Andrew: Hey, everyone. It’s Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. If you look at the home of the ambitious upstart, if you see Mixergy.com, you’re going to see that it’s full of guys who either earn millions of dollars a year or sold their companies for millions of dollars. That’s what Mixergy’s about. But today’s guest says that’s not what business is all about. He’s Tom Rossi, founder of Molehill, which makes three web apps — Tick, msites, and Buzzsprout. He and I had a conversation about a different way to look at business. I invited him here to Mixergy to talk about it.Tom, if it’s not millions and billions of dollars, then what is it about?
Tom: Well, I think it’s about life. Life isn’t found in those things. We can have all the money in the world, but what are we going to do with it? Where are we going to find happiness? And so, for us, my co-founder, Kevin Finn, and I, we went into it with the idea of we wanted our business to support us in life, not our life to support our business. And sometimes it’s hard for people to relate to that because they go into it with this idea of how can we make the most money, whereas we went in with how can I have the most freedom? All of our kids, each of us have three kids. They are not even in kindergarten. My oldest is in first grade. Most of them are younger than kindergarten, and we want to be there. We want to be around. We want to be in the house. We want to have freedom to be able to go up there for lunch or go on a field trip with our kids and things like that.
So that was really the lifestyle that we wanted to be able to build, being able to participate in ministries and non-profits that we work with, having the time to be able to do those things. So we built the company kind of around that.
So a lot of times people are like, “Man, if you did this to your product, you’d make so much more money or you’d be able to grow it or you’d be able to do this or that.” And it’s like, “Yeah, but it would change my lifestyle. It would make it difficult.” Now I’ve got to have an office. Now I have to have employees. Now I have to do this or to do that.
So really, that’s kind of our take on it, because building a business it’s not just about the money. It’s about finding life and really it being a vehicle, because you’re never going to find your life in your business. I love what I do. I love the business. But that’s not really where I’m going to find fulfillment and happiness, you know, in that. It’s going to be in family. It’s going to be in the ministries or non-profits or ways that you can serve and live in your community. So that’s kind of our philosophy.
Andrew: Give me an idea of something that you can do now because you are running this business that you couldn’t do if you had a job or you couldn’t do if you were slaving away. I shouldn’t even say slaving away, if you working hard trying to build $100 million dollar a year business.
Tom: Yeah. I mean it’s kind of, I feel bad sometimes because at our elementary school, I mean I can go to anything, any event I’m usually there. Whereas other dads, it’s hard. It’s the middle of the day. It’s hard for them to be able to go there unless they are using their lunch break. But for me it’s been great to just be involved in my kids’ life, while I can. While they still look up to me and want to be around me, I want to be there, because I know they are going to be teenagers one day and they won’t. So that’s one way is just participating in stuff at school. I work with a church. I’m a teacher at a church, and I spend a half a day a week working with, actually at the church office, working with other folks there. And they are always like, “Are you on staff?” No, I just, this is a way that I spend my time because I get life from it, and I’ve got the freedom to be able to do that.
Andrew: All right. I’m not sure I buy into this, but I don’t have kids yet. So who knows. To me the idea of business is something, it’s, the goal of business is to build something that you’re so passionate about that you want to spend endless hours on it. But you know what? I don’t have any kids, so maybe if I had kids, I’d want to go to school with them or check out their school plays.
Tom: It’s definitely a balance. Like I don’t want to make it sound like, oh, we put in the minimum amount of hours. We don’t like what we do, but we do it, to be able to go and do the other things that we want. That’s not true. Like part of our lifestyle is our work. We want to do things that make us happy. We want to do things, like we talk all the time about products. Man, that’d be a great product. But you know what? It would stink. Like I wouldn’t want to build it, I wouldn’t want to support it. I wouldn’t want to work with it. So we don’t build it. We want to build stuff that we would be happy to work on.
We wanted, Ruby on Rails, we love Ruby on Rails. Why? Because it’s a language that’s fun to work in. I can look forward to a day of coding, which I do. I love coding, I love what I do, and I love, late at night if I’ve got some time, I’m going to jump on and I’m going to work on my business. I don’t look at it as work. I look at it as this is something I’m passionate and excited about. But my goal is not to make those millions of dollars, and I’m not going to be happy until I get it. My goal is to be happy, and I’m happy when I’m coding.
Andrew: All right. Here’s what you guys create. You, and first of all I should say, you are running a successful business. You’re profitable right?
Tom: Yeah, very profitable.
Andrew: Just because it’s not $100 million a year business, I don’t want to give my audience the wrong impression. This is a successful business. You’ve got three web apps that are up and running, that are kicking off profits. You’re not Groupon, but you’re doing very well for yourself.
Tom: Right.
Andrew: Here’s what the three products are. One product is called Tick. It’s a time tracking application that helps you hit your budgets. Second product is msites. It lets you build a real website with zero technical knowledge. And thirdly, we got Buzzsprout, it’s the best way to publish, host, and track your podcast. I’m obviously reading this directly from some material that you guys put out there. So those are the three products that you guys have built.
Tom: Yup.
Andrew: And I asked you before the interview, are you willing to tell us what the revenues are and you said what?
Tom: Well, it’s just I hesitate to talk about the revenues because we don’t want that to put us in a box.
Andrew: That’s okay.
Tom: With other people. But I can say that both Kevin and I do really well for ourselves. We don’t have to go and build other products. Even Buzzsprout, it was funny when we launched Buzzsprout. It was right around the time that a couple other podcasting sites were going out of business. So we had people contacting us saying, “Well, are you going to stick around or is this thing going to go under?” We’re like, we didn’t need the money. We wanted to build the product, and we knew that there was a need out there that was scratched an itch for us and for some of our msites customers. So we went out and we built it.
So it was nice to be able to say, “Look, it doesn’t matter what happens. We’re committed to the product. We’re not in it for the money.” So we do really well with what we’ve got. For two of us, again if you build expectations for yourself that are realistic, I don’t have to pay myself a million dollars a year to be happy. Now granted, I do make good money, let’s say that. I am concerned about the tax implications and the things that are going on in Washington. That does affect me. But I’m not, you know, I don’t want to get into too much of the revenues.
