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NEW POD! This week we caught up with @Everette and chatted about: 👀 Everette’s path to entrepreneurship, including dropping out of school 🙌 The importance of being authentic in everything you do 😌 Some of his favorite self-care apps Listen hereee: https://t.co/lz1gGgpncj

New Product Hunt Radio today: https://t.co/g45a2Gxauj @Everette on how to build a brand and the importance of authenticity (which happens to be one of our 5 stated values at Product Hunt) https://t.co/zTbTxZLcJX

12 months ago

Being an entrepreneur is hard. Being a serial entrepreneur juggling multiple companies and projects is even harder. Luckily, there's @AdobeDocCloud. Read my blog post about how they empower serial entrepreneurs: https://t.co/VR4aHKGP67 #AdobePartner https://t.co/Yf8I1tn1gZ

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SketchNotes of My Talk: "How to Make More Money from Your Business" | Rob Walling - Serial Entrepreneur

In October I spoke at Dan & Ian’s DCBKK event in Bangkok, Thailand about how to make more money from your business.

Through the mad illustration skills of one Maggie Appleton , here are SketchNotes summarizing my entire talk in a single image (click the image for a hi-res version).

These are sketchnotes from serial entrepreneur Rob Walling's talk from the 2014 DCBKK event in Bangkok, Thailand.

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about 1 year ago
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Lessons Learned "Selling" My Bootstrapped Software Product | Rob Walling - Serial Entrepreneur

I purchased a small software product about 16 months ago and after putting in hundreds of hours cleaning up the code and growing revenue, I offered it for sale to free up time for this blog and pursue another potential opportunity (that has since gone by the wayside, as these things are apt to do).

Within a week of my “for sale” post I received 20 email inquiries, sent out nearly that many NDAs, distributed 13 sales packets (including a detailed description of the product with all the relevant data, and a Google Analytics PDF) to those who returned signed NDAs, and spent about 10 hours answering questions via email.

I set a deadline for offers to keep the process from dragging on, and by the time the deadline passed I had three suitable offers on my desk. Two of them were nearly identical, with a down payment and monthly payments.

The third was something I hadn’t expected.

Good Developers In my 9 years as a professional developer I’ve worked with at least a hundred developers, but I can count on one hand the people I would recruit if I were starting a company – these are the best software developers I’ve worked with. Most are not great because of their pyrotechnic coding skills; they’re great because of their non-technical chops (future-oriented, ultra-reliable, attention to detail, and smart).

When I put DotNetInvoice on the auction block I was contacted by a developer named Jeremy whom I worked with from 2000-2003 (and on a few small projects since then). We worked closely on a number of projects, pulled a few all-nighters, and wrote more software than many of the four (or more) person teams I’ve worked with since. Jeremy is one of the aforementioned developers that I would count on my one hand.

So Jeremy called to make an offer for DotNetInvoice, but he had some concerns. He was fine with the coding aspects of the project, but questioned whether he had the time to get up to speed on everything it takes to run a small software product given that he hasn’t done much in the way of shrink-wrapped software, SEO, and marketing. After a few conversations he brought up the idea of buying in as a partner.

Partnerships I’m wary of partnerships for a few reasons. I’ve worked solo for years and I like the control, the ability to make decisions when and how I want, and the fact that I answer to no one except my clients/customers. Partnerships inevitably bring a loss of control and create many unknowns due to the fact that you’re working with another person, typically someone you don’t know as well as you should when you start the partnership (“You’ve been to jail for what?!”).

Having worked with Jeremy for thousands of hours I have a good read on his strengths and weaknesses, which means many of the scary unknowns of forming a partnership are a little less scary and a little less unknown. And I have to admit that the prospect of being able to share the ongoing support and development burden was enticing. To top it off, although the the other two cash offers were over my minimum asking price, they were not what I was hoping for.

So I mulled it over for a few days, talked to a few friends and colleagues, and decided that the partnership offered the best terms: I get a small bit of up front cash, retain partial ownership, and get to focus on the pieces of the business I enjoy (and where I do the most good).

We still have the complications that come with a partnership (potential conflicts, loss of control, things falling through the cracks), but the thought of keeping the product I’ve worked so hard to build and having more time for other endeavors is very, very appealing. And the fact that I’m going out of town next week and I don’t have to spend a moment thinking about answering support emails is priceless.

Although not what I anticipated, my gut tells me the product will be far better with two experienced people working on it.

Next Steps We recently finished hashing out the contract, and expect to release the much needed next version, with much sweat from Jeremy, in the next few weeks.

Do I wish it had sold for a high valuation? I think so. But even though I was committed to selling, I had a nagging doubt about whether it was the right decision. If you’ve ever built something and tried to sell it you’ll know the mechanics of the sale aren’t the hard part – it’s the psychological piece. I think I lucked out this time around.

A few lessons I took away from the sale process (keeping in mind I’ve bought or sold several websites and one software product in the past):

  • Set Your Price Range – You’ll want to stay between 12 and 30 months of revenue. This is the standard range for websites and software products and in my experience is in line with what the market will bear. The range varies based on the amount of time your product takes to maintain, your expenses, and the number of potential buyers given your price range and technology.
  • Rule of Thumb on NDA s – If you expect the product to sell for more than $10k, protect the future buyer by requiring an NDA before disclosing financial information.
  • Prepare Your Sales Kit – Include a detailed summary of the product:
    • Product Overview
    • Customers
    • Technical details
    • Positive reviews and high-profile links
    • Revenue
    • Expenses
    • Partnerships
    • Personnel
    • Competition
    • Website traffic (although include a detailed traffic report in a separate document)
    • Assets included in the sale
    • Price range
    • Future plans (surely you will have a list a mile long)
  • Don’t Accept PayPal or Credit Cards – Chargebacks are too easy and the fees are high (3% of $10,000 is $300). Use escrow.com or good old fashioned checks.
  • Transferring Assets – You may want to use a service like escrow.com; they facilitate the exchange of your product once funds are deposited in an escrow account. Another option is to use a sales contracts that specifies the following: half of the purchase price to be paid up-front (via check), the assets are transferred, then the second half is paid.
  • Hold on to Your Domain Until the Last Dollar is Paid – I received two offers that involved ongoing monthly payments for a fixed duration (1 year). In this case, after a contract was signed and I had received the down payment I would have sent the assets to the new owner and pointed the domain to his server, but maintained control of the domain until the last dollar was in my hand. Maintain control of your domain name: it’s your most valuable piece of IP.

Thanks to everyone who expressed interest in the sale. I’ll keep you posted on how things progress.

I discuss how the sale of my software product DotNetInvoice went, and look a bit at the future direction.

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about 1 year ago
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The Illusion of Success | eCommerceFuel

Double Your eCommerce Business in the Next Year

...by requesting the most effective growth and profitability strategies we've unearthed from 5+ years of studying successful stores.

Double Your eCommerce Business in the Next Year

...by requesting the most effective growth and profitability strategies we've unearthed from 5+ years of studying successful stores.

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Skye Chilton is the owner of RealMushrooms.com, a family-owned and operated company that supplies top-quality herbal and medicinal mushroom...

Garret and Deeanne Akerson are the co-founders of Kindred Bravely, which creates maternity and nursing clothes that are beautiful...

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Today we are joined by Sujay Kapadia, Founder of Hospitology.com. Sujay left his job as a doctor to pursue a career in the eCommerce world...

Learn what happens behind the scenes of a successful business with Rob Walling, co-founder of TinySeed and founder of Drip.

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about 1 year ago

1/ After 15 years of writing, speaking, mentoring, and advising, this has never gotten old. I received an email this morning: "I'm a long-time listener of your podcast. It was influential in helping me build my SaaS business from scratch. Last Thursday, I sold the business...

about 1 year ago
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‎Mixing Business with Pleasure: Ep. 5 - Rob & Sherry Walling - Hope in a F***-ed Up World

    • Entrepreneurship

The extremely-accomplished (and hilarious) Rob & Sherry Walling are married co-owners, serial entrepreneurs, authors, podcasters, and parents to three kids (and one puppy!). Today, they’re sharing with us how they wear so many hats and still manage to find hope, happiness, and Zen in this crazy world we’re all living in.

‎The extremely-accomplished (and hilarious) Rob & Sherry Walling are married co-owners, serial entrepreneurs, authors, podcasters, and parents to three kids (and one puppy!). Today, they’re sharing with us how they wear so many hats and still manage to find hope, happiness, and Zen in this crazy worl…

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Video

Are You Learning Fast Enough? with Anders Thue Pedersen

1/ To create any value in the world, you have to stumble upon an undiscovered truth about what's possible and then make it happen.

about 1 year ago

3/ Why is the failure rate so high for truth explorers? Because obvious truths have been discovered and acted upon. To create value, you need to venture far beyond the obvious and discover what nobody else has discovered so far.

about 1 year ago

4/ How do you venture far and discover hidden truths? YOU MAKE A LOT OF ATTEMPTS. This is what young entrepreneurs do. The sheer number of explorers venturing in random directions guarantees that a subset of them will stumble upon undiscovered truths.

about 1 year ago
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Episode 86 | SaaS Pricing, Accountability Partners and a Micropreneur Success Story

Episode 86 | SaaS Pricing, Accountability Partners and a Micropreneur Success Story

00:00

Show Notes

Transcript

[00:00] Mike : This is Startups For The Rest of Us: Episode 86.

[00:02] [Music]

[00:11] Mike : Welcome to Startups For The Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.

[00:19] Rob : And I’m Rob.

[00:20] Mike : And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So what’s going on this week, Rob?

[00:25] Rob : Well I was down in Los Angeles hanging out with some friends and I managed to hook up with Jason Roberts who lives in Pasadena. Jason Roberts is a co-host TechZing. My wife and our two kids went over to his house and his wife, Sandy, cooked us some burgers and we just had a really good time. It was cool to meet his family, you know, you heard about them on the podcast. Yeah, they’re just like — just like he describes. They are all blonde. They look Swedish. But we had a really good time. So thanks. Thanks to Jason and Sandy for hosting us and we got to just — it’s so good, you know, to sit down and just talked tech and we talked startups and we talked podcast. We talked behind the scene stuff. He’s going to do a lot of meaty stuff sitting around a pool, drinking glass of wine and watching the kids.

[01:04] Mike : Did his wife get in on that discussion?

[01:06] Rob : She and my wife actually did and they started talking about how they neither of them listen to our podcasts and then Sandy joked and said, “You know, we should record a podcast about what it’s like to be married to a startup founder.” And we’re actually looking at putting something together like that and I think it’d be really interesting for Jason to interview the two wives or perhaps my wife to interview them as a couple to find out the dynamic. So anyways, we’re talking about doing something like that just about kind of how to have a family and keep sane and trying to launch your startup and there’s — there’s a lot that could be learn from hearing other people’s experiences.

[01:41] Mike : I think I remember Scott Hanselman. I think he had his wife on at one point and they were talking about either possibly writing a book or actually they were in the process of doing it and putting something together that was along the same line. But I definitely recall something from the Hanselminutes Podcast about that.

[001:59] Rob : Cool. Yeah,I know he’s had his wife on a couple of times but I didn’t know that they’re writing a book till today.

[02:04] Mike : Yeah, I could be misremembering that.

[02:06] Rob : How about you? What’s going on?

[02:07] Mike : Me, in Ohio right now, Columbus. I got a free room upgrade for Father’s Day. So I’m in a king size suite. Kind of spent some time with the kids by the pool and got a pool cover for the pool which I didn’t think it would make that much of a difference but it adds about ten degrees to the pool.

[02:24] Rob : I couldn’t say —

[02:26] Mike : It’s in the mid 80’s.

[02:26] Rob : Yup. At some point, it gets too hot. When it gets to be about one, it’ll get up in to the one like 109 or 110 in Fresno for a few days during the summer and the pool gets too hot to swim in like its feels like a hot tub. It’s not that it burns you but it is not refreshing at all.

[02:41] Mike : Ahh.

[02:41] Rob : Well hey, we have some new iTunes reviews just in the past few days, some of the good ones actually. One is from a Rich Hart. He says, “Great advice and cut AuditShark lose.” [Laughter] People are — people are starting to make comments in the iTunes reviews which I think is funny. He says, “Mike and Rob, I absolutely enjoy your weekly podcast. It’s always timely relevant and informative. Since I’ve started listening, I’ve created an internet business. Cut my teeth with using VA’s and find myself pushing everyday to make something happen.” Then he comments he says he thinks it’s time for you to let AuditShark in to the wild.

[03:12] And we also got a great comment from Zach and he says, “The art of enlightening others, I have to say I’ve learned more from these guys than I ever learned in business school. It just goes to show there’s no substitute for experience. Thanks, Rob and Mike” And then I like his comment. He talks about how we commented on needing a conference coordinator for MicroConf next year and he says, “I disagree. What you need is a franchise.” So [Laughter] we’re — become McDonald’s. He says, “You’ve already built the model, why not spread the love. Imagine hundreds of mini MicroConf’s across the country managed by local micropreneurs. The mini MicroConf’s remain small, personal and retaining the value of points express by past attendees.”

[03:35] Anyways, interesting suggestion. Don’t think we have any plans to do that right now. That would be more like franchising it in to almost a meetup group. So I mean Lean Startups certainly has experience a lot of success with that. I think there are several hundred Lean Startup Groups around the world.

[04:01] Mike : Yeah, I think so. You know, micropreneur meetup groups is really any difference is just there’s a huge difference between having a full-blown conference versus something local where people get together on probably a more regular basis.

[04:13] Rob : Right.

[04:14] Mike : But you and I talked about putting on something even smaller than MicroConf and just the level of effort, it’s just hard.

[04:21] Rob : Right. It’s hard to justify it, right? If you’d just do a regional conference, you can’t get the same level of speakers. You can’t get the same level of attendees. If you try to do it one day, people won’t come in from further away than, you know, a few hours drive and you just — you kind of lose a lot of what we considered to be the magic of MicroConf. With that said, there are several meetups. And I’d say I’ve probably been contacted by six or eight people who say they are basically doing like a micropreneur meetups. And there’s — there’s one in Australia that we’ve already mentioned. There are several kind of in the Midwest and a few on the east coast. So there are things springing up. Yeah, maybe long term we’d figure out a way to better help facilitate that.

[04:53] Mike : I’ve been to a couple on the east coast. Usually it’s more me kind of organizing it or saying, hey, I’m going to be in this area for the next week or two weeks or whatever and then people going to reach out and three or four or five people want to get together, then we just go out some place to have dinner or something like that.

[05:14] Rob : Right. And the meetups I’m talking about are more like accountability meetups and sometimes they get a speaker to come in or they’ll share knowledge that that one of them maybe discovered over the past few weeks. I’ve actually done some video Q&A with a couple of them as well where they’ll just Skype me in and then we’ll have like a 30-minute thing and they’ll talk about the projects and we’ll just chat about it. Any updates from you this week?

[05:34] Mike : Well, I had an interesting discussion with Patrick McKenzie this past week about AuditShark pricing. One of the things that he’s been doing lately is he set up this training area of his website and I just — I signed up for it because I like hearing the sorts of things that he talks about. The first one was a video that talks about how to make your first product experience awesome and then he followed it up with I think it’s called the Black Arts of a SaaS Pricing which was pretty interesting. And it’s kind of timely because I’m looking at pricing for AuditShark right now.

[06:02] So I e-mailed him and just say, “Hey, this is what I’m doing. What do you — what do you think of it?” And he had some interesting takes on it. His idea was actually to instead of doing like a per server pricing for AuditShark, essentially use different levels. So you know, maybe the first level and say — he was just throwing numbers out there but say $50 a month for up to five servers and then up to $500 a month for twenty five servers and then I think the next level was fifty servers for $500 and then five hundred servers for $5000, then above that, contact us for enterprise pricing.

[06:34] Rob : Are those the specific tiers he laid out?

[06:36] Mike : Yeah, those are the tiers that he laid out which I found interesting because of the numbers and I was like, well it seems to me like one server and $50 would probably be more appropriate than, you know, five and fifty but I was also looking at that thinking to myself, well, if you do one in $50, it doesn’t give you a lot of leeway to do some of the techniques that he kind of outline which was if you change your pricing tiers and then measure kind of the before and after conversion rates and you also calculate the profit margins from each of those, it allows you to change the numbers on the page without changing the actual prices.

