Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions on topics including the value of startup accelerators, onboarding, liability insurance and more.
Items mentioned in this episode:
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. To where this week sir?
Mike: Well, I wanted to give a congratulations to Ty Wood. He was the winner of the AppSumo contest last month and he won a all expense paid trip to both MicroConfs.
Rob: Nice.
Mike: That was courtesy of AppSumo. I just wanted to say a big shout out to those guys and say thank you to them for sponsoring that. We’ll see Ty Wood at MicroConf.
Rob: Yeah, Ty, please come up, introduce yourself. It would be good to meet you. Thanks to AppSumo for that. Speaking of MicroConf, I believe this episode goes live just a couple of weeks before MicroConf. I’m guessing we might have a few tickets left either for Starter or Growth. If you’re interested with hanging around with a couple of hundred other serious SaaS software startup founders, you should head over to microconf.com, take a peek at it and hopefully, we’ll see you in Vegas.
Today, we’re going to dig into some listener questions after we’re down to absolute zero a couple of episodes ago. We got a nice little influx, we got a few voicemails, but I wanted to kick us off with first a thank you from James.
He says, “Hi, Mike and Rob. I’ve been listening since 2014. I’m a solo entrepreneur living in Central Africa, in Burundi, Rwanda. Here, we don’t have angel investors. Instead there are people with cash but most of the time, they aren’t people who share my same values. There’s a lot of financial corruption here. I decided to go solo, train another developer. Now we have two main products that can serve two different niches locally. The wisdom on your podcast has helped me so much during my journey. We have different realities, but I regularly find motivation to continue on and a clear understanding during the journey, so thank you so much.”
Thanks so much for that, James. I really appreciate it. We started the podcast, both to find other people like us because it was like, “Hey, you and me, are the only people doing this,” and then to find a handful of others that were doing it? Along the way, I’ve really seen it as an amazing by product that we’re able to help people whether it’s directly or indirectly, whether it’s us just talking and giving motivation or tactics or through the conference that we started and the community we’ve built. I love getting emails like this. these kinds of things make my week.
Mike: Yeah, congratulations, James. It’s hard enough to put one product together but you’ve got two that are serving two different niches and both helping out underground where you’re living. It’s fantastic to be able to help out the local community and be able to make a living from it as well. Really appreciate hearing from you and best of luck with that.
Rob: Our first question of the day is a voicemail on the value of joining an accelerator if you ultimately want to raise institutional funding.
“Hey, Rob and Mike. This is Sree, cofounder of clocr.com, it’s short for cloud locker. We are an early stage startup company based out of Austin, Texas. CLOCR empowers you to manage and protect your family’s most important documents and enables you or your loved ones to have instant access in case of financial, personal, or medical emergencies. We are currently in a pre-launch stage and we’re giving away about 1000 lifetime subscriptions for early adopters. I found you guys about four months ago on the podcast and it changed my life forever. Seriously. The amount of guidance you both provide is invaluable. I wish I had found this podcast about a year ago. Please do keep up the good work. I can’t wait to meet both of you at the Micro Conference.
I found several co-founders for CLOCR and that is [inaudible 00:04:20] our LinkedIn and angellist. I’ve been self-funding CLOCR for about a year or so—less lower than a year. I’m getting ready for the launch in the next four weeks. My strategy is to seek a small amount of funding, $200k-$300k for the next 18 months or so to a kind of a workable debt. Our plan is to aggressively bring in users before going in for institutional funding. I denied a few requests for funding. Here are the questions: Now that I have a few advisers joining CLOCR and I continue to add advisors as we go, is there a value in going down the accelerator path? Will that add any value in terms of the buzz and visibility or will it be a distraction? Will these accelerator programs help set-up for funding, or will they help me grow the user base? My main goal is to increase the user base and set-up the [00:05:17] vision thing and folks to build the company. Second question, I do like the participate in a startup innovation competition, do you have a short list of companies that we can participate on? Thank you.”
I kind of took three questions away from that. He said, “Is there value in joining an accelerator? Will it provide buzz or visibility?” Second question is, “Do accelerators help grow the user base?” and will it help him get set-up for funding or will it be counter to that, will it be a distraction. The third one is about innovation competition.
I think I’ll start with the innovation competition and say, I don’t know, I would probably just Google it. There’s one called 59 Days of Coding in Fresno. That’s really the only one I’ve been involved in that and that’s the only one I know off the top of my head.
Mike: Going back to Sree’s first couple of questions, is there value in going through an accelerator in terms of buzz and visibility. I would think that for some accelerators you would get some buzz from it but for something like CLOCR that is more B2C oriented, I suspect that the buzz you get from it is probably not going be to nearly as helpful. They may have PR outlets that could help you generate more publicity and get in front of more consumer type of users. But I think the main value in joining an accelerator—I guess there’s a couple of different things you can get out of it—but the first one would be the mentorship.
It’s not necessarily about growing your user base directly by virtue of joining an accelerator but rather you get mentorship to point you in the right direction and helps guide you in terms of what other people have done before you, what mistakes they’ve made, what things they’ve done that’s gone really well, people they can introduce you to, the network. Those are the types of things that are going to grow your user base. It’s not like you just join and you suddenly get a magic ticket that pumps 5000 new users into your app. It’s not how it works. You have to basically go through the program and talk to people and figure out what it is that you’re supposed to do that’s going to have the most impact and then go do it. That is going to grow your user base.
The other thing that the accelerator’s going to do for you is if it’s coupled with funding of any kind, it’s going to help give you runway and allow you to focus on working on the business as opposed to working on it as a side venture. Because if you’re trying to do something nights and weekends, that’s great and all, but you only have so much time to do that, and a lot of your time is probably going to be spent on your main job trying to make ends meet for you and your family. Getting rid of that as a distraction is going to be one of those main benefits of that accelerator.
The other one is if you’re looking to raise money down the road, an accelerator, going through a program like essentially gives you validation, and to some extent, trust from other investors that, “Oh, this accelerator invested in me and the business because they believe what we’re doing.” By virtue of that, that’s transferred to other investors. There’s a lot of credibility that you can gain in your business just by virtue of being attached to them. But because they have presumably vetted you in some way, shape, or form in order to accept you into the accelerator program.
Rob: I would agree with that. I imagine someone gets 900 applicants and they pick 10 and you’re one of the 10. There’s some signaling there. There’s some halo effect—I don’t know what you want to call it—but you were chosen. It’s different but it’s like getting into Harvard or getting into Yale; you make it through a selection process and that does lend some type of credibility.
I think like you said, it’s going to depend on the accelerator. I mean, there’s hundreds of accelerators and some of them are going to be really good, like helping you grow your user base. But you can either contact prior companies who have gone through it or you can look at the people who are running it and who the mentors are and think to yourself, “Do those people know how to grow a user base? Do I think that their advice or their network, whatever it is that they have can help translate into that?”
I have seen accelerators where I’ve looked at the list of mentors and I don’t know who any of them are or a lot of them are business coaches or college professors or people who maybe have not run a business directly. That’s always a question in my mind of like, “Are they going to give me MBA advise or are they going to be boots on the ground and really dig in to what’s going?” That’s one question I would ask about how to do that.
Certainly, a top name accelerator like YCombinator or TechStars, I think that gives you buzz and visibility. Obviously, the elephant in the room is I run TinySeed which is a startup accelerator designed for all community. I think that there will be a certain amount of buzz and visibility given within our sphere when we announce. I think that as time goes on that buzz and visibility will get bigger and bigger as we become more successful, and as our alumni, do more interesting things.
Our answer is probably the same, yours and mine. It’s like, yeah there is value, but I also—you’ve probably heard this advise of like, “If you’re going to get an MBA, you do it for the network and you do it for certain things.” There’s advises I don’t bother getting it from bottom tier school because it’s not the information, it’s more about the prestige of having Harvard on your diploma or whatever. I would think similarly of there are going to be accelerators that I’ve heard that don’t bring a ton of value. This is not a blanket answer for all accelerators. There really is a vetting process that you’re going to have to go through.
I think his second question was kind of like, “Do accelerators help set you up to raise subsequent funding?” My understanding is pretty much unequivocally, yes. That’s actually the goal of most accelerators, to provide you enough money to get to that demo day to have a product to raise funding. TinySeed in particular, that’s not our end goal, but there’s nothing in our terms or even in our goals for our companies that say you should or should not raise subsequent rounds.
One example is some of the angel investments that I’ve made in the “bootstrap space” most of them have not gone on to raise subsequent rounds but one or two have. I’ve been super encouraging about that because the founder saw the opportunity, wanted to level up, the money was there, and the choice is something you evaluate when you get there. I guess the answer to, do startup accelerators help set-up for funding, I think across the board, yes. I don’t know of an accelerator that won’t help you do that, that won’t connect you to angel investors or VCs down the line should you want to raise that money.
Now, one thing I would say is that there are some funds that are offering money to the bootstrapper space that do have clauses in them that will make it hard to raise funding later on. Just be sure you have a good lawyer, or you really look at the terms, or read. There are comparisons of these alternative funding approaches, the non-traditional VC stuff. Do your research and figure out, “If I did want to raise the $2 million later on, is this basically a poison pill?” Poison pill clause doesn’t allow me to do that. As I’ve said, we do not have that in Tiny Seed. We’re going to make it very easy to have [inaudible 00:12:37] investments. I’m thinking most will but there are some that whether intentionally or accidentally do have some clauses but those are not, as I said, they’re not accelerators.
The last thing I realized, innovation competitions. Since he’s a B2C, you should try to go on Shark Tank. It’s not a competition per se. I don’t think Shark Tank is the [00:12:58] all of anything but I do enjoy it for the entertainment value and that’s why B2C companies go on there, is to get that exposure. In addition to potentially getting a high-profile investor, but just going on there is going to drive some interest.
Mike: I’ve seen stories of people who’ve gone on to Shark Tank and whether they got a deal or not, sometimes there’s stories that circle back on those companies afterwards. There is that exposure piece of being on there whether that investor helps you or not doesn’t matter because people will see you. They see your business, they see your company, and you’re getting exposure that you probably would not have gotten otherwise.
Rob: Thanks for the question. Super interesting one. It’s good for this community to be thinking about it and talking about this. our next question is super interesting. It’s about how to better communicate to users who should be connecting to an existing SaaS account. Basically, they’ve been invited as sub-users but instead, they’re signing up for new trials over and over and over. Let’s listen to this one.
“Hi guys. It’s Jarrod from sportstrackerapp.com here. We run a website that helps teachers and students organize their track and field and swimming needs. We’ve been really successful watching it grow. At certain stage, we introduced the feature that will allow admin staff to welcome sub-account access to their students so that they can login and register themselves into different events.
It’s dramatically cut down the workload of the admin staff. However, we’ve noticed that since opening up this feature, some students—regardless of the communication that we make available to the admin staff—students are coming through and signing-up to the website as an admin user and starting trial accounts and obviously, that’s not something that’s even remotely close to what they need to do.
What actually happens is the admin staff are given a piece of print out paper or an email that they pass onto the students and it sends them to a different URL [inaudible 00:15:13]. However, regardless of that communication, we still can’t get past the few students signing up on a daily basis. What thoughts do you have around making this as clear as possible without making a trial require a credit card, because obviously that would stop students. I look forward to hearing what you think about it. Thanks!”
Should we start by saying how we would design the ideal flow just to make sure, because I know he said no matter what the communication is, the students still come in sign-up for the trial. But could we walk down the steps of how we would do it. What would the ideal flow to at least communicate to them so that maybe there’s one or two things that he’s not doing that they could try then actually get to his question.
Mike: I think that there’s a couple of assumptions that you need to make or at least clarify as part of this while we’re going through this mental exercise. Are we assuming that this app is design explicitly for colleges, universities, schools, etc., and then the students that are part of it? Or is it like a general-purpose app that can be used outside of that system because it seems that this is a very specific situation. I’m not clear on whether or not the app is geared that way.
Rob: I think it’s focused on the niche of sports, managing sports teams. I’m guessing it’s more like junior high high school.
Mike: Okay.
Rob: Let’s make that assumption.
Mike: I guess based on that, it sounds like that the fundamental problem is that there’s confusion passing the information onto the teachers as to how to invite those students. If they’re getting forwarded to a particular URL, that’s fine, but if they’re printing something out and handing it to them and then the student comes to the website because they see that on it, that poses something of a problem.
I think that one thing that does come to mind though is if this is such a serious problem and it comes up constantly then I would take a look at the sign-up process itself and ask people when they go to register, are they a student or are they a teacher/coach or whatever. By that, you could basically interject yourself into that sign-up process and say, “Well, if you are a student coming in here, chances are you’re not going to be signing up for an actual trial of the product, you actually want to be attached with a sub-account.” How do you direct them to that?
Obviously, that’s going to depend on whether or not they’re signing in with an email address that is part of the school system for example. Because with this, you can match them up and let them select stuff, but I don’t know how much privacy controls or concerns are around that either. I think that the very first thing that I would look at doing is seeing whether or not you can differentiate between a student signing up and a teacher/coach because that right there should tell you whether or not they should be actually creating a trial or not.
Rob: I would agree with that. I think that what you could do is sign-up for trial and it’s like, “Are you a student? Are you a coach or administrator?” If they say student, then you default to saying, “You should’ve received an invite from your whatever. Check that email or check the flyer. But if you really are trying to sign up for a brand-new account for your school, then click here.” Make it like really have to opt in. you have to double opt in if you’re a student where you have to click that and then click another thing whereas if you’re a coach or administrator or whatever, then make that the default.
The other thing I was thinking about—I’m trying to think how to make this work. What I’m imagining is that I’m a coach, I have my account, I log in, and it says, “Invite Users.” I can enter some email addresses of students. Then it either gives me a PDF to print out and physically hand to them, he said, the physical paper, or it sends them an email. What if on that PDF and the email that goes to the student there is no mention of the name of the URL? It does not say Sports Tracker. All it says is, “Your coach so and so is inviting you as an administrator on the thing that organizes your sports team. Go here to sign-up or to accept this invitation.”
That URL could feasibly be just a totally different URL. Just pick whatever, a random one, thesportstrackersignup.com or even just signupfortheapp.com—just pick something. If they go to the homepage or if they go to the full URL, because my guess is it says like right now, it’s sportstracker.com or .com—I don’t even know what their URL is—but let’s say sportstracker.co/ a bunch of stuff to accept the invite, and people are just typing in sporttracker.co and then hitting trial. Don’t even allow them to do that. Just give them a completely different URL and the homepage is something that says, “You need a special code. Enter the code in the URL,” or whatever. You can figure out a way how to do this intelligently but not let them get back to your main URL in anyway because you can control the message. You have this PDF and this email that go directly to them. What do you think about that?
Mike: I think that’s fine. Unless you have a situation where the professor or the coach or whoever is telling them, “Hey, I use this app. Here’s the name of it.” Because if they search for it and I think that that’s the problem he’s alluding to is that if they go online, presumably they’re web savvy enough to go online and search and then they come to the website. The one thing I would think about is giving somebody a sign up that is literally just a single field that says, “Accept Invitation,” or something along those lines or as you said, give them a PDF that they can print out.
I don’t know the mechanics of how it’s currently being done because do you want to just print something out that’s exactly the same for all 30 people on the team or do you have individual ones for all 30 of them? I would imagine you would want the former rather than the latter so that you don’t have to plug in 30 different email addresses. You print the exact same thing, hand it out to everybody in the team and say, “Go here and do this.” And then they basically join. Maybe it’s like a 6-digit code or a 10-digit code or something like that. They just go to, as you said, the URL, plug it in, and that’s the end of it. I think hiding the name of the product is probably the best bet because that way, the kids won’t search for it.
Rob: To be honest, Sports Tracker, when I go to just search for that phrase in Google, there’s a bunch of iOS apps that come up. I can’t find the app that he’s talking about in Google right now. There’s sports-tracker.com, there’s SportsTrackr with no E, there’s all these things and I don’t think any of them are his app. I actually don’t know that even hiding the name, I really think it’s just the URL. You know what people could do is if it says Sports Tracker on the PDF and they go to Google and type it in then sign-up for the first one, it’s going to be the wrong app. Maybe they should just hide the name and the URL and try to get them there.
Like I said, it’s an interesting problem—user behavior thing—to have but I think there are probably some ways that we’ve thrown out. Hopefully, those are helpful to him. Thanks for the question.
Our next question is about liability insurance. It’s from Z and he says, “Hey guys. Could you talk about what types of liability insurance SaaS companies should get? It’s very confusing, there’s not much information out there. What type of insurance should founders get for their companies depending on the stage they’re in and to protect themselves and the company?”
We have talked about this in the past, right, Mike? We’ve talked about getting an LLC and maybe worrying less about the insurance aspect of it because you have the liability protection there in the early stages. Obviously, we’re not attorneys, we can’t give legal advice and really, you should not take advice from two chuckle heads like us. But in the early days of a product, I would tend to have any type of E&O insurance. When you have 10 customers or something unless you’re in a particularly litigious niche.
Mike: I think the question here is different though. He’s talking specifically about liability insurance versus the liability of having things under a company. To his point, this is very confusing and there’s not much information out there. The reason it’s confusing is because insurance is one of those old industries where they profit based on your lack of knowledge and them being able to be kind of opaque about stuff.
If you go to, let’s say, two or three or five different insurance companies and ask them for a quote for liability insurance for your company, they’re going to say, “Okay. Fill out this form and give us a bunch of information.” Every single one of those forms is going to be different. It’s not like going to a sandwich shop and ordering a ham sandwich. That’s going to be basically the same between 30 different ham sandwich shops.
But with insurance, even liability insurance, it’s different for every single one of them. They’re going to have different questions, they’re going to want to know different things, and each of those forms is going to be different. Then they’re going to plug it in their back end of the engine and they’re going to say, “Okay. Here’s the risk profile, etc., and these are the things that we cover.” If you compare the output of each of those plans, there are going to be differences between them. It’s not like there’s a standardized liability insurance. There’s going to be some like Plan 1 from Company 1 might include XY and Z and then the same exact information that you gave to Company 2, they’re going to say, “We cover X and Y,” but they’re not even going to mention Z because it’s not covered but they cover QR and L.
It’s complicated and the reason you’re finding it that it’s confusing is because it is confusing. It sucks. It’s weird when you have to go through those things but really, there’s the umbrella policies. You have to be careful about what you’re doing in terms of what access to customer information you have, what your access level is to your on-site software or databases, or level of access that you need in their environment. All those things are going to be questions, are beyond those forms. Every company is going to quote you differently.
Rob: Yep. Insurance—not fun. I think that to protect yourself from personal liability, you can of course get an LLC or an S-Corp or whatever is the equivalent in whatever country you live in. I tend to say, when you’re young and you don’t have a lot of money or what’s called judgement proof, no one’s going to sue you because you don’t have any money. When you get to the point where you have some assets, I recommend getting a personal liability plan. I shouldn’t say recommend, this is what I have done. [inaudible 00:25:43] recommended to me and this is what I did, and it’s to get a personal liability coverage.
You can get $1 million or even a $2 million coverage for literally a few hundred dollars a year protects you from personal liability if you get in a car accident and someone sues you because their neck hurts or whatever. I think it protects your personal wealth and I don’t know all the details. It’s going to depend on your circumstance in the policy you get as to whether or not someone piercing a corporate veil. You don’t come in through an LLC after your personal asset. It’s going to protect that or not.
And then if you really want insurance for your company, personally, I would go to foundershiled.com, that’s who I use. I’m trying to think of some type of E&O or some insurance when we had to deal with a big Fortune 500 company and they required us to have, of course, crazy stuff that no one else requires you to have. I went to foundershiled.com, had a great experience with them when they were first starting out. They’re much further along now and really can’t recommend them highly enough for folks like us who really don’t want to deal with all the nuts and bolts of it but kind of need to get some [inaudible 00:26:49].
It depends on your risk tolerance how soon you want to do this but those are our general thoughts. Thanks for the question, Z. I hope that was helpful. Our next question is from Hamish and it’s about outsourcing development and NDAs.
He says, “I’m a new listener. I’m catching up with previous episodes. I’ve a question. I have a website which at the moment is no more than a hobby. I want to outsource some development to see if I can take it to the next level. I’m presuming NDA is not worth much for a small website. Should I be at all bothered about giving access to the code to a third-party developer? Are there any basic steps I can take to protect the copyright and the ideas?”
What do you think, Mike?
Mike: It goes back to the standard disclaimer: We’re not lawyers or insurance agents. An NDA is probably not going to be worth the time. The one thing I would be aware of or at least pay attention to is it when you are having somebody else build the code for you or write anything for you that you want to have a contract of some kind in place. If you’re hiring them through something like Upwork, that is generally taking care of it for you, but otherwise, you’re going to want to have something that says that it’s essentially a work for hire and that you own the output of that. That is probably the most basic thing that I would do. That ensures that you own whatever it is that they write for you. Beyond that, I don’t know. I wouldn’t worry too much about it because at this stage, it’s just an idea and it may or may not go anywhere.
Let’s say that they build it and you start making a couple of thousand dollars a month from it. The chances of them stealing it and trying to do the same thing, I would say are probably small. But even if they did try to do it, it’s not the app itself; it’s all the marketing and the sales engine and the sales funnel and emails—all the stuff that you do alongside of it—that is going to make that much money, it’s not the code itself and the app.
Rob: Yeah. I’m not sure how much I have to add there. There’s always risk with this kind of stuff. I would say that I’ve had dozens and dozens of developers that I’ve hired, some for really small projects, some for really big ones. As far as I know, none of them have ever stolen my code and gone off and tried to compete with it. I mean, maybe here’s a chance that I had a class in something that interacted with Stripe or with Twilio and they took it and used it in another project. How would I possibly know? But I have not had that experience.
I think that it’s easy to be bothered by this stuff. I think it’s easy to be overly concerned with it. It does depend on risk tolerance, but I would really air on the side of just hiring someone good and interviewing them to the point where you trust them and letting them do it and trust that they’re not going to steal your code because most people frankly, want the paycheck. It’s just so much effort to steal your code and try to do something with it. The odds of it happening I think are pretty slim.
