Master Class:
How to launch (and price) your product

Taught by Ryan Delk of Gumroad

Master Class: Launch Your Product


Report Bugs

Master Class Toolbox

Course Cheat Sheet



Transcript

Andrew: This session is about how to launch and price your products. It’s led by Ryan Delk. He is the head of growth and business development at Gumroad. Gumroad, of course, let’s bring up their webpage, is the platform that helps creators make a living by enabling them to easily sell what they make to their audiences. You’ll see these guys have incredible, incredible users on their platform.My name is Andrew Warner. I’ll help facilitate this session. Ryan, thanks for being here.Ryan: Andrew, thanks so much for having me. I’m excited to be here.

Andrew: One of the many creators on your platform is a guy named Sasha. What did he create?

Ryan: Sasha is a designer based in Japan. A lot of things, a designer by trade. He’s worked with a lot of amazing companies. A couple years ago, he wrote a book called Step by Step UI Design. This book was on user interface design, aimed at tech companies. The book did well. He sold a bunch of copies of it. He made tens of thousands of dollars over the course of the book’s life, over the last three or four years. It was his first product that he sold, and he was writing it on the side while he was doing design consulting work.

He was happy with the results. He thought it was good. He saw this trend of what a lot of other people were doing with pricing and promotion. He decided to do his own version of that and keep things very simple. He sold the book for $5.99. He eventually added a couple different options and stuff, but kept things real simple. He made $20,000 or $30,000 over the course of the life of the book, which is great. That’s a great income from a side project. He was able to, over the course of the next couple years, learn a lot of things about product launches. A lot of things we’re going to talk about today that were able to help him make more than ten times as much on his next couple launches.

Andrew: Using the things the ideas that we’re going to talk about today, including one specific idea that we’ll discuss later on in the program, he was able to go to over $300,000 from $30,000.

Ryan: Exactly. Yeah.

Andrew: All right. That’s the power of what we’re talking about here today. Boy, you are the guy to do it. The reason we invited you on here is because I’m seeing more and more content creators use Gumroad. I figure as the person who’s introducing them to the platform, and the platform that helps them earn a living, you guys, and you specifically, know what it takes to do well. You’ve watched all these people grow.

Here’s the big board of ideas that we’re going to be talking about, all based on Ryan’s experience. The first one is basic, but it sets the foundation for everything else. You’re saying we should build an audience the smart way on our email list.

Ryan: Yeah, absolutely. When we first started with Gumroad, we had this idea of selling should be as easy as sharing. I think that’s still very, very true. That’s still something that’s a very close part of what we do and what we try to do. We learned very quickly that this idea of just sharing products on social media, for some people that works really well, particularly very large creators with massive audiences. That can work well, but for the majority of people, social doesn’t convert very well.

We learned very quickly through looking at data on campaigns and through data on where people were actually having conversions. People that would click through, view the product, and then end up purchasing. We started to see this amazing stuff where email would convert much, much better than social.

For every hundred viewers that came to a product on average, let’s say through Twitter and Facebook, a hundred users, maybe one would buy the product. Maybe two, for someone with a really, really engaged audience. Versus that same person sending it out to a hundred people via email, we would start seeing cases where eight or nine or 10 or even 12 people would buy the product when coming from an email list.

You’re talking about literally more than a 10x difference in conversion coming off of social versus email. We started to see this pop up with a lot of different people. A lot of different creators that were some of them learning it along with us, some of them we were able to share with them and say, “Hey, you should really invest super heavily in email.”

It’s hard because social is a very sexy and interesting thing. Everyone wants to build these big audiences on Twitter and Facebook, and there’s a lot of value there. It’s good for your brand. You can get a lot of engagement. Things can go viral. But when it comes to selling products, email is the way to go.

The person that I think does email probably better than anyone else I know is Brendan Dunn. He does a lot of things. He’s a former agency owner. He lives in Virginia. He has written several books, has a couple course products, has a master class, all targeted at freelancers. Almost any type of freelancer could apply his stuff, but a lot of consultants, people that are billing by the hour, teaching them how to get more leads, charging more for their rates. And then eventually build their consultancy or grow their own consultancy if that’s the why they have a lot of interest in.

Andrew: Let’s bring up his site it is, there it is.

Ryan: Yeah, and what you actually say there was and exit model, prompting you to go to his email list, which is one of the reasons why he does this well. So this is a great example were he actual set this up, this is new. And a lot of people don’t like these exit models and they think they’re a little bit obtrusive.

But what he did he actually only shows you this if you come into his site from Google. So if you Google something and his blog ranks highly for it and you have no context for him prior and you’re coming in, then he shows you this to try and get you on his email list.

But if you’re a regular blog subscriber you’ll never see this because he doesn’t want to give you that obtrusive experience. Which I think is just brilliant.

Andrew: You will see this if you go directly in there. And again he’s asking for an email there. Oh look his Mixergy interview is on his site.

Ryan: There you go.

Andrew: I see, I didn’t realize that he valued email so well. So what does he do with email beyond the [??] we just say?

Ryan: Yeah, so there’s a lot of things he does very well. The thing I think is really interesting is he launched this campaign, last year I think, where he basically started trying to convert his social following into email subscribers.

And value for him of an email subscriber is massive. He’s amazing at marketing, amazing at using a lot of techniques we’re going to talk about there. So he’s able to drive a lot of revenue for every email subscriber that he can get. Particularly if you look at it on like a lifetime value angle.

So in the double digit dollars easily. For every new email subscriber he can. And so he started retargeting people who came to his website and would then visit Facebook or LinkedIn or other social networks. Retargeting them with an optimum to get involved in one of his email courses.

So I think he tried a couple different courses, things on how to raise your rates, how to get more leads as a freelancer, how to build your own agency whatever it might be. And he had these incredible conversation rates because he has people … he was giving them something valuable, which we know assuming that a lot of us here about like email.

We use something, tease them with some, and give them something of value in exchange for getting on your email list. So it might be access to course, a book whatever it might be. And we’ll talk about that a little bit later.

Andrew: Let’s look at how he’s doing it, this is his page the moment … let me bring up my web browser again. This is how I bring up my web browser.

Let’s take a look this is Twitter account right now. And the very top thing that he has there because he pinned it and you can now pin Tweets to the top of timeline. It’s this learn how to price yourself right with my new nine day email course. That’s the link that he’s promoting.

If I click on that I see a request for an email address, right there. If want to take this free first lesson and then reason for why I should do it and again another email input box. And so this is what he’s doing to convert social viewers into email subscribers. And then from there as you said it’s much easier to sell.

Ryan: Exactly because once you have the email address you have a direct line to them versus relying on them logging into Twitter and you see it and logging into Facebook and it appearing on the top of their feed. And that’s a great example. Every person that hits his Twitter profile sees that direct URL which basically I call to action for them to subscribe to his list.

Andrew: It’s really important to hear that coming from you guys because I know that Ty Hill created Gumroad as a place where you can sell as easily as you Tweet.

Ryan: Totally.

Andrew: It was social centric at first, but obviously you’re finding that are other things that work even better.

Ryan: I mean I certainly see the value in social and definitely a huge fan of Twitter and Facebook. We just did a deal with Twitter while we’re working on helping them bring in stream commerce to Twitter.com. So definitely see a lot of value in social.

But I think for people a lot of people in our audience, a lot of people that we work with especially in the creators email just convert so much better than any social channel. And it’s a huge opportunity especially if you’re investing heavily. And so sure you want to convert these people and the email subscribers.

Andrew: All right on to the big board again, here’s the next big idea which is you want to prime your audience for your product and use drip marketing and there’s a company that you guys worked with Colt Ford.

Ryan: Yes.

Andrew: Excuse me actually its musician not a company. I’m so used to calling everyone companies.

Ryan: Yeah, so something that I think that’s interesting at Gumroad we work people don’t know that’s a lot of different types of creators. So we work with independent creators who don’t have an agent, don’t have a manager just write books or courses.

We work with well-known authors people like Chris Colbow, who Andrew and I were talking about earlier. And we work with really well-known musicians, filmmakers, people in the entertainment space as well. So we’re able to sort of gather data and look at what works across all these verticals. And the cool thing about everything we’re talking about today is that we’ve literally seen this work for every single type of creator and every single vertical. So this isn’t just something that works well if you’re an author.

It also works well if you’re a filmmaker, if you’re trying to sell software products, whatever it might be. This artist, Colt Ford, he’s a country artist. His label is Average Joes Entertainment, out of Nashville. They had an album coming out. He has a pretty decent very, very engaged following that loves all of his stuff. He’s sort of a hybrid hip hop country artist, which is sort of a weird, niche market that he just dominates.

We were talking with his label about doing this release through Gumroad, and they came to us and they said, “Hey, what could we do that would just really send us over the top? What are you guys seeing that works really, really well? What can we emulate?” Props to them. They were very open about trying new things, things they had never tried before and weren’t sure if we’re going to work.

I said, “Listen, there’s a lot of things that could work. I think what would really crush it is if you guys A) invested really heavily in getting everyone off of social onto your email list,” like we just talked about, “And then B) took that email list and started priming people to get excited about the album.”

Previously, what they had done is they would just email everyone the day the album was out and say, “Hey, go get it on iTunes. It’s here. Go.” That can work, but as something that Nathan Barry, who I think has also been on Mixergy, talks about often is that you should convince your audience to buy before they have the opportunity to buy. You want them already so excited about what you’re offering that they’ve already decided in their head, “I’m going to buy.”

We worked with them to craft these little nuggets that they would drip out. They would try to get everyone on their email list by saying, “Hey, if you join the email list, you’ll get to hear 30 seconds of the new single.” Or, “You’ll get a sneak peek of the new music video.” That would get people onto the email list. Once they were on the email list, they sent out this series of drip emails every single week. For people who don’t know drip emails, it’s just a fancy term for emailing people over time, leading up to a product launch.

They would send out little 15-second teasers of Colt doing something related to the album. They would send out interviews with him that were behind the scenes about the album. They would do all sorts of these little teaser things leading up to the album. They saw this work in a huge way. They were going to be excited if it was Top 50 in the category. He’s got a decent audience, but he’s not this international superstar.

We actually just recently got the results back from this campaign. We saw the sales, but we weren’t sure how it was going to stack up. The album was actually a massive hit. It actually went to number one in country. Obviously, he was very happy. The label was very happy. They attribute a lot of the success to this campaign. They just sent us this framed album plaque.

Andrew: Tilt it so the top is down and the bottom… Yeah, there you go.

Ryan: They sent us this framed album plaque of the album going number one, thanking us for our help and helping make that happen. That was cool. We actually literally got that yesterday.

Andrew: That’s so cool.

Ryan: A very timely example. It’s a good example. I think we hear a lot of tech people writing about these things, but these strategies work. They work across the board. They work for everyone.

Andrew: What are some of the things that we can think about dripping out? It’s hard to come up with stuff to write to tell people about a product that they can’t even buy yet.

Ryan: Are you asking… Sorry, you’re breaking up at the beginning.

Andrew: What are some of the things that we can drip out over time?

Ryan: I actually think that it works really well to give away some of the best content or best parts of the product that you’re trying to get them to buy before it’s actually available. If you’re selling a course, things like snippets of video interviews, or maybe even a full interview that’s a part of the course. Chapters of a book. An extended trailer of a film. The first single off an album. All these types of things work really well.

What I’ve heard from a lot of people is that they’re hesitant to give away anything too good. They’re afraid people won’t buy the product. I think in some cases that might be true, but in most cases if you give me something really cool, my instinct going to say, “OK. There must be a lot more cool stuff in this product. I’d better get it.” I think in general, giving away the coolest, most awesome stuff to the list, especially as a drip sequence, is the best way.

Andrew: Okay. That’s easy to come up with. If we have the actual product, then slicing off pieces of it and handing it out is so much easier than trying to come up with yet another piece of content, and another, and another, and another.

All right. Let’s go on to the next big idea, which is to have a three-tiered pricing plan. I think everyone knows it, but I think it’s still worth explaining what this is.

Ryan: Yeah. Tiered pricing is basically the idea of rather than launching a product at a single price point, rather than selling a book at $5, rather than selling a course for just $25, you should have multiple product tiers at different price points with different levels of value. You have the basic edition at one price point, a mid-tier edition at another, and then a deluxe, extreme edition up at the high end.

Andrew: We talked about how one of the people who’s especially good at is Chris Guillebeau, here is one of the way’s he does it. So there’s three different packages, he puts check box next to each one. Software programs are really good at this but content creators like me often do it. And this is what you’re talking about. So Nathan Barry is someone who’s done this really well.

Ryan: Yeah, so Nathan has done an amazing job at this. He actually did it on all his products. And I think it stemmed from a conversation he had actually with Chris. Just in passing that Chris mentioned, you know Tier Pricing’s has actually worked pretty well.

And so Nathan actually tried it for his first product, it actually worked really, really well. And there’s a couple reasons why I think Tier Pricing works well, and we’ll talk about that first then we can talk about the specifics of the actual price points.

But I think Tier Pricing works well because we all have people in our audience, regardless of the size of the audience, regardless of how long you’ve been creating content. You have people who are, you know they have an expectation of how engaged they are, how excited they are about products.

And if you only release a product that is single price point you’re really limiting yourself. And you’re limiting yourself in for a couple reasons. The most of important of which I think is because people who are really engaged and really excited, you don’t give them an opportunity to fulfill their desire to get the most insane amazing package they can possible get. Even if it cost $250.

So Nathan’s case you can look at his App Design Hymn book or the Web App Book whatever…

Andrew: Let’s go look at. There it is.

Ryan: He was several different pricing tiers, that basically…

Andrew: Here’s the package for $249, we scroll down we see the book and videos for $99 and we scroll down below we see just the book for $39.

Ryan: Exactly, and I think those pricing points sort of cover all the different people in our audience. So you could have people that are just to get on your list, just checking it out. And they’re not ready to spend $250, but they might spend $29 on getting access to a new product you came out.

Versus people who have been on your list for three years been getting a bunch of value from you, love everything that you do. And they say, you know what I want the expensive awesome thing, because I want all the video interview, I want all the extra bounce content I want everything.

And for those people you don’t want to push them into just a small price point, if you only still want price point. You want to give them the opportunity to grab that highest price package and fulfill the desire they have for that.

Andrew: So lets’ look at some of his results. Here is one of the screen shots, one of the images you sent me. Can you describe what we’re looking at?

Ryan: Yeah, so this is an image that we sort of came up with, or our design team came up with, during a case study. Where we basically looked at with Nathan, and obviously with his approval, with the percentage of sales, so this is like the actual number of transactions for each product verses the amount of revenue, the percentage of total revenue for each product.

So as you would image the book is the $29, $39 package, the book plus videos is the $100 package, the complete package is $250 package. So as you would image more people on like a quantity level purchase the book, then purchase the higher price packages.

But the interesting thing is you look at the revenue piece and you see that more than half of his revenue, I think during this case study was maybe 54-56% of the total revenue of the product release came from that top package.

And so even though more people on an actual numbers bases are buying the lower price product which is what you would expect. The higher price packages which often we think about as something that maybe a few people would buy or maybe only a few people would be interested in actually make up the majority of the revenue, in this case more than half of the revenue from the product launch.

We’re talking about 50, 60, 70 thousand dollar product launch to a large audience that makes up a large amount of money just by having that complete package.

Andrew: And this is how you’re suggesting that we think about it. Let me bring up one more in here. This is how we think about the tiers.

Ryan: Yeah, so this is a talk I gave I think at Micro Comp last year. And I was looking up sort of what are the ideal pricing tiers because that’s a question that I was getting a lot I was like I know I should use tier pricing but what should those tiers be. And its hard question because I think it’s pretty contextual based on your audience, based on the product.

But what we found to be the highest converting tiers was and these are in multiple so it works for whatever price point you want to set. But 1X, 2.5X, 5X so if you’re thinking about your bottom package being $20, you’re middle package might be somewhere between $50, $60 I mean your top tier package should be $100 or more.

And that will feel really aggressive at first especially if it’s your first product launch to think about that extreme of a tier. It’s much easier to do 9, 20, 30 or something. But that’s really, you need that big of a spread to really push people into the correct package for them. What most people find is that the middle package actually just ends up working like a price anchor. People then either say, “Okay, I’m either going to just get the small package, or if I’m interested in the middle package, I might as well pay more and get that top package.”

Andrew: I see. That makes sense. I can’t believe that it’s working that well for so many of your people.

Ryan: Yeah. It’s unbelievable how well it works, especially just looking at how much more revenue you get because of it.

Andrew: Well, actually, I was going to ask about whether musicians can do it, but I guess the answer’s about to come up. Here, let me bring up the next big point, which is you want to determine your highest converting price point per product. What do you mean by that?

Ryan: This is a really, really important thing that I think there’s starting to be more people talking about. Hopefully, we can contribute to that discussion. I think that for specific types of products, you have to be in specific price ranges in order to convert well. This won’t work for everyone, but I think in most cases you can basically classify your product into an impulse buy category. Something that people are going to stumble upon, read, check out, and then decide, “You know what? That’s for me. I want it. Let’s move forward.”

Or something that people are going to have to think about for longer. For most people, this is anything over maybe $25, maybe $30. That would include things like what Nathan’s selling all the way up to $1000 courses. A lot of things that remit safety sales. Things like that that are things you have to think about a lot longer and really make a commitment to.

I think that it’s easy just to look at what a friend’s doing and then price your products accordingly. I think you have to think about the goals for the product, and then price it accordingly, based on what you think will convert well. If your goal is to just drive exposure, get your message out, build your audience, build your email list, then maybe it makes sense to release a $2 e-book. That might make perfect sense. It’s an impulse buy. It’s quick for people to buy. It’s easy for them to share with their friends. That’s a very quick and easy thing.

If your goal is to create something for a lot of value, to drive a lot of revenue, to spend a lot of time on, then a $2 price point is probably not what you want to aim for. You want to do something that’s much more in the $30 or $40 or $50 or much higher range.

I think it’s important, because we as humans have been conditioned to make assumptions about the value of the product based on the price point. If you tell me a car is $80,000, I’m immediately making assumptions about the quality of the car. Even if I’ve never seen it, never heard of it, I’m immediately thinking, “Well, since it costs $70,000, it must be decent.” Versus if you tell me, “Hey, I found this sweet deal on a car. It’s $1500.” Likewise, I’m immediately making assumptions on the quality of that car.

I think that we do the same thing in a lot of other things in life, including products when we look at them. I think thinking about what the type of price point you want to offer, the way you want to condition your audience, is really important. Both of these can be successful. It’s not to say that you can’t sell products at a low price point, you should only sell high price products. I think it’s important to think about your goals when you’re pricing it, and then optimize accordingly.

Andrew: Let’s look at an example. Is Eminem a good example of this? Is this a good place to bring him up?

Ryan: Yes. Eminem. That would be perfect.

Andrew: I didn’t know, by the way, until I saw the notes for this session, that Eminem is on Gumroad.

Ryan: He is. He is one of the many Gumroad creators.

Andrew: All right. How is Eminem using this idea?

Ryan: Eminem is a hip hop artist. Most people are probably familiar with him. For most of his career, he did the standard music/merch artist release strategy, which was…

Andrew: Yeah, what is that?

Ryan: You release an album, $9. Maybe the deluxe addition is $16. You sell some merch, and that’s sort of the…

Andrew: Merch meaning like a T-shirt for $25 to people who would complain that they have to pay that much for a T-shirt.

Ryan: Exactly. You have a store on your site. That’s what his audience was conditioned to. About four, maybe three years ago, his team had this idea. They actually looked at what Michael Jordan was doing with his shoes, with Nike. Every single one of the drops is very exclusive. It’s fixed quantity. They’re expensive. Everyone knows Jordans are expensive. If you’re going to buy Jordans, they’re going to be expensive. You’ve got to act quickly to get them. Most people don’t complain about the price of Jordans. They’re just excited to get them.

They said, “Well, Eminem is very iconic. He has this massive fan base.” He actually has the third largest Facebook page, with a hundred million fans.

Andrew: I had no idea.

Ryan: They basically said, “Let’s do the same thing.” They spent three years essentially conditioning his audience and his fans to this new strategy. They no longer sold products for a $12 beanie and a $15 hoodie or T-shirt. Everything was exclusive, limited edition, limited quantities, never going to be made again. And so now if you check out his Facebook page on any given week. Almost every week they drop a new exclusive something, it’s a hoodie, it’s a pair of shoes, it’s a beanie, it’s a t-shirt.

And the price points are very high. You’re not buying a t-shirt for $20, the t-shirts going to cost $55 and the hoodies going to be a $130. But the audience knows there’s only going to be a thousand of these made, there’s only going to be 2500 of these made, once they’re gone they’re gone.

Maybe they’re going to be collectible there’s going to be a lot grad in terms of your friends are going to be jealous whatever. And it basically totally conditioned his audience to now understand that everything that Eminem puts out is a high quality, high price point product. Its limited edition and you better act quickly because it’s going to sell out in seconds or minutes in those cases.

Andrew: Let’s look at that on his Facebook page, see if I can bring it all up fast enough. This is his Facebook page, here is pre-order bundles now available including prints of the original written lyrics to Lose Yourself. If we click over and check out the next tab we can see there it is a thousand bucks for this print. Two disk CD and hand signed canvas print.

Ryan: Exactly and this thing is selling very, very well. And this is a great example of there’s very few artist that could put out a thousand dollar item of any type regardless of its signed or not. And not have a massive revolt on their hands or just not sell any.

But over the course of three year Eminem has completely commissioned his fans to know that he’s going to put out this type of exclusive awesome products, and the love it they eat it up. I think this is great example of the importance of sort of understanding that your audience is going to be conditioned to what you price your products at. And if you work hard and you sort of are very intention about it you can build sort of an exception around price that can be very locative in terms of driving a lot of revenue.

Andrew: By the way I thought that Gumroad was just for digit sales I didn’t realize you guys do stuff like this.

Ryan: Yeah, so we’re slowly expanding in the physical. It’s very complicated with fulfillment and all that.

Andrew: Who does the [??]?

Ryan: We just partner with a couple different filming companies. So not in house. Fulfillments not something you want to be involved in actually.

Andrew: No you don’t, it’s really tough.

Ryan: Yeah.

Andrew: All right but that’s good to know. All right and we’ll come back in the end and talk about how the first story that we started telling at the top of this interview with I guess it was … let me see what his name was…

Ryan: Sasha, right.

Andrew: Yeah, well talk about which one of these ideas Sasha used and how well it worked for him.

Ryan: Yeah, absolutely.

Andrew: The next one is to pick that tactics that work for your audience and there’s one person who I know has been doing especially well with you guys Kyle Webster. What does Kyle sell?

Ryan: Yeah, so Kyle. Kyles actually an incredibly talented artist, who does a lot of illustrations for the New Yorker and the New York Times, Time magazine. And his entire career has been doing basically contract freelance illustrations.

Andrew: Is this his work?

Ryan: Yeah, totally. And so he over the course of the last 25 years grew a little bit just unhappy with the current photoshop tool that were available. And so he actually started designing his own brushes. He would build his own photoshop brushes.

I’m not an illustrator but from what I understand like the brushed you use in photoshop are very important and it’s sort of like the type of pencil you use to draw, it’s a thing. And so he decided after maybe five or six years that maybe other people would want these bushes too.

And a year and half ago decided to just put a brush out, and see how it worked. He launched a brush, said hey this is $3 just put it on Twitter, put it on Tumbler and it blew up. He made I think almost a thousand dollars off that brush. By just releasing it and saying, hey all my illustrator friends you can have it.

So fast forward to today a year and a half later Kyle has crossed over $250,000 in total brush sales closing in on $300,000. And now makes more money selling photoshop brushes then he does from his other sort of contract work. Because he doesn’t need to do as much of that anymore. He just does it when he enjoys it.

And what I think is really interesting about Kyle is that there’s a lot of blogs, there’s a lot of articles about how you market product this is how you do it, this is what works. But I think there’s this element of like you have to know your audience, and you have to know what they’re going to want what they’re going to be excited about and what’s going to convert.

And so with Kyle he tried a few different things, he tried doing guest post, he tried building an email list. And does some stuff with email that works decently well. He tried a couple sort of leveraging his press contracts to get a few really, really big, you know, pieces and New York times people like that, and none of these thing really converted. But what he found was that most of his audience, and then most of the other illustrators, were very, very active on Tumblr. And so what he decided to do was just throughout the week he would post different things he was drawing on Tumblr and tons of people would reblog them, which is like the Tumblr equivalent of a retweet and share them and say this is amazing, this is amazing work, and then every Monday, he does what’s called mega-pack Monday, and so he basically gives away a mega pack of his brushes, which is all the brushes he has. He sells them for 30 or 40 bucks.

Andrew: Let’s look at that too. This is his Tumblr page, right?

Ryan: Yeah.

Andrew: And here is what a mega pack looks like, right? Kyle’s ultimate mega pack for Photoshop.

Ryan: Exactly.

Andrew: Let’s click on that. And that takes us over here.

Ryan: Yeah. So that’s his gum road profile. And so what he does, he says, this is mega pack Monday. Anyone who reblogs this on Tumblr will be, or retweets it on Twitter, will be entered to win a free mega pack. And what happens is, you know, if you look at some of these posts, they’ll have like 3000 reblogs of people that want to win. Their friends see it, they want to win. They just get incredible, incredible engagement because people want to win these free mega packs, but then in the posts is a link to his store, and so he’s able to generate a ton of traffic to his store from people that are basically entering to win this thing. It’s not something that I would think about as a main marketing channel for products; I don’t think much about Tumblr. I had no idea that this whole audience exists, but he’s basically built, not his entire business but a massive percentage of his business, on this Tumblr audience.

I think it’s a great example of learning where your audience is, learning how they engage with you, learning how they engage with other people, and then just playing your cards to that and not necessarily spending time on what everyone else thinks will work really well, or your sort of prescriptively says “hey, you should do this”. But just learning what works and then doubling down on that, and I think he’s a great example of how you can be incredibly, incredibly successful, you know, if you find something that works and double down on it, even if it’s not like a conventional marketing tactic.

Andrew: And know what, it’s so much easier than guest blogging on other sites.

Ryan: Exactly. Writing 30 guest blog posts.

Andrew: And hoping that they’ll work. Here, I think this is one of them. I was searching a moment ago, and you can see that people are starting to. There it is.

Ryan: Yeah. It’s just insane.

Andrew: Reblog, reblog, reblog, reblog. And this is the way that he’s promoting it today: “great new pencils for Photoshop designed by Kyle included in every single mega pack. 3PM Eastern, Kyle. Reblog and win. Reblog this post for a chance to win a mega pack of photoshop brushes, yes, the same brushes used by artists at Disney Dreamworks.” Well, great. He’s done incredible work. I mean, just looking at him in preparation for our conversation, I didn’t realize how many places his work was featured. Here’s one…

Ryan: Yeah. It’s amazing.

Andrew: that’s on the Washington Post, on the cover.

Ryan: Yeah. He’s incredibly, incredibly talented. And what’s cool about the story, he’s able to now just do what he loves, which is do illustrations, and he’s not now bound by making sure that he can make enough money from this illustration work. He just does it when he enjoys it, when he’s excited about it, takes projects that he’s excited about it and is able to have a very healthy income stream on the side through his brush sales.

Andrew: Okay. The next big idea is keep pushing to drive ongoing revenue, and I think now we’re going to talk again about Sasha, so why don’t we look at all the points up here. Which of these is the one that helped him get to 300,000 the most? Which of the ones that we’ve talked about so far before we get into keep pushing?

Ryan: Yeah. So the tiered pricing is definitely the one that was the game changer for him. And I can tell a little bit of the story around that, and then also, he did a great job of this last tactic, keep pushing to drive ongoing revenue. He was able to really leverage a lot of cool stuff to keep that revenue coming in after the product launch.

Andrew: So, for tiered pricing for him, he started out with 5.99 ebook.

Ryan: Yep.

Andrew: What did he do to add to that?

Ryan: Yeah. So, Sasha, Sasha’s awesome because he actually was very staunch on how he thought that tiered pricing was not a good idea and very public about it.

So him…

Andrew: Oh, really.

Ryan: …and a few other people sort of had a little, it was like a little thing, sort of in jest but there were some sort of notes of seriousness, and he was sort of very against this idea, and what was awesome is he sort of saw it working. He was working on this new project called Discover Meteor, which is a book on Meteor JS, and he was able to sort of see what was working with this tiered pricing stuff. I was actually jamming with him on twitter in preparation for this to get some data points, and the Discover Meteor book that he launched with tiered pricing has actually done about 10X, more than 10X actually now in total revenue than the step by step UI design book.

What he noted to me, which I thought was very fair, was that it’s sort of like comparing apples to oranges. They’re different books with different audiences. What he did, which I thought was perfect, is he went in and backed out how much revenue he would have made with the exact same number of sales if he only launched Discover Meteor at the lowest price point.

We did the math together, and basically found out that by having tiered pricing for Discover Meteor, he was able to drive 52% more total revenue over the course of a year and a half. Just by having tiered pricing. For those of you that know Sasha and how well he does this, those are no small numbers.

He’s an incredible marketer and understands these things really well. He gave me permission to share his numbers. It’s over $100,000 in revenue from this product that is directly attributable to tiered pricing that he was able to earn as a function of using tiered pricing versus just a complete, flat, one-stop pricing model.

Andrew: Let’s look at what we were just talking about. This is the book?

Ryan: Yeah.

Andrew: If I click on “Get the Book” I can either pick the $29 option, or I can see the $89 option, or the premium option for $179. He’s definitely using that. The next point is you’re saying we should keep pushing to drive ongoing revenue. What did he do after that?

Ryan: I don’t know if you have it. I included a sales graph of him. We did a case study with him, so he gave us permission to prove this. This was done about a year ago. This is his sales graph over the course of a year. May 7, 2013 to May 7, 2014. Just about six months ago. At this point, he had done $240,000 in product revenue.

For most people, what happens after you launch a product is you launch a product, you spend a ton of energy around launch. You do guest blog posts, you do a bunch of marketing, you do ads, whatever. Basically, all of your revenue comes in the next two weeks, three weeks, four weeks. After you’ve hit two or three months after the product launch, for most people, they’re making almost no revenue off their product. They’re already thinking about the next product.

What Sasha did was he very much viewed this book and this product as something that was going to function more like a subscription software platform than a book. He wasn’t interested in just launching this, making as much money as he could, and then moving on to the next product. He wanted to really invest and spend time on this. He spent a lot of time creating it and spent time promoting it and trying to build something amazing.

What you’ll notice is he has the big spike on launch day, which everyone has. That’s what everyone generates. Then you’ll notice that he’s been able to generate consistent sales of several thousand dollars a day. There’s actually a slight upward trend towards the end of the graph where he’s learning what works well, what marketing things are converting, what can we keep doing. He’s been able to drive between $5000 and $10,000 a week in sales, continuously, of this product.

There’s a few things that I think worked really, really well for him. The first being that he is just in general an incredibly hard worker. He spends a lot of time on this, has learned what works really well. He basically was able to leverage the things that were happening in the Meteor community. Meteor is a JavaScript framework, for those of you who aren’t familiar. JavaScript framework, it’s being updated constantly. There’s new things happening, news coming out.

What he did was he leveraged all these things that he could add as updates to the packages. A new version comes out, he’s able to record a new interview, whatever it might be. He adds these to the packages, and then he leverages those as marketing opportunities. He’s continuously working to add more things to the packages, to add more value.

He’s able to blast out to his list and say, “Hey, just added these four things. It doesn’t look like you’ve bought it yet. We’d love to have you pick it up today. It’s much more valuable than it was a week ago, and we’ll keep adding cool things.”

The interesting approach that I think he took to the email piece of it is a lot of us, if you launch a product, you immediately think, “Okay. I have this big list that I built up with opt-in forms, getting people primed for the product. I used drip marketing and I launched the product. I emailed everyone a couple times, but the launch is over now. Let’s just merge those two MailChimp lists. Those people will just be on my regular newsletter now, and we’ll go from there.”

Sasha didn’t view it that way. Sasha viewed everyone who was on that pre-launch list as an opportunity to make a sale and a sale he needed to earn. Anyone who makes a purchase is removed from that pre-launch list, but everyone else on the pre-launch list is still, to this date, getting emails that he’s writing, that he’s sending and saying, “Hey, here’s things we’ve added. Here’s some cool news in the Meteor community. Here’s a few snippets of the book. Here’s some new content you can check out. We’d really love to have you make the purchase, buy it”, whatever, basically still getting marketing emails, and he would use the outcome as complete binary.

So either these people are going to buy the product, or they are going to unsubscribe, and there is no in between. So he is able to drive all of this ongoing revenue because he is still using drip marketing a year and a half after launch, which is unbelievable to me, and it is awesome, and it makes so much sense. But I think it is easy to just, it is not necessarily laziness, but you just think, “Okay, the launch is over, there is no need to keep doing this.” But I think what you see is, you know, literally, he has been able to earn, you know, hundreds of thousands of dollars now, as a function of still keeping the pedal on the gas, and still, you know, being able to drive a lot of these sales through things like drip marketing, updating the product, all that kind of stuff.

Andrew: That approach really appeals to me, because I interview authors all the time who write a book, and once they are done promoting it, they are onto the next thing, and it is like they forgot about those old ideas.

Ryan: Oh, totally.

Andrew: They are gone.

Ryan: Yep.

Andrew: Well, this makes so much sense, and like you said, you learn more about how to promote, you learn more about how to sell it, you learn more about what to say to people, how to make it useful. That makes a lot of sense to me, and I am glad that he is doing well. Can I say the revenue number that he has for what he is doing per day now?

Ryan: Yeah, totally.

Andrew: Okay, I have it in my notes here, he is at about a thousand bucks a day right now.

Ryan: Yeah, he is doing amazing.

Andrew: That is fantastic. Alright, onto the big board for the final point, which is to use concentric circles of people hearing about your launch.

Ryan: Yeah, so this one, I think we talked about briefly. You know, there is not a ton to say on this. I think the main point here, I think, is to think about, you know, everyone has their core audience, which are people on their email list, people that are, you know, following them on Twitter, and really engaged there, people that read their blog on RSS. And then we have sort of a larger circle which are people that maybe occasionally read the blog, occasionally, you know, check out Twitter or Facebook, and then there is sort of a larger circle which is the people that are sort of generally interested in the things that I am writing about.

Maybe they follow other bloggers that are interested in what I am writing about, maybe there is some overlap there. But there is sort of these circles of engagement, and I think when you are thinking about a product launch, or you are thinking about even just building an audience, thinking about how you are targeting each of those circles is really, really important. And I think, you know, one of the reasons advertising works so well, even for huge, expensive products like cars, you know, wedding rings, things like this, no one is expecting, like Toyota is not expecting me to go out and buy a Corolla because I saw one television ad, and I am immediately thinking, “Okay, well, I will go spend, you know, $25,000 on a Corolla.”

They are thinking that I am going to see a television ad, I am going to see another one in two weeks, I am going to see ten more over the course of the next six months, two of my friends might get a Corolla, I might test drive it with them, I might like it, and then my car breaks down, and I need to go buy one, and I am thinking, “Oh, the Corolla is cool.” So the whole point of advertising and marketing even is getting people to have multiple touch points with your product, multiple experiences with it, and I think often with product launches, it is easy to think, well, I am just going to blast my email list, tweet a couple times, and then you know, I will be good, and the people who will to buy it will buy it.

But you know, especially for people who are not in that core concentric circle, for people that are outside that in your sort of larger audience or people that are just fringely involved in your audience, it is going to take multiple touch points, multiple times of them being exposed to the product for them to actually make the purchase. And so, when you are thinking about, you know, whether it is guest posts, whether it is getting people to tweet and Facebook about it, whether it is getting people to do, like if you are doing a joint venture deal, and having someone email their list, thinking about those circles, thinking about where people are targeted on those circles, and having different approaches for each of those, I think is really important, and understanding the idea that people need to get hit multiple times with it.

And you know, the chance of you tweeting about something and saying, “hey, you know, this is the guy I interviewed on Mixergy, he just came out with a book; it is really cool.” I might check it out, maybe I will buy it. But if you tweet about it, and then I get an email from a friend saying, “hey, this book is really good.” And then I see another tweet about it, I am much likely to then make the purchase.

Andrew: That makes sense. This has been fantastic because it is all usable, it is all practical, we do not have to do every single item on the big board that we talked about today. We can pick one or two of them, and apply those, and then go back and get more.

Ryan: Totally.

Andrew: I especially like to hear about how Sasha was against one of these ideas, ended up using it, and today he is open about how effectively it worked for him.

Ryan: Yeah, totally.

Andrew: So the company, of course, is Gumroad. Is the best place to follow you, is it your Twitter account?

Ryan: Yeah, Twitter, or my personal email is just the letter “R” at Gumroad dot com.

Andrew: R@GumRoad.com What is a good…

Ryan: Yeah.

Andrew: What is a good contact for you?

Ryan: For email?

Andrew: Yeah, I mean, what kind of email do you want? I do not just want to ask people to hit you with email and flood your inbox.

Ryan: Anything I can do to help. Seriously, I give out my email publicly, it is in my Twitter bio, whatever, if you have questions…

Andrew: I have got it right here.