[07:12] I found that interesting. I didn’t realize it until after the facts but obviously I said, “You know, you don’t need to reply to this. And this just got my internal thoughts.” But then I started beginning to think about that. I was like, oh that makes sense. You can just change those numbers without changing the pricing because obviously changing the pricing on your page is kind of a big deal but if you just change the features that you’re associating with each of those pricing levels, it’s not nearly as big of deal.

[07:35] Rob : Absolutely on with HitTail just within the last month as about a month ago based on some advice and discussion in one of my Masterminds some guy said, “You know, you should raise your pricing.” We kind of discuss how to do that and what I did was I kept my pricing the same and I lowered the number of visits that each tier gets. It is the same pricing just like you’re talking about. That’s resulted in zero changing conversion rate which is awesome because it means that I’m essentially making more money, right? Because I’ve essentially raised my pricing because these people are signing up, you know, they’re being upgraded in to higher tiers. I can totally see that. I hadn’t — I’d never thought about the advantage of having that when you’re split testing pricing but it’s definitely a good tip to have.

[08:12] So I’m intrigued, I’ve actually giving this quite a bit of thought because there’s been several apps that I’ve been — been kind of working with some entrepreneurs and they’re looking at having that strict per seat pricing that you and I have discussed, you know, you’ve always kind of have that number per month, per server or per seat for AuditShark and we batted that around. Even over the past week, I thought about like the advantage of tiers and that you can essentially segment customers. So it’s not just this linear escalation of pricing but it’s to add one more server, you know, they only had ten bucks a month but they actually have to jump up a tier in essence, right?

[08:48] And now, as soon as they go to eleven or they go to sixteen, they kind of go over your tier than they do have to make a substantial jump. And that’s how most apps work now, right? That’s how SaaS apps work. I mean if you look at, you know, Basecamp or Highrise or any of these, it’s not a gradual — it’s not a per user cost. It’s actually doubles. It’s – the rule of thumb that I’ve always use as you pick a price and then you double it and you give them more than twice the amount of stuff they get at the lower plan. And so his pricing though it sounds like he was doing 10x.

[09:15] Mike : Yeah.

[09:15] Rob : He had 5500 and 5000. That’s typically a broader range than I do. I mean I would think of 4999, you know, 199 but —

[09:23] Mike : It was five servers for $50, twenty servers plus some sweetener for five hundred or two hundred servers for 5000 and then two hundred plus was call.

[09:31] Rob : Got it —

[09:31] Mike : That’s what it was. It wasn’t 550 or 500, it was — the point I was kind of getting at was at the very low end, it was not one server, it was five and that was kind of the starting point. He said that the idea was that if you have ten servers, you’re likely a very, very different business from somebody who has only two, you know, regardless of whether they are high-value servers or low-value servers. You know, somebody with ten servers has — well, like what he likes to refer to as a metric ton of money. And he said that it doesn’t really makes sense to charge linearly from one to ten in his estimation.

[10:02] Rob : Then that totally makes sense. And that’s why there’s a couple of guys that like I said I’ve been talking to and I’ve recommended they do tiering as well. And I think I’ve always look back at the FogBugz model. I’m realizing that I’m not a fan of that model and I see lot of disadvantages to doing it that way.

[10:16] Mike : I think that with FogBugz once you get past a certain point, it actually becomes much, much less expensive. So for example, I’m looking at their pricing now, from 24 to 150 users, they have a tier which is 599 a month or 719 a month for both FogBugz and Kiln. And then the next level up is a 151 to a thousand users and that one is $1,199 per month for both FogBugz and Kiln. So you can —

[10:42] Rob : So that’s insanely cheap.

[10:44] Mike : Yeah, I know it is. That’s — I found that interesting that they —

[10:46] Rob : Yeah.

[10:47] Mike : … kind of go to that at the higher end, they’re not charging–

[10:49] Rob : I agree.

[10:50] Mike : … targeting exponentially more.

[10:52] Rob : Yeah, that’s tough. That’s a tough sale for me. They either know something about their numbers that we don’t or they’re leaving money on the table with that. I wouldn’t discount stuff that much at the high end because like Patrick says and this is been very obvious in every business I’ve ever had, the people who are at the higher end tend to have more money to spend. And in general, you can’t just charge them more per seat, right? You can’t charge the little guy in a less per user and then as you go up, you actually charge more. I mean you have to give — you do have to give some kind of discount but it’s a huge mistake in my opinion to have an enterprise plan where 80% discount or something, you know, if you have a thousand users. That’s the way everyone does it and your competition does it, that’s how you have to price it and that’s fine and that maybe the case here. But I’ve never had a business where as it gets to the high end, I give substantial discounts.

[11:36] Mike : Yeah, what I find really odd is that it’s $30 a month for both FogBugz and Kiln and then if you just kind of extrapolate that and say well for a hundred users that would be $3000 a month but on their pricing tier, that’s unlimited and in fact, their low ends tier goes from 24 to 150 people and that’s only $700 a month.

[11:56] Rob : So they give a really big price break as you go up.

[11:57] Mike : Yeah, when you started getting in to enterprises they expect like —

[12:03] Rob : Yeah.

[12:03] Mike : … a 50% discount, you know —

[12:05] Rob : Right —

[12:05] Mike : … that’s — that what they expect.

[12:06] Rob : And I bet FogBugz competition which is where it’s like Atlassian and a few others, I bet they do the same thing and I bet this is more of a competitive move. If you publish pricing on the web, you’re going to have to be competing with those folks whereas if you have a product that, you know, doesn’t have a direct competitive, then it’s a lot harder to do that.

[12:10] Mike : Yeah, I think that Atlassian specifically targets enterprise customers with their pricing.

[12:30] Rob : Yeah, they do.

[12:30] Mike : So there’s — there’s this considerably different but it also requires considerably more resources in order to run it.

[12:35] Rob : Right. Okay. So no final notice on your pricing but it sounds like you’re working on it.

[12:40 Mike : Yeah, I’m working on it and I’m definitely going to move towards a some sort of a tiered pricing model, you know, I’m having my designer rework my sales page, my pricing page a little bit so that it’s got four different levels there instead of three. And as somebody pointed out to me when they were kind of reviewing the pricing page was that I had green check marks and red X’s next to some of the different sets of features and they’re like that looks like a warning flag to me of “Oh, don’t choose this because of this.”

[13:08] Rob : Right.

[13:08] Mike : Which I found interesting so I’m going to — I had talked to the designer already and said, “Look, you know, you got to remove those red X’s and they have to be like grayed out X’s instead. So —

[13:18] Rob : Right. But once you get started with your pricing stuff, I would guess that first ten or twenty customers you have, you’re going to be negotiating pricing and then you’re going to trying to figure out what works for them and then you’re going to learn more as you go. I mean the bottom line is when you’re starting out, you’d just have no idea what people are willing to pay. You can ask them all you want and make a best guess at it but we’ve known several founders who, you know, go in to it in the first twenty or thirty customers all get different pricing based on how they’re — how they’re able to pay.

[13:46] Mike : Right. Yeah and honestly, we’ll probably do the same sort of thing when I launch AuditShark. I mean I’m going to go to the people and you know, I probably won’t specifically publish pricing out there. I mean I’m going to go to my list and start talking to people individually and start signing them on. They’ll probably all have different pricing and till they get in and start using the product and then I can get feedback from them to say, “Now, that you’ve seen it, is this worth what you’re paying?”

[14:10] Rob : That’s the thing. Yup, you have to figure out if you’re providing the value that because you can convince someone with marketing to charge them, you know, a little lot higher than you otherwise could but then when they get in there if your churn rates really high because they’re like, “Ahh, this isn’t worth it” then you need to adjust pretty quickly and it’s such a heavy learning experience the first several months you have an app out because it’s just so young and you’re trying to figure out which way to where to go that try the most value for them.

[14:32] Mike : Right. And I think you can definitely short change yourself in many ways on that on some of the pricing. I mean you can say, “Oh well yeah. I’m only going to charge you $10 a month” when you should really be charging them a hundred and they’re getting a hundred dollars worth the value out of it.

[14:44] Rob : Right. And but I think the thing is early on like when you only have ten or twenty customers, some people are going to get in and they’re going to get, you know, a lot more value. You’re going to under charge them, bottom line and you’d just have to do that and just grandfather them in and move on. I mean that’s just the way it goes, right? Because you’re not going — this app is not going to have ten or twenty customers. You’re hoping to have hundreds if not, thousands of them. And so if you’re really mucking around with pricing early on which you should be to figure out that the optimal, you’re going to make some mistakes both high and low as you go forward. And so I don’t think, you know, if someone is paying ten bucks a month that they really are getting hundred dollars worth of value, well, good for them. Thanks for being a charter customer. I mean that’s —

[15:18] Mike : Thanks for the feedback. I mean that’s —

[15:19] Rob : Absolutely.

[15:19] Mike : … what you’re doing. You’re basically paying for them in a way for their feedback. I mean sure they’re giving you money but you know, feedback.

[15:26] Rob : Right, right. And I don’t believe in large betas. I believe in very small betas and you can give discounts to beta people. I wouldn’t use that as a reason to kind of under charge everyone. You know I’m saying? I mean I might bring in a handful of people four or five and give them a discount but I think beyond that, you really got to start getting to where people are basically getting the value out of it that they’re paying.

[15:45] Mike : Right.

[15:46] [Music]

[15:49] Rob : So I got a e-mail this week from Tope. He’s a long-time Micropreneur Academy member and he’s a founder of App Design Vault. And this is a great e-mail. He says, “Just got an e-mail from AppSumo today and it made my day. HitTail was featured alongside my product App Design Vault.” And then he took a screen shot of it and attached it. “I’m a lifetime Academy member and a lot of what I learned went in to the marketing and the DNA of App Design Vault. I quit my job seven months ago and making — and I’m making a full-time living from the business. So definitely seeing your product and mine in the same context is a good thing to see. Thanks for all your help on the podcast and the Academy. Thanks. Tope.”

[16:25] So this is just — it’s another one of those success stories like this is a stuff a love hearing, right? This is [Laughter] why we’re doing the podcast. This is why we started the Academy. Frankly, App Design Vault kicks ass. I’ve always love this idea. It’s basically iPhone App design templates. And he’s got a great call to action on their home page. If you’re an iPhone app designer, it’s a no brainer. He says, “Give me your name and your e-mail. I’m going to send you an app design worth $70 to your inbox just for doing this.” And then, you know, he says, “Join over 2000 users who are making their apps rock.” And it’s just a big gallery of all kinds of different iPhone app design templates. This is just such a great market to be in right now, right? Because instead of actually building the app, they’re selling the tools for people to build apps and since it is such a growth market, everyone is talking about it. There’s just a lot of search going on and there’s a lot of people talking about it. So I love — I love the niche and he executed it well. So thanks — thanks for letting us know, Tope.

[17:15] Mike : Yeah, that’s really cool to hear. I mean I saw the AppSumo e-mail come in as well and I saw HitTail right next to App Design Vault and that was — it’s pretty cool to see. I mean it’s that point —

[17:24] Rob : It is.

[17:24] Mike : It’s nice to talk to people but then to see the social proof I’ll call it, it’s very cool app.

[17:29] Rob : Yeah. So you have that — the AppSumo deals are going to pretty well. They run their deals for longer now. It’s kind of a different set up. They used to just do one day and they would e-mail everybody but it’s like they have the list segmented now.

[17:39] Mike : Uh huh.

[17:39] Rob : So it’s kind of several weeks that I have to wait to really — I can see daily updates but it’s not like this big massive traffic like it used to be. Used to basically be on e-mail support all day for eight hours [Laughter] because you get so many questions because their list is like 6 — 700,000 people. So when they e-mail out to, you know, it’s — it’s a rush of traffic. But so far, it’s doing very well and sales are going well.

[18:02] Mike : Yeah, I hadn’t thought about how to manage a list like that but it does make a lot of sense that they would segment their list like that so that way they probably evens things out a bit. So it’s kind of space little things out and they level out the traffic a little bit.

[18:14] Rob : Right.

[18:14] Mike : It’s very cool. I somehow landed an accountability partner for AuditShark this morning.

[18:20] Rob : Sweet. How did you that?

[18:22] Mike : I didn’t actively try for it. Somebody contacted me through my blog and basically in a very nice way said that “I’m going to e-mail you assuming that it’s okay with you, I’m going to e-mail you every week until you get AuditShark launched and out the door.” So I thought that was really cool. And I had — we had an e-mail exchange back and forth a couple of times to kind of let him know where I was with AuditShark and what sort of things were going on. I sent him an e-mail link to the temporary sales website that I’ve been working on just so he could kind of see what it looked like and where the things are at. And he said he liked it. He had some good suggestions for it. So I’m going to take some of those in to account and you know, rework a couple of different things.

[19:02] One of the things that I got was that I keep hearing from people that they think that I’m waiting until everything is perfect with AuditShark before I launch it and you know, people are saying, “Oh, you got to launch it. You got to launch it.” And it’s not that I’m holding off until everything is perfect and that, you know, all my I’s are dotted and T’s or crossed. It’s just things are just not ready. I mean I can give it to somebody right now and it would work and would do what it needs to do, the problem is that the back end of it is kind of builds around this idea of a set up policies and a library of these control points that you select and you can push down to your machines and pull it back the results for.

[19:40] But the problem is I don’t have that library built and I don’t have a good way to get things in to that library. So that’s what the tool developers that I’ve hired are working on right now is they’re working on the tools that will build those control points and build the policies that will then go in to the library. So I’m hoping that they’ll be done with that within the next four or five weeks but the UI is complicated So you know, until that stuff is done though, I can’t really move forward with pushing the product out which sucks in a way but at the same time, you know, I’ve also got other things to work on while they’re doing that.

[20:11] Rob : Yeah, I think I mean to summarize, you built AuditShark yourself for a couple of years. You spent two years. You were – or maybe a little more than that and you were focusing on banks and you thought that banks were going to be your market. You had it in there and as it got towards at the end, you found out there were a couple of things. One, that your — kind of your customer development, your discussions with banks were misunderstood, right? They were talking about one thing. You interpreted it differently. When you finally got to it, it turns out you hadn’t actually built what they wanted. And B, the sales process was going to be so high touch that you decided you didn’t want to go down that road.

[20:45] Now we can go to on all types of discussion about whether, you know, what you could have done earlier to avoid that and all that stuff but that’s fine. Once you got there, you realized, I can’t do this. I’m not going to go forward with this and so you decided to pivot. And then you were saying, “Okay, I have this code base that does something and it can help some group of people. Where is that market?” And as MicroConf came around, you started asking folks there and it turns out you’re going to be probably pivoting towards servicing people who have web servers and app servers and you’re going to be scanning for like vulnerabilities and that kind of stuff. That takes retooling of your app, right? Bottom line like you needed then figure out what the new feature set is. You don’t have to rewrite the whole app but you absolutely have to either you or have someone else write some code to now get AuditShark to do what this new market needs.

[21:15] Mike : Yeah. And the thing is there’s not a lot of that piece that needs to be done. It’s just the fact that there’s this library in the back end that needs to be populated somehow. And the —

[21:39] Rob : Right.

[21:39] Mike : … only good way to do it is to manually do it at the database

[21:42] Rob : So there is work that has to be done whether it’s code or not and some work has to be done to make it fit this new problem you’re trying to solve. You’re now trying to reachieve problem solution fit, right? Or achieve it. Period. So now you’re trying to achieve it with this — this new market, this new group of people and that is going to take time. You do a lot of consulting. You consult, you know, most of your — of your full time hours during the week and you’re also doing a blog and a podcast and doing this other stuff. So it’s not as if this is your full-time gig. So the fact that it takes you a couple of months to pivot is not surprising to me but it does seem like a lot of comments are coming through that are saying why haven’t you launched yet.

[22:19] And while this has been a long, you know, a long process, a two or three-year journey of you figuring this app out. Some mistakes were made. At this point, I don’t think you can launch like you have to get this stuff done before you do it and of course, I would love for you to pull a bunch of all nighters and launch next week but that’s just — that’s not realistic. If you think Mike should talk to more customers or get in to more detail or do more customer development, that’s fine like I can deal with that as like a more valid opinion. I just don’t think it’s reasonable for you to say, “All right, you should just launch tomorrow because the app is actually not done. It doesn’t solve the problem that you’re trying to solve at this point.

[22:50] Mike : Yeah, that’s definitely accurate. There’s a couple of tools that need to be built in order for the product to really work in this market. And right now, it’s just not there.

