In this episode of Startups For The Rest Of Us, Rob and Mike talk about SaaS marketing lessons you’ll wish you’d learned sooner. Based on an article on karolakarlson.com they break the list down to 9 key lessons including growth plans, mission statements, tracking metrics and more.
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Mike: In this episode of Startups for the Rest of Us, Rob and I are going to be talking about SaaS marketing lessons you’ll wish you’d learn sooner. This is Startups for the Rest of Us, Episode 398. Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs to be awesome building, launching and growing software products, whether you put your first product or you’re just thinking about it. I’m Mike.
Rob: I’m Rob.
Mike: We’re here to share experiences to help you avoid the same mistakes we’ve made. What’s the word of this week, Rob?
Rob: The word this week is a little bit of wrestling with Google and they’re indexing in webmaster tools because I 301 redirected my entire old blog site, Software by Rob, and I got a new domain, Rob Walling, and I 301’d all that and got it all set up. There’s just always more complexity than you think there’s going to be. I had this seven-step checklist that I went through and, of course, parts of it went wrong and parts of it got cached while I was in the middle of troubleshooting and so you don’t know what the real version is.
I’m literally like–I texted Derek and I’m like, “Can you hit this URL and let me know what you see?” even though I flushed my cash and all that. It was just giving me–from different browsers, it was giving me different results. It wasn’t that big of a deal but then the redirect was fine, everything’s been working and then the Google indexing has really not started. It probably took–it’s been almost 10 days, maybe 14 days, and it’s just now picking up on the new domain. I’m looking at the search analytics and just starting to see 50 total clicks. It’s literally like one day’s worth of clicks or less than that, actually, has started to pick up.
Mike: The hard part about that is that, because Google has different Google-plexes all over the place, different people are going to be different ones so they’re not–the different indexes are in different places, which kind of sucks.
Rob: Yeah, I agree. This is just–it’s like try not to redirect stuff. You can totally do it and not lose traffic in the long term but, in the short term, it’s kind of always a bit more work and there’s always these loose ends that happen. By no means was it a disaster or anything; it was kind of a fun little thing to, I don’t know, stay busy with, but I’ll just be happy when everything’s moved over. Again, the whole site’s functional if you go to Rob Walling. You can go look around and everything’s there but, now, I’m just trying to get Google to make all the Google search results look use Rob Walling instead of the old site. How about you? What’s going on?
Mike: I was looking through some of the comments on some of our older episodes and there was one or a couple of episodes ago where we had talked about the moniker of “the Rest of Us” and how we should have trademarked that or something like that, not that we probably would have gone that road. Glen Bennett wrote and said that there was an Apple ad from the ’80s where they called it “The Computer for the Rest of Us” so we were beat by quite a lot on that.
Rob: Yeah, and that’s been a part of the English language for, I guess, 50 years. I have no idea what the first use of it was but I definitely heard it growing up, just people talking about that.
Mike: Yup. Yeah, so we definitely missed the door on that one.
Rob: Yeah, for sure. There were some other pretty interesting comments. There’s a comment from Rasmus on Episode 389, which was titled Pro Tips for Attending Conferences, and he says something else he does is go to the gym in the morning. It really makes your mind and body ready to listen and learn all day. That is something we forgot to say because I actually try to go to the gym when I’m at conferences, and it’s especially easy at MicroConf because of our 10:00 AM start time. When we used to start at 9:00, I never had time because I was too tired. That is something that I recommend, even to go for a short run, even if it’s only 15 minutes or something. I like getting up and getting out.
Another couple of comments on Episode 395, which was 20 Podcasts We Like, we had two more that requested. Kristoff Engelhart recommended How I Built This by Guy Raz. That’s at NPR podcast, I believe, and he said he specifically liked the episode with the Collision Brothers from Stripe, the guy from Home Depot and the one with the Founders of Ben and Jerry’s. I’ve listened to a few episodes of How I Built This and I liked it. I think I struggled with the fact there were some–the signal to noise for me was a bit low because it’s an NPR show and so it’s tailored to the masses and I always struggle to consume startup stuff made for the masses. Honestly, it’s a really well-produced show if you’re interested. It’s just in interview format, basically, and it’s as you would expect from NPR.
The last comment was from the same episode from Abdu, and he says, “I find it odd you didn’t mention Mixergy. Even Rob was a guest on it.” Yeah, I’ve been a guest on Mixergy six times, I think–five or six times–but it’s not something that I currently have in my rotation. I definitely used to listen to it but the volume of shows that comes out–it just hasn’t been on my radar for a while. Totally, I still see Andrew at conferences and every once and a while. When I hear that someone I know or there’s a particularly interesting interview on Mixergy, I absolutely download it and listen to it, but it’s not on my everyday podcast subscription feed anymore.
Again, that’s mostly due to the sheer volume of shows that come out of there and the interview format. Andrew was one of the early pioneers of that. They were folks who were doing startup interviews but he came on the scene and really revolutionized that, way before John Lee Dumas and several other folks who’ve done it since then. I have a ton of respect for what he’s built and, obviously, have enjoyed my conversations on Mixergy with him. I, in all honesty, listen to less interview shows than I used to. If you do look at that list of 20, there are very few truly just all interview shows. Even like This Week in Startups that we just mentioned, they do some interviews but I personally skip many of those and I listen to a lot more to the news round tables and even some of the pitching ones.
Mike: Going back to your blog redesign that you did for your website, there’s a missed business opportunity in there where somebody could have acquired Rob Walling and sold it to you.
Rob: Someone did. I bought it from another guy named Rob Walling.
Rob: Yeah, I bought it a couple of months ago.
Mike: That’s different. If you bought it from another Rob Walling whereas if you would have bought it from Mike Taber, then that would have been different.
Rob: I know. It was funny. When I emailed him, the guy was like, “Whoa, this is kind of weird.” He’s like, “I thought it was a trick email.” I was like, “No, this is actually another Rob Walling.” We had different middle names, of course, but he was funny. He said, “Well, I can tell by your name that you are a scholarly gentleman of great intelligence and manners,” or something. I was like, “Well done, Sir. This is going to be fun.” Just the negotiation and buying it from him was kind of fun.
Mike: That reminds me of when I was at Home Depot a couple of years ago. They paged Mike Taber over the intercom and so, of course, I go come to find out there’s a guy who works there named Mike Taber who lives nearby. It was interesting to meet another Mike Taber.
Rob: Yeah, totally. Very cool. What are we talking about today?
Mike: Today, we are going to be going over a blog article written by Karola Karlson, and it’s over at karolakarlson.com and we’ll link that up in the show notes. It is about SaaS marketing lessons. The title of this episode is SaaS Marketing Lessons You’ll Wish You’d Learn Sooner and what I did was I kind of consolidated a bunch of these things because there’s some things in here that overlap a lot with other topics, and there’s 35 different items in this particular blog article. We’re going to condense that down a little bit. I’m going to talk more focused about some of these different pieces where it applies specifically to the types of people who are listening to this show.
Rob: We have about 9, it looks like, down from 35.
Mike: 9 SaaS marketing lessons.
Rob: They’re making a listicle!
Mike: The first one is about finding your high expectation customer, and there’s another link that we’ll add into the show notes because there is a link over to a blog article that somebody else wrote all about finding what your high expectation customer is, and the basic definition of that is the type of customer who has very high expectations for your product and they know exactly what it is that they want to do. There’s a series of questions that you can answer very specifically about them. For example, “Who is it that needs the product? What does it do for them? How do they feel about it? What’s the true benefit for them?” and, “Will your product exceed their expectations?”
If all those criteria are met, then you have what’s called a high expectation customer because they know exactly what it is that they want and they need, and their bar is very high. If you can exceed that bar, then you’re going to satisfy a much larger number of customers. Early on, it’s going to be very difficult for you to meet that especially because they’re going to be an advanced customer; they’re not going to be an early adopter. Assuming that you can meet that bar for that customer, then you’re going to be able to sell to a much larger pool of people. This is going to help you to grow the business a lot just because of that much larger pool, and knowing those numbers helps you in a great number of other ways which we’ll talk about later in this episode.
Rob: Right, and when they define the high expectation customer, they say it’s the most discerning person within your target demographic. It’s someone who will acknowledge and enjoy your product or service for its greatest benefit, and that person needs to be someone who others aspire to emulate because they see them as clever, judicious and insightful.
Mike: The second lesson is to not sell to everyone. I think, generally speaking, this is obvious advice that’s repeated a lot by different people on the startups basis, but the real question is, “Why is this repeated so often?” It’s because it tells you who not to sell to, who should you not be targeting for your SaaS or your products, or your service. The real benefit of doing that is that, if you can get rid of those people in certain marketing channels or you avoid marketing to them because they’re not a great fit for your product, either that could be for a variety of reasons; either they churn out a lot or it’s an ancillary benefit to them, they’re not really looking for your products.
There’s all these different reasons why they might not be your ideal customer but, by removing them from the pool of people that you’re actively marketing to, then it’s going to yield a lot better ROI across all of your marketing channels and it allows you to focus much more on the types of people who are a good fit for your product versus the ones that are not as good a fit and you’re going to have to do a lot more work in order to sell them on your product.
Rob: Yeah, and, in the early days, this is all you can do, right? Especially if you’re bootstrapped but even when you’re funded. Five years ago, I thought about a venture-funded company and thought, “Man, they have infinite resources and they can just sell to everyone.” Then, of course, I worked inside Leadpages for 20 months and realized that, “No, even there, there are these massive trade offs. They just can’t hire enough good people.” Even with really high budgets, they can’t hire enough good people to sell to everyone.
I think your point about, “Yes, we hear this over and over,” is well-taken, but why do we hear it? It’s because people make this mistake over, and over, and over. In your early days, it’s really easy that anyone who gives you a dollar, you want to get the product to them because you want to maximize your revenue because every dollar means you can market more. The problem with that is you can quickly, especially if you’re a software product, go off the rails with folks who are requesting things that take you away from your core vision or the core vision that’s going to meet the needs of most people versus someone, again–if you’re selling to internet marketers or the SaaS founders and then a photographer who comes in, he can pay $1000.00 a year but he’s going to have totally different requests.
I went through this exact thing early on with Drip where we just got a request that was like, “We don’t really want to build that and that doesn’t help anybody else,” and so then that person was disappointed and they didn’t love the product. We eventually parted ways but it was a lesson I think each of us learns as we go, is just say no fairly frequently. If you don’t think they’re going to get value of it or they’re not in your core market, I would err on the side of saying no in the early days.
Mike: That kind of leads a little bit into the next one, which is to have a mission statement. I think, most of the time, this is probably not a great place to focus a lot of your time and effort but the reality is that when you have a mission statement about what it is that you are trying to do and what you are trying to achieve with the product and the business, then it allows you to use that as marketing collateral so you can tell your customers what it is that you’re trying to achieve, who you’re trying to do that for and who you are like and who you are not like.
By default, by having this mission statement, it allows you to decide what it is that you don’t do in addition to what it is that you are going to do. By having that mission statement, you can refer back to it when you’re trying to look at these customers who come in and one of them says, “Oh, I run a photography business.” You’re like, “Yeah, that’s probably not a great fit,” and you can tell that my going back and looking at your mission statement. I don’t think a mission statement is something that you can do on Day One just because it’s probably going to take some time to figure out what that is based on who your ideal customer is, and you’re not going to know that on Day One. That’s going to take some time and effort to figure that out over the course of many months or even, potentially, years. Once you have that mind, it gives you that reference point to go back and say no.
Rob: I would edit this one a bit. In the article, Kerola says that you absolutely must know your unique value proposition and your mission statement. For me, the unique value proposition comes way before a mission statement because the mission statement is that global thing of like, “Google wants to organize the world’s information.” I don’t think you know that from the start; very few people do especially if you’re bootstrapped, you’re doing customer development or even funded for that matter.
I know I often say that if you’re bootstrapped, then blah, blah, blah, but it applies to both in so many cases that if you’re just trying to figure out what to build, I don’t know that your mission statement matters as much as you’re honing in on a solution for your folks for the people who are using you or asking for you to make changes to the app. It’s like, “What separates you from the other solutions on the market?” and that’s what your unique value proposition is, the UVP. It’s UVP or USP, unique selling proposition, but it’s what makes you different.
When you’re building out an email solution, it’s like, “Well, how are you different than Yesware or than MailChimp, and you’ve just got to hone in on that because, if you’re not different, then it’s just a “me too” play. It’s possible to make a living doing that. It’s possible to build a business. Certainly, people have done it but it’s so much harder because you’re just going to be slogging it out for sales that you still don’t have enough of a differentiator. If you’re going to build something that’s a “me too” play, then you need to find a unique traffic source. You need to be really good at SEO and rank in the top three and outrank everybody else and just expect that a certain amount of people are going to sign up without looking at your competitions. There are ways to do this but, in my book, trying to figure out early on how you’re going to be differentiated from the competition is probably the number one thing I’d look at.
Mike: The next item on the list is that what you’re putting together your growth plans, you should focus on actions, not just not the numbers that you need to hit. I think both of them are absolutely important but, without those numbers, you don’t know what it is you’re trying to achieve but, without the actions, you’re never going to be able to achieve them because those actions are critical to being able to meet whatever numbers you put on paper. Based on the numbers, you can backtrack from there and decide what actions need to be taken in order to get that point.
I think in a previous episode, we’ve talked about, basically, mapping out what your goals look like and reverse based on the endpoint that you’re trying to reach and then backtracking from there. “What is it do I need to do before to I get to that point?” and continuing along that path but you need to have those actions and decide what order those actions need to be taken because, if you’re not doing it in the right order or you’re doing it in the wrong places–for example, if you want to do SEO on your website, that’s great and all in order to increase the footprint but what pages are the ones that you should start with. Certain pageants are just not going to matter at all versus other ones, and being able to prioritize those is critical.
Rob: I have mixed thoughts about this one. I agree that it should focus on both, in my opinion. I like focusing on actions, of course, because of exactly what you said and what she says in the article because, then, you’re just delivering–as Ellie said, you’re making those hard phone calls a day, not focusing on the end result and making X sails, but you’re just putting in the work. I’m also motivated by numbers and I’m motivated by the success of seeing things grow. I like to have a goal to strive for that’s not just going through the motions.
I know this is not just saying go through the motions but I think I could fall into the trap if I’m not also keeping my eye on the numbers of just doing things during the day. I think a lot of people can fall under that type. It’s like my actions are to tweet this and to do a blogpost. To do some Instagram on social media–and that could be your plan, but it’s like you have to then measure and make sure that’s moving the numbers, and maybe that’s where I’m kind of nitpicking this one, is I think it should be heavily correlated. You can’t attribute everything to numbers but, man, if you’re not getting out of the plan you’re doing, then you have to change that up. I think that’s where I’m saying–I think I focused on both actions and numbers.
Mike: Maybe focus is a wrong way to put it. It needs to include both as opposed to should focus on one or the other. If you have a growth plan and it’s just, “Hey, these are the numbers that I want to hit,” it’s going to be useless. You have to have those actions as well. If you’re going to go through those actions, you also need to do some sort of measurements and have numbers that you’re going to hit afterwards because, if you’re just doing actions, as you said, and you’re not getting any results of out it, then why are you doing those things? The critical piece here is where you have to have both; it’s not just one or the other.
Moving on, the next one is to optimize for growth, not leads, and it kind of ties back a little back to the growth plan. If you are optimizing for adding, let’s say, newsletter subscribes. That’s great and all, but how are you getting them through the rest of your funnel? Are you trying to optimize them to get them to become activated or sign up to download other things from your newsletter? Are you trying to get them over to the pricing page? What is it that you’re trying to get them to do next?
You need to track the customer or that prospect through the entire sales because, if you’re not doing that, then you can’t track those numbers and you have no way to identify how many people are moving from one step to the next. By tracking those things, it allows you to get rid of the lower IRO activities that you’re doing because those are time and money sinks, and it’s just going to take up a lot of your time and attention. You could be using to spend on other higher IRO activities because those are the things that are generated in better leaves and those and those better leads become better customers because they’re going to seek around for longer and because they’re a better fir for you.
Rob: This reminds me of a couple of conversations I’ve had over the years with folks who are measuring too early in the funnel. I was talking to one sort of founder who said, “Yeah, I have 10,000 uniques a month in my website. How many uniques do you have?” I was like, “That doesn’t matter.” It really doesn’t matter unless we’re talking about certain things but if we’re talking about just making sales, it’s like, “How many trials did you get out of that? How many converted to paid? How many stuck around for more than two or three months?”
It’s like, “Go deeper in the funnel,” which is essentially what this is saying: Don’t get hung up on these top-of-the-funnel metrics. Now, the top-of-the-funnel metrics can be important because they obviously feed the later metrics, but if you’re not closing and retaining people, you are leaking people out of the bottom of your funnel and you’re never going to grow the business. What’s funny is I think it was the same conversation. The guy said he had 10,000 uniques and, at the time, DotNetInvoice was doing 1000 uniques or 1500, but it was doing three or four grand a month, and he was blown away by that because he’s doing way more than his app.
I was like, “It’s because a lot of people who come–it’s highly-targeted traffic and so many of the people who come buy,” and it’s $300.00 a month. There all these reasons why the math work but it was just a head-exploding thing. Really, it’s just mass. It’s just, “Look at the top and you’re going to lose certain people out of each step of that funnel, whether it’s to a demo or to a trial, and then it’s to paid, and then it’s how long they stuck around. With the rules-of-thumb that we frequently covered in this podcast–have covered in talks, have covered in blog posts and such–you can tell which step of the funnel you need to focus on. That’s the biggest thing, is optimizing for growth means focus on that part of the funnel where you have the opportunity to make the biggest difference.
As you grow your app, that is going to move. It’s going to move down the funnel. Probably, early on, it’s going to be like, “Oh my, gosh. We’re not retaining anyone,” and it’s like, “Well, it’s because you don’t have product market fit,” and this can be like, “Oh my, gosh. No one’s setting up for a trial.” It’s because your marketing’s off with your product market fit now. Then, it’s like, “Oh my, gosh. We don’t have nearly enough people hitting our website. It’s like, “Yeah, it’s because you haven’t been focusing on marketing; you’ve been focusing on customer development and building your product.” You’re going to move up and then you’ll probably move the other way and move right back down one to two years in your product, assuming that you have something that’s reasonably successfully.
That actually takes us to our next one, which I think is Points 5 or 6, and it’s track the right metrics. It’s things like monthly recurring revenue, cost per acquisition, cost to acquire a customer and your lifetime value. You obviously need to look at top-of-funnel stuff like, “How many uniques to my website? How many trials am I getting? What is the visit-to-trial percentage? What is the trial-to-paid percentage?” You need to look at those, but those are not as important as the ones I just said, because the ones that MRR, cost per acquisition and the lifetime value are the ones that are optimizing for growth.
A loose rule of thumb is that lifetime value should be greater than or equal three times your cost to acquire a customer. That means it’s a solid acquisition channel if you can make those numbers line up. Now, one thing to say is that what holds true for funded companies and, typically, if you’re funded, you want to acquire a customer for less than one year of their value to you. The average revenue per user or even the revenue for this particular user is $20.00. Then, no matter how long they stick around or even if they stick around five years, if you’re funded, you tend to want to spend less than about $240.00 to acquire that person because it’s $20.00 times 12.
Now, if you’re not funded, cash is a real issue. Typically, I see folks wanting to keep their customer acquisition costs between two and four months of what they’re going to get back from that customer. I remember we hit tail on them on them with Drip as we got more money coming in, we extended that out to 5, and then 6, and then 7 and then you learn to manage your cash and you learn that this month’s cash is coming in and I can now spend more and more to acquire. The more you can spend, the more customers you can put through the funnel. You can’t do this without tracking the right metrics and you have to keep in mind not just these loose rules of thumb that are thrown around for fun in companies but, if you’re bootstrapped, it’s going to be a little bit of a tighter grip on that purse unless you have a big bucket of funding that you’re pulling from.
Mike: Just to reiterate on that piece that Rob had commented on, if you’re bootstrapped, you really want to get your money back a lot quicker if you can with Bluetick I’m going through the same thing where it’s very difficult to allocate a lot of money and resources towards acquiring customers in certain channels just because I know that it’s going to take a heck of a lot longer, and the reality is I just don’t have the money to be able to dump a lot in because if you–let’s say it costs you $500.00 to acquire a customer and, yes, you’ll get $1,500.00 out of it, but it’s going to take you a full year to get there. You can end up going broke if you try and dump all your money into that. You kind of have to play long ball there.
The point of that particular anecdote is that everything takes a lot longer than you want it to. You’re going to have to truck your funnel activity over a longer period of time, you’re probably going to get your lifetime value from these customers in a much longer period of time than you would like to, your tests will take longer to complete, then you’re going to have to analyze them and act on them, but everything is going to take a lot longer than you would like it to. That includes goals and stuff that you put forward as well. If you decide that, “Hey, we’re going to do this marketing campaign and we expect it to take 3 or 4 weeks,” it’s probably going to take you 5 or 6 if not longer just because of all the other things that are going on that are going to demand your attention in the business. Support tickets will come up, things like that, and it just takes longer to do just about everything.
Rob: Our second-to-last lesson you’ll wish you’d learned sooner is to publish with intent, and it’s basically to have a strategy behind what you publish to provide value in a consumable format, value quality over quantity and to track performance and double down on promoting content that does well. Five years ago, quantity actually went out over quality, not in every case but people just cranked out–companies that were cranking out 1 post a week, and then 3, and then 5, and then literally 10 a week twice a day during the week were winning the SEO game and the content marketing game.
That has switched. That’s changed up. Now, folks are focusing on much longer pieces of content, really pillar content, The Ultimate Guide to This and The Definitive Guide to That that might be 20-30,000 words, half the length of the book, and they make it available as a download but also, for the SEO, put it in HTML format. It’s fewer and bigger bats is what it is, and then you double down on the ones that work and you walk away from the ones that don’t. That’s essentially what Kerola’s talking about here.
Mike: The last SaaS marketing lesson you’ll wish you’d learned sooner is that prospects are people. Pretty much everybody on your mailing list that has signed up for it at some point, there’s a person behind every single one of those email addressed. People don’t generally like to be sold to; what they enjoy in going to a website is going to educate them because you’re the expert in a particular space and they’re trying to learn from you. Moving on from that, once you have established that trust, then you’re going to be able to sell your product to them, but it’s more of a situation where they’re the ones who are deciding that they’re going to take that next step.
This is mainly because it is an online marketing scenario. If you are in a direct sales demo, then you are essentially pitching, but you’re on that schedule within whatever the time of that meeting is, but when they’re coming to your website, they’re on their own schedule, and they can pick and choose when they’re going to move forward and you have very, very little control over it. The reality is you have to treat them like a person when you’re interacting with them through the mailing list and take time to build that trust; don’t try to pitch, pitch, pitch because it’s just simply not going to work. Going the education route, helping them to become better at whatever it is that they’re trying to do is going to be much more effective than trying to build all of the trust in a particular email and then sell them on a particular touch point. They’re not just going to go come to your website and buy something on the first shot.
Rob: Yeah, there are very few products that you can sell with one touch point. Often, info products are this way because they tend to be impulse purchases and you can put time constraints and reward pressure and all that stuff, and that is one reason that info marketers have these big splashy launches, is that it’s not a recurring payment. It’s just aspirational and you can sell a lot more of something when it’s aspirational. When it’s software, it requires people’s time and so, as you’re saying, folks are very unlikely to come and buy the first time and there does have to be some type of trust or relationship built up.
Now, there are ways to shortcut this. One of the ways is to have social proof, in essence, to have other people vouch for you. I should back up and say the first way to do it is just to build your own audience. You don’t have to do that to start a product. There’s a bunch of people who do it without ever having an audience of people that follow them. I’ve done it several times with several products, and it’s totally doable and it’s not a bad way to go. I don’t think building an audience is the only way to do it.
However, these days, it is easier than ever to build an audience if that’s your thing. You can do that to build trust in advance. The problem is you have to have a massive list. Let’s say you have a list of 1,000 people who are really following you and you want to sell a SaaS product that’s $10.00 or $20.00 a month. You’re not going to get to critical mass that way. You’re just not going to sell enough licenses or subscriptions to your software to make that work.
If you’re selling a book and you have 1,000 people really following you, you might sell 300 or 400 copies of that book. It would be an ambitious amount, but I’ve done it myself. My first book did that. That is enough to kind of get a ball rolling that could potentially result in stuff down the line. Those are kind of the two sides of building the audience yourself. Another way to do it, as I was saying earlier, is that the next step is to kind of have other people vouch for you, and whether that means testimonials or whether that means they’ll do joint webinars with you, in some way, endorsing your product, saying that they use it, assuming that they do.
That’s another way to kind of shortcut that trust and get growth faster than having to educate everyone individually about why they should trust you, and that was one thing that Clay Collins did really well in the early days of Leadpages, was to do the webinar model and to do with it a bunch of his internet marketing friends who would vouch for Leadpages because they were using it, and then, there you go, you have access to literally hundreds of thousands of people even though your audience is not that large.
That’s just one angle of this “prospects are people” but the real thing to think about is that every prospect, every person, makes their own decision based on what they know about you and the product and what they’ve heard about you and the product. It’s something to keep in mind, that just numbers and conversion rates can help you forget much to your detriment. To recap, the 9 SaaS marketing lessons you’ll wish you’d learn sooner are, number one, find your high expectation customer; number two, don’t sell to everyone; number three, have a mission statement; number four, growth plan should focus on actions and not numbers; number five, optimize for growth, not leads; number six, track the right metrics; number seven, everything takes time; number eight, publish with intent; and, number nine, prospects are people.
If you have a question for us, call our voicemail number at 8888-01-9690 or record an MP3 and email us at email@example.com. Our theme music is an excerpt from We’re Out of Control by Moot, used under Creative Commons. Subscribe to us on iTunes by searching for startups and visit Startups for the Rest of Us for a full transcript of each episode. Thanks for listening. We’ll see you next time.
In this episode of Startups For The Rest Of Us, Rob flies solo and answers a number of listener questions. The topics include monetizing SaaS with ads, should a WP plugin company consider SaaS and more.
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In this episode of Startups For The Rest Of Us, I kicked Mike off the show. I fly solo and I’m answering a bunch of listener questions, covering topics ranging from monetizing SaaS using ads to whether a WordPress Plugin company should consider launching a SaaS, as well as how to deal with the struggles of launching a two sided marketplace. This is Startups For the Rest of Us episode 383.
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, and Mike has no power for the past day or two. He has no internet, and I think a storm came through and knocked out a bunch of power. He won’t have it back he said at the earliest til midnight tonight. I jump into a car with my son, my 11 year old. We are heading to Lake Geneva, Wisconsin for Gary Con in about two hours. There was no overlap.
Mike emailed me and let me know he wasn’t able to make it and so my goal was to find a guest this morning. I emailed three or four people short notice and no one is able to show up. Here I am, we ship every week, every Tuesday morning an episode comes out.
I dug into our listener question bag and we were down to one listener question last week, we’re up to eight or nine this week, which is great. I enjoy these episodes when we answer listener questions. We’ve been doing them a lot more lately. What I’ve noticed is it feels like there’s a lot more listener participation and it also feels like we’re keeping up with topics that are not just coming out of our heads.
These are really questions and topics that you, the listener, are thinking about. It feels like I enjoy these episodes because I feel like they’re as relevant as we can be to the moment of what you’re thinking about and what you’re launching as a listener base. We are here to share our experiences, to hope you avoid the same mistakes we’ve made. Also, to weigh in on questions that you have as you’re growing, building, launching your startup.
Let’s dive into our first question. It’s from [Dylan Dee 00:02:10] and it’s about whether he can use advertising as a SaaS revenue model. He says, “My company is Dunwich Technologies, it’s a healthcare focused consultancy. We’re developing a SaaS app to help patients better understand their confusing medical bills. I see the value in one off uses, doesn’t feel like an app that could garner much daily activity or many daily active users. It’s more like an every so often use. This coupled with not wanting to charge for the app leaves me with few revenue options. Would medical/pharma ads on this app be the only or the best way to monetize it in your opinion?”
My opinion is this will not work at all. Because if you don’t have a lot of daily actives, then ad based revenue models are gonna bring in pennies for you. I would be shocked if you have people logging in once a month or once every other month. Let’s say you had 100,00 people using the app and they only log in once a month, you’re gonna make hundreds of dollar. It is catastrophically low, the ad rates are just very low these days. You look at a company like Facebook or Twitter, Google, and the only reason that ads work for them is because they have so many people constantly using the app.
If you’re going direct to consumer and you don’t think you can charge for it or don’t want to charge for it, I would think of this as more of a lead gen thing. Can it generate leads? Can you build up a free customer based and generate leads for your consultancy? Or, can it generate leads for another SaaS app that you may want to charge for, or a video course–I’m just throwing things out.
Obviously, you may not want to create a video course, you get the idea. If you’re gonna build something that truly is freemium but there is no ‘mium’ to it, there’s no premium aspect because you’re not gonna upsell. But actually, that is another thing you can think about is to launch this. See what happens, see if there’s any uptick. If you get 10,000 free users in there asking for more things, you could then consider going freemium and having a paid tier on top of this. Even if it does just a $5 or $10 a month thing.
It’s really hard to do B2C SaaS, it’s not done very often. If you look at even Dropbox, they are trying to pivot into the enterprise because that’s where more money is and the lower churn and all the stuff. Box.net kind of beat them to the punch on that. I think that Dropbox was conceived as a B2C company but if they really want to maximize the valuation frankly, they want to get into the enterprise because enterprise customers have higher lifetime values. And if you look at the stock market in public or even the private markets, companies serving mid market and enterprise, and even SMBs are valued higher than the same amount of revenue serving consumers because that revenue tends to be more volatile.
All that to say, I don’t think you have any chance of making any money that’s gonna move the needle using an advertising model. I would say if you’re gonna build it, if you really want to, give the thing away, see what happens, see if it becomes lead gen. If nobody uses it, then that’s fine too. At least you took your shot.
Our next question is an audio question. It’s about a WordPress Plugin company, whether they should offer a SaaS offering.
“Hey Rob and Mike. I love the show. My name is Kyle, thanks for taking my question. I work for a small WordPress Plugin company. We’re pretty well established and doing just fine, but looking to grow and take on some new exciting project. I have some ideas that I wanted to get your input on.
Basically, I want to see if introducing a small SaaS offering might make sense for our business? Obviously, we distribute our WordPress Plugin, that’s our business right now. Our customers are mostly in ecommerce but I was in the interest of helping our customers succeed and solve real problems that they have. Also becoming as indispensable to them as we can be while at the same time introducing new streams of revenue for our business.
I was wondering if maybe we should consider adding a SaaS offering which we make available only initially to our existing users. Not something that we market to our broad audience, but something that we just silently roll out to users of our plugins already. I’m thinking this could be something very simple, some tool like helping them with their email delivery or file storage, data backups, staging environments, remote site management, reporting businesses sites, something like that, I don’t know. We can make a simple tool, put it in front of existing users and say, ‘Click here to take advantage of this extra monthly tool.’
My questions are, how do you feel about the idea of creating some simple, light MVP simple SaaS product? Initially making it only available to current users of our plugin. Do you have any opinions about the type of SaaS product which would be the best for us to choose if so? Something simple yet still useful to our customers for mostly running ecommerce sites. Thanks so much and I look forward to meeting both of you this year at Micro Conf, thanks.”
This is a great question. I think a lot of WordPress Plugin vendors probably think about this because the appeal of having monthly recurring revenue versus the potential spikiness of WordPress Plugin in the one time sales, it’s appealing. SaaS and subscription revenue is the golden ticket that everyone is looking for.
I would say that just to start with, a, I think this is a great idea. I’m all for it. I think if you wanted to tip toe into it, you should definitely do it. I would say that when I talk to folks who do WordPress or do one time sales, they’re always talking about launching a SaaS. When I talk to people who have SaaS apps, so many of them are jealous of these one time sale products because those product price points tend to be higher.
You might sell a WordPress Plugin for $40 to $200 and you get that nice pop right off the bat. If you sell one customer, you make $200 that month. Whereas if you have a lightweight SaaS, you might make $10 that month from the customer and you gotta keep them around and you’re constantly working to do that to retain them. I know that with DotNetInvoice, which was an invoicing software I owned years ago, it was $300 for the product, for a developer to buy it and use it.
We only sold 8-15 copies a month. You think about that, you think about let’s just say 10, you think about making 10 new SaaS sign ups that stick around and become customers and that is catastrophic. Unless you’re very, very expensive, in the enterprise. But just the normal, let’s say you’re $20, $30, $40 a month, that’s slow growth. It’s gonna be agonizing. Whereas if we sold 10 of DotNetInvoice, it was $3,000 a month. At the time, I was looking to make a car payment or make a house payment and I was doing consulting. This was just a little side project that I didn’t spend a ton of time on. That dollar amount and getting all the lifetime value upfront from your customers, there is some appeal to that.
I would say don’t look that [inaudible 00:09:17]. Do realize that the couple beauties of WordPress are that you do get all the lifetime value upfront and that you have that built-in distribution channel of the WordPress repo, and that also ranks high in Google which then can bring people to your WordPress page and get that free download. With all that said, when I talked to a lot of WordPress folks who have plugins, are making some money, they are always thinking of how to get into SaaS, and I don’t think that’s a bad thing. A, I think it’s great. SaaS is more complicated, it levels you up. There’s more to learn, it is that recurring revenue that you’re looking for.
Number one, I think yes, you should give this a shot. Number two, I think you have an advantage because you already have paying customers. I have no idea about this business if you have a thousand people who’ve purchased it or if you have ten thousand, but that is a great built in audience right there to start a SaaS from.
I’ve talked on the podcast and at MicroCon a couple of years ago about what I believe are the only four true competitive advantages in SaaS. It’s who you know, it’s your network. It’s who knows you, it’s your audience, that includes customers. And it’s being early to a space and being a growth hacker, someone who knows how to think through methodically and really grow anything.
This is a case where you already have an existing audience of customers, you do have an advantage over someone starting from scratch. You have customers who probably trust you and like you. If you build something with them in mind, you should be able to have a pretty good strat to your business.
In addition, you probably have a bunch of free users and I know they won’t convert as well but that should be a number that’s 10 or even 100 times the number of people who’ve actually paid you and so you do have some reach there. That’s the plus side.
The negative side is you building a SaaS is gonna take a lot more time than building a WordPress Plugin in general. There’s so much more, there’s the hosting and the infrastructure and uptime and all the stuff that you don’t have to deal with. It is gonna be a big learning experience. I wouldn’t want you to think just because you’ve built software, you’ve built products and you’ve sold it, you definitely have learned a lot but SaaS is going to be that next level up in terms of complexity.
In my opinion, if I were you, especially in the ecommerce space, I would start talking to my customers, you already have them. You can have a few ideas and I think in a perfect world you might have three of four ideas that you start running by customers and saying which one of these would you absolutely, no doubt, would sign up for tomorrow. Take that short list and run it by, I’m sure you know a bunch of them personally, and then start emailing a hundred of your customers at a time even if you don’t know them and being just like, “Hey we’re considering branching into this, would you buy it?” I think you’re gonna get pretty good feedback form that pretty quickly.
That’s how I would approach it, I think, asking my opinion, you’ve asked my opinion about what kind of app you should build, I have no idea because I don’t know. I don’t know your customer base or what you’re currently serving. I think that the best WordPress to SaaS progressions are things like Opt-In Monster where it was just a WordPress Plugin and then they just launched basically the same thing as the SaaS app. It was subscription, they already had the features that they knew that was killer, they had experience in it. They literally just turned the WordPress Plugin into a recurring subscription.
If you’re not on WordPress, you can still use it but you pay the monthly. Craig Hewitt is doing this with his WordPress Plugin Seriously Simple Hosting, and then it’s Castos now. Moving from this WordPress space and just building a SaaS out of it, I think that’s a good way to go because you already have experience with that. You already have inbound interest, folks finding you through the WordPress repo so you do have that traffic source and distribution channel.
Again, I think if you want to get in this and get into the recurring game, I think it’s a good idea and I do think you have some advantages given your current business. Thanks for the question.
Our next question is from Alex Baxter. He says, “Love the podcast, big fan. I’m attempting to bootstrap a startup in the job site space.” A job website, a two-sided marketplace. “As I begin to look for companies to post jobs to the site, would you suggest allowing companies to post jobs for free to get the initial supply of jobs up for candidates to view then worry about monthly fees later, or trying to charge from the get go? I’m leaning towards free but I wanted your thoughts.”
The reason I like this question is because it’s the classic two sided marketplace. Whenever I talk to anyone about a two-sided marketplace, I say basically the same thing. You’re gonna have to figure out which side you need to get first. In this case, you’re not gonna have any job seekers come to the site if it has no jobs. You have to get the jobs up first.
Yes, I would beg, borrow, and steal to get jobs on this site. I’ve seen new job sites launched and they’ll go and scrape Monster, Indeed, Hot Jobs and all these other things in order to populate their jobs and start form there and then spin out. I’m not saying you should or shouldn’t do that but it’s a way to think about it. There are jobs postings out there that you would be able to populate on your site and it’s additional distribution for them.