Andrew: Okay. What about users? Can you give us a sense of the number of users that you guys have?
Tom: Sure. Between all of our different apps we have over 50,000 maybe close to 60,000 users between the systems.
Andrew: Okay.
Tom: And the vast majority of those are on Tick.
Andrew: And are they paid users?
Tom: No.
Andrew: Not necessarily.
Tom: Well, Tick has free subscriptions. So does Buzzsprout. Both of those have free subscriptions. Msites is the only one that eventually they have to get onto a paid plan.
Andrew: Okay. All right. I want to understand your philosophy just a little bit more. And then for the audience, I promise we’re going to get to how we built this up, how he built up a company that could support him, that can grow, that can build his passion that he has and give him the room to go do other things. But let me ask you this. I’m looking right now on my website and it looks like I’m featuring the Groupon interview. What’s wrong with someone saying to themselves, “I want to be the next Groupon”? These guys are worth billions of dollars, came out of nowhere. If they could do it, I could do it. I’m going to work and create that. Why do you disagree with that philosophy?
Tom: I don’t know if it’s so much as disagreeing, it’s just a different philosophy. I’m not going to go to the [inaudible 0:09:55] and tell people not to buy lottery tickets. You can buy a lottery ticket, you can go for it. But it’s just you’re probably better off having more realistic expectations for how to spend that dollar than buying a lottery ticket. But I’m not knocking it. I’m not at all saying that there aren’t people that are very happy saying, “You know what? I’m going to build a company that is going to be a billion dollars. I’m going to sell it to Google and get people charged up and all that kind of stuff.” As long as they are finding life in that and they are excited while they are doing it and they are not going to feel like they threw their life away, if it doesn’t happen, go for it. You know, that’s a fine philosophy.
For me, I felt like, especially when we started having kids, that I would look back and be like, “Man I spent way too much time at the office.” There would be a regret associated with that.
Andrew: All right. And I’ve asked other people in the past who have said, “I love entrepreneurship because it gives me freedom to do anything that I want.” Before the interview, I’d say, “Okay, I want to bring this up in the interview. Can you give me some examples of what is it that you do and that this freedom has given you?” They’re like, “Well, I could go on vacation.” I say, “All right. Like what? That would be interesting to talk about.” They go, “I haven’t taken one in a long time but I could.”
Tom: Exactly, exactly.
Andrew: “I could go see my kids in school.” I go, “All right. You’re interested in seeing your kids in school. What are they doing?” “I can’t do it now, but I could in theory.” And you’re actually out there, you’re doing it.
Tom: Yeah.
Andrew: And that shows that it’s possible in business to . . . entrepreneurship does give you that freedom. It’s possible to take it in the direction that you’re going, especially makes it possible to do it.
So let’s find out how you got here. Before the company was called Molehill, it was called what?
Tom: Capernaum. It was a services company.
Andrew: What kind of service did you guys do?
Tom: We built web based applications and telephony applications. We started in ’96, right about when the Internet was starting to take off and so you could do pretty much anything. So we tried to focus on just application development. So somebody would hire us, a company would bring us in, we’d build an application, sell it, and then move on to the next one.
Andrew: Okay.
Tom: And that’s kind of what bit us in about 2001, when the market kind of fell off. What happened for us, one of our goals was always to work with ministries and non-profits, organizations that typically lagged behind with technology. We wanted to be able to make our services available to them, for money, we weren’t doing it for free. I don’t want to make it sound like we’re great saints or anything, but we really wanted to approach them and help them understand how the technology benefited them. So about 50% of our client based was non-profits.
Well, September 11th happened, that wiped out all of our non-profits. They all froze any kind of capital expenses. So even though you can show them, look this is going to save you money, this is going to do this or that, it didn’t matter. So I’m sitting on a staff of 20 people and our business is just slowly, there is less and less of it. And I realized, we’ve got to do something. We’ve got to keep these people busy.
And what was funny when we first started, we’re like, “Oh yeah, we’re going to be a product company. We’re going to build cool products and whatever. We’re just going to do client work on the side.” And here it is, years later, we’re saying, “Gosh, what are we going to build?” And so it was fun. We spent a lot of time with the staff. We had plenty of time to come up with some ideas for products. We actually built two products at the time.
One of them was called msites, which we still have, the content management system, which is designed for non-profits. It’s kind of based on our experience out of that. And we built another product called Focal Point, which was Flash based telephony application for call centers. We built that and sold that off. It just kind of showed though, wait a minute, there is something wrong with this model. The client services model didn’t work for us because it’s living hand to mouth, you know.
I remember when we got our first million dollar contract. It was a huge project. I was so excited. We had a big party. It was a lot of work to get the deal. And I remember sitting there thinking, I’ve got to get another million dollar deal when this is done, because I’m going to have to hire people. I’m going to have to, you know, there’s, all these things that are going to happen as a result of getting this contract. And I felt all this weight of, I can’t even enjoy the time that I have right now, because I’m worried about getting the next big deal to be able to support this organization.
Andrew: Let me ask you about that, because that’s the problem with service businesses. A lot of people get into them because it doesn’t require much money up front, because it starts off with just their skills, and then they can build up and hire more people. They have this idea that eventually they don’t want to be selling their time. They want to build a product that just keeps bringing in revenue, not at all tied to the amount of hours that they spend on the product. But they don’t make it work.
You had the same vision. You’re telling me you launched in ’96. 2001 is when the big crisis hit. What were some of the challenges that you had in getting your own products up and running in the first five years? I want to understand the challenges that we’re going into when we have this model in mind.
Tom: Yeah. I hear it all the time, and I wasn’t above it. We were in the same boat. We were pushed into the product business in a lot of ways because we didn’t have anything else to do. You either fire everybody else or you come up with something to do.
Andrew: But in the five years why didn’t you do it?