[22:59] Rob : Our relationship is never really been about like keeping each other accountable with our apps like I don’t come to you and say, “Hey, I need feedback” or “I need you to keep me accountable on this” and you haven’t either and that’s why the accountability episodes where we really dove in to AuditShark, we’re kind of weird because we don’t necessarily have that relationship. We do have a business partnership with MicroConf, the Academy and the podcast but aside from that like I don’t particularly like unsolicited feedback, let me put it that way. So when people give me unsolicited feedback and they tell me how they think I should run my business or how they think I should develop my product, I don’t like it and I irritated with those people in general.

[23:31] And so I don’t feel like I should sit here and tell you unsolicited, “You should do this, that and this with AuditShark” because it implies that somehow one of us knows better than the other or something like that. Now if you came and said “Rob, you know, I really want your feedback” which you have. You’ve actually done that offline several times where after the podcast, you’ll show me your sales site and you say what do you think? But to sit here in a public form and for one of us to kind of dictate to the other, “Well Mike, I think you’re doing this wrong and you should do this, that and this” I just, yeah, I just don’t know how – how helpful that is and you and I don’t particularly have that. We just don’t have that relationship, right?

[24:02] Mike : Yeah. I mean you made some points. I mean I’ve gotten some unsolicited feedback from people saying, “Oh, you should do this and this and this.” And I’m looking at that feedback saying I understand where you’re coming from because I haven’t share all of the information with you but you’re so far off in left field but that’s just not even remotely close to accurate. And I don’t even know where to address how many problems there are with what you just said. So it is hard and you know, I try to share as much as I possibly can on a podcast but I obviously don’t share everything. I think this particular episode we’re doing a lot more just because we’re focusing more on, you know, what sort of things we’ve been working on but I don’t think that everybody wants to hear about AuditShark every episode or HitTail every episode. I mean that’s not —

[24:40] Rob : Right.

[24:40] Mike : … what this podcast is about.

[24:43] Rob : Right. The issues that we discuss here a lot deeper and a lot more complex than we probably play them out on this podcast. I got a good e-mail. I thought it was funny. It kind of relates to this topic of maybe someone outside your business thinking they know more, you know, they know what’s best for it. I got — I got an e-mail. A guy was canceling HitTail and he said, “Thanks for canceling my account. If you guys offered a plan of $4.95 a month that allowed the X visitors a month rather than, you know, whatever your currently offering, I’ll definitely be back. At this certain level that’s when I started to see proper visitors and feel free to passes feedback on to your people, I’m sure you’ll get a lot more business doing this as well.” And so basically he’s saying to lower your pricing. Funny thing is I get — probably get an e-mail like this maybe one or two a month from the several hundred people that signed up for trials. That’s right —

[25:27] Mike : Is it your lowest plan $10 a month?

[25:29] Rob : It is.

[25:30] Mike : So he’s saying that this extra $5 a month is just not worth it.

[25:34] Rob : That’s what he’s saying, yeah.

[25:36] Mike : Oh, okay.

[25:36] Rob : And it’s so hard to make money at $4.95 a month for anything but the implied message here is that the best price is less than– it’s always less than whatever you’re charging. The best price is always that, right? And whenever you get these e-mails and the second thing is always imply to charging less will always result in loads of customers. And neither of those is accurate as we’ve known.

[25:57] Mike : As single support e-mail would totally blow that $4.95 out of the water.

[26:01] Rob : I know. When you are living and breathing and inside something and you know all the numbers in the metrics, I know that I do not want customers at $4.95 like it’s just wouldn’t work. It would lower my lifetime value too much. So I will pass, you know, on customers who want to pay $4.95 and if they’re able to get value out of it at $9.95 and up — I mean I have customers paying a hundred dollars a month and are very happy with the app and I want to get a lot more of those.

[26:24] Mike : No, I totally understand and I completely agree. It’s so hard to explain to people that they’re wrong because they don’t have the data but you don’t necessarily want to share the data with everybody either.

[26:35] Rob : Yeah, I don’t — I didn’t want to say explain to them that they’re wrong. I don’t know if it’s about right or wrong. I think it’s more about how you, you approach the business, right? It’s like if you want to take your business up market and try to make it like more valuable and find the people who are willing to pay the higher end prices, then you go about things a certain way. But if you’re trying to go for a freemium product, I mean that — frankly when I bought it, it was — there were some freemium users and people were saying “You should start a free plan and you’ll get a bunch of customers and…” I’ve never seen it work with bootstrappers.

[27:01]I can’t think of a single bootstrap company that has ever kept their free plan around. A lot of people launch with it and then they winded up cutting it out. There’s that Why Free Plans Don’t Work blog post that Ruben did on my blog that was on softwarebyrob.com. It was quite a successful post because he pointed out this fallacy that we can use the same approach as like a venture funded company trying to do the freemium model and what freemium can work is very, very difficult to pull off. So I need these most people’s images of how a product should be launched and the pricing and all that stuff is sorely warped if they haven’t actually done it themselves.

[27:35] Mike : Yeah, I considered a free plan for AuditShark but I couldn’t think of a good way to actually make it work and provide enough value that people would view it as a valuable service but limited enough in such that they would want to upgrade and I just couldn’t come up with anything this kind of — it’s not worth of time and effort, really.

[27:54] Rob : Right. So anyways, I think kind of to close that loop. We were talking about AuditShark and whether you should be launching right at this very minute or whether you are in process of pivoting and that you need a little bit of time to pivot. If there’s one thing that I would say, I would like to see you talking to consumers like actually talking to them on Skype or pretty intense e-mail conversations. But before you build something, I want to make sure — I would like to make sure that you’re building really what they need.

[28:19] Mike : Yeah. At this point, I mean the product is what it is and there is not much but the core of it is going to change. I mean it can pull back results from a machine pretty much anything that you want. I think what I really need to find out is what sort of format they’re looking for the data to come back. I mean what underlying problem is that they’re to solve and for the most part of the people that I’ve talked to have said that they want some level of assurance that somebody is looking over their shoulder and making sure that they’re not doing something dumb on their machines. I really feel like there’s a big difference between what the small people want versus the big people want.

[27:01] So like the large customers, they basically want to save money because to them a data breach is obviously is a huge deal but it takes them forever to close the loop on that and notify customers whatever the statistic was. There was something like $43 per record loss. So you lose a hundred thousand records and you know, there’s a couple of million dollars in cost associated with that because you’ve got all these other things that you need to do and this is more for like losing credit card information. But for a small customer that, you know, let’s say that you were using AuditShark for, you know, your server and what it would cost you if your entire HitTail server was cracked open and hacker stole all the data. I have no idea how to even estimate what that would cost. I mean I have no idea how many customers but let’s say that it’s a thousand customers for easy math and you know, $43 a record that’s, you know, $43,000.

[29:44] Rob : Right.

[29:44] Mike : Is it realistic to say that that’s how much it’s going to cost you? You know, I don’t know. I’m not — I’m really not sure when it comes to things that are not credit card related. I mean you can look at all these studies but it’s very skewed because those much smaller businesses don’t report that information. They’re not statistically significant, you know, because regulators don’t come down on those small companies. So it’s just very hard to translate those larger customers and the fees that they pay for those data losses into the much smaller customers. So I think the motivations for buying AuditShark are going to be radically different.

[30:18] Rob : Right. That’s what you’ve started to pin point, you asked that question in the survey kind of why would you need this, what would your pain point be. Your working that in to your — your copy, your marketing materials and that’s what I’m saying. I think that going deeper into those issues and trying to figuring out if there is one or two or maybe three issues that you kind of segment people in to that they’re trying to combat and figuring out which one of those to attack first but keeping it as simple as possible. I mean it’s like, you know, I’m coming back to the HitTail feature I just released with the articles. I started off with this awesome spec and I drew it up like a true developer should and it was gold plated and had all this logic in it and I looked at it said “God, that’s going to take a month to build.”

[30:57] And I just threw everything out and I said I’m not going to — I was going to offer three different levels of quality. I was going to offer all these choices of length. I was going to offer all these — there are all these features, you know, with the market place, rather market place I’m working with that I could choose and I basically just hard coded all of those in the code and I made one length, one quality level one price. You click the button to order or not. And as a result, I could totally simplify that you and I are in the entire integration. And it sets, you know, it’s a really minimal feature. Basically, I stripped it down and I think that’s where you’re probably headed or I hope you’re headed, you know, it’s to figure out what that minimally viable feature set is in order to get that those first customers onboard.

[31:37] Mike : Yeah, I’m not so worried about the feature set because like I said I mean the product’s library is what it is. I mean the product does what it does. I’m not changing that at this point. How I portray to the user is a little different. I mean I may need to massage that stuff a little bit but I mean in a fundamental level, it tells you whether something is configured properly or not. There’s an error message that could pop up as well or there is something that comes up and it shows up as purely information. So you know, like the operating system it’s Window 2008. Okay, well that’s not right or wrong. It’s just it is what it is. And then you’ve got, you know, you might say, well it’s the latest service pack installed, yes or no. And if it’s not, that’s a bad thing. If it is, then that’s a good thing, you know. So you’ve got your okay’s versus not okay results. And then the fourth thing that can come out is honestly an error. And that covers pretty much every single case you could possibly think of for pulling back configuration information.

[32:27] [Music]

[32:30] Rob : So I think I’ve selected my next product idea.

[32:33] Mike : Oh yeah? What’s that?

[32:34] Rob : Yeah, well at this point, I’m going to keep it under wraps.

[32:38] Mike : [Laughter]

[32:39] Rob : The thing is I’m months — I could literally be six to twelve months out for even starting to work on it because I’ve got — I’m trying to stay focused and I’m dying because you know, like us entrepreneurs, we totally want to do the next thing because the next thing is way cooler than anything we were working on now. Yeah, right now I’m like focused with an exclamation mark, right? I’m like trying not to wander off the path like HitTail. I’ve just gotten the funnel optimized. I’m starting to market it again after a few months off and things are really starting to take off. They’re starting to do well how about I said that way. As much as I’d like this next idea and I think that it could provide value to a lot of people, I don’t want to have a bunch of ideas going at once, you know?

[33:14] Mike : Yeah, I talked about it in our previous podcast where I said that me having AuditShark going and then this Altiris Training site, then my forum —

[33:21] Rob : Yeah.

[33:21] Mike : … software is kind of being reworked and I’ve actually had sales requests and questions and stuff come in for all three of them in the past week and it’s just — it’s a juggling act. It really —

[33:32] Rob : Yup.

[33:32] Mike : … in a way kind of sucks. You know, it’s my own fault for putting myself in this position but I’ve had people sign up for the — the training site and there’s things that are just not ready yet. And then I’ve had people come in and say, “Hey, can you get the demo up and running for your forum software? I really like to see what it looks like specifically so that I don’t have to buy a site unseen.” There’s all these things going on and as I said before, my worst fear is that everything is going to kind of come to a head at the same time and that’s starting to happen. So I —

[33:58] Rob : Right.

[33:58] Mike : … I would definitely hold off. [Laughter]

[34:00] Rob : Yeah — and the thing is I mean I say I think I’ve settled them my idea. I haven’t settled any idea. I’ve settled on the fact that there maybe a need for certain thing is and what I really need to going to do is start talking to people, getting out there and if there really is a need and verifying and all that. And frankly, I don’t have a ton of time to do that right now and I don’t have the focus to do it. I totally could outsource it like I could sketch stuff up and send it to a developer and have them starting building it. But I just — I don’t want — I don’t think that’s a right decision right now. I think that I need to do more on research upfront to make sure that it’s solving the problem and I need to basically not be doing either those things because I really — I’m struggling to fight off the urge to start this product and I should just stick with HitTail for now.

[34:41] Mike : Yeah I have several other things that I have thought about and I’ve got them in a Google doc somewhere and I’m just looking at them. Every once a while, I look or I’ll glance at it and say, “Man, I’d like to do that but there’s just not now”, you know.

[34:52] Rob : Yeah.

[34:52] Mike : And I don’t think that there are market opportunities that are going to go away anytime soon.

[34:56] Rob : Right.

[34:56] Mike : So I feel like I’ve got time.

[34:59] Rob : I am coming up on a one year anniversary of owning HitTail.

[35:02] Mike : Oh cool.

[35:03] Rob : … that crazy? Anyways, you had I think one more thing you want to chat about.

[35:06] Mike : Yeah, actually. Do you have like a build server for any of your products?

[35:10] Rob : I used to.

[35:12] Mike : You used to —

[35:12] Rob : I don’t have at this point.

[35:13] Mike : You don’t okay? Okay. Because I was wondering how you – right now I’m starting to run in to some issues because I’ve got multiple developers working on, you know —

[35:20] Rob : Oh yeah.

[35:20] Mike : … the same code base.

[35:21] Rob : Yup.

[35:22] Mike : So merging code and making sure the check-ins from different people are all —

[35:26] Rob : Yeah.

[35:26] Mike : … working and it’s starting to become kind of a pain in the neck. I did start taking my build server and moving it out, you know, in to Rackspace that I didn’t had it hosted locally so it could do everything out there. And it’s one of those things where it’s like I would love to have that build server up and running right now so that it could do all those automated checks and everything else. I just don’t have the time in it.

[35:46] Rob : Does it — do any of your developers have the expertise to — I mean isn’t it CruiseControl? Is that still the standard because a couple of years ago, last time I set it up that’s what I used. And most developers knew how to — most .NET guys they know how to install that.

[35:57] Mike : Yeah. I’m using Final Builder. So –

[36:00] Rob : Okay.

[36:00] Mike : … it’s a little bit different. You know, I don’t know. I might be able to hand it off to one of my guys.

[36:04] Rob : Kind of give it off. Yeah. Obviously —

[36:05] Mike : Yeah.

[36:05] Rob : Obviously, you have to check it and make sure it’s done right but that might be — might be the better solution. You’re using Source Control at this point, right?

[36:11] Mike : Yeah, yeah.

[36:11] Rob : Were they able to merge? Okay. So it’s not like they have standard copies.

[36:15] Mike : Right, right. And I mean everyone is using Kiln and you know, they’re checking their code in and the issue that I’m running in to is just it’s like certain times not everything is being checked in so that in compiles on their machine but it doesn’t necessarily compile for anybody else.

[36:30] Rob : Right.

[36:30] Mike : So that’s one of the issues.

[36:32] Rob : That’s a big one. Yeah man, as soon as you ramp up to two developers from one, it is such a big deal, right? It is like a big leap. And then going from two to three, it’s not as big of a leap because you get these processes handed out.

[36:45] Mike : Right. And that’s what I’m trying to figure out is how do I put this process in place without actually having to do [Laughter].

[36:50] Rob : Yeah. Now, I hear you.

[36:53] Mike : So I mean part of it, you know, making sure that the code is good quality and everything else. So I’m going to have to do some of that anyway. I mean I’m going to have to review the code which is not that big of deal. It’s just making sure that it’s all following the rule. So I think there’s FxCop or something like that. I used to use it. It’s basically to make sure that all the code was following specific standards but I haven’t used it in a while. But I was had the issue. It would flag a lot of different things and say oh, this is wrong or that’s wrong and it’s like, no, that’s fine, don’t worry about that. And I never really dug in to it enough to figure out how to tackle some of those switches. So maybe — maybe you’re right. Maybe I just hand it off to one of these guys and say, “Hey, can you, you know, work with the build server and just straightening out all the stuff?”

[37:32] Rob : Or you could at least give it a shot.

[37:33] [Music]

[37:36] Rob : So if you have a question or a comment for us, you can e-mail it to us at [email protected] Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. You should subscribe to this podcast in iTunes. You can search for Startups or you can go to StartupsfortheRestofUs.com and subscribe via RSS where you’ll also find a full transcript of each episode. Thanks for listening. See you next time.

Rob and Mike discuss SaaS pricing, accountability partners and share a success story of an Academy member.

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about 1 year ago

Episode 14 | Overcoming Fear

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Show Notes

Transcript

[00:01] Rob Walling: This is Startups for the Rest of Us: Episode 14.

[00:04] [music]

[00:13] Rob: Welcome to Startups For the Rest of Us, the podcast that helps developers be awesome at launching software products, whether you have built your first product or are just thinking about. I’m Rob.

[00:23] Mike Taber: And I’m Mike.

[00:24] Rob: And we’re here to share our experience to help you avoid the same mistakes we’ve made. What’s new this week, Mike?

[00:29] Mike: I am having tons of fun getting a development box set up for a website. For those of you who don’t know, Rob and I run The Micropreneur Academy. It’s more or less to help developers learn how to do sales and marketing for their products. And we’ve got tons and tons of content out there. But the problem that we have is that whenever we are doing changes to the site, because it is all built in WordPress, it is very difficult.

