Andrew: Coming up, you know how you can build the perfect product, show it to people, and they’ll tell you that what you’ve built is way better than what they’re using, and then they still won’t even try, won’t even switch to your product? Why not, and what can you do about it? Towards the end of this interview, Stu talks about how that happened to him, and what he did. The one thing that he did, that solved that problem.Also, I’ve done these interviews now for years. There’s one moment though, I feel especially ashamed of, something that I did and I was just getting started. I wasn’t sure of how to talk on camera and what not to say. Well I said it, and in this interview I’m going to address it, because it had to do with today’s guest.
Finally, what happens when somebody leaves you? I mean relationship wise. That’s totally different; you can let that person go. What happens when it’s in business and your business suffers if they go? What do you do? Well it happened to Stu, and check out what he did, and make sure to catch the practice that he had to put in to doing it right. I think it’s something that can help you at some point in the future. All that and so much more coming up.
Three messages before we get started. If you’re a tech entrepreneur, don’t you have unique needs that the average lawyer can’t help you with? That’s why you need Scott Edward Walker of Walker Corporate Law. If you’ve read his articles on VentureBeat, you know that he can help you with issues like raising money, or issuing stock options, or even deciding whether to form a corporation. Scott Edward Walker is the entrepreneur’s lawyer. See him at Walkercorporatelawyer.com.
Do you remember when I interviewed Sarah Sutton Fell about how thousands of people pay for her job site? Look at the biggest point that she made. She said that she has a phone number on every page of her site, because, and here’s the stat, 95% of people who call end up buying. Most people though, don’t call her, but seeing a real number increases their confidence in her, and they buy. So try this. Go to grasshopper.com and get a phone number that will make your company sound professional. Add it to your site, and see what happens. Grasshopper.com.
Remember Patrick Buckley who I interviewed? He came up with an idea for an iPad case. He built a store to sell it, and in about a few months, he generated about $1,000,000 in sales. Well the platform he used is Shopify. If you have an idea to sell anything, set up your store on shopify.com, because Shopify stores are designed to increase sales. Plus, Shopify makes it easy to set up a beautiful store, and manage it. Shopify.com.
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Hey there freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious sub start, and the place where I’ve interviewed over 100, over a 100, over 800 proven entrepreneurs that have come here to tell you their story. Deep in depth interviews of what I do here.
In this interview I’m going to find out how a non-developer, who’s upset about software created a profitable plug-in that now powers over 40,000 sites, including Mixergy. When Stu McLaren couldn’t find software that did what he needed, he co-founded WishList products, which makes a WordPress plug-in that turns a blog into a powerful membership site. Stu later created rhino support, a support system that saves you time when you respond to customers. I invited him here to tell the story of how he built those amazing products. Stu welcome.
Stu: Thanks, Andrew. Glad to be here, buddy.
Andrew: So, I’ve said amazing, I’ve said how impressed I am, even in the intro already, and people will see, when we talk about your revenue’s, how well you’ve done. So what I want to know is, if you’ve been doing so well for so long, why haven’t you done a Mixergy interview? Why did you keep saying no to me, when I asked you to come on here?
Stu: I think one of the main reasons, was I like being under the radar. I’m a low-key guy. I would classify myself as a introverted extrovert. So, I’m comfortable when I’m on stage, in front of a lot of people speaking and talking, but I’m a very introverted kind of guy and I just like keeping to myself. So, I know you ask those probing questions, and you dig deep in your interviews. So I just like to stand behind the curtain, if you will. That’s why I’ve not been on Mixergy before.
Andrew: So you’re here today. You’re ready to talk and answer those probing questions. What’s a probing question, before that you thought, “I’m not ready to talk about that”?
Stu: Well, I know you always ask people about their revenue. You know, that’s one of the top things that…
Andrew: You don’t want to talk about your revenues?
Stu: Yeah, because I really didn’t want people to know how well we were doing, because obviously when you’re doing really well it begins to attract other customers. For me I just kind of saw it as we were doing really well, things were really cooking, and they still are, so it was just one of those strategies where I wanted to kind of use it to our advantage for as long as we could. Now competitors are popping up left, right and center, so it doesn’t really matter.
Andrew: I see, so now it’s okay for you to talk. What about the other side of it? First of all, I understand and completely respect that. That’s why I never push someone to come on and never reveal their revenues when I know about it in private, but what about the other side of it? If people knew how big you were they would say, “You know what? I can trust my company to this plug in. I can trust the future of my business to be built on top of Stu’s plug in because he’s not well funded, but he’s bringing in enough revenue that I know he’s going to be around for a long time.” Why didn’t that persuade you to do it?
Stu: That’s a valid question. I mean, I think my approach in that was to rather instead of me being out there telling the world how good we are, I’d rather let our client’s tell the world. My goal has been for the last couple of years just to build relationships and then allow those relationships to lead to those people utilizing WishList Members. We’ve had Ink Magazine recently use WishList Member. We’ve had New York Times best- selling authors, like Michael Hyatt, use WishList Member. My goal is to rather showcase our clients and let them tell our story rather than me going out and being vocal about it.
Andrew: I’ve talked about WishList Members so much that people must have thought that I got some kind of affiliate kick back or something, because people want to know how I do my interview sites, and one of the tools I recommend is WishList Member. I think it’s more important than the mike. You can get any old mike at the store, but the plug in you have that’s going to manage your membership site, once you commit to it, you’re committed to it. Your audience is tied to you through that plug in, and it’s important to pick the right one. I’m going to come back and ask about the time when you reached out to me, because it wasn’t at a great time, and it wasn’t because of something positive that I said. Do you mind if I talk about that publically later in the interview?
Stu: Sure, I don’t mind. You’ll have to remind me about the specifics, but I’d be happy to share.
Andrew: All right, if you’re ready to be probed, let’s start by probing you. What size revenues are you doing?
Stu: Go ahead, so probe me.
Andrew: Revenues? What are you guys doing at WishList? We’ll get to Rhino Support in a moment, but WishList?
Stu: WishList has been a multiple seven-figure business now for going on five years. It will be five years this year, so after the first year every year thereafter we’ve been a multiple seven-figure business. It’s afforded us the ability to certainly grow, and our team has expanded over the years. We’ve gone from initially just three of us, to five of us, and now there are 17 of us full time. Because of that we’ve been able to do a lot more cool things and so forth. It’s been four 4+ years a seven-figure a year business.
Andrew: You’re telling me after the first year you brought in more than $1,000,000.00 in revenue selling essentially a plug in for WordPress that basically lets people sell access to their sites.
Stu: Our first year we didn’t do a million dollars, but in our second year, so after that first year, our second year we did, and it’s a WordPress plug in. It’s kind of mind boggling and humbling. Andrew, when I think about it, I get chills because like I would never have thought, and that’s kind of why I wanted to stay under the radar. I was kind of like pinching myself every day. It’s been pretty amazing.
Andrew: And you’re not a developer? You don’t code this stuff, right?
Stu: Dude, I’m the farthest thing from a developer. I am just very fortunate because I’ve been able to surround myself with people who are really, really good at that stuff. I’m not a developer. I would consider myself a PhotoShop hack, but I’m certainly not a designer. I’m just a guy that was able to think a lot like customers. That really can serve a lot of people who are listening. If you can put yourself in a customer’s shoes, and you can envision what you want, chances are there will be others that want it, too.
Andrew: So far, I’ve not probed. I’ve complimented, and I’ve rehashed some data that you showed on your website. You said multiple millions on the site. Let’s go a little deeper since this is Mixergy. When we’re talking about multiple millions – 2012 $4,000,000.00 in sales on WishList?
Stu: No, it would be less than that.
Andrew: Less than that.
Stu: We’re less than $4,000,000.00 a year, but here’s the reality. There is still a lot of potential. I feel, and our company feels, there’s a lot more to gain from getting the word out about WishList. There’s a lot more markets that we want to go after. The WordPress market itself is growing exponentially so it’s really exciting and so there’s a lot more potential left and we really do feel like we’re just getting started. Truth be told Andrew, I never had experience running a company like this before. I’d never had experience running a multi-million dollar company so I’m learning a lot along the way but it’s just one those things just putting one foot in front of the other.
Andrew: What was the frustration that led you to do it? What were you trying to do when you said, “No tool is going to work for me.”?
Stu: Well, I was actually trying to build my own membership site and at the time a lot of my friends and colleagues were recommending a membership site plug-in and it was just, I’m fairly technical. I know enough to be able to do basic HTML and to be able to upload files and all that kind of stuff but I just couldn’t get this darn thing figured out and it was really frustrating me because I knew word press. I knew how to use WordPress and everybody was saying, “You have to integrate WordPress and you have to integrate this other plug-in and you have to make the two connect and blah, blah, blah.” and I couldn’t get it figured it. I had to keep calling a webmaster and it was just costing me more and more money. I was just bitching and moaning about this experience with a good friend of mine Tracy.
Andrew: You were paying the company that makes the software to help you implement it. Is that right?
Stu: I was paying somebody else, like another web developer to help me install this script and integrate it with word press.
