Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy where I interview proven entrepreneurs. I’m kind of shot out of a cannon today. I freaking love today’s guest. Neil Patel is a guy I’ve known for years ever since I started reading about him online and how he was kind of irritating people back when he was doing search engine optimization when it was considered this like evil thing that you do. And I liked his attitude about it. He had this like maverick get away with something even though he never did like . . . anyway, he had this attitude that I really liked.
And he went from services to starting software to raising money for a company called Kissmetrics that competed with a lot of analytics companies. The company closed down. He started other software companies and then the freaking guy blew my mind by going into services. I always thought that you start off with services because you don’t have much money and you have time so you do work for clients. And then you build software to get out of the world of trading time for money. And this guy was super smart. He still run software companies. He got into services. And he seems so excited about it that his eyes light up in private when I talked to him about services. So I invited him here to talk about his services business. It’s called Neil Patel Digital. It is a digital marketing agency. We’ll find out what that means.
And we’ll find out why he’s . . . well, I want to find out about that. I want to find out why the guy who told me that he would never fall in love before in a past interview because it was a waste of time, kept him from his business, whether he really loves his wife or did he just get married for some other reason, tax purposes, I don’t know. And also find out what happened with that company that closed, Kissmetrics, and so much more.
This interview is sponsored by two guests who Neil Patel has used. So you know they’ve got to be good. The first will help you hire phenomenal developers, it’s called Toptal, and the second will help you do email marketing and so much more right, it’s called ActiveCampaign. Neil, good to see you here.
Neil: Good to see you as well. What’s funny is you mentioned your sponsors. I’ve actually used both of them. Toptal, I found a good developer from.
Neil: And then better than Upwork, no offense to Upwork, we use them as well. And then ActiveCampaign I’ve used for years.
Andrew: The fact that you use ActiveCampaign says a lot. But I know you’re not going to give me your revenue. And I’m not going to play the game of asking you and making myself look like I’m somebody who’s going to beat you into giving me something. But I also know that you’re going to be willing to give some sense of size of Neil Patel Digital.
Neil: Yeah, so we have multiple offices all around the world. We’re just opening another office right now in Chicago. Our president and then our director of operations went office shopping in Chicago to try to find some deals on Google. Used furniture, I always look for all that kind of stuff.
Andrew: Give me that data numbers. You’re a numbers guy.
Neil: Yeah. So I don’t know our international numbers. I’m hiring but I do know they’re growing quite fast. In the United States, we’re hiring roughly 18 people a month. That’s what we’ve averaged since January of this year all the way to June and the May. When we take all those months, we’ve been hiring 18 new people each month. We’re also closing without giving you total revenue numbers, we’re closing additional two million in contracts each and every single month.
Andrew: So you started out with zero at the start of this year, January you would have done another two, February you would have done $4 million in annual fix and so on.
Neil: If I keep going up then, yeah, I’ll be at 24.
Andrew: And it’s recurring. So here’s the thing . . .
Neil: And that’s after churn.
Andrew: Oh, after people leave. Got it.
Neil: We’re closing a net $2 million.
Andrew: I see your eyes light up and you smile when you talk about these numbers. I love that you know this stuff like you said before the interview started like the back of your hand. What am I missing when I’m thinking about services businesses being a good starting point, but a pain in the butt to live in forever?
Neil: You’re right, but I noticed a huge trend that most people aren’t leveraging. But, first off, services businesses suck to run. We all agree on that. I don’t have to run mine. I know that sounds bad, but I don’t really have to run mine. So I’m not in the grinder each and every single day. I generate the leads. I’m very involved with the team, the strategy growing it, but I don’t have to be in the grind anymore. I had to fund it, you know, so that sucked. But other than that . . .
Andrew: How much did you put into it?
Neil: Not much. Less than a million bucks. The software, more. There’s also software component to it, a bit more than $2 million.
Andrew: When you say software component, it’s the software that you use to implement the digital marketing strategy that you have for your clients. Am I right?
Neil: That is my future dream. So technically, the software is I put $2 million into something that doesn’t generate any revenue or help reduce and cost or anything.
Andrew: Got it.
Neil: I noticed that trend a few years ago.
Andrew: Yeah, tell me.
Neil: So when you look at all these software companies, most of them, you know, there were years and years ago, when we first got started, there was very little competition, it was hard to create these software companies. Now there’s all these platforms and open source and anyone, you know, any John or Jane down the street can start their own software company in the next day or two. It’s not that expensive. Amazon Web Services has made it where it’s so easy to creating software company. For that reason, software has become a race to the bottom.
When I started in the software world, you could charge 50, 100 bucks a month, not a ton of solutions. People pay you and your churn wasn’t that bad because there’s not too much competition. Times have changed. Now it’s easier to create these companies. It’s more affordable. And a lot of them have been doing things like freemium models, free trials, and you’ve seen it and companies like Dropbox have grown at a very rapid pace. But when you look at these software companies because cost is going down, you’ll also notice that people are fighting for the price. Have you noticed Freshworks? Are you familiar with Freshworks?
Andrew: Yeah, they’ve got a collection of software for help desk, for CRM and so on. Every time there’s the Salesforce conference here, they have ads that say, “We’re cheaper than Salesforce,” and . . .
Neil: Bingo, you got it right.
Andrew: . . . that’s what you’re talking about.
Neil: Yes. Okay. And Freshdesk as well. They’ve raised a few hundred million bucks. Their model is will just undercut you? And they still make a good healthy business doing that. But that’s the problem. Someone else is going to come down later down the road and be like, “Freshdesk or Freshworks, you’re now worth $3 billion or $2 billion,” whatever the number is, “And we’re going to undercut you and we’re happy if we create a $500 million business.” Where does it ever end?
Andrew: And not to disparage it, but you own a company called subscribers.com, which do push alerts to browsers. There’s PushCrew that does the whole thing for free.
Andrew: Obviously not the same. You do more marketing automation there. But what we’re going to say? Technically what?
Neil: Technically, I don’t own it, but yeah.
Andrew: Who owns it?
Andrew: Oh, it’s not your company? He owns it 100%?
Andrew: Oh, I didn’t realize that. Okay, that’s an example. So you noticed that and you said, “Look, services.” The problem though of pain in the butt of having to deal with a lot of clients is hard. What do you do about that?
Neil: Okay, so the clients are a pain in the butt and it’s hard and you can do much there, you just deal with it. But the overall goal is, why can’t we use machine learning and AI to automate a large portion of services? And then hopefully, it won’t be as painful, it will be much more scalable and a much more lucrative business.
Andrew: Okay, but you don’t have that yet, right?
Neil: I do not have that. Yeah.
Andrew: And the services that you . . . the other thing you told me before was, “Look, Dropbox, if it sells to an individual, they have to price themselves so low to compete with free and deal with . . . ” Meanwhile, when they go to enterprise, they could charge hundreds of thousands of dollars, millions of dollars, is what software companies are charging enterprise. You saw that and you said, “This is what I’m going to think about when I’m thinking about services,” right?
Neil: And then Dropbox now has an enterprise plan. And they’ve just redesigned their whole app. They’re focusing on enterprise. They made it public on TechCrunch.
Andrew: Right. And so you’re thinking the same thing, “I’m going to go for the bigger higher paying clients,” right?
Neil: That’s how we make our money like the Adobe’s of the world and stuff like that.
Andrew: But can you give me a sense of what . . . like what’s the cheapest that somebody pays you monthly?
Neil: It depends. We have SMB division in Utah. And the venture we want to gradually get them up. So our prices can start at $1,000, $2,000 a month, so like 24 grand a year. But we make almost all our money from the people paying like a half a million bucks a year, a million bucks a year, etc. So like . . .
Andrew: And when someone pays $1,000 or $5,000, what are they getting?
Neil: We help streamline like their on-page SEO. We try to help them a little bit with content but there’s only so much we can end up doing with it because for $1,000 you got to service the client, not a ton of margin.
Andrew: Yeah, I don’t see you smile when you talk about that.
Neil: It’s a terrible business financially. But the way I look at it is if I can make software automate most of these things, then it becomes extremely lucrative business.
Andrew: And that’s the future. If you can have backend software automated, you promise a client that you’re going to improve their SEO, on-page SEO, whatever it is. Software does it, you’re fine.
