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Designing the Ideal Bootstrapped Business with Jason Cohen

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so what I would like to do to kick this

off is talk about what I think a

so-called perfect the bootstrap startup

is and what are those attributes what

does it mean in terms of making money in

terms of going to market in terms of

acquiring customers and why could

because I think most companies don't

work and just like heat and said in the

in the video they're most companies for

one don't build something people want

but I think it's even worse than that I

think they also maybe are building

something people want but not in a

structure that lends itself to

bootstrapping that is not in a structure

that lends itself for low money low time

and all that kind of stuff either and I

feel like a lot of companies fail just

because it's not a good fit for the

resources and constraints and advantages

that you have having a small company and

as Rob alluded to I've built for

companies by bootstrapping and all of

them made more than a million dollars

all of them are a year all of them are

profitable two of them were sold even my

current one WP engine was the same and

then I went and joined the other side

and I raised some money and we're trying

to swing for the fences now which is a

whole new challenge but I did bootstrap

it to this point before raising money so

it still counts as far as this is

concerned so this is how I think about

um what it means to do this and by the

way we were talking to heatin last night

he says I don't like bootstrap I don't

even know what that means anymore it

sucks and I don't like it like it like

someone said in the video

I don't like lifestyle business because

there's just pejorative implied there

and I agree with that and so Heaton

suggests that see now I'm stealing

Heaton's thunder and he's gonna go talk

tomorrow and not have anything to say

but oh good he seemed happy though but

Eaton said let's call it self-funded I

said yes that's good self-funded and

maybe that means little friends and

family maybe that means a little bit a

little debt but not the kind that you're

giving up any significant amount of your

company for self-funded so let's call it

that I think self-funded anyway so this

is what I think of as a self-funded

company I think the right mind frame is

the frame of mine is to say that it is a

cash machine meaning a predictable way

in which you're going to make profit

every month and this is what I mean how

many people in here currently have a

business where if you did nothing next

month you stayed in Vegas and went crazy

business would make ten thousand dollars

in revenue next month for sure like

without any doubt at all how many oh not

bad but still not more than 20% I'd say

and that's that's kind of the point I

mean look at this audience of folks who

can afford a fairly expensive ticket and

all this to come out here and still it's

almost impossible to hit what I just

said which is barely really enough to

just quit your job which is maybe the

first kind of a goal you might have in a

self-funded startup just people to focus

on it full-time there's probably a

biggest goal and especially if you have

a family or something like that where um

it's it's especially you know it's

especially interesting to you to to make

this company work so this is this is

what I want to talk about building for

the whole rest of the time something

that predictably and repeatedly always

gives you $10,000 a month per founder in

revenue and hopefully more like 20 30 40

that sort of thing and how I see

building that and to be fair um this is

exactly the constraints I put on myself

with WP engine and even the company that

I didn't do before that because I

couldn't find a way to make these

constraints fit and decided therefore

it's not a good way to self fund

something so first I want to talk about

revenue models and this might be pretty

obvious but um my third company smart

bear was what you might call one-off

software you bought it you downloaded it

and you don't really come back

maybe there's upgrades maybe for

enterprise plans you get 20% per year if

you really hackle them and they really

care about the features you added but

more or less every time the month turns

over you have to start from scratch for

revenue this is of course the opposite

of a cash machine as far as I'm

concerned and I can tell you that smart

bear even after having millions in

revenue and therefore probably should

have felt pretty comfortable each month

that we'd be ok I literally would wake

up in the middle of the night wake up in

the night panicked wondering how am I

gonna cover payroll in the this month

and I felt that way when was just me for

two years and I felt that way 7 years

later when was a team of 12 and all that

I still felt the same way it never got

better ever ever and it's a horrible way

to live I had it's horrible so I don't

like that so of course recruiting

revenue we don't have to gonna have to

compete you over the head about that no

kidding that's what it means to get much

to know I'm going to have money

is that it's recurrent but I think the

details around this are not obvious I

want to get into what specifically I

mean because you probably have heard of

this thing that Kevin Kelly first the

thought of called a thousand fans and he

said you know all these artists

especially especially musicians who want

to get away from the labels they they

could get away with labels if they could

just get a thousand rabid fans to to buy

like one or two hundred dollars a year

worth of merch and going to concerts and

stuff like that and that's all they need

and they wouldn't need labels or

anything it because what they really

want I mean sure they want lots of money

that'd be great but considering right

now they are have to have a full-time

job and barely can do the band versus

okay I don't have ten million dollars in

the bank but I'm doing what I love which

is just playing music and traveling the

country that's an amazing shift and all

you need is a thousand rabid fans this

isn't this is a really romantic

fantastic concept and so Seth Godin got

ahold of it and he's like that is and so

he posted it and then it got really

popular and that's where everyone heard

about it more or less the problem is

that a couple of weeks later kevin kelly

redacted the whole idea he said you know

i was inundated with information from

actual artists and they said this is

completely not true and first of all you

can't even get people to give you 100

200 dollars a year it's hard you can't

get a thousand rabid fans you can get

like 30 or 50 of your you know your

friends and family and stuff but

actually a thousand fans super hard to

get a thousand people at any price point

is really hard how many people in here

have over a thousand customers ooh not

bad how many of them give you $10 a

month or more $100 a month or more right

it's really hard to get 10,000 of

anything and really hard to get you know

a you know a decent amount of money and

the other thing was even if they did

have the the you know one or two hundred

dollars a year times a thousand so to

you know say call it $200,000 not enough

to cover all the expenses for traveling

around doing paying a couple of band

members and stuff it actually isn't

enough so unfortunately Seth it was it

was not in his interest to redact his

own thing so he didn't Seth didn't say a

thing and so it was stuck in everyone's

mind that

thousand rabid fans is a good idea and

no one read the thing that said actually

it's not so I'm gonna propose a

different thing instead that let's do

one hundred and fifty fans or really

hundred fifty customers right and you

can do one hundred fifty for sure and

because first of all you can get fifty

just by scratching and clawing and going

to these kind of things and talking to

people and you know I did things for

Debbie pangaean for example where I

literally called our sorry email people

I'll give you the exact technique I

would go to LinkedIn and I'd find people

who are consultants in WordPress because

we're WordPress hosting and I would send

them the following email I'd say hey I'm

a founder of this new WordPress hosting

company it's supposed to be designed for

folks like you so I'd love to talk to

you about your pain and your needs into

the you know customer development stuff

right and then I'd say now I know your

time is valuable you're a consultant and

so I absolutely do not want you to feel

like I'm just trying to grab time from

you I am very happy to pay whatever you

think is fair for an hour of your time

even if that's more than your normal

hourly rate because I appreciate this is

a weird one off thing so I I literally

don't care but I'm very interested and

here's what happened I set 40 of those a

hundred percent of them agreed to talk

to me on the phone and I actually talked

to you know thirty-eight the rest didn't

schedule or whatever but there's a

hundred percent positive response rate

and 38 of the 42 me and zero of them

asked for any money in other words I was

just respectful of them they were happy

to help so that's obviously only one

technique but it's a pretty easy one to

use for pretty much anything so this is

what I mean you can scratch and get

there with the with the idea for a

company I had before um WP engine I

couldn't find enough people to give me

money and so I gave up

both WP engine I was able to find 3040

people who agreed to give me $50 a month

if I built this thing before I had a

company name before I had a PowerPoint

presentation before I had any employees

before I had a server invited anything I

already had 30 people doing that and a

capital factory which is an incubator in

Austin that I helped start I tell

companies every single year to do this

and usually about half of them try it

and you'd be surprised how many times

you can get 20 or 30 people to give you