Ryan: … About any of this stuff, anything we can do to help, definitely feel free to hit me up. And then we also have a resource center where we share a lot of these types of, you know, key studies.

Andrew: Where is it at?

Ryan: If you go to, let me get the URL for you. It is GumRoad.com/resource-center

Andrew: Alright, let’s see, resource dash center, and I see my typo there, I will fix it right now, real time. There it is.

Ryan: So, interview with Chris Guillebeau, a bunch of case studies. There is a case study on Sasha, a case study on Kyle Webster, who we mentioned…

Andrew: Mm-hmm.

Ryan: … A bunch of sort of guides on how to build an audience, marketing strategies, all that kind of stuff, so a lot of things that we talked about are highlighted here. Hopefully, you know, super valuable information.

Andrew: Yeah. This is really well done. One of the things I always admired about you guys at Gumroad is your design. It is just so…

Ryan: Yeah.

Andrew: It is so beautiful, easy to read, and incredibly helpful. Thank you so much for doing this.

Ryan: Absolutely, thanks for having me, Andrew.

Andrew: You bet. Thank you all for being a part of it. Bye everyone!

DOWNLOAD TRANSCRIPT

Master Class:
How to write better ads
(So you get more clicks)
Taught by Perry Marshall of 80/20 Sales and Marketing

Master Class: Ad Copywriting


Report Bugs

Master Class Toolbox

Course Cheat Sheet



Transcript

Andrew: This session is about how to write better ads. It is led by the great Perry Marshall, founder of Perry S. Marshall and Associates, which consults both online and brick and mortar companies on generating sales leads, web traffic, and maximizing advertising results. He, of course, is the author of this great book that I hope many of you have read. If you haven’t, go grab it — “80/20 Sales and Marketing: The Definitive Guide to Working Less and Making More.” Perry, welcome back. It’s good to have you here.Perry: It’s good to be here. When I was on before, I got such a great response. You have a very passionate audience which I love. There are some hosts of shows where their audience isn’t very passionate. I like it this way!Andrew: I want the fiery people! And I keep encouraging them to let guests know if something worked, helped, or touched them. So let’s give them something really good today.To help the audience understand what they can do with today’s topic, let’s start with these stats that came from a gentleman named Ben Garelick [SP], who was in one of your hot seats. What’s a hot seat and where was Ben when you started talking to him?

Perry: I do this thing called a four-man intensive. It’s two days, four people in a room, and everybody gets a half-day hot seat. That means it’s all about you, it’s all about your business, everybody in the room is focused on you. They’re all from completely different industries which helps the cross-pollination of ideas and it’s all about making your business better. In fact, we did this session a couple of different times and one of them is in our AdWords copywriting express product.

Andrew: So these stat examples are before you got started, right? He was basically doing 5% click rates.

Perry: Right. If you read the ads…Rock Climbing Courses, Develop Climbing Skills Rapidly, Schools in Europe, Spain, they’re pretty typical ads. Then look at what we came up with using our particular methodology. We got the 5% up to 10-12%. These new ads are burning with personality — Mountaineering School: Born-College-Job-Marry Spouse-Kids-Retire-Die. Want More?

This came from really digging into who comes to their mountain training school. When do they come? Why do they come? I found out these are typically guys that graduated from college. They’ve been working under buzzing fluorescent lights for the last three years and it’s killing them. They realize that if they don’t do something interesting, they’re going to be like their Dads. They’re going to be overweight, die of a heart attack, or die of boredom.

A whole story started to emerge and I came to understand there is this whole culture around mountaineering and this was really what Ben was selling. We dug out that message and had a clever way to just rotate through the combinations. There are enough boring companies, boring ads, boring people in the world, so let’s jack it up with some excitement. That’s what we did. In Google AdWords, if your average, it isn’t no fun. In Google, 2% of the advertisers get 50% of the traffic, that’s fact. What are you going to do to be in that top 2%? You’re not going to get there with a ho-hum message. AdWords is very competitive.

Andrew: That’s what we’re going to get into here. How to avoid that ho-hum, add emotion, and bring in people beyond the person you’re hoping to click and use them to help get more clicks.

I just want to read one more before we move on to the big board of ideas which we’ll be covering. I thought these were so creative and well written. Here’s the one that’s right smack in the middle. It says: Mountaineering School — that weak, sniveling voice in your head begs you to quit. Climb on. Here’s another, masochist spa is the headline, I don’t think I need to read anymore and let me see. Works sucks? I unzip my tent. What’s your commute?

So, really, full of emotion, full of heart, full of passion and that’s what we’re going for here. Let’s take a look at the big board and see how we’re going to get our audience here today there. The first big point that we’ll talk about is to use the little comma that could to boost click-through rates instantly and I think I’ve got an example of it here. Is this it?

Perry: Yes. It is. It is.

Andrew: What is the little comma?

Perry: All right so these six ads, if you could look inside of the google account, what you would see is that even though all these ads are pretty similar to each other, the worst one is about 1.3% and the best one is 4.3 and the second best is like 4.2 or something like that.

Andrew: OK.

Perry: And it’s, so the best ads here are actually the upper left and the upper right. Actually no, it’s the upper left and then the second one down from the left.

Andrew: Ah, okay. Mm-hmm. Sorry, I’ll let you explain it.

Perry: Those were the best ones in the pack but the one on top, the only difference between these two ads, is that one comma in the first line. How to write a book fast versus how to write a book, fast. Now that one comma actually made an 8% difference in the performance of the ad, as far as how many clicks it got you, how much it cost to run the ad, is 8% better and I call it the little comma that could. Okay? And, what is that about? That is about the fact that human beings are extremely sensitive to copy.

Andrew: Mm-hmm.

Perry: They are extremely sensitive to language and you only really fully realize this when you go out there and you start testing stuff and we did this and in this particular account, that comma is probably worth 500 bucks a year. On a not terribly, you know, high-traffic set of keywords. And so, like, yeah, one comma could be worth 500 bucks a year and so it pays to invest in your copyrighting education, right?

Andrew: Mm-hmm.

Perry: You know, why is that? I think it’s because of rhythm. You know, the ad has a little more pizazz.

Andrew: What should we be taking away from that? Is it that add a comma at the end of all of our, before the last word of every one of our copy or is it something else?

Perry: Well, actually, there’s two points. One is, it’s not about the commas per se, but it’s the fine touches. The little things really do make a difference.

Andrew: I see.

Perry: Okay. And we know it’s true when we listen to our favorite music. You know, you just love them, the exact way that guy did that little flourish on the guitar before, you know, they went to the second verse or whatever. These little things matter a lot but there’s actually a bigger point, which was that people actually get mired in the little stuff and they become unable to look at big stuff, which is the real point of the conversation I want to have with you today. Okay.

Andrew: Mm-hmm.

Perry: It’s not very hard to come up with a list of little things you could, well do we say tomato or do we do tomato. Do we spell the word nine or do I use the number nine and you know you can like do all these kinds of things but there’s a much larger point and here’s what it is. So…

Andrew: Mm-hmm.

Perry: You know, I taught hundreds of thousands of people how to write Google ads and you know you could buy our Google Ad Words book on Amazon and all of that but what I learned was that people almost always, they get an in ad-writing rut and what happens is they try some things and they find something that seems to work like “Write A Book Fast, 14 Days From Start To Finish.” Boy, people seem to click on that. Then they start optimizing it and they get it down to commas and then when they’re done with that everything else they try bombs out and they get stuck and they’re like boy I think there must be some way I could write a better ad than this, but I can’t come up with it and every time I try stuff it hurts my overall performance.

I’m scared of Google because of the mighty G, and then they just peak up. I had to find a way to get around this. So that’s why we came up with the Swiss army knife concept. We’re going to talk about that. Because you need a way to break out of a creative rut and come up with something completely new. Not only that, to be able to rotate through a whole range of completely new things that are all valid.

Andrew: I see. So what you’re saying is, those little flourishes will help you, but we want to go beyond that and have a Swiss army knife like tool that will allow us to make big dramatic changes with just a small tool. Those are some of the things that we’re going to be talking about today. The Swiss army knife is your way of expressing I think it’s 17 different approaches to change in copy. If someone is in a rut they can just go through that Swiss army knife and say, “All right. Let me try number one, number two or a collection of them.” We’ll talk about some of them here today.

Perry: Right.

Andrew: All right. Let’s move on to the next view point which is to write about people related to your customer. Here is the typical ad for a topic that’s kind of painful. There it is. This is what people will see when they search for divorce, or separation, or phrases like that here. I’m just going to slide it down so we can see the sponsored links. This is what we see on the right side of Google search results. This is not what you want us to do. Why not?

Perry: Well this is very typical. I typed bad marriage into Google and this is exactly what I got. This is very typical of any industry. We could have been looking for plumbers, we could have been looking for IT professionals. What we would usually get, we would get boring ads, they’re just the Internet version of been in business since 1993, family owned, commercial and residential, just really boring. I got inspired because I was writing ads, and I was typing in these key words and that one afternoon this friend came over and she was right in the middle of a divorce. My wife and I were like her shoulder to cry on. She’s a brand new single mom and you know the story.

So what does the single mom talk to you about? Oh, and he did this and he did that and guess why you’re sad. I’m like these ads are not speaking to the real stuff here. How do we get like. . . come on let’s call out the elephant in the room. We decided we needed a set of relationships in the customer’s life that would apply to any customer in any situation buying any product. We can up with Boyd One of the Swiss army knife.

Andrew: That related here. I think I’ve got a screen shot of it. This is available on your site.

Perry: Yeah. So this is the simplified version. We got the customer.

Andrew: And what they did in the ads we showed before was talk about the customer directly.

Perry: Right. They would talk about the customer or they would talk about the advertiser like, Rhonda Callaway, LCSW. The ad was usually about the advertiser. Well that’s the most boring thing that the advertiser can talk about because that doesn’t involve all the dramas in their life and so this is the simplified one. So a thing that your customer loves. Come up with a list. A person with a bad marriage. What do they love? Well maybe he would really love a weekend in a spa and a Jacuzzi, and spend some time together and make love and everything except they’re fighting too much so they can’t do that. You put a thing your customer hates while I hate going on a weekend trip and fighting with my spouse all weekend, your customer’s worst enemy.

Well, how about the other woman? I heard a bunch of stories about that when my friend was going through a divorce, you know. Who’s her best friend? Maybe it’s her kids, right? Maybe on some days the customer’s best friend is her husband. Maybe on other days, he’s her worst enemy, and we start writing these things down. And so the whole idea of the Swiss army knife is that we’re going to connect things together, almost like at random, and we’re going to write an ad about it.

Andrew: Let’s take a look, here’s what it looks like when we do that.

Perry: Bad marriage is constant fights. That was one of the things they put on the hate list. Don’t go to bed angry. Fourteen minute video will calm your mind. Or the best friend was your husband and the enemy was his lover. Who is your husband with? Is he sleeping with her right now? Get revenge and a smile on your face. Right? Well, now did we not call out the elephant in the room?

Andrew: Yeah.

Perry: Are we not truth telling? Now I want to be careful. I’m not guaranteeing you that if you write these in-your-face ads, which are really fun to write and really funny to read, I’m not guaranteeing you that this is the exact right approach. You may need to take that 10 and dial it down to a three or a four. You may need to use innuendo instead of being so direct. You can shade it all kinds of different ways, but the point is we’re getting the issues all out on the table so that we can then very easily write a whole bunch of completely different ads. They’re all guaranteed to punch the emotional button that is making them search in the first place. Because why are they searching?

What time is it? It’s 11:21 or it’s 1:00 o’clock in the morning or whatever, and they’re in pain. Why are they in pain? Do they want to hear about someone’s LCSW? Oh, you’re a licensed clinical social worker. Well!

Andrew: Now when you bring that up, I’m taking a look at this, and yeah it does look ridiculous! No one cares about Rhonda Calloway at that point.

Perry: And God bless her!

Andrew: Yeah, nothing wrong with Rhonda, but you’re right, that’s not what someone is thinking about. Here is what they are thinking about. Look here are two more examples. Nasty fight, the other woman sick of being compared to her, change the game free report. Or here’s another one. The other woman: stepmom. How will you feel when your children call her “mommy?” These are examples that are really 10. They’re really hitting you in the face. You may have to dial it down, but the point is still absolutely relevant which is to say, think about the other people in the person’s life, and you gave us this chart as a way of thinking about and prodding us.

And this is just a screenshot from your site. Most people will think about – here let me do this, use my handy teletrainer. Most people will do, yes themselves, or their customer. You are giving us so many others to think about that are more interesting. And I think I should put away the teletrainer. Oh, one more! Here we go.

Perry: And then all we have to do is draw a line from one of those circles to another one, and pick two things and write an ad, right? Now this is just the crude first step, but that’s all we got to do. And it’s like, well, alright, so I wrote an ad about that, so now move the line and pick another circle and then combine those two things and write an ad and all the sudden, now, you’re on your way of never running out of things to test. And you know, we’re not testing commas anymore. We’re testing entire dramas that have gone on in the person’s life and which one really resonates. And that’s what we did with Ben. With his mount training school.

Andrew: Yeah, let’s look at that with fresh eyes.

Perry: Tell me about your customer. What do they love? What do they hate? Now if you look at these ads and you go, “Well, you know they probably love their spouse and maybe they hate their job and maybe their commute. “Well Ben, when people get out on the mountain with you, what do they complain about there?” “Oh, you know, hanging on the edge of a cliff. They complain about that. Sleeping in a tent for six weeks. Living on a glacier. And it’s also like the most exhilarating thing they’ve ever done in their life and they come back a changed person.” He tells me they usually come face to face with their manhood, their womanhood, their mortality, they’re probably sobbing on the edge of a mountain somewhere for a little while and they hold themselves together, you know and he’s telling me all this.

I’m like dude. He’s not making this up, all right. He is totally sincere. In fact the problem is his ads did not reflect his real passion. I mean, if you meet this guy, oh my goodness, you know. Andrew, I’m warning you. If you go meet Ben, he might talk you into quitting Mixergy and like being in Patagonia for six months.

Andrew: Living in mud and actually or snow in Patagonia out of a tent. That’s not such a bad idea actually. I love Patagonia.

Perry: So yes, it’s like what’s the real story? There’s always a story. It’s always more interesting than the boring ad that some assistant came up with.

Andrew: All right. On to the next big point which touches on something you mentioned a moment ago. The next one is to write emotionally and you said earlier that this friend of yours was going through a divorce didn’t just talk about it in logical bullet point ways but she talked about it in emotional ways. She talked about it from a very personal point of view and you’re saying we should match it. What is the mistake most people make when they go over or below and how should we match?

Perry: Well, long ago a guy named Robert Collier said enter the conversation that is going on inside your customer’s head, okay and you actually want to match it in content and in tone, okay. So what is she thinking about? If she is thinking about her children’s new step mom and hey got more toys for Christmas than they got from me. Okay, if that’s what she is thinking about you need to talk to her about that and you need to talk to her about that the way that she talks to herself or the way that she talks to her friends about that and so that means you do need to match the intensity. Andrew Goodman, he’s one of the other great ad words guys, he said it’s the Goldilocks principle. Not too hot, not too cold. Just right is what you actually want. Totally right about that and so you can dial that down.

You can go, well okay. Let’s talk not as blatantly about this but let’s still get the message across and also about emotion. So by training I’m an engineer and honestly, maybe this is a confessional. When I write ads, I tend to … when I write in general, I tend to start with logic and I tend to lay out a logical structure but what I personally have to do is, I have to flip it around so I’ll write something and I’ll go . . . well, he did this and she did that and I kind of sound like a newspaper reporter and then she burst into tears. And I’ll eventually get to the emotion and what I have to do is when I’m done I have to turn it upside down and I have to go … so she burst into tears, right?

Andrew: I see. Yes. And then she . . .

Perry: And then I tell why she burst into tears and eventually we find out the whole story but I’m going to start with the vase shattering and the flowers smearing all over the couch and the water dripping onto the floor and she’s screaming at him and he is defending himself and he’s checking his cell phone, right. And then we’re going to find out why and again, as an engineer, I just have to do that backwards. Some people naturally, they’ll start with the emotion first but it just depends. But I can tell you this. People buy based on emotion and they back it up with logic later and frankly it’s true when people buy a Starbucks in the morning and it’s also true when a venture capitalist gives you three million dollars. I mean, I’m telling you, this is how human beings are. Sometimes the logic is a bigger part of it and sometimes it really is spreadsheets and stuff but not usually.

Andrew: Yes.

Perry: Not usually.

Andrew: I like that upside down approach. I’m trying to think of it for my own audience too. That what did they do and what happens next? What happens after that and where does that smash in the wall happen that I need to bring up and that’s where I should be starting. You gave Jeremy in the pre-interview a list of these emotions. How do we use these?

Perry: Okay. So there’s an amateur way to use them and there’s a pro way to use them.

Andrew: Okay.

Perry: The amateur way is anger, joy, disgust, blah blah, anticipation and then they would just put those words in the ad. Are you angry about . . . okay that would be the amateur way and it could work but the real professional way . . . tell me a story or give me a snip of dialogue that expresses anger so like one of the best copyrighting books ever is ‘On Writing’ by Stephen King. Okay. Should be a surprise; not exactly a copyrighting book but a great book about writing and he explains that when you write fiction almost everything, almost all the action of the whole entire book is in the dialogue.

What does the clown that eats children for dinner say to Billy when he meets him in the Stephen King book, right? It’s the words that come out of his mouth so if you’re real pro, give me even half a sentence that the angry woman says to her husband, right, and if you don’t know, call up one of your divorced friends and ask and be prepared for a 45 minute conversation in which you will get years of material.

Andrew: So I’m thinking about someone in the audience who might have an app that allows designers to create better proposals. He is there to solve a problem of a designer just wants to design and not create proposals. What he should be thinking of is the pain of a customer who doesn’t send a proposal and then maybe the internal dialogue I could image of why didn’t I send it out and I allowed that guy who is the worst designer to take my job and start with that and include that phrase instead of you’ll be angry if you don’t send out proposals right. Use the statement of someone who is that angry. Show them. Don’t tell them.

Perry: That’s right. Start with the agony and work backwards. Start with the ecstasy and work backwards. Whichever way it is that’s what you want to do.

Andrew: All right. Let’s go on to the next big point here that we wanted to bring up which is to use proof to write high click through rate advertising. I’m looking here in my notes. Everyone you say has some kind of proof and you have the story from a Belgium chocolate company. Belgium chocolate story.

Perry: Okay. So I had this guy at one of my intensives and he had this website. It was “We’ve got the best Belgium chocolate” and I’m like, well that doesn’t really demonstrate anything. So here’s what I am looking for. I want you to tell me how you took your entire vacation and you drove all over Belgium until you found this one guy and he goes oh, oh, oh, that’s what happened and I’m like, okay, so what happened? He goes, well I did take my whole vacation, or holiday, because he was from Great Britain actually and I took my whole holiday and I drove all over Belgium and I found this one town and I walked into this chocolate shop and I bought some chocolates. I ate the chocolates.

And oh my goodness it was oh man these were so good and by the way they were because he brought some samples and he shared them with us and my whole family devoured them in about a day and a half. He goes I asked the owner and the owner comes and I go these are great chocolates. What do you do for marketing and that guy goes marketing? I don’t do marketing. I am an artist and I make the chocolates and I put them in the window and some people come in and buy them and some people don’t and I don’t care. Get out. Don’t talk to me about marketing. The guy literally kicked him out. He keeps coming back like the next day and the next day, he keeps coming back. Finally, okay. I will let you buy these and we can ship them to England.

Well, that story, all by itself, is a form of proof that all of the adjectives in the world can’t replace because don’t tell me, show me. You can still show through a story.

Now, maybe another kind of proof might be I remember when I was a kid, I had a Tonka truck. I got this little Tonka truck brochure and it had a picture of a car parked on the top of the Tonka dump truck. It’s like, this holds the weight of a Gran Torino. I still remember that, even though I probably was five years old when I saw that. That’s proof.

So many times, people, they don’t have any. The usually have some, but they don’t use it. I think as much as possible you should start with it. Why not right a Belgian chocolate ad that says I spent my entire six week holiday scouring Belgium, and this is the oddball character I met. Now, that’s an ad. Really, tell me about that.

Andrew: I tend to think of proof as statistics as data. You’re saying a story is proof too.

Perry: Well, yeah. I absolutely believe in statistics, and data, and case studies. Our Swiss Army knife product has a whole list. But you got to demonstrate. However you can, you need to demonstrate to me the truth of what you’re saying.

Andrew: You know what? That’s the way we start these programs. I specifically asked you for the story of the guy who sold training on mountain climbing. That’s how we started because I do think the audience says, “Who is this guy? I know Perry Marshall, but I don’t know that he really has the stuff.” By showing an example, by telling a story of how you fix someone’s business or someone’s ads, we get to convince the audience that they should trust and pay attention.

Perry: Right. Isn’t that more interesting and more persuasive than saying I wrote the number one Google AdWords book?

Andrew: Yes. Strangely, writing the number one Google AdWords book is much more meaningful, but people don’t pay as much attention to it, and they don’t remember it, and they don’t go back later on, thinking about the specific ads.

Perry: Right, because in the Swiss Army knife blade one, that story’s about me. They want a story that’s either about them or somebody just like them. Well, I don’t run a mountain training school, but I do run a hypnosis thing. My ads are boring and I’m not sure how to write exciting ones. Well, okay. Let’s go down the rabbit hole and we’ll teach you how.

Andrew: What if someone’s new and just getting started, and they don’t have that kind of proof? They don’t have that story yet.

Perry: If your product is worth selling, there must be some way that you know that it’s worth selling. 90% of the time, there is a story. If you go, well, all right. I don’t have these case studies, and I don’t have this poof, and we just developed this product, and it’s brand new and I haven’t even sold it to one person yet, there’s still a story of why did you spend the last nine months of your life pursuing this? What convinced you? Why did you spend three days walking the trade show in Hong Kong until you found this one crazy little widget that does this super special thing? Why did you eat bad dim sum and whatever else, and then fly 13 hours to get there?

At some point, it’s going to tumble out. Any good copywriter knows this, that there is this point at which the real story starts to come out. It’s like you’re an excavator. It’s like you’re an archaeologist. You’re digging. Oh, no. There, see? There’s the tile floor in the temple from 2,700 years ago.

Andrew: We do that all the time with guests who we interview about how they built their businesses. It’s amazing how they forget the reason why they did it and the importance of it, and that’s a big reason why someone is going to even pay attention to the interview.

I just did an interview with this woman who built a $2+ million a year business selling capes for children and, you know, all the related things that go along with it. But apparently this is a big business because kids love capes and they love tutus and so on. And her origin story was she made these capes at home for her son’s birthday party so that her son’s friends can play with the capes and then take them home and remember they had this great thing.

And other parents saw it and said we would like it too. And then she started literally sewing at home and so on. How do you not pay attention to a housewife who comes up with this idea that way and builds up her business all the way to the top? I get it. So that’s exactly what more of us need to think about when we’re marketing and frankly I would even say as entrepreneurs and business people we’re not doing enough of it. And great point.

Perry: Right. How did you prove yourself? There’s another thing about that story you just told. That is the way that the best products organically come into existence is somebody just needed a way. So, wow, let’s give the capes for the birthday party, and then they accidentally find out, “You know Billy has been like, you know, jumping around in the backyard with that cape for the last two months? It’s like his favorite toy.” She’s like, “Well, I’ll be darn. It’s great” as opposed to, you know, some of us get all cerebral and like, you know what? I have this invention. I think . . .

Andrew: Yeah.

Perry: You know, right? And in those deals, there isn’t a story, like it doesn’t exist and like probably you should run the other way.

Andrew: [laughs] Even in those situations then, what I would think of now that I’ve learned this approach from you, I would think, “Do they have a customer who had this kind of issue, a customer whose family was just expecting another boring party and they bought 10 capes for the 10 friends who were coming over. They gave them out, and the next day everyone who came to the party was flying around with the cape around the school. That’s the kind of thing you’re talking about.

Perry: Yeah. Right.

Andrew: All right. Let’s go on to the big board here. And the next one is to use direct marketing offers and . . . I think it’s been a while since we put this together. I’m actually reading the notes myself here. One of the things here is we do a lot of prep beforehand, and we have this big outline that we’re going through. And I read it before we start, but now let me read it right here because I forgot this one.

I change the offer on the landing page that increased the click rate. It was my control ad for selling my Google ad course. We changed it to an ad cheat sheet on the landing page, and the click rate went up 33% overnight. What’s the page exactly?

Perry: So this is a little old, but it’s still completely relevant to anybody. So this was our “Five Days to Success” Google AdWords free email course. And for a long time we were just saying, you know, “Sign up for this email course and every day for five days we’ll give you a really great tip for AdWords. And so, you know, we did what I was describing earlier. You know, we come up with all of these different wordings and everything. We finally come up with an ad. We just can’t improve it to save our life. It’s really good, but surely we could have made this better.

And then finally, you know what? Let’s change what they get. And so we added a cheat sheet. We added this one page cheat sheet on the landing page, and then we said we just changed the ads to promise they get a cheat sheet. And like instantly everything went up 33%. The cost of customer acquisition went down like what, by a quarter or something like that.

All of a sudden it’s basically we’re at 125% or 130% of where we were, and here’s the point, okay? This is not about cheat sheets or like any one particular thins, okay? Here’s what I’m really trained to drive at. What I’m trying to drive at is that whatever the person gets from you for engaging with taking the next little baby step after they click on the ad.

So I don’t care if it’s a quotation or a free consultation or a free sample or a video or a software tool or some way of grading yourself or whatever. I don’t care what it is. But can you up the ante on whatever that is because, you know, what people will, people demand more in exchange for their email address this year than…

Andrew: Mm.

Perry: …they did last year. Okay? And you’re, if what you’re giving away is good and appealing, you should be able to describe it in a Google ad in such a way that it makes a person salivate and so that’s what I mean direct-marketing offers like, you know, there’s a lot of classic things that people do…

Andrew: It gives a list of them. Here are some of uh, here they are. All right, guarantee free sample, no obligation, given them software, add a deadline, OK, disqualification, percentage discount. I’m just reading some of them, percent to charity, given them membership, reports, white papers, audio/video and accompanying offer. That’s the kind of stuff that you want us to think about. Think of it as a menu that we can go to and pick something to add to our audience, to give to our customers.

Perry: …yep. Sweeten the deal and then that automatically makes, I mean, when you have a really sweet deal, it’s easier to write an ad.

Andrew: Mm-hmm.

Perry: And if you’re having a hard time writing an ad if you’re like staring at Microsoft Word blank screen trying to write an ad, it probably means that your offer is really milk toast.

Andrew: Mm.

Perry: I learned this a long time ago. I was trying to write an ad for this laundry detergent and like there wasn’t anything to say about it. It was like, and this mentor of mine, he’s like nobody’s lying awake at night thinking about this. Like go find something to sell that people are worried about.

Andrew: Mm.

Perry: Like, oh. You know and there’s a lot of boring things out there. Don’t sell boring things. Like the world doesn’t need another boring thing.

Andrew: That makes sense. The world does not need another boring thing. Um, on to the next one. And you know what, though, I think about that from a distance and say our world doesn’t need another boring thing, but when it’s time for me to actually act, too many times I think, let’s play it safe or I don’t say let’s play it safe, I say you know what? I like Perry Marshall. I want him to like me. I want us to do, I want this to do well. Let’s just be really nice about and it and instead I should not be especially nice. I shouldn’t let go like before we started, I said I like my audience I don’t want them to think that I’m peeing on camera. So I’m going to pour my water [??] camera like this. I should have just done that on camera. I should have told them, hey guys I’m not going to the bathroom right now. I’m actually just pouring water and take that dangerous road.

Perry: Yeah.

Andrew: It’s been that dangerous. [??] On to the next big point. Squeeze multiple ad elements into an ad. Yes, you give us the Swiss Army knife full of different ideas but you’re also saying pack them in together. You can talk about both relationships and create a disqualification or talk about relationships and have a deadline.

Perry: Mm-hmm. Yeah. The best copywriting, the best writing, I mean I don’t care if we’re talking about Stephen King or John Carlton or, you know, whoever the famous copywriter is. The very best writers pack a lot of emotion and a lot of content into few words.

Andrew: Yeah.

Perry: Okay? And so the thing about Swiss Army knife is like well, you know, you’re looking at all these little elements and ingredients and I’ve got this ad and it’s alright. Its, you know 120 characters long. Without adding any more characters, can I pack some more emotional punch into this? Can I pack some more elements into this? And you almost always can because, you know, that density of communication, I mean, that’s what’s going to get people’s attention. It’s what makes ads leap off the page. It gives them that slight edge. You know, you’re looking for that slight edge against everybody else.

Andrew: I’m trying to think of, has there ever been a business where you just couldn’t make it interesting? Where you just, and then, I’m trying to think of like a tough example that you still found a way to pull through. I guess divorce is, for some reason divorce now seems really easy. Oh yeah, of course, that’s got a ton of emotion but that would’ve scared me away.

Perry: Okay, let me take that one since we’re on that subject. I was actually at, I was speaking at one of Sandi Krakowski’s conferences and she had this woman who does marriage counseling. Like that’s her business and we were having this whole conversation about okay, how do you charge more? How do you raise your fees? How, you know, and I’m actually making the woman a little uncomfortable. It was like well she really does want to make more money,” but whenever it’s like, “Well, I’m going to charge YOU, for advice.” Like if a marriage counselor is comfortable at $65 an hour, then raising it to $120, will make them squirm.

Andrew: Mm-hmm.

Perry: Right? And I said, “So, so try this on for size.” I go, “All your other therapist friends, they all just charge by the hour, right? Right?” And I said, “Isn’t it true most of- they’re all afraid they’re going to offend the client, so they just sit there and play patty cake and they kind of, they pussyfoot around the issues and it takes three weeks to like, get into anything serious. Right?” And she goes, “Yes.”

Andrew: Really?

Perry: Yeah! She said yeah, that’s normal. You know, like, it’s like their letting the clutch out, right? [??] Well, I said try this on for size: you sit down with a couple and you have an initial consultation, and you say, I don’t work the same way everybody else does.

Here’s what I do: I take on your complete marriage for- I said pick a time period- for six months, for a year, and I say we’re going to work together for the next 12 months and it’s going to cost you guys $5,000. And we’re actually going to put half the money in escrow. And if you do all the homework assignments that I give you then, you know, Mrs. Jones, if he isn’t treating you like a lady, you know, if this isn’t happening, that isn’t happening, then you know, I’ll return half that money to you. Mr. Jones, you know, if you guys aren’t making love, and if she’s not- you know, if this hasn’t happened, you know. But I’m going to expect you to do your part and that’s how I work.

And I’m not going to sit here and just do this hourly thing and, you know. Like, you already know if you like me or not so you can decide, but I’m not going to just, like, have you come in four times and then disappear and me never have any idea where you went. We get together, we get results. Now, I just applied that to marriage counseling. You realize how many, how many service companies, how many products, they don’t actually guarantee any kind of actual end result, they don’t have any skin in the game. Do you realize that if you change the deal that way, you might be able to charge three times more money than everybody else? Why? Because you deliver certainty and all they do is play patty cake with you for one hour at a time.

Andrew: I see. And that’s just one tip from earlier that we talked about. Which model- that was in the used direct marketing offers.

Perry: Yeah.

Andrew: So bring in that guarantee to a place where other people aren’t offering guarantee and you can increase your prices dramatically, but also be that much more valuable to people.

Perry: That’s right. And I almost always find guarantees end up needing to be 2-way streets. The customer almost always has to do something in order to be sure, you know…

Andrew: I was going to say because if not for that, then the clients will come in every week and just wait to get their money back, and not- and feel almost like they’re going to be rewarded if they don’t do anything, rewarded if they don’t get back together, because if they don’t, they get back $2500.

Perry: Right, right.

Andrew: So you’re saying, it has to be both ways. Both people have to have skin in the game.

Perry: Yeah, and it’s like, Mr. Jones, Mrs. Jones, you BOTH have to want this. Okay, I’m not going to counsel if one of you wants a good marriage and the other one wants your $2500 back.

Andrew: Yeah.

Perry: It’s like, you’ve got to sign in blood. No, I do not actually want my $2500 back. I want a good relationship. I don’t know how to get there. I need your help. Right? And so that means you’re putting pressure on the customer to perform. You know, if you sell software how many software companies, like- well, their IT department’s a bunch of clowns, like no wonder they can’t get our stuff to work. Right?

Andrew: I see. Use our software to enter your customers in every day and just keep contacting the way that our software tells you to. If you don’t make more money, we’ll give you back your money, or we’ll give you back half of what you paid. Frankly, give you back all your money if you don’t- if you use it and you don’t get the results.

Perry: Right.

Andrew: Those are great tips, great advice. If somebody wants to follow up with you, I know there are two places: one is, we’re going to talk about 80/20 book, the other is: where can they go if they want to see all of the ideas in the Swiss army knife?

Perry: [laughs] Yeah, if you can type a search box in my website, PerryMarshall.com, and…

Andrew: Let’s go to the site right now.

Perry: Yeah, you can go to PerryMarshall.com and type in ‘Swiss army knife’ and we have a product, and we guarantee- yeah that’s it. We guarantee that if you do this process, you’ll be able to beat your best [??]. I don’t care who wrote it, okay? I don’t care if you hired the most expensive copywriter you could find, you’ll always be able to do better. And so yeah, you know, go take a look at that and…

Andrew: I also say, about the book, “80/20 Sales and Marketing”, here it is up on everyone’s screen. Perry, thank you so much for doing this.

Perry: Hey, thank you! It’s really great to be on Mixergy. I think you have a very cool show, a very cool format. You ask great questions and it’s fun. So, thanks for having…

Andrew: I can tell you, entrepreneurs, if someone did a sight search on Mixergy and typed in your name, Perry Marshall, that you will come up with multiple entrepreneurs who have said, “and then I got Perry Marshall’s tips book, or signed up for something, and as a result I figured out how to do ad sales, as a result, we increased.” And it’s impressive what you’ve helped other people do. Thank you so much for being here. Thank you all for- and hang on for a second, I want to talk to you offline for a moment [laughs].

Perry: Okay.

Andrew: And thank you all for being a part of it. Again if you’ve got anything of value, don’t forget to let them know.

DOWNLOAD TRANSCRIPT

Master Class:
How to use Lean Analytics
(To build a better start-up faster)
Taught by Ben Yoskovitz of Lean Analytics

Master Class: Lean Analytics


Report Bugs

Master Class Toolbox

Course Cheat Sheet



Transcript

Andrew: This session is about lean analytics. It’s hosted with me and today’s guest, Benjamin Yoskovitz. He is a longtime entrepreneur in the tech space and an angel investor, and the author of this book, “Lean Analytics: Use Data to Build a Better Start-up Faster.” My name is Andrew Warner. I’m going to help facilitate. Ben, good to have you on here.Ben: Thank you very much for having me.Andrew: The problem we’re trying to help people who are listening to us avoid is something that you experienced a few years ago. You spent a lot of time building a product called Stand Out Jobs and when you launched, what happened?Ben: Sure. So this is a very common problem for entrepreneurs. As you said, we invested a lot of time, a considerable amount of money. We thought we knew all the answers, a little bit of ego I would say involved in that and to some degree there has to be when you’re starting a company, but we launched it and unfortunately didn’t get the sort of traction we were expecting from it. And so the assumptions we had maybe made in our own minds about why this thing would be valuable to people weren’t panning out. And it wasn’t quite silenced from our Beta users, but it was clear that what we thought was a solution to a problem that we were attacking was not resonating with the people we were going after.Andrew: Here is a screenshot of the site. What could you have done differently? Where was the mistake there?

Ben: Well, there were a few mistakes, but the number one mistake, I think, when we go back right to the beginning of this company was not building a smaller version of the product and testing it more frequently with users. And so in lean start-up vernacular we call that a minimum viable product and I’m sure you’ve heard that before, and folks listening have heard that before, but we didn’t really build an MVP. We built something, I would say, considerably larger than that.

Andrew: So Ben, what’s the problem with that? So you spent a lot of time. Yeah, you didn’t build an MVP. Yes, people didn’t like what you put together, but can’t you at that point say, “All right, we’ll just redo the whole thing and start over.” Can’t you do that or what’s the problem with that?

Ben: Well, you can try, of course, right? And companies do, in fact, do that, but the cycle time from going from, okay, idea to building something to figuring out if this is working. It’s very long, unfortunately.

Andrew: I see.

Ben: And so you’ve mentally and psychologically, and financially committed to something. And so you’ve put yourself in a position where it’s very hard to go and do something else and change it completely. Frankly you’re not even going to know what to change to begin with. You’re not even going to say, “Okay, this is not quite working, but what have I learned from this experience?”

Andrew: I see and because there is such a big product you can’t tell which aspect of it isn’t hitting, which aspect you need to emphasize. I see.

Ben: Yeah, absolutely.

Andrew: Before I get to an example of how when someone who is listening to us applies all the ideas that we’re going to be talking about today, what can happen to them, I got to ask you a personal question.

Ben: Sure.

Andrew: If this business didn’t work out, where did you get the money that you’re using to invest in all these start-ups?