In terms of offering for free to employers, I probably would, because you have no traffic. You really can’t charge them because you have no job seekers yet. In my opinion, it’s probably a, “Hey, this is going to be free for the first three months or six months or until we have 10,000 uniques a month, or until every job receives 50 views per month.” There’s something that just needs to trigger that they need to start paying you. Because you don’t want to get a bunch of your best employers and just be like, “Yep, this side is free to post,” because that’s not a business perpetually.
You have to take an approach that long term you’re not comping your best customers. That’s why it kills me, I‘ve seen people pretty often do this with SaaS where they get this launch list or they get 5 or 10 interested customers and they say, “Yeah, for your feedback, I’m just going to comp you lifetime.” I think to myself no, these are your first 10 people. You can give them a discount, you can comp them for six months, give a discount for the first year. You can do that because they are giving you effort but also providing them a ton of value with the software.
If they’re willing to sit and work for beta software with you, then they probably have a pain point that you’re also helping with. Don’t do that would be my advice. Don’t cut that revenue off at the knees, especially in the early days when you need it most.
For this, I would definitely consider just cold outbound outreach. I’m guessing this is probably a vertical and you probably know all the companies in that vertical and that would be cold emails, cold phone calls to basically just start with like, “Hey, I see jobs on your site. Can I repost these here? Do you give me permission?”
Technically, I got to be honest, I don’t know if you even need permission legally. Whether it’s an ethical thing. You’re providing them with more distribution, you’re republishing jobs, but do they have a copyright to the job posting? They may. You may want to check with them first. You’re gonna have to talk to a lawyer, just do your research on that, but that’s what I would do is if they already have jobs posted in their own site, I would look to just be like I will do this for free for the first three months since we’re getting started up and I will just pull all your jobs in, are you cool with that? Try to make it as easy as possible. I would either a scraper, an importer, hire a VA, I would do something that is able to pull in those jobs so these folks are not having to do the work and it’s just a simple and easy yes.
And then, your results are gonna make or break whether they want to pay you. That’s a cool and a stressful situation to be in. I think back to I believe it was TripAdvisor in their early days. Their big game is building all these SEO pages. They’ll have a destination and then they’ll have all the rankings and then they get all the search engine traffic. They were trying to monetize and they went to cut deals with travel ticketers, airlines, hotels, all of this stuff. They basically said, “Buzz off, we don‘t care.”
TripAdvisor already had a bunch of traffic, they turned on this [inaudible 00:17:22] to some of these ticketers, and I don’t know if it was airlines or hotels or just people selling tickets but whatever it is, people selling the things that they were talking about on TripAdvisor. They turned on this [inaudible 00:17:33] and just started sending a bunch of traffic, they didn’t charge for it and they didn’t get a kickback, they didn’t get a commission, but then they turned it off after two to four weeks. At that point, the people selling tickets said, “Wait a minute, what did you just do?” They said, “We turned the traffic off.” They said, “What do we need to do to get that turned back on?” That’s your conversation.
That’s where you start. You said, “Well, we’re gonna charge you. You need to give us a cut of the ticket sales.” That’s what you’re going to be, that’s the situation you’re gonna be in here is thinking about if you get these job for free for three months and no one applies to your site, they’re not gonna pay you. But if they get fantastic talent, it doesn’t need to be a lot, I’ve used a few job sites where I only got three or four applicants but they were all top notch because it was just a really small niche and I continued using them after that. Very good question, I appreciate that Alex and I hope it helps.
Our next question comes from Robert Andrews. He says, “I’m a long time tech journalist and editor turned content consultant. I’ve written a book it’s called Startup Blueprint: Seven Skills For Founders, Leaders and Builders. It was a bit of an experiment in discovering those skills, distilling them and frankly trying to make my first product. Think it turned out great. I have some good reviews but I’d love to get feedback particularly on the marketing strategy. After spending so long witting the book, I did almost nothing to get it in people’s hands. It’s the proverbial tree which no one heard falling in the forest.
My current approach is to offer a free sample chapter in return for an email triggering email sequence and weekly insights from the book as well as links to purchase,” which I think is a great idea. “Built out the campaign in Drip, put the sign up form on the site, but it has no traffic. I thought of driving sign-ups with Facebook and LinkedIn lead ads but I’m not sure these can be cost effective enough to market product like a book. Any thoughts? Appreciate it.”
This is a good question. I think, as Robert alluded to, this is somewhat of a common thing. Authors don’t tend to think about the marketing side of it. If you were to do this “right”, then you would be doing pre launch. You’d build a prelaunch list. If you listen to ZenFounder, you heard Sherry and I talking about our book for the past six months when we started writing it. You can even go so far–when Brennan Dunn works on a project, he’s actively sharing pieces of it on Twitter, on his blog, to his email list, and just build anticipation over time. That’s what I did when I wrote my first book back in 2010. I was sharing pieces of it getting feedback and that’s really the way to do it because it engages people and then by the time you get there it’s a no brainer for someone to buy it.
If you haven’t done that, then, yeah you are starting from a cold start and especially in this space, there’s so many people with the startup message and the entrepreneurial message. It is hard to stand out. I think Facebook and LinkedIn ads I do not believe will work just because of the cost. Typically, you need LTV of 150 and up to work but you know what? This is the learning experience.
You’ve said it, I totally, personally, would run some Facebook and LinkedIn ads just to see what it feels like. Maybe your conversion rate on a book because it’s so cheap will be way higher than the software that I’ve tried to sell using Facebook and LinkedIn ads. There’s a chance it will work, you can find a small subset of people or some some audience that will be willing to buy it. Even if you only breakeven, part of this is just getting the reach out there. Because every customer who buys from you, now they’re part of your audience. You have their email address and I think that’s a great way to do it.
I think another way is of course, I’ve talked about this a lot, is a podcast tour. If you have no name or no reach, then it is just gonna be cold emails to podcasts, you’re going to have to figure out what the story is because it’s not, “I just wrote a book. Can I come and talk about it on your show?” Because you’re gonna get zero yeses for that. You have to figure out what the angle is for that particular show and why that show’s audience would really want to hear about one of the concepts from your book. If you have any type of network in this space obviously, then that’s where you want to start.
And then of course public speaking, if you do any of that. If you get invited, you can often ask the organizers to buy a copy of your book for everybody at the conference, both Sherry and I have done that and it’s worked out really well. It gets it in more people’s hands, you give them a discount of course. But then you get up there and people get to here you and then you have a video that gets on YouTube or Vimeo and then you can promote that. There’s all these angles.
But I find selling a book a lot different than selling software because it’s so much more about your credibility, it’s about the person who wrote it, and it’s also about the message as well but it’s much less about the utility than software. Software has to solve a problem right away. People will churn out of it immediately. But a book can be an impulse purchase and it’s just about throwing a wide net and finding a lot of people who could potentially be interested. Like I said, it’s an impulse purchase. I will often hear about a book, and just as I’m hearing the podcast, jump into Audible and buy it because my Audible credits were so dang cheap.
I’m on the annual plan and I buy a bazillion books a year, very much an impulse purchase for a lot of people, especially if it’s a $20, $25 book. But the advice I would give is figure out how you’re gonna couch or position your book so that it’s different than everything else. Because when I hear the title, which again is Startup Blueprint: Seven Skills For Founders, Leaders and Builders, it sounds like a lot of other books, it sounds somewhat generic, it’s not super inspiring to me, personally. I probably wouldn’t buy it based in the title alone. You’re gonna have to figure out how do I further differentiate it from all the other books that are talking about the same topics.
An example is my first book came out 2010, it’s called Start Small, Stay Small: A Developer’s Guide to Launching a Startup. I had a couple of advantages. I had an audience of a bunch of developers who a lot were into products. I called it Start Small, Stay Small which was interesting title for a startup book because no one ever talks about staying small. It was like that’s curious. I really niched it down; A Developer’s Guide to Launching a Startup. I actually got a bunch of people telling me, “This isn’t just for developers, anyone can use this.” I said, “I know, but I really wanted, if you were a developer, to just basically be a no brainer purchase for you.” That’s what happened, and the book has done very well.
I’m trying to think what the most recent numbers are, it’s probably sold maybe 12,000 copies at between $20 and $35 a piece. Some of that’s been on Amazon, but yeah, hundreds of thousands of dollars literally I’ve made from that book. That was never the intent but it definitely did very well and I think part of that was because I had this small audience. This was before Micro Conf, it was I believe before the podcast or maybe right at the same time as the podcast was coming out. It was before a lot of this stuff.
I was really just a blogger and a guy who was making a full time living off of these small products and that was about it. It wasn’t like I had the reach or the network or anything that I have today and yet this book just kept selling. I think it also helped, it was a good book. It was well written, I put everything I had into it. I was super prescriptive and super detailed. It wasn’t like it was just a pure marketing thing, there was also a virtuous cycle of word of mouth that helped it continue to spread and sell over the years.
Good question, Robert, I appreciate it. I hope those thoughts are helpful.
I think that wraps this show. If you have a question for us, call our voicemail at 888–801-9690. You can also email an mp3 file or any type of audio file really to us at firstname.lastname@example.org, audio questions go to the top of the stack almost always, answer those first, but we do of course accept text questions as well via email. 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.
In this episode of Startups For The Rest Of Us, Mike interviews Alli Blum about how she helps convert prospects into long-term customers in SaaS onboarding through email. They talk about the three phases of SaaS onboarding, the marketers perspective, the product approach, and more.
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Mike: In this episode of Startups For The Rest Of Us, we’re going to be talking about how to improve your SaaS onboarding emails. This is Startups For The Rest Of Us Episode 368.
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 Mike.
Alli: And I’m Alli.
Mike: And we’re here to share experiences to help you avoid the same mistakes we’ve made. How are you doing this week, Alli?
Alli: Fantastic. How are you?
Mike: I’m doing great. Welcome to the show. Wanted to introduce you to everybody. I guess that I’d say your background is in copywriting but really, the gist of what you do is you help people convert prospects into long term customers in their SaaS onboarding emails. You’ve worked with a bunch of different high profile companies, I’d say, like KISSmetrics, and CrazyEgg, and MixPanel, and Autopilot. Seems like the plethora of companies that people look up to and are well known. Just want to say great to have you on and we’re going to be talking today about how to improve people’s SaaS onboarding emails.
Alli: Thank you very much. I am so excited to be here. Yeah, I’ve had the opportunity to write for some of those fine publications that you just listed. My background is that I have worked with technology companies from a lot of different places. I knew I wanted to start my own product based company, right now I’m doing service based business. I started looking around the research that you do when you’re just getting started at learning about startups and I saw Startups For The Rest Of Us and I learned about MicroConf. I just thought, oh, I think this is like a thing I want to get near to and learn more about but I was too chicken to actually come close to you. But when I finally started getting the courage, I looked and I wanted to meet people, I looked at who was attending MicroConf. I was just like, I would just email them and say, “Hey, I want to know more about what you’re doing.”
Mike: That’s awesome. It’s nice to see that the MicroConf Community is having an impact on people and we’re always looking for ways to expand that. This past year obviously, we expanded into the Growth Edition and the Starter Edition. If you’re looking for tickets, any of the listeners looking for tickets, you can get on the mailing list over at microconf.com and tickets are going to be publicly available the next couple of weeks. By the time this episode comes out, we’re pretty close to that.
I guess with Alli’s intro in mind, one of the things that we’re going to focus on today is the different techniques that you can use to improve your SaaS onboarding emails because that’s your focus point at the stage of your career, Alli. Wanted to have you on the show and educate our listeners a bit about how they can improve their onboarding emails and what the specific steps that they can take to walk through the process of improving those. Like anything else in your business, it’s an iterative process. You’ll go through it once and then you’ll come back to it and revise and repeat. I think that you have a unique perspective and that you’ve done this for a bunch of different people whereas most people listening to this will probably only have done it for one or two apps, yet you got a much wider range of experience that I think will be really helpful to listeners.
Alli: Cool, yeah. One of the things that I’m excited to talk about is if you’re listening to Startups For The Rest Of Us, you may have just launched, maybe getting ready to launch, you may have been around for a couple of years. Depending on where you are, there’s a little bit of a different approach that you may want to take to make sure that your onboarding is actually doing what you want it to do.
Mike: There are different phases to the onboarding process. Why don’t you talk a little bit about the three different phases where people might fall on the spectrum?
Alli: Excellent. The first phase would be when you have no automation at all. This would be if your app is very new or if your app had more of a consultative sales process before moving into a self signup process. At this point, you may not know too much about what makes people fall in love with your app, you may not even know too much about who the folks are who are coming into your app. This early stage, your goal is to get as much of that information as you can to talk to as many people as you can and really get a feel for why they’re signing up for a trial, why they’re starting to use your app, what are they trying to get out of it and who are they.
You take the same approach at later stages. After you’ve been around for a little while, you may have already started to introduce some automation. You may want to have a welcome email, you may have a couple of emails that go out to tell folks about features they can try during their trial but you may not have a full automation process or a full set of sequences designed to actually turn your trial users into paying customers.
And then once you’re at that stage where you’ve done a lot of hard work, where you’ve got everything automated, everything is triggered by specific events as opposed to time triggers, then you might be getting ready to be at a point where you really want to start optimizing and testing different things out, seeing what you can, seeing if you can get to a point where you’re bringing as much juice out of your trial as you can.
Mike: Those are the three basic phases of the onboarding process where people will probably fall, who are listening to this. You either got no automation, you got some minimal automation, or I’ll say complete automation that’s much more advanced. Everything is done through triggers or events or what have you.
A general process that I think people will go through when they’re looking at implementing these, regardless of which of those three phases you’re currently at, is to look at your current onboarding emails and try to identify the shortest path, they’re trying to get a customer to recognize value and figuring out what steps they need to take. And then for each step, write an email that takes them through the process of achieving that stuff.
We talked a little bit offline, you actually had some rules for this piece of it. We’re just giving a basic process now, I thought it was really interesting that you had three different rules that applied to writing the individual emails. I wanted to go through those real quick.
Alli: Yes. Many times you’ll see, if you sign up for SaaS trials or if you’re sending out emails yourself, you’ll see emails are general, and they’ll say here’s a welcome guide or read some cases studies or don’t you know we have video tutorials? What I don’t like about emails like this is that they actually introduce quite a lot of work for your reader, they have to stop and figure out what they’re doing, why they’re here. That’s why I have these rules for writing. It’s about getting that hidden work out of the way so that people who see your email can just figure out what to do and then do it.
The first one is called the Rule of One, it’s a conversion copywriting rule and it means or it states that you should write your copy for one reader, and you should get them to do one thing. You may send out an email that says here are the six tips you need to do to get started. Instead of that approach, I would recommend saying here’s the one thing you need to do to get started. This is something that a lot of folks may think oh, well if you have more calls to action in there than maybe some of those more likely to click on something for sure, but there’s a lot of data that doesn’t support that claim. I think it’s on marketing props, there’s a study where Whirlpool eliminated all the calls to action from their emails except for one and they saw 42% increase in clickthroughs. Getting rid of everything from your email and just having one clear call to action is rule number one.
Rule number two is to make sure that call to action is measurable. When we say measurable, that means we want someone to be able to know when they’ve done it. If your call to action is for someone to upload a video or to invite a team member, these are concrete actions. When you’ve done it, you know you’ve done it.
What would be a call to action that’s not measurable is something like explore my account. It’s a little bit less well defined, folks come in may not know when they’re done exploring their account, if they’ve even achieved anything. It introduces that work where they have to figure out what to do.
Then the third thing is to make sure that your call to action is something meaningful. Really, that the whole email is meaningful. We want people who are reading our emails to say, okay, yes, I need to do this. Instead of sending an email with a call to action, and we were talking about this offline that says something like submit or login, something that’s pretty boring. No one’s life ever improved because they clicked login. You’re going want to talk about what is going to happen as a result of doing whatever it is the thing that you’re doing.
Instead of login, maybe it’s invite the team member. If you want to take it even one step further, less of a call to action and more of a call to value, you could say, “Cut the time you spend on support tickets in half.” Made that one up off the top of my head, it’s probably not the best example. The reason I shared this is to show that you want to make sure you’re communicating why someone should do what you’re asking them to do. Because people have a zillion emails in their inbox, they’re going to ignore yours unless you give them a reason to do anything about it. Three rules, rule of one, make your call to action measurable and make it meaningful.
Mike: Awesome. I think that applies to not just emails that you’re writing inside your onboarding sequence but you can also generically apply that to marketing copy on your webpage or landing pages. There are lots of things that cross applies too. Again, we’re going back to the basic process for iterating on your email sequences. The first one was identifying that shortest path, second one was for each step writing the email, and then for the third step is to take a look at that. If they don’t take the actions on the follow up to remind them to take, usually this involves some level of events and automation. You’re typically not going to get here without some level of automation whether you’re using Zapier or a timed trigger that you can interject and stop. You’re just not going to be able to keep up with it after 5 or 10 people are involved in your onboarding process.
Then the next step is to measure the results of those emails and make sure that people are moving or progressing through your sales funnel. There’s a lot of different tools you can use, you can implement custom database tables or use tools like MixPanel or KISSmetrics, Intercom, Drift. There’s lots of things that do that but it’s really about making sure that you have the information to go back through and iterate for that process and make it better.
What I want to talk to you today about was that there are different perspectives for improving that process. There are three that you had talked to me about. The first one was the marketer’s perspective. Can you talk a little bit about what the marketer’s perspective is and why people tend to use this?
Alli: When you’re talking about a trial, and then the messaging that you’re doing in a trial, one way that you can think about this and one way that a lot of folks will think about the trial is part of a marketing funnel. You have your content marketing and your outreach marketing and you bring people to your site and then you get them to opt in and sign up for a trial, then they’re in the trial, and then you’re retaining them once they’ve upgraded. It’s one step in this funnel toward keeping long term customers.
If you’re a marketer, you might say okay, if the trial’s not doing what I want it to do, the way that I describe this problem is that I have a leaky funnel. Something is happening in my trial where people are not staying around. If you’re a marketer, you’re going to approach this problem like a marketer. You’re going to say okay, why are my conversion rates so low? Am I getting the wrong people into my trial? Am I not targeting the right people? Is my messaging somehow not what my target prospect wants to hear? Is the problem that my web copy is out of date that my content marketing is wrong, there’s a mismatch between who I’m talking to and who I want in my trial? Marketer’s perspective is about fixing a broken part of your funnel.
Mike: Awesome. In most cases, this assumes that your sales funnel is I’ll say either long enough or you have enough people going through it that it makes sense to look at that and try to find optimizations. If you’ve only got 10 or 20 people going through a month, it’s hard to look for optimizations with lower numbers, just because you can’t really get a good sense of what is statistically significant or not.
The second approach you talked about was the product approach. I think the product approach is probably one that I hear the most about because pretty much everyone is doing it, they’re saying how do I draw attention to the different things. Talk a little bit about the product approach when it comes to the SaaS onboarding funnel.
Alli: Oh my gosh. Me too. I hear this. Every SaaS founder that I talk to, who has a problem with their onboarding, they say, “We have so many features, how do we get more people to try all of our features during the trial?”
Mike: Why do you think that is that they want everybody to try out all the different features?
Alli: I think it’s because many of these SaaS founders who I spoke to, who like I said come from the MicroConf Community, they’re building features that people ask for, they’re building features a lot of times because they have done research and they have figured out that this is a real pain and their feature addresses that pain. They build the feature and the folks that have it, folks that are using the feature are enjoying it, and it makes sense that you would want to solve other people’s pain. Why wouldn’t you want someone to try out everything that they can do in your app. It’s going to make their lives so much better.
I think people approach it from the right place, so to speak, people really want to help. The only problem is that that’s not always, I have found, what people want to do when they come to your app. Even people who are very aware of what they want to do with your product, maybe they know the exact features that they want, they still don’t need to see all the features, at least during trial.
Mike: Yeah. They’re there to use your app because they want to solve their particular problem, not because they want to use every feature, whereas the developer tends to be more focused on, hey, I created this new feature over here, you should come check it out or you should use it. And making assumptions about the reason why some of their customers are falling out of the sales funnel is because they’re not using that feature or making assumptions about what the value is that people are getting out of it versus understanding what the customers really looking for and what would make them successful and what things they actually need to do in order to be successful.
Alli: Exactly. So much of this has a lot to do with who’s coming to your app and what category you’re in, and the stage of awareness that most of your buyers are. I like to think about categories that are really saturated as most of their prospects are likely to be switchers. If you are using, for example, a proposal software as a freelancer and something goes wrong and you don’t like it anymore and you want to switch to another one, you already know basically what you’re looking for and there might be a single feature that you need. But during your trial, you don’t need someone to bombard you and say, did you know we could do payments, did you know we could convert currency, if the only feature that you need is version control. If you are that feature focused buyer, you’ll go figure out or you’ll ask someone if this feature is available a lot of times.
Mike: I think it’s not just about the feature, it’s just about the fact that they are in that mindset of I want something else and I want to find something to solve this specific thing which is the reason I’m switching from somebody else, versus somebody who has searched for a pain point that they had and they are so early on in the buying process that they’re not at the point where they’re not willing to put their credit card down versus somebody who is just like you described, they’re willing to put their credit card down because that new product has that one feature that they really need.
Alli: One of the things that I think is really interesting is that in that level of awareness where people, in copy writing we might call it most aware with a high level of intent, someone is aware of their problem, they’re pain aware, they know that solutions exist, so they’re solution aware, they’re product aware, they know that your product exists, and then they’re most aware. They know your product is where, they know that you are a good candidate for solving their problem.
And then if they’re most aware with intent, that’s the dream buyer. If you have what they’re looking for, then they’re going to find you. But most people aren’t that, we do not have the luxury of being able to write for people who already know that we are the right fit for them. As marketers, copywriters, product managers, SaaS owners of any kind, we have to be ready to help folks along the way and say okay, this is what you are most likely to want to do. We’re going to help you figure out how to use this app to get you where you need to be. That’s when we start to get into that third perspective that we are talking about.
Mike: Which is a customer success approach. I guess the general way to phrase the customer success approach is that you’re looking to identify what the success milestones are for somebody coming onto your product and how can you help enable those for the prospects. I think this is what we’re going to really drill into so that people can get some actionable takeaways for this. The first question that most people are going to have to try and answer is what success milestones could there be? You talked a little bit about this before but can you elaborate on that a little bit? I think it’s probably going to be different for each product.
Alli: It’s totally different for each product. It’s different for each product and it’s different across categories. Mike, are you at a stake yet where you know what your customer’s success milestones are for Bluetick?
Mike: I have some idea of it. I would say I don’t have 100% confirmations but there are certain things that the customer has to do in order to provide value to them. The first one is that they need to connect their mailbox, if they don’t connect their mailbox then obviously they’re not getting any sort of value from the products. The second one is that they need to set up email sequences. If you’re not sending emails, the product doesn’t give any value. And then third one is you have to have contacts loaded into the system to send the emails to. And then the fourth one is obviously you have to actually send the emails.
Really, the most important one is getting them to the point where they send the emails and the value that can be measured is that when they start getting replies from those automated emails that are going out. There’s a way to measure that and then there’s those progressive steps leading up to that which they don’t do any of those then the number at the end is going to be zero. But once they get through those initial set of things, then there’s a way to measure how successful they are as they’re using the product.
Alli: That’s really cool. What I’m curious about, it sounds like the moment where people are most likely to say oh, okay, I need to keep using Bluetick, is the moment when they get that first reply, that second reply to an email that’s been sending out as part of an automation, is that what you’re observing?
Mike: Yeah, that’s it. I have customers who will sign up and then they start sending the emails out. And then after even just a day or two, they start seeing that they’re getting responses and they know that it’s working. If somebody didn’t respond, the system would follow up for them and they don’t have to worry about it. That’s exactly right.
Alli: It’s really awesome that you have that insight because Bluetick is still a very young app. I think one of the things that some apps are naturally predisposed to have these built in success milestones where you have to do a couple of things that are not that difficult in terms of the cognitive load that you bear while you’re doing them. You have to write the emails and that’s pretty tricky. But you have these clear success milestones and the measure of success is also very clear. People who are signing up, setting up their inbox, getting their contacts, sending the sequences, and then getting those replies, that’s a very clear measure and that’s great when you’re able to do that.
Mike: But that’s really a close feedback loop where there’s no real, I don’t want to say no other options but that’s the result of the product itself. I think that it’s much less clear when you have something that does any sort of analytics. I think you and I talked offline a little bit about Wistia and the process that they had gone through to increase their onboarding experience and make sure that people are successful.
If I remember correctly from reading an article, somebody just said that one of the things that they looked at was making sure that people were looking at their analytics inside of Wistia. They’d upload a video and invite a team mate and look at the analytics. Looking at analytics does not necessarily mean you take action on them. It depends on how you view that as to whether or not that’s a real milestone. How much of a milestone is it? If you went to the page and then you clicked away, does that count? Or you have to come back to it several times? I think it’s very subjective at that point. Not everything, I think, falls into a neat bucket like the process that I outlined for Bluetick does.
Alli: I think you’re absolutely right. If only every app had as clear and straightforward a feedback loop as Bluetick, make my job a lot easier.
Mike: What is it that you would recommend if somebody’s in that situation where you’ve got some customers that are coming on board and you might have an idea of what your success milestones could be, but you’re not sure. What are some of the couple of things that you could do right away to try and figure out what those milestones are or whether or not your assumptions about them are correct.
Alli: The first thing that I would recommend, it’s kind of asking yourself a series of questions. The first thing that I would say is okay, do I know who’s using my app and are all the people who use my app using it pretty much the same and what does that look like. That’s the first question. Is everyone here using the app that we have the same, and if not, how are we going to start talking to everyone the right way?
Mike: Would you recommend starting with that as a question of what the size of their business is or are there other things that you can think of that would be better suited for that type of self segmentation or is it just size of business is a great place to start and then dig in from there?
Alli: It depends. It always depends. It depends on what your category is and what those main factors might be. Ideally, you’re in a place where you are starting to have some insight that these differences may exist. You may, for example, notice that 30% of your users just never click invite a team member. They just never do that one action. That’s a very telling piece of information where team size may be a very large variable.
Mike: Going back to what you’re talking about, the product approach where one of the reasons that that may fall down is if you’re trying to get people to use the invite a team member but if they don’t have team members, they’re not going to use that. Of course, writing those onboarding emails, trying to get them to use it is never going to work because they don’t even have team members.
Alli: Yes. I sign up for apps all the time because I want to see what their free trial emails look like. A lot of them are apps that I plan on using. If the first thing they ask me to do is invite a team member, I kind of just assume it’s not for me, it’s not a product for a solopreneur because I don’t have a team member that I need to add. You’re right. The product based approach will frequently say we have our products, let’s make people use it, and the customer success approach would be like okay, who are our customers and how do we make them successful?
Mike: Right. You’re really just personalizing the features that you’re offering them based on the problems that they’re facing and they’re trying to solve. It’s just personalization of your software for them.
Alli: Exactly. Yes.
Mike: Once you’ve gone through the process of self segmenting people a little bit, what’s the next step? How should you go about finding more information about them? Because I think there’s only so many questions you can ask in self segmentation emails before you have to go onto the next step. What would that next step be?
Alli: Yes. The self segmenters are good to start off because they can be automatically triggered and you can keep collecting that data while you’re diving into the harder data which might be lurking in your KISSmetrics account, in that quantitative user behavior based data. What are people actually doing? This is really challenging to make sure that your data collection methods are labelled correctly, set up correctly, but it’s a matter of sifting through a massive amount of data and saying what are people doing right before they sign up for a paid plan? If the question you’re answering is why don’t more people upgrade, then look at what people who have upgraded have done.
One of my favorite places to look is inside your support ticketing software. I love looking at what kinds of question people are asking while they are in their trials. One of my favorite little tip is to look for phrases that follow the phrase, “So that.” So if someone’s asking you a question and they’re saying how do I configure my invoice with an automatic payment link ‘so that’ I can accept international currency, or how do I upload my video in a small file format ‘so that’ I can share it in email.
Then, you’re starting to get some data on why people are coming to your app. What is the real problem that they’re trying to solve? If it’s the video example, you have a video that you need to email to someone, emailing a video is like an impossible task if you do it as a file, how do you help someone who wants to do that, figure out how to do that. One of the things that Wistia does really well is incorporate that into both their email onboarding but also into their in app UX messaging.
Mike: All this stuff, what you just talked about is really ways to be sure that the assumptions that you’re making previously about what the success milestones are are valid. I think that looking through the support emails, specifically after where they say ‘so that I can do whatever,’ that’s fantastic, I’ve never heard that one before.
Alli: When we do review binding as copywriters, you can do it in product development where you go out and you find the pains and the crispy-sticky language, you find what people are looking for and you find out why they want to do it. Getting into the idea of the ‘so that’ is one of my favorite, favorite copy tips because it helps you just get that one level deeper. Because we’re all emotionally human creatures with wants and needs that we don’t always articulate. This is one of the reasons why we look for that ‘so that’ because we don’t want to make any assumptions about what someone is asking us for help with. If someone says I need to be able to do XYZ, you can help them of course and you should, and that’s great. If they also tell you why they want to do it, that’s gold.
Mike: All of this information is intended to help you build out the emails sequences around those success milestones but how do you know when you have enough data to get started? Does it take 5 or 10 data points or do you need 80 or 100? It feels like there’s not really a hard statistical significant number that you can look at because this is all gut feel to some extent?
Alli: That’s a really good question. When you start noticing patterns, when you notice that the folks that you talk to share the same functional role or they have the same need, they tend to do the same things or they have the same questions, that is a point when you are ready to dedicate your time to your onboarding.
Mike: It is really about looking at the patterns and when you start to recognize them and you start hearing the same things over and over again, that’s when you shift modes over to starting to automate things in your emails versus continuously analyze the data that’s coming in, right?
Alli: Yeah. I think never stop looking at the data. The more close relationship that you can have with either that quantitative user data of who does what, stuff that you can put into a graph or a chart, and that qualitative data of what people are saying and when they’re saying it. But the more that you can maintain that relationship with the data, especially during onboarding, the more that you’re going to be able to push those free to paid conversion rates up to a quarter of percent here, a little bit here, and that’s how you start to get to those high rates.
Mike: I think in terms of the pattern recognition, every brain is a different engine and you start to see massive differences between two things. Part of gathering this data allows you to see the differences between what different customers are doing. As soon as you start to recognize, hey, this customer segment over here is much larger than the second one over there, then you start focusing on one versus the other and it makes it easier to make those decisions because you have the numbers in front of you.
Alli: I agree.
Mike: Once you have this qualitative data and you believe those success milestones are, the next step is to coach people around those milestones and steer people towards them. What is the default that people tend towards if they don’t do that? What are the mistakes that people make instead of actively going after those things and intentionally doing them, what’s the default that people do?
Alli: Yes. There are so many mistakes. The default that I see is on the first day, you get a welcome email from the founder and a welcome email that says, “Here is a guide to get setup.” Or, “Here is a list of all of the places you can get support; our blog, our video tutorials, our 7 tips, our 13 minute video.” And while it is great for founders to send out those emails, while it is great to tell your users where they can get support, it is much better to say, “Great! You just signed up. Here is what we need you to do next.” The alternative to sending out emails that show your users what they should be doing while they’re onboarding is really just sending them useless information. It’s the equivalent of an email blast to everyone you know that says, “Hey, we have a thing.” Or, “Here is a new feature, look at it.” It just drives me crazy because these are apps that in many, many cases are very user friendly, in many cases are very helpful, they address a real pain, but these emails come through and they just get in the way and they make it so much more difficult to get started than it needs to be. They just introduce so much work.
Mike: They’re really just not helpful, is what you’re saying.
Alli: They’re not helpful. It’s like if you show up to a store and someone says, okay, can I help you find anything? You say no thanks, I’m just looking. And then if you show up to a store and someone says hi, would you like to try on our new jeans? But you’re there to buy a vase. They never asked you who you are or what you’re there for, they never made any attempts to help you get started or figure out what you want to do. This isn’t the best analogy.
Mike: I think it’s a great one. Because it’s exactly why I use Amazon.
Mike: Because I just don’t want to be bothered. I don’t want to go into a store and have them try and sell me some stuff that I just absolutely have no interest in. I think it’s a very great analogy.
Alli: I’m sure there are times when you are looking for something specific that maybe you haven’t bought before or you haven’t been able to track down where you need someone’s help and you’re grateful for their help. But if you walk into the store and they ask you if you want help with something that’s not the thing you came there for, then you just leave or you go some place else.
Mike: I think that’s partly a function of them either having some sort of quota and at that point, their help is about them, it’s not about you. It’s not about what they can do for you, it’s about what can I do to meet our goals or our internal needs or this product needs to be sold. Let me see if I can direct people to it. I think that’s the fundamental issue.
Alli: Yeah. It really, really is because the difference between the product approach and the customer success approach, even though neither of those are strictly a sales approach, the product approach is very self centered, this is what I have to show you. Do you want to come look at it? As opposed to I think this is what is going to help you get through what you’re trying to do here.
Mike: I think there’s a big difference that you can just objectively notice when you sign onto a software product where the onboarding itself is extremely well put together and well thought out, and is helpful versus the ones where it just meanders along, it doesn’t really direct you through to the things that are relevant to you. It’s very clear when you see those two things side by side, but I think when you’re working on your own products, it’s very difficult to be a little bit more objective about that.
Alli: The biggest take aways that I would say, I would hope anyone who’s working on their onboarding walks away from this, how can I learn more about who’s using my app? How can I learn more about why they’re using it? And how can I learn more about what they’re doing that makes them successful.
And then once you’re starting to really notice those patterns, that’s a sign to really dedicate more time to this and start implementing those sequences in your onboarding that get people to really coach them around those success milestones. Instead of taking that product approach of saying okay, let’s look at everything. Really taking that approach of saying how can I help people be successful. What do they need to do first, what do they need to do second, how can I help them do it?
Mike: Awesome. I think that’s a great place to leave off for the listeners. What’s the best place for people to follow up with you or find you after the episode or if they want to ask questions?
Alli: My email address is the best way to reach me. It’s email@example.com.
Mike: Alli, thanks so much for coming on. I really appreciate having you.
Alli: Thanks for having me, Mike.
Mike: 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 firstname.lastname@example.org. 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.
In this episode of Startups For The Rest Of Us, Mike interviews Brian Casel, Founder of AudienceOps, about transitioning from productized services to SaaS. Brian discusses what AudienceOps was like 6 months into development, he touches on team management and how he handles developing a new product while supporting an existing one.
Items mentioned in this episode:
- Audience Ops
- Ops Calendar
- Brian on Twitter
- Brian’s website & newsletter
- Brian’s Productize course
- Boostrapped Web Podcast
- Big Snow Tiny Conf
Mike [00:00]: In this episode of ‘Startups for The Rest of Us,’ I’m going to be talking to Brian Casel about transitioning from productized services to SaaS. This is ‘Startups for The Rest of Us’ episode 331.
Mike [00:17]: 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 built your first product or you’re just thinking about it.
Brian [00:25]: And I’m Brian.
Mike [00:26]: And we’re here to share experience to help you avoid the same mistakes we’ve made. How are you doing this week, Brian?
Brian [00:30]: Doing good, Mike. Thanks for having me on.
Mike [00:31]: Yeah, no problem. So, for the audience here, in case they’re not familiar with who you are, Brian Casel was the founder of Restaurant Engine which he sold a couple of years ago. He’s also been a speaker at MicroConf and he is the current founder and CEO of Audience Ops. And then he’s also the co-host of Big Snow Tiny Conf which I attended a few weeks ago, and he’s also the co-host of the Bootstrapped Web Podcast with Jordan Gal. Did I leave anything out?
Brian [00:57]: Yup. That’s about everything I’m focused on right now. I also write about productized services and things on personal blog. But yeah, these days I’m really pretty much all in on the audience apps business, that’s what I’ve been doing.
Mike [01:10]: Yup, and we’ll link a bunch of those things up in the show notes. But one of the things I want to talk to you today about was the fact that you’re essentially running a business that is a productized service called Audience Ops. And for the listeners who aren’t familiar with it, can you give a brief description of what Audience Ops is and what it does?
Brian [01:26]: Yeah. So, Audience Ops is a content marketing company. And we’re going on almost two years now since I started it. And so basically, we make it easy for businesses to do content and do it well. And now, as we’re going into 2017 here, we’ve kind of expanded our line of different products to help accomplish that goal. So we’ve had our service side of the business and basically, there are two versions of the service now. There’s the content service where we write the content.
We basically write your blog content for you and manage the whole process from start to finish. And now we have Audience Ops Express where if you’re doing content, you can send us your drafts and we will handle all of the legwork to get it published like proofreading the images, the formatting setup, transcribing your audio or video, whatever it is that you can basically send on limited content pieces to us and we’ll handle all the legwork from there.
So that’s the service side of it. And then this year, we’re now in the process of launching our software called Ops Calendar. And that’s essentially a content calendar tool that streamlines and automates a lot of the parts of the production process for doing content. So it’s got like smart checklist which automate recurring tasks and delegating those based on one year content as publishing. You can track analytics to see traffic and conversion numbers on a post by post basis right there in your calendar.