a check right there for something that

does not exist if the idea is in fact

solving a pain that they really have

which of course is the measure anyway so

you can get 50 people

and you can you can do you know guest

posting on certain blogs and other

social media stuff I actually don't

think you can get a lot around that I'll

talk about that later but you can

certainly scratch and claw a little bit

out of that and then finally you're

gonna have some kind of marketing even

if that's as mundane as Adwords and or

special ads on a particular you know

particular sites that are relevant to

your thing or something like that you

can scrape that together again if you

can't scrape that together over a period

of months of course but if you can't do

that then I would argue that it's gonna

be hard to make this a company ever and

so if it could be a company ever in 75

not not hard to do but the other trick

is okay great I can get 150 but the goal

remember is I want a ten thousand

dollars a month in revenue and so this

makes a very obvious formula that I need

to charge what is what may feel like a

lot of money seventy dollars a month say

on average and again a lot of people who

are self-funded realize that their

product that doesn't have a lot of

features and it's kind of shitty and the

support slow because it's just you and

like actually everything about it is

kind of shitty and so I'm not worth the

charging a lot of money and so you know

you feel like a home and in charge 19

dollars a month

nine dollars a month and often that's

coupled with but I'll get thousands of

customers which is of course again very

hard so my argument to you is that

that's that is not a good idea that's a

difficult way to go and the easy ways to

decide how it is valid to charge a lot

of money and the good news is this is

something that Erica Douglas is going to

talk about for her entire talk and in

fact several other people I believe

we're going to touch on this and I'll

even throw out a few things you're

getting a ton of ways to do this so you

have no excuse not to so one example of

doing this is exactly the price points

that we did at WP engine we got started

which are those and just having

different tiers with crap and um you

know of course it'll vary by product but

more features or more a more volume of

stuff segmented by customer type that

sort of thing the usual tearing kind of thing

thing

those were our tears and our average

revenue per customer was more than $100

a month with those particular tears

this is what I mean right another

example is charge a lot for the product

ninety nine even $1.99 but then have

coupons and specials all of the time one

thing we tried doing once is we it we

had that $49 one what we did is

wrote 79 and then crossed it out and

said 49 in sales went up right the same

thing it just kind of makes it feel so

that's what I mean right

or it make it ninety-nine a month and

that's fine except you go to you go to

bloggers and such and you give them a

coupon for their readers which will give

them 30 percent off for a year which

again just gets you back to the 66

average that you need but everybody

feels like they're getting a lot more

value right so there all kinds of the

Internet's full of tricks like this I

suppose and you'll again you'll hear a

lot more but the point is you got to

charge more money there's lots of ways

to do that this is no excuse and then of

course the nice thing is if you do get

to 150 surely that's not the ceiling

even in a tiny niche and if 150

baguettes up 10 grand then you can see

oh well yes that's a good that's a good

point to go for only because then it's

very clear that you could get to 15 or

20 probably who knows about a million

and who knows if you even want to do

that but certainly you know you can get

a nice stable company that way and so

again I don't want to beat up the the

price thing too much because you'll get

more of that but what I do want to do is

is put one word in your mind about this

and that's Boutique because you think

about outside of the tech world what

does this mean what's a similar thing a

shop that's only got one or two people

in it and it's super expensive and it's

barely ever open because it's just them

it sounds like a micro business if any

kind of it can't answer the email we're

here at work so you're not open kind of

right and but you get incredible

attention and the work is amazing and

it's unique and it's special and you

feel good helping out people who are

really making a go of it and so you

don't mind that it's three times as

expensive as it should be for a dress or

whatever the hell it is right Boutique

so you can be a boutique consultant like

Patrick McKenzie you can be a boutique

anything right so this thing even a

lawyer right the independent boutique

lawyer is a thing and so I think this is

a nice positive way to say yeah this is

why it is ok to spend money and this

this now dovetails with this with the

talk I did last year about saying you

know if you say I am just one person

who's really making a go of it that's

the kind of thing that actually lets you

charge more money because people go

that's awesome because startups are cool

right now aren't they and so people want

to give you more money Boutique

okay so staying with the concept of

revenue but moving around a little bit

away from the model I want to talk about

cash flow obviously very important for

any company but in particular

self-funded one because you don't have

cash that's the deal

and you know cash is king we're not

going to talk about that but since cash

is king you have to use the annual

prepaid trick how many people have are

using annual prepays right now very few

that's interesting okay have to do it

you have to it's required by law it

turns out um because let's suppose you

figure out a way that you could spend

$300 and acquire a customer on average

that pays fifty bucks a month this is

actually pretty easy there's a lot of

clicks on Google ads or that you know

that's like one blog post that content

Lee writes that you post somewhere you

only need one sale from it you know this

is this is actually a pretty easy bar to

reach $350 a month but if that's true

you if you can spend that to do that

then if you've spent 60 grand right now

if this was a perfect little model if

you could you'd get to your ten grand a

month run rate right now just kind of an

interesting thought if you think of it

in that way and so what happens with

annual prepay is you can actually do

that because if you think about it if

you put up on the site and say alright

if you sign up now for annual then I'll

give you two months free so okay you

collect less money over the over the you

know imaginary course of a year that's

true you can collect sixteen percent

less money okay two months but the deal

is that you pay the 60 K for the for the

signups and you get 100 K in cash now of

course if you waited over course a whole

year you would eventually get 120 K

which is more but that means that right

now you get 40 K in the bank right now

you get your already to your goal and

you have 40 K in the bank to go deploy

on other stuff like more advertising or

developing something or hiring a

designer finally so it doesn't look like

ass or whatever it is you're gonna do

right like it's so having 40 K today now

no cash flow problems is always worth

that what you would have had you would

have had 60 K over the next 12 months

always every single time that's actually

true of almost any SAS business period

but in particular it's true of

self-funded businesses so you have to do

this now this is imaginary you can't

make everyone do this right and so I'll

give you some hard figures this is

exactly the numbers that we get at

wpengine so you can see what I mean

one quarter of our signups that come

through the website elect the annual

prepay by revenue so that means 75% of

the time it's true I only collect one

month of revenue from the customer that

first month and a quarter of the time

though I get ten times one month right

not twelve because it's they give us a

discount and so math is pretty simple I

get over three times the cash flow every

month that I would have had and in

particular the way that our with the

cost of our customer acquisition we

actually collect more money in cash

every month then it costs us to acquire

those customers just like the previous

math that is exactly what happens and so

we literally operate with an infinite

marketing budget the marketing budget at

W engine is not limited by money because

we'll make it back in fact we make its

negative one months because I make the

money in credit cards today gets

deposited in the bank right and then the

credit card for stuff like Adwords

doesn't hit till next month does it

actually a negative one months of cash

flow on that it's okay and so can you

I'm saying now look maybe the ratios

won't be the same but any number of

people that elected annually is a lot a

lot better and lets you deploy that

money right away so by the way we can't

do infinite marketing though because

we're constrained by other things like

human beings we actually stopped our

marketing at some point because our tech

support organization was so overwhelmed

with tickets that we were giving people

bad service which I suppose is a good

problem to have but it's a problem

anyway anyway so it's very realistic

that this is the case and I absolutely

think you have to do it and so let me

give you a couple of extra and tips and

hacks of how to get people to do annual

more as we do a really fun one is you

make a coupon again to give to other

sources like affiliates and bloggers and

stuff like that people who might send

you traffic and you give them a coupon

that says your readers can get three

months free you if they sign up for an

annual prepay and of course the coupon

has to only work in that case of course

you're giving them two months free

anyway so three months is not that much