Andrew: Can you say which one you were looking at? I was looking at all of them back then.
Stu: A Member.
Andrew: A Member, so right now on my site I think I still have remnants of that because A Member’s not a plug-in for a word press, at least it wasn’t then, I don’t know what it is now. It’s something that you had to create a separate directory on your server for. It was all this stuff, it was complicated. I understand the frustration.
Stu: Yeah and you had to hack HTT access files and you had to do all this crazy script installation so, for a regular guy or gal that is fairly comfortable online and fairly comfortable with a computer, it was still really difficult to figure out. It was obvious that this had been designed, certainly by a very intelligent developer, but it wasn’t designed for the end user. That’s where my frustration really came into play.
Andrew: You were trying to built a membership site for what?
Stu: Well, I had heard a lot of my friends and colleagues had started different membership sites so, at the time I was managing affiliate programs for a lot of mini marketers that are marketing online. So, I had this area of expertise and I was constantly getting asked questions about it so I was developing a membership site to basically deliver that information to more people that wanted it and I just couldn’t get it set up. That’s ultimately the starting point of [??] member.
Andrew: What was the content that you were selling?
Stu: I was going to be selling information teaching people how to manage an affiliate program effectively. Affiliate programs are very powerful, especially online because it’s like having a virtual sales force. What a lot of people don’t realize is how to manage those affiliates to certainly get them excited and engaged and wanting to promote your product. Not just one time but every month.
Andrew: How did you know how to do that?
Stu: It just from experience. My very first client recognized that I had a skill set there to work with people and I was fairly technical, in that I could help people get stuff figured out and I love to teach. Those three skills combined really make for a really effective affiliate manager because you’re helping people, you’re showing them how to sell your products and you have to be able to get in and get links for people and stuff like that. It just went from there. I did a thing or two right and word got out and I had multiple clients and that’s kind of how the experience became what I had.
Andrew: What’s the thing or two you did right?
Stu: We did several multi-million dollar launches in short periods of time. Less than a month and so it doesn’t take long for people are asking, “Well, who helped you with this? Who helped you with that?” and my name got spread around that way.
Andrew: How did you get those launches to go so well?
Stu: A lot of it just came down to coordinating people around a specific time frame. Giving them the tools that they needed to be able to get your word out. The biggest lesson around affiliate marketing is that you have to give people a reason to spread your message. You got to give people a reason to spread your marketing.
Andrew: Isn’t the reason, “Hey I’ll give you a percentage of my revenue.”?
Stu: That’s not enough. No, you have to make your affiliates look good because obviously they’re going to be sending your information out to their customer base and so forth and they don’t want to be pounding their list day in and day out with sales messages for you and you’ve got to find creative ways to make them look good so that they still want to share what it is that you have without coming across as a cheesy, sleazy salesperson. So, there are many ways to do this but ultimately you’ve got to give your affiliates a good reason to promote your products and services and you need to do this on a regular basis. Most affiliate programs create one set of tools and they just hope that their affiliates are going to come in and use those tools every single month. Well, that doesn’t happen. They might use them once.
Andrew: By tools you mean the copy that the affiliates will send out? The e-mails, the visuals.
Stu: Right, like e-mail templates, Twitter templates, banner ads, promotions, that kind of thing. Most people create on set of tools and then hope that their affiliates are going to promote on an ongoing basis but the reality is, you have to create fresh materials for them every single month that’s built around a good promotion or a good reason for them to spread the word.
Andrew: And you were a consultant who was doing this for other companies?
Stu: Yes. I was hired as an affiliate manager and that was what our company did. We basically managed these affiliate programs for a variety of other companies and so we would be doing promotions for four or five clients on any given month.
Andrew: Before you did that I hear that you were working at a company. Now you’re a guy that I understand loves entrepreneurship, there’s this really combative blog post that I recently tweeted out that you said, “Hey, you guys are really just jealous when you’re complaining that what we’re doing is just building lifestyle businesses and calling it not a real business because we’re not funded, and we’re not this and we’re not that. What you’re really doing is expressing your own inner jealousy. Jealousy of the fact that we’re profitable. Jealousy of the fact that we’re comfortable and secure in our business. Jealousy of the fact that we can fly out.” And sure enough, you wanted to meet with me and a couple of people in New York. You flew to New York. I thought you happened to be in New York. You flew just to have drinks and lunch with us. So, that’s what I think of you. You ended up working where in the beginning of your career?
Stu: So, in the very beginning, after I had graduated university, I knew that I wanted to be an entrepreneur but at the same time I also recognized that I was very, very green. I didn’t have a lot of experience so, I wanted to get to get a lot of experience and I began working with a company that produced seminars every single month. So, I was basically hired as their operations manager to help them coordinate these events and to run that business from an operational standpoint. It was great for me because I got lots of exposure to a lot of entrepreneurial ideas because every seminar that was hosted, we had a variety of different speakers that would come and speak and they were talking on all kinds of different subjects and so that’s really where I got my eyes opened to the world that we have available to us. The most exciting thing to me was hearing a lot of these people talk about businesses that were started online. The reason that I was really passionate about that was because I live in a very small town, an hour and a half south of Toronto. I love being from a small town. You know, a lot of people are like city folks, they have to be in New York or have to be down in San Francisco because you want to be around that hustle bustle. I just like being in my own little place, in my own little bubble, out in the middle of nowhere. So, this was really, for me, exciting. Being able to envision building a business, serving people around the world and still being able to live where it is that I want to live. That’s ultimately what planted the seed for me and it wasn’t too long after that I went out on my own and started to do my own thing.
Andrew: All right. So that’s when you got into consulting. Consulting did so well that you created a site where you were teaching people what you were doing. Then you said, “Hey, I don’t just want to teach them, I want to sell what I’m teaching.” and God knows in the affiliate’s base people are willing to pay for it because it’s money in the bank if they can find a good tactic that will help them with their affiliate program.
Great, you’re looking around, you’re seeing that the tools that are out there don’t work and, I saw the same thing. Many people saw the same thing. We hired consultants where we just said “This is the crap of the industry and we have to accept it.” You did something different and I want to know why. Why did you hire someone? Why didn’t you say, “That’s not my business. I don’t know software but I’m really good at speaking and teaching and learning and sharing what I’ve learned. I don’t want to get into a business that I don’t understand. I don’t want to have to deal with code. I want to deal with what I’m good at.”
Why didn’t you stick to your knitting?
Stu: Well, I mean, I have to give credit where credit is due. My friend who I was talking to where I was moaning and groaning about the fact that I had to hire somebody to help me set all of this up, his name is Tracy Chillers and he’s ultimately now my business partner with Wishes Products. Because he asked a very important question. He said ‘Well, you’re moaning and groaning about this. What would happen if you could just create your own dream solution? What would you do?’ And I just kind of went off on a rant, Andrew. And I was like ‘Dude, I would do this and I would do that and I would structure it this way and I’d be able to give them the ability to do this and that’ and he said ‘Well, why don’t you?’ And I said ‘Well, dude. I am not a coder. I can’t, you know, make that happen’ and he’s like ‘Well, I have somebody who works with me who’s a very good developer. Why don’t we team up and do it together?’
And that’s kind of when I was like wow, this could be very exciting. And so as I mentioned, I’m a bit of a Photoshop hack so I know enough to be dangerous. And I went in and that’s when I began designing some very basic mock-ups. And then I handed those off to Tracy and his developer was a gentleman by the name Mike, Mike Lopez. And Mike went to work and this is the crazy thing. In about a month we had the first beta version of WishList Member, which it was exciting. It was one of those things where you come up with an idea and somebody else makes it happen. It was like Christmas.
And so that really was the beginning.
Andrew: This is the dream that most entrepreneurs who don’t develop have. That I’ve got this great idea, some coder should appreciate how great it is and go develop this thing and put it together in a month.
It doesn’t happen. I want to understand why it happened for you. First of all, how did you know Tracy well enough that you can say I will do this for you?
Stu: So Tracy was actually, the gentleman that I had worked in the seminar company for, that was Tracy’s father. And so Tracy and I had built a friendship and a relationship as a result of me working for his father. And so even after I left that company and I was doing the consulting and we had a great [??]. By all means, here’s the other thing. We had a very successful consulting business. For me it was just me and my wife, or my wife was working but basically I had two other people that were working with me and it was a multiple, very high five figure income a month.
So it was a great business. But the down side was it was all dependant on my time. So this for me was really exciting because this was a way where I could create something once and then just focus on selling it and not have to worry about it requiring my time.
So I had a relationship with Tracy and he had a relationship with Mike, who he had worked with for years and years. Mike is a phenomenal coder and so that’s, I think, a tribute to Mike and that he was able to take those mock- ups, those basic mock-ups. We had a few conversations and he was basically able to run with it from there and to me that’s a sign that somebody was really, really [?].
Andrew: How does an introvert guy like you, people can’t tell on camera but you say you’re introverted. How do you stay in touch with Tracy and build a relationship with him that works? I don’t know my bosses’ kids, the people that I work with. I don’t their kids. I don’t have a relationship with the developer where we’re not actually doing everything together but we’re friends and just talking all the time about ideas.
