How does a founder build a profitable business by helping companies pick the right software?
Don Fornes is the founder of Software Advice, a lead generation service for software companies.
I invited him here to talk about how he did it.
Don Fornes, Software Advice
Don Fornes is the founder and CEO of Software Advice which is a lead generation service for software companies.
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Hey there freedom fighters, my name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. How does a founder build a profitable business by helping companies pick the right software? Don Fornes is the founder of Software Advice, a lead generation service for software companies. I invited him here to talk about how he did it. Welcome, Don.
Don: Thanks for having me.
Andrew: What size revenues are you guys doing now?
Don: Right now, we’re a little over $10 million in revenue.
Andrew: Wow. How much outside funding do you have in the business?
Andrew: Wow, impressive. How old is this business?
Don: We launched the first website in 2006, just about this time of year. I guess I’ve been on my own for about eight years, but it’s about seven years that the company has been up and running.
Andrew: Unreal, $10 million annual revenue, bootstrap company, in the tech space, and I hadn’t heard of it until we read a blog post on perfect audience. Bob Hiler did it and said you’ve got to find out about this person. Why is that?
Don: I think that’s a business philosophy we’ve had, that if we keep our nose to the grindstone, focus on the execution that will make the business work. When you’re a bootstrap company, you don’t have a big budget to hire P.R. firms, and do press tours, and you can’t say, “Oh, we raised $50 million,” and get on Tech Crunch. You kind of have to do what’s going to bring in revenue today. That was a lot of this core execution in very specific niche markets. Only now are we really picking our head up and saying, “Hey, let’s start to tell the story about our company.”
Andrew: This is unbelievable execution. Let me see if I understand what the product is. Then we’re going to go back in time, and figure out where you came up with the idea, and how you built it up to this size. If I understand it right, a business needs software like CRM [SP] to manage their contacts. They come to your website, which is a really great domain, softwareadvice.com. They click around. They find CRM [SP] for their industry. They get a list of potential software that they could pick from. They click one. When they click and sign up, they get software that works for them. You get commission from the software vendor. Of course, this whole thing could have started with a Google search, not just a search on Software Advice. Do I have it roughly right?
Don: Roughly right. I’d say that one thing that is really unique about our company is that we’re not just a web company. It’s not just about the web pages and clicking buttons. We have a whole team of analysts here who we’ve trained in specific markets, say construction, or medical, or CRM, or human resources, who become expert in those domains. They get on the phone with every buyer who engages us on our website and do a needs analysis to understand what that buyer needs. How big of a company are they? What industry are they in? What features and capabilities do they need? What’s their budget? What are they replacing and why? Then based on that, narrow down a short list of products that would be a good fit for them. So that kind of offline or on the phone, on a dialog, is really key. It’s something that’s missing from a lot of web businesses.
Andrew: I know that that’s the key part of why your business works. I see the phone number right at the top of the page even as a browse through a list of options for software that I could use. I see the phone number in the center. We’re doing to talk about how that happened and why that was such a huge part of the business’s success. First let’s go back and understand what you were doing just before this. You told Jeremy in the pre- interview that you went into finance because it sounded important. Is that really why you started out your career in finance?
Don: Well, I think I was referring to, as a kid I wanted to be a business person. It seemed important. There were role models in the community that I looked up to who were business people. When I decided to go into finance it was really my senior year in college. I got a job in finance. I did not get any other jobs. It was also that there was on campus recruiting. You basically went into finance or you went into consulting. That was about it, unless you had plans to go to medical school, or law school, or what have you.
I went into finance because it was a well worn path. Actually, back then it was, you were proud to say that you were an investment banker. Things changed a bit since then, but it was a great start to my career, and a lot of wonderful people, and great experiences.
Andrew: It was. Andrea [??] says you were working there from ’95 to ’99 at Hambrecht and Quist.
Don: Yeah, that was a really special firm. It wasn’t one of the big, major investment banks. It was a few hundred professionals when I joined, just really good people, really good culture. We focused on technology and health care, two really rapid growth markets.
Andrew: They got into technology early on. They were the company, from what I remember, that helped a lot of startups go public, right?
Don: Yep, took Apple, Genentech public. Netscape, which was big while I was there. A lot of folks these days may not know that or remember them.
Andrew: Then in ’99 you went into a tech company, which one?
Don: It was called Epiphany. It was a Kleiner Perkins funded startup. It brought on a very high profile CEO to run the company. They were a company whose business we were pitching while I was at Hambrecht and Quist. You know, it was ’99, it was the hot thing to do to jump a startup. I was kind of done with the finance thing. I’d been there for four years. I only thought I’d be there for two or three. So I called up that CEO and introduced myself and said, “Hey, I’d like to talk about maybe helping you with your IPO, and mergers and acquisitions. Long story short, that’s what I ended up doing for about six years.