Ben: Oh! So I’ve been through a number of businesses. The last company I was at, not my current company, it was a company I joined very early on. I wasn’t a co-founder. The company was called Go Instant. And Go Instant was acquired by SalesForce in 2012. And so that was a financial success for myself, for the founders, for some of the early employees. And so that was one of my significant successes if you will, but that was the one that allowed me to get a little bit more into angel investing.

Andrew: I see. This is go Instant from October 2011 and within about a year they were sold of your [??].

Ben: Yeah, I joined the company in October 2011. About a year after that the company was sold. I worked for about two years inside of SalesForce, inside of Go Instant, essentially integrating Go Instant into SalesForce. I’ve since moved on to another start-up again, not the founder of it, but in fact, the start-up I’m currently working for, I was, in fact, the first angel investor in that startup.

Andrew: I see, Codified.

Ben: Codified, exactly. And the founder I had known for many, many years and he said, “Ben, I need you to come run product”, and the lure of chasing the dream, if you will, was very strong. And so I joined Codified.

Andrew: I get it. All right, so then if what we just showed is an example of what not to do, here is an example that will help us understand why analytics are important. What’s your connection to this company?

Ben: Sure. So I’ll give you the premise of HighScore House very quickly. They were looking at game-ifying chores for children and their parents. Not just chores, it could be activities, things you wanted to encourage your children to do, but the idea was to have children on a daily basis do tasks that parents agreed with the children to do. They would get points. They would then redeem those points for rewards. It might be toys, it might be a $10 gift card, whatever the case may be.

They went through the process of validating this idea with parents, they built their minimum viable product, and then they launched that to their beta users. So this is where it gets interesting from a lean startup and from an analytical perspective. Before they would say, “Is this MVP successful?” That’s the ultimate question we’re asking here. Is this product resonating with users? Is it creating enough value to justify going to the next stage of this and investing more money in it to scale it?

Andrew: And you’re going to advise us in a moment that we should have a metric that the whole company is gearing towards. Did they have that?

Ben: They did. So we were looking at active users. We said, “What’s a proxy here for value,” because they weren’t charging money, and money is the best proxy for value. If people are paying you, that’s, of course, great determination of whether you’re creating value or not, but in this case it was usage, are people using the product? So we encouraged them to set a very high bar. What’s a high bar that tells you that people are really, really using this product? So they said, “Based on some of our assumptions, based on our understanding of parents and children behavior, we think families should use the product four times per week.”

Andrew: Okay.

Ben: That was kind of their benchmark. You can, of course, measure that. How many times are people logging in? How many times are people using the product? So we said great. If I remember correctly, we were sort of looking at, say, if about 10% to 20% or your users are what you deem to be active, that’s great. That’s a good percentage, and we think that that justifies continuing with this business.

Andrew: So what happened when they actually looked at their real metrics?

Ben: They had a low percentage of people using it that frequently.

Andrew: Okay.

Ben: So they tried a whole bunch of different things. They tried tweaking the product, changing the product, changing the value prop, acquiring different users. All the kinds of things like let’s just go out and do more stuff to try to get this metric to where we think it needs to be. And then the founder of the company said nothing was working.

Andrew: Nothing is getting them to have 10% of their users log in four times a week and show that they really like the product.

Ben: Exactly.

Andrew: So what did the founder do?

Ben: The founder said, “I’m going to pick up the phone and I’m going to start calling moms.” Mostly moms, right. So he picks up the phone and he starts calling people who aren’t at the threshold, but are below that threshold. He would call parents who were using it once or twice a week, and the feedback was overwhelmingly positive. People were saying, “We love it. Our kids are doing what we want them to do. The kids are engaged in the product.” So the obvious next question is, “Well, why aren’t you using it more often?”

So what he learned was a lot of parents like to control the amount of time their children are on the children or on an iPad or on a mobile device, whatever it may be. So parent’s would say, “Well, on Sunday night, we sit down with our kid, and we go through the tasks that they’re going to do, we put them in HighScore House, then the kids do the tasks all week. We ask the kids to not use the computers during the week, and on Saturday or Sunday, they come back in, they cross off everything, and they’re happy, and we do it again.”

So what he learned from that was something about his users behavior, that is wasn’t a fault of HighScore House that people weren’t using it. That was a faulty assumption. He learned that parents were very happy using it only once or maybe twice per week because of a family dynamic, because they don’t want their kids on the computer.

Andrew: I see. So they had to change the analytics that they were using, they had to change the way that they were thinking about what makes their product a success or not. I assumed since this is a successful example of somebody using Lean Analytics that the company would be thriving. I went to their site, and they’re down.

Ben: Yeah, they’re down. So here’s the thing about any tactic anybody can ever teach you about anything pretty much is that there’s absolutely no silver bullet.

Andrew: Is there an example of a win, of somebody who has actually gone through all this, and because they mastered Lean Analytics or maybe not mastered it, but did it well that they built a thriving company or a company that’s still around?

Ben: Yeah, I think there’s a number of examples of those companies.

Andrew: Give me one.

Ben: The example I would use, they’re no longer around because they were acquired, but it was a company called Localmind.

Andrew: Okay.

Ben: Localmind was also one of our investments in Year One Labs. So what they did that I think was interesting was, they didn’t build a product to start testing assumptions, instead of building a product, so local mind to take a step back, was a location based q and a service on a mobile device right, so if you had a question about a particular place, the lineup at a place, the, you know, the daily specials.

Andrew: You want to find somebody who’s right there and ask them a question.

Ben: Exactly, and it was anonymous right, so you’re asking an anonymous real time question. And so, we all thought, “Oh, this, this is a great idea.” This service doesn’t exist, but before building an IOS application, which is a challenge, we said, what can we do to try to vet, you know, prove or disprove some of the assumptions and so the founders of Local Mind, they thought the number one problem for their business would be that people wouldn’t answer questions. That people, you know, you would send a question anonymously, some person would get it and be like, I don’t know who this person is, I’m not answering this question so I said, how can we test this assumption or this risk before we start building product.

Andrew: Okay.

Ben: And so what they did was, they used geo tag tweets, so people who were tweeting from Times Square, geo tag tweet, so you would know they’re at Times Square, they’re tweeting about whatever it is.

Andrew: Because Twitter automatically, for many users, will put in their location within the tweet, so they were able to search and find someone who was in Times Square and say, let’s ask this random stranger a question, and when they asked the random stranger a question, what happened?

Ben: People answered the questions.

Andrew: Gotcha, and that’s how they were able to prove that their idea worked and it was, it was worth working on and. .

Ben: Well, they proved that one, one risk, they de-risked one element of the business.

Andrew: Gotcha.

Ben: Right, not the whole business, but they de-risked one element. But that approach to things of, let’s test something, let’s not invest heavily in engineering and design and building a product if we can test something and de-risk it first, let’s de-risk it, and then move to the next challenge, the next problem, the next risk. And so, they were able to do that quite successfully, they were ultimately acquired by Air BnB, I can’t remember what year that was, well, 2010 probably.

Andrew: This was an investment of yours?

Ben: It was, yes.

Andrew: It was. So you did well from that one?

Ben: Yes, so that was successful, and I mean, they, those guys have gone on to do great things and thrive at Air BnB, which is, of course, an amaze, I mean, is a huge and amazing company.

Andrew: All right. Alright, so now I get a sense of the possibilities here. We can reduce risk before we even build software and we can understand, by doing that, what software we should be building and what companies we should build for people and if we do it right, we might have the kind of exit that the company that you’re talking about had with Air BnB. I’m going to move on to the big board here so we can get to the audience and see how they can take advantage of these ideas and use them in their own business. The first thing that you say is focus on the one metric that matters, the one metric that matters and if you give the example of this company. Who are these guys, and how did they do that?

Ben: Sure, so, the one metric that matters is a sort of this core idea of the book which says that any given point in time with your business, there’s one metric that you should really be focused on and it’s the metric that you would align the whole company on, it’s the metric that everybody is trying to improve and is thinking about. Obviously, it’s not the only thing that you track with your business but it’s there to create focus for the company around, what are my number one problems and what’s the metric that’s going to help me understand if I’m doing things in the right direction. So, that picture is of a good friend of mine, his name is Randy Smerick, and he is a serial entrepreneur, he has a whole bunch of businesses, funnily enough in the text base, but this is a restaurant, Solare Restaurante in San Diego.

Andrew: I see, and that’s him in the center there.

Ben: That’s him in the center, exactly. A Mexican restaurant, doing extremely well in San Diego and the one metric that matters for them, or we’ll say like, one of the key metrics that they look at is this ratio of staffing costs to gross revenues and what they’ve found is that when staffing costs exceed 30%, so they look at a ratio of about 30% of staffing cost to gross revenues, if they can, on a daily basis, have staffing cost to gross revenues be above 30%, they know they’re, the business is doing well and it’s healthy, at that given moment in time. And so, if that number is too high, so staffing costs are, you know, 40, 50, 60 % of gross revenues, it probably means what they’re doing is they’re got too many staff for the revenue that they’re generating, if it’s too low, let’s say it’s 20% or 10% ratio, it probably means that, you know, business is doing well but they’re understaffed.

So, it’s a, think of the one metric that matters, like, a health indicator for your business. It doesn’t give you all the answers. I think of it, like, it gives you permission to ask questions. So, imagine in this particular case, on a weekly basis or a daily basis, that number is 50%, you know, there’s too much, you know, the staffing costs are way high compared to gross revenues. Why is that happening?

Andrew: Right.

Ben: Is it revenues are too low? Are staffing costs too high? It gives you the ability to go in and dig into the problem, and then try to solve it.

Andrew: Let me take a look at a typical business that has prospects, leads, and customers. For example, mine. People come to the sight, we have hits. We can measure that. People end up giving us their email address, those are called leads. And then we have customers, when they buy.

Ben: Right.

Andrew: I could get drowned in data because it’s not just how many hits I have, but: Did this conversation get more hits than the other conversation? Do conversations with younger entrepreneurs get more than older entrepreneurs? How did we do last week versus this week? Where do we get the most email addresses? Where do we get the most customers? All of this data is relevant. How do I pick the one that is the most relevant?

Ben: We look at two things; there’s two things that we focus on. The first one is the stage of your business. When we look at the book we define five stages that every startup will go through. It starts with empathy. It goes to stickiness. It goes to virality, revenue, and scale. This is a fundamental tenet of lean analytics, that companies go through these five stages. Then you have to look at your business model, and you have to understand genuinely what is your business model.

In some cases that may be about Revenue, which is obvious; SaaS revenue, subscription revenue, an app purchase revenue, whatever it is. If it’s not a revenue-generating business, maybe it’s a consumer application, then your business model is more around engagement and usage. You have to understand the stage that you’re at, and you have to understand your business model.

If you understand those two things, and you’re honest with yourself about those, that really helps you narrow down what the one metric that matters is for your company. For Mixergy, as an example, and obviously I don’t know, right. I don’t know any of the numbers.

Andrew: We’re just using it as an example.

Ben: Just as an example.

Andrew: It’s okay that you don’t get it perfectly right, but I want to understand the bigger concept because of it. Let’s put it up.

Ben: Sure. The concept has been around for a while.

Andrew: Yep.

Ben: The company is successful. The company has grown. These are all things I know to be reasonably true.

Andrew: Okay.

Ben: We know you’re past empathy. Empathy is does anybody even care?

Andrew: I see. When we’re just starting out, that metric around empathy is what’s important to us.

Ben: Exactly. 100 percent.

Andrew: Does anyone care that this thing exists?

Ben: Right. At that stage, often times, it’s qualitative feedback. There might not even be a product; it might just be qualitative feedback from talking to users. That’s very much a lean start-up principle of “getting out of the building,” if you will, and talking to customers.

Andrew: Early stage, are we getting any people who say, “Yeah, we like this.” How many of those people are we getting, but we don’ have to go more than that.

Ben: That’s right.

Andrew: All right. Let’s go on, then, to later on.

Ben: Stickiness is when you’re building that minimum viable product. You build the first version of this product, now you’re putting it into the hands of those early adopters, and now you’re starting to measure things. You’re starting to measure engagement, and usage. That’s typically what you’re looking at, some form of engagement. This is the “high-score house” thing: are they using it frequently enough as a proxy for our creating value. The problem we were trying to solve with this product, are we solving it with this early beta version or this MVP version of our product.

Andrew: Okay.

Ben: That’s stickiness. If we use Mixergy as an example, we’re past the stickiness phase.

Andrew: If we were at the stickiness stage, it might be, “How far into an interview are people watching?” How many notes are they making on an interview? How many comments are they adding? How often are they coming back?

Ben: Those are all useful metrics in terms of engagement. I would guess it’s more along the lines of how frequently do they come back. Every time we publish a new interview, do people come back and consume the interview? Let’s not worry if they consume the whole thing, yet. Let’s not worry if they engage. Let’s just worry if they’re some definition of active.

Andrew: I see. As an entrepreneur, and if there’s a small team at this stage, what you’re focused on is, Are people coming back? Is this product sticky?

Ben: Sticky. Exactly.

Andrew: All right. Let’s go on, later stage.

Ben: Once you get past sticky, you’ve proven that a small group of people are using this product, are happy with this product; that you’re solving a problem. Now you need to get into virality. Virality means a lot of different things. In a consumer application it, literally, means how many people does each individual person invite. We’re talking here about customer acquisition. Can you go beyond those early adopters, to a broader audience? You’re now starting to test customer acquisition channels. You’re now testing real virality insight. Is your product viral?

Andrew: Are people sharing the product with their friends?

Ben: Exactly.

Andrew: Or, How many of them are sharing it? How many friends are they sharing it with? That’s the kind of number you’re looking for . . .

Ben: Exactly.

Andrew: . . . or for buying ads what

is our conversion rate? How many customers are we getting, or users are we getting in every month?

Ben: So now, that funnel you just sort of described a minute or so ago that you were describing about Mixergy. Now I care a little bit more about that funnel, right. Now you might worry more about the top of the funnel in terms of can I acquire anybody, you know a hundred people love this thing but now I need to get to a thousand, and then I need to get five thousand.

Andrew: Now I care about hits, or what we call prospects. All right, on to the next section here, wait before we get to the big board, the revenue.

Ben: Revenue, sure.

Andrew: Later on in the business is, is there enough revenue?

Ben: Exactly, so you may be charging from day one, right of course. It depends entirely on your business, right whether you’re … and maybe even at this point you’re not charging based on the type of business you’re running.

But now you have to look at … so now what you’ve done is you know people care, you know people use the product, and you know how to acquire users slash customers. Now you have to figure out if the economics makes sense.

You know, now you’re looking at the life time value of you customer verses the acquisition cost, now you’re looking at does the economic engine of this business work. And so that if I was thinking about

Mixergy I would guess that you are somewhere between virality and revenue. If I just had to guess that’s sort of like we can acquire users, are they good users, are the sticky do they convert into paying users.

How much am I paying to acquire them verses how much are they worth to me long term. That revenue is really when you’re focused on is the business economically sound, were as up to this point you know you may be getting a little of revenue into the business but you haven’t really focused on that because yon don’t have enough usage.

Andrew: Okay, and then finally as the company gets bigger we’re looking for metric, a single metric to focus on around scale. What’s an example of that?

Ben: So for scale again, scale can mean so many different things, because the other part of this of course is what is your business model, right. So scale may mean we just, you know, grow our acquisition because we know the funnel works. It might mean, you know if I’m thinking about a tech product it might mean we develop an API and we become a platform. And we acquire users and partners that way.

In a more traditional B2B business we’re now at the point where we’re hiring sales people because we have a formula. We know you know how many leads a sales person can generate we know what the sales cycle is. And now we’re really looking at just closing deals. And so in a B2B kind of software sort of traditional B2B software business, the one metric that matters is going to be close deals, as an example. Could be closed deals, right.

Andrew: So what you’re saying is, of course, lots of metrics matter but if you’re going to put one up on a big LCD screen for the company or one in the corner of your screen. If you’re individual entrepreneur you need one metric that makes sense and you need not a big table with tons of data but one that you’re going to focus on, one that you’re going to…

Ben: Here’s what I would suggest is that you, it’s so easy to track things now. We’re so lucky now that there’s so many tools we can use to track our analytics. I surge recommend track everything, right because you never know when something will be valuable.

The more data you collect the ability you have to ask questions of that data, right. You realize there’s a problem in your business somewhere you can now go look at the data to try to find an answer. But if you’re focused on to many things it’s very difficult to succeed.

Andrew: Track as much as possible, focus on one metric, all right. Let’s go back to the big board now we understand why we want to focus on the metric and we understand how to find that one metric based on were our company is.

The next big thing that you tell us, is want to focus on a metric that aligns with our business goals. And you give an example of this company, let’s zoom in this is…

Ben: Wine Express.

Andrew: Wine Express they created an AB test to test one of their web pages. And what could they have done, what’s the mistake that other companies would have made?

Ben: So I think what was interesting. So we dug a lot into Ecommerce Company so you know Wine Express is an Ecommerce Company the sell wine online. And so they have this page the wine of the day page and it was already quite successful for them. But they thought, you know what I think we can make this page more successful, I think we’re not sort of leveraging the full advantages we can out of this page.

And so they hired a company to do an AB test, and I think I’m sure you know your audience is familiar with sort of we change a few things on the page, we can see sort of the changes on the screen. And let’s measure which page is better. But the real question is well what the definition of better. And a lot of company’s would assume well conversation of course is better, right.

Which page converts more people? But one express said, well conversion you know is a good proxy for or possible a good proxy for success but really revenue per customer is actually what matters. Right? Because if one of these pages, if I optimize for conversion, but everybody comes to the wine of the day page, but they only spend, you know, $5.00, that might be worse than a page that converts less effectively but everybody spends $20.00. And so, that to me was fascinating because my instinct would have immediately been, “which page converts better”? That’s an easy question.

But in fact, revenue per customer is what really matters here because they found that one of these pages happened to convert better, but it’s really people would go in, they’d buy the wine of the day and then they would buy more. And they would buy more. And that’s obviously a home-run victory for that business because they’re focused on revenue, which for Wine Express drives that company, not focused on conversion. You can very easily over optimize a specific metric thinking that it’s the right thing, but you have to really understand how is it actually impacting your business.

Andrew: For them, the one that got fewer customers, the page that got fewer customers ended up delivering 41% more revenue, you say? Forty-one percent more revenue per visitor…

Ben: Right.

Andrew: …from the one that got fewer customers?

Ben: So, it didn’t actually get fewer customers. I think it converted slightly higher…

Andrew: Okay.

Ben: …but it wasn’t significantly higher.

Andrew: I see.

Ben: So, if you were just looking at conversion, you might say this is not super conclusive, but then when they look at revenue they were like, wait a second, these people are converting a little bit more, but they’re actually buying more. And so that’s really, the lesson here for me is, you know, just be careful about what metric you look at. Making an easy assumption that, well, conversion automatically means more success; it might not. You might be acquiring bad customers. Think about a mixergy funnel. You might try an ad campaign, for example, to acquire users, and you might get a whole bunch of them, but if they don’t convert later down the funnel, you know they don’t go from freemium [SP] to paid, or…

Andrew: We might actually have something that’s a little bit different where we created a sales page that got more revenue, but fewer customers, and we decided that we’d rather have more customers and less revenue because if we had more customers it meant better engagement for our interviewees.

Ben: Right.

Andrew: And we had to say, yes, more revenue feels great, but more customers actually has the ability to keep this thing sustaining longer. And then, if we need to, we can sell other things to the same audience base.

Ben: Right. So, I think that’s a great example of understanding your business and the stage that your business is at. You know, maybe later you’re able to optimize for revenue. Today, you’re optimizing for engagement on videos.

Andrew: Yep.

Ben: Right? And so, it’s a question of…when we think of business models, I think of them like a map. Right? It’s not like, “Well, I charge $10.00 per month.” That’s not a business model. It’s everything that gets a user from where they’re coming from to your site, to converting, to engaging, to churning potentially. Think of it like a whole map that you would put on a white board. That’s a business model. And when you realize, “Okay. I’m at the point now where I care about engagement with the videos because the people who are doing them, you’re trying to make them happy with that engagement…”

Andrew: A bigger audience.

Ben: Exactly. Then you optimize for that. You sacrifice a little bit on the revenue for more people. Later on that may change because the business evolves.

Andrew: All right. On to the big board. The next big thing we want to talk about is to change that one metric that matters. Yes, you want us to pick it, but you want us to also change it and be flexible. For that, a good example is Buffer.

Ben: Yes.

Andrew: I use Buffer all the time when I want to share something on Twitter. Instead of going directly to Twitter and tweeting it out, I add it to Buffer. Buffer will pick the optimal time of the day to tweet it out and will send it out at that point. What was their first one metric to focus on?

Ben: So, when they started Buffer…and I use Buffer too, great product. Great team. Great founders. So, it’s interesting because they did a couple of things. One is they started charging out of the gate, which is extremely rare for what you would consider sort of a consumer product. Right? Not sort of a traditional enterprise software product. They started charging. They did that for a couple of reasons. One was just financially for themselves, personally, to have some money and see what would happen there. But really it was a great measure of “Does anybody care”? So if we think about empathy, if you can get people to pay you some money, that’s a pretty good indication that they care about the problem that you’re solving.

Andrew: Yes.

Ben: And so, that was their first thing, let’s just charge people and see if anybody pays, right? But what’s great about Buffer is that, okay it turns out that people paid, and enough people paid that Joel and the co-founders of Buffer said there might be a business here. We don’t know for sure, but there might be. And so then they moved through the stages from empathy through to scale in sort of a logical progression. So once they saw that people were coming and paying, then they said, “Okay, well, what percentages of people are actually creating accounts?”

And it turns out at the time it was about 20% of visitors were creating accounts, and that’s a pretty good number, and so they said, “Okay well that’s more validation here then…” We’re not optimizing for revenue right, we’re not looking at the real economics, but we’re just proving that enough people are interested in this product, and then okay well how many use the product? And 60% of people who signed up…

Andrew: Yeah, I’ve got the numbers here.

Ben: Yeah, that’s great if you show them. 60% of people who signed up were turned in the first month, and so you see that’s stickiness right? Enough people cared, a high enough percentage of people cared, people were paying which is a pretty good proxy for a sort of consumer product, 60% of people stayed after the first month, 20% of people were still around after six months, which is quite good, and so you see they go from empathy to stickiness, and then they really started to focus on the end of the funnel which is conversion. They actually switched the model to free. They said, “Well we know people will pay but let’s go free because we need to acquire more people.”

Andrew: Or freemium.

Ben: Freemium, exactly, exactly, exactly.

Andrew: Where there’s a free version but you pay to go awesome.

Ben: Where you pay…And so then they went to that sort of virility stage of let’s use freemium as a marketing lever to acquire more customers faster, and let’s see what conversion looks like, and conversion at the time when we did this was about 2%, which is actually quite good for a freemium business, and so then they, they’re very much in that scale phase, which is okay we know, we know what our funnel looks like, our funnel proves to us, not just the funnel of acquiring people but the usage, and engagement, and churn, they look pretty solid let’s focus on…In a freemium business you have to focus on just tons, and tons, and tons of users. The math doesn’t work otherwise, and so they’re very much in that scale phase now which is let’s just acquire a ton of people and see if they follow the same behaviors of the people that came before, and if they do you’ve got a business.

Andrew: I see. The big takeaway is you need to keep changing your one metric and metric needs to make sense within your business. I actually understood that the founders focused at first on revenue, not just for empathy but because they needed money to survive if they were going to do this full-time.

Ben: Absolutely, absolutely. So there’s a little bit of survival instinct there right? Which is fantastic that the risk there of course is you know a little bit of revenue is not you know, it again like all businesses you know you solve one problem, you de-risk one thing only to get to the next problem, right? It’s I mean you know this right? It’s not like, it’s not like you solved the first problem in your company and then just everything magically falls into place. Right so you’re right they did that in a way of saying, “We just need enough money to be able to feed ourselves,” and that’s just the reality for lots of people starting companies, and if you can get to that stage that’s fantastic. I look at it and say, “If you take that part out of it, the necessity out of it, to me it’s a proxy for empathy.”

Andrew: So my whole team then will be focused on one goal at a time, one big clear goal for them, I and other people in the team will be thinking more granularly what do we need to do to get to that goal, is that number really meaningful for us still, that kind of thing? But as a team we’re all working together towards the one goal.

Ben: Yeah so I think way you described it, you know the big LCD screen, or you know the monitor if you don’t have the big screen, there’s one number in the middle it’s the number that we’re all focused on. It’s the number that tells us you know we have a goal for that number, and then there’s a whole bunch of numbers around that that are secondary numbers that help tell us you know give us more granular detail. You can have lots of different parts of your business all working towards the same goal in their own way. You know if you’re trying to lower churn for example, right? Which is you know the percentage of let’s say paying customers that abandon your service on a month, let’s say on a monthly basis customer support is tackling churn, sales people are tackling churn, marketing is tackling…

Everybody can be tackling churn in their own way. They can be running their own tests, their own experiments, they can be looking at it at a very fine, you know very fine amount of detail, but the whole business can say we know the top of the funnel works, we know lots of people are coming through, too many people are leaving, the bucket is to leaky, in that particular case everybody can work towards solving churn.

Andrew: All right. On to the big board for the next big idea for us to talk about which is to understand what business you’re in I interviewed this founder of this company.

Ben: Did you?

Andrew: I did, he’s such a great guy.

Ben: Yeah.

Andrew: And we talked about this topic that you and are going to be discussing, which is how he came, how clear fit his company came to their pricing model. What did they do and how did that happen because they understood the business they were in.

Ben: Right so I think this is like this is so much more fundamental then just lean analytics, this is just fundamental to understand your business, and I think when you say to someone you know understand your business model sounds like, “Well of course I know how I charge customers,” but Clear Fit is in the recruitment space and so having been in the recruitment space, I have a certain affinity and Ben Baldwin’s a great founder, they, they’re business is about assessing candidates. So, you sort of have to understand a little bit about what that business is, it’s for assessing candidates, so, somebody applies for a job, they have technology and tools for assessing that candidate, whether they’re a good fit or not for your company.

So they went out and they said, we’re going to launch this product, launch this business and we’re going to charge $99 per month. Right. And so they were going to take the, what we would describe, software is a service subscription model. It’s the model that, if you can build your business that way, if your business is aligned to be a subscription service, it’s kind of the Holy Grail because of course, people just pay every month, certainly there’s some churn but it’s kind of the, it creates the hockey sticks of subscription businesses or in the enterprise software space. But, what they were finding was that, they were getting some traction, but they were getting pushed back from their customers about the business model. People didn’t understand, well, why do I have to pay $99 a month when I’m only hiring this month and maybe next month, I’m not hiring this much.

The folks that they were talking to, HR folks, just, they didn’t quite get the value prop. The value prop wasn’t resonating with the business model. Alone, the value prop made sense to them, yes, we need a way of assessing all these candidates but when they applied the business model, it was causing friction. So, they switched the business model, and they said, ok, it’s not $99 per month, it’s now 300, 350, at the time $300, $350 per job posting. Now, what is interesting about Clear Fit’s business is that it’s not really about job postings, of course, there’s a job posting and candidates apply to the job and then Clear Fit takes over. .

Andrew: From what I remember, the posting happens on other sites. Like, they will post it on Linked It, etc. for you but, what they do is, really well, is what you said, they help you figure out which of the candidates that are applying make the most sense for you to consider.

Ben: Right. So, it’s not a job org, right, it’s not, it doesn’t, the pay per post model doesn’t really make sense for the ongoing value proposition of Clear Fit but what happened was they 3xed sales and they 10Xed revenue by changing the business model because what happened was they understood the customer and that’s the real lesson here. HR people get a budget from other people in the company to say we need to hire for these positions, you have, let’s $2,000 to make your bets and HR people will make bets on job boards for that job posting, they’ll get all the candidates in and they’ll try to fill the position. And so, by changing the business model to a model that the customer understood, that product was exactly the same, everything was basically the same, the model was changed.

Andrew: All right. Back to the big board here and we’re going to talk about a company we discussed at the top of our conversation. Next big topic is, to quickly test ideas with a concierge MVP, again, another mixer g interview we did this, this is Air BnB. What do they do here?

Ben: So, this is, so there’s a couple of things going on here that I think are fascinating. The concierge MVP idea is one of them. The concierge MVP is just, instead of building product, I mean, I would use local minds sort of, what they did with Twitter, almost like a concierge MVP, instead of building a product, can we find another way of doing it that, that’s not scalable, right, we know that that’s not a long term solution but what can we do to de-risk this, to test some of our assumptions. So, Air BnB, looked at the rental volume of their properties and they sort of saw this and said, you know what, properties that have better photos on Air BnB seem to be renting at a higher frequency than properties that have poor photos.

Andrew: And by the way, let me just show this on the screen, anyone who sees this can understand why the property on the left doesn’t get, doesn’t go as often as the property on the right. People don’t want to book on the left as often as they do on the right even though it’s the exact same place. And, it’s the photo, the photo on the right obviously makes the place look more enticing, makes it look more open, bigger. Okay. So that’s what they noticed, how did they use that information?

Ben: So they said instead of going out and building an entire system for taking photos and making something complicated, they hire 20 photographers and they said, they put up a page and they said, anybody who wants free photos of their place can sign up and we will send a photographer and we’ll take free photos. End of story. Not a scalable system, there was no calendaring system, no behind the scenes system for managing photographers, it was all being done by him.

But what they found was, not surprisingly that professionally photographed places were booked I think it was about three times as much. So they increased bookings three times just by using professional photography. And so that was, they did that by hand. They hired 20 people. They sent them out and said go take photos of these places. But then they started to build that system out. Right, then they started to build technology behind the scenes to optimize the scheduling, the, you know, deploying of photographers, the recruiting of photographers.

They started to build out this product because it became a real part of their Airbnb. And still today that screen shot off course is from 2012. But they still provide free photos for anybody because they know it’s going to significantly increase their bookings. And their whole business is based on bookings.

Andrew: And this, this is little big, but that is what happened

Ben: Right, Exactly, so, you know, right when they started this program this Concierge MVP, you see 20 photographers, you know, late tech 2010, booking started to go up. And you see a hockey stick in and that hockey stick is of course even bigger today. And the photography program is of course not the only reason for that. But at the point in time, it had a material impact on their business. So, I think the point here is for software companies anyway, but for any kind of business, you don’t have to always build the whole solution or what you deem the whole solution to be. You can build a piece of it that’s not scalable. See if it works. Test it against the important metrics and matters and then build the system that is actually scalable and automated and all of those wonderful things that make it sustainable.

Andrew: I see. Yeah, that’s what this Concierge MVP idea is. A lot of time people think of an MVP, minimum viable product, as an actual product. Concierge MVP says doesn’t have to be a product. It can be some human being doing this in a very handmade, a very unscalable way. But you are telling us, do it that way so that you can get some metrics. And if the metrics, if the analytics tell you that this is worth pursuing then figure how to scale it and whether or not to get in to it. But don’t do it and don’t do it from the start. Don’t start building out a team of photographers. Don’t start building up the software. Try doing it.

Ben: Right. And Air BnB you know at that time in their business, they had the resources to do basically whatever they wanted. Right

Andrew: Yes they had tons of that. They were flush

Ben: They could have hired ten thousand photographers. Who wouldn’t want to go do that work for Air BnB. They could have built a massive thing. Spent six months designing the perfect you know the back end automation system for scheduling photographers and said wowowow [SP]. Don’t do that. As you described, build something small. It’s not scalable. And it’s not even a real product. And let’s just validate that this thing actually works and moves the needle on what matters for our business.

Andrew: All Right. On to the big board again. The penultimate point, which is to find the industry benchmarks. Again a friend and another Mixergy interviewee, here he is Jason Cohen’s Business, WP Engine which hosts WordPress sites. In fact they are hosting this site, Mixergy. What’s the issue that he had? Let me bring him up again.

Ben: So this is a big challenge. So you know, when we say to or when I would say to the company or what we say in the book is you know you pick that metric that matters. And once you understand your business model and what stage you are at, it becomes fairly easy to focus on something that’s going to matter. But then two other, you know the next step there is you need a target, you need a goal. And what we would describe as a line in the sand.

Let’s say, you know that the metric you focused is churn. Just use that. And that’s the example from WP Engine, right. But you know, let’s say churn is 8% right now per month for your business. You know it’s not good. You know it could be better. And your acquisition is good and you want to focus on retaining more people. But what should it be. What is it?

Andrew: Should it be zero?

Ben: Well zero. But there is no such thing, right? There is absolutely no such thing. So we ask, we sort of recommend to people or ask them when I talk to companies, you need a goal in mind. Just like high score house, four times per week and they change the goal based on their learning. Right. So, Jason, when he was growing WP Engine, they had a churn rate of 2% or so per month. And when you think about it, that’s a quarter of your customers a year disappearing. Right, which can freak you out. That’s a lot of customers, right.

So he went and said, “We are going to go and try to improve churn.” They did a bunch of things and they couldn’t really move the needle on churn. It just sort of stayed, 2% 3%. And so he then went and said, I need to go get more information about this. And so he talked to other people in his industry in the hosting space. He raises capital in part for Automattic, the makers of WordPress. So by talking to some other folks in his industry, he learned that a trail of two percent is quite healthy in the hosting business.

Andrew: And Automattic is another hosting company for WordPress sites. So they’re very similar, a very similar business. And so if Automattic says, “Hey, our churn is 2%”, then how could Jason really do much better than that?

Ben: Exactly.

Andrew: I see. And so…

Ben: And so…

Andrew: At that point he says, “You know what? My numbers are right where they need to be for churn. Let’s focus on things that we have much more impact on.”

Ben: Exactly. So, now that, you know, once he sort of learned, “I can’t make churn one percent. I can’t make it point five percent”. It’s going to be . . . Now if it ever goes up from there we kind of know what our benchmark should be and we can maybe address that down the road. At the time, I could spend all my energy banging my head against the wall trying to over optimize a metric that’s probably not going to move. And even if I improve it a little bit it probably won’t have a significant impact on the business.

So it kind of . . . I sort of would use it like the term . . . It sort of gave Jason permission, if you will, to move on to something else that would have a bigger impact. Now that he knows churn is only two percent, you can logically focus more on acquisition to acquire more people and widen the top of the funnel. Why pour more people into the bucket? The bucket’s a little bit leaky. It’s always going to be leaky. But it’s good enough, if you will.

Andrew: And I did see that he did that a lot. He…

Ben: Yeah.

Andrew: …not only got more people at the top of the funnel but bigger and bigger clients at the top.

Ben: Right. Exactly.

Andrew: All right. Final point is one that we kind of talked about earlier. This is “Always question and test your assumptions.” We talked about how this company did it. Here’s Localmind, if I can bring them up on the screen. There they are. Localmind is the company we talked about earlier which wanted to let people say, let people ask others- wait. Said- ha, you know what? I did such a good job of explaining it a moment ago. Let me see if I can recapture the magic. Hang on a second. Here’s what they did. They said, “People want to know what’s going on in a local place. Can we create an app that lets them find out what’s happening in a small location by asking strangers who are there?” Instead of building the app first, they went to twitter to test one of their assumptions. How else have people done it?

Ben: Well, I think there’s all kinds of ways of sort of testing things before you really commit. So, you know, AD testing, I think, is a good example of that. [inaudible] express sort of saying, “You know, let’s test different versions of this.” I like to think about- you know, when you think about testing marketing language or value propositions using landing pages in a way that, you know, don’t change your whole website. Throw up a landing page. Acquire some traffic maybe through Google or Facebook. Obviously depends on your business. Drive that traffic to that new landing page and see what happens.

So before you rebrand your company, before you change your entire home page, there’s lots of ways of sort of testing things in advance. So I think- and Localmind is a good example of that. Instead of investing- before you assume the answer is to build something, think about a way of testing it before you build something.

Andrew: You know, I’m looking online, but for some reason I can’t bring it up right now. Buffer did that. So oh. Here we go. Yeah. Here. I’m going to grab a screen shot and show you. It’s as good as I can get…

Ben: Okay.

Andrew: …at this moment but. It’s from my interview with Joel. Here’s what he did. This is the very first thing he put up on his site. “Tweet more consistently with Buffer”. And you can’t yet see the button there but in the upper right you can see the words that were on the button which are “Plans and Pricing”.

Ben: Right.

Andrew: He was testing to see if anyone would actually click on “Plans and Pricing” to see if anyone would actually pay for this…

Ben: Right.

Andrew: …and there was nothing there. He didn’t even have like a basic PayPal button on there.

Ben: Yeah.

Andrew: It just said, “Sorry. Give me your email address and I’ll let you know when you can pay.”

Ben: Absolutely.

Andrew: And that’s a basic way of testing.

Ben: Yeah, I mean. And you can do it inside your product as well, right? You can do it, um well I’m trying to remember what product. I-I- I forgot the name now. But a product I was using recently or testing out. It had a “Reports” button. And I clicked it and it was just like, you know, “The reports aren’t ready yet. They’re coming soon.” You know, “Tell us what you would be interested in when it comes to reporting.” So, you can even do this inside your product.

Andrew: And they were testing the assumption that people actually want reporting.

Ben: Want reports. And then, of course, if you clicked it, now you’ve hooked me so I’m going to tell you what I want, right? So you’re just going to, you know. Maybe you’re going to irritate a few people because the reports aren’t there, but by and large, people will click it, which you are able to track. And then it gives you a way of opening up a conversation with those users.