Tom: You just get busy. You’re doing client work, man. It’s hard. It’s really hard to get in the mentality of I’m going to say no to client work. For now, maybe I’m going to turn down a project, maybe I’m just, I’m not going to spend my Fridays. I tell my friends that are still doing client work, “Take Fridays, spend the whole day not doing any client work. Granted, you can’t bill one of your hours, but spend it on a product. Try to come up with something.” We never did that.
Andrew: Why don’t your friends that you tell that to and people in my audience who hear that, why aren’t they going to do it? What’s the big, practical slap in the face that they get hit with when they try it?
Tom: I think it’s much easier when I know I’m going to get paid. If I go and I do the work, I’m going to get paid.
Andrew: I see.
Tom: As opposed to, well, if I spend my . . . let’s say I spend my Fridays. Well, how many Fridays am I going to spend before I ever see a dime? And then they are starting to doubt their product. They are starting to do doubt whether or not this. When meanwhile, I know if I go work for a client, at least I’m going to get paid for my hours. And it’s like you got to get over that. You got to get over that hump. You got to just get out there and do it, probably for your own sanity just to be able to, because client work can be so brutal for a creative person. But also to be able to get a product out there. The only way it’s going to happen is if you discipline yourself to spend the time. It’s not going to happen with your leftovers, and it’s not going to happen naturally.
Andrew: Why not this . . .
Tom: That’s my opinion.
Andrew: Let me understand the psychology too, because I think it’s applicable to people beyond service entrepreneurs. When you’re starting with a blank slate, whether it’s a blank piece of paper and you have to write this novel that you have imagined, or a blank website that you have to fill up with a great product, you end up with writer’s block. You end up with insecurity about how well it’s going to do. You end up with worries about what other people are going to think of you and how they are going to judge you based on that. Does any of that come into play, do you think, for people in that space?
Tom: Yeah. I think there are humps that you run into in the development of a product. And probably that’s the first hump that you’ve got to get over is, “Am I even building a product that people care about?” But then there are all these other things that you run into. And what’s great for us is now that we’ve launched three or four products, we’ll talk about it and encourage one another. Kevin and I have had this conversation a lot where he’ll remind me. He’ll be like, “Don’t you remember this is the same thing we experienced with Tick? We just need to push through. We just need to get to the other side of it. We just need to get something out there, moving on.”
So I think that’s an encouragement I think that a lot of people need when it comes to a product. You’re going to start having doubts and insecurities, and you’re going to want to scrap everything and start over. It’s just, it’s your mind. It’s a mind game. You just have to push through and get it done. Just get something out there. It’s much easier to make course correction than it is to get the thing moving.
Andrew: Interesting, right. I find that even with writing. If I have to even just put some piece of garbage up, at least for myself to look at, my mind instinctively will come up with ways to correct it and it’ll improve. But if I have to look at that blank piece of paper and fill it with greatness, I’m in trouble.
Tom: Yeah.
Andrew: I see. So you’re saying just put something out there. Okay. So here you are 2001. I think you said you have . . . sorry?
Tom: Even if the product isn’t perfect, just get something out there. Even if it’s not going to make tons of money, get something out there. So that way you can start to have that kind of experience.
Andrew: Okay. So 2001, economy takes a hit. You decide you’re going to get into the product business. You have 35 people who are working with you, right?
Tom: We had 20.
Andrew: 20. 20 people who are working with you. That’s a lot of people. You were going to, were you able to keep them all as you transitioned to products?
Tom: What we basically did was we started working on the products. We built Focal Point and msites. We still did client work to help offset some of our expenses. And then just as people left, we never rehired. So it just dwindled down and dwindled down over the next three or four years, until we got to the point where it was just basically, really until it got to just to me. Kevin at the time, Kevin Finn, my partner, he was working as an employee. He saw the writing on the wall and he said, “I’m going to try something else.” So he actually quit and moved down to Miami to join an ad agency.
So he did that for a couple of years, for a while. Then we reconnected, after a while, when he had the idea of Tick. Really that was his brain child, from his experience at Capernaum and also with the ad agency. He and a couple of other guys that he was working with down there kind of came up with this idea of Tick. Meanwhile, I had msites and I said, “Look, let’s move back up to Jacksonville. Let’s get this thing going again as a product company instead of a services company.” So that’s kind of how things shook out.
Andrew: Okay. Before I ask the next question, can you put your Skype on do not disturb, that way when the messages come in we won’t hear the alerts as they pop up? It’s just right on the menu bar, if you click on the little Skype and select do not disturb. They will be told to leave you alone. Okay. So what’s the first product that you create?
Tom: The first product that we ever created?
Andrew: Yes.
Tom: It was actually that little product that I told you about called Focal Point.
Andrew: Focal Point. What was Focal Point?
Tom: Flash based, it was a Flash ticker. It was based on the ESPN sports ticker that you can download for your computer, and it was for call centers. They could track how many calls were in queue, how many people were waiting for calls, and things like that. We did have some telephony background working with telephony applications.
Andrew: Okay.
Tom: So it was kind of, it kind of just fell out of other work that we were doing. But like I said, we had the time and we needed to build something. But even then, I saw a problem with being a product company because I built it and I sold it. And that was it.
Andrew: You sold it one time?
Tom: I sold it one time.
Andrew: Ah, okay. So you just built it and then did you have a customer in mind?
Tom: Yeah. Yeah. So we had a customer in mind that would be interested in buying it, but it just showed the flaw in that thinking. It was a services company trying to become a product company.
Andrew: Right.
Tom: Well, all I did was productize my service. I just shrunk wrap it and sold it one time. I was like, “Wait a minute. Now I don’t have a product anymore.” So msites and all of our products since have been built around recurring revenue, building a rapport with your customers, your subscribers, and charging them less money on a more recurring basis.
Andrew: So after Focal Point, the very next thing you did was msites?
Tom: msites.
Andrew: Okay. And what was the idea behind msites? What was the opportunity I should say that you saw?
Tom: The opportunity was working with these non-profits, small campus ministries, things like that, non-technical people that were really struggling with websites. At the time, there weren’t a lot of these content management systems that are out there today. They’re not going to go install an Apache server and stuff like that. They just want to log in and put some photos up. They want to change their calendar. They want to create a blog, and they want to do things like that.