Andrew: I’m sorry. You called up the CEO of this company, that was this huge company, lots of attention, and you pitched him on hiring you for a job?
Don: Yeah. It wasn’t huge at the time. It was still a startup, less than 3 million in revenue, but it definitely had an outsized [??] reputation at the time. But, yeah, I did. It’s some job seeking advice I give to a lot of young folks. I actually went into the interview with a PowerPoint detailing what I thought his M and A strategy should be after the IPO. So I kind of took control of the interview and said, “This is what I think you should do…” to show that I could really help him, because otherwise they’re just kind of stuck having to figure you out, and ask the same old interview questions. I think that went really well for both of us. We ended up acquiring our first acquisition as a public company was one of the ideas that I pitched in that interview.
Andrew: Wow. That’s a very unique way of getting a job and then executing on that job. So things seem to have been going well, but I don’t know how much I can say about this. I want to respect a guest’s privacy, but I do want to talk about one of the acquisitions that didn’t sit right with you as an insider. How much do you feel comfortable saying about that now that we’re recording it on camera?
Don: I can certainly talk about that.
Andrew: What happened? What was the acquisition and why didn’t it sit right with you?
Don: Well, I wouldn’t say that it didn’t sit right with me. I was a young guy at the time and hindsight is everything. I think it’s more just a lesson I took away from that experience. That it was 1999 – 2000. It was the dot-com era. The company had raised $450 million. The order of the day was get big fast. If you didn’t do that, you fell out of favor with the public markets. They were encouraging big, bold moves. You’d announce an acquisition and your stock would go up 20%, 30%.
So it was the right thing to be doing at that point in time. We made one acquisition that was another startup, much smaller than us, didn’t have necessarily a mature product or customer base, but was a hot company, and we gave away maybe a quarter of our equity for this company, and it was just prior to when the bubble burst. And we ended up having to do a lot of cleanup with that company. It wasn’t as strong an acquisition as some of the early ones we did. I think the lesson I took away–we were all in it together, and we all learned great lessons–but the lesson I took away was: I don’t need to be that super hot company. I don’t need to swing for the fences. I just want to do things methodically, with pragmatism, and it’s OK. We grow a little slower if our ambitions are not as grand. I will do it in a way that gets it done long-term.
One that’s interesting is that my boss there is a guy named Phil Fernandez, who’s the CEO of Marketo, which just went public, and it’s a wild success. A lot of people know Marketo now, and it’s been successful for him, for his venture capitalists, and he really swung for the fences with that. And I remember when we were both still at Epiphany and we were talking about our next ideas and things like that, and he was still a believer in the swing- for-the-fences-and-go-big-model. Raised a lot of capital. And I had gotten onto this bootstrap, keep-it-simple, pick-fights-you-can-win model. This has worked out well for me, and that approach has worked out well for him. But we both learned from this…
Andrew: Don. Do you ever regret it? Do you ever look at your friend, and compare yourself to your old boss, who has this more common (well, I don’t know that it’s necessarily more common), but who has this approach that worked out for him? Do you ever compare yourself and feel bad about your decision?
Andrew: No. Why?
Don: Well, in that particular relationship there isn’t really a rivalry. He’s traditional and been a mentor and a more senior figure, so I don’t compare myself to him in that sense. I certainly (like anyone) want to win. I have a competitive streak, so I compare myself to others. I compare myself to that model. I’ve looked and remember early on in starting this company YouTube sold to Google, and I thought, “Gee. Those guys got big really fast and made a lot of money.”
Don: But, it’s more that I don’t see myself as that kind of an entrepreneur. I’m not a Mark Zuckerberg. I’m not a Sergey Brin or Larry Page. So I want to go out there and start a company I think I can be successful with, go after markets I think I can win. At the same time, if I were running a public company right now, I wouldn’t be able to be home every night to put my kids to bed. This is the right combination of hard work, success, and lifestyle.
Andrew: So where did the idea come from?
Don: Well, I had left Epiphany at a point where the bubble had burst, and the company was still viable because it had a very strong balance sheet, but we weren’t growing. Things weren’t very exciting, and I kind of lost my mojo. I knew that I needed to let myself go and burn the ships, which is something I like to say. You need to just quit your day job, go out there, and be forced to make it work with the entrepreneurial venture you’re going to take on. And that’s what I did.
I didn’t’ really have a business idea, but I had this model that a friend was doing, which was a search fund where you would align with some investors, go out and look for a company to acquire, and build it up. Kind of a mini private-equity play. And I was pursuing that, focused on the software industry, trying to find a software business that I could buy with investors and build it up. I worked on that for about a year and got close on a couple of deals. The big one fell apart, and at that point I’d also come to realize, “Gee. I’ve done all this research on niche software markets, and there is no great resource out there on the web where you can research these markets and these products. Someone needs to build this.” There’s Gartner and Forrester for the Fortune 500 or the Fortune 1000, but no one is serving the small, midsize business market. I thought it wouldn’t take a lot of capital; it’s something I could bootstrap. I’m going to pivot and (what they say today) focus on something else. So I got working on this idea.