Andrew: The book that everything we’ve talked about here today is based on is called “Lean Analytics: Use Data to Build a Better Startup Faster”. What’s one thing that if people go and grab the book they should be looking for?

Ben: Well, so don’t read the whole book. How about that?

Andrew: Okay.

Ben: So. You know, it’s a very, very big book. The screen shot doesn’t show that. But it clocks in, you know, 400 plus pages. Like, it’s a behemoth. But the reason it’s so big is because when you talk about metrics. We try very hard to get into specifics and details. Like some of the case studies. And we try to, you know. Find the stage that you’re at for your business and find the section of the book that relates to your stage. Find the business model for your business. And we cover about six business models in the book. And see if one of those, or a couple of those, resonate with you. So I see it more like a reference book as opposed to a book that you sort of read cover to cover.

Andrew: Oh. That makes sense, especially for startup entrepreneurs that don’t have much time to sit and read…

Ben: Yeah.

Andrew: …long books. All right, but there it is. Let’s bring it back up on the screen one more time. “Lean Analytics”. Ben, thank you so much for doing this session with me.

Ben: Awesome. Thank you very much.

Andrew: You bet. Thank you all for being a part of it. Bye everyone.

DOWNLOAD TRANSCRIPT

Master Class:
How to test a revenue generating program
(From scratch)
Taught by David Bullock of CEOMastery

Master Class: Test Revenue


Report Bugs

Master Class Toolbox

Course Cheat Sheet



Transcript

Andrew: This session is about how to find and test a revenue generating program. It’s led by a returning guest here today, David Bullock. He is a consultant who helps companies find and grow their revenue. That includes working with them on SEO, pay per click, traffic building, funnel creation, and so much more up and down the chain of command.He works with newer startups and with more established businesses, like American Express and Kawasaki. You can find more about him on his personal site which is DavidBullock.com or on CEOMastery.org. I just scrolled over a list of his past clients, but you can click around and find out more about him on there.So David, thank you and welcome.David: Thank you so much. Good to be here.

Andrew: You are working for this company. Let me bring a screenshot up. it’s called “The Nurse Company”. Whoa, I just went a little too big. There we go. And they had an idea for a Facebook-like product. What did you think of that idea when they said they wanted to create a Facebook . . . Actually what kind of Facebook-like product did they have, and what did you think of the idea?

David: Well, what they wanted to do was create a Facebook for nurses. That was the original business plan with the idea that typical companies have. Start a Facebook page and if we make it, somebody is going to come in and buy it from us.

Andrew: Mm-hmm.

David: And I looked at them and I said, “Well, that sounds good except the question is what if no one buys you quickly. What kind of money are you going to make between the idea and buyout? And so since that was the case, one of the things we looked at was, wow, there’s already a Facebook. So who’s going to buy that?

And what happened is quickly I sat with the CEO and I asked the question. In your marketplace where’s the money? Is it in the nurses or is it in employment or education? Basically was it hospitals? The employment in the hospital of the nurses or is it in education? We found the money was in education and in the employment side.

So we went from this idea which is a typical startup idea of “We’re going to build it, and then someone is going to come and somebody is going to snatch us up and life is going to be good because it’s going to be a big buyout too. What if they don’t? And what can we test quickly to find out if there’s money in the marketplace? And what I advised them to do very quickly was let’s see if we can learn some straight lead generation using AdWords. And let’s find out if we can actually place nurses in hospitals like a headhunter for a finder’s fee.

Andrew: Interesting.

David: So, again, we went from this idea which is a typical idea, a great idea, to hold on. Let’s go upstream or downstream and find out where the money is.

Andrew: And if they would have created the Facebook for Nurses, I imagine they would have been in for a world of hurt. You told them, “Look, it’s not much revenue. You’re being a little more diplomatic than I would be. [laughs]

But because of the tactics we’re about to teach today, you helped them identify an opportunity. It did bring in revenue and you tested it using AdWords. I’ve got here in my notes for your conversation with Ann Marie Ward who produced this that you spent . . . In three months you spent $4,000 on AdWords. Do you remember what your revenue was from that, from the $4,000 on AdWords?

David: They told me that they created about $30,000 worth of gross revenue in.

Andrew: So that’s it. And not that’s it, that’s it. That is the point, $30,000. You’re able to test their idea and say, “Look, here is something that shows measurable promise. This is the direction that makes sense for you, and as a result did they go on your direction?

I know we’re going to hear about more in the conversation, but did the? They did.

David: Yeah. What they did is actually they did the AdWords in my account. That’s why I still have access to AdWords. I did the AdWords in my account. I transferred all the AdWords ads, landing page, as well as the key sets. So I gave it all to them, and then they went on ahead and ran their account. And they continued running it. Again, look at their local advertising for the region, and they used that to create $30,000 of revenue.

They brought a nurse on who actually spoke in nurse language to nurses, placed them in the hospitals, and that’s how they had the initial revenue. I believe it was $30,000, so it was great.

Andrew: I see. Here are some of the ads you ran. Let’s see. Whoa, that’s a little too big. There we go. There are the ads that you ran, licensed nurse jobs, Tennessee nurse salary for registered nurse, et cetera.

David: Mm-hmm.

Andrew: That’s it. There is the money.

David: Yeah. And look at the ads I want to point out here. Look how specific the ad is, Tennessee nurse’s salary for an RN, experienced licensed . . . So I’m asking in the ad disqualifying as well as qualifying people because you see . . .

Andrew: We’re going to see that in a moment too.

David: Mm-hmm.

Andrew: Yeah.

David: Right.

Andrew: Disqualification is important.

David: Absolutely, absolutely.

Andrew: Right.

David: I mean, do you decide if you want everybody? No, we don’t want everybody. You want the people who can fit the bill for whatever it is you’re trying to make money with.

Andrew: All right. Let’s go on to the board. The big board of ideas. The first thing we’re going to be covering. And this is everything we are going to be talking about today. But the very first thing we want to talk about is to find an undeveloped marketplace. The Facebook for X is already developed. You want to find the undeveloped marketplace. You did that, since at the top of the interview I mentioned Kawasaki. You did that with Kawasaki. I think this is one of their…some of their equipment. Help me understand how you saw their equipment and helped them think about an undeveloped marketplace.

David: Well, I was working with Kawasaki. This was recent, this was last year. They’ve been here for quite a long time, but their company actually is working in much of a startup mode. So when I came to work with them, I look at their market. They are primarily automotive. If you look there, those are boxes. Everything that leaves a plant goes into a box. Whether it be Hershey bars, Rice Krispies bars, it doesn’t matter. It has to leave in a box. That’s palletizing in the food industry. So what did I do? I said well you’re over in automotive and it’s a blood bath. You have everybody in that same place. Profit margins are getting thinner and thinner. The competition is high. Very crowded. I said let’s go over to the food industry.

We went over to the food industry and we found out there were these situations like this where you had to put a robot at the end of the line, to put the box on to a pallet, to get them into the truck. So I went ahead and actually found one of my contacts who had worked in the food and beverage industry for quite a long time. He already had the relationships. And it was an easy way to go in to Niagara water or to Hersheys or to Folgers, Smuckers, or I’m trying to remember the last one, but it was the food industry. And we had a contact. They were not there. Because we knew where the application was, we were to take something that was being used from one side that was unprofitable, to a place where it was completely profitable and green field. Wonderfully green field.

Andrew: Green field meaning [sp]untrowed upon?

David: Untrowed upon. I think they call it Blue Ocean Strategy. I think that’s what it’s called in startup-ese. Blue Ocean. No one’s there. There’s no sharks in the water. And manufacturing calls that green field. There’s nobody there. That way you can walk into the plant and say “Oh, you know you can automate that? Oh you know you can automate that?” And it just was wonderful. Because all of a sudden now we’re not only selling robots, we’re also selling service. And we’re going into new markets with products and services that over here they were commonplace, but over here they’re extremely valuable. The lesson here is your product has multiple uses. And you won’t know where it can be used or how it could be configured until you actually take a step to the left or the right of where you thought your niche was. You can still niche. So don’t think that when you’re being diversified that you’re not niching. You’re just niching maybe in a more profitable location, or a more profitable industry.

Andrew: So what that brought to mind to me was this interview that I recorded the other day with a guy who runs Superfly Kids, and he used to do ad words for so many different things. He was a marketer. I can’t even think of some of the examples. But there were so many mainstream things he could be doing with it. Instead he hooked up with a woman who sells capes for kids. He said all of my marketing techniques that might be commonplace in the rest of the startup world, is completely unused in retail for kids who want capes. And so I asked him what did you do to get going and he said, “Well I came up with a URL that had my keywords in it.” I said, all right that didn’t work. Then what did work? And he said, “No that worked!” Nobody was using it in the cape space. And no one was using it, or very few people were using it, in a kid retail space.

So it was those kinds of changes that allowed him to build his company. He told me the actual revenue, but all he was willing to say on camera was over $2 million. Impressive. And that’s what you’re talking about. Look for places that don’t have as much competition. And for Kawasaki it was going to food. Hersheys and Smuckers as customers. Here is the other thing I learned from you. Kawasaki does more than motorcycles? They do this stuff?

David: They do motorcycles, ATVs, robots. They do jet planes, bridges. They do turbines. They do bullet trains. That is something that people don’t know. Now watch this now, Kawasaki has been branded here in the United States as motorcycles. But here it is, they have this wide breath of situation. I’m going to tell you a story that was not necessarily going to be part of this interview. Kawasaki could go to a trade show and they could go put a motorcycle for the trade show. And people because they know the motorcycle they’ll come and give, no joke, bags and bags of leads.

And I told her manager, I said, “You’re the only robot company who also sells robots, ATVs, and everything else that you can use it as a marketing gimmick to get the people to come into the second auditorium way in the back. And you’re the only one with a robot, and you watch them pickup two garbage bags of handwritten, email address and phone number leads just because they wanted the motorcycle.

So, again, when you’re with your company the idea is what can you tie with your company that gets enough attention to garner the actual just full out focus of the marketplace.

Andrew: Yeah.

David: Just because you’re selling software does not mean you can’t tie it with something which is new, cool, and exciting.

Andrew: All right. Let’s look at the next idea. This is one that you already brought up which is you want to qualify your customers to increase conversions. You did that before. Tell me if I went into the Internet archive to see if I could find a screenshot of what this company’s qualification page looked like. Does this look familiar at all to you?

David: Yes, I built that.

Andrew: You built that.

David: I built that but it looked prettier than that because it had a header and it had footers in the background.

Andrew: Yeah. Our archive does not pull in images, and it doesn’t seem to say CSS and other things, but this is it. What were you doing here, and how did this help?

David: This company was a fleet tracking company, a fleet GPS system is what it was selling. And what this page shows is this is the qualification page. So they were getting a lead from the general marketplace where they would typically go into the front door of their website. The front door of their website was not targeted to grab the person’s information.

So what I did is I went and I called their call center first and I called some of their customers and asked questions, like, okay, what are you looking for if you’re looking for a fleet tracking system. What do your customers say? Once I gathered that information, I designed the page.

Now on the page I asked for a couple things: names, email address, phone number – now watch this now – best time to call. So if I put best time to call they’re expecting a phone call from me now.

Andrew: Mm-hmm.

David: Right? Then I was asking for position in the company. So now I know are they a decision maker or not and then questions, like how many trucks do you have. Then I ask the question what’s the potential of sale here? And then further I asked do you let the people take the trucks home? Now that’s an insider question that would tell them actually what I was talking about. And then yes or no, yes or no, and then at the end do you have any comment.

So when I get that lead now, it is a warm call because I’m going to say “hi”. You fill out this. You answer these questions. You said you wanted me to call in the afternoon. It’s about two o’clock. Is this still a good time? So the questions disqualify . . .

Andrew: Let’s see if we lost the connection there. If we did, we’ll piece it all back together. Oh sorry. We lost you thee. You were saying the question just disqualifies and then we lost you.

David: Yeah, right. The question disqualifies them because I was asking the question within the dropdown. It was a minimum of two trucks, two. If they had one or zero, then obviously I didn’t want to talk to them.

Andrew: But I look at this though, and I see reduced conversion rates, meaning . . . I saw the look. I wish I had brought it up on camera. I saw the look you gave me as soon as I said reduced conversion, but I do see that. And I say every extra field is going to mean fewer people fill it out. When I look at my AB test software to see did I increase conversions or not, this would definitely reduce it because of all of the questions you are asking.

So why did you make that face? It’s important to understand that.

David: Are you looking for subscribers, people just filling out your form, or are you looking for sales?

Andrew: I guess, I feel like the more people join my mailing list the more opportunity I have to make a sale to them, and if they’re on the mailing list and they’re not qualified, how much does it cost me a couple of pennies a year to keep them on the mailing list? Fine, maybe they’ll end up doing something else, like promoting one of my pieces of content, sharing with someone else who they know is in business who might be interested and so on.

David: And, again, in a business where you are looking for volume and you have an information product, that makes perfect sense. But then when you start looking at your actual open rates and actual response rates from a subscriber’s list, it’s very different than a buyer’s list. I’m in a situation here where one sale would produce a minimum of $20,000 in revenue in this particular marketplace plus they have a call center which means they don’t have a sense of cost. They have people who are on the phone. So they’re paying people to make sales.

Andrew: I see, okay.

David: Those leads close at 20% in the call center. They were ecstatic because before they were getting five to 10%. I doubled their actual call to close rate for the people that they’re paying to be on the phone. So, again, you have to look at the infrastructural systems to determine whether it’s a few cents or it’s actually someone’s salary every year and they’re not making the grade. So that’s really what it is.

Andrew: And you know what, actually? There is a time in a product development where I do add more questions, lots more questions; where I do want to qualify people. And that’s when I’m just launching something new, and I don’t just want anyone in there because I want to have very specific feedback. I want the person who really cares about it, not the person who’s just checking me out and is going to have all kinds of issues that don’t relate to the person who really cares, you know? So, at that point I add more questions.

Here, let me actually be clear about it. I had this course that I did about how to deal with the inner critic that we all have in our heads. I said, “You know, let’s get as many people in as possible.” In fact, I did, as I grew the list. And then I said, “I’ll have some people over to my house, and get some real live feedback from them.” I said, “Let’s let as many people as possible, who cares?” I had one guy come in, and I just couldn’t give him the feedback on his ideas that would work. And it felt like maybe what I’m working on just doesn’t work because it’s not clicking with him- he’s loud, he’s giving me negative feedback.

I said, “All right, I should go back to the drawing board.” And then I looked and I saw everyone else was happy except for him and I understood why. He was only participating because he wanted to hang out with me, and he couldn’t get me to return his calls. Everyone else was actually in for the issue. So I should have disqualified him. I should have said, “I only want the people who are good fits.”

This is a very long story, actually. I don’t like when I talk this much. I’m here to hear you talk that much. But what I’m saying is, early on in product development I do want just the right people and I could see how something like this would make more sense. And, yes, definitely I could see how it would make sense when you’re selling things on the phone, and it costs a lot of money to talk to every prospect.

David: Well, I’m going to give you something here which I typically don’t share- something called story alignment. There’s four stories that are relevant in a marketplace: product story, market story, client story, and your story. There’s only four. Now, within those four, one informs the other. Typically, if you look at the way people work, typically they’re either product focused or themselves focused. They forget about the market standards on this side, and they forget that the actual customer has a story that has to align, which is [what] you’re speaking to.

There’s a whole methodology around story alignment that I do with companies, because once you get those stories aligned- just like when we were talking about the nurse company, the stories aligned- and when the stories align, as well as when the GPS systems align, you get sales. You can’t not get sales. So that’s a whole other methodology that we go through.

But one of the things you spoke to was the inner critic. A lot of times we cannot hear our stories because of other people’s, and that’s the problem.

Andrew: All right, fair point. I think we’ve explained this and I think it’s time then to move on to the next idea, which is to run a quick and dirty video campaign test. You did this with an education company that was rushing to launch tablets for kids. How many videos did they create before they started to create their product?

David: They created one wonderful 30 second video. It took six months. They had the right pictures and the right script, and the perfect music, and the perfect child- it was great. And then they put it out to market and nobody moved because it was a call to action.

Andrew: Did they do this after or before they created their product, the tablet?

David: They actually had created the product, they had prototypes and they created it before. So they were running in parallel paths, which is OK.

Andrew: Okay.

David: So they did it before, and I remember looking at the video. And I said, “OK, um, what is this supposed to do?” And they said, “Oh, this is going to give us our sales.” And I said, “No, this is a commercial lauding how wonderful the company is, but not necessarily giving them a strong ‘The tablet will do this, this, and this, your child will do this, and you can buy it over here.'” None of that was there. So what we did is as I’m looking at the video, I said, “Can I use the video, thank you. Sliced it, diced it, used a piece of it, did the script, did the voice-over, put it together, and then we created our own video in like three days. Then we turned around and took our video, put ti out and got 20,000 views within about the next 10 days, and found out what the market wanted and what they didn’t want by how they handled this video.

Andrew: What do you mean, “How they handled this video”? How can you tell from a video which features they wanted and which they didn’t, so that you know how to promote it in the future?

David: Well, what we did in this particular case, we used the company virtues that that they said were important to them. Again, this was very much customer focused, they weren’t market focused at all. We did that, and what we found is we got 20,000 views- we did get click-throughs, traffic from the video itself, but then it didn’t pull the only [??] website, so we knew that there were people that wanted a tablet. We knew that at least they wanted something from this company because there was market recognition, but we also knew there wasn’t enough emotional push from the video to [??] the sales page [??] actually make sales.

Andrew: Okay.

David: And you can actually see that by looking at the tiers in the analytics. First of all, was the video seen? Great, it was seen. How long was it watched? Okay, that tells you the engagement factors, where are they dropping off. Then the question is, did they actually go to the link which is under the video on YouTube, or are they going to actually click the one that’s on the interior of the video itself.

Andrew: And you used two different URLs, one underneath and one within the video to see – oh, okay. Here is the video, let me see if I can bring it up here. There’s your site on my browser. Here is the video, and now I understand.

David: That’s part of [??] Vimeo.

Andrew: Yeah, now it’s on Vimeo on the link that you sent me. Now I understand why you have – oh, this is just an image, this is another image that you took. This is software that – the software creates this, it’s not like you actually did this, right?

David: [??] look different, right.

Andrew: And now you’re testing to see internet connectivity. Do people care about that? Here is video from them, I imagine. The mother giving her daughter a tablet. Actually if you scroll back you can see the daughter is opening up – let me zoom in. What am I doing, there we go, right? Oh, zoom in does not work. Okay, I will fix that. There we go. And more information, using that software. And then at the end there’s a link within the video. And so that is all information for you. What are they interested in, what are they watching.

David: Right. And again, I used pieces [??] from their video to make that video. Their video was wonderful, it was whimsical, it had beautiful music, it was lovely. But there was no hardcore action, real features and benefits that people could grab onto. And I could just look, I was like, well they care about this, this, and this, but not that. And the nice thing is, when you’re doing your own videos, you can swap pieces in and out at any given time, and you can find out what people care about. It’s very easy with video.

Andrew: I see, yeah. It is these days. These days.

David: [??]

Andrew: I used to do that when I sold – before I did video courses, I created videos to sell guides, like document guides that were based on my interviews. And I remember I shot a video and people weren’t exactly getting it. And I could see that they didn’t understand that it was a guide with multiple pages, that they didn’t have to wait for it to come in the mail. And I got that through feedback from people, but then I could go back into the video and make an adjustment and show that it’s paper and you can flip through it and suddenly I can see, because of my analytics, that people are watching it, and that its sales increased. That kind of stuff is very helpful. I forget the video – video is actually a bear to edit, but it is editable.

David: Oh, and [??]. First of all, if you do a voice under, which you do to script, you can cut and chop a script easily with Audacity or even within Screenflow or Camtasia. It’s just easy in there. And even Snagit now does a great job. It’s like, 40 bucks, maybe. And you can speak the screen, you can get all the stuff. And just again, when you do your audios or your videos, if you do an [??], like you think of it, okay, this is this point. you can always take pieces and parts and move them around and find out sequence [??] people enjoy things, or whether [??]

Andrew: You know what that is [??] If you create as much as possible the modules ahead of time, because even if I have the same mike, the same set up, the same room, if I come back three days later and record an extra feature, my voice sounds different enough that when I slice it in the audience can pick up on it. I know I can when I’m listening. So yeah, what I often will do record without my video being on if it’s something I plan to edit in and out, and then at the end of recording also create these other snippets that I could slice in and out.

David: Exactly. [??]

Andrew: So that’s how you’re doing it, that’s what you’re telling us to do when we’re testing the value prop onto the big board. We’re going to take a look at the next idea we’re going to cover, which is, use what you have to leverage other revenue streams. You did that at the [??] company. You were CMO, right? Chief Marketing Officer at that business?

David: Yes. Exactly. In 2010, correct.

Andrew: When you started with them, what did they do, before we get into this point.

David: Oh, they were the Facebook for Nurses [SP]. They had this idea, we’re going to create a Facebook for Nurses, which is going to be more of a forum in a community for Nurses. And the first task was to build that and then they wanted me to help them with the social media. So we built it. Okay, what did I do for them? I came in, found out, I did the first [??] piece which put them on the map. The second piece I did with them, I went into Facebook and actually used Facebook ads to put 5000 people into their membership within 30 days, and that got the investor to say, “Oh, wow we have growth here.” Which then got the investors excited, and then from there I said, “Okay, two places to go.” Again, education and employment. So, we started doing lead generation, head-hunter work for hospitals. That was one side. Then we went to Chamberlain.

Andrew: Hold that thought. We’re going to get to that in a moment, because that first thing is important. Once you realize that creating a social network for nurses doesn’t make sense, but we have all of these nurses in our system that I got for the company from Facebook. What can we do with what we have to find other revenue streams? And that’s when you said, “Let’s try nurse placement,” and that’s when you tested it. You said, “Same pool of people; let’s see if we can be,” as you call it now, “The headhunter that helps hospitals find nurses.” That’s the model that you eventually shifted to?

David: We shifted there, and then we shifted to selling advertising into that nurse community to the educational institutions.

Andrew: That’s the part I want to get to because it helps make the next point that we’re getting to. But, what I want to understand here is the big idea, which is to say you have the resource: what else can you sell to them? What else can you use to bring in revenue? How do you find these other revenue sources, right? I have a Mixergy audience, for example. Someone listening to us might say, “You know what, I’ve sold 1000 or 500 people on my software and service. They’re all paying me month to month. But I also have this list of 10,000 people who aren’t buyers. I’m going to look for another revenue source.” David, how do they find another revenue source?

David: I’ll tell you a story first. I remember I sat them down in a room and said, “There’s nurse Betty sitting across from you. Let’s look at nurse Betty’s career. Well, nurse Betty is going to need shoes, a stethoscope, books, scrubs; she’s going to need continuing education. Of what we know about her, what of those things can we sell to her? Because nurse Betty has a life outside of just education, and outside of just employment. Let’s go into the employment: what does she need while she’s being employed? What does she need while she’s being educated?” And then started finding affiliate programs and developing joint venture relationships with the people who supported either one of those sides of her life. Again, we talk about customer life cycle. You have to put yourself into the place of the customer, and start really looking at what all would they need to support the happiest life they can have as a human being in that particular role.

Andrew: So, you thought about scrubs, and you thought about multiple other ideas, but also job placement. How can you test these ideas quickly, and see will they make sense? Without having to create a scrub-based business that manufactures and ships scrubs. I can see how you can actually test that fairly easily; maybe drop-ship. But how do you test the other one, which is the idea of doing job placement? Do you start doing job placement for them? Do you start making calls to hospitals and saying, “Hey, I have some nurses here that might want to work with you. Can I get paid every time I send them over?” Or is there another way? How can you test your idea?

David: Well, you did something very important. You did this part. The phone is a very significant marketing tool, and research development tool. It was exactly that, “Hi, I have these nurses. They’re here locally. Do you have a need for registered nurses?” It’s a simple question.

Andrew: Calling up the hospital HR department?

David: It’s either yes or no. If you don’t have a need now, might you have a need later? Yes or no? What type of nurse would you want if you were wanting one? And they’ll tell you. And you have the nurses; you have 5000 nurses over here, and you look at the list and that’s it. Now you’re a matchmaker.

Andrew: The hospital says, “I need a nurse.” You have a list of people who happen to, because of the way that you were targeting when you got started, happen to be in the same state. You go to them and you say, “We have a job opportunity. Are you interested?” And you send people over, and you get paid every time they join.

David: Right. When you spoke of the software, this was people. Let’s take the metaphor and go over to software as a service. Who bought your software? What are they using it for? What other things does that person need, either upstream or downstream, of what they are doing with your software that would either make their life easier, make things faster for them, or make things more profitable in whatever it is they are doing? Either save time or save money.

If you ask those two questions; upstream and downstream of whatever it is that you are doing, you will always find money. Don’t get me wrong; it’s a little bit hard for people to do that when they’re focused on their business. So, typically you have someone like me come in and say, “Let’s look at this,” and then we can do the brainstorming upstream and downstream. And you also need someone who’s not been in your market so long because a lot of times because you’re in your market we’re told to niche, niche, niche, niche. Then we get a little bit blind so it’s available. And we’re also told not to diversify. If you look at my website, you see I work with robots, jet plans down to vitamins and software.

That gets to a point where I can see a great many different types of products and services that are available, right? If you go there, Kawasaki’s Robotics, heavy industrial equipment. School Zone, that was flash cards and laptops. Ensemble, that was the nurse company that then turned into Nurse Place. But then . . .

Andrew: Ah, yes. Here’s where it became this company now. This is their name, Ensemble. What does Ensemble do?

David: Ensemble is actually a piece of software that actually does an evidence-based management system for hospitals and universities. So it actually comes in and says, okay, this person’s in accounting. Based against their peers, do they know everything an accountant would need to know? They do a 360 degree assessment of them, and then they basically match them against everyone else in the department to find out are they actually up to par and improving. And are they getting the training that they need?

Andrew: I see.

David: Role-based, not job-based because what they found in the nursing situation is if you help the nurse know and understand her role, then everything from doing the administrative work to changing bedpans to being a good, friendly nurse to the patient was part of the role of being a nurse.

And so that’s what they’ve evolved to from a Facebook for Nurses. Then they’re in software and human development and [??].

Andrew: This is what they became after all of these changes that you’re talking about. Look for revenue. Where else can we find it and so on?

David: Right. And now that they’re software-based I believe that. I believe if you do the research, you’ll see that they got picked up with a partner, I’m going to call El Severe [SP]. El Severe is like a 400 year old multibillion dollar publishing company. It is now their partner. They wouldn’t have been able to get there unless they came through the route of “We did the nurse piece. We did the social media piece. We did the membership piece.” Okay, now let’s move up the line now to software, and then they become more attractive to other companies.

Now this company is sellable. This is one that they would have built [??].

Andrew: Yeah, I peeked through my notes. This is the before shot. This is where they started, and that isn’t sellable as a business. This is where they moved to and this looks like a Marcel business. Their design looks better too, but the business idea as you’ve explained it is better.

David: Yeah.

Andrew: All right. Let’s move on to the next big point, and again we’re going to come back to this business that you worked with. But the next idea is find the profitable offer. This is the offer that they ran. You said they did both education and employment. What is Chamberlain? Oh, a college of nursing.

David: Right.

Andrew: So what is the deal that they had with them?

David: So they were actually selling leads to Chamberlain. Chamberlain was looking for nurses that needed to continue education or were going on to start. Ensemble, the nurse company, at that point had all these nurses. They had a bunch of nurses in the membership, and they were then selling leads to Chamberlain. And Chamberlain was advertising within their community that they had.

Andrew: I see.

David: And that was a profitable offer.

Andrew: That’s pretty typical where someone has a mailing list and they say, “I can’t keep creating products, and I can’t find advertisers for it. I’ll partner up with someone, and every time a member of my mailing list goes and signs up I’ll get payment. That’s essentially what it was, or did they take every lead fast . . . Actually how did they get the leads? How did they get their people to convert into Chamberlain leads?

David: Well, actually Chamberlain, there’s a couple of things that they did. I have a couple of models here. One of them, they had banner ads within the community. That was one. And the other piece was . . . Actually I remember being in a meeting. I was actually going to do lead generation straight into a Chamberlain landing page and drive leads, like an affiliate because, again, we knew AdWords. We knew how to get nurses. We knew where they were, so it was a matter of using AdWords, a skill we already had in our quiver. And actually push them for lead generation for Chamberlain.

Andrew: To be honest with you, that feels like a desperate move, that a company that’s doing well. Really?

David: Wow.

Andrew: Isn’t it a desperate move when they’re saying, “We’re now going to buy AdWords and send it to Chamberlain’s website so that we can get leads for Chamberlain. Then you become your main focus as a business. Then you start to become an ad buyer.

David: But wait a minute? If this is something that’s easily set up, you already had the market intelligence, it just basically runs itself. Okay, I’m going to take . . . I hear what you’re saying. I’m going to take a step backward.

Andrew: Mm-hmm.

David: Okay, so the work I was doing with Fleetmatics [SP] that was the fleet GPS system. That revenue stream, for me, was $9,000 a month. That stream for them was $20,000 per sale. So if you already had the market intelligence, and it’s easily set up, why not get the money? Because that reduces your burn. It’s not a desperate move if you already have everything in place. We already had everything in place because we learned the skill set when we were placing [??].

Andrew: All right, I get it. It gives you some room to experiment with ad buys and see what you can learn about buying ads for nurses. At the same time, I am so single-mindedly focused that I wouldn’t do that, but I accept that that’s what worked for you guys. If someone comes in here and says, “You know, we could start doing ad buys for,” frankly, if they even come in and they say, “We should be doing software for entrepreneurs,” I say, “No, no. We are focused on education. We don’t get away from that.”

David: But, here’s the thing. You have people who are available within your community. I remember when we spoke about this early one, I was like, “Andrew, if I were you I would set it up so that you had this community and I would do this that and the other thing,” and then lo and behold, you migrated to that piece where it become a profitable thing. You weren’t just giving the information out. You built a following, and now, the following is big enough with your critical mass, you’re in a position that you could say, “If you want access to this stuff it’s going to cost you some dollars.” That’s a good model. That model is the same one that they were using. It’s like, “Look, we’ve built this community.

Now, how can we leverage the community, keep it growing, and just find other revenue streams?” As a CMO as well as Chief Revenue Officer, where can we make money here? Where can we show revenue dollars to the bottom line? Because I was an SCO pay per click media [??], I said, “Oh, what we can do is,” and I started making connections and moving things around. Again, it wasn’t costly to the CEO. It wasn’t anything to me. I could outsource it, and it actually created revenue, so it depends what your focus is.

Andrew: Okay, fair enough. We’ll see what the audience thinks, also. I like when we have a disagreement, or different points of view.

David: No worries.

Andrew: I actually would like more disagreements here, but when we have different points of view I like to hear the audience because it does bring them out. It does make people say, “Andrew, you’re stupid. Now let me give you some reason behind it,” or, “Andrew, you’re brilliant. The other guy’s not right.” I don’t mind as long as people have solid information behind what they’re going to say to us. Onto the next big point. There is it, which is to borrow credibility. You did that when you worked for this company. I’m going to just bring up their Facebook. This is from Facebook. There it is.

David: Hugh [SP]. Borrow credibility, absolutely. Look at those pictures. Do you see the Rolls Royce, and what not? That’s one piece of it. Those pictures speak of a high-end product.

Andrew: You’re saying this is the way that you also borrow credibility, with the photos that you post on Facebook and the way that you communicate what your brand is about.

David: That’s one way.

Andrew: Okay.

David: The other way that I was actually really thinking of when I said that was, on their website, we got press, I believe it was the LA Business Journal, several trade journals, ABC, NBC, Fox, The Wall Street Journal. We took all those icons, put them on the website, “As seen on,” because then when you’re in the marketplace because you have the credibility…

Andrew: Here, this is from the site. Where is it?

David: Right. I said, “Just put these at the bottom, and put this into your investor’s package.” Why? Because, when I’m speaking to investors about this particular project they want to know that you already have traction in the marketplace. When you’re a startup, like a real startup, you have nothing and you have to borrow credibility from somewhere. So, to be able to say that these people have covered you says that you have some credibility, like the market does care.

Andrew: Okay.

David: We also did some work on Birchbox. Birchbox, they have well over, I believe, 200 reviews on Birchbox, so now the investor can say not only do you have market credibility but you actually have customer reviews and people saying stuff about your product. Subsequently, just this past weekend, they were able to take all of this credibility, go sit in a meeting with investors, and guess what? I believe they’ll be funded within the next couple of weeks. Done. Why? They had these things set up beforehand and not just a good idea, you see what I’m saying?

Andrew: Okay. All right, and you’re saying even being in Birchbox added credibility to them?

David: Right, because people know what Birchbox is, they have feedback from the marketplace, and now people are looking for it in stores and they were looking for what? Distribution. So, since they now have market credibility, people are saying, yay, nay, we liked the product, we didn’t like the product. Now when they go to the Neiman Marcus or the Macy’s, they can say, “Look, we’re out in the marketplace. We’re already making money online and guess what? The marketplace is saying that, ‘We like this,’ and, ‘This is an underserved market.’ But all these things add up in the narrative that they speak that gives them credibility and value to whoever they’re speaking to.

Andrew: Okay. All right. Let’s move on now to the final point. There it is: Move to where the money is. Great line.

David: Business 101.

Andrew: Yeah. Let’s bring up the company that did that. Again, I’m opening it up on a tab, but there it is. What is Videoo, with two o’s?

David: Videoo is a mashup between YouTube, Twitter, and Reddit, meaning you can take a video, upload it to this particular application, along with the hashtag. It will then put them all into one playlist. Then you can vote up or vote down the video that you like. So now you have customer interaction mashed up with video mashed up with the hashtagging of social media.

Andrew: Okay.

David: So for customer engagement, for a contest, or product reviews, this is a perfect application. They’re new in the marketplace.

Andrew: Okay. So then how did you help them find the money?

David: Well, they were doing plays at the network level, meaning ABC, NBC, Univision, that type of thing. They were looking at television platforms. Why? Because television platforms have the biggest eyes. What did I do? I sat and thought about it for a moment. I said, ‘Hmmm. Music. Musicians are looking for customer engagement. Let me go into the entertainment side and let me use this here.’ I’m finding that that is where the money is.

Andrew: With musicians is where the money is?

David: Not even with musicians, but in the entertainment piece because music videos are the most viral things on the planet number one. Behind that, if you drive interaction in those particular cases, you have merchandise sales, you have album sales, you have that type of thing. And, again, they went to the network platform side, I went at the consumer brands, big companies, like large beverage companies and whatnot, who aren’t necessarily looking for [??], but they’re looking for engagement and looking for branding. So there’s more money there.

Andrew: It looks like they haven’t gotten it yet. I can see that you’re saying, “Look to see where the revenue is.” It doesn’t seem like they’ve gotten that, right?

David: What do you mean?

Andrew: Have they figured out where their revenue is yet?

David: Well, I have. I’m the business development manager. I’m in those conversations right now.

Andrew: Okay.

David: There’s more money, just like with Kawasaki, in different underserved markets for the same product.

Andrew: OK. So then where did they find their revenue?

David: I’m finding the revenue right now. Can you see me?

Andrew: Yeah. Yeah, I’ll bring it up. I was looking at their site, but there it is. Yes. So where did they find their revenue then, or where are you finding it now?

David: In the entertainment space.

Andrew: By going into entertainment. Can you be more specific? What did you do?

David: I will say this. There are some protocols within entertainment in the music side that are very, very profitable. One of them is country music. Another one is rock. They are looking to actually continue the experience of the customer at the concert.

Andrew: So the musicians are paying to be connected to them after the concert.

David: Right. That’s the whole thing. If you think about musicians, look at this for a minute. A musician is a small business. It’s like a startup. Their product is the music. That’s what they have. The typical artist is about 7-10 people. It’s really a small business. Now, what do they need to have? They need to capture a mailing list. They need to drive customer interaction. The cell phones that everyone has with the selfies is what the video product does. Then they now know exactly who their customers are, they’re driving interaction, they’re building a list. If you have that, guess what? The next time you’re playing at that particular venue, you push the button, you drive people, you make money.

Andrew: I see. So now they’re partnering up with musicians and those musicians are using this platform to build their mailing list and the musicians are going to pay to be able to do that.

David: Right. Yes.

Andrew: That’s what you’re thinking anyway, but you’re not there yet.

David: I am in the conversations. I’ll put it to you like this: I’m right where I need to be.

Andrew: Let’s step away, then, from video. The idea here is you want to move where the money is. So what you’re saying is, ‘Look to see who has the revenue, where’s the market that has enough money to pay and help you build your business.’

David: Yes, and I’ll say something else too. The SAS model works in certain markets, and the software as a service market does not work in other markets because with anything, and I want to really stress this, any one of these applications or any one of your ideas is just a tool. But it takes someone from just the tool to but it takes someone from the tool to a result that they actually want or need in their business. That gap is really where the money is, and I typically play there.