You can manage a list of content ideas and have those going to your calendar and into production schedule social media. So it kind of pulls all the disjointed pieces of doing content marketing all together in one place. And so that tool has been in development for the last six months. And right now in March 2017, we’re just now rolling it out to – so we’ve had some beta costumers in it and now we’re starting to roll it out to customers on our early access list.
Mike [03:11]: So before Audience Ops, you had run Restaurant Engine. Now, would you have classified that as a productized service?
Brian [03:18]: Yeah. So I think Restaurant Engine evolved into a productized service. It started like purely as a SaaS. It was a website builder for restaurants. And what I learned in the first year or two was that those customers really valued the done-for-you aspect. I was doing concierge onboarding just to get people onboard. Like, we will set up your website for you, started doing that for free just to get them onboard. And then I started charging for it and then we started requiring that service for all customers. And eventually, it became kind of that software plus service productized service model, if you will.
I mean, that’s where I really started to learn the value of combining software with service. So not only providing the tool but providing the done-for-you aspect. But then when I started Audience Ops, having really sunk my teeth into that productized service model, I decided to start that business with the productized service model first as a way to launch it, establish it, grow revenue really quickly and also just grow its, like its brand if you will and our credibility in the content marketing space which now two years into it are what we started this process about 18 months into it, we’re able to expand into other products for this same space doing content marketing.
Mike [04:32]: I think what I find interesting about the journey is that you started out with Restaurant Engine trying to build it into a SaaS product and realized that that was not going to work and you transitioned it into a productized service. And then when you started Audience Ops, you kind of made the deliberate choice of, “Hey, I’m going to create this as a productized service because I know how to sell that.” And then now two years into it, you’re looking at creating a SaaS based on that productized service.
Brian [04:56]: Yeah, essentially. I identified a few specific pain points through the process of delivering our service and doing content on a regular weekly basis, and we’ve used a variety of different tools and we still do. But having identified those pains through the process of doing content, that’s what led to the initial concept for Ops Calendar and then that also led to validating that other people have those pain points too which eventually led to investing and building it and getting it out there.
Mike [05:28]: From I guess a boarder perspective, you seem to have done the gamut of all the different types of products. You’ve had your productized course which is especially an info product. And then you’ve also had a productized service and now you’re working on a SaaS product, and previously as I said before, Restaurant Engine was intended to be a SaaS product and it didn’t turn out that way.
But I guess, could you contrast a little bit the differences between starting in a productized service versus starting a SaaS? Because obviously, I think that there’s timeline differences and there’s experience differences and there’s all these things that go into one versus the other. For the listeners, can you contrast those things a little bit which one’s easier? What are some of the pros and cons of doing a productized service, for example, versus a SaaS application or just kind of the classic SaaS?
Brian [06:13]: Yeah, sure. So, in my view, just from like a viability standpoint, the idea of building and launching a SaaS product requires a pretty heavy investment of time and money. Whether you’re a developer or not, and I consider myself a non-technical founder. I mean, I do the design and the frontend stuff but I don’t code the backend. So in my case to build a SaaS software, I knew going into it, that would require investing quite a bit of money into hiring other developers but also a lot of my time. And I knew from experience of running Restaurant Engine that it takes several months to, maybe longer, to even build the initial version that users can actually use and then a year or longer to even make it a viable recurring revenue business that could potentially replace part or all of your income.
And so, that was the math that I was looking at in 2015, when I was looking to get into my next business. I was considering various ideas. Coming out of Restaurant Engine, I was looking at different ideas of what I should kind of sink my teeth into as my next business. And I look at making it a productized service first because I knew that that’s something that I can actually launch to paying customers very, very quickly, even charge a higher price point for it and have a recurring revenue model with that.
And literally within the first 30 days, we had our first clients onboard for Audience Ops for our done-for-you content service. And that grew pretty quickly over the first 18 months to a point where it enabled me to build a team around it, build a process and a system, and then ultimately, well, really early on, really, I was able to remove myself from the day-to-day process of delivering that service because I had the team and the systems in place.
So that freed me up to focus on growing into other products. I wouldn’t have really been able to make the math work on building a software from the very beginning and that’s why I went with the productized service. But secondly I wouldn’t have identified the pain points associated with doing content in terms of how it would relate to a software tool until a year or two into it. So I think both kind of led to that.
Mike [08:24]: Right. So it’s partially a function of the runway, so to speak, and the time that it takes to get up and running. And then there’s the other side of it is the learning component about how do I actually solve this problem in a way that makes sense for the customers of the product.
Brian [08:38]: Yeah, absolutely. I mean, this is a fully self-funded business. That’s how I’ve always handled it throughout all of my businesses up until now and still going forward. And so, we’re very cash flow sensitive kind of profit first type of mentality from start to finish. And that’s ultimately what made it possible for me to even consider investing thousands of dollars a month to just hire developers, not to mention the cost of marketing a new SaaS product. So yeah, lie this business has been working off of the profits from the productized service and then that continues to fund the development going forward.
Mike [09:13]: One of the things I wanted you to help kind of contrast for the list of terms is the difference in financial and starting that service based or productized service business versus starting a SaaS. So, you’re about six months in on the SaaS application. You said you’re spending a couple of thousand dollars a month for developers. So, ballpark are we talking somewhere between $12,000 and $20,000 that you’ve put into building the SaaS so far?
Brian [09:37]: Yeah. I’d say that’s about accurate probably closer to 20 so far.
Mike [09:41]: Okay. So, about negative 20 and this is after 6 months. And for the Audience Ops service, in six months, roughly what was the revenue?
Brian [09:50]: Well, six months in, it’s probably somewhere around maybe 10k to 15k a month MRR. And so early on in like the first three to six months, I actually took it deliberately very slow. We took on a few clients early on and then we kind of paused the service to get our process as in team employees, and then started to ramp up against starting from six months, probably around the 12-month mark. I think we were up to somewhere around 30k MRR. And I think it was probably around that point, around 10 to 12 months into the business.
I mean, I basically had my own salary kind of covered. I’ve always just kind of paid myself the base amount of what I need to live and support my family. And so, again, as the productized service, I’ve been able to cover that from pretty early on in the business. But then by around 10 to 12 months in is when I started to put aside whatever extra profit that was left over after all expenses were paid from the business and after I was covered. And I’ve put it aside maybe roughly 2,000 to 3,000 a month in profit. And that grew and that deviated from month to month.
So, I started doing that around 10 to 12 months in. And then by around 18 months is when I had a bit of a savings, like a business savings account saved up, and then I invested that to start. That basically jumpstarted the investment into hiring developers, but still through this day, the services continue to fund the development going forward.
Mike [11:19]: Yeah. And I kind of want to make that distinction very clear because just in terms of finances loan, SaaS scene is kind of a holy grail on the software world because it’s recurring revenue. But at the same time, if you’re looking at a productized service, you said to yourself that Audience Ops was making around $15,000 a month and you just literally said, you were taking it slow. You could’ve probably pushed on the gas harder if you wanted to. But six months in, you’re pointing $15,000 a month from it. Whereas six months in on the development of the SaaS, you’re still technically a zero because you’re not charging customers yet. You’ve spent closer to $20,000 on it so you’re at the negative.
And just kind of do the math on those and you’re probably at – if I had a guess, we’re probably at $60,000 in revenue from the productized service versus zero and plus you’re also running the deficit because you’ve spent $20,000 on it. And it’s just a very start contrast between those two things. And I think it begs the question, if you’re doing well with that productized service or it’s easy to build something like that and get it up and running and make it profitable, why would somebody even ever want to do a SaaS?
Brian [12:22]: Yeah, that’s a good question. So, we see this a lot, right? You look at those top-line MRR revenue numbers and they seem so dreamy. I refer it to many and they would seem very dreamy to me looking at it just a couple of years ago. The reality of the productized service model is that there are a lot of cost associated with it. Obviously, there’s more people involved. Like, we have a pretty large team. Our team is fully remove all over the world but all of our writers and all of our project managers are in the U.S.
So as the revenue goes up and as we bring on clients, our costs go up and our team grows. And that’s what led me to the decision that, “Okay, this year in 2017, I need to look at diversifying our product line and growing into more scalable products such as software and even our Audience Ops Express services is a little bit more scalable than our content service.” That’s not other say that the content service is not able grow and scale. It’s just not as scalable as something like a software service.
The tradeoff of course is that the productized service can grow much quicker. It can remain profitable the whole way through. Whereas the SaaS, even if you’re charging somewhere around $99 a month or more for a B2B software which may seem like a relatively higher, I don’t know, these days it’s all relative price points, right, but it just takes a long time to get enough customers to make that viable. And I realized that going in. And so that’s why I continued to work both sides of it basically the service side and the software side.
And with the service especially a recurring productized service, we deal with a lot of the same issues that a typical SaaS would turn and optimizing our onboarding process and retention and that sort of stuff. So yeah, it all kind of plays into it.
Mike [14:14]: Yeah. I mean, I think that there’s that confusion when you start looking at those numbers and saying, “Oh, well, the business is making $15,000 a month and it’s a service business.” But you don’t realize that there’s got to be probably five or six different people involved and they’re all working part-time in a business like that. And it’s the manual labor or just in general the labor cost associated with running any productized service are all around providing those services because it’s not like the software side where whether you’re running something once or 50 million times, it almost doesn’t matter to you. The cost is almost the same versus if you have to pay somebody to do something once, maybe it’s $50. You have to pay them 100 time to do it, it’s 5,000.
Brian [14:54]: Well, yeah. I mean, the way that I was looking at it especially going into this year was as the service keeps growing. Like, if the service were to double or triple in size in terms of clients and revenue, that would mean that our team would close to double at least. And then I started to look at like, “Well, what does that picture look like?” And then that’s just a very large team with lots of people and I wanted to get into. I still want to keep the team relatively small.
The other side of this is people think about productized service is like, “Well, that’s just kind of consulting or that’s like freelancing or building an agency,” and yes, it is manual services. There’s no doubt about that. But the way that I approach it is it’s a very focused, systematic, process driven service where we really do one thing and we have a very defined production line, and I’ve got people in place who handle very specific pieces of the process.
So unlike an agency which might take on anything and everything. If you’re a marketing agency or a design, development agency, like you take on so many different projects and different types of clients, for us, we bring on a client. They go through our standard onboarding process then they go into our standard delivery model for content and production and publishing and it works pretty well. We’ve got a fantastic team of talented people but they all really rely on our processes. And that’s what enables me to not be involved in the day-to-day service stuff.
I do coach the team a bit and I work on our processes and things but my role is really to make sure that the operation runs efficiently and then to free up most of my time to work with the developers and design the SaaS and then think about marketing and all that kind of stuff.
Mike [16:33]: Right. I guess the underlying point there is that when you start a business or anybody starts a business, the person who is the founder generally can do most things. And it’s very easy to, I think, fall onto a trap where you look at something whether it’s a specific problem or a service that somebody’s offering and say, “Well, I can do that faster and cheaper and offer it at even a better price or maybe a higher price,” because you’re offering higher quality. And then you almost trick yourself into thinking that, “Oh, well, if I scale this up, let me just multiply myself by 10 and I’ll have 10 times revenue, 10 times the profit margin.”
And I think what inevitably happens is your profit margins tend to go down because there’s management overhead that you don’t take into account as you build out the team. And I imagine at this point, your Audience Ops is at a point where you’ve got middle management, so to speak, that are managing teams of different people whether writers or the people who are posting the content. I mean, there’s a lot of stuff that goes into it and people don’t take into account that there’s that management overhead that will eat into the profit margins.
Brian[17:32]: Yeah, exactly. I mean, we pay the writers and we also have like client managers who are client facing. So I’ve kind of delegated the client facing communication stuff even like calls and emails and stuff. And then we have a team manager and her job is kind of more internally and she kind of keeps track of the people on the team and keeping them updated. And then I’m looped in like I have every two weeks to do a call with the managers and I’m in touch with everybody on the team pretty regularly.
So, I would say there’s one more piece to this on how the productized service relates to the SaaS. It’s not just about a funding source to invest in the SaaS. It’s also, I built it as Audience Ops the company. We’re a content marketing company and like I said, we wouldn’t have identified the pain points that would led to the SaaS product unless we have done the service. But also, I think it gives us a lot of credibility in terms of building software tools or even our training stuff if we hadn’t done content marketing at this level of scale and we continue to do it and I use content marketing heavily in my previous company.
So I think those kinds, like establishing the service and the company as a content marketing focused company with that sort of credibility leads in nicely to – it’s almost like an obvious next step for us to release software tools for doing content market.
Mike [18:54]: Now, I guess kind of playing off for that a little bit. Because there’s overlap in terms of what the service does and what the Ops Calendar does, what sort of team over lap did you have with the new product, with the calendar itself. Because obviously, you’ve got all the writers and the managers in place to essentially optimize the entire process around publishing content for your customers. How much of that were you able to reuse when building the Ops Calendar?
Brian [19:19]: Yeah, it’s a good question. Really largely, the people working on the Ops Calendar and the service are mostly separate. I mean, we’re all in the same slack room together but I did have to go out and hire. So we have two developers who I brought on specifically to work on Ops Calendar, just given the technology that that’s built with, we didn’t have that type of developer in house. We did have a WordPress developer who I’ve been working on with.
So Audience Ops also sells a couple of small WordPress plug-ins like our content upgrades plug-in and we built and launched that over a year ago at a really great WordPress developer who builds that and he continues to maintain that plug-in. So I did loop him in on Ops Calendar. So we have just released the WordPress integration between our calendar tool and your WordPress site. And so, since he’s the WordPress expert and I had been working with him before, I brought him in just for that piece. But beyond that, really from day to day in terms of developing the product, I’ve been working with the developers and then the team is a bit separate.
I am of course looping the team in on the progress of Ops Calendar and right now as the tool has kind of matured a little bit, now we’re starting to actually work it into our process for delivering content for our clients and for ourselves. And I’m starting to use it for my own content on my own blog. And so the team on Audience Ops is essentially a customer, if you will, of Ops Calendar, obviously we got paying for it but it’s working through a process and clients of Audience Ops service were using Ops Calendar to serve them as well so they could access to it as well.
Mike [21:00]: Right. The underlying challenge I think is that you had to essentially bring on new team members in order to develop this product just because you didn’t have that talent or the focus that you could divide off from what they were currently doing into building this new product. It was really, you bring in a couple of extra people and put an umbrella around them or kind of a small divider that says, “Hey, you guys are going to work over here on this other thing and we’re not going to merge things together or have you guys work together on stuff until you reach a certain point where the product is essentially usable by the team,” and that could take several months between four and six months. You said that you’re at about right now, correct?
Brian [21:38]: Yeah, exactly. Yup.
Mike [21:40]: So, I guess what are the challenges associated with running those two different things side by side, because you’ve obviously got to keep the Audience Ops system up and running and making sure everybody is doing what they’re supposed to do, what your customers are getting service so you’re bringing on new customers. And at the same time, you’re also building this second product that has – I mean, you obviously got like the beta customers who signed up for it and agreed to pay for it early on. But what are the challenges associated with managing those two desperate teams? Because I think that there’s very big differences between them and the goals that they have and the responsibilities?
Brian [22:14]: Yeah. I’d say just the challenge for me personally is managing multiple things at the same time. So I do jump back and forth between working with the team on the service, coaching the managers, or improving our processes and systems there to these days really spending most of my time working with the developers and I handle kind of like the design and the user experience and the product, kind of managing the product on the SaaS side. That’s really where I spend most of my energy. I’d say a third thing that I do is just overall marketing for the business, working at our marketing funnels and making plans there.
Yeah. So I mean, it’s kind of tough to jump back and forth between those things but at the same time, I do think that that’s part of the role of the founder in a way. Obviously, I’m not doing everything myself. A lot of it is kind of managing and giving input on things. So a lot of the technical time-consuming work of coding software or writing content, that stuff is not necessarily on my plate. I’m taking more of a strategic level giving input, giving direction, and that sort of stuff. And that’s what I spend most of my time doing. That’s where I think where I add the most value to the team.
I think that, again, the services and the software are so connected. It’s not like what I did years ago when I was launching Restaurant Engine where I – like on the side I was doing web design consulting work, and then in my nights and weekends or early mornings or whatever, I would plug away at my little SaaS, bootstrapped SaaS startup where they’re completely separate worlds, and I don’t feel like that today. Like today, I’m really just building this Audience Ops business that has a line of different products but they all really serve the same mission which is to make doing content easy and effective for businesses, and yes, just kind of pushing on that in different areas of the business.
Mike [24:07]: So, I guess now that you have built this productized service and then in addition, you went in and started the SaaS application o the side and it’s obviously all in to the same umbrella, I think that there’s definitely a lot of advantages to what you have done versus I think that somebody have talked to MicroConf several years ago about having products that were very, very different from one another and not related. So you couldn’t leverage the same audiences and obviously in this case, you have created things in such a way that those audiences do overlap. They do kind of lead into each other in the same ecosystem. And I’m curious to know what is it that in building the SaaS app kind of under that umbrella, what would you have done differently next time that you maybe saw as mistakes or things that held you back this time going through that process?
Brian [24:52]: I think probably the classic thing that most especially non-technical founders face is just the pace of development. I think I had a bit of a learning curve early on there. And I’m not totally new to developing software. I had worked on Restaurant Engine and other things in the past. But I think on the one hand, we made a pretty good pace. Like, we’re actually launching it to paying customers now six months in, but at the same time, just having an understanding of like, “All right. We’re going to have all these features built out and ready to launch by certain dates.” I had probably two or three months into the development process. I had a wakeup call to see, “Okay. This is actually how long it takes to build even just the baseline architecture and the core parts of the app.”
And then what ends up happening was about four months into development, I decided to hire a second developer. So I have one full-time developer and now the second developer is on part-time just for the sake of increasing speed and being able to have two people work on different features simultaneously. And so that’s helped to speed things up a bit but yeah, that was one of the challenges I think.
Mike [25:56]: It’s interesting that you bring that up because I think you and I had talked a while back about the pace of development and I kind of – I actually warned you at the time because I ran into the exact same thing where I underestimated things and how long they would take and even after that, you kind of experienced the same thing. And I don’t think this is unique. I think that everyone does this to some extent. They look at something and say, “Oh, well, this is how long I think it’s going to take.” And then, things go sideways or there’s other things you just miss and don’t take into account. And it takes so much longer than you ever think that it’s going to. And I’m curious to know what your thoughts on why that is. I have my own thoughts and I kind of want to get your take on it though.
Brian [26:34]: Well, yeah, I mean, I’m sure you’re in tuned with the technical aspects of what takes so long. But for my perspective as, I don’t know, I kind of consider myself a semi-technical person. So –
Mike [26:45]: But I don’t think that that’s the problem. So like I’m a technical person and I still get it wrong. So I’m curious to know like as a non-technical person, what do you see is the problems and then maybe we can kind of collaborate to figure out, “Okay. Why is it that everybody gets this wrong, not just technical or non-technical people?”
But the decision to do that other big feature later instead of now, pushing those things off, definitely helps. And the way that I’ve been able to do that is by really being in constant contact with our customers especially that we have a group of 14 beta customers who prepaid and they were the first users to start using it a couple of months ago. I mean, regular communication with them as well as people on the early access list. And what I’ve been able to find out is there are few features that people just keep upvoting or keep asking about and keep hammering that these are the ones that they really care about. And then are few other features that I think are nice to have that we will certainly use. Other people may find nice to use but they don’t necessarily have to be in this version that we’re sending out to customers today. And so I think there’s that decision process.
I think the other thing is one thing again as like a semi-technical founder in the fact that I had to hire those developers that are new. So that we were just getting to know each other in the first month or two of working together. And part of the reason why it went so slowly early on was because they were not necessarily aware of how technical I could be for them to explain some of the technical challenges.
And so what would happen a couple of times early on was they’d hit some walls, some technical challenges with one of the requirements that I put in. And then they would kind of go and try to work on it and troubleshoot it for three, four, or five days at a time and I’m not aware of what that technical challenge is. But if they brought it to my attention earlier, then I could tell you, “Oh. Well, okay, I understand what the challenge is. We could just tweak the design in this way and just eliminate days of development from a user experience that’s not a big deal.”
So it took about a month or two for me and my developer to really get on the same page in terms of how we can communicate technical challenges. And once we got that kind of squared away, we’re able to move much faster because we actually are able to collaborate on those technical hurdles even though I can’t do the coding myself, I can help think through, “Okay, for a design standpoint, we can re-architect it at this way or, okay, this is what’s really important that that piece is not as important,” and we can communicate that much clear and that helps us move a lot faster.
Mike [29:55]: Yeah. Being able to prioritize those things is kind of critical and so incredibly important to the entire process that it’s hard to underemphasize how much that plays a factor into the speed of the development, how quickly you get things out the door. And one thing that you had said, the one word that jumped out while you’re talking was the word “ruthless” and being ruthless in terms of saying, “We are not going to do that right now because that’s not important.”
And one thing that kind of jumps to mind, Brian, as an example of when I was working on Bluetick was there was a password reset feature that you could literally see on the front page. You go there and you enter in your email address. And you would expect that it would email you and say, “Hey. Here is your new password or here’s a mechanism for using that.” And over the course of nine months, I had literally three people use it and it didn’t work any of those three times because it was never wired up. It was like we never implemented that feature. It was there, you could see it but then I would get emails from people saying, “Hey, I tried the password reset. It didn’t work. How do I get my password reset?” And I would manually do it.
But it would’ve taken a while to get that done. It doesn’t sound hard and it really isn’t but it takes a couple of days to get it right. And that was something, I kind of made the conscious decision to say, “This actually isn’t that important.” It was on the designs so it ended up in the UI. But that’s one of those things where I made the conscious decision that I’m not going to do this. And I’m sure you have your own examples of things where you’re like, “Let’s just remove that.”
Brian [31:20]: Yeah, absolutely. I mean, again, I’m constantly in contact with people who come through the early access list or the beta users and I’m always asking them, “Why are you asking about that? What are you trying to accomplish? Or what was it about the other tools that fell short for you?” And I’m always trying to get their underlying goal or their frustration, and then I’m trying to figure out like, “Well, can our app already do that or what is the feature that they’ll be waiting for?”
Just the other thing that I see just a lot in this community is I think a lack of a sense of urgency. And this comes back to the whole self-funding aspect. I mean, and also from a marketing standpoint and rolling out and launching a new product. I feel the sense of urgency because, A, we can’t just develop this thing forever and not have revenue, that we’ll run out of money too quickly. But B, people are joining this early access list and they’ve been joining it for six months or more and every day that ticks by that I’m not contacting them or inviting them to start using the app, I feel like ticks away at like the chance that they actually will still need the app when I do send them that email invite.
So, I’m trying to minimize that length of time as much as possible and I think right now we’re at the – I think that the app is beyond an MVP stage at this point but it’s like the minimum viable level of development that I can start to have customers use the thing, and even start to give me feedback and objections about, “Okay. Some users may use it but some users still may have objections.” And I’ve been getting that kind of feedback from beta customers but I think now is that next step to get it out the door.
Mike [33:02]: Yeah. I totally agree with what you just said about waiting too long for getting those people in there and having them use it. I mean, I literally run into that with Bluetick where because some of the development cycles took so long and the tech stack just took too long to get pieces in there. It got to the point where some people who were on that early access list, they kind of looked at and said, “Look, it’s been so long that either this just doesn’t turn out to be a need for me right now or it’s not a good fit, or let’s revisit this in a few months because right now it’s not a good time.” It’s disappointing but at the same time I also kind of expected that not every single one of those early access customers would eventually become a paying customer and you have to expect that. But at the same time, because it’s been so long on my side, some of those people are just not going to convert because they’ve either found other solutions or they’ve realized, “Hey, this isn’t actually a dire pressing need that I have.”
Brian [33:53]: Yeah. One thing that I’ve been doing. And so everybody who joins the early access list on the next page, they see a survey. And they’ve answered a bunch of questions that goes to my email inbox. I read and I reply to just about every single one of those. And what I do is, I just place a star on those responses to that survey that I think are just really engaged. And so, the ones who just send like a one-word answer to the questions, I probably won’t star them. But the ones who send three, four, five paragraphs and then they reply to my email and we have a whole email exchange, I give them a star.
And so those are going to be the prioritized people who I invite first and the first batch and the second batch. And so, yeah, I want to make sure that those people who clearly have this pain and they’re actively seeking a solution and they’re willing to give me all this feedback before even seeing the thing, I want to make sure that they get in there first.
Mike [34:45]: Awesome. Well, I guess any parting words of wisdom for somebody who is potentially thinking about transitioning from a productized service into building a SaaS.
Brian [34:55]: Yeah. I mean, again, I think I see it really as that bridge to build the company first and then expand into doing something like a SaaS. And I think the key is to get the productized service running to a point where it doesn’t require you to be in there in the day to day, so that you can free up all that extra time and mental energy to think about, “Okay, where does this thing go next and where are those opportunities for the next product that would make sense in this line of products from this business?” At least that’s how I’ve been thinking about it. And so I think the key is to put those systems in process and in place to free yourself up.
Mike [35:32]: Awesome. Well, Brian, I just want to say thanks a lot for coming on and talking to people about how to transition from a productized service into a SaaS. What are the best places where people can find you if they want to look up more information or get in touch with you about this?
Brian [35:43]: Sure. So, the site is audienceops.com, that’s where the services are and Ops Calendar is over at opscalendar.com. And my personal site is CasJm.com and that’s where I write a lot about productized services and my personal newsletter. And then I co-host the podcast with Jordan Gal, Bootstrapped Web.
Mike [36:03]: And then people can also get in touch with you on Twitter at CasJam, right?
Brian [36:06]: Yes. Yeah. I still use Twitter.
Mike [36:10]: Yes, that’s an iffy question these days. We’ll see what happens with Twitter.
Brian [36:13]: Right.
Mike [36:14]: Well, Brian, again, thanks so much for coming on. I really appreciate it. 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 email@example.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt used under creative comments. 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.
In this episode of Startups For The Rest Of Us, Rob and Mike make their goals for 2017. In addition to setting their new goals, they also talk about last year’s goals and how they did.
Items mentioned in this episode:
Mike [00:00]: In this episode of ‘Startups for the Rest of Us,’ Rob and I are going to be talking about our goals for 2017. This is ‘Startups for the Rest of Us’ episode 318. 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 Mike.
Rob [00:25]: And I’m Rob.
Mike [00:26]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
Rob [00:30]: The word is iTunes reviews. We have 510 worldwide reviews. A recent review is from a username that’s a lot of numbers and letters so I’m not going to pronounce it. But it’s just from a couple days ago. It says, “Great information but why do they talk so fast? Their podcast sounds like it’s being played at 2x speed and it’s annoying.” What do you think, Mike?
Mike [00:49]: I don’t know. I always play it at 2x speed anyways, so.
Rob [00:49]: I’m the one that talks fast. So here’s the thing. I actually do listen to it at 2x speed. We don’t speed the podcast up at all. I think maybe I just talk too fast. Because I don’t feel like you talk nearly as fast as I do.
Mike [01:02]: Yeah probably. It’s weird but I’ll talk to people whose podcasts I listen to and I have listened to their podcasts on 2x speed so when I talk to them I naturally expect it to be at 2x speed.
Rob [01:12]: Oh, I totally agree. So anyways, we love reviews. We don’t love it when you call us annoying. But we would appreciate if you could log into iTunes, click five stars. You don’t actually need to leave feedback or sentences or type anything. Just hitting that five star would be super helpful for us. Keeps us motivated to keep going and helps us get found in iTunes. On another note – quick Drip update – we’re hiring another person to help with – is such a task. It’s really our first non-developer hire. We’re hire someone to help with deliverability and kind of compliance and a bunch of internal stuff that’s currently spread – like I do some of it and Derek does some of it and our support team handles some of it. And it’ll be nice to be able to get that under one roof. So I think we have our number one candidate all chosen and should get that going here within the next couple weeks. How about you? Do you have any updates?
Mike [01:57]: Well, I got an email from Tyler Tringas, who reached out to me because there was a podcast episode we did a few weeks ago where we talked about some of the different books that were out there in the bootstrapped area. And he said it sounded like we were having trouble coming up with books that were kind of written in that space. And he’s got one that he wrote called ‘The Micro-SaaS eBook.’ And it’s actually being released for free from his blog. So if you go to microsaas.co. We’ll link that up in the show notes. But you can get it for free. It’s aimed at first-time SaaS developers. I looked through it. He’s got four chapters out there right now and I think he’s shooting for 12 or 13. But it looks pretty good. It’s definitely a good resource for anyone who has never developed SaaS before. It has some solid advice in there about what sorts of things you should just completely avoid. And it’s based on his experience building a Micro-SaaS of his own on the side where he built it up to, I think, $250K in annual revenue and it was for store mapping. So if you have a bunch of stores that you want people to be able to locate and put that map on your website then he essentially provides the capabilities to integrate that onto your website and allow people to search for the different store locations that you have.
Rob [03:04]: Very cool. So I was thinking today – it was actually over the last few days – you know, coming up in the late let’s say 2008, 2009, 2010 I was just all – and even before that – I was all about being solo. I think I’ve mentioned this maybe briefly before. But I think that working in an office and working on development teams and working for managers and stuff, I just didn’t enjoy it. And so I kind of turned that into this thought of I just want to be solo; and I don’t want to manage anybody; and I don’t want to work with anybody; and I want to be off on my own doing things. And then over the course of time, I found that I just couldn’t do bigger things when I was completely on my own. Even with a team of eight contractors or whatever. And so eventually I wound up hiring folks as HitTail grew and then as we grew Drip. I mean, it’s a really different way to approach building software. But the realization I had today was you know, last week several of my team members were out of town. Anna and Derek specifically were out for several days for Thanksgiving and so was I. I didn’t see them for about a week and then they were gone Monday and Tuesday and I was in the office and realizing like I actually really don’t like doing this solo thing anymore.
[04:05]: It’s been an interesting transition for me of how much my enjoyment of work now is about having teammates; and about doing things with the team; and working with people; and helping them do their best every day and helping them excel. And then they, I think, in turn do the same for me. They kind of motivate me to do it. So, it’s kind of a random realization. But I’ve been thinking, you know, obviously if I think years down the line and I think what am I going to be up to – I don’t honestly know if I want to do another solo thing where it’s just completely me because so much of the fun and actually so much of the biggest epic realizations and the big breakthroughs that we have tend to be when I’m talking and working with another person or two other people and we’re having these in-depth conversations. Kind of like the breakthrough Derek and I had a couple weeks ago. That just wouldn’t have happened on my own. I don’t know. It’s kind of an interesting thought process. What do you think about that?
Mike [04:55]: I wonder if that’s more of a factor of what your historical experience has been when working with other people. I mean, your last job was working for the City of Pasadena, wasn’t it?
Rob [05:06]: I worked there and then I worked for a credit card company in Los Angeles for a couple of years.
Mike [05:10]: Yeah, that sounds fun. No offense there but –
Rob [05:13]: Yeah. For sure.
Mike [05:15]: Looking objectively at both of those and, granted, in at a very, very cursory level it sounds to me like you probably weren’t necessarily working with people who inspired you to do better and were working on things that were extremely interesting. So, I would almost attribute that to where you came from and what your background was. It feels to me like you would have just changed what your viewpoint was based on “Oh, now I’ve got this team, and I’ve liked them, and I hired them, and we fit together well.” Versus, you know, you come out of this environment where you either don’t enjoy the job or the management and you’re just not having a good time. And you’re like, “Oh, I hate people. I want out and I want to go do my own thing.”
Rob [05:54]: Right. I realized that it’s not that I hate working with people. It’s that I hate working with the wrong people.
Mike [05:59]: Yeah.
Rob [06:00]: You know? And finding the right people really changed the game for me.
Mike [06:02]: I was trying to put it in a very polite way.
Rob [06:05]: Yeah. How about you? Anything else you’ve been up to this week?
Mike [06:08]: Well, I ran a last minute cyber Monday sale for my book and sold quite a few copies. I shipped out a lot of the physical copies of the book several days ago. And one of the things I found out was I was looking through the people who bought it because I had to go through and fulfill the orders for the physical copies because I have them printed on demand through CreateSpace. And one of the people who bought it actually lives right in my town. I have to reach out to him at one point.
Rob [06:33]: Yeah, that’s cool.
Mike [06:34]: It was interesting. I was kind of shocked because I was going through and was like, “Oh, I’ve got to send one to -“ wait. He’s like five minutes from my house.
Rob [06:41]: Yeah, totally. Got to get together for lunch.
Mike [06:43]: Yep. The one thing I have started to run into if anyone knows of a print on demand service for printing and sending out books that allows you to just upload a spreadsheet of those – because when a bunch of them come in it’s kind of a pain in the neck to actually go through so if anyone knows of something like that definitely let me know. I sent an email into CreateSpace’s customer support to see if I could just upload a spreadsheet but it’s kind of a pain in the neck.
Rob [07:05]: Yeah. I agree. Or something that integrates with Gumroad. Because I ran into the same issue with – my 10-year-old wrote the ‘Parent’s Guide to Minecraft’ book and whenever a new order comes in one of us has to go and manually enter it into CreateSpace to print it out and it seems like there should just be a better way. Like an API or something.
Mike [07:22]: Yeah. Like I said, I emailed them and asked them if they had any information on how to do that but it would be nice if there were other options out there that just kind of integrated, as you said, directly into Gumroad so that it’s all completely hands-off so I didn’t even have to worry about it.
Rob [07:33]: Right. And to be honest, when copies of my book ‘Start Small, Stay Small’ come through, I actually do have a VA who does that for me. And basically when I get the purchase conformation I forward it over to the VA and say, “Please send this book.” And you know the address is right in there so. It’s human automation. It’s not ideal but it could save you some time if you get 10, 20 orders like that again.
Mike [07:52]: Yep.
Rob [07:53]: So, what are we talking about this week?
Mike [07:54]: Well, we are going to be, I think, revisiting our goals from 2016 and looking to see how we did on them. And then discussing a little bit about our 2017 goals.
Rob [08:02]: Yeah. We’ve done a goals episode, what do you think? Four, five years in a row?
Mike [08:06]: I think so. Something like that.
Rob [08:08]: The podcast started in 2010, if I recall. So I think we’ve done it most of the years. It would actually be interesting to kind of look back at all the goals we’ve had over the years. Do you think it would be happy or like the Boulevard of Broken Dreams to look back over those goals?
Mike [08:21]: It depends on whether it’s you or me looking at them.
Rob [08:25]: Yeah. You want to kick us off with a couple of your goals? Looks like you had four goals from 2016 and I had three.
Mike [08:33]: On that list, there were two kind of major goals and the two other ones were more strategy related in terms of how I was going to accomplish them. I look back at them now and it’s probably a little more difficult to quantify some of these. But the first one was to launch my new product by early next year. My goal was to have early access by April 1st and then email my launch list by July 1st. I was able to get it, I’ll say, the MVP ready by April 1st but it certainly wasn’t ready for prime time. And in fact, it probably took four to five months after that in order for it to get to the point where it was not even minimally useable, but useable enough to start providing value. We’ve spent the last couple of months just trying to clean up a bunch of stuff and make it so that we can iterate faster on different features.
[09:17]: I’ll be honest, I’m kind of disappointed at how long it has taken to get some of these things done. But at the same time, I also feel that, right now, the product is actually in a reasonably good position and it’s looking better. And when I’m talking to people they seem excited by it. I was talking to somebody from Microsoft the other day and they just kind of called me out of the loo and said, “Hey, can we talk about how you’re using this [?]?” And I said, “Sure.” And I got on the phone and was talking to them. I was telling them about what my product does that runs on their platform and he was like, “This isn’t a discussion for now, but I’d love to hear more about it.” So, it’s nice to get that kind of feedback. And I’m getting inquiries from people and walking through what it is that they need and how it can best serve them. But it’s hard because I still get a lot of support requests as well. So, trying to balance between all of the different things and just juggle. That’s been, I’d say, the hardest challenge over the past couple of months.
Rob [10:07]: And so, your goal was to hit early access by April 1 and you kind of got there. We give you maybe an 8 out of 10 on that.
Mike [10:11]: Yeah.
Rob [10:13]: And your plan was to launch to your email list by July 1, which is about three months after that. When did you launch to your email list?
Mike [10:19]: I, honestly, still haven’t done that.
Rob [10:20]: Oh, wow. Okay.
Mike [10:21]: Yeah. I’ve been individually going to people and kind of picking them off of the email list and following up with them based on their interactions with the emails in there. But I haven’t done like a mass email to them to say, “Hey, come sign up.” So, I’ve gone individually to people who seem like they’re more interested than others. But I’m a little hesitant right now. As I said, Microsoft’s coming in. They’re sending in a couple of consultants to take a look at some stuff. But I have some concerns about scalability. And I think that until those are alleviated – Once they are, I’ll feel better about that but I’m a little gun shy about just dropping about 20, 30, 50 mailboxes on the thing.
