that’s just a line below your pricing grid, but by default, you have a $60 a year or five or $10 a month, whatever. Monthly, you’re going to have crazy high churn because people, what do you have a job search every few years and you search for a few months and then you’re done. So that’s one whole concern, but I won’t go down that rabbit hole because you didn’t ask about that. But that’s one way to think about it. If you want to be able to provide access on a need basis, I mean, unless you’re going to verify they have need, you’re not going to do that. It’s going to be kind of an honor system thing. 

Rob Walling (31:51): That will allow you to collect your five or $10 a month from folks who can pay it. If I was looking for a job today, I would have the means to pay and I would pay you. I see this all the time. I buy games like tabletop games, print and play games, and they will say, “Hey, suggested price is $5 or $10 for this PDF.” But if you don’t have the means, you can get it for free. I always pay because I have the means. And I’m not saying everyone’s like me, but some people will comply with that. Another way to think about it, an alternative is to not do what I just said, which is to have the honor system plan that you can get it for free and charge everyone in the early days to prove to you whether this is actually a need because people put their money where their mouth is and that will prove some product market fit. 

Rob Walling (32:36): It will provide revenue and motivation for you to keep going. And if you get this up, whether through the B2C or the B2B side, if you get this up to thousands of dollars a month, then it’s really easy for you to say, “You know what? I have revenue coming in. I have motivation. I want to keep doing this thing. And I want to offer it to folks who have a dire need for this who maybe can’t afford it.” When I think about having a company that’s doing, I’m going to jump ahead, but like a million dollars, two million, three million a year, don’t you have a ton of leeway there to now offer something free or very, very low cost to a lot of people because you have a business now that can support that. I’ve been involved in a lot of charitable giving and donating and just generosity since I became an adult and had the means. 

Rob Walling (33:23): Sherry and I have both given away a lot of money and a lot of time to causes that we believe in. And I believe a way to be generous and give away a lot is to earn a lot. It’s to provide a lot of value to the world in a way that people pay for that and then you can then be generous with that. If you think about my path, like imagine if we launched Drip as kind of a nonprofit, open source, mostly free, and there would be a lot of people using Drip to probably do good things, right? But how much value would we have created in the world? How much motivation would we have had in the long run to keep going and would it have been sustainable? And for me, the answer’s probably not. So I like to think about getting some stability first on your own by providing value for people who are willing to pay for it and then potentially offering this, as you said, the mission driven side of it, or you could do it alongside of it. 

Rob Walling (34:22): I mean, I guess my first suggestion was to just do it all at once and kind of make it an honor system. I definitely would not launch it and ask for donations. That’s the opposite, right? That is the opt in where people have to opt in versus, oh no, the default is you pay for this unless you have a need-based thing, so they kind of have to opt out. And honestly, if you want this to exist in the world and you feel like it can do good for people, the best thing you can do is make it sustainable, is to make it so that not only are you yourself compensated for working on it and therefore will want to work on it for years and years, but just the project itself has users who have some skin in the game and are offering feedback on an ongoing basis. 

Rob Walling (35:06): And then of course the B2B side, yeah, that’s exactly where I’d go. That will be so much more sustainable. Your churn will be a fraction of the B2C side. And I don’t know that I can even comment, you kind of asked for pricing ideas. I think I’ve given you pricing ideas around the B2C and the free-ish plan. The B2B would maybe be seat-based. I don’t know if they’re all solo. There’d be a software access fee. And it depends. If you need to do a demo, like at least one call to close, probably need to charge about $300 a month for it to make it worth it. But if it’s no demo, you can charge less than that. 50 or $100 if people, even the B2B side is able to basically self-serve. So I appreciate that question, Leanna. Thanks for sending it in. My last question of the day is about healthcare costs and startup runway. 