Andrew: Okay, then you’re back in a software company, though, aren’t you?
Neil: Yeah. But I’m in a different software business in which I’m selling services by automating through software. I believe it’s the future software.
Andrew: Why is that the future of software as opposed to a product that someone can just go use themselves?
Neil: There’s only so much money you can make through self-service. Like I’ll look at Slack’s S-1. Majority of the revenue. Technically, it’s not above 50% but a large chunk of the revenue comes from less than 600 clients. It’s like 500 and something clients make up a large portion of their revenue.
Andrew: Are you actually sitting there reading their S-1 looking at this data yourself?
Neil: No, Hiten does it and then he tells me.
Andrew: Your brother-in-law.
Neil: Yeah. And that’s where he got that from.
Andrew: He’s good that way. He’s very bookish. I’m wondering how you got started with this. It seems like it all started with your blog “Quick Sprout,” right?
Neil: So I had a blog, “Quick Sprout,” and we tried creating a software company from that.
Andrew: What was the software company you tried to create from that?
Neil: SEO software. [inaudible 00:10:19] like Moz and all.
Andrew: On your site?
Neil: Yeah, on Quick Sprout.
Andrew: Yeah, I do remember that Quick Sprout would have a course for a while there. And then the other thing that Quick Sprout had was the Q&A software on the site so people can go and ask any question and get an answer. I was like becoming Stack Exchange. And then at one point, I went to Quick Sprout and your blog didn’t have a blog. Instead, it had a field where I could type in my website. And if I put in my website, I would get information comparing my site to other sites telling me where my failures were. That’s the software you’re talking about?
Neil: Yeah. At that time, Hiten and I and another guy named Steve, we ended up creating a software company on Quick Sprout. We couldn’t get the software to work well. We tried it. They did a good job with development, product research, etc. We just couldn’t get the adoption of it. And then at the same time I was blogging on neilpatel.com. And no matter what I was doing, software I was creating, whatever it may be, I was getting a shit ton of people hitting me up for consultant. Now at this time, I was living in Vegas. And my roommate at the time was Mike who is the CEO of Neil Patel Digital.
Andrew: Can I pause the story for a second?
Andrew: I know you were living in . . . where was that? In the upper northwest. Seattle?
Neil: Yeah, Seattle.
Andrew: Why did you end up in Vegas?
Neil: I just had a home there.
Andrew: Just because you had a house there?
Neil: Yeah, I got a good deal because CityCenter was going through a renegotiation of their bank loans. So one of their buildings, the Mandarin Oriental, it’s now the Waldorf Astoria. There are selling units for pennies on the dollar if you can come in and just buy them without, you know, inspection or any of that. So I bought as many as I could. Yeah.
Andrew: And then the other question I have is, you’re well off. Why do you need a roommate?
Neil: He lived with me for free.
Neil: He was a friend and he was just like, “Dude, I’m tired of working at my dad’s car dealership. What I’m going to do?” I’m like, “I don’t know. Come to Vegas, you can live here for free. I got empty house.”
Andrew: This is what you do. Like Mike Kamo. There are bunch of people who’ve been around you in different ways you’ve introduced me to over the years. Why do you like having people around you? What are you thinking of with that?
Neil: So when I see people who are talented or they can do something that I think has some potential, I’ll try to see if I can groom them and then get them run stuff for me. My goal isn’t to be a CEO. My goal isn’t to build multi-million or even billion dollar companies. My goal is to find people who will go and build them for me and then own the majority.
Andrew: And so in him, the thing that I . . . I don’t know a lot of these people who you’ve kind of picked up along the way, but the thing that I noticed about them is they’re incredibly burning with ambition to the point where they could almost just ruin themselves, right? Because they just get too far ahead of themselves and they get too frustrated with how life doesn’t fit the way that they wanted to do, incredibly full of ambition, and they can sacrifice everything because they got nothing.
Andrew: What else are you looking for?
Neil: Sales-oriented people. I’m also looking for people who are creatives. So to give you idea is Mike’s dad owned a Mazda dealership. He still has it. He also owned a few other dealerships like a Kia dealership or Saturn, whatever they were. So Mike didn’t go to college. His dad said, “You’re going to work for me and you’re going to start at the bottom like in the parts department.” He was making minimum wage. Eventually Mike moved his way up into commission-only sales rep. And then he’s like, “Dad, I want to buy a home. I want to figure out how to make more money and I want more money. Can you pay you more?” His dad was like, “Well, you want to make more money, you got to make me more money.”
Mike eventually figured out how to get people approved for cars that have bad credit. He figured out how to buy leads from online. He figured out how to sell them cars and he added this unit in his dad’s business, 100% legal, and he added $100,000 a month in profit to his dad’s business. Right? He was creative. And his dad gave him a car and he bought a condo. That’s how he got his start.
Andrew: What about another personal question? At some point, don’t you want to just have your own space? Like, do you really want to come home to Mike and hang out with Mike and have to make conversation with Mike at the end of the day?
Neil: Las Vegas wasn’t my home main home. I also have a home in Seattle at the same time.
Andrew: So when you’re going there, it’s, “I’m going to be with Mike. We’re going to get energized. We’re going to groom him.” And when you say groom him, how do you groom these people?
Neil: More so I’m terrible at coaching and educating. I’m really good with people who are creative and fast learners and they can figure out things on their own. So if I’m around them enough and I bring him enough business scenarios or they hear me talk on the phone, they’ll pick things up and learn. And I knew Mike was someone who’s able to learn because he learned how to run his dad’s car dealership business adventure without his dad.
Andrew: And it’s just business scenarios. You’re sitting around going, “Well, what if we do this? What if we do that,” right? That’s the type of thing that you’re thinking of with them.
Neil: No, I don’t do anything they have to come up with idea. So Mike was the one who came up with the business not me.
Andrew: So they sit around or in his case he was sitting around and just shooting a bunch of ideas at you and then one idea was, “Hey, come on, we should be doing services for these people in a more . . . ” Well, you take the story from there. What was he saying?
Neil: Yeah, so more so, comes to Las Vegas. I make them do grunt work. So I’m like, “This is my business. Wherever I need help, you’re going to help me.”
Andrew: Like what?
Neil: He helped me create infographics, deal with content creation. And he was, “Neil, you spend so much time with basic stuff like trying to Photoshop images,” and he’s like, “You suck at this. Why can I hire someone at Upwork to make this process better for you?” “Oh, you’re doing your own research for your own infographics, let me find someone who can do it for you for 20 bucks, 50 bucks.”
Andrew: And so at that point, you were really literally doing your own infographic design and research?
Neil: Not the design, I can’t do design on infographic.
Andrew: But did the research?
Andrew: This was what year?
Neil: Boy, maybe 2016.
Andrew: 2016. Oh, wow, that’s not even that long ago.
Neil: Yeah. I enjoy doing it though. Like I still write my own blog posts, but I love writing.
Andrew: That’s what it is that you personally enjoy. Okay. The reason that I asked is I still have this voice in my head. I remember over 10 years ago, you came to speak at a live event and you said . . . I forget what it was but you said, “I have monkeys doing it for me.” And I remember people in the audience, there were two who were a little, like, insulted by that and said, “He means like people who are just kind of monkeying around doing stuff like replying to comments on his behalf.”
And I always saw you as the person who was really good at getting other people to do the stuff that we don’t even notice need to get done. And so, with that mindset, you still did things like research infographics, and right now I’m understanding. I wanted to like process it in my head. And the reason you did is because you liked it. All right, so he’s telling you all this. How does he pitch this idea to you of doing services?
Neil: So six months. He didn’t live in Las Vegas for long. Less than a year if I had a guess. He’s just like, “Neil, look, you got all these traffic, you got all these people hitting me up for consulting. Let me see if I can just sell these leads.” And I’m like, “No, no, if you sell the leads and other people do the work and they’re upset, I’m going to look bad.” And he’s like, “As long as if I convince these agencies that we sell these leads to that if someone is unhappy, they got a refund 100%.” Okay?
Andrew: I know what you mean. Yes.
Neil: And he started that and he ramped it up to roughly a half a million dollars a month.
Andrew: A half a million dollars a month and people unsolicitedly coming to you?
