How did a woman who didn’t want to climb the corporate ladder bootstrap a profitable company?
Sara Margulis, Honeyfund
Sara Margulis is the CEO at Honeyfund which is an online wedding gift registry.
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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 did a woman who didn’t want to climb the corporate ladder bootstrap a profitable company? Sara Margulis is the founder of Honey Fund, an online wedding gift registry. Her latest site is Plum Fund, the first free crowd-funding website. I invited Sara here to talk about how she did it. Sara, welcome.
Sara: Thanks, Andrew. How are you?
Andrew: Good. So, I met your husband at an event that I did here in San Francisco, and he started telling me all about you. I was taking text messages to myself to remember what he said, and one of the things he told me was the revenue. But since he told it to me in confidence, I don’t want to reveal it. I want to ask you instead. What do you feel comfortable sharing about your revenue?
Sara: Well, you know, I… We’ve always been a transparent site. We try not to be worried too much about what our competitors know about us, so I’m totally comfortable answering any questions you have for me.
Andrew: OK, so what were revenues last year, 2012?
Sara: 2012 revenues. Overall, we brought in just over half a million dollars in revenue.
Andrew: Wow. And what about profits?
Sara: Profited about… Well, you know we’re an online company. There’s not a lot of expenses, so I’ll just tell you it was maybe about three quarters of that.
Andrew: Wow. Congratulations on doing this, on pulling this off. And it happened because of a problem that you had when you were getting married. What’s the problem?
Sara: Yeah, you know, we got married in 2005. Sometime before that, I started researching honeymoon registries. It was a very, very brand-new concept at the time. I have no idea how I even had heard about it. But I went online to Google and I typed in “honeymoon registries” and gosh, I had such a hard time finding a site that did what I wanted it to do, that looked professional and up-to-date for the web standards of 2004, and that didn’t charge an exorbitant fee. You know, all the sites out there were charging seven to nine percent fees, which for us amounted to about another night on our honeymoon that we would have to forgo in fees. We just felt like that was ridiculous. So that was the problem we had. My husband, Josh, being a web developer, he was able to create our own little hokey version of a honeymoon registry for our own wedding website. And that’s how the idea got started.
Andrew: I’m looking at the registry that you guys built. Can you describe it for people? And what we’ll do is we’ll include the screenshots in the post so people can see it. What am I looking at here in your first version?
Sara: You’re looking at my wedding website. Sarah and Josh, April 2nd, 2005. And we just had a simple page on that website that listed all the things that we needed money for for our honeymoon. So there was the airfare to Fiji. We went to Fiji which was like a dream come true. There was airfare for the island-hopping flights. There were resort fees. There was…
Andrew: I see a spa massage. Actually, it looks like “Spa massage, 20 requested, zero still needed, price $50. Airport hotel: we need to spend one night in Nadine near the airport to catch our 4:45 a.m. flight. One requested, zero still needed, $60.” So, people got to pick which one of these items they wanted to pay for…
Andrew: …and they click “Purchase,” and that way, they could give it to you.
Sara: Yeah, and I mean, it was so simple. All they did was say, “OK, I want to buy them a massage,” and click select and then enter their name and print off a little page that says. This is how much you pledged to give Sarah and Josh, send it in the mail with a check or bring it to the wedding. It’s very dumb down.
Andrew: The reason that I ask, that I read that is because I wanted to point out that you’re requesting 20 massages.
Sara: Yeah, right. Andrew: Why?
Sara: It’s kind of one of the ways our site works is that you can take a big ticket items and break them down, it’s gift in full amounts. So for us, we didn’t actually want 20 massages but we wanted maybe 10 massages. Five for each bus over a two week period and so that would cost maybe a $1,000, you can break it all down to increments that people can get. Andrew: I see. So they’re not literally buying you a massage, what they’re doing it contributing to the massage portion of your portion honey moon?
Andrew: And why did you want to do this, as opposed to what other people do, which is to have Crate & Barrel Registry or an Amazon Registry. What was it about this?
Sara: That’s a really good question and it really speaks to what’s driven and the growth of our business. More and more people are living together when they get married and they have everything they need for a household, sometimes twice as many things. But they don’t have the cash in the bank to do that fantastic honey moon. A lot of people don’t have the mom and dad with the deep pockets to help pay for that wedding anymore so anything they do have is going towards having a fantastic wedding and the honey moon is really an afterthought. We’ve found so many or our friends not going on a honey moon at all or taking a weekend away nearby that really run that cost. And we thought, we want to go to Fugue, we want a once in a lifetime experience, we want to remember our honey moon as something amazing for the rest of our married life, and let’s make it happen, you know?
Andrew: And then the idea was initially just to build it for yourselves?
Sara: Yes, the idea was just…that the sites out there are not good enough for our standards and we’re going to do it ourselves.
Andrew: April Dykman who pre-interviewed you asked you what the original version looked like and you said, I’m looking at her notes here; guests would print out the item they wanted and include a check.
Sara: That’s it.
Andrew: You kept it that simple?
Sara: That simple, we could have taken credit card payments on our PayPal account but we didn’t want to pay the 3% fee, we just felt like we wanted to make the impossible, we wanted to keep all that money for something really great on our honey moon.
Andrew: And you also use a phrase, “Dumb Down.”
Sara: Yes, I did.
Andrew: Why? What was it about this that makes you say that?
