Andrew: This interview is sponsored by Walker Corporate Law. Do you need a lawyer? It’s not the local guy who doesn’t really get startups, not the really expensive guy who wants a piece of your business; the one who really understands the startup community and is there to help you. If you do, go to Scott Edward Walker of Walker Corporate Law.
It’s also sponsored by Grasshopper. Do you need a phone number where your customers can dial in, press one to go to sales, press two to go to customer service, etc., and maybe even all those numbers actually lead to your cell phone but it makes you look big? Do you need that kind of feature and so many others? Go to Grasshopper.com Alright, let’s get started.
Hey there freedom fighters, my name is Andrew Warner and I am the founder of Mixergy, home of the ambitious upstart, and in this interview I want to find out how a founder who almost went bankrupt ended up turning things around. Landon Ray is the founder of Office Autopilot which makes email marketing software with powerful online marketing tools. I invited him here to talk to him about how he bootstrapped this company, and about Ontrapalooza, which is more like a two-day business party than a conference. I want to find out how it’s going, who’s going to speak there, and just generally why he’s putting this thing together. Landon, you smiled as you heard me say, ”almost went bankrupt”, isn’t that true?
Landon: Oh gosh.
Andrew: Is it true, or did I exaggerate there?
Landon: Well, we definitely had our hard times and yes we got very close to pulling the plug, I’m not sure that, on the scale of financial disasters out there that we were anywhere near the top but yea, we definitely took our time figuring this thing out. Five years of abject failure before we found any traction at all.
Andrew: And, I’m sorry to be getting this personal this quickly into it, but it hurt your marriage, too that you were so focused on turning things around, didn’t it?
Landon: Andrew, yeah, yeah it definitely hurt my marriage as well.
Andrew: What happened there? Because frankly I’m fairly newly married, and sometimes I feel like my obsession is going to hurt my marriage.
Andrew: What happened with-
Landon: Yea. Well, let’s see. I mean, I think basically that adding the stress of entrepreneurship and this gigantic, risk of kind of putting all of your financial eggs into this crazy unknown basket, brings to a relationship brings up and really brings to the surface everybody’s core values around things like how they spend their money, how they spend their time, and different people’s risk profiles. For us it brought up that we have very different ideas about things like that, and you know it was tough.
The reality is I’ve always been an entrepreneur, I’ve always been somebody who’s always made my own way, but the reality is that when I met my then- wife I had kind of like, retired from my first career, and I took four years off. I was plunking around my property, remodeling my house, and that’s how she knew me and that’s how she got to know me. So when I dove back into entrepreneurship that was a big shock to her, and it was a challenge for us to get through that.
Andrew: Were you in a situation where you then couldn’t spend as much money, didn’t have as much in the bank, or maybe even hurting at the grocery store? Is that what you mean?
Landon: No, it was just more like…. You know, I went ten years without an income and I spent a lot of money on the business, invested a lot of money in the business, and yea when I started out I had, I’d made several million dollars trading stock in the late 90’s and by the end it was getting tight. It wasn’t like, no, not trouble at the grocery store, but it was definitely to the point where I had two little kids. When I first started the business, it was just a few months after we had our first child and then we had another one three years later. So yea I had two young kids, and I was definitely risking our long-term financial security.
Andrew: I remember when I first started in entrepreneurship, I saw this movie about a gambler who’d go out and gamble and then suddenly do well, and then gamble and lose everything, but he would say, ‘No, I’ve got it. I know I could do well.’ And then he would go back again when he had a little bit of money and again lose it all. He just caused disruption for himself. It caused problems for him and for his family, and people around him just were watching and were hurting because of it, and I thought is this what I’m going to be doing, and I don’t want to be that.
Landon: Yeah, good question.
Andrew: How did you know that you weren’t this kind of gambler who was hurting people around you and that you were a responsible entrepreneur with a vision? How can we tell the difference?
Landon: Yeah, well, it’s a good question. I think to compare entrepreneurship to gambling is interesting, especially for somebody in your position who has interviewed so many of us. Does it look like gambling to you?
Andrew: When I watch other people, no, but when I was looking at myself just starting out, I said, “Maybe it’s not gambling, but maybe what I’m doing is believing in some kind of cult of startup, where if I look around everyone has hopes of success, but really the people who I know around me are hurting financially, smart people who aren’t making much money and can go on for years like that with the opportunity of maybe doing well.”
Andrew: I did question myself, and I continued only because I’m a guy who finishes things, not because there was any logic to it, and if I applied some logic, I don’t know if I would’ve continued. So, for me, it was I complete. I hated college. I had to complete college. I wasn’t sure if entrepreneurship was right, but I had to complete it, see it through. What was it for you that kept you going?
Landon: I think it’s probably a combination of things. One is not a lot of other options, quite frankly. I have never had a job job. I was a waiter and I sold flowers at farmer’s markets, and then I ended up on Wall Street and made a bunch of money. The idea of going to work for somebody else, I didn’t see that happening for myself. That wasn’t going to happen. So there’s that.
Andrew: I see.
Landon: And plus what skills did I have? I mean, I was a trader. I didn’t have any real skills. I was unemployable. So there’s that, but that wasn’t the main thing. I think the main thing is that us entrepreneurs, we tend to have some sort of wellspring of confidence that comes from somewhere that fundamentally has us know that if someone can do it, I can probably do it, too. I’m not an idiot. I definitely am not the fastest learner out there, but ultimately if I persevere, I’ve been successful at the things I’ve tried, and some of the things I’ve tried have been pretty hard.