How did you get that?
Stu: Well, you know, Tracy’s passionate about entrepreneurship as well so, I mean, I think one of the things, when I say I’m an introvert, Andrew, it’s like I’m introverted in the sense that if we go to a seminar or something, if I’m by myself, I’m going to be the guy in the back of the room that’s going to sit it by myself, I’m probably not going to approach anybody. I’m not going to be actively wanting to talk to somebody. I love talking to people but I don’t like starting those conversations.
So for me that’s what I’m talking about when I’m introverted. But when it comes to one on one, I like, you know, connecting with people. And so, you know, much like you and I have stayed in touch over the years, it was the same way with Tracy. Every now and then, we would shoot each other an email or phone call and we’d just talk about each other’s businesses and try to help each other out. And I think that’s really important, specially in the virtual world that we live in. We’ve got to be more proactive about doing that. And in fact, in the last year and a half, I’ve increased, you know, my willingness to proactively reach to other people just because I know how important it really is.
Andrew: I see. OK. And we’re going to see how you do this more as the interview progresses. But the idea was Hey, I’m an entrepreneur. I need to stay in touch with other people who are entrepreneurs, and talk about my issues, get to know what their issues are, help them, wait for them to have an opportunity to help me, and so on.” You get this idea to him, why doesn’t he say, “Great idea, Mr. Idea Guy, here’s the bill if you want me to build it for you?” That would be the normal thing to do.
Stu: I think from Tracy’s perspective, he too was looking for another product that could be sold where it’s created once, and revenue is generated on an ongoing basis. He was very mindful of the fact that he didn’t want to get into another “time-for-money” situation, which that would have been. It would have been a contract, and at the end of the contract it would’ve been done. He was looking for an ongoing revenue source. Ultimately, that’s why it made a great partnership.
Andrew: He was going to build it and you were going to market it and keep it in touch with real user’s needs. How did you show him that you were good at that? He’s going to show you that he’s good at developing it by showing the product. You still have to give him an understanding that you’ve got what it takes. Be able to communicate something that would make him confident in your ability to sell this once he invests all this time. How do you do that as an entrepreneur?
Stu: That’s a really good question. I think at the end of the day, if you’re your own customer, your enthusiasm and the clarity in terms of how the product is going to be used, is naturally going to be expressed. In my situation, I was somebody who wanted to set up a membership site, with WordPress as the delivery system, but there was not an easy way to be able to protect the content and get it out there. So, I’m communicating all these frustrations. On the flip side, I’m communicating to him, “This is how I would envision it being”. I would explain to him how it could be easier, so that people could get a membership site up faster, and could protect the content the way they wanted it to be protected. Tracy is hearing that, and he knows that he’s got Mike, the lead developer for his company, who is “uber”-skillful. He’s saying to himself, “This is an easy win! I can help build the business, Mike can develop the code, and Stu can be the engine in terms of the ideas.” It was a pretty easy match for him.
Andrew: There’s a mistake people often make when they’re their own customer, and I’m going to ask you about that in a second. First, I don’t want to pass this part of your story without asking you about this journaling workshop. You know, as everyone in the audience knows, that all of our guests are pre-interviewed before they come here. One of the reasons we pre-interview a guest is to find out the things we would have discovered if we had just researched you. Some journalism workshop helped you flesh out this idea? How does that happen?
Stu: This predates back to when I just graduated university. They had trained us to basically go into the corporate world, and get into management and executive-type roles.
Andrew: The university did?
Stu: Yes, the university did. As a result of going through university, I was interviewed by several big companies up here in Canada. I got accepted into a very elite executive management program up here called Maple Leaf Foods. This was everything my parents had dreamed and hoped would happen for me. I had a great salary. I was making more than both my parents would be combined, so for them this was amazing. I had a company car, I had all the benefits, and all the positives. But, for me, there was a gut-instinct that this wasn’t the right fit for me. I’m not a suit-and-tie kind of guy. I couldn’t envision myself going into an office everyday. It just didn’t feel right.
I graduated, but before I started work I gave myself a four-month buffer from time that I finished university to the time that I would start. In that four-month buffer, I went to a creativity conference with another good friend of mine. I was enthralled with this one speaker. He was speaking multiple times, and I just kept going to the same workshops. Finally, he said to me, “Stu, listen, I’m going to be talking about a lot of the same stuff that you’ve already heard in some of the other sessions. You might as well go to another workshop and get the benefit of hearing from somebody else.” By that time, all the other workshops were already full. The only one that was available was one that my buddy went to, which was a journaling workshop. I was thinking, “Honestly? Journaling? Do I really want to go to that?”
But, it was the only one I could get into. So, I go to this journaling workshop, and one of the exercises was to just brain-dump like what was going on in your mind. So I’m writing and at the time another good friend of mine who had graduated the same time as I did, he was contemplating whether he should go out on his own and start his own business because while we were in university he was a really, really successful web developer. He had built all kinds of websites and in fact, he built one for the university itself.
So I’m writing and I’m talking about my friend Jeremy and I’m saying, “Jer has just got to grow some balls and he’s just got to go out on his own and he’s just got to go for it” and then part of the exercise is at the end of it you look at it and you ask yourself like, “What do you see of yourself in what you just wrote?” and I was like, “Oh my God. I’m not just writing about Jer. I’m writing about myself as well” and that was the turning point for me. I knew right then and there-I made the decision-“I’m not going to go into the corporate world. I’m going to go out on my own. I have no idea what the heck I’m going to do but I’m going to start my own business.” And so that’s how it all happened was from that journaling workshop that I didn’t even want to go to.
Andrew: And I see how you just kept moving around and moving around until you found what that thing would be and now we’re at that thing, the first thing-which is software. Actually, and you go into more depth on this on your blog, about how if you don’t know what you’re going to do but you just know you want to do something big, how do you start? And you talk about your process and how other people can follow that too. We’ve seen now that you’re here with the software.
The issue is with the way that you came up with the idea with the software is well, it’s best described by the problem that I have with someone who is emailing me who is saying to me, “At this moment, day after day for the last week or so, check out my software. Let’s try… You should try it” and so on… I keep looking at his software. I keep investing time in his software and I could tell he is a well-meaning person who put a lot of time into his software but it only makes sense to him. He scratched his own itch and nobody else itches like that. I know I don’t. And I have to get into his mind to even understand what he has created, let alone how I can use it. And of course it doesn’t fit my life in any way. It’s not solving a need for me.
You started out that way. How did you not make the same mistake that this guy who I’m talking about-but really dozens if not hundreds of people have gone through that path and I’ve even made that mistake-how did you not make that mistake of creating something that is unique to you and only scratches your itch?
Stu: Well, I mean here is where I am very fortunate to have business partners. So and Tracy… Tracy was a great sounding board because Tracy helps balance all of the ideas that I throw up on the wall and then he takes a broader perspective in terms of identifying what would be better to add to a product or subtract from a product. So right from the get-go Tracy was very, very mindful about making this a product that a lot more people other than just Stu could use. So I can’t take a lot of credit for that, Andrew because Tracy is very, very good at that but at the same time I’ve learned from that experience to the point now where when we are developing other products and services you’ve really got to have a good baseline-a general baseline of what the product is going to do.
And then many times people get caught up in trying to make things do too specific tasks so they add all these features to try to please everybody but the reality is I don’t think that you should do that. I think you have a core and then ultimately for the developers out there, I would develop an API that gives people who want to do all those specific things the ability to be able to do that but it doesn’t impact the core product. So moving forward, that’s basically how we manage everything now. We have a core set of features that will allow the vast majority of people to do what it is that they want to do and then if somebody wants it to do something very, very specific we always look to build a robust API so that people can tie in to that and make whatever product that we’re doing do specific things.
Andrew: I see. Okay. And so how did you know what that core would be?
Stu: We would always ask ourselves one key question and that is, “Would the vast majority of people use this?” and if the answer is “yes,” then it would get included into the core. If the answer was “Well, not really” or if there was any type of hesitation, then it wouldn’t get included into the core. So Wishlist Member is a great example. We have a core for Wishlist Member but then we as a company have developed all kinds of additional “bonus plug-ins” that we call them, where they add very specific functionality. That very specific functionality, it wouldn’t fit into the core because not everybody would use that and therefore we’re just making it bloated with all kinds of code that doesn’t need to be there. So that was ultimately the key question is “Would the vast majority of people use this? If the answer was yes, we’d include it. If the answer was no, or there was any hesitation, we wouldn’t include it.
Andrew: What about this thing that you did? I eluded earlier to the fact that you keep talking to other people. And one way that you do it is through Masterminds. And you told Jeremy here that you, soon after you created WishList, the membership plugin that works with WordPress, you gave it to your Mastermind group at a discounted pr-, you didn’t give it to them for free, you said I’m charging for this, is that right?