Neil: Yeah, because we have that many visitors and leads.
Andrew: And they would just fill in that contact form that you had?
Neil: And clearly about half a million was our cut. So half a million had very little to no expenses.
Andrew: So from what I remember, Neil Patel’s, for a long time, you didn’t even own your own domain. It was an artist who had it, right?
Neil: I don’t know who owned it, but somehow I ended up getting it because someone bid it and they graciously gave it to me.
Andrew: Wow. Okay. And that became like your place to test marketing ideas in public, wasn’t it?
Neil: So the moment I signed on business partners for Quick Sprout, Hiten at the time and Steve, I was like, “I still want a place where I can call home as a personal blog for me to just share my thoughts.” And so neilpatel.com I was just blogging and sharing my thoughts and it actually gained visibility.
Andrew: Okay, got it. Because after Kissmetrics, you Hiten and Steve got together and you said, “Look, this was my site, Quick Sprout, but let’s work together and co-own it?”
Andrew: Okay. And why didn’t that work out with them? Because the software didn’t make sense?
Neil: No, we all gave it a good shot. It’s just people weren’t willing to pay for it.
Andrew: And so did you guys have like an amicable separation where you said, “Listen, this is my site. It always has been my site. I’m taking it back since we weren’t able to make it work?”
Neil: No. Hiten owns it. I’m just like, “I’m good. I already have another site that does well.”
Andrew: Hiten owns Quick Sprout?
Neil: Yeah, he owns Quick Sprout.
Andrew: How did he own the site that you’re known for forever?
Neil: I told them, “I’m good. I’ll take Neil Patel back. I don’t need it. I have neilpatel.com.” Because Neil Patel has quite a bit more traffic.
Andrew: Oh, wow, I didn’t realize he owns Quick Sprout now. And that’s it. It wasn’t, “Hey . . . ” You just gave him all brand equity and all the traffic that came from it?
Andrew: Interesting. Okay, all right. Let me talk about my first sponsor and come back here and . . . the thing that I get about you is like you’re really good at working the angles and talking about it. And I remember talking to Hiten about that with you. And also that you’re . . . I forget what the word is. Not a schnorrer. You’re not like someone who’s just going to hug stuff from people. One of the first times that I met you, I remember, like, you showed me an email. Somebody bought you a computer, and they expected stuff. And I said, “So now you’re just going to take it and essentially take advantage of him?” And you froze up like, “No way, Andrew. I’m not doing that.” I could see in your eyes that that was not the right like thing to have said to you. You weren’t even going to entertain just taking advantage of the fact that someone sending you a computer.
All right, let me talk about my first sponsor, it’s going to be ActiveCampaign. What’s your connection to ActiveCampaign? Why are you using them and not all the other people that are out there?
Neil: So I use quite a few email providers that are one of the ones that I use. But they have a lot of features. It’s good. The usability of the product’s great. And most importantly, for me, the deliverability’s amazing.
Andrew: Oh, right. A lot of times you think that your email is not working, but it turns out, it’s just not getting delivered. There’s a competitor of theirs that for a while there couldn’t even get their email delivered to. And, look, Hotmail is not big, but couldn’t get email delivered to Hotmail. And so their numbers just looked down and then they were blaming users for it. Anyway, this stuff happens all the time.
The feature that I find most exciting about ActiveCampaign is the simplicity like you mentioned. The fact that they do have things that will allow you to, for example, customize messages for bigger clients, for smaller clients, people who have been interested in one part of your side versus another, and all you have to do with slide in a little bit of text to customize it based on where they were on the site. Super simple, very effective.
If you’re out there and you’re listening to me and you want to go check out ActiveCampaign, go to activecampaign.com/mixergy. When you use that URL, they’re going to let you try their software for free. If you’re happy with them . . . look at this racing to the bottom and prices. Let you let you have the second month free after you sign up and they’ll do two free consultation calls with you to make sure that you get all the value that you want out of the software. And, of course, if you’re using a competitor’s product that you’re not happy with, they’ll migrate you for free. It’s activecampaign.com/mixergy.
Okay, let’s continue on with this story. So Mike comes to you with this thing. And all he does is he takes the leads and he gives them to agencies and you’re at half a million, you and he, and then what’s your cut with him on that?
Andrew: He takes 80?
Andrew: You take 80?
Neil: Yeah, of course. [inaudible 00:21:52] percent.
Andrew: You’re generous but not a pushover. Okay, I get it. And then I guess then it’s a natural transition then to say, “We’re going to start to do this ourselves,” right?
Neil: Correct. From there, he also tried eBooks and courses and all this kind of stuff. Some of them worked out, some of them didn’t. But yeah, in general, we’re just like, “Wait, we should just do consulting ourselves because we can close way more and make way more money as well.”
Andrew: Was there more to it than just waiting for the leads to come in for people to hit you up in the contact form and say, “I need consulting services?” Were you guys talking to them? Was he getting to know them first? Was he selling them at all?
Neil: No, we get four million visitors a month. You don’t need to convert that many to make a decent business.
Andrew: That’s it? It was just all the people who were coming in, all task people too? Did you do a search in your inbox to see who else had sent consulting? No?
Neil: At four million visitors a month, whoever hits you up that day you pour it and that’s it.
Andrew: That’s it?
Neil: Yeah, it’s a ton of traffic. Like just being . . .
Andrew: Nothing more clever than that?
Neil: No, nothing more than that.
Andrew: Why didn’t you stick with that? Why didn’t you say, “Hey, you know what?” You mentioned earlier Upwork and there’s Toptal and there’s all these other services. What they do is kind of make the introduction. Why didn’t you say, “You know what? Why do we want to get into the services business? Why don’t we just keep making the leads happen and take a cut?”
Neil: Because when I get people to complain or people that complain, I get angry. And sure, people are willing to offer refunds, but I still don’t like the complaints. And because of that, I wasn’t willing to continually do it.
Andrew: And you got some of those?
Andrew: You did. Okay. And so you when you start an agency, did you start to focus on a specific type of customer at first, did you start to focus on a specific type of service?
Neil: When we started our agency, internally, we focus on the customer that we can help. So instead of just closing whoever, you look at the leads, you talk to them, you figure out their problems. Then it gets passed over to someone internally who’s technical. If we feel we can provide results, we look at their revenue, their conversion rates, their margins, all that stuff. If we think we can make the campaign successful and profitable, we take it on. If we don’t, we tell them no and why.
Andrew: But in the beginning, what did you start off with?
Neil: We started with SEO. And then eventually we added in other services like pay-per-click management, social media, content marketing . . .
Andrew: What part of SEO?
Neil: On-page mainly. That’s what the main thing we first started with. Now we do everything.
Andrew: What does that mean when you started out with that?
Neil: So if you have a site, you’re not ranking on Google, you get hit with the Google penalty, or you lose traffic, whatever it may be, your competitors outrank you. We analyze your site, your code, the keywords, and we figure out how to get you more traffic. In essence, make your site loved by Google.
Andrew: Can you be more specific about some of the things you did in the early days? I want to get a sense of what it was like before it was overwhelmingly big, before it was 18 new people a day and offices everywhere.
Neil: Yeah, it was actually the same thing. There wasn’t much. It’s just that we do more of it. We would change code on their page like title tags, meta description. Eventually, you would have to write content, adjust the content, make sure the right keywords went there, interlinked their page, make sure there was no errors when Google Search Console spits out the report. We will look for things like broken links, pages that are indexed versus how many pages that are created, try to fix the ratio because if more pages are indexed. Then in theory you can have you can rank for more keywords.
Andrew: So did you work with a checklist? Is that how you kept things organized?
Neil: Yeah, not so much checklist. It’s just when you do this so often, you look at a site and you could have a checklist saying, “These are all the things you need to do.” But more importantly, every site has their own issues. So some site could have a really messy URL structure with like question marks and numbers in their URLs instead of using keywords, while someone else could just have their whole site in Flash, and it’s not indexing Google. So whether there’s a checklist or not, you got a more so look at it and what’s the number one, two, and three thing that’s stopping them from getting rankings and you first fix those. Because if your checklist has 200 items, there’s no way you’re going to go through all 200 quick enough.
Andrew: And so who did you get to do the work at first?
Neil: We heard in-house employees.