I walk down the street and I see businesses left and right, all down the street, of people that have been successful at this thing, and, yeah, I was banging my head against the wall, that’s true. But ultimately, if the chiropractor can do it and the restaurateur can do it and the plumbing supply guy can do it, then there’s got to be a win for me around here somewhere.
Andrew: You didn’t tell, I don’t think, April Dykman in the pre- interview about what your revenues were, but she found a Forbes piece that said that 2012 revenues were 5 million. Is Forbes right?
Landon: Yeah. 2012, yeah. And we’re on track to do probably 9 this year.
Andrew: And it’s bootstrapped?
Landon: Largely, yeah. We’ve had a little bit of investment along the way. In 2010, we got about a half million bucks from a friend and maybe in 2007 a couple hundred grand from some friends also, and then I also put a lot of money into it in the early days.
Andrew: Okay. And profitable now?
Landon: Yeah, well, we run it break even basically, so as we grow our revenues, we just add more people. We just added a new class of 14 new employees yesterday, as a matter of fact, so we’re up to 72 now.
Andrew: Wow. Now, one of the things that I heard about you is that you guys are the company that cares. E-mail, marketing companies tend to be tough to work with. I was just doing a search in my Evernote for my research on you that the team put together, and what I kept coming up with was people who I talked to privately who said, “We use OfficeAutoPilot.” “The founder had contacted me,” one person said, I guess. Do you e-mail people personally?
Landon: Well, I certainly do use e-mail. I don’t handle client issues much anymore, no, but, yeah, it’s not impossible that I contacted a client.
Andrew: Let’s see how you built this up. I want to understand about what you were doing before, where the idea came from, how you built it up, what the difficulty was, and how you figured it out towards the end.
Andrew: And as you said, you started out as a trader. How did you get into trading?
Landon: Oh that was just totally random. I was, like I said, selling flowers at farmers markets for a local flower farm in [??] Bay, and I was kind of hanging out and playing my guitar and living the good life. And then I turned 25 and I had kind of a panic attack about like what the hell am I going to do with my life? This was, gosh I don’t know ’96 or something like that, and the Internet there was the whiff of something happening in Silicon Valley. I would just come public, it was like 12 bucks and ‘cisco was starting to become a big deal, and I just felt like something’s going to happen here and I don’t want to miss it but I didn’t have a degree; I’d actually dropped out of college.
I’m not a finisher the way you are, I actually dropped out of college like one quarter before graduating because I didn’t care about that degree I was about to get. But I didn’t have any business experience, I wasn’t a co- owner, I was like, ”I don’t want to miss this thing” and so I thought that I’d just try to figure out how I was going to take part in this coming renaissance is what it seemed like. And then I found an article on the cover of [??] Magazine about these guys who were doing what eventually became day-trading. Chris [Blafkt] and his brother, and yea I thought it was interesting that it had this picture of this woman and it was killing it, and so I went to Texas and did some research and ended up in New York City and next thing I knew I was living in New York City living next to these guys who turned out to be great traders. Took me a long time to figure it out, but eventually I did.
Andrew: What did you figure out that enabled you to, as you said earlier, make millions in stocks?
Landon: Wow. Really we’re going to talk about how to trade stocks. Let’s see.
Andrew: I don’t want to get too deep into it, but-Landon: Yeah.
Andrew: I want to know what, I’ve seen and remember those days.
Landon: I’ll tell you.
Andrew: Lots of-
Landon: I’ll tell you something.
Andrew: Lots of people who lost everything in there.
Andrew: The thing that I can tell you that would be relevant to an entrepreneurial conversation.
Andrew: Is, that the fundamental shift that happens – it took me a year of basically losing money and hating myself for not having the discipline to follow the rules, basically – and the fundamental shift was to simply give up trying all of the easy ways out, and to just do what I knew I had to do. And buckle down and get this plan, and quit screwing around. That was what shifted it, and it shifted it in a big way and right away.
In fact, that story replayed itself in my entrepreneurial experience as we were failing and failing, and I was researching, going to conferences, reading about copyrighting, and trying to find the magic bullet to make it all work. Ultimately I finally had to just like buckle down and go like actually what I need right now is to do exactly what I know how to do, which is very simple. Find out what clients want, give it to them, go out, get on the phone, reach them, make people happy, and actually sell something. Quit getting ready, quit allowing myself the luxury of being in the learning phase.
Landon: I see what you mean. I’m going to come back and find out how you specifically found out what clients wanted, and what they did want, but you transitioned. I want to continue with the story, because you transitioned from being a trader to being an entrepreneur. Why’d you stop trading if it was going so well?
Andrew: Oh, I didn’t. 2000 came around, I went from making like a gazillion dollars to making zero dollars pretty much overnight. My last month of making real money was probably, you know, right near the top. The top of the market was like March or April of 2000, I think I probably did alright in 2000, and that was it. So I battled along for another year probably, 2001, but it wasn’t fun anymore when I wasn’t making money.
Landon: And that’s when you went to Santa Barbara, you got a house, got married, and had kids.
Andrew: I was already in Santa Barbara, and I moved to Santa Barbara in 2000, I actually started a trading company here. I taught a bunch of people how to trade, I had a whole bunch of employees, and so that wound up in 2001. Once I was done with that I had always wanted to have a home, and another one of my odd-jobs as a young man was to work on construction projects. So I had that experience, so yea I bought a place and remodeled it. And then after a few years it just was time for me to get back into the game and do something. I’d kind of remodeled this property and this house, and had gotten married and had a kid. I had a buddy who was running this very small web-development company just basically making websites for local business. And we just started brainstorming, what’s it going to be, what we should do, and what would be fun. We came up with an idea and had at it.
Andrew: What was the idea?