Our next question, Mike, I pulled off of Quora. It was in the startup section and it said, “How much should an MVP cost?” What do you think about that? I love the premise of the question. It’s just like, “Oh boy!”
Mike: How much should an MVP cost? This seem like a trick question.
Rob: I would say that an MVP should cost zero.
Mike: Zero, yes.
Rob: I mean, not in all cases but remember, an MVP really shouldn’t be a software product, if at all possible. It should be me strapping a Google spreadsheet to Zapier, to a VA, to me peddling a hamster wheel that makes the thing go on, and to make give the appearance that I have a product but in fact it’s just all human-powered. I mean, that’s just one example. But I think an MVP should as little as possible. Take the number in your head and remove a zero or two.
Mike: I think the interesting thing about this question and maybe is because it comes from Quora, there’s people who are not necessarily as experienced in understanding exactly what a minimum viable product would actually be. But really what you’re looking for there is, “What is the least amount of work you can do to answer a particular question?” And you have to start with the question. If you don’t start with the question, you’re really not doing the whole MVP process correctly.
That’s kind of the core of the issue here I think is if you don’t understand what an MVP actually means, then asking how much it should cost is almost irrelevant because it really depends on what the question you’re trying to answer is. Like, “Will people pay for this?” “Well, just go online and do a Google search and see if there are other products out there that exist that solve that problem. If so, then yes.” That’s a very simple thing to do and it costs you absolutely nothing more than a few keystrokes. But if it’s a lot more complicated like, “Can you get $1000 or $10,000 people to your website in order to validate that you can acquire that traffic in order to potentially sell them something?” Well, that’s a very different question that you’re trying to answer. The amount that it’s going to cost is going to be different.
I would actually differentiate between how much time it’s going to cost you versus how much money and over what time period because all three of those things are very different. You might be able to find out a piece of information, but it could take three months. It might only take an hour or a week for the three months but the total time span that it takes is going to make a difference. If you’re trying to validate a couple of different ideas against one another or answer several different questions, it can become difficult to answer all of them in a time frame that is appropriate to whatever your current life situation is.
Rob: Yup. I think those are good points. Like I said, I think it should cost, frankly, as little as possible. You should be able to strap together a lot of tools and not have to actually build software if you’ve validated to that point or you get your 10 or 20 buy-ins, your purchases, pre-purchases, commitments, or whatever you’re going to do. I agree with you. I think I like the different dimensions you put on that words like there’s price, there’s hours of your time, and then there’s duration–is it 6 months or 12 months or 2 months or whatever.
I would love to get an MVP done in less than two months for, I don’t know, less than $5000, less than $10,000. It depends on who you hire. If you hire in the States, it’s going to be more expensive. It’s kind of hard to say, I think but I do think it’s an interesting thought experiment. It’s like, “Are you building an MVP of an email service provider or are you building an MVP of a little form app, like something that compete with Typeform or Google Forms or something.” That’s a totally different use case.
Again, if you’re going to give people Type Form, you just build the form UI, have it go straight into a Google spreadsheet so you don’t [inaudible 00:33:48] have a database and then to actually build the UI to build the form, you manually build that directly with your customers, you don’t build any type of form builder. You know what I mean? That could literally be like a weekend project of just displaying a landing page with the forms that you plug into some XML file or some database or JSON thing. That’s pretty minimally viable but it would be a product if you’re trying to test something out.
Anyways, I think that probably wraps us up for the day except for our final question of the day, Mike. The Star Wars Holiday Special marked the first appearance of which Star Wars character? There are four choices: Jabba the Hutt, Boba Fett, Jar Jar Binks, Lando Calrissian. Do you know the Star Wars holiday special? Have you heard of it?
Mike: I’ve heard of it.
Rob: It’s from the ‘70s. It’s awful. Go to YouTube and look it up. It is really not good. There’s this thing called life day and there’s wookiees and it’s really not canon.
Mike: I sort of vaguely remember hearing about it or seeing it. The question is which of these four characters shows up for the first time in that?
Rob: For the first time in the Star Wars Holiday Special that came out in ’78. It’s Jabba the Hutt, Boba Fett, Jar Jar Binks, Lando Calrissian.
Mike: I’m thinking Boba Fett.
Rob: You are correct.
Mike: Yes.
Rob: It’s in an animated segment of the show.
Mike: Oh!
Rob: Yup. This has never been released on video but as I said, you can hit YouTube or other places to find recordings of it.
Mike: Oh, that is shockingly nerdy.
Rob: It is. It is nerdy. I couldn’t get through it. I watched five minutes of it, and I had to scrap it.
Mike: Is it that painful?
Rob: It’s awful.
Mike: It’s painful as a podcast and our jokes.
Rob: Yes, it is indeed.
Mike: Oh, that’s terrible. Well, on that note, if you have a question for us, you can call it into our voicemail number 888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 433 | Managing Your Emotions, the Cost of an MVP, and More Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions on topics including managing emotions, cost of an MVP, taking a business idea and more.
Items mentioned in this episode:
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve build your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. Where this week, sir?
Mike: Well, just wanted to give people a reminder that today is the last day to apply for the Starter Edition scholarship and I said before, we’ve got over 25 to give away. We will link it up in the show notes, but definitely go check it out if you’re interested at all in coming to MicroConf Starter Edition. Just fill out the application, it doesn’t take more than 5-10 minutes to do, and we will have those within the next couple of days. The notifications will go out and let people know who’s been awarded the scholarships and hopefully everybody who is able to accept them. If not, then we’ll go back to the pool and go to the “runners-up” to see who else is available. Obviously, some people’s travel plans change or whatever. So, we’ll make sure that if we’re going to give somebody a scholarship, they can actually use this. It may take a few extra days.
Rob: Yup. Head over to Episode 433 on startupsfortherestofus.com for a link to that in our show notes. For me, not a ton of updates. Was on vacation and now, looking forward to some home construction being done on our house here in Minneapolis. We bought it about eight months ago and during the escrow process, an inspection picked up some anomalies in the stucco so we got a credit to have those fixed. All that’s fine except for the fact that it was supposed to take two months and it’s been like seven months of construction.
Things are getting put back together now but it just kind of wears on you and it can be loud. You and I’ve recorded in the past few months, I’m having to mute, we have to edit out things, and there’s people in my house all the time. So, I’m really looking forward to that being done. They had to replace some windows and re-stucco things. They can’t re-stucco things because it’s too cold right now, so they have to wait. There’s scaffolding and such. It’ll still be up, I’m guessing, for another month or two until it warms up. At least the inside can be completely done and all the outlets work again. They had to rip receptacles out and turn the power off on certain parts of the house.
Given that two of us work from home and we homeschool the kid, a lot of us are home a lot of the time. I think if I was going into an office, it will almost be easier because it will just be done while we’re not here. But when I’m talking to you on this podcast and then two construction workers walk in and start painting the walls, I’ll admit, it’s a little distracting.
Mike: You think?
Rob: Yeah. So I’m looking forward to that. That’s really in the kind of end-game right now. They’re just putting trim on things, and hanging blinds and such. I’m very much looking forward to getting past that.
Mike: Yeah. Having to redo anything in your house just really sucks. It’s just the worst.
Rob: Yup. Always costs more. It’s like software. Always costs more than you wanted to. It always takes longer to do than you think.
Mike: Yeah. So, what are we talking about this week?
Rob: Well, we have some listener questions. We’re going to kick us off with a voice mail. As always, voice mails rise to the top of our listener questions stack. This is a good question about the emotional side of running a startup and what to do when you make a change and it makes people angry. How to handle that?
Benjamin: Hey guys. It’s Benjamin from Philadelphia. I run a company called Commit Swimming. It’s a small SaaS app product. Recently, I raised prices and I’m looking to hear you guys thoughts on some feedback that I’ve gotten. I thought I did everything that I could to properly communicate to customers, like that the price increase was coming, why it’s happening, and what it was going to be. I also communicated clearly what it was then a couple of months later.
I inevitably would like about 1500 paying subscribers. I’ve gotten a few pretty nasty emails back on the topic and it’s one of those things that I just feel kind of down as a founder. It wasn’t like a money-grab situation. It was in order to pour more money developing features for the same customers that I’m serving. That type of emotional backlash can really take a toll.
I’m just curious to have a discussion around. I could hear Mike and Rob’s talk on what situations have you come across that made you feel like, “Oh did I do something wrong? How can I right this wrong?” and how do you deal with that internally? Another founder with all that emotional baggage riding on you, either in the sales process or in a situation with increasing prices or dissatisfied customer, that feeling that you just messed up and you disappointed somebody. How do you handle that internally and then how do you try to make it right with the customer?
I’d love to hear your thoughts, in particular, the emotional side of it? Thanks again for everything you guys do. I love your podcast, I love everything that you have done so far for the community, and I look forward to hearing your thoughts on this. Thanks guys. Bye.
Rob: So price increases huh, Mike? Nothing ever goes wrong with those.
Mike: Of course not.
Rob: That’s a good question. Obviously, we could talk about the price increase specifically, but that’s not really his question. It’s just that, what do you when people get mad. Did you do something wrong, didn’t you, and how do you deal with all that? What are your thoughts on it?
Mike: I think that the one piece of advice I have that trumps everything else is context matters here. If you were to take a few steps back and try to be extremely objective about what the situation was and what happened, does it makes sense for people to be extremely angry? The number of people has a big impact. He says he’s got 1500 paying subscribers. Well, how many nasty emails did you get from that? Was it 5 or was it 500? That’s a big difference.
Rob: Yeah. He says it was only a couple, which is an indicator, right?
Mike: Exactly. That was my point was that when he said he only got a couple of emails, to me that says that it’s probably not a big deal. That’s only partially related to his question because the question was how do you deal with the emotional side of it? My point here is that you should take a few steps back to make sure that you’re being objective about how you addressed the situation, how you brought it to them, how you let people know, and then is their response justifiable? If it was 500 people complaining, then obviously that means you probably screwed up. If it’s only a couple and even if they’re extremely vocal and extremely upset over, it’s probably not your fault.
I’ll point to an email that I got literally two days ago from Backblaze saying, “Hey, just wanted to let you know, we’re raising our prices.” They’re raising them from $5 a month to $6 a month. I literally just got done using Backblaze. To make sure that my entire machine was backed up, I’m going through and pulling down files that I wasn’t sure whether or not would be included in my end of backup that I did at home, and I’m extremely happy with it.
So when I got this email saying they’re going to increase it from $5 to $6 a month, that’s technically a 20% increase. But at the same time, I am ecstatic with that. You can raise it to $7.50 and I really would not care. I would pay you right now again. They even have a button there inside the email that says, “Hey, you can purchase an extension and essentially grandfather yourself in for the next two years at the original price that we had put forth back in 2008,” but they went through and they laid out their entire justification for it.
Again, that’s actually a little hack that I would say you can offer to them to extend their current pricing by a predetermined amount of time. If there were 5 or 10 people who emailed you and they were extremely upset about it, it has nothing to do with you. It’s about them. It’s about their situation. Whatever you did was like the straw that broke the camel’s back. It has nothing to do with the specifics of what you did or how you could have done things differently. It’s there’s probably something else going on there that you didn’t know about, you couldn’t have known about, and quite frankly there’s nothing you could have done about. I probably wouldn’t worry about it if it fell into that category.
Rob: Yeah. There are rules of thumb when doing price increases, specifically, and we’ve talked about it on the show, I had tweets written about it barely four weeks ago, and I don’t think that’s the point of this question. The point really is what you said, which is gathering context and trying to look at it rationally when it’s an emotional response that we all have because we relate to other people, we want to do well, we want to do right by our customers, and if you get even one or two really nasty emails, it can bring you down, even if you did everything right. Everything is right as you could possibly do it and communicated it well and all that stuff.
Just at any point when you make a person or some people angry, I think the things that I always remember is to number one, to apologize, number two, if it’s really a super small minority then to hold your ground. That’s something that you could always evaluate. If someone says, “Hey, I’ve been a customer for 10 years, I recommended all these people, and I use it when I teach my class at this college or blah-blah-blah,” then maybe you do make an exception.
Overall, if it’s just someone who’s just angry because you’re doing something that you need to keep your business afloat or you need to continue running your business, then you probably just need to apologize and be like, “Hey, maybe there are other options for you.” That is what I found over the years is the people who tend to get all huffy about things, get huffy about everything. They’re the most vocal ones and they’re frankly people who you would rather not have their money. I would rather have them use a competitor that can be something that you suggest to folks.
That doesn’t cover really his question which is, how do you handle it mentally and emotionally. I think there’s a few coping strategies that I’ve learned and developed over the years. The first thing is try not to take it personally. Easier said than done but really step back and say, “Look, this person doesn’t know me. They don’t know what’s going on. They’re just typing stuff. They wouldn’t say this to my face at a conference or whatever.” That’s the first thing. Second thing is get a sanity check on it. This is something I would bring up in my mastermind group. I would throw this out, “Hey, this is what’s happened, this was the email, and it was brutal.” You are going to have camaraderie. You’re going to have that community from people who are saying, “Yeah, this happened to me, too,” and then it normalizes the experience.
Let’s say a couple of times a year, I’ll get an email from a founder who’s like, “Oh my gosh. This person’s totally railing on me on Twitter about XYZ. Tell my what I should do?” or like, “Help me,” or whatever, and I will basically give them advice like, “Yup, this has happened to me. This is how you deal with it. It sucks but it happens to all of us.” If you’re doing anything interesting out in the world, you’re going to have people get mad about something at some point. That’s not a justification for pissing everybody off all the time, but once in a while you’re going to do something or say something or make a move that’s going to do it. Realize that that comes with doing interesting things and realize that it’s part of the course and it’s something you have to develop a thicker skin about.
Those are the basic open strategies and that’s probably what I would do. I would also not send flippant or rush responses. Boomerang or snooze those emails for a day to give yourself time to think about it. Don’t ruminate on it. Don’t sit there and stress about it constantly. It’s not as big of a deal as you think.
I think on the flip side is, did the person change and you have 100 people email you, like you said, Mike, 50 or 100, well then realize that you may have done something wrong and try to figure out what that is. Is it really unfair or did you just not communicate it well? Can you go back and communicate it better? Or do you need to back away? Do you need to undo it?
Intercom did this 3-4 years ago, where they were going to double or triple their prices and they grandfather for 6-12 months. People were furious and there was a huge uproar. They actually backed down and they didn’t raise their prices. Then and there, I think raise them two years later and they did the same thing but they communicated it better. It still made people mad but don’t give them an excuse to be mad. They’re going to be mad about a pricing change, anyway.
Check the boxes of grandfather if you can. If you can’t, then you really got to communicate why the product is better. There’s all these steps and mitigation to raising prices that I would do. But really, it’s with experience and going through this a few times, you just learn to not take it so personally and to try to get a realistic gauge of, anytime anyone’s mad it doesn’t mean you’re wrong.
That’s the thing. A lot of us take that on like, “Oh someone’s mad at me. I did something wrong.” That’s not necessarily true. There are people who are just mad at about everything all the time and today is their day to be mad at you for something that frankly probably is better for all of your customers in the long term. If you have more money to keep the business afloat and that build the app out and whatever else, and if no one else had an issue with it like you said, Mike, with CrashPlan, $5 to $6, you just don’t care. Netflix raise their prices a dollar, I just don’t care because it’s a good service. I’m going to keep it and I’m not going to get in this fake outrage over $12 a year.
Mike: Another strategy is, if you have objectively determined that you are not at fault and it is really the other person there, not you, you kind of step away from those things. If it’s emails that would come in, hand them to a support rep and say, “Just respond to this as nicely and politely as you can.” That way, you’re not the one who’s suffering the mental anguish over having to respond to those because honestly, you’ve got other things to deal with in the business than replying to a support email from somebody who is going to cancel anyway.
Rob: Thanks for that question. I hope our thoughts were helpful. The next question is from Rodrigo Pontes and his question is, “Should I target the manager or the company?” He says, “Long time fan, first time caller.” Actually he said first question but long time, first time. Have you heard that, Mike, on the morning DJ stuff?
Mike: Yeah, I have.
Rob: Long time, first time. Long time listener, first time question asker. “I’m a solo founder bootstrapping a SaaS web app called OneOneMeeting, oneonemeeting.com. OneOneMeeting is a note-taking app exclusively for one-on-one meetings. It allows you register meeting notes, commitments, goals, and share it between the leader and the team members. So, it’s specifically one-one-one between managers and people that report to them.”
“What should I do in my early marketing efforts? Target individual managers that could buy OneOneMeeting for their own use, or target HR executives that could implement it in the whole company? For more details, I have two paying customers that bought it for their own use and I have about five colleagues of my day job employer on a free trial and a scheduled meeting with our VP. They try to demo it and try to sell a corporate account for my whole company. I’m still at my day job, so I have limited time to do sales and in-person presentations during work hours.”
What are your thoughts?
Mike: This is one of those questions where I’m not necessarily the target market, so my advice here should be taken with a grain of salt. I think if I were to say one way or the other you should target this one or that one, the reality of the situation is I don’t really know, but what I would say is that there’s a couple of different ways I would try and find that out.
I think that the question or the point about having limited time to sales and personal meetings right now is a limiting factor, I would try to go outside of your current network and go to, as you said, the colleagues of your day job employer, go find out information from those people and try and narrow down, as quickly as possible, which of these two you should go after. Then from there, you also want to branch out and ask every single person who’s using it, if they would introduce you to somebody else who might be a good fit for it.
If you can get three introductions, that’s great. Always ask for three, settle for one, but push for that one. This is a one-to-one meeting note-taking app, so if they’re not willing to introduce you to one other person, then they’re probably not willing to actually use it to have these meetings anyway. So, I would go down that path and try to figure that out.
The other thing I would comment on is that, because it’s so early on, I don’t know if you really know what your pricing model is actually going to be yet, like individual plans versus corporate plans. I think those are kind of up the air and exactly what the pricing around those should be. I feel like it’s too early to tell. I seem to think that you need to go down a little bit further in the rabbit hole and try to figure out where it’s going to resonate and get traction before you start focusing on one or the other.
Rob: This wouldn’t normally be a clear-cut decision except for the fact he said his time is limited during the day. I think that if you go after a HR execs, they’re getting so hounded by people trying to sell them stuff, that they really are going to require a lot of hand-holding and a lot of proof to push it through.
I feel like you should go with the more guerrilla approach, like Slack and Dropbox do, where they infiltrate at a lower level in the org chart and then once you’ve got a bunch of people using it, then you ring them up and you say, “Hey, I’ve noticed that you have 10 different managers using this. You want to have good management of this, an insight, blah-blah-blah. You know, you need to get our enterprise account.”
I don’t know if that means that it needs to be free for one manager at a time or whatever. You look at Slack and you look at Dropbox, and that’s how they’re able to do that. People can sign-up essentially without a credit card and you can really infiltrate the org that way. You have to find if managers have a credit card with some type of limit on it so you could make it relatively inexpensive, but once you actually do sell their account to the VP of HR, that there would be a need to be a big step-up in price because selling a product like this is going to be hard to scale at a low price. Although if you do per seat pricing, then it should naturally scale itself because the successful companies tend to be growing anyway, and if it works, they’re going to want to add more and more of their teams on twit. I could see the whole $3, $5, $7 per seat pricing working if you can get 50-100 people at an org using it.
All that to say, if I were in your shoes, I would personally go after the managers because I think the managers are the ones that are going to get the value out of it. The person whose pain point it really solves in the most direct way and the managers are the ones that can start implementing it without a bunch of bureaucracy and approvals and all that stuff. If they can just run wild with it and prove it out, then it’s a much, much easier sale as you go up the chain. Thanks for the question, Rodrigo. I hope that was helpful.
Our next question is about taking someone’s business idea. I’m going to leave him anonymous. It’s interesting. He says, “Little background about me. I have a Bachelor’s of Science in Computer Science and Business Administration. I’ve been working on IT since 2006 as a developer and a manager. Two years ago, I worked for an online company that I found to be really interesting and right up my alley. I applied, I got hired on as a developer to help maintain and update their current website. Come to find out that their new site was never going to see the light of day due to the fact that the manager overseeing everything wanted to keep adding useless features to the site. The site was from the 90s and was written in a language that is no longer supported and it can’t support more modern features that a growing business website needs. This really bugged me so I left the company.”
“Then one day I was talking to a friend over drinks and he said I should start my own thing so I did. From there it snowballed into a reasonable product that I think I can take to market. My question is, when I started with the company, I had signed an NDA and a non-compete valid for one year after I left. That one year mark is coming up in the next week. I want to start pushing content out to get things going. I didn’t work on anything on the site while I was there and I’m not using any code or tech from the company because I consider that stealing. Everything I’ve created is 100% from scratch and of a different language and technology stack than the one at the prior company.”
“Have you guys ever had to deal with anything like this? Looking at it either my point of view as the startup or as the old company with the 1990s website? Also, I want to say a huge thanks for sharing your experiences. You guys answered a lot of my questions on your podcast.”
What do you think about this, Mike? Do you fully understand what he’s asking? He’s basically launching a competitor to something and they’re outdated tech. I don’t think he’s asking an ethical question because I think he’s going to do it. It’s more the legal side of it? Can they sue him?
Mike: Well, I think a lot of what he said seems to be different from what he’s actually asking. My understanding of what he has said was he was hired to help develop and maintain the current website of this other company and he signed an NDA and a non-compete. But then he left and he’s coming up a year later for his NDA and non-compete no longer being valid. And the products he wants to build is what the company was developing. I don’t think it’s actually anything related to the website for that company.
Rob: That’s what I’m confused about.
Mike: Yeah. That’s what I gather as the situation is what he’s building is actually what the company itself produced and that his non-compete would be wide enough to cover whatever their product was and is the product that he’s building is that, although he was hired to just work on the website.
Rob: Let’s go with that assumption because I was confused as to was it the website the product? Is it just like a lead gen company, the website is the product. There is no product behind it. You just drive ads or you do SEO and then you get people to send in form, and then you basically can sell those leads. That’s what I was thinking but maybe there’s a software behind it and he’s replicating that. What do you think here?
Mike: There’s the fine between what is legal and what’s not in which it’s impossible for us to comment on the specifics of that if we were in that situation. I have been in this exact situation. I was in this situation with AutoShark, where I basically knew that the product that I was rebuilding from scratch was going to go away at some point in the future. My thought was if I were to rebuild it, I can essentially come in and replace the product that was end-of-life.