Rob [10:59]: Oh, geez. That’s a bummer. That’s a real bummer to have that concern at this early stage. I know that you’ve been kind of cherry picking people out and adding a customer here or a customer week or a few customers a month. But I guess I hadn’t realized it was – what am I not paying attention or something – I hadn’t realized that you hadn’t emailed your list. Scalability, yeah, that’s the concern right now. It’s December 1 right now when we’re recording this. What’s it going to take to fix that? Like how long?
Mike [11:23]: I’m meeting with them next week, so I’ll have a better understanding of it after that. I really just want that second set of eyes looking over my shoulder who’s got some experience scaling out stuff like this. That’s really all it is. I mean, could I start adding one a day for the next 30 days? I probably could. Could I add 30 tomorrow? Probably not. It would probably work but, as I said, there’s a lot of hand holding that kind of goes into the product at the moment just to get people on it, get them using it. You probably ran into this early on with Drip where somebody would sign on, you put them in and then it might have been difficult to get them to add in their email addresses or to write the emails that went with it. And, of course, you can help them out with that. You can write them for them or you can offer to port emails over. But you can’t make them do certain things. You know what I mean?
Rob [12:12]: Right. Yep. To be honest, when we were doing it before where we had our onboarding built out like kind of walked them through it like a guided set up or a wizard, I used Boomerang a ton. I would just email somebody and then Boomerang it three or four days later and check in. I was essentially, I kind of had a poor man’s Bluetick. That’s really what you want. You really want a Bluetick that’s basically pinging people. I think you could [dog food?] your own product certainly for this onboarding. But yeah, that was it. It was a lot of questions and it was a lot of “Can I do this for you?” and it was a lot of “What do you think?” and it was just a bunch of hustle; is how I remember. And then once we knew the sticking points and kind of that minimum path to awesome where people got the dopamine rush from it then we built that into code and we built the actual guided setup with the bar across the top and the trial emails that go out to people and let them know what’s next.
Mike [13:00]: Yeah. Some of that stuff like the onboarding issues that people have run into, those are some of the things that we’ve focused on. So one thing, for example, when an email gets bounced if they send it to an invalid email address, it comes back. And the software previously didn’t know how to handle that. It just kind of ignored it. And it depended on whether or not it came back directly from the server or if it came back delayed in some way, shape or form way after it was sent. Depending on which situation it was in, it might do one thing, it might do another. At this point, it now handles that and it also marks those emails as bounced inside the application. But previously it didn’t do that. So you had not way of telling based on contact in the system how the system treated it. You also didn’t have a way to pause people; you didn’t have a way to just mark it as completed; you didn’t have a way to mark somebody as, “Hey, don’t ever contact this person again.”
[13:48]: There’s a lot of these – I don’t want to call them edge cases – but situations that come up where people are using the software and then they say, “Oh, I would like to be able to do this. Or mark somebody in this way. Or if an email gets bounced, I want to tag them automatically.” And some of that goes in to actual automation and some of it’s just how do you have field in here that captures this piece of information and is that something that lots of people want. So, those are the things I’m still kind of working through. But I am kind of moving in the direction of a public launch. The website itself, I got that ready, I think last week. And there’s still a lot of work to do on it but I, at least, got a new design and some webpages out there and I’m working on putting a full blown signup process in place for that.
Rob [14:29]: Right. And you don’t even need that to launch though, right?
Mike [14:31]: I don’t need that to put somebody onboard. I can manually walk them through but I want to get it to the point where I don’t have to manually do it. That’s really the –
Rob [14:40]: Oh, that’s true. Because when you send them the email, you want them to be able to go and signup on their own.
Mike [14:43]: Exactly. Exactly.
Rob [14:44]: Okay. Yeah. Got it.
Mike [14:45]: I can get somebody on Skype Call and walk them through it but I don’t want to have to do that long-term.
Rob [14:51]: And by the way, you and I have both used the phrase “an email.” What we really mean is “a launch sequence.” You’re not going to send them an email, “Hey, come and sign up.” You’re going to build some anticipation and you’re going to tantalize them and give them a little screenshot, screen cast action. Then you’re going to, boom, drop the hammer on them. Here’s the big discount. Time limited for that – right? It’s the standard?
Mike [15:09]: Um-hmm.
Rob [15:10]: Okay. Just making sure. I would hate to see you make that mistake. I know you –
Mike [15:14]: No, I’m definitely not doing that.
Rob [15:17]: Here you go. Our app is up. Probably once a quarter I just get from some random start-up that I must have signed up here about a year ago and I get this random thing, “Hey, Blaze app has” – I’m just making a name up – “blah-blah app has launched. Come sign up.” And it’s like “A” I don’t even remember what you do. “B” one email’s not going to get me to do it. “C” you didn’t build any anticipation. Just kind of making all the rookie mistakes and, I mean, you can obviously 10x your signups if you do it over a sequence and you build some anticipation.
Mike [15:47]: Yeah. One of the things I’m looking at doing as kind of a marketing tactic for this is setting up stuff inside of Bluetick to more or less just demonstrate how it works. As opposed to having somebody come to the website and go through a tour, say “Hey, why don’t you come over here, enter in your email address and you’ll see exactly how this works. This is what’s going to happen. This is what would look like if one of your customers or one of your prospects was on the other end.” And then just be very blunt and open and honest with them and say, “Look, I’m marketing to you. This is all automated but you wouldn’t know that probably unless I told you. And this is how you can make it look for the people that you are pursuing as leads.”
[16:25]: I did some of that when I was onboarding people and it worked really well. I had the little disclaimer at the bottom, “Hey, by the way, this is completely automated. I’m not touching anything here. And if you don’t respond then you’re going to get another email and here’s the time you’re going to get it.” It would be great to be able to have those things injected in there and use that as more of a demonstration of exactly how it works and what it’s going to look like from the other side. Because that’s one of the concerns that I hear from people is, “How is this going to look to my customers? How do I make sure that it looks like it is personalized and it has that warm fuzzy feeling as opposed to this was some bulk, automated, cold email?” Or what have you. That’s the thing. They want that illusion of personal touch and –
Rob [17:07]: Sure.
Mike [17:08]: – there’s some things that they don’t get that from.
Rob [17:10]: Got it. So when they enter their email and they click submit, they’re actually going to receive an email that says, “Hey, this is a sample.” Or were you going to just show them like a screenshot of a sample?
Mike [17:19]: My intent is to build out, essentially, a series of emails and workflows inside of Bluetick that will walk them through. And if they take certain actions, it will do different things. And at the bottom of the emails I would basically just say, “P.S., if you do this, this is going to happen. If you do this other thing, then that’s going to happen. If you don’t do anything, then this is what will be next.”
Rob [17:38]: Got it. But will they be receiving actual emails in their real inbox –
Mike [17:41]: Yes.
Rob [17:42]: – with this? Yeah. See, I think that’s super cool. I was going to say if not, you should do that. Because that’s the true demo of it is for them to really see what the customer sees.
Mike [17:48]: Exactly.
Rob [17:49]: That’s cool. So we’re 21 minutes in and we’re one bullet of 14. Let’s move on. This may be a little bit of a longer episode. My first goal for 2016 – so the one that I set a year ago – was to 2.5x Drip’s revenue. And at the time that I set this goal we were on pace at our current growth rate to hit 1.8x. I actually think we will hit – it’s going to be very, very close to hitting 2.5x. A lot of that help was Leadpages – the acquisition and then their marketing team. Something interesting that they did is when Leadpages acquired us and then did the $1 plan and then the free plan, is they actually nuked about $22,000, $23,000 in MRR. That actually set us way back on this goal. And this was just a personal goal that I had set up for myself. Leadpages goals for Drip are totally different. So that actually set us back and then we’ve since, of course, caught back up to it. So, anyways. Yeah, 2.5x I think we’ll either hit it or we’ll be really close. Something like 2.4. And given the level of revenue that Drip was at a year ago, this is not too bad. Not too shabby. How about you? What’s your next one?
Mike [18:54]: My next one was to rerun some of my, what I called ‘life experiments’ because back in 2015 I hadn’t done so well on them. And this year I’d say I probably did about the same as I did last year where they ran for a while, I was doing a bunch of different things and then things got busy with Bluetick and I kind of took my eye off of that stuff. So early on in the year it was good and then mid to late year I just didn’t do so much. So I kind of focused on Bluetick more than let’s say going to the gym and going to random events and stuff. There’s like a Renaissance fair that is south of Boston that I wanted to get to this year that I just didn’t get to. And then there is a gaming meetup nearby that I’ve been going to meets every week but I don’t go every week. It’s nice to get out and do things like that and just kind of meet new people. You work from home all the time and you don’t get out much so there’s not a whole lot of social interaction. So it’s nice to get out of the house and do other things. I really just want to kind of open my horizons to other stuff, to new things and get me out of my day-to-day.
Rob [19:54]: That’s what you mean by ‘life experiments?” Like the meetup and the Renaissance fair?
Mike [19:58]: Life experiments is more like trying new things and doing things that I wouldn’t normally do is more it than anything else.
Rob [20:04]: All right. My second goal for the previous year was to support Sherry with her ‘ZenFounder’ book. I was planning to be second author on a book that she had outlined and was planning to write. Kind of like a founder of mental health. Like how to stay sane while starting up type of thing. That’s still on the docket. To be honest, the Drip acquisition just decimated any time that I had to be able to contribute to that. And then the relocation and kind of the chaos that that created – planning for a move; planning to sell a house; shut down Sherry’s private practice; pull the kids out of school; find a new place to live; get the mover. Just everything that goes along with that was literally hundreds of person hours and it was all the nights and weekend time that Sherry probably would have spent writing the book. So this did not happen in any way, shape or form – and in fact, I don’t even know – I think she has maybe less than a chapter kind of drafted up. I think this will be on her docket here in the next year. I wouldn’t be surprised if she gets it all or mostly done in 2017.
Mike [21:03]: The third goal on my list was to be a lot more deliberate about where I spent my time. So to kind of draw delineations between work time and family time and then me time. And my intent was to work less and enjoy my off time a little bit more and generally be healthier. That went well for the first few months. And then after I got to that pre-launch beta period for Bluetick, things went downhill for probably four or five months. And then I think things are getting back on track at this point. So the last month or two I’ve been going to bed earlier, turning off all electronics and stuff like that. And just kind of taking it easy in the evenings. So, I don’t know. I’m not sure how to rate this one. Probably 6 or 7 out of 10 as opposed to anything else.
Rob [21:41]: Cool. And my third and final goal for the previous year was to make three to five angel investments in Bootstrapper. These are post-traction B2B SaaS apps. So in essence kind of going after the folks who are building real businesses rather than raising crazy rounds for B2C stuff. And I definitely made two investments and there was a third that is still in the works basically. And they’re having actually – I’ve committed to it but they’re having a delay in getting some paperwork together. So, I’ll say that I’ve mostly made this goal. In retrospect, five is just a little ambitious for me given how little time I have to devote to this and just how few really – I don’t know. I’m trying to say investment worthy companies that there are and that kind of came across my desk at a valuation that made sense. Since I am somewhat a small time angel investor, I’m not going to invest in rounds when people have valuations of $7 million or something. It just doesn’t make sense for me to write a check. It just doesn’t make economic sense. So for a deal to really be a fit for me and my skill-set where I can provide value, which is why I’m investing in things. Not just to get a return or to have a dog in the race, but I want to actually be able to contribute and offer advice, insight and opinions. It’s kind of niched down in terms of opportunities that I think are really a fit for me. I’m going to be moving forward keeping it kind of a more modest goal.
Mike [23:01]: My fourth goal was to be more complete with my planning. And the intent there was to create full plans rather than partial ones because I have a tendency sometimes to have things more in my head as opposed to written down on paper. I’ll scope out the first set of things really well and then after that I won’t drill down and write down a lot of the details until I get near the end of something. And then I kind of thrash a little bit. I did reasonably well with this. I would say that I definitely got to a point with Bluetick last year where things kind of went off the rails for a while and things are, as I said, kind of getting back in the right direction at this point. A lot of the plans that I came up with are starting to look like I can actually go back and pursue them. But some of the plans that I did put together, they basically just got delayed is really what it came down to. I do have a full blown marketing plan for Bluetick set out and I have a road map for the Product for Features and stuff. But even with that product road map things get moved around a lot which I’m not really comfortable with but, at the same time, customers are asking for stuff so I kind of have to slot in what they need versus what I think that the product needs just because they’re using it, they’re running into issues and it’s like those things need to be fixed.
Rob [24:11]: Yeah. And there’s a balance here between having a longer term plan of like, “Over the next 12 months I want to do this to revenue and here’s the general idea of how I’m going to get there” I think is one thing. And even having that in writing is probably good like “here are the tactics I’m going try. Here are the growth sprints or whatever.” I feel like planning product road maps is really difficult. Like we move ours around quite frequently based on customer request; based on response to the market; based on the realization we have of like “Oh my gosh, we shouldn’t have been doing this the whole time. We really need to get that in sooner.” Based on performance; based on someone trying to send spam through your system. There’s all these things that make you respond so my thing has always – we tend to roadmap about 60 to 90 days out. And I think if you’ve planned that out really well and have it written in order 60 to 90 days, I think that’s plenty of time. As early as you are where you’re still getting customers in who are going to find deal breakers for them. I’ll be honest, when we were at your point we were literally planning maybe a week out, sometimes two.
Mike [25:08]: Okay good. That makes me feel so much better because it was like I’m not anywhere close to 60 days.
Rob [25:13]: No, but we’re such a more mature product, you know. And we have more developers and you just have to do things a certain way. But you’re trying to just hammer out little things to keep your people around. And I think that when people have deal breakers and they’re like, “I can’t use your software until it has this,” we would drop everything and just do that. We would build that to get that next customer. It was like, “What can I build to get the next customer in the door.” So, all that to say, yeah, there’s a balance here. I think that having some long term plans but being really flexible with certain other ones at a different phase of your business I think is important. All right, 2017 goals. Looks like you have four, I have three. You want to kick us off with your first?
Mike [25:47]: Sure. So the first one is to log at least 100 days of exercises coming here. And under the umbrella of exercise I’m including both going to the gym and doing things around the house that are more physical exertion related. If I’m going out in the yard and clearing a bunch of brush and stuff like that. Moving rocks and stuff around. I kind of log that as a checkmark under the box of exercise for the day. Obviously, if I just walk up the stairs and back down or something like that I’m not going to count it. Because there’s certain things that you can do around the house that really should count as getting out of your chair and doing a little bit more than you probably would on a regular day.
Rob [26:23]: Is that why “exercise” is in quotes in the outline?
Mike [26:26]: Yes.
Rob [26:27]: Is that your case of exercising? That’s funny.
Mike [26:29]: Thanks for calling me out on that.
Rob [26:32]: Totally. My first goal is – it’s an interesting one. And it’s one that I’ve kind of struggled with and really had to think about. But you know I went on my retreat where I got strep throat a couple of weeks ago. And one thing I realized is that I really don’t want to start anything new in 2017. I don’t know if I can unequivocally say that I will not for the next 12 months start anything new but that’s kind of how it feels right now where basically you and I have the podcast, we run three MicroConfs now – two in Vegas, one in Europe – I have a podcast with Sherry and I’m still all in running Drip. And I’m still at the point where I’m kind of recovering from this year. Even the past couple years of just pushing hard, growing Drip and then the acquisition and kind of all the chaos and stress that created. And so, as I sit here today, I don’t really have the desire to do anything new. I’m talking like stuff that I might do and say, “Hey, launch a new app. Hey, write a book, start a new podcast.”
[27:25]: Whatever I might do with free time. It’s an interesting non-goal almost. It’s something that I want to – I don’t know that I’ve ever done this. You know what, last time I did this was in 2010 when our second son was born and I really kind of worked kind of the four-hour work week. I was working about maybe 10 to 12, 10 to 16 hours a week. That was when I had that whole portfolio of Micropreneur businesses – DotNetInvoice and stuff. It was right before HitTail. And that was a great time and I eventually got really bored and felt like what am I doing with my life. And that’s when I geared up and acquired HitTail and kind of 10x’d all my previous efforts. I think the one exception to this non-goal may be that if Sherry decides to really write the ZenFounder book, I want to do that with her. But I wouldn’t be, you know, the driving force. I would be probably adding my voice to it and helping her think through some stuff.
Mike [28:12]: I think there’s something to be said for intentionally doing nothing, so to speak. There’s times when you’ll go through like a rough patch or things are just really, really busy and you kind of need a break at that point. And you’ve been heads down on Drip for so long that running a startup is not necessarily the easiest thing in the world to do. It takes a lot of time, dedication and focus and it becomes something that you’re so focused on and you’re devoting so much of your energy to that there comes a point where you just kind of need a break I think. So it sounds to me like you’re probably close to that point or, you know, and it’s not to say that you’re just going to walk away and just go off and do something else as opposed to Leadpages. But coasting is not a bad thing.
Rob [28:54]: Yeah.
Mike [28:55]: You know you can’t always have a goal every single week. It’s hard to maintain that level of exertion for years on end. You can do it for a little while but you can’t do it forever.
Rob [29:05]: Yeah and it’s interesting. You use the word “coasting” and I guess I feel like I don’t think of it as much as coasting as just not starting anything new. I still want to be all in on the stuff that we’re doing, you know. I don’t want to coast on MicroConf; I don’t want to coast on the podcasts; and I don’t want to coast on Drip. I just don’t want to add anything new. Because it’s the new stuff, right. Like you’re going through right now. Just the tremendous amount of energy that that takes to get something from a standing stop to any type of worthwhile point, it’s a lot of effort. I genuinely do see this as a temporary thing. I do not think I’m done for life. But it’s almost like if you’ve ever burned out, it just takes a while to recover from that. I don’t know if I burned out or not. I just know that looking back on this year- there was obviously a lot of good that came out of it – but it was a very exhausting year. I’m looking ahead and think about just kind of being all in on what I have and not adding anything to that plate, it feels like a good thing to strive for.
Mike [29:59]: My next goal for 2017 is to make Bluetick profitable. And by profitable I also mean including my time.
Rob [30:05]: Woo hoo! So not ramen profitable?
Mike [30:06]: Yes, not ramen profitable. Something that if there was nothing else that I could make a fulltime living doing it. And I think that there’s definitely some challenges with this. I’m sure we’ll talk about them at length in some other episode, I don’t think we should do it here because we’ve talked at length about it very early on just the challenges of this past year. But I feel like it’s in a good spot at the moment. And even with some of the concerns I have about scalability, I still feel like a lot of the stuff is well written enough that it can be broken out and it can be made to work better without nearly as much effort as it took to get there. So we can talk about that some other episode. I’m sure we will. But that’s kind of my goal for the next year is to make sure that it is a profitable product moving forward.
Rob [30:48]: That’s a good goal, man. To me this is the number one thing that you could be focused on all year. And I think it’s really measurable. I think it could be a really good win for you. So, glad you have that in here. My second goal is to do between one and three angel investments this year. I’ve really enjoyed this process of getting to know founders and of, like I said, being able to offer advice and to be able to contribute financially and help their business get to the next level. I would think that even without trying too hard, I’ll probably just stumble upon one over the next year and I think top end might be three angel investments. And this is a way for me to feel like I’m really still in the game with these startups because I am invested and I’m seeing the monthly revenue growth and I’m seeing the struggles they’re going through but I don’t have to go through them first hand. And I can still do a 30-minute call or an hour call and I feel like dispense, “Here’s what I’d do in this situation.” But I don’t have to then go do it. This is probably my way of really staying in the thick of things without perhaps really staying in the thick of things.
Mike [31:53]: It gives you a layer of abstraction between you and the actual problems. My third goal is to blog publicly at least every two weeks. So that comes out to 26 total blog posts over the next year or so. But I’ve got a lot of ideas that I’ve written down that I just haven’t sat down and allocated the time to write those things out. But there’s still a lot of things that are just kind of jumbled up in my head so I kind of want to get those out. Somebody asked me before if I was going to write another book and I don’t see that in the near future. But I definitely see that, for me at least, writing about or documenting some of the things that I’ve been running into helps me get it, not just out of my system, but helps me think through it a little bit better and gives me a little bit more objectivity. I kind of want to make an effort to set aside the time to make that a priority and, not so much to get it out there so that people can read it, but more to get it out of my head and become more objective about certain things.
Rob [32:46]: This one’s interesting. I like the ambition of it. Are you like me where a blog post for you is like maybe between two and eight hours depending on how much time you invest in it?
Mike [32:57]: It could be. I actually thought a little bit more about this and – I didn’t write it down on the notes here – but my thought process behind this was to allocate between one and two hours per week to writing. And if it’s done at that point then it gets published and if it’s not done it still gets published. I’m really going to be working with hard deadlines in terms of the time that I’m allocating to it. So, it’s not going to be stuff that’s highly polished; it’s not going to be stuff that is extremely well thought through but it helps me get things out of my head. Because I write on a regular basis anyway, I just don’t publish it. So I think that by doing that it will give me that outlet to just put it out there and give people an opportunity to comment on it or talk about it or give it as points that could go up in discussions or what have you. I see it as just a way to get that stuff out of my head really, like I said. I’m doing a lot of that stuff now anyway, I’m just not publishing it. That’s not helpful for other people and that’s one of those things that I like doing is I like helping other people. And because the stuff that I write for the most part now isn’t published, it doesn’t do that.
Rob [34:04]: Yeah. I like the one to two-hour timeline for you. Or kind of a time box because otherwise I think – I do believe your focus should be Bluetick. And that if this goal distracts you from that that I should not basically. I think if you can set yourself a two-hour time limit every two weeks that’s perfectly reasonably.
Mike [34:22]: Yeah. And I think some of the topics are going to be related to things that I’m running into for Bluetick as well. I have some experiments that I want to run in terms of pricing plans and that will probably be turned into a blog post about what I’m doing and why. And other people might find it useful. They might say, “Yeah, that sounds great but it wouldn’t work for us and here’s why.” And that’s fine. But the idea is more for me to think about those things a little bit more objectively and by putting that tight time box on it then it forces me to finish in that time. Because you said that it could take you anywhere from four to eight hours to write a blog post. I could easily do the same thing because there’s not real end date for writing a blog post. It may take you an hour, it may take you 25 but if you don’t put that cap on it, it could easily go forever.
Rob [35:08]: My third and final goal for the next year is to exercise two days per week. I have typically been exercising about one day a week, one and half days a week. Kind of finding it hard to really carve out the time. But since moving to Minneapolis I have found since we live right next to a lake that it is so much easier to just get out for 20 minutes and just run. In our neighborhood back in Fresno, it just wasn’t really feasible. There were no sidewalks and there were all these busy streets and it just didn’t make a lot of sense. So I found this a lot easier. I think the challenge will be in the winter. I’ve run a few days when it’s in the 20’s and the low 30’s. I have kind of the proper gear for that at this point I think. So we’ll see if I’m disciplined enough to really carve out the time. But I’ve just found that the more I do that kind of the better I feel overall. It’s funny, I looked at this goal, you know, two days a week is about 104 days of exercise a year and you basically have a very similar goal of 100 days. So, I think both of us are looking to stay in shape now that we’re as old as we are, huh?
Mike [36:07]: Yeah. I mean, you look at the raw number of 100 and it’s like, wow, that’s a lot. When you break it down like you just said, two days a week is actually not that much when you look at it across the entire year.
Rob [36:19]: No, it’s not. And to be honest, I would love for it to be three days. I’d love for it to be every other day. But those just aren’t realities for me these days given what’s going on. So I don’t think this is overly ambitious. I think it’s very realistic. But certainly an ambitious one would be a three day a week exercise plan. And for my fourth – it’s somewhat of an honorable mention because I just can’t be as specific as I would like to be on the podcast – but I have goals for Drip basically. And these days there are some secret revenue goals, although I’m not as in charge of that as I used to be given that Leadpages handles the marketing so well. I have more product goals about giving certain features out and just making it basically the best marketing automation tool available. I’m not going to sit here and lay out the roadmap of everything we’re going to build but I definitely have some very specific things that in the next 12 months if we don’t build I will be displeased. Maybe by the time we get back here next year, I should be able to point backwards and say, “Hey, that’s when we launched this, this and that. Those are the three components that I was trying to get out.” I apologize for the vagueness in advance. But in retrospect, I’ll be able to talk a little more about it.
Mike [37:24]: Awesome. Well, I think that about wraps us up. I’m sure we’ll be revisiting some of these throughout the year. And it probably makes sense to take a look at these in April or May or so and just make sure that we’re at least on target for some of these. And if we’re not we can start revisiting that.
Rob [37:38]: I agree. And as a listener, if you have a question for us, call our voicemail number at 888-801-9690 or email us at firstname.lastname@example.org. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt used under creative comments. 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.
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to take pre-orders for a new product. These are strategies that can be used to help gain interest and validate a product. They also discuss some motivations and benefits to taking pre-orders.
Items mentioned in this episode:
Mike [00:00:00]: In this episode of “Startups for the Rest of Us,” Rob and I are going to be talking about strategies for taking pre-orders for new product. This is “Startups for the Rest of Us,” episode 305.
Mike [00:00:16]: 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 Mike –
Rob [00:00:25]: And I’m Rob.
Mike [00:00:26]: – And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
Rob [00:00:30]: Well, it’s nice to be in a big city where a lot of musical acts are coming through, and this week we are seeing not one, but two, bands, or acts, at this club called First Avenue, which is this icon of Minneapolis. It was featured prominently in that movie “Purple Rain,” and I think Prince owned it at one point, so it’s this club that’s been a club since the ‘70’s, and it’s just a very popular club. Anyway, we saw Lauren Hill, former lead singer of the Fugees, a couple nights ago. Then we’re seeing Explosions in the Sky tomorrow, so aside from the same stuff that I’ve been saying for the past four or five episodes, of we’re almost done unpacking, it feels like transition is coming to an end, we’re hiring several people at Drip, and things are moving forward and going pretty well in general, that’s the other thing that’s new.
Mike [00:01:13]: You know, when you first mentioned you were going out and seeing a couple of musical acts, my first thought was you’re going to get to hear the entire soundtrack for “Frozen,” or something like that.
Rob [00:01:21]: Yeah, right.
Mike [00:01:22]: Laughs.
Rob [00:01:22]: I mean that’s a lot of what we did – well, not a lot of what we did, but I think that tends to be the default. You get the musical stuff coming through that is kid-appropriate. It’s easy to bring them, and it’s been fun to do some grownup things, too, which the big city really allows that pretty easily.
Mike [00:01:37]: Cool.
Rob [00:01:38]: How about you? What’s going on?
Mike [00:01:38]: Well, I’m finally back to normal in terms of my back issues. I don’t think I really talked about it on the podcast, but I was kind of out of commission for about a week, week and a half with a pretty severe spinal problem. So, back on my feet now. I can actually stand and walk around without too much trouble, and kind of getting back to things and plowing through the work that has been stacking up a little bit. The other thing I do have is a listener sent us an email about an episode we did back in 303, which was our favorite tabletop games, and he runs a company called Playtable.xyz. So, if you go over to that website, they have – essentially, it’s a tabletop game device that you can put down, and you can play tabletop games on it. The focus is on being able to minimize the setup and tear-down time for some of the more complicated games and to be able to streamline the rules so that you don’t have to go look things up, and it gives a little bit of visual flair to the tabletop games. I checked it out. They’ve got a video up and got a mailing list that you can sign up for. It looks pretty cool.
Rob [00:02:33]: Yeah, I checked it out as well. I’m intrigued by it. I’d like to see how many games they get on it and how expensive they are and that kind of stuff, but certainly it’s an interesting work-around instead of having to read all the paper rules all the time. That’s something I like. You know, we talked about Pandemic a couple episodes ago, and there is a Pandemic for the iPad, and it’s really cool –
Mike [00:02:51]: There is.
Rob [00:02:51]: – Because you don’t have to remember all the stuff. You just move around, and it really helps guide you. I think it’s – once you know the rules of Pandemic, it’s easy enough to play, but those first couple of games are pretty painful just trying to remember everything –
Mike [00:03:01]: Yeah.
Rob [00:03:02]: – And that’s what the iPad kind of – it’s scaffolding that helps you get their faster, basically.
Mike [00:03:07]: Yeah. Some of those games, it’s not even just all the rules. It’s all the little markers and stuff that you have to put on the board for all these different things. Then there’re special-case situations that an app will just take care of that stuff for you. I think there’s a bunch of apps for some of the games that we had talked about. I’m pretty sure there’s one for Catan. There is one for Pandemic. There’s also one for Small World, which I think was only $6 or $7, but if you buy the board game itself, it’s 40 or 50 or something like that.
Rob [00:03:32]: Oh, jeez. Okay.
Mike [00:03:33]: Yeah, so there’s a huge price difference between them, but it’s on an iPad so it’s not nearly as expansive; but you do get the abilities to play against computer opponents. So, if you like to game, you can do that.
Rob [00:03:44]: Yeah, that’s nice. Cool. So, what are we talking about today?
Mike [00:03:47]: Today, what we’re going to be talking about is how to take pre-orders for a new product. These are essentially strategies that you can use to go out and, if you have an idea that you’re trying to validate, or you’re trying to get people interested in it and trying to figure out what it is that you actually need to build, then you probably want to get to a point where you’re going to be taking pre-orders for that product. That product can be a piece of software, it can be a book, it can be a service, it can be a course. Depending on how long it takes and what your time investment is going to be, you want to be reasonably sure that people are going to pay for it afterwards. You don’t want to spend six months or 12 months building something and then try to find people to buy it. I think we talked about it before. James Kennedy at MicroConf Europe had said that sales is really about finding out what people want, going out and getting it, and then delivering it to them; and you have to do it in that order. And if you try to build something and then go find someone to sell it to, you’re in a much more difficult situation, because now you’ve already put that time investment in, and it may not have been the right time investment. So, taking pre-orders is a step along that process to identify whether or not you’re on the right track. So, let’s talk about some of the motivations for taking pre-orders. I think the first motivation is risk mitigation. Are you going to be able to find people who are willing to pay for this? Can you convince those people that it’s going to solve their problem? There are a few caveats here, because if you’re talking to people individually and one-on-one, it’s much easier to sell somebody on the idea than it is if they were to come to your website; but that’s also the intent behind this. You want to have those conversations so you’re talking to them directly and you get the feedback about what sorts of hurdles you’re going to run into, or what questions they have, so that you can use those questions to put on the website that talks about those objection points that they might have.
Rob [00:05:36]: Yeah, and I think risk mitigation is a really nice benefit of asking for pre-orders. I think there’re obviously a lot of different ways to mitigate risk in terms of having a product idea that you don’t know if anyone is going to buy, but this is perhaps one of the best. Building an email list is another one. Talking to people and getting a verbal commitment is another one, but until someone actually makes purchase you don’t know for sure if they, in fact, will do it, right? We’ve heard people different doing it different ways, where you get a check that you’re not going to cash, or where you get the credit card and actually charge it and tell them you’ll refund it if stuff doesn’t work out. But I think this is an intriguing way to do this, and I think that it requires probably a lot of chutzpah to ask for money up front, especially if it’s someone you don’t know. I think if you tend to know people and they trust you’re going to deliver, makes it a little easier; but I do think that doing this is an interesting idea. We’ve talked about this in the past. I have always tended to build the email list rather than actually as for pre-orders up front – than actually take money. There’s a bunch of logic to that, that maybe we can cover in this episode, of why I’ve done that; but at the same time, I do think that, single-handedly, risk mitigation may be the single biggest reason that you may want to lean towards actually taking pre-orders.
Mike [00:06:48]: Let’s expand on that a little bit right now instead of trying to talk about it or come back to it later –
Rob [00:06:52]: Sure.
Mike [00:06:52]: – Because building the email list, I think in many ways, serves as a proxy for asking for money –
Rob [00:06:58]: Exactly.
Mike [00:06:58]: – And that you can use that as – there’s people that have signed up for my mailing list; and, sure, I’ve got 1,000 people there, but not all of them are going to buy, but some percentage is going to buy.
Rob [00:07:07]: There you go.
Mike [00:07:07]: The question is what percentage is that? You don’t really know, and taking the pre-orders and actually taking somebody’s money for it is not even just a proxy for that email list. It is actual money that you’ve got in your hands that all you have to do is you have to deliver what it is that they wanted.
Rob [00:07:22]: Right. And, yeah, all those points are valid. The reason I like building an email list is because I can get – let’s take Drip, for example. I built the list up to about 3400 people, and then I was able to nurture them along the process: give them screenshots; give them screen casts; ask for feedback via a survey; eventually do a slow launch, a email three to five hundred people at a time. It was a very well-orchestrated and well-crafted thing, and we had a really good conversion rate on that. If instead of building the list I just had a form that was like, “Here’s this amazing thing, and at the bottom of this page pre-order Drip for” – whatever – “three months for 99 bucks,” or whatever price it would’ve been, I would have gotten – I don’t know – a hundredth. Maybe I would’ve gotten 50 people or 100 people to pay me. Now, I would’ve had that money up front and would’ve had it for sure, but I wouldn’t have had the access to all 3,400 people, right? I actually think in the long run I converted a lot more people to paying, but I had to accept a little more risk up front by not taking the money up front. That make sense?
Mike [00:08:20]: Right. It does, but I don’t think that you would use that exact, same process for taking pre-orders. Taking a pre-order is not something where you just put up a website and just hope that people buy it sight unseen without any real walk through of it. I think that with a pre-order, your strategy is really finding people who really desperately have that problem and then crafting a solution that specifically solves that and, at the same time, having those individual conversations with other people who hopefully overlap, to help give you a better sense of what you should actually be building rather than building stuff, sending it out, doing surveys and not having as much of a hands-on approach with the people that you’re talking to. I think the strategy that I’ve seen work and I’ve used so far, with BlueTick, for example, is that if those initial people that you’re taking pre-orders from – if you know them or they know you, you can have those one-on-one conversations and establish that rapport with them such that you’re able to get the answers to the questions that you really need answered.
Rob [00:09:19]: Got it. Yeah, so you’re talking about doing medium-, high-touch sales to get a handful of pre-orders, in essence, to validate a product. I think there’s a difference – I think we’re talking about two, different things and I think those two different things are you’re talking, by hand, going through 10 or 15 people and getting those pre-orders to say, “All right, it’s valid. Let’s start building it.” I’m talking more about later on down the line, having that big list where you actually want to launch and you want to launch to thousands of MRR right off the bat. But I think our two approaches that we’re talking about are actually most powerful when they’re combined, and let me –
Mike [00:09:48]: Yeah.
Rob [00:09:49]: – Talk through that real quick. I do think that validating – the way I validated Drip was I emailed a bunch of people – by “a bunch,” it was 17 – and I got verbal commitments via email, “Yes, if you deliver that, I would try it out for three months.” That’s all it was. I didn’t actually take pre-orders. Now, why didn’t I take pre-orders? Well, two things. One, I knew that it could easily be six months from that time until we finished the product, because Derek was part-time on it. There was just a bunch of stuff, and I didn’t know how long it would take. It didn’t feel cool to me to take people’s money and to just sit on it for that long. Number two, all the people I was emailing with had some relationship with me, and so I trusted that if they actually said that they would try it out, that they would try it out. In the end, almost all – there were 11 people that said yes, and almost all of them – I think nine or ten – took me up on it and did deliver. Now, your mileage may vary there. If you’re at a conference and you’re meeting brand new people and you don’t know them, it’s like how much is their verbal commitment worth? You don’t know. I do think there’re some things to think about there. I don’t think there’s a right or wrong answer here. I really do think that you have to ask yourself what situation you’re in. Now, I have seen people multiple times when they go to take pre-orders, they do it on a landing page, where they send you to a site that looks like a landing page or a SaaS marketing site type thing, and they say, “The products aren’t ready. Enter your credit card here. We’ll charge you 49 bucks, and you’ll get the first X months free.” That’s the approach I mentioned, and that’s, I think, what we’re both saying is: “You probably don’t want to do that.” I actually think that’s a really bad approach, and the reason is because of what I said earlier. If you can build a list of a couple thousand people and then get pre-orders from there, you’re going to be way better off, right? It’s to combine the two approaches and nurture that list until you’re getting close to when the products will be ready. Then you’ve shown the screenshots. You’ve shown them screen casts. You’ve got them interested in the product. Then before the product is ready, but you’re like, “I think it’ll be done in the next month,” or the next few weeks, then you come in and say, “I’m going to give you this awesome deal. Buy your first year or your first six months for X, Y, Z.” They’ve already seen the screenshots. They know it’s pretty close anyways. Then that’s when you’re going to make that big, initial push, and I think you can get quite a bit of revenue. You’re no longer validating the idea. I guess you’re validating all the way to product-market fit, if we were to just take it literally; but you do at least know that there’s some desire for it. At this point, you really are trying to maximize some early revenue and get momentum going.