Landon: Well this was 2004 and the idea was called Page One was the business, and the idea was an interesting take on SEO. So this was the time when getting at the top of Google was just kind of entering the consciousness of entrepreneurs. Before that they didn’t realize that it was a good thing for their business to be in the search rankings and they were just starting to learn about that. Also it was a time when the real estate market was going ballistic. After the stock market crashed all of a sudden real goods started to look, real properties started to look good. Interest rates tanked and so house prices went nuts, and so all of a sudden everyone had a real estate license. I think the number of realtors doubled in like ten seconds.
Landon: And so those two things came together, and we realized that we could probably do SEO for realtors. We had this interesting idea where instead of doing it the way everyone else was doing it which was basically, ”Give me two or three thousand dollars a month and I’ll be your SEO guy.” We changed it around. We basically made a website, we created this automated website maker and we made a website and we scraped City Data, I think was the website, some census data website. And we made websites for like the top thousand cities in America, and we did all of this crazy stuff.
We made this thing called a ”Content Spinner”, it made articles, an article bot, ”Web Spinner” is what we called it. But it was like an article robot, and we’d automatically post to blogs, we created this big link thing where they were all linking together. And then we’d get to the top of Google, it was easy back in those days, those kind of hijinks worked. And so we’d get to the top of Google, and then we’d basically call up the realtors in that town and say, ”Hey, we’ve got the spot, do you want to rent it from us?” So that was an interesting model and it worked until we realized that it worked, it worked period. And then we realized that Google ultimately held the keys to our success.
You know one day we were going to lock into that business and Google could take the whole thing away very easily, and obviously eventually that would have happened. So yea, it seems that I realized that I ultimately didn’t have the power in my business to cause its success. I just wasn’t interested in that business anymore, and along the way I had learned I was the sales and marketing guy. I had never done sales or marketing before so I just dove in and started reading, and as I said going to conferences and learning about direct response marketing and online marketing.
And what I learned was a bunch of strategies and tactics and that there were no tools at the time to actually implement any of that stuff so we started building it internally. I was having a lot of fun with the developers building these internal tools for things like split-tests, lead- capture, and lead-source; following up with leads based on their [inaudible 3:53], or what they told us in forums and split-testing and all this stuff.
Andrew: And this was to find real estate agents who were going to eventually buy from you and get highly ranked in Google Search results?
Landon: Yeah exactly. What we found was that there were different segments of the market. So there were three particular ones. There were new realtors; these people had just gotten their license fresh off the presses, they’d never sold a home before, they were younger and understood the internet but they didn’t understand anything about how to sell a house and had no reputation. That was one kind of thing. Then there were these old- timers who’d been doing this for 25 years who didn’t understand the internet, had been selling houses forever, and were basically being attacked by this onslaught of young morons, from their perspective. Those are very different conversations to be having.
And then we had the brokers themselves, the guys who were running these fast-growing brokers. So we had three very distinct conversations to be having, and we were doing all kinds of stuff; advertising, trade-shows, direct-mail, banners, and AdWords which was a brand new system. And cold- calling, we had a whole bunch of people just cold-call novices. To be able to capture information, understand who they were so that we could cold-call them, and then automatically follow-up in a way that was relevant to what we knew were going to be their needs, was crucial. Also to be able to find out what was working and what was not; tracking, is that banner or is that email drop that we bought profitable? So-
Andrew: So this is a profitable business that was growing, or were there challenges at that point because you were selling a new concept? Search engine optimization was not a huge, was not something people believed in.
Landon: Yeah. It was hard, yea. I mean it was not blowing up. We were forcing it to work because I was pouring money into it, and we were just kind of man-handling it with, like I said, cold-calling, whatever we had to do to get business. But we got, probably got up to 700 or a thousand clients paying us, I don’t even remember. I mean we didn’t get past probably 30 or 40 grand a month in revenue I don’t think. It was going okay, it wasn’t taking off on its own.
Realtors are not very tech-savvy, they’re dramatically over-served as an industry. It’s amazing what you can get as a realtor for $19 a month from these companies that have been around forever; Advanced Access or Top- Producer or companies like that. They’re just hammered like crazy by people trying to sell them stuff, especially back then, it was like trying to sell the doctor at your dentists. They’ve got their wall up.
So yeah, it was a tough market and also it wasn’t one that I was very passionate about because realtors are just basically sales-people, and a lot of them are struggling with their backs against the wall financially and there’s a little dog-eat-dog. There is definitely some shining examples of people that are really out for their clients’ success, and there’s a lot of the other stuff, too. It wasn’t a lot of fun as a crowd to work with.
Andrew: So, you transitioned at that point. What did you transition to?
Landon: Well the tools, so once I realized that I wasn’t interested in SEO, these tools that I’d been building were really fun and I was shocked that that stuff wasn’t available. I did a little more research and realized that actually it was available, there was this burgeoning industry called marketing automation, and there were a few different players in the space. There was [El Loqua] was the leader at the time, but at the time they were charging ridiculous money; it was like $10,000 a month and they wanted to sign you for two years, and they told you that you needed to have like two people to run the thing full-time.
It was an enterprise tool, a crazy enterprise tool. They’ve since come way down the stream of course, but this was before [Marcetto] or [HubSpot] even existed. There was a market to lead, [V-Trends], this company called [ManCore]. But they were all very expensive, and they were targeting the enterprise; they were all also integrated with [SalesForce.com] that was your CRM. And we had [SalesForce.com] and we hated it, as a small business it was just not the right solution for us. So-
Landon: What’s that?
Andrew: Why did you feel it wasn’t the right solution for you?