Between the idea and implementation to result, that’s the biggest piece, because I could give you a hammer and you can build a dollhouse, a doghouse, a castle, or a bridge. Every one of those is going to actually bring more money, but it’s the same tool. You have to get really clear that it can be used in multiple places. And again, that takes, typically, someone stepping back, coming from several different markets to see “where can this be used?”

Andrew: Okay. All right, so that is what you do. You help companies find their revenue, and help them grow their revenue. We’ve talked about a few examples, and if people want to follow up with you, there’s this page that I’ve been showing quite a few times. By the way, the reason I’m showing that page every time I go to a webpage is for some reason, the software that I’m using right now, won’t allow me–here’s what happens when I just try to show any old webpage: Blank! Until… I show David’s page, and now I can go back to that same tab.

David: Wow. So I guess I’m special then.

Andrew: Weird. It will not show it unless I first show your page. I don’t understand. Actually, I think I’ve got a sense of why, and now I’ll have to and troubleshoot that.

David: Mm-hmm.

Andrew: For now, though, I will say thank you, David, for doing this. You do work with start-ups, you do work with companies that are further ahead, and the best way for people to connect with you is it to go to–in fact, for me the best way to see any webpage today is to just go to davidbullock.com, but…

David: You could either go to davidbullock.com or you can go to ceomastery.org.

Andrew: CEOmastery.org, and you prefer that to davidbullock.com.

David: Well, either or. Both of them will get to me. One’s my celebrity site, and the other one’s my actual consultancy site, which shows client results.

Andrew: Gotcha.

David: And what I’ll do for this audience is if you call and tell me that you came from Mixergy, we’ll spend fifteen minutes and we will find out another way for you to make revenue quickly with your business, and then we’ll work from there. I typically charge money for that consultation, but for your people, if they call and we set up an appointment, we will find a revenue stream for you within that first consultation, and then if we decide to move forward, we’ll do that. But I’ll do that for your folks for no charge.

Andrew: Whoa. All right, that’s a really big offer. There’s a way to really shock people and get their attention. All right. And the phone number is right up on the site. Do you want them to just call you cold, or shoot you an e-mail first?

David: Shoot me an e-mail first.

Andrew: I would suggest that, too.

David: Yeah; david@davidbullock.net is my e-mail. It will come to me, and what I want you to put in the subject line so I know it’s you, so you can take advantage of this offer, is say “Mixergy offer.” Put that in the subject line.

Andrew: Sure.

David: So if you email david@davidbullock.net, “Mixergy offer,” I will respond to that and we’ll move forward. If you just e-mail me and say “Hey, Dave, I thought the thing was great,” I’m going to say “Great, thank you for the kind words.” But if you put “Mixergy offer” in the subject line, then we’ll get back in touch with you, set up an appointment, we’ll have our little debrief, and we’ll figure out what we can do next. But the goal is to help you find another revenue source as quickly as possible, that is low cost, very high value, and low risk.

Andrew: Well, that’s a really generous offer. I appreciate you doing that. Wow. Thank you and thank you all for being a part of it. Bye, everyone.

DOWNLOAD TRANSCRIPT

Master Class:
How to use smartcuts to build faster
(the way hackers, innovators and icons accelerate success)
Taught by Shane Snow of Contently

Master Class: Smartcuts


Report Bugs

Master Class Toolbox

Course Cheat Sheet



Transcript

Andrew: This session is about how to accelerate your success. It is led by Shane Snow, founder of Contently, which helps brands build high value audiences, and helps journalists build a career doing what they love. This session is based partially on his experiences at that company, and partially on this book, which I highly recommend, Smart Cuts: How Hackers, Innovators, and Icons Accelerate Success. The reason I love it is because it’s so well written. It really sucks you in.My name is Andrew Warner. I’ll help facilitate. I’m the founder Mixergy, where proven founders like Shane teach. Shane, thanks for being here.Shane: Hey, it’s my pleasure. It’s great to be back.Andrew: You’re killing it with Contently, but a few years ago you ran this. What is this site right here? (??)

Shane: Yes. This is site that I worked on for a couple of years. It’s called Scored It, and it’s essentially a proto Pinterest. It’s like a very crude rudimentary Pinterest before Pinterest. This was my project for a couple of years. It feels like, looking at the success of Pinterest, it feels like I missed a huge opportunity, but it was an incredible learning experience for me as an entrepreneur in what not to do when you’re trying to build a company.

I learned a lot of lessons with it. Primarily, that you need to get over yourself, and show people your ideas early on, and be willing to launch something. I spent so much time putting everything that I had into this, and being so nervous about what would happen if people saw it. It wasn’t quite perfect. That by the time I was finished with it, well sort of finished with it. By the time I launched it, it wasn’t what the market wanted, and there were other things like Pinterest that were coming out that were actually what the market wanted.

This was kind of my missed opportunity, but that taught me a bunch of valuable lessons. I’m glad for it. Although, I spent a lot of time on it. I think a lot of people probably feel similarly about their projects.

Andrew: What’s one mistake that you made that anyone who reads Smart Cuts will be able to avoid?

Shane: I think a big one is, kind of a (??), almost a skip to the end of Smart Cuts. One of the (??) of the book is that if you want to build really big things you can’t do it alone. It can be easier to build big, incredible things, and do incredible things then to do sort of smaller things, but it takes the help of other people. One of the big things I learned from this is I was working on this by myself, kind of refusing to show it to people for fear of (inaudible)

People would take my ideas, or that I wouldn’t be good enough, and I’d be judged. Building my current business, Contently, I have two co-founders that I split the mental work load with, but that together we’ve been able to rally the kind of support that you need to build anything. I think at Scored It I was to married to my own ego, and I own precious ideas, and wanting to do it myself. Then realized that it was foolish if you want to build something that actually impacts people’s lives.

Andrew: We have a lot that we’re going to be covering here. I just realized that one thing that we probably left out is the section of your book about mentors. There are a lot of people who do believe that they need help, but they don’t know how to get it. You say that when they try to get it they do it in a foolish way. Let’s add that to the session later on.

Shane: Okay.

Andrew: First, just so people realize that you did get past that stage. That you have done extremely well. Contently now has these clients. How many Fortune 500 clients do you guys have?

Shane: We have, last count, we have over 54 Fortune 500 clients. Probably we’re at something more like 70 now. These are the logos of the different places where we have writers from. We have about half of the journalists in America have profiles on our platform as freelancers.

Andrew: Oh, really.

Shane: Yeah. It’s kind of incredible. It started out as my friends in journalism who are looking for work. It ended up building a platform where anyone who’s a journalist can create a profile, and showcase their work, and use that to get work, but we collect the data on what you write about, and how successful your work is so, that we can then match you smartly in sort of a match.com way with very smart publishers. For us most of those are brands like Coca Cola, and American Express that to hire writers, reporters for really good rates to tell stories for them. We’ve built a huge business off of this. It’s huge for me. We have about 78 employees that are . . .

Andrew: What’s the evaluation of the business now?

Shane: We’re a private company so, the valuation is kind of one of those things our investors don’t want out there too much. We’ve raised over $11 million, and we’re making eight figures in revenue, and growing very quickly, tripling every year. I think if we keep tripling every year we’ll eclipse the world economy in a couple of years.

Andrew: Over 10 million on revenue.

Shane: Yes. All right.

Andrew: How old’s your company?

Shane: Not quite four years.

Andrew: Wow. All right. Let’s go on to the big board, and see how everyone else can do what you’ve done, or grow based on what you’ve learned as you built up. Here’s the big board right there. The first thing you say is that we should apply the Frank Sinatra principle, right. You did that. How did you guys do it?

Shane: The, Frank Sinatra, principle comes from the song New York, New York. In the song he says if I can make if there I’ll make it anywhere. It’s this great classical line. There’s something about this song that captures the essence of being an entrepreneur, but also something like human psychology where we look at for judging people that we want to work with, or companies that we want to work with we can look at their kind of years of paying dues.

This is one of the concepts I explore in my book about how the paradigm of pain (inaudible) how much time you’ve spent doing something doesn’t necessarily correlate to how good you are, or much you merit a job. This is true from who becomes Fortune 500 CEOs to who becomes president of the United States. That the correlation between time spent, and dues paid it’s almost not correlated to how successful you are, or how good of a leader you are.

But what is, or what is a much better proxy to how good someone is this Frank Sinatra principle. Have you made it somewhere else that’s similar, or slightly lower down on the ladder? I’ll illustrate this with quickly with my journalism career, and then with what we did at Contently. When I first went out as a journalist I wanted to write for Wired magazine, which is my favorite magazine. Very first thing I did is I overreached. I pitched the features editor at the magazine.

I said I have a great story. He said, hey, I appreciate the enthusiasm. Come back in a few years kids when you have some experience. We just don’t print people that are without many years of experience. What I did is I went to the very lowest on the totem pole publication that was sort of in Wired (??) that I could find blogs in the same category. I pitched them, and I wrote for them.

As soon as I’d written a few stories I went one level up. Just a shade higher, a shade more creditable than these low level blogs. I wrote a few stories for them, and then went one level up. I went from the Next Web, to Gizmodo, to Mashable, to Fast Company, and within six months’ time I went back to Wired, I said, hey, editor at Wired, remember me. Six months ago we talked. I’ve since written for a Fast Company, and Mashable, and Gizmodo, and Next Web, and all these other places, basically, if I can make if there I can make it here.

Here’s my story idea. They ended up printing my first story for them. We applied this same idea that people are willing to take a bet on someone that’s coming from one wrung lower on the ladder if they’ve proven kind of by association that they’ve made it in New York. For our company what this was is we were three guys that had, we were entrepreneurs, but we didn’t have any big successes under our belt. We wanted to get clients that could pay our journalists really well.

We wanted to work with New York Times. We wanted to with the Coca Colas, but you can’t show up to Coca Cola, or the New York Times, and say, hey, we’re no one. Please work with us. That’s totally overreaching. We did what I think a lot of very smart startups do is we started small, very low on the ladder, and we borrowed the creditability like Frank Sinatra from the people we worked with. The very first thing we did is we sold some clients that no one had ever heard of on our services based on, sort of, the merit of our services.

We stuck their logos on our website. These were not anyone you would know, or respect necessarily, but then as soon as we had some clients in our office who were rather than just owning the niche of these kind of crappy, small not ideal clients, and just going for that, and expending broader there. We went to one level up. We said who’s slightly bigger, or better than these clients, and let’s pitch them.

We showed the logos of the clients we’d worked with before. We pitched that next level client. Then as soon as we landed those clients we put their logos on the website. We replaced the old ones. Then we went to the next level, and then we went to the next level. Until after about nine months we were pitching American Express, which became our first Fortune 500 client. The pitch for them was not hey, we’ve been in business for nine months, but we’re really great guys, and we have a good product. Please trust us. Because that doesn’t work with someone at that level.

The pitch was look at this huge roster of clients that we have worked with that we’ve built up to. In fact in a very short amount of time we have such momentum in the market people are talking about how fast our star is rising, and don’t you want to be on that train too. That’s the idea of the Frank Sinatra principle. You move from New York if you’re a lawyer. You go to Kentucky even if you’re the worse lawyer in New York in Kentucky they say, well, she was a lawyer in New York. She must be good. That’s kind of the idea of the Frank Sinatra principle. Again, back to this idea of ego. We all think that we can work with American Express, or we can write for the New York Times, or Wired magazine, but it’s proving the creditability that you have what it takes. It’s difficult in this way of borrowing from a brand that’s similar a little bit, a step away, is a very effective way to do that.

Andrew: How is that different from just paying your dues? From saying to someone who’s listening to us, “Go out there, spend some time before you get to American Express, sell to a lot of smaller companies.”

Shane: The idea is you reverse engineer your own series of steps to get to the big goal and you make them steps that can be accomplished very quickly. To work with American Express, they might want to see normally that you have five, ten years of business experience. You’re not spending five or ten years of business experience if you go this sort of non-traditional ladder climbing route. You want to break things down into steps that you can complete immediately.

So, again, back to my journalism example, most people start out as journalists as an intern at Wired. This is conventional dues paying advice. You get an internship. You work really hard. Then you get a job as an entry level fact checker and you work for a year or two, and then you get upgraded to a junior reporter. You work for a few years and you get upgraded to a mid-level or senior reporter. Then you wait for someone to die of liver failure and you finally get your shot at being a columnist or a feature writer. Suddenly ten years have gone by. If instead, you jump from ladder to ladder. You jump from different places.

Andrew: Rapidly trading up.

Shane: Exactly, rapidly trading up.

Andrew: The example you give in your book are Brigham Young University students who don’t drink at night, but instead they play this game called Bigger and Better. They start out with one little thing. They knock on a door and say “Do you have something bigger and better than this?” And they go from a paper clip to a stapler. They go to the next place with the stapler and say “Do you have something bigger and better than this?” That’s what you want us to do, rapidly ask “What’s bigger and better” on our way towards this goal that we have, and for you it was companies like American Express.

Shane: Exactly.

Andrew: Ok. Alright, and as we can see right on your home page this is actually… I was looking to see ‘How do I describe what Contently is?’ And right on the home page is your client. It does speak volumes. You don’t have to tell me so much what you do when you say here are the people who trust us. Then, I pay attention to what you do.

Shane: Right. If you see Google and GE, you say “Oh wow, these guys have made it in New York” so to speak, and maybe it’s worth talking to them.

Andrew: All right. On to the next big one. Which is, you say “break the rules.” You guys use to work with clients that you now call, or publishers that you now call “crappy clients.” They pay low rates, right?

Shane: Yes. So, the break the rules thing is really interesting. Essentially the premise of the book Smart Cuts is that when, throughout history in any industry from business to science to art, to government. Whenever you see breakthrough change or step function improvement rather than incremental improvement, it’s when someone has broken the rules that aren’t rules. They have gone against the common convention, or the common assumptions of their industry or field. Picasso was great because he broke all the rules of art that was contemporary at his time. You don’t always succeed, sometimes you break rules and you fall flat, but you don’t change the world by playing the same game that everyone else is playing.

Andrew: What’s the rule that you may not even have realized you were following in your industry at Contently?

Shane: The rule was… For us, we assumed that we were working with journalists and that the clients for our journalists as freelancers would be media companies. That they would be working for journalistic organizations. And so we went out trying to sell to The New York Times, and CBS, and NBC, and Esquire and these kinds of companies that journalists weren’t right for. They do journalism. What happened to us was… First of all that industry is a very tough industry. They are going through a lot of changes and the reason we have so many freelancers is because they were being laid off from these places. We are trying to broker work for them as independent workers but it is very hard.

These are business that are very resistant to change and technology because they are worried about more jobs being lost if they get more efficient. So, it was a slog until we realized that… One day our first big epiphany client was a company called Mint.com, that I’d worked with as a designer years before. In the same week, or couple of weeks, we went to CBS and they said “Hey, we love what you’re doing. We have a big project for you. We want to pay ten cents a word.” Which is like sweat shop rates. Then in the same week or two weeks, fortnight if you will, Mint.com which is owned by Intuit, a gigantic financial services brand. They said “We pay a dollar a word.”

So the light bulb went off for us that maybe there is a market for the talent that we’re brokering that is completely outside of the realm of what we thought was possible. Maybe there’s an unexpected source of work for these guys that the skillset that you have as a reporter and a story teller, and as a journalist could be in demand elsewhere. And we found that that’s the case and since then in the last three years the word content marketing the term contentment marketing has blown up and everyone is doing brand and content and native advertising. These are all euphemism for commercial company’s doing what journalist do best which is finding great stories and tell them, building relationships with people through story telling.

So this was in the early days very scary to us and to our users who said, you know, journalism is this pure crash, you know this is something we’re keeping the government honest we can’t do journalism for a company that has a marketing mission you know where the ethics. And so we struggled with all of these things about how do we address the ethic of this industry? And how do, it’s clearly a source of income for us and for our journalist how do we make this work.

And over the last couple of years what we’ve seen is that not only have people congealed around a source of code of ethics and that largely driven by the work that we’ve put on there, but also this is a market that no one saw coming on as fast as it did. And because we were willing to sort of say, sort of defy the faces of the old school media people from where I come from about what a journalist can do, we were able to build a dramatically bigger business then we thought.

I mean this idea of breaking rules, we do this all the time when we think about, you know, what are the products that we’re building things like deleting features, are going against kind of what is expected. I mean you see talked about.

Andrew: One delete more of the features is we’re going to get to in a moment, is do you delete something that’s pretty shocking. By the way why the company… why do you pronounce it contently instead of contently.

Shane: So the story is that we originally were calling ourselves contently, because it’s a content based business. But people kept saying, contently. And so we eventually we decided to go with that, what the users are saying, we’ll adopt that. But it’s kind of become part of our brand that we work with huge company’s, we’re a B2B company.

Typically that’s a very stuffy business to be in. But we’re known as being very update and I think that’s what keeps us positive internally.

Andrew: You’re just contempt, you’re fine.

Shane: Exactly. We’re happy, we’re upbeat, you see this with our design and with the way our office is, and the people that we hire. And I think that… I mean that makes me happy. So we own that contently is more than just content. It’s about happiness and value and love at some point.

Andrew: All right, fair enough. Next big point is you want to build from the tallest platform and you guys had a problem where writers would apply to write and what would they do?

Shane: So writers would apply to write and part of our challenge is we wanted to broker work between real professionals who could command high rates because that’s good for our business, it’s good for them because they could survive. But you have a lot people… there are lot of people who are willing to write for very low rates not journalist or sometimes journalist. But there’s this thing going on called the content farms were you search for something on Google and all ten results would be crappy sites like eHow and YSpeak these SEO sites they’re paying writers five bucks to write this content for the robots, for the search engines.

And we really didn’t want to be that kind of company so we wanted broker work for people who were really good that could command high writes, that could create content that people loved, and that people shared. And to do that we had to screen basically the good writers, the professionals with real journalism expertise from amateurs or you know people who hadn’t gotten there yet or people who were just trying to make a quick buck on the internet.

And so initially what we said, we had people self-identify meaning we had them sign up we said, what are expertise in writing about? Turns out people who are desperate for work, desperate for money will say they are great at everything. And so it’s very hard for us to… we’ll wanted to build a scalable business, we didn’t want to fact check everyone by hand, it’s very hard to get this business rolling with that problem.

And so what we realized is that the best… we tried all these things we had people write essays and it turns out that the people are most motivated were the people who were most desperate for money. And that real journalist were skeptical of like why do I have to write an essay like I have other options. So we evenly realized it’s almost like an oh da moment that you’re past work is the best indicated that we can see how good your writing is. If you’ve written for the New York Times, then that’s a good indicator that you’re a pretty good writer. Especially if you’ve written for them multiple times like if they had you back.

And at the same time we realized that writers aren’t necessarily Web designers and they want to promote themselves, they want to build a Website so we build this system that basically lets you build your own Website, put in all of our work, your clips so that we could see you past work as representation of you best selves and then screen writers based on that. You could actually do it through data now, which is really great and automated. But, the problem was. . .

Andrew: There used to be a search when I first interviewed you, it was self-reported right? You’re supposed to link to your articles.

Shane: Exactly, you’re supposed to link to your articles. You’re supposed to find all of your stuff around the internet.

Andrew: Mm-hmm.

Shane: And we’re supposed to trust that it’s you, and you’re not masquerading as Malcom Gladwell. So it was a big task, and what we wanted to do is to help them to say, “Type in your name and we’ll slurp in your work from around the internet,” which is itself, a standalone product. That is actually a very hard thing to build. You’re building a search engine, essentially.

Andrew: Mm-hmm.

Shane: There’s all this work that either our users had to do or that we had to do. One day we figured out that we could actually leverage other people’s technology to do this, and we could leverage Google to find all of the articles that someone had written online.

So, we talk about these platforms. A lot of people start with, “Well, we’re going to build the thing,” you default to let’s build it. What we started looking for was, “Who’s built something similar that we can basically co-opt?” We can stand on top of the mountain that they’ve constructed.

Andrew: Mm-hmm.

Shane: We ended up hooking into the Google and Bing API and making it so that we basically used their APIs to search for, so I type in Shane Snow, and. . .

Andrew: Is that how you built this? This comes up because of Google and Bing APIs?

Shane: Yes, so this gets built now in 20 seconds. So I type in Shane Snow, and we hit Google and we hit Bing automatically, and we find all of Shane Snow’s work at all of his publications, pull in all of the logos, pull in all the pictures and all the information in 20 seconds, or less. Then I can drag and drop and make it look nice.

It turned out that this was the killer feature that got us thousands of writers, that people who were slow to sign up when it was this arduous process, and they’d add five clips, but when we did it automatically for them, suddenly people loved this experience. They built these websites they were very proud of, and they told their friends, and we had this viral growth start to happen.

It could have been. . . It could have taken us two years to build this feature had we done it kind of the stupid way, which is how I built my old public interest site.

Andrew: Wouldn’t it have been better if you built it yourself, instead of using Google?

Shane: Totally. It would have been. . . Well, so, what we built in, like, five days, is 90% as good as it would have been if we’d spent two years on it. So it would be better. There still are false positives. There’s still bugs and there’s still problems, but done is better than perfect, especially when you’re in the early days of [??].

Andrew: So, you’re two years faster, and as a result, yes, you lose 10% more. . . I don’t know. It would have been 10% better, but it’s faster, and it works, and you’re doing it by leveraging someone else’s network, someone else’s platform. And that’s the way you want us to keep thinking?

Shane: Exactly. We do this all the time and anything. . . I mean, especially with stuff that we’re building, but even with our learning. I talk about, in the book, how kids who are given calculators earlier actually learn the underlying fundamentals of math faster than kids who are given a pen and paper first. So there’s something about this idea of giving yourself the best technology and a leg up first. Even if you think it’s going to hamstring you a little bit, what it does is that it gives you the jumpstart that gets you the accelerated learning in the beginning, and then that gives you much more time to go into, refine and optimizing, get that extra 10% much quicker than it would take otherwise.

Andrew: All right. Let’s go onto the next big idea, which is, the way I wrote it anyway, it’s steal. You want us to steal, not just steal, but steal from the masters. And you did it. How did you steal using this spreadsheet?

Shane: Yes. So, this is one of my favorite things that my friends call “Shane’s neurotic spreadsheeting.” One of my heroes is. . . Speaking of stealing from the masters, one of my heroes is Ben Franklin.

Andrew: Mm-hmm.

Shane: The autobiography of Ben Franklin, if you get nothing else out of this conversation, is go buy that book. Actually, it’s free, I think, on the Gutenberg Project. Read the autobiography of Ben Franklin. This guy was incredibly inventive, and I identify with him because he was a journalist and an entrepreneur.

He’s this incredible thinker who kind of bucked the common convention, which is what I’m all about. What Ben Franklin did, I have stolen from him, and consequently been able to learn a lot of things quickly. What he did was he decided he wanted to be not just a good writer, but an amazing writer. Most of us, when we want to learn a skill, either at a meta level, as a business, or as an individual, we, if we’re. . . If we go the conventional way, we’ll go to school, right?

Andrew: I’ll tell you, I went the conventional way. I said, “You know, I’m going to start writing on Mixergy. I need to learn how to be a writer,” because I never really cared about writing class in school. I went to Gotham Writing Workshop when I lived in D.C., and boy, this was horrible. First of all, they were really out of date. They believed that the newspaper industry was going to come right back and people were going to come right back, and people were going to buy newspapers. Which just was maddening! The way that they-

Shane: Wow.

Andrew: …they learn. The way that they forced me to wait to get to the next thing was just crazy making. So that’s a conventional method, and it clearly was a pain in the butt. Out of touch.

Shane: Yea! So what, what Ben Franklin did …

Andrew: Mm-hmm…

Shane: …when he wanted to become a good writer, the other thing that people do is they go for higher a coach or something and, you know, this gets at the mentorship idea. What Ben Franklin did, he said, I don’t want to learn from my peers, or sort of the local expert, I want to learn from the very best writers in the world, and I want to get as good or better than these people. So he took the prevailing magazine of the day, which I believe is called The Spectator, it was sort of The New Yorker of the 1700s.

Andrew: Mm-hmm.

Shane: It’s this great magazine from England with the best writing ever. So what he did was, he’d sit down with this magazine, he would take these very detailed neurotic notes, on a sentence level. Like here’s what a sentence essentially says, here’s what this paragraph essentially says. And he’d do this for a full article, and then he’d put the article away, and he’d come back in a few days, when he had kind of forgotten the story, and then he’d look at his notes and he’d try to write the story, write the magazine story from his notes.

So he was kind of doing this steal and copy, and then recreate, this deconstruct and then reconstruct process. And he’d write, you know, his article as best he thought like this is how the spectator would right this based on his notes, and then he’d compare his story to the spectator’s story. And then he’d look at what they did that he didn’t do, and in this process he learned about his, the things that he did by habit, that he wouldn’t have necessarily have picked up on. You know, the way he used vocabulary, the way he used sentences, the things he did wrong. And he’d do this over and over and over again, until eventually he’d brag that he was producing better versions of these stories than the original versions.

And so this is a concept that I’ve sort of stolen from him, and this spreadsheet that you’ve pulled up, is me when I decided I wanted to start writing longer stuff. I wanted to look at, and when I was working on my book, wanted to look at my favorite, the best writers in the world who were good at long form narrative feature writing. So this story was one of the, probably the, one of the best feature stories out there. It’s called the Great Zucchini by Gene Weingarten. Hilarious story. It’s hilarious and so well done.

And so what I did was at a sentence level, at a paragraph level, at a word count level, I mapped out exactly how this guy constructed this story, in a neurotic way. And you’ll see on the side, you know, number of words of this length, even, and this many syllables, and at a level of detail that it’s, probably, like why would this matter. When you go through this, and you map out stories over and over again like this, you start to pick up the tiny details the patterns of what make the difference between good writing and exceptional writing.

And so, I’d do this with all sorts of things, with writing, I wanted to write a non-fiction book, I went and I looked at writers like, this, and then I went and looked at great fantastic fiction writers or people from other industries. And I did the same neurotic sort of spread-sheeting process, so I could not just absorb other great art and try to emulate it, but that I could figure out why, what are the mechanics for what makes for great writing, and of course infuse my own style.

Andrew: All right so here’s what I see when I look at it. You broke it up by sections, so section one The Cox Family Party. Break it up further, each section in paragraphs. Paragraph one, lead GW jumps into the scene but doesn’t spell out what the occasion is, it’s almost a cinematic beginning focusing on the character while unveiling the setting. And then you break it down, sentence by sentence, you put each sentence in it’s own cell, and then each sentence gets a work count on it so that you can see it’s 20 words in the first sentence, 10 words in the second sentence, two words in the next one. Then you have your notes and then you out how many one syllable words, how many two syllable words, and this just gives you a deeper understanding of what he did with that article?

Shane: Yes, exactly! I learned how he built suspense, how he sets up characters, how he describes things and actually what I learned from Gene Weingarten, whose a great writer, what he doesn’t say is actually more important than what he does say. He’s very brilliant at this, and you only pick this up when you really dissect it. Also he uses a lot of one syllable words. Like his writing is so punchy-

Andrew: Right.

Shane: … cause he uses so many one syllable words and then punctuates it, once and awhile with a really big word, especially as you get further down the spreadsheet. And I found that you know, in my own writing I’m too robust and I’m too, I use too many big long syllables, words that actually slow the reader down. You can read one of his stories twice as fast as a story of mine at the same length. And so these are the kinds of things that you learn, and that, and so when I would write, I would say, how would Gene write this sentence or this paragraph? How would Gene open this story, and some of my other favorite writers you know? How would Oscar Wild do this? How would John Robson do this? And that’s what I mean by stealing from masters is when you get to the point where in your practice or in your career you’re having these sorts of heroes of yours guide not just your discipline, but kind of your journey as well. Asking that like what would so and so do.

Andrew: What did you learn in your book? In Smart Cuts you have a chapter open up with a story, that creates a sense of mystery. Then you go to another story, and then another story. They each build on an understanding that we need to have in order to unravel the first mystery that you just, put in front of us. Where did you learn that format?

Shane: So there… I mean there’s a couple great writers that do this very well. Charles Duhigg, if you read his book The Power of Habit, has a couple chapters that are built this way. But really where this came from, is the TV show Alias. So J.J. Abrams is one of my favorite story tellers, and he is fantastic and you see this thing that he does actually does in many of his movies too. Like the Mission Impossible 3 movie has this great opener where Mission Impossible 3 opens with this scene of Tom Cruise and he’s tied to a chair and there’s his girlfriend and she’s got the gun to her head and it’s this cliffhanger moment halfway through the movie, and then it goes back to the beginning.

And so the whole movie, when you want to get up to use the bathroom, you’re like “No but what if it gets to this part?” And so I studied how he does his story telling, to try and create this cinematic effect, and I don’t think I nearly capture the essence of how great a story teller J.J. Abrams is, but I love… For me it was about getting people to reach the end of a chapter and then end the chapter on a note where they say “Well, gosh I got to start the next chapter. It’s not that late I want to start the next chapter”. And so basically I looked at people that…

Andrew: I get that. And the other thing it does…

Shane: Thank you.

Andrew: …is because you started out with 1 mystery and then another story and another. And all these stories come from real life, real experiences. By the time we’re done with the chapter, we understand the first mystery and we have a conclusive understanding of why it happened. But we also have this layer of understanding that goes along with having multiple supporting stories. Speaking of the book, and here’s something I didn’t have in the outline, but I think it’s important. You say that to accelerate success, you need mentors, but you can’t just walk up to someone and say, “Be my mentor”. So…

Shane: Right.

Andrew: …what’s the better approach? And not just you, but Charles Sandburg said it in her book Lean In. What is the better approach then if we want a mentor?

Shane: So, the question I wanted to ask when I started this, was you see throughout history from Socrates to Star Wars to Steve Jobs, this mentor relationship that accelerates the student’s growth and success, right? Mr. Miyagi helps…

…[??]…

Andrew: …Steve Jobs had a mentor in the founder of- What’s his name? Cook into it, and a couple of other people that you mentioned.

Shane: Exactly. And, you know, Obi Wan Kenobi trained Luke Skywalker, right? And that’s how he got good with a light saber so quickly. And, so you see this is part of our culture. We understand that this mentorship relationship can be powerful, but when you look at the research you see that, actually on balance most mentorship relationships yield nothing. No better salaries, no better outcomes. Not even better likelihood of not ending up in jail. And so what I dug into is what is the difference between mentorship relationships that work and that don’t. And the big thing. And I don’t want to spoil too much, but the big takeaway has to do with the organicness and vulnerability inherent to the relationship. And the mentor guiding not just your practice, but guiding your journey. The thing that bothered me, is, you know in Plato was mentored by Socrates, right? There was some kid on the other side of the world that was just as brilliant as Plato, who had no access to Socrates. And like that sucks and many of us are like this, and we grow up in places where we don’t have access to whoever it is that we want to be our mentor.

And what were told, is to do this sort of weird networky thing where we find their email address and we ask them to mentor us. Or we show up to an event with a business card and we say “Hey will you please mentor me?” while your hands are shaking giving them your card. And this doesn’t work very well. It’s not an informal, organic, vulnerable relationship that gets built out of that. And usually the answer is “I’m sorry I’m busy”.

So what I looked at is through this story of Jimmy Fallon, who is one of the youngest success stories in comedy and now he’s the youngest night show host in 50 years. How he got on Saturday Night Live so quickly, as this kid who knew no one, who came from nowhere. And part of it is… Has to do with finding mentors that can guide your journey, that aren’t necessarily alive, and aren’t neccesarily people you have access to.

What you see is this pattern of credible people from, you know Jimmy Fallon on to others that they profile in the book, like Elon Musk, that they become obsessed. Like I’m obsessed with Ben and Franklin. Obsessed with incredible people and they learn their biographies, they study their autobiographies, they study the tiny details of their eating habits and their spiritual habits and their work habits. And part of what Jimmy Fallon did was he obsessed with Adam Sandler to the point that he asked himself the question what would Adam do? And he memorized his manager and like his own history and every line from every one of his movies.

And what Jimmy found is his mentor, who didn’t have any idea about who he was, who guided him through his journey as a comedian from that far. And this steep obsession that relationship that you have that the other person doesn’t even know. And through the book I talk about how this is something Jay Z talks about it; this is something that Lewis [??] talks about; this is something that this amazing shoe designer that I found talk about using Jackie Robinson as this focal point to help him to not only get through the hard things he was doing but also practices discipline. You don’t have to access to a great mentor if you have the right strategy for finding for I guess studying and obsessing over one person in the world, who can be your guiding star.

Andrew: And this spreadsheet that you have created isn’t just about anerosis [SP]. It actually worked. Here is your article in “The New Yorker”, which is not an easy place to get featured. we are not just talking about some blog. We are talking about a magazine, a publication now online too, with incredible history

Shane: And it was definitely an honor and I have some other stories coming out in the New Yorker pretty soon. As a twenty something, you know, who has just come in to journalism a few years before it’s incredible. I am kind of crazy to me. And I owe it to these people whose writing taught me how to write and like that. But its I mean it’s a small case study in how you can accelerate beyond the time that people lay off for this how long should it take to get in to New Yorker or to build a business or two or to learn a discipline.

Andrew: All right. On to the big board, Let me see what’s the next big idea is. It’s to build built to throw away as soon as possible. This is one of the things that you throw away. That’s shocking. Sorry we are deleting your account. who do you do this to?

Shane: [Laughs] So, in the early days, we had this problem of all these writers who were not good or who didn’t know they were good and all these kind of desperate scam me make money on the Internet types. And we had to reiterate on what we are doing with content, how we are screening people, the platform itself? and the common advice we get even from the forward thinking start up circle is to fail fast fail often test test test, you know Iterate, Iterate Iterate. But there is one tiny thing, I mean there are a couple of things that are wrong with it.

But there is one tiny thing that’s wrong with it is when you don’t or not willing to let go of what you have done before., it’s very hard to iterate completely in to again sort of break the convention that is holding you back from breakthrough success. So we had all of these users in the very first version of content [??] that we knew that there were some diamonds in it. But there were a lot of bad users. So we agonized over what shall we know do to agree to screen these writers s and get and sift them and all of that. And we realized that actually the easiest thing to do would be to delete everyone and make them re-sign up rather than take the thing that was not working and try to mold them in to something that was, Let’s just start over.

Andrew: Because when you are first looking for writers to participate, you were looking anywhere. You guys were operating out of a sense of desperation, so you went to forums, you went all over the place try to get people and when you do that indiscriminate search you end up with not very discriminating list of people and instead of adjusting you are saying we just deleted him.

Shane: Just deleted him. And we actually ended up. It was this terrifying kind of liberating experience, Wow, we just deleted a lot of users. Anyway we sent an E-mail that said beta was closed, sign up again later sort of thing or however we did it. We ended doing this two times where the next version we built it to throw away. We said we are going to learn in this one month period. We are going to learn more even more and we are going to figure out what’s wrong and what’s not. And then at the end of that we are going to delete that beta and do it those users we are going to throw it away.

Andrew: Until then at that point we are deleting you. if you sign up, there is a temporary relationship

Shane: Exactly. This is Beta version 2. You know, thanks for joining.

Andrew: What else did you delete so deliberately? I know the first version of the site, the first version of the software you deleted and started over

Shane: We deleted the software.We deleted the users. We deleted. we essentially deleted the software twice I believe how many times the software got deleted. And we restarted with users I think it was three times. The only think that we delete though often is features. so we track everything that often in the site down to the mouse movements and a lot of it is synonymous tracking. But there are also such things that people will tell you they want or they need as, your user, your customer. And then so what we do is we track these and the things that people aren’t using, or that 20% of our users are using we end up deleting. And it’s a little bit scary but it’s surprisingly liberating that what happens when you kind of like clean out our closet, you throw out the trash or you move to a new house and you don’t take your stuff with you. That you become suddenly unencumbered and you don’t have to make excuses for the stuff you old had.

So you know when you have this old novelty t-shirt that you love and it has sentimental value and you make excuses for why you’re keeping it. And it loads your luggage down. But once you throw it away you don’t think about it. And it actually helps you to move on and maybe dress a little better next time. That’s kind of the idea.

Andrew: David Cohen, actually who reintroduced us he’s an investor in our company. He said to me that you should delete features just to see if people complain. Because if they’re not screaming about it they probably didn’t care about it, and weren’t passionate about it. And so you should get rid of it as a way of staying lean. That’s what you going, did you ever delete anything and have people scream at you?

Shane: We deleted… we’ve had people scream at a couple things we’ve deleted. I don’t know if we’ve brought anything back, because we… I’m sure we have I can’t think of an example though. I mean people have complained about we deleted green button and they want it to be green again or whatever things like that, and you ignore that.

But there’s not been anything that we’ve deleted that everyone has flipped out about and it’s because we’re very deliberate about it, but we know that people aren’t using it. Sometimes we’ve deleted stuff that people are using, but we message to them that this is gone because X is taking its place and then they understand.

Andrew: All right, on the board, speaking of David Cohen, the founder of TechStars. Next point is to focus on small wins and harness momentum. There was a period were you guys weren’t doing as well as you’re doing today. We’re you guys were close to running out of money and you decided to raise how much money?

Shane: We wanted to raise a million dollars.

Andrew: Okay, and it’s when you did it, I’m assuming people saw how big the business was going to be and they said sure because that’s the way things work sometimes.

Shane: We had a whole line of people outside of our office offering us, you know million dollar increments. Some were saying two how about ten, no.