Mike [00:12:01]: Yeah, and I think the two approaches, as you said, are very complementary, and they overlap quite a bit. I don’t think that you either do one or the other, but you are probably not going to be in a position where you can gather 1,000 or 2,000 emails without having a pretty solid idea of what it is that you’re offering and what problem that you’re solving. That’s really where some of these strategies for taking the pre-orders really helps, because you can have those individual conversations. You can use that to craft what it is that you’re going to building, the marketing messages around it, the specific pain points that you’re trying to solve, and then use that information to go out and help build your mailing list at the same time. Then you’re building, and you’ve validated, “Hey, I’ve got enough people here that have placed a pre-order for it.” In parallel, you’re also trying to build that mailing list, using that information. I think you can build a mailing list without it. You can kind of – I don’t want to say “guess,” but it is, I’ll say taking educated guesses about what it is that people really want or need and having a few conversations here and there to help make sure that you’re on the right track.
Rob [00:13:00]: Yeah. I think another benefit to doing this kind of hybrid approach you’re talking about, where you do get validation up front from a small number of people and maybe take pre-orders, maybe you don’t based on what you want to do, and then building that mailing list, launching to it and potentially also taking a second round, essentially, of pre-orders right before you’re ready to launch. There’s another benefit to that in that you can then start trying out paid media when you’re building that list, right? You can try Facebook ads and AdWords and whatever else. You can also try content marketing. You try SEO. You can do a bunch of stuff that is that more broad, wider funnel marketing rather than just all the one-on-one stuff that would be required if you really have to talk to everyone who’s going to buy from you.
Mike [00:13:39]: I think one of the other motivations for accepting the pre-orders is that it allows you to fill in some of the knowledge gaps in terms of who exactly is your target customer, what do they do, what’s their role. This comes back to having those individual conversations with people, and it allows those one-on-one conversations, let you find out what you think is important that the customer actually doesn’t care about. It’s very easy to think that something needs to be done when the customers actually don’t care about it. It might be cool. It might be interesting to see, but it’s not something that is really a big deal. Then the reverse of that can also be true. You might think that, “This small feature over here is a nice-to-have,” and then customers see it, and they realize how powerful it is, and suddenly that’s the thing that they really are looking for; and you didn’t necessarily realize right away that that was so important to them. They may not have either, but in seeing it, it can change their mind, and it can make them see things in a different light.
Rob [00:14:34]: Other knowledge gaps it can fill in are what is important to buyers that you don’t know about, how much are people willing to pay versus what you think they’re willing to pay or what you think your app is worth. There are a lot of questions early on when you’re building an app, and I think that getting someone to put money down – this is essentially another form of risk mitigation, and it’s a form of learning early on, even before you have a product.
Mike [00:14:55]: Yeah, and we’ll talk specifically about what people are willing to pay versus what you think it is a little bit further in this episode. Yeah, those are all very important parts. Again, those two motivations for taking the pre-orders are just the risk mitigation and then helping to fill in the knowledge gaps. Let’s talk very, very briefly about how to actually take somebody’s money when you’re doing pre-orders. There’s three different ways that I know of. The first one, that I’ve done, is using WordPress and WP Simple Pay Pro and Stripe. It’s very easy, obviously, to set up a WordPress site. There’s a plugin made by Phil Dirkson. It’s called WP Simple Pay Pro, that you can buy. I think it’s $40 or $50, or something like that. It’s not very expensive. Then you wire it up to a Stripe account, and you can take pre-orders. You can even refund people’s money through Stripe months later, whether it’s six months, or seven months later. It appears to not be a big deal through Stripe. Now, of course, their credit card still has to be active; but you can do that and because Stripe hooks into your bank account when depositing the money, they’re able to turn around and take that money back out of your account, assuming that no more money is coming into the Stripe account. The other two mechanisms that I’ve seen are Gumroad and SendOwl. Both of these are mechanisms for typically delivering digital assets over the Internet. Both GumRoad and SendOwl allow you to set up a pre-order mechanism that allows you to distribute things once you’ve taken a pre-order. One thing I don’t know about either of these is whether or not you can go back and charge them in the future, like on a subscription basis, so it may not be the best option if you’re selling a SaaS application. But if you’re selling an info product, or a training product, or a book of any kind, those are pretty reasonable options, because then once you’ve finished it, you can upload it and then get it distributed to people very, very quickly.
Rob [00:16:36]: The other option here is there’s an iOS app – I’m assuming there’re android apps as well, but I’m just looking in iTunes right now. There’s an iOS app called Payment for Stripe, and you can hook this into your Stripe account. You could potentially, if you’re at a conference or anywhere, you could be talking to folks in person and pretty easily take pre-orders. I think that’s a nice way to do this if you don’t want to do it over the web and you want to do something more in-person.
Mike [00:16:57]: When you’re doing one-on-one demos with people, what is it that you really need to show them? For something like a course or a training product, you probably want to give them a course outline. If it’s a book, you probably want to give them a table of contents and outline all the different topics that you’re going to cover. If it’s software, you mostly want to have screen mock-ups of some kind. What I would do is I would walk through all the important parts of the application that are going to solve their problem. You don’t need to put in every screen, show things like profile screens and administration screens. You most likely don’t need those. You really want to focus on the screens that are going to solve their problem. I would wire up as much as you possibly can in a way that makes it obvious where they’re supposed to go and what they’re going to do and how they’re going to solve the problem that that software is designed to solve. There’s a lot of different tools and wire framing products out there that you can use. Balsamic is one that I’ve used pretty extensively. I’ve also seen people using Vision App, and there’s probably half a dozen others as well. You can put these together, and you can spend as much or as little time on these things as you want. It’s like any software product. You’re going to get out of it what you put into it, but at some point you have to draw the line and say, “Yes, this is good enough.” I think that’s a very important piece to remember – is that you don’t have to make everything look pretty. The final design does not have to be there. You’re really trying to focus on the problem that you’re solving and showing to the person that you’re going to give that demo to that this product is going to solve that problem.
Rob [00:18:23]: Yeah, that’s a key thing to remember. When I did pre-orders for Drip, I actually didn’t show any screenshots. I do think it’s helpful – if you are a designer, you can do decent mock-ups – to show some, but I think that if you get too far into the weeds, people frankly don’t necessarily have the time to dig into it. I think building a landing page and a marketing page for it with just a bunch of copy and maybe a fake screenshot – not even as something you’re going to distribute, but just as something that you can email to folks as you’re emailing or as you’re talking through – or, even just a short slide deck, like five slides of what you think things might look like. But I think you should focus, as you said, more on – you’ve got to figure out that value proposition, and that value proposition could almost be communicated in one sentence or a sentence plus a few bullets. If that’s what resonates, then what you’re actually going to build can come later. You’re just trying to figure out – is there a problem here that needs to be solved? and what is the general way that I’m going to solve that? I think the earlier in the process that you can figure out and that you can get confirmation that it really resonates with people, where they’re not puzzled, like, “Yeah, I guess that’s it,” but where they’re like, “Oh, my gosh, yes. This is such a big pain point,” that’s really what you’re trying to get to.
Mike [00:19:26]: The other thing to keep in mind when you’re going through that is that your value proposition that you communicate people is likely going to change probably dramatically between the first two or three or even five people. You’re going to iterate on that value proposition and your sales pitch after each person that you talk to, because you’re going to get feedback. There’re going to be certain things that resonate with them, and the future conversations that you have, you’re going to want to take those and extract things that you’ve learned from earlier conversations and present it to them and see if that works with them. You’re sort of split-testing the information that you’re learning with the other people that you’re giving the demo to. I don’t know as I would just say, “Give a demo to five or ten people.” You want to give it too as many as you can. I would probably shoot for at least 15 or 20, if you can do that; but realistically, you also want to run your idea past probably more than that. Probably, 30 or 40 people is probably a good, ballpark number of people to run the idea past. Then in terms of the demos, you probably want to give at least a dozen of them so that you can start honing in on the specific pieces that the majority of the people feel are important to them. Then you can concentrate on understanding what features need to be built first and what is the most important to people, and categorizing them according to what things need to be built first, and what things can be pushed, what things are not important and just can go into a future version.
Rob [00:20:45]: Is this similar to the process that you’ve been following for BlueTick?
Mike [00:20:48]: It is, actually. Most of it is. For example, I didn’t take orders through GumRoad or SendOwl. I took them using WordPress and the WP Simple Pay Pro. One thing that we haven’t talked about yet – I did say that we’d come back to it – was talking to people about actually taking the sale and taking their money for it. What I did for this piece was – what I wasn’t sure of was how much people were willing to pay for it. I had in my mind that I wanted to charge people $50 per mailbox for it, but I wasn’t sure whether or not that would be appropriate. What would people feel like the product was going to be worth to their business based on the problems that it solved? So, when I explained to them – I said, “Hey, here’s what my process is. I may or may not actually go through with this, but if I take your money and I decide not to go through with it, then I’ll refund it.” I laid out my refund policy. I laid out exactly what my timetable was, and I told them, “I’ll take your money now. I’m probably not going to be able to deliver for at least four to six months, and even after that point, it may still not work for you for another three or four months after that. So, it could be upwards of eight or nine months before I have something that I’m able to deliver to you. With that said, if eight months down the road you say, ‘This isn’t working for me,’ or, ‘I’ve gone on a different direction,’ I’m more than happy to give you a refund, and I’ll eat whatever transaction costs. If I have to send it to you through PayPal, I’m more than happy to do that. What I’m really interested in now is does this actually solve a problem for you that you’re willing to pay for.” Going back to the naming a price, this is a piece that I wasn’t real sure about, so I was very careful and cautious about presenting it to people in such a way that I wanted them to name what they felt it was going to be worth to their business. So, when I did that, I said, “You’re going to put your credit card number in,” and the website that I connected it to, I literally had a text box there, and they had to type in the amount. So, I would send them a URL through Skype, and they could plug in that number, and I would ask them to prepay for a certain number of months. It defaulted to 3, but they could select anywhere between 1 and 6. I’ve had a recent conversation with somebody, and they thought that, by and large, everyone would just choose one month. But the reality is what I found was out of the dozen people that I took pre-orders from initially, there was one person who prepaid for one month, there were two people who prepaid for two months, and then nine people who prepaid for three months. So, it was very interesting to see that most of them prepared for either the default, or at least a little bit. I think that that was because they had this understanding that, “I’m not going to get a ton of value out of this up front. It’s more of a longer-term investment,” which is really what I was looking for, because that validates and qualifies the people who are signing up for pre-orders, they’re looking at it as a longer-term investment. They’re looking at it as something that they’re going to be using for a while as opposed to somebody who’s a tire kicker who’s on your mailing list and does not have the level of investment or intended investment that you desire as the person who’s creating the product. I will say for sure that the first couple of conversations that you have with people – and this is especially true on the first conversation where you’re asking for that pre-sale – is when you ask them and say, “This is what it looks like. Would it solve your problem?” If they say yes, say, “Great. Well, here’s a webpage I’m going to give you. Here’s what the refund policy is, timeline, et cetera, when you will be charged for it the next time.” What I did for people was I took the payment that they had, and I said, “I will apply that as a credit to your account, but only after you have told me that it’s going to provide value to you.” I think that there’s a few different ways you can structure when they’re going to start paying for the application that you’re delivering, or the product that you’re delivering. But if it’s a SaaS application, you have three options. You can either have them start being charged when they’re first onboarded, a specified time after onboarding. Let’s say you onboard them on the first of January. You can say, “You get it for X number of months,” whatever you’ve prepaid for, “and then I will start charging you immediately,” or maybe you give them a 90-day grace period because you know that when you first get them onboarded there’s probably going to be issues. So, maybe you give them a little bit of an extended runway there. What I did, which I think may have been a mistake, was to say, “I’m not going to charge you until it provides value.” In retrospect, I think that that was a mistake because it gives people an unlimited time window which they can push it lower on their priority list. So, one of the challenges I’ve run into is people just aren’t really making time for using the app, and I think that if you were to say, “After I’ve onboarded you, I won’t charge you for 60 days, but once that point hits then the clock will start.” If you set that expectation up front, then you can always extend it. You can always say, “Look, we delivered this. We’re not quite ready yet. We know that there are some issues or things that we need to implement for it to really provide value, so we’re going to push this timetable out.” If you’re trying to dial things back in, if you’re trying to reel them in, you’re almost taking things away from it, and it’s not really fair to do that.
Rob [00:25:34]: Yeah, that makes sense. That’s a good way to think about it. I’ve talked about this, but with Drip I basically let people have unlimited trial because I was working so closely with them. This was for the first, let’s say, maybe 20 customers, when I was essentially doing early access, and we were just onboarding and trying to get features done. The hard part that I had is certain people would say, “Once I have X and Y, then I’m willing to pay,” and sometimes X and Y took us a month to build. I didn’t want anyone’s trial to be expiring during that time, so that’s why I was telling people, “Once it provides value, then let’s call it and start charging.” But I think you make a good point. There’s always not a real impetus for them to dig in and do a time investment there, so I think this is another place where kind of have to use your judgment.
Mike [00:26:17]: The other piece that factors into that is – let’s say that you signed up – call it ten people for easy math there, and three of them come back to you with stuff that’s going to take a month to build. Well, in order to deliver all three of those things, it’s going to take three months to probably deliver it, so it kind of pushes your entire timetable back for all kinds of things, and some of them you may not have realized up front that those things really needed to be built in order to provide value to everybody. So, if you dial back those expectations a little bit and say, “Look, you’ve prepaid for three months. I’m going to give you a month and a half, or two months up front just to get comfortable with it. Then I will start applying the credit.” Again, it just goes back to being able to extend things out if you need to, or if problems come up and you need to push things out and say, “Look, I know we were going to charge you now, but we’re not going to. We’re going to push this out because we’re not ready yet. We can’t deliver on this yet, and it’s not fair to you.”
Rob [00:27:10]: Yeah, I think that’s a good way to handle it.
Mike [00:27:12]: The other thing that I did, as I mentioned before, about naming the price and letting the customer pick their price is that it gives you a solid sense of what people are actually willing to pay versus what you think that they’re willing to pay. I think that this is super-important, because if you are too far off in what you think that the product is worth – let’s say that you think that people are going to pay $100 a month for it, and they come back to you and they say, “Yeah, I might pay 35 or 40 for it, but 100 is just way too much,” you might step back and say, “Do I really want to go forward and build this product when my lifetime value is going to be less than half of what I thought it was going to be?” And assuming that somebody paying $50 a month would stick around the same amount of time as somebody paying $100 a month, your lifetime value is going to be half for those people, so the issue is can you justify building the product at that price point and selling it at that price point. Are you going to be able to acquire customers at that price point? If you are talking to somebody and you name a price, their mind is instantly anchored to that price as opposed to what they think it’s going to provide to them in value, so there may be a disconnect between people who don’t know who you are or what the story is behind it and just hit your website versus those people that you’re talking to individually, and you can kind of convince them that, “Hey, this is a justifiable price for reasons X, Y and Z.” You can’t have that conversation with somebody who just hits your website.
Rob [00:28:30]: Yeah. Since pricing is such a hard thing to nail down, and there is so much guesswork and risk in it, I really liked the conversations that I had early on validating Drip. I think it is really important, and I also think something you need to think about is, if you’re just getting started, it can be okay to have a lower-priced product that you’re going to learn on. I think of how I stair-stepped up, and I went from one-time sales and then to subscriptions with HitTail, and it was – what – nine dollar starting point. It was like $9.95 and 20 bucks and 40 bucks and 80 bucks. Then at a certain point, I saw how bad the churn was, and there were limitations of how much I could grow it. Then beyond that, it was like, “Let’s get aspirational,” right? The original pricing of Drip was 99 bucks a month. That was going to be the minimum, and I kept saying, “What do we have to build to make this product worth 99 bucks a month?” That can be an interesting question if you’re far enough along that it makes sense to do, but I also don’t – I think you can toy with lowering price points. Just know you’re going to have more churn and stuff like that.
Mike [00:29:25]: I think the last step in this process is once you have decided whether or not you’re going to move forward or abandon the product that you’re looking at launching, I think you need to let everybody know. You need to let them know whether it’s a mass email or individual emails. If you’ve decided to move on and go do something else because it doesn’t look like you’re either going to be able to deliver, or that the product is going to be radically different than what you had envisioned and it’s not something that you want to pursue, then you’re going to want to go back and refund everybody’s money and maybe look at either a related product, or try something completely different. But regardless of what that is, you need to let people know early enough in the pre-order process, especially when you have them on the phone or you’re talking to them and you’re giving them that demo. Set their expectations, and you can tell them, “I’m doing this with X number of people,” or you can just ballpark it. Let them know, “I expect to know within 30 days,” for example, “whether or not I’m going to move forward with this. At that point, if I don’t have enough people, or haven’t gotten enough momentum with this, I’ll refund your money.” So, just make sure that you let them know what you’re going to be doing at that point. If you’ve made a commitment to them that you’re going to let them know by a certain date, follow through with that. Once you’ve done that, make sure to keep in touch every four to six weeks to let them know how things are going, what new developments are going on. If you can, include screenshots and keep them posted on how different pieces of the application are going, if you’re ahead or behind in any areas. The more information that you can tell them about how close you are to the original timeline that you expected, the better off you’re going to be and the more invested that they’re going to be in the application when they finally get onboarded. You’re going to help generate that excitement with them.
Rob [00:31:00]: I think this part can’t be underscored enough. When you have someone’s money, they tend to want to see some results from it. You can either make it kind of a crappy experience for them where you’re not communicating with them very well, and that would tend to be a lot of our defaults. As a developer, your head’s down, and you want to build stuff. Or an entrepreneur, if you have other developers, you’re going to tend to not communicate enough. But I think there’s a really nice approach here to be able to get people excited about this, and then they get thinking, and then they get talking about it. Then they tell other people. What we saw with Drip was there were people in early access who started talking in their Mastermind groups and in their little, private slack channels and their private forums, and I started getting direct emails from people saying, “Hey, So-and-so’s talking about this,” you know. We had early-access folks like Brennan Dunn and Jeff [?] and Ruben from BidSketch, and they’d say, “Ruben mentioned this. This sounds like something I need. Can I get in on it?” So, I then had people asking to get in early access before we launched. It was crazy – right? That’s a type of thing that you want to be able to build. It’s not as hard as it sounds. I don’t think this is lightning-in-a-bottle, Cinderella story stuff. This is just following this playbook and building something that people really are interested and need, and that it really does solve a pain point for them.
Mike [00:32:08]: Yeah, that’s actually a really good point, because if somebody comes to you and specifically asks to be on that early access program, there’s nothing saying that you can’t put them into it. Let’s say you’ve got the initial 12 people signed up, and you’re working through the pre-order process with them. Maybe you’ve delivered an alpha version to them. There’s nothing saying that you can’t take more pre-orders and put them through that process and start onboarding those people. I’ve actually done that to some extent, but it’s also got to be somebody who I feel is going to be a good fit for it and is going to start using it right away as opposed to somebody who is more of a tire kicker, I’ll say.
Rob [00:32:40]: Totally. I feel the same way. I also added people late. I did confirm with them. I was like, “If you’re really ready to dive in, let’s do this. There’s not a lot of time.” So, I added a little bit of time pressure, and I also started implying by that point – since I’d had enough experience with folks getting started up on Drip, I did tell them, “Hey, I’m going to give you as much time as you need for trial, but it’s going to tend to be between 20 and 30 days when you’re really going to hit the ground running.” So, I kind of set an expectation of, “You can’t just surf on this thing for 90 days and expect to see results.”
Mike [00:33:06]: Yeah, and as they’re going through that onboarding process, it helps you pave over some of the rough points of the app, whether there’s documentation issues, or pieces that are not entirely clear because the [UY?] or the [UX?] is not well designed. Or, you just haven’t quite figured out how to present information in a way that makes it easy for the user to understand. There’s lots of those types of issues that, as you’re going through the early-access pieces of it, you’re going to be aware of those. You can point people specifically to different things, or you can create videos that you send somebody so that you maybe don’t – get to a point where you don’t have to onboard each person individually. That’s really the position you want to be leading up to the point where you leverage your mailing list and start doing a much more public launch.
Rob [00:33:49]: That wraps us up for the day. If you have a question for us, can call our voicemail number at (888) 801-9690; or, email us at email@example.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. Subscribe to us in iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, and we’ll see you next time.
In this episode of Startups For The Rest Of Us, Rob and Mike talk live at MicroConf Europe about the four unfair advantages to faster SaaS growth. They also expand the topic to things that seem like unfair advantages but aren’t and how to improve your chances of getting an unfair advantage. At the end of the talk they do a short Q&A with some audience members.
Items mentioned in this episode:
- Slides from Presentation
- Woo Themes
- Crazy Egg
Rob [00:00]: In this episode of ‘Startups for the Rest of Us,’ Mike and I are going to discuss the four –
Mike [00:04]: Stop. You didn’t say it was episode 300.
Rob [00:06]: Then I say this is episode –
Mike [00:10]: All right.
Rob [00:10]: This is going to be good.
Mike [00:11]: We do stop like this on occasion.
Rob [00:13]: Oh, I love it.
Mike [00:13]: I’m not kidding.
Rob [00:14]: In this episode of ‘Startups for the Rest of Us,’ Mike and I discuss the four unfair advantages for faster SaaS growth. This is ‘Startups for the Rest of Us’ episode 300.
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 [00:44]: And I’m Mike.
Rob [00:47]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike [00:51]: Well, we are live with an episode. We’ve never done a live episode before. And we’re recording at the 10th MicroConf in Europe, in sunny Barcelona.
Rob [01:00]: Indeed. And we have some audience participation going on. We’re going to have a Q and A at the end. But I have to admit it feels very different to record here in front of 110 people, instead of sitting home alone in my office with the mic muted.
Mike [01:12]: Yes, very different. Not necessarily intimidating, but it’s just all eyes are one you, and you’re like all of our general screw-ups are going to visible to everyone.
Rob [01:21]: Right. So we do have an interesting announcement. A little top secret preview, both for the audience here and the folks that are going to hear it next week. MicroConf in Vegas this year is going to be two conferences back to back. So we’re doing MicroConf as usual – MicroConf that we’ve done for the past several years – April 10th and 11th at the Tropicana. And then we’re doing something called MicroConf Starter Edition. And that’s going to be on the 12th and the 13th. And there will be more info to come on that later. But if you’re interested in potentially coming to Vegas for either of those two day conferences that we’ll be running back to back – and they’ll have an evening reception that overlaps – come to MicroConf.com and enter your email.
Mike [02:02]: Awesome. So, anything else new this week?
Rob [02:05]: Hanging out in Barcelona.
Mike [02:05]: Awesome.
Rob [02:06]: Pretty cool.
Mike [02:06]: What are we talking about this week?
Rob [02:08]: We’re talking about the four unfair advantages for faster SaaS growth. And this is specifically the self-funded edition. This is based on a MicroConf talk I did in Las Vegas just about four or five months ago. We actually have some slides the folks here in the audience will see, and maybe we’ll publish these in the show notes or something, if Josh contacts us.
Mike [02:24]: Yes, that would be cool.
Rob [02:25]: That would be nice. The whole premise of this is that as I was putting together this talk, I was trying to think of – I’ve had a lot of software products over the years, and some that are not software products, and DRIP, of all of them, grew way faster than the others. I had a SaaS app called HitTail before this, Wedding Toolbox, DotNetInvoice, CMSthemer, Beach Towels. I wrote a book, ‘Conference.’ Just other stuff. And I started thinking, “Why is it that DRIP got such traction so quickly?” Once we had product market fit there was a lot of growth. How did this happen? What was the anomaly?
And so, I started thinking through the differences of how I had changed, how my skills had changed, and I was trying to attribute it to just, well, I got smarter, I had a little more money, I had a little more skills. Then I took a look at some other fast growing SaaS apps. I looked at things like Baremetrics, Balsamiq, Bidsketch, Woo Themes, Clarity, Basecamp – some of these aren’t SaaS apps, per se. Woo Themes is a subscription WordPress theme service – WP Engine and others. And was trying to pick out what was the advantage that these had over other apps that maybe launched around the same time, even in similar spaces or overlapping spaces, but didn’t have kind of this meteoric growth. A lot of these apps were growing 10, 20, 30% a month in the early months, and once they stopped reporting – because eventually most people do stop telling all the numbers once the table stakes get high. I’m trying to figure out what it was.
So I looked at these. I looked at a whole other list. This is from, I think, our Founder Café homepage, just looked through apps and did research. I talked to some founders. So, this is mostly anecdotal, but it’s based on my experience, my conversations with hundreds of SaaS founders and even other software product types. So, I dug in and I picked out four things I know are unfair advantages. And I think one of them is a requirement for fast, early growth. I couldn’t find an app that was growing quickly that didn’t have at least one of these things in place. When I say “quickly” I don’t mean it was growing three, four, five percent a month. I’m talking the ones that – remember when Baremetrics came out and Josh was publishing his early revenue? And we were like, “What in the world? This is really fast.” It’s that kind of growth. And it may not sustain forever, but at least in the early days how he got there. I’m sorry. We’re going to also talk about things that seem like unfair advantages but aren’t. And then we’re going to talk about how to improve your chances of getting an unfair advantage.
Mike [04:45]: Why don’t we talk a little bit about what an unfair advantage is. An unfair advantage is really a competitive advantage that you have over other people, and whether that’s other people or other businesses. And there’s a bunch of different ways to define this. Probably one of the better ones comes from Jason Cohen. He says that the only real competitive advantage is that which cannot be copied and cannot be bought. This encompasses a bunch of different things. And I think the really important piece here is that there’s a differentiation between those two sides of it. It cannot be copied and it cannot be bought. So, cannot be copied. There’s a lot of different reasons why something might not be able to be copied. You may have some insight or knowledge, for example, on a very specific type of business. Or you may have a background that relates to how a particular process is done, or a new roadmap for how version 2.0 or 3.0 of something is coming out, and you’re involved in the creation of that. Those are the types of things where you have that insider knowledge that nobody else has, and they could learn it but it’s going to take them a long time. The second side of that is it cannot be bought. If you get funding, you still are not going to be able to replicate that. Those two factors in place, I think Jason has got it brilliantly on at that point. The combination of those two factors, that’s what makes it a competitive advantage.
Rob [06:04]: So let’s dive into the first one. Unfair advantage number one is if you are early. So, it’s to be early. This is probably the most common as I looked through. As I ran through Baremetrics and – what was it? Woo Themes? – they were an early one. I think I actually talk about them in a second. I shouldn’t start naming the companies. But being early is a very common way. If you’re early into a niche, it’s a way to get fast early growth, because there’s just no other options for you at the time. The issue with being early is that it’s temporary, because typically – unless you’re in a very small niche – there’s going to be fast followers. So, if you’re the first one to launch into, let’s say Woo Themes as they created their first subscription premium themes, there were dozens of them by the next year. It doesn’t necessarily go away, because you can still keep that brand recognition, but you are going to bring competition. Especially if you talk a lot about your success, which we’ve seen some people do, and bring competitors into the space.
Mike [07:01]: And it seems like there’s places where just being involved in a particular space, or on a particular platform, just by virtue of being there you can almost make yourself early anyway. In some cases you just completely luck out. You happen to be in the right place at the right time, and there’s not necessarily an element of skill or your relationships involved. But if you are – let’s say that you’re working with Woo Themes and you already know the people – you know the founders personally – and they come to you and they say, “We’re building a platform, and we want to be able to build a mechanism for people to build plug-ins on our platform.” By virtue of having those relationships you are able to leverage yourself into being early there. There is a large element of luck involved. You can’t necessarily depend on being early all the time, or even most of the time. It’s something that is just going to happen, and you don’t really have a lot of control over it.
Rob [07:51]: Being early is basically feasible in very small markets, because at this point those tend to be the markets that are underserved in this day and age. In 2016, there are SaaS apps in all the major markets. So it’s going to be feasible in small markets, or in emerging markets. What I mean by that is markets that don’t really exist yet. So again, you think of Woo Themes premium – WordPress was around, but it was really kind of an emerging market when Woo Themes came out. And Stripe had been around a little while, but how many SaaS apps had built on it when Josh launched Baremetrics. Stripe Analytics was an emerging market when he hit that. The other thing is being early requires swift execution. So if you get out early and you build something and you get to market, if you’re still working your fulltime job and you only have five, ten hours a week to work on it, and you do get any type of pickup, you’re going to get trucked. You’re going to get caught and you’re going to get overtaken quickly. So, once you get out ahead, you really don’t want to lose this be early advantage. We look at our two criteria. What do you think, Mike? Can being early be copied or bought?
Mike [08:49]: Not easily. If you are able to quickly execute on something that you see it coming out, and you have the money to be able to do it, then yes. But by virtue of the type of company that would have that type of money, they don’t move quickly. You have that advantage of being small, being able to out-maneuver them and implement something fast that they’re not going to be able to get there in front of you. Now they may get there a little after you, and that poses a bit of a different challenge just because they come in after you and they do have more money than you, they do have more resources, but, hopefully, you can leverage yourself into a position of “dominance.” And if you are early, it’s probably in a small market anyway. And chances are good they won’t come after you.
Rob [09:24]: Very good. Some examples of folks who were early. I’ve already mentioned Baremetrics. It’s SaaS analytics for Stripe, Joshua’s first to market as far as I know. Balsamiq. So Peldi’s startup was a really early mockup tool, basically. If not the first one that I had heard about that was kind of made for the modern age, and wasn’t the old kind of Visio style. Bidsketch, a friend of MicroConf, Rubin Gamez, was really the first proposal software made for the web, and he got early traction with that. Woo Themes, as I said. And then Basecamp. They were the first web-based project management tool that I remember. I’m not sure if they were the number one, but they certainly were the first early entrant.
So as we’re going to walk through these four unfair advantages, I kind of want, instead of everyone just listening, I want you to think to yourself, “Where do I stand on a scale of one to ten?” But I was trying to think what does that mean? What does one to ten mean? And so, I think maybe one to Basecamp. Or one to Baremetrics. Where do you think your app, or the app idea that you have, stands on this rating scale? And this may not be super relevant to you. We have three other advantages, and maybe they’ll be more relevant. But if you are thinking of launching something, it’s good to know. If you think about DRIP, it was probably a one or a two. It wasn’t early. We have hundreds of competitors so that wasn’t necessarily our unfair advantage. So it’s okay if you don’t have some of these.
Mike [10:38]: I think there’s some challenge in trying to figure out where you are in that spectrum, because you look at something like Basecamp now and they have 30 or 60 employees or something like that. And they have millions of dollars that are coming in, and hundreds of thousands, or millions, of subscribers. And knowing whether or not your market – or the thing that you’re going after – and whether or not it’s going to ever get to that point, it makes it difficult to try and relate yourself to where they are. One to Basecamp, I think there may be a better way to put that. I’m not sure.
Rob [11:05]: There probably is. Maybe when we do this next time you can write the outline. No, I was only kidding – BOOM! I only do that when it’s live. I don’t –
Mike [11:13]: I’ll write your talk next time.
Rob [11:13]: All right. Unfair advantage number two is who you know. This is your network. These are the people, not just who you know, but who would be willing to endorse you, who would be willing to promote you to their audience, who would be willing to advise you, or make intros. It’s deeper than just, “Oh yeah, I know that guy who sat next to me at MicroConf.” It’s like, is this person willing; do they know you, like and trust you enough that they’re willing to put a little bit of their reputation on the line in front of their audience, or in front of someone else who has an audience that they’ll make an intro to?
Mike [11:47]: Yeah. You’re basically asking them to spend their social capital on your behalf. So you have to have at least some level of trust, or knowledge, there. And it’s not really just about the type of product that you have, or how good it is, because if you’re just launching a product it’s probably not very good, and you have to have that relationship with them that they know that you’re going to be able to come through, or you’re willing to do what it takes and put forth the effort. As opposed to, “Hey, I’d like an introduction to [Beth Flynn?].” Or somebody else like that. And there’s a lot of social capital there, and if that product tanks, or that relationship goes south for whatever reason, then it’s really their reputation on the line. It’s not yours. So that makes it challenging.
Rob [12:25]: Another caveat, or note about this, is that who you know, you kind of need to know people that your competitors can’t access as well, because there’s potentially a loss of value there. I think if someone was an affiliate for you and a competitor, it could work, but it certainly has a lot less value if your networks overlap heavily. It would be really nice if your network was very different, and the two circles didn’t overlap much. So what do you think, Mike, who you know? Copied, bought?
Mike [12:51]: Definitely not. Well, it depends on your friends, and who you know, and whether they can be bought or not [laughter]. I think that there’s definitely difficulty in copying, or buying, either one of those things. With certain types of markets you can kind of buy your way into relationships. For example, a reseller market, you can spend money taking people out to dinner and convincing them to promote your products, especially if you have the type of margins that are there in order to, essentially, compensate them for that time, or that’s their business. It could very well be that they’re getting paid to promote products and they don’t necessarily care. But I think that, in general, you probably don’t want those types of people to help you promote your product anyway.
Rob [13:27]: And some examples of businesses that were grown based on the person’s network, based on who they knew, AppSumo is one. Most people don’t remember but Noah Kagan was pretty much an unknown in our circles in 2012, 2011, whenever AppSumo launched. And, in fact –
Mike [13:45]: He spoke at the first MicroConf.
Rob [13:47]: That’s right.
Mike [13:47]: He was not known until after MicroConf. We can make that claim.
Rob [13:50]: Yes, I guess so.
Mike [13:51]: I don’t think so.
Rob [13:51]: The two aren’t correlated, but they happen to line up. So, when he launched AppSumo it was a “deal a day” site, where he would get these big bundles of software and he’d discount them, and the first deal they every did 20 or 25% of the deal sales went to Micropreneur Academy members. Somebody posted it in our forums, and it was just the perfect lineup because we all consumed software and stuff, and it was kind of a founder bundle, or startup bundle. And he just picked up the phone and started calling me. And I’m like, “Who is this guy?” A) I don’t like talking on the phone and b) who are you. I get a lot of phone calls. And we talked and I had no idea. And he’s like, “I was employee number seven at Facebook.” And I’m like, “This is crazy.” But he built a lot of that business based on relationships. And he either built them – like he did when he picked up the phone and called me – because later on we did a deal together. He put HitTail on AppSumo. He was able to build these bundles because of his extensive network of people. Then he was able to get affiliates and just do all types of crazy stuff. And it was based on his network.
Clarity.FM from Dan Martell. Dan Martell is also a MicroConf speaker. That dude just knows everyone, and if he doesn’t know you, he will soon. He just utilized that network really well. Clarity.FM is advice for founders and entrepreneurs. It’s actually a network of successful founders who you can call on the phone and just book like ten minutes of their time for X dollars, and it was a marketplace, right? Few of us in this room, if any, could start a marketplace like that, because you need so many high-end founders. And he just picked up the phone, wrote emails, and was able to populate this business. And he later sold it. He sold it a couple of years ago to Startups.co.
WP Engine is another one. Jason Cohen talked early on about how his network didn’t allow him to grow WP Engine, but it allowed him to hire really good people because of his blog, and it allowed him to raise funding like that because he was well known. So those two things contributed heavily towards his growth. And then a shout-out to [Carthoop?]. It’s an honorable mention, because he’s still working on it and growing it. But Jordan, as I view it, he knows a lot of people, especially in his space. So he’s in the e-commerce space. He just has a way of — I see it, and I remember Dan Martell meeting everybody, and suddenly Dan Martell knows way more people than I do in my own circle. And Jordan’s the kind of guy who’s doing that. So these are some good examples.
Mike [15:59]: I kind of joked about it earlier, but every single person behind those companies has been a MicroConf speaker at one point.
Rob [16:05]: I didn’t do that intentionally –
Mike [16:07]: I know.
Rob [16:07]: – but it is – when I’m going to write this and outline it it’s kind of like I’m going through and I went to all these startup lists and all these – I did go through all the MicroConf speakers and I just put this huge list of SaaS apps and startups together. And I was thinking which one do we know grew fast? Which ones didn’t we? And then breaking down the criteria. So there is definitely some bias here. It did come out of me.
Mike [16:26]: Yeah. There’s definitely bias there, but I also think that there’s a correlation with those types of people, because they travel in the same circles. And when you tend to get into a particular – and social network is kind of a nuance term, I think at this point – but when you get into a social network of people – and I would say that MicroConf people are a social network of people. There are various other ones out there. There’s startup groups in different cities. They’re all their own social network. So you have those social – maybe social circles is a better way to phrase it – but when you get into a social circle, you can very quickly and easily be introduced to other people, and over time those relationships develop. And, as you are kind of alluding, over time those relationships develop into something where you are able to just tap into those relationships and talk to people and just get-to-know-you basis, and you’re able to use those people to grow your business. And “used” is probably a strong term, but leverage that relationship.
Rob [17:18]: So, on our one to ten scale, where do you stand between one and maybe a Jason Cohen, in terms of your network?
Mike [17:25]: Jason Cohen knows everybody.
Rob [17:27]: He does. It’s crazy. All right. Unfair advantage number three is, who knows you. So this is your audience. This could be an existing customer base, where there’s people who may have perhaps bought an info product from you. Maybe it’s folks who have subscribed to your one-time sale WordPress plug-in and then you’re going to launch a SaaS app. It’s people who know, like and trust you.