Landon: Oh man. It was expensive, it was a long-term contract, it was rapidly over-complicated, and they didn’t do anything for us. It was just a data-sync. So I had to brow-beat… I mean it got to the point where I literally told my sales-people that if you don’t update the data in Salesforce, I’m not going to pay you. I’m only going to pay you for sales that have complete records, or whatever. And the reason it was such a challenge was because it did our sales people no good to fill that data out, it was all reporting to upper management. That was just terrible, it was a terrible solution. Plus it was not totally web-enabled; you couldn’t send email, you couldn’t do web-tracking, all of the stuff we wanted to do it just didn’t do.
Andrew: Ideally, what did you want your system to do? At that time, before you fully understood the possibilities, what were you trying to get your system to do?
Landon: Capture leads from the web with lead-source, automatically follow- up… What we wanted was for our sales people to be one step in the follow- up process. We wanted it to be like an auto-responder, day one, out goes an email saying thanks very much for whatever, I bet you’re a new realtor that’s never sold a house before and you’re going to use this amazing tool called the internet to beat the old guys, right? And then we wanted to track whether they came back, for example, maybe do some lead-scrolling – that probably came later. But we wanted to then say, on day two, task a sales rep to follow up and hey sales rep, have this kind of conversation because here’s what we know about these guys.
Andrew: I see.
Landon: And just that last step, that alone was just not possible at the time.
Andrew: Did you hack something like that together with Excel?
Landon: No, we built it. We built our own internal tools.
Andrew: Oh, really?
Landon: So we basically, we [??] drop sales for us, we made our own CRM system and our own web-forum builder and our own auto-responder, and yea we [inaudible 57:6] sales first, we built it ourselves.
Andrew: So how did you know that this tool that you needed internally was needed by other people, and that other people weren’t just happy with Sales Force or happy with what other system they had?
Landon: You know, I wouldn’t say that I knew. I think that I was really excited about the tools that we were building, I was like this is obvious, I was going to these conferences and they were saying the split-tests, follow-ups, blah-blah-blah but there was no way to do it. I was like oh my god, how come there’s no way to do it? Here’s the tools, everybody obviously needs this.
So actually, interestingly, the first thing we did was a giant mistake, so we made these tools. We had them internally already, we polished them a little bit and turned them into a product and then we, because we had all of this experience in the real-estate industry, we decided let’s sell this same thing to realtors. Because we already had all of these leads, we already had all of these clients, we already had all of these relationships. So we tried to sell, basically marketing automation and CRM to the real-estate industry, which was an unmitigated disaster.
Andrew: Why? You had them, you understood them.
Landon: Yes. Because realtors are not technical, they’re not willing to spend the kind of money or time on a system like this. The whole idea of automated follow-up was just… They were used to hand-written cards, and that’s what the leaders of their industry were telling them to do, is literally hand-written, all of this really manual stuff; drop by, print a calendar and bring a calendar to their door, or whatever.
Andrew: Actually because they’re dealing with high revenue small number of leads based business, it’s very local, they need to keep doing that. I see, and so they weren’t the right market for you even though you had access to them.
Andrew: How did you know that they weren’t the right market? Sometimes it’s hard for us as entrepreneurs to know that it’s not our product that’s at fault, it’s not our sales pitch that’s at fault, it’s not anything – it’s this market that we’re going after.
Landon: Well again the word ”know”, I’m not sure that I would use that word, it was clear, it was obvious, that that market was not right because we simply weren’t selling the product; it was like a complete flop so there was no mystery about that. And the first hundred sales conversations you sell nothing, you’re just like it would have to get a thousand times better for me to even have a chance here, that’s not going to happen; so onward. So our next hack was, it seemed obvious at the time, I was like the locals are killing it, market to these killers all these businesses are charging so much money.
Our products, if not equivalent, are definitely in the game, very similar plus we actually beat them in some ways because we actually have this kind of like CRM tool like contact management tool built-in. Those tools you also had to have a Sales Force to connect. Now we’re in like 2006, we’re so- and-so, and it’s like Web2.0. Web2.0 was all about making it easy, sell service, low prices, try before you buy, and kind of taking the enterprise sales cycle out of the equation.
Landon: So there was nobody doing that in marketing [inaudible 4:27] so it was becoming cult. So that was our next idea, let’s web2.0 enterprising automation. So that’s what we did, and we started advertising where those guys advertised and basically got our asses handed to us again, and the reason-
Andrew: Why this time? Sorry you were trying to say it.
Landon: Yeah. The reason this time was because that was a market I did not understand, I never had a job in an enterprise, I’d never talked to a chief marketing officer before. I never, I did not understand what that life was like, and what their concerns were, and what their needs were. It was, to me, just a naive hack. Like we’re just going to do what those guys do better, but I had no idea. So one of the things I didn’t realize, and it seemed obvious to me, we’re going to charge a quarter of the price or a tenth of the price, we’re going to give them free trials, we’re not going lock them in for two years. You know, why would they not? With an equivalent product.
Andrew: Yeah. So everything you’re saying, even in hindsight, to me makes sense. So why not?
Landon: Because, that’s not how enterprises buy. Because enterprises expect us, expect you to respond to RFP’s because somebody’s job is on the line. If they make a bad call on something like this they’re going to lose their job – so they’re not incentivized to buy cheaper. They’re incentivized to buy leader, because then if it all goes south they can say, ”Well, you know shit, we bought the leader.” So cheaper, newer, do-it-yourself was all wrong for these guys – it was just totally all wrong.
Andrew: And also, I’m imagining I have someone on the floor here who sells copiers. I’m imagining that he can’t go and just pick up software to sell copiers and start adding leads into the software that he found online that’s better than what this company recommends. I imagine that they have software that they need to put their leads into and he has to use that.