Andrew: How many people right away? It seems like it was pretty down to business fast.
Neil: If I had a guess, 5 to 10.
Andrew: Five to 10 people. I’m assuming it’s like friends and friends of friends, that type of people?
Neil: No, just post ads on Indeed. Hit up people.
Andrew: Why? Why do you do that as someone who’s so well connected in this space?
Neil: One, the office at the time was just in San Diego. So we’re trying to find people to hire who are local. You know, when I say LinkedIn, we would go on our own LinkedIn posting messages saying, “Hey, does anyone want to work for us? Do you meet any of these qualifications? We have job openings.” All that kind of stuff as well.
Andrew: And what was the deal between you and Mike ownership-wise?
Neil: Same 80/20.
Andrew: 80/20, okay. How does he end up owning . . . I guess he owns Hello Bar now?
Neil: He owns Hello Bar. Yeah.
Andrew: That was a site that you bought with Hiten from . . .
Andrew: Chuck Longanecker.
Andrew: Right. And so you guys ran it for a while. How is he now the owner of it? What’s the transition there?
Neil: Well, we weren’t getting traction on it, right? Because we were focused on CrazyEgg and not enough people spending time on Hello Bar, which was a big mistake of ours. And Mike wanted a project and that was the project.
Andrew: Meaning work on it and then you own it?
Neil: He wanted to own it. So he wanted to run it. Because at that time, we were thinking, “What do we want to do with Hello Bar? Do I invest it? Keep pushing forward?” And Mike wanted to go and run it. He’s like, “Look, I can make this a business. It may not be a $5 million a month business or $10 million a year business or whatever the number would be,” but he’s like, “I can make this a big enough business and have a nice paycheck from it.” So he decided to take it over. Subscribers was my own personal project. I put in 550, 570 grand into it. More so to solve my own problems with push notification. I didn’t care to run it as a business and then I just gave it to him.
Andrew: You just you invested a few $100,000 into it and you just gave it to him without asking for anything in return?
Neil: Yeah, 550, 570, something like that.
Andrew: And did you just give that to him then?
Neil: I didn’t care for it. It doesn’t matter. Everyone believes just because you put money into a company is worth something. It’s worth shit. It’s only worth . . .
Andrew: The domain alone though is got to be worth something. No?
Neil: Yeah, maybe 30, 40 grand. I bought it for 30-something.
Andrew: Got it. Wow. All right.
Neil: You have to keep in mind too, he does really well for me and the agency. The key is not to be greedy.
Andrew: The thing that I wonder then is it seems like nobody is running anything but it’s getting run incredibly well. So for example, you said, “Look, I don’t want to run an agency. It’s not my headache. It’s Mike’s headache.” But meanwhile, Mike has not just the agency but he also has to run these two pieces of software that weren’t doing well for you. And I imagining that he’s saying, “Well, I’ve got . . . ” I know he’s got someone who’s running it with him.
Neil: No, he has someone who runs it, not even running it with him. He’s not running it.
Andrew: I was trying not to be insulting and I hate when I edit myself like that. Yeah, he’s got someone who runs it for him. What do you guys do that allows you to have somebody run a company for you where most people who spend all their time on a company can’t get it right?
Neil: So we have a different hiring philosophy that most people. When you hire someone, you’re usually looking for someone who’s qualified for the job and they can do it well. Because we’re not starting up and we have capital. We look for people who have been successful doing that same exact type of company in the past. So, for example, with our ad agency, Neil Patel Digital, Mike brought in a guy named Jeff Johnson. Jeff Johnson was, I believe, I’m probably misquoting on his title, but I believe he ran sales on iCrossing but sold to Hearst for 400 and something million.
It’s one of their first toys. Got that thing to over 100 million in revenue and then they sold. Then he was the CEO of Covario. He took that from 0 to roughly 50 million a year and ad agency revenue and then he sold. And then he took PMX. Help them clean up their numbers. Got them to 50 plus million in revenue and 20% margins, right? And then now he’s added again with Neil Patel Digital. So we only hire people who have done something in the past successfully, ideally not once, but twice because if they’ve done it twice successfully, there’s a good chance they’ll do it a third time.
Andrew: I wish that COO Alliance was our . . . they just paid to sponsor and this is what the founder told me to do. And I wish he was sponsoring this episode. I don’t know why we don’t have it up and running it. Cameron Herold would have been such a perfect lead in for that ad. So at what point did you transition from Mike to someone else to . . . sorry, what was his name who is running it?
Neil: Jeff Johnson. Mike still runs it. Mike is the CEO.
Andrew: Okay, yeah, I don’t even see Jeff Johnson on the homepage.
Neil: Yeah, he’s the president.
Andrew: So at what point did . . . I guess there wasn’t a transition. So you just brought in somebody who’s done this before to help run it with Mike and not instead of Mike?
Neil: Most of the leadership, our head of analytics ran, I think, 18% analytics and data science team at Mirum, which is a huge ad agency, right? So everyone that we bring in has done their exact role in the past and they were successful at it. We don’t bring new people.
Andrew: What do you do to keep dealing with clients from being a mess? Like from having them ask for things that are beyond what you’re usually doing, from having them have expectations that are unreasonable, from getting requests when you can’t satisfy them?
Neil: We have a head of client services named Dana who’s dealt with this problem for many, many years for other ad agencies.
Andrew: And what is the solution then? Teach me based on what you know?
Neil: Simple answer is no. You just say no.
Andrew: You just say no?
Neil: Yeah, like, “Sorry, that’s out of scope. If you’re interested in that, yeah, we can talk. We can connect you with sales rep and we can go over how we can implement that for you or what they’ll look like.”
Andrew: And so the reason you were able to put this whole infrastructure in place is because you got to half a million in sales so fast, a monthly sales. And that is what you were able to invest in growing the team.
Neil: No. So there was a period of like six months to a year from what that stopped to when we created that agency.
Andrew: What do you mean? Well, you just stopped taking on new leads, stop forwarding them on and worked on creating the agency.
Neil: No, we started selling eBooks and info-products. And we were like, “Yeah, let’s do this instead. It could make even more.”
Andrew: Oh, really? Why? And why do you think you went in that direction? Why didn’t it work?
Neil: We got up to 650 grand a month in revenue. Profit margins were high. It didn’t work because, again, you can get so much information for free. Why do you need to keep paying for info, right? And we also didn’t put enough time and energy to create the best info-product out there.
Andrew: So then you go back and . . . And why did you stop selling services then or at least leads?
Neil: We thought we’d be better off with the sold those leads to buyer info-products.
Andrew: Oh, so someone said, “Hey, I want to kind of hire you.” You said, “Well, we’ve got this eBook. You can do it yourself.”
Andrew: Got it. Got it. Okay. And so then you get back into leads or you say, “We’re going to start an agency from scratch.”
Neil: Start an agency from scratch.
Andrew: From scratch. And that’s where your money came in to invest in the business.
Neil: Yes, that’s why I’ve been putting money out of my own pocket.
Andrew: Wow, do you still invest in real estate?
Neil: I do.
Andrew: You do? What type of real estate?
Neil: Any. I’m sitting in a home right now in Los Angeles, California.
Neil: Well, I do apartment complexes, homes. Anything that I think has a good deal.
Andrew: Full complex.
Andrew: That you buy the whole apartment complex.
Neil: Depending on the size. So the biggest one I did was either 196 units or 296 units. But I bought it with a group of people.
Andrew: What’s the group?
Neil: There was just a big group of people. The guy who ended up bringing it to me was a guy named Kevin. He’s one of the co-founders of Wetpaint.
Neil: I believe his father-in-law, [Dixon 00:34:05], was running that group. And Dixon since has passed away, but he owned the complex across the street, and he was like, “Look, there’s this complex someone bought it for 26 million bucks. They put 6 million down, 20 million bank loan. My complex across the street is fully occupied. Theirs is struggling. It’s poor management.” He’s like, “The bank will give it to us for $20 million. They haven’t been able to pay their bill.” So we took it over 20 million, fixed it and grew it and then the economy was recovering as well and then we flipped it again.
Andrew: The reason I was asking who is because I remember over the years, you’ve been really good about finding good mentors, good advisors. Like just like you’re grooming someone else, there’s someone who’s kind of grooming you. I forget who it was. I think it was Andy who told you about real estate and convinced you to shift your attention to it. Am I right, and buy your first apartment?