Mike [17:46]: And it could just be people you’ve worked with before. Most people discount, or undervalue, LinkedIn to some extent, because a lot of people will use it as a mechanism for just kind of increasing their network connections in efforts to be able to leverage that into success, or download the list of emails, and they’ll just start introducing themselves to other people. But when you connect with somebody, a lot of times people will start with the people that they’ve worked with in the past, people they actually shared a job experience. Then, from there, you start finding, “Oh, there’s these small groups of people that I worked with maybe at a startup ten or 15 years ago that went on to do other things, and I didn’t realize that these two people now work at the same company, and I worked with them – one at this company and one at this other company – and now they work together. You can also leverage those relationships to ask them about other people; your second or third connections in LinkedIn. And I’m not saying that LinkedIn is the panacea for all of your networking issues, because it’s certainly not. But you can use that to gain some visibility, and it works in the reverse as well. Those people will see you on the other end. So you see it from your perspective, but you are on the other end of that as well.
Rob [18:51]: All right. What do you think, Mike, who knows you, your audience? Can that be copied, can it be bought?
Mike [18:54]: It goes back a little bit to who you know, and whether or not those relationships are reciprocal. Because just because you know somebody doesn’t mean that they know you as well. There’s that element of trust that you can leverage, and whether or not you have a voice that they’re paying attention to in any way, shape or form. So, it definitely can’t be copied or bought. It can be re-implemented, but it’s going to be at a slower growth rate. You’re probably much better off being in a position where other people know you than you know of them on a peripheral basis. For example, I know Jason Cohen, but it’s not like I’m on his inner circle or anything. And he knows who I am, but the relationship is not, I would say, directly equivalent in both ways.
Rob [19:35]: All right. So, examples of businesses that have been built on the who knows you, but built on an existing audience. SumoMe. So going back to Noah Kagan, he had already had AppSumo, he had a very large email list. 750,000. I think they’ve kind of made it public. And then when they went to build SumoMe, they basically had the big email list that they could get started really quick, and they got to six figures in the installs – hundreds of thousands, or over a hundred thousand pretty quickly based on that list. They took their existing audience and they very intelligently turned it into a software success.
Edgar, meetedgar.com. This is Laura Roeder. She had an audience of folks who had bought training and information products from her on social media and Twitter marketing. It may have been Facebook, too, but definitely Twitter marketing. Then she started a SaaS app for essentially doing just that. It had a system to it, and was able to pretty quickly get to – I think she got to $100,000 a month of MRR within, was it six months or ten months? It was very fast. Anomalous growth.
KISSmetrics. Hiten Shah, Neil Patel. They started Crazy Egg. They had an audience of marketers who said, “These guys build good products.” When they came out with KISSmetrics, they already had that list of customers, and they had a small marketing audience, but they really had a lot of customers who trusted them.
LeadFuze. Justin McGill started this as a productized service. It was doing cold email outreach. He actually had what they call BDR’s – business development reps – he had a staff of them who were doing email outreach. They were actually doing some for DRIP. They would go get customers. Then he built LeadFuze, the software product, behind it using that revenue. Then he sunsetted that productized service, and now LeadFuze is a SaaS app – and he’s public about this so I can say it – but they hit 30,000, 31,000 in MRR in a short time. Again, it’s like six months or something. So it’s pretty good growth.
Then DRIP. I would say that one of the big reasons that I got early traction, and that Drip was able to grow the way it did, was a little bit because of my network. But I think a bigger part of that is because of who knows me. It’s because when I said, “I’m launching something and I think it’s good.”, people would listen. They would at least give me the time of day. Whether they were going to switch that day from MailChimp, I at least got the benefit of the doubt.
Mike [21:41]: I think there’s an important distinction to make here when you use the phrase “Who knows you?” It is not necessarily who is in your audience that knows you. At least not the number of people because, for example, ‘Startups for the Rest of Us’ has 11,000 listeners or weekly downloads or something like that. All it takes is one person in that audience who they may know 200,000 people, or 300,000 people, and they may have a channel that you can leverage. So, even though your particular audience, the people listening directly to you, may be lower than you’d like, it doesn’t necessarily mean go out build an audience. You could very well have just five friends, and one of those people, all it takes is their relationships. And if they know who you are and they know what you’re building, “Oh, let me introduce you to so and so. They can help you.” That’s where that social capital comes in. That’s where those social circles are really helpful. So, it is not necessarily equal in both ways. But that’s an important distinction about “Who knows you?” is not just about the number of people that know you. That number gives you a bigger surface area, but it also gives you those people that may have their own relationships that can work in reverse for you.
Rob [22:45]: The influencers. So, in terms of “who knows you,” where do you stand from one to ten with ten maybe being someone like Noah Kagan, who has, obviously, a very large audience. And our fourth and final unfair advantages for self-funded SaaS founders is growth expertise. This one’s a little tricky. Growth expertise is knowing the tactics, knowing the strategy, and having experience doing these things. It’s not just reading about them, but it’s having this in-depth knowledge of it. And it’s people who we think of as the best growth people. That’s what I mean by expertise. I don’t mean someone who has toyed around with stuff, or someone who has done some marketing. And there are people, who without an audience – this was the tricky one where I said, “I have apps here that have grown with no audience and very little network as far as I can tell. And they weren’t early so how did that happen?” And every one of them there was a founder, or there was a marketer there, who just knew his stuff, his or her stuff. They just nailed it. And that’s what I’ve encapsulated with this one.
And copied or bought is a tough one on this. Copying, very hard. It could take years to get that expertise. Bought, could be bought perhaps with equity, but the best growth people we know they don’t just work. You can’t just pay someone $200,000, $300,000. These growth people, they’re not going to do it. So bought, very, very hard. You would need to give away a chunk of equity.
Mike [23:55]: I think that’s the key piece there. You can pay for expertise, but there becomes a certain level of expertise that is, I’ll say, early enough in a particular technique of some kind that is really difficult to buy them. You can go out and you can find people that are doing consulting for $20,000, $30,000, $50,000 a week for certain things, and you can’t buy them. There’s stories from unnamed individuals who’ve probably been a little bit public about – without naming names – and they’ve said, “I was offered $1 million dollars for annual salary and I turned it down.” And it wasn’t to say that they couldn’t be bought, because they were obviously doing the consulting work, but they didn’t want to be tied to that, and there was no equity involved. So when you get into those situations, to find somebody that is that good that early, without offering them equity, I think it would be really challenging to be able to buy them.
Rob [24:42]: Some examples of these companies are companies like Sean Ellis’ Qualaroo, who’s here in the house.
Mike [24:48]: Actually, it’s not Sean Ellis –
Rob [24:49]: Sean Ellis. Yes, I know he sold it, but he grew it and then sold it. But Qualaroo’s a sponsor of MicroConf this year. That’s not why this is here. I put this here back in April. We have Buffer from Joel and Leo. They were a little bit early into that market, but they weren’t the first. There were plenty doing what Buffer was doing. But is it Leo? Leo’s the growth guy, is that right? I forget if Joel’s the – Anyway, one of them is the programmer and one of them is more the growth guy. And that dude just hustled, and they didn’t know anybody. He cold emailed me, and he knew Hiten, and then he cold emailed me and said, “I’d love to do a guest post or two on your blog.” And I was like, “Well, you know…” And he showed me examples of his writing. I get a lot – if you have a successful blog then you get tons of offers for this. I typically turn them down but I said, “Well, give me a sample.” And his writing was really good. Over the course of a couple weeks, he did two guest posts. I found out later he was doing one guest post a day on all the big blogs. If you go back and you look at that time when Buffer was getting started, you look at everybody, like Jason Cohen, my blog, on Startups, [?] blog – just pretty much every blog you can imagine that has any type of influence, any type of link-back authority, and Buffer has a guest post on that. He was just hustling. He had growth expertise and he had hustle.
Crazy Egg is another one where they didn’t have an audience at that point but Hiten and Neil, let’s just say, they’re at the top of their game, and some of the best in the world at this.
Mike [26:04]: Going back to your Buffer example. When you do that type of thing and you’ve reached out to Hiten Shah or Rob Walling and you get at least some visibility. You said yourself, “I had no idea who this guy was.” And you asked for a sample of his writing, and then started looking back and seeing where else it was that he was being published, you can leverage those relationships, because really what you’re doing in a way is – back to your stair step approach – you’re leveling up the people that you’re talking to. You’re talking to people who have fairly large social circles, and you leverage that relationship into a larger relationship that they may have with somebody else who is bigger. Then you go bigger, and you keep going bigger. And you go, “By the way, I did a blog post over here for Neil Patel. And I did one for Rob Walling. And I did one for Hiten Shah.” And then it’s like how do you turn something like that down? You can leverage those types of relationships, but you can’t just go for the big fish. You’ve got to work your way up to it.
Rob [26:51]: In terms of growth expertise, I’d ask you to think about, “Where do you stand on a scale from one to ten, where ten maybe someone like a Sean Ellis or a Neil Patel?” Whoever you think in your mind is maybe the best of the best. So, a couple other things that I’d say are not unfair advantages, and that a lot of these are just table stakes for competitive spaces. If you’re going to go into a space with 100 competitors all of these are table stakes. If you go into a niche that’s maybe smaller and doesn’t have a tone of competitors, these will get you an advantage, but it’s not an unfair high growth advantage having just these things. I have five or six things here. One is great design and UX. I love great design and UX, most people in here probably do. But this alone isn’t going to cut it. This is table stakes if you’re going to be in a competitive space.
Mike [27:32]: And the reason is because that can be copied. You can very easily copy that.
Rob [27:36]: Copy or buy it.
Mike [27:37]: And that goes back to Jason’s quote, “You can copy it or buy it.” You can go buy the same theme that they did. Or you can buy the same designer that they used. There’s way to copy a design. It’s not a big deal.
Rob [27:46]: Technical or design skills. While, again, I think these are super valuable, most of us in here do. These are things that can be bought for a couple hundred thousand dollars. You could hire a really good technical or design person, or a great design or UX person, unlike that growth thing. Money. Money’s not an unfair advantage. Maybe unless you’re the only one in an entire space that has money, but money is cheap these days. It may not be forever, but it’s pretty easy to get a round of funding. As we’ve heard a lot of people just having some success, and then people are throwing hundreds of thousands of dollars at you. This is the climate we currently live in. Five years ago it wasn’t that way, right after 2008, 2009 – which I guess is not seven years ago – and in five years it may not be that way. But right now money is pretty easy to get.
An uncopiable idea. When I was researching unfair advantages, this came up in a few of kind of the big MBA like Stanford Business Review, Harvard Journal of such and such MBA stuff, and an uncopiable idea is something like a Google where you have that killer algorithm and it’s completely uncopiable. And the reason that I don’t think this applies to us is because this is for self-funded SaaS, and I could not think or find a single self-funded SaaS app that ever had an uncopiable idea. So that’s why it’s on this list. Domain expertise. Let’s say you’re selling to lawyers. I think that’s a good thing, that if you were a lawyer, your brother’s a lawyer, your co-founders a lawyer, that is really good. Not uncopiable though. And then passion, interest, time, focus. Again, these are table stakes. These are things that I used to think, “If I have that, I have an advantage over people.” These days I don’t think you do.
Mike [29:13]: I think everything that you just listed there, all of its stuff that you could either copy or buy. And they are helpful, but they’re not the only things that are going to get you to a higher level.
Rob [29:21]: So if you look at the four unfair advantages we’ve listed – we’ve listed be early, who you know, who knows you, and growth expertise. The latter three – who you know, who knows you, and growth expertise – those come with you. Those are skills, or assets, that you can bring with you from product to product, year over year. Being early – I’m not trying to downplay that – I wish I could be early actually. I think that’s the thing is I’ve never been early to anything in my life. I’m not the creative type. And I think that there are certain people who are just going to be thinking that way and are going to be at the right place, at the right time. But for me, I like to develop repeatable models that can be used over and over. That’s what we do at MicroConf is try to teach things that, not just say, “Well, go be early.” because that’s not helpful. Because you don’t know how to do that. We like to teach things that are fairly repeatable, testable, validatable. And so these latter three are things that you can take with you over time.
Mike [30:10]: You’re not even early to the podcast half the time.
Rob [30:12]: I know. I have to keep you waiting. And so, to wrap us up – there’s just a couple of more minutes here – it’s interesting, as I looked at my stair-step approach, where I talk about building one-time apps and then stepping up to one-time sale apps, like WordPress plug-ins and such. Then stepping up to step two which is selling enough of those until you can buy your own time. And then eventually stepping up into recurring revenue. This fits pretty well with this whole unfair advantage thing, because if you do this right – you’re going to launch a WordPress plug-in for e-signature or for lawyers or for something. For sales people. For ecommerce. Then you’re probably going to launch maybe a few more WordPress plug-ins in that space. And by the time you get to step three, and you’re trying to do recurring revenue, which is really hard as we kind of all hear over and over, you may have that. You’re likely to have maybe some growth expertise in that. Maybe you have a network of people in that space, which is who knows you. Maybe you have an audience in that space, which is who you know. So the ideal is that if you travel a path that you would build these skills and build these unfair advantages up over time as you go through your journey.
Mike [31:13]: That was actually an interesting thing that I looked at. Even on your stair step approach, early on you look at the things that you did. It was the WordPress plug-in, all the single products, the one-time sales, things like that. And you didn’t even really have any unfair advantages at the time. You were basically in learning mode. You’ve got the learn, build, grow stages for, basically, how DRIP went. But early on it was just you were learning, and you were in learning mode the entire time. And eventually you got to a point where you learned and then people knew who you were. And then after that it was kind of going a step beyond that. So you built up these unfair advantages over time. And I think that that’s an interesting point, is that just because you don’t have them now doesn’t mean that you can’t have them in the future. Being able to build them over time, there’s a trajectory that you can get, and as you build that trajectory – as you build more products or launch more things or do different things in different markets – you learn to toggle the levers in ways that will accelerate the growth in ways that were previously never possible.
Earlier in Steli’s talk, somebody had asked him could he have started with Close.IO and he said, “No, I don’t think that I could have, because there were a lot of things that we needed to go through and we needed to learn.” And I think that that’s very true for most of the paths that many of us are on as self-funded bootstrappers. You really need to go through those missteps and learn those different things along the way. As you get further advanced you learn the techniques and the patterns that come up where you can turn that knob just a little bit tighter and get a growth acceleration that you never thought possible, or that you weren’t comfortable with.
That’s one thing with, for example, building an email list or sending out emails. People are very hesitant in their early days. You’ve got 25 subscribers. “Oh, I’m really not sure about hitting the button on that email that I’m going to send.” It’s 25 people, it doesn’t matter. There’s people, as they proceed past that, you get to 2,500 and 25,000 and you’re just like, “Okay, whatever, I’m just going to hit the button.” And it doesn’t matter at that point because you’re comfortable, you’re confident that you’ve gone through those missteps, and it doesn’t make a difference anymore because you’ve learned what to do and realized that some of the mistakes that you make, they don’t matter nearly as much as you think that they do.
Rob [33:12]: I like that you used the phrase “self-funded bootstrappers.”
Mike [33:15]: Sorry.
Rob [33:16]: So the question we want to leave you with today is, “Which of your advantages do you want to increase?” And now I think we have time for just a couple questions from the audience.
Mike [33:24]: I made up that term, by the way. “Self-funded bootstrappers.”
Rob [33:27]: Self-funded bootstrappers. Hiten would love and hate it, right?
Mike [33:28]: You want to hear another term I –
Speaker 3 [33:30]: He would hate it.
Mike [33:32]: I’ve got another one I made up. Plagiarism.
Rob [33:33]: Plagiarism. Nice.
Andreas [33:35]: I’m Andreas. I’m the founder of [Hunter Recruitment?]. And I was thinking about the unfair advantage, and I was thinking about the problem because we are building a platform with a validation machine. But really maybe our unfair advantage is the people that we know, the tech people that we know. We are [residents?] right now in [Google Campus?] in Madrid, and probably the disadvantage is the people that sit down near to us. We really want the other startups outside the campus know these people could be. I don’t know if you agree with that.
Mike [34:17]: I would say it does map back to that, because it is partly about who you know and who knows you. And I don’t want to directly say it’s because of geography at that point, because you sit close to them. But in a way it is. You are sitting very close to them. How many other people are sitting close to them that are doing what you do? That are trying to connect tech people with businesses that are trying to hire them? So there is that element of geography, but when you translate it to the internet it’s not exactly one to one mapping.
Andreas [34:39]: A relationship.
Mike [34:42]: Right. But that relationship is there because you sit around the corner from them. And you’re probably going to give somebody who sits around the corner in another cubicle the time of day, whereas if somebody just cold calls you over the internet and says, “I’m James Kennedy from Rubberstamp.IO in South Africa. I’d like – “. You’re not going to pay attention, unless you wanted that and you’re basically right there.
Rob [34:59]: Any more questions? May be time for one more.
Speaker 4 [35:04]: What do you think about software patents, because I think there are some companies who use them and abuse them as an unfair advantage?
Rob [35:13]: Software patents?
Mike [35:14]: Software patents, yes. I think both Rob and I have lots of things to say about –
Rob [35:16]: Travesty.
Mike [35:17]: – patents.
Rob [35:17]: Yes, I have a lot of opinions on that. Go listen to the ‘This American Life’ and the ‘Planet Money’ episodes on it. It’s absolutely catastrophic. That’s my opinion. Software patents in the U.S. were not allowed until 1998, and since then it has become an absolute epidemic.
Speaker 5 [35:31]: Okay, thank you. A quick question. How do you recognize when you’re early then when you are wrong?
Rob [35:36]: That’s good. This is our last question. How do you recognize when you’re early or when you’re wrong? Okay, so this advantage is to be early and hit it at the right time rather than – you’re talking about being too early. Being too early to a market is where there’s no one there that needs it yet. And then in a year you see someone launched the exact same thing and it takes off. So like Foursquare had been done like six times. Facebook had been done three or four times, almost exactly the same way, but there was something about the flux of technology and such. You know when you’re right, because you’re right, and the curve looks like this. And you know when you’re wrong – I guess what I’m saying is, you said early versus wrong, and I’m saying too early is equivalent to wrong. But this early advantage is actually when it works. It’s the perfect time. You’re just early ahead of other competitors, but you hit the market at the right time. That’s what I meant by it.
Mike [36:31]: I would say you don’t know until way after the fact. If you are early there’s varying degrees of early. There’s “way too early”, which is – as Rob said – is effectively wrong. But there’s also near the tail end of it, when you’re basically ready to give up, there will be an uptick in growth and that’s going to start giving you hope. And you maybe stick around a little bit. That’s the point where you would recognize, “Hey, I was just early,” versus you were way to early and you get to that point and you just give up. And it’s a matter of how much time do you spend in the “zombie product” land where you’re not really making enough money to be able to support it and be able to grow it the way you need. And I think that boils down to trajectory at that point. How fast are you growing whether it’s users or installs or money? Those are the three things that you can, at least initially, measure a business on.
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In this episode of Startups For The Rest Of Us, Rob and Mike give you a short guide to online presales for SaaS and software. Some of the topics they dive into include inbound leads, sales funnels, lead qualification, and general sales process for buyers.
Items mentioned in this episode:
Mike [00:00]: In this episode of “Startups for the Rest of Us,” Rob and I are going to be talking about how to do online pre-sales for SaaS and software. This is “Startups for the Rest of Us,” Episode 289.
Mike [00:17]: 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 Mike –
Rob [00:26]: And I’m Rob.
Mike [00:27]: – and we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
Rob [00:31]: Well, I want to apologize to our listeners that the episode that came out last Tuesday, published five hours late due to just a minor scheduling mix up. But we received quite a few tweets and several emails asking where the episode was. I think that’s a good sign – right –
Mike [00:49]: Yes.
Rob [00:49]: – a good problem to have that people notice when you’re a few hours late delivering?
Mike [00:52]: I think so. I would like to attribute it to the entire New England area going dark from Internet yesterday but I can’t say that that’s really the case.
Rob [00:59]: Right. It had nothing to do with it, but the timing is really good – right? We have something to blame it on.
Mike [01:03]: Right, yeah.
Rob [01:03]: Yeah, it was really a bummer. You said – was it a couple of states had a major shutdown?
Mike [01:07]: Yeah, apparently Level 3 Communications – somebody cut a fiber cable, and it took down the Internet throughout parts of – let’s see here. It was New York City, other parts of New York; and then there was Connecticut, Massachusetts and Rhode Island. It affected Time Warner Communications, Cox and Verizon. Somebody cut the wrong cable, I guess, so, “We just cut a cable.”
Rob [01:28]: So, were you tethering to your phone all day, then?
Mike [01:30]: Yeah, pretty much, which kind of sucks; because I was a little worried due to the fact that I had a demo to do yesterday morning. I was sitting there, tethered to my phone and running everything through that. I had Skype running. I had my sales demo running; and everything, amazingly, worked well enough that it didn’t really make a difference. But I did burn through, like, 500 MG worth of data in maybe an hour.
Rob [01:52]: Yeah, that’s a bummer, because it’s two-way, real-time video; so it can’t be compressed, probably, as much as other things. It’s audio, and that’s a lot of data. Are you going to up your data plan for the month?
Mike [02:01]: No. I don’t think I have to, actually. I’m on the minimal 5 GB plan for each month, and I actually have that shared between my wife and I; but I work from home, so I don’t really use it very much and just dropped my data plan because I didn’t really need all the extra bandwidth. Then, of course, the kids come home, and they’re like, “We want to watch Netflix.” I’m like, “No.”
Rob [02:20]: “Not a chance,” yeah. That’s funny.
Mike [02:22]: Nope.
Rob [02:22]: Hey, I have a book and a movie recommendation this week. I’ve been listening to a lot of nonfiction books that aren’t business-related, and there’s a book called “The Big Short,” by Michael Lewis, that I listened to a couple years ago when it first came out. I like pretty much everything Michael Lewis does, and I was blown away by this book when I had listened to it years ago. Then I heard they’re making a movie out of it, but I was thinking, “There’s no way they can pull off this movie,” because the book is so complex, and there’s so much to it. Although the book is better, they did an amazing job, and I think the movie’s probably going to be up for awards, if it hasn’t won them already. I don’t even know when the awards shows are. Apologies about that, but amazing writing and acting and all that stuff. So, if you have time, I’d say listen to the audio book or read the book, because it will blow you away. If you only have a couple hours, then watch the movie, but it’s about the financial crisis – essentially, the housing crisis in 2008 – and how the bankers caused it and a bunch of players. There were three-different players who predicted it and bet against it. It’s called “betting short” – right – “going short” on it. Just the characters in it are amazing. It’s probably my favorite film I’ve seen in the past maybe year and one of my favorite books during the past year as well.
Mike [03:27]: Interesting side note here: I actually know Michael Lewis personally.
Rob [03:30]: Is that right? Where do you know him from?
Mike [03:31]: I have to put a little caveat on here. It’s a different Michael Lewis, who is also a writer, and there’s a little confusion there.
Rob [03:36]: Oh, got it. Nice. You know a Michael Lewis.
Mike [03:39]: I know a Michael Lewis. It is not that particular Michael Lewis, but he does often get confused with that. Of course, he’s got the name and driver’s license to back it up, so he could pull it off if he really wanted to, but I don’t know how long it would last. [Laugh]
Rob [03:51]: “The Big Short” – read the book?
Mike [03:52]: I have not. I did see advertisements and stuff for the movie, but I haven’t checked it out yet. It does look good, though.
Rob [03:57]: Yeah. It’ll rock your world. How about you? What’s going on this week?
Mike [04:00]: Well, I hired somebody to do some manual testing on Blue Tick a couple weeks ago, and they’ve gone through and started sending over bug reports. Most of it’s little stuff, like, “This field right here doesn’t prevent you from putting in as much text as you want,” which is kind of nice, because that’s the advantage of having testers who their job is to go in and break things. At the same time, it’s creating a lot of work for you that I would say is lower in the priority list for most of it, and it doesn’t necessarily do anything specific for the app other than make it more stable in the long run. So, when somebody goes in and tries to do something funky like that, the app doesn’t break under what the person is doing.
Rob [04:41]: What’s your thought behind hiring this person rather than either doing it yourself, or having developers continue to do it? The reason I ask I know developers are not the best testers, and you need a certain personality type because a lot of developers will just crank it out and then push the code. At Drip, we are ten people. There’s a couple of part-timers in there, but we still don’t have a dedicated manual tester. We’ve been able to get by pretty well without it. I’m interested in hearing your thoughts on why you’re making that move early.
Mike [05:09]: Sure. I’ll call it more of a safety net than anything else, because there’s a bunch of different ways you can go about testing. The reason I hired somebody to do it was because going through that manual profess was just time-consuming, and there’re certain parts of the application that I haven’t been able to get to the point where we can automatically test them either using unit tests or integration tests or anything like that. It makes it very difficult to go through that, because it’s just so time-consuming. For example – just something little – I’ll give you a prime example. When I was first starting to onboard some people, we went through and I said, “I need you to go over to this page and register.” Well, we changed the back end route for the URL where you go to register; but it wasn’t something that we ever went in and tested again after making that change, because how often do you go in and actually register? We actually have code in there that just automatically sets up the account so that you don’t have to.
When I first went in to onboard somebody, I found out that that was broken, and because we didn’t have the unit test in place, or a manual tester who would go through and just perform some of the basic functionality, I ran into that. Fortunately, I was able to fix it on the fly; but, again, I want to make sure that as we’re pushing things into production, those types of things don’t come up, that are fundamental issues that would prevent it from working. You can do a lot of manual testing, but as I said, it’s time-consuming. So, what our basic process is now is we’re going through. We’re implementing unit tests and making sure that the back end of the application is functional. Then we push it into a staging area, and then in the staging area the person goes through, runs some basic spot checks to make sure that the app itself is still completely functional on the front end – or at least mostly functional – and letting them know, “We changed this,” or, “We fixed this thing over here. Can you double-check it?” Then they check it in the staging area. Assuming he signs off on it, then we take that from the staging area and move it into production.
That’s it more than anything else. I think it’s partially a result of the fact that we’re using Angular on the front end, so it’s a little bit more difficult to do unit tests on front end Angular code mainly because we just haven’t set it up to do that yet.
Rob [07:11]: Yeah, that’s tough. When you have that much code on the front end, you’re right. It’s a lot harder to unit test it. I also think that you’re essentially using contract labor, and so your developers may not be as committed to making sure all the I’s are dotted and the T’s are crossed as when it was Derek and I working – and he’s known us since a co-founder – hacking stuff out and has a very high standard for making sure stuff works before it ships. I think there’s perhaps a different motivation there, so you need maybe an extra check in place to avoid having things breaking on you.
Mike [07:39]: Right. Like I said, it’s partly a time commitment thing. I found that I was spending a heck of a lot of time. I’d send something over to somebody: “Hey, could you implement this,” or, “fix this?” They’d fix it, and it’d come back to me, and then I would have to spend additional time going through everything that I just did in order to make sure that not only did that thing work, but it didn’t break other things as well. And there were times where that happened very early on in the process. It doesn’t happen nearly as much at this point, but with that staging area in place, it makes things a lot easier. It cuts several hours a week of my time out of that process. The cost benefit is certainly there.
Rob [08:13]: What are we talking about today?
Mike [08:14]: Well, we got a listener question in from Guy Lewis, and he says, “Hi, Mike and Rob. I’m wondering if between you, you have a best practice for engaging with B-to-B clients who make sales inquiries via an online business. I have experience in pre-sales face-to-face, but translating this into an email dialogue doesn’t translate well for me. So, specifically, I want to understand typically how much should your pre-sales people who answer online inquiries be pushing early for trials, or just being more relaxed and answering client questions, leaving the clients to reply and come back when they’re ready to engage more. Thanks, Guy.”
Rob [08:42]: To clarify right off the bat, this is from the time someone first engages with you – maybe they sign up for an email list – all the way up until the point where probably they do a demo. So, this is all pre-sales and pre-demo that we’ll be talking about. Mostly, we’re going to focus on SaaS and software sales. It might apply to other industries, but obviously these are the things that you and I are most familiar with and qualified to talk about.
Mike [09:05]: Something else to point out is that I think that in most cases, this pre-sales process is probably not going to be as applicable to something like an info product or any sort of education or training material. I will put a little bit of a caveat on there that says that if you’re selling something that is high-price, that may not necessarily be the case. This could be applicable to those situations, because you are probably going to be much more involved in vetting those applicants or those people who are contacting you in order to identify whether or not your product is a good fit for them; because you clearly don’t want to sell a product to somebody who they simply can’t use it, or it’s not going to benefit them. At the same time, you are probably going to have to go through some sort of pre-qualification process to make sure that, if you’re selling, let’s say, a $5,000 training product, it is going to be a good fit for them and you’re not wasting your time trying to track them down to get them to come to the table and pull out their credit card.
Rob [09:58]: Right, and I’d say this also applies to even lower-priced SaaS apps and software products where at least you’re willing to answer questions and engage via email manually, one-on-one; or, you’re willing to do maybe a pre-qualification phone call or something like that. If you’re selling really no-touch signup and you don’t even want to answer individual questions if someone has some specifics about their setup or how you’re going to work, then this won’t apply; but I think almost every SaaS app that you’d be launching today probably should fall into this. Even if your price is 10 or 20 a month, you or a support person should be willing to do some manual pre-sales email back and forth. Even if you’re not ultimately looking for a demo as the end result maybe you’re just looking to encourage to go to trial. Having some back-and-forth via email and answering questions and encouraging down the steps of the funnel should still fit into the paradigm we’re talking about, all the way up to folks who – let’s say you’re selling for 100 a month. Then, for sure, you’re willing to go back and forth via email; probably jump on a qualifying call 10 to 15 minutes, and then ultimately move towards either a demo or a trial.
Mike [10:58]: The first step in this process is to look at your inbound leads as essentially a sales funnel and try to set it up as a decision-based workflow. Essentially, what that means is that when somebody comes into that sales funnel, you analyze where they’re coming in and decide what to do when they enter that point. If they come in through this web form, do this. If they come in because they replied to an email, then do this other thing over here. Or, if they went over and they viewed your trial page and then they viewed your pricing page and then sent you a support email, do something else. The idea here is that you really want to take a step back and look at your entire sales funnel leading up to the point where they sign in and go to a trial as a decision-based workflow of some kind, and you map out all those different decision points.
Rob [11:46]: Yeah, and to get really specific with this, in essence, once someone signs up for your email list – let’s presume that they’re either opting in to get an email mini course, or a PDF tools list just to keep things simple. When you first start out and you’re just building this funnel out, that’s all you’re going to have, and you’re going to want to educate and give them topics and content that they can use without signing up for your tool; but the whole time, you’re mentioning that your tool makes it a lot easier or faster for them to do it. It will save them time and potentially save them money, or make them money. Then you’re doing a soft sell during this time. Might have a P.S. that says, “Check out our trial.” Or, if you really do want to do demos, if that’s your main focus, then you could have a P.S. that says, “Hey, interested in learning more? Click this ca-[?] link at the bottom of this email and set up a qualifying call,” if you’re doing qualifying calls before your demos. The way to decide to do that, it depends. If you have a lot of people coming in and you really want to qualify them, you should do the qualifying call first. If you don’t yet have a ton of people in your funnel, you can go straight to demo and just qualify them in the first five minutes of the demo and then end the demo if they don’t qualify. There are some very specific questions you can ask people to help that.
Beyond that, as you expand this, you’re probably at some point going to do a webinar. You’re probably at some point going to be creating some free content, or even valuable content. At Drip, we have two eBooks now, one of which we sell; and we actually sell real copies of it through Gumroad, and then we have a video course that we sell. These are all things that can educate and are valuable and that do give your brand some legitimacy, I guess. So, throughout the funnel – as you expand it; you don’t have to do this from day one – we then start pitching, and we say, “We’re going to give you these free eBooks.” “We’re going to give you this free video training,” which is a recorded webinar we’ve done at some point. Each of these touchpoints is an excuse to then say at the end, “If you’re interested, click this button and do” either whatever you’re looking for. You’re looking for a qualifying call, or you’re looking for them to sign directly up for a trial, or you’re looking to encourage them for a demo, or you’re going to qualify them. That’s a couple more specific ideas and thoughts about how to structure this front end piece of the funnel.
Mike [13:45]: And much of the decisions that you make there are going to be based on volume. As Rob said, if you only have a couple of people that are coming into your sales funnel each week, then it’s a lot easier to push somebody towards a demo, regardless of the price point because you want to be able to get information from them, and you really need to be able to gather some of that feedback in order to use that information for future efforts and to redirect your attention towards doing different things for those people. But if you have a ton of people coming in, let’s say you have a hundred a day, then your strategies for dealing with 100 people are going to be very, very different than if you were only getting one per day.
Along with that, what you need to do is you need to take a look at your sales funnel and map out, either using paper or some sort of flowchart software, and get at least an idea or approximation of how many leads you’re getting in from different places and what the decision points are for the customers at those points. One of the things that – I’ve done this myself in the past where I’ve set up some sort of a sales funnel, and if I don’t map out the entire decision tree, it’s very easy to lose some of the decision making along the way for the customer. If a customer gets to a certain point at the end of a particular email sequence, or in the middle of an email sequence, if you don’t have those calls to action mapped out, or at least documented some place, it’s very easy to forget that you either didn’t have one, or that it leads to a certain place. Then the customer just kind of gets lost, because you’ve lost track of them at that point and you didn’t take the time or the opportunity to redirect them in a certain place. Even if you did, what happens if they don’t? What happens if they do not take that step that you wanted? Do you just drop them at that point? That’s something to be very careful, of because you don’t want to have a sales funnel where these people are just dropping out of it because you didn’t give them a call to action, or you didn’t take into account the fact that they may not have gone in the direction that you wanted them to or expected them to.
Rob [15:35]: Yeah, and in terms of mapping out your sales funnel – in the old days, I used to literally map it out on paper and then scan it in. This is five, six years ago. I also used Vizio for a while. I think these days, I’d probably – a lot of people are using Gliffy, but these days people have moved towards building it in the app you’re using. If you’re using the right tool – let’s say you’re using Drip. You can use the workflows or using Infusionsoft. You can use their Campaign Builder. You can really build out a sales funnel visually in the tool that you’re using, so you save yourself having to keep documentation, essentially; because your documentation is this actual funnel, and you can move people in and out and have it all in a nice, visual flow.
Mike [16:09]: Yeah, that’s extremely helpful. What I tend to start with is just graph paper, and I’ll work on things from there until I get to the point where I want to finalize it and then move it into the app. But you’re absolutely right. Having that visual workflow inside of an app is very helpful in terms of being able to redirect people through your sales funnel. Even if you’re not actually using the tool for those people – if you have a workflow that you’re trying to move people through, even if they’re not actually doing it inside of the tool, if you just want to tag them or something like that, that can still be very helpful for helping to determine where people are going. There’re similar things in other tools, such as Pipedrive, for example, where you can just people through a sales funnel. They’re not quite the same, but it is helpful to see it visually.
Rob [16:51]: We also have several workflows that are in draft that we use more as documentation than as actual production use. Someday they will be in production, but we use it as reference.
Mike [16:59]: The third step is to take a look at your price point and the complexity of your products in order to determine how to proceed for the business. If you have a high-price-point product, or it’s a complicated product, or if it integrates into a core part of the customer’s business, then taking people and trying to push them into a personalized sales demo is probably going to work out a lot better than sending them directly to a trial; because the communication medium for a phone call or a demo is much different than it is if you’re just trying to engage with somebody through email. If you send them an email, it’s very easy for those things to get lost, or for people to glance at it and not really take in some of the subtle nuances that you’re looking for them to understand. In any sort of business or product where it integrates highly into the business, it makes much more sense to try and get those people into a call of some kind so that you can have those conversations.
At this point, you really have to ask yourself what’s the best or most cost-effective way in order to move somebody towards making a purchase. Just keep in mind that I didn’t say “into making a purchase”; I said “towards it.” There’s a very key distinction there in that you want to move them along the path but you don’t necessarily want to force them. There’s a couple of different reasons for that. One is people don’t like feeling as if they’re being forced into buying a product, or feel like they’re being pushed; but at the same time, you also need to make sure that you’re giving people the information they need in order to make a good decision. And that good decision might be something that they can make immediately, but it might not be something that they’re comfortable with for a week, or three weeks, or even three months. It really depends on where they are in their buy-in process.
Rob [18:32]: At Drip, we used to encourage everyone to sign up for a trial, and then while they were in their trial we would try to contact them and help them get onboarded. We would do calls at that point, if needed. Then about – really, it was over a year ago now. We switched to where we have two different calls to action, and people can choose to either start a trial – because some people like self-serve. I actually prefer self-serve and to dig in and figure stuff out on my own, but a lot of people like to see demos. If you go to the Drip homepage, you’ll see at the bottom it says “Start a trial” or “Schedule a demo.” Then we have a whole funnel to submit yourself to schedule that demo. What we found is that, initially, like the first month, it was a hit to our trial count; because there were enough people that were hitting that demo button that weren’t clicking the trial button. But over time, the people who clicked the demo and actually showed up are way more qualified when they sign up; and once they get inside the app, they’re more educated, and they’re more likely to actually convert. So, it can be good to give folks a choice if you’re on the edge.