Andrew: You know, four larger companies, I forget who it was, but I met an entrepreneur here in San Francisco who works for a company that just does nothing but procurement for bigger companies, just picking out the things that they’re going to buy. It’s a huge business for them. For smaller businesses, it just doesn’t exist.
I see the opportunity that you saw. I see the reason and the path that you took to get there. What’s the first thing that you do to launch this idea?
Don: Probably more than I had to. I wrote a business plan, which I don’t think that in the agile best practices that are being espoused today would say you should do, but I wrote a fairly detailed, lengthy business plan. Then I called up a bunch of software vendors in what I planned to be my first vertical market, construction. I said, “I want to show you this idea, but you have to sign a non-disclosure agreement.” It’s not something I’d do again. It wasn’t… you know… If you need that much protection for your idea, it’s probably not very defensible. But, did that, got some feedback, some positive, some negative, enough to say, “You know what? This is viable.”
Then I went and started sketching out what the site would look like. I’ve got a friend who’s a designer to design it. Got a former co-worker to code it. It only took about nine months to get that live. Of course version 1.0 is a bit of a disaster.
Andrew: What was the original business model?
Don: The same business model, just without the telephone qualifications needs analysis process.
Andrew: You took it to software vendors, the people who are going to be essentially advertising on this site and getting customers from you. What was some of the feedback that they gave you that changed the way that you were looking at the problem?
Don: A lot of the feedback was around the quality that they needed and that there was an opportunity cost for their sales people, that they could get a lot of low quality leads or very few high quality leads. Even if you adjusted the price, so that it reflected the increased value or the decreased value, that the lower quality leads really had an opportunity cost to them, because you have those sales peoples time chasing down and filtering through all those poorly qualified leads. At the time, I said, yeah, yeah, just fully believing that my leads would be high quality, so I’d be on the right side of that.
Andrew: I see. Then you launch and were you flooded with traffic?
Don: No. Maybe just from my mom and dad. No one was coming. You couldn’t find us in Google. No one cared.
Andrew: What was your plan for getting customers, for getting traffic I should say, that would eventually convert into leads for your clients?
Don: Well I knew that buying advertising on Google and other search engines would be important, pay per click advertising. I knew that search engine optimization would be important. I didn’t know much of anything about those two disciplines. I figured we could get good at them. Really, once I got the site live, that’s when I started working on that, reading about that, trying to understand it. It was maybe a few months after the first site went live. The site went live in June, this was October. I met a guy named Austin Merit [SP]. He look me up off the alumni directory from where we went to undergrad. I was living in big sky Montana. He was moving out there more or less to ski, but to get a job in home building. We just, through a networking email he sent me, we went out to dinner and I thought, “Oh, boy, this guy has got to join me. He’s great.”
When he joined, that’s when I had a business partner. I had someone to bounce ideas off of. We really rallied each other every day. We figured out this SEO thing, and the pay per click advertising thing, and built some partnerships. It was probably six months later we really started getting some traffic. Of course, then there were other issues to deal with.
Andrew: What was the most effective thing for you for getting traffic? I mean, you’re a new company. You’ve got to get traffic quickly. What worked fast?
Don: Well, there’s no doubt about the best traffic that we could get was from the search engines.
Andrew: And you knew that early on, SEO.
Don: We knew it, I don’t think we knew how important or how much better it would be. The quality of traffic coming from a search engine where there’s an explicit search query there is buyer intent there, that person is looking for that category of software. We’ve never been able to find anything better in terms of traffic.
Andrew: I see. And I could see by the way the kinds of queries that are sending traffic to your site, it’s medical billing software, supermarket monitoring software, program of human resource management system, CRM software, billing software, medical billing software. It sounds right?
Don: Yes, those are all what I call generic category phrases for different types of software. And when someone’s searching for something like medical billing software they are interested in buying medical billing software in most cases but they also probably haven’t narrowed it down yet to a specific brand and that’s where we can come in and really provide a value.
Andrew: You said version one of the sight was a disaster, why?
Don: Well, we need people to convert, that is, to engage us, to fill out a form and say hey, I want more information, I want to talk to you. And there is an art and a science to that, and that is not something we knew anything about, and we had to experiment with new layouts. What we found with the first version of the sight was very much user generated content, very detailed side by side comparisons, and maybe overwhelming, too much information for the buyer. And so, we really simplified things alot, and it took about a year and a half before we really got to a conversion rate where we were monetizing our traffic effectively.