What I found was that the fear of being sued by a large company that has the ability, the resources, and the lawyers that are just on staff already, was paralyzing. That is always going to stick in the back of your mind and you will not get away from it. I don’t know how big they are, or I don’t know what they do, or I don’t know how much of an impact you would have on them, but for me, it was paralyzing. I had a very hard time separating the business and marketing stuff that I was doing.
My situation was probably complicated because I was also still doing consulting work for them. It wasn’t really a non-compete because I was a separate company anyway but I was a subcontractor for them. So I was barred from going back to those existing companies that I’ve already done consulting work for which was installing the sort of software but then I’m also building a replacement for. Mentally, it’s very difficult to get past that.
I won’t say that the easier route is to just go on a completely different direction, but if you have the domain knowledge and expertise and you think you can execute on it better than them, by all means. Just be prepared that if you do a good enough job at some point, they may decide to come back and sue you, but they can sue you anyway. They can sue you and say, “Well, you developed this IP that we own,” and any company that you have left could theoretically make that claim. It doesn’t mean it will hold up, but that’s going to be an issue that you’re going to have to reconcile and come to terms with. Is it realistic that they can do it? Is it going to happen? It’s probably not, but it could.
Then there’s the other side of the coin where if you do a good enough job, they may decide, “Hey, it’s going to be better for us to acquire this than to continue building the thing that we have in-house.” That’s entirely possible as well. But again, it’s probably just as likely is them suing you. That’s something that you’re just going to have to mentally deal with, make a decision, and move on, because otherwise you’re going to spend far too much time thinking about it and not enough time actually working on the business.
Rob: Yeah. That’s a good point. It’s weird because this does get back to the ethical-moral conversation we had a couple of episodes ago. I think that legally, if you document everything and you really are on the right side of the law, then you should be okay in the long run. But they can still sue you and you still have to hire a lawyer to defend yourself. And you still have to either negotiate a settlement or go to court, which is very expensive, and you still have to prove all this. There’s a lot of ifs. Even if you’re on the right side of the law, in my distant third-hand experience with working at companies where lawsuits are going on, no one wins but the lawyers. The only ones that make money are the lawyers. It’s really not good to get involved in that. That’s always my thought with lawyers and lawsuits. It’s really kind of be on the right side of that.
Then there’s the side of it that I think about as an entrepreneur. It’s like, is this interesting to you to build this or will it be boring? Is it just an opportunistic view of like, “Hey, I can make some money with this,” or is it like, “No, this is actually something that I really, really want to do”?
I would caution against doing something just because you saw it work at a different company and you feel like you could build better tech than them. That’s not a recipe for success in my work. But if you have taken their success as a reason to not do customer development and not build an email list and not make sure there’s demand and not make sure that you have the credibility to do this, I think you’re making a mistake and I think you could build a product and release it to Crickets. Or it could be years and years of toil on this and does that sound fun? Just like any other product that would launch, I would ask myself, is there really a market here? Am I the one to do this? And does this sound interesting to me?
Mike: It looks like from the opportunistic nature of something like that, if it’s already in an established business, they are doing their sales and marketing and getting customers, it’s very easy to think you can replicate some of that. It’s like an iceberg. There’s tons and tons of things that go on under the covers of the business that you have absolutely no knowledge or exposure to and a lot of times, some of these things are very relationship-driven. You don’t even know it because you’re not even aware of how those conversations even happen. It’s very difficult to compete in those situations, so just be very cautious about that.
Rob: Yeah. It’s like you said, it’s easy to be inside a business, look around, see everything wrong with it, and be like, “I can do this better,” but it’s actually really hard to do better. It’s not something that can happen overnight. Just building better tech isn’t, in my opinion, going to be the key to that.
I think the other thing to think about is, you use the term taking someone else’s business idea. It’s a trip that if you hadn’t worked for them, you would just be a competitor. It’s like, did Drip take MailChimp’s business idea? Did Drip take Infusionsoft’s business idea because it competed with them? Well, no. We did our own thing our own way. We found customers, we got feedback, then we implemented features, and blah-blah-blah.
The difference here is you worked for them and you saw inside the business. There is complexity there where if you are going to compete with them that you need to get over the thought that you took their business idea. I think it comes back to what you said, Mike, is that it’s going to hang over your head mentally. Whether you think about the legal side of it or you just have this internal embarrassment or shame that you “took it/stole it” is what you’re implying, if you hadn’t worked for them, that wouldn’t be the case. If you think that you’re going to hang on to it like that and constantly think that you’ve taken this business idea from them, I would caution you against perhaps doing this. We’ll just ask you to think about it because it can get in your head.
More than half of being a successful founder, I believe, is just dealing with the mental side of things and being able to handle your own psychology, understanding yourself and not just stressing out or not putting much of a burden on yourself, not having things that aren’t true be running through you head, that negative self-talk, and this could be a source of that. In your shoes, I would really think hard about whether you can mentally get over that hurdle of thinking that potentially you took this business idea because you don’t want that hanging over your head for the next several years as you build this up. Thanks for the question, anonymous. I hope that was helpful.
Our next question is about how to approach a B2C company. This is a long email, someone summarized it. It says he’s a huge fan of the podcast, started listening about five years ago. He’s a senior developer, he’s always had the product itch, and he’s working on an app. It’s called VidHug, vidhug.com. It started as a scratch-your-own-itch project for his mother’s birthday and it’s definitely B2C. It’s low LTV. It’s non-recurring revenue. He says, “I feel like I have a mini Rob on my shoulder most days, saying ‘What are you even doing with this?!’ Thing is, I don’t really have a counterpoint for you except for a feeling and that feeling comes from talking to customers that are now able to do something they previously could not.”
So, the idea with VidHug is you can send out an email with a link and people can record basically birthday wishes or well wishes and they all get combined into this 30-second or 60-second video. If you go to vidhug.com you can see samples of these videos. If it’s someone’s birthday and then their grandkids in there, their kids in there, aunts and uncles, whatever, all recorded there and then all gets mashed up.
He said he launched it in July 2018 to Crickets. He didn’t do any pre-marketing, he got a few paying customers, didn’t really get a break until earlier this year when he’s got some organic traffic flowing from a referral in a blog post. He’s on pace to do $600 a month and that’s a funnel he can now improve. He says, “I’m also turned to build a B2B side of the business and I found a potential application of remote and distributed companies using VidHug to celebrate employees or onboard new employees. I’ve got three companies trying this out. I tried validating a separate B2B site for this, but I think it was spreading myself too thin and I’m just going to go down with vidhug.com for now.”
“The primary move forward is to focus on growing organic channels on the B2C side through SEO and referrals and also build a B2B side which would bring recurring revenue. Do you think I’m crazy for even trying this?” Just as a point of data, he has basically a free tier and then he has one that is $15. It’s a one-time thing for the B2C side. What do you think, Mike?
Mike: Well, to answer his question there actually, “Am I crazy for even trying?” The answer is yes. It’s just a matter of how crazy we all are.
Rob: Exactly. It’s just a specter.
Mike: It’s varying degree, yes. I feel a little bit early on to be trying to separate and go after both B2C and B2B. It seems like the revenue is a little bit low and I feel like the marketing channels you have to reach out to, the type of audience, the types of content that you have to build for them, the feature set, and all these other things, it feels like it creates two different businesses. I get where he said he tried validating a separate B2B site for the application and he felt like he’s spreading himself too thin, but it seems to me you’re going to do the same thing if you try and cater to a B2B market as well. Maybe not, maybe you can just integrate it with certain types of things or multiple-use for accounts, for example. Maybe there’s an obvious way to upsell people into a more B2B version of the app. Maybe that’s a way to go for that, but it does seem like it’s a little bit early.
So going back to the question of are you crazy for trying something that’s B2C? I would say no. I definitely think that there are opportunities out there for people to build B2C businesses that are solid and profitable. It’s just a matter of making sure you are methodical about how you pursue your different traffic sources, putting people in your mailing list, optimizing the product itself for revenue for getting people into it, and making them happy. If you can do those things, it doesn’t matter whether it’s B2B or B2C. You’re still going to have happy customers who are going to give you money. But that last piece of it is the key part. They have to be happy and give you money because if they’re not giving you money, you don’t really have a business.
I think that’s the challenge that most people run into with B2C companies is that your LTV tends to be much lower and you need a larger number of customers in order to make it work. There are a lot of viral components to something like this. You can email out to a bunch of people and if one person gets in there and then email 50 people, now you’re in front of 50 people instead of just one. That’s a huge viral aspect that a lot of things that try to do B2C don’t necessarily have because this has that kind of bait into it that’s an encouraging sign. It’s not the only thing I would look at but it’s definitely encouraging.
Rob: Yeah. It’s tough because B2C is just hard. It’s just a different game. With this customer lifetime value, you can’t run ads, you can’t pay salespeople. So many things you can’t do. It literally be outreach to bloggers, offering it free to bloggers, sponsoring bloggers, I keep saying bloggers, podcasters, whatever, people with audiences. Here’s the thing. If you’ve got a bunch if Instagramers with huge followings, YouTubers, bloggers, podcasters, yeah it would be possible to grow this. But it’s a completely different playbook than what we typically talk about or what you’re going to hear from MicroConf speakers, for example, or an attraction book where it really is more focused on doing a lot more B2B stuff.
You just have to ask yourself, is that what you want to do? Do you want to build those relationships with influencers and figure out how to get them to do it and then talk about it? That would be my playbook for this. Personally, I don’t enjoy that. It’s hard to do without the existing relationships, be it can be expensive response for them, it’s pretty risky, it’s not super repeatable, you just got to go one to the next, there’s just a lot to it. You got to ask yourself, “Hey, is this something that I want to do?” and if not, then I would look at the B2B side.
The tough part of it is it’s not a critical must-have thing, but I do think it’s kind of clever and it’s a fun nice-to-have that I have seen larger companies, even companies that 50 or 100 people, do special things when they onboard new people and make funny videos to welcome them or things like this. While I don’t know if they would pay for it, I think that would be a question you’d want to start having with people before you dug into the B2B side. That’s certainly a more repeatable thing but I still think there’s just a lot of risk.
I don’t see an angle here and that doesn’t mean there is no angle. Really, they’re just a feature. This is just one feature. It mashes up some video. It’s cool but it’s not as sweet a thing and it’s not something that people will use every week and rely on. It’s going to be harder. It’s not going to be the core of the HR’s workflow or the core of the manager’s workflow. It’s just a nice-to-have.
I think that’s the other thing to think about is, I had businesses in the early days that only made $1000 a month, $2000 a month, and frankly, I learned a lot from them. It was a stair step approach. I learned how to whatever, do run ads, do SEO, do display ads, do AdWords and that kind of stuff, and I took that experience with me to the next thing.
In its current incarnation, do I think VidHug can be a mid six-figure business? I don’t. It’s just my opinion, it doesn’t mean I’m right or wrong, but I don’t see an angle there as it stands today. But then again, I could have said that about Drip the month it launched because it was just an email capture form and autoresponder. Then we kept pivoting and grinding, customer developing, slow launching, and doing all the things that you heard me talk about on this podcast over the years, and eventually got it well under the seven-figure mark.
That’s the thing. As it stands today, VidHug is a cool side project and frankly I’m impressed that you’ve gotten it to $600 a month, given the price point and all that. But I think it depends on how you’re thinking about it. If you think about it as good learning and you want to build it up to $1000-$3000 a month, that to me seems doable, and it will be learning, it will be a little bit of income, I don’t know how you would ever get it past there. Maybe you’ll eventually come to a point where you see an angle to do that.
I also had a lot of businesses that never did. I had ebooks and info products. I had ecommerce site and I had small software products and I had one-time software products. All of those topped out and I could never get them past, let’s say, between $500-$5000 a month. I had several that were in that range. Eventually, I had to sunsetted them or I sold them as I moved on to bigger things.
My gut is that VidHug will will fit into that space, that role into your entrepreneurial career, there’s certainly a time and place for those, and you just got to figure out, I think, how you are thinking about it and where you want it to take you. Thanks for the question, Amir. That was a fund one and certainly wish you the best of luck as you move forward with VidHug.
At this point, we are completely out of questions. Zero questions, Mike.
Mike: Zero?
Rob: Zero.
Mike: I have a question for you.
Rob: What’s your question?
Mike: If Elon Musk actually gets us to the point of taking us out into the outer reaches of outer space, where do you think that we should go first?
Rob: Mars?
Mike: No, I mean not just outer space. Out of our solar system. Where do you think we should go first?
Rob: I have no idea. I don’t know enough about astronomy to know what’s interesting.
Mike: Well, do you know which star cluster’s the closest?
Rob: Alpha Centauri?
Mike: It is. You think we should go there?
Rob: Sure.
Mike: I don’t think so. I checked online, it’s only got three stars.
Rob: Badum-boom. There it was.
Mike: If you have a question for us, you call into our voicemail number 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt, used under Creative Commons. Subscribe to us on iTunes by searching for ‘startups’ and visit startupsfortherestofus.com for a full transcript to each episode. Thanks for listening and we’ll see you next time.
Episode 429 | Building a Launch List of 5,900 and Grinding Out Customer Development
Show Notes
In this episode of Startups For The Rest Of Us, Rob talks with Derrick Reimer about his new product Level. They go through the development timeline as Derrick gives insights on the early access phase, alpha testing, taking pre-orders, and going live with the MVP.
Items mentioned in this episode:
- AppSumo MicroConf Giveaway
- MicroConf Growth Edition
- MicroConf Starter Edition
- Level.app
- The Art of Product
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching, and growing software products. Whether you’ve built your first product, or you’re just thinking about it. I’m Rob.
Derrick: And I’m Derrick.
Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So where this week, Derrick?
Derrick: Just in the startup trenches doing some customer onboarding calls.
Rob: How many calls have you done this week?
Derrick: So far, I’ve done seven. I have 11 or 12 booked right now.
Rob: Very nice.
Derrick: I reached a milestone this week. It feels good to finally be in the realm of getting the product into the hands of potential customers and having those awkward conversations about, “When do you want to start paying for this thing?” but it feels good to be in this realm.
Rob: Yeah, it’s cool. You’ve been working on Level now for 9 or 10 months. It’s a long road to get to this place even for those like yourself who’ve done it a few times before.
Derrick: Yeah, it’s kind of unbelievable when I look back at the timeline. Depending on how you look at it, some would say that’s a really short amount of time to just go from nothing to a product that is potentially viable, but on the same token I’m ever impatient and feel like, “Man, it’s been an eternity.”
Rob: Right, and you’ve been able to work full time on it which is a luxury a lot of people don’t have. I can imagine doing this nights and weekends trying get here. I know you’ve been there, so you remember how it was.
Derrick: Totally.
Rob: We’re going to dive in today to your story. We’re actually going to catch folks up because last time you were on the show was in July, it was episode 399. We talked about how you were validating the idea of Level and how you started having people reserve their handles to build your pre launch list. Today, we’re going to continue that story. We’re going to talk about where you’ve been since then, tell the story of the major milestones you’ve hit through the rest of 2018, and pull out the learnings from those. Folks listening can see how an experienced founder like yourself has taken on this challenge of building essentially a competitor to Slack, which is an app that has a lot of momentum, and trying to thread a usability needle and have a different use case that works better for your development teams.
But before we dive in, I want to talk about an AppSumo contest that’s happening, where AppSumo is going to pay for an all-expense paid trip to both MicroConf Starter Edition and Growth in late March. We’ll link that up in the show notes, but they’ve graciously sponsored this podcast and are going to be giving somebody a trip to both of those. You could be a lucky winner Derrick.
Derrick: Yeah, I know, because it’s open to anyone even if people have purchased a ticket, right?
Rob: Exactly. We’ll refund your ticket if you win. I don’t think it’s open to me, but I’m tempted to apply.
Derrick: I was going to say I’d definitely jump on that. If there was a call to action in that email, I’m sure I clicked it. I’m not sure how that would look if I won it, but here’s to hoping.
Rob: I know. I just know that I am totally not involved in the selection process. I have no idea what’s going on. That giveaway ends on February 11th, which is another week or two after this goes live. Check it out if you haven’t.
You were here in July. You and I were talking before the show, kind of laying out some milestones that happened since then. I know you were heads down, you’re in pretty hardcore design mode of trying to figure out what are the screens going to look like, how am I going to architect the inbox, how do you compete with Slack in a way that is less invasive, less interruptive. I mean, that’s the promise of Level. For folks who want to a good explanation of it, go to level.app and it’s your headline there, ‘Team communication optimized for deep work.’
In September, you were telling me you came to a fork in the road in terms of this. You’re writing some code I believe, but you were trying to decide the hardest part of this app to design really is probably the inbox. From a usability perspective, you just have to get it right. Talk to us about where you were in September.
Derrick: Up until that point, it’s funny now looking back like why did it take me so long to get to where I am today? I think a big part of that was, I spent a few months at the frontend just focusing mostly on getting familiar, comfortable with the Tech Stack, this is an application that has a lot of real time stuff. It will eventually need offline support, web sockets, just a very different type of application from the ones I’ve built before.
I spent a lot of time getting familiar with Tech Stack, and also I had a general vision in my head of how the product should work, like just kind of picture how it would feel. It’s interesting how once you get from the phase of, I have the vision for this thing, and how it should function, and how it should not interrupt people like Slack does, to actually getting down to the implementation.
There’s a big gap there. In theory I know how it should work, but it’s actually a really hard problem to solve to strike just the right balance. I think we were sitting on your rooftop, September, I was sipping some scotch and I was like, “Rob, what am I going to do?” What should I do? Should I spend time doing another round of calls with potential customers, try to put together some wireframes and some mockups, show it to them, cast a vision for how it’s going to work, and potentially get responses like, “Yeah, looks cool”? Or do I take the route of just spending some time writing some code, and implementing what I feel is my best guess at how it should function according to my own experience, and what I’ve heard from others?
To me, at the time it felt risky because I know that that big trap that a lot of people fall into is going to the basement, code for months, emerge, and potentially be missing the mark. I’ve been very careful and almost a little bit paranoid not to fall into that trap, even though it’s still really hard even after having a few apps under your belt. That’s kind of the crossroads.
Rob: Yeah and it’s never clear cut. You and I sat and tried to look at what are the options here and what are the drawbacks because you don’t want to fall into exactly that trap. Like the conventional wisdom says, “Do more customer development upfront, have a lot of conversations, don’t waste time writing a bunch of code, get it all settled out of front.” But it seems like your gut feel and mind in essence, too, was by the time we get to the end of the conversation it’s like your intuition of what it should be, since you’re trying to invent something new or at least innovate enough in a medium that’s chat, but you’re trying to do it differently, and it’s like, “I’m not sure that having conversations with people about mockups is going to get you there.” It wasn’t like you should absolutely do A or B. We both by the end leaned towards, “Go build something,” because until someone touches it and clicks a button, and even if it’s a fake simulated chat with an invisible person, with a bot, or whatever, at least they’ll get an idea of like, “Oh, that doesn’t make sense at all,” or, “Oh, it does,” in a way that I don’t know, you can’t get your hands on mockups the way that you can with some code.
Derrick: Yeah. If Steve Jobs would have taken some wireframes of the iPhone and showed it to people, would people have caught the magic? I don’t think so. It would look like an interesting concept, “Oh, it’s a phone that you can web browse on, and have all these apps, and these games. Interesting.” It’s hard to represent the user experience aspect of it, which I think for Level is a really big thing. It just has to feel right to people. As opposed to some other apps where it has this very specific utilitarian purpose, and as long as it can deliver on this purpose, then it will be good. Level is not necessarily good even if it delivers on the purpose, it also has to feel right.
Rob: I want to touch on the thing you said about Steve Jobs. I feel like some people will throw that around. He’s also an exception. Henry Ford talks about the model T being a faster horse or whatever, which I think is actually apocryphal. I’m not sure that he ever said that, but the idea is that I’m an innovator and I know better, I’m never going to show such to customers, and that’s what has gotten people into the two years of coding in your basement thing.
One I think is knowing your strengths. You happen to have really solid strength in app usability and design. I think both you and I were like, “You’re probably going to do a better job of this than most people would know, so take a flyer on it,” and two, I think it’s a gut feel. It’s like how strongly do you feel that you know what’s better in this space? Are you like, “I don’t really know the solution and I truly do need the input of 10 or 20 potential customers,” then think I’ll do that. It didn’t seem like you needed that. That’s what we were pulling out. You had enough of an image in your head of what you wanted to do that we thought it was worth the gamble. That’s how it felt, right?
Derrick: Yeah. I think that this is also one of the other things that complicates getting that type of feedback from wireframes for Level. It’s the type of product where if someone came and asked me, “Here’s what I’m thinking for a new tool that solves this problem, what do you think?” I would be like, “I don’t know if I could answer that very accurately either,” because I’d be like, “Well, it just depends on if I use it for two weeks, go through my day, and a bunch of stuff isn’t falling through the cracks, or do I truly feel like I am able to retain focus better, or am I constantly drawn to go check it?” There’s a whole story that has to come together. I don’t know if I’m imaginative enough to be able to answer with confidence like, “Yeah, I think you nailed it.”
Rob: All startups have some type of risk, whether it’s a market risk or technology risk. It’s almost [UX 00:10:14] risk, or threading the needle of being that’s the riskiest thing. We know you can build the app and you’re probably going to market it pretty well. I think there is some market risk in terms of, is the market of people who don’t like being interrupted by Slack, how large is that market? That’s an open question, but that’s one that’s very hard to answer until you build something cool right now. At that point, you made the decision to not have more conversations, and not build mockups, and you got to code in September.
Derrick: Yeah.
Rob: And then October, you did your early access phase. It was like pre-early access or something, right?
Derrick: Yeah. I’ve already been building foundations leading up to that point. So then it was just locking in some decisions around how the inbox works and some of the other elements in the product. I was only a few weeks away from being able to show it to people. At that phase, now looking back, it was very early and it would have been a pretty big ask to have any teams really switch off of their existing tooling and use this. There are just elements that people had come to expect in a communication tool that were just not present in Level.