We’re email-marketing software, and some people are experts, and they just want to get in. They don’t want to be forced to go through a demo. There’re other funnels where you really need to go through a demo before you get in the app, because you’re just going to be lost, and your trials – they just aren’t going to convert by themselves. That’s what you were saying, Mike, when you were talking about if it’s an extremely complex product, or fits a high price point. There are certain things to it that you’re just going to need to educate. Even if your product’s not complex, but if it’s complex for the audience – like, if you have realtors who aren’t super good at, let’s say, project management or something; and you have a management tool for them, or a process management tool, you’re probably going to want to do demos with most of them; because a lot of them are not going to be technically oriented enough to just be able to get up and self-start. you’re going to have to make a judgment here as to whether you give people a choice, or you force them down one path or another.
This is part of optimizing your funnel. We talk a lot about getting to product-market fit, and product-market fit is when you get that product that everybody wants to buy, and people really will convert and stick around. The next step after that, or the thing you’re doing at the same time is you’re trying to figure out – it’s almost like sales process or sales funnel market fit where you’re trying to optimize that to reduce friction and to figure out what works the best for the people who are coming to you and for the leads who are coming to you. What is what most of them want? And then try to help guide them down that path, and that’s really what we’re discussing here – is the discovery of that and then the architecture of the funnel as they come through and start to become pre-qualified.
Mike [20:55]: Let’s talk a little bit about the general sales process for people who are making purchases. The key thing that you want to try and do here is to be able to identify where that prospect is in their buying process. This ties a little bit back into what Rob was just talking about where he was giving people the option to either take a look at a demo, or to start a trial immediately. There are a couple of different stages here. The first one is awareness. In the awareness stage, are they even aware that there is a particular problem they’re experiencing, or that there are other solutions that are available? The next step in this process is nurturing. Do they even know enough about the nuances of the problem and the solution that you offer? The third step is qualification. Are they a good prospect for you to start going after, or to even use your product at all? The fourth one is evaluation. Are they looking at the different options that are available and deciding where they are going to spend their time, either doing a demo or a trial – taking a look at those things and really deciding whether or not they’re going to not just move forward with a purchase, but taking a look at the different competitors and figuring out which one is the best for them? Then the last one is actually making a buying decision, which is purchasing.
Try and identify where the prospect is in their buying process. You can use what your inbound funnel looks like to some extent to help figure that out. If they come to you and they’ve started a trial, for example; or, they’ve come to a demo, you know that they’ve come to that demo and they are probably past the awareness stage. They’re probably past the nurturing stage. You don’t need to send them additional educational material. That said, depending on what their questions are, you may need to send them some more stuff. You may need to send them some more educational information, but those different touchpoints that you have with them are going to be key pieces to trying to figure out where they are in that buying process and then adjusting where they end up starting into your pre-sales funnel.
Rob [22:44]: Right. It’s easy to assume that when someone first signs up for your list that they’re in the awareness phase. That’s not always the case. You may have someone who already knows about your product. They already are comparing it to two or three other options. They have a short list. They’re a savvy buyer; and really they’re in the third phase, the qualification phase, already. This is where having not just some email marketing tool, but actually some type of nice marketing automation tool where someone can click a link and jump ahead, or they can opt to get quicker to qualification, or quicker to a demo, or quicker to trial is actually really, really helpful. In the traditional roles, marketing is the first three that you mentioned. Marketing is essentially awareness, it’s nurturing, and it starts qualification. Then sales tends to pick up at qualification and then helps with evaluation and purchase. So, again, depending on your price point and your complexity, when marketing hands off to sales, that first piece that sales needs to do is qualify them. They’ll be partially qualified through how they’ve interacted and how they’ve maybe filled out a form, or what you know about them; but at a certain point, you’re really going to have to dig in and start asking some actual questions in terms of who they are, what their usage is like, who they’re evaluating you against, etcetera.
Mike [23:53]: That said, let’s talk a little bit about the lead qualification process, because that’s really where the core of this particular episode is headed. You really need to be able to qualify those people in order to determine how it is best to treat them inside of your sales funnel.
There’s a couple of different things to lead qualification. I think the differentiation between two different types of qualification is that qualification can either be explicit or it can be implicit. It depends a lot on whether you need to speak with those people directly. How do they come into your sales funnel? Is it through an email list? Is it through a webinar? Did they fill out a simple form that just asks for their name and gave a text box for their phone number? Or, did you have this two- or three-page application process that they needed to go through in order to submit that to you so that you could take a look at it and review it? Depending on which of those mechanisms you’re looking at, you can decide whether or not that’s more of an implicit or an explicit lead qualification. If they filled out a giant, lengthy form, then that’s pretty explicit. You’re going to be able to get a lot more detailed information. If they just signed up for an email list, it’s much more implicit, and you can’t really judge just yet whether or not they’re going to be a qualified lead.
Rob [25:04]: The most important part of lead qualification is you’re trying to figure out is it worth your time and is it worth their time in continuing the conversation. You’re trying to be mindful of both of your resources and schedules in this, because if they’re not going to get value out of the product and it’s going to be a bad experience for them, then you’re wasting both of your time in this. The key thing that we found is to figure out a short list of qualifying questions, and that’s something you’re going to have to develop over time. You’re going to start intuitively, and then over time you’re going to see patterns. Get those into a doc as soon as you can so that you can ask the same questions the same way every time and then slowly split-test those questions with others and figure out what it is that essentially – there’s certain things that you shouldn’t be doing with your tool at all, so you’re going to learn over time.
I’ll give you an example. With Drip, we get multiple people per week jumping on demos, and the first thing they talk about is how they have a purchased list, or how they have a list of people that they’ve scraped from the Internet, and that’s called “email outreach.” While that’s perfectly acceptable in some tools, it’s not in tools like Drip, MailChimp, AWeber and Fusionsoft. We’re for warm leads, and we’re for nurturing once people have opted in to hear from you. That’s an easy pre-qualifier for us – a disqualifier, I would say. To just be able to say, “Tell me about your list.” “Where’d you get it from?” “When was the last time you emailed them?” You talk that through. We have very specific things.
You’re going to learn what that question is for your tool. How are people accidentally – because it’s not malicious. They just don’t know. They see “email tool,” and they feel like they can just put whoever in that they want. So, figure out what those questions are to disqualify folks early on, as well as the ones that will really qualify them well. You might know that you serve SaaS businesses and people who are bootstrappers, people who have raised funding, or info marketers, or bloggers. There’s going to be a group that you serve really well. Figure out if they’re in that or in the periphery and can fit your use case. If they’re not, it’s really nice for you to have knowledge of your space and be able to actually recommend them out to a tool that is going to work for them; because, again, it’s a matter of using your time well and using their time well.
I heard [Sully Efty?] say this. You don’t owe a demo to anyone. You don’t, and you don’t want to use your 30 to 40 minutes of demo time on someone who you know is not going to get value out of this. So, if they’re qualified, then do it. If not, then you’ll figure out some key phrases to basically politely encourage them that you’re not the right fit and, hopefully, recommend another tool that might be a better fit.
Mike [27:27]: A nice side effect of going through this process and really taking a hard look at this information and what those qualifying or disqualifying questions are is that those can also be used on your website and your sales collateral and your marketing collateral to help guide the people who are going to be a good fit into your sales funnel, and further down, versus trying to push those people away. There’s a couple of different ways that you can push those people away. Maybe, as Rob said, you recommend somebody else’s product for them. In that particular case, if they came in and they have a purchased email list, for example, then they’re not a good fit for Drip. Is there another product out there that could be recommended, or another mechanism that could be used for them to use that list? Those are different ways to down-sell to some extent, or to just provide them with value such that if they come into a situation in the future where they could use your product, then it would be a better fit and they can come back. At the same time, if there are lower-tiered opportunities for offering different products, or lower-price products; or, if they’re a do-it-yourself type customer, can they buy a lower-tiered version of it and do everything themselves? Or, if you have a higher-priced consulting product, maybe they’re a good fit for that. Depending on where they are, what you’re doing and how they fit into that, you’re going to be able to start pushing them – probably “push” is too strong a word, but help guide them in one direction or another based on what it is that you offer, what it is that they’re looking for; and be able to answer those questions pretty concretely.
Rob [28:54]: Another question you want to think about is: would this lead perhaps be better served with a lower-tiered or lower-priced product? Are they a DIY type? Are they not a good fit for you at all due to one of these disqualifiers? Would they be better served either by a competitor or even another class of tool, or even just staying with paper and pencil? Sometimes, we’ve had people to purchase who are doing – he was just getting an email started, had zero people and was going to do something with bars or restaurants and get the owners to sign up. Then he was going to send emails manually. It was just a really manual thing, and we realized, “You know? Maybe just have, like, a Google Doc or an Excel spreadsheet, or even just a paper signup form and then send the emails yourself manually until you prove this out. Then if things work, you can look at a tool like Drip, or even a free account with MailChimp for a little while, if you’re really just sending small broadcasts.” Often, especially people who are just getting started, they may have more of a need for a lot of support. You have to use your judgment. The people who are going to pay you a lot of money tend to be the ones that are more tech-savvy, and they’re further along, so they’re going to tend to be less supportive and definitely worth any support time you have to spend with them.
This is an evaluation piece you have to do early on. In your road and your journey of your product, you’re going to want everyone, and you’re going to learn who are good fits and who are not. Then you refine this over time. As it goes further on, dealing in volume and just getting a lot of people using your platform may not be the right play for you, especially if you’re a bootstrapper; because supporting someone at a $29-a-month plan, they’re going to be more likely to churn, more likely to be unhappy; and they’re often going to need a lot more support than someone at the higher end. So, a qualification is not just can they get value out of the tool, but it’s is it a good mutual fit in both directions.
Mike [30:39]: One of the things that you had mentioned in there was how far along are they. I think that there’s two, different aspects to that. One is how far along are they in the life cycle of their business. Then the other side of it is are they already performing the tasks that your tool is offering to them today, and they’re doing it manually versus are they looking at potentially using it to start doing that. So, if they’re already entrenched in doing that; they’re doing it today, but it’s painful, then your tool can certainly help them out, versus a situation where they look at that and say, “Well, I’d really like to try that out, but we haven’t done it before.” Those are two, very different types of customers. I think that the people who are already doing it today, they’re much easier to sell on it. They’re much easier to work with because they know exactly what they want and what they’re looking for, versus the other ones where you are probably going to do a lot more education with them to help them figure out how to solve that particular problem, because they’ve never run into any of the challenges before because they’ve just never done it.
Rob [31:33]: I think the bottom line is that the majority of pre-sales is really to identify where someone is in the buying process and give them the right information that they need that’s relevant to that step. I think in most cases, a quick phone call tends to be the best if you have the bandwidth to do that. Then in other cases, if you don’t have the bandwidth, you can try to do it via email. Probably not as successful, but some people will prefer email. So, giving them either option, I think, is the ideal way to do it. Your results may vary depending on how much time you have to do it and how good you are at talking to people on the phone and how interested you and/or your team are in doing that.
I think that’s going to wrap us up for today. We designed this whole episode around a listener question. If you have a question for us, you can call our voicemail number at 8-8-8-8-0-1-9-6-9-0; or, email us at email@example.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. Subscribe to us in iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening, and we’ll see you next time.
In this episode of Startups For The Rest Of Us, Rob and Mike discuss the long, slow, SaaS ramp of death. They define it, tell you how to recognize it, share their own experiences with it, and give tips on how to get out of it using tactical and mental coping mechanisms.
Items mentioned in this episode:
Rob [00:00]: In this episode of “Startups for the Rest of Us,” Mike and I discuss the long, slow SaaS ramp of death. This is “Startups for the Rest of Us,” episode 282.
Rob [00:18]: Welcome to “Startups for the Rest of Us,” the podcast that helps designers, developers and entrepreneurs be awesome at launching software products, whether you’ve built your first product, or your just thinking about it. I’m Rob –
Mike [00:26]: And I’m Mike.
Rob [00:27]: – and we’re here to share our experiences to help you avoid the same mistakes we’ve made. What is the word this week, sir?
Mike [00:32]: Well, we’re making a final push to get all the development work done for Bluetick before the end of next week because, obviously, at the end of next week, right after that, MicroConf starts up. So, we’re trying to get everything out the door and just doing some testing on different things, making sure people can use it end-to-end; and then, hopefully, by the end of next week, I’ll be able to start onboarding people a little bit in advance of the intended release date; or, at least the private release to the early-access people. I’ll start onboarding people, and I do have a volunteer to be the first person on it. So, I’ll start working with that person, and we’ll go from there.
Rob [01:05]: That’s exciting, man. How does it feel?
Mike [01:06]: Good. There’s obviously little jitters about, “Well, I know that some of this code is” — I wouldn’t say it’s janky or anything, but probably hasn’t been tested a lot. I think there’s a big difference when you’re first rolling something out versus something that has gone through thousands or tens of thousands of iterations and you know that it’s pretty solid, and that it’s got a lot of the edge cases taken care of. But because I’m reading mail from people’s mail servers, like the iMap protocol, there’s a lot of edge cases. So, there’s all these things where things could go wrong. And I went through over a hundred thousand emails in my own mailbox, so I’ve mined those out and got all the edge cases out of there; but who knows what else is out there, you know?
Rob [01:54]: Oh, yeah. Once you get into this stuff, kind in the wild, where you have emails; or, you have data that may not be as well-formatted as, quote-unquote, “in a laboratory,” or in unit tests that you might write, there’s always going to be edge cases. We’ve seen such crazy stuff with Drip, whether it’s on the reply-tracking side, or just something wants is to send. You send tens of millions of emails a month, and suddenly you’re just going to find edge cases. So, I would guess that right off the bat, you’ll catch a few as new folks sign up, and then there’ll be a nice lull where you’re okay. Then once you hit scale, where you start really doing a lot of iMap stuff, you’ll probably see even more weird edge cases. Like, emoticons or emojis won’t work, or there’s just tweaky stuff that different mail servers do.
Mike [02:29]: Yeah, then there’s also places where, in the RFCs for the iMap protocol, there are ambiguities, and different mail servers handle those things differently. Some will follow the letter, and some will just ignore what the RFC says. So, there’re places where, for example, you’re not supposed to have nulls in certain places; and there are emails that do it, and they just ignore the protocols. Then especially when you get into things where people are sending spam, for example, or you’re looking in a spam folder and saying, “Okay. Well is there an email in here that got miscategorized that we want to validate whether or not someone replied to it?” Any of those could be really screwed up just because who knows where those things came from, or what mail server they could have originated from? They could’ve even just come from a Perl script or something like that. Who knows?
Mike [03:38]: Yeah. We’re already separating out some of the code where we are trying to identify what the mail server is in order to start handling some of those edge cases just because we know that this particular case is handled very well in this mail server, and this other mail server just simply doesn’t handle it at all.
Rob [03:55]: That is the worst! The worst is when you start having ‘if’ statements, and they’re, “If mail server is XYZ…” Aw, that’s terrible, man.
Mike [04:02]: Yeah.
Rob [04:02]: Well, it’s good to hear you’re still on track, and excited to hear an update once you have that first early-access person in and then when you get to your milestones of getting five or ten people in there, using it. First paying customer – it’s all coming quickly, man.
Mike [04:16]: Well, technically, all of them are paying customers at the moment.
Rob [04:20]: Oh, nice, nice.
Mike [04:21]: Everyone who is on my early-access list of these initial sixteen people, they’ve all paid me for it. So, it’s really just a matter of making sure that it’s working for them. Obviously, if it doesn’t work or it can’t work for them, then I’ll issue refunds as needed; but everyone that I’m putting on it over probably the next six weeks or so is essentially a paying customer already.
Rob [04:439: Right, but when I was saying “coming on board,” I meant subscribing –
Mike [04:44]: Oh, yes.
Rob [04:44]: – because they paid you up front for the privilege of early access, and that’s obviously cool for both sides; but at a certain point, you’re going to have to prove enough value that they’re willing to pay that every month. And that time will come once they’re using it. Cool.
We have a whole slew of new iTunes reviews. I won’t read them all, but Jerry Weir from Luxembourg said, “A great show. Value in every episode. If you’re at all into starting your own business, alone or on a team, you shouldn’t miss out on ‘Startups for the Rest of Us.’”
We have [Prof.?] DuChamp from the United States. He says, “Listen, or miss out. You choose. If you’re doing anything related to startups, you would be plain silly to not listen to this podcast. Mike and Rob do a really good job of explaining the minutia of building your platform. It’s not about interviewing the biggest names in the industry, or even talking about trending topics. They get into stuff that really matters.”
So, thanks, guys, for the five-star reviews. We got seven or eight other new ones, 475 worldwide so far. If you want to help us on our push to get 500 worldwide reviews in iTunes, please log in and give us a five star.
Mike [05:42]: A few minutes ago, I mentioned that we were working on getting Bluetick finished before we MicroConf, and one of the things we’re doing this year is that – we usually do giveaways for a lot of the different sponsors; and then as part of “Startups for the Rest of Us” and the Micropreneur Academy, we give away a couple of different things. This year, we’ve just decided to give away an Amazon Echo, so that’ll be one of the grand prizes from Micropreneur Academy this year.
Rob [06:05]: When the Echo first came out, I almost bought it. I think it was, like 99 bucks if you were in the early access program, and I decided not to because I kick-start so much stuff as it is, that I have stuff laying around my house and stuff that I’ve given away, or sold, or whatever; and I just didn’t really want another device. But there’s buzz building around this thing, and I’ve heard that it’s really cool. You have one, right?
Mike [06:25]: Yes, I have one. It’s very interesting. There’s a lot of different voice commands that you can give it. I ended up on a mailing list. I don’t know whether it was part of registration process or anything like that, but what they’ll do is they will email me as they start adding new features, and they’ll tell you in the email, “Hey, say this to the Amazon Echo, and it will start responding to you in this way or that way.” Or, you can play games with it. They’ll tell you about new games that came out, or new things that they’ve integrated into. There’s a few, different, other devices you can get that will automate different things in your house. You can integrate it, I think, with Nest at this point, but there’s also other thermostat controls that you can use. Then there’s a device that you can plug into your car, for example; and because your car is probably close enough to your house to get Wi-Fi and connect through that. You can ask Echo information about your car based on what it is feeding back through that interface. So, there’s a lot of other devices that they’re working on, but in and of itself, it’s pretty interesting the types of things you can do with it. My kids will use it for a few different things here and there, too.
Rob [07:24]: I think Amazon is sneaking in the backdoor, and I they’re going after, eventually, the home automation market. Right? I think they’re going to try to be the hub for all of that, which was not apparent when they first launched this. I thought of it as more of a media device and a to-do list management device and a timer or something; but it seems like they’re making inroads. I guess with – as well as the speaker and the voice recognition work, that it’s getting legs. I’m hearing people talk about it, so it’s on my wish list right now. I would guess I’ll be getting one in the next month or two. All I really want – I want to be able to set a kitchen timer verbally, without having to use my hands. I want to be able to start a Spotify playlist, start Pandora, audible books and put stuff on to-do lists. If I could do all that verbally, and it was seamless, and it worked almost every time, it’s a no-brainer for me.
Mike [08:08]: Yeah, I’d say the voice recognition is pretty good in it. There was a few times where it will obviously fall down. If you happen to say a name, for example, then it will just pick it up. Or, if it even thinks that you did, then it will try and interpret whatever it is that you said. So, there’s obviously those types of issues, but you’re going to get that with any device, I think.
Rob [08:26]: Yeah.
Hey, I’m listening to the book “Masters of Doom” again. The last time I listened was probably a couple years ago, and it’s a story of id Software. It’s John Carmack and John Romero, who built Doom and Quake and Wolfenstein 3D; and I can’t get enough of this story. This is either the second or the third time I’ve listened to it and, to be honest, I just kicked it on. I was going to listen to the first ten or 20 minutes, just to refresh my memory of some things; and I’m three or four hours in now. It’s such a compelling book, and it’s one of those complete outlier stories where they just happen to hit a few, big changes in videogames and computer games. They hit the cusp right in the late ’80s, early ’90s as PC games are just starting to come into fruition. They were also working 90-hour weeks and loving it. There were a lot of extenuating circumstances. They were kind of the perfect age to do it. They weren’t older with families and kids and everything, so there’s reasons that what they did resulted in the success that it did. Nonetheless, the story is so compelling and well-told. It’s just fun to go on the ride with them.
Mike [09:25]: Very cool. Yeah, I still have that on my list of things to check out at some point, and I just haven’t gotten to it.
Rob [09:31]: Yeah, it’s purely a fun startup read. It’s obviously not a true story, but it’s not something that you’re going to take away actionable business tidbits or anything.
Mike [09:39]: Right, and that’s probably why it hasn’t really made it up the top of my list yet.
Rob [09:43]: Totally. Yeah, you’ve got other things on your mind.
So, today we’re talking about the long, slow SaaS ramp of death. This top came from a thread in Founder Café, which is our private membership community. We asked for topics for the podcast, and someone said, “I’d love to hear you guys talk about the long, slow SaaS ramp of death. What is it? Did you experience it? How do you recognize it? How do you get out of it? Tactical, as well as mental coping mechanisms to help you get through it would be interesting.” Two or three people chimed in about elements they wanted to hear about, and so I figured we’d start. We’d define it. We’d talk about what it’s like to experience it, how you recognize it, some ways to basically cope with it, both tactically and mentally.
Mike [10:20]: Yeah, I first heard this term several years ago at the Business of Software conference, and it was a talk given by Gail Goodman, who was the CEO of Constant Contact. I think Constant Contact got recently acquired by somebody for – I don’t know. It was a billion dollars or some ridiculous number like that. She talked about the very early days of Constant Contact and how, when they launched, they weren’t getting a lot of traction, and the growth was incredibly slow. They were one of the – I wouldn’t say the first SaaS company out there, but they started back in I think it was around 2000 or something like that, and that’s about the time where her talk picked up. She showed an example of what the growth was like, and it was a very, very long ramp of very low growth. Of course, you know over time that the growth compounds, but it seemed like the growth levels that she was expecting were significantly lower than what you would expect for a SaaS company.
Rob [11:19]: Yeah, and since they were so early in the SaaS space, they had a hard time even convincing people to use web-based software. Everybody wanted to download the stuff on their desktop. As a result, the growth was lower than you would see today, but the interesting thing is that this concept of a “long, slow SaaS ramp of death” resonated so much with everyone who has ever been involved in a SaaS app; because although the pitch or the slope of the ramps these days may have a sharper curve because we can grow things faster and people are more used to paying for SaaS, it’s still stands that we all still feel this. So, even if Gail talked about a specific growth rate, and nowadays we can do five times that, or ten times that, it still feels like a “long, slow SaaS ramp of death” if you compare it to people who are starting consulting firms or productized consulting firms; or someone who maybe gets a hit, a mobile app in the App Store; or, someone who’s doing big enterprise sales and doing those that are 100,000, 200,000 a pop. They can start and grow a business. All those can start and grow a business a lot faster than SaaS. SaaS is essentially the tortoise in the race, right, where it just plods along, plods along, and it grows. The particular growth rate isn’t what’s important here; it’s that it will always feel slow. That’s really why this phrase resonated with so many people. It’s very, very rare that someone’s not going to feel this if you’re starting a company.
Mike [12:41]: I think that’s probably an important point to come on and talk a little bit about – is the fact that it’s always going to be slower than you want or slower than you expect. I think that’s part of a human inclination to want more; or, to just want something to be faster, or better; or, to expect that you’re going to do better than you’re currently doing, because there’s always higher expectations that you put on yourself, rather than those expectations that other people are putting you.
Rob [13:08]: Yeah, we’re all impatient. We’re entrepreneurs, and that’s the point, is that we don’t like systems that don’t make sense, and we don’t like things that move slowly; and that is what makes us founders. That’s what makes us start things, to try to change things; and we want to change things now, not in six months, not in two years. Unfortunately, SaaS apps take a lot longer than we want them to. I was trying to think of any exceptions that I can think of in recent memory of actual SaaS apps that have had such steep growth curves that the founders might not feel that they went through the “long, slow SaaS ramp of death,” and I can only think of a couple. One is Slack, and Slack is one of the fastest-growing SaaS apps in history, as far as I know. I think Xero is another one. They raised $170 million. According to a recent podcast I heard, they are claiming to be the fastest-growing SaaS app, so maybe those people don’t feel that way. Also more within our community, I think Buffer has grown very quickly; and Laura Roeder’s Edgar, they all had good growth curves. I wonder if you went and asked Leo from Buffer, though – Leo or Joel, to be honest – if they felt like early days didn’t have a “long, slow SaaS ramp” – because now they have traction, right? Now they have a name and that mini brand that Jason Lemkin talks about, which we’ll discuss a little bit later. But, the early days of getting that boulder moving up the hill, I think, is always going to feel like the “long, slow SaaS ramp of death.”
The problem is that this feeling is exacerbated by the massive success stories that surround us, because we hear these outlier success stories. We hear and we see Buffer’s metrics and Laura Roeder talking about Edgar getting to 100k and MRR in five months, or however long it took. And, frankly, while those are great stories, they are Cinderella stories. They are one in a thousand, or one in 500. They’re very rare, and they set your expectations to unrealistic levels. Same thing with Peldi in the early days launching Balsamiq. He had great success. It took off like a rocket ship, and he got to a half million dollars. It wasn’t a SaaS app, but it got to half a million dollars in revenue in the first year. I remember someone signing up for the Micropreneur Academy right after that and saying, “Yeah, my goals is to get to half a million dollars in my first year.”
[15:12] We had to say, “Whoa, whoa, whoa. No, that’s completely out of the realm of possibility.” Not literally out of the realm, because it could obviously happen; but it’s just not going to happen. Peldi hit just such this unique culmination of things: right place, right time, right idea, right person. Everything matched up for him, and I would say the same thing for the Buffer guys and for Laura Roeder with Edgar and for Slack. Of the thousands or tens of thousands of startups that have launched in the past few years, there’s literally a handful that have had that.
So, I think the idea here is don’t let these unrealistic expectations make you think that you have to be growing as fast as everyone else, because it’s not the case. Hundreds and thousands of other startups are growing a lot slower than those other guys. They really are outliers. We can be happy for them, and we can look to see what they did to succeed and try to adopt that, but we can’t have the expectation that our startups are going to grow like theirs.
Mike [16:03]: Well, the other thing to keep in mind is that it’s more about what is right for you and what’s appropriate for you and what you want to get out of it. Just because you have this idea in your head that you could grow the startup extremely fast or extremely big in a very short time period, the other question that I don’t necessarily think that most people think about is, “What is the cost of doing that?” And I don’t mean the cost in dollars. It’s what’s the cost on your mental sanity, your health, your relationships and all the other stuff; because unless you’re running a high-growth startup that you have investors that you report to, that you really need to be able to show massive growth in order to even justify your own existence – if you’re running your own business, the only person you actually have to answer to is yourself. So, I think there’s a different matter of the expectations and scenarios for a lot of these things as well.
Rob [16:53]: Another part of this question that the original poster asked – he said, “How do you recognize the ‘long, slow SaaS ramp of death’?” My sentiment is that you’re just always going to experience that. That’s the default, right? It’s going to be the rare, rare outlier case. And you’re going to know if you’re not experiencing it, because things are going to be blowing up like crazy, and you’re going to be growing 50 grand a month in MRR or something. Then you’re not really experiencing it. But, to be honest, I don’t personally know a SaaS founder who hasn’t felt this as they’re going through it; because no matter how fast you’re growing, you always want to grow faster. Today, if you don’t have a SaaS app, or you’ve just launched, I bet you’re thinking, “Boy, if I could grow at a thousand dollars a month, that would be amazing.” But as soon as you get there, then you’re going to want 2,000, and when you get to 2,000 a month, you’re going to want 5,000. It’s really the arrival fallacy, right, of you’re never going to be happy with it. It’s always going to feel like you’re on the “long, slow SaaS ramp of death,” so I think recognizing it isn’t even an issue. I just think accepting that it’s going to be there is the way to go.
Mike [17:49]: With all of that said, there are some things that you need to keep in mind in terms of being able to cope with that, and what we’re going to talk about now is some tactics for coping with those particular feelings of either an inadequate growth rate, or you just aren’t getting to where you want to go as fast as you want to be.
The first tactic is to try and establish some sort of virality around your product. I don’t necessarily mean go out and try and identify some mechanism for making sure that your product is in front of every, single possible person it could be in front of. It’s more about trying to find ways that you can scale the app using mechanisms other than yourself or the things that you’re doing. So, when you talk about virality in general, what you’re usually talking about is other people talking about your product on your behalf so that you don’t have to do it, so that you don’t necessarily have to be present for every conversation. You don’t necessarily have to be driving every little bit of traffic. If there’s people talking about your app, then, in essence, what ends up happening is that you benefit from that traffic. So, whether it is other people writing up articles about your product, or you doing a podcast tour and talking about the product, essentially you’re leveraging other people’s networks and other people’s influence. What that can do is that can help drive growth for your app without you being directly involved in all those various aspects of it.
Rob [19:08]: Yeah. True virality is really hard to get into a product, and try to fit it in retroactively is not easy. Very, very difficult. You tend to have to design the product itself around a viral loop. So, thinking about something like, when you sign up for Facebook, how they ask you to invite friends and that you really can’t get much out of it until you’ve invited those friends. That was an early viral loop. That’s been overdone so much that it doesn’t work as well as it used to, but people first started doing that, it was pretty clever. Even having a “powered by your app’s name” link in something that is customer-facing, so we have the “powered by Drip” link at the bottom of our widget. MailChimp has “powered by MailChimp” at the bottom of their emails, of their free plan. I think Hotmail did that in the early days, where they had “powered by Hotmail,” or something like that; and that really helped drive a lot of viral growth early on.
So, the idea here is that your “long, slow SaaS ramp” is always going to be there, but the way to make it more palatable so you can deal with it is to have growth; because growth really does solve most problems. I think I should couch this. We’ve said this many times, but you’re really not going to grow until you find product-market fit. You have to build a product that people really, really want. Then grow from there. The first step is to basically find product-market fit as quickly as possible. During that part, you’re going to have just a flat growth curve, pretty much. It may take you months. It may take you longer than that, but that’s going to be the really hard part. Once you have product-market fit, growing is a fairly repeatable and scalable process. There’s a lot more detailed and specific information about growth than there is about finding product-market fit, because finding product-market fit is so much more about art than it is about science; whereas, growth is a lot more about the science of it. So, getting this growth going is what can help you feel better and get you out of the long, slow SaaS ramp. Obviously, baking virality – that could be an entire podcast series just doing that, but that’s one thing to keep in mind as you’re getting started.
Another tactic that works pretty well is to target a community of users that has strong word-of-mouth; they talk a lot online. An example of a community that doesn’t do this is folks who own construction businesses. They may talk once a year at trade shows, or they may talk amongst themselves with industry trade publications; but the word-of-mouth for your product is not going to be strong until you have the vast majority of that market. Whereas, in the designer community, or the agency community – the consultants, the SEO and marketing consultants – or, the founder community – all these communities, they have really strong word-of-mouth because they’re always constantly sharing with one another what they’re up to, new tools they’re finding. Just picking an audience can be a big part of helping you grow faster. Because, again, if I build accounting software for construction firms, versus accounting software for startups, I’m going to be so much more likely to get that early strong word-of-mouth with the startups, because they’re just talking to each other more often. And so, this won’t cure your “SAS ramp of death,” but if you really do build an amazing product – you can think about how Zen Payroll and Zenefits came on the scene, and they targeted startups first. Then once they got that strong word-of-mouth and the mini brand, then they were able to spin that up into faster growth.
Mike [22:16]: One of the interesting pieces of what you just said about targeting communities that have a strong word-of-mouth is that this is an area that I think a lot of people discount, or don’t think about when they’re first looking at building a product, because they’re more interested in the problem itself and how they can solve it and how they can do better than the other things out there. They don’t necessarily think a little bit further down the road about, “How are people going to find this?” “Is there going to be either a viral loop that I can tap into, or an existing market of people that are going to be easier to get in front of than other people?” “Are these people talking to one another?” What you just said about the word-of-mouth – I hear a lot of people saying, “I’m going to go after the real estate market,” or, I’m going to go after the attorneys market, because they’re under-served, and their software is terrible.” I’m not saying that either one of those things is an untrue statement, but at the same time, if you completely discount the fact that a lot of these people don’t necessarily talk to one another outside of those trade shows on a yearly basis, then it makes getting that word-of-mouth growth loop very, very difficult.
Rob [23:20]: Right. We’re not saying that you can’t grow without these things, but these are the higher-growth approaches. These are things that are not content marketing and paid acquisition. Those are great, standard, long-term approaches. SEO is another one. Those are your standbys. Those are your blocking and tackling, right? You’re going to implement those, and that’s going to get your growth curve going over time; but you will ride on the long, slow SaaS ramp if all you’re doing is content marketing, paid acquisition and SEO; because that stuff just takes a long time to do. Right? There’s this phrase “grinding it out” that I think about. A way to try to short-circuit that and not feel like you’re grinding it out as much is to use one of these faster-growth approaches. And that’s virality. That’s targeting the community with strong word-of-mouth that we’ve talked about.
Another one is to try and get to a million dollars in ARR as soon as possible. I realize we’re all trying to do that, but there’s this thing called a “mini brand.” I think this term was coined by Jason Lemkin from SaaStr. I really like his stuff. He basically says once you hit a million, you will tend to have this thing called a “mini brand.” You’re not a brand that everybody knows, but you’re a brand that enough people know that you will just start having strong word-of-mouth even if you didn’t have one before. You’ll start having an audience and fans, even if you didn’t have one before. That’s actually when it gets easier to grow, once you cross into the seven-figure range, because you’re just on the lists. When the people write the blog posts about the “Ten Best XYZ Accounting Software,” you’re on every one; because once you hit that rate, you have enough users that people are talking about you, and you just have a footprint. That’s another kind of hack – is to get to that point and to get enough customers using you that people are just naturally talking about you.
Mike [24:54]: The last hack that you can use to leverage a higher growth rate is to look at an audience or a community that you might already have access to, so whether that’s one that you’ve built yourself or one that you’re familiar with or involved in. You look around at a lot of these stories about people who have a really high growth rate. “Oh, I posted on Reddit or Hacker News, and I got 300, or 400 subscribers on the first day for my app.” They talk about these large growth rates. It’s because they were already plugged in. If you’re not plugged into that particular network, then it’s very difficult to just walk in and on day one you have the credibility from people to be able to attract that type of user base or that community. A lot of times, if you’re not already involved in that community, they have no idea who you are. So, when you approach them from the outside, they say, “Oh, well, you’re just self-promoting and self-advertising, so I’m really not interested in listening to what you have to say, because you’re not here to benefit the community. You’re here to benefit yourself.”
So, if you’re already involved in some of those communities, look to those to tap into; but if you don’t, again, you can also build your own audience. You can build your own community over time before you get to the point where you launch. And having that built-in audience before you launch can be really, really helpful, especially if you’re targeting that audience with your product. If there’s not a lot of crossover or overlap between what your product does and the community, it’s not going to be very helpful. It’s very similar to a lot of these stories you hear about entrepreneurs who have these massive audiences. It doesn’t have to be a hundred thousand or a million people. It could just a mailing list of a couple thousand people that are following them on their blog. A lot of times, what you find is that when they launch a product that’s not applicable to that, they might get one, or two, or five sign-ups out of it; but they’re not going to get the hundreds or thousands that you might expect if they had 20 or 30,000 subscribers.
Rob [26:44]: Yeah, and it’s interesting. Obviously, being part of a community is one thing, but it’s so much more valuable to really have your own audience, to basically have your own email list where you’re communicating with people. The hard part with that is, as you just said, you can have a mailing list of 20,000 people who were listening to you talk about design, or entrepreneurship, or something. Then if you actually go and launch a product, like a SaaS product, especially, it’s going to be really hard to get them to buy from you. It’s not just going to happen magically. I’ve seen it happen over and over where people have personal brands, and they have a sizable email list – let’s say 15 to 30,000 range – and they start a SaaS app, and it just doesn’t resonate because: a) you didn’t have a product-market fit from the start; b) if you haven’t already been selling these people something, directly – aside from info products, because info products are exceptionally easy to sell to audiences – but if you haven’t really had a specific brand name in a specific space – Laura Roeder is actually a good counter example to all this, right? She did build an audience, and they were buying from her. They were buying social media training from her for years and years, so she was selling really solid stuff. Then she essentially launched a tool to do exactly that. Everything she’d espoused, she launched a SaaS app called Edgar that does all of that. That was such a perfect fit, and it’s such an example of how to do it.
Rather than having that blog where you have, “Alright, designers and entrepreneurs are buying stuff from me about how to launch products,” and suddenly you just go and launch your SaaS app that isn’t a SaaS app that helps people launch products. It’s a SaaS app that does their accounting, or helps them do – I don’t know – landing pages. I’m just trying to come up with ideas here. You will get a few who sign up, but since it’s not directly in line with everything you’ve been talking about, your uptick to your own audience is going to be a lot lower than you think, unless it’s directly in line. So, I think having an audience can be super powerful, but it can also leave you to have higher expectations than you should, of how many of those will actually convert. When we were launching DRIP, I valued the leads that I got through Facebook ads and through organic traffic and through these other means, podcasts that were higher than my own audience; because I knew that, while I would get some hardcore folks who wanted to use Drip or to use a product that I built, I knew that the conversion rate on my own list – my Software by Rob list – would not be as high as these other traffic sources that had come truly to see the product and to get the value proposition that I was preaching.