[00:54] One of the problems that we have is being able to do development work on that box without bringing it down or crashing it because we are making some changes and trying to see if they work. And what I’ve been doing lately is I’ve been using this product called JumpBox to essentially bring up a development server very quickly so that I can dump all the content onto that JumpBox.

[01:13] And essentially, what it is, if you go to jumpbox.com, they’ve got a couple of different pricing plans. But the one that I’m using is basically a LAMP stack. And it allows you to download a virtual machine, and it is preconfigured with an OS and everything you need to just run a LAMP stack.

[01:30] And all you do is you fire it up, it grabs an IP address, and you specify a password for it. And you can just log in and you are up and running in literally, like, three minutes after you’ve downloaded this JumpBox. It’s really, really cool.

[01:44] Rob: That’s awesome. How much time did you spend getting that going?

[01:46] Mike: It probably took me more time to download it than anything else. And the download really wasn’t very large. It was like 100, 150 Megs, something like that, for the JumpBox itself that I downloaded.

[01:59] And like I said, they’ve got a couple of different pricing plans. The first one is free, but then they’ve got like a Pro version and a Business version. And you get a 15 day trial for free. So it’s pretty cool.

[02:08] Rob: Well it’s nice to have a Dev environment. I know that’s something we’ve talked about for a long time. Good. Anything else?

[02:14] Mike: No, that’s about it. What about you?

[02:16] Rob: What the hell have I been doing? Good grief.

[02:19] Mike: Nothing. Slacker. [laughs]

[02:21] Rob: Yeah, yeah. I’ve been amazed at how much extra time the book has taken. The book is done. The final proof arrived. I ordered copies, going to the printer. You know, that whole thing. But like starting a company, you think that writing the actual code is going to be the bulk of the work, but it’s like 50%-60% tops.

[02:41] And same thing with the book. I thought that putting together all the material and writing everything would be the bulk. But man, I’ve just had such a number of tasks to take care of with building the sales website and getting emails out to the list, and a number of other things—getting the ISBN number and working with formatting. And, of course, I’m not a designer, so it takes me a long time to do that stuff.

[03:01] And it’s not as easy to outsource as, say, HTML work. Or maybe it is, but I just don’t have the right contacts. I’m kind of out of my element with it. So I’ve chewed up a lot of time over the past week.

[03:10] And I actually made what I consider, in retrospect, an error in judgment. I basically had a four hour estimate to create the sales website, which is just a one page thing. You know, “Click here to buy the PDF, click here to buy the paperback.” And it wound up, by the time I integrated with two payment processors, it took me 16 hours, which was just painful.

[03:31] And the integration is not an integration. It’s just a click an Amazon button and click a Google Pay button. That’s not anything like some fancy form that does it all. I mean I was amazed at how long it took, so I was disappointed with it.

[03:42] I wasn’t going to outsource it, just because I literally thought it would take me two, and I estimated four just to be on the high side. And by the time I got everything the way I wanted it, it was way high. So in retrospect, definitely should have outsourced that.

[03:55] Mike: I can think of two other mistakes, off the top of my head, that you’ve made. Well, the first is I don’t think we’ve actually talked about the fact that you were writing a book on this podcast.

[04:03] Rob: No, no, we did! Episode 11!

[04:05] Mike: Did we? Oh, all right.

[04:06] Rob: Yeah, I added it today.

[04:06] Mike: My bad. All right, so we’ll score that a point for you today then.

[04:10] Rob: Nice.

[04:11] Mike: The other one, though, is that if you had just asked me, my wife used to do print layout for a magazine.

[04:17] Rob: That’s right! You’ve told me that like 10 times! How did I not do that? Yeah, it’s not going to look nearly as good as it would have if she gave it like 30 seconds of a look, I’m sure.

[04:26] Mike: Probably.

[04:27] Rob: Well, that’s been my week. So if you are interested in the book if you are listening to this, startupbook.net. It will definitely be out and available in PDF and paperback format by the time this podcast goes live.

[04:38] You know, the other thing I wanted to mention this week is, I was talking to someone about a week ago, and they listen to the podcast, and I was like, “Yeah, well, you know, you can stay in tune with what Mike and I do on our blogs.” And he was like, “Oh, you guys blog?” And I was like, “Man! We’ve been doing this podcast for two months and we’ve been blogging for like five years each.” And I was like, “Oh, I thought the blog was kind of our deal!”

[04:59] Anyways, I realized we’ve never mentioned our blog URL’s, or maybe in passing we have. But if people are interested in hearing more about this type of micropreneur stuff, my blog is www.softwarebyrob.com , and Mike’s blog is www.singlefounder.com . This is where we actually write original articles and new posts on starting a software company, launching products, and being a micropreneur and such.

[05:21] [music]

[05:24] Mike: What are we discussing today? I think we actually had a listener comment from somebody on the startupsfortherestofus.com website, right?

[05:33] Rob: That’s right. So, at startupsfortherestofus.com, that’s where you can download and listen to all of these episodes. And in Episode 1, a guy named Scott Herbert made a text comment at the bottom, and he said: “First, thanks for a podcast that doesn’t think I have $10 million of VC funding and want to tell me how to spend it. Secondly, I’d love to hear a cast on fear. Someone has offered to review my application for their blog, and I’m scared by this. I said yes, of course, but does it get any easier?”

[06:00] Rob: So that’s what we’re going to be talking about today.

[06:02] Mike: Cool. So, the short answer to that is, you did the right thing, and yes, it does get easier. And the key to making it easier faster is to do it more often. But we’ll obviously talk about that a little bit more.

[06:13] I think when it comes to fear, there are a couple of different options that you have. I think I’d boil it down to four basic options. When you are faced with fear, these are your choices. You can either cave, which basically you give up, you can struggle with it and challenge it head on. Number three is you can accept it and kind of do nothing about it but just kind of accept that you are fearful of that and there is just nothing you can do. And then the fourth one is you can try and work around that fear or try to avoid it. So if you are afraid of heights, you just never go into tall buildings or something like that.

[06:45] And some of those work better than others, but obviously, challenging your fears head on is going to help you get over those fears a lot quicker. Rob, why don’t you talk a little bit about what sort of things people are typically afraid of? I think this pertains specifically to business. We could talk about arachnophobia and fear of all sorts of weird other things like short people, but I think this question relates more specifically to building your own business.

[07:09] Rob: Yeah, the things that I most commonly see software developers and people starting startups dealing with are thoughts like, “What if nobody likes my software? What if nobody buys my software? What if I fail and I invest all this time and it is just wasted time? What if I can’t get any traffic to my site? What if I don’t get this right the first time? And what will other people think of me? Even if this does or doesn’t work out, what will people think of me while this is going on?”

[07:35] I think that’s a big part of fear, is dealing with how other people view you. I mean it almost takes me back to junior high and high school. I think it takes all of us back, that, you know, someone is going to laugh at us or make fun of us, or point something out publicly that is just going to really embarrass us.

[07:49] So those are the most common fears. I think everything stems from the fear of failure and the fear of other people seeing you fail.

[07:57] Mike: I think that’s kind of the biggest thing, is that people seem to think that whatever they do or say, people think of that as a reflection of themselves, especially when they are writing software and they want to put it out there.

[08:09] I see people pushing off their software releases because they are afraid of what people are going to think of their software. They always say, “I want to get it right. I want it to be perfect.” And you know what? It’s not going to be perfect. So you kind of have to get over that.

[08:24] Honestly, some people probably have a fear of launching a product. “What do I do when those support calls come in? What do I do when a customer is irritated that this bug crashed and they lost all this data?” You know what? Those things can happen. I mean nobody is perfect. That stuff is going to happen sooner or later.

[08:38] And the only thing that you can do is deal with it head on, accept that you made a mistake, and move on. If you sit there and try and live in the past or the future, you are not going to get anywhere. You can’t sit there and just worry all the time about what happens if this?

[08:55] Well, you know what? Why are you thinking about that now? Why don’t you continue living your life, moving on, doing your development, get past your launch, and then if that happens, then you worry about it.

[09:05] And I think maybe there is a difference between doing that versus if you have critical bugs in your software that you know is going to cause somebody’s machine to crash and burn, yeah, you have to fix those before launch. But you can’t just let the fear of having bugs in your code or the fear or people running into problems with your code take that as a reflection upon you, because it is not a reflection on you. Everybody is human. Everybody makes mistakes. And when you create bugs in your software, those are mistakes, and they’ve got to be fixed.

[09:32] And getting over those fears is just a matter of accepting that that is going to happen. And you can fix those bugs, you can move on, and version 2 is going to better than version 1.

[09:40] Rob: Yeah, I think the two things that I think about when encountering fear like this is that A, the first time you do anything, you are going to be scared. Like the first time you published a single blog post, you are going to be scared. I was the first time I did it, the first time I published an essay and a bunch of people read it and people started ragging on it. I had anxiety about this. I mean this is just natural. The first time you record a podcast you’re going to have anxiety. The first time you speak at a user group, the first time you speak at a conference.

[10:09] Any time you do something publicly, you are going to have some type of fear. There’s some natural inclination in all of us that we feel like we’re going to be judged by everyone. And whether it’s realistic or not, knowing that the first time you do something you are going to feel this anxiety and this fear is, I think, really helpful. Because then you can identify it very quickly and say, “Oh, this is that feeling again. It’s that same old thing that comes very naturally. And I shouldn’t be scared of it, and I shouldn’t let it talk me out of doing this thing.”

[10:38] I’ve actually started following that fear. And this is a little bit like Seth Goden with “Linchpin” where he kept saying the lizard brain is this negative talk. And if you go towards the lizard brain when the lizard brain talks to you and says “Don’t do this thing,” you’re typically stretching yourself and you’re actually doing something good. You’re actually moving in a direction that will grow who you are.

[10:56] And the second thing is that, I think as software developers most of us have this natural anxiety of wanting to be perfectionists. I was talking to a developer today and he said, “Yeah. I want my software to be perfect. I know it’s not going to be, but what if I launch it and there’s a bunch of bugs in it?”

[11:12] There’s two different types of people, right? There are the people who don’t care enough, and those people don’t tend to be really good software developers. They don’t tend to want to launch a software product. The ones who are doing this tend to be more of the perfectionists; tend to be more of the people who are stressing out about it. And that’s us.

[11:29] We have this anxiety that actually provides productivity. If you’ve ever heard of the Yerkes Dodson Curve, it’s a psychology theory that anxiety helps you, to a point, helps you be productive. And if you’re not anxious at all about a deadline, it’s very likely you’re going to miss that deadline, and that you’re not going to be productive.

[11:46] And so anxiety, which translates to fear, is actually a good thing to a certain extent. And it actually will make you perform better and do more work quicker, be more productive.

[11:56] Mike: I know what you’re saying about being able to have a healthy dose of anxiety, because I remember back in college I used to feed off of deadlines like it was my job. I guess, kind of, it was. [laughs] But the fact is if I had a deadline for a paper coming up or a project, or something like that, as that deadline got closer and closer, I would just use it to energize myself and kind of really focus in on what it was that I had to do and what I had to get done. And somehow it just helped me to meet a lot of the deadlines. And don’t get me wrong, I mean, there was a certain amount of procrastination there.

[12:29] But I’ve also seen studies where that…you take three groups of people and you give one a deadline at the end of the quarter or semester, and then you give another group of people regular deadlines throughout that time period. And then you tell the third people they can create any deadlines they want. People will tend to procrastinate until the end. I would just feed off that natural energy for those deadlines.

[12:51] So for me the anxiety, I think, helped a little bit. But you also have to be a little bit realistic about, and keep it in your head, “Am I actually going to meet this deadline, or is it just a completely lost cause?”

[13:02] Rob: Yeah, that’s the thing with fear. And I’m kind of equating fear with anxiety, because I think when you say fear, you think a lion is attacking us. And anxiety is more of a realistic explanation or a realistic description of what we really feel when you’re going to go up and speak in front of people, or we’re going to release a software product and maybe have someone say something bad about it, or something. I think anxiety might be a better word for it.

[13:25] But there was a study, and, of course, I wish I could quote it, but it was a study done at UC Berkeley. And it compared the anxiety levels, the stress levels of cops who were working in East Oakland versus students during finals week. And the anxiety levels were actually higher in the students during finals week.

[13:44] And what that shows is that anxiety, a lot of, if not all of it, is in your head. Some of it can be chemical as well; you can be prone to be an anxious person, but a lot of it is in your head. Ever since then, I have really learned to focus in on my anxiety and realize when it’s coming, and identify it, and then do something more productive with it, and allow it to motivate me rather than cause me to cave.

[14:07] Mike: I think you bring up an interesting point about the difference between fear and anxiety, though, because I think personally I have my own fears, and my fears tend to be more long-term things that I’m afraid of happening. And then there are certain anxieties that I’ll go through.

[14:23] I’m a pretty good public speaker, but I think everybody gets at least a little bit nervous when they’re about to go up and do some sort of big presentation. But in terms of fears and stuff, one of my own fears is, as the soul breadwinner of my family, my wife stays home with the kids so that I can go out and work.

[14:40] But one of my fears is, “What if my income streams come crashing to a halt and I’m not able to support my family? What if I’m on the road and something happens to me? Will my family be taken care of? How will that happen? How are they going to deal with that?”

[14:51] And honestly, I generally don’t worry about myself in terms of my health. But it doesn’t mean that I didn’t go out and buy a life insurance policy just to make sure that that sort of thing is taken care of. In terms of my income streams, I know that if it came down to it I would do whatever needed to be done in order to make ends meet.

[15:07] I mean, if I had to go to Barnes and Noble and get a job stacking books or something like that, you know what? So be it. I’ll do what it takes to take care of my family. But that’s one of the long-term fears that I have. I don’t really get anxious about those. I mean think about them, but I also think about how to deal with them. And how to alleviate those things as concerns. What about you?

[15:26] Rob: I think a long-term fear I have is the same thing. Being that we’re both self-employed, it’s a reality that our income could be majorly impacted very quickly. And in fact, these last few months I’ve talked about it. Due to the recession, there’s several different income streams that I have that have substantially decreased, 50% or more.

[15:44] And so I’ve kind of been staring it in the face, realizing, “Wow. If it continues like this there’s going to be some issues down the line over the next few months.” So this is all happening right as I’m about to have my second child. So it’s absolutely…. I think any entrepreneur, the fear of just making ends meet and continuing to have a solvent business is a valid fear. And it is for me as well.

[16:05] Mike: That’s one of the things that I’ve heard from people as well. And I get asked that question. “Aren’t you afraid of going out of business?” Or this or that. And the way I see it, being self-employed actually gives me a certain amount of control over it because I am in control of my own destiny. I get to make the decisions that ultimately affect how I do in life.

[16:24] If I were working for some corporate employer some place, they could decide to let everybody go on any given day. And there’s literally nothing you can do about it. You think about it in terms of job security. Most people think of it that way.

[16:36] But you can also think of it in terms of financial security. You go to work for somebody, you’re completely at their mercy in terms of your income. And sure they can let you go, and then you can go find another job. But right now it’s hard to find jobs for most people. There’s tons of people out of work and the unemployment rate’s really high.

[16:53.] I look at that and say, “Well you know what? I could either work for somebody else where I’m completely at their mercy, or I can work for myself where I’m at the mercy of my own bad decisions, so to speak.” And honestly, to make the choice between those two, I’d rather work for myself any day of the week.

[17:08] Now granted, you have to be making money in order to be able to do that sort of thing. But it’s certainly an interesting way to look at it.

[17:15] Rob: Yeah, I think you make a good point there. No matter which avenue you choose, whether you work for an employer or start your own company, you’re going to have fear about something, right? You should have some fear that maybe you’ll get laid off, maybe the company will go out of business. You should have fear if you’re an entrepreneur that maybe you won’t make ends meet. So it’s not like you can escape it by choosing one route over the other.

[17:35] I think people can talk themselves into not having fear if they work for an employer. I think you’re kidding yourself by saying, “Oh I’m not going to get laid off. This company’s never going to go out of business.” Those kind of things. But I think that there are fears in, really, any choice that you make. There’s no way to escape the realities of what might happen.