Sara: Well, I had, in 2004 I’d completed an MBA program at Golden Gate University where I worked. One of the classes that I took that really stuck with me and really influenced the development of this site was called the Management of Technology and Innovation. And in that class we read a pretty famous MBA book called “The Innovators Dilemma.” And the innovators dilemma really talks about what the customer wants, or what the developer thinks the customer wants is not always what really is going to sell. The example they used is the Palm Pilot and this is a famous MBA class, or a key study, but the idea was that when HPM palmed the originally the Palm Pilot they were trying to put full functional spreadsheets and fully functional Word and just make it like a mini computer that you hold in your hand. Really, in the end, what they discovers is that people just wanted three things, they wanted email, they want a contact list, and they wanted their phone, and that was all they needed and when they dumped it down that much the things just flopped the shelves, right? So we realized that the reason that these headlines were so expensive is because they were trying to cover this credit card fee. We thought if we could get around this credit card fee we can make this available for free and that’s what people really want. Andrew: I see. Did you initially think that you were going to build this out for other people, or was this just for us and let’s see what happens?
Sara: The original version was just for us and we wanted to get around the credit card fee so that’s why we did it that way. Then we realized other people wanted it that way too.
Andrew: How did you know that other people wanted this and you aren’t the only ones that wanted a honey moon registry?
Sara: At the time I was working in a marketing department and everybody who used our site, all of our friends who are our age and getting married thought it was the best idea since sliced bread. People are parent generations thought it was such a neat idea. The idea that they could give something unique and special, and they weren’t just going to Macy’s and buying a set of bed sheets or a toaster. To them it was just…they were really jazzed by it and in my marketing department we were working with this marketing museum and one the guys in the marketing agency was just going crazy over this idea and I just thought, and I thought, he knows something, he’s a marketing genius, he knows what will really stick and everyone we know is just going crazy over this idea and they were really the ones that pushed us to start it.
Andrew: You also went to SEO Book in the beginning.
Andrew: What were you doing on SEO Book?
Sara: One of the first things we did when we decided to start an online business is dive into what brings people to the websites and I wanted to make sure that people who wanted to find us could find us and so I bought Aaron Walls book, SEO book, and I went to Perry Marshal and I read the definitive guide to Ad words and these guys, you know they’ve been doing this for years already, they knew what drives traffic online and Aaron Wall’s book really opened my eyes as to having the right content on your site and I found that a lot of people were nervous about the etiquette relating to cash registries and asking for money instead of gifts so that was one of the first thing I did. I wrote an etiquette page and that page still ranks really well in the search engines because people ask that question.
Andrew: You mean before you even started coding and building this, you wrote an answer to the etiquette question?
Sara: Yeah, I was on the sidelines writing all the content, Josh was coding and I was writing all the content and again people still have this question and they wanted to know the answer.
Andrew: How did you know that people had that question about etiquette?
Sara: One of the things that Aaron Wall recommended was to give a good key word research tool so I went out and I got a key words analyzer, it’s not even available anymore, this thing is so old. But I started looking up terms related to honeymoon registries, weddings, wedding gifts and the etiquette term popped up in some of the related searches so I started diving into that and I saw there’s people with this question and there’s very little content that answered that.
Andrew: I see. Were you also looking to see if enough people were interested in free honeymoon registries?
Sara: I was actually mainly looking to see who was interested in honeymoon registry and again I wanted another related keywords that popped up was free honeymoon registry. Obviously that had been one of our concerns and so we realized that we really didn’t have to try to keep it free.
Andrew: I see. Okay you were validating your idea, but also looking to sharpen it and the validation came by seeing that people were searching for honeymoon registries. The sharpening came from seeing that they wanted a free honeymoon registry, like you.
Andrew: Okay. We talked about all the different things that innovators want to add to their products and the need to simplify. Was there one thing that you guys wrestled with that you thought, we have to add this, but push yourselves not to?
Sara: We did realize that there were going to be people who really wanted an online payments and we wrestled with whether or not to offer that at launch and I honestly can’t remember whether or not we did or not launch it with PayPal or not, but the answer to us was PayPal, people could link their own PayPal account, PayPal charged us 2.9% the $0.30, that transaction and the fee handling all went through PayPal, directly to the couple so we didn’t have to be involved in the transaction and I would say the number one thing that we wrestled with is that we didn’t really want to get involved in those transaction processing.
Sara: Because we didn’t want to be PayPal, we didn’t want to be a bank, we didn’t want to deal with the liability, we didn’t want to deal with customer service headache, we really needed to keep it simple. We started this business, Josh could have been studying Robert Kawasaki, Rich Dad, Poor Dad, Passive Income, and Cash Flow 101 board game, like furiously everything. Trying to drill these ideas into our minds and we knew that we’d be biting off more than we can chew and it would not be a passive business if we got involved in transaction processing.
Andrew: Alright. What about something else, what else was your spreadsheet that you said people need this on our device but they didn’t.
Sara: Good question. A lot of people would ask us for a wedding website, kind of functionalities that they didn’t have to have both the wedding website and the honeymoon registry. We wrestled with this a lot over the years, do we provide this kind of wedding website, teacher or at least a basic page where people can list their wedding details and it turns out that we haven’t really needed that, we didn’t really need that over the years. We did launch with it, it was like a separate page where you could say, okay, everybody come to my wedding website and check out what’s happening with my wedding, but really it was just honey fun and it was a way to bring people to look at the registry which is tacky, it’s against etiquette to put your registry info into your invitation and your wedding invitation.