Andrew: Even if he hates it, he can bitch about it to his friends after work over a beer, but he’s got to use it.
Landon: Yeah. So we [??] and so we actually integrated with Sales Force early on, so we actually tried to compete with these guys directly basically. You are never going to displace Sales Force of course.
Andrew: I see. So you’re saying it’s managements at Sales Force is what we all use, then Landing Software was going to plug into Sales Force to give the newer guys, the lower level guys, a chance to comply with management but try new software. Why didn’t that work then?
Landon: Same reason. Because that’s exactly what [??] was doing. They plug into Sales Force, give this awesome tool to the chief marketing officer, chief marketing officer is not putting his job on the line for a couple of punks in a yurt, you know, like us. They’re just not doing it. And saving a couple thousand dollars a month, is not a benefit, it was literally just not a benefit to them. I mean we got a couple of clients, I’m not saying we completely struck out.
We learned a lot, we got a couple of great clients some of which are still with us today. But ultimately that was a major uphill battle. And, you know, call after call after call: you first talk to one guy, and then he’s introducing you to his boss, and then he’s introducing you to the whole freaking management team. And then we’re like, ”Oh yea it’s a thousand dollars a month.” Why’d you spend like 40 hours trying to sell this deal, and now… It just wasn’t going to work out.
Andrew: I get it, I get it. And then-
Landon: The enterprise sales process, how those guys did that, is they raised a bunch of money and PC money and they hired these vast sales teams. These guys who know the enterprise sales process. They went out and did that, they were flying around the country, and you know, we just could not compete at that level.
Andrew: And it seems like part of they charge so much, why your competitors were charging so much, is because they had to go through all of these meetings. It was to pay for the sales, not to pay for the software. So, was the answer then to find the right market, and once you did things took off?
Landon: Pretty much, that got us closer. So meanwhile I’m still going to these kind of small business conferences and I’m learning about entrepreneurship, learning about how to do marketing and stuff like that. And my peers, the friends that I made there, kind of learned about what I did and were like, ”Hey, we’d like to check this thing out.” And by the time we were, I think, I want to say at $1,500 a month or $1,200 a month, which was like a quarter of what our competitors were charging but still way too much for my peers at these conferences for a small-time entrepreneur.
So they were like, ”We’d like to try this thing out but it’s too expensive for us, can we get some kind of deal?” and at this point we were starving and we’re like yea sure, how much can you pay us? And so we went from, I think from $1,200 or $1,500 to $600, and then we went from $600 to $300, and then at $300 we started doing a little bit better. We started getting people who were willing to pay that, and still at this time, there wasn’t documentation, I didn’t have a support team so I was still doing all of the support. I don’t know if you could even sign up for an account online, you might have had to do that manually or over the phone. So it was not, you know, it was still very high-touch. It was very high touch it was taking a lot of time.
At this point I probably had one, we had two engineers; me and then one buddy of mine who was doing support with me. And then I realized this is starting to work, this feels better. In this small business market though people aren’t dropping $300 a month without trying it, and the idea of a ramp-up, like an entry-level product seemed like the right thing and we felt like that’s what we needed to do. So we needed to get all the way downstream, and get into $30 bucks a month $80 bucks a month, and kind of ramp people up. So that was when it finally worked, and this is now early 2009, we launched an entry-level product at $30 which was basically our full-featured thing but stripped down. So it went $30, $80, $300, $600 in pricing levels. And the $300 was the full, all of the features.
Andrew: So it was at that point where you shifted away from enterprise and real estate and all of the people who weren’t the right fit, and moved to your peers, people with smaller companies, entrepreneurs themselves, and reduced the price to a point where they could afford entering $30 a month.
Landon: Yeah, now we’re competing with companies like A Webber that are just like email marketing companies, we did so much more than they did. And we’re competing with them on price and basically-
Andrew: Like 2009 A Webber was starting to, they were big.
Landon: Oh yeah, big.
Andrew: they were killing it, you were suffering, and all they did was email; and what did you guys do? Email meaning you had a form, you could add your email address, people could add their email addresses to it, and you as a marketer could send email out. They also at the time I think even allowed tagging, multiple lists, but it was basically email. And what were you guys doing?
Landon: Well, a lot more. We had all of that, plus in your auto-[??] we actually created a direct-mail postcard system where you could actually create postcards online and then add them into your auto-responder sequences. So like on day three, for one guy, created a partnership with a print company so that we were like the world’s first integrated multi-channel marketing system, right, for $30.
Andrew: I see.
Landon: Plus we did landing pages, so we created with the same kind of driving [??] editor you could make these single-page leading pages with no html plus we were contact-management. So this wasn’t just like a list in these email programs, this was like full-on create your contact record take notes, you have a complete contact history you could see, we had web- tracking on every page of your site so you could see every page that every contact visited. You could see when they were on your site, what page they were looking at, and all that stuff. We had split-testing, so if you were going to these marketing conferences you could do what everyone was telling you to do, god it kind of went on and on.
Andrew: Okay, and I don’t mean to sell your competitors short, they had more features than I listed but it was more email and you were thinking way beyond email, it has to be marketing automation.
Andrew: Now these are a lot of features to build out when you don’t have very many customers.
Andrew: Was that a mistake? Should you have created a product with fewer features and look for the right market and then built the rest of the features once that market needed it and was willing to pay for it?
Landon: Yeah, you know that’s a great question and I think that my answer will probably be totally controversial here, but yea I don’t think it was a mistake. I think it was a secret of our success, and I honestly think that [??] startup and the whole concept of [??] viable product is a disservice to the marketplace. It works really great for entrepreneurs, because you can try things cheap and see if it works before pouring any more of your VC’s money into it – it serves the VC world very well for you to make little bets, but in terms of actually delivering value to the marketplace, the reality of the world today is that entrepreneurs when they kind of figure out that they need technology to run their stuff, is a freaking forest of minimal viable products.