Stu: Yeah, well, yes, there is two important lessons there. So, important lesson number one is definitely get involved with Masterminds. You know, Andrew, you and I have been involved in different Masterminds over the years. I really feel that’s important. And it goes back to what I was saying before. I live in a small town, Andrew. I’m surrounded by farmers. You know, there’s not software companies in where I live. So, I need to be proactive about it. But that means, you know reaching out and connecting with people on a regular basis and forming Masterminds where you can discuss your business. Because, you know there’s nothing more powerful than being in a group of like-minded individuals who can give you honest and critical feedback about what you’re doing moving forward. So then the second part of that was yeah, we didn’t give it to them for free. We have it to them at a discounted price because I wanted to see if people would actually pay for it. Now obviously this is going to be a little bit skewed because they’re friends and they’re going to know who I am. But it’s still a good measuring stick because if none of them paid for it then I’d have to certainly go back to the drawing board and ask myself a lot of important questions. But if people were willing to pay for it, that’s a step forward and now we can begin making some progress.
Andrew: You were very quick to charge but one of the things that I noticed was, I remember I had a problem with WishList early on, and we’ll get to that in a moment. And so-
Stu: We don’t have to.
Andrew: I already paid for it but I said, I need this to work. I’m just going to buy like a multi-site membership or something. And I had an issue with that and then I emailed you and you said, you know what I trust you. You told me you bought a multi-site membership and you still have an issue. I’m just going to make this work for you. And I forget what it was but it went a long way that you weren’t just charging which I appreciate but you also trusted me as a customer, before we ever knew each other. Let’s get into that problem, actually. The reason that you and I connected, everything now is going well. You’ve-, releasing this, it’s going well, you’re selling it, you’re selling through affiliate programs which is going well for you because you have the background to do it. And then I did something that I’m kind of ashamed of and I don’t do it because of what I’m about to tell people. What happened was I had Chris Pearson, the founder of, what’s his theme called-, Thesis.
Andrew: I had him on here and he said I’m thinking of creating a membership site and I said, you should because I’m having a problem with, and I called out WishList. And the reason I never do this is because the people who I talk about are in the audience. Just because I’m upset at the moment doesn’t mean that this is a reflection of how I feel and it’s no way to get future guests and to build relationships with people I hope will be honest with my audience. But anyway. So you were in the audience. You immediately emailed me and said, I understand the problem, and you started talking to me about it. And we even got on the phone and you talked to me about what was going on. The problem had to do with, I’m going to talk about it publicly because you’re comfortable with that I can tell from the notes. Mike. What happened to Mike and what was the issues that you guys were going through at that point?
Stu: Yeah, so this was right around the time when we had a very critical situation happen with our company. So, in the beginning it was Tracy my business partner, and his developer, Mike. And so the three of us were basically the core of WishList. And you know truthfully Andrew, we had no idea that this would transform into the business that it was. So, we each still had our own businesses. You know so, I still had my consulting business. Tracy still had his business where he had other software products, and Mike was working for Tracy.
But eventually we realized that thing had some legs. And, we can maybe get into this but, I ultimately decided that I was going to finish my consulting, I was going to completely end all of those contracts. And I was going to focus entirely on WishList. And that was a big gamble and we can talk about that later on. But, so eventually the business started taking off, and I you know I’m full time into WishList, Mike is full time into WishList. Tracy was probably about 80% into it because he still had some other projects going on. But basically the only guy, technically, that could in the code was Mike. So you can imagine, our company’s is taking off, we’re getting thousands and thousands of customers buying Wishlist Member. There are all kinds of issues that are going to come up, and the only person that can answer those is Mike.
So in the beginning, I’ve got my sleeves rolled up and I’m answering as many support tickets as I can but, ultimately, if it came down to code, it was, ‘Assign to Mike. Assign to Mike’. So Mike’s just getting bombarded by all these technical questions and he’s just getting burnt out. So eventually he came to Tracy and me and said to us, ‘Guys, I love you both but I’m actually going to go out on my own and start my own company’. I was like, ‘What? Dude, no! You can’t leave. How are we going to run this thing’? So it was a panic moment, a real panic moment and we had no idea what we were going to do. Ultimately, we went on a hiring spree. We intended to hire one person to replace Mike but it was really difficult to find, and we were looking at really highly qualified people and nobody had the skill set that we had in Mike and it was scary. So we put out a job request to our customer base and we said, ‘We are looking for somebody-a developer and some customer support help’, and we got flooded with all kinds of job applications, which was amazing, and it took us a while to weed through them all. We intended to hire one person; we ended up hiring six, and then we thought, ‘Okay. Well, Mike gave us two weeks to basically bring these people up to speed and then the umbilical cord was cut, and Mike was off on his and and Wishlist was on its own’.
Well, this was a really tricky time because Word Press, which WishList Member is based on, they made a number of massive updates and, as a result, a bunch of things broke in WishList and we were scrambling to try to get those figured out. We had support requests coming in from all of our customers saying, ‘This isn’t working, this isn’t working’, and it was just an absolute nightmare. So the problem that you were having was in the midst of all of that chaos. A few months went by and we were still trying to develop and scramble and get somebody to help us fix all this stuff, and then Tracy says, ‘You what,’ because Mike was from the Philippines, ‘I’m going to be flying over to the Philippines because we’re going to hire a couple more developers. I’m going to hire Mike for a week of consulting to fix these problems and get WishList Member up to date with the new version of Word Press and hopefully, then, we’ll be able to move forward’.
And I said, ‘Dude, I am coming with you on that trip”. And he was like, “Okay”. And I said, “And I don’t think we should ask Mike for a week of consulting. We need to get Mike back”. And he was like, “Well, okay. What does that mean? Offer him the job again?” I’m like, “No, dude. I’ve been watching Mixergy, and on Mixergy whenever there’s a software company, there’s always one tech guy that when shit hits the fan can roll up his sleeves and fix stuff. We don’t have that guy. We need that guy and Mike is it. I think we should make him a partner in the business.” And Tracy was like, “Whoa! I don’t know that we need to go that far.” And I’m like, “Dude, I’m telling you this is essential for the future of our company. I want to come over because I want to make that pitch to Mike.”
So Tracy agreed and we both went over. I’ve never rehearsed a pitch so much in my life, Andrew, because I knew in my heart of hearts we needed Mike and we needed him back bad. So we were meeting with Mike before we were going to meet with some of our team and before we were going to interview some of the other guys over there. So I’m meeting with Mike and I’m asking him, “Hey, Mike. How’s your business going?” because he went out on his own to start his own business. He said, “Well, you know, there’s a lot more to running your own business. I haven’t even gotten around to the stuff that I love doing. I’m still caught up in the accounting, bookkeeping, and all that stuff.” And I was like, “Yeah, I know how that feels.” Inside I’m like, “Yes! Yes!” So then I said to him, “Okay, dude. Listen. We’ve hired you for a week of consulting but we’ve actually have a different offer for you. We want you back.” And so I went into the whole pitch. I said, “We want you back. Not as somebody that’s working with us; we want you back as a partner in the business. We want you to just focus on what you do best, which is the and building a team of developers, so that it’s not just dependent on you.” Because he’s a great teacher, and he loves to teach other coders, as well, so that was really important to him.
So at the end of that conversation, the smile on his face is getting bigger and bigger, he’s really happy, and he says, “You know what, I’d be stupid to say no. I’m in.” And I was, like, “Praise the Lord. Sweet Jesus. The man is back.” So then, afterward, we’re walking back to visit the rest of our team, and he says to me, “Can I be honest with you guys?” And I said, “Yeah, dude. I would hope so.” He’s like, “Before I came to this meeting, my wife, actually, suggested that I ask for my job back.” And I said, “Really, OK. Here’s what I want you to do. I want you to go back to your wife and tell her that you not only took her advise and got your job back, but that you convinced us that you should be a partner in the company.” I’m like, “You do that, and you’re going to be getting the best sex that you’ve gotten in months.”
So anyway, long story short, Mike came back and it was like night and day. Mike organized our development team, he set up best practices, we got everybody back up to speed, and the company just took off from that point forward. But it was a really critical time in our company’s history, for sure.
Andrew: What’s his share in the business?
Stu: Well, I don’t want to get into that, because that’s certainly Mike’s information, and I don’t want to share his information with everybody else.
Andrew: I was actually digging into my finger, so I would not crack a smile, and go, “I have no right to ask that. I have no right to ask a lot of this stuff.”
Stu: No. That’s more Mike’s business. But I will tell you that he’s making a lot more money, as a result of being a partner, than he ever was being someone who works with us.
But there’s an important lesson there, I think, for everybody. In that, when you somebody who’s so critical to the future of your business, don’t ever hesitate to give them skin in the game. This is as much Mike’s business as it is mine, and as it is Tracy’s now, so that’s paid for itself many, many times over. So I’m just a firm believer that when you’ve got great people, give them some skin in the game, as well.
Andrew: Jeremy asked you what you learned from this experience, and you told him about the buzz factor. Before I ask about that, what’s the bus factor?
Stu: The bus factor is if one of your key people get hit by a bus, what happens to your company. If Mike got hit by a bus, or left, our company was on a very quick, downward spiral. So when your developing a company, you want to develop it so that if any one person gets removed from that company, the company can still continue to move forward, and not get caught in a downward spiral.