Andrew: The etiquette says do not do that.
Sara: The etiquette says; don’t put your registry information in your invitation.
Andrew: So how would you do it?
Sara:: So we were giving people a way around this, which was, bring them to your Honeyfund wedding website, it’s not really a registry, it’s just a wedding website, it tells about their wedding, but really in the background it was all geared to drive people towards Honeyfund.
Andrew: I see, and that didn’t work.
Sara: And over time, you know, it was confusing to people, and so much new wedding website functionality was being created for free from all these other sites, and we were just felt like, this isn’t our game, we don’t need to be providing this, so with Honeyfund Two dado[sounds like] we took it out.
Andrew: So what is the way to tell people who are being invited to your wedding that you also have this honey moon registry?
Sara: Well, what we recommend is that you create a wedding website, and on your Registry tab, you list all the registries that you have and let people choose what they want to contribute towards, and we always recommend that you always have at least one traditional registry alongside your Honeyfund.
Sara: There are still people out there who are still very uncomfortable giving cash and there’s people who want to pick out a china pattern and purchase from it. There’s people who want to monogram towels for you and that’s just the way it is, and it’s based on long standing traditions in our culture that we don’t feel like we don’t need to try to eradicate, we can just exist alongside.
Andrew: I see, and then there’s some cultures where cash is the only thing you’d give, if you give presents, then it’s kind of strange.
Sara: Right and we’re finding that with those cultures, Honeyfund is really exciting too. Because, again it’s a new exciting way for your guests to contribute, in some cultures you bring your 20 dollar bill and you put it in the money tree, or you put it in the brides dress while they’re dancing.
Andrew: Oh really? I didn’t know that.
Sara: Yeah, the honey dance, that’s a Filipino tradition I think, don’t quote me on that. Honeyfund is also enabling that cash giving in a new and exciting way for the guests. So it’s really kind of bringing two cultures together.
Andrew: I see, you still want to give a gift, and you get to say you gave a gift, but really you’re giving cash, and the person gets to have the cash and the flexibility that comes with that.
Sara: Mm-hmm, yeah.
Andrew: And there’s a meaning of course that’s attached to giving a gift that maybe there isn’t to cash.
Andrew: So now, Josh is coding, you’re writing up a storm, at some point soon you have to get users in, and as I understand it, you started going after users before you were officially launched, right?
Sara: Yeah, we put up a placeholder page that said, coming soon, finally a free honey moon registry, and we made it look really pretty so people would realize there’s finally a current design out there for a honey moon registry in this. We said, enter your email address here and get an invitational when the site launches, and I don’t remember how long we had that page up for, but when we launched it, we had a hundred people on the list.
Andrew: A hundred people who showed up before the product was even built, and today these kinds of launching websites that ask for an email address are more popular. But entrepreneurs still have a hard time getting users to come to those sites and enter their email addresses. What did you do that got people to come in and enter their email addresses and say, yes, tell me when this is going to launch.
Sara: Well, there were two main ways that we went out and let people know about this on the web. First thing we did was set up an Outwards account, and I mentioned my Peri Marshall class on adderoids[sounds like], and so we just purchased honey moon registry, free honey moon registry, honey moon registry etiquette, so we turned it on, why not, let’s do this thing. And people starting clicking those ads and coming through. We also went out to the bridal forums, if you’re going to get married or if are married you know about the knot.com, the big wedding related website. They have bridal forums where brides get on there and chat with each other, and share ideas. The honey moon registry idea was getting a lot of traction on the knot because there was this question of etiquette, is this tacky or is this not tacky, and so I still had my knot account, I just jumped on the boards and started chatting away and talking about Honeyfund and went to modernbride.com and all the boards that were up there.
Andrew: So you were buying ads?
Sara: Mm-hmm, yeah.
Andrew: Before you had a product, before you really knew how you were going to monetize it, and we’ll talk in a moment about how you were going to monetize it.
Andrew: Why did you start buying ads that early?
Sara: Well, we knew it was coming, we want to [??], we knew people would love it. We just said, let’s start seeing what happens
Andrew: I’m looking at your business, there it is. Can you describe it to people, this is not what I expected when I clicked on the business plan PDF.
Sara: These were just some notes we had when we were developing our business plan.
Andrew: So this isn’t the actual business plan? These were your notes.
Sara: This isn’t the business plan. These were the notes that I was taking. I was copying and pasting from California Business Start-Up Guide and things like that; just going out to the web looking for business plan templates and things like that. So, I copied and pasted these notes that I came across the other day and I realized, “Wow, we really followed so many of these principles.” The main ones had to do with where innovative ideas come from. The first, well there was ‘unsatisfied customers’, which of course that was Josh and me. That’s where this idea came from.
‘Demograhic changes in society’- yes, we were older when we got married. We were living together. We already had the stuff. We were looking for cash toward this amazing honeymoon. The third item on the list is ‘luck’ and I’ve got to say that Josh and I have been very fortunate in our adventure. This is our first [??] to entrepreneurship and we’ve been very fortunate. ‘Imagination’- you know, I think it took a lot of imagination for us to say, “Let’s facilitate an offline [??]. Let’s make something new and different out of an age-old custom of giving someone a wedding gift.” Vision- we already had the vision of how it worked. We saw how it worked and we got a lot of great feedback on it. The last thing on the list is ‘problem-solving.’ An innovative idea comes from an innovative way of solving a problem. And for us, that was [??] fees and facilitating an offline transaction.