So I went to my guys, and I was frustrated because one of the ministries I was working with, they couldn’t do it. I’m like, “Surely there is a way to do this. We’ve got to figure out a way to do this.” And so that’s where msites came from. The idea of being, at the time, we were thinking mini sites, like they would be mini sites for organizations, where I’m an association, the Gator Clubs for the University of Florida, they are spread out all over the place. But they are made up of volunteers. It’s a non-profit. They’re not very technical, but they need to be able to have a web page. They need to be able to have a calendar and things like that. So anyways, that’s where msites came from. That was the first product that we built. So as the services were dwindling, msites was kind of ramping up, and it was a slow growth. I spent a lot of time on the phone actually selling it, actually calling and talking to people.
Andrew: Really?
Tom: Trying to get organizations. Yeah, yeah.
Andrew: What did the first version look like?
Tom: It’s funny you say that because we just took it down. It actually has been running now for years. We probably had 150 subscribers that were still on the old system that was launched whenever, five years ago or something, and they just never moved over to the new version that was built on Rails. They were on the old one that built in .net. I mean it was just, just dated. If you were to look at it and . . .
Andrew: And they were paying month to month to month all these years?
Tom: All these years, they have been paying month to month.
Andrew: How much were they paying monthly on average?
Tom: Anywhere from $30 to $60 a month.
Andrew: That’s just the beauty of a monthly membership isn’t it?
Tom: Yeah. Now, they were using their sites. Don’t get me wrong. It wasn’t like we were just charging their card. They were actually using their sites and it worked for them. They didn’t need the new features. They didn’t need the Twitter integration and the Facebook integration and stuff like that. But yeah, you asked about the old version, I mean, it didn’t look great. It worked. It kind of looked dated, especially for a designer. You go there and look and go, “Wow, that was built probably in the early 2000s.” Yeah, we just took it off line last week. We moved everybody over to the new version.
Andrew: What features did it have?
Tom: All those features I told you — the ability to create a photo gallery, to make a calendar, blogs weren’t really around when we started it, it was news. In the new version, we call them a blog. But in the old version, it was create news articles. One of the cool features that a lot of them enjoy is there is a broadcast e-mail tool that allows them to actually take content on their website and send it out in the form of an e-mail.
Andrew: Yeah.
Tom: So that way it really, again, we want to streamline their time. You’re talking about volunteers or non-technical people who don’t have a lot of time to go and . . . they aren’t going to use Campaign Monitor to build an e-mail. So they log in. They go and upload, they put some stuff in their calendar, they upload some photos, they click on I want to send a broadcast e-mail to my supporters, and then boom, they send it out and they are done.
Andrew: I see.
Tom: So that was kind of the thinking.
Andrew: Okay. And you were picking up the phone and trying to sell it, or not trying to, you were actually selling it.
Tom: Yeah.
Andrew: One at a time. How did that go?
Tom: It was painful. I mean I kind of, I enjoy sales. I like interacting with our customers, so that aspect of it is good. But you’re talking about a product that is $30 to $60 a month. How many phone calls can you make to really make it worthwhile? But what I found specifically with msites, these non-profits talk to each other. And so, granted that phone call costs you a lot, but if that person subscribes, most likely they are going to tell 10 other people who you’ll never have to make a phone call to that will subscribe. So that’s what eventually happened with msites is it eventually reached a point where they were talking to each other and now people sign up all the time and it’s almost always some type of referral. They know somebody who’s using it, and that’s how they know to come to us.
Andrew: How did you know who to call? Where did you get the list?
Tom: Well, I called anybody that was in that target demographics. I called campus ministries, every organization that had affiliations where they needed calendars and photos and photo galleries and such.
Andrew: So you looked up online, it probably wasn’t Googling. It was Yahooing.
Tom: Yeah.
Andrew: You Yahooed a bunch of non-profits, and you said, “I’ve got their phone numbers. I’ll pick up the phone. I’ll call them up. I’ll pitch them my services.” But you were Yahooing them, actually that wouldn’t even be right because if you were Yahooing them, you probably would come up with their website. You probably went to the Yellow Pages or something.
Tom: Well, what I was doing was going after the main organizations. So like for example, Campus Crusade. Campus Crusade is a massive campus ministry, and they have thousands of campuses. So I was starting at the headquarter level, so calling them directly, finding out who to talk to, to get to these other lower level campuses. That was the original strategy that I took, and it didn’t work that well. Eventually, I figured out that it was better to make the calls from the bottom up, because the headquarters were just so difficult to deal with.
Andrew: Okay. Then when you did that, you’d have to call up the local church group and say, “Do you need a website”?
Tom: I would call them up and I’d say, “What are you doing for your website?” “Oh, I have a student,” inevitably, “I have a student who’s building my website.” “Oh really, how long has he been building it for? Has it ever launched? Here, go to msites. Click on this. Now you have a new website. Why don’t you upload a photo?” You know, in a matter of . . .
Andrew: You would walk them through the creation of it?
Tom: Oh, yeah.
Andrew: You’d give them the free version of the site right now?
Tom: Yeah.
Andrew: And if they wanted to upgrade, would you call them and upgrade them?
Tom: No, we used to give them a 30-day free trial. We actually lowered it to 15 days, because we found out that people didn’t log in and they’d forget about it. So we shortened the free time period. But yeah, so they would get a free time period to build a website, and then they would just be blown away. They’re like, “Man, this is easy. I don’t have to wait for this.” So what happened was some of those campus ministries started telling their churches, and then that became a whole new market for us. Churches are probably our biggest, in terms of revenue, they are our biggest msites subscriber because they run into the same issues.
It’s different, but it’s the same kind of story. So I started cold calling churches, and it was the same thing. “Oh well, one of the elder’s son built the website.” “Really? I’m looking at your website right now. It looks like it hasn’t been updated in a year and a half.” “Well, yeah, he’s kind of hard to get a hold of.” “Well, wouldn’t you like to be able to log in and do it yourself?” “Oh no, no, I’m not a technical person, I don’t know HTML and whatever.” And I’m like, “Here let me show you.” And then I’d get them to msites. So I did that a lot. And then they would talk to others..