Andrew: You know we get a little bit jaded because it seems like everyone’s raising not just a few thousand bucks, but millions of dollars here and there and it seems so frickin easy. But as you say, it wasn’t so easy for you. What happened?

Shane: It’s not, and so many… you only hear the Cinderella story’s and actually a lot of time those stories they’ve been tolling for years before they get their magical break. But most of the time you’re spending a lot time and effort and you’re not getting the deal you want. And entrepreneurs say, we’re optimistic, and we believe in ourselves and we have this great vision. We often do over reach.

And so what we did, we tried to raise a million dollars and we didn’t have that much revenue, we didn’t have that much traction. And we were banking on well we have great team but people said, well what is your team. You haven’t sold a business before, you know you’ve built stuff but you haven’t sold anything.

And so we realized that it’s harder to, you know again back to that analogy that you started talking about, that I talked about in the book of the students that they’ll trade the toothpick for the pen, for the sticky notes, for the flowers, and eventually they get a television set.

If you go door to door and you ask people to give you a television set they’re going to call the police or they’re going to say no. But if you go door to door and you break the task down in to a serious of tasks, when you show up with a bike and say would you trade me this bike for a television set it’s a much easier ask.

And so that’s what there’s this, in psychology they call this the psychology of small wins. Small wins are small tasks that you can complete very quickly and easily and they have a low chance of failure. But that to us that sense of progress even a very tiny win is very motivating but it’s also very motivating for people who are watching you for outside supporters.

And it’s interesting when you look at statistics around companies that can raise money and how much money they raise. And you know get big grants and customers and all of these that momentum appears to be more important than sort of the raw numbers of success. So a company that’s smaller but this is growing faster or appears to be moving faster, having lots of wins over and over again will get better deals from investors then a company that is bigger than that company.

And so what we realized is we were reaching to big but if we could go a little smaller a lot smaller then we could take that and take the success that we could get from a smaller round and parlay that for something bigger.

Andrew: How small what was the amount that you guys went for?

Shane: We ended up raising $300,000.

Andrew: Three hundred, that’s what you went for?

Shane: Yes and it was a third of what we wanted, which it’s kind of disappointing right. And you feel like a little bit less of a person, right.

Andrew: And you clearly said, by the way this is from, this is from the deck where you guys were trying to raise money right, you have clearly said, this is what we are going for.

Shane: [laughs] To be on the honest side Yeah, we were raising $1 million both the…

Andrew: And when you didn’t get, frankly it wasn’t easy even to get $3000.In order to get it, you said,” Look if we get in to Tech stars” and looking at my notes here “we will raise money and after that you are going to do better”. Right Give us three hundred thousand. we will use that to get in to tech stars. And as a result of getting in to Tech stars, what happened? what else did you tell them?

Shane: Yeah, we said. we are going to do; we are trying to get into TechStars. TechStars, it isn’t a solitary program, there is some brand cache, there is this Frank Sinatra thing. With that if you make it in to TechStars. We are going to go through TechStars and then we are going to raise a $1 million or $2 million and over that three months, you are going to triple your investments. Basically it’s like, you are going to take a small win, we going to do this TechStar thing, and then we are going to go for the bigger win and that was the pitch essentially to the investors and we took a little more delusional than we would have had, we would have been able to raise million dollars in the beginning. But it actually made it much easier much faster to deal. And actually the things that happened is we when we were talking to TechStars people, they were pretty interested. But they are on the [??] they all have good companies. And when they heard that we were talking to these investors found a collective who were these great investors.

Andrew: And they were a collective great group of people

Shane: Yeah. They were moderately interested. They were intrigued by the TechStars thing. When the TechStars started a way to talk to them they said well a friend of collectives is interested in you. Then we ought to get you to the tech stars. And then we went to back to the friend of collectives and then we said TechStars is interested in us and TechStars are letting us in. They said well, if you are going into TechStars and we going to give this money. This is going to be a great deal for us.

And that’s what happened. It kind of played off of each other. And then we did the three month TechStars program. And then immediately after the three month program, we were able to raise $2 million. It took us six weeks when normally it would take three to six months. And that was because we broke it down into a series of smaller wins rather than trying to eat the whole elephant at once. And of course there was a lot of other dominos that have to fall in place, but that was the idea. Rather than being supplied for. No it had to be a million but then we fail that don’t get this because we said and everyone heard us say it. That didn’t matter. What mattered was building a business and getting out of our one way.

Andrew: And you are in and you are actually read about. they were starting to tell your story on their site, Right. There you are. You were one of the companies that they were proudest of having had you in the program. Right on to the big board again. Next big thing is to kill complexity. And you guys decided that even though Google Analytics exists, Clique exists, chart beat exists. You are going to create your own analytics package. Why?

Shane: So our customers. So, why create our own? Again back to this, we should leverage this platform. someone else had built something. You know, we wanted our customers to be able to see that the content they are creating were turning into a return on their investments. So that they can continue being customers and also they could create content that’s good for their business. Good for the world. Interesting for the journalists.

Andrew: Look we have these great writers they might they have signed up and they have. We have these great writers and look at how they impact your business. And they see statistics that show it, they are much more likely to buy it. Makes sense. Okay, that was your idea. Why create your own then?

Shane: Well there is a different between Google Analytics or Chart beat will provide for you and what we want toe. We wanted to show them that People spend so much time with your content and that eventually turns in to conversions and brand lifts. So there was, there were features that we couldn’t find on the market. So we wanted to build those features. But when we started building analytics platform the common thing and the very first thing that we started mapping out before we realized that it was a bad idea was there is all the data you can collect. You can put a JavaScript on page and you can get all the page views, you can get the referrer and you can get where they went next and you know all of these things.

We decided when we start analytics platform that we didn’t want to have any of the features that these other platforms had. So we probably had Google Analytics installed already. so we decided to and people gave us a lot of hard times at this. But actually we got a lot of buzz out of it that we realized an analytics platform that did not tell you page attributes. And didn’t tell you the most common attributes that kind of default you know, we didn’t tell you the shares. You have no idea how many shares are happening even though you cut on the page. We could collect that. We could show you that information.

And because we wanted to make it as simple as possible for the one goal that our clients have these content marketers they wanted to know how we are building our relationship with future customers. How people should be coming customers. Page views might correlate to that. But often it doesn’t, also you might be measuring page view shares certainly don’t correlate to that. There is also all sorts of data that allow people to share before they read the stuff.

And so we basically showed them a couple of metrics and it was how much time in aggregate are people spending with you across their visit so if I come back to Mixergy five times, there’s a running counter of how much time I’ve spent with you so how that relationship’s being built then how far down the page they get. Percentage of the story they complete. So those are the two things that we showed initially and people freaked out at first. They said, where are the page views, where are the shares? Shares are important and we said no. That’s too much to think about. One of my favorite analogies is Sherlock Holmes in Studying Scarlett, Dr. Watson tells Sherlock, he mentions that the earth revolves around the sun and not the other way around and Sherlock gets mad at him and he says, why would you tell me that? And he says, but how do you not know that? And he says, “Why would this matter to me?” I hope that I shall forget this so that I have more room in my brain to think about other things.

So that’s what we wanted to do for our customers is cut out all of the extra buttons and extra features and just tell them this is what’s working. In effect, we simplified it even more so that you don’t even have to look at these counts of how much time people have spent with you. We just tell you this is the content that’s working the best by X percentage and here’s what it was about this content that was better. This author, this topic, this timing. So it doesn’t matter. If a marketer looks at this they don’t need to know these charts and graphs and statistics. They just need to know what should I do next? So we took everything away except for that.

Andrew: So how did this article help you think through that issue? I love the way this article is written. How do I tell this story? Actually can you tell the story really quickly about, because you’re right. It does make me like Ryan Gosling more. I had no idea who the guy was except I’d seen him in movies. And I’d always turn to my wife and say we know him. What was he in and she might tell me. Now I remember Ryan Gosling and I actually do like him which why would I ever care about an actor?

Shane: That makes me happy. I’m a big Ryan Gosling fan now but I didn’t use to be. I used to think he was all right or whatever. He was this pretty boy actor that was in these movies I didn’t watch so one day I was bored at like an event or something and I read his Wikipedia entry and learned that his story according to Wikipedia and after reading the story I suddenly liked him.

The story is, briefly, that when he was a kid he grew up in Canada and his dad left the family when he was really young and he grew up with this mom who was stressed out and single and working all the time and so he just stayed home and watched movies. And he didn’t learn to read until he was like 12 years old or something like that. And he was diagnosed with ADHD. He was the trouble student and a troubled kid and he showed up to school with knives and he threw them at other kids because he watched Rambo when he was five years old and somehow his mom let him do that when she was at work. So it was this kid that he did not have a lot going for him other than he was a cute kid. But he didn’t know how to read and it’s so sad and crappy but he loved movies.

Andrew: And then…

Shane: And then, Mickey Mouse Club came to town and he decided to audition because he loved movies and he was cute so he got in the Mickey Mouse Club. His mom couldn’t move to Florida with him because she was too poor so he moves to Florida by himself and he gets adopted by Justin Timberlake’s mom which is true. She became his legal guardian. That’s like mind-blowing, first of all. This happened to this kid. Justin Timberlake’s mom.

And then he does the Mickey Mouse Club and he finds his passion and he learns to read and he memorizes lines and he becomes this very successful and actually terrific dramatic actor and so after learning that story of what he’d been through in his past and to where he got now, it didn’t matter that he was this pretty boy actor. I suddenly wanted to support him. I wanted to watch his movies. His movies come out and I’m like, yeah, Ryan Goslings in this and I’m going to support this guy.

Andrew: It makes me like Justin Timberlake more also because of that story, because of his mom did. So what is your point with that? Your point, actually, I don’t want to make your point for you. I know it, but

Shane: I think the point is.

Andrew: I feel like a know-it-all when I read a lot in preparation for [??].

Shane: The point is that, the more you can understand someone’s story, the more you can build, stories build relationships and they make people care.

Andrew: And that’s what you say throughout. I wish all of my guests understood that. Nobody cares about your facts. People care about your stories and through your stories they understand your facts and they believe them, right?

Shane: Right.

Andrew: And so here you say right at the top of your site, so that was your point of your article that you were trying to show people instead of telling them, show them, that stories work. How did that inform your thinking about what analytics to provide people?

Shane: Okay, so this story was the most popular story we had for some period of time.

Andrew: This article here.

Shane: Yeah, this article here. It had an incredible amount of sharing, it had an insane amount of traffic and page views. A lot of the social stuff going on. And it was the story that kept on giving. We just kept getting traffic, kept getting traffic until we installed our new analytics platform which looks at the relationship factor with us because of this story? And it’s considered [??] the story itself…

Andrew: Did you just change something in your audio?

Shane: I think I just stepped on the plug. Can you hear me now?

Andrew: Yeah, that’s more consistent.

Shane: Sorry.

Andrew: We could have done without the headset, now that I hear how it sounds. But since we started with the headset, let’s keep it consistent.

Shane: Okay. So, I’ll go back to this.

Andrew: You were getting this traffic, which sounds fantastic. Except…?

Shane: Except when we looked at our Contently Insights Analytics Platform which shows you, are you building relationships with readers that are coming as traffic, we saw that most of the traffic for this article was not turning into anything. These people were not sticking around. They weren’t reading the whole story. They weren’t coming back, ever. They were never going to be interested in Contently’s products.

What we realized is that because it was about Ryan Gosling, we got this huge social media — people who love Ryan Gosling checking it out, and then bouncing; that people didn’t actually even make it through the story. They didn’t even get to learn the story, that I find very inspiring.

Andrew: Their whole point is gone. They just wanted to hear about Justin Timberlake, and Ryan Gosling, I see. So, that’s an example of how the stats that most people think are important, like [??] kits are completely insignificant when you start to look at the bigger picture you have a better understanding, I see. And that’s why keeping it simple helped you guys?

Shane: Right. Getting distracted by the page sheets.

Andrew: This is the way your analyst looks now?

Shane: Let’s see.

Andrew: I’m just going to take as much base as I can, here.

Shane: This is a previous version of it. It’s gotten even simpler, but yeah. We even eschewed charge. We were like, “What’s the point of having these impressive looking charts. All you want to know is, people are spending three and a half minutes with you, on average. And there’s 40,000 of them a week.”

Andrew: And average finish is 81%, which is really strong.

Shane: It’s good, right?

Andrew: Yeah.

Shane: Then I think this one…like reading four to C, yeah. So here’s the Ryan Gosling story, and the average finish is not as much as the average story. But the average number of readers is much higher.

Andrew: The average finish is 26%. 26, no the average finish 73%. That’s not too bad.

Shane: That’s not too bad. Actually, I want to set the screen shot that’s real [laughs]. Yeah, so what we learned is that this story, it was under performing our other stories, and that these people went over time when you look at do these people come back? And the running total — so the average reader of this story — how do they compare down the road to the average reader that we have that’s a repeat visitor, that ends up being in the category of a person that’s likely to move our business? But this story actually was not a great story.

Andrew: If we were to keep scrolling through, we can see actually…I don’t know if this makes sense to get too deep into it, but the more I look through it, the more I can see the value of this simple approach. Now I see all the articles right below, if I move over and scroll down to them there. It’s like moving a slide on an old projector on the screen.

Shane: Yeah [laughs].

Andrew: But you can see, 99 years of content marketing, how American Express became a major American publisher. That one did well. Let me see if it’s bought the data on that. That one got time on site three minutes; average finish 87%, et cetera. All right, so that’s your point. Keep it really simple. Remove the things that you think are important, and focus on the things that really are important. And you guys did that with your data.

On to the next big point — yeah, let’s do it. Here’s the final one. Oh, go 10 times bigger rather than 10% bigger. You know, I had a guest on here, [SP] Juan Mata Teki who said, “Forget 10 times bigger. Go 10% bigger every week. And if you could do 10% bigger every week through compound interest, you’ll do a lot better.”

You’ve an opposite approach. You say, “No, look for 10 times bigger.” In fact, you guys get together in meetings and you say — what do you call the meetings — periodically they do, here’s what I see in my notes, a 10 time meeting. So, it’s as simple as that. What happens in these 10 time meetings?

Shane: Yeah, the 10X meeting is, what we’ll do is we’ll sit down and we’ll pick a topic, like a theme in our business or a slice of our business and say, “For the sake of argument and debate, what if we had to make this 10 times better?” We’ll say, “Our writer network, we have 50,000 writers. They are this engaged. What if we had to make the writer network 10 times better? What would that mean?”

Then first we talk about well, would 10 times better mean 10 times more writers, 10 times more engaged, 10 times happier, 10 times better net promoter score, what is it? So, we have that debate. And then we say, “Okay, so we want 10 times better net promoter score for our writers. Not 10%, but 10 times. What do you have to do? What do we have to do for the sake of debate, to reach that goal? Who would we have to fire? What would we have to break? What product will we have to get rid of? Who do we have to hire? How much money would we need to spend? What assumptions about our core business would we have to throw away if we were to make this happen?”

And so, what this exercise does is it gets you to use what psychologists call lateral thinking. Sort of, the MacGyver idea of using a tool for not its intended purpose, or attacking a problem sideways rather than straightforward. If you have to break something in order to make an improvement then you can start to get to what is actually important, and come up with much more creative solutions to problems.

If we had these meetings, and we said how do we make our writer network 10% better? Basically, what it’d amount to is doing more of the same thing. Would you have to say, well, this has to be 10 times better. You have to think of things that are different, that are dramatic, and that can yield some really interesting results.

The quote, actually, that I quote in book comes from the philosophy that they have at Google X, which is that 10 times better can be easier than 10% better. For a couple of reasons. One is that if you make a product that’s 10% better you better be good at marketing because it’s hard to get people to switch. It’s harder to get people to change their habits. If you make something that’s 10 times better people are going to fall over themselves to it. The product markets itself.

If you try to build something 10% better you have to work within the old paradigm. You have to use all your old machines, and your old tools, and your old technologies. If you have to make something 10 times better you have to find better platforms. You have to fire people, and you have to break things, but you end up being able to do it in many cases cheaper, and more effectively. This is how you avoid being disrupted by the people who are unencumbered by your past.

Andrew: Let’s see how you guys did it practically. You guys wanted to sell to bigger companies, bigger Fortune 500 companies, more big companies. In order to do that you needed a sales person.

Shane: Right.

Andrew: But that’s not enough.

Shane: Right. Well, we had this problem with our model where we were initially we were making 15% on transactions. You hire a journalist for 500 bucks. Contently gets 15% of that, but we were working with Coke, and Pepsi, and JP Morgan, and GE, and Google, and in order to get those kinds of companies to buy into our solution you have to have a sales person. That sales person has to have a commission. Suddenly, with the commission we’re making very, very tiny margins.

When you look at the math suddenly we need millions of stories being written in order to make a business that an investor’s possibly interested in, or that we’re possibly interested in. We realized that we’re not going to change our industry. We’re not going to change our writer’s lives if we go out of business because we can’t make a profit. We sat down, and we had this meeting where, I don’t know that we articulated it, this was before our official 10X meetings, but we said, how do we make our net profit, or our net margin, net revenue better? 10x better essentially than the 1% that we’re making, or 5%.

Andrew: Couldn’t you just increase prices, or take a bigger cut?

Shane: That’s one of the things we floated. The problem is we weren’t providing necessarily enough value. If we increased the rate to 30% journalists would just go around us. We had to keep the rates low enough that it made sense for us to be in the middle. Then we have this existential question of do we belong in the middle? Is this a business at all? The other thing too is we cared so much about the journalists we came at this from place of we want to help these creative people do what they love, and make more money.

Make a real income. If we take more money from them it’s going to squeeze the little guy, which maybe that’s an assumption that we would rethink, but we felt deep down that we didn’t want to. That was the one thing that was holy for us. What we realized in the course of this exercise of we have to figure out a way to make our net profit greater is we were selling to these really big companies. We had to build some software features to help them project manage these journalists.

To get them paid. To them through procurement. To get assignments, story ideas, and all of that. We built these tools to make the process easier. My two co-founders floated the idea of well, software business make 100% margin. What if we sold our tools for subscription? I actually said no. I said softwares supposed to be free. There’s no way. We can’t do that. Let’s think of another idea.

Andrew: Because software in your situation is just supposed to facilitate the interaction between the two people that you get paid to connect.

Shane: Exactly. The rule for us was that the money came from the transaction between the journalists. It was coming from the content. What my co-founders prevailed on me that we should at least test it. We said let’s do what we always do. Let’s do a one month test. We have some new features coming out. We’ll tell people that those features cost 1300 dollars a month. In one month we’ll see do people buy it, and if that will throw away this pricing. In the first month we sold a dozen of these to new clients. The light bulb went off. We said, wow.

People are willing to pay, and in fact they expect to pay for project management software for a subscription, or a license of some sort in addition to the content that they’re doing. And so that epiphany led us to saying ‘Well, there’s… people are willing to pay 1300 dollars a month. What’s the 10000 dollar a month plan? What’s the 20000 dollars a month plan? And so we started this escalating pricing, and we actually ended up building out a kind of diagram that I think you might have. Of…

Shane: Let’s bring it up.

Andrew: …how can we capture the most value from our customers? How do we price, you know, what’s the…

Shane: Yeah.

Andrew: …what’s the $20,000 plan? So what we did was we mapped out, you can see on this chart, there’s one axis is willingness to pay. How much money you have in your pocket, that you would be willing to part with. And number of companies in that boat. Now there’s this curve that’s probably somewhat regular like this. And then we said let’s make 3 pricing fines, let’s draw boxes underneath this curve.

So we have three tiers of pricing we can do, and then we looked at each of these boxes and said these companies that fit into this racket of willingness to pay; what are their unique needs that the companies in the next two categories don’t have. And what are the things that are common to all of them? And so we went through this exercise and basically found that the companies that are the most willing to pay the most money, have needs like compliance and lawyers need to be looped in on stuff and they want special reports that the smaller guys don’t need. And some of those features actually counter-intuitively are easier to build. They don’t cost us as much technologically. But they’re in common with this willingness to pay factor.

And so this…basically we built this counter-intuitive to us, based on our knowledge of technology pricing paradigm that dramatically accelerated our business. Suddenly we had people… I mean I think our pricing now after many experiments, something around 3500 dollars a month for the lowest, sort of basic set of features, gives you access to our journalists. And then, you know, 6000 a month for a little bit more. And 10-50000 a month for kind of the enterprise you want, the kitchen sink and all of the compliance stuff. And this took our company to more than 10x. Our profit suddenly, our net profit or our net revenue, you know was suddenly dramatically higher than before.

And this changed the game for our company. And we wouldn’t have had this huge growth that we’ve experienced now and more investment and employees and happy customers. And be able to, you know, not coincidentally, help more journalists make more money, if we hadn’t decided that it was okay to go from being, you know, the…[??]…first idea to a software company.

Andrew: So the ten percent more thinking would have said, “Well we’re getting 15% commission, maybe we can take it up to this 16 and a half, or 20%.

Shane: [whispering] Exactly.

Andrew: The 10x is, what else can we do? And that’s what led you to software. With software you get to keep a 100% of the revenue versus 15% of the revenue that you do with the magic. It seems like now the fifteen percent commission of the commission that you get on connecting writers and publishers is small compared to the revenue that you get in from this new software.

Shane: Oh yeah. Yeah, in fact, we have you know account services and yeah we hardly make any profit after… at the end of the day that fifteen percent you know essentially helps us to fulfill this hunt and really the only money we’re making from our profit sampling is coming from the software, which is totally different than we expected.

Andrew: Well, the book is Shortcuts, there it is up on the screen, How Hackers, Innovators, and Icons accelerate success. What I like about the book is it’s so well written it just keeps hooking you in and it’s incredibly well researched. And there’s no ulterior motive. A lot of times when entrepreneurs write books, let’s be honest, they write the book that will get them the clients that they need.

And in this case it’s, here’s what works. And not what works for me today, what works for many people that you respect over time. Everyone from Jimmy Fallon, to President Lincoln, and entrepreneurs that we know. And it’s just really well told and the other thing that I like about it, is a lot of time when people say here’s shortcuts to success, they haven’t hit success yet. They’re basically writing a book report about people who they’re studying and it’s great for them, but I don’t want to read your book report. I want to know from someone who’s done it.

What does it really take? And that’s what this book has. I don’t want to keep railing on other people I want to say this is a really well written book and I think people who get it are going to love it. In fact, I think people that even get it as a sample from Amazon Kindle are going to be very happy with it…and then they’re going to want…

Shane: Thank you.

Andrew: to finish the rest of the book.

Shane: It’s very flattering of you to say, for me it’s been an exercise in. I mean, it’s been an intellectual adventure I’d call it. In helping me to accelerate my business using these things, but telling stories that hopefully will inspire a lot of people, so I’m…

Andrew: Do you wind up doing any interviews for this book?

Shane: Yeah. Oh yeah…

Andrew: Right, I remember I was talking about it and you said I’m interested in doing interviews. And you were talking to me about what it takes or something like that.

Shane: Well, I ended up interviewing probably over a 100 interviews. I spent my weekends, so I’d work at [??] during the week and nights and the mornings, and then every weekend I’d to LA or London or to Chicago to interview people and get their stories.

And so the book is a mixture of narrative and sort of academic research. And a lot of it is …

Andrew: Why did you work on this book all that time when you’re running a successful business, one that’s fast growing and needs your attention? Why are sitting and writing books on the weekend?

Shane: Yeah, a good question. Part of it is what I love. It’s why I got into the content business in the first place. But the other part is that I had been before content like writing about fast growing companies, people who did incredible things very quickly. And I wanted to do the same for our business.

I didn’t want to be a run of the mill business, and so the best way to me with the only skills that I have as an entrepreneur comes from my curiosity as a journalist, my reporting skills. I figured if I can find these people and then maybe find out their secrets, maybe we can apply them to Contently.

So at the same time I was writing the book, you were able to use those to help accelerate our business. So it kind of fed together. And at the end of the day the book’s not about Contently at all. I think it says Contently once in the introduction.

Andrew: I know. I’d like it to be more about Contently. That’s why we did a pre-interview with you even though you wrote a book. All right. Show us how you used it because you really were trying to come at it from a very academic point of view, well researched. I want to hear more about your story that’s why we did that here.

Shane: Well, thank you. I’m glad that we could get this story here too because it’s a good supplement. But, yeah, the book itself was … at the end of the day even though it’s not about Contently it’s great content marketing. We’re in the content marketing business. People who read this book learn about content marketing. It helps me build my brand as an entrepreneur which then helps me get the guest stories and add [??] and get attention for speaking gigs that will help our business.

But at the end of the day too for me this … I believe in providing value for other people before you ask for value, and if I can contribute to other people doing great things for their careers or for their business or work or society, that’s going to come back. That’s why I’m building a business that helps journalists make money versus a business that gets rid of jobs, I guess, for robotics [??]

I care about that at the end of the day, like I’ll be fine. I’m an entrepreneur. I can make money, you know. But it’s for me what makes me happiest is seeing can I pay forward what people have done for me and teach me how to do what I do.

Andrew: Well, thanks so much for coming here and teaching the Mixergy community. As I say, always if you get any value out of this or any other interview, any other content online find a way to thank the person who you learned from.

I found it’s a great way to get to know someone, starting off with thank you as opposed to starting off with, “Hey, you know what? Would you be my mentor?”

So Shane, thank you so much for doing this session with me. And thank you all for being a part of it.

Shane: Andrew, it’s my pleasure. Thank you.

Andrew: Thank you.

DOWNLOAD TRANSCRIPT

Master Class:
How to get traction
(A Startup Guide to Getting Customers)
Taught by Gabriel Weinberg of DuckDuckGo

Master Class: Get Traction


Report Bugs



Transcript

Andrew: This session is about how to get traction for your start-up. It’s led by Gabriel Weinberg. He is the founder of DuckDuckGo, the search engine that doesn’t track you. The whole conversation here today is based on his new book, Traction: A Startup Guide to Getting Customers. These are the big ideas we’ll be talking about. I’ll explain them in a moment. My name is Andrew Warner. I’m the founder of Mixergy. I’ll help facilitate. Gabriel, it’s good to have you back on here.Gabriel: It’s great to be here people. So years later, reference our first Mixergy interview.Andrew: Oh, I love that and I’m going to reference that it in a moment in a really helpful way. Wait until you see a blast from the past. But first, I want people to understand why we’re doing this. In fact, even though your search engine now is doing extremely well, even though it seems like startups come easy to you because this is your second big success, you’ve had a few failures. In fact, you’ve said you’ve had 23 projects over the last 20 years. There were many failures, including the one with this Groupomatic. What is Groupomatic and why do you think that and a few of your other startups didn’t do so well?Gabriel: First of all, you’re absolutely right, a lot of failures in there. And so one, I understand the failure. And two, it shouldn’t be a bad thing necessarily to fail, but they each have their own reasons. So Groupomatic, if you’re familiar with meetup.com, it was kind of a competitor to meetup.com. I still think one could have a competitor to meetup.com, but I made a bunch of mistakes in pursuing this.One is the mistake we really talk about in the book which is I didn’t really focus on getting traction while I was building the product, so I did do some lead startupy [SP] stuff and had some bitter customers and asked what their problem was. And I made a product that people were somewhat interested in, but there was clearly some need for it because, for example, MeetUp charges $19 to start a meetup and I was doing it for free. So that’s obviously there is some need there, but I didn’t pursue exactly what market to focus on, what the marketing message should be, what marketing channel was really going to get the growth curve, so I launched it to basically no fanfare, had no idea what to do next, and that’s really the common story unfortunately.People developed the product not thinking about traction or you think about it as an afterthought and then their runway is tiny, and then they basically run out of money on that little, tiny runway, and then they have to kill their product. And the sad part about it is the products are actually often good.

Andrew: Yeah.

Gabriel: They actually pursue a need.

Andrew: Gabriel, am I right to say that often when the product is exceptionally good it causes problems for traction because it means that the developer, that the founder often spent so much time creating a great product and didn’t do what you’re about to talk to us about which is simultaneously talk about, and think about, and plan traction.

Gabriel: Absolutely! So we advocate is to spend half your time on traction and in theory that sounds easy, and simple, and straightforward because, yeah, you need traction to succeed, so wouldn’t you spend half your time on it? But in reality you started this company and or project because you had this passion for a product and you want to make that come to life and so your draw to spend all your time on product is so hard. Additionally on the traction side it’s like, whoa, that involves a lot of stuff, out of my comfort zone, it may cost some money probably, it’s unknown to me and so there are a lot of reasons why even if you know that you want to do it, you’re pushed to spend less time on it.

Andrew: I talked a moment ago about how you run a successful search engine. This is DuckDuckGo, the search engine that doesn’t track you. By using the ideas that we’re going to be talking about here today, here is what you were able to do with your traffic. Right?

Gabriel: Yes.

Andrew: Where are you guys right now?

Gabriel: We are at about 150 million searches a month and we started even before this, the grift that we were at before is in that little zero, but this starts in 2010. We actually launched in 2008. And so we started at around 10,000 searches a month and now we’re at 150 million. But one thing that growth curve really illustrates is what happens to a lot of startups. A lot of startups aren’t like the steady increase or an exponential.

Andrew: Yeah, let me show you [??] doing that, yeah.

Gabriel: It’s hard to tell because it’s not a long burden of graph, but you could see in that graph, you could see the step functions how we are basically going along a bit, increasing a little bit, and then it would jump up and jump up and then jump up again. That’s three or four jump ups in here. And what that is is really a marketing channel got unlocked for us. We discovered a whole new way to grow. And when you’re going through one of those exponential curves like those explosions, generally there’s one channel that is dominating that.

And unfortunately if you’re in a search engine market space where there’s so many people, everyone needs a search engine. You have to get so big to make a dent. We ran out of volume on a lot of those channels. That happens to a lot of people. You reach diminishing returns on your marketing campaign. You actually have to start over. So we’ve gone through six different main channels. We started with SEO and then moved to social ads, mainly Reddit. Then we did contact marketing on my blog and then microsites [sp]. Then we did print PR and then TV PR. And now we’re on to business development. Where we’re a search option on the latest iPhones.

Andrew: Yeah.

Gabriel: And each one of those kind of moved the needle at a different stage for us but also on the flip side they stopped moving after a while. And so we…

Andrew: And we’re going to get into that when we talk about it…

Gabriel: Feel free to drill down on all of it.

Andrew: The key thing though that I want to emphasis here is that to get to this traffic that we’re looking at here, you worked on traction as you worked on the product and the other point that I want to make is that I don’t think we were clear enough is you tried lots of different tactics, lots of different approaches to see what hit. And when one worked for you that’s when you focused on it. Am I right? And then eventually we’ll see it loses its effectiveness. And we’ll talk about what to do about that. Do I have that right?

Gabriel: That is absolutely right. In those periods of more slow growth we were testing things and trying to find that next kind of growth channel that would unlock it. And unfortunately, I think this is a reality, sometimes it takes a long time. And part of that is product focus. You’re doing [??] product. But it was definitely not an overnight success.

Andrew: And we’re going to talk about how you did that. I wanted to just show that you’re a guy who had felt the pain of not getting traction. And then once you figured it out, I invited you here to talk about it. I don’t want people who are theorists. I want people who actually have done it to talk and teach others how to do it. Here is the list of concepts that we pulled right out of your book, right out of “Traction” that I thought would be helpful for us to talk about here today. The first of them is to use the bulls-eye framework to find a profitable channel. Before we even explain what it is, I thought maybe we could talk about Noah Kagan, one of the entrepreneurs that you interviewed for your book. How did he see the bulls-eye framework when he worked at Mint.com, the online finance tool?

Gabriel: Right, so there are two kind of underlying premises that you kind of have to buy into to believe this framework. The first is the one we just talked about. Which is that when you’re really growing usually one channel dominates. And for Noah at Mint when he was first starting out that was targeting blogs.

Andrew: Okay.

Gabriel: So he got, you know, Mint is a finance tool and ultimately he really targeted blogs that were related to finance to get his traction. So that’s one thing. The second premise is that there are a lot of different ways to get traction and we identify 19. And you don’t know ahead of time which is the right channel and even more so you’re biased against some because just based on what you know. And people usually just start with what they know. And that intuitively makes sense, but it’s not really the right thing to do because what you know may just be the wrong channel for your business at that time.

Andrew: Or I can see, frankly, you say that content marketing, going to blogs, worked for Noah. I can see myself listening to this and saying, “Great. I’m going to skip ahead and I’m going to go talk to blogs. Tell me what Noah did. Great. I’ll go and do that.” And you’re saying that’s not the way to do it because it may not work for me. Instead Noah worked through a process to get there and the process started with the, actually with what?

Gabriel: Yeah, exactly. He made a spreadsheet. And he really brainstormed all of the different channels that he could use. He really started with a goal. I know that was a little farther down on your list, but I’m going to jump it a little bit.

Andrew: Do it.

Gabriel: We can come back to it. Which is you need a traction goal to measure against. And his goal was a hundred thousand customers within the first year.

Andrew: Okay.

Gabriel: That was meaningful for their business for particular reasons for them. You know? They thought that would be the traction they would need to get to the next level. And that’s a great goal is to have one that is an inflection point of your company. However, if his goal was a thousand users, the strategies he might employ to do that are going to be very different than the ones that are a hundred thousand.

Andrew: Okay.

Gabriel: Some of the channels wouldn’t work. And so you got to know what your goal is so you can measure what you’re doing against that goal. So he started with that goal. Then he said I’m going to list all the different channels I can do and I’m going to try to put some rough numbers to them. My best ideas for that channel. How many people do I think will convert? How much will it cost to convert them and are these direct customers that I want? And from that list he narrowed it down to a few different channels that he would try. And then he ran tests on them. He said, okay, I am going to try one or two blogs for the blogs. That’s what his test was and see how that converts. After running the tests, the blogs really seem like they could give me the volume I need. The customers are working. The cost is not high and so I am going to choose to focus on that channel and that’s what he did and it worked.

Andrew: Is this the process? Brainstorm, rank, prioritize, test and focus?

Gabriel: That is exactly the process I just laid out and that is the bull’s-eye frame work. It is essentially the metaphor for bull’s-eye is that you think of yourself shooting archery. An arrow towards the target and the bull’s-eye is that exact marketing channel at the center that will help you take off and you want to hit that bull’s-eye. Unfortunately the regular approach is basically shooting blindfolded. That’s the one where you do what you know or do what you heard people did and you take this random walk.

Andrew: Did you ever do that? Did you ever just say others had tried this one approach? I’m going to do this blindly or where you always as focused as we’re suggesting to the audience.

Gabriel: Yes. I made this exact common mistake as everyone else. So I mentioned that the first channel for DuckDuckGo was SEO so the only reason for that was my last business grew a lot through SEO so I know SEO and I’m going to get traction through SEO. I got a tiny bit of transaction through SEO and the way we did that I did a lot of talking on my last interview because this was many years ago. It was try to get people who were on Google to get to DuckDuckGo when they were searching for the term new search engine and they would type in new search engine and they would find DuckDuckGo and they would do it. That actually was good. Those were good customers but the volume was tiny so my traction goal, wanting to get to 100 million searches a month it was never going to move them. So all my focus on that was just not the right channel.

Andrew: I remember actually in the early days when you and I connected, in one of the emails you sent me this little widget that I could put up on Mixergy that would allow people to see all the social networks that I was on and link to them and then underneath it is said new search engine hyperlinked over to DuckDuckGo and it wasn’t until I got your book that I realized what you were doing back then. I thought you were just goofing around with widgets. You were such a fan of hacker news where we connected that you wanted to connect people back to hacker news, something like that, and now I see. All right.

Gabriel: That’s exactly right. That’s what you do when you focus on a channel. You find these underutilized tactics that no one else is doing. At the time when we were doing this widget thing it worked beautifully. We ranked high for new search engines. It was just the wrong channel to feel my energy in there, right because it just didn’t yield that many searches.

Andrew: Okay. So, this is the bull’s-eye framework. Brainstorm, rank, prioritize, test and focus. We’ll see a little bit more about how Noah did it in a moment but this is the site that he basically sent people to from those blogs. He would go to bloggers and he would say, would you be interested in putting a “I want Mint” widget on your site and that worked for him. He sponsored them by paying for them. He got guest posts there and so on but it all started by brainstorming a list of places that he could possibly promote Mint. Started ranking them. Prioritized them. He started testing them and once he found the one that worked, that’s when he focused. That’s when he did the newsletter sponsorship. The Suze Orman sponsorship, etc.

Gabriel: You may be getting to this in a second, but can I make a point on that?

Andrew: Yes.

Gabriel: So those things that you just listed he did were very creative, right? He didn’t go through normal . . . If you are going to target blogs you don’t normally just send cold emails and say I’ll give you $500 to put up this badge, right? He discovered some of these tactics only by testing within that channel and really focusing on it creatively.

Andrew: I see.

Gabriel: The other mistake that people make is that they’re like, okay, I ran a few tests. Some of the Google ads are kind of working. Some Facebook ads are working. This blog thing kind of works. I’m going to try to do a little bit of all of it but if you do that you are not doing the focusing right. You won’t get to those creative ideas. But he got there.