Andrew: Did you put that list together and then try to find the business? It seems like it is the opposite. Where you said, “We have this vision for a business. Let’s put a list together of where innovative ideas come from and just check to see if…”
Sara: … [??] A lot of it was just validating the idea and making sure that we crossed all the t’s and dotted all the i’s and that we weren’t just… We didn’t want to just throw something out there that we thought was good and see what happened. We wanted to make sure that we took this idea that we knew people loved and we also executed according to some standard business practices.
Andrew: I see. So, you just keep looking for validation and we’ll get to [??] in a moment to one thing that you got wrong, but you didn’t know it until after you launched. For now, let’s continue with this document. There’s just one other section here, which is the ‘remember’ section.
Sara: There were four things to remember. Look for new ideas (and again, the new idea for us was dumbing-down the payment process). Keep it simple. This has been a huge influence for Josh and I over the last seven years of this business. We always opt for the simpler solution because we know that the users will tell us if it needs to be complex. We put out the boring, plain Craigslist version of what [??] we want to build. Then we let them tell us how they want to bling it out. Starting small. Again, we’re in a [??] market. We’re okay with having a small market size. I was watching your interview with Patrick Flinn where you said, “The riches are the [??].”
Sara: And that’s where we feel like we’ve been really fortunate in this [??] market. Then the last idea to remember is just try, try, try again. That’s where we can get into how we [??] on our revenue model.
Andrew: One thing that occurs to me here is that if you have a really happy customer, chances are he’s not going to return to your site, she’s not going to come back and buy again. That’s it. They had their wedding. They’re happy together. They’re happy with the service; they’re moving on. Isn’t that difficult to have to keep going out and finding new customers over and over?
Sara: Well, you know somewhere in the neighborhood of one and a half million people get married every year or one and a half million weddings a year in the US. So, the market is there whether it’s a repeat customer or not. Believe it or not, we actually do have repeat customers; people who broke off an engagement or are getting married a second time are starting to turn up on Honey Bun.
Andrew: But it’s still not like Coffee where we return every single day…
Sara: …Right, right.
Andrew: Not every business, of course, is going to be like Coffee. That’s extraordinary. But that is a challenge isn’t it? To have to keep finding new customers?
Sara: It really has been pretty simple. We always keep those [??] up and everybody who uses Honey Bun invites 150 people, on average, to their wedding.
Sara: And all those people come to Honey Bun and give a gift and some of those people are also going to be getting married soon. Some of those people- every one of those people knows someone who’s getting married; whether they’re an aunt, an uncle, a mom, or a dad. So, we found that it’s just the word of mouth and the innate viral quality of the wedding market has kept us going.
Andrew: Do you do anything to make your name stand out with the gift givers?
Sara: That’s a good question. I mean, [??] saying thanks for giving your gift and if you like this idea go like us on Facebook or things like that, but, I wouldn’t say there’s anything special. It’s just they go and they have a good experience and kind of getting back to my research that I did in the SEO book with Aaron Wall, his main maxim is that if you create something that has a real value to people that’s all the search engine optimization you need. People are going to talk about you. They’re going to refer you. They’re going to be delighted with the service you provided them and that will show up on the web and that’s what drives more traffic back to your site.
Andrew: I’m looking at what I thought was Honeyfund Version 1.0, but it’s actually Honeyfund Beta the really early version. I can see the simplicity of it. I can see how people can write their payment method. I mean, they’re actually typing on their computer with their payment methods [??], right?
Sara: Yeah, what you’re looking at is the internal experience of a registered couple and how they set it up.
Andrew: Okay and then I see on the right the answer to my question which is, where did you envision the revenue coming from?
Sara: Yeah, we started out in 2005 when really the big online revenue model was ad sales. And we really imagined that our brides would sign up for Honeyfund, they would tell us all this demographic information about themselves; where they live, and wedding vendors they’re still looking for. I mean, they were filling out two pages of checklists on what are you still looking for and what are your interests, and we built this huge signup process and I can’t believe that people actually filled it out, but they did. And we thought, okay, great we’re going to sell to email marketing list buyers. We’re going to post our Google Ads. We’re going to sell advertising to wedding vendors. We’re going to match wedding vendors in these zip codes to brides in this zip code, and so that was our whole revenue model. And we built it all up for launch and it just totally flopped.
What wedding vendor in Chicago is going to sign up to pay us a $100.00 when we have three Chicago brides to send to her? We just didn’t have enough people in each place and we didn’t have enough brides to really sell a list to any email marketer either. And it was just too much of an effort for our brides to fill all this stuff out. One, it wasn’t really going to make us any money, so we just let it kind of run in the background for a while, but it didn’t go anywhere. And sometime in our third year we started getting a critical mass of requests for this feature and that feature and can I please have pictures next to my items? I want to put a picture of a spa or I want to put a picture of my destination, my resort. And we were like, yeah, okay, people wanted images. Which in 2008 that’s kind of when things started going all image-based, right? And they were asking us for; can we turn off the ads on our page? We just don’t want our guests having to deal with ads. We were like okay, we can probably do that.