Andrew: What does the M in msites stand for?
Tom: Originally, we were thinking mini sites, because we were thinking of going after those higher organizations, like Campus Crusade, and then them having mini sites for all of their campuses. But that just never panned out. So now, we sell from the bottom up.
Andrew: Okay. All right. A lot of people who I’ve talked to, a lot of entrepreneurs who call up their customers in the early days learn a lot about the product and what it needs. What did you learn that you wouldn’t have learned if you just put it out on the Web and let people buy it for themselves?
Tom: I think you learn a lot about what is important for them.
Andrew: Give me a few examples?
Tom: I’m trying to think with msites.
Andrew: I’ll give you one thing you’ve learned. If you would have just put up online a website for the big churches, for that top of the organization to sign up and distribute it downward, you wouldn’t have known that that is just not the way to go. You’d have to talk to them to hear why not.
Tom: Yeah, that is a good example. We built that back end.
Andrew: Oh you did?
Tom: We built this back end for the super user interface for them to be able to manage their organization, and not one person ever logged into it, because they didn’t care. Nobody wanted that. But we spent all the resources building it. And that was years ago. With Tick, we had similar conversations of, “Okay. Is this an area that we need to build right now? Or can we wait until users are in there and let them tell us that they want it?” And that happens all the time. Does this feature belong in the version one, or do we wait until we have users that will tell us? Because they will tell you, especially a technical product like Tick, they are very vocal of what they want and their expectations is that they should have it tomorrow.
Msites takes a little bit more goading to get them to communicate, because they are just so technically challenged that they are insecure about anything that they say. I still enjoy getting on the phone with my msites subscribers. We put our phone number up there. They can call. So we talk to them all the time.
Andrew: Why do you put your phone number up there? I’m always curious about that. Do I see the phone number? I don’t see it here.
Tom: msites, if you go to the Contact Us.
Andrew: Contact Us.
Tom: Yeah. We actually put our phone number up there, because msites they’re not that technical and they are intimidated by everything technical. So when you get them on the phone, it just goes a lot better. You know I see this all the time with Tick. Somebody will fill out a support request, and they just come across really mean and obnoxious in their support request.
Well the same thing will happen with msites but they are not really being mean and obnoxious. They’re just not very good at e-mail. So they put it in all caps because they don’t know how to turn caps lock off. You know what I mean? As opposed to Tick, when they put it in all caps, they know what they are doing. So when you get on the phone with them, it typically goes better for both of you. I can better understand what they’re saying and they can . . . they don’t know the difference between a web browser and their operating systems. So you’ll ask them, “Hey what web browser are you using?” They’ll write back Windows XP. No, Windows 95. So yeah, we do do a lot of phone support.
Andrew: Okay. So the first product that was a real product and not a one-time sale was msites. What is the next one?
Tom: Tick.
Andrew: Tick. And what was the idea for Tick? Where did you come up with that?
Tom: Out of our client services days. It was always frustrating of figuring out where were in our budget. You’d go and sell a product. You get the customer. You go through this long elegant dance of requirements and proposals and budgeting. Then you actually begin development. When you have a staff of whatever, 20 folks, banging on a project, you can blow through hours super quick. And what we found was, we were always looking in the rearview mirror to figure out how we were doing.
So we’re saying, “Okay, how many hours have you burnt through last month?” And so we said, “We want to build a product that helps you track your time and actually hit your budgets, not just track your time to find out at the end of the month how you did last month. We want to be able to help you hit your budgets now.”
So Kevin really ran with that. He came up with the designs working with a couple of the guys that were at the ad agency that he was with. So he kind of comped that up and came up with the idea of Tick. I really liked it. Msites was doing well. So we kind of had a talk about philosophy of what we want our business to do. “I don’t want to have employees. I don’t want to have to work every day. I want to have this freedom. So if you want a partner, you want to come back up and be a partner, you need to know these are some of the things.” And Kevin was all about it. It was a great fit. So he came back up to Jacksonville as a partner and then we built Tick.
Andrew: I see. So you guys built it together. Or did he have some of it built beforehand?
Tom: He built some of it ahead of time.
Andrew: Okay.
Tom: Like he had some of the designs and stuff like that and maybe some of the HTML even while he was still down there. But we didn’t launch the product until he came back up here. We finished it up and rolled it out.
Andrew: Were you and Kevin 50/50 partners?
Tom: No, no.
Andrew: Okay. I was going to say you built so much of it.
Tom: When we first started, when he first came up, just for having the idea and the comps and the work that he had already done, he got a minority share in the company, when he come on board. And then after we launched and Tick really did well, Tick still continues to do well, we kind of had a distribution of shares later on so that we are much closer than we were when first started.
Andrew: Okay. I see what you mean.
Tom: 50/50, I think that’s a tough, that’s a tough business to run. Even now, we’re 51/49, but we act like partners, so it’s not like I have to pull out my extra share that often. Ever, I don’t think I’ve ever.
Andrew: Why would you need him at all? Why would you take on a partner when you already showed that you could create msites, that you already have a model in place, you could hire an employee or just work twice as hard and build your second app?
Tom: Well, I had employees when I built msites, which eventually I did not have.
Andrew: I see.
Tom: So that’s one aspect of it. But even just philosophically, I don’t . . . Kevin and I are good complements for each other. I enjoy the technical. I enjoy coding. I enjoy server administration. I enjoy dealing with people and getting on the phone with customers. These are things that give me life, that I like doing.
Whereas he enjoys creating. He loves drawing out the incredible looking websites, designing, all that usability. Kevin is excellent at usability, coming up with the best way for users to interact with applications. I don’t want to do any of that, and so it was a perfect fit for a partnership. And I didn’t want him to be an employee. I wanted somebody who was in this with me. So when we’re working late because we want to be able to pay ourselves the next week, we’re both going to be in it together.
Andrew: Right, right.