Neil: My home, my first home. So I remember I was living in the Hyatt Hotel in Seattle because of him. He’s like, “I got this deal of a lifetime.” He’s like, “The developer, I looked into him, they got money. And I know the recession just came, but we can do a deal where I can get you this unit. It was like 600 grand. I’ll get it for you for 390 or something like that thousand dollars. And in a year, if you’re not happy, you can sell it back to him at the price he paid with that real estate.” I was like, “Sounds good. Sign me up.”
Andrew: That’s it. And you just trusted that he’s going to do that because?
Neil: Because I’ve always had good luck with Andy. I love him to death. You know, like he has a venture fund now and I gave him money for the venture fund. And I told him, I’m like, “Hey, if you don’t make me a return of my capital, it’s okay.” You know, I’m like, “I don’t mind.” I’m like, “I’ll give you money just because you’ve taught me so much and we’re good friends.” Like I don’t even care if he gives me a return. And if he doesn’t, he doesn’t. But I believe in him and he should give me a return because he’s good at what he does. But in general I would keep betting on him even if I didn’t get a return this time.
Andrew: I forget, what Andy’s last name?
Andrew: Andy Lui, right, right. All right. Since we’re talking about personal stuff, why did you get married? You told me that relationships were distraction. You told me that getting a new iPhone was a distraction. You had that very old one until when it cracked, until the screen cracked.
Neil: Do you remember this one?
Andrew: Is that the same one? It is the same one.
Neil: It is the old school.
Andrew: Wow. There are no apps.
Neil: I don’t have the battery but like as you can see the corner is cracked.
Neil: So they were trying to charge me 150 bucks to fix the screen and the battery because I have to charge my phone around three times a day right now. And I’m like, “Man, this isn’t making sense. I’m buying the same old phone from eBay, brand new, for less than $150.
Andrew: Okay. I can’t believe that you’re still living that cheap lifestyle. I think it was Andy Lui who told me when I interviewed him that this is one thing that your whole group of friends has to work their way out of because you almost spend so little money on stuff that it hurts you just like in the time waste.
Neil: Yeah. I just don’t like spending money if I don’t have to. Like right now when I’m living in LA I walk everywhere. I’m like, if I can walk somewhere I save on gas and everything, so why not?
Neil: But, yeah. So going back to your marriage question, you know, I was happy. I fell in love. So what ends up happening . . .
Andrew: Genuinely in love?
Neil: Yeah. I met her in Vegas.
Andrew: What makes you fall in love with someone?
Neil: We clicked. We’re very similar.
Andrew: On what? Like she’s also this . . . I don’t know how to say . . .
Neil: A better way to put it is she eats similar foods to me. She lets me work and never complains. She’s very considerate. She knows businesses is a priority and never tries to distract me from it. She doesn’t drink or party. Like we have so much commonalities, we’re both quirky and weird. And, you know, “Yeah, it’s like that works out.”
Andrew: So typical evening for Neil at home with his wife would be what?
Neil: Netflix and chill. And what I mean Netflix and chill, I’m not talking about intercourse. I’m talking about like both on separate sides of the couch watching Netflix and falling asleep.
Andrew: And do you have a laptop in your lap while you’re watching?
Neil: Yeah. I got my wife the laptop too. So now she has a laptop in her lap.
Andrew: So the two of you are sitting on the couch, laptop on each lap, you’re working and what’s she doing?
Neil: She’s just chilling, researching, looking at stuff, whatever she wants.
Andrew: Okay, just the standard stuff that we all do online. But you’re hard at work on one of your businesses?
Neil: Yeah. And then we also do things like we try to walk every single day for an hour. Like a lot of commonalities, I think.
Andrew: And you walk together?
Neil: Yeah. And we’ll just talk and like, “How’s your day? What’s new?” Tried to eat dinner.
Andrew: Does she bring out the best in you? I feel like if people don’t challenge you or teach you something that it may not be worth your time.
Neil: Yeah, she keeps pushing me to keep growing the business, doing better . . .
Andrew: She does? What’s her deal? What does she do?
Neil: She used to own a modeling agency in Las Vegas. So all the conferences needed people, and she would fill it out for that and she would take a cut and she would have to go be there. And I’m like, “Oh, this is great. This is creative.” And, you know, she never made a killing. But let’s say she made around, I don’t know, like seven grand a month or so. And she does it all working from her home and chilling. And I’m like, “This is great. This is creative.” I’m like, you know, [inaudible 00:39:16]
Andrew: What are you trying to do? Why are you working so hard? To get to what?
Neil: I want to donate everything.
Neil: Yeah, I really will.
Andrew: So why are you doing it?
Neil: To donate everything? It’s fun.
Andrew: No, I mean, why are you working this hard? It’s just you love . . . I asked Hiten Shah, your brother-in-law, while we were driving to dinner. I love that he’s vegetarian because then we could go to vegetarian dinner together and he can order anything and I can eat it all.
Neil: Are you a vegetarian?
Andrew: Yes. My wife is a lifelong vegetarian so I tried it. It’s been really helpful for me, especially as a runner, to not be weighed down by meat. Anyway, I loved it. And he said, “Neil just wants to keep leveling himself up.” You don’t even compare yourself to other people, do you?
Neil: No. So to me, it’s just a game and it’s how much better can I do. Like for example, I met Ryan Graves a long time ago, that Uber guy, right? And that’s just in New York, San Francisco. And there was no business deal to have anything there. He hit me up on Twitter. Someone set it up. And, you know, when he made a ton of money, it’s not like I was like, “Oh my God, I wish I could have done that. I could have been Uber investor.” I don’t think like that. I’m like, “Good for Ryan. He’s a really kind guy. He deserves it. He’s a hard worker.”
Andrew: That’s it?
Neil: That’s it.
Andrew: There’s not a part of you that goes, “Oh, I should start one of these bigger companies. I better work harder because I could be as Ryan Graves successful?” No?
Neil: No. I believe you live life, then you chill and relax and do whatever makes you happy. See, for me, I don’t have too many bills. If you have a home that’s paid off and you don’t have any financial bills each month, money is irrelevant. What are you going to do? Buy a home . . .
Andrew: Does it make you lazy to not have to keep working to compete with someone else? It doesn’t make you lazy . . . it doesn’t. You just have internal drive to be better than the last time?
Andrew: That’s it?
Neil: And that’s it. And then I just keep going because, to me, that’s what I love. And the donation part, that’s just fun. Like I like . . . I used to try and buying shit. And when I bought a shit it would make me happy for a day or two and that was it. But then when you put a smile on someone else’s face, it last forever. Like that little thing like someone who has like issues with eyes and like cataracts and fixing them, like in the United States that’s not a big deal. But overseas people can’t afford that. So you fix it and then they can see. And they’re happy. Like that’s priceless.
Andrew: Have you done that? Would you go on one of those trips where you get to see your money get used?
Neil: I do not but my wife does. So . . .
Andrew: She does.
Neil: . . . before I started dating her she used a volunteer every week like at food shelters, and children’s hospital. She didn’t have the money to donate but she had the time. And that also worked out really well for us because she deals with the seeing and making sure everything gets to play nicely. And I get to focus on working because I think it’s in more efficient . . .
Andrew: And so you’re donating now?
Neil: Yeah. And have for a very long . . .
Andrew: And she gets to see the pleasure and tell you the pleasure about it. And that’s it?
Neil: Yeah. She’s the one who picks where it goes to.
Andrew: Okay. Let me talk about my second sponsor. And then I got to close this out by asking you a little bit about Kissmetrics, what happened there, why is it that . . . anyway, we’ll find out about all this. Second sponsor is Toptal. How did you hire from Toptal?
Neil: One of my employees had someone hit up Toptal. We found them from an ad on Google. And they hired someone then we worked with them.
Andrew: I asked Hiten, I said, “You guys have such incredible network. Why are you hiring from Toptal?” He said, “The matcher, number one.” I said, “What do you mean about the matcher?” He says, “You tell him what you’re looking for. This guy just totally understands what you’re after, how you work. And then they go on and figure it out.” It’s the matcher who gets you and then go gets you the right person.