[17:52] Mike: Right. One of the quotes that I keep, and It’s actually sort of related to fear. This quote I keep actually on a Post It note right next to my monitor. And it reads, “It is possible to commit no mistakes and still lose.” It was actually in a Star Trek: The Next Generation episode from Patrick Stewart. And I think it was in reference to…Data was playing this game against somebody else. And he ended up losing to this other person. And he couldn’t figure out how it was that he lost. And that’s what Captain Picard told him. He’s like, “It’s possible to commit no mistakes and still lose.”

[18:21] And that’s true in life as well. You can do all the right things and still come out at the end of the pack. There’s times when there’s absolutely nothing you can do, and you’re going to lose. I mean, that’s just a fact.

[18:33] I don’t want people to think that you’re going to lose every time, but there’s always a chance that you could lose. And there’s always a chance that you could fail at whatever it is that you’re doing. But if you’re in control, if you’re making those decisions…Most people generally think they’re smart people, they’re going to make reasonably decent decisions.

[18:48] And you have to keep that in mind when you’re going through those motions. You’re going to make the right decision with the information that you have at the time. And if, at the end of the day, you came out at the end of the pack, you have to kind of accept that and move on, and say, “OK, well that was a learning experience,” and take that forward, and go on with the next task. You can’t let those things bother you. I know people who kind of let things bother them for years.

[19:10] I can think of one person in particular who’s let things bother him for years, and years, and years. And you know what? He’s never going to get past it. It hasn’t happened yet. You can either let it get in your way of life or you can put it behind you and keep going.

[19:24] Rob: The other thing I like about that quote is I think it’s a good reminder that you have to take risks in order to do something worthwhile. You have to take risks in order to start a company, or even to have a child, or buy a house; any of these things that I personally hold dear and that other people may as well. You can’t just stay in your safe zone all the time.

[19:44] And that’s really what I take away from that quote, is it’s like, “You can make no mistakes and never do anything, and still fail.” If you decide, “Oh, well I’m never going to get married because I might get hurt, never going to have a child because it’s too hard, never going to buy a house because I don’t want to take on the risk, never going to start a company,” in my life and my goals, I would consider myself that I would not have succeeded if I hadn’t done these things.

[20:05] What I take away from that quote is that taking risks is a necessity if you are an ambitious person. And if you have goals, you’re going to have to risk something to achieve those goals. If you sit back and don’t do it, I would consider that failure, not taking the risks.

[20:19] Mike: And taking the risks doesn’t mean you’re guaranteed failure or success. It just means that you’re taking those risks. You’re kind of gambling either way. But honestly, it’s not like the odds in Vegas. Your odds are a lot better when you’re putting that faith in yourself and your own decision making powers as opposed to the dice or the roulette table in Vegas. It’s a completely different type of gambling, I’ll say. Calculated risks is what I’ll call it.

[20:44] So with that, why don’t we talk about Six Steps to dealing with that fear or anxiety?

[20:48] Rob: Step number one is to take small steps. If you try to leap out too far, if you try to start up a huge company or try to start two companies at once, it can just be too much and it can overwhelm you pretty easily.

[21:01] So if you are the type of person that fear tends to hold you back, take a small step. Maybe instead of putting up a bunch of money or putting in a bunch of time in order to start a company, try to either start a smaller version of that or just do a little baby step of it. You know, try to get that minimal viable product out and do some traffic testing and see what’s going to happen. It’s a much smaller step but will still help move you in the direction of, say, starting a company.

[21:28] Mike: The other thing you can do is if you’re trying to get into, for example, product marketing and you don’t necessarily have a product yet, you can sign up for any number of affiliate programs. Amazon.com has got one where you can become an affiliate to sell their books. By referring traffic back to them, if those people buy things from Amazon, you get credit for those.

[21:48] Well, that’s a very small thing, and I’ll be perfectly honest and say that I don’t think you’re going to make a lot of money from it, but you will probably learn quite a bit from it. You can use that to help yourself as a baby step to become a better marketer, for example.

[22:02] Step number two is to get some concrete motivation in the right direction. What this really means is that if you’re trying to do something, find somebody else who’s done that and kind of pick their brain. Get some help from them, ask them how they did it, and ask them how they dealt with their fear or their anxiety about it. For example, if it’s public speaking, you can go talk to somebody else who does public speaking for a living or join Toastmasters or something along those lines.

[22:30] You really need to find somebody else who can talk to you about it or you can talk to them about it and ask them questions and really get down to the bottom of what it is that you’re afraid of. Have them help motivate you in the right direction.

[22:44] Rob: Step three is to look at failure and rejection in a new light. What we mean by that is instead of taking failure and rejection as a negative thing; realize that it does tend to be a valuable learning experience. Mike and I have already talked in a previous episode about whether failure is a learning experience or not, or you should only have successes, or the whole discussion of that. Both of us believe pretty firmly that you will learn from your failures and that rejections will ultimately teach you to overcome these hurdles that you’re facing.

[23:17] I know that every time I’ve face rejection it’s impacted me. But the more that I face, the less each of them impact me. I think becoming aware that failure and rejection are going to be inevitable as you do anything that has risks in it, becoming aware of that is a big part. Because then once it comes, you’re much less surprised by it.

[23:40] Mike: There are obviously different levels of that failure and rejection. Rob and I also talked about before when we first started getting into AdWords and we blew in excess of $1,000 a piece in the first month of doing our AdWords campaigns. Don’t get me wrong, $1,000 is not pocket money or anything to be blown on AdWords, but I’ve made some much, much greater financial mistakes than that in the past. You just take them with a grain of salt and say, “Look, you know what? I understand what happened and it’s not something I would repeat.” But you learn from those things.

[24:12] Number four is to not get too caught up in the past or in the future. You really need to keep your mind working in the here and now. What I mean by that is, if you’ve made mistakes in the past, don’t dwell on them, because it’s certainly not going to help you; it’s just going to drag you down. It’s going to drag your moral down and you’re going to be constantly thinking about them. What that will do, as a byproduct, is basically distract you from the things that you have going on today.

[24:37] While you’re doing that, you’re basically dividing your mind while half of it’s saying, “Oh my God. I can’t believe that thing that I did last Thursday or three years ago and it still haunts me to this day.” It’s like, “Well, you know what? Everybody makes mistakes, and how you deal with them is just as important as the things that you take from them.”

[24:55] Similarly, you can’t worry too much about what’s going on in the future. If you’ve got some problem that you think is going to come up in the future, and I’ll go back to the one I mentioned before about I travel a fair amount for my job. What happens if I’m on a flight and the plan goes down? Now granted, the chances of that happening are pretty slim to none, but you know what? It could happen. So what did I do? I went out and got a hefty life insurance policy, and if something does happen to me, at least I know that my family is going to be taken care of.

[25:25] It’s all about mitigating those risks so that you can take your mind off of those fears and put them together and focus on what it is you are doing today.

[25:34] Rob: Step five is that things don’t happen overnight and you need to keep working on it. Bottom line is that fear goes away the more times you do something. If you have a fear of public speaking, the more times you do it, it’s going to get better. If you have a fear of publishing blog posts, it takes you 10 hours and 20 edits to get a 500 word post out, you need to do it more. You’ll get a little better at it, but you’ll get over the fear that it has to be perfect. And, if it takes you 20 hours to build a website. So the bottom line is it’s not very complex. You’re going to be scared the first time you do something, and you need to do it over and over if it’s worth it to you to actually get good at something.

[26:13] Mike: And the sixth step to dealing with fear is to get a sanity check from someone else. Whenever you’re working on something, whether it’s new software, or a blog post, or a piece of marketing collateral, or press release, anything along those lines, anything related to your business or even in your personal life, just get a sanity check from someone else. It could be a close friend, it could be someone who barely knows you.

[26:35] I had somebody contact me who said “Hey, I’d like to get your input on something because I don’t talk to you very much and you don’t know anybody that I know. So it would be great to hear from you about what you think of this.” That’s a perfect scenario where you can get that sanity check from someone else with virtually no fear of anyone else being informed about what your fears are.

[26:56] One of the things that Rob and I actually used to do probably five, six years ago, something like that, when we were first getting our blog started, we actually started sending some of our blog posts back and forth to get a sanity check on it, to say “Hey, what do you think of this article? What do you think of the wording to this? Does this strike a chord or is it just too bland, etc.” We did that for, what was it, six months or something like that? And then we just went off our separate ways. By that time we’d gotten over our fears about doing any sort of blog posts and publicly voicing what our thoughts and opinions were.

[27:28] Rob: I think we did it for closer to a year, actually. I think it was certainly helpful for me. I think it improved the work that both of us produced, as well as, at least from my perspective, it reduced the anxiety I had when I went to publish something, because I knew that someone had already looked at it pretty critically. And so if I sent it over and you kinda said “Nah, this is not very good,” or, “There’s a big flaw in this logic,” then I would rewrite that piece. And then when I posted it, I knew that it essentially had a sanity check done to it, and it really reduced the fear that I was going to get slammed online.

[28:01] So to recap, the six steps that deal with fear are: Number one: take small steps. Number two: get some concrete motivation in the right direction. Number three: see failure and rejection in a new light. Number four: don’t get caught up with in past or the future, work in the here and now. Number five: keep working at it. Things don’t happen overnight. And number six: get a sanity check from someone else.

[28:24] [music]

[28:27] Rob: Well we’ve been receiving a lot of questions from podcast listeners, so we’re actually going to do two questions this episode.

[28:35] Mike: Our first question is from Jonah Knight and he says, “Hi Mike and Rob. I recently found the show on iTunes and I’m re-listening to the first five. As you’ve said, the other startup shows may be good fun, but they don’t really speak to someone like me. You should also know that my little business is not a tech startup, and yet I feel like almost everything you’ve said applies to me.

[28:52] That said, I do have a question for you. I’m a singer/songwriter working on building a business foundation. Because the music industry is currently a black hole, I’m very resistant to modeling my business plan after their track record of failure. Lately I’ve been trying to behave like a small tech startup with my product being music.

[29:09] My question is this. You talk about micropreneurs releasing multiple products over time in order to have multiple incomes streams . For a content creator, would you say making another CD is the same as releasing another product? Or would another product be something else like an iPhone app?”

[29:23] His website is www.jonahofthesea.com/ghotz . I guess that goes to his CD that he’d given us as a link.

[29:35] I think the question really boils down to, is releasing another application the same as making another CD? In many senses it is, because you have two different things you can sell. You can put the same price point on them or different price points. But when you’re doing any sort of contact creation, you have to keep in mind that they are going to most likely be related.

[29:59] And especially if you are doing something like music. I mean if you create a CD, chances are that your second CD is going to be at least related to your first. And the problem with that is that if you release a CD, and I’ll be kind of blunt here, if nobody likes it, then the problem you are going to run into is the second one, because it is similar to the first, people are probably not going to like that one either.

[30:23] On the flipside of that, if people really like it, then chances are your second one they will like as well. And that’s why you end up with these bands who come out with a couple dozen CD’s, and then you’ve got these other bands where they are one hit wonders because they had like one song that was good out of the five CD’s that they released. Everybody hits a homerun once. It’s those people who are able to do it over and over again that are going to be really successful. What are your thoughts Rob?

[30:51] Rob: I think as a content creator compared to a developer, that yeah, creating a new CD is the equivalent of essentially creating a new application. I think there are complexities, like you’ve said. There are some other forces in play where songs by the same artist on different CD’s may not be viewed like different applications would be. They are somehow linked.

[31:11] Now I think that is obviously a detriment in the way you point it out. I think it is also an advantage in that if you get five CD’s down the line and suddenly you’ve built a following over these years, and you become a good marketer, and you learn how to get people interested in your music, it’s very likely they will come back and buy your past catalogue. So the more fans you build in the future, they will come back and buy your old stuff. Whereas if you have five different applications, it is unlikely that if someone likes one that they are going to buy the other four, because they don’t tend to be related.

[31:37] So I think there are some differences, but I do think that creating new CD’s is essentially equivalent to producing multiple income streams. At the same time, Jonah brought up building an iPhone app, or having an iPhone app built. And I see that as more of like a marketing approach rather than creating new content. I think it’s like repurposing existing content, which I think is a great idea.

[32:00] Anytime you can take something that you’ve poured a lot of time into and that, essentially, you own the rights to and repurpose that in multiple ways, whether it is to audio, or to video, or to text, or to an iPhone app, I absolutely think that you need to experiment with that. I think that going in that direction may or may not lead to anything, but you are not going to know until you give it a try.

[32:21] So while I wouldn’t equate creating iPhone apps to creating a new income stream for an artist or for a musician, I still would recommend it as something that you probably want to try out and see. If you have the business acumen to do that, try it out and see what happens. It certainly is kind of a great field right now for that space. I haven’t heard of a lot of musicians creating iPhone apps. So give it a shot and let us know.

[32:42] Mike: So thanks for the question Jonah. I think that now we are going to move on to our second question. What’s our second question Rob?

[32:48] Troy Price: “Hi guys. I’m calling in with a compliment. This is Troy Price over at fleamarketmoneymaker.com. First, let me just say that I completely love your show. Been with you since episode 1. Your focus is laser specific; just really on topic with each and every show.

[33:05] I’ve got a more personal question for you. You described that you all had nine to five jobs as you were starting these businesses. When was the point that you shifted from an employee of someone else to a micropreneur solely? I’m interested in that. If you can just let us know, I am sure that other people are interested as well. Thanks.”

[33:24] Rob: This is a good question. It’s one that I hear quite a bit. I don’t recommend that people leave their employer before starting a company. I tend to believe that you can get quite a bit done before you leave the safety of salaried employment.

[33:39] The question that Troy asked was at what point do you leave employment? It really boils down to what your comfort level is. If you are more of a risk taker, you can do it earlier. And if tend to be fairly conservative and you have a family and a house, you are going to want to do it later. And you are going to wind up working more hours as a result. But that’s the price you pay for being a little more conservative with it.

[33:59] In my own journey, I worked fulltime until I had about 70% of my income covered by my products. And so what was interesting is that at this number grew, this percentage…And when I say fulltime, I wasn’t salaried, I was consulting. But I was consulting fulltime. So I had essentially 100% income coming in. And then as my products grew, I had months where I was making 120%, then 130% of my income, 140%, 150%. You know, it was growing over several months.

[34:30] And I was banking that extra money. And so as soon as your products start earning money, if you are able to put some of that in savings, then when you hit a certain level, you are going to realize, “Wow. I have X thousand dollars in the bank, and my monthly product income covers 60%, 70%, 80% of my salary.”

[34:47] At that point, even being fairly conservative, which I am, it was kind of a no brainer to stop looking for new consulting work and to just focus on products, and to try to grow that 70% up to 100%. And in the meantime, essentially live off of that 70% plus whatever I had in savings to make it up.

[35:06] And the interesting side effect of all that is when I stopped doing consulting, it was incredible how much free time I had all of a sudden. And I hadn’t really thought about it, but I really was working a fulltime job and doing all these products. Suddenly, that 30-40 hours a week of consulting was just gone, and I just had so much free time all of a sudden. So it was a happy ending to that story.

[35:26] But that’s personally where I wound up. So again, I think depending on your level of comfort, you are going to be maybe at a different point, but that’s how I approached it. How about you Mike?

[35:35] Mike: For me it was a little different, because I basically took the plunge. I had a consulting gig lined up. I had a fulltime salary. The company had just gotten acquired six months before. And at that time, the company laid off about 10% of their people. Basically we were told our entire office we were all safe because we had just been acquired and they didn’t want to make any disruptions in the revenue stream that we were going to be bringing in to them.

[35:58] So, I’ll be honest. I could have sat there and been fat, dumb, and happy for quite some time and not had to work real hard. I just wasn’t terribly happy with it, and I looked around and there was a company really close to me that said, “Hey, we need a consultant. We need somebody for about a six month project.”

[36:15] And I kind of did the mental calculation and said, “Well, I could stick around here or I could go do this consulting engagement.” And I really didn’t have any savings laying around. I had gotten maybe $8,000 or so from the stock options from when the company had gotten acquired, and that was about it.

[36:31] So I cashed in those stock options and started going this consulting job. And it was about three months in and the company I was working through, their customer stopped paying them. The project crashed and burned. And I was three and a half months in and I was owed about $40,000 to $50,000 from a company that hadn’t paid and said they had no intentions of paying. And then I had to scramble to find something else.

[36:54] So in retrospect, I mean things turned out well because I ended up getting paid eventually, and I got interest on that money. But I went for probably six months wondering if I was ever going to see this $30 or $40,000. Don’t get me wrong, that’s a huge chunk of money. But at the time, I wasn’t so much worried about a place to find a job. I mean I had connections and I knew that with my skills I could find something else.