I got good feedback, a good amount of like, “Hey, this feels a little bit off. This kind of thing works junky when I use it. It might be a bug.” It was valuable in a lot of ways, but it didn’t provide all the value that I hoped it would. I kind of, at one point, hoped that some people would actually switch off their existing tools and then it became clear that it just wasn’t there yet. There was still more that needed to be built.
Rob: That’s interesting. You showed it to customers, you got some feedback, but you felt like it maybe wasn’t worth it. You didn’t get enough feedback to warrant all the time at that point.
Derrick: Yeah. It goes back to that analogy of what is an MVP? Is it up a half-built product or is it just a simplified version of a product that will eventually grow into a more full-featured thing? I think at that phase, it was a bicycle missing a wheel.
Rob: Rather than a scooter or something, right?
Derrick: Yeah.
Rob: That’s interesting. We jumped ahead in November and that was when you decided to set a public launch date. It was a public launch date but it was essentially of a minimum viable product that you thought teams could use. You set that date for January 21st which is a few days ago now. What made you decide to put a stake in the ground in November and set a date?
Derrick: There were a few things leading to that. One is I was becoming really impatient with it not moving to that next phase. Part of it was for my own psychology. I wanted to have this date set. I actually was kind of inspired. We were interviewing Paul Jarvis who just released a book in January.
Rob: Company of One.
Derrick: Company of One, really good read. He was doing his press tour for that promotion and stuff. I remember seeing everywhere that he was showing up, he was talking about, “The book is coming on January 15th,” or whatever it was. I’m sure that’s kind of an artifact. They’re just weird publishing schedules, and working with traditional publishers and stuff. But it kind of inspired me like it would be kind of nice if I could be talking about Level and have a date. There’s a date that is coming, and so start building momentum up to that, partially for myself, partially for people who are following the story, and getting excited about it. I was ready to give something a little bit more into the public conversation. That was a big piece of it.
I’ve been toying with the idea of doing presales for the product. Some people are more aggressive with this than others, some people as soon as they have the idea, they’re asking for money right away. I feel like that’s just something you have to take on a case-by-case, founder-by-founder, what you’re comfortable with, what market you’re in, and so on. For me, I felt like to be most comfortable asking for money, I wanted to have a date that I could use and say, “If you put down a deposit today for Level, you will get access guaranteed by the this date,” that was another big piece of motivation.
Rob: I can see that. In retrospect, do you think it was a good decision to set that date?
Derrick: Yeah, I think it was great. No regrets on that. I actually probably could have pushed it earlier. There were definitely things that always happens with launches a few days before. I’m like, “Oh, it would be nice to get that in.” I was working around the clock a few days leading up to Monday, slipping in things that were just like, “I would really love to have this. When I’m demoing the product, I want this part to really shine.” I definitely procrastinated a little bit but I think I could have probably pushed it even a little bit earlier. Being close to the holidays and stuff, I just wasn’t sure how hosed my work schedule would be over that period of time. The value of having a public deadline, there’s many benefits to it. No regrets.
Rob: What did it do for you? Did it just motivate you like, “I have to get this done so I’m going to work more cut scope”?
Derrick: Yeah. I think it’s a really good forcing function for bringing clarity. I fall into this trap all the time. I pay close attention to detail about stuff and I’m very particular about UX. I could easily just keep iterating on small pieces and burn hours on that. I definitely have done my fair share of that. Even still with all these pressures I put on myself to keep focused on the most important things. I think deadline is even more forcing function than just me telling myself to stay focused.
Rob: Yeah, that makes sense. I feel like one of the purposes of deadlines in our space is that, people who build great products almost without exception are perfectionists. They never think it’s good enough because their taste in products is so high. That’s how they know when it’s good, because their taste is good. If your taste is good, you don’t want to put something crappy out. To you, crappy is like things that everyone else looks and says, “Oh, that’s so amazing and gorgeous,” and it’s like, “No, it’s one pixel off of this and that,” at a certain point, you set a date, and you just force yourself to do it.
We’ve done this a couple times already with Tiny Seed where we just go up and decided to announce in October, and we’ve set a forcing function of getting this first batch picked out before MicroConf which is end of March, and that feels incredibly ambitious. I stress about that every day, but it’s good. It’s made me motivated. It hasn’t made me work more hours, but it’s making me be way more focused on the important things. Anything that’s not getting me closer, getting us closer to that objective, I’m just putting on the side. I think it’s good.
Derrick: That’s why I like the concept of healthy stress which has been well studied. There is a certain amount of stress that’s good. I think it’s kind of like that Basecamp mentality. They talk a lot about how they work and how they set these six-week cycles. At first, when I heard Basecamp has deadlines, that seems opposite of how they work. I thought they were calmly, and work at a natural cadence, and not overly stressed, but once you dig into their philosophy around that, it’s like, “No, we set deadlines. No, we cut scope around those deadlines. We don’t burn ourselves out, or make people toxically stressed, and pack in a bunch of work that’s unrealistic. We just pull the other levers to make it happen.” That’s what I found. I’m either going to work around the clock, obsess about every single detail, and try to pack in a bunch of features, or I’m just going to set aside my compulsion to perfect everything, and just focus on the most important stuff.
Rob: Cool. In November also, you mentioned you did a presale in essence. What was the purpose behind that?
Derrick: Yeah. I’ve wanted to do that for awhile and then kind of setting this deadline in my mind, made it kind of feasible to propose this to the public. My rationale was I wanted to figure out, at that point it was probably close to 4,000 people on the launch list who reserved a handle on Level. That’s a lot of people. There’s a lot of people who are supportive. I’m doing a lot of working in public, on Twitter and stuff, sharing my work.
There’s quite a few people who seem to really be following along with the story and glad that it’s happening. That still doesn’t necessarily translate to who’s actually feeling the pain enough to hand over their hard earned dollars for a solution. For me, this was like getting that set of people who are most feeling the pain, most willing to pay, and those are the ones that I want to be getting into the product first, hearing their feedback, and kind of building off of that.
Rob: It’s a good filter in essence is what you’re saying. You just picked out a number out of the air if I recall. It was $48 which is six times your Percy pricing. It’s $8 a seat, right?
Derrick: Yeah, right.
Rob: How many preorders did you get? What was your total preorder amount? I’m curious.
Derrick: I think it was around $2500. I’m not good at mental arithmetic. I think it was 55 or 56 people who went to buying the preorder.
Rob: Were you happy with that? Did you have a number in your head in advance?
Derrick: I didn’t really know how to declare success or failure on that. I felt happy with it. If I got 20 people, I was going to be happy. That felt good to me.
Rob: Cool. Let’s jump forward. It sounds like the holidays, December was a lot of coding. Even early January you were heads down, you’re just trying to get stuff done and meet this deadline. Here we are, we’re recording the week of the 21st, even though it’s going to go live next week. You talked about doing seven calls so far and you have another half dozen or so scheduled. How is it feeling? Do you feel like the product’s at that point where it’s a good time to do it? Are you getting a lot of value out of this or is it still too early to tell?
Derrick: I’m feeling overall positive about it. I think I had to temper my expectations, because the switching costs for a lot of organizations is pretty high. For better or worse, Slack starts out as just a place for humans to talk to each other within their organization. Gradually, some organizations decide to kind of turn it into this place that runs a bunch of their internal workflows, maybe the sales team relies on it for leads to come through into a specific Slack channel which then they can follow up with.
For some people I’ve talked to, it’s proven that this is going to be a longer process. Overall, the response has been positive. Even from those who have more complicated set up, it’s still like, “This product looks really interesting. I’m intrigued.” But the gap between me being intrigued as the champion in my organization, and us actually switching over to it, for some, the gap is pretty big. I think it’s a reminder to me that I need to be patient and just set my expectations properly.
Another artifact of this is that Level is going to be most impactful for teams that are a little bit larger. Really small teams just don’t feel a lot of the pain that teams that are growing start to feel when Slack really becomes unwieldy. That’s another thing that I’m keeping at the back of my mind, set those expectations properly. I’m really feeling positive about this model of staying in the zone of vetting people who come into the funnel, that alternately make it into a demo with me, who ultimately get into the product to try it out, as opposed to doing the big splash public launch, let in a bunch of people, get a big spike of interest, and then a majority of them turn out, and probably send in feedback along the way that I don’t really know if I can trust because I don’t know if they’re a good fit in the first place.
Rob: It’s going more after the super human model, right?
Derrick: Yeah, exactly.
Rob: Derrick, do you remember a day maybe 5-10 years ago where you dreamt of just building a self-service software product that paid your bills. Is that why you got into this?
Derrick: I think so, yeah. My very first product that I remember throwing something together and then I literally Googled, “How do I get customers?” I just thought they would come.
Rob: Yeah. Now here you are, doing heavy hand-holding, onboarding, and conversations It’s good stuff. It’s just crazy how it changes especially as your goals change too, I think. You want to build something great and you want to build something that I’ll say is a decent sized company, whatever that means to people. I just don’t know if you can do that anymore, trying to go no touch. It’s really hard. I shouldn’t say you can’t, but it’s really going to be one in a million or something to just thread that needle and have the Cinderella story. You’re putting in the work. This is what it’s about.
Derrick: Yeah. I feel the no touch phase will come once the product market fit is extremely tight. I feel everything I am doing now—of course I didn’t come up with any of this, these are things that people talk about—going through this phase of intense hand-holding, keeping the filters on really strong, for this round of folks, of the people who put in a preorder, I sent them a questionnaire, asked a bunch of questions about what are the current problems in more detail with chat, what tools are they using, how big is their team, are these for project management, what does email look like in their company. Just a bunch of things I felt like would be good inputs into me understanding their use case, and being able to cater my demo to them, and set my own expectations on what I expect from them. Not everyone has submitted that questionnaire. Not everyone got a Calendly link to get on my calendar to then get into the product yet.
I’ll keep nudging to other people who have preordered and haven’t done that yet. I want to keep the filters really tight because what that does is ensures that I’m getting the best quality feedback that I can possibly get, to then hopefully lead to more of these folks coming through the pipeline, and getting just tighter product market fit.
Rob: You put in the kind of grinding out customer development now so that later on, you have that fit and you know that you can market it and self service it. It’s a good way to think about it. If you think about it, it mirrors very closely what we did in the early days of Drip. You were off coding and I was doing what you’re doing. I was either having calls, or doing videos, so that you could keep moving full speed. In this case, you have to do both because you’re a single founder. I’m pretty proud of what we built with Drip. It had product market fit. Once we nailed that, growth really kicked in. It’s a good kind of analogy or parallel thought there.
One of the things that you’ve done well is, you’ve built up this launch list of almost 5900 email addresses. It’s people who wanted to reserve their handle, and they probably want to follow along, and might want to use Level. There’s all the reasons but I’m curious, for listeners out there who haven’t built a lunch list yet, the first question is what’s the value of that launch list? It’s probably pretty obvious, but I talked through that a little bit and then how did you do that?
I know you have a podcast Art of Product, we should plug it here. Folks want to hear two software founders who were getting it done and building interesting products. They talk every week, you and your co-host Ben that’s artofproductpodcast.com. You have a podcast but that didn’t get your 5900 handles. Talk to us about the value you see in it, and why you spent the time to build it, and then talk through a couple things you’ve done to do that.
Derrick: I think the benefits of having that email list, it talked about a bunch. You’re going to have a certain conversion rate on your list, ultimately. The larger you can grow that list, hopefully the more customers you’ll have come out the other end. When it’s really early, I don’t know how well qualified everyone is on that list, but I know that right now I wanted that to be a very wide top of funnel, just get people onto a list so that they can have a chance of hearing about what I’m up to, and hopefully converting if they’re kind of in the camp of a good, ideal fit.
What really cranked up the number of people submitting the form was adding that scarcity piece, that reserving a handle. When I did that, it obviously has to fit with the kind of application that you have. If you don’t have something where there will be a user name, then it wouldn’t make sense to do that. I think introducing some element of scarcity is just enough to push a lot of people over to, “Well, I don’t really know, but I’ll at least drop my email in this,” they’re getting some kind of perceived value in addition to just getting email updates.
I actually don’t have great historical metrics on conversion rate of hitting the homepage to submitting, but my traffic is not that huge right now. It’s a pretty high percentage of people who land on the homepage will submit that form. It’s not like I have a huge amount of traffic coming to the website, but if I look into my analytics, I think a majority of people are either coming from Twitter, links on Twitter to Level which is where I’m predominantly talking about in the open what I’m working on day-to-day, and just direct. People who either hear about it on the podcast, or hear about it from someone else in person, or whatever, just typing in level.app and coming directly there.
I think I’m kind of playing a long ball with this, but from the get go decided I was going to be as open and transparent with the development process as possible. The thinking behind that is just, people are interested in following a journey. Starting out the Level journey with the manifesto, I think that resonated with a lot of people. It gets people curious about how this is going to all come together, and then in the process of sharing openly what I’m working on, also trying to just be useful to other people. It’s something that Adam Wathan and Steve Schoger are really good at with their newly launched Refactoring UI.
A core part of their strategy was to provide hot tips on Twitter and just be insanely valuable. Giving away a bunch of free knowledge and just stuff that is part of their day-to-day work that they can just package up and share in a way that provides value to other people. That was insanely effective for them. I’m following that same similar strategy of just trying to share a lot. I think it’s built up a decent amount of people who are just genuinely interested in the story. That leads people to when they sign up for a handle, they are more likely to tweet about it and tell it to their friends. That leads to more people signing up. It’s just kind of a nice little flywheel there.
Rob: Yeah, that’s nice. One concern that I have with that approach, especially with SaaS, it’s different than what Adam and Steve are doing, is that SaaS is a tool and people pay for it on a monthly basis, whereas Adam and Steve sell info products. They sell books and courses on the topics that they’re tweeting. There’s a tighter alignment there. I think their conversion rate will be very high and I think yours will be less. It was that way when we were doing Drip as well.
I don’t know if you remember but the first 500 people on our email launch list were mostly for me talking about it on this podcast and a couple other places. The conversion rate on those was far less than the ones that I got from other avenues. It’s not a bad approach, but it might give you a false sense of security. I don’t think you’re kidding yourself in thinking that everyone who wants to follow your story is going to sign up for Level. I want folks at home, if you’re listening to this, realize that there’s difference here.
I still think it’s a viable approach, and it’s something I would be doing the same, but you have to have it in the back of your head that these people are probably not going to convert as well as if you’re running a targeted ad campaign to only the demographic that gets value out of it. If they give you their email and they’re more of a cold lead, they almost might have a better chance if that’s a real pain point for them, versus someone who’s listening and is just like, “I want to follow along and see how Derrick is marketing,” right?
Derrick: Yeah. That’s a really good point. One thing that is in my favor that is not universally in people’s favor when they’re working out in public and sharing their story is that, the people who are potentially good candidates to become Level customers are developers, designers, founders, and that’s the people that are in my tribe on Twitter. The community that I have some degree of access to that are interested in the story, they’re interested in the meta story, they’re interested in the startup journey because there are other startup people, and this just happens to be a tool that is being sold to other startups and founders and stuff like that. If you’re building countertop installer software, sharing your story to other developers on Twitter isn’t necessarily going to move the needle at all.
Rob: Exactly. I’m curious, you had to buckle down at some point, put a stake in the ground, and make some hard choices, and decisions about the inbox. This is as you said, it’s the most critical part of the app because if it works, it’s magical, and angels sing down from the heavens. If it doesn’t, then it’s just a big point of your app that really needs to go well. How did you finally decide to buckle down and just say, “I got to make a call on this,” because I know that you’ve thought about it a lot and it was a long process there.
Derrick: I think I don’t have any other choice. I have to do this. I have to just follow my gut instinct and know that I may have to change this. It may not be a perfect implementation and it’s something that I have to fight against because now that I’ve been through Drip, Codetree, and all these experiences, I am very aware of the cost of legacy code and technical debt. Part of me was like, I don’t want to write any code unless I’m sure that it’s going to not have to change in a significant way.
I had to get past that a little bit and know that there’s always going to be a tension between writing well-crafted, well-tested code that you’re going to invest a lot of time into making it really rock solid and know that you’re potentially going to have to change a bunch of that, and rework data models, and rip out database tables, and do launch data migration, or whatever it may be. I ultimately just had to make the call that I’ve got to do this, I’ve got to get it in the hands of people, and then hopefully the mutations are relatively small, and I can just dial it in with smaller refinements, but also know that maybe it is larger shifts that need to happen.
Rob: How about the experience this time around? In essence it’s your third app, but you had two or three before that. It’s like the fifth or sixth project. You’ve had a lot of experience doing this, so reflecting on it as someone who has launched and grown things in the past. The last nine or ten months when you look back, did it take longer than you thought? Less time than you thought?
Derrick: Yeah, I think my big takeaway is this stuff, regardless of your experience, never gets easy. It gets easier in some ways, but there are fundamental truths about custom software development that still hold regardless of how experienced you are and knowing that there are some of those pitfalls that arise once you have some battle scars. The first time around in earlier apps, I was probably less concerned about scaling challenges for example, because figuring that rightly so that will tackle those problems when we get there.
Now, coming out of an experience with Drip where there were a ton of scaling challenges, I think it’s been a difficult thing that I’ve tried to stay aware of not prematurely optimizing things, or planning to much in advance for scale that I don’t really know what scaling challenges will look like, so try not to invest too much into over-architecting stuff. It gets easier in some ways but then also gets harder in other ways once you have more experience under your belt.
Rob: Yeah. I made a mistake or just a judgment error after HitTail as we started Drip. I thought that it would go faster because I knew more, I had more experience, and more knowledge, and it didn’t. I remember being very frustrated by that for a year. Your mindset and your expectations can really negatively impact your experience of an event.
Derrick: Yeah.
Rob: That’s what you’re saying, don’t get overconfident. Parts of it get easier and you do get better at it, but I don’t think you get faster at it. There is a difference. Look at David Cancel, who’s on his fifth or sixth, all have been successful and exited. Right out of the gate he raised $5 million, or $10 million, or $15 million, it was a huge number, right out of the gate as they were starting. He’s been grinding on Drip for years now, and yes they have traction now, but the first one or two years, it was not getting the traction that I would have expected from a founder of his experience and caliber. Even Jason Cohen with WP Engine. WP Engine is huge now. Remember him bootstrapping and toiling away for a year-and-a-half or two years before anyone had heard of it? It’s crazy.
Derrick: Yeah. When I look at the product, I’m trying to keep Level very simple and elegant. I looked at the product today and I’ve been spending a lot of time in it obviously using it myself. The mechanics of this feels very simple. On the one hand I think, why did it take me so long to arrive at something that feels so simple? It feels like given all this time and all this effort, it should be something that has thousands of dials and tweaks to it, and just like this very complicated system. Just looking at a product that looks simple on the surface doesn’t mean that there weren’t thousands of hours of thinking, and laying on the floor, staring at the ceiling, trying to figure out the most elegant way to execute this. It’s even hard for me sometimes looking at my own product to say, “Why did this take so long?” but it just does, because these are hard problems to solve.
Rob: For sure. Well sir, I think we’re at time. Thanks so much for coming back on the show.
Derrick: Cool. Thanks for having me.
Rob: If folks want to keep up with Level, that’s at level.app, and if they want to hear you talk about it every week, it’s artofproductpodcast.com, or they can head to iTunes, Stitcher, wherever fine podcasts are sold. Have you gotten into Spotify yet?
Derrick: We are in Spotify. Actually, that just happened. We use Fireside for hosting our podcast and they just did it one day. I just went in and I’m like, “Oh, I guess we’re in Spotify.”
Rob: Yeah, that’s cool. Good for you. Folks have been requesting that we get in Spotify and I was like, “How do we do that?” [00:37:57] research [00:37:58] and appear that because we self host on a shared hosting thing with a CDN over it, we don’t use any of the fancy big hosts that kind of do it all for you. It looked like we were going to have to move hosting, copy all the files, and do 301s, and I was like, “I’m not sure this is worth it,” but as it turns out, we missed a link to the first look around. So when I submit our RSS feed 15 minutes later, we were in Spotify. I was like, “Yes. [00:38:22]. It’s great.” Well, thanks again sir for coming on the show.
Derrick: Thanks for having me Rob.
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Episode 407 | A SaaS Pricing Conundrum, Subdomains, Building an Affordable MVP, and More Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us , Rob and Mike answer a number of listener questions on topics including SaaS pricing, subdomains, and building affordable MVP’s.
Items mentioned in this episode:
Welcome to Startups For The Rest Of Us. The podcast that helps developers, designers, and entrepreneurs to be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re here to share out experiences to help you avoid the same mistakes we’ve made. Where this week, sir?
Mike: You remember a few weeks ago when I said I had gone unto meetup.com, and had started a Dungeons & Dragons group, and gotten a couple of people together, and started playing a campaign?
Rob: Indeed.
Mike: Because I’m signed up for and have a paid account now, they started emailing me about various groups, like, “Hey, you might be interested in this,” and I was told that I should join the Massachusetts cannabis marketing and sales group.
Rob: You totally should. That’s a growth market, man.
Mike: Yeah.
Rob: Is it legal in Massachusetts?
Mike: It is. Although I don’t think anybody’s licensed to actually sell it yet, that happened two years ago, they said, “Yes, this is now legal in Massachusetts for recreational use.” but they still had to go through all these regulatory hurdles, and people had to get certified, and all these other stuff. They’re like, “Yes, you can use it recreationally, but nobody can sell it to you.” that was the situation for a couple of years, I think that they’re supposedly sometime this summer, starting to do that but I don’t know. Maybe the deadline has already passed. I don’t know.
Rob: Because I was back in California, I think it was when I was at SaaStr, so it was probably, February or March of this year, and it’s legal there. It’s been medically legal for years, so they already have the dispensaries, and they legalized it. I think it was maybe, less than a year later, they were allowed to sell it for recreational use.
I was walking around at night with some friends from the conference, co-workers, there was a lot of pot smoke that you could smell, and it was like, “Oh, yeah.” Of course, I was looking around like, “Oh man, they can’t be doing that, right?” it’s just this sense you get when you smell that. But it’s like, “No, no. It’s just legal, and you can do it on the corner.” It’s such a trip, such a trip. It’s going to be weird to get used to. The way it’s going, it’s going to be legal in all 50 States, eventually. It’ll be an interesting thing to adjust to.