So you look at our company now, Mike is a partner in the business, but he’s still our lead developer. But under Mike, we have a whole team of people now who are developers, and they have varying degrees of skill sets. So some are good at specific types of code, others are good at other specific types of code. But regardless, if Mike were to leave now, the company would still be able to run. And that’s certainly a credit to Mike developing those younger coders so that he’s duplicating himself.
So the whole bus factor is never, ever, ever have one person in your company that if they get removed, your company would crumble. Or, if they get hit by a bus, and that’s what I’m really talking about with the bus factor.
Andrew: So here’s what I want to know about that. And I’m glad that you’re here to talk about this, because you’re not a developer. I’ve talked to other entrepreneurs and have said, “What happens if your developer goes away?” They go, “Well it will be painful. But I’ll just roll up my sleeves, and I’ll sit and develop.” And in other cases, it’s been easier. They’ll say, “Well, I actually had a salesperson, a VP of sales leave me. And I spent six months just selling, and it got me a lot of credibility within the company, because people said, ‘This guy still knows how to sell, and he knows our product better than we do, and so on.'” But that doesn’t work for you. And that doesn’t work for the person who’s especially attracted to this interview who says, “I’m not a developer either. I’m listening to this because Stu’s not a developer like me. I’m now understanding how Stu developed his company. And how he made an offer to his developer, and the value of a developer, and all that. But what do I do if my guy disappears on me, and I can’t bring him back?” So what do we non-developers do to create this bus factor early on when we can’t afford a team of developers?
Stu: One of the things I’d recommend is you definitely want to hire multiple people. In the beginning, it’s going to be tough, because you’re not going to have the financial resources to hire a whole team of people. But you can do it in different stages. So when we got Mike back, we slowly but surely looked to add a new developer. Usually it was around every six months to a year we would add one, or two, or even three people to our team. Each time we were hiring, in the beginning their skill sets we were looking for generalized skill sets, and now what’s happening is we are hiring people that have a specialty in a certain area. Perhaps they’re specialists in working with databases. Some are specialists in working with CSS or JQuery or whatever. Now we are getting more specific in terms of who and what we’re hiring for, but even then I don’t want to hire just one person who knows JQuery and nobody else does, because if that person leaves the company then we’re screwed in that one area.
So it’s about offsetting your risks within the company and so, how do you do that? Well initially, you’re going to have to hire one person and the best practice is for that person if ultimately they are good and comfortable teaching other people how to code. If they’re not good and comfortable teaching other people how to code or do that specific area of the business, then you need to create systems so that other people can jump in and begin replicating this. You’re really good at this, Andrew, and this is one of the things that I continue to learn from you is how you’ve systemized your whole business. As a result of that you can plug people in and out and it doesn’t impact the overall progress of your company. So, we’re talking about coders specifically, but this can apply to marketing, sales, or any other area. Even customer support. We have an amazing customer support team that’s led by Ray who is our customer support manager. If Ray were to leave it would be devastating to our company because he is just so good at what he does. But even inside that he has trained our other customer support people and they would be able to pick up where Ray left off. So it’s about finding people who are very good at it but then finding ways for them to teach others how to replicate themselves and creating the security for them in knowing that they’re not teaching other people to take their job, they’re teaching other people to enhance the overall company.
Andrew: Why build your software on top of WordPress where you’re basically stuck in WordPress’ world?
Stu: Good question. If I were to go back would we do it again in WordPress? I don’t know. That would be an interesting discussion. There are definitely pluses and minuses being tied to WordPress. In the beginning, the thought process was this. WordPress is a great platform for distributing content. It is something people are already familiar with because they’re blogging and it would be a natural extension for them to be able to protect content that they’re already putting on a blog. For us it was just a natural step. But moving forward, as you’ll see with Rhino support, we’re not doing that anymore. We’re building web based services so that we’re not dependent on any platform because there are a whole bunch of associated headaches and complications when you are tied to a specific platform.
Andrew: Chris Pearson talked about that in his interview. People can go back and listen to that, one of the most popular interviews. So let me tell you about this mug that I’ve been holding up and then I’ll ask you a question because I think it’s relevant here. So this is a mug sent by one of my fans. The guy’s name is Brandon Colley, he is the cofounder of Sizzle Pig and what Sizzle Pig does is, imagine you take a collection of photos and you want to resize them, it does it all in the cloud for you. No scripts, no headaches, it just does it. That’s what Sizzle Pig is. I asked some people in my audience to send me mugs because I want the other people in the audience to know that they’re real businesses being built by people who listen to these interviews. Like you for example, built a real business as you were listening to these interviews. We’re not talking about fluff we’re talking about real useful ideas that companies are being built on. Sometimes I feel if I say hey, there are web based businesses built, it just doesn’t feel real. Here, I’m holding the mug. This is a real company. Somehow the logo I think and the fact that I’m holding something tangible will feel like a real company.
Stu: So I’ll send you a t-shirt next week so that it will say WishList member so that WishList member is a real company.
Andrew: I’ll try it on in one of my interviews. Make sure to get my buff body. I love to wear t-shirts but the more running I do, I used to wear t-shirts on camera which is what I wear in to work but the more running I do the more thing and emaciated I look in t-shirts, no matter how small. So I sit here and people go, oh is Andrew not eating enough? What’s wrong with him? Does he have an illness? So I asked him what he liked about Mixergy and what he. He talked about 37 signals and my interview with DHH of 37 Signals. He says, ‘Look, what I learned is never give web applications for free and you did that.’ He says, ‘Charge monthly. It’s win- win for you and the client.’ That’s what he said. We really got into it with DHH, David Heinemeier Hansson of 37 Signals. Now I’m wondering in your interview, as I’m holding this mug by someone who is using that lesson in his business. Why not charge monthly? My business is built on it monthly. I had a problem the other day. Tracy got on the phone with my SysAdmin and spent about an hour helping him out. Why not charge monthly? You’ve earned it and your business would have predictable ongoing revenue.
Stu: The reason why I didn’t want to charge monthly for this, was because I had a gut instinct from the customer’s perspective that they would see WishList Member a lot more favorably and they’d give it a try quicker if there was not a monthly charge associated with it. I know, as a customer, if I’m launching a membership site, I’m going to be less likely to want to pay a monthly fee. Because I don’t know if the idea’s even going to take off. If this membership site is even going to make money. If it makes money, then I’m probably, heck yeah, I’m in. I’d definitely pay monthly for that. But in the beginning, there’s so many unknowns. You’re really not sure as to whether it’s going to be worth it. A one time fee for a lot of people, myself included, is a lot more of a safe entry point. I was approaching this from the customer’s perspective. Would I want to pay a monthly fee for this? No, I wouldn’t. And so, we decided to do a one time fee. I think it was the right decision, Andrew. Because it allowed us to penetrate the market very, very quickly. Because there were other solutions that popped up. People that have even been on your show, like the Kajobbi [SP] guys. They charge a monthly fee. I think it’s targeted at a different clientele. For us, in the beginning, we knew that it needed to be a one time fee. We went back and forth as far as what that one time fee would be several times. We ultimately settled on 97 and 297 for the developer license.
Andrew: I disagree with you. I’m not here to disagree with you and get my opinions out here. I’m here to push you for your real feelings here. I have to say that, yes, starting out, I would’ve been afraid if there was a monthly fee. But once you go big, you get comforted by a monthly fee. My sense is that you were starting out and you were at that place where I was when I was first signing up for WishList. You’re going, ‘I’m not ready to commit to something forever and paying someone else forever. It’s too scary.’ Today, now that you’re an enterprise customer, when you see the enterprise point of view, don’t you reconsider and say maybe we offer everything for free but we also have an enterprise add-on that’s a premium monthly like 24 hours support or something. Do you in your heart of hearts question it?
Stu: No, I don’t, I don’t. I firmly believe we made the right decision. Now, with that said, I will build on what you just said. Once of the things that I realized is that there is a lot more opportunity for us in regards to WishList for providing additional services for Enterprise type clients. Or clients where they’ve graduated to the point where they’ve got a very successful membership site that’s bringing in recurring revenue. They have no hesitation in paying an extra monthly fee to be able to get that faster service or whatever it may be. That is certainly an area of opportunity for us. But in the beginning, Andrew, for me, and it served us well, it was about acquiring a customer base as quickly as possible. And penetrating the market as quickly as we could. We did that and now we have a solid foundation. We can introduce other services for clients like yourself who would be willing to pay more on a monthly basis to be able to have premium services available to them.
Andrew: You’re really kind to not to be upset. There’s something that other interviewees would’ve been upset by. I’ll get to it in a moment. But let me ask one line of questions around this WishList product. That is insider. The insider membership that you offer. What percentage of your WishList revenue comes from this 25 or 20 bucks a month that people like me pay to get access to it?
Stu: What percentage of our revenue? Probably about 25% to 30% of our revenue comes from that membership. Now here’s an important lesson with that. So you talked about the importance of charging on a monthly basis for the product owner. Well, what we were discovering was the value of acquiring a customer was going down significantly the longer the customer was with us. Because they’re paying a one time fee up front, but yet we’re inquiring all kinds of support costs on a regular basis as questions are coming in from those customers. So it’s costing us to continue to support them and we needed a way to offset that. And so, one of the other things that we discovered was a lot of our customers were emailing us and asking us questions about how to build a successful membership site. Because you’ve got to remember, behind the scenes on this, I had a number of membership sites that I was running myself, using our software. You know, and so-
Andrew: Oh you were still running membership sites?