Andrew: I see. So, it’s counter intuitive but offering more [??].
Don: Yes, there is a real trade off there, you could overwhelm people, you could confuse them, or in some cases you just give away everything you’ve got and there’s no quit pro-co with the visitor. On the internet everyone wants everything for free, and that’s great but for a service like ours to exist there has to be a way for us to generate revenue.
Andrew: And so, if people got all this information would they then just go directly to the software vendor, is that the problem?
Don: Probably. I would have no way to know at that point, but now that we have very strong engagement with our visitors we do know that a fair amount of our visitors use us as a resource and do a superficial skim of our website and then go directly to the brands and I describe that as kind of a free rider benefit that our clients get from being on our website, and we’re OK with that, we’re doing fine, they’re doing fine, that’s great.
Andrew: Your first three companies, your first three customers gave you significant upfront revenue. How much money and how did you get them to give you revenue upfront?
Don: You know I think it was before we had our website live. It was not easy to do, and we eventually stopped asking for money upfront. We found it was much easier to say hey we’ll do this pay for performance, you only pay for the introductions we make to you.[??] Nothing upfront, no contractual term, canceling time, that’s when we really took off in the number of clients that signed up, but those first three were really leaders in the construction software market, foundation software, Sage software, and Dexter and Chaney. And I think they had confidence that they can make due, they saw the business plan and thought, OK, this guy’s really investing here, you know, I think he’s probably going to be successful and we want to be in on it early because there are benefits to being in on it early. So I was asking for $25,000 from each of them, I didn’t get anywhere near that much but for a guy working out of his spare bedroom with no income, getting a few thousand or I think the highest was $12,000, that was great. It wasn’t quite enough to fund the whole venture but it was a nice subsidy. Interesting story, it was Sage software had given me $12,000 and about a year later I called them up just to check on something and they said no, I don’t think we work with you anymore. We canceled that relationship and I said, “I’ve only sent you about $2,000 worth of leads. You paid for $12,000.” They said, “Yeah, it was a real disappointment.” I said, “Well, I’m going to send you the other $10,000, whether you like it or not.” They said, “Okay, great.” I did send them the next $10,000, because it was right about then that we were starting to pick up the pace and see some success. Then they called up and said, “Hey, thanks for that, and this is good. Let’s renew.” So that was worth it.
Andrew: So essentially in the beginning every company that you were listing, on the CRM page for example, was not a sponsor. Sage [SP] might have been sponsoring with their CRM package, but the rest were just on the list, right?
Don: No, actually, everyone that you see on our web page is a client.
Andrew: Was that even in the beginning? Did you have enough clients to populate a whole site?
Don: I think we went live with a little over 20. That’s just in construction, but today we have about 110 construction software vendors. Our thinking, while at some point we may list other companies that are not clients, our thinking is that our model is so easy for them to participate in that they could sign up, we could get the vast majority of the market, which we have, and certainly the meaningful vendors in the market. So we…
Andrew: The reason that worked is you focused in on construction. You didn’t say we were going to service construction companies, mobile companies, medical, and every other. You said we’re going to focus on one, is that right?
Don: Yes. Today we serve about 24 markets, I believe. Initially, for the first couple years, it was just construction. That was just a classic crossing the chasm kind of strategy. Again, another thing I learned from my experience at Epiphany, when we were in the go-go dot-com days, we said, “We’re all things to all people. We’re going to serve B to B companies, B to C companies, across every market.” As the bubble popped and we had to get more disciplined and focused, I was leading the industry marketing effort, which was to focus in just on those industries we were really good at. So we went back to a crossing the chasm type strategy. When it was time to start my own thing, I thought, you know, I’m going to start it that way from the beginning.
Andrew: So now we get to the point where Bob Hiler’s article and information to me, it was time to bring that in. You did not have your customers, your users, the businesses that were doing research on your site, they were turning in to leads for your clients. They weren’t happy with the software that they were getting. How did you know that?
Don: I’m sorry, we might have that reversed. Were you … are you referring to actually the clients, the software companies, not being satisfied with the referrals they were getting? That was a challenge we faced early on, probably in the 2007 era, when we first started generating a significant volume of leads. I started calling these early clients, like Foundation, and Dexter and Cheney, and Sage, [SP], and saying, “Hey, we’ve sent you a bunch of these leads. What do you think?”
Hold on, this is funny, I have an automatic switch and if I sit too still my lights go out, very eco-friendly.
They said, “Actually, they’re not very good, kind of junky. They’re not real buyers.”
Andrew: I see.