Neil: I think people think about it the wrong way when it’s Toptal or any of these services. It’s not about your network. It’s about speed, execution, and business. A lot of times that people win don’t necessarily have the best product or service. Speed goes a very long way. Companies like Toptal help you execute faster.
Andrew: Yeah, they do. And you can often get started with their people within days. All right, for anyone who’s listening who wants to go try out Toptal, it was created by two Mixergy fans who are offering something to us that they are not been offering to anybody else, which is 80 hours of Toptal developer credit when they pay for the first 80 hours. I saw smile on your face like, “Good deal.”
Neil: Like I should go do this.
Andrew: I saw little corners of your mouth go up. Eighty hours of Toptal developer credit when you pay for your first 80 hours, in addition to a no-risk trial period. Listen, guys, its Top as in top of your head. Tal as in talent. Here’s the URL, toptal.com/mixergy. By the way, Sachit Gupta, the guy who sells ads for us. He goes, “Andrew, I’m already getting you the highest CPMs possible. We can’t keep justifying things on CPM but I got a new way.” I go, “What’s your new way?” He says, “Brand value. It’s beyond the CPM. What you’re doing is you are putting their brand with influencers’ reputation, boom.” So now what he needs to do is clip out this, if you’re talking about Toptal and send it to them. And goes, “Forget about CPM. Your brand now is associated with Neil Patel. Boom, forget CPM. Let’s talk bigger numbers.”
Neil: It works. I got paid 110 grand to do a spiel on how PayPal is great.
Neil: On YouTube. I had to put a disclaimer. I put the disclaimer . . .
Andrew: Oh, you mean on your YouTube channel.
Neil: Yeah. It works. People pay for that all day long. [Inaudible 00:44:07], they’re like, “Would you do a video for PayPal for 110 grand?” I’m like, “How long is the video?” They’re like, “A few minutes?” I’m like, “Sounds good.” I’m like, “What do have to say?” They’re like, “Whatever you want.” I’m like, “Sounds good.”
Andrew: That’s where I had a hard time trying to figure out what to talk to you about. Because there is this . . . It’s not just here. I actually don’t watch you on YouTube ever. But I do see you on Facebook. And you do this, just stand in front of a white wall. Someone is shooting video and clipping you. It’s giving me maybe the same stuff that I might find on your blog, but I prefer it. So there’s a bunch of different things going on for you. Let’s go back then to the thing that didn’t work out, Kissmetrics. What what’s your take on what happened there? Actually, wait, let’s describe what Kissmetrics was and then what’s your take on what happened?
Neil: Yeah. So Kissmetrics was a web analytics company that helps you optimize for your lifetime by the customer. Hiten and I co-founded the company. Within the first year to two years, let’s say, two years, we got up to around 500 grand a month in reoccurring revenue, roughly around there. We got an FTC investigation class action lawsuit. Derailed the company. New CEO came in place. It didn’t work out. They put in another new CEO and he didn’t work out either. And the company’s revenue stayed the same if not decreased over time. They were never able to continually grow it.
And, yeah, so I heard from one of their ex-employees, because I know most employees, right? Hiten and I hired them. Hiten said, “Yeah, they are struggling. They did a second round of layoffs.” And I knew they got a lot of traffic. So I hit up the guy. I was just like, “Look, you know, if you’re not generating revenue from the site, your audience is probably not right. Whatever it may be, you know, do you want a half a million bucks for the domain? And he’s just like the domain [stuff 00:45:58]?” I’m like, “Yeah, I’ll give you a half a million bucks.” So then within like . . . he got board approval right away. Within 30 days I wired him the money. Whenever he gave me the legal contract, I sent it off.
Andrew: And then it was all redirected. Everything from that site redirected directly to neilpatel.com, right?
Neil: Yes. But I gave him a sweetheart deal. So I structured the deal. I’m like, “Look, I know if I tell you to switch your name in 30 days, that’s too hard. I’ll give you the half a million up front. I’ll even pay to maintain the blog, which was estimated around $50,000. So I’ll take on that expense. And on top of that I’ll let you use it for another six months. And then after I’ll take ownership and it gives you time to transition. And then I transferred to neilpatel.com because that blog ranks for a lot of marketing terms. I knew what each of those visitors were worth because in my ad agency we’re monetizing this traffic and converting them into leads. So I was doing basic math and I’m like, “Oh, I can get my money back in a few months.” So I’m like, “Sounds good. Sign me up.”
Andrew: What I don’t get is like are you linking past articles from Kissmetrics blog to . . . are you mapping them to your own blog posts or is it all just . . . you are. I got it.
Neil: I redirected it. So I took those blog posts, moved them to Neil Patel and redirect it. So if you submitted a guest post, Andrew Warner, your guest post would be on Neil Patel. It still says written by Andrew Warner, etc. [inaudible 00:47:24] links. If any blog posts was written by me, because I wrote a lot of the content as well on the Kissmetrics blog, that just got moved over. I didn’t have to say “Written by Neil Patel” because it’s already written by me.
Andrew: I see. Okay, that’s why I’m not finding it because I’d have to look at individual posts and get a sense of it. By the way, it looks like this Chief Technology Officer of the FTC basically made a reputation on you guys.
Andrew: I’m looking for Kissmetrics articles about what happened with the FTC and all I see is his name.
Neil: Yeah. I don’t know if he made his reputation off of us but he really stuck it to us. But the FTC is really cool. So they didn’t slap us with any fines, penalties, anything. They were just like, “Okay, cool. You didn’t really do much wrong at all. So you’re good to go.”
Andrew: It was a lawsuit? All right, then what was it?
Neil: Class action lawsuits. But you have insurance so the insurance is settled. And they pay the fine which is cheaper than trying to fight it in court. So at the time our lawyer who’s the head of FTC for Facebook, Ashley Beringer, she’s like, “We can probably beat this in court but it’s going to cost you around 1, 1.1 million bucks. We have insurance.” She was just like, “It’s better for us to just use insurance us to pay a few 100 grand to half a million bucks but the insurance pay the rest and settle because that’s cheaper than us paying a million out our pocket.” That’s what we ended up doing.
Andrew: CrazyEgg, do you still own that?
Neil: With Hiten, yeah.
Andrew: With Hiten. So the two of you still on the site. You’re still growing it. What else do you own? What else are you working on?
Neil: I don’t know. I have . . .
Andrew: No other software? So the number one thing is it’s Neil Patel Digital.
Neil: Neil Patel and CrazyEgg and that’s it.
Andrew: What . . .
Neil: I still help Mike with subscribers, Hello Bar here and there. But I mainly focus my time on Neil Patel Digital. Like I even have standups with the team. Like tomorrow I have a standup with everyone in SEO and content. And I’ll like break down some of the latest strategies that I’m using that we can implement for clients to getting even better results.
Andrew: How do you stay in touch with what’s going on there so that you can pass it on to them? I thought it would work the other way, they would pass it on to you and then you would go blog about it.
Neil: I still have a lot of sites. I experiment a ton.
Andrew: Wait, you’re testing out on different websites. What’s an example of a site that you’re experimenting on? Is it that weight loss site?
Andrew: No. I don’t have that one anymore but I’ll give you neilpatel.com. A lot of them I don’t want to end up revealing because I don’t want people knowing they’re mine.
Andrew: Okay. So you’re testing . . . what’s an example of something you tested on there? You’ll test on your own websites to get an understanding of what works?
Neil: Every single week. I run at least one test a week.
Andrew: You personally?
Neil: Yeah. I love this. Like for me, I don’t enjoy being a CEO. I don’t enjoy managing hundreds of employees. I enjoy being a marketer. So that’s what I do. And to give the example of testing is I had one of my guys use machine learning to figure it out what are the most clicked words in Google search. And then I run an experiment on 100 and something pages, I think it’s like 115 pages, and we’re adjusting the title tags to see if we can increase the click-through rates. So like I’ll have a lot of fun doing this. Like for me, I get a kick out of that.
Andrew: And you’ll personally sit and do that?
Neil: Yeah, I don’t look at that as work. I look at that as like to learn. I mean, that’s fun. It’s like playing.
Andrew: Yeah, I see you leaning forward now as we’re talking about this. So what are some of the tests that have worked out well for you recently?