Andrew: Okay. Here is the next big point we are going to talk about, which is divide you time between building and finding traction. We talked about that a moment ago. But I want to put little bit more flesh on that idea may be by talking about Rick from Unbalanced. The day, I think the first hire he had was a blogger, Right.

Gabriel: That is correct. Before he did any product work, he was, he really took this, mean not hard thing the hardest thing he had ever for a book. He took this idea in to the heart that he would be spending 50% of their time on traction. And you know he is a perfect example. They were blogging and that ended being the biggest channels. So, they had foresight there. But, Let me take you through the metaphor why this works. It’s the leaky bucket ones. Everyone is familiar with leaky buckets got holes in. And in this case, you are pouring in customers. And at the beginning you are falling out because you know your product always has holes in it. You have to plug them.

Traditionally people are like, Okay that’s what you know lean start up is supposed to do, Right. I had some Beta customers. I go and talk to them. I plug some of them.

That gets some of them. But not all of it. That’s where lies the problem. But those Beta customers are too close to you. Because you coach them, you now, you know them. They are not real cold market feedback. So, what he did is he had this blog and he was getting a steady stream of people in to his idea initially and then to his product. And they were cold. He has a marketing product. And his were just marketers without he cannot survive. And so he could test what the real customers would do with his product.

And so that he could figure out what the messaging really should be what the niche initial focus on should be. And more importantly, what others additional holes that he really needed to plug to get this thing to take off. That one he did take off. When he did launch finally, he had, he was kind of amazing. He had a You know, a unique list of Emails and he knew exactly how to market it and then it could kick off immediately.

Andrew: Here is the first blog post on his site. Ali, his co-founder wrote. Hello everyone, welcome to Unbalanced Etc. And the he says, we will be posting a lot of great content in the lead up to launch time, which is expected to be final quarter of 2009. He was doing this in mid-2009. What do you say to someone who is listening to this, who says, Maybe they should focus first on creating a product first before blogging. Building a blog takes time. Thinking about what to write takes time. Figuring out your marketing takes time. All that time should be going in towards building your product. And so maybe you get your product out a little bit faster and put it in people’s hands

Gabriel: So this is counter intuitive. But it is true. If you what normally happens is people make that arguments it make sense, although it’s wrong. And people launch and they can’t get traction. And they realize they can’t get traction because they needed to do something slightly different with their product. And then they end up in this multiple product development cycles. What giving traction in parallel does for you is it not only helps you to take off the new one you launched. But you are actually launching with the right product because you are plugging all those holes we are talking about. And so yes you spend less time on product, but at the same point you get actually a better product out of it. But it’s kind of amazing. It’s like kids having a cake and eat it too, kind of thing.

Andrew: Here is one of the things that I say from the early days of his site. This is actually still up on the site, right now. But it was created and published before he officially launched the product. It’s a lead magnet. 101 landing page optimization tips. In order to get it, you have to put in your Email address and then you get it. And this is one of the ways he was getting beta customers. And that’s what you are suggesting. And that by doing that he got strangers who were interested in landing page optimization and therefore interested in market he was going after. To give him their Email address and then he had a list of potential customers to talk to and get feedback from its address. Right

Gabriel: Yeah, another kind of real point here is that where kind of getting real is that we are not talking about is that a lot of people need for is money at some point to fund their idea right. And to do that in nowadays you can’t raise money on an optimum any more that easily. You need traction to do that. And so the other kind of real motivating factor even this earlier and be more confident when you launch you are launched to a good traction growth curve is that it’s going to you know it’s an option to be able to raise money easier, whereas if you launch and you struggle and you don’t ever have a growth curve, it is really hard to raise money.

Andrew: I see. That is really hard actually. And frankly I also feel that learning how to get customers take time. Just like figuring out how to create a great product takes time. If you wait to do it, you’re missing out on all that experience, all that failure, all that learning.

Gabriel: Yeah, completely agree. Not only that, it is a skill that you’re going to need to be successful. And arguably, this gets a little meta, but you started this company or this service because you had domain expertise in this area, a passion. You did not have domain expertise or passion in this getting traction area. So you’re actually behind in that area relative to product. If you could consider the life cycle of your company, you need to spend that time initially to kind of catch up or you’re going to be behind forever.

Andrew: Can I just take a detour away from the big board for a moment, from the big ideas we’re going to talk about. I want to point out two things that I’m noticing just by looking at the camera. First of all, usually people who I interview the more successful they get, the heavier they get because there’s so much stress, there’s so little time. Meanwhile I’m looking at you, you’re pretty freaking fit. I don’t think people can even see it on camera because I don’t have the camera all the way panned down. Are you working out while you’re doing this? How are you staying stress free?

Gabriel: I appreciate that. I agree with you. It is quite stressful. I think exercise. I’m not going to be too preachy about any of this, but…,

Andrew: What do you do? What kind of exercise are you doing?

Gabriel: To me low stress involves like the exercise benefits of reducing stress are meaningful to me. So I try to, not a ton of stuff actually, but I try to walk around as much as possible. You know, that kind of stuff. Right before this interview I just took a 30 minute walk. Which may be why I look a little sweaty or something.

Andrew: No. You’re looking energetic. I like it. And here’s the second thing I’m noticing and I’ll put the camera on you for that. Are you in your house right now?

Gabriel: I am in the DuckDuckGo headquarter office. In my office.

Andrew: Got you. Because I think, I know actually that in the past interviews that you’ve done on Mixergy you were working from your house. Weren’t you just also the primary care taker at home?

Gabriel: Yes. When I started DuckDuckGo I did it myself for the first three and a half years. I started 2007 and in 2009 we had our first kid, Eli who’s now five. But the first two years I was a stay at home dad and also doing DuckDuckGo.

Andrew: Yeah, I couldn’t believe it.

Gabriel: And then we kind of switched those roles. Our kids are in school full time now so there’s more time. But yeah, it was awesome. At the end of 2011 when we finally took some outside money we rented this office. We’re mainly a virtual company so 80 percent of our staff is worldwide. But we do have this office here and I do like having an office.

Andrew: I do too. I like having a little bit of space. All right, I got to move on to the big board here quickly because we have a lot to cover. The next big idea I want to cover is the willingness to do things that do not scale. Again, going back now to Noah Kagan who we’ve talked about before. He used to email people individually as you said and say, “Can I send you 500 bucks.” That’s not an automated system. That’s not part of some kind of infusion soft drip campaign. It was him doing it. What’s the advantage of doing it manually like that? As opposed to saying, “You know, if offering people 500 bucks is the way to do it, let’s just email a bunch of people or let’s add it to our drip campaign.” Why…

Gabriel: There’s two advantages. One is especially at the early, earliest stage like him right. Your traction goal is usually small. You need to get a little bit of traction to get to the next level. Whatever that level is for you. Because of that a lot of unscaleable [sp] things actually move the needle for that goal. Going and speaking at one conference and going even door to door in some cases with some products. These things won’t move the needle later on in your business life. But that’s okay because right now they are. And if you know what your goal is then you should be willing to do it if the numbers work out. That’s one of the things. The second thing is one of the advantages startups have and founders have is that they’re authentic people. And they’re company has this authenticity to it. And people love talking to founders. So two of the needle at these small ways if you’re actually the founder reaching out or someone who’s really authentic like Noah was, that in and of itself is kind of surprising to people on the other end and you’ll have much higher conversion rates.

Andrew: He used to get people to put this up on their site. Little badges. They’re still available on Mint.com right now. I know, I checked. That’s where I got the screen shot. But he used to get them to just put badges on their site that say, “I want Mint.” Or, “I support… ” Actually that is what it said. It said, “I want Mint.” This is before Mint officially launched. And if they did, I think he would move them up and give them earlier access. And that’s the kind of thing that he used to do that got a ten thousand pre-registrations before he even launched.

Gabriel: This makes another good point that it’s kind of an underlying premise to his approach and in general getting traction is that we’re talking about building the product while you’re building traction. But the premise in there is that you’re working on a product and working toward a product that people really want. And if that wasn’t the case with Mint then no one would have put these badges up no matter how persuasive he was. But the underlying idea for the product was really compelling and people really did want it. And so he needed to marry that good product idea with a good traction idea. But you need both.

Andrew: I found to that by doing that, by reaching out to people and promoting the product even before it’s launched, you get feedback about what people get excited about with the product. What features they are bothered by.

Gabriel: That’s exactly the kind of thing you get from we were talking earlier about, you might change the product because of that. Right?

Andrew: Yeah.

Gabriel: And I don’t know the particular case with them, what they did with Mint. But he may have been like, “Okay, I reached out to a hundred of these people. People really want the idea of checks and having the checks part of this work.”

Andrew: Right.

Gabriel: And then he’d be like, “You know, we’ve got to prioritize that in our road map. That might have been two years down the road. Let’s do that now because that’s really going to get us the take-off immediately.”

Andrew: I just realized that we’ve used Noah Kagan now as an example twice in the book. And apparently I use Noah as an example several times in Mixergy. But if you look in the book, there’s tons of examples, tons of companies. You’ve talked to Rand Fishkin. You’ve talked with Jimmy Wales. Who are some of the people who the book is based on?

Gabriel: We talked to literally dozens of successful founders and then experts in each of these 19 channels. And so basically once we uncovered all the 19, we decided we need to go talk to several founders or find traction stories for several founders in each of the 19 verticals. And exactly how they did it and give basic tactics or strategies or how to get into them. So for each one of those channels we talked to people. So for like community building we ended up talking to Alexis from Reddit and Jeff Atwood from Stock Exchange and now Discourse. And for speaking engagements we talked to Dan Martell of Clarity who has grown traction through that channel. So literally every channel we were like, “Okay, what start up is really an emblem of this channel doing so well at it? Let’s go talk to them.”

Andrew: Here is chapter one of the book. That’s where you have a list of all 19 traction channels. Everything from viral marketing, public relations, community building, speaking engagements, offline events, affiliate programs, sales, existing platforms, trade shows. These are the ones that you broke down and then there’s a chapter on each one of them. And then within that chapter examples from real entrepreneurs like the ones that we’ve mentioned. That’s the way that you structure the book.

Gabriel: Yes. And the first five chapters are this kind of intro traction thinking and how to think about this bulls-eye framework we’ve been talking about. And then some questions everyone asks. Like when should I pivot? How much traction do I need for investors? That kind of stuff.

Andrew: All right. Back to the big board. The next thing is something that you brought up earlier. Which is you need to create your traction goal. And here is as I said earlier is that you were on Mixergy and I wanted to bring up one of the things you said.

Gabriel: I wonder what I said.

Andrew: Look at this. In there it’s hard to see, but I wanted to get the full interview in there. Here is an interview that you did on Mixergy that you did on December 5th, 2011, is when I published it. And you said, “At some time, we’re at this ten million now, and I’m trying to figure out ways to get to a hundred million. And that’s going to take things that we haven’t done before. And I’m starting to think about what they are, but I’m getting beyond our questions so feel free to jump in.” I like that you got beyond the question. What you were saying is this is the goal that we hit right now and you are aiming for, back in 2011, for a hundred million what.

Gabriel: A hundred million searches a month. The reason for that goal was we felt that would be a level where we would be at break even in a company and be a much more of a sustainable trajectory forever. And that did turn out to be true. But it was also true when I talked to you we had just reached that plateau where we didn’t know what was going to, we had to start this whole process over. We didn’t know what was really going to move that needle.

Andrew: What? And by the way, the reason that you knew you could be self-sustaining is you were running ads in the search results a little bit more. Not a little bit, much clearer than Google ads. So, people could see what they were, and you were monetizing your business just like that, right?

Gabriel: Yeah, right, so, you know, we don’t track you. And it just turns out you don’t have to track people to make money on a web search, because you do it based on the keyword. You know, you type in car, and get a car ad. We don’t have to know anything about you. And so, we could have a, that business is well-established. And so we can figure out what the numbers were on it. And could easily run them and say, okay, at 100,000,000, you know, we could have something here.

Andrew: I see. So, what’s the importance of doing that? Why not say, you know what? We just have to keep on growing. The number 100 is important, but as long as we just keep growing and figuring things out, maybe we can find a way to be self-sustaining at 50,000. Let’s be more flexible. Maybe we can find a way to be more profitable actually, at 25,000,000. What’s the significance of finding a specific number?

Gabriel: So, I think you could, that is a good conversation to have. And maybe out of that, you decide your goal is 25,000,000. But, here’s the reason why you want to go on the significance, is because if you don’t have a goal, and you’re kind of successful. We had 10,000,000 that served to set the months. You know, now we’re at 150,000,000. But, at that time, I thought we were successful, too. Whenever you start reaching the point of success, and you probably hear us message you, people are coming to you all the time with opportunities.

Andrew: Mm-hmm.

Gabriel: Right? And you can think of a way to use almost any of these channels, somewhat effectively. And so, you start to look at that, and you’re saying, okay. If I spend a month on this, maybe I can increase it by 1,000,000 searches. And I spend a month on this, I can increase it 1,000,000 searches. But then, if you have nothing to measure it against, there’s really a draw to go do that. But, a lot of those things are distracting, because there might have been something else you could spend time on to get 50,000,000 more searches.

Andrew: Mm-hmm.

Gabriel: And, if you’re not thinking about it at that level, then you have too much of a draw to do these smaller things that don’t ultimately move the needle. But, the only way you can tell something moves the needle is to know what the goal is.

Andrew: I see. You know what? I think I maybe should rephrase that question. Because, what you said makes perfect sense, but what I’m trying to understand is how to reconcile the idea of being lean and flexible with what your product becomes, and the need to have a goal, so that you’re guided in a direction and know how to pick between multiple opportunities. What we’re told is, listen to your customers and hear what they want. If, over and over, your customers would have told you, I don’t care about search. I do care much more about, I don’t know, email. Or these forms that you create that you use to organize yourself, you would do that. So, how do you reconcile the need to be so flexible that you listen to your customers to the point of shifting your product completely, and your internal need to have a specific number to guide you, and, along with that, a specific product to create to hit that number?

Gabriel: No, I think that’s a good, insightful question. I mean, I think the establishment of the goal is the end result of that deeper conversation. Right?

Andrew: Mm-hmm.

Gabriel: So, you really shouldn’t just set a goal in a vacuum. You’re either, you’re doing it after kicking all those signals from your customers about email or whatever, right?

Andrew: Mm-hm.

Gabriel: And, you know, that’s what we did, when we did that. And we said, we had a time when, you know, we thought about doing email, and things like that. You know, are we a privacy company? Are we a search company? And, we took in all those signals, and decided, you know, we’re a search company. We think that’s where our focus should be. And, given all that time, and thought, that went into knowing that we’re a search company. Now, what should our goal be as a search company? So, I do think there is attention there. I think you’re on to something. But, I think after all of that, you still need to end that conversation with a goal.

Andrew: Okay. Speaking of, I mentioned that Gabriel has a forum. And, you’ve had a forum to help guide you, and help you stay in touch with your community for DuckDuckGo. You did the same thing for this book, of course we’ll link it up, so that anyone who wants to have a further conversation about this, or be engaged in a community of people who are thinking and working towards getting traction. We’ll link it up, so that people can go to it, but it’s just discuss.tractionbook.com. I’ve got it here on my second monitor. All right, let’s go on to the next big idea, which is, we want to design our sales. [Noise] Whoa. Whoa, hang on a second.

Gabriel: [Laughs] What is that?

Andrew: I think we’re having a fire alarm here.

Gabriel: Oh, really, is that what it is?

Andrew: I’ll edit this out.

Man: May I have your attention, please?

Andrew: Shoot.

Man: May I have your attention, please?

Andrew: I mean shit.

Gabriel: [laughs]

Man: The situation in the building is all clear.

Andrew: Oh.

Man: Please return to your floor.

Gabriel: You didn’t even know you had a problem.

Man: May I have your attention, please?

Andrew: I guess not.

Man: May I have your attention, please?

Andrew: [laughs]

Man: The situation in the building is all clear.

Andrew: Maybe I won’t edit this out.

Gabriel: [laughs]

Andrew: People should see that the situation in the building is all clear. Stop panicking people. Usually when a fire alarm goes off I will hit the mute on my mike and continue and then come in between fire alarms. Hey, we’re all clear. Thank you. All right. You know what? I think I am leaving that in there. Here we go. The next big idea for us to talk about is design your sales funnel from the standpoint of the customer. JBoss is a company that did that. Here, I actually have their sales funnel right there. Right? This is the process that they go through to take strangers and turn them into customers. How do they do this? What is their funnel if you remember?

Gabriel: Absolutely. They were a primary example in our sales chapter. This concept of the funnel is really applicable to all channels if you will because ultimately what you are doing is taking a customer in from some marketing channel, right? You want them to come out or some percentage to come out the other side and pay you for your services, right?

Andrew: Yes.

Gabriel: And that process of coming in and going through is your funnel. What they’re talking about is designed from a customer. The opposite of that is designing it from the company prospective. So you’re thinking I have this product. I need to put up a pricing page and I’m coming up with this price point and they need to pay before they try it because I need money right now or whatever. That’s from your perspective, right? But the customer perspective is they land on my website, who is the primary customer landing there? What are they thinking? What do they really need? In JBoss’ case, they decided and they were going to do this ahead of time, they had open source software so their customer was mainly browsing on their site, just trying to implement the product and a lot of them wanted documentation.

So what they decided to do was tie getting the documentation to getting an email address and once they got the email address then they would run that through a [??] campaign and see if they needed more help and if they needed more help, like support and stuff, then they would go through their inside sales team. That process was really [??] to the customer because they really didn’t bother them until they really needed something and then they could really get out of the process when they needed to be into the sales [??] For other businesses it may be totally different but the general point is that you need to think from a customer perspective and the easiest way to do that is to go try to talk to customers the same way like it’s a start-up.

Andrew: And the idea is to think, all right, a stranger is coming over to my site or as JBoss on their funnel calls it over on the left, a suspect, comes over the sight and you are thinking, what is that person looking for? What does that person need? How do we take them to the next thing that they need and the next step after that and only when it makes sense for us to come in with a sale, do we make that offer to them. I actually thought it was pretty interesting the way that JBoss did it. I’m looking here at my notes and they would keep interacting with people and I think I’ve got this . . . there it is. They would wait for people to do things to have a certain level of interaction like check in to a couple of webinars for example and only when they did a few of those things did they say, now let’s see if they’re interested in talking to us. Software today allows us to do it. AWeber doesn’t do it for email as far as I know but Infusionsoft and many of the other email software packages do that.

Gabriel: Yes. Absolutely. Every business is going to be different but they had a great [??] model, right? So they had tons of people using their software but a lot of them weren’t interested in paying for it. They weren’t a business that had a need to pay for it and you know if they went after everybody they would just drown and not make any money and so they figured out who to go after and that is basically what they are doing. They are identifying the real needs in their business so they are not wasting time with their sales organization. Often people will split marketing and sales on that basis. The marketing team job is to collect these data points and deliver leads to the sales team.

Andrew: What about your site? Can every site have a sales funnel? I am looking at yours and it’s just a search bar. Is there a funnel that you can create for that to create more connection with your customer?

Gabriel: Yes. A search engine is very difficult because people want their search results as fast as possible. They don’t want stuff in the middle of that but yes, if you [??] further on that, we have a few links on the home page, right? For people who are a little more interested we have a tour it takes them through and really the selling point or the conversion that we are trying to go for is people setting their search engine at DuckDuckGo. So the bottom of that, the buttons we’ve chosen to put on there is, okay, use it in your browser, set it as your home page, or learn more if you need to do that to set it. And so we’ve kind of boiled it down to those.

Andrew: I see. Boy, this zooming in is there, it’s kind of funky. I want to make sure just to show it, but it pops off the page even. I see what you’re saying. All right, so that is kind of a funnel and it’s not as corralled as other people.

Gabriel: Well, we’re in a unique situation where we don’t collect any information about our customers.

Andrew: Yes. It’s not that you’re just a search engine where people would want to type in their search results and move on, and don’t want a white paper, and don’t want to give you their email address, but you’re a person and a company that actually specifically say, “We don’t do that. We will not track you.” I see, so there are other ways to do it. Looking at yours you say, “Set it as a home page, use it in Chrome.” Okay, onto the next big point which is scale customer acquisition by using engineering as marketing. You talk about how Dharmesh Shah, a previous Mixergy interviewee did that when he had problems with his own person SEO.

Gabriel: Yeah, this is one of these channels engineers marketing probably no one has ever heard of that because we had to name it in the book because it didn’t have a name. And it’s one of these super underutilized channels that honestly, like I think is wide open for a lot of companies. And the basic idea is two-fold. One, spending some of your precious product resources, engineering resources, on building something just for getting traction and the common result of that is a free complimentary site that exists freestanding, solves a need, and then exists as a lead kind of funnel into your main product. So it’s not freemium, it’s not like a free [??] to your site. It’s completely separate.

So in Dharmesh’s case, he’s the founder of HubSpot inbound marketing company. He created this tool. Originally he created it for himself and then he put it out there called Marketing Grader, it was Website Grader initially, where you just type in your domain name and it grades your site. It tells you how good you’re doing at SEO and other kind of inbound things.

Andrew: There it is for our site, for Mixergy.

Gabriel: And it’s super useful. Right?

Andrew: Sorry?

Gabriel: It’s super useful. It tells you kind of what to do and all.

Andrew: Yeah, it gives you a specific number, 60 out of 100. We could be doing better and it tells you what you could do differently. And along the way it also has one of these where he’s collecting my email address. Usually we think about content marketing the way that unbound has used it where they had an eBook that we had to, as users, put in our email address to get. That’s one way to do it. You’re suggesting that this is another and that’s create software, and use the engineering that goes into creating software as marketing. [??]

Gabriel: Yeah, what’s super interesting about this is this site is not a business. Right? It would not work independently, but it is still a super useful tool that people would want. And so you mentioned Rand Fishkin earlier. He also does this really well with SEOmoz where he has FollowerWonk and a couple other tools that you can essentially just use, and they’re useful, but they’re also complimentary to their main product.

And so there is a direct up sell and so there is a really good incentive and connection or symbiotic relationship between the free tool and the actual product. And when it works, it works really great because these single purpose tools are very SEOable [SP] themselves. They spread. They can spread virally sometimes. Webmasters who find this website grader useful are telling each other that about millions of people have come through this site and HubSpot, their S1 [??] IPO, they don’t have tens of thousands of customers. Right?

And so it’s an order, it’s a magnitude higher on Website Grader that are actual customer based and that’s great because they have identified which customer is kind of like [??]. They should be targeted and then they can go after it and kind of sell them.

Andrew: You mentioned FollowerWonk. I recommended this is an independent tool and you’re right. This is a tool from Rand Fishkin’s Moz and it helps him get people in the door and get them aware of Moz as a company. Cool, onto the big board and our final point is to change traction channels as the company expands. And you started talking about how you did this. You started off with SEO. Can you just elaborate a little bit about what the problem was with SEO because it seemed like it was working well for you. You were building up your keyword and people typed in new search engine would see DuckDuckGo as the top result. What’s the problem there?

Gabriel: The problem was just that the volume tapped out and there weren’t other great search terms for us to be easily able to convert.

Andrew: Okay.

Gabriel: The volume just wasn’t there. So it did work for a while. It just reached a point of diminishing returns. So when we started the goal of the hundred million that was never going to get us over to like a hundred thousand.

Andrew: I see.

Gabriel: So it was just not going to work. That’s what happens is when you see that diminishing returns you got to start this brainstorming, reg prioritize, testing focus process over again. The great thing about it is you’ve learned a lot in the first phase or whatever phase you were in. You ran tests in that phase. You know what kind of customers are better for you now. You know what marketing messages work. So you can look at the original brainstorming and you’ll have better brainstorming. You look at those ideas with all the full knowledge that you know have and you can think back to how dumb you were a year ago.

Andrew: Here’s on that I remember helped me see you outside of our own tech community. It was this. A billboard that says Google tracks you, we don’t. Search better at DuckDuckGo.com. How do you end up with that when you’re cycling through? Can you walk me through the process that lead to this that then as a result helped you spike your traffic? Whereas that if we look at your traffic, here it is. That’s actually one of the big milestones along this chart.

Gabriel: That’s right. It is. This billboard was, offline ads is a channel. And I think billboards are an underutilized things and we may get to that in the future. But this interestingly enough was a test we did for print PR. And the thought was we’re really going to test print PR. We think this as we’re putting it up, and I think it still does, makes a great picture for a lead story. And we thought the story itself was compelling. You know, putting up a billboard, we put this up in San Francisco in Google’s backyard as this kind of David, Goliath, DuckDuckGo, Google story. And pitched it to a Wired reporter and they ran with it and made it the lead story for a day. And then we leveraged that to get in print for the same story in USA Today and a couple of other places, I’m forgetting. That was the test and it worked beautifully. I didn’t know what would happen if people really read the print story would actually convert.

Andrew: So your test was you said, “We had this theory that PR is going to help grow our user base.”

Gabriel: Yes.

Andrew: “How do we get PR? Let’s try something that is PR worthy. The thing we’ll try is a billboard. And if that works we’ll expand. If it doesn’t work, we’ll try a different channel.”

Gabriel: That’s right. Let’s try something big. In the book we advocate when you get started smaller cheap tests. But thankfully we were a little farther along and it was still relatively cheap. It was only seven thousand dollars. But it was a cheap test in the scheme of where we were. And the idea was let’s go big with this. Get a real national story and see what happens without numbers. And it worked. It really did move the needle and so we said we’re going to double down on this and try to get print similar press for the next year. That’s what we focused on. And it worked. Until…

Andrew: Press became one of your traction channels.

Gabriel: Yeah. And it became our focus for really the next year. With regards to traction until it stopped moving the needle.

Andrew: Here is, actually, here is the traction chart for DuckDuckGo. It’s B on that chart. B now looks like a little blip. At the time it was huge. A though is don’t track us. That was another idea that you tested out and then when it worked out that’s when you decided you were going to double down on emphasizing that we don’t track?

Gabriel: Yeah. That’s also true to. And it was also the test for content marketing on micro sites.

Andrew: I see.

Gabriel: And we also double downed on that a bit with further tests later on. They didn’t really move the needle as much so we really focused…

Andrew: Micro sites didn’t, but this idea of we’re not going to track you and we’re going to protect your security did and so you focused on that.

Gabriel: Yeah. That’s the other cool thing about tests is you may not discover, and that’s kind of like we were talking about it earlier when you come back, you may not discover the right channel, but you might discover something else about your customers or where the messaging should be of the focus.

Andrew: So just to wrap it up here, the channels that have worked for you using the process are what? Search engine optimization, PR, what else?

Gabriel: Content marketing. My blog was kind of the second one. Reddit advertising and social advertising. Then TV PR, so for PR we went for print and then our max seller really focused on TV. Then now, business development. So deals with [??] as a search option.

Andrew: In Apple products and the ones that were big disappointments?

Gabriel: We have tried most things on the list.

Andrew: Okay.

Gabriel: Honestly, we’ve tried a bunch of the online advertising platforms, as a good example. Google ad words included Facebook ads, stumble upon, and all these other different advertising platforms. We haven’t been able to really make that work.

Andrew: I remember reading your Facebook experiment. One where you were basically targeting your wife, and she didn’t click that bad. Facebook is not going to be good for us, at the time anyway.

Gabriel: Yeah, the problem is, especially early on, we can maybe start, some of this stuff might work later on, but we weren’t monetizing that well, and still aren’t monetizing that great, and they were too expensive. They were crazily expensive considering how much the cost requires your band way.

Andrew: All right. The book is “Traction”. There it is up on the screen. You people didn’t give us a digital version of the book. You intentionally said no paper only. Why is that?

Gabriel: There is a digital version. It took us a little while for it to come out, for no particular reason.

Andrew: Okay, I thought maybe you didn’t trust me. You said, “You know that guy, Andrew; I think he is going to pass it on to all of his fans, forget it”.

Gabriel: I’m happy to send you a digital version.

Andrew: No, I can get the digital version now. It’s available in the Kindle store, right?

Gabriel: Yeah, it’s available in the Kindle Store. We just had trouble getting it up and I had the books printed and sitting around before then. It took us awhile to go up.

Andrew: We were internally here at the office talking saying ‘why wouldn’t Gabriel trust us with the book? Is it a tracking thing? Does he not believe in us? Does he not trust anyone?’ I see. All right. It was just not available. The book is called “Traction”. There are a couple of things that are related to the book. Tell me if we can give this out, even to the audience. Access to the message boards? Sure, we have talked about that, right? That’s discussed on Tractionbook.com. Of course, we will link to it. There is a bull’s eye spreadsheet. Can we link to that?

Gabriel: Yep. It’s on the forums.

Andrew: Great. What is the bull’s-eye spreadsheet?

Gabriel: It is kind of the spreadsheet we talked about with no early on. We generalized that and it helps you go through this process. It’s just a very simple spreadsheet, so don’t think it’s complicated.

Andrew: It’s to give people a visual understanding of what we’ve talked about. It’s a simple style spreadsheet.

Gabriel: And the columns are commented and it just helps you fill in your brainstorming.

Andrew: Okay. Then there is also a bull’s eye framework PNG. I don’t think I could show it here on the screen. It’s gigantic with lots of small print. Can we give that out too?

Gabriel: Yeah, that would be great. Actually, someone, one of our readers…

Andrew: Yeah, it’s in the discussion form.

Gabriel: put that together. It wasn’t made by us.

Andrew: That’s fantastic.

Gabriel: It was something that didn’t think of. That’s why you have a community.

Andrew: I do like a good community. I remember in one of my early interviews I went to the community and said, “What should I ask him?” because I have an outsiders understanding, admittedly a good one, but I still am not as deep as your guys and they started sending me questions. Was that one of the ideas? One of the tests for you. Will community work as a way of getting traction?

Gabriel: Yes, and we are still trying to make that work. I still believe that community and even some case of viral could work for that to go, but we have not been able to figure it out in six years. I am still confident that it will. Community has definitely been a large part of how we grow the product because we do instant answers and our instant open platforms are open source and we have a huge community there. But in terms of actually growing the user base, it hasn’t as much, at least in a structured way. There is an offline word of mouth.

Andrew: What’s the answer thing?

Gabriel: So our product focus is on instant answers above the links. You get an answer.

Andrew: Oh, okay. I thought there was a whole other community that I missed, like a Q&A core thing.

Gabriel: No, the community is around, you’re telling us “I’m into stocks and this is the best stock source”, and I can even go in and coat it and contribute to jump back up. All that works, and that community is awesome.

Andrew: That community that builds the product is great. I see that you haven’t figured out yet how to use community to grow. There is a whole chapter here on community building for anyone who wants to expand right along with you. The book is called “Traction”. We have talked about it several times here on Mixergy. There, I should hold it up like that. Gabriel Weinberg, thank you so much for coming here and talking about it.

Gabriel: Thanks for having me back.

Andrew: You bet. If anyone out there got any value out of this, find a way to say thank you to Gabriel, maybe in a forum, maybe in person at an event. Maybe if you have a five year old you can see him at school. Honestly, really, the way Gabriel and I connected was by just catching each other on an online service called Hacker News. We started talking via email and we built a relationship. I always recommend that if you see something worthwhile online you find a way to connect with and thank the person that created it. I think it will start a relationship for you and frankly, it just feels good, for you and for them. I’m going to do it right now. Gabriel, thank you again for being on Mixergy.

Gabriel: And thank you for helping us with the book.

Andrew: Oh, yes I am mentioned in the book. I am very proud of that.

Gabriel: Yes, you are mentioned several times because you helped us a lot. That’s originally I think how we have to talk to you because I was interested in a subject and you were doing interviews that I liked.

Andrew: I do remember. You emailed me and said, “I was looking for you in my inbox” and I saw one of the other emails where you said, “Andrew, how you do this video side by side?” and I sent you the process. It’s good to see that a book came out of that. Wow, so that was helpful. Good.

Gabriel: Absolutely.

Andrew: Cool, thank you all. Bye guys.

DOWNLOAD TRANSCRIPT

Master Class:
How to create predictable revenue
(And double your sales)
Taught by Aaron Ross of Predictable Revenue

Master Class: Predictable Revenue


Report Bugs



Transcript

Andrew: This session is about creating predictable revenue, and it’s led by Aaron Ross. He is Founder of Predictable Revenue, the consulting company that helps businesses double and triple their sales, tech companies that have, at least, a sales person or two, at least, if not many more and they need to get appointments should be talking to Ross, Aaron Ross, to Aaron Ross, to Mr. Ross.Aaron: I like that, yeah. Mister, I like that.Andrew: Mr. Ross.Aaron: Feels good.Andrew: We’re both in Regus offices. So there’s like this emphasis on being very professional in a Regus office when you work out of it. All right, on to being more professional. I’ll point you guys to what we will be talking about today.This is our outline. It is based on Aaron’s book, “Predictable Revenue.” I’m going to help facilitate and hopefully maybe keep things a little less than Mr. Ross, even though I’m wearing the jacket with the pocket square.Aaron: Trust me, anyone who knows me knows that I’m not that formal.

Andrew: [laughs]

Aaron: I actually put on a collared shirt today.

Andrew: Way to go for the Mixergy audience.

Aaron: [laughs]

Andrew: All right. Let’s get right into it. Aaron, this is the company that you ran about a little over a decade ago. I’ve got an article in Red Herring. It was showing that your company, LeaseExchange.com, was one of the 10 to watch. You raised money for it. What happened to it?

Aaron: Yeah. Wow. How did you find that? That’s cool. I haven’t seen that in a while.

Andrew: A lot of Googling.

Aaron: [laughs] So yeah, Lease Exchange was a company I started back in the late 90s and I think one of the first bubbles, or maybe the first Internet bubble. Raised venture money. Hired a little bit of sales but it was one of these situations sales at the time wasn’t sexy. It was all about PR and I guess it was that times version of Indel [SP] marketing. We weren’t actually getting revenue in the sales team. I as CEO had no idea what to do because I didn’t know anything about sales because I’d say I hired a VP of Sales, like, figure it out.

And ultimately the company went under. We tried to sell, and it went bankrupt. But the lesson I learned was as CEO, I know it’s obvious in hindsight, but you have to know how to sell and how to build a sales team because that’s actually what brings money in the door ultimately.

Andrew: Yeah.

Aaron: It’s very useful for a company.

Andrew: Yeah. We were talking before. We officially started about how entrepreneurs often know they need sales. They get excited when revenue goes up. It’s validating, but at the same time they feel like, well, maybe that’s not the thing I should be doing. Someone else should do it. Maybe …

Aaron: I don’t want to sell.

Andrew: Maybe it’s creating the product, right?

Aaron: Or let’s see, I just want to create a product that everyone just comes in and buys it.

Andrew: Right.

Aaron: Instagram did it.

Andrew: Right, so why can’t we do it too?

Aaron: Come on. The reality is you’re not going to accomplish anything in life unless you know how to sell yourself, your ideas, or your products.

Andrew: And, yes, that company had to close down, but after that you ended up at Sales Force where you helped them grow their sales. This is an article from Sales Force. You left just before this, so you’re still a part of that revenue. And at the time they were doing over $700 million in revenue. I wanted to show that to give people a sense of how big a field you were playing on once you got good at sales.

And, of course, since then you’ve gotten even better. Now this is what you do. Can you tell me just a little bit about what you were doing at Sales Force that allowed the company to grow their sales so much?

Aaron: Sure. What was interesting was in leaving Lease Exchange and there’s about a year or two before I joined Sales Force, but the thing I knew was that I wanted to start another company. And before I did I felt I needed to know how to build a sales team or how to create a professional sales function or just to sell.

Every entrepreneur has the inherent ability to sell themselves. People recruiting, raising money. So I went to Sales Force. The only job they had in sales because I actually wanted to just sell was the lowest level job. It was answering the 800 line.

Andrew: Okay.

Aaron: I checked my ego at the door because I just wanted to learn.

Andrew: Wait, you started off at Sales Force answering their 800 number?

Aaron: That’s the only job they had in sales.

Andrew: Okay.

Aaron: I figured, look, once I got in the door that I would … I didn’t want that job necessarily, but I wanted to get in and then I’d figure out some way to make a difference.

Andrew: Okay.

Aaron: And then so, that was going from whatever, CEO of a venture-backed company.

Andrew: Yeah.

Aaron: [??] the most junior level at Salesforce, 800 line. And within a few months though what happened was I saw and I learned quickly about how it was working and some, and saw that we were making this huge investment in field salespeople in Salesforce and started targeting bigger companies. And there’s this old belief, which I think still happens a lot. Which is, “Hey, we’re going to hire these expensive salespeople and they’re going to bring in their prior relationships, they’re going to have these businesses relationships and contacts and they’ll help just bring them in.”

Andrew: Yeah.

Aaron: And more often than not that doesn’t work at all. Once in a while it might in certain situations, but usually you get nothing.

Andrew: So what did you do?

Aaron: Well I suggested, “Okay, we’re making God knows how many millions of dollars in salespeople and product and so on and we have no pipeline, or very little. And Salesforce is getting a ton of inbound leads for their small business customers, but almost nothing for their larger customer where the money is.”

Andrew: Okay.

Aaron: Or, most places. “So hey, why don’t we create a, I’ll figure out, [Inaudible 00:01:06] figure out a way to create an outbound prospecting process or function so we can go out and generate the pipeline we need.”

Andrew: Okay.