Don: I thought, “How could that be? I have every intention of making quality introductions here.” At that point, we weren’t doing the needs analysis and the telephone qualification. So I thought, “You know, let’s pick up the phone and call these buyers, and see what went wrong.” What we found out is that of all the buyers that come through your website, and fill out a form, or download information you’ve got job seekers, who’ve got to learn a piece of software for a job interview. Or, you’ve got students doing a report. Or, you’ve got people researching who don’t have authority, or don’t have the right budget. Or, it’s a residential remodelers thing; I want SAP [SP] or Oracle. They don’t even know what that means or that it’s a seven figure investment. We started to piece that together.
From those conversations, I started following up with the software vendors and saying, “Hey, I talked to this guy. We originally sent him here, but now we’re realizing he should go to you. Here’s all the notes on what he needs. I’ve clarified this information about functional requirements, the size of the business, what kind of jobs he does,” and they started saying, “Wow, this is great, this is what we want.” So then we did the math on, well, “What would it take to call every one of these buyers?” And it takes a lot of work. It takes ? and really talented people. Training them. Building a lot of systems and infrastructure to support them. And it gave us a lot of gray hairs. Austin really lead that effort and did an outstanding job figuring it out. It become a ? entry. To where most people who have tried to do what we do, because it looks like a great business, get stuck there because it’s the hard part. No one really wants to do it. And we’ve figured it out, made it scalable and put in the hard work. It makes our introductions better for the softer buyer and the softer vendor and it’s really been our secret sauce.
Andrew: I see. If I get excited about your business, I could very quickly set up a WordPress site with a list of vendors, call up the vendors, and charge them per lead. But my leads aren’t going to be quality because I’m not going to be able to make the phone calls that you’re making and to qualify people ahead of time. And it was: get them to come to the site, send them to the right category, figure out which product they’re interested in, then when they click the button ask them for a price or a demo, that’s when you ask them a couple of questions and then you follow up with a phone call even after they’ve answered some questions on the site?
Don: Yeah. They answer fairly little in the way of questions on the site because you don’t want to slow them down and they may not fully understand the questions. So, we ask the really sophisticated, meaningful questions on the phone. Whether it’s because they requested information on a specific product or downloaded a white paper or asked us for a free consultations. Whatever the call to action that got them on the phone with us, we follow the same process of really trying to understand their needs and then talking them through to what the right solution or solutions are that they should investigate further.
Andrew: But everyone gets a phone call?
Don: We would never make an introduction without a phone call.
Andrew: Wow. And then the top of the page asks for my number. It says, “No Sales Pitch is just unbiased advice and expertise”. But, how can you be unbiased when you have customers who are paying you? And I’m guessing that they pay you a variable amount.
Don: Well, so, it’s not a very low amount. Everyone’s on the same pricing schedule. But it’s unbiased in that, take construction, we have a hundred and ten different products on the website and we will narrow it down to 2 to 5 based on how much work the buyer wants to do, investigating and researching, and say, and we’re not going to tell you which product you should buy. We’re just going to narrow down to the short list for you to follow up on. So we’re not trying to say that one is better than another. And certainly not because one pays us more. We don’t do that. And we’re not selling them. We’re not saying, “you need to buy this” or “this is right for you”. We’re just saying, “Hey, we’ve narrowed it down from 110 to say, 3. You go figure out what you want to buy. But we just saved you a lot of time and research.”
Andrew: Right. And then how many people make these phone calls?
Don: Right now we’ve got about 30.
Don: And we just keep hiring.
Andrew: You said earlier, “I decided to pick up the phone and call up some of these businesses”. Was it that easy? Or were you wrestling with yourself a little bit?
Don: Oh, it’s hard work. You’d much rather just design some pretty web pages and get them live and sit back and watch the revenue roll in, but it doesn’t really work that way. And it’s really tough. Tele-sales, tele- anything is tough. Whether you’re on the sales side or the service side. Whether you’re helping someone for free or not. People really like to just be behind their computers. So it was difficult, but we really thought, you know, Austin and I both came from a background of hard work. We both talk about when we were young, we had to do yard work. It was yard work for our parents and then it was yard work for neighbors to make money, and, not glamorous, not fun, but we learned early that the hard work has value. So we’ve taken the approach with this business that one of our key ? entry is, we’ll take on the hard work that other people don’t want to do. People want arbitrage, they want scale, they want efficiency. We love efficiency, but we’re willing to put in the hard work.
Andrew: And the efficiency comes in the form of software that you create for your team to make it easier for them to make phone calls and to be helpful on those calls.
Don: Yes. Our CTO is a legit computer science guy, Masters from MIT and he leads a team of developers to build not just the website you see but all sorts of applications that we feel as our infrastructure. Our call center application, our billing system, our CRM system, our recommendation and decision support engine that helps our analyst narrow down the right products based on the buyer’s profile. This is all code we developed over the last 7 years that’s, I think in terms of feature breath and depth, on par with any other commercial solutions you would buy except that it is built to do exactly what we need, nothing more, nothing less.