All of these little point solutions, and the Silicon Valley tells them, ”Yea stay focused, stay into your core, do one thing, make web forums.” And cool, good for Wufu to have made web forums and a successful business doing web forums, but web forums is not a solution for any business. Email, same thing, email is great for A Webber and all of those companies but ultimately for entrepreneurs what they’re faced with is, ”Oh my god, what do I do here?
I’ve got to get this, and this thing, and this other thing, and this other thing, and clutch [sounds like] them all together, and figure out how that integrates, and then, oh, my God, I need this other thing, but that doesn’t even agree with my disk, and then I’ve got to pull that apart. And it creates this huge problem that every single entrepreneur has to surmount. Individually, by themselves, they’ve got to figure out this mess of technology. That is an enormous market inefficiency in my view and one that will not last, and there will be a solution out there. There will be a place where entrepreneurs go, period, to go and get all the technology they need to start their businesses.
There will be a leader in this industry, and there’s just not one today. The way Salesforce.com owns the mid-market, where is that guy, that is so good for the market as a whole. Even if you want to argue, because who use Salesforce often don’t love it, even if the product itself isn’t the greatest, which I would argue with them I think Salesforce is amazing for those businesses, but even if you don’t like the product, that there is a leader and that everybody’s there provides a tremendous amount of value to the marketplace as a whole and to the players in it. It’s completely missing in the small business space, and that’s what’s going to go away here.
Andrew: Okay. I see what you mean. I guess I come at it from a techie point of view, where I think it’s kind of fun to try LeadPages [SP] when I was on [??] before and see that Leadpages has a few new features and switch to that, and then to pick between MailChimp and A Webber and say, “I like A Webber better because of all this other stuff,’ and plug that in, and then plug in WordPress.
Andrew: And you’re saying that’s way too much overhead for most people, and then they’d never work well together.
Landon: Yeah, I would suggest that it’s too much overhead for you, that while you’re screwing around with that, you’re not doing your business.
Andrew: So even if I lose a few features by having something that’s integrated, I have a lot more time. Okay. So I see where you’re going with this.
Landon: Well, plus it’s not just that you’re losing features, there’s actual capabilities that you need to have that are made available by having all your data in one place. That’s why CRM is a crucial tool. If you have your shopping cart over here and your e-mail system over here, and you want to send an e-mail to everybody who’s bought this product but not that product, who you haven’t talked to in three months, how do you do that?
Landon: You know what I mean? It’s a nightmare.
Andrew: Right. I see that you’re building up. You told April that it took five years for you guys to actually start. Is that about right? Five years of trying to figure out what the product is, who the right company is to buy?
Landon: Well, until we got traction. Yeah, until we got traction, yeah. Well, that includes the whole Page One [SP] time, which was 18 months or 2 years. But, yeah, several attempts before we really got a bunch of traction.
Andrew: And a lot of people who are coming to you, you said, in the beginning were people who you met at conferences and said, ‘Yeah, I’d love to use this. Can you give me a deal here, because I can’t afford whatever you’re charging before?’ But you can’t grow a business just by people who you happen to meet at conferences, especially not if you’re talking about $30 a month. How did you get the rest of the customers now that you found product market fit?
Landon: Yeah, it’s kind of incredible, but our business has grown entirely by word of mouth. We literally sent out an e-mail to my list of friends when we launched our entry level product and pretty much never did anything else.
Andrew: When you say list of friends, in the pre-interview April talked to you, and you said it was two e-mails to this list of 10,000 contacts. You had 10,000 contacts.
Andrew: How do you get that?
Landon: I had a list of people that were frequenters of this kind of conference. Being in the e-mail business now, I really shouldn’t talk about this, but basically it was spam, and it was exactly the kind of thing that we would never allow. It was a purchased list. Borrowed.
Andrew: How’d you purchase the list?
Landon: It was not purchased. It was borrowed.
Landon: It was borrowed from a friend. It was a list of people that go to these Internet marketing, marketing conferences. We would literally not allow somebody on our system to do what we did, because they did not sign up to hear from us. It was not permission based. We just e-mailed them. We only e-mailed them twice, but that was all it took. Literally it started a fire, and it just went.
Andrew: You know what, before I continue with the story, it makes me wonder about something you told me before we started. You said some of your friends have already been interviewed here, and you knew what to expect? And you said it with a smile before the interview started. What did you learn to expect here?
Landon: Oh, just you and your very direct questions. Getting to the bottom of it, Ali Shanti is a friend of ours, and you got a pretty intense interview with her not long ago.
Andrew: Were you in her Burning Man camp?
Landon: No, I’m not, but I am going to see her out there, I’m sure. I’ve only been to Burning Man once before, but I’m actually going to head out there this year.
Andrew: Did you hear in her interview what happens in the Burning Man camp? It’s free love.
Landon: What’s that?
Andrew: Free love, baby.
Landon: Free love, really?
Landon: I missed that part, I must have skimmed. Shit.
Andrew: Let’s continue because there’s something here that you and April talked about that I’ve got to ask you. You said that one of your biggest challenges was systematizing. That’s been an issue for me here at Mixergy. I have a team of people that includes April, and sometimes it becomes such chaos that instead of me having a day where I get to think about my interviews, I think about all the other stuff that my systems didn’t handle, like, you know, the computer issue that I had to deal with before you and I started. Talk to me a little bit about the issues that you had with systems.