[37:15] Those things just kind of led into the consulting business that I was doing at the time, Moon River Consulting, and then it kind of transitioned from there into Moon River Software, which is the software business that I have.

[37:25] [music]

[37:28] Mike: So thanks to both Jonah and Troy. If you have a question or comment, please call it in to our voicemail number at 1-888-801-9690. Or you can email it in MP3 or text format to .

[37:43] If you enjoyed this podcast, please consider writing a review in iTunes by searching for” Startups”. You can subscribe to this podcast in iTunes or via RSS at startupsfortherestofus.com. We’ll see you next time.

[37:53] Our theme music is an excerpt of “We’re Outta Control” by MoOt, used under Creative Commons. A full transcript of this podcast is available at our website, startupsfortherestofus.com. We’ll see you next time.

Mike and Rob discuss the difference between anxiety and fear, with an emphasis on how to address and overcome your fears.

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2/ But not any truth will do for value creation. Value-creating truths share the following properties: - Others wish they would have discovered it first - After discovery, many other people become interested in it - Generally point to an even larger truth

about 1 year ago

Episode 1 | What is a Micropreneur?

Show Notes

Transcript

Mike Taber: This is Startups for the Rest of Us: Episode 1.

[music]

Mike: Welcome to Startups For the Rest of Us, the podcast that helps developers be awesome at launching software products, whether you have built your first product or are just thinking about. I’m Mike.

Rob Walling: And I’m Rob.

Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So Rob, exactly why are we here again? Rob: I have no idea! We’ve decided to do some crazy thing and record a podcast; something that neither of us have ever done.

Mike: Well, that’s true, but I think that the important thing that we are really here for is to share the things that we’ve done in the past and, most importantly, share the mistakes that we’ve made over the past several years in building out our product portfolios and building up our companies.

Rob: Yeah, and I think along with the mistakes come the successes as well, right?

Mike: I hope so! [laughs]

Rob: I mean we’ve learned from both of them. Yeah, I guess if we didn’t have any successes, no one should listen to us.

Mike: Why exactly are we developing this podcast? I mean does the world really need another podcast about startups?

Rob: You know, like we talked about before, there is this obvious gap in the market. There are a lot of podcasts aimed at venture backed startups, high growth startups, but there are so few podcasts aimed at bootstrap startups. And frankly, the ones that I listen to, they don’t tend to have super practical information that you can apply to your startup or micro ISV right away.

There are a lot of interview podcasts, and there is a lot of information that is just floating around, kind of almost superficial stuff that you hear on blogs, and I am hoping we can go a little more in depth with ours.

Mike: Definitely. I mean I think that is the key point here is that we can try to go a little bit further than what you would find on a blog. I mean the point of a blog is partially for information, but some of it is entertainment as well. And to get the right information you need, you tend to go to a lot of different blogs or a lot of different websites.

And one of the key things we would like to bring to the table and share with our listeners is the experience that we’ve had, the things that we’ve done that maybe didn’t work out so well, and then the things that we’ve done in the past that did work out pretty well, and try to collectively show a lot of that information all in one spot.

Rob: We don’t intend this to be another show that interviews startup founders. There are a lot of those, and I think most of us probably listen to them. So we are not going to be duplicating that format. We may have an interview once in a while, but that is not going to be the gist of it.

Individually, you and I have been through a lot as entrepreneurs. And, you know, obviously our goal is to provide real world strategies that have worked for our businesses that ideally will help someone else who is listening to the podcast.

Mike: Right. That’s the goal.

Rob: OK. Let’s get started by introducing ourselves.

Mike: My name is Mike Taber and I am the founder of both Moon River Software and Moon River Consulting. I am based in the greater Boston area. I work for myself fulltime. And I have been self employed since around 2005.

I used to work for a company called Pedestal Software that got acquired by Altiris back in 2005 for somewhere around $65 million or so.

Rob: Holy smokes! I hope you got a fat check off of that!

Mike: I got 0.0001%, and it was actually a little less than that. I did the math on it.

Rob: Wait, 65…1, 2, 3, 1, 2, 3…

Mike: It was about $8,000, so you don’t have to do the math. But needless to say, somebody made out a lot better than I did. So the number sounds big, but that kind of pushed me over the edge and I said, “You know what? Why should I be doing all this work to let somebody else be reaping the rewards?”

And, you know, that is why I started Moon River software and eventually spun off Moon River Consulting out of it. I just didn’t want to be in the position where I was making other people loads of money. I mean I am a smart guy, or at least reasonably smart. My wife tells me otherwise. But, you know, that is what I wanted to do. I wanted to be master of my own destiny. And I’ve said that to several other people, and at the end of the day, that is just what it comes down to.

So what about you Rob?

Rob: Well, I followed a similar path, actually. Over the past 10 years, I’ve had a couple of salary positions, but mostly I’ve done software consulting. And whether that is for a firm that I was paid hourly through, or I spun off my own firm in 2002 that eventually went fulltime a couple years later.

And I realized pretty quickly that consulting is fun, but I had a tough time building things for other people. I enjoyed it, but it really wasn’t fulfilling me the way that I wanted my work life to do. So I started building my own products and launching them. And pretty quickly I found a couple other products that people had launched that weren’t doing well and acquired them. And I started learning the ropes of marketing software, essentially, on a very small scale, obviously. I am not Microsoft. I mean it is me, one guy, and a couple of contractors I have, or a handful of contractors, I should say.

But I found that I enjoyed it pretty quickly, although I blew through…Man, I blew through a ton of money early on! I don’t know if I ever told you, but I dropped $1,200 on Adwords in six weeks one time and I made one $99 sale off of it.

Mike: I blew like $1,500 in a month before, so I know what you are talking about.

Rob: Yeah. Totally, you just have no idea what you are doing. And looking back, I still have the campaign saved, and I look at it and I am like, “What in the hell was I thinking?” It is not set up very well at all.

So anyway, I own a handful of software products, and I build them, I acquire them, and I market them, and I really enjoy it. And that is what I do fulltime now. So I think it is like you: master of my own destiny or master of my own domain, as they like to say, if you have seen Seinfeld. [laughs]

Mike: [laughs] So I guess one of the things that we wanted to discuss son our first podcast was exactly what is a micropreneur, because that was one of the things that you and I had come up with a while back, and just came up with the idea and definition of a micropreneur. And it is not something I have heard anybody else really talk about. It is just something we kind of spawned off on our own. It sort of makes sense. So why don’t you kind of explain to everybody what a micropreneur is.

Rob: Sure. A micropreneur is a word that we made up, essentially. But after we made it up, we found out, of course, other people were using it in different contexts. But essentially what we focused on is a micropreneur as a technical individual, someone with technical skill, and that can typically be software development or web development skill, and someone who wants to launch small software businesses. And whether that is a downloadable software product, like something that you write and runs on a desktop, like time tracking, or an invoicing app, even a game, or it can be a software as a service application, or an iPhone app, a Blackberry app. I mean kind of anything that you can code up that someone will pay you for.

I have owned things ranging from an ecommerce site, to an e-book, to software products, to software as a service applications, a niche job website. I mean kind of all this stuff fits under this umbrella of a micropreneur-something that you can build and sell online.

And a micropreneur is the person behind that. Some people might be confused by: What is a micropreneur versus a micro ISV? And a micro ISV is a one person software company, whereas the micropreneur is the person behind that micro ISV.

We are going to be using that word a lot in this podcast and in the future. So today we are going to talk about six tenants that you and I put together that essentially try to define what a micropreneur actually is. Let’s get started.

Mike: So the first tenant of being a micropreneur is: a micropreneur is a technical entrepreneur who writes software that creates value for a niche market. You can choose to write games, you can make downloadable software that gets installed on somebody’s machine, or you can do software as a service. It could be something like building comic book creation software. It could be software that is used for creating bingo cards. Just about anything is game for a micropreneur to be creating.

Rob: Right. And I think the key part of tenant one is that it is a niche market.

Mike: You are not going to build a Microsoft Word, but you might build a word processor that is designed for people who need to write a master’s thesis or a PhD dissertation-something along those lines.

Rob: Yep. So it is finding and choosing a niche. Since we are only one person, you can’t possibly take on a huge company. And tenant two is: a micropreneur starts with a single product or website but may build or require more once he or she has learned how to market software.

And this is an interesting one, because a lot of developers don’t think in terms of having multiple products. And they think that they are going to find a niche and build a comic book cataloguing software, and that it is going to make 10 grand a month, or five grand a month, or whatever they need to live on. Typically, that doesn’t happen.

But often, you can build something that maybe generates a lot less than that. And if you stack enough of them together, then you can actually build up a reasonable amount of income. This is not for everyone. Certainly, some developers are going to just want to do one product, and that is going to be their goal, and that is totally fine. But we have really talked about the goal, for a lot of people, is going to be to do multiple products. And as a result, there will have to be some automation involved, because, you know, you can’t manage five products and do everything all by yourself.

Mike: And that is actually a good leading to tenant number three, because tenant number three is: a micropreneur is intent on staying small. Now, small is something you have to define for yourself. Is small a one person company? You are going to be a one employee company for however long you want to run the business? Or do you want to grow it out to two or three people? Or do you have a couple of friends who have jumped on board with you and decided to build out whatever the product or products are that you have decided to build?

But essentially, the micropreneur is intent on staying small. And that is in direct contrast to things like venture capital startups or Angel investor startups who want to build out a company and build it as largely as they can and as quickly as they can in order to make a lot of money and cash out.

Rob: And tenant four is: A micropreneur is a highly technical entrepreneur who values time, location, or income independence. Again, some developers, some micropreneurs, may value only one of these things. Some may value all three of them. And let me step through each of them.

Time independence is the ability to be in control of your own time. So as a consultant, even if you work from home, you tend to have to work between nine and five or nine and nine as a lot of us did when we were consulting. Time independence is if you have a software product that you really don’t have any kind of working hour constraints; that you can work weekends and you can work nights, and you can do all types of crazy stuff.

Location independence is when you can live anywhere you want. And then income independence, of course, is being much more in control of your own income streams. So it is not relying on a salary or even consulting clients.

Now, you are never, of course, completely, 100% in charge of your income, because it depends on the market and what is selling. But if you have a product and it sells to 20, 30, 40, 50 people a month, you are really not controlled by any one person anymore. And that is really the crux of income independence, is you are not beholden to a single entity for the majority of your income.

And as you build or acquire more products, you become less and less beholden not only to each individual customer, but to each individual product. So you just have a lot more diversification.

And as I said before, some people will value one or two of these and others really will make it a goal to achieve all three of them.

Mike: Tenant number five is: A micropreneur merges existing technical knowledge with online marketing knowledge. In order to succeed as a micropreneur, you really need to be able to combine technical knowledge with that marketing knowledge. And if you don’t, what is going to happen is you are going to build a great product, but nobody is going to buy it because you are not able to market it effectively.

And the opposite is true as well. If you have great marketing knowledge but no technical ability, it is very difficult to build a great product that people are going to want to buy. So if you are able to merge both of these things, then what you have is a very, very powerful combination that not a lot of developers or marketers are going to be able to match, because it is very difficult to build up both of those silos of knowledge, I will say. And most of us went to school for development and we know how to develop software, and we could do it in our sleep, but it is really the marketing side that is a lot more challenging because there are many things that are just not well defined in terms of the problem space.

So, for example, if something is wrong in your code, if you got a bug, you know what the parameters are around that bug. You know exactly what is going on. And you may not necessarily know why, but you can step it through the debugger and figure all that stuff out.

If something is wrong on your website and you are just not getting traffic, it could be a million different things. And it is just as bad, if not worse than a technical problem, where, you know, you have a finite space of where this problem could be. With a website where the entire Internet could be hitting it or, in this particular case, is not hitting it, you have to figure out why, and it could be just about anything.

And being able to clearly identify what those sources of problems are is really what is going to separate a micropreneur from the average off the street developer who can certainly code his way out of a wet paper bag, but isn’t necessarily going to be able to figure out those problems.

Rob: Yeah. I think this is a really important tenant, and I think it is one that a lot of developers don’t think about. We totally underestimate how important and how difficult it is to learn the marketing side of things.

Tenant six is: A micropreneur is a cross between four things: a software developer, a webmaster, a marketer, and an entrepreneur. We all know what a developer is. A webmaster, the reason you have to have this in your blood, or learn it, or learn to outsource it is that we are talking about selling online. And even today, iPhone, Blackberry apps that don’t run on the web need some type of sales site or sales information. So you are going to have to know or learn something about getting a nice website up.

And the last two are a marketer and an entrepreneur. And these are the ones that take a lot of time to learn and a lot of trial and error. And, of course, Mike, that is what you and I have spent the last 10 years learning, right?

Mike: Oh yeah!

Rob: Those are the ones that cost you money.

Mike: Time.

Rob: Time. Tons of time. Yeah. And you can learn some of it from books. It is like coding, right? You can learn some of it from books, but you need to have a lot of experience doing it as well.

And so the marketing part is learning how to get the word out and get people interested in your product. And the entrepreneur is the person with the vision, and it is the person who can kind of make everything happen, whether they are doing a lot of the work themselves or whether they are just being the visionary and outsourcing them as they go along.

So those are the four things that would be great if they were four different people each gifted in those areas. But realistically, as a micropreneur, all four of them-one person.

Mike: So now that we’ve kind of talked about exactly what constitutes a micropreneur and what it takes to be a micropreneur, one of the things that we also wanted to talk about was what a micropreneur is not.

Rob: You know, the first thing that a micropreneur is not at all is not an Internet “get rich quick” scheme. A, you are not going to get rich, B, you are not going to do it quickly, and C, it is not a scheme at all. So it just has nothing to do with any of that stuff. I mean it really is a long term mentality of taking technical knowledge and applying it in an intelligent, formatted manner, and learning from experience, and, over a long term, building up one or more viable businesses that hopefully generate some income for you and provides some level of independence.

And again, whether that independence you want is just to have a couple hundred bucks a month to help make a car payment, or if ultimately you want to quit your job, that is going to take a couple of years, right? But it is not anything like an Internet “get rich quick” scheme or a work from home scheme or any of that stuff that you hear about online or on late night TV.

Mike: A second thing that we wanted to point out that a micropreneur is not about is being a micropreneur is not about venture backed startups or very high growth startups. It has absolutely nothing to do with any of these large or high competition niche markets. If you wanted to try and create the next word processor, going about it in as a micropreneur is really not a…I don’t even think it is a viable option, to be perfectly honest. I don’t even know how well Google is doing at it with their Google Docs against Microsoft.

Rob: Venture capitalists have portfolios of products, so they can afford for 10 or 20 of them to fail because they have the one that returns such a huge return for them. But when you are an entrepreneur, your portfolio is one company. Or, in our case, maybe it is a few small companies. But realistically, if you are going to go for the venture backed route, you are going to have one company at a time, and it is going to take you 3-5 years to do it, and it is going to take a lot of work and a lot of passion and effort out of you.

So how many of those are you going to be able to do in your whole life? You know, maybe two or three tops? And if the first two fail, you may not come back for a third. So it really is an odds game, and the odds are just stacked against you too far for us to consider the venture world viable.

So that is why, when we look at micropreneurship, the odds of you succeeding, if you do it right, and if you do it smart, are very high.

Mike: I almost look at a micropreneur as essentially a mini VC or mini Angel who has all these different products in their portfolio. And if one of them does great and five of them do bad, no big deal, because you have got that one product that is doing well.

And if you make these products that are small enough that address a problem in the market, something is going to do well. All it takes is doing the research, doing your homework. And essentially, what you are doing is you are spreading out your risks among all these different products. And if you get a product that only pulls in $25 a month, well, OK. Well, no big deal. But for every product that you have like that, how many others is it going to take before you find one that gets $1,000 month or two or three thousand dollars a month?

And the more of these small applications that you crank out, the better your chances are. And essentially, you become that mini VC of your product portfolio.

[music]

Mike: One of the reasons that Rob and I started to put together this podcast was because, individually, we have gotten a lot of questions over the years about: How do you go about finding a market? How do you go about selling your products? How is it that you have gotten successful and been able to do the things that you have done?

And today what we have is a question from somebody who asked us. Here is his question.

Aaron: Hi guys. This is Aaron. I have a question about competition today. I think a lot of people, including myself, get caught up in the discovery phase. At least for me, it has a lot to do with wanting to find that slam dunk-that product that is almost guaranteed to be a success.