Stu: Yeah, yeah absolutely. So they were asking us a lot of questions about how do we successfully build a membership site, and I was openly sharing, and I was teaching from examples of my own sites. But it was counter intuitive because I didn’t have-, these customers were copying what I was doing. Many of them were creating sites in the same markets that I was entering. And it was creating a nightmare, it was creating competition for myself. So, I said we can’t keep teaching through what I’m doing because I’m creating competition for myself. So we need a way to be able to teach our customers with an example site. So ultimately that led to the idea of, listen, why don’t we create a membership site for membership site owners, and we can teach everything that we know about membership sites inside of there. They can use that as an example. They can steal and take whatever they want from that membership site. And it will be a great way for us as a business to generate recurring revenue to offset our ongoing expenses of providing support.
Andrew: Here’s the thing. You still are not eager to talk about WishList. In fact, we wanted you to talk about WishList, you said, “No no no, I’m running this new thing, Rhino support.” We said, “Can we ask you about WishList?” You said, “Yes but please ask me about Rhino support.” And usually when a guest has that we can see in awkward ways he sticks his new product in to everything. So how did you meet your wife? Well, it’s like if I had Rhino support, I would have met her so much faster and she would have fallen in love me the next day, that’s why Rhino support should have existed back then. Let me tell you about that. So, you didn’t stick it in awkwardly and I really appreciate it and I think the audience can connect with you and it’s ultimately better for your product, I think, to not shove it in to the conversation. But you do want us to know about Rhino support because it is launched. And what I want to know is, where do you now get the idea for Rhino support and how do you decide to add that?
Stu: Well, and so this builds on what we’ve already talked about. And that is we had a frustration in our business when it came to support desks. And so, my wife and I also run our own charity. So, we build schools over in Africa and every year we take our top donors over there to see the school and to spend time with the kids and it’s an amazing experience. Well, one of our donors that had come over with us and had donated to build multiple classrooms. His name was Scott Brandley. And Scott and I spent a lot of time together while we were on the trip and we were talking about business. He has a software company as well. And, we were just talking about, you know, building software companies and all the headaches and frustrations that come with that. And one of the things that I was moaning and groaning to him about was our ongoing support costs. So, we were using ZenDesk. And the thing that frustrated me was as our company was growing we had to then buy another agent account for ZenDesk. So it was another 50 dollars a month. And so that’s another 600 dollars a year. And so as a business owner, I was getting more and more frustrated and irritated and reluctant to add more people to our help desk because it was going to cost me more. So even though I knew it would be better to add more people support wise, it was costing me more. So, he said, dude we have the same frustration! And, so we ultimately built our own support desk. And he started telling me about it and I was like, man, that sounds awesome! So, after that trip, we got back, and he sent me a login for Rhino support. And so that’s ultimately what began the conversation and the partnership with those guys.
Andrew: I don’t get that. I don’t get a guy who’s doing over a million in sales saying I’m upset that I have to pay six hundred dollars for customer support because the solution to that problem is creating a whole new product which is a whole diversion from your main project and anyone who needs an extra customer support person is probably bringing in enough revenue to not care about ZenDesk price. ZenDesk is really deeply…
Stu: Listen, listen. I’m going to stop you right there. You’re full of crap Andrew. If you had your own expense where every time, for example, it wasn’t six hundred dollars a year. It was six hundred dollar per agent per year, so we had a growing company. Now we’re up to seventeen full time people, so these costs add up very quickly. Andrew, I know that you’re mindful as far as your budget goes. If there’s a way to save money, as entrepreneurs, a penny saved is just as good as a penny earned. I’m very very mindful of the fact that just because we’re growing doesn’t mean that our expenses need to grow with it. Ultimately what I want to do is I want to maintain the same level of expenses and continue to grow the revenue so that the spread continues to grow, that’s where the profits lie. Dude, I know you’re as focused on your bottom line as anybody and so, we both…
Andrew: I am but when it comes to this stuff…there’s a company that wants to just host all of my media files. That costs me six hundred bucks a month. All they want is a mention because Mixergy is big and if we say that we are hosting on them and people can see that obviously the files are being served up quickly and efficiently that it is a good relationship for both of us. I’m thinking, it’s going to take me a little bit of work to move over. I don’t need that distraction. Anything like that is a whole distraction. I’d pay to get distractions out of my way so I can focus on the rest of the business.
Stu: You know the flipside of that, Andrew, it was a distraction for me. For me the frustration of having to pay more on a monthly basis every time I wanted to improve our customer service, that was a distraction for me. I was getting more and more irritated by that. That’s why I was very interested in what Scott and his team had developed with Rhino support. Eventually that led to a partnership, but it didn’t start there. That’s why I was looking for another alternative or looking for another way because the other side of it was in ZenDesk I was paying for a lot of features that our team never used. That was frustrating to me as well because that felt like waste as well.
Andrew: When I looked at it, I was trying to think how do I introduce it today and I saw the price difference. The price is like pennies compared to ZenDesk, especially if you have a bigger organization. It was like three prices, solo, one site, and multiple sites and the price is so small that if you need a customer support team it’s not going to be an issue, so I thought, I’m not going to talk about that. I will say that it saves you time. To me, saving me time, getting features I don’t need out of the way, making it clean, that makes sense. That’s what you featured at the top of your site. How did you know that’s what you should feature at the top. That’s what you should, in addition to price, focus on?
Stu: Every business is going to be at different levels. Your business, Andrew, you’re at the point where you don’t mind spending money to save you time. In the beginning when somebody is bootstrapping and starting up, listen dude, every penny counts. I’m definitely going to be mindful of the budget. Our target market here are not the companies that are midlevel companies. Our target market for Rhino are companies that are doing between fifty thousand a year to five million a year. That’s a big spread, but really the types of businesses that fall into those categories are not really that much different. For us, it was definitely about time as well. We dealt with customer support on an every day basis. We deal with hundred of customer support tickets every single day. If I can have a system that is going to reduce the amount of time that our support staff is providing customer support, that is going to save me money. So, I’m very hungry to make more money but I’m also just as hungry to save money as well. Saving time equals saving money for me, so that was one huge thing. The other thing I knew was that there are other people like myself who are technical enough to go in and be able to set a couple of things up but we’re not super technical that we can deal with scripts and this and that. So, I wanted to make a solution that somebody like me could sign up for and have their account up and running and usable within an hour or two for example. And so with ZenDesk that wasn’t the case. You know you could get a basic thing up but we still had to rely on Mike our developer and our development team to get a whole bunch of other things set up. So I just knew that those were frustrations that I experienced and I knew others would probably experience them too.
Andrew: Where do I, where do I want to go. There’s, I know that as we’re talking about this there’s something on my mind. I know my audience well enough to know what’s on their mind with this but I’ve got, but what hesitation they have, and I’ll come back to that in a second. But first I want to know how you built this product up. First you said you partnered up with Mike. Why does Mike become a partner with you? He is the guy who is already developing this, so far ahead that he is able to give you a username and password.
Stu: Yeah, it was actually we partnered up with Scott.
Andrew: No, excuse me, Scott. Right, I even wrote it down to make sure I get it right and I ended up saying Mike Lopez anyway. So Scott. Why Scott? Why did he partner up with you?
Stu: Well, he asked for my feedback because he knew that we were heavy users of our support desk so we would be able to provide some really unique insights in terms of usability because we live, eat, and breathe support with WishList. When I first logged in I didn’t quite know how to express this to him Andrew, but, I mean now I’m comfortable saying it because he knows because he’s seen the before and after. But dude, it was ghetto. It was like real ghetto. From a usability standpoint, it was very, very old school. You could tell that it had been designed by a programmer. And no offense programmers out there, but listen, there’s somebody who has an eye for design you can just tell the difference between somebody who is really good at design and somebody who is a Photoshop hack like myself. So it looked like something that I would design if I were trying to do it myself and I knew that was ghetto. Then, in addition to that, it just didn’t make sense in a lot of areas. So, one of the main things that I always look for in a product is can somebody use this product without ever referencing video tutorials or any support docs. If the answer is no you need to go back to the drawing board and you need to change a bunch of things. That has come from experience with WishList. There are things now, looking back, that I would love to change. We’re going to be doing a huge overhaul as far as that, because if somebody were to use WishList chances are they would have to reference some support documentation. With Ryan we had a clean slate and I thought, you know what, there’s a good opportunity here, it’s a great product, but there’s needs to be some changes made as far as the usability.
Andrew: So because of your ability to show him that you could improve the product he said, all right. This is the guy who I need. I know how to build it but I don’t know how to design it for humans. I don’t know how to walk them through how they can use it. That’s the reason he partnered up with you?