Andrew: You told Jeremy you’re a pessimist. And entrepreneurs generally are optimists. How do you deal with that?
Don: Yes. I shouldn’t say that I’m a pessimist but, what is the book? I might be paranoid [??]. I don’t take anything for granted. I don’t believe things are necessarily going to go my way even though they sometimes do. And I think we just have to work for things. And through that it’s been stressful at times. I definitely worry about, we got 60 households that are dependent on the success of this company and so I bear that responsibility including my own household. But I’ve had to work on my own confidence and myself and what we can achieve here.
I wish that I were more optimistic as I think an optimist, whether they’re in sales or they’re an entrepreneur or what have you, they believe that the next task that they go after, the next phone call they make, the next email they send is going to be a win. And that’s what motivates them to accomplish that next task. I don’t have that to draw upon as much but I do have a gritty determination to just keep going.
Andrew: And it seems like that’s your trigger. Like, the sense of ‘I don’t know that this phone call is going to go well. There’s a good chance that this call is going to fail for me’ triggers in you the feeling that I’m disciplined enough and I work hard enough that I will keep on making calls until I make the right one. You don’t just leave it as I’m pessimistic about how this call is going to go. You allow that to trigger a meaningful, healthful emotion in you.
Does that feel right?
Don: Yes. I think there are a lot of ways to skin a cat, right? You could be an optimist and just always feel like doing the next thing is going to be a win or you can have that kind of determination. I was an athlete in High School and College. You go through a lot of pain and training and you get better. You look back weeks or months down the line and you see I’m faster, I’m stronger than I used to be.
So I encourage when we hire, we offer people who’ve been athletes in High School or College. We think they have that pattern recognition of going through the pain, seeing the success and repeating it.
Andrew: So what I’ve wondering is why is it that some pessimist just end up accepting the world as it and they go nowhere and other pessimists seem to do well because of their pessimism and it seems like it’s the pessimist who don’t do well just accept their pessimism. Maybe even evangelize it and tell everyone else the world is meant for other people, it’s stacked against them and so on. The pessimist who do well have these triggers. When they feel like ‘Oh, I don’t have enough opportunities’ then it triggers some hard work that I better work extra hard, or I don’t have any funding, well that means I’m going to be scrappier than anyone who does have funding.
Does that feel right to you?
Don: You know, I think it’s pretty simple. You got to have something going for you, right? A lot of business books or experts on entrepreneurship will try and come up with the secret formula for what makes an entrepreneur. I think there are all sorts of successful entrepreneurs with different personality types. There are certainly personality types that you can categorize and say ‘Yes. They have a high likelihood to be a successful entrepreneur’. Optimism I think is one characteristic that is great to have. Determination, willingness to work hard is another. Being brilliant could help. Certainly, we see a lot of that in the tech industry. Back to what I was saying earlier, I’m no Mark Zuckerberg or Sergey Brin. I realized early it wasn’t my brilliance that was going to make me a successful entrepreneur. I should pick intellectual battles I can win. So, you’ve got to have something going for you. But I don’t think you should ever count yourself out as an entrepreneur because you don’t fit the stereotypical definition of an entrepreneur. If you look, there are all sorts of hidden millionaires across this country that are all just small businesses around the corner who may not be brilliant. They may not be optimistic. In most cases, they’re probably hard-working. But they’ve got something going for them, even if maybe it’s luck.
Andrew: And I can see where pessimism could lead in the wrong direction when it comes to building a business that depends on Google so highly. And when Panda’s algorithm change happened, what happened to your business?
Don: Well, we’ve had ups and downs with Google over the years. It’s generally been up and to the right. We had issues with the Panda algorithm in early 2011 (not the first release of it, but the second) which cut our traffic fairly significantly. It didn’t disappear, but it reduced our rankings for a lot of keyboards. And it’s interesting that our revenue didn’t decline much at all because there’s so much of what we call elasticity in our business. We never seem to have enough analysts meeting the demands that we have so it didn’t have a big impact from a revenue sense, but certainly we want those rankings to keep going up. We want traffic from Google to keep going up.
Well, I think what we’ve learned every time Google made a big change that has impacted us in a negative way is that we could do better. We could have better content, more engaging content. We could do better by the visitor. And a lot of people, if you read the SEO forms, will say, “Oh. Darn you, Google. It’s all your fault.” But I think actually what Google is doing is trying to converge the experience of the user and the algorithm to a point where the algorithm is expressing what the users think and see and want to see and showing the best results for those users. And if you are continually improving your website for [??] experience, you can do very well. We’ve always done well, but we could always do better. I think that the algorithm changes that have not worked in our favor have typically been a wake-up call that we should continue to work to do better.
Andrew: And one of the things that the data has started to do is to produce more content. Better quality, more of it. Is that right?