Tom: So I think, I encourage a lot of web people to figure out what you’re good at and what you want to do, because there’s a lot of people that say, “I’m good at both.” Well, really you’re not, you’re not. There’s one thing that sucks the life out of you, and there’s something that you really enjoy. Figure out what it is that you enjoy, and the other thing is a good thing to partner with.
I think partnerships are great. I don’t think 50/50 partnerships are great, but partnerships, in general, I think are great. Do the things that you do well and the things that you don’t do well and the things you don’t want to do that suck the life out of you, get a partner that does enjoy those things.
Andrew: I think Amy Hoy, who I’ve got to have here to an interview, she’s a developer who teaches people how to build web app based businesses, she has this idea that anyone with enough patience and hard work can build a 30 by 500 business where you get 500 people who pay you 30 bucks a month or 30 people who pay you 500 bucks a month. Did msites hit that level before you guys partnered up?
Tom: Msites was generating somewhere around $8,000 to $10,000 a month. I think, we kind of set a goal of I believe about $8,000 a month before he would even come up.
Andrew: Got you. Okay. So you had enough, enough of a cushion that he wasn’t coming up on a wing and prayer.
Tom: Well, but he was coming on a much reduced salary.
Andrew: Right.
Tom: It wasn’t that much money.
Andrew: I see.
Tom: But that’s what we said is we, I was making it all. So I was doing pretty good. I was $8,000 to $10,000 a month with no expenses. Your server hosting, I mean, I’m working from home. I got no office. It was a good time for me financially, but it was short lived. How long would I be able to do that? Really how much fun is it going to be?
So anyways, when he comes on board, we figured out what is the minimum we can make for a while to get Tick out there. Meanwhile, msites was growing every month. Msites had a good linear growth. Like it was growing about $200 or $300 a month, every month in recurring revenue. So you could actually predict out how much money you’d be making in a year or whatever. So that’s kind of where we were when he came on.
Andrew: Okay. Tick accounts for what percent of your business?
Tom: Now, it’s probably just over 60%, maybe 70%.
Andrew: Wow.
Tom: Yeah, Tick dwarfed msites in about two years.
Andrew: Okay.
Tom: Yeah, in about two years it started just beating the snot out of msites.
Andrew: Why, actually, how did you get the first customers for Tick?
Tom: Tick I think is an anomaly when it comes to building a product, because our target audience was technical people. They were people that were on the Web. They are developers. That’s who we were thinking about when we built the product. These are people that are reading blogs. These are people that are Googling. As opposed to msites, which are very technically inept people, they are not, you know, they are very difficult to reach. They are suspicious of anything technical.
So anyways, Tick was built for that target audience, and Kevin did an incredible job of reaching out to bloggers and getting them to check out the product. One blogger that he ended up connecting up with wrote about us on CNET. And that really just opened up the flood gates for us. Because when those guys got in, then they went and they started blogging about it and people were talking about the design and things like that. We just got a lot of great publicity.
So Tick grew much faster, but I think it’s not probably typical for an app unless it’s built for that audience. If you’re building an app for that audience, I think you’re going to be able to hit a better market penetration pretty quick. But we didn’t see that with msites and we didn’t see that with Buzzsprout. Tick stood out in that.
Andrew: You know, Jason Fried, 37signals, told me something similar. He said when you build a web app, build it for yourself. Build something that you need and then go find others who need it too. I’m going to ask you the same question I asked him. When you build it for yourself, how do you keep from building something that only you, yourself, need, and how do you avoid that?
Tom: That’s the question that you’re always asking yourself. Just like 37signals, we like the idea of opinionated software. We believe that you should track your time to hit your budgets in a specific way. So all the time we would ask ourselves, “Is that just us?” You know what I mean? “Is this just the way that we do it, or is this the way that other people do it?” The first release of Tick was all us. Now that we’ve been out there for a while and we get feedback and we learn, we go, “That’s actually a pretty good idea. That’s a good way to do it”. You know you learn from your customers and you make changes as you go.
But we don’t do everything our users ask. Even if we have users . . . a lot of users will ask for something that we just don’t think belongs in the product. We are not going to do it. It’s not going to happen.
Andrew: But in the beginning, how did you avoid that in the beginning? When you built this thing, you put it out there, how did you create something more than just the two of you, you and Kevin, would need?
Tom: I mean it’s hard. It was a constant conversation of, “Do we need that feature? Do I need to add that to the product?” And really it’s usually framed in the, “Are people going to pay for this? Is it worth the development?”
Andrew: How do you know that? I don’t even know if people are going to watch this interview. I always wonder, when I create something, will they want it. How did you know it?
Tom: You don’t. We had no idea.
Andrew: So how did you protect yourself from wasting too much time, from wasting maybe money on something that people didn’t want?
Tom: I think that’s what it means to be an entrepreneur. You’re willing to take those risks and to say I’m willing to get out there and do it. And had we launched it and it didn’t get picked up as well as it did, I don’t think it would have, it wouldn’t have crushed us, because we didn’t take out another mortgage on the house and all these kinds of things. We didn’t forfeit our lives to be able to do it. That’s why we’re talking about lifestyle. Even in the throes of Tick, it was about our lifestyle. We were working the hours that we wanted to work. We pushed the deadlines. We made it comfortable for ourselves to be able to do that.
Now granted, at the time, we weren’t living on that much money. We were living off of msites. So it’s not like, like now, we joke because we are taking our corporate retreat will be a cruise in February. We couldn’t afford to do that in the early times, but we didn’t forfeit our lives to be able to get the product out there originally. We just disciplined ourselves to get it done.
Andrew: How long did you spend developing it before you launched?
Tom: Oh, man, I want to say it was about, it was under a year for Tick. Yeah, I’m not exactly sure how long.
Andrew: Under a year, that’s so far from the lean startup techniques, the lean startup method. In retrospect, was that the right amount of time? Was it too little, too much? How do you feel about it?
Tom: Well, it was kind of spread out, because, like I said, only part of that time was he actually even full time on it. So he was doing it nights and weekends with other guys down in Miami until he came on full time. And so when he actually came on full time, I’m not sure how long it took us, but I don’t think we spent too much time on it. In the middle of our development or maybe early on in the development, we went to the 37signals “Getting Real” and to the workshop. It was really good.