more but it's a big incentive for people

to come up and do it and if it only

works on annual it's a big cash bump

so that's one see another one I told

this to a company a capital Factory um

so they were charging I believed $29 a

month and I said well and they were all

sorts and they had something else like

they didn't have annual prepay at all

and I said well no no I take it back

they were charging $99 a year and I said

oh okay well um why don't you charge $49

a month and then make the annual

discount like half off like it's it's

six months free just make it ridiculous

so they did and signups didn't change at

all like the number of signups I mean

didn't change at all in other words

everyone was perfectly happy to see a

higher price monthly and then receive a

much much bigger price annually and all

of a sudden that happened so if you're

worried about that annual net number is

too big then just raise the monthly rate

a little bit and discount the annual lot

so that it feels like a terrific deal if

people pick the monthly fine you just

raise it a lot so great and if they pick

the annual they feel like it's a good

deal so he encouraged them to do exactly

that right another thing I did at a

capital factory and this is what I was

just confused with um is that the

company was charging I think it was $50

a year and I said just make it per month

and see what happens and they did and

signups didn't change at all again this

is just like raising your price do it

and then he said okay well now do an

annual and again like you can give what

kind of discounting you want so I got to

do stuff like that I'll give you a

couple more hacks ARPU stands for

average revenue per user that comes from

telco that's just another way of saying

revenue per customer just a couple of

extra hacks on this because again this

amount of money that you're charging per

customer is the most important metric I

think in your company it's going to be

more important than things like

cancellation rate even and other things

like that when you're small this is the

most important thing that will move the

needle on stuff and again you'll hear a

lot more in this whole conference so

that's good so one thing is just raise

prices yet another story of here is

there was another capital factory

company because see there's a hundred

companies and have a factory to

understand so that's why have a lot of

stories in there but it's good it's a

corpus of lots of things lots of people

bootstrapping and

and they were charging 19 dollars a

month and I said well double it and see

what happens no no you understand like

just well do it for a week and if no one

signs up it's cool they're just the only

getting one or two sign ups a day

anyways like it won't really matter so

they doubled it to 49 or whatever it was

and signups didn't change at all they're

like this is great I just doubled

revenue yeah what are you gonna do now

they said oh I'm gonna buy a lot of

Adwords do all this stuff and it's like

no you're gonna double it again or at

least fifty percent or something until

something else until something bad

happens right and we just raised the

damn prices that's one of them there's

other things this is this is when Erica

taught me actually say so maybe I'm

stealing her stuff but you have the

tears highlight the middle you've seen

this on lots of websites right you

highlight the middle one and people tend

to get it instead of the lower one have

really big one on the end for people

that really want they just decide they

always want to spend the most money

people will do that it's nice another

one from Erica is called the most

expensive when the business plan and the

people with businesses will sign up for

that automatically it works and if you

go to our website you'll see exactly

that thanks Erica

and so there's lots of tricks and again

you'll see a lot more this this uh

during this conference another hack a

lot of people have free trials 15-day

free trial 30-day free trial that make

sense customers want to test stuff out

first no one trusts anyone that's fine

um but I hate free trials actually for

especially for bootstrap companies

because you never get that money back

most people that sign up with a credit

card will stay if that's not true by the

way something is incredibly poisonous

fix that part and don't worry about

there as this right but if that's true

then that means most of the time when

they give you their credit card you're

giving them fifteen or thirty days for

nothing and you're never gonna charge

them for it so you just lost the money

and that sucks so I don't like trials

but you have to give them something so

we switched to a 60-day money-back

guarantee instead of a 15-day free trial

and in both cases we took the credit

card or originally and when we say but

we won't charge you until the trial is

over and the other one we just charge to

charge them anyway and said we'll give

you a refund and much more time and

sales went up and people would email us

and say you know that 15 days didn't

seem like enough time now that I have 60

days I decided to sign up

but I'm charging you more like don't do

it like I did yeah they don't it's more

time and so you get more money and

actually it's it's a pretty interesting

and let me give you some data to back

this up I'm like I have no time access

and no X and y-axis isn't that nice

that's because it's not gonna give you

too much information of you fans and

works but this is our number of

customers graph and there's a pretty

obvious change point right there

and that was about January of last year

we added a 60-day money-back guarantee

instead of a trial we changed our tears

around a little bit like you saw a lot

of that again is due to Erica we added

that business here when you rename the

tears including business look right and

this is not even revenue is this number

of signups right revenue is even better

right but number of science in other

words no it's not like well we charge

more of a fewer people signed up in any

of that math no all of it went up now

again won't always be like this but the

point is people are so scared of

changing prices or did it it's like no

just do it and look at it and like that

and the final thing I'll say on revenue

is I don't like any kind of self funded

startups in which the the revenue model

is anything like what I call picking up

pennies which is stuff like Kickstarter

where I'm gonna have all this activity

and money's gonna move around and I'll

just I'll just scrape off the top or

I'll have a donation site and people

will send money and I'll get 1% and the

reason I don't like it is actually that

nicely demonstrated by Kickstarter they

did over a hundred million dollars of

funding of stuff last year which is

really cool except they only made six

million dollars and that wasn't even

enough to cover their cost so they lost

money and so they have to raise more

money and Kickstarter is one of the most

successful examples of a you know kind

of quick growing um you know picking up

any sort of a company and even they they

can't make money really add it I just I

don't like that maybe a scale at out

other things maybe for raising money

maybe all that but not not this kind so

I don't like anything like that I like

it when you go get customers and charge

them lots of money that's what I want so

so now I want to set revenue aside and

talk about markets what kinds of goat

what kinds of markets to me are

conducive to a cash machine company and

again everything you know there's

exceptions to all rules and stuff like

that but I feel like there are some

markets which are intrinsically

difficult to build a cash machine in and

markets where it's intrinsically easier

and so I just want to go through this

and the first thing is this question of

like should it be B to C or B to B

meaning do I sell to other businesses or

do I sell to consumers and I want to

make a very strong argument that you

should absolutely never not not not sell

to consumers people don't spend money on

stuff I mean Gmail is like one of the

best and perhaps the best you know

online mail thing that has ever existed

that ever ever and they started charging

people five dollars a month knowing what

did crazy I know five dollars a month

for the most amazing email that exists

App Store is a good example again I

remember reading a review of an app that

I was gonna buy it's a one dollar 99

cent app and the review said this is

terrible it didn't have this feature

whatever maybe if it was 99 cents it

would have been worth it but not at a

dollar ninety-nine it's like that's the

consumer market that's the deal this is

not conducive to seventy dollars a month

right that's what people pay for their

time warner bill and even then they

complain about it like an suit it's too

hard to do this in consumer back up a

fly another good example they make they

make back they back up stuff that's a

good that's a good cell phone kind of

company right backing up stuff I think

so except they sold the consumers and

they only charge $40 a year to back up

everything couldn't be done damn it so

they switch to doing business um and if

you think about all the companies that

that you that you might um you know

follow or idolize in this in this sort

of self-funded thing like 37signals and

fog Creek and lassie and like in you

know all the all the people who spoke

last year and all that kind of stuff all

my companies they're all b2b there's not

a b2c one in there in fact on the

speaker list like right off the bat

every single person in here almost is

selling b2b and the thing about but not

Patrick right because he's got the be no

car crater that sells to consumers

except talked to Patrick about it and

right please just don't do that is what

he says don't do that so now he's

telling scheduling software people that

have businesses so he's now in the b2b

camp - and then you have Rob and it's

true that robbed these cell towels and

online and stuff like that the consumers