Neil: So I’m working on the click-through one. Another one that I ended up testing out was creating a tool. So I had this notion that Google is going to continue to change their algorithm. It’s going to be harder to continue to get rankings from SEO. They may want you to spend money on ads. I decided to create a free software, you know, and just release everything for free that my competitors tried for and see if I can gobble up a lot of the traffic. And that’s been working. And I’m not relying on algorithms, Facebook, YouTube, or any social site or even ads. And then eventually, I’ll turn that into a machine learning software that can do the work for people. But like that is now driving roughly a third of my traffic.
Andrew: You know what? So I see it every once in a while on Product Hunt . . . here’s one, Backlinks by Neil Patel.
Andrew: That’s one of the tools. So you saw that someone would create a tool. Who was it that you were targeting with that?
Andrew: Is that how it’s pronounced, not Ahrefs?
Neil: Yeah, it’s Ahrefs.
Andrew: Ahrefs. I’m curious. Why did . . . ?
Neil: I could be wrong.
Andrew: You know what? I ran ads for them. I could be wrong. I’m going to Singapore in a few days just because of that guy because . . .
Neil: They’re smart people.
Andrew: Super smart.
Neil: They made $40 million last year. They saved it on track for 60. I’m like, “You know, I’m not affecting the market now, but if I can take their paid features, majority, and even create a product that’s half as good.” I don’t even have to match them and just release for free, you know many leads I get? You know the biggest misconception in the software world that people don’t know? Do you know that Fortune 1000 companies tend to use free software over paid software? Do you know why?
Neil: Because . . .
Andrew: Budget approval. That’s my guess.
Neil: Exactly. Budget approval. You got it right.
Andrew: That’s it. So they’re just saying, “Look, to get Ahrefs or Ahrefs approval, I got to go and ask somebody and justify. Screw that, this thing, Backlinks by Neil Patel, I just go use that.” And then when they use that and they need help, that’s when they turn to your consulting service. And this is a lead generator for consulting.
Neil: Correct. And Ahrefs could say, “Our software is 10 times better.” But yes, it costs money. So how is someone going to know? You may say people who work at Microsoft have money, but you know how hard it is to get approval to spend $100 a month? It is not as simple as just like, “We’re Microsoft. We have a $900 billion market cap. Let me go swipe your credit card.” Like we cannot do that.
Andrew: You know what? I had a friend who spent very little money, under $100, insignificant. I almost wanted to just say the person’s name, it doesn’t matter. It’s not that anyone had a problem with it, it’s someone was trying to make a name for themselves by checking in on that. Like why did you spend on that thing? You have to understand that we don’t spend money. It was someone who’s very low on the totem pole, who’s insignificant and assistant to someone who’s trying to show off that they care. Got it. All right, so this is your strategy. Let’s make tools that bring people in, and then if they bring people in, then we’ll sell them services.
Neil: And then eventually, I want it to be a full circle and then have the tools to do the fulfillment so that way, the services are more scalable, higher margins, and I can disrupt the whole agency model.
Andrew: And it’s all because your whole understanding . . . no, you’re still . . . it’s because you believe that people don’t value software enough anymore. And so if they don’t . . .
Neil: Because we’ve not novel anymore. It’s just everyone has it. There’s a ton of Me2 companies and nothing special about it.
Andrew: And then software also requires you to figure it out for yourself and do the work for yourself.
Andrew: Okay. All right. So here’s another thing that I noticed. When I go into something like Product Hunt, I sometimes go and just to see is Neil actually responding to this? Freaking guys responding to everybody. Like you wrote, “You’re welcome to Eric [Immanueli 00:54:12].”
Andrew: Why are you doing that?
Neil: All right. So on top of that, Product Hunt resets at night time, Pacific Standard Time. So my guys are submitting it around 1:00 a.m. And then I put my alarm to wake up that 1:00 a.m., and I set it every two hours to keep waking up and responding to comments.
Andrew: So everyone sees that there is a response. Why are you doing that?
Neil: I enjoy it. Like there’s nothing to it other than like . . . it’s like why do you do this podcast? You can figure out other ways to make money.
Andrew: I do love it. It’s true. But like you got a baby. Do you wake up in the middle of the night for the baby?
Neil: No comment.
Neil: I would wake up for the baby. I haven’t yet, but I would.
Andrew: Your dad asked you if loved your baby, right?
Neil: Yeah, he was like, “Do you love your baby?”
Andrew: Why do you think your dad asked you that?
Neil: I’m not that emotional. I’m very black and white. Even Hiten said that to me because I’m like, “Hey Hiten, you know, we’re starting to have much more employee turnover.” I’m like, “How do you fix this?” And I was just getting candid feedback from him. And he’s like, “Why are they churning?” And for HR reasons, I can’t get into it. But they’re like, really silly reasons on why people are churning and most of them like 80%, 90% of them are inaccurate. Like people making claims. And I’m like, “They don’t even have data, so there’s no way this is true.”
You know, and like we’re really nicely run company. Like at our ad agency, 60% of the employees are female, right? We even have females in executive positions like we made a proactive approach to try to have female executive roles. And like we’ve done so many things to try to improve culture and all this. And I’m not saying anyone is making any accusations or anything like that. But the point I’m trying to make is we haven’t. Hiten is just like, “You know, you’re super logical, and you don’t have an emotional side.” He’s like, “Here are a few things to connect better with people.”
Andrew: Like what can you do to connect better with people?
Neil: Yeah, so I’ll break down some of the notes. He gave me some really good feedback today. He always gives me good feedback. But I wrote down like nine things. Now, some of them I can’t repeat. But he told me to do a few things. He’s like, “Do exit interviews, ask them why so you get better feedback.” And I’m like, “All right, we already do that.” He’s like, “When you bring people in, explain why it’s the best place to work. Talk about why, you know, this is so much better than other agencies and bring in people who have worked at past agencies because they do come into our company and they’re like, ‘We worked at. Dentsu, WPP, and this is why your agency is so much better.’ But new people who have never worked at that ad agency, they don’t know how it’s like to work at other companies, they just graduate college, and they’re like, ‘Ah, there must be something better out there.”
So he’s like, “You need to connect more with people.” So he’s like, “Create a video, you know, for every new person that comes, and create a customized tailored video welcoming them to the company and just talking about your values and stuff like that.”
Andrew: So for all 18 people, you’re going to create a custom video every month?
Neil: I don’t know if I’m going to do that but I’m thinking about it.
Andrew: Okay, but that’s what he’s suggesting. Okay.
Neil: No, it’s one of the ones. And he was saying, “Indoctrinate the team on culture, why it’s exists? Why it’s amazing? And you do that from day one. Think of a SaaS product.” He explained everything to me in a logical way because he knows that’s how I . . . He’s just like, “Think of software. If the onboarding experience is terrible, they’re going to churn, no matter how much you improve your product six months down the road.” He’s like, “Same with employees, if someone comes and they have a terrible experience the first day, the first week, the first month, it’s really hard to change your perception. So it’s like your indoctrination has to be amazing.”
Another thing that he said was, “It’s very important to make people feel that they’re really useful.” So when they do good things, just telling people, and even Andy Lui has given me this feedback. Andy Lui said, “There were studies out there that shows that if you tell people how they did a good job in certain things and give them that credit, that public attention, saying, ‘Hey, you did an amazing job and here’s why,’ that goes further than even giving people raises.” And I’m not saying we won’t get people raises, but just shows that you need to also give compliments as well. So just a lot of little things like that is what he mapped out that helps me connect better with people.
Andrew: So he says you need to be more emotional. What would you say about him? What’s your analysis of him?
Neil: That’s tough. Hiten is very self-aware. So he looks at things that he needs to improve. Like he even tells me, and this will actually be my feedback. But it’s not really feedback because he even mentioned it to me before I mentioned it to you. He’s just like, “I want to improve on sales. What are some advice for this,” right? So he knows where his weaknesses are and he tries to improve upon.
Andrew: That’s your analysis of him. I feel like the other thing is he’s a little too self-aware and a little too loving of other people more than you, maybe not too much, more than you.