Mike: Yeah. Definitely can be interesting. I just found it funny that they’re like, “Oh, you should join this group.”
Rob: Totally. They know who you are, Mike, deep down.
Mike: I guess, maybe. I don’t know. How about you?
Rob: I’ve been doing some smart home stuff which is something I’ve been interested in for years. But since we had a rental for the past couple of years, obviously, I wasn’t going to put a bunch of stuff in a rental. I now have several Alexas—oops, I just activated.
Mike: We should leave this in. This is good radio.
Rob: Yeah, I have several Echos in the house. I need to, not say A-L-E-X-A. I’m enjoying them. I’m enjoying that you can use them as intercoms because our house has a lot of stairs. There’s three or four stories—depending on how you count.
Mike: I found out about that the other day that you could use it as an intercom. I didn’t know that you could do that. You can just drop into some other room in the house. Although I was told there’s a—not a security loophole or something like that—but something associated with it where you have to disable it by default. Otherwise, if somebody in your contact list, they know you have one, they can drop into your living room and just talk to you through the intercom, I think over the internet, and I didn’t know that.
Rob: Oh, interesting.
Mike: Yeah. It doesn’t sound good.
Rob: Yeah. I enjoyed doing it most from the Echo app on my phone. You can just click a couple of times, and then boom, you’re just speaking out of one of the Amazon Echos. Our kids’ playroom is way downstairs, and it’s easier than running down and telling them dinner is ready. It’s pretty nice.
I’ve definitely bought into the Echo ecosystem, and I like their direction that’s going. I got a Nest for the first time. I tried installing Nest at our old house, but it wasn’t compatible. I have a Nest here, and I can now control that of course with the app, and it’s smart thermostat, and that’s fun. You can even tell the Echo to adjust the temperature, I believe. I haven’t activated that yet.
We moved into this house, it’s in the Midwest, it was built right around 2000, and they wired the whole thing for in-home speakers. There’s speakers in almost every room. There’s this big central places where he had a receiver, a tuner, CD player, and all this stuff. I’m thinking, in the 90s, that’s what I would have done. When in college, I would love big speakers from dorm room to dorm room, as I moved around or apartment to apartment, and you had your receiver, you had your amp and all that stuff.
Now I went online, and I was like, “There’s got to be an easier way here. I want to be able to stream everything.” I researched it, and of course, Sonos is the leader in that space. While I don’t love how proprietary Sonos is, even down to the fact that I can’t just stream from Spotify through my Sonos but I believe that you have to use the Sonos app, and you […] it into your Spotify account like, “I don’t want to use the Sonos app.”
Mike: Oh, geez.
Rob: I know. I know. I need to double-check that because they may have opened it up, but last time I looked, you weren’t able to kind of just airplay it–the equivalent of that through the Sonos thing. But anyway, they have this thing called, Sonos Connect: Amp. The Amp part means it has an amp in it that you can connect to speakers. I just got one, just as an experiment. I put in on the first floor, and sure enough, it takes the place of all of this equipment he had, the speaker wires go in the back, and there’s volume knobs on every wall in the house.
I was going to bail on it altogether and just not do it. But Sherri’s like, “No, no, no. If we have people over, there’d be multiple…” because you can do multiple floors, and there’s all this stuff. All that to say, I reluctantly implemented Sonos in this smart home thing, but man, it’s cool. You can tell your Echo to start this on Spotify on the Sonos, and it will do it, and you go to the wall and turn it up. It’s magical, man. It’s pretty interesting. It feels like we’re living in the future.
Mike: That’s pretty cool. I bought a new amplifier maybe two or three years ago because my old one was 12, 15 years old. Actually, it was more than that. It’s probably close to 20. It still works great. It’s just that it didn’t have any of the connections. It didn’t have an HDMI connection. It still had all the component outputs or inputs and everything else. I couldn’t hook it up to any new equipment that I had, like a Blu-ray player and stuff like that. I was like, “Alright, fine.” I brought it down, and I bought a new amp.
I was looking at all the different options, and it seemed to me like a lot of that type of equipment, is very much like car technology where they’ll build something into it like Spotify or something like that, and it’s obsolete almost the second you buy it. They’re terribly useful. It sucks that it feels like that type of technology is still on that trend, where everything is proprietary, and it’s so hard to connect stuff, and it’s expensive too, but at the same time, it doesn’t really wear out. I still got speakers that were almost 20 years old, and they’re still in great working condition. I don’t really have any need to buy new ones, except for the fact that if something breaks. That’s it.
Rob: Yeah, that makes sense. I agree. I was concerned when I bought this Sonos. I had to research it because I was, “Do they even support speaker outputs anymore? There’s exterior speakers in the patios, is it going to drive those? Is it going to connect to all the stuff?” Sure enough on the back, it looked like it had the right ports and it wound up doing it. They’re called banana clips.
I agree. Trying to interface this newfangled technology with stuff that has existed for 30, 40 years, maybe even longer. I remember twisting speaker wires together. I had four speakers in my dorm room. Certainly, it was quadraphonic, it was a stereo, but I would twist them together, ran them into the amp, and do all the stuff, and that technology is now having to interface with, like you said, this Spotify stuff.
I did evaluate not doing Sonos. There are, obviously, other brands that have streaming music devices that have amps built-in, but they just all seem, like you said, bolted on, and antiquated. I don’t know. It’s interesting to see how this is going to shake out. I’m interested to see how it’s going to shake out over the next few years.
Obviously, I’m investing in ecosystems now. I’ve been on the Alexa ecosystem now. I’m in obviously now, on the Sonos a little bit. I think I’m probably going to have to get at least one more […] perhaps too because there’s different zones and stuff. But I’m trying to pick market leaders because I don’t want to buy the Betamax, and suddenly have to bail on it because they just killed the line or whatever.
Mike: Well, that just means you’ll have to find the one that is selling porn with it, that will be the winner.
Rob: I do think, I might need to stand corrected because I opened Spotify while we were talking, and it does look like I can just connect to the Sonos downstairs, and just stream it through there instead of using their app. I’ll test that later to prove it out. I know for a while they didn’t do that. But if it does it now, they must have added it in the past whatever, six months or something.
Mike: It seems to me, for that type of technology, anything that comes to streaming, you just want something where you can connect to it with Bluetooth or something like that, or with even just a cable, and then from there, it just acts as a dummy piece of equipment that just does its thing, and that’s its sole purpose is, and then you plug other stuff into it. It seems most people would really just want to do that.
My wife used to work at an electronic house, and they had all these high-end stereo systems going up to $100,000-$150,000. Don’t get wrong, they were beautiful, but the reality is you’re going to spend that much money on a stereo system for some downstairs place. Their target market was people who had nothing better to do with their money. Sure, that makes sense, but I think for the average user, it doesn’t matter that much.
Rob: Yeah, that’s the thing. Like you sad, I wouldn’t want to use a cable because the Sonos is in a cabinet set away but Bluetooth or I believe it’s just via wifi because it connects to wifi obviously, and it had its own identity. Once I […] it connects over that. I’m not Bluetooth-connected to Sonos at all. The phone just know where it is.
Mike: Yeah.
Rob: With that, should we do a whole episode?
Mike: We could talk about all the different problems of those too. There was some kid’s device that was out there that connected into the WiFi, but it also would record pretty much anything, and it would send it back to the servers to the company that made it, it wasn’t encrypted, and it was using it to do voice recognition. They were basically collecting voice data from kids. It was like, “Oh boy. That’s not good,” and it’s all not encrypted either. That’s a big problem.
Rob: Yeah. That’s the thing too. The IoT is the term for this—Internet of Things. Everything is going to be on the internet at some point, is what they’re saying. The IoT devices are much like the Nest and the Sonos and even smart toasters, smart microwaves, smart fridges, and all the stuff that’s supposed to be coming.
That stuff is said to be a hacker’s dream. Most of it, it’s super insecure. Some of it, if it doesn’t get patched, then it’s easy to hack. Even a lot of it that is patched is easy to hack into. They’re saying that’s the coming wave of hacks. That’s going to be the zombie nets of the future. Because that’s how folks do DDoSes—they go out, and they take control of a bunch of old PCs that are unpatched, and then they do attacks, distributed denial-of-service, from all those things. They’re saying that the Internet of Things is going to be tenfold or a hundredfold the number of devices. It’s going to have that much power.
Mike: Yeah. I shudder for people who have to deal with those types of problems.
Rob: Seriously, yup. Cool. Let’s dive in. We have some listener questions. We have some comments on some prior episodes. Our first comment is on episode 403 which was titled, Should You Love What You’re Working On? and it’s from Martin. He just came to startupsfortherestofus.com and entered a comment at the bottom of episode 403’s blog post.
He said, “Hi, Rob and Mike. Thanks for another great episode. When you guys talked about love versus opportunity, I was reminded of the idea that it can take hard work to cultivate a passion. If I remember correctly, Cal Newport talks about this idea in one of his books. I don’t know about you guys, but I’ve noticed that there are a lot of things where you need to put in the work first before you start to enjoy them. I’m currently working as a software consultant, and I remembered that the reason I picked up programming in the first place was because as a kid, I was into video games. Now many years later, I really enjoyed developing software, often more than playing games. I think that’s true of many things. For example, when you’re just starting with any kind of sport, and you suck at it, it’s often not that great, but once you put some effort into it and you start to improve, you suddenly get why people enjoyed doing it.”
I think Martin has a good point. Thanks for posting, Martin. This is how I felt about playing music–playing the guitar. When I first started it, it was really hard, and then definitely the better I got, the more I wanted to play my guitar. What do you think about this?
Mike: I remember reading about this. I think that Josh Kaufman wrote a book about learning different things. I’m pretty sure he had a graph in there that showed that. There’s a skill level versus enjoyment. When you first start doing something new, you suck at it which is to be expected, but you don’t enjoy it at all. Then once you get a little skilled at it, then you really start to enjoy it because you feel you know what you’re doing, so you’re on the cusp of always learning this new stuff, but you’re also enjoying the journey. Once you get much more advanced, then it’s about putting the time and effort to practice, and get the muscle memory or the mental connections made so you don’t have to really think about it when you’re doing it. Pretty sure it was Josh’s book that—I can’t remember the name of the book off the top of my head—but I think that that was in there.
Rob: It’s called The First 20 Hours: How to Learn Anything Fast.
Mike: Yes, that was it. Yup. It’s a fascinating read, too. If you are interested in learning new things and the process of learning new things, I’d definitely recommend picking up that book and checking it out. He goes through several different things that he learned, like the ukulele, sailboarding, and a couple of other things. It’s just fascinating how he learned about how to learn stuff.
I always had a problem with that when I was in college. When I got to college, I just authorized, “Go ahead,” relied on my natural ability to just remember things, pay attention in class, and then do well on tests. When I get to college, you have to do the homework. That was always a problem for me in college, but it worked itself out eventually, but it took years for that to happen.
Rob: Yup. For sure, I felt the same thing. The First 20 Hours by Josh Kaufman. It’s also on audible which is I believe how I read that book. Thanks for the comment, Martin. Our first question of the day is from Michael Needle. He’s from alltheguides.com. He says, “Mike and Rob, first, thanks for all you do. I previously called in about building a marketplace, alltheguides.com, to connect adventure travelers and guides. I’m close to finishing the platform, and I took your advice on building one segment first. I went with guides to have providers ready when clients come,” which is the way I believe we should have recommended that you do. It’s a two-sided marketplace, and we said when you start with two-side marketplace you have to get that one side done first.
Now back to his email. “Now ahead of the platform launch, I want to make sure I can bring the clients to the site, the customers, the consumers. I thought I’d follow your advice by starting an informative blog in order to get emails.” Adventure Travel Ideas, I think is the idea of the blog. Here’s the question. “I already have a landing page up from my platform. I assume it would be better to have the lead gen on a different domain as opposed to a subdomain. I just assume that subdomains will be less likely to draw initial visitors. Am I wrong on this? Or if I’m right, and I should go with a different domain, what is the best way to nudge my list towards the platform once it’s launched? Thanks again, guys. You provide invaluable advice and inspiration.” What do you think, Mike?
Mike: I think there’s a natural inclination to believe that you should put your landing page and stuff like that on some sort of a subdomain and that’s how you’re driving traffic to them. But the reality is, I think is that if you’re doing tour guides in a marketplace like this, I don’t think people necessarily really care about the subdomain. I think what really comes into it with the subdomain is that you’re trying to establish new website according to Google, and do all the SEO, and the site ranking, and get that up based on how Google looks at it.
You could instead focus that energy on a subdirectory in your main domain and use that to essentially focus your efforts and increase the authority of that domain versus trying to do it with one subdomain and then another— that’s probably the approach that I would go with. I guess there’s a few different examples I would point to like Craigslist, Angie’s List, and Reddit. Reddit’s got all those different subReddits and stuff in it, but they’re all under, most of them in different subdirectories.
Rob: The reddits? Yup. It’s reddit.com/r/whatever, /startups or whatever.
Mike: Right and that’s not necessarily a two-sided market, but Craiglist is. Based on the location, they will have subdirectories, which are a geographic location, but I wouldn’t worry too much about the subdirectories, at the moment. I guess I’m curious to know whether or not you’re trying to use those subdomains as like the location, like city name, or something like that. Maybe it would make more sense in that case, but at the same time, you could also just use it like it as a different subdirectory as well, and you’ll benefit, for the site authority, through that.
Rob: That’s the thing, and now Google has come out and said, “Oh, subdomain, subdirectory, there’s no difference.” I still think there’s some difference. I still believe, deep down, that subdirectory is better for SEO. I do like your point there. I think if you are going to start a blog, I would try to do it in subdomain, if possible. It’s not always possible to do that. You might need to do reverse-proxy and do some things if you’re running WordPress because you don’t tend to want to run WordPress on a production app server. When I say don’t tend to want to, I mean don’t do it. There’s just too many security holes.
If you want to host it somewhere, I’d go with somebody like the VPNGINE or Pagely or whatever. I think I may have misspoken earlier and said subdomain, but what I mean was subdirectory, if you can do a subdirectory, that’s what I would do.
I don’t think this matters actually, that much. When using a different domain for the lead gen, I would probably lean towards subdirectory, and if you need to use a subdomain, I don’t know—its just apples and oranges, this is small stuff. If you’re going to drive ads to it, it doesn’t matter, nobody cares, they’ll just click on the ad, and they’d go see it. If you’re going to try for SEO then like Mike and I were saying, I would lean towards subdirectory, if possible, I think it’s pretty clean, but in all cases, I don’t know that it matters that much.
Mike: Yeah. The one really nice thing about having everything underneath the same domains—and you’re not dealing with subdomains—is redirecting people back and forth, and then also dealing with the fact that, like any tracking analytics where you’re trying to track like, “Did somebody hit this subdomain and then this other subdomain?” and then you got cookies back and forth between them. With marketing tools, it becomes an absolute nightmare.
You’re much better off just having it all on one domain and then you don’t have to worry about that because the cookies are going to be able to work all on that domain between different directories, versus, like a Google Analytics tracking code. Something as simple as that is going to be an absolute nightmare to work across multiple domains.
Rob: Yeah, and it’s possible, you just got to know how to do it. It’s not out-of-the-box trivial. Sharing cookies is a pain, and then you’ll get the, “Hey, this person came from one of your domains to the other, and they show up as a new visitor.” It’s not ideal. Anyway, I hope that helps.
Our next question is from long-time listeners and friends of ours. Folks that we’ve known that have come to MicroConfs–Dan Taylor and Simon Payne. Dan Taylor runs appsevents.com, which is an events company that runs more than 300 annuals events. Simon Payne was the co-founder of Lead Pages. They both live in Prague, actually, in Czech Republic. Simon was working on an app with Dan Taylor, and Simon has also launched a WordPress button called Convert Player. That’s pretty cool.
Anyway, they wrote in. They said, “Hi, Rob and Mike. Two long-time listeners here, Dan and Simon. We’ve developed and released a SaaS app called EventsFrame. It’s eventsframe.com. It’s ticketing and attendee management system, with fixed low monthly pricing for unlimited events and unlimited attendees. We’ve moved all of my company, AppsEvents more than 300 annual events to this, and done a full public launch last month. We already have paid sign-ups from our listings on sites like Capterra, some content marketing, and some basic Facebook ads, which have converted this in paying customers, which is a good sign. We’re doing an AppSumo launch in a couple of weeks to get a bunch of users on this system, which is taking a lot of our focus, but we’re planning for how we grow this long-term, as Simon and I are focusing all our time on this project.”
“Our question is on pricing. As you know, systems like Eventbrite take a percentage of ticket price, and most systems follow a similar model. With AppsEvents, I was spending thousands of dollars a year on Eventbrite fees. We want to go for a fixed price for unlimited events and attendees. Our initial idea is $97 a month. Now the issue with this is that people running one several small events might prefer a percentage of ticket price, as there is no upfront cost. And on the other end, large event producers would pay a lot more than $97 a month,” or I think he’s saying they should pay a lot more than that cost they’re getting more value. “We guess some pricing tiers could be good. But any ideas to help with our process would be greatly appreciated. All the best, Dan and Simon.” What do you think?
Mike: This is something that I actually looked into pretty heavily and struggled with several years ago. Back when I was running AuditShark, one of the ideas that I had come up with was, ironically, Bluetick, because I was doing a lot of outreach to people and I just needed to follow-up with them and keep on them. But also, as a side note, I was also helping out on the sponsorships side for MicroConf. For that particular problem, I found that I had to do the same thing.
I said, “Oh if I had this product or tool in place that would allow me to do that outreach as an event organizer that would help me out a lot.” I looked around. A bunch of different things didn’t really work very well for what my use case was. I said, “Well, could I build this? Is this something that I could basically move away from AuditShark?” because at the time, it wasn’t really on the best path, and I recognized that at the time.
Anyway, I looked into specifics of whether or not I could target event organizers with that. What I realized was that there’s a wide range of types of event organizers. Some of them, that’s all they do, they organize events like the AppsEvents company. They will organize hundreds of events every single year, and then there’s ones like MicroConf where we do it a couple of times a year, and that’s it.
For ones like that, a monthly pricing model really doesn’t work well because of the fact that you’re only running a couple of events. If you’re doing it on a regular basis, sure, it makes a lot more sense. But as you pointed out, it makes a lot more sense to just do with a percentage of the ticket price for those types of customers.
The other thing I would look at is, Eventbrite, yes, they do charge a percentage of the ticket, but they also give the event organizers the ability to pass that cost onto the attendees. That’s actually what we do with MicroConf. It’s only a couple of percent, but at the same time, it raises the ticket price by that amount. The question you have to ask is, “Well, as the event organizer, is that something that’s going to turn away people? Are they going to, not buy a ticket because they have to pay that extra fee?” That’s again, for the event coordinator to decide. But your problem is, how are you charging?
For us, Eventbrite is I’ll say, “free” and that we’re passing those cost on, and then on the other side, we’re paying the cost of the payment processing, which we would have to pay, regardless. Whether Eventbrite handles it or we do it through PayPal or Stripe or whoever, that fee has to be paid. But our payment to Eventbrite is basically, covered by the attendees buying those tickets, which make it free for us, which makes it a lot more attractive than a $97 a month plan or even a $50 a month plan. Coupled with the fact that, we also don’t run more than a couple of events a year. Why should we be paying for that over the course of the entire year if we’re only running events in a certain time window, I’ll say?
That’s exactly the problem that I ran into when I was trying to identify, “Well, how can I build this email follow-up product aimed at event organizers?” Event organizers, if they run a lot of events, awesome. They’re a good target. But if they don’t, then having them pay a monthly fee is not going to work.
Rob: Yeah. Basically, what Dan and Simon are talking about doing is doing pricing innovation in the events space. While I think it certainly saved Dan money from a customer perspective—he was paying Eventbrite thousands a year—I’m not sure it makes sense to do this from a business perspective.
There’s a reason that most of these events software companies charge the way they do. The reason, as you’ve laid it out, if your event is free, you don’t pay EventBrite anything. If you only sell 20 tickets, and they’re $5 each, then I believe you pay Eventbrite 2.5% of that. If they do the processing, they charge you 3% fee, payment processing fee or we use PayPal, and obviously, it’s whatever it is, 2.9% or 3% there.
Or, if you sell $100,000 worth of tickets in a year, then yeah, you do pay $2500, so I get the […] Eventbrite. It makes sense from a customer perspective of being like, “Man, I’m paying EventBrite so much money,” but now that you’re on the other side of it, and you’re running a business, my thought is like, “Yes, that’s how you want it. You want it so that the people who are getting a little bit of value out of this system aren’t paying that much for it and it scales up perfectly linearly with how they do it.”
If you sell $100,000 for the tickets, you’re probably making a chunk of money. We can argue about whether $2500 is too much money, but you definitely are getting quite a bit of value out of the system if you’re selling $100,000 worth.
Trying to do pricing innovation is a challenge. Is it business model canvas? That something that if you read that book, do you remember the book?
Mike: Yeah, I remember it. There was a whole worksheet that went with it.
Rob: Yup and that talks a lot about trying to do pricing innovation. I don’t know if it has practical enough tips to help you sort this out. But I will say that I tried to innovate on pricing in the early days of Drip, and instead of doing per subscriber just like MailChimp and everybody else is doing, I tried to do new subscribers per month, and it was a bad idea. Not only did they confuse people, but as we started to scale up, we were not growing nearly as fast as we should have.
That’s the thing that you’re going to run into is you’re going to have people who come and are selling half a million dollars’ worth of tickets on your system and they’re going to be paying $97 or even if you do tiers, it’s not going to be that much. They’re not going to be paying you 2.5% of $500,000.
I think since people are used to this, and it is a lucrative model. If anything, you could try to be the low-cost provider which I don’t think is a terrible idea in this space. I don’t know enough about the whole space. I know that EventBrite, yes, it does feel expensive to a lot of people, and it’s clunky, so you have those two things. They have a ton of features, but they’re a little more expensive than everybody wants them to be, and they’re arguably quite a bit harder to use, although they have a lot of features.