like it fair enough

except he ditched all that and now he's

telling invoicing software that's b2b

and then hit and then hit tail which is

b2b and now a new thing which is B - B

so it's BV its b2b that's the deal all

right that's that's all I got all right

so let me give you some markets I like

and don't like so first of all I don't

like any market in which the pain that

the customer experiences is temporary

where we have to catch them in a certain

point in their life we had a company go

through capital factory that sold this

really neat thing we took your wedding

photos and it made videos out of it it

was inexpensive it was really cool every

single customer that used that everyone

said it was awesome they would do it

again and made a testimonial everyone

and who cares because you only get

married what twice three times so it's

not that's not enough of recurring

revenue right and the problem is you

have to catch them right like while

they're planning their wedding

well you and everyone else on earth

trying to sell things to Brides and you

know they spent a lot of money you know

a lot of big humming spending a lot of

money trying to get in front of Brides

right it's hard to go get in that point

of time and go sell the thing and it's

not recurring I don't like that events

is another one you constantly see ice

constantly see startups trying to sell

stuff to people who do events and they

it's hard to do that it's only once a

year and most it's difficult another

another kind of different example of the

same thing at my company smart bear

after we sold it we started acquiring

other companies and and one of them was

a code profiler which is a tool that

tells you how you're if your software is

running slowly why that's useful of

course and so what what happened is

there was a free trial so what happened

is there's suffering slowly and they

search for a profiler they get it they

go fix the problem hooray what a great

tool except I'm still in my free trial

period and now we don't have the pain

anymore so you can buy and it's very

difficult to get them to get recurring

or something because the thing isn't

recurring so temporary pain so if it's

not a continuous pain I like it

so sort of conversely I like things not

necessary pain or but they value is

itself somehow naturally recurring so

that it makes sense that you would

continue charging in a recurring manner

so one example is if the costs of the

service itself is recurring which is

like wpengine

are a hosting company because obviously

we have servers and bandwidth and stuff

like that and that sits there and fans

have to spin and amps have to move

around and stuff like that and so like

clearly there are costs and so it

clearly we charge you every month

there's no doubt about it and the only

question is how much there's no there's

no like it should be free like it's not

even it doesn't even come up because the

costs themselves are ongoing another

example are anything tied to financial

cycles invoicing reconciliation taxes

reporting metrics compliance HR admin is

like a ton of stuff that sort of

attached to financial cycles monthly

quarterly annual stuff all those again

there you have to do it and so anything

that goes into that role is good

invoicing software is is you know Rob's

invoicing software is a good example

another fun data point on this there was

a study of thousands of mobile apps that

somebody did and they asked how much

money they were making here's a here's

one I know most people here are doing

Web Apps but still there's a funny data

point they asked thousands of mobile app

developers how much money do you make in

your app and thirty percent of them said

zero dollars and another thirty percent

said I don't know so from that same

study that's interesting maybe a ward

away from from the mobile app thing for

recurring revenue maybe but in

particular apps that were IT focused

averaged a fifteen hundred dollars a

month in revenue and apps that were

financed based averaged six thousand

dollars a month so again finance cycles

good thing another one is um when the

nature of the pain or the challenge or

the value itself changes over time by

its nature so a lot of examples here are

like in digital marketing like SEO

changes Google changes its mind and

other competitors come up and you do

other stuff and then it's just it's just

ever-changing so whatever the tool is

that you use to track or improve SEO

sort of bites very nature you have to

keep using it because the theme

underneath it is moving so lots of

things in digital

Marketing are like this AdWords SEO

competitive reports email marketing

content marketing social media

measurement techniques a B testing like

kind of anything in that world is by its

very nature dynamic is an overused word

but it's true changing over time and so

you kind of need a tool over and over

again um to keep up with it so that's a

natural pattern

another one is support which may be a

dangerous place to go for a self-funded

company because that means human time

and that can be very expensive but the

fact is that support is something that

is again naturally recurring it's very

easy so for example we have a premium

support package that's $500 a month that

gets you some better essays and stuff

and so for example a simple version of

that is you could say for only $100 a

month you can have a you can have a

premium support package in which your

tickets get priority over the people who

are not and you just make two queues and

work them that way and so those people

simply have faster response times bla

bla bla at the front of the line and

it's pretty much free money because you

want to do all the tickets anyways and

it just changes the order in which you

do it in such a way that people are

giving you money so that's interesting

way to incorporate support in a way that

is actually conducive to a you know low

touch support kind of thing like we're

talking about we you know we now have

this big scaling support organization so

it's more complicated as account

management stuff but anyway that's a way

to do it in a small way so when I don't

like is products that are viral where

that's supposed to be how they grow and

the reason is number one they almost

never work

just by the numbers they almost never

work and so I just don't like it at all

because it's look it's low risk of

success and that sucks

another thing is even if the viola

coefficient is okay it's hard to get

going like the only have a hundred users

and every month one percent of them

invite a friend it's like right that's

one more user M or zero because now

we're in rounding error right like it's

really hard to get going unless you have

this big corpus to start with right and

so in that big corpus to start with is

often really difficult and expensive

like you often can't charge yet and it's

hard so to me it doesn't fit the model

of the cell phone at startup so I don't

kind of thing I do like is anything that

um that isn't a real time in its nature

by which I mean it is not

that the user absolutely gets something

out of you in this instant or else it's over

over

so um Hosting is a bad is a counter

example so here's one example where the

attention was not a good fit in this and

and rightly so

I mean imagine how many times we wake up

in the middle of the night to fix

something and that's because when a site

is down and then all the night we have

to go fix it because it's a real-time

right we can't wait till the morning

not okay that's supposed to invoicing

software where it could wait till the

morning it's not ideal but you can you

can send that invoice out in a day it's

okay doesn't be today and that's

terrific that's what you want you don't

want to get up in the night that was a

mistake you don't want to do that so

anything that's sort of decision support

for a business so right analytics and

metrics and monitoring all these kind of

things are almost never real-time in

their nature and and/or they make the

data might be but the availability

doesn't necessarily need to be which is

kind of more to the point another

example is again anything in finance

because there's always lots of buffer

around when the finance folks have to do

their various things and so you have

time project management's another random

just just another random example these

are obviously far from exhaustive these

just sort of the you know getting your

juices flowing

project management again like if my if

Trello isn't available for an hour that

does suck no doubt about it like I saw

several Trello board so I was walking

around so for sure that's that's

something but you're not gonna cancel

you're not gonna go in that case I'm

gonna completely switch to different

problems just not gonna happen because

it's okay anything that's content is

obviously something that's easy and

content also is super easy to make

highly available anyway you put our an

s3 finished right or something like that

like contents easy to make always

available anyhow in it and anyway if

it's not available it's okay another

market kind of market I don't like is

marketplaces this is where I have buyers

and sellers and I bring them together so

that they have a marketplace of fun Etsy

is a marketplace Kickstarter is a

marketplace eBay is sort of the

quintessential it you know big

marketplace play Amazon oddly enough is

kind of a marketplace and that they're

they're you know Amazon doesn't make any

products okay now they make a few but in

general they don't right they just get

consumers to a website and get

products and sell it that's a

marketplace and the reason I don't like it

again marketplace is very difficult to

build almost never work because you kind

of have two businesses you have the

business of getting the sellers to get

over here and put your products here and

use my method of payment and God knows

what else it is and you have to go do

that and pull them over and you have no

buyers you have to do that with and you