So in 2008 we put together a premium package and really again it was just based on user feedback on the features that they wanted and we turned it on, we did some pricing research, we said okay we’re going to charge $28.00 for this thing. It’s a one time fee, its super simple. We were kind of basing the whole idea off of Flicker Pro, the premium model and it was like a light bulb went off. All of a sudden we were making real money and we were like when’s Josh going to quit his job at Adobe and it was great. Again, we lucked into and it was based on all of our user’s feedback; they told us how they wanted it to be.
Andrew: But you get so much feedback when you’re doing something like this. Especially when you’re offering it for free. How were you able to pick out those three things that are still on your site right now? I’m looking at something that I copied from Honeyfund, it says “You may upgrade to Honeyfund Premium for a one time charge of $39.00,” that’s what it is today, “This includes your choice of design templates one, photo slide share of you, two, and number three, photos next to your registry items. And number four, no ads on your registry.” How are you able to pick out those four things and say, a-ha, that is what we’re going to charge for. All those other requests, we’re going to leave them out.
Sara: Right. I did some market research. I had taken a class on marketing research in my MBA program and I love crunching numbers and doing my, you know regression analysis. We threw up like a survey monkey that sent it out to all of our current users and said, we basically, I think we presented them with three or four different premium packages and they told us which one, you know, by the numbers, by the data we figured out which ones would be more successful.
Andrew: I see. What were the, was this the package you thought would went out, or was there another one?
Sara: We thought that people, again, coming back to that question of the wedding website, we thought, so many people would ask for like fully functional wedding websites, with all (Eps) and all that stuff. And we really thought that that one would win but it didn’t.
Andrew: I see. So you found, “hey” people would pay to have a fully functioning wedding website, I would think so too now that you mentioned it.
Andrew: Would they have preferred these things ok.
Sara: We feel like that that would have been the deal breakers for them. These were the things that they just really wanted, and they were going to pay for it.
Andrew: Let me see if I understand how you did this. You are saying that you put it up as if they are already built. You charged and then you saw what people would pay for, or did I misunderstanding what you are saying?
Sara: No. We did a survey, and on the survey page, you know, we said: “would you prefer this package or this package?” So it is very simple marketing research.
Andrew: Ok. And that’s what told you this is what people are willing to pay for.
Sara: Right. And then we went back again and we did a second survey and we said, we knew which future set we were going to sell, and this time we said “Would you be willing to pay $29 for this feature set?” Yes or No? And you know we broke the list under three groups, and we tested $19, $29, and $39. And we just did the math, and the $29 column was the winner. So that’s how we priced it in the beginning.
Andrew: What do you say to people who are listening, who would worry that if you ask people in a survey their responses won’t, people won’t live up to what they are saying that they are going to do, they won’t actually pay when the time comes to wipe out that credit card?
Sara: Yes, you know that was a, that is a valid question that we addressed in my marketing research class, and it has to do with the way you ask them, if you ask them “would you rather pay $19, $29, or $39?” obviously everybody is always going to answer $19 right?
Sara: So we broke with groups into three sections and the first section we ask “Would you pay $19 or would you just forgo this opportunity?” Yes. You know and they say “yes we would buy this”, or “no we would not.” And that is just a more reliable kind of way of getting at whether or not they would actually purchase online.
Andrew: I see.
Sara: Then we went, you know, like a year later we went through and we actually did a live test on the site and we, to half of the people we showed the price of 29, and to half of the people we showed the price of 39. And the people who paid 39, we actually only ended up charging them 29, because that was our price at the time, but we knew that they were going to, they entered their credit card with the $39…
Andrew: I see.
Sara: … showing on their screen even though … now we have emailed them and said “Oh you just got a discount”, you know, and that’s how we knew that it was ok to raise the price a little bit.
Andrew: That’s great! What about getting rid of features? How do you know when you adding features that it is time for them to go?
Sara: Oh. Is there a feature that we’ve gotten rid of? Oh, you know I told you about the wedding website functionality that we kind of got rid of. It really has to do with you know, you know that some people are going to be upset no matter what you do you know, if you, if it is time to get rid of a feature and they were like that one percent of people that are really into it, they are going to be upset really. But when it comes down to it, it is a numbers thing you know, and…
Andrew: So how do you put numbers on features?
Sara: It, we just measure it based on our customer service inquiries, you know, if we are getting like a couple a day of people upset and we can help them and get them, either work around a solution that they find acceptable, then we consider it you know, a win like that feature can go.
But if we are getting like tons and tons of emails from people like super upset, people tell you in their email how it is impacting them in ways that you can’t even really you know, anticipate. So, and it has really been important to our business since we launched that Josh and I have answered every email that is coming to the business. Since launch up until last summer we hired our part time customer service person to help us out, but we still answer email almost every day.
Andrew: And it is still just the two of you full time, and then one person who is doing customer service?
Sara: Yes, and now we also recently hired a (UX) designer.
Andrew: Ok. Who did the design in the beginning?
Sara: Yes. He was a coder on (DreamWeaver) so not only did he have, you know the computer science like lines of code, background, but he also was working on a product that was built for web designers so he had some of the design concepts, too.
Andrew: Is he self-taught?
Sara: He went to USC and got a degree in computer science.
Andrew: How long before he was able to quit his job at Adobe?
Sara: He quit two and a half years ago, so it was about four and a half years.