This is like going after a QuickBooks or InfusionSoft or Marketo—kind of going after that. If you make your software infinitely usable and slightly less expensive, but you still keep the same model, maybe only try 2.5%, I don’t know. I know you have other bootstrap competitors around you, look at what they’re doing. That’s probably where I would start is doing just a big survey of all the pricing structures of all the events SaaS apps, and mapping that out on a big sheet of paper or mind map or something, and trying to think that through.
I think in the end, you are going to want to be a percentage of revenue is my guess, because otherwise, you’re going to constantly have this problem. Try to think if there’s any way around it with tiers, try to think creatively. It’s like you could have a free tier or you can’t charge for events, and then you could have your $50 a month tier where you go to a certain amount of ticket sales. In essence, you’re taking a percentage, but you’re not, you’re just having tiers of it. That would maybe be the only other thing that I would consider. But man, just taking 1.5%, 2.5%, it’s so clean. It makes your pricing look so clean. It’s simple, and everybody understands that.
Mike: I think the problem that you just alluded to is that, depending on the size of the event that you’re dealing with, if it’s 5 or 10 people, you might have one price tier, and then if it’s 50, you could have another. Whether or not you deal with those, like what’s the price point of those? If it’s $25,000, but they only allow five people in it, is it a free account? Depending on the value that you’re providing to them, that’s really what you’re pricing should be based on.
I think you almost get into this territory of, you have an unlimited number of pricing tiers because how high could those ticket prices go or what is it that you actually basing it on? Is it the number of attendees or is it ticket price? Or is it a combination of the two? Once you get into that territory, it gets overly complicated, and people don’t want to deal with it because they’re like, “This pricing model is too confusing for me. I feel like I’m going to get screwed, so I’m going with the competitor because I understand it.”
Rob: Thanks for the question, Dan and Simon. I hope that was helpful and I definitely wish you guys the best of luck with EventsFrame.
Our next question is from Alex, and he says, “Hi again. Thanks for all the great content. I feel like I’m in a bit of a dilemma. I have an idea that I would like to turn into a business. It’s for a job site. I have the requirements, more or less hammered out to the point I can have a developer build it. I’ve recently been in the process of getting quotes from various companies, and freelancers to build it but I’m hesitant to make this jump. Aside from the inherent risk of it just failing, I’m concerned I will spend all my money on the MVP then quickly run out of money to fund any iterations on the site. I don’t know anyone willing to help me build this for free, and I also don’t know the first thing about raising money or how to prepare for that. I guess my question is, how would you approach building an MVP in the most affordable way?”
One thing I’ll throw out before you dive in Mike is, you’ll not be able to raise money, maybe from family and friends, but you’re not going to be able to raise money without a working app these days. It’s just kind of table stakes. Although he asked us, “How would you approach building an MVP is the most affordable way?” I don’t know that’s a question we should answer. I think the question we should answer is, how do you validate this more before building an MVP. Would you agree?
Mike: Yeah, I would agree. That’s the next step is like, what is the MVP? What question are you trying to answer? The question I think you’re trying to answer is, “How do I know if I should dump this money into this type of product?” I think the answer to that is the same thing that I did with Bluetick. Go to balsamiq.com, and buy a copy of Balsamiq for $80, and mock everything up. Then go try, and sell that to people, and see if people are actually interested in buying what it is that you have.
That will do a couple of different things for you. One is, it will help you find the types of people that you need to talk to, and the second thing it will do is, it’ll give you enough information to say like, “Is this something that people would actually pay for?” and that’s the answer to your question is, if you can get enough people and find the market for it and tap into a channel of people to talk to, to get them excited about it, and find out if they’re going to pay for it, then sure, go for it.
But if you can’t get past that part, if you can’t find the people to talk to, it’s never going to work. You’re just not going to be able to turn it into a working product, regardless whether you have code written or not. That’s not the problem. The problem is trying to find those customers and make sure they are willing to pay for it. There’s obvious concerns here about, Alex’s voice about, “I’m concerned about making the jump because of the risk of it failing,” and that’s how you make sure that it’s not going to fail.
Rob: Yup, I would agree with that. I think the question you need to ask yourself is, “How can you validate this before dumping a bunch of money into it and doing as much of that as possible?” Sometimes, an MVP is not even software. We’ve talked about this in the past. An MVP might be you with an Excel spreadsheet or a Google spreadsheet. It might be you manually writing things, taking in a list of keyword someone gives you, manually running an algorithm on them in Excel, and then giving back the keywords they’re most likely to rank for. That is basically what I would have done if I had built an MVP for HitTail, as an example, or any keyword tool.
There are ways to do it without needing to hire anyone to write a line of code. My second book, which is a collection of essays, is called Start Marketing The Day You Start Coding, but now, I think it’s Start Marketing Or At Least Validating Well Before You Start Coding. With Drip, I had 11 people who said that they would pay $99 a month for what we were going to build before we broke ground on code. I wanted 10, happened to get 11, then Derrick started writing code.
I know for Bluetick you got pre-orders. There is a lot of hustle that can happen up front. It’s hard work. This is the stuff that, “Well, is anyone going to trust me? Who am I? Is anyone going to trust me if I don’t have the software after the software ?” No, that’s an excuse. Yes, it would be better if you had all the software, and could just start marketing it. But that’s not the case.
I think your concern is valid, that going out and building an MVP, it’s very, very unlikely that’s going to have product fit, so you’re going to have to iterate. If you don’t have the money or the time or the skills to iterate on that, then you need to figure out how to get to the point where you feel more confident.
Here’s the thing. If you try to recruit a developer to build it for free—we’ve talked about this in the past—nope, no developer is going to want to do that. If you go to a developer and you say, “Hey, I built all these mockups, I have 25 phone calls, and I got 10 pre-orders, they paid for a quarter, three months of service, and they’ve all committed to—assuming it works and does what I say—it’s going to be $50 or $100 a month after that, boom, we’re going to be at $1000 MRR,” yes, that’s a lot of hustle, and it’s a lot of work, but that’s how you recruit a co-founder or at least a developer who is willing to build it maybe for an equity share or something like that.
I like the way you’re thinking about it. I’m glad you’re hesitant to just dive into the MVP, but I don’t think you should look at building an MVP as software in the most affordable way. I think you should look at, not automating them, doing stuff manually, and think of, “How can I possibly validate this?” The first step is going to be customer conversations, then it’s going to be trying to get pre-orders, then it’s going to be doing it manually until the software’s built, then it’s building a crappy software MVP, and then it’s doing a better job. I bet there’s a lot of steps between where you are today and basically, paying someone to build a complete SaaS app.
Mike: I think part of it just stems from the classic misunderstanding of what an MVP is because MVP has the word Product in it, and that’s not really what it means. I talked about this in my book, Single Founder Handbook, and I quote Wikipedia from […]. It says, “An MVP is not a minimal product. It is a strategy and process directed toward making and selling a product to customers.” What you have to understand there is that it explicitly calls out an MVP as a process, not as a product. Building a product is not your MVP; answering a question is what your MVP is. The first thing that you have to start with is, “What is my question?” and here it’s, “How do I know that I need to pay people to develop software?” It’s all the stuff before that that Rob just talked about, like talk to customers, find out what they really want, and whether they’re going to pay for it, that’s all the stuff that you need to do..
Thanks for the question, Alex. I hope that was really helpful. I think that about wraps us up for the day. If you have a question for us, you can email it to questions@startupsfortherestofus.com, or you can send us a voicemail by calling 1-888-801-9690. 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, and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 366 | Building an MVP as a Non-Developer, Gaining Traction with Stair-Stepping, and More Listener Questions
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike take a number of listen questions on topics including bootstrapping an MVP as a non-developer, gaining traction with the stair-step approach, and more.
Items mentioned in this episode:
Transcript
Rob: In this episode of Startups For The Rest Of Us, Mike and I talk about building an MVP as a non developer, gaining traction with stair stepping and answer more listener questions. This is Startups For The Rest Of Us Episode 366.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. Mike, I have a question for you before we start the episode here. What is the lamest and/or most embarrassing domain name that you have ever purchased?
Mike: Lamest and most embarrassing, I don’t think of any that I got that were embarrassing. I’d say probably the lamest was dotnetforumsoftware, I think it was.
Rob: It was like dotnetforumsoftware.com?
Mike: Yup.
Rob: I don’t remember offhand but I had some when exact match was such a big deal and the dashed exact match was not as good but almost as good, I had some horrendous, like five and six-word dashed dotnets. It’s like business-credit-cards.net or something like that. It was when I was hacking a lot of SEO stuff and just trying to figure out how to rank stuff. Most of those wound up being AdSense sites that made back their initial investment and then not much more because Google updates came along but there’s probably some pretty embarrassing names in the boulevard of broken dreams there.
Mike: Yeah. I can definitely think of a bunch that I don’t remember whether I’ve registered them or not but they were kind of non starters because they were either hard to pronounce or could be very difficult for people to hear it and associate a domain name with it. They were just bad ideas. I think one of them was bitclinic.com or something like that. I don’t think I ever registered that one but there’s a whole list of them that I came up with and they’re just disqualified for a number of different reasons.
Rob: Especially once you start hosting a podcast, or doing public speaking, or going on interviews, you realize how important the pronunciation and the ability to spell something in one way that there’s no ambiguity over which version, if you’re using a homophone or whatever, which version of the word that you’re using.
Mike: Yeah, God forbid you register penisland and try to sell pens because that’s just not going to work out.
Rob: Penisland, did you do that?
Mike: No, I didn’t but I remember reading somebody who did.
Rob: Got it. Cool. What’s going on with you and Bluetick this week?
Mike: I’m still working on that code refactoring that I started on last week or was working on last week and it’s just turned into a nightmare. I was going through a bunch of changes and I made them and then a lot of my unit tests failed and then I had to start digging to figure out why and then realized that there’s some architecture changes that need to be made so there’s code refactoring. I’m like, “Oh, this is way more complicated and way more involved than I thought it would be.” A lot of it is because there’s stuff that’s buried in the code that I learned it all like a while back and then left it out of my brain for a while and it was just brain dumped and I’ve forgotten most of it.
Now, I’ve had to go back and research some of the stuff and say, “Okay, how does this actually work again?” Because like I said, it’s going to be kind of re-factor and re-architect so it just makes it difficult.
Rob: Yeah. This is to give yourself a multi user capability. Is that right? Like folks can have multiple logins and pay per seat?
Mike: Yup.
Rob: Cool. This sounds like something that’s pretty important especially based on our conversation last week. This is nice expansion revenue to get from folks who are using it. You’ve had this request a lot along the way and I know that you’ve avoided building it because you knew there was going to be some complexity around re architecting things.
Mike: Yeah. It wouldn’t be so bad except that a lot of the services layer is all hard coded for the user account. All the database changes and stuff are in place, the services layer is all really tied to either the user or the account at this point so that’s still reasonably good at this point but the problem is that authentication mechanism on the frontend, I’ve got to pass the account information up and down the stack, which if I could kind of separate that out and use it like an object to pass in as opposed to a user ID. It would make things so much simpler and it’s not that simple right now.
Rob: Yeah, it’s a bummer. It’s hard to do something you know you need to do but then it takes longer than you want it to. This is where the founder impatience kicks in of like, “I want to be moving faster but if I rush it, I’m going to cut corners and then I’m going to regret it later.” So how do you deal with that? I know the feeling, man. This is the time to hammer it out as quickly as possible. Drink a lot of caffeine and listen to some death metal.
Mike: I forgot when it was, it was earlier this week but I was looking at the stuff that I had to do and I’m like, “Man, I really should be switching over to doing the marketing stuff.” And I was like, “I know if I do that, then I’m basically leaving this half done and it’s going to take me longer to get back through it.” As you said, it’s got to be done right the first time. I figured I’d just pile through and made the conscious decision to just continue on it.
Rob: Alright. From my end, since I’m hopping on a plane tomorrow, I don’t have many updates this week. I’ve been wrapping up some loose ends and I’m actually talking about hiring plans for next year and just kind of looking. It’s November now and it’s starting to be time to look ahead and project growth, both revenue and usage growth and stay ahead of scaling. We’re looking at what hiring is going to need to be required in order to do that. That’s been an interesting exercise and one that I have not done so thoroughly in the past.
Our growth has never been this fast now that we’re in this venture funded engine. I have to be a little more deliberate about it because if we wait until we have issues, if I wait until we’re understaffed or if we wait until we start seeing performance problems and it’s too late because it takes months to fix these so I’m trying to think three, four, five months out right now. That’s been, I wouldn’t say fun because I don’t particularly enjoy it but it has been enlightening and I think a necessity if I want to feel relaxed and chill and have a good time next year.
Other than that, we have a lot of five star iTunes reviews. We have 550 reviews in worldwide iTunes repo. Most recent one was on October 9th. It says, “Tons of practical tips and lessons.” It’s from [Honey Maura 00:06:24] in Canada and he says, “I’ve been listening for about four years now and I love what Rob and Mike share each week. I’m hooked. I’ve been following Rob’s stair step approach since launching several premium WordPress plugins first and a few months back launching my first SaaS. Thanks for all you do.” He’s with repurpose.io.
If you haven’t left us a review, you don’t need to leave a full comment. We do appreciate it. Just going into iTunes, Stitcher, Downcast, Overcast, or whatever you use to catch your podcast as it may be, hopping in there and hitting the five star rating would do us a great favor.
Today, we’re going to be answering some listener questions. It’s funny there’s a whole theme going on. A lot of it is like I’ve launched. Now what? It’s kind of the theme of today. Maybe not every single one but there’s three or four here that are asking guidance post launch.
Our first question is from [Yan Wustland 00:07:13]. He says, “Hi Rob and Mike, thanks for the great show. Like everyone else, I have to praise your excellent work with the podcast. I feel I have a classical developer problem. I am a solution looking for a problem. I started with web development and then I continued to the iOS, Android, and Mac development. I like the stair step approach and I’ve been launching single products targeted towards web developers like myself, more specific to the niche of Laravel developers.” He has a link here. It’s eastwest.se/apps.
“So far, I’m selling a couple of licenses per week but it’s nowhere close to paying my bills. I have got a great response from the Laravel community and customers but I feel I have to make a move. Their expectations at Mac app should be cheaper than a WordPress plugin and most of my customers who are developers seem to dislike monthly subscriptions. I have a lot of ideas for new products but all of them are centered around MacOS, which I’m passionate about, where it feels a lot harder to justify recurring subscriptions. Without all the details, what advice would you give?”
He laid out some options and we don’t have to stick to these options but I’ll lay them out here. “Number one, continue with one time products and learn more about marketing. Number two, this is not the right place to be and I should try to come up with another product and then find product market fit. Eventually, the right idea will come up. Number three, bite the apple and try to introduce annual plans in my Mac apps with the risk of making customers angry. To me, all the possibilities are a bit paralyzing. How do I know which is the right one to go for? Again, thanks for the great podcast.” What do you think, Sir?
Mike: I’m looking at the website. One thing that I’ve noticed is that the apps themselves seem like they’re a little bit all over the place. There’s this thing called F-Bar which is for managing Laravel Forge Servers. Another one is git-ftp deploy, which is for ftp deployment and then there’s like a radio player and then plugs of the world, which is your guide to sockets and plugs for iOS. These different apps or utilities are all over the map in terms of what types of problems they solve so it makes it difficult to do the marketing for them because there’s no overlap between them.
I think I might go down the road of looking to see if you could just sell off a couple of these outright to somebody else and have them take them over and then focus the efforts on building a small suite or a tool set of different things that you could sell individually and then have a bundle option. If you really are getting a lot of interest from the Laravel community, then that’s a great option in terms of being able to raise your lifetime value for those customers because then that bundle option’s going to give people the ability to pay you more.
They’ll feel like they’re getting the deal on it because individually, these products might cost $100 but if you give it to them for $70 or something like that, then it’s a better deal for them.
Rob: I want to jump in here. What I’ve noticed in looking through his list of apps is the top two, one is like you said, the Laravel Forge Server and the other one is git-ftp deploy. Those two he charges for. If you click through, one is $15 and the other is $20. Everything below that, which is a radio player and a timer and crush cockroaches, a game, it doesn’t appear like he charges for those. Maybe when you click through to iOS, they’re $1 or $2. But I mean these are definitely really small utilities almost.
One thing I would say just for organization’s sake is on the website, on his apps page, I’d probably have a heading that says tools for developers and then other stuff I’ve built. Because I bet my guess is he’s making a lot more money. He said he’s only selling a couple of licenses a week at $15 to $20, so it’s not that much money. Maybe a low end car payment in a month. He’s probably making the vast majority of his stuff from this top two if he’s making any from the lower ones at all.
I agree with you. I think the folks are starting to focus on people who are willing to pay something. Even if it’s $15, $20 a month, I think that’s probably a decent first step.
Mike: Yeah. I didn’t get that far because I was trying to go through. When I browse, I usually will right click on a link and then go to the next one and right click on it so that I can open things up quickly in different tabs. The way that the website works is if you right click on something, it actually browses to it. There’s no way to open up those links in a different tab so I honestly didn’t get there. It was annoying.
Rob: That makes sense. I guess as I think about this, it seems like when I look at the three options, he laid out basically keep doing what you’re doing and build more products or start doing totally different things, try to launch a SaaS app or something or launch annual plans. It seems to me the third one is the easiest to test, launching an annual plan. If you pushed it out for one or two weeks and everybody’s angry and nobody pays it and sales plummet, or do it for a month. If it doesn’t work, it’s easy to undo this. To go back to people and give them a refund or just say, “We’ve abandoned the annual plans and now you just get it for good just like everyone else does.”
I would try that with one or both of the apps and realizing that you will get some complaints but if suddenly, you see more sales or you feel like you’re going to make money with that in the long term, I don’t think that’s a bad way to go and it’s easy to test.
The real problem there is even if you test that, if you’re only selling a couple of licenses a week, then you’re not going to see any fruit from this for another year until they come up for renewal. Really, you’re not doing anything to grow your revenue in the short term. I think one of the big issues is something that he pointed out is that utilities in the app in any app store, they’re a commodity in essence and you really can’t charge that much for them and so, they have to have wide appeal and you have to sell a lot of them in order to make any type of money at it.
I think it’s a tough space to be in. The other drag about it that’s a trip is selling through the Mac App Store means you have this instant, easy distribution. That’s a good thing. The bad thing is you’re really not learning much about marketing because you’re not building a website, building an email list, nurturing people, running ads or blog, doing content marketing or whatever it is that we want to talk about marketing a product. If you don’t have to do that, you can but you don’t have to do that if you’re in these app stores.
One of the benefits that I found in the stair step approach is you’re not just gaining revenue and you’re not just gaining confidence, you’re not just gaining money, you’re gaining experience doing things with these smaller products. Even the folks who do WordPress and they put them in the repo and then they have an upsell to a free version, they have to learn how to write nurture sequences and how to write good copy and how to build an email list.
There’s other things that they do that I think the app stores, while they’re a good starting point and including Themeforest in there, anything that you post into, that pays you a commission but has all the distribution, it is a nice thing to get started on the side. But to grow that to the point where it supports you is hard because the prices are low and even if you get to the point where it supports and you compile all your hours, you’ve really missed out learning a lot of things that someone who is slogging away, building WordPress plugin or an ad on the Shopify and he’s doing more traditional marketing, I think we’ll learn that.
I don’t have a really strong recommendation here but I do feel like if you can’t market these through other channels, because if you only get one or two a week through the Mac App Store, then obviously there’s just not that many people searching for it in there. Do you go market it elsewhere?
Whatever it is, whatever they purchase, you talk about it in forums or you go on podcasts or whatever, you have a message you’re going to use to promote it, you try to do those to grow sales or do you perhaps get into a space where there’s a little more margin and you can launch products that are at least $50 or $100. Having a lifetime value of $50 or $100 is still a pretty tough gig but definitely it would be a step up from these $15 and $20 sales.
When you’re selling something that’s this cheap, distribution has to pretty much be free. You really need to rank number one or top three in Google or rank high in an app store or in YouTube or in Amazon or in one of these places where people just find you because you just don’t have enough money to really do any type of paid marketing. That’s definitely the challenge here.
One of the things you can think about is you’ve built something that people want or at least there is some sales here and there, you may want to think about doing some of these deal a day sites, they have developer deal a day site. I know you have to cut your prices and it wouldn’t be a sustainable thing but it could be an interesting short term influx of cash that can help motivate you to build that next thing.
I think if I were in your shoes, given what’s going on, I don’t see any easy way to grow these existing products. Nothing jumps out at me aside from doing some of these deal things, which again is a short term thing. Personally, without knowing all the details, I would probably start thinking about a way to launch something else that has just a higher lifetime value, whether that’s a one time or a recurring thing, that just leaves a little more money to do some of these other marketing approach and try your hand at them.
Mike: A couple of things that come to mind is try and pursue an affiliate channel of some kind. There are lots of websites out there that just have dozens and dozens of products or actually, probably tens of thousands of products on them where people can go through and identify what products that they want to push as an affiliate on their own site. It’s hard to get noticed in those so you would probably want to pick and choose different people to approach for that.
If you have a set of customers who keep running into a particular problem that your software works really well to solve, then approach in like the vendor’s, whatever that platform is of that application and trying to get in the door as an affiliate and say, “Hey, bundle this other application, whether it’s your git-ftp deploy or your F-Bar,” that would be a good way to get in front of those people and provide yourself with an additional channel.
Rob: I like that idea. I like that. It could be worth pursuing as well. Find another JV channel, basically, to go through. That’s cool. Thanks for the question, I hope that was helpful.
Our next question is another one from Saphia and he had sent a question a couple of weeks ago. Subject line is we may have built [00:17:04]. He says, “I’m a big fan of the show. I’m still binging my way to the backlog since I discovered it. Thanks for the great advice. I’d like your opinion on something. My co-founder and I, first time founders, have been building a SaaS app for about a year, part time, based on an idea that he had as a business coach. Essentially, the app recreates a process but moves it online. It’s one he’s been successfully charging for offline for a number of years and it solves the problem of lack of clarity and difficulty onboarding new employees in a flat organization.