Landon: So, now you’re skipping way ahead. So, we’ve got some traction, what happened next was, it happened fast, right? We went from a dozen or two dozen customers to a thousand in, I don’t know, a month or two. And all of a sudden the phone was just ringing off the hook, and I had to bring in employees, people who had no idea what we were doing, I was hiring kids to answer the phone for me, and it became mayhem, just instantly, right?
And, very quickly I realized that I was just completely tapped out in my ability to manage this growing company. I don’t know how frantic you are these days, but when I got my seventh or eighth employee, I think that they just sat there, literally, for a couple of weeks, because I didn’t even have time to stop and ask them to do anything. I couldn’t take the time, “Not right this second!” Sorry.
Andrew: You say you couldn’t take the time to work with someone because you were so busy doing,
Landon: Doing it. Just doing it. I couldn’t even do it.
Andrew: I’ve been there, yes.
Landon: I had the foresight, fortunately, at that time to begin the process of recruiting an operations person, somebody who knew what they were doing, and that process took quite a long time – about a year, actually. But, now we can fast forward to now, you know, which is three or four years later. I’ve got a lot of experience now with running a bunch of people, a bunch of different teams, and it’s been an incredible, incredible learning experience.
So, in terms of systems, here’s how we do it. We actually have an internal course that we call driver’s ed, that we teach our new employees. After they’ve been here for nine days, they take this six week long course, and it basically teaches them about how we organize our work, and one of the things that we teach them is about how to solve things permanently and completely. Globally and completely.
Andrew: Globally and permanently.
Landon: Globally and permanently. And how to do that is by systematizing. We actually teach our employees how to write the systems, and teach them then how to delegate. Because once you’ve successfully delegated a process, then you know that your system works. So, we actually teach everybody in our company how to do that, and it’s part of their job. Basically the first thing we do when we give anybody any job is that we assign them the project to write it down. Systematize it and write it down.
Andrew: Any job that they have, they systematize.
Andrew: And write it down, and what? I don’t mean to get too technical, but,
Landon: No, let’s do it.
Andrew: What software?
Landon: That has shifted several times. It started out as Google .docs. Actually, it started out kind of like whatever they grabbed: Google .docs, or paper, or whatever. Then, we went to an Intranet, which was basically a membership site, kind of a WordPress membership site for our internal employees. And then we actually have now moved all that stuff, believe it or not, to ZenDesk. We’re very heavy ZenDesk users, because we have a lot of tickets, and we’re pretty fancy. In fact, one of our customer service guys spoke on stage at the ZenDesk conference not long ago, because we were pretty tricky with ZenDesk, so we use ZenDesk forms now, internal ZenDesk forms, to house our business processes.
Andrew: What kind of things would you systemize? Like, how small a project would an employee systemize in the company?
Landon: Okay. So we break our [??] workload up into two different types. One we call business maintenance, and that is the stuff that’s basically in their job description, all the stuff that keeps the business afloat. So if you’re a customer service guy, it’s answer tickets and answer the phone. If you are a postmaster or a project manager, or you’re a graphic designer, or whatever it is, it’s you doing that work. So that’s what keeps the wheels on and what keeps us delivering our product to the world. We have another category of work, which we call project work, which is all the stuff that is intended to move the business forward as an organization, to improve something, to solve a challenge, or to take advantage of an opportunity.
We have a pretty unique way of organizing here, where in most companies that kind of project work is done by higher level people, and business maintenance is kind of delegated down. In our organization, we’ve rearranged that so that everybody actually does both. Everybody does project work and business maintenance work, and we do it in very scheduled times. There are actually two hour and a half blocks of time of day we call time block where we have total communication silence, and we work on project work. The rest of the day is business maintenance work, and basically anything in business maintenance that’s in your job description, whatever that is, is documented. Project work doesn’t get documented, because it’s very often one off stuff.
Andrew: Let me ask you something. You know how Zappos will bring people into their office and show them the culture so that other companies can learn from them?
Andrew: Any chance that I can come into your office and see how you guys systemize so that I can learn from it, because I’ve never seen anyone systemize like this before?
Landon: Yeah. Sure, Andrew, come on down. We actually just did a public version of Driver’s Ed over the web, live streamed it for eight weeks. It’s actually an eight-week course. It’s six courses over eight weeks.
Andrew: Where you show people how internal you guys systemize, can I get that?
Landon: Yeah, we probably recorded it. I assume you probably could. Yeah, you’d probably want the Cliff Notes version, like here’s how we get it done.
Andrew: I’ll take whatever. I feel like I bought into the religion of systemizing things.
Andrew: I’m starting to see that, you know what, if I’m going to do something like pick a restaurant . . . Two weeks ago, a guest came in from out of town. I spent an hour finding the right restaurant for him.
Andrew: And then I realized, that’s a waste of my time, and I’m going crazy.
Andrew: How do I tell Andrea what kind of restaurant to pick?
Landon: You didn’t call [sounds like]. That’s a good question. Those are the level of details that we’ve [??] I never used to have an assistant, and now I’ve got two full-time assistants, and, yeah, it’s bizarre, man, how many things that I never imagined an assistant would do for me now gets done for me.
Andrew: But the process of me thinking through what kind of restaurant do I want, it needs to accept credit cards, for example, I just need to document it and then when I go into Yelp, I could say accept credit cards, a sit down service so we can talk, quiet, all these things are check boxes. I just need to think about them ahead of time. So what you would say to me is, “Andrew, if you’re booking a restaurant, write it down and document it?”
Landon: I would actually make my assistant document it. So I would sit down with them and have a conversation with them, and then they would document it, yeah.