Don: Yeah, we wanted unique content. Every page needed to say something unique and valuable. We wrote about a half million words of content. We put a lot of people on just taking a lot of the institutional knowledge that we’ve developed about software and these different markets and putting it down on paper (not really paper, but figurative paper), and getting it out there on the web. And that worked for us, and we broke through and did really well as a result. We’ve had our ups and downs since, but in general we just have to keep pushing to provide a better experience for the user and justify our place in the market.
Andrew: I did a search to see what some of your active subdomains are and came across something called b2b-marketing-mentor.softwareadvice.com. There are a few dashes in there for anyone who’s trying to type it in. But it’s basically a blog. And is that one of the things that you started creating? A blog with articles by Jeffrey Russo, product manager at HubSpot? It has articles like “What Venture Capitalists want in a Marketing Executive.” “Marketing should own Telephone Lead Qualification” is another article title. Is that one of the changes?
Don: That is. That came around a little later, but what we’re doing there is we have specific blogs that align with the software markets we serve. So, b2b-marketing-mentor is all about CRM. It’s about marketing automation and sales automation. “Customer Service Investigator” is about customer support and call center software. “The Profitable Practice” is about medical. And the thing with software is that software always automates some process in an organization. So, success with buying and implementing software always comes with a change or an improvement to the business process. What we’re trying to do in those blogs is talk not just about the software but the business processes. So how can a physician improve their billing, and their patient encounters, and their clinical data collection? How can a B to B marketer improve their lead nurturing processes, not just with software, not out there selling and promoting just software, but the actual business processes? So that’s the type of content that we’re creating with those blogs.
Andrew: I heard that version 2.5 of your software of your site didn’t meet expectations. What does that mean? What happened there?
Don: Well, this goes way back to that period of when we were still trying to get people to engage with the site, and engage us, and convert, and fill out forms, and say tell me more. We still had a fairly complex web user interface, too much information. We had traffic coming to the web site, but people weren’t really engaging us. We tried a new version. We actually, with each release of the site, had a new development team, because we had horrible luck finding developers early on. We were off-shoring most of it. We just signed up a new team in Belarus, very talented engineers. We were excited about them. It was actually pretty expensive for us at the time. We invested a lot in this new design. When we went live it just didn’t improve much, maybe a little, not enough to generate revenue.
So that was the second and a half, almost third, version of our site. I thought, “Oh, boy. This isn’t going anywhere.” I was living in Montana. There was nothing else to do for work. I knew I’d probably have to wrap thing up, admit failure, and go back to the Bay area, and get a marketing job. Which would be good, but I have these entrepreneurial ambitions. I wanted to succeed, but I remember having a phone call talking to my mother and saying, “Yeah, basically, this isn’t working out. I think I’m going to have to wrap it up.” She’s not a sophisticated business person. She’s not a technologist. She’s just my mom. She said, “That’s too bad, because you know someone else is going to figure it out and do well with it.”
Andrew: And that led you to feel…
Don: It was just calling me out. I’m going to go give this another shot.
Andrew: Yeah, it would be painful to watch someone else take this idea and succeed with it if you’d given up on it.
Don: Yeah, that would have stung a bit. I don’t think she even meant that. It’s not her personality, but it certainly had that effect.
Andrew: What did work out for you was 2009, the stimulus bill. What happened?
Don: You know, one of the big components of the stimulus bill was funds put aside to subsidize the adoption of electronic medical records, or electronic health records as they’re more commonly known now. They put a lot of money behind this and said basically, “Physicians, we will give you $44,000 if you adopt these electronic medical records and show that you’re making meaningful use of them, using them to an extent that really impacts your practice in medicine.”
We had entered medical, it was the second market that we entered. Once we got some traction, we said, “Okay, we’ve got it working in construction. Let’s go into medical and retail.” We went into medical probably less than two years before that stimulus bill. We built up our presence and our critical mass, and then that stimulus came along. It was the first time we really had wind at our backs, that there was something that we didn’t do, you know a burden that we didn’t carry, just kind of came our way.
Medical quickly became 60% of our business, and really helped grow the business and fund our growth. We used that revenue to diversify in other markets. Medical is a much smaller portion of our business now and that’s deliberate. It really was some wind at our back, and it’s rare that we’ve had wind at our back.
Andrew: Let me do a quick plug here for a course that I think anyone who is watching this would want to take as a follow up. Then I want to ask you one important question that doesn’t necessarily have to do with business, but boy, does it impact business.
The plug is for Mixergy Premium. If you’re a member, and you’ve heard us talk about content marketing, and maybe you want to experiment with doing more of it, there’s a guy named Leo Woodrich. He’s the cofounder of Buffer, bufferapp.com. I saw blog everywhere. In fact, now that I’ve said his name, Leo Woodrich, you’ll start to spot his photo with his glasses and his byline and start to see him everywhere.