Our landing page has collected more than 500 emails. The feedback we get on blog and social media is generally super positive. People seem to be very eager to try the product. Now, we have an MVP that we launched with about 10 leads as a free trial for a few weeks. All the feedback is very positive. None of them have yet paid for the product. It’s a flat rate of $99 a month per team. Some have logged a few bugs in quick win features that I’ve deployed in a matter of days. How would you approach this? Should we go down the list of 500 prospects and another 10 leads? Should we focus our attention on the current 10 and get to the core of why they’re not paying? How do we know if we have problem-solution fit and most importantly, if there was a problem in the first place. Could it be that we built a cool looking product that is just nice to have? Am I too impatient? How long does it take to close a sale in the B2B world?”
I’ll let you take this first. At the am I too impatient, it’s like yes, we all are. You can be searching for product market fit for 6, 9, 12 months. This can take a really long time. I would definitely give it a little more time but why don’t you weigh in, Mike, on maybe what you would do next.
Mike: Welcome to the club of impatience. I don’t think that that ever goes away. Nothing will ever go as fast as you want it to or you won’t scale as quickly as you like. In terms of what to do next, if you’ve got a list of 500 people and you’ve only gone through 10 or so, I might look at those 10 a little bit and start asking those people questions. It sounds like maybe either haven’t asked them questions or you’ve asked a couple of people and maybe they didn’t get back to you but you really don’t have enough information right now to go off of.
What I’d be careful of is burning through that entire list of 500 and just trying to on board all of them and get to the point where you’re not getting enough information to make a good decision about what to do next. I think one of the issues that I ran into with Bluetick was that when I was putting people onto the system at first, I didn’t do a very good job of defining what a success card here was and what the next steps were for people and what the timeline was.
I feel like the timeline was probably the most important thing and I was the worst at that. I basically said, “Hey, try this out and let me know when it’s providing value and at that point, then I’ll start charging you.” That absolutely didn’t work. When I turned around and I decided to put a time pressure on it, that’s when people made the decision.
I think part of that was due to the fact that it just took so long to get to that point where, I don’t want to say put my foot down but I drew that line in the sand and said, “Okay, either you’re in or you’re out.” It’s very easy to just let things slide. If you go back to this 10 and you really can’t get answers from them, that’s fine. Just go to the next 10, that’s okay again. You’ve still got 480 more people.
But set clear expectations with them about how the process is going go, how long they’re going to be able to test things for, what you’re going to do if a bug comes up. You can explicitly tell them like, “We will pause the billing, for example, for x number of days.” Or however long it takes us to get that particular issue fixed. If they come to you and there’s a problem, push their trial out by a day or a week or whatever, if that’s how long it takes you. If it’s going to take you six months, obviously, then I would say move on because that’s not going to be beneficial for you and it’s probably not a good fit for them at that point.
But you can essentially iterate through probably 5 to 10 times and you’ll get through 50 to 100 of those people and you’ll find out a lot of information about what is working and what’s resonating with them and what’s not.
Another thing I would do is when you’re going through the on boarding process, don’t let them do it themselves, walk them through it. Get them on board, walk them through signing up with their account, get on a video call with them and watch them do it and watch where they have problems because that’s where you’re going to learn the most from. Having them tell you after the fact is just not going to be very helpful. You want to watch them struggle and watch what they’re doing.
That’s what I did with Bluetick, was watch people sign up for it. Every time they had a problem, I wrote it down. Even if they just looked around on the screen and they weren’t sure where to go next, I wrote it down because that’s a problem. Because when I’m not there to guide somebody or answer a question directly, how are they going to figure it out on their own? If I don’t see that that’s a problem or you don’t see that there’s a problem on that on-boarding area, you’re not going to be able to figure it out especially just by looking at statistics and data from Mixpanel or Kissmetrics or whatever, those things are not going to tell you what’s wrong.
Rob: That was a really good answer. Tell me honestly, did you rehearse that before this episode in front of the mirror?
Mike: No, I did not but I thought about that a lot.
Rob: It was really good. You called out basically handholding and watching people use the app and see where they stumble, you called out digging in with the 10 current ones and not jumping ahead and digging as much as you can into finding out why they’re not paying and setting expectations properly. And then only when you’re convinced that it’s not going to be a fit for them or that you can’t get the answers, then go to the next 10 and then you talk about doing that 5 or 10 more times, which might take months and months.
Remember, I called this the slow launch of Drip where we got our first paying customer in June. There was early access. They weren’t paying yet. But by the end of maybe June or July, I think it was our first payment. We didn’t launch to our big list until November. It took us five months of essentially this exact process of I was letting people in 5 and 10 at a time, looking at where they were succeeding, where they were failing, where they were getting value and doing that. This is the playbook, man. I think you captured it really well.
Sophia, I won’t just say that’s what I would do but that’s what I did and that’s what Mike did. You’re following the path and I think the answer to the question of are you too impatient is yes but we’re all impatient so don’t feel bad about it.
Our next question is from Sameer. He says, “I’m launched but I’m discouraged. What are my next steps?” He says, “I built dcaclab.com for teaching electronics. I feel schools all over the world will love to use it. In fact, some schools already use it but I still am not making enough income to leave my 9:00AM to 5:00PM job. I’ve done everything I can. I’m still pushing forward towards freedom. The most recent thing I’ve done is add a blog to the website so I could start adding content to get more traffic and hopefully more sales. It’s very hard work and I’m working by myself. How would you encourage me to keep going my website? Alexa global ranking is 338,000 and I feel tired. I’m interested in hearing from you on how I can keep strong and not give up.”
What do you think, Mike? Should he keep strong and not give up? I guess it depends on how much progress he’s made, right? It’s like if he has one paying customer and he spent a year, then he probably should give up, maybe.
Mike: It’s hard to answer with the data that we have. I think you have to figure out whether or not you’ve actually got traction. I think we’ve talked about this a little bit in the past but one of the things, and I heard somebody talk about this on a podcast as well, I can’t remember who it was, but they talked about the fact that if you launch a bunch of things, it’s a lot easier to see where the outliers are as opposed to launching let’s say three products and none of them do well. It’s hard for you to see what the outlier is, where things go really, really well and you recognize that.
If I remember correctly, it was somebody who I’d been talking to, Paul Graham, about that where they just didn’t know what success looked like because they didn’t have a very objective opinion. It’s just like, “Oh yes, get as many people as you possibly can onto the system or the platform and grow as quickly as possible.” You’ll know when you’re doing well and you’ll know when you’ve got traction and some success with it.
Unless you get to that point, you really don’t have a good understanding of what that actually looks like. If you don’t have any of those successes, it’s very difficult to be objective about your own situation. That’s how I would look back at the stuff that you have done and talk to other people who have put apps out there and have gotten some level of traction or progress with it and ask them to evaluate the different things that are in your business versus maybe theirs. Even if they’re only a little bit more ahead of you.
Let’s say that they’re making $1,000 a month, they can look at their own statistics and how they got to where they’re at, versus the things that you’re doing now and what you’re getting and let you know where the different problem areas are. There’s not going to be a silver bullet here but it will help point you at least in the right direction.
In terms of the app itself and the direction that I would go to towards trying to get more traffic and more sales, the name itself dcaclab, I get it. It’s direct current alternating current. But if you’re not really into electronics, you’re not going to really understand that. That’s not necessarily the point but the average person may not quite understand the subtleties of the difference between them. If you play with home electronics kits and stuff like that, unless you’re an electrical engineer or have electrical training of some kind, you really don’t completely understand that. It’s not going to come to you like if you’re searching for it on the web like dcac. That’s just not going to come up.
The SEO perspective is probably going to be a little hard. I’m not saying change it. It’s just something to think about. But this screams to me something that you could go to Kickstarter with. People in our age bracket are probably the most likely people to help fund something like this because they want to teach their kids about electronics and how alternating current works and how direct current works and how you can build little pieces of a large robot and experiment with those types of things. It just seems to me like that would be a great channel to go after to try and expand not just the horizon of what the number of people that you can reach but also to get an influx of cash. You could do a heck of a lot more with it.
There’s a lot of information out there on how to do a good Kickstarter and I’m not going to say that it’s easy because I know people who’ve done it and have made lots and lots of money from it or brought in lots of money but you also have to be able to deliver on it. Getting yourself to a certain point where Kickstarter really works well for you, you also have to do a lot of pre marketing in order to essentially accelerate it and pour gas in the fire once you do get it on Kickstarter.
The similar things that come to mind is you could go the route of trying to get into government funded channels like directly into public education, public schools, or even private universities or private schools, but those seem to me like the channel is going to take you a heck of a lot longer in terms of the timeline to develop and I don’t know how much time you have to put into this or even how much energy you have left to do it because it sounds to me like you’re at the end of your rope.
Rob: That’s a thing. Selling directly to schools or universities would be the money fad here in terms of the big contracts. It can make a difference. But it’s like one to two years sales cycles because they budget way out and you gotta convince them it works. I got to be honest. Just looking at the screenshots and I just watched a little video. It’s a pretty sleek tool. It really does look like a circuit board. I think you use it right here on a web browser. It’s interesting here.
It’s one of those tough markets of individuals probably aren’t going to buy it in terms of like, “I wouldn’t buy this for my kids because I might buy a coding class or something. It’s only $42 a year but I just don’t know. They’re not doing enough circuits right now.” You’re just going to get onesie, twosie sales. What you want to do is go after groups like schools, universities, even public, private, all that stuff but that’s just that enterprise sales cycle and so it becomes a challenge.
I like the advice that you laid out. I think that if you have almost no traction, if you literally have a couple hundred dollars in revenue, it might be time to just walk away, sell it on Flippa. You have built something here that has some value but it probably couldn’t sell through a broker if it’s that small. If you have at least say $25,000 a year in revenue, it may have to be profit actually, then you can approach a website or an app broker.
If you really are burned out and just struggling to get past there, that’s not a bad option, then you’ll find that you’ll leave out with a little bit of cash in your pocket and feeling refreshed. That’s something I’ve done a number of times so I know firsthand how that feels to keep an app around longer than it should and feel guilty about it because you’re not committing the time and you feel like you’ve invested a lot of stuff and you have this cause fallacy and you want to keep building it and you don’t know when to stop. I’m not saying that you should stop but you do need to listen to those feelings if you feel like you’ve just been pushing a boulder uphill and you haven’t really made any progress.
I kind of have a question mark in my mind, whether a blog, which is what you mentioned, has an x marketing channel is the right thing. I think if there’s a lot of SEO terms, there’s long tail, people searching for this kind of stuff, then maybe I wouldn’t do it for six months without some type of noticeable ROI. I might do it for a couple of months and of course, the hard part there is you have to need time to build this snowball there.
AdWords isn’t going to work here. Facebook Ads, probably not, given the low lifetime value. There’s not a ton of options aside from the places we’ve talked about before, which are the joint venture deals of is there anyone anywhere who’s bundling these things together. Is there anyone who has an audience that would be interested in this? Like a blog or that you could pay a big 40% affiliate commission to get the nice one time hit. What other free channels are there? Are there forums? Are there discussions? Is there a stock exchange for electronics? I’m almost sure there is. Can you become active in there and you don’t just hit there and pitch your thing, that you answer the questions because you haven’t seen a lot about circuits but you answer questions and then your profile has the links in it.
There are ways to do this. This is not like a high growth market. It’s not something that you’re going to hit a hockey stick by tapping the right thing. It is just going to be a slow build and if you’re interested in it and you still want to push it, then do that. If you’re not, then I would think about launching the next thing because you obviously have some skills to be able to launch this one.
Mike: Something else that came to mind as you were talking was what about building a course around teaching somebody how to use electronics and then bundling a one year subscription of this, or three months, or six months with it. That way, you’re really selling the course but this is kind of an augmentation of that course. That seems like a good idea.
Rob: Yeah. I pay quite a bit of money for my 11-year old who does coding courses. I buy those courses online and then he goes through them and he builds minecraft models and all that stuff. If there is a way to make this interesting, parents are likely to buy things for their kids. That’s an interesting market. It’s not an enterprise sale but it is a way, like you said, they’re going that B2C kind of Kickstarter path, selling the course with this bundled as a Kickstarter or an Indiegogo or something. That may be the best idea we came up with today regarding this business in particular.
Thanks for the question, Sameera. I hope that was helpful.
Our last question for today is about bootstrapping an MVP as a non developer. It’s from Rusty. He says, “I have an idea for a SaaS application. I feel like I have a great in, in an industry that I’m familiar with. However, I’m not confident enough in my abilities as a programmer to actually code a viable product. What’s the most financially viable way for me to get a demonstrable demo of a product up and running without having the personal ability to code it?
Mike: I think the first step is to take it from beyond having a great idea in an industry to talking to people and get in either commitments or actual presales from the people there to give you the confidence that go into that without having a development background and being able to know that you can essentially program your way out of any technical problem that you run into.
It is probably the place to start because if you can get those commitments and have that confidence that people are willing to pay for it and you’re able to find enough of those people, then that’s really the next step. It seems like a clear way to try and figure that out. If you do get that confidence, especially if you have let’s say $20,000 in pre sales, you can take that proof of presales and go to a developer and have a much higher chance of being able to convince your average off the street developer that hey, let me work with this other person or a partner and I’ll either do it for free or do it for a really low rate in exchange for equity or whatever in order to be able to latch onto this business that clearly has some legs to it.
Because what you’ll run into if you go to a developer and say, “Hey, I’ve got this great idea. I’d like you to build it for me.” I can tell you what’s going to happen. They’re going to say, “Haha, no. I don’t think so.” Unless they’re just not any good at it because there’s too many developers who’ve done that too many times and they’ve gotten burned. It just does not work out because the technical side of this is not the problem. The problem is the business side of making sure that you can get in front of enough customers on a repeatable basis. If you can prove that upfront, then you can move on towards actually building the product itself.
But I don’t think that there’s a lot that you need to do in order to even just put something in front of people who you’re talking to. I did Balsamiq mark-ups for Bluetick and that was all I needed in order to get presales. I would recommend having those conversations first and then going to the process of showing them what it might look like and then after that, if you can get them to buy into it, then move on to actually building a prototype until you get to that point where they say, “Yes, I’m willing to pay for it.” Or, “It’s a problem that I have that I need to solve.” It doesn’t matter. You can build all the prototypes you want but you could very well just be building the wrong thing.
Rob: That’s a playbook sort of recap. Have more conversations, have a bunch of one on one conversations. You can go out and you can look in forums and you can look in wherever folks who you’re trying to sell to hangout. If you have any inn in the industry, you already probably know a bunch of people in that industry. Talk to them, describe the idea in as much detail as you can and say, “It’s going to be $100 a month to whatever you think the pricing will be. What do you think?”
If they say yes, then say, “Awesome. I’m going to go build mock ups and I’m going to come back and show you. If I build this product, are you willing to pay that?” And then they’ll say yes or no. Once you get enough people and you really have an idea of what you want to build, like Mike said, make the mock ups. Balsamiq is a great tool. I think today, it’s like sketching and vision but you don’t need to get too fancy with this.
When you come back to them and you say, “Here’s what it is. Here’s what it really does.” They’ll have questions for you. Then you make a decision. If you get a bunch of people ordering and you get the validation, like Mike said, you can go to a developer or if you have savings, you can feel a little more confident that perhaps this thing will work and maybe you go and hire a developer, which is a whole other podcast episode. A lot of challenges there but you can hire someone to build it and essentially hire a cofounder or you could go down a different path.
If it’s a service that can be mocked up and handled by hand like by yourself or by a virtual assistant with minimal software, maybe no software at all like can you mock this thing up, have a fully functional version with Google Forms and Zapier and you copying some kind of a spreadsheet and manually sending emails through Gmail or MailChimp or manually crunching data in Excel spreadsheet, instead of an app actually doing it, then maybe you don’t even need a developer to get to the next step, past the mock-ups.
The next one is, “Okay, now I’m going to do this for you.” I don’t know what your service is so that’s where this part’s hard. But it’s like if you’ve committed that you’re going to bring 20 leads a week to lawyers or to real estate agents, it’s like, yeah you want to build a software to do that ultimately. But now, just get on a phone and generate the leads. Run the AdWords and generate the leads. If you’re going to do SEO analysis on something, then yes, you’ll want a computer to do that eventually. But for now, just do it yourself. Do it manually and develop the algorithm and send them pen and paper in essence. Send them that Excel spreadsheet that is super low tech and see if they’re like, “Oh my gosh, it’s amazing. I’m getting a ton of value out of this.” Or if they’re like, “Yeah, the results really aren’t as interesting as I thought they would be. They don’t necessarily need to, in a lot of cases, actually use a software to get the value that the software will ultimately provide.
That’s kind of your either or. They are depending on the idea. If you can’t do that and that is possible in more and more niches than you think and with more ideas than you think. But if that’s totally not possible, then yeah, you do go down the train of trying to build a prototype/mvp. Those things don’t have to be the same, but in this case, they essentially would be.
Mike: Thanks for the question, Rusty. I think that about wraps us up for today. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com.
Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 252 | The Unconventional MVP with Jesse Mecham
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Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Jesse Mecham about the unconventional MVP. Jesse talks about his background and company as well as his first product he put out in the market.
Items mentioned in this episode:
Transcript
Mike [00:01] In this episode of Startups For the Rest of Us I’m going to be talking to Jesse Mecham about the Unconventional MVP. This is Startups For the Rest of Us, episode 252.
Welcome to Startups For the Rest of Us, the podcast 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.
Jesse [00:25]: I’m Jesse.
Mike [00:26]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Jesse?
Jesse [00:30]: I’m doing very well.
Mike [00:32]: Excellent. Well, I wanted to have you on the show today because I wanted to talk to you a little bit about your story and share the background of your company with the listeners and talk a little bit about the MVP that you essentially put out in the market and the product that you started with. But before we get to that point I wanted to let people know exactly who you are and a little more about your business. The company that you started is called You Need A Budget, and when did you start this company?
Jesse [00:57]: Back in September of 2004.
Mike [01:00]: Okay. And today you essentially sell personal budgeting software for, I believe it’s $60 per license, correct?
Jesse [01:08]: It is, yeah. It still does top software for the time being. 60 bucks, one time and then we’ve sold upgrades over the years to keep the revenue going.
Mike [01:16]: Right. So you call the company You Need A Budget. It’s kind of colloquially known as YNAB. Where does YNAB stand today? Like how big is the business, what’s your approximate revenue look like? How often do you do software releases and how many employees do you have, that kind of stuff.
Jesse [01:31]: Yeah. Software releases, we haven’t done one for a long time because we’re right in the middle of a big, completely from scratch re-write, moving to the web and changing our business model into a SaaS model. That part has changed quite a bit. We’ve been just heads down on that for a couple years. Size-wise, employees, I think we just hired our 30th or 31st. She starts next Tuesday. Her name’s Carrie and she’ll be managing our customer support team. So pretty good size team. A mix of part-time and full-time people. About two-thirds of them are full-time. We’re engineer heavy and we’ve got a couple designers. We need another designer here pretty soon. I always say we won’t hire anymore and then we hire again.
And then revenue-wise, last year we did about four and a half million and this year we’re looking to do maybe a smidge more. But just around there again.
Mike [02:24]: Right. So essentially 30 employees, four and a half million dollars in revenue. And this is a downloadable, one time purchase software.
Jesse [02:32]: Yeah, that’s kind of funny. But yeah. Just recently, Intuit, who’s our main competitor, they sell Quicken and QuickBooks and Mint. They own all those properties. They just mentioned that they were going to sell off Quicken, which is a good signal for us that we’re doing the right thing, getting out of the desktop software business as well. Little step.
Mike [02:56]: Okay. So, as I said, I wanted to focus in on the big picture first to give people an idea why you’re on the show because I think that the backstory behind YNAB is extremely important because essentially of where the business came from and where it started. So let’s start walking backward a little bit. What were some of the major milestones that you hit along the way? Were there specific software releases that you had that were extremely beneficial to you or certain things that happened in the market that really took you to the next level? Kind of give us an idea of what major milestones there were.
Jesse [03:25]: Yeah. There were some interesting ones along the way, maybe a handful. Our software- like our releases, which we’ll probably dig into a lot with the MVP, but moving from my original product into our first bonafide software product, that was monumental relatively for us, early on. Each new release we then moved into the Mac platform a couple years later. And as that platform grew in popularity over the years, we rode that. The app store, the whole mobile thing, we rode that with phones that sync up with your data and everything. And that’s also standard now, but back at the time, it was a big deal. So that wave we rode. We had a funny one where we would sell the software on the Steam gaming platform from Valve. And that was –
Mike [04:09]: Really?
Jesse [04:10]: – yeah. So we didn’t even think it would work but we were one of a few titles that they let in as kind of a little test to sell non-games. And we did really well in like their Flash sales and other things like that. That was a significant boost to our revenue back two years ago. The gamers, they buy compulsively. It’s a hilarious side story. It’s funny that you’re selling budgeting software and people are impulsively buying it and not considering the purchase. So there was some irony. But that was a big one. It got us out in the market quite a bit more. There were a lot of new users. So that was another big- there are tiny ones all along the way, but those are kind of big highlights.
Mike [04:52]: Right. When was this business founded? It was back in what, mid-2000’s? Something like that?
Jesse [04:57]: Yeah, I officially did the paperwork for it in 2007. So like three years later.
Mike [05:02]: Okay.
Jesse [05:04]: Where I started making money, very, very small amounts of money, was end of ’04.
Mike [05:12]: Okay. So you basically operated it probably as a- did you even file for a DBA yet or just run it through –
Jesse [05:17]: No way. I didn’t even think about that. I wanted to make rent with the money. It was like totally- nothing official about it, you know.
Mike [05:25]: Got it. I didn’t realize that. I thought you at least had a DBA in the early days.
Jesse [05:30]: Yeah, I don’t even know if I knew what that was at the time.
Mike [05:33]: Yeah, that’s okay. I guess you filed for the business back in 2007. When was it that you had hired your first employee? Was it after that or before that?
Jesse [05:40]: It was after that. I had been working with Taylor, that originally built our first piece of software. He and I worked together in ’06 for the first time. And then middle of ’08, I was able to convince him to jump ship from the video game industry and come over and build budget software.
Mike [05:57]: Got it. Okay. I guess take a step back a little bit. Where was the business financially when you decided to start hiring people?