need two buyers you need to convince

them and advertise them whatever the

hell you do to get them over here and

you don't have sellers yet see this

chicken and egg kind of to business

Janus sort of thing going on it's hard

and the good news is if you're

successful it's very defensible we were

talking about this last night but

supposing Etsy right now open source

their whole environment so can you go

compete with Etsy no because people type

Etsy calm that is actually their asset

asset the fact that someone types at sea

calm the fact that someone types evades

fact that some of the types Kickstarter

is in fact the valuable asset of a

company not the code behind it right so

that's cool it's great but again for a

self-funded startup I feel like two

companies are have a much much lower

risk of succeeding than one you know two

that have to both be successful in a way

and it's just hard so I don't I don't

like it a market I do like going back

again is something that can be done and

I think there's a ton of kinds of things

that can be done but what I mean is you

don't want to be in a feature war with

another product where where your success

is tied to things like oh they have more

features than I just have to keep

writing because by your very nature you

don't have many developers and you don't

as many resources in general your

designers aren't as good whatever by its

very nature so why would you compete in

a space in which lots of features is it

is is a differentiator when that's not a

kind of a thing that you're gonna have

as a unique differentiator nico mac the

guy that made winzip with made a million

dollars a year in the 90s with shareware

and winzip was done right I mean sure

there was like WinZip nine and who even

knows what it did nothing right it's

it's winzip and most of us stolen anyhow

and he still made a million dollars a

year way back when that was actually

pretty hard and you were mailing

postcards with checks and stuff for the

shareware remember that beer ware and

all that um but that's what I mean a

product that can be done not that you

never work on it again of course that's

not really the case but it can be done

and there's a ton of kinds of products

like that I like that

another thing I like is an aftermarket

by which I mean there's already an

established incumbent product that has a

lot of following and you can tack onto

the end of it and so some examples right

here smart fair was like that so you

already have version control and now you

have code review so we integrated with

perforce and subversion and CVS and in

fact a dozen different things balsamiq

mockups started as add-ons to Basecamp

and so on woo themes obviously is is

themes on the platform of WordPress the

current company is based on the fact

that WordPress has a huge following and

they need a host somewhere that's an

often after market service for WordPress

alien skin is a company that's that kind

of well known for being around for over

a decade meaning making tons of money

bootstrapped and they make photoshop

plugins cool photoshop plugins they

don't make Photoshop they just make cool

plugins afterwards queue ODBC is a

company's been around since 1984 let me

say that again

and they're bootstrapped and all they do

is sell this product that takes a

QuickBooks file and puts an ODBC

interface on it so you can make database

queries against it pretty cool

aftermarket tool for QuickBooks so um

this is what I mean it so much is it's

easy to understand like this is the

product this is exactly how it works

these are the pain points a lot of

people with this product have this pain

point I know how to find those customers

because they use this particular product

so the keywords are obvious many times

the vendors are interested in supporting

you I gave a talk at the perforce that's

version control the perforce user

conference every year about code review

because we were an aftermarket tool on

perforce and we promoted perforce as

well um as a result just there was no

agreement we didn't change money we just

did because perforce was good and so our

tool worked well with it and so I got

customers all the time by being invited

to their user conference and to give a

talk which is bizarre because they

wanted to support it so even better are

the are the companies or what I would

say ecosystems meaning companies that

intentionally go make this after market

market and like Salesforce you can

there's literally s force com where they

help you make a product that you can

then sell the Salesforce customers and

Heroku does that with their plug-in

store and the Apple App Store is really

the same thing for the device you're an aftermarket

aftermarket

for the device right now some of these

ecosystems are more friendly than others

like the App Store is well known for you

know not approving the app or maybe

competing with you eventually so that

one's a little bit trickier I mean not

to say that means you shouldn't do it

but it's a you know you have to look at

that risk but then you look at these

ecosystems like Salesforce and Heroku

and it's very clear that they are

committed to not doing that to you

and so like Salesforce people complain

like they haven't added features in

years that's exactly right because they

want other people to make money adding

features because that's part of their

ecosystem and they know that's part of

what makes them strong and they act that

way and so as Heroku that's good

that's the kind of ecosystem that's I

love because look it's a marketing

channel sales channel a pricing channel

like there's all kinds of stuff that you

sort of get built-in when it's like that

and I love built-in and the last thing

about market I want to talk about is I

think you should be in a big market and

this is typically something that a VC

you would tell you right you want to be

in a big market with lots where people

are spending billions of dollars and why

does a VC want that well because if you

see wants you to be worth a billion

dollars and that's not possible unless

people are spending billion dollars or

maybe you're making up a new market that

you think is gonna be worth a billion

dollars so that's why they care we don't

care about that at all but I still think

it you should be a big market because

first of all there's lots of niches that

you can be in so you've sliced out this

little customer segment of ok only

people from Wichita Falls who invoice to

other states with sales tax then we're

going to nail it

and there's 462 of them and we can find

them because it's Wichita Falls is how

we can just walk around and find them

and actually that's a pretty good idea

that's pretty good place to get started

and then you can get bigger right so

that's good except the problem with a

small market is that if that little

niche doesn't work there may not be

another thing to go do that's of any

interesting size and so your options are

limited and that's bad because obviously

at the front and even in the middle of

the business you're never sure exactly

what's going to work out and what's next

and all that kind of stuff a big market

has lots of playground lots of niches

that you could if this fails you're here

if this is successful you could expand

to there whatever you have optionality

and optionality is always power the

other thing is your product doesn't have

to be the number one best thing ever for anything

anything

how many CRM tools are there how many

project management tools

there how many time keepers software out

there how many invoice packages are

there like hundreds that are in each

category maybe more and not everyone's

making a bunch of money but actually a

lot of people are making enough money

and that's interesting in a big market

there's so much space the it's okay if

it's not the number one best thing for

everything you can still have a business

and that's good and not necessarily true

in a smaller market and of course just

the fact that it's big and people are

spending billions of dollars means there

is a market at all and like Heaton again

said earlier a many perhaps most

companies fail because they're not

building something where there is a pain

that people will pay for that you can

get to all this other stuff but in a

huge market there is a pain and people

are spending money and you probably

can't get to it right it validates that

off the bat and that's a huge thing and

it's easy to find those customers and if

you change your mind as I did with WP

engine and decided to change it from a

cash machine to screw it I want to swing

for the fences if been in a big market

you still have that option

that's all options good so the third

thing I want to get through is um how do

you acquire customers right so we talked

about charge a lot of money and how and

kinds of markets I like you don't like

and now what about getting customers so

probably the most controversial thing

out I will state is that I do not like

social media in any form for getting

customers I don't think it works very

well I think it's a lot of time I think

people don't acknowledge how much time

and and cost it actually is and I don't

think it it often does not result in a

repeatable business where it's a cash

machine and every month it does it and

every month you can acquire customers

I want to business where I can put in a

dollar and no I'll make four dollars

this year or maybe even now cuz I've

annual prepay right that's what I want

and in social media does not give that

to me it's ever-changing it's hard to

have a voice it's hard to do stuff I

have a blog with 40 thousand readers and

when I launch WP engine a blogging

platform I was sure I'd get maybe 30 50

new customers just out of people going

Oh Jason's doing that I'm gonna switch

to that and see what it is right that's

maybe that's egotistical well it

definitely is egotistical but that's

what I wanted to do so I did and I got

two signups this many out of tens of

thousands of readers and actually I