Neil: Very much. So a great example of this is his dad does medical fairs. And I’ve donated to that as well. And he’ll go all around the world and try to do these help camps and try to like help people out for free. And his dad is an amazing doctor in Southern California. Now, there was this one country, without getting into details, he went there, he got them all this equipment for free, helped him out. Then when he left, they took the equipment and they started charging people for the treatments, and they kept the money.
Neil: So Hiten’s dad even though he knew this, he still went back later on and help them out again.
Andrew: Even though they took advantage, he still cared enough to go help.
Neil: Yes. All he cares is to help people to live a better life and he really wants to make the world a better place from a medical perspective.
Andrew: And Hiten has a little bit of that in him too.
Neil: A lot of that. Hiten always puts other people first even when they screw him over.
Andrew: They have to figure out how to stop doing that.
Neil: Yes, because there’s a certain point where he needs to look at himself and himself and his family be the priority. Now, again, Hiten already does well financially, so it’s not like he’s struggling or has to worry about any of that. I’m sorry about that.
Andrew: It’s like we’re going late by 20 minutes. Thanks for spending the extra time.
Neil: No worries. So Hiten really cares about, “How can I go out there and just help people.” Like he doesn’t care about money, which is fine. He wants to make it, but he always will do the right thing even when people screw him over, and I’ve seen people screw him over and he’ll still do the right thing and help them out even in the future.
Andrew: Yeah, I used to be a little bit cynical about that quote that he had on his everything, something like, “There’s no telling how far you can go by helping other people go far,” or something like that, right?
Andrew: I get it. That’s very much Hiten. All right. One last question. Actually, I’ve been meaning to ask you for years. Ten years ago, it’s been 10 years so we can analyze this. You were doing work for people in exchange for like some kind of equity shares or something in the business. Example of that was Mahalo, which is not going to set the world on fire. But it’s amazing how Jason is going to stick with it.
Neil: Yeah. I think it isn’t Mahalo, but yeah, in general . . .
Andrew: You did or did not?
Neil: I did not.
Andrew: So all these advisor shares. Yeah, you did try because he was . . . what do you make of that company?
Neil: Mahalo or . . . ?
Andrew: Yeah, Mahalo, and Jason Calacanis who runs it.
Neil: I don’t know too much about Mahalo. I haven’t [inaudible 01:01:14] over the years, but I know Jason is smart. He’s done well.
Andrew: Really well. Okay, so there were a bunch of companies that you were getting advisor shares on it. I was skeptical about whether that would be worth anything. It felt like it wasn’t worth your time. But if you’re learning something from them, that’s it. If you’re getting to know the people, great. And almost taking advisor shares is a distraction because they feel like they paid you off when you’re doing so much for them. Did pay off over the last 10 years, advisor shares, financially?
Neil: No, and I’ve helped out companies like Freshworks to you give you an example, help them out a lot in their first year, and then there’s a cliff on investing. So then when they remove them, you don’t get anything and you help them. And I’m not saying they’re terrible . . .
Andrew: Even if you keep helping after the cliff?
Neil: No, no, no, no. Like so the way shares works, typically, when your advisor shares says you’re on a 4-year vesting period, the first 12 months, you hope for free. And if they like you at the end of year one, you’ll get all the shares for the first whole year. If they don’t want you after the end of month 11, you don’t get any shares, right? So you could just use your time and not get anything. Like I had that experience with Freshworks. I helped them when they just started off.
Now, I’m not saying I was worth it or anything like that. I didn’t end up getting shares. Technically I signed a piece of paper, but they revoked it. I helped them out. Oh, well, right? It’s business. But in general, there’s companies that still gave me shares and I kept helping them. And whether it’s Freshworks or anyone else, it doesn’t matter when I looked at the numbers. I would have made way more money like millions of dollars by just charging them all for consulting.
Andrew: Okay, that’s good. I mean, it’s interesting to hear in retrospect. What about angel investing? You don’t do any of that?
Neil: I do. I’ve done very well for angel.
Andrew: You have. What’s a good example of something that you’ve invested in?
Neil: I made money on Redfin when they went public.
Neil: I had a company called Walk Score I invested in. They got sold to Redfin. I got shares of Redfin and cash. That did well. Remitly, they raise a 100 from Naspers or PayU or something like that. They bought all my shares for roughly 17X for whatever I put my money in. But overall, I’ve had amazing returns from angel investing.
Andrew: “Hustle,” the book, did you write it?
Neil: I did not write it.
Andrew: You did not?
Neil: Patrick and Jonas wrote everything. I sold the book.
Andrew: Yeah, you were the face of the book. And then you now get to say that you’re a bestselling author?
Neil: Correct. I wouldn’t ever do it again. It’s not worth being a New York Times bestselling author. It doesn’t do shit for your career.
Andrew: Even the little brand name thing, it doesn’t?
Neil: It doesn’t do shit.
Andrew: Neil, why are you doing this interview? Speaking of doesn’t do shit, why do you hoping to get out of this? I’m proud to have you on. Someone on your team said, “Neil would be interested in doing.” Shut up. Yes. So I said yes. I know it’s great for me, because I love having this conversation because you’re always super open. What’s in it for you, dude? Why do this?
Neil: So, probably Grant hit you up. Grant just hits a lot of people. He’s like, “Yeah, the more press.” I’m like, “Yeah, whatever you want.” But you personally have a connection with you. You’ve known each other for such a long time, right? It’s not about money. It’s not about doing anything specific.
Andrew: It’s not like SEO value or anything. You’re not, nothing. Yeah. so saying it yes for Grant, and Grant is saying it because he believed this is good for your business?
Neil: Not even that. I was like, “I haven’t talked to you in a long time. Like now I’ll catch with you.”
Andrew: Yeah, this is the best way for me to talk to people. If friends want to talk to me, there are friends that I haven’t talked to in a long time. If we could just turn it into a podcast, I’d love it. If they let me hit them up with questions like this, even better. This is like my first date, Neil. I swear, my wife and I was sitting at a hotel in Beverly Hills outside beautiful fireplace the whole thing and it was just like boom, boom, boom, question, question, question. “When did you first have sex?” “What the hell is this?” True story.
All right. Neil Patel is on neilpatel.com or go to Neil Patel Digital. Here’s the thing that stands out for me, and go to Neil Patel Digital, it’s Neil Patel’s name. He is wearing this beautiful white sweater vest that looks like nothing can touch it. It’s so pure that even couldn’t put his elbows on the desk because it’s too beautiful. And the other two guys on there, look like they’re wearing T-shirts because they got to work hard. One is like an Instagram influencer and the others are like hustlers who better work hard. I thought that was just so fascinating. You don’t even have the title of CEO, nothing there. Neil Patel Digital for anyone who wants to go check it out. Neilpatel.com if you want to see the blog.
And I want to thank the two sponsors who make this interview happen. The very first sponsor is a Toptal for hiring developer. I talk too freaking fast. Toptal, top as in top of your head. Tal as in talent .com/mixergy. And the second is activecampaign.com/mixergy. You know, let me close this out. Quick plug. I’ve been incredibly proud of the work that we’re doing with Mixergy Premium. You and I have talk a little bit about membership.
Andrew: I am finally super proud of it. Like I’ve been proud of the entrepreneurs who have come on to do courses with me. Like Gabriel Weinberg, super smart guy, writes a book “Traction” on how to get traction for a company, for a product. And doesn’t just write it, the freaking guy goes out there and does it. And now, DuckDuckGo is getting tons of search volume, obviously, it’s not beating Google, but it’s getting a significant enough business for them to build a business on. It’s embedded into, frankly, Google Chrome browser, it’s embedded into Safari. He taught a course before all this about traction.
He is still using his ideas for traction on a site. He did a course with me. I brought in this producer, took that course, re-mastered it, I mean, really re-mastered it. Made it look really good. Went back to Gabriel because what I have is the introduction. So I introduced him to Gabriel, recorded an update with it, merged the two together. I’m so freaking proud of that. Whether you watch that course or anything else that we have at Mixergy Premium, you’re going to love the new stuff that we’ve got out there. And if you want to watch that course, go to mixergy.com/duck, get it duck for DuckDuckGo. Cool. All right, Neil, thanks so much for doing this. It’s great to talk to you again.
Neil: Yeah, thanks for having me.
Andrew: All right. Next episode is going to be on “Neil Patel Real Estate Tips.” We’ll invite you back on. Thanks, man.