I remember when we came back from that we scratched so many, just things that were out there that we just didn’t need to build. Like they weren’t core to the product, we didn’t need to build it to get it out there, and it had a real effect on us being able to get out there quicker.
Andrew: I see.
Tom: There is a tremendous value to getting out there quicker, but it’s always that struggle. I mean Buzzsprout, Kevin and I were just talking about it this week. We feel like Buzzsprout, we probably spent too much time, like we developed too much. We should have launched it earlier with less features, just to give it time, to get feedback from people who were using it and to really evaluate the features that need to be in the product rather than . . .
Andrew: What are some of the features you got rid of in Tick, when you decided to get real and keep things simpler?
Tom: Anything that has to do with dollars. We said ultimately if you need to hit your budget, it’s about the time. It’s not about the dollars. It doesn’t matter if you sell your project for $20,000. In reality, what you want to hit is, I don’t want to spend more than 2,000 hours on a project, or 200 hours.
Andrew: I see.
Tom: I don’t want to go over that many hours. Why put the dollars in there at all? It just adds confusion. And to this day, we still get people who are, “Tick, I can’t put in dollars for my budget?” It’s not going to help hit your budget. We don’t want to put it in there. We want you to hit your budget. The best way to hit your budget is to translate that into hours, because if I’m a developer on your team and I look and I see how many hours I have left, that’s much easier for me than looking and seeing how many dollars are left.
So anyways, that’s a good example. We had a bunch of features that were related to helping evaluate dollars wise how you’re doing in your budget. We pulled all that out, and actually it hasn’t gone back in. We’ve talked about ways that we might be able to incorporate it, but Tick has been out for a while now with nothing to do with dollars.
Andrew: All right. What else do I want to know here? Buzzsprout. What was the idea behind Buzzsprout, your third product?
Tom: Buzzsprout was partly a frustration that we had with msites, where we had non-technical users that wanted to do podcasts — churches, groups like that, volunteer driven — and it was just incredibly complicated to be able to go out and create a podcast, to be able to take our audio files and format them correctly and build an RSS feed and all that kind of jazz. So we kept referring them to different companies that would go out of business. And we said finally, “Let’s just build it. It would be a fun project to work on. We’ve got a target audience that we can reach out to with our msites subscribers.” So out of the gate we had probably 50 to 100 subscribers just because we offered it to our msites subscribers.
But yeah, the idea there was to make it super simple to be able to build your own podcasts. And what was funny was even technical people have subscribed to Buzzsprout because it’s just so easy. They are like, well yeah, when you think about it, they are like. We would talk to people, we’d go to like RubyConf and things like that, or talk to people at meetups and things. They would be like, “Would people really pay for that?” They’re like, “Isn’t easy? All you have to do is, you upload the file after you format it and then you edit the RSS feed and, yeah actually, wait a minute. I think I would use it.” They would start thinking about all the work that goes into a podcast. So anyway, that was the thinking behind Buzzsprout.
Andrew: Yeah, it’s a nightmare to get a podcast up properly. I could see why people don’t do it. Maybe not a nightmare, but it’s tougher than it should be. You said that you probably would’ve scaled that back. Can you tell me about that?
Tom: Well, it’s hard to figure what we did that we didn’t need to. Like with Buzzsprout, we give them the ability to customize and have their own Buzzsprout page, which is for their podcast, when most of our subscribers are into the way that we allow them to embed their podcasts in their sites. And that was, it wasn’t really an afterthought but it wasn’t something that we spent as much time on as we did with allowing them to build their own Buzz pages or Buzzsprout sites and things like that.
But it was a good example of something that we probably didn’t have to build to be able to launch. Had we waited, we would have found out that embedding is much more important to our subscribers, of giving them abilities to control how the embedding works and things like that.
Andrew: What was the essence of it, that if you could go back and say, we’re only going to launch the essence, everything else is going to come from users, what do you think that essence would have been, that small, little seed?
Tom: For Buzzsprout?
Andrew: Yeah.
Tom: I think that’s the one that stands out to me. With all of our products we try to get down to the, you know what is the one thing that we are going to do better than anybody? So for every product we’ve got to be able to answer that question. What is the one thing? I think it was good to great when they talk about the hedgehog principle. The fox, he’s sly and he can do all kinds of things. The hedgehog can do only one thing but he does it really well. That’s always have been our philosophy. And so with Tick, we want to be the best product at tracking your time and hitting your budgets. Msites, we want to be the simplest product for non-profits. For Buzzsprout, we want to be able to be the best way to get your podcast out on the Internet. So kind of having those mantras, then that’s that small seed you’re talking about. Okay. Are we helping do that thing if we add that feature in there?
Andrew: Okay. All right, I see. Any products that you tried that failed?
Tom: Not yet. But it’s kind of hard to define a failure. If we were to launch a product that doesn’t break the bank but it’s still making money, it’s a product. What’s difficult is, if I’m talking about quitting my day job, well now you have got an enormous amount of pressure because whatever product you build has to replace that income that you would have made as an employee. We’re kind of past that. So now, we have more freedom to risk and to build products that maybe won’t make as much money, but they are fun and we want to build them. That’s a good place to be. Out of the gate, you got to get enough revenue to quit your job.
Andrew: I see. So for example, if Buzzsprout charges $9 for the cheapest plan, I think, right? Am I right about that? Let me see.
Tom: Yeah.
Andrew: Well, it’s got the free, which is two hours. But as long as you’ve got 100 people who are paying the 9 bucks a month and you don’t have to keep upgrading it or updating it, you got a good business. It sits there. It’s not great. The audience isn’t telling you add more features. They’re not willing to pay for more than you’ve got there. It’s fine. It’s not a failure if . . . I see how you limit your failures is what I’m trying to say.