Mike [28:58]: I do want to clarify one, little, tiny piece of that because we glossed over it: the fact that what we’re saying here is not that you can’t use your own personal audience that is unrelated to find specific people, or to mine it for people you can use very, very early on in the process to make sure that you’re building something that people want, and that it’s something that they need, and that they’ll pay for and all that stuff. What we’re really focusing on here is the fact that that list is not going to be as applicable for high growth rate. It’s not that you can’t use it for a lot of the early customer development and stuff like that. That’s absolutely what you should be using it for and what you can, and it works really well. We’re just saying that you’re probably not going to get giant growth rates out of it is all.
Rob [29:41]: That’s a good point. Exactly. That’s what you should use it for, is the early days, getting to product-market fit. But once you tap that list a few times, you’re done. You’re not going to keep growing from it.
All right. So, let’s dive into the last section here. We’re going to talk about some mental coping mechanisms, because there’s obviously a lot of stress that goes along with this, and there can be frustration when things aren’t growing quickly. In fact, if you go back and listen to my MicroConf talk from last year, I talk about how frustrated I got after we watched and just kind of plateaued between 7 and 10,000 MRR, and we weren’t able to get past it for another four or five months, till we actually found product-market fit and started growing. So, I have a few tactics here of ways to get you through that and some thought processes to think about it.
The first one is just to have realistic expectations from the start. Realize that if this is your first-ever SaaS app, it’s going to grow really slow. You’re going to make a lot of mistakes, and don’t look at the examples that we mentioned above of people who grew really fast. Look at examples of people in your community, whether it’s the MicroConf community, Founder Café community; and ask what realistic growth rates are. I can tell you that when you’re at a thousand MRR, and you’re growing at a few hundred dollars a month, that’s a perfectly realistic growth rate, and you should actually — I won’t say you should be happy with it, because you should never be happy with anything, right? As a founder, you want to be pushing it further, but that is not a terrible rate if you’re just trying to figure out your early marketing approaches. So, 10, 20 percent growth when you’re doing a thousand or 2,000 bucks a month isn’t very much, right? It’s a few hundred dollars a month. And while you shouldn’t be striving in these early days to kick it up ton 50 percent or 100 percent growth month over month, and while that is totally possible, that’s not something that you should expect or be disappointed if you’re not achieving. I think that’s something that gets people stuck – that they see these outsize results, and their expectations are not realistic.
Mike [31:25]: One of the points that Rob just made about having realistic expectations from the start of it is that a lot of times, you’re still really trying to figure out what that product-market fit looks like. Early on, you don’t have it. Chances are really, really against you that, out of the gate, you have product-market fit and you know exactly what it is that people want. And even if you do know what people want, sometimes it’s difficult to put it in words that resonate with those people. And those are two very, very different things. Just because you’ve built what they want and what they need, it doesn’t necessarily mean that it’s easy for you to convey that to people in a way that makes it easy for them to not only understand, but to attract their attention. So, keep that difference in mind and understand that when you’re going through this process, a lot of it is about figuring out exactly what those things are that resonate with people, because those are the things that are going to drive your growth. It’s not having the best product, or the product that hits all the check boxes that somebody has. It’s about being able to relay that information to somebody in a way that attracts their attention.
Rob [32:27]: The next tactic I have for mentally dealing with this is to have a mastermind group. This is advice we give a lot, but that is going to be something that’s going to be able to give you a sanity check on your growth. I think that’s probably the third tactic I’d mention – is to get a sanity check on your growth, whether that’s through your mastermind group, looking at normal SaaS metrics, just asking around, asking in Founder Café. Look at normal growth for the vast majority of these apps, not these one-in-a-thousand outliers.
Mike [32:55]: The next coping mechanism is to celebrate some of the different milestones that you meet, whether that’s a thousand dollars a month, or $5,000 a month, or even if it’s just those numbers in total, in aggregate. One of the episodes previously, in episode 268, we talked about setting annual goals; and one of the recommendations was to concretely define some different milestones and make sure you celebrate them, whether that’s going out to dinner some night, or buying yourself something. Just make sure you’re setting aside time to pay attention to those milestones and realize that each one of those is a stepping stone on the way to something bigger and better, because obviously you don’t go from a dollar a month to a $100,000 a month overnight. It just simply does not happen. That said, you do have to be mindful of the different steps that you’re taking along the way, because there are going to be a lot of those steps.
Rob [33:46]: I think lastly, take some time to reflect. Look back six months, 12 months and compare your revenue to this month’s. It’s surprising how you can get to a point where it feels normal to be at X revenue a month or X growth rate per month; but if you look back even just a few months, you were way less than that. You forget the progress you’ve made, and you forget how hard you’ve worked to get where you are. So, this isn’t celebrating milestones as much as it is just look at how far you’ve come and think about the work that you’ve put in and the results and the benefits that you’re reaping from that, and just celebrate and be happy with that. Then, the next day wake up and be pissed off at how slow you’re growing and try to do five more marketing approaches, because that is the roller coaster of doing this. That’s the roller coaster of startups, and it’s the roller coaster of SaaS, for sure.
Mike [34:31]: Yeah, and I think it’s important to look back at that past revenue, because chances are really good that – especially if you’re not making a full-time living from your app – that most, if not all, of the money that you’re making from your app you’re probably putting right back into it. So, you look at your bank account, and it hasn’t changed. Or, maybe it’s even lower than the previous month because you spent all of the money that you made this month, plus all and then some of the money that you made the previous month. So, it’s very difficult to just look at the dollar amount in your bank account and recognize what your accomplishments actually are. You really need to go back and look and compare your revenue over time in order to get a better understanding of that, because you probably are spending as much money as you possibly can in order to drive that growth, and it’s not obvious through just looking at that bottom line in your bank account where that growth is, or even that you have growth.
I think that wraps us up for the day. If you have a question for us, you can call it in to our voicemail number at 1.888.801.9690. Or, you can email it to us at firstname.lastname@example.org. 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 of each episode.
Thanks for listening, and we’ll see you next time.
In this episode of Startups For The Rest Of us, Rob and Mike talk about tools you’ll need for your bootstrapped startup. They discuss the different options to choose from pertaining to the pre/post revenue stages of your business.
Items mentioned in this episode:
- Conference Notes Podcast with Mike Taber
- Less Accounting
- Google Webmaster Tools
- Google Hangouts
Mike [00:00]: In this episode of Startups for the Rest of Us, Rob and I are going to be talking about tools you’ll need for your bootstrap startup. This is startups for the rest of us episode 281. Welcome to Startups for The Rest of Us, the podcast helps developers, designers and entrepreneurs to be awesome at launching software products, whether you’ve build your first product or you’re just thinking about it. I’m Mike.
Rob [00:24]: And I’m Rob.
Mike [00:25]: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What are you doing this week, Rob?
Rob [00:29]: I’m getting excited for MicroConf. It’s just a couple of weeks out in Las Vegas and we have a pretty cool speaker lineup I’m excited about. A lot of new names this year, names that folks may not have heard of but that either you or I have seen speak elsewhere or we have been highly recommended by MicroConf attendees that we trust. There’s folks like Claire Liew from Know Your Company who did a Believe at BoS Lighting Talk. We have Amir Khella from Keynotopia who has spoken in several places and Scott Nixon from Happy Herbivore recommended him and I’m excited about his story the more I talk to him on Skype. A lot of people haven’t heard the story Keynotopia but it’s pretty fascinating. We have Tracy Osborn from WeddingLovely and Patrick Campbell from Price Intelligently and of course Des Traynor from Intercom, which is cool. There’s several others and some names that you’d recognize as well. It’s cool because I feel like it’s a bit of a sleeper year in terms of brand new big name folks. I’m excited about the possibility of the quality of these talks that I think people will come across with.
Mike [01:30]: I think it’s interesting how at some conferences you look at the lineup especially early on and either you are attracted to it or you really notice it. There’s a bunch of standout names that you’ve heard before and they’re high profile names. I totally agree with you. A lot of the names we have on the docket this year are not probably as well know but the speaking quality is still there, the stories are still going to be interesting. It will be great to see how things turn out this year and what comes out of that.
Rob [01:59]: I think of it in terms of Joanna [Wylde?], when she first spoke at MicroConf, she was an up and comer at the time in this space. Brandon Dan was at the time. He first spoke; it was like four or five years ago maybe. It was a while ago. We’ve had several folks like Josh Pigford was still running PopSurvey. Samuel [Hullick?] before he was doing – there’s a lot of folks who are now more prominent in our space, who have graced the stage before they were big names and that’s how I feel about several of the speakers here. I have a feeling that they will be becoming well know partially from taking the stage at MicroConf. You get some name recognition there. There’re headed on that trajectory and I think we’re just helping them along. How about you? What’s going on?
Mike [02:42]: A couple of days I signed out what I hope is going to be my final to the people who have prepaid for Bluetick before I start on-boarding them in the next couple of weeks. Right now we’re testing and trying to work out some of the different kinks and the application and make sure that the basic usage scenarios and the basic workflow that people will go through to use the product are in line with not only expectations but everything’s working and we’re properly handling everything. A few minor issues here and there and we’re dog-fooding it internally but it’s looking good so far.
Rob [03:13]: You’re deadline that you’ve set for that is April 1. Is that correct?
Mike [03:17]: Yeah. Unfortunately, there’s a lot of things that play into that unfortunate part of it but at April 1st obviously is April Fool’s Day and it wasn’t intentional. It just happened to be Friday of – I think I counted out a certain number of weeks that was either 12 or something like that. I said, “Okay, I want to have it done by this time,” and that it just happened to be the day. It’s also two days before MicroConf.
Rob [03:38]: I know. You picked that day before we scheduled MicroConf, I think?
Mike [03:41]: Yeah. I did. That’s not exactly true. We knew what the dates were going to be for MicroConf but it was leading up to it. It was like I just did the calculation and I thought to myself, well, it would either be the 12 weeks or I could try to rush things so I’d have to do it in less time, which I didn’t think was all that feasible. I knew that I’d have to start cutting things and making concessions or whatever. If I pushed it, I would have to push it by probably at least two weeks. It’s just because the way that MicroConf fell. It’s like, “Well, I’ll try and get it done before hand.”
Rob [04:13]: But you’re on track right now?
Mike [04:14]: Yeah, so far. There’s still two and a half weeks to go. By the time this episode comes out, it will be a week and a half.
Rob [04:19]: That’s cool. For folks who don’t know what Bluetick is, what’s the one or two sentence explanation of what it does?
Mike [04:27]: It’s essentially a sales automation tool that allows you to follow up with people in an automated fashion. The system follows up for you so that you don’t have to, as opposed to other tools like Boomerang or followup.cc. You can have them ping you and remind you that you need to follow up with somebody but this will do it on your behalf so that you don’t have to. Obviously there’s very distinct places where you would use it in your sales workflow but the idea is to help move somebody from one stage of your sales funnel to the next.
Rob [04:59]: Very nice. As for me, I’m on the Drip front. February was a good month. In fact, in [?] it was the best month we’ve had of growth and that followed up the launch of workflows in January. All the trials or some of the trials converted then and that seems to have kicked us up to a next stage of growth which is good. We also, coincidentally, didn’t have anything to do with that growth but we hired two people in the past couple of weeks. I’ve been trying to hire a Senior Rails Developer since November, December and it just happened that we happen to find him right towards the end of February. We also figured out we needed another person in customer success, hopefully, it’s the last hiring that we’ll be doing for a while because it is time-consuming and not necessarily – the goal of drip is not to have a lot of people. We’re not going for headcount, like funded startups are but it is nice to have finally because those were open loops. They were continually in my trailer board to find a person to help with this and find the next developer and stuff. Now that that it is closed out, it feels good to have that behind us and we can all move faster, able to handle the workload, get more features built and more people on-boarded. Things are going good.
Mike [06:03]: Earlier, we were talking briefly about MicroConf. James Carbary from Sweet Fish Media had me on the conference notes podcast that you can check out. We’ll link that up into the show notes. He was interviewing me about MicroConf and what the takeaways were from MicroConf 2015. We talked a little bit about that and if you’re interested, we’ll link that up in the show notes.
Rob [06:22]: Sounds good. What are we talking about today?
Mike [06:24]: Today what we’re going to be talking about is some of the different tools that you’ll need for running a bootstrap startup. We want to talk a little bit about what’s reasonable, what’s not and essentially how to allocate your money in your startup. The major focus here is mostly on tools, not necessarily things like the cost of doing business and getting insurance or office space or other physical things that you need to run your business or maybe computers of whatever. What we’re really trying to do is focus on the things that you’ll need to use on a monthly basis. That cuts out a lot of those different things I’ve just talked about but we’re also actively cutting out things like software tools because depending on your tech stack, that’s going to, pretty dramatically, between different startups. We decided to avoid that as a matter of choice.
Rob [07:11]: Software development tools. The actual stuff you need to build software like maybe source control on your editor and if you need Microsoft licenses to IDEs and stuff like that. But we will be talking a lot about software that you need subscription to SaaS apps and stuff like that.
Mike [07:25]: Exactly. We also divided these into two different phases, I’ll call them. The first one is a pre-revenue and the second one is post-revenue. In the pre-revenue, we’re going to be talking about some of the different tools that you’ll want to look at or some general guidelines that you can follow in deciding which tools you use for your business and then there’s also the post-revenue stage, where we talk a lot about the different categories or classifications of tools that you might be interested in using for your startup and what some of the different options are.
Rob [07:54]: Cool, let’s dive in.
Mike [07:55]: In the pre-revenue stage, the emphasis here is making sure that your business has enough money to get through to the point where you have a source of revenue for the business on ongoing basis. If you spend, let’s say $100,000, to try and get your startup off the ground but you only bring in $5,000, then clearly that business is not probably going to fly. The idea here is to spend as little money as possible yet still get your products out the door so that you can make more money, so that you can feed that back into the business. But if you’re spending far faster than you’re able to acquire money, chances are really good that that business is just never going to go anywhere. At that point you’re probably better off finding a different business to use, a different product to offer, a different service to offer. In this case, in general what we’re looking at is the idea that if you’re spending more than $50 a month for any individual tool or any individual service, then you might want to take a hard look at that and figure out is that really necessary for your business pre-revenue.
Rob [08:55]: A good example of this is a tool like a Mixpanel or a CaseMetrix that start around 150 bucks and obviously there’re free plans and stuff but if you were start paying for them. I haven’t installed either one of those when I bring out a pre-revenue product. Once you get 1,000 or 2,000 in revenue, it becomes easier to justify spending that kind of money. There’re great insights you can get out of that software. But if you install that for months and months and you don’t have enough revenue to pay for it, that one always feels like an iffy proposition. All these comes back to how much money do you have to start the business because let’s say you raise an inch round. This probably doesn’t apply to you as we said in the title. We called this ‘Tools You Need for Your Bootstrap Startup’. These guidelines may apply less to that. If you’re self-funded and you do have 20, 30 grand in the bank that you’re using to get this thing going, that could also be an exception to this.
You may want to use faster. If you recall when we were building and launching Drip, I had other apps that were able to bankroll it. We wanted to move faster. We did spend more money than maybe these guidelines suggest. If you truly are working a day job and launching something on the side in your nights and weekends, a good guideline is about a $50 topper for any individual tool or service that you’re going to use. Getting started on day one of your writing code, the only couple of things that I can think of that are absolutely critical, aside from your development tools, are some web hosting and payment processing. A lot of other stuff you can get by with [?] essentially with the free stuff like the Google Analytics and the Webmaster Tools and the basic things, especially as a one person shop, which will probably be at this time. There’re a lot of tools that have a free plan for a single solo founder or a single user. You’re going to want to take advantage of those in this early stage.
Mike [10:46]: Another example or a very specific example of one of those things is being able to collect e-mail addresses and signing-up for $200 e-mail marketing platform when you don’t have any revenue and you’re really not getting enough traffic to drive to that to be able to collect those e-mail addresses. You can get by with a free MailChimp Account, for example. That will, at least, get you started. You don’t need to spend a ton of money on these tools especially when the free plans will suffice while you’re trying to figure out whether that business is going to work at all. The second guideline for a pre-revenue company is to not spend more than $200 a month across all of the different tools that you’re using. The idea behind this is that if you are really launching something on the side and let’s say you’re a fulltime employee at some place else, you’re just doing this on the side, it can be difficult to go through all of those tools and pay attention to all of them or give them the attention and care that they need in order to make them work for your business.
Chances are you’ve got a lot of other things going on, you’ve got all the development going on, you’re still trying to figure out what that market looks like. If you really have that many tools that you’re looking at, chances are good that you’re probably not focusing on the right things. You really need to be talking to the customers and spending a lot more time in those areas and building what it is that they want as opposed to trying to use all these different tools to optimize something when, quite frankly, you don’t have the traffic or the level of interest or attention from people that you really need in order to get to make that optimization work.
Rob [12:16]: I think that’s a good point, that tools can and will be a distraction if you want to chase down the next shiny object. It’s like stop breathing product on and parker news and looking at all the shiny new marketing SaaS or development SaaS that’s coming out. Focus on you building what you have instead and just use the basics like we’ve already said. Hosting, payment processing, maybe a landing page provider. That’s probably about it. I’m thinking back to Drip. We had revenue from other products that were being able to back it. But we had hosting; I had WP Engine Account for the blog and the knowledge base, payment processing and maybe one or two other things but it was very minimal. We’re talking on a recurring basis. What we’re not talking about here, let’s dive into the exceptions. It’s still with pre-revenue. We have three exceptions. One of them is paid ads. That’s not what we’re talking about at all here. We’re talking about tools on a recurring basis.
Paid advertising to gather information or you get in front of people is an exception to this because I believe that spending money to learn things is so valuable at this pre-revenue stage. Ideally, you’ll be able to run a reasonable test for about $100 to $200 per test. Long term, as it gets bigger, some tests may require several thousand dollars before you try to scale it up. That’s not what you’re trying to do at this point. You’re trying to find cheap clicks, split test value propositions and learn more and build a small list and that kind of stuff. For a few hundred bucks, you should be able to do that. This will let you figure out what you’re doing right and what you’re doing wrong so you can leverage that information as you’re building the product.
Mike [13:51]: The second exception here is also the legal or accounting fees to get set up as a business. Quite frankly, you can get by without setting up a full blown corporation or doing any of that stuff before you even have a product that’s out the door. You can do a lot of things and depending on who you’re working with, whether your CPA, you may be able to write off a lot of those development costs once you have gone down the path of getting an official corporation or officially filing a DBA or something along those lines. A lot of things, you can just backdate those. Again, you have to talk to your CPA about how that would work for your business. But the reality is a lot of those costs are minimal anyway, especially in the long term of your business. Over the course of your business, you’re probably going to be spending hundreds of thousands of dollars and not being able to write off $1,000 or 2,000 from the very beginning is probably not going to break the bank for you.
Rob [14:45]: We’re not lawyers or CPAs obviously but I will tell you that every business that I’ve started and every product that I launched, I have pushed off the legal and the accounting stuff as long as I possibly could. In terms of accounting, I may have done the book-keeping using tools like Xero that we’ll talk about later or Less Accounting. But the legal stuff of actually getting that as corp set up or whatever it is, the LOC, it all depends on your risk tolerance. Boy, I’ve always tried to push that off as long as possible because if you don’t have revenue and you’re spending money and time setting all that stuff up, you’re detracting from your ability to grow. The third exception, in this preliminary stage, is contract labor. If you’re hiring work, you’re hiring folks, let’s say on UpWork or even just contractors through your network, it is harder to do this one on the cheap. You can find cheaper people but you’re going have to spend more time managing them and correcting their work in general.
Realistically though, there has to be a limit on these contractor cost. If you’re seeking 20 grand in the product development for something that doesn’t have any customers or pre-launch lists, you’re probably going down the wrong path. But if you have interest, you have that launch list and you’re in communication with people, that gives you the confidence to spend more and more money. When people come and ask, we’ll often get the question of like how much does it cost to build a mobile app or how much should I pay to build my SaaS MVP or that kind of stuff. The loose range that I typically throw out is 5 to 10K and obviously it depends on what you’re building and how much software development and management experience because that dictates the level and the seniority of the developer you’re going to be able to hire, which is going to impact the cost of it and all that.
But if you have a lot of marketing skills and you have a list and you know what you’re doing then of course, dropping a lot more money than 20K might make sense. But if this is your first time and you’re doing on nights and weekends, you really need to keep a tight constraint on these things and especially in the early days. I was in the single digit thousands. That was my comfort level of how much I would drop before I would get someone in and at least paying me something for the product.
Mike [16:50]: I guess what those things said about the pre-revenue stage. Let’s move on to post-revenue. One of the differentiations here that I feel like we really need to make is the fact that when you’re talking about a pre-revenue business, there’s a very finite time window during which that pre-revenue period is sitting. It’s easy to look at a lot of different examples of those types of businesses because it’s all in this very tightly defined range. When you’re talking about post-revenue, that could mean anything from one dollar a month to a million dollars a month. Most of the time when we’re talking about our listeners or the audience that we’re referring to is generally businesses that operate up into the five, six or seven figures a year. With that kind of stuff in mind, it’s also very difficult to generalize and say, “Well, you should only be paying $25 or $30 a month on this particular thing because depending on whether you’re closer to $1,000 a month or $100,000 a month, you may be paying significantly more based on the requirements for your business. Most of the guidelines in prices that we’re going to throw out are entry level but you could also extrapolate those a little bit because some of them are based on per-user pricing and you may have one user or you may have 15 or 20. Those prices can fluctuate a little bit but will at least give some guidelines around starting points.
Rob [18:09]: Let’s kick it off with probably the most important tool for a startup that’s obviously going to be doing stuff online, it’s your hosting. This cost is going to depend a lot on your app, your infrastructure requirements but I like to ballpark between 50 and 200 bucks a month. This is post-revenue so this is when you’re not on shared web hosting anymore. At this point, you’ve beefed up and you have some type of virtual machine, whether it’s on Rackspace, on Amazon EC2 or you’re on a Heroku instance, that’s when I feel your post-revenue, you feel more comfortable outsourcing some of the management of this and paying a little more to get a couple of servers, at least, to have high availability and good performance. I think that a decent ballpark, when you’re ramping up is between 50 and 20 bucks a month.
Mike [18:57]: I think that $50 to $200 a month could also be per server as well. If you have 10 servers, you might be paying $2,000 or $3000 for the servers that you have. It comes down to what your app is. Something else that falls under this bucket is whether or not you’re running your sales website at the same place as your app is. Those are two probably different things. You might run your sales website on WordPress and have it hosted at WP Engine. One site of a WP Engine is going to run you $30 a month but you can also upgrade your plan to the next level, which is $100 a month. These are round about numbers but they do give you an idea of what the starting points look like and what’s reasonable.
Rob [19:40]: In pre-revenue you can be – a lot of stuff have launches on shared hosting for 20, 30 bucks a month. As you get towards launch or maybe after you get 5 or 10 people paying you for it, then you move to this better hosting basically where you have your own servers. If you’re a hardcore developer and you have a little bit more money in the bank, you probably going to start with this level of the 50 to 200 bucks. It’s a bummer when you’re sitting there coding for four, five months and you want to have a landing page up and you’re paying 50 or 100 bucks a month just to do that. That’s never made much sense to me.
Mike [20:12]: The next category is payroll. If you have gotten to the point where you are post-revenue and let’s just assume you’ve even gotten past the post-revenue part, you start to go fulltime; one of the things that you need to look at is payroll. I’ve looked at payroll providers over the years and tried out a couple of different ones. The one that I settled on recently was Gusto. They used to be called Zen Payroll but they changed their name about five or six months ago. I have no idea what the rationale behind that change was but they did change it. Something like this should probably run you around $40 to $50 a month. Some of the larger, I would say more entrenched players, that if you’re not eligible for Gusto based on where you live, you might have to go with someone like [?] or Paychex. Those are U.S. based companies. I don’t know what the options are in other countries but either one of those is probably going to run you anywhere from $50 to $75 a month. What I have noticed about those types of companies is that they have a tendency to quote you a price and then they will tack on additional fees for doing things like, “Oh, we’re going to over-night your paperwork so that it’s there on pay day.” It’s like, “Well, everything’s direct deposit. I don’t need you to over-night it,” but they’ll do it anyway and it’s an extra $10 or $20 per pay period and that’s how they do that. It can get pricy, which is why is why I gravitated much more towards Gusto because it’s just a flat rate. Everything’s taken care of on line. They also take care of 1099s for you so you don’t have to worry about that as well, especially if you’re going through contractors that are outside of a platform like UpWork.
Rob [21:47]: Don’t do your payroll yourself. That’s insane. I’ve known some small businesses that do that and there’s no reason to do that anymore. I used Paychex for several years. Eventually, their payroll started having a lot of errors. They did a really good job early on and it was great. I think I was paying about 100 bucks a month and it was totally worth it and then more and more errors as we scaled up and it was all via phone. It was like you could have some reports online but it was junky. You couldn’t update anything online so I would have to be on the phone all the time and it doesn’t work into my workflow. The fact that Gusto, formerly Zen Payroll, is fully online and is as good as they are. They’re cheap. It’s like 24 bucks a month and then 5 bucks per employee and it’s unlimited payrolls or something. If you’re one of two people, it’s in the 20s or 30s. This is a no brainer.
Mike [22:30]: They recently updated their pricing too. They went up a little bit.
Rob [22:34]: Oh, did they?
Mike [22:34]: Yeah.
Rob [22:34]: Did they grandfather us?
Mike [22:35]: I don’t know. I’m grandfather, I think.
Rob [22:39]: The next category is video hosting. Obviously you’re going to have some demo videos. You’re going to have some marketing videos. You’re just going to have a need for videos as you scale up even a little bit. YouTube is free but you have so little control and the player is not very nice. It’s not very attractive I should say. At the end of your video, they pop up 20 related videos that are from other people. It takes you out of what you’re doing. It’s not very professional. To me, again it’s post-revenue. As soon as you have some revenue, you’re going to want to go with someone like Wistia, which is about 240 bucks a year or Vimeo, which is 200 bucks a year or SproutVideo, which is in that range. They might have a $10 or $15 a month plan because you’re going to get so much more control. You’re going to get better metrics. A lot of them have e-mail capture built in, where you can gait a marketing video at a certain point or a valuable video that you want people to watch.
You can feature-gait it to where in essence they have to enter an e-mail to get past that. That can go directly into a provider like a Drip or MailChimp or something. This is when I hadn’t really thought of earlier on because it slipped under the radar. But as soon as we had video that needed to appear on our website, which is SSL, we could only use a few providers. Since I didn’t want to use YouTube, it became expensive pretty quick. I remember we started off with a $20 plan and then by the time we had a few videos it was up to 50. I pay either 100 or it might be a little more than that like 120 a month to Wistia because of the volume of bandwidth and the features. We needed some specific features that are feature-gaited up to that point. It’s not outrageous for sure but when you can start at 20 bucks a month, it’s a pretty good way to go.
Mike [24:18]: I will point out that I think both Wistia and Vimeo have free plans that you can get on if you want to get started with those services on day one. If you are pre-revenue, you can use those services obviously if there is feature-gaiting. If you get to a point where you’re scaling and you’re using a lot of bandwidth or there’s other features that you want to be able to use, you may have to start paying for it. But again, the pricing isn’t completely outrageous either. The next category is e-mail marketing tools. By e-mail marketing, really what I mean is capturing e-mail addresses from people and being able to send out bulk e-mails. A lot of different tools fall under this bucket; MailChimp, AWeber, Constant Contact, those types of tools. The idea here is that you want something that is going to allow you to send out mass e-mails to your mailing list.
Rob [25:06]: This is actually one of the others that if you’re pre-revenue, this was the other thing that we had. I talked about hosting and payment providers. E-mail marketing would be the other one. In the very early days, if you’d collect e-mails and send a broadcast once in a while, MailChimp is not a bad tool for that. It’s only once you segment the list and try to do anything of any complexity that you might run into problems and need to outgrow it. That’s when you move into these e-mail marketing automation tools, which are going to run you 50 bucks a month and up. That’s like a Drip, [?] and Infusionsoft and when you’re post-revenue, this is a necessity. It’s rare that you’re going to grow and scale on a basic e-mail marketing tool that doesn’t have the automation stuff baked into it.
Mike [25:47]: The next category is cash management software services. In virtually every case if you’re looking for any sort of book-keeping software, I would go Xero. They have an online subscription. You go out there and it’s very easy to use. It generally follows accepted best practices for accounting. If you know anything about accounting, you can do anything that you would probably need to do inside of Xero. There’s also other options out there. QuickBooks Online is probably the big player in this particular space. They do have QuickBooks Desktop Edition. There’s also other tools out there like Less Accounting and Outright. There’s other ancillary tools that I would probably put underneath this category such as Baremetrics or FirstOfficer.io, that allow you to analyze the incoming payments. I might also throw PayPal underneath this and I would also put something like FreshBooks or Expensify for doing invoices and receipt tracking. Generally speaking, most of those tools should not cost you very much, $20, 30, 40 a month at the most for each individual one. Being able to know how much money is coming in and how much is going out is going to save you a ton of time at the end of the year especially if you’re post-revenue and you have to start tracking how much did I spend? How much did I make? How much can I write off? All the reports and stuff that you need out of that. If you don’t have it tracked, it can be very difficult. If you have a very simple business, you can do it in Excel. But once you start getting complicated with anything, you get lots of transactions. It’s hard to track all that stuff outside of excel.
Rob [27:16]: We live in the golden age of starting a business. The fact that you can get all the power of the tools you just mentioned and you don’t need to install a server because it’s all SaaS and you can pay, like you said, 10, 20, 30 bucks a month for these, is just amazing. 10 to 15 years ago it was so much of a hustle, you install desktop software and then you had to back the files and the desktop software wasn’t very good. When you change computers, you had to try to remember to get the files. It was so much of a hustle. This is a much better approach. The next category, we have it as two items but I’ll lump it into one. The first is Website Traffic Analytics and the next one after that is Advanced Analytics. For just basic analytics, Google Analytics is great, Google Webmaster Tools, Clicky, which is at getclicky.com is 10 bucks a month. Those show you your unique visitors and aggregate data.
These are a no brainer for getting started and you should have them if, for nothing else, to have the historical data, you should have these installed. The advance side is going to be a tool more like a Mixpanel or CaseMetrix and that can often give you a per visitor insight. You can identify people and know what individuals did. You can analyze funnels with more advanced precision and all that stuff. They have free plans but they get expensive quick. It goes from free to 150 a month. For business generating even a few thousand bucks, it’s probably worth it because the insights you can pull out of that on how to optimize your funnel are a big deal. It’s scaling up if you’re doing 20, 30, 40 grand a month. You should be using one of these tools
Mike [28:42]: The next category is dashboarding software, which if you are running a business and you have a lot of different tools, sometimes you have to go to multiple tools in order to find a lot of different KPIs or Key Performance Indicators that you’re looking for. Sometimes it’s more helpful to have a dashboard of some kind. There’s different options out there like DigMyData or Cyph. There seemed to be more and more of these types of tool popping up all the time. What I find is that I like the idea of having a dashboard and being able to look at that data at a glance. But what I find is that if I see some piece of data that I want to drill into, I then have to go over to the tool anyway. Having a dashboard itself probably doesn’t do a lot for me except for give me the ability to publicize some of that data to other people on the team. If you’re just using it for yourself, if you’re a one person company, my guess is dashboards are probably not going to help you very much. They look nice and they sound great in theory but as a business owner, you’re probably going to be digging into that data anyway.
Rob [29:39]: Landing pages is another category here. That will cost you, let’s say, between 20 and 50 bucks a month. There’s KickoffLabs, LeadPages, Unbounce, Instapage. There’s a lot of players in this space. ClickFunnels is another one. It’s funny because I never used landing pages when I was hacking away solo on everything because I would just copy to HTML and I’d modify it and I’d do all that. But now that we’re working on a team and we’re moving fats and there’s a bunch of people doing stuff and we have a marketer who, just fulltime, is running experiments, it helps to have something where you can just crank out a landing page in 10 minutes and not have to worry about deploying and having it in source control and is it on the main website or is it WordPress and do I have a plug in. it is simpler to have one of these providers. You’re mileage may vary and each company may do it differently but I have definitely been sold on the value of using one of these landing page providers, if for nothing else, for some of the templates are nice. The speed of implementation, the speed of iteration has accelerated by using one of these platforms.
Mike [30:38]: The next two categories, I’m lumping these together but they’re both sales tools. Essentially you have your basic entry level CRMs. These will run you $10 to $20. Sometimes that’s per user, sometimes it’s just a flat rate. This is for a basic CRM or a basic sales tool of some kind. In this category I would put things like Pipedrive, Highrise or Zoho and many of the basic sales or CRM tools like that. The next level up, once you start to get a lot of information in there and you start to do more advance things or you want to do any sort of automation, it’s almost very similar to e-mail marketing, where you’ve got basic e-mail marketing and you’ve got the advanced stuff. In the advanced category for sales tools, you’re probably looking at $50 and up per user. I would say that Bluetick falls into this category. You’ll also find tools like Salesforce or Closed.io. The basics of most of these tools is that it helps to automate or improve your sales process and because of the increased efficiencies that those types of tools provide you, they do cost quite a bit more.
Rob [31:39]: Our next category is demo software meaning software that helps you give demos to your potential customers. Some free options are things like Skype, Google Hangouts, join.me, all of which we tried at Drip and they all had one hang up or another. They’re other unprofessional or a lot of people aren’t on Skype or you have to get approval from their username in order to contact them. It just feels like you’re running a junky service. We have since moved on from those. GoToMeeting and WebExpo have free plans. I haven’t used either of them but I know they’re popular. We’ve settled on Zoom which is 15 bucks a month per user. It’s working out quite well. There’s a lot of tools available for this. You just want to find something that is A, professional and B gives you a lot of control and allows you to demo whatever you need and frankly you may also want the user, depending on whether if you’re also using this sometimes for on-boarding or some high end support, you may want the user to be able to share in their screen and that’s a nice benefit of a tool like Zoom and GoToMeeting. These should be in there. They’re anywhere from free up to about 15 to 20 bucks per user, depending in the features you want. You can find something that’s like $50 per user per month. You should be able to get by with 15 to 20 range.
Mike [32:51]: Now that we’ve talked a lot of those different categories, we want to talk about two different exceptions that we came up with for this. The first one is that in general spending money to learn something is worth the investment. You’re looking at a specific channel and you’re spending money there to try and figure out whether you can use that channel to acquire customers or you’re trying to learn things about your audience. It’s very difficult to give guidelines about what specifically you should be spending on these things because if you are making $1,000 a month, clearly you don’t want to be spending $1,000 a month on your advertising or $10,000 a month on your advertising to learn something. But if you’re bringing in $100,000 a month, spending $10,000 to try and figure out whether or not a particular channel is going work for you to acquire customer, that could be justified. It’s difficult to provide specifics in this particular area because of that but we do want to point it out as something of an exception to this. It’s hard to give guidance about exact numbers for that.
Rob [33:48]: It’s also hard to give guidance. Your pre-revenue is a pretty finite space and there’s not a lot of room there. You can be specific about it. Post-revenue is anywhere from a dollar a month up to hundreds of millions a month. It’s hard to give all of these ballparks. Generally, we’re talking about businesses that are doing up to in the seven figures a year. Once you’re in the eight figures, a lot of stuff changes. With that in mind, the other exception to all of this is headcount. Salary for one employee is going to eclipse everything in this list combined. But we just wanted to talk about tools today and the software tools that you would need to get started up.
Mike [34:27]: We’re running a little short on time here but we do want to live you guys with two tips in general about looking at the different services that you’re using in your business. The first one is that you should buy tools that do the job that you need done not tools that you have seen other successful people or businesses using. A lot of time just using that particular tool that somebody else is using isn’t going to make you as successful as they are. It’s more about how you use the tool and what jobs you’re accomplishing with them as opposed to the tools that you’re using.
Rob [34:54]: The other tip I’ll throw out is to buy what you need now not what you’re going to need in the future because otherwise you’re going to be paying for something that you can probably upgrade to at the point when you need it. There’re some minor exceptions. If you think about a Mixpanel or CaseMetrix, the more historical data you have the better. Unless you do have a lot of budget that dropping 100, 150 bucks a month from the very start is a dubious proposition if you’re trying to bootstrap a startup. In general, the best advice is to buy what you need now and not something that you think you’re going to need in the next six months. That wraps us up for today. If you have a question for us, call our voicemail number at 8-8-8-8-0-1-9-6-9-0 or e-mail us at email@example.com. Our theme music is an excerpt from ‘We’re Out of Control’ by MoOt, used under creative comments. Subscribe to us on 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.