He’s a guy who started writing dozens, then hundreds and I think he’s in the thousands and thousands of articles all over the text start up space at first. He branched out from there. He wrote these articles that were compelling. That got him a lot of traffic, a lot of attention. All that traffic, or much of it converted to customers of his app, a buffer app.
I saw him everywhere. I knew he was doing this really well. I knew other entrepreneurs that were going to him for advice. I said, “Can you come and teach this process here at Mixergy?” He’s a long time Mixergy fan. He said yes. He spent a lot of time putting it together. He taught this course here. If you’re interested in content marketing, Leo’s course is the one for you to take.
I’m not trying to up sale you on anything. I just want you to know that if you’re a Mixergy premium member, that is there for you. You should go to Mixergypremium.com and just take that course even if you’re not a visual person. It’s a pretty visual course. You can still get the mp3 and listen to it. Leo’s course on content marketing is spectacular and a good follow up to this program.
Go to Mixergypremium.com if you’re a member. We have dozens of courses like that that will help you with your business. Hundreds of interviews that will help you see how others have done it. If you’re not a Mixergy premium member, sign up. Not only is it going to be great for you, but it also helps continue what we’re doing here at Mixergy, Mixergypremium.com. I guarantee it.
Here’s the final question, final area. You went to Argentina. You got engaged. How soon after the engagement did you go to Argentina?
Don: I got engaged in July of 2006. We got married in August of 2007. It was three weeks later that we moved to Argentina.
Andrew: Did you have kids at the time?
Don: No. We had 110 lb. Burmese mountain dog who we call our first daughter.
Andrew: You brought the dog with you to Argentina?
Don: We did. I probably wouldn’t do that again. Long flight for a puppy.
Andrew: We moved right after our wedding too, to Argentina for a year. We did take a dog and a cat because Argentina’s very open to it. It helped me with my work to be there, to get away from my everyday rut and to be able to sit and focus during the day. They don’t start going out to dinner until about 10:00 so I could still participate in social life afterwards. Do you have a similar experience?
Don: Yeah. It was a great experience that way. It was interesting for us. It was right at that point where we were really growing the telephone base part of our business. We were running these calls over VoIP, still earlier days of VoIP. The bandwidth in Argentina is not what it is in the U.S. We were off in the Patagonian Andes in a town called Baraloche, which you’ve probably heard of or been to.
In these small motels it was Austin and a new marketing guy, Houston Neil who we had just hired. He flew down. The three of us were just setting up these impromptu offices and trying to talk to people in the U.S. over VoIP from Argentina in the mountains. You had kids getting out of school at 3:00 PM going to the local internet cafe and playing these network video games. Taking the town’s bandwidth basically. It was us versus them competing for bandwidth.
Eventually after a few months we said we can’t do this. We’ve got to get home to a real bandwidth and get serious about this. It was a great experience.
Andrew: I was in an office in Buenos Aires where the internet was so good that I have not had internet as good before or since except when I moved here to San Francisco. Buenos Aires is not in the mountains. It was in a building designed for businesses. It seems. Sorry, what were you going to say?
Don: We didn’t have any money at the time. We were staying in motel rooms that were about $15 U.S. a night.
Andrew: Is that why now you guys have a program at your company where people can take a month off and go anywhere in the world and work from there as long as the internet is good, as long as it’s not in the mountains and they’re competing with gamers for bandwidth?
Don: Yeah. It’s not a month off. It’s work abroad so they’re definitely working. They’ll typically add a week or two of vacation to that so they actually get five or six weeks away. It is why we did it. We wanted to preserve that kind of virtual work model that the freedom and the creativity that comes from going abroad. We knew that we needed a home base here in the U.S.
We do that and people have gone to Shamanic France, Vietnam, all across Spain, home to Missouri or North Dakota. I tend to go somewhere in the U.S. I’m going to the Pacific Northwest next month for my work abroad. Austin goes back to Montana just about every chance he gets. It’s a great program. It’s been a lot of fun and a good selling point as we hire people.
Andrew: It sounds like it. I’m shocked that it took me this long to hear about how big a business and how interesting a company you’ve built. I’m in this space. I’m proud to have you on here and I think it’s an inspiring story. I hope that someone else who’s watching this will start picking up on your story because I’d like to read more about it.
I don’t want to just keep hearing about these companies that get $5 million funding and then end up selling for (?) higher prices. I want to hear about real businesses like yours. I want to know how you did it and I’m proud that you’re on this site telling us your story.
Don: Great, it was fun Andrew. Thanks for having me.
Andrew: Thank you. Don is of course with softwareadvice.com. Go check out the site to really understand the business. Thank you all for being part of it. Bye guys.
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