Stu: His company, the reason they partnered up with us was because of that. We have a very, very good understanding of what makes a good consumer product for the masses. Number two is that I love marketing and so I love to be able to come up with creative ideas on how to market a product or service and they weren’t too keen on that. They were very good at product development but they didn’t really enjoy the marketing side of it as much. So, this was really a marriage made in heaven because they were great at development and support and they wanted to do those two things. That was good because it wouldn’t take any resources from our core team with our WishList team. Then, I love design and love marketing, and so I could handle that and run with that. It was a great marriage for both sides.
Andrew: Because you handled that and they could handle development you guys partnered up. Is it a 50/50 partnership with you personally?
Stu: Yeah, with our company. So WishList Products is a 50/50 partner with Scott and Garrett and their company. So, yeah, it’s basically a 50/50 partnership our company and their company. Basically we had a one page agreement. This is how simple it was. It was you guys handle those two things, we handle these two things, and then we split the cost. So basically the revenue comes in, minus the expenses, and whatever is split, that’s what gets divided. So it was pretty easy and straight forward and I think sometimes we can make things too complicated when really they could just keep things real simple. We already had trust there. I know Scott really well because he has been donating for our charity for years. So I’ve gone to Africa with the guy two years in a row. So, there was a lot of trust that had already been developed there.
Andrew: What’s the name of the charity?
Stu: World Teacher Aide. We help fund schools over in Kenya. And I love that…
Andrew: And you take off for…
Stu: We could go on a whole tangent if you get me going on the reason why I do all this stuff, the reason why I live here…the reason why…. This is why I’m so mindful of how much money I’m spending Andrew, because if I can save the money, that dollar that I save can go over to Africa and feed a child every day for half a month. That’s why I’m so passionate about being mindful of my expenses. Because, we always think about as entrepreneurs it’s about the money that we’re making, and we go get the cars and the houses and all that stuff.
Dude, I’m telling you there’s a shift happening and you know for me it’s about being a conduit. As entrepreneurs we have the amazing ability to change lives because, if you know how to make money you can have massive impact in this world.
I never really understood what it meant to be an entrepreneur, until my wife took me over to Africa, until we went on these trips. That’s when I really saw, “Holy Cow!”, if I have an extra hundred dollars, an extra thousand dollars, an extra ten thousand dollars, what impact I can have on these communities and these people. And, so that’s why I’m passionate about saving money, dude. It’s because we can put it to great causes. And that’s ultimately what I think an entrepreneur is really about is making money and then channeling it toward the things that you’re most passionate about. It’s okay to keep some of it but, at the same time I would certainly encourage people to give a lot of it away. Because, you’ll transform your outlook on business once you do. But, we’ll save that for another day.
Andrew: One question you were upset at me for asking, because I think I was–by asking why someone who is making a million dollars plus in sales care about the 600 dollars he pays per agent. I think by asking that it felt like maybe I was belittling…
Stu: You were making fun of me for being cheap.
Andrew: That’s what you heard. That’s not what I was saying. I was feeling like I need to understand the real motivation for starting a business because if it’s really just the price than hell, ZenDesk can match your price by coming up with a strip down feature version of it. So, I want to know what else was there. So, you had a sense of what the product could be because you used support software forever.
Andrew: You had a sense of the price because; it was coming out of your pocket. It wasn’t coming out of your investors’ pockets when you were paying for your support. Let’s talk about how you made sure, how you got a reality check and saw does anyone else care about these two things that I care about, the feature set and the price? How did you know that you weren’t the only one? How can you say with such confidence, “Andrew, I disagree with you here based on experience.”?
Stu: Because I saw dude, I saw it on the twitter feed. You know every day I was seeing people that were moaning and groaning on twitter about ZenDesk, about the exact same thing that I was talking about. Paying on a per agent, per month basis and they were talking about features they weren’t using. Why should they have to pay for all this stuff? And so I knew I wasn’t alone. But, then when I began talking to other friends and colleagues’ about the fact that this was a frustration. I have the same frustration too.
You know, at some point you’ve just got to trust your instincts, and that’s really what happened with rhino. I know that we were experiencing that frustration and through short conversations with others, they were experiencing it as well. And so to me that made for a great starting point to work from.
Andrew: How’d you get your first customers?
Stu: So, for our first customers we gave a bunch of accounts away for free because, with rhino I knew this is going to go big pretty quick because of the match to market, in this case. So, the type of customer that we’re going after it’s a really good match for.
We really wanted to be mindful because we have to really be able to scale this properly. We started comp-ing a bunch of accounts to a whole bunch of friends and colleagues, and we got several hundred people using it, just to bang on the system. Some people were just checking it out and other people were actually actively using it. As a result of that we made a ton of iterations.
This isn’t a product that we…this is the complete opposite to WishList Member. WishList Member, we came up with the idea and had a beta version within a month and then we were selling it to the public within three months. With rhino, Scott and Garret, had the first version available when I saw it, had actually been up to six months in the works up to that point. Then fast forward another entire year and then we started getting other people using it, including ourselves, WishList. We transferred our entire business over to Rhino. We had a bunch of heavy hitters that were using it on a regular basis. Then we continued to make iterations. It was only a couple of months later that we actually made it publicly available. It was over two years in development, Andrew. A large part of that was because we just wanted to make the user experience spot-on. We wanted to make sure we got it right. And now that we have, it’s very satisfying on a number of levels. Because it’s not only satisfying for us, but also for our customers.
Andrew: Let me understand the process. Over the months and months and months that you were iterating and building, it wasn’t in isolation. Because you were giving the software out to people who were giving you feedback. One thing that you intentionally were trying to do was get a wide variety of companies. You guys were a software company. But you also wanted an info product company for example. What did you learn by diversifying your users? For example, what did you learn from working with this info product company that you didn’t know on your own? How did it help shape the product?
Stu: The key there is if you’ve got a product that is going to mass markets, you want to find a beta test of different types of customers. Because people are going to use your product in different ways. We had a very standardized practice in our company in terms of how we set up the support desk and how we use it. But our practices are going to be different from your practices, Andrew, which are going to be different from everybody else’s practices. Even within the different software companies that were using our solution, they used it in different ways. When we reached out to different info marketers that provided great online support, they began using it in ways that we never even thought of.
Andrew: For example?
Stu: Just in the way that they were very heavy in terms of tagging certain tickets, so that they could find those tickets again. Specifically, so that if questions are coming in and they could pull those questions out and create info products or reports or things of that nature, based around the questions that were coning in. Essentially, they were using their support desk as not only a way to get back to their customers, but it was like this huge vault of content ideas that they could come back to and find again and again. The tagging for them was really important so that they could find stuff to create content around. For us, we don’t use tagging. So it wasn’t anywhere near as important. That’s just one example.
Another example would be like just everyday use of the solution. For us, we encourage our customers to e-mail email@example.com. That comes straight into the help desk. While other customers, they like having a thing on their website that says, ‘Contact us’, and people can fill out a form right there on the website. Just different ways of using or providing support. It really helped to get a broad range of different types of companies.
Andrew: Let me do a quick plug. Then I want to ask the question that, I know as you were talking about Rhino, people were saying, ‘Yes, but.’ I want to ask the question that comes after the but. The plug of course is for Mixergy Premium. One of the things I love about Mixergy Premium is real entrepreneurs teach. Why is that important? Well, when it came to learning how to build a membership site, I wanted to learn not from some guy who thought he knew everything, not from some guy who looked at the site and was a know-it-all. But I said, ‘I want to learn how to do this.’ Who knows best? Well, the guy who creates software who gives feedback to all these 44,000 plus membership sites. I said, ‘I want to go to that guy.’ This was just when I was starting out with Mixergy Premium and we were just offering courses. I said, ‘Let’s go to Stu. We want to learn how to build our membership site. Let’s ask Stu. He’s a fan of Mixergy. Let’s ask him to teach. And Stu taught how to build a membership site and how to retain people on a membership site.
To me, that is the value of Mixergy Premium. Real entrepreneurs who know it do a favor to me by coming here and teaching what they know to the audience. That’s why the quality is so good. If you guys took that course, one of the things that you might notice that I’m doing especially like leaning on, so you guys could be aware of is, you said, ‘Open loops and closed loops [??] that.’ Throughout this interview, if I was going to ask a question, I was going to let people know, like, open a loop to let them know what was coming up so they would stay on ’til later. That’s why I’m even promoting this one hesitation that people must have. I will answer that, I will ask that question after this plug. Because it’s one of the things that I learned from you. If people go and start listening to my past interviews, if you’re working your way backwards, you’re going to start to see that I’ve done it throughout past interviews, more and more as I get more comfortable, but I learned that, and that’s one of many things I learned from Stu.
If you’re running a membership site, check out that course at mixergypremium.com. If you’re not, but quite frankly you should, everyone thinks you should just create a blog and then run some ads or hope people come to your site, but I think membership site is the way to go. It’s so much more meaningful than selling ads.
Stu: Let me stop you there, Andrew, because you gave content away for free for years and years and years. How has your business changed as a result of still giving content away for free, but you’ve changed your model and now you charge for it. What has that done for your business?