asked heating on my heating your

really huh your internet-famous and you

launched these little companies and see

them with your stuff what the hell am i

doing wrong means he just goes no it's

always like that it doesn't work move on

just like that but great the you know so

of course you can say well what about

buffer those guys are really good at

social media yes yes yes you know of

course it can be successful especially

if you're really good at it and spend

tons of time on it as they do yes of

course but in general I don't like that

I want I want to know I spend money and

make money that's what I want

and so since that's the model I like

that it's it's very important that you

know how much you're gonna you're gonna

pay per click that could be Adwords or

anything else but one way or another

you're paying for a visit to the website

that's how most online marketing stuff

can be boiled down to one way or another

so it's a good question how much should

I pay per click so this is my answer

which is sort of needs justification my

answer is that you can you take how much

average revenue you get per customer

divided by 25 and that's what you can

pay per click so if your average $50 a

month in revenue you pay $2 a click now

obviously it's like a ton of assumptions

and going on in here I like this is

not what is this so however I didn't

want to spend more time here going

through the math and stuff and besides

you might want to tweak my assumptions

and my numbers come up with your own

sort of better formula for you so I put

up a blog post which I hope is there

maybe someone can check and make sure it

really went up because I didn't oh it is great

great

um and it has the whole derivation of

this and blah blah so I'll just move on

and let you look at that if you care but

the point is you know obviously this

needs to be a data-driven thing what's

my conversion rate how much you know

what's the quality of the traffic

segment by by market like there's a

landing page optimization like there's a million

million

empirical data points you would actually

do to compute this but of course you

don't have any of those data points and

even if you have a couple hundred

customers you don't have enough data for

that to be statistically significant

anyway so you still need a rule of thumb

and so that there it is so now the bad

news so let's say all of this works you

create this little company and you have

no employees are just a few employees

you actually like working with and it's

chunking out 30 40 K a month in profit

maybe that'd be nice

and everything's going well what happens

next it keeps growing that's what it

does that's what companies that are

successful do they don't stop and so if

it keeps growing and you don't hire

people to work on support then you're

gonna give bad customer support is that

okay is that all right for you is that

the kind of company you wanted to build

that you enjoy working on and do you

hire more people and if you do what does

that mean in terms of your job and you

used to just worry about looking after

marketing or just looking after the code

but now you're managing people now it

becomes a thing that wasn't the thing

that you wanted to become that you

didn't set out for and so this is this

is kind of an issue and so so what some

people do there's various ways kind of

out of this you know you can you can

just sell the company for two big who's

the guy that has the the that that book

about selling your company where's where

is he selling your company online

yeah websites area so you go talk to

that guy about selling your website

online and it'll help you cuz he has a

book about so hooray but it's hard

obviously to sell that's easier said

than done and usually don't get that

much money for it sometimes you sell it

if you have a partner if you have an

employee sometimes you can sell to them

a nice trick there is a lot of times

people don't have like a bunch of cash

to give you and so you do some kind of

earn out like you're gonna get five or

ten grand a month or a percentage of

revenue for three years and in that way

the company can afford to pay you off

while you go off and that's not such a

bad thing but of course you also don't

have your company anymore

this is how this is what happened to my

second company IT watchdogs we were I

guess I'm probably running low on time

right Rob how am i doing that time okay

so um so we we had we had we had built

this amazing device for a customer of

ours on a contract basis and it was

wildly successful to them they were

immediately making millions of dollars

more money per year with this thing that

was embedded in their stuff and I

remember we were sitting there in their

conference room in Lincoln Nebraska and

they and they said hey what's stopping

you from building the same product and

selling it to the other hundred power

strip manufacturers

and we thought we said nothing I guess

we don't have an exclusive so yeah

that's not a bad idea it's a four months

later they bought the company that's it

so it happens of course but again it's

hard to it's hard to like make that

happen or plan for that common thing

people say is raise prices I mean shoot

if you don't want more customers and

make each of the customers pay more this

is good and that's true but they're you

know it does also change the nature of

the business so this conference is a

good example this year was more

expensive than last year and so some

people that were a little more of a

wanna preneur and not really you know

not really that serious just sort of

snooping around you charge more and some

of them will drop off and that was

something that was useful for the

conference but if this conference

retained grand like almost no one could

no one almost no one here could or

shouldn't show up for that kind of dough

and who would I don't know but it'd be a

different conference whatever that is be

different so just raising prices also

changes the clientele and that may or

may not be again okay for what you want

to do and again you can decide well

screw this bootstrapping thing I'm gonna

I'll go ahead and raise money that's

fine and that's what we did with WP

engine and so that's cool if you decide

you want to change your journey

completely that's fine

but if you knew this ahead of time then

all this bootstrapping was actually a

bad idea in other words if you wanted to

go do you know if that was your goal in

the first place then you should have

just been on that path and optimizing

yourself and your time and going to

market and all that in the first place

and not sort of gone too slowly at first

and then finally decide to accelerate so

it's a sub optimization anyway and you

should have kind of known that ahead of time

time

maybe so this is but this is this is

this is kind of bad like so what is the

answer here I mean I want this little

company and then if I am successful then

it won't be that thing it's just like

this weird catch-22 and there isn't a

great there isn't a great answer

unfortunately this is one of those

dilemmas you know how you know people

sell their company and then you know Oh

boohoo money doesn't make you happy and

Oh boohoo you don't know what to do next

Oh boohoo like you made ten million

dollars shut up right but actually it's

very real and actually you know people's

happiness some fulfillment is very real

and this is this is going to happen in

some form or fashion to you if you're successful

successful

and then it won't feel like you know oh

that's a high-class problem like yes and

it's your problem and so what you can do

it's hard and so but it's supposed to

why like working at IBM we're not doing

this now it's in our DNA we have to do

this so the only thing I can tell you to

combated is this this guy fail ease was

a Greek business man but then he turned

philosopher which I suppose that's kind

of what people who are in tech now do

right like they get successful business

and then they get blogs and right same

thing anyway so they lease it was asked

famously um what is the hardest thing

and he said to know thyself hardest

thing to me that is the sort of answer

to this dilemma of what is it that I

want from this what am I trying to build

with this company I know trending money

yeah I know I don't want to date you up

right on but what what am I trying to do

for me what's gonna be fulfilling for me

and even that is gonna change over time

unfortunately which means you have to

keep figuring that out and it's the

hardest thing oops

I thought building the company was the

hardest thing nope it's this that's the

hardest thing and so that's again a very

difficult message because there's not

much of an answer in that other than

yeah it's really hard no other than

maybe talking about it and especially

talking about it with folks who have

trod that path before and maybe doing

almost therapy with them to do that

which I'm happy to do I know lots of

lots of other other people are very

happy to do that sort of thing it's a

nice conversation to have um the other

thing he was asked in that same

interview was what is the easiest thing

and he says to give advice which is what

I've been doing for an hour so I'm doing

the easiest thing by telling you do the

hardest thing great easy for me to say

because then I can just wrap and leave

and it's up to you to do all the hard

stuff and so people ask what's my

formula for success which is a stupid

question but if there is an answer then

I've just given it to you but as best I can

can

in this past hour which is that you need

to have predictable acquisition of

customers which give you recurring

revenue that you're using an annual

prepaid to solve all your cash flow

problems with any market that's

conducive to the kind of company that

you're building and the constraints and

advantages that you have like being a

boutique but not not have

a million hours a week and that's how

you create a cash machine I hope

everyone here does exactly that and