What I am finding out is if there is a market for some kind of software product, chances are someone else is already out there offering a solution, and an even greater chance that there are multiple solutions.

So my question is: How much competition is too much competition? And in a related question: How do you compete with free, or do you? Thanks.

Mike: So Rob, why don’t you take a first crack at that one?

Rob: So the first part is: How much competition is too much competition? In my experience, there is too much competition when the cost to acquire a customer is more than you are going to make from that customer.

So if you have a 1% conversion rate, meaning you sell to one customer out of every 100 that come to your website, and your product is a $100 product, that means that every visitor to your website is worth $1. And if it costs you more than $1 to send people to your website, that means there is too much competition in the niche.

Mike: I think my take on it is that determining how much competition is too much competition is more of a judgment call based on your own personality as well. There are cases where going into a particular niche, there is a lot of competition and there is substantial competition. But if you feel that you can overcome the hurdles to garner attention from the people out there searching for whatever that solution is, by all means, go for it.

But you do have to do your homework. You do have to do the research and make absolutely sure that you are going to be tolerant of the risks that you are undertaking in that particular market.

Rob: Right. And I think a key point that both of us made there is neither of us emphasized “if you can build a better product.” That has something to do with it, but not a ton. Right?

Mike: [laughs] Yeah.

Rob: Really, the key factor is the marketing side of it-getting people to your website. Because you can build a better product and, frankly, no one is going to care. No one is going to hear about it. You have to look at the economics of the marketing.

To get a little more specific, Mike, you and I have talked about the cost of acquiring a customer. And it is like if you are a developer and you don’t have a site, you don’t have a product, how do you figure that out? And there are a couple of tools that you and I both used. One is the Google Adwords keyword tool where you can search on a term. And then you have to go to the exact phrase match. A lot of people go to the broad match. You go to the exact phrase match and kind of peek around and get a relative idea, although this thing can be off by an order of magnitude. But get a relative idea of how many people are looking for particular search phrases.

And the other tool that I’ve used that works really well is SpyFu.com. It helps you not only at…If there is competition in a niche, it helps you look at the keywords that they are ranking for and pulling in traffic for. It also gives you an idea of the Google AdWords they are running and the cost they are paying for them. So you can pretty quickly see: “Oh, they are paying $5 per click because they are in the wedding niche. So I really need to have a high conversion rate and an expensive product in order to make it viable.”

There is a lot more math to it, obviously. Maybe we can get into that in a later podcast. But those are some key tools that you will want to check out.

Mike: So the second part of this question was: How do you compete with free, or do you? And I think that that is a much more difficult question to answer, mainly because it depends so much on who you are competing against and what the specific product is.

For example, there are a lot of products that Google offers. I would not want to be in the business of trying to resell email at this point.

Rob: Run away! And an online office suite…I mean any of these things. Yeah, if Google has online calendaring, like, you are hosed. So if you are talking free like Google, then just consider it case closed.

Mike: But at the same time, there are also tons of email providers out there that are still making money because they actually have value. And this is the key part that I want to drill into, because I think that in the vast majority of cases-we can use email as a great example-you really are going to have a hard time competing with Google trying to offer email services, because theirs are free.

However, personally, I outsource my email. And I actually have a hosted solution that I pay for because I get Exchange Server with it. And it has all these advanced features and functionality that I like to use. And I honestly like having Exchange Server running behind my business.

So, for me, it works. And for the company that I am purchasing it from, they are obviously making money off of this, and they are reselling Exchange Email to me and making money off of it, and are successfully competing against Google.

Rob: I think that there are niches around where there may be a free provider that isn’t doing a very good job, and that you can come in and compete with them. I think the way to tell the difference is that if there is someone with venture capital in their back pocket and they are offering a free service, you don’t want to enter that market, because they have deep, deep pockets and you are not going to outgun them on features. You are one person and they probably have a team of developers. And they are using a freemium model, which is very difficult to get to work for micropreneurs. You have to have massive scale.

So competing with them, they are probably going to put out a good product, and I would say not to compete with them.

Mike: There is also the other argument. I saw Eric Sink from SourceGear answer basically the same question from a college student: “Well, why should I purchase a license for SourceGear when I can go out and get Subversion or any of these other open source version control systems for free?”

And his answer was basically that because buying SoureGear’s…you know, whether you are buying Vault or whether you are buying Fortress, that saves you time and money. And the reason it saves you time and money is because your time as a developer is worth something. And the only time that going after those open source solutions where it is going to benefit you is if your time is “worthless”. And I forget whether he actually used the term “worthless” or not.

But I mean he makes a very valid, worthy point. It can take time and effort to get some of these solutions up and running. And if you are working at a company where they are paying their developers $100,000 a year, they don’t want to have to deal with that stuff. They want to be able to call somebody and say, “Hey, your software isn’t working. How do I fix it? I’ve paid you for whatever the license fees are.” And they expect support. They expect somebody to stand behind that product and fix things when they are broken.

Rob: I can see the flames now. “Mike Taber says open source software is terrible! He says it’s worthless!”

[music]

Rob: Now it’s time for This Week’s Tip. So a little bit about this segment since it is the first time we are doing it. The idea of This Week’s Tip is that we are going to try to make this portion of the program about tools and tips that Mike and I actually use day to day. And we are going to try to relate our unique experience with the tools and tips. So Mike, what is this week’s tip?

Mike: The tool is called RescueTime. You can find it at rescuetime.com. And what this tool does is you install it on your desktop and it will track the things that you do while you are doing them. If you go to a website, or if you are playing games, if you are using Word or various parts of Office, or Skype, or writing email, what have you, this software tracks and categorizes all of the different pieces of software that you use. And it assigns values to them to say how productive it thinks that you are being.

And it keeps track of how much you have been working. You can have it set for 24 hours a day usage or only between working hours, etc. But because, as a micropreneur, you only have a limited time, typically, as you start, you have got maybe 10 or 15 hours a week that you can dedicate to being a micropreneur and to building up your products. So you want to maximize the effectiveness of that time.

So by measuring your efficiency, you can essentially help yourself to be more productive. And looking at my most recent efficiency rating, your efficiency can be rated anywhere from negative two to positive two. Email tends to be neutral-it tends to be a rating of zero. Games, I think, are negative two. Something like your IDE’s for development, those tend to be plus two. And you can customize each of these.

But my efficiency for this past week, based on 42 hours of work, was .81. The average user efficiency… which, I get an email every week, so my RescueTime weekly summary that tells me how productive I am being in relation to other people who are using the product.

The average user efficiency of everybody else was 0.10 for 43 hours and 12 minutes, on average, of work. Granted, this past week was a holiday week, so I wouldn’t put too much stock in the fact that I was eight times more productive than other people. But it at least gives me a benchmark to shoot for.

But you can find it, again, at rescuetime.com, and that is this week’s tip!

[music]

Rob: If you have a question or comment, please call it into our voicemail number: 1-888-801-9690. Or you can email it in .mp3 or text format to . Feel free to include your name and your URL if desired. A transcript of this podcast is available on our website: startupsfortherestofus.com.

If you enjoyed this podcast, please consider subscribing to us on iTunes by searching for “Startups For the Rest of Us.” Or you can also subscribe via RSS at startupsfortherestofus.com. We will see you next time.

Rob Walling and Mike Taber define "Micropreneur," a term describing a software developer turned solo-entrepreneur with a hint of marketer and webmaster.

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Episode 2 | Stupid Reasons to Start a Software Company

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[00:00] Rob Walling: This is Startups For the Rest of Us: Episode 2.

[00:03] [music]

[00:12] Rob: Welcome to Startups For the Rest of Us, the podcast that helps developers be awesome at launching software products, whether you have built your first product or are just thinking about it. I’m Rob.

[00:23]Mike Taber: And I’m Mike.

[00:24] Rob: And we are here to share our experiences to help you avoid the same mistakes we’ve made. So, Mike, what is going on this week?

[00:31] Mike: Not much. Just working on my product and trying to get it out the door. [laughs] I’m putting the finishing touches on that forum software relaunch.

[00:40] Rob: Oh, cool. OK. What’s the name of your forum software?

[00:44] Mike: It’s still to be determined. [laughs] It’s gone through two name changes and I’m still trying to figure out the third.

[00:49] Rob: Very good. Are you doing the development yourself?

[00:51] Mike: Mm-hmm.

[00:52] Rob: That’s fun. How much longer do you have?

[00:54] Mike: I would say maybe 20 or 30 hours total worth of work, or of development time, left. It’s mostly just finishing touches, like I said. But I rewrote all the back end’s database code and rewrote everything using stored procedures and redid a lot of things. So it just needed a lot of love and care, I’ll say. [laughs]

[01:14] Rob: Right.

[01:15] Mike: What about you?

[01:16] Rob: Well, you know, it is just after the first of the year here when we are recording, and so I’ve been taking a look at 2010 and figuring out kind of what direction I want to head with several of my businesses. And so I’ve been working on a marketing plan for DotNet Invoice specifically, and looking pretty in-depth at some adjustments I want to make to the way I’ve been marketing in the past couple years.

[01:37] You know, we did a redesign of the website and I think it came out pretty well.

[01:41] Mike: I saw that. I think it looks really good.

[01:43] Rob: Yeah, thanks! I just got that live, I think, in November. So now I want to push a lot of traffic to it because I want to do a lot of AB testing and improve conversion rates. With the old site, the conversion rate was so-so, and I think a lot of that had to do with it just wasn’t super-professional. It just kind of looked like a hacked together site rather than something that was professionally designed. So I think I’ll have much more of an easier time optimizing this site and getting conversions up.

[02:11] So that’s something I’ve been focusing quite a bit on. And then I also have an announcement to make. My second child is due in June of this year!

[02:19] Mike: Oh, congratulations!

[02:20] Rob: Yeah. Thanks a lot! I didn’t tell you about that! [laughs]

[02:23] Mike: No, you didn’t. [laughs]

[02:24] Rob: I am literally announcing it on this podcast. So that has actually given me the emphasis to look at acquiring a couple new websites or software products in the next few months and kind of getting them into my portfolio to make up for some time that my wife is going to take off and, potentially, some time that I’m going to take off, so I want to get them under wraps. So I am on the prowl looking for products and apps to acquire.

[02:48] Mike: Mm-hmm. Two is a lot different than one, I will tell you that.

[02:51] Rob: That’s what I’ve heard! Well, you know, I’ve heard both. I’ve heard that two is not as difficult because the jump from zero to one is way more than one to two. And then I’ve heard, just like you said, that it is actually a lot because you have to chase two kids around at once.

[03:05] Mike: Yeah, it just depends on how old the second one is at any given them. Obviously, when they are younger and they are not mobile yet, then it is not really that bad because you at least know what you are doing, kind of like business. You know, in any of your second products, as opposed to your first, you at least know what you are doing the second time around. But it still eats into your time quite a bit. Obviously, I mean you have to pay attention to a lot. So, you know, it is not like you can just put things on cruise control or auto-pilot! [laughs]

[03:34] Rob: Right.

[03:35] Mike: Well, good. That’s very exciting!

[03:37] Rob: Thanks.

[03:38] [music]

[03:41] Rob: Here we are in our main segment, and what we are going to be talking about today are three stupid reasons to start a software company.

[03:48] Mike: Yes.

[03:49] Rob: So Mike and I sat down and we’ve had a lot of discussions about starting software companies, launching products, and there are a lot of misunderstandings going on, maybe, in the developer community.

[04:01] Some people launch products for the right reasons, but most of us, the first one, we do it for the wrong reasons. And so given our experience, we came up with three reasons that we wanted to share with everyone.

[04:11] Reason number one is: having a product idea. And just having a product idea is a bad reason to try to start a software company. And the reason is that there is a big difference between a software product and a software project.

[04:27] Software projects are things that you build for fun, right? And you have this product idea and it is going to be fun to build; you want to use a piece of technology, typically is what the emphasis is. Whereas a software product is something that is actually commercially viable. It is something that someone will pay money for.

[04:44] And it is so easy to confuse these two things — product and project. And it is easy to fall into the trap of looking at a cool, new technology like WPF or even AJAX a few years ago and to say, “Man, what can I build with this?” rather than just start from a market need and to ask, “What would people pay money for?” and then going backwards and actually building that.

[05:08] Those ideas tend to be a little more boring frankly. Not as exciting. They don’t ignite our developer passion as much as using this cool new technology. So just having a product idea is not a very good reason to launch a product.

[05:21] Mike: A lot of things that I’ve seen and, quite frankly, done in the past, I guess distant past, thankfully, a lot of what I had done was just look at something somebody else had done or was in the middle of doing and say, “Oh. I could do that.”

[05:32] I think about the number one example in my mind is Ebay. How many people who are listening to this podcast have the development skills to build Ebay? And let’s be honest: granted, there’s a huge scale that you would have to deal with, but out of the gate there’s virtually no software product has to deal with scaling issues. I mean, no products have those sorts of problems out of the gate.

[05:52] So typically, what you do is you build a prototype or you start building this clone of somebody else’s successful product. And you do it because you either want to prove to yourself or to somebody else that you can do it or you think that you might be able to make money off of it. And the problem with it is that that’s a project. It’s not going to go anywhere because you haven’t really committed to building it into something that is going to make money. You’re essentially trying to prove to yourself that you can do exactly what somebody else did or do it better than they did.

[06:21] Rob: Yeah. I think a corollary that we should add to this is that an even worse idea to launch a software product is because you have a “feature idea.” Have you ever heard someone say like, “Microsoft Word is cool but it just needs to be able to do this.”? Or, “Ebay is cool but it really needs voice chat.” And so someone goes off and builds eBay and then adds voice chat and think that that’s going to make a big different. Whereas eBay can then in a week, implement voice chat and you’re out of business and they have the marketing and everything in place.

[06:50] Mike: Yeah, I mean there’s no feature that is compelling enough that can be added onto a product that will make that a compelling product.

[06:58] Rob: Reason number two.

[06:59] Mike: So reason number two: to get rich. We always hear about the person who wrote some stupid application that anyone with half a brain could have written and made millions. But this, in and of itself, is an awful reason to state a company, especially a software company.

[07:14] If you want to make a million dollars and you want to retire early, you need to do one of the following three things: either buy a lottery ticket, go to Vegas and put $500,000 on black or write a Facebook application, because that’s probably what it’s going to take. I mean, essentially, you’re gambling with your future. And most of us are really not gamblers, or at least we prefer not to gamble with our time, that’s why some people are geared for doing start ups and Angel or VC funded companies and some people aren’t, because they’re just not interested in gambling with their future.

[07:44] If you’re looking for a high risk, high reward situation, then by all means: Angel and VC funder ventures are a great way to go and there’s a number of other podcasts you can listen to that you would probably enjoy a lot better than this one. But if you’re out to get incredibly rich then starting a software company probably isn’t the way to go because it’s going to take a while and it’s not going to be something that you’re going to be able to do overnight.

[08:04] Rob: Yeah. And I think you touched on a good point there. Even over the long term, the odds of you getting “incredibly rich” are just pretty low. The odds of making a comfortable living…

[08:14] Mike: I think those are very high.

[08:16] Rob: I do too, especially over an investment if you stick with it long-term over several years. I think a lot of people would be able to do that. But yeah, you’re right.

[08:24] Mike: That’s a great way to put it, though. If you’re looking at building a software company as an investment in your future and if you’re building these smaller applications that gradually have value or you’re able to tweak them until you get them right and you’re able to start generating recurring revenue from each of those ventures or small businesses, many businesses if you will, that is going to take your portfolio, your software company, whatever you have, whatever entity you set up behind your software products and that will grow that into a investment for you.

[08:57] Rob: Stupid Reason number 3: because it sounds like fun. Starting a software company is a lot of fun; it’s new, it’s exciting. But running a software company is a lot like a relationship. In the beginning everything’s new and fun, but after a while you realize it’s actually a lot of work. It’s easily three to five times more work than you ever thought it would be. Now, why is that?

[09:22] It’s primarily because we’re software developers and we think that the bulk of the work is in building the product, but it’s not. Only about 30% of the total effort of what it takes to launch a product is really in the development of the software itself.

[09:37] Once you have a product you have to worry about selling that product. And it can take a long time to get to the point where you’re actually paying yourself for the development time you put into it. As an example, making money is fun, but do you get giddy every time you get a pay check? After a while, the novelty just wears off.

[09:54] Mike: It’s a lot of work. I mean, that’s the bottom line.