Andrew: Okay. How do documents get updated? If your assistant books a restaurant and then someone else books a restaurant, how they update it without screwing up what she does?
Landon: Well, if it’s working, it doesn’t need updating, so processes get updated when they fail. So, “Hey, you know what, thanks for scheduling it. I got that you followed the process. I forgot to tell you that I needed it to be light enough so that we can read. So can you fix that for next time?” And they just know that part of the deal is, yes, I’m going to do that again and that needs to be updated in the process.
Andrew: All right. I’ve got to follow up with you afterwards. I’ve got to learn that, but I know that you need to run to a board meeting. Let me do a quick round of lightning questions, let’s call it. You said earlier you wanted to find out what clients want and then give it to them. How did you do that? What did you mean by that?
Landon: [??] oh, ask them.
Andrew: [??] learning [??]
Landon: Yeah, ask them. It’s amazing. It’s amazing. Ask them.
Andrew: You just make phone calls to your clients and say, “Hey, where are we failing? What do you guys need?”
Landon: You know, it’s hard. You got to do both. Cause here’s the thing: there’s things that we build, that we have built, that no client would have ever thought to ask for and then once we’ve unveiled it, they really wanted it. Steve Jobs is famous for talking about that with the iPhone, right? Nobody would have asked for that. Or, I don’t know, maybe the iPad. I can’t remember. So, there is a mix, right? There’s a mix of… Here, lightening round? Read The Four steps to the Epiphany. Do customer validation. That works.
Andrew: You said you suddenly, in the story, you got to 1000 customers a month.
Andrew: That’s how quickly you guys grew. Is that all word of mouth? You did do any ad buys? You didn’t do anything to promote yourselves? Were you putting Infusionsoft in the e-mails that were going out on behalf of your clients?
Landon: No. Literally, wait, what was that about Infusionsoft?
Andrew: Oh, sorry, Infusionsoft is my next question.
Landon: That’s alright. The bottom of the e-mail, it does say a “Powered by Ontraport” on the bottom of the e-mails. But that’s not it. It’s entrepreneurs telling their friends. That’s what happened. Honestly, to this day, if I could be, you know, honest, the one thing that’s left in this business that makes me nervous is that we don’t know how to successfully get clients through any paid channel. We’re just now beginning to experiment with that, and we’re starting to see some better results, but not profitable results yet. And, so, to me, I’m so grateful for word of mouth and we focus a lot on creating extraordinary experiences for our clients. And it’s not an accident that people tell their friends. But if I wanted a bunch more customers next month, I don’t have any access to creating that.
Andrew: Wow. OK. The question that I was going to ask earlier that kind of bled into the previous one about Infusionsoft was this: I looked back to see who in my interviews was talking about you, and there were several entrepreneurs who I talked to who said they used a system where they couldn’t get their e-mail delivered, they had problems, and then they switched to you. And they didn’t all say Infusionsoft, but I know that’s who they meant. How much of a help was it that they were having deliverability issues?
Landon: Yeah. Not just deliverability issues. Infusionsoft issues in general definitely moved the needle for us. Probably especially in the 2010- 11 time frame. Yeah. That was good for us. I mean, I would say right now … There was a time when probably 25% of our new customers were ex- Infusionsoft users. I don’t think it’s that way anymore, just cause we get more customers from other places. But it’s still significant.
Andrew: Alright. So much I want to ask. I’ll finish up with Ontrapalooza. What is this thing?
Landon: Ontrapalooza is our users conference and kind of a business education conference. So, Ontraport is the name of our company. You mentioned [??]. We had to change names. We actually were told we were going to be sued by Microsoft for using the name ‘Office.’
Landon: In our name. Yeah.
Andrew: And so now you guys are going to be Ontraport because of that?
Landon: So, ontraport.com, O-N-T-R-A-P-O-R-T, is our website. [??] is still up, but that’s going to go away here in a minute. And, so, Ontrapalooza is our users conference and our kind of business education. So, about half the people that come are clients and the other half are just entrepreneurs. It’s where we bring our friends. Some amazing speakers, Eben Pagan is going to be there. Brendon Burchard is going to be there. This guy Joey Coleman, who did Customer Experience design for Zappos is going go be there. Taki Moore, this amazing entrepreneur from Australia is flying out to speak. And, of course, many people from our team are going to be talking. [??] our Operations Officer’s going to be talking about Operations.
Andrew: Is the person who’s in charge of this Zen desk process that you describe where everyone documents what they do …
Landon: Yes, he’s going to talk also. No, she’s …. Lena Requist is her name. She’s our COO. She’s going to be there talking. And then we talk about amazing ways people are using our software to automate their businesses and stuff like that. And then we have the whole thing at the Bacara Resort, which is this incredible resort on the Pacific Ocean in Santa Barbara. So, it’s going to be awesome. And you should come! Ontrapalooza.com, O-N-T-R-A-P-A-L-O-O-Z-A dot com. It’s October 2nd and 3rd.
Andrew: October 2nd and 3rd.
Andrew: Thank you so much Landon for doing this interview, and there’s so much that I didn’t even get to. I hope we’ll get another opportunity to …
Landon: [??] Let’s do it. Let’s talk about business management next time.
Andrew: I could talk about nothing but that with you, and I didn’t even get into that! About managing people, about the books that you recommend around that. I’m going to save all this for the next interview. I would love to have you on. I’m saying that publicly right now on camera so that other people can start demanding it and can start asking specific questions that they’d want from a second interview. Till then, I’m just going to say thank you for doing this interview. Everyone who’s watching this and reading the transcript or listening to the MP3, check out ontraport.com. Thank you for doing this. Bye.
Landon: Awesome. Thanks, Andrew.