thanks for your time you talk a little

bit about any advisor tips you have for

a SAS business that doesn't actually

have subscription revenue but rather a

transactional revenue it's a b2b model

acquisition is more traditional sales

with potentially larger revenue per

customer but much of what I see and read

about in SAS is focused on you know

getting business through clicks and and

writing the enterprise sales yeah an

enterprise SAS company in particular

okay great yes so first of all you said

it's not recurring yes it is it's an

annual contract mostly in enterprise

right maybe quarterly but usually can do

annual and that's good because that's

the annual prepay too and you can do

that in enterprise because their budgets

are typically annual as well so they

could care less and of course it's

easier to do one P o and one invoice per

year and do that with some kind of

automatic renewal that they have to

contact you if they don't want that kind

of thing right um obviously you gotta

charge a lot a lot and there's gonna be

you know you have to deal with M SAS and

all kinds of stuff there the purchase

orders gonna take forever to pay and all

that the other day we got a purchase

order with net 130 on it okay well so so

actually that that's you know rough in

that in that sense so um so obviously

you have a sales office often have a

sales force model with that but to be

clear at smartbear it was almost all

enterprise sales and there was no

salespeople and the way it worked as I

did all the demos and I went on the

sales calls and everybody who was back

at the office was competent in doing all

of those things and then when I had to

hire really competent people because

they had to be able to write code and

talk to customers and do tech support

and after sales questions which means

they had to be really smart and

multi-talented and they were expensive

but I also had a million dollars of

revenue per head because they were

really good and so we could be really

lean not in the lean startup sense I

suppose but in the not spending a lot of

money sense and so I could distribute

the money to them instead which is great

so that's an example of a bootstrap

company in the enterprise space where

you have terrific folks all around so

you don't go

haier haier out and build out a big

enterprise sales team you can do that of

course um it's much harder to it to me

to bootstrap that exactly because of

this time lag and money because to go

get them still you have to do cold calls

or some other kind of outreach or some

conferences or put white papers on stuff

and the sales cycle is often very long

especially because you catch them maybe

in a discovery phase and they're not yet

ready to buy and they're not ready to

select you and then the lawyers get

involved and it just takes a long time

and all that cost you're eating and

humans and time before you get the

purchase order and then still they don't

want to pay and then it'll go out in the

next check run and you know it can be a

long time before you get the dough the

good news of course is once you get it

you often keep those things for five years

years

it was fantastic right but you got to

charge the Lots to sort of get over the

hump of all that other stuff if you do

hire salespeople you got to go to you

often will have to go to more of a like

Commission only but lots of commission

model because you don't have the cash to

float you know a great sales guy for

their you know one hundred hundred or

one fifty one fifty sort of a

compensation model that they might be

expecting you can't say you just have to

say well I hope you dragon a lot of

sailfish and then you can eat a lot

I don't know right so that's hard to get

going so it is harder because of these

constraints which aren't necessarily you

know working but um but you can do it I

did it

um the pilots are another good trick so

you say why don't we start with it often

they want to do pilots anyway depending

on the product but let's just try it

with thirty seats see how that goes

maybe you can turn that around a lot

faster with a smaller budget and um and

then you get some cash flow going and

some relationship going and then go many

of the transactions we did were like

that our average transaction was twelve

thousand dollars but on the first

transaction but our average total

transaction was sixty thousand because

over time they'd buy more sometimes even

six and seven figures over the course of

you know year and a half or so

and so that kind of like get in there

and then go get more which sales people

call land and expand is not a bad model

either and helps you get a little more

cash flow I mean this is a whole topic

really so I hope some of that helps or

answered your question I know I know a

lot of

I'm coders that have products don't

necessarily take advantage of affiliate

programs how do you feel about that um I

think there's a lot of products for

which affiliate programs are great not

Enterprise but um we do pretty well with

affiliates and at first we did not we

didn't do a good job when we first

launched them and then we relaunched it

with ShareASale and we kind of did a

better job and in reaching out

personally to affiliates and especially

some of the larger ones and so on to try

to make it work giving them special

coupons much like the ones I just said

those but I really like it and if you're

gonna do affiliates I think first of all

you need it you need to pay the

affiliate a lot because they encourage

them to do it and especially the bigger

affiliates do get paid a lot and so you

won't get their attention unless you're

spending a lot of money with them at the

same time that's a big cash flow thing

because they get their money quickly

like typically in 45 days so if you're

paying an affiliate two hundred three

hundred dollars there's a lot I mean

most affiliate programs are more like 30

bucks and that's fine but you won't get

a lot of attention but if you're

charging a lot of money then you can pay

the affiliate a lot see isn't that

better to charge a lot of money it opens

up options but also you need that annual

prepay because it's so much money that

you're paying so quickly to them and so

again I would couple that with special

coupons for them to encourage the annual

and then you're back to good from a cash

flow perspective but in general I do

think it depends on the business there

are things like the one we're in and

hosting or in WordPress where the a ton

of companies who make a lot of money

through affiliate sales so it sort of

stands to reason that we could - and

there's other areas where it's not true

and so you'll just have to see but

certainly the affiliate doesn't get paid

unless you know they say you get a sale

so it seems to me you could certainly

make the math work and then either the

affiliate program will work or it won't

and either you'll get better at it or

not but either way you're not gonna pay

them till you get a sale so it's pretty

easy to make sure that equation works

and then you know then give it a try but

if it does work it's incredibly powerful

you want to talk about predictable

because those affiliates it's their job

to get more money every month right so

you have these people who themselves

it's it's in their interest to try to

send you new customers every month and

that's great that's that's exactly the

kind of predictable cash machine that

you want so in that sense I really like

affiliate sales

and one final note of fear on that is

there's a lot of shady affiliates and if

you ever go to Affiliate conference you

kind of feel like you need to take a

bath afterwards uh-huh there it's a lot

of them are are shady and so also you'll

get people if you're not if you're not

controlling who actually is able to do

the affiliate program and kind of

vetting them you'll be spread all kinds

of stuff that probably is not good for

your brand or even for sales or any of

those things and so you may or may not

care about that I mean may or may not be

interesting to us and it worked WP

engine we care about our reputation

quite a lot we trade on that reputation

of service and attitude and all that

kind of stuff and so it's important to

us that that not be the case we even

don't do certain SEO things even stuff

that's kind of gray hat just because what if that kind of looked bad so

what if that kind of looked bad so because we value that we are careful

because we value that we are careful about affiliates but you may or may not

about affiliates but you may or may not care and we know one thing that you

care and we know one thing that you regret doing or perhaps we're not doing

regret doing or perhaps we're not doing on your business journey man all kinds

on your business journey man all kinds of stuff all of the time I think you're

of stuff all of the time I think you're not honest if you don't say that right

doing or not doing I mean anybody that looks back over you know a year and

looks back over you know a year and can't and says like everything was

can't and says like everything was perfect I didn't make any mistakes

perfect I didn't make any mistakes you know not true I guess one thing I

you know not true I guess one thing I would say is if I look at a pattern that

would say is if I look at a pattern that I keep repeating that I have to be

I keep repeating that I have to be careful about so the things I'm not

careful about so the things I'm not really learning about and therefore I

really learning about and therefore I really regret it because if you make

really regret it because if you make that mistake the first time you can't

that mistake the first time you can't really regret it you say I made the best

really regret it you say I made the best choice I could at the time and let's

choice I could at the time and let's move on right but if you make it

move on right but if you make it repeatedly then maybe you start

repeatedly then maybe you start regretting that you're not getting