Rob Walling (35:57): This is a US-based question, just so folks know. And Charlie writes, “Big fan of Startups for the Rest of Us. One topic I would like to hear you cover, the impact of healthcare costs on early stage startups. For small teams, traditional group insurance can run 15 to $20,000 per employee per year, which materially shortens runway. If founders skip it, hiring and retention get harder fast.” Feels like one of those boring but critical expenses that doesn’t get discussed enough in bootstrap circles. There are some newer options out there that could seriously benefit many of these startup businesses. I’d love to hear your take on how founders should think about healthcare pre and post product market fit. Thanks for all you do. Thanks, Charlie. Yeah. I mean, oh my gosh. The fact that here in the US, there is, I guess, a group of the population that really rallied to have the right to go bankrupt from healthcare costs feels catastrophic to me. 

Rob Walling (36:56): And just the state of our healthcare system here is insane. And it is one of the biggest headwinds to entrepreneurship, in my opinion, in the states. And again, if you’re in Canada or Europe, you guys got this part locked. There are obviously some other headwinds in terms of entrepreneurship. There’s a lot of laws and such that are not in your favor, but it is catastrophic to me. And for all the lip service that the politicians pay to wanting to create jobs and entrepreneurship and all this stuff, they’re not doing anything about our healthcare costs and it is catastrophic. So the impact of healthcare costs on early stage startups is a huge deal. It’s a huge deal. And you’re right, 15 to $20,000 a year per employee, absolutely shortens runway, absolutely increases the cost of hiring. People wonder why bootstrapped startups in the US want to hire in Canada or overseas, and it’s because that cost is significantly less. 

Rob Walling (38:01): So the approach that I’ve seen bootstrappers take is they often give a stipend, which I think is legal. It used to be not legal to do this, but you give a stipend of $500 a month or $1,000 a month and have people get their own insurance on the public exchanges. And yeah, you’re not going to hire super senior talent. It’s going to be harder to find super senior talent that way. There’s another issue, which is you get a solopreneur who is building a great business and they get it to five or 10K a month, but they don’t want to quit their day job because the healthcare at their day job is $30,000 a year that they’re not paying, that their big employer is paying. And so therefore they don’t actually want to go all in because they don’t want to lose their benefits. And the fact that healthcare is tied to employers is a relic. 

Rob Walling (38:53): It’s a remnant of, I think, what is it, post-depression era. It shouldn’t exist that way. I do not think employers should be involved or needing to be involved, but that’s where we are. And so yeah, I guess that’s my take is like, if you’re pre-product market fit, you don’t need to worry about this because you’re not hiring a bunch of people and you don’t really have the money to do any of this. If you’re post-product market fit and you’re bootstrapping and you’re growing, I’ve seen folks do things ranging from, well, I guess I’m only going to hire people in their 20s and 30s because they need less insurance and they’re cheaper to insure. And maybe you set up a group plan and maybe you don’t. I know a lot of folks that don’t set up a group plan. And as I said, they give some type of stipend towards the public exchanges. 

Rob Walling (39:36): It is an interesting argument for raising money and I don’t want that to be… I want the argument to raise money to be because it’s the best tool for the job right now. It will get you there faster. It will save you years and it will lead to more success in a shorter timeframe. What I don’t want it to be is, “Oh, you need this so that you can hire good employees because the healthcare cost is so high.” But it certainly changes the game if you raise 250,000, $500,000 to where it’s not that this goes away, but it just has a lot less impact than if you are truly, truly bootstrapping. And every dollar of MRR that you earn has to go to pay that employee who, oh, maybe their 60 or 70K a year suddenly becomes an 80 or 90K a year employee because of healthcare costs. 

Rob Walling (40:25): So I don’t know of a silver bullet beyond those options. That is what I’m seeing folks do. But Charlie, you mentioned there are some newer options that could benefit startup businesses. I’m all ears to hear them if you have other options beyond what I have named. And I appreciate that question. Something we’ve touched on over the years for sure on the show, but given how expensive it is and how big of an issue it is, at least here in the US, I think it’s always worth a discussion. So that’s going to wrap me up for today. Thank you so much for joining me this week and every week. And as another reminder, MicroConf Mastermind Matching is closing in just a few days on April 17th. Head to microconfmasterminds.com if you’re interested. This is Rob Walling signing off from episode 828.