Tom: Yeah. And like we were talking about in the beginning, it’s coming up with how are you going to measure success. If I measured success on being bought by Google, we’re failures. But if I said it’s freeing us up to do the things that we enjoy and making a good income while we do it and being able to do the things that we are good at, that gives us life, that’s really what we want to accomplish. So Buzzsprout, and I don’t mind telling you, Buzzsprout we launched in 2009, and right now it’s making somewhere around $2,500 to $3,000 a month, which isn’t that much money. But it’s every month and it’s growing. I think it’s pretty realistic.
If I were to launch an app, in a year, okay maybe I’m going to make $2,500 to $3,000 a month. Well, when all that money is going to you and to whatever you are doing in your business, that’s significant. That’s something to work with.
Andrew: With all of your businesses, you’ve got monthly fees. Have the monthly fees ever gone down? I mean the monthly revenue ever gone down from them?
Tom: As a monthly, probably, you mean like one month it made less than the month before?
Andrew: Yeah.
Tom: Yeah.
Andrew: Is that common?
Tom: Yeah. You have a little bit of noise where it’ll grow by a certain amount and then the next month it might go down. But typically over, if you look at two or three months at a time, it’s going up. All of our products are going up.
Andrew: So from quarter to quarter, revenue just keeps going up?
Tom: Yeah.
Andrew: Is that a product of a monthly fee based business? Do you think that’s because it’s a monthly fee based business or no?
Tom: No. I think partly it’s due to our recurring relationship. With all of our products we really go out of our way to do good support. And you go, “Well, gosh, how do you do that when you spend your time up at the school or doing all these other things that you want to do?” But the reality is you can be really good at support by e-mail. I’ll get on the phone with msites, but what I do is I’ll schedule it. I know that Thursday morning or whatever I’m going to be around, so I am going to go ahead and schedule some phone calls on that day.
For my e-mail support, I can do that at anytime. I can do it at 10:00 at night. It freaks people out. They’ll e-mail Tick thinking it’s some kind of black hole, and it could be 10:00, 11:00 at night. I’m passionate about my product. If somebody writes in, I’m going to respond back. Anyway, I think that helps to build a rapport with those users, and so they are more likely to tweet about it, to blog about it, to tell other people. They are more likely to keep the relationship with you and to keep paying you.
Andrew: If you saw me reaching, I was reaching for my phone. If I dialed your customer support number, I’m going to do it right now, I’m not making any adjustments. Let’s see what happens. Where does this go? Does this go to you?
Tom: It will go to Google Voice.
Andrew: Okay.
Tom: Where it will transcribe the voicemail.
Andrew: Okay.
Tom: And then e-mail our support mailbox.
Andrew: Got you.
Tom: Kevin and I monitor the support mailbox on our phones, our computers.
Andrew: Hello?
Tom: If it sounds really bad, maybe we’ll call you. If it’s something that we can do by e-mail, we’ll just e-mail you.
Andrew: How do you get my e-mail address? Do I have to leave it on Google Voice?
Tom: Well, if I don’t know, I don’t have a choice but to call you like with msites.
Andrew: If you don’t know the . . . sorry. If I call up right now, I haven’t got the voicemail message yet, but I am imagining what will happen is Google Voice will say, “Please say your name.” I’ll say my name. Actually, it’s just ringing. Do I have the right number? 244-, ah, I got the wrong number, that’s why.
Tom: Well, what it will do, now we only put up our phone number for msites. So Tick, we don’t get phone calls for. Msites, when they call, typically it’s a Grandma and she can’t figure out whether or not her calendar is working correctly or whatever. And so you got no choice, man. With a call like that, you got to pick up the phone and call her. There’s nothing you’re going to be able to do.
But maybe it’s, hey this is so and so. I can’t log into my account. I forgot my password. So you just send them an e-mail. “Did you click on the link that says forgot password?” We do all of our support in Google, which is awesome. So if I hear the person’s name and it’s Frank Schmidt, I can just go into Google into our support mailbox and do Frank Schmidt and it will bring back every interaction with this guy since he’s subscribed with us. So that really helps our support process of being able to identify what’s going on.
Andrew: It went straight to voicemail like you said and then get the transcription. So this number doesn’t even get forwarded to your cell phones?
Tom: Well, we could if we wanted, but we usually don’t.
Andrew: Okay. Interesting. All right. So there it is. One advice. Somebody who wants to build a business that brings in money every month, that maybe doesn’t make them into the next Groupon but does give them a good business, what is the one piece of advice you’d give them?
Tom: I’d say tighten it up. Tighten up your focus. Answer the question of what’s the one thing, do one thing really, really well. What’s the one thing you’re going to do, do it in a way that people want to pay you to do it, and then get it done. Just stay focused on that and get it done. Carve out the time. Don’t give it your leftovers. Don’t say, “Well, I’m going to do it when I don’t have other work.” Say, “No, I’m going to spend all day Friday. I’m going to spend every Saturday morning,” whatever, whatever you can afford to do. Just get it done.
Andrew: That one thing.
Tom: That one thing and you do it well. It sounds obnoxious but I say I want to be the best. Tick, I still believe is the best way to track your time and hit your budgets. What is the one thing that you’re going to be the best at? And that means you might have to tighten your focus of what exactly it is that you’re going to do to be able to say you’re the best at it. We’re not the best way to track your time. We’re the best way to track your time when you’re hitting your budgets. So something along those lines, thinking through, what’s the one thing that you’re going to do the best.
Andrew: All right. The website is TheMolehill.com, if you want to see the three apps that we talked about. TheMoleHill.com or you can go to MSites.com, Buzzsprout.com or Tickspot.com. Tom, thanks for doing the interview.
Tom: Thanks.
Andrew: All right. And thank you all for watching. Oh, and you know what? Before I end this guys, come back to Mixergy and give me feedback on this. This is not my typical interview. I want to know whether you guys want more interviews like this or whether you think it was interesting for once but not any others. So give me feedback on this interview, how it went. Give me your feedback on lifestyle based businesses, whether you want more or less of those. Thank you guys for watching. Tom, thanks again for doing the interview.
Tom: Thanks.
Andrew: Bye.
This transcript brought to you by www.Speechpad.com.