regretting that you're not getting better at it I guess two things there

better at it I guess two things there one is not getting rid of someone fast

one is not getting rid of someone fast enough that needed to go almost always

enough that needed to go almost always culturally based very rare that it's

culturally based very rare that it's skills based it's usually cultural based

skills based it's usually cultural based because people do poison that well and

because people do poison that well and that could just be a consultant it could

that could just be a consultant it could be employee it could be any of those

be employee it could be any of those kinds of things but that's really

kinds of things but that's really important and no one ever says well we

important and no one ever says well we fired that person too quickly no one

fired that person too quickly no one ever says that but everyone has a story

ever says that but everyone has a story of when they didn't fire someone soon

of when they didn't fire someone soon enough

enough so that's a mistake that I probably

so that's a mistake that I probably continue to make um and it's a constant

continue to make um and it's a constant thing and again even if you don't have

thing and again even if you don't have employees that could be true of a

employees that could be true of a consultant that you kind of feel may be

consultant that you kind of feel may be taking advantage of you or isn't really

taking advantage of you or isn't really working out but you're sort of well but

working out but you're sort of well but they're engaged so I'll just like

they're engaged so I'll just like there's there's lots of examples of that

there's there's lots of examples of that kind of thing I regret not staying true

kind of thing I regret not staying true to what I felt was the right thing to do

to what I felt was the right thing to do and that's in lots of different

and that's in lots of different situations

situations um yeah like the affiliates a weirdo

um yeah like the affiliates a weirdo feel like I'm kind of I'm kind of skeevy

feel like I'm kind of I'm kind of skeevy about having this person promoting my

about having this person promoting my thing should I do that or not and to me

thing should I do that or not and to me especially when you're building a

especially when you're building a self-funded company in which your

self-funded company in which your identity is so tied up in the company

identity is so tied up in the company itself I always regret not following

itself I always regret not following what I think is the right thing how to

what I think is the right thing how to treat people how to treat people coming

treat people how to treat people coming in coming out um the standards that you

in coming out um the standards that you set up inside the company for yourself

set up inside the company for yourself the customers for the product for other

the customers for the product for other people that you work with for hearing

people that you work with for hearing something that someone says and not like

something that someone says and not like and not kind of standing up for it and

and not kind of standing up for it and saying no that's not acceptable here

saying no that's not acceptable here it's not it's not funny it's not okay

it's not it's not funny it's not okay not doing that often enough the all

not doing that often enough the all kinds of things like that of I know I

kinds of things like that of I know I feel right now this is wrong and I'm not

feel right now this is wrong and I'm not acting strong enough to in to make this

acting strong enough to in to make this known to everyone and to say no this is

known to everyone and to say no this is what I'm building this is what we're

what I'm building this is what we're doing this is who we are I always regret

doing this is who we are I always regret not doing that after the fact so you

not doing that after the fact so you mentioned earlier about the little

mentioned earlier about the little formula of calculating your how much you

formula of calculating your how much you can afford per click so I noticed that

can afford per click so I noticed that was like a $2 $2 per click right so I'm

was like a $2 $2 per click right so I'm curious for wpengine or are you actually

curious for wpengine or are you actually being able to get that sort of cost per

being able to get that sort of cost per click or what are you doing no we can

click or what are you doing no we can spend even more so again the real answer

spend even more so again the real answer there is you measure everything all

there is you measure everything all throughout the funnel and you can

throughout the funnel and you can segment you segment out the cost to

segment you segment out the cost to acquire a customer by by the marketing

acquire a customer by by the marketing channel and was that there was an

channel and was that there was an affiliate there was a sales assisted was

affiliate there was a sales assisted was your a coupon because that makes it cost

your a coupon because that makes it cost more and that the customer stick around

more and that the customer stick around or did they cancel and we even measure

or did they cancel and we even measure stuff like and how much server costs are

stuff like and how much server costs are they costing how much support costs I

they costing how much support costs I think we have all of that and so for

think we have all of that and so for every customer we have all of that is we

every customer we have all of that is we have all this analysis that's very

have all this analysis that's very detailed and per philia and per channel

detailed and per philia and per channel and jiù jiù jiù jiù right um and so

and jiù jiù jiù jiù right um and so we're very precise about how the

we're very precise about how the marketing campaigns are working what's

marketing campaigns are working what's the payback period and so on that is the

the payback period and so on that is the correct thing to do but you know we have

correct thing to do but you know we have you know we sign we're in the four

you know we sign we're in the four figures of new customers per month so we

figures of new customers per month so we have a lot of data right so we can do

have a lot of data right so we can do all that statistically and actually have

all that statistically and actually have something also since we're shooting the

something also since we're shooting the moon now also we're willing to spend

moon now also we're willing to spend even more money than there might be you

even more money than there might be you know then you might think in order to

know then you might think in order to get customers and so we're that's even

get customers and so we're that's even more because we just want the customers

more because we just want the customers because we know what to do with them and

because we know what to do with them and that's valuable to us another thing is

that's valuable to us another thing is we are so good at word-of-mouth and

we are so good at word-of-mouth and social media and the consultant channel

social media and the consultant channel that most of our new signups are

that most of our new signups are actually without advertising at all but

actually without advertising at all but what that means is we can spend that

what that means is we can spend that much more acquiring through advertising

much more acquiring through advertising because on average it's still very cheap

because on average it's still very cheap and so we can afford against it so even

and so we can afford against it so even if we lose some money on some things

if we lose some money on some things just the fact that we have the customer

just the fact that we have the customer they might tell a friend

they might tell a friend they might upgrade later and so on just

they might upgrade later and so on just having a customer is it has a value and

having a customer is it has a value and financial value even over time even if

financial value even over time even if it's a little more difficult to measure

it's a little more difficult to measure all of that value it is true and so we

all of that value it is true and so we can spend even more so we measure all

can spend even more so we measure all this and we do it absolutely empirically

this and we do it absolutely empirically so that we know that and so with that

so that we know that and so with that we're pointing out is until you are

we're pointing out is until you are signing up a thousand people a month and

signing up a thousand people a month and are measuring all this stuff even if you

are measuring all this stuff even if you are measuring it you still don't have

are measuring it you still don't have enough data to really say and things are

enough data to really say and things are gonna fluctuate a lot week to week month

gonna fluctuate a lot week to week month to month and so on and so until you have

to month and so on and so until you have enough data to actually use data I had

enough data to actually use data I had this sort of assumptions in process

this sort of assumptions in process which actually came from other surveys

which actually came from other surveys and other things so that these

and other things so that these assumptions themselves seem correct in

assumptions themselves seem correct in the main and and and so so I that's why

the main and and and so so I that's why I like that formula but it's only

I like that formula but it's only because without data you have to have

because without data you have to have some rule of thumb and this is my best

some rule of thumb and this is my best effort at providing anyone with one that

effort at providing anyone with one that that's it's logical

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YouTube Transcript:Designing the Ideal Bootstrapped Business with Jason Cohen

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Designing the Ideal Bootstrapped Business with Jason Cohen