Jesse [06:05]: That one’s tough. Every hire is scary. And early on especially. It’s not as scary now. Taylor, he and I originally worked out a revenue share because I couldn’t guarantee a salary. And I remember he took a significant pay cut from what he was making. No benefits. And I could probably back into it actually. Let’s see. The year that he came on we probably did maybe half a million in revenue. That’s a pretty good guess.
Mike [06:34]: Okay. So it wasn’t as though the business was struggling but at the same time, probably when he first came on, you didn’t necessarily know how well things were going to go with him on staff?
Jesse [06:43]: Yeah.
Mike [06:44]: You were kind of making an educated guess in looking back for your sales and kind of looking forward and doing some projections. But you still weren’t quite sure. It was still a risk in your mind.
Jesse [06:55]: Yeah. He took the bigger risk, in my opinion, because he left this career with the cash flow, a dip in cash flow and all that. I’m happy that it paid off for him later on. But it was an educated guess. It still was super scary, which I’m really conservatively wired. So where I feel scared, most people don’t feel anything. And I think anyone else would have probably hired quicker than me and it would have been batter. I just would drag my feet.
Mike [07:19]: Right. Okay. Let’s talk about your shift into the business. Where was the business when you finally decided to go full-time on it?
Jesse [07:26]: I was working as an accountant. I got a Master’s degree in accounting and I was working down in Dallas for a big accounting firm, working 80 hours a week for months and months. It was getting old. I had two little boys and a wife in this new city. It was rough. I had big, personal incentive to not do accounting. And also it’s really boring work. But to highlight how crazy conservative I was, I was making about twice in profit from YNAB what I was making at my day job. And I was working on it maybe an hour a day, if I could squeeze it in. So it took me so long to jump. When I was at about 15 grand in profit per month, that was where I felt comfortable, where I said, “Okay, I can start working on this more as a full-time endeavor.”
Mike [08:18]: Got it. So the business was hitting that 15,000 a month, which is ballpark 180k a year. And that’s when you felt comfortable leaving your full-time position and coming over and doing this full-time.
Jesse [08:29]: Yeah. And I still actually did other stuff on the side because I didn’t want to raid the coffers of YNAB. So that 15 grand in profit, you can look at it and you can eat it and feed your kids with it or you can reinvest it back in the business. And I was definitely more inclined to reinvest than to consume it. So I really tried to built up other things on the side as well and try and reinvest that profit as aggressively as possible.
Mike [08:54]: Right. Now you said at this time your day job was essentially as an accountant. And you have a Master’s degree in, I think you said, finance for accounting.
Jesse [09:01]: Yeah.
Mike [09:02]: You’re not a software developer.
Jesse [09:02]: No.
Mike [09:04]: What was your first product?
Jesse [09:06]: The very first one that we sold and made money was a spreadsheet. I originally built it for me and Julie, my wife, when we first got married. And it worked well for us. We were super poor but the budget seemed to be working well. And then I wanted to Julie to be able to stay home and be a stay-at-home mom when our first baby was born. That was a big deal to her so I was pretty motivated to try and make extra money. And about 350 bucks a month was my target. If I can make that on the side, selling this spreadsheet, we’d be good. We could get out of school. We would have to borrow money for it, that type of thing.
Mike [09:40]: So how much were you selling the spreadsheet for?
Jesse [09:42]: I tried at $9.95. Nine dollars and ninety-five cents. So like Bic Mac pricing. But I tried it at $9.95 and I couldn’t get any traction. For about two weeks I was paying for visits through Pay per click way back when it was cheap and easy and no one bought it. I had enough visitors hit the site where you should have seen some purchases just from the law of numbers, right. But no one was buying it. So then I had chatted with a friend one day on the bus and he said, “You ought to double your price. People aren’t buying it because it’s cheap.” And so I doubled it to $19.95 and saw my first sale that first day.
Mike [10:19]: Interesting.
Jesse [10:20]: I had to refund that sale but it was still a good thing. So still good.
Mike [10:25]: It’s ironic that you doubled your price and then you immediately had to refund that first sale.
Jesse [10:30]: I was at a negotiations class the other day. It was fascinating. This guy’s major negotiation work with countries and things. He was giving us this clinic and there was one little bit that jumped out that would apply to every single person listening. He said, “You never want to bargain with yourself.” And when we go to price our own services we always bargain with ourselves well before we’re bargaining or negotiating with someone that’s actually going to pay us. So you’ll bargain with yourself and just talk yourself down. And when you bargain it’s always about price. It’s never about value. So he was trying to get us to say, “Don’t bargain. Always negotiate.” And then do not bargain with yourself, especially. I think it’s applicable for anyone just getting started. We’re so quick to talk ourselves down to this barebones price and it’s not helpful at all.
Mike [11:20]: Yeah, that’s fantastic advice. And I think it especially applies to software developers who tend to undervalue what other people are willing to pay for their work. Especially given their average salaries, just to be honest.
Jesse [11:32]: Developers are wizards. They’re like magic people. How do you place a price on that? You got to think of yourself as a wizard and then maybe you could price more appropriately. From my view, I just see magic happen. And where people that are in the know, you have the cursive knowledge where it’s like I could build that. I could do that. That’s the worst place to be.
Mike [11:53]: So your first product, it was just this spreadsheet. You were selling it for $20 per download, I guess. And you said that at some point you got it to the point where it was making what, $15,000 which was when you decided to make the leap –
Jesse [12:06]: No, by that time the spreadsheet really capped out at making about five, six grand a month. Where I started making about 15 in profit was when we had launched our software, about two years later. That was the big jump.
Mike [12:22]: Got it. So there was this time period during which you were only selling the spreadsheet.
Jesse [12:25]: Oh yeah. About two years just selling the spreadsheet.
Mike [12:29]: And how long did it take you to build the spreadsheet?
Jesse [12:32]: When you’re building it for yourself you don’t really count that time, but if you were to start from scratch and build it and knew what you wanted and had a clear spec on it, it took me a couple weeks. Of course I tried to make it fancy first and then I pulled back as it got complex, which is a classic trap we all fall into. But over time I actually simplified it, stripped things out of it. But it wasn’t a huge endeavor. I mean two weeks, that’s not long.
Mike [12:54]: And that’s something you said you were making what, five, six thousand dollars a month from?
Jesse [12:58]: Yeah, toward the end when I learned how to market, that was the ticket. But I pulled up some stats while we were chatting. My first full year – so I launched in September of ’04. It didn’t really do anything. And then in ’05, by December of that year, I’d made in profits, 2500 bucks. And that was when I was in school as a college kid. I was working a 30 hour job, going to school full-time and doing this little business on the side. I wasn’t investing tons of time. And I was learning a ton as I went along. So I’m trying to paint this picture that even for someone to get to a grand or two with the information that we have available now, it’s totally doable. And the product, it was a spreadsheet. It’s a spreadsheet.
Mike [13:42]: Right. So you said that you launched the software product in 2006, right?
Jesse [13:46]: Yeah, end of 2006, right at the tail end there.
Mike [13:49]: How long did it take to build the software product itself?
Jesse [13:52]: It took Taylor, he was the sole developer, it took him nine months. We just worked over the phone. We didn’t beta test it, which is funny. I kind of used it a little bit but we did not do anything formal. Yeah, nine months with just a solo developer. And we were basically porting the functionality of the spreadsheet over into a Windows application.
Mike [14:13]: Right. And I think that’s the part that is really interesting because you start out with this MVP, which is nothing more than a spreadsheet which takes you about two weeks, and then you make this leap from – you’ve got a market, you’ve got people paying for this spreadsheet, and they’re clearly willing to pay for it. There’s a demand there that you have proven with this spreadsheet –
Jesse [14:30]: Absolutely.
Mike [14:31]: – and then you say, “Let me take that information and I’ll predict the future a little bit. If they’re willing to pay for this spreadsheet, I bet they would pay for this software product that I could build based on this demand.”
Jesse [14:42]: Yeah. I felt confidant enough about it that even risk adverse as I am, I had been saving money up to that point to put a down payment on a house, because in the U.S., if you think back to like ’06, ’05, real estate’s going crazy, right. So Julie and I are going to graduate in ’06 and we’ve got this baby, another one on the way, and I’m thinking we’ve got to get a house because everyone’s buying houses. So I’m saving for this down payment. In the meantime Taylor comes along and says, “I could improve your spreadsheet,” and I said, “No, I’d rather have you build separate software.” So he just agrees to like a project rate and it was a lump sum, milestone payment. Pretty standard stuff. And we do that over nine months. But I was confident enough in the move, I knew people would pay more for this software. And I knew that the software would also be, obviously, more attractive to more people. So I could charge more and appeal to a broader market. And I used our down payment money, for the house, that we had earmarked for that. I came to Julie and was like, “Hey, what about this thing instead? I have this stranger down in Texas that wants to build this.” She was game. But I felt confident enough because I had market knowledge. It was priceless. I didn’t feel like it was risky at all.
Mike [15:57]: That brings up a separate point. Because you’re not a developer, you didn’t start by building a piece of software because, quite frankly, you just didn’t have the skill set. How do you think that affected the evolution of the product? I think most software developers would immediately jump into building a product, but you went in a different way, I think, because you were forced to. How did that impact, not just the financials of the business, but how did it impact your approach to the future of the business?
Jesse [16:22]: It’s been a huge advantage for us that we started with that spreadsheet. When you think about building a piece of software, and it was fairly complex, that we had built in nine months, but because we were riffing on an MVP built on a spreadsheet, it naturally constrained the normal desire we have to add, add, add, and make more complex. Because it was just like listen, take this, make it so it can run without Excel. And it was like, okay that’s good. So how should the UI act? Well, let’s just have it kind of look a lot like the spreadsheet. Okay, that works well. Taylor and I both aren’t designers and weren’t designers back then even more so. So it forced us to just recognize we’re going to do still kind of the minimum, but take this obvious next step. I feel like a lot of times when you build first, with this grain-like open field in front of you, you have a hard time making decisions because you have so many options. Where we just didn’t have the advantage. It would be interesting to think how we could, as a budding entrepreneur, as this developer, how you could create artificial restraints for yourself to try and control that.
Mike [17:33]: Right. And I think that’s the problem that most of us as developers face is that we’ve got this open-ended problem that we’re trying to solve and we say to ourselves, “I could do this or I could do that,” and “It’d be really cool if I added this other thing over here,” and you end off into the weeds trying to add some stuff in that ultimately you don’t even know whether or not anyone is going to use it or going to care, unless you’re doing a lot of heavy upfront customer development. But because you had that MVP already in place and you knew what people were paying for, it was really just a process of replication so that you could produce incremental improvements on it and increase the price and do lots of other things.
Jesse [18:10]: Absolutely. Like just to give people an example, we launched the software end of ’06, that is supposed to compete with Quicken or Microsoft Money at the time. And it’s a check register with a budget laid on top of it, essentially. We didn’t even allow you to have multiple accounts in the software that we originally sold for $40. So we would just tell people every transaction goes in one big register. And we sold it and people bought it and it worked. It really worked. It wasn’t like we were selling them something broken. But you didn’t import from your bank, we didn’t handle reconciling to any accounts. We had very rudimentary reporting. It was so barebones and it still just gave us that much more knowledge to keep heading down the path. And that’s what you want. You don’t want to know the end goal. You just want to know that you should stay on the path you’re on and be content there. So we try to build, a lot of times for the destination and then who knows where that ends up.
Mike [19:13]: You mentioned Microsoft Money just a few seconds ago. Didn’t they go out of business or didn’t they shut that product down?
Jesse [19:19]: They did. They shut it down. Several years ago, actually.
Mike [19:22]: And now Quicken is being spun off. How does it feel to basically have run them out of business?
Jesse [19:27]: It’s hilarious. I feel really good. I feel like we conquered them. No. Intuit’s revenue for consumer non-tax revenue is like $340 million a year. They’re a four and a half billion dollar a year company. There’s such a far distance between them and the next guys it’s crazy. I don’t even know if they’ve heard of us. But maybe they have. That would be fun. It is cool to see that we’re headed in the same direction as the big guys because I think they obviously have major market knowledge with all the exposure they have.
Mike [19;58]: There’s a lot of benefit to having hindsight when you’ve gone through this process –
Jesse [20:00]: That’s true.
Mike [20:02]: – are there other products that you can think of that in hindsight you could have potentially come out with that were also not software related or were not directly pieces of software that either could have done well or had the potential, maybe not quite as much potential as what you ultimately ended up with or maybe something that could have exceeded it. Are there anythings that you can come up with that fit that mold that were non-software?
Jesse [20:26]: They’re all kind of related to YNAB and its core business but we’ve tested all sorts of different monetization strategies over the years. We’ve tested partnering with companies that we like. Like Betterment is one that we like. We don’t take commission from them anymore but we still refer them. We were kind of going like a blogger route early, early on where it was like affiliate relationships. I found that to be fairly distracting from the core. We did some servicing around, literally over the phone type work, coaching with business owners to try and teach them how to manage their cash flow better. And I actually ended up selling that off to my friend Mark who was running that for us anyway. And he now runs that Budget Nerd. But for us it was working, it was just I felt like we were losing focus.
Mike [21:17]: It was a distraction.
Jesse [21:18]: Yeah, it was a distraction. I’m very, very susceptible to the new shiny and so I really have to check myself and make sure I’m focused on just a few very core things, and then obviously drive that to the whole team.
Mike [21:32]: Now I think that focus is probably something that all software developers who are starting out and trying to find that product that they want to invest a lot of their time in, maybe it’s the next six months or maybe the next ten years. But what sorts of other advice do you have for people who are specifically looking at building software first? Because as we discussed, you had the spreadsheet first and that’s probably more of a non-traditional MVP. What other shortcuts could people come up with that would help them get to the point where they have a product that people will pay for?
Jesse [22:04]: I like the idea of utilities. So if you’re thinking software specifically, I’m trying to go that route. I like the idea of looking at a very, very concrete problem where the MVP, where the problem is so small and so specific that you can’t add too many features on top of it. I know the open source is a great solution for a lot of these, but I think you could not do the open source route potentially, and just say what is this utility that does this one thing that people on Stack Overflow are constantly asking about or that I’m constantly having to do again and again? Whatever it may be, and just release something very small, very concrete, one off, no subscription, only so that you can cut your teeth on the transaction, the marketing. And so the smaller the problem is the smaller the solution, super niche, the easier it is to market it, which means then you can- it’s tough to find the pain when you’re trying to sell financial software. It takes awhile. It’s complex as far as marketing goes. But when you’re solving this very, very concrete problem that like a little utility solves, suddenly it’s very clear. What I want to do it get people to a very clear value proposition and a very clear solution and get them to be able to build it quickly, release it quickly, have a defined market, just to practice that aspect. Once you start making money, the desire to build, it’s minimized a little bit because you realize this thing that I was procrastinating to selling, isn’t as hard as I thought it was. But all these developers, you guys don’t find it easy to sell but you find it easy to code so you procrastinate the selling and just keep coding and coding and coding. That was a long answer.
Mike [23:59]: No, that’s okay.
Jesse [24:02]: That’s like if I were to coach someone on, I’d be like find a smaller problem. Find a smaller problem, really, really small, and then see what you can do. Like a little ruby gem or whatever it may be, but just something super small and then go for it.
Mike [24:14]: Well I think the natural inclination for developers is to look at stuff like that and because they minimize the value of the particular problem that they’re trying to solve, and they say I could whip up something to fix that in a week or a month or something like that, they minimize how valuable that is to a base of people. And I think the other mistake that they make is that because they try to make something that’s a little bit more generic or bigger, it makes the marketing, as you said, a little bit more difficult because it’s not so well defined. Selling financial software, it’s not abstract, it’s just there’s no concrete pain point that you’re solving. It’s just, it’s financial software. But what specific thing are you doing that somebody might have a particular problem with? And it doesn’t allow you to focus in on the marketing.
Jesse [25:02]: And so that’s the- you can do it. Like in our field we know a lot about the market and how you talk about money. It’s basically around stress. But the idea if I were a developer releasing some little thing that I said could supposedly whip out myself for two weeks, that’s the value proposition right there. You talk to that developer and you say, “Listen, do you really want to spend two weeks doing this? I’ve done it for you and it will cost you half and hours wage.” And then suddenly you get some traction, the value proposition’s really clear, and then you can start to test the waters. I like the WordPress plugin market. I like it for that reason. Those can also totally metastasize on you. But I like it for that reason that you can do small little solutions and get used to the marketing. It’s not a slam dunk but it’s some – I’ve just had some thinking along those lines lately.
Mike [25:51]: Yeah, I think the other thing that that also helps people with is it helps somebody starting small because they don’t have to think about creating 30 or 50 pages on their website. They only need to create one that says, “Hey, this is this exact problem I’m solving,” and they tend to get very specific, highly targeted traffic, which somebody else or a competitor would treat as long tail traffic so they don’t care about it. So you’ll rank higher for it. And then over time you gradually increase the size of the product and it’s capabilities and what it does. And eventually ten years down the road you end up with youneedabudget.com, 30 employees and four and a half million in revenue.
Jesse [26:26]: Yeah, that’s not how I started, right? So you start super small and you don’t worry about how did Jesse do this or that because the answers are obvious when you’re in the moment. I know where we’re going now. I’m hopeful our decisions are solid. But it feels just as obvious to me now as it did six, seven, eight years ago because you just deal with the information you have on hand and you don’t try and predict the future, you just try to keep things small and concise and tight. And then when you’re deciding should I start a new product or should I keep going whole hog on this one, I would tell you to not start the new product.
Mike [27:04]: Something else that you brought up early was that you were doing marketing for this spreadsheet. And I know that there’s a lot of techniques that were probably highly applicable back when you first started this process, like for example, you mentioned Google AdWords were much more cost effective at the time. What other types of things were you doing to market this spreadsheet?
Jesse [27:25]: I was trying to get in with- blogging was just starting up and financial blogs were one of the first because people were pretty intrigued by the idea that you’re sharing finances online. That took off. And I would try and get in the blogging space and it worked to a degree. I tried to recruit affiliates for a while and have people be paid commissions to push YNAB. And I had some that were great but 98 percent of them were horrible and would sell one copy a month and then they would want the world from you as far as “Can you do this, can you do that?” So it was just kind of a time sink and we shut down the affiliate thing. The best thing I did marketing wise was an email course. It was no comparison. The absolute best thing I did early on was I wrote a ten-day budgeting, I think I called it a bootcamp back in the day. And it just taught them my four rules, my method for how you should think about money. And it was super soft sell. And it, I think, quadrupled, actually I have it right here. It doubled our revenue month over month and then doubled it again the next month. It was insane. It still works, too. We still use that as a marketing technique.
Mike [28:36]: Right. And I think that that actually illustrates a gap that a lot of people who are getting into entrepreneurship face also is where the initial expectation is I’ll create this product and I’ll create a website and then I’ll put a buy now link on my site and people will search for it. They come to the site, they click the buy now link or they download a trial and then boom, they’re a customer. But it doesn’t really work that way. The email course that you put out there, that’s basically building trust. It’s not just website, click the button, payment. There’s this time period in the middle where you have to build some level of trust before they’re going to give you money.
Jesse [29:12]: And you’ve got to recognize they’re not all ready to buy right away. They’re in different stages. And the email course does a good job of keeping its arms around them while they’re moving through those different stages.
Mike [29:23]: Right. And that’s something that in some cases re-marketing helps with that where you’re cooking people and then you’re advertising to them later on to help bring them back to your website. But the basic idea there is they’re not ready to buy today, they might be tomorrow, they might be six weeks from now but you still want to be able to maintain some sort of open line of communication with them to help bring them back when they are ready.
Jesse [29:45]: Yeah. Absolutely. Yeah, the re-marketing didn’t exist back then but it would have been gold. Works for us now. It’s the nature of the beast. And in our field with financial software people just aren’t ready. They’re in research mode and things like that. So it’s critical that you recognize that they’re in different phases. And some markets aren’t. Some are like I need to book a hotel, and if you can capture that, you behave differently. But most there’s a long process. I’m thinking about buying a new car, right. Guess how long it’s going to take me. And those marketers know that. You just got to make sure you understand what your cycle is for your buyer and respect that and keep in contact.
Mike [30:24]: Yeah, all great advice. Are there any parting words of wisdom that you want to leave for the listeners?
Jesse [30:30]: Enjoy it while you’re doing it, like enjoy the whole process and make yourself uncomfortable. Do things that you are procrastinating. There was a good book called the War of Art. I didn’t really like the second half of the book but the first half it’s about overcoming your resistance to really doing your best work. It’s been a book that I’ve thoroughly enjoyed. The creative types and developers are extremely creative, designers, obviously extremely creative. That is a book for you. You want to make sure that you’re overcoming what the author calls “Resistance,” and I think that’s just part of the battle. But enjoy the whole process. Just be in the moment with it.
Mike [31:12]: Thanks. So Jesse, it’s great having you on. If people want to learn more of the different you have to say, if anyone’s interested there is a video from Jesse’s talk from last year over on the MicroConf site. You go to microconf.com and then check out the videos there. His talk from 2014 is there. We’ll probably have the 2015 video up there because you were a speaker this past year as well. Where can people find you online and where can they specifically learn more about You Need A Budget?
Jesse [31:37]: So youneedabudget.com if you’re interested in the software specifically or if you just want to look at how we market and things like that it’s good to visit and see what we do there.
Mike [31:47]: I’ll second that. It’s actually very fantastic the way that you have a lot of information there and you do a lot of educational stuff around personal finance and helping to draw them in and kind of tell a story to them about this is what your life could look like if you follow this process.
Jesse [32:02]: Yeah, I have a good team there. And then the software’s excellent so there’s that as well. If you want to follow me online, I don’t tweet a ton but it’s @Jessemecham. I occasionally will tweet something trite. I go to MicroConf so if you ever want to meet face to face. That’s kind of the only conference I regularly attend. Just hit me up at email if you want. It’s Jesse@YNAB.com and I’m happy to chat or give unsolicited advice.
Mike [32:34]: Excellent. Well, thanks for coming on.
Jesse [32:35]: Yeah, you bet. Thanks, Mike. It was a lot of fun.
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