Andrew: Okay, here’s what it did. First of all, the fact that there are people here who are going to edit this, there are people who are going to write the blog post, there are people who are going to help me with the comments, all that, it’s paid for that. That’s fine. I can say that there’s more money in this, but that’s not what I think is more important. Years ago I had dinner with Hiten Shah, the founder of KISSmetrics, and I said, “What do you think of Mixergy?” and he says, “It’s great. I love it. I listen to it,” and so on. I said, “Can I charge?” He says, “No. I wouldn’t pay.” I said, “Why not?” He said, “Well, I don’t to just hear and pay for stories. I need solutions. Tell me what I can do at the end of these things.” I said, “Hmm, that’s just Heaton.” I didn’t listen because, you know, I had an ad-based business, and the only number I looked at was how many more people were going to watch. I just needed to ask crazy questions, and I needed to get big names to come on. When it came time to charge, I had to start listening to that. I had to start saying to myself, huh, people like these stories, and there’s a lot of value in them, but what they want is to know how to bring those lessons back. I was forced to listen to feedback like that from Heaton. I was forced to listen to other feedback from people that disagreed with my world view because I can see that people will come for free to anything, but when it comes time to really vote with their dollars, they are much more disciplined, much more concerned about it. Once they have paid, not just with their attention but with their dollars, their feedback is much more meaningful.
When I look at people who send me feedback who are paid members and unpaid members, it’s a world apart. Yes, occasionally I get a really intelligent person who knows about WordPress who solves a problem for me, and I love those guys, but for the most part, the people who are just listening for free are just like entertained by the people who are paid premium members who have useful feedback are upset with me for not having asked you certain question and not doing a certain course, and they explain why. That’s what it did for me. Both of those things.
Stu: I know that the quality of the product you’re producing went up when you had the revenue coming in because of the fact you could hire people to help, and that freed you up to focus and hone your craft and really connect with your customer base, which is what you’re talking about. The more time you have to align yourself with that customer base and really develop those relationships, the better product you can produce because you know exactly what’s going to meet their needs. If you didn’t have the ability to do that, you’d still be doing all this stuff yourself, you wouldn’t have that time and you wouldn’t have that time to think. I’m grateful that you did it because I’ve gotten tremendous value from the premium membership. I listen to a whole bunch of courses on there all the time. I won’t get into it, but there’s a ton of content in there that I’ve listened to, so I’m a huge fan as well.
Andrew: Thank you!. Thanks for doing it. If you’re a premium member, check out Stu’s course and over 80 other courses and 100s of interviews in depth where we get you useful, actionable advice in a way I think is more interesting than the radio programs or the music you might be listening on your commute or sitting at your desk. I know the results are there. I guarantee them. Go to mixergypremium.com. If you’re not a member sign up there, and if you are, go and just enjoy everything that we create for you.
Here’s the final question. A lot of people are seeing this, and they’re saying, “Great. I like Stu. I dig his world view. I understand that price is important to me, but I’m married to”, whatever the program is. Let’s say ZenDesk, which is what you’re using. You can tempt me with a really great program, but everything I have is already in there. What do you do with a customer like that?
Stu: You have to find ways to make it drop-dead simple for them to make that transition. The only example that I can give you right now is with Rhino. We were a company, WishList, that had tens of thousands, maybe even hundreds of thousands of tickets at that point when we eventually made the transition. Andrew, as much as we had built up Rhino and as much as we had our fingerprints all over Rhino and designed and implemented it exactly how we wanted I was still scared and nervous about making that transition because I knew, there were a lot of loose ends. If we make that transition what happens to all the open tickets that if a customer replies that was in Zeindesk, what happens to that? Do they just go unanswered?
Andrew: I didn’t even think of that, right.
Stu: There’s a lot of situations that could be complicated when we make that transition.
Andrew: How do you solve that? Because right now there are people in my audience who are thinking I see a big giant company, I can compete with them because I create a better problem, but people are already embedded into their world. What did you do to solve that?
Stu: We devised a thing we call our “White Glove Service.” So long story short, we needed this ourselves. I’ve said this multiple times throughout this interview, I believe when you’re your own customer you have your finger on the pulse of exactly what your customers want. So in our case, where was my hesitation coming from because I was really nervous from transitioning. We had to make that transition smooth and easy and what we did was we found a way to be able to create Rhino so that when somebody is transitioning from ZenDesk for example, any new ticket that is being replied to or created in ZenDesk would be replicated in Rhino. So now, you can continue the conversation in Rhino and slowly but surely phase out ZenDesk. It is not necessarily a hard transition because you’re still going to have open tickets. Slowly but surely you can transition. For us, immediately, month one, we cut down from having sixteen, at the time, sixteen agent accounts, we cut it down to one. The savings there was significant, over seven hundred dollars a month in savings right there. Now, with Rhino, any new ticket that was created would open in Rhino. Any ticket that was responded to that used to be an old ZenDesk ticket would be opened in Rhino. It just helped us create a much more smooth transition. Eventually we phased out ZenDesk because most of the tickets that were being responded to, there were no more tickets being responded to in ZenDesk. They were all being opened and responded to in Rhino.
Andrew: And so that’s the deal. To understand that you need to give people a way to transition over to your thing. You can’t say I am better, people come. It’s I am better, people will want to come, now how do I deal with this wall that basically exists that keeps them from leaving their current product.
Stu: So to go back to the company that has been approaching you about hosting your media files. You admittedly said, listen, yeah I could save a bunch of money if I were to use that company. Yeah, I think they’ve got a great product. But the thing that is stopping me is the headache and frustration of moving all of my existing files over to that service. So that company, the transition would be how do we create a drop dead simple way for people who are experiencing the exact same thing that you are experiencing and help them transition over to our service. So if you are going after a competitor whose got a similar service, how can you make it so simple for people to transition over to you from this service that they are currently using.
Andrew: I was so glad that they said, oh that’s easy, when I brought that issue up. Then they answered it in one sentence, which I said, let me send that over to somebody who is managing my site because I want to make sure we can do this. But yeah, it’s true, they could have said you are going to save so much money, spend a little of upfront time and adjust all the URLs on your site to point to our system and so on. But yeah, they took care of that and understood it just like you guys did at Rhino.
Stu: It’s really, really important to understand regardless of whatever service or product you’re creating that the pain of disconnect will far outweigh any type of savings that people can experience. So another example would be for a long, long time we were using a shopping cart that served its purpose. It helped us for years and years and years, but then we allowed there was another solution that would allow our business to grow at a much faster rate and get to a much bigger level. But there was a pain of disconnect. We had all of our products and all of our auto responders and all of our customer all in the old shopping cart, so dude it sucked making that transition. Even though we were really, really motivated we put it off for years and years because of that whole transition phase. So, this is a very, very serious thing for anybody developing a product to be aware of. Because you can have the greatest product in the world, but people will be hesitant to move over if it’s not easy and if there’s a huge pain of disconnect.
Andrew: All right. Stu, I’ve got so many other notes here. Usually I go, “Well, my job is to edit. I’m only going to take the good stuff.” But there’s one thing that I feel really bad that we didn’t include. And it’s the lessons learned from this. We always ask guests what they did. And they usually give us one idea. You gave us four great ones.
I don’t want to get into it here, because I don’t think we could. We’re already way over time, and I don’t think we could do it right. So let me just say this. If you guys are curious about what they are. We talked about the bus factor. There are three others that I think are even more powerful. Just ask for it and we’ll put it in the comments. I’m not looking to ask for it so that you guys can get charged for it. I just want to know, are you curious about it? Or do you think, well, I already got enough. I’m moving on. Ask for it and I’ll do it or Andrea or Ari or somebody here at Mixergy will do it.
For me, I’m really grateful that you did this interview finally. Finally. Years I’ve been wanting you to come on and do an interview. You said, “No, no.” Well, here we are. Thank you for doing it.
Stu: I appreciate you having us on, Andrew. And you know I’m a huge fan of Mixergy. I had been before we knew each other on a friend level. And I’m proud of the fact that Mixergy is powered by WishList Member You’ve got a great audience, and I’m one of them. I learn from your audience all the time as well. So we’re kind of all in this together, and I’m just honored to be a part of it and glad I could contribute in some way.
Andrew: I appreciate it. And if there’s someone in the audience right now who is saying, “I’m where Stu was. I’m not ready to talk about this yet,” we could talk privately. I never told Stu’s numbers. Mike Colella years ago showed me a screen cast at his computer and goes, “Here’s my revenue. Here’s what I’m doing.” Years he told me, and we knew it wasn’t the right time to do an interview. When it finally was, I had all of that background, and we were able to do a great interview. Now he and I are friends. He was over here for scotch recently to talk business. Several other people, Chris Luck on Skype, when I started charging, he goes, “Don’t freak out. let me show you where you ‘re going to go.” He showed me his register. At some point I hope I’ll have him on here.
I never reveal your numbers. Even Stu told ,e where he was. I never revealed it, but I do want you guys, when you’re ready, to come on to do this interview. Do what Stu did, teach about you experience. Stu, I’m so grateful to you for doing this interview. Congratulations on Rhino Support, and thank you all for being a part of it.
Stu: Thanks everyone.