[09:56] Rob: Yeah. Starting a software company has been romanticized by a lot of the blogs we read. I started reading “Joel On Software” eight or nine years ago and I was under the impression that it was this really fun thing to do. And reading Eric Sink’s blog and a lot of these tales of people starting their software company or startup sound like it’s a ton of fun. And I don’t think we get a lot of…

[10:20] Mike: You don’t get the reality of it. You get the picturesque version of starting a software company from bloggers. I mean, they tell you about all the great things and you can get to see all the different places they go, and the things that they do, and the new products that they launch and you just get this heavily romanticized version of building a software company.

[10:40] What they don’t tell you about is the massive amount of bills that you have to pay that are associated with your product. I mean, they don’t tell you about the stacks and mountains of paperwork that you need to deal with at the end of the year with the IRS because they’re saying, “You owe us X amount of dollars because you made this much money last year.” Or you’re dealing with partnerships or things like that.

[11:00] Just the paperwork issues alone are horrendous, they’re terrible and nobody ever talks about those. Nobody ever tells you that you need to file paperwork every year with the state or with the government just because you own a software company. People don’t say that sort of stuff. What you hear about is, “Oh, I launched this new product and it was successful. We had 40 billion users on the first day.” That’s the sort of stuff you hear about. You don’t have to hear about all the back end stuff that needs to get done.

[11:23] Rob: Right. There’s a reason for that, because the backend stuff is kind of boring. If you’d blogged about it, it just wouldn’t be that interesting and that’s fine. But you have to realize that when you’re reading these blogs…And these blogs includes yours and mine certainly; I don’t blog about the boring…

[11:38] Mike: You’re right.

[11:39] Rob: …last week. I spend a few hours every month doing finances and stuff and I’ve never written a blog post about that. Frankly, because it really wouldn’t add much value and it would be kind of boring. So you’re right. It just doesn’t present a really clear picture of it. And as a result, I think a lot of people including myself, eight or nine years, go into the business of starting a software because it sounds like fun. And that’s why Stupid Reason number 3 is because it sounds like fun.

[12:04] Mike: Stupid Reason number four to start a software company is: you think, “How hard could it be?” You think that it’s going to be easy. You read all these blogs and this is something of an add on to reason number three, because it sounds like fun – but you look at all these bloggers who are out there, who own their software companies and are running them, and it just seems like it’s easy; it seems like success comes easy for these people. It doesn’t seem like what they’re doing is really all that difficulty. And as I said, you get this romanticized view of running a software company, building a software company, and it’s not nearly as easy as it’s made out to be from these blogs.

[12:40] Rob: The interesting stories out there tend to be your edge cases. The interesting story that a magazine, like Entrepreneur, or Inc., or Fast Company, or Business 2.0 back in the day, the stories they’re going to write about are these anomalies that don’t happen every day.

[12:56] If you start a company that serves the niche of helping paper companies organize their inventory, that is so boring and no one cares. And you’re not going to make 10 million bucks in revenue the first year, right? You’re going to build up slowly. It’s hard to get an interesting story out of that.

[13:12] Whereas the Facebook apps that have all these downloads, the iPhone apps, that’s what everyone’s talking about. And as a result, it seems like all you have to do is write an app because all these stories about these apps are filled with wild successes. It’s very, very rare you will see a story that is a dismal failure. And typically, when you see one that’s about a failure, it’s always in the past. It’s what someone learned from it and how they parlayed it into their present success. Right? Typically, someone has a success after the failure that they’re actually writing about.

[13:43] Mike: Right. I think you hit the nail on the head. All the publicity that’s around a lot of startups and software companies, they make it look easy. And you look at what they are doing and what they have done and the thing that jumps right into your mind is, “If they can make that successful, how hard could it really be?”

[14:01] One of the things I remember from a long time ago was looking at what other people were doing and what other people building. For example, one of my earliest companies, which was not necessarily a failure but wasn’t certainly a startling success, was I started a company to build computers for people. And it’s certainly not the sexiest business in the world, building a computer, but at the time there weren’t very companies or many shops out there that were doing it. And Dell was doing a horrendous job of it. They just could not build a machine to save their life. Everything that I worked on was always a Dell machine and they had hardware problems all over the place. Hard drives would fail left and right. Video cards would just bomb. None of the drivers seemed to work and it was just a mess. It was a nightmare working on all this stuff.

[14:47] And I’m like, “Well, I can do a better job than them.” And I did. And for probably, I’d say, about two years or so I was pretty successful selling these computers. And I was making probably on average about $300 per machine that I sold. And it was great money, because at the time I was in college and I didn’t really have any other income. And I was just selling several of these computers a month and doing reasonably well.

[15:10] And it got to the point where it was just a lot of manual labor and just wasn’t really worth it anymore. I felt like Dell was a bunch of morons. That’s really what it was. And I’m like, “If they can make a successful company and they’re doing an absolutely terrible job, then how could I possibly not be successful doing almost the same thing? All I need to do is basically do what they’re doing and do it better, and how could I possibly fail?” And I won’t say that I failed, but I certainly got to the point where I just didn’t want to do it anymore. It just wasn’t interesting or fun to me anymore.

[15:42] Rob: Right. Since Dell was the darling of Wall Street and the Internet back then, I’m sure it seemed like you could just build a better computer and you would be Dell soon. And that obviously isn’t the case. There’s more complexity to it than that.

[15:57] Now that’s we’ve talked about four stupid reasons to start a software company, let’s take a look at the right reason to start a software company.

[16:04] Mike: Is there only one?

[16:05] Rob: I think there’s only one and it’s to achieve goals that you define. So you can have multiple goals, but the reason to start a software company should be to achieve some goal or goals that you’ve decided on before you start launching that company. If you don’t have a clear understanding of what your goals are, it’s very hard to make decisions moving forward.

[16:29] Imagine that you’re driving west, you come to a fork in the road. Do you go left or right? That depends on whether your destination is north or south. If you don’t have a destination in mind it’s really hard to make those decisions effectively and to move towards your goals.

[16:43] I think another example is if you’re starting to build a product and someone comes along and makes a suggestion and says, “Hey, don’t you think you should get investors, raise 100 grand or 500 grand, and really go big with this thing and eventually have an IPO and cash out of this thing a multi-millionaire?”

[17:01] That all sounds great and attractive but if, from the start, you decided that your goals were to spend more time with your family, to leave a job that you didn’t like, to live where you want, to have income flexibility, and location independence and time independence, if that’s something that you really sat down and thought about and decided that those are your goals for starting a company, then the suggestion, while it sounds interesting, is something that you probably need to turn down. Or else, what you’ll find is that you’ll chase after this because it sounds so attractive, and six months or a year or two years down the line on your way to achieve this thing that your friend had suggested, you’re going to be really unhappy because you’re not going after what you really want and what you decided on up front.

[17:44] Mike: That’s kind of the difference between, “Do you want to be king or do you want to be rich?”, sort of.

[17:49] Rob: Yeah, that’s right. That’s a good point. And the thought behind king or rich, you want to go into what the difference is between being king or being rich?

[17:57] Mike: Sure. So if you want to be king then it means that you want to build up a company and you essentially want to be recognized for being the head of that company and be somewhat famous in your realm, so that speak.

[18:11] So, for example, Joel Spolsky is famous among developers for what he does at Fog Creek. Jason Fried at 37 Signals, same sort of thing. I mean I think that if you were to offer to buy those companies out, they would turn you down. And not so much because you wouldn’t offer them enough money, but because they enjoy being king of their domain, so to speak.

[18:31] Instead, if you look at somebody like Jason Cohen of Smart Bear Software, he got to a certain point where somebody came to him and gave him an offer that he just really couldn’t refuse. They said, “We’ll give you several million dollars for your company.” And he said, “Where do I sign?” because he made a decision at the very beginning that he wanted to be rich. He wanted to build his company, sell it, and then essentially retire early. And that’s exactly what he did.

[18:56] So the first step is to decide on your goals. The next step is to write those goals down. A study by Dr. Gail Matthews found that people who write down their goals had a statistically higher chance of achieving those goals than people who didn’t. And this research was based on a widely cited but completely non-existent Yale or Harvard study, based on where you hear it from, that there was supposedly 3% of the graduates had written goals at graduation day. And between 10 and 20 years later, those 3% had achieved a net worth of about 10 times what the other 97% of the graduates combined had achieved.

[19:36] And while this particular Harvard/Yale study doesn’t actually exist, the research done by Dr. Matthews shows that it really is true, not quite to the extent that this non-existent study would have had you believe. After all, I’ve never written down that I need to take a shower, but somehow I manage to get it done every single day, or at least most days. [laughs]

[19:55] Rob: That’s not what your wife tells me.

[19:57] Mike: That’s true, but she lies!

[19:59] [laughter]

[20:00] Rob: Well, but this is an interesting point because I hate writing goals down. It feels self-helpy and it just feels like, “What if someone finds these?”, like it’s a diary or something that I don’t really want to put on paper that could be potentially be read by someone else, because it just feels vulnerable.

[20:17] Mike: Is it because it would damage your reputation if you don’t get those things done?

[20:22] Rob: I don’t know. If you just write them down…Let’s say I wrote them down on a piece of paper here in my office and I didn’t put them online or anything. I’m not so worried about reputation…I guess it just feels cheesy to me. It really does. I know that sounds odd, but that’s why I had never written goals down before just a couple years ago, actually. And one of the reasons I’m now a fist pounding proponent of writing them down is because this worked for me. I’m not only a client, I’m the president.

[20:49] Mike: That sounds like the Hair Club for Men.

[20:51] Rob: It was! I really believe that writing down your goals is important, because a few years ago I broke down, I wrote them up, and the interesting thing is that I had forgotten about them for maybe six months or a year. And I came back to them and most of them had come true. And so, you know, I’m not 100% sure what happened there. I just know that I wrote those goals down and I’m very happy I did achieve them. So I think this is a key part…

[21:17] Mike: Of your success?

[21:18] Rob: Of your success. Yeah, of getting stuff written down and getting started with your company.

[21:24] Mike: Well, I don’t think that writing your goals down is very much different than using some sort of project management software to keep track of all the things that you need to get done. There are all these project management software packages out there and typically you set them up and say, “This is the goal I’m trying to reach; these are the tasks that need to be executed in order to get there.”

[21:45] Rob: So one short term goal that Mike and I have discussed, one thing we propose to people who are thinking about launching their first product, is to strive to build a product that generate $1,000 a month profit with less than 2 ½ hours per week of support time.

[22:02] This is a reasonable and an attainable goal, and it has a number of benefits. First thing is it places a value on your time of about $100 an hour. This is also a quantifiable goal, which is a good thing.

[22:14] Second, the $1,000 per month revenue is not millions of dollars. It’s virtually impossible to make a huge amount of money from day one. And if that’s what you have your sights on, you’re going to get discouraged quickly.

[22:26] Your first milestone is one of the hardest ones to achieve. It gets easier over time because you know more about what you’re doing, you’re going to start making fewer mistakes, but setting an achievable and quantifiable first goal is very important to making this whole process work.

[22:45] Mike: It’s just easier the second time around. And I think the only other thing I would add is that what you said about the first milestone being the most difficult is absolutely true. As you do things more and more, you get more comfortable with them. And repetition certainly helps. And I’m actually on my fourth business at this point and every business that I have started has done incrementally better than all the previous ones.

[23:13] And if I were to probably quantify it, I would probably say that each business that I have started is probably more successful than all the businesses I started before each of those. So my second business was more successful than my first and my third business was more successful than my first and second business combined. I think it just takes repetition and experience, and you don’t get that unless you actually get started.

[23:38] Rob: And I think the first time that you start making any money from a product that you launched or a business that you started, and whether that is $100 a month or a $1,000 dollars a month, you passed a milestone. And the next time you try to do that with a business in the future, it’s so much easier to get there. There’s this mental hurdle that you don’t have to clear again because you’re already cleared it.

[23:58] Mike: Do you think that’s because you know that it’s now possible, now that you’ve reached that $100 or $1,000 a month?

[24:04] Rob: I do think so. I think it has a lot to do with maybe some self-confidence and believing that you can do it, as well as the mental hurdle that we all place in front of ourselves not believing that it can be achieved.

[24:17] I’m sure you’ve heard the story of Robert Bannister. He’s the guy who broke the four minute mile. And people had tried for years to run a mile faster than four minutes and no one was doing it. And as soon as he did it, in the next year there were half dozen or a dozen who broke it. And for years before that, no one had done it.

[24:36] So there’s this big mental blockade that we put in front of certain feats. And no matter how much someone tells us, “You can make $500 a month,” or “You can launch this product,” or “You can be successful,” you just don’t believe it until you’ve done it yourself. And then once you’ve done it yourself, then that hurdle is gone; the wall’s broken down and now you can move forward much easier the second time.

[24:57] Mike: Did you say Robert Bannister?

[24:59] Rob: Yeah.

[25:00] Mike: It’s Roger Bannister.

[25:01] Rob: Is it really?

[25:02] Mike: Yes.

[25:03] Rob: Roger?

[25:04] Mike: Yeah, Sir Roger Gilbert Bannister. You’ve been misquoting for years. [laughs]

[25:09] Rob: I have! That’s terrible. I always thought I was named after him. I was his namesake. I’ve been robbed!

[25:15] Mike: [laughs] No pun intended!

[25:17] Rob: No pun intended! All right. Roger.

[25:20] Mike: It’s funny, because when you said that, I’d never heard of him. [laughs] So setting a dollar amount as a goal is obviously one of the things that you can do. But something else that you can do, completely unrelated to money, is trying to get users for your product.

[25:33] There is no shortage of companies out there that are putting their software out there and choosing not to even charge people for it. They are essentially using a free pricing model for their software. You can choose to pay for it, donation — that sort of thing.

[25:47] But you really need to set a goal. And whether that goal is a monetary goal or whether you just want people to use your software, people to use the things that you build. Maybe there is a particular problem that you want to solve. Whether you are trying to make money from that particular product or not, you need to be able to set those goals.

[26:04] So even if your first product you’ve decided, “Hey, you know what? I want to build a software product and I’m not trying to make any money. In fact, I don’t want to make any money from this product. The only thing I want to do is learn the process of how to take a product, build it, put it out there, and market it.”

[26:18] And you can take that knowledge and, as I said, your very first milestone is the most difficult one to get to. And if you can take a product and you build it, and it is a completely free product, you get it out there and you get 10,000 people using it, well, that sets your level of expectations for the next product that you build, because you know that you can get 10,000 people to use your product. Although, sure, there are people who are using it for free, but there are going to be people out there who are willing to pay for your products.

[26:47] Rob: I think that is a good point. It is a good reminder that this is certainly not all about money, right? It is maybe not even a little bit about money for most people. I mean it is about enjoying building and launching a product. It is about learning a lot of new skills. And ultimately, it may be about independence.

[27:04] Mike: It goes back to your goals. It goes back to deciding on what your goals are and whether your goals are to work for yourself, work for somebody else. It is interesting that we are talking about this, because I had somebody who was chatting with me last night online. He is fresh out of college and wants to become a sales engineer.

[27:21] And I had him into my office. I interviewed him. I actually know him personally. I then offered him a job at one point. He ended up going to another company. But one of the things that he was interested in was becoming a presales engineer. And for somebody fresh out of college, that is very difficult. And it has nothing to do with talent. It has nothing to do with ability. It has to do with where you are in your career.

[27:44] And because he’s coming fresh out of college, nobody is going to give him a presales job where he is trying to sell enterprise level software. It is just not going to happen. And the reason is because he is too young.

[27:55] And it is sad to have to say that, because obviously, that comes down to age discrimination. But you and I both know that somebody coming out of college is going to be given, essentially, grunt work to do for several years until they’ve essentially proven that they are capable of doing other things.

[28:12] So essentially, I laid it out to him and I said, “You need to decide what your end goal is, and then, from there, back off a bit and say, ‘OK, well how do I get there?’ And based on what your final goals are, map out your path to reach those goals.”

[28:26] [music]

[28:29] Mike: If you have a question or comment, please call it into our voicemail number: 1-888-801-9690. Or you can email it in MP3 or text format to . Feel free to include your name and URL if desired. A transcript of this podcast is available on our website at startupsfortherestofus.com.

[28:53] If you enjoyed this podcast, please consider subscribing to us on iTunes by searching for “Startups For the Rest of Us.” Or you can also subscribe via RSS at startupsfortherestofus.com. We will see you next time.

Mike Taber and Rob Walling discuss some good and not-so-good reasons to start a software company.

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