Andrew: Four and a half years. Was there any point in those four and a half years where you said, “This is a fun side project, but it’s not going to support us. We should move on”?
Sara: No. I mean, it’s grown so steadily and the growth rates were one and a half to two times every year. We never thought, “This isn’t working.” We just thought, “How can we turn it up?”
Andrew: I see. Get more users in the door.
Sara: Yeah, and get more revenue per user and all the while sticking with our core value, which is maintaining a free service and giving people what we had wanted when we started out, which was a great honeymooners’ free site and ultimately that green honeymoon.
Andrew: When you had kids — and now you have two children, right?
Sara: That’s right.
Andrew: Did it become scarier to be entrepreneurs at that point?
Sara: Oh yeah, when we bought our first house Josh was still working at Adobe, but the site wasn’t making that much revenue. We were about to turn on the premium feature and we bought the house knowing that if the premium thing didn’t work out, we weren’t really going to be able to make the mortgage. Thankfully, it did. When he quit his job, we thought, “Well, he’s going to have more time to work on the business and we can expand all these revenue opportunities that we have, but if we don’t go anywhere, then it’s going to be a little tight,” on just the small amount of premium revenue we were making at the time.
Andrew: Why did you take a risk on buying a house before you knew the revenue would be there?
Sara: Oh, I knew. I knew in my heart it would be there.
Andrew: You just knew people are going to pay.
Sara: I just knew.
Andrew: How could you get that certain?
Sara: OK, this is where we’re going to get into this intuitive business thing. Maybe this is something that women can identify with, and your female audience. For me, I grew up with my dad as an accountant, my mom was a spiritual counselor. So, I had this really deep connection to my woman’s intuition, and my sense of what is true and right in the world and I have this numbers practical sense, and I grew up in West Sonoma County where things are really progressive here and people are really into a lot of spiritual things and New Age-y things. There’s also people who get work done and go in to work, commuting to the city, and California just offers that mixed bag.
Andrew: That’s why I came to live here.
Sara: Yeah, totally, yeah. So, I think the intuition that I had, this real sure sense that premium was going somewhere was based on all my interaction with customers. Again, I was answering email every day. At that time it was just me because Josh had a day job, so I answered all the email myself. I knew that people wanted these features. We did all the marketing research, they told us they were going to pay and we were building, building, building and it was going to be launching any day. We just took the risk.
Andrew: One thing you learned as you built up a business is how to manage time.
Andrew: What was the problem that you had before you learned this?
Sara: In my day job when I was working marketing before we started this site, my desk was always just piled with stuff and I was running from meeting to meeting and emails were always popping up. This is the problem that a lot of modern businesspeople have is it’s very reaction-based style of doing business and too much multitasking. I had to retrain myself to do one thing at a time. When I was answering email, I was answering email. When I was working on something else, I had to close the email program so that I could actually give all my attention to that thing and get it done because emails are always coming in.
Andrew: Why is that a problem? If you’re working on something and email comes in and you can answer it quickly, why not give the person a quick answer?
Sara: Well, I would do that a lot, and then the things that I was working on were left undone.
Andrew: That’s what happens to me, too.
Sara: You really have to focus. Did you ever read Seven Habits of Highly Effective People? You know the quadrants of highly productive, but less urgent. The things that I had to make sure were getting done, things that had a big impact but were the least urgent. Email was also having a very big impact altogether, but each email individually, it seems so urgent, but it’s not as important at the time.
Andrew: You seem to read a lot. You’ve referred to a lot of books that changed you. What are some books that you recommend that people in the audience listen to if they’re going to start a business? Actually, I think everyone here either started one or maybe they’re going to.
Andrew: So let’s do for both, for entrepreneurs in general.
Sara: OK. Well, a lot of the reading that I was exposed to is through my MBA program and I did a working professional MBA program at Golden Gate University. I was working full-time for them at the time and I was taking classes after school and just putting in a couple hours. It doesn’t matter what you read. Pick something that interests you, but put in a couple hours a day or a couple hours a week, or just make sure that you’re always, always educating yourself. Whether it’s watching a Mixergy interview or reading a book that interests you or spending time with another entrepreneur, putting that time in is really important because it expands your mind and gives you ideas that you never thought you could have.
Andrew: I see, so it’s not so much about, “Hey, here’s this one book that’s going to change your life. You don’t need anything else, but you do need to read this.” You’re saying instead, “Just keep reading.”
Sara: Keep exposing yourself to new ideas and they come, they just come. Somebody recently recommended this TED talk with Amanda Palmer. It was called “The Art of Asking” and it was so amazing because we’re getting ready to launch Plum Fund and we’re thinking about etiquette involved in cash gifting and we’re thinking about how do we make this such a win for both the people who register and their guests who come and give them money. So I sat down and I opened up that TED talk, and it was 45 minutes or something. And it’s like, when do you have time to sit down and spend 45 minutes with your undivided attention, but I just knew that was an important thing to do. After I was done watching that talk, the tagline for Plumfund was in my mind right then. It was just perfect, it’s just exactly what I needed and that’s why you have to give it that time because it sparks creativity.
Andrew: I ought to check that out. I’m pausing the interview, I mean not literally pausing it, but I’m actually going to type while we talk. Amanda Palmer, get the TED talk. Maybe if I have time for lunch today, I’ll watch that.
Sara: That one was about the art of asking, but watching it sparked the creativity that I needed in that moment.
Andrew: Well, one more thing about public speaking and then I’ve got a list of questions here from Mixergy premium members. We’re trying it as an experiment. That will feed into this question that I have about Plumfund. First, you said something to April, you said your hobbies are self- improvement, learning about marketing, and also public speaking. Why public speaking?
Sara: Well, again, when Josh and I started Honeyfund, we were learning about entrepreneurship, learning about wealth and making money work for you as opposed to working for money. One of the highest paying jobs in the US is public speaking. In the back of my mind I’ve always known that we were going there eventually and I didn’t have a lot of public speaking experience when I was a kid although I was always happy to be in front of a crowd. That was one of the things that I’ve been working on for myself.
Andrew: What do you do to improve your public speaking?
Sara: I bought this course from this company in San Francisco. I think it was called “Improving Your Speaking Skills” or something like that. She literally has you doing exercises where you’re reading out of Alice in Wonderland, diction, and how to hold your body and your face when you’re speaking, and things like that.
Andrew: I know I keep talking about Dale Carnegie in these interviews, but usually I talk about How to Win Friends and Influence People. I think maybe even before he wrote that book, he wrote a book on public speaking and I got an early copy of it. I mean, an ancient used version of that book and it is so good, maybe even better than the new modernized version of it. If anyone is out there who’s interested in public speaking, I highly recommend you get it. His whole idea is make your statement in two minutes or less by using a story that people are interested in and that also has a call to action in it. The way he taught it, when I wasn’t sure how to speak, when I was giving presentations at Toastmasters and didn’t know what to do, it just gave me a simple guide: here’s how to tell a story, here’s how to ask for the action that you want, and how to make it all interesting. It’s really good.
Sara: I think I might have that book somewhere.
Andrew: You do?
Sara: I have to dig it out.
Andrew: It’s a really good book.
Sara: That’s a great recommendation.
Andrew: Alright, since we’re talking about books, first I’ll do a plug for Mixergy Premium by saying that one of the things that we’ve been doing with Mixergy Premium is turning to authors and asking them to come on and teach their books to our premium members. But, we don’t just ask them to present it. We read the book here, we pull out the key ideas that we think will apply to our audience, we make them relatable to the work that they have, and then we work with the author to teach those ideas. So, for example, who was it who I just spoke with? Cal Newport. The author of, “So Good They Can’t Ignore You.” What we did was, we read the book, we meaning me and Alex Champagne, who produced Staff Course, we pulled out the key ideas that we know are important to our audience by going through the emails and we saw people said, “Hey, it’s great for you, Andrew, that you knew what you wanted to do from the beginning, but I don’t know what I’m passionate about. I don’t know what my goals are. I don’t know where I want to be in life.” So we took those questions, we asked those questions of ourselves as we read the book, we pulled out the ideas that apply to people who have those issues, from the book. Then, we look for examples in stories from his book that apply to our audience that they relate to. Like, we knew that Steve Jobs would be someone that they know. That people in technology would be people that they relate to. And we use those stories to make those points with Cal, and you can see as he’s doing this with us that his smile on his face just keeps growing because he sees that we did our research, he knows that we’ve made this applicable to our audience and he knows that it’s going to have impact.
And that’s just one course of about one hundred that we have on Mixergy Premium. More and more of them are taught by entrepreneurs who have also written books, and we break down their books with them. And, of course, if you don’t like our process, I still recommend Cal Newport’s book, “So Good They Can’t Ignore You”. But if you’re someone who’s just curious, this is a great way to start. Listen to the author teach you the book using the Mixergy method, which breaks down the book in a way that you can use it, and pulls out those ideas that you actually care about, and gives you stories that are memorable and are interesting to you because we understand your background. I don’t think this will be widely fascinating to the rest of the world, but if you come at it from a start-up / upstart mentality, and you’re coming to these programs from a tech background, I think you’ll especially appreciate it. Go to Mixergypremium.com. We’ve got Peter Sims of “Little Bets”, Ash Maurya of “Running Lean”, we’ve got Bob Burg of “Go Giver”, and so many others. Mixergypremium.com, I guarantee you’ll love it.
One of the things that I’ve been doing with Mixergy premium members, Sara, is I created a quick Facebook group and I said, “Here’s who I’m going to have on, I’m going to have Sarah of Honeyfund on. Do you have any questions for her?” Here are a few questions. I thought we could go rapid fire through this, and this will lead into what your new project is. “Lgroyer” asked, “Isn’t it socially awkward to ask for cash at a wedding? How do you do it?”
Sara: Yeah, that’s a great question. We’ve found that was something that a lot of our original users wanted to know about. Honeyfund really enables you to ask for cash toward something. We’ve found that when guests know that their cash is going toward something they’re not as shy, or they’re not as apprehensive about getting out their checkbook. So, again, if you look at a Honeyfund registry it’s for airfare, hotel nights, massages, and excursions. Like, Josh and I did a whole day sailing trip along the Mamanuca Island chain in Fiji. What a cool gift. And we still remember who gave us that gift. All day, while we’re on the boat, we were thinking about that person who gave it to us. We took a picture of us and sent it to that person as a thank you for that gift. The whole thing is so much more than just giving cash, and that’s how it works.
Andrew: How does a couple know how much to spend on their honeymoon if they don’t know how much they’re going to get in advance?
Sara: That’s a great question too. We recommend that people talk to a travel agent, or do their homework. Find out where they want to go, and how much it’s going to cost, and then do a rough estimate of how many people are coming to their wedding, how many people they think might be open to the idea, and then we give them a multiplier of $75 or something. So they get an idea of how much they might raise.
Andrew: You just base it on the estimate?
Sara: Yeah. We say, make sure that you have some backup plan, because you’re not going to cancel your whole trip to Fiji if you’re short by $1,000.00. So have a backup plan so that you know how you’re going to make it happen.
Andrew: I also noticed that your calculator doesn’t ask people where they’re going, so how do you come up with the calculation?
Sara: What we ask is, “How far are you going from home? How many hours on the plane?” And I found that if you’re going 1-2 hours the airfare is going to be in this range, and if you’re going 3-4 hours away from home your airfare is going to be in this range. So it’s an estimate.
Andrew: I see. Ultimately what we’re doing is giving people a socially acceptable way to give you cash and a way for them to know that the cash was used to something that will make your life happier and that will make their gift memorable.
Sara: Yeah. Really it’s about people who value experiences, life experiences over fame, you know.
Andrew: It’s not a direct, “Hey I gave you money, that money is going to this trip,” or… I guess it’s much more flexible than a direct dollar gift.
Sara: Right, it’s very flexible, so let’s say that you know, we end up raising $1,200 dollars but our trip is going to cost $1,800 dollars, then somebody who bought us you know our fourth massage, that money might go towards airfare instead and we’ll let them know that at the end of the process. Like, you know, thank you so much for your gift, you know we ended up having to use it towards airfare but we still had a great honeymoon and, you know, it was all because of you.
Andrew: Johnathan Vanhorn [SP] asked, “Are you afraid that someone is going to copy your idea and then you’ll be forced to fight for market share with them?” I see a big smile as you’re answering.
Sara: We already are, you know, people have copied our idea. You know, keeping it free and keeping the offline payment options has really been the thing that has protected us against competition. There’s not a lot of companies out there who are bootstraps, you know, work at home folks who can afford to not charge a transaction fee, and so that’s how we’ve really kept it, you know, I would just by genuinely keeping it free and wanting to provide a free service to people because we can, has just protected us from, you know, it’s given so much brand recognition and a warm fuzzy, you know, around our brand that people come back to us.
Andrew: Free is a hard price point to compete with.
Sara: Yes, exactly, yeah.
Andrew: And, here’s another question. Are there any plans to expand beyond honeymoon registries?
Sara: Yeah, we are getting ready to launch plumfund.com, which is the first free crowd funding site and this idea really was marked by our previous users who are having babies. “Hey do you have babyfund.com?” People who are planning their parents’ anniversaries, people who just bought a house that has an old bar that they want to renovate. You know, anything you can imagine needing money for in your life. You know, people have asked us, “Is there a Honeyfund for that?” And a lot of people have used Honeyfund for things that aren’t related to weddings, you know, it just kind of happened, you know?
Andrew: Didn’t a couple use it for fertility treatments?
Sara: Yeah, we had one couple that this was related to their wedding but they wanted to have a baby and they were adding fertility treatments to their cruise registry you know? [laughs] So really it’s very flexible, you can add anything you want, you can raise money towards anything you want, you can help a friend, you can raise money for your classroom. You can raise money for your marathon. It will have all the great flexibility of Honey Fund, all the free functionality that we have for there, but just be geared towards, you know, anything as opposed to weddings.
Andrew: I see. And the idea again is that it’s free unlike all of these other sites that are charging. It’s hard for people to compete with and keep it simple for the users.
Andrew: And I’m on the site right now. By the time this interview goes up this home page might be different but I see the same approach that you used to Honeyfund, which is the landing page describes basically what the product is going to be and a place for people to enter their e-mail address.
Andrew: How far along are you in building out the product?
Sara: Oh, we’re hoping to go live next week.
Andrew: OK. So by the time people listen to this, this site will of course be launched and this time I see that you didn’t write any articles. I just did a Google Search within your site.
Sara: Yeah. We haven’t posted them yet but they’re there.
Sara: Yeah, we’ll still have an etiquette page. It’s really important for people to understand etiquette around asking people for money instead of gifts. People will be using this for graduations, anniversaries, you know, personal events in their lives where people want to buy a gift. And then we are also going to have some content related to fund raising in general, you know, for the people that use it for their classroom or, you know, some charitable event. There’s also, you know, questions regarding that process and how Honeyfund or Plumfund will enable that in a different way than you’re used to.
Andrew: Alright. Final question. Any advice for other entrepreneurs who want to create something for free the way that you did?
Sara: Yeah, I mean, the advice I have is think about what it is that you want to offer, the problem that you want to solve and give it away from the goodness of your heart and because you can. And let them tell you how they want to pay you for it.
Andrew: That’s great. That’s exactly what you guys did.
Andrew: Alright. The site of course is Honeyfund and the new site is plumfund.com. If people want to say thank you Sara for doing this interview what’s a good way for them to connect with you?
Sara: Twitter.com/honeyfund, facebook.com/honeyfund, pinterest.com/
Sara: And of course they can always email me directly Sara, S-A-R-A, at honeyfund.com.
Andrew: Alright. Of course check out the site, honeyfund.com. Thank you all for being a part of it. Sara, thanks for doing this interview.
Sara: Thank you so much, Andrew.
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