Aaron: And up until that point Salesforce had tried hiring some outside firms to prospect for them, do telemarketing. They had some people internally making cold calls, they tried to get salespeople to prospect, and nothing worked at all. Like literally there’d be projects where you’d spend $10,000, $15,000 and then got a zero percent result. I figured it wouldn’t be hard to beat that with a bit of focus.

Andrew: And so what you, if I’m understanding it right, just to be extremely careful about this, you helped create a lead generation process for Salesforce that helped increase recurring revenues by $100,000,000?

Aaron: Yeah, it was in a few years there, and basically gave them the ability to go out and generate as much pipeline as we needed.

Andrew: Wow, okay.

Aaron: So in other words, it’s that gap. We have 50 salespeople and they have a quota of X and they’re only getting Y leads, which isn’t nearly enough to feed them. Like what do we do, how do we give them enough pipeline so they can hit their numbers and the company can hit its numbers?

Andrew: Okay, all right. I was tempted to say, “Well what did you do? Be more specific.” But of course, that’s what we’re going to be talking about today, what you did there that is applicable to the person who’s listening to us now who’s build a Salesforce or getting more leads for an existing Salesforce. I should also say that this is where you are right now, this is the company that you built. And let’s go into the first of the big ideas that we’re going to be talking about to help the person who’s listening to us to create a sales machine. And the first is to figure out what’s not working and try something new.

Aaron: It sounds sort of self-evident but . . .

Andrew: Sorry?

Aaron: I said it sounds sort of self-evident but people get this wrong all the time.

Andrew: Where do they start instead?

Aaron: Well they do more of what’s not working.

Andrew: Oh, okay. SO give me an example of how it’s done right. This was a company that was having some issues, what did they do when they did it right?

Aaron: Well HyperQuality, and this is a few years ago, but HyperQuality was very typical of a software company, where you have an executive team that is used to the traditional way of selling. It’s changing, but the traditional way of selling is you hire salespeople and they prospect and they bring in- You’ve got marketing generating their leads and salespeople have to do all their own prospecting to fill the gap.

Andrew: Okay.

Aaron: Whether they’re inside or outside. And it rarely works and it’s not repeatable, and for sure not predictable. Salespeople shouldn’t prospect.

Andrew: Okay.

Aaron: But what they did is, my partner at the time, Marylou, we helped the company say, “All right, if you take,” she actually did this for them, “a dedicated prospector, a prospecting function, who can focus on prospecting and is doing it full-time, can do it right, and stay on top of things, it makes it much easier to create a predictable and repeatable way to get sales appointments.

Andrew: Okay, and so they went from two leads a month and the leads were being generated by salespeople, am I right?

Aaron: By inbound, by word of mouth usually they were inbound.

Andrew: Word of mouth, someone would call in and they get just two a month?

Aaron: Yeah, two.

Andrew: Okay.

Aaron: This is, again, an enterprise company in a market where customer, it’s like a niche market. And about their marketing , maybe it wasn’t that great, but they only got two qualified leads a month. They probably got hundreds of registrations but most of them just were not a good fit.

Andrew: Got you. And then within 90 days, the woman whose image I show up on the screen, Marylou Tyler, who was co-founder of your book, excuse me, co-author of the book, she was able to increase their qualified leads to eight a month. And the way she did it was by saying, “Salespeople should not be prospecting.” What else did she do that allowed that to happen?

Aaron: Well, part of it is that focus on . . . going back to companies who do the wrong thing and then they do more of it, a lot of companies are not getting enough leads and so management tells sales people: make more calls, send more emails.

Andrew: Okay.

Aaron: You’re not getting leads, so do more of what’s not working.

Andrew: Okay.

Aaron: So this company, where they’re open to change–let’s try something new. Let’s have someone who’s dedicated to prospecting do it. That’s one of the most important points, is having a focus. Now, whether it’s a person or a team, or maybe even an outsource service, it’s focusing in a place and figuring out what kind of system can you use to actually get those appointments in a predictable way. So she used the system that created salesforce. It’s called cold calling 2.0 because, honestly, it’s like calling on cold companies but without cold calls, without phone calls. It’s mostly an email-based prospecting. It was very effective in getting them a lot more appointments compared to what they’d tried before.

Andrew: Okay. So what we can take away from this is they evaluated what was not working for them and they realized that it’s the prospecting part of their sales process that wasn’t working and then they tried a new approach, which happened to be the approach that you’re going to tell us about. Right?

Aaron: Yeah.

Andrew: So that’s what you want us to do, not, “Hey, we’re not making enough sales. We need to make more phone calls” It’s, “Look at what’s not working before you decide what you need to be doing more of or different of.”

Aaron: Yeah, because, again, marketing was generating lots of leads but they mostly weren’t any good. Sales people were prospecting but not getting anything, so what’s something new they could try? And this worked.

Andrew: All right. Then we’ll get into that in a little more depth in a moment, but the next big point that we want to talk about is to keep sales emails short. Do you have an outline that we can keep in mind as we’re sending out those cold emails or any sales email?

Aaron: Yeah. I found an example here. I think there’s one phrase I kept saying at a workshop for SAP recently. The phrase I kept saying over and over again was: keep it easy to understand and easy to answer to, or easy to respond to.

Andrew: Okay.

Aaron: Think about the ones where it’s a cold email or maybe you don’t know them very well, so let’s forget where you’re doing a lot of emailing and you’re deep in a deal. Most sales emails are too long. They have too much jargon and they’re just vague.

Andrew: Yes.

Aaron: “Let me know if you need any help.” That’s a terrible call to action.

Andrew: What is a better call to action? I know what you mean. “Let me know if you need any help.” I don’t respond to those because they just tell me to let them know if I need any help so I assume it doesn’t need a response, and so I don’t respond and then I get an email back saying, “Well, you didn’t respond to this. Did you see it?” Yeah, I saw it.

Aaron: I don’t know what kind of help. Tell me what you can help me with and I’ll tell you if I need it or not.

Andrew: Right. So then what’s a clearer call to action within an email if it’s not the one we just talked about?

Aaron: Well, the one you’ve got here on the screen.

Andrew: Let’s take a look at it.

Aaron: Yeah. Again, there’s lots of different types of sales emails. You always got to try. There’s not one type that works for everyone, but the principles here are sound. So, for example, it’s short–two or three sentences. HubSpot did a study that suggested the ideal initial sales emails, the first or second email you exchange with someone, should be 300 to 500 characters.

Andrew: Okay.

Aaron: So I always think two to three sentences is a good rule of thumb. Try to dejargonize [SP] it. So don’t put in words like “leverage,” “scalable.”

Andrew: But they make me sound so corporate, like calling you “Mr. Ross.”

Aaron: I know. You see, especially early stage entrepreneurs, guys who are under a million or two, you develop all this messaging when you’re pitching VCs and investors, and all that is basically crap for when you’re trying to use it for prospects because prospects don’t care about you do. They care about what you can do for them.

Andrew: Yeah.

Aaron: A lot of what we do at [??] is help people English-ify their emails or phone calls and just turn it into simple English. But, again, this email.

Andrew: Yeah, let’s take a look at this. Here, I’ll read it out. Subject line, “10 Times [insert company name] Traction in 10 minutes. Hello, [first name]. I have an idea that I can explain in 10 minutes that can get its next hundred best customers. I recently used this idea to help our client, [insert name of competitor or other company], almost triple their monthly run rate. [first name], let’s schedule a quick 10-minute call so I can share the idea with you. When works best for you?” And so what you like about that is that it’s short. You also like that there is a clear call to action. When is the best time for you? And you also like that we don’t talk a lot about the company itself. In fact, I can’t even tell what this company does, but I can tell what it will do for its client.

Aaron: It’s intriguing. Okay, intriguing. Now, I will say this is not one of my email templates which I don’t like to share.

Andrew: No, I found this on ringlead.com, their cool email template.

Aaron: Yeah, and by which it’s a good sample. So I’ll tell you about the things I like and don’t like.

Andrew: Okay.

Aaron: Someday I’m going to do a lot more around email writing. So the thing I like about it is it’s pretty short and it’s intriguing. The first thing is curiosity because people open emails and respond to them, at least open and read them typically for one or three reasons. It’s either personal, so it’s like, “Hey, Andrew. I saw we lived in L.A. Together. I know your wife.”

Andrew: Yep.

Aaron: And the second reason is because it’s useful and it’s something they learned. And the third is because it’s intriguing and you can combine them, but those are basically the three reasons. I like intriguing with prospecting.

Andrew: And this one is intriguing. I could increase your traction in ten minutes.

Aaron: Yeah, I think it’s over selling it in subject [??].

Andrew: A little too gimmicky, ten times your traffic in ten minutes.

Aaron: So again, I like is that each sentence is short and sweet, to the point.

Andrew: Yep.

Aaron: Also, here is a really important tip is that they broke it up into different sentences, so there is white space, because it’s easier on a phone to read a sentence and then a sentence, and a sentence. When it’s all lumped into one big sentence it’s just harder to read.

Andrew: Yeah.

Aaron: And they use social proof which would be we helped your competitor do this.

Andrew: That’s cool.

Aaron: The last thing I would take off at the very end, the when works best for you. Again, we could improve the last sentence, but in general [??].

Andrew: What would work? You know what I do is I say, “Can I call you on Tuesday at 11:00 a.m.?” Even though I know that chances are good that they’re not free Tuesday at 11:00 a.m., I like that they at least hit reply and say, “I can’t do that time.” And then we could at least start the conversation about when.

Aaron: Exactly. It’s better to offer something concrete or specific whether it’s what’s the best way to get 20 minutes on your calendar which is more asking about the method or like you said, “What about tomorrow at 11?” Because what you want and this is true in the email in general, and easy to understand, and easy to respond to, it’s better to get a no that doesn’t work for me because usually then they say, “What about this other option?”

Andrew: Right.

Aaron: Where you die, where you get killed here is when people get confused because when they get confused they don’t respond at all.

Andrew: Okay, all right.

Aaron: When it’s too vague. I’ll give you one more example on what not to do with this kind of email.

Andrew: Okay.

Aaron: If you can ask someone a question, so let’s say, you want to ask a question. I think a great one usually is, let’s say you sell software, ask them what kind of tool they use. So let’s say you sell marketing software. Okay?

Andrew: Yep.

Aaron: And they say, “Hey, by the way, what do you use today for your email marketing?” It’s a software app. Okay, that’s simple that understands simple to answer. Oh, a question you shouldn’t ask, “What are your email marketing goals for this year?

Andrew: Ah! Yes, I see, okay.

Aaron: And we’re like, wait a second. I don’t really know. I got to think about it. Okay, move on.

Andrew: And these would be just be a simple, easy to answer question.

Aaron: Yeah, to start the conversation. Now once you have more of a relationship then they’re willing to put more energy into answering more complicated questions. But the idea is, especially on email on a phone call when they’re getting to know someone is, you don’t want a yes or no question, but you don’t want the question to be so vague that people are like it’s really hard to answer.

Andrew: Okay. Then I end up putting it off until later and then later becomes three weeks. And then well, it’s been three weeks, I should just move on, they apparently mean.

Aaron: Yeah, so and like they what are your goals, what are your challenges?

Andrew: It’s a good example of a tough one.

Aaron: Yeah.

Andrew: And why am I going to tell a stranger that? Okay, onto the big board. The next thing we’re going to be talking about is specialize.

Aaron: A very important one, yeah.

Andrew: Separate your team’s responsibilities. Why is that so important? I saw that you were jumping in.

Aaron: I think this is probably the number one most important thing for companies to understand in sales. And I believe this is becoming more of a standard especially in Silicon Valley. And I’d like to think a lot of it is because of the book. I hear a lot of companies say it’s their sales play book, but I know across even the U.S. and big companies, and there are a lot of companies who don’t get this. And this is really about, you know traditionally sales people had to do everything. They first responded to their own inbound leads. They did their own prospecting, closed their own deals, and managed their own prospecting.

Andrew: What do you mean by prospecting?

Aaron: They had to do their cold calls or knock on doors.

Andrew: Cold calls, okay.

So they get the leads coming in. They have to do their own phone calls. They have to then follow-up with people who seem interested. They then go into meetings with them, either online using a serves like Google Hangouts or in person, etcetera. And so that’s not the way to go. What is a better approach then?

Aaron: Yeah, because what you have when that happens you have people who are multi-tasking, doing lots of things not very well. And what Salesforce was a leader in, and I’ve just helped popularize this this idea of specializing you sales roles.

Wherein if you have . . . this isn’t for consumer sales, you have like a one call sale, but especially business to business products having different sales people focused on their specialty. Like you have outbound prospectors, who they are very dedicated to just prospecting. And they don’t close deals, and they don’t respond to inbound leads. That is upper left number one.

Andrew: Here let me show it. This is a process that you want us to have?

Aaron: No. This is probably the most important idea still. At some point they’ll change because everyone will be doing it, but this is probably the number one place to start to make everything work better. Generally four core roles, I mean this is more of a template. Is that you have prospectors prospecting and closures closing. So number three in the middle.

All they do, they have some sales people who are just closing new business. And a fourth role on the right, which is post sales anything, could be customer success, it could be account management or a mix. But once someone’s a customer.

Andrew: Somebody else needs to talk to them.

Aaron: Someone else, yeah there’s a baton handed off and there’s a . . .

Andrew: Let me break this down. I want to make sure I’m fully following it. So left most two rectangles, one of them is outbound reps, that means there’s a dedicated group of people who just make phone calls and see who out there in the world is interested. A different group of people still are the inbound reps, who except calls in. And I’m imagining for a smaller company that might be the same person. Or are you saying even there it wouldn’t be?

Aaron: Well I’ll tell you, once you go over the roles I’ll tell you how to apply this if you only have one person at the company.

Andrew: Got you. Okay, so one role is an outbound sales rep, that person makes those calls out into the world and sees who’s interested.

Aaron: Outbound prospecting. Yeah, more outbound emails but yeah, the principle is you’re reaching out to people who aren’t calling you.

Andrew: And the inbound rep is someone who takes calls from people who see the Webinar and are interested. Or go to the Web page and are interested.

Aaron: Go to your Website, register on the Website. Start a pre-trial, ask for demo. And neither of those, usually almost always neither of those roles close deals.

Andrew: Okay, and then you have different role for closing the deal. That is the real sales person as we understand them. Explains, guides, closes the sale. And then finally you have someone who just maintains the deal, maintains the relationship and make sure that everyone’s happy.

All right so if we have a big organization we at least have four people, if not four groups of people who are handling this. If we’re starting out you had mentioned though, the one person organization. How would that break down then?

Aaron: So we have a small team. What happens is, specialization is still important but you specialize your time. So for example let’s say that you’re a CEO and you’re the only person who’s selling. You’re one CEO and there’s a bunch of engineers, and you don’t have enough leads. So you, I need to prospect, I need to go out and get some customers. You can’t do it five minutes here, and five minutes there, it’s impossible to do effectively.

Better is to say, block out time on your calendar at least 90 minutes or two hours to do that. Could be a day, could be Tuesday’s it could be, you know, whatever it is, but you’ve got to block out our calendar. So you specialize your calendar time. You wouldn’t need to do it for every role. But it’s really for the things that are most important that aren’t getting done, where you’d focus time. It’s really about focus.

Andrew: So it might be something like, every Thursday at 2:00 I make outbound calls and see who is interested and then I get them into the pipeline.

Aaron: Could be sure. Yeah, every Thursday, every other Thursday, Monday, Tuesday, Wednesday could be, you know again last week with let’s say with ten sales people even when sales people have to prospect, you know, as part-time you got to calendar it.

Some people want to do it in the morning for themselves. Some people are afternoon with a buddy. The way you do it is different but it’s about having that focus time were you are dedicated to it and you block out all the distractions.

Andrew: Okay, all right. And I imagine then the first and easiest role probably to hire for is the inbound rep person who just takes all those inbound calls for people who say the Webinar etcetera.

Aaron: Yeah, and now if you have inbound leads what happens is pretty commonly with an early state company CEO’s closing deals. And usually the best first hire is a prosecutor. If you have lots of inbound leads already, you hire an inbound rep to respond to them. If you don’t really have many inbound leads so if you probably have less than like 100 a month, then you kind of start with a prospector.

Andrew: Mm-hmm.

Aaron: Because you don’t really need an inbound person for a few leads, so you start with a prospector. Then, once the prospector’s setting appointments for the CEO, and they get too busy, after that, you might promote the prospector to closing. You might hire a closer.

Andrew: Got you.

Aaron: You’re basically creating this farm team system to grow people up in your system, and it’s pretty hard. I find it’s very common for, at least, founders who don’t have a lot of sales experience, they usually hire the wrong salespeople.

Andrew: What do they do instead?

Aaron: Sales is this mysterious thing, and they see this resume. “Oh, someone worked at Siebel, or someone worked at Salesforce. Someone worked at Facebook, they sold all this stuff.” They don’t realize that that person succeeded in a big company with a big brand, and so on. And so, I think what’s usually a less risky way to go is hiring more junior people to start who are very hungry, coachable, and eager to learn sales. It’s not rocket science, really, it’s not. They can figure it out, so grow them up from the bottom.

Unless you have some board members, or you have someone who you know who really has an eye for sales talent. . . It can make a big difference to bring in an experienced salesperson, but I find that, without help, most, a lot of founders, it’s their first time, just, they don’t know how to hire a good one.

Andrew: So it’s better to hire someone who’s junior, who is trainable, coachable, and then tell them about this process and put them in that box that you labeled number one.

Aaron: Yeah. Give them the chance to focus on it, because, if you’re a founder, you can only do it part-time, so it’s really hard to. . . But if you can have someone who’s smart and hungry, who can focus on how to sell full-time. They’ll figure it out.

Andrew: Yep. All right. Let’s bring up the board again. Number four, we’re going to talk about not focusing on just closing the deals instead of. . . Instead of doing that, we should be thinking about giving value afterwards. You worked with a client who had that issue. What happened to [Guild]?

Aaron: Yeah. Well, [Guild], I think it’s a lot like a lot of tech companies, a lot of startups. It’s very focused on getting customers in. “Need more customers, we need to grow revenue.” What happens is, especially in SaaS companies, you get your first 10 customers, or 50, or 100, and then a whole bunch of them fail out when their renewal comes up, or even earlier. So it goes from, “More, more, more customers,” to, “Oh my god! Save the customers we’ve got.”

I think it’s so important for companies to stay focused on yes, get more customers, but get the right ones, and know how to make them successful.

Andrew: I see.

Aaron: So customer success, usually people wait too long to create a role or focus around customers. . . the idea of customer success or customer success management role of function or program.

Andrew: Going back to this illustration that you created, I spent a lot of time in that conversation talking about Sections 1, 2 and 3, and hardly any on Number 4. This is what you’re talking about. We need to spend more time on Number 4, nurturing that customer after she buys and building that relationship so that we don’t increase churn. Is that right?

Aaron: Yep. It’s a lot easier to keep the customers you have than to get new ones.

Andrew: All right. So then, at this company, when they did that, they were losing four percent of their customers every month, which roughly was 50% a year, which is dramatic.

Aaron: Ouch.

Andrew: So, after that, you were able to cut their churn from four percent to one percent. That’s a quarter, 75% off, too many percentage points.

Aaron: Yeah, they went from losing 50% a year to losing, now, under 15% a year, which is about standard for SaaS companies.

Andrew: That’s huge.

Aaron: In terms of the number of customers. Yep.

Andrew: All right. So, if we buy into that and we say, “All right, we’re ready to do it ourselves. We want to focus on box number four, what are some of the things that we can do to maintain customers, to have our reps do?

Aaron: That’s a good question. I think a lot of it is just putting. . . My focus is having. . . It could be a monthly meeting…Sorry, I mean a weekly meeting with executives about it, if you can’t have a dedicated person. If you have a dedicated person, even better, and then they will help figure it out. Usually what happens it, it can be a combination of sales education to make sure salespeople are targeting and closing the right kinds of customers, setting appropriate expectations, plus having, hopefully, someone who’s dedicated after the sale to be there to make sure that the launch implementation. . . The customers know how to use the product, and their hands are held through the point where they have their own momentum. Right?

All right. It’s pretty common. Customers come in, they buy a product, and they’re like we bought it, we’re really excited, but now what do we do. They lose momentum and they can fail out. You can’t let your eye off the ball with them until probably three months after they’ve bought and you see they have their own momentum and are self-sufficient. Then, you can take less attention off of them.

Andrew: I’m going to do a session on that. I was just looking at my calendar on the phone to see when that’s coming up on just how to nurture a customer after they’ve come in, what are some of the specific things we can do, and what are some of the broader ideas we need to understand. I don’t have the exact data right now, but we’re going to have to have that up on the site because that is important and it’s hardly ever talked about.

Aaron: Yeah. It’s becoming more popular now, this idea of customer success. It’s one of the thing I’m most excited to write about. I think now it’s more of a standard, especially in Silicon Valley. You invest in customer success early.

There’s a client I had called Bright Edge. I started with them I guess it was a few years ago when they were a million dollars. They went from one million to 20 million in three years in revenue, mostly through that outbound prospecting system. Part of what helped them make prospecting successful was they really knew their customers and what it took to make them successful and which kinds of customers could be success to target and which ones to avoid.

Andrew: I see.

Aaron: When they were 10 to 15 people they had already made their first hire for someone who was just customer success. Earlier is better in terms of… It’s an investment. It’s not a cost. It’s not glorified customer support. This is hiring someone who’s going to be a high return investment because they’re going to save you a ton of churn and make you much smarter about the kinds of customers that you should go after.

Andrew: Because when you’re talking to a customer after they bought, you get a better understanding of what makes them happy, who is never going to be happy, who it’s a good fit for, etcetera.

Aaron: Yeah, how to make them successful. Plus, when you have happier customers and somebody who’s dedicated to them, it’s easier to get case studies and testimonials which you need whether you’re marketing, or selling, or prospecting, or closing. It’s really important.

Andrew: Cool. And, you got measurable results for Guild. They did when they made these changes. Speaking of numbers and measurability, people might’ve noticed that it took me a while to get all those stats out right for Guild. That brings up another point, point number five, which is you’re recommending fewer but better metrics. You had an issue with this guy. Who is this?

Aaron: Frankie V.

Andrew: Frankie V.

Aaron: The president of worldwide sales at Salesforce. The title’s always changing.

Andrew: I think he’s listed as executive vice president now on their website. Where I was looking for his photo I saw that. Frank van Veenendaal…

Aaron: Veenendaal.

Andrew: Veenendaal.

Aaron: Veenendaal, yeah.

Andrew: Veenendaal.

Aaron: I worked for him. Of course, I like metrics. I was an engineer. What I found when I was managing the sales team was it was easy to either overwhelm my team or management with different metrics, charts, trends, and so on. It was important for me to look at all these things but then to distill it down to what are the few key things that people need to focus on. Everybody…

Andrew: With a company that big that I’m sure prides itself on metrics, how do you distill it down for him? What do you come up with that ends up making the whole company more efficient without losing data because you want simplification?

Aaron: There were two metrics that we focused on for him and also that he could use to share with the executive team in terms of proof of the contribution of this particular sales team. One, for example, was every month Salesforce looked at the top ten biggest deals that closed that month. We would go back and highlight which deals came from the prospecting team…

Andrew: Okay.

Aaron: [??] It turns out about 50% month after month. About half came from the team. We always audited, fact checked, and dug in to make sure that we weren’t taking credit for what we didn’t do. Mark Benioff looked at this very closely.

That was one way to highlight the impact the prospecting team was having on the business. We color coded, and he’d send it out. That was one. Another one was just a percentage of all the revenue that was being sourced by this team.

The first one’s a list. Here are the top ten, and these color coded which are sourced from outbound prospecting. The other was a pie chart that said this percentage came from X or this percentage came from prospecting. And it was about 37 or 40%, you know, which is a big chunk of revenue. Almost half of the revenue was coming from prospecting. And so, again, he sort of used that to, I don’t know if to market it, but just to show the executive team how important it was and why it was important to invest in that effort.

Andrew: Okay. So you were only working with him on prospecting, right?

Aaron: Yeah.

Andrew: But he was working with lots of different departments, working on lots of different things. If every one of those groups of people sent in a flood of data it would have been unmanageable.

Aaron: Totally.

Andrew: So you just said I’m just going to give them two things. I’m going to tell him what percentage of the big deals, of the number of big deals what percentage of them came from our Cold Calling 2.0 System. And then what percentage of money came in. So the percentage of the overall number of big deals and the percentage of cash that comes from this, and then he can watch as that grows. And it also allows you guys to see how much bigger you’re getting without looking at all the details.

Aaron: Yeah. Because that’s really what the executives cared about, which in my case how much money is it making us at that point. And I think, again, when you’re a sales person/entrepreneur it’s easy to forget to put yourself in someone else’s shoes and realize whatever you’re trying to communicate to them, whether it’s over email, they have so many other things going on.

I think empathy is really important. I think empathy is the right term in this case, but it’s important to be able to put yourself in their shoes. All right, if I was that person, what would I really care about? I had to pick a few things and you can’t dump a whole bunch of information on someone.

Andrew: If you do that, you’re able to grow the prospecting team from just six people to 200 more than I could put up on the …

Aaron: Yeah.

Andrew: … on the screen.

Aaron: Two hundred people around the world.

Andrew: Prospecting. I’ve said this before, but it was something that stuck with me. My earliest interview with Noah Kagan who was the sixth hire at Facebook was about this specific issue of you get so much data as a business person today, as someone who’s the tech person. And his interview was about limiting what you take in, and he told me that when he worked with Mark Zuckerberg the data, the single point that they kept talking about was growth.

So if Noah came up with a great idea, it came back to growth. Is it going to move our number? And if not, then let’s not focus on it right now. Let’s spend time on just that one number. And obviously that worked for them.

Let’s go back to the big board. Number six, create repeatable processes. Before I show the visual for that, what’s the problem here that we’re solving?

Aaron: Yeah. I’m going to give an example that combines a big of the viewer metrics with repeatable process.

Andrew: Okay.

Aaron: It’s actually right now there’s a company I’m working with called Education Inc. on the East Coast.

Andrew: Okay.

Aaron: It doesn’t matter what they do. It’s hard to explain, but they had a customer success challenge. They’re keeping customers happy, and I think we went through … We started with just picking out one or two key metrics to focus on that they should care about because they’re making all kinds of stuff, appointments and emails and this and that and the other. It was just too scattered.

So first by focusing on just one or two real important things it made it easy to say, “All right. If you want to move in this case, I think it was called the percentage of unbilled hours. But it was this key metric. Then it was simple to say, “Well, all right, what affects that?” Let’s say it’s a certain kind of contracts. Okay, well, how can we go out and improve these contracts?

And it just made it a lot easier to focus in on a way so this metric and what can we do in a repeatable way to improve it. So I finally zeroed in on focus and thinking when you try to do too many things with too many metrics it’s impossible to create some repeatable systems. And you can’t have predictable revenue without some kind of repeatable systems within the company.

Andrew: Okay. Let’s take a look at the system that we want to show for this. It is up on everyone’s screen. Now there it is.

Aaron: Yep, one of my favorites.

Andrew: These are, by the way, all hand made. You made these visuals?

Aaron: Yeah. Well, this one I designed. I had someone color it, but all the art I did myself.

Andrew: Okay.

Aaron: So I don’t think we’ve shown any of the art yet, but on the cover of the book we’ve got one coming up soon.

Andrew: Okay.

Aaron: This one I actually do art sketching and so on. It’s interesting I’ve noticed more around the web, more hand drawn stuff.

Andrew: I like it.

Aaron: There’s that organic, authentic human feeling to it that is catching people’s attention.

Andrew: Okay, so what are we looking at here for Cold Cqlling 2.0?

Aaron: Well, I’d say look if you want predictable revenue and a company that grows through sales, you have to have predictable lead generation. Because lead generation is your big lever.

Andrew: Mm-hmm.

Aaron: You know, it doesn’t matter how great your sales process is. If your lead generating is crummy, you’re going to struggle. If you have great lead generation, you can get pretty much get everything else wrong and still do pretty well. So in this case, one of the most predictable ways to generate quality leads is through prospecting if you have a repeatable way to do it. And this is when I came up with Salesforce. This is my particular system. Call it cold calling 2.0, because it was really more about sending cold emails and not making cold calls. But this is great. Whatever you do, you can channel most things into funnels. Whether it’s development with bugs and features and so on. Marketing. This is a prospecting funnel.

Andrew: I put my dating into a funnel when I was dating. How many women do I need to talk to every night. And of those, how many are going to actually give me a phone number? Of those, how many can I get a follow up. I know what you’re talking about.

Aaron: With your conversion rates and so on.

Andrew: Yeah, my conversion rate was low but at least I had a funnel with a lot of people, a lot of prospects at the top.

Aaron: And this is different, because from what I knew, almost all of the prospecting systems out there were all about how many dials a day did you make, and how many people pick up, and how many appointments did you get. And what I found was that that didn’t work at all for me. Cold calling was waste of time. I didn’t like it. The people I called didn’t like it. So anyway, I came up with this different approach using email and a referral system. And I found that if I sent, let’s use round numbers. Again, it began with being really specific and smart about who I was going after. The kinds of companies, the kinds of people.

Andrew: Okay.

Aaron: When I reached out, I’m usually asking for a referral. So let’s say I sent like 1000 emails a month, just use a round number. I could see about a 10% response rate. So you have 100 responses. And this is over, now over hundreds of thousands of emails, I don’t even know, but it’s a pretty consistent response rate. Seventy nine percent.

Andrew: Okay.

Aaron: I get a regular set of responses, which turn into like a hundred conversations a month, quick conversations. Are we a fit? And then from there, setting up ten to fifteen appointments for salespeople. Of which seventy five percent would be accepted or convert into a qualified sales opportunity. The salesperson says, “I’m going to take this and put it in my pipeline.” And then from there, twenty percent of those we close. So once you do this for awhile, you can get your data. It’s going to vary a bit by company, but you can have a predictable way to generate leads because you say you have a certain number of emails ‘x’, turns into appointments ‘y’, which turn into a certain amount of revenue ‘z’.

Andrew: Why couldn’t this work out when the salespeople were doing the prospecting themselves? Why couldn’t it be repeatable at that point?

Aaron: It’s just too hard to juggle. You know, to do it a few minutes here, a few minutes there. This works really well when you’ve got someone doing it full time. It just needs focus to do it really well. And to be consistent with it because it takes consistent outreach and consistent follow up. So salespeople, what they needed, in order for them to prospect, I think they should but it should be like a very small number of target accounts. Like 5 or 10 or maybe even less depending on who you are. Or either strategic accounts, special ones, or partners that they could get referrals from. But like a small number of special situations because that makes it easier to focus on doing a few things, going deep with a small number of targets.

In other words, what works with prospecting is, and this is more the principle or targeting, talking to 10 companies 10 times each rather than a hundred companies once. Focus on fewer, better accounts. And also, frankly, salespeople are not very good at it. They don’t like to do it, they’re not good at it, it’s not repeatable. Because even if a salesperson is good at prospecting and closing, which is very rare, they prospect, they fill their pipeline. They have to stop prospecting because they are now busy closing. They get into this up and down cycle. It’s not a scalable, repeatable way to build a sales team or to generate leads.

Andrew: Alright, let’s go on then to the next and final point, which is, “Move to Self-Management by Using the 80/20 Rule”. So, we see now how you’re able to build up your team at Salesforce, but there was also a problem that was building up along with the team and along with the revenues. And that’s that there were too many responsibilities on you.

Aaron: Mm-hmm. Yeah, because at one point I had up to fifteen direct reports, plus I finally got a protege to be like a helpful manager. But I found after about ten, when I had ten people reporting to me that still felt like a team.

Andrew: Yeah.

Aaron: And after that it was just too many we sort of lost that feel of actually being on a team and I didn’t feel like it was working. People weren’t getting the right coaching and it just didn’t feel right. I wanted the team to be independent of me, because I didn’t want to be trapped by the team and I wanted the team to be able to depend on me but not be dependent on me.

Andrew: Yep.

Aaron: Because if they were dependent on me, I would never be able to take a break, be promoted, go on vacation, or who knows what else. I wanted it to be able to last beyond when I left.

Andrew: Yep. And so you built this out, explain what this is, and here I think this visual is going to help us understand it.

Aaron: It’s a bit. It’s a little related to the sales which is the idea of how you manage your company, your team, trickles down throughout the culture.

Andrew: Okay.

Aaron: So if you are micro-managing your people. Let’s say you’re a CEO and you micro-manage your execs, they’re going to end up at some point micro-managing their people. Or actually here’s a better example, say you’re CEO and you’re always putting the pressure on the VP of sales. All right.

Andrew: Yep.

Aaron: The board is pressuring you, VP of sales turns around to the sales people like, “Where’s those deals, come on we need to get in this month.” Sales people turn around to the customers or prospects and they do whatever they need to do to get the deals in, whether or not it’s good for the customers necessarily, or whether or not it’s good for the long-term health of the company. You know, crazy big discounts, promising custom work, all sorts of things just to get the deal in.

Andrew: Yep.

Aaron: And there’s that short-term scramble, fire-fighting, you can see companies who are always in the short-term scramble or fire-fighting mode. Or other companies that have more of an even keel long-term approach. So what I find as CEO, especially because it really starts with the CEO, but this can apply to management, which is how can you promote more of a culture of trust in helping your employees take more responsibility. You know, act as mini-CEOs because ultimately it’s more fulfilling for them, and you get better results when they can make more of their own decisions and it makes the company more scalable. Because as long as the CEO or head of sales is required, let’s just stick to sales. As long as the company sales are dependent on a CEO or frequent sales-

Andrew: Yep.

Aaron: You’re only limiting your growth. You have to be able to design the CEO or head of sales out of the sales process in order to grow.

Andrew: Okay. And it seems like one way that you did that was by breaking up the roles, those four roles that we talked about earlier-

Aaron: That makes a big difference.

Andrew: That makes a huge difference. Doing things that are repeatable makes a huge difference because if they’re repeatable people know them, they get better at them, they don’t need you. But this 80-20 principle and the way you applied it is interesting to me. That you broke your work apart into 20% important work that you had to do, and 80% distributable work that other people could do, right?

Aaron: Yeah and so, when I had a team and I was thinking, “Alright, there’s some stuff that I need to do and I want to do. And there’s a bunch of stuff I don’t want to do.” So how can I take the stuff I don’t want to do, like training new hires.

Andrew: Yep.

Aaron: Like after the 20th person I’d hired, do I want to sit down and teach him how to use Sales-Force? I don’t, but… so not only do I not want to do that, it’s not a good use of my time when I’ve got a big team, and some of the people on the team actually really enjoy helping. And-

Andrew: Okay, so then that’s part of the 80% that you distribute out to someone else and someone else then becomes responsible for that.

Aaron: Yeah. So by having someone on the team take over… actually what I did was I broke 15 people up into three sub-teams, so each sub-team of five picked their own team-lead, like a quarterback.

Andrew: Yep.

Aaron: So okay, here’s your five and you guys choose your leader. And then each sub-team leader was responsible for a few key things like bringing on new hires or training the new hires. Getting the team reporting right, coaching their own team, and so on. And it gave them a chance to exercise their leadership skills, it took some of the stuff I didn’t want to do off my plate, and they enjoyed it more because they got to be more like mini-CEO’s, but not everybody wins at that point.

Andrew: Got it. That makes sense and now you have an organization that has independent cells, lots of people get experience, and you’re not the bottleneck anymore.

Aaron: Yeah. Part of it is about letting go and not trying to control everything, which can be hard for a lot of entrepreneurs like us.

One example, and this is in the book, is how I think transparency is often the easiest place to begin. Whenever I did my monthly reports to my [Inaudible 0:00:20] seniors, I shared those with the team. I believe that most companies, when you do board meetings you should share those with the company as well.

Even at Salesforce with the sales compensation, I involve the team in designing, or updating, or reporting on their own sales compensation. What I found is by involving people in here’s the current comp, what’s working and what’s not, what should we change, how should we log it and report it and so on, it took a little more work at the beginning to involve people in feedback and so on, but it shortened everything.

It made it overall an easier process, because there weren’t surprises later for them. They knew about it up front. They were more bought into it when the comp plan changed. I didn’t have to feel like I needed to do all this work by myself off in a corner and then come back and dump it on people.

I feel like if there’s really one phrase I would leave with you about management and what works, and in sales, too, are these two words: no surprises.

Andrew: No surprises.

Aaron: No surprises.

Andrew: Predictability.

Aaron: Yeah. If there’s nothing else you remember, I’d say no surprises. Employees don’t like to be surprised, C.E.O.s don’t like to be surprised, and customers don’t like to be surprised.

Andrew: That’s a good place to end it. Before I show the book title one more time and a list of the things we’ve covered here, let me ask you this. This is a brand new or sort of brand new system for me where, I suppose, we were… Oh, suddenly we’re getting an echo. Interesting.

Aaron: Bonus.

Andrew: Bonus, right. I wonder what’s bringing it in. Anyway, what I was going to ask you was now that you’ve seen this new system, does it feel a little distracting to fool around with all the different [??] and your video and my video.

Aaron: Not so much. I’m focused mostly on the camera here.

Andrew: Okay.

Aaron: Because if I’m looking down here I probably would be annoying to the viewers. I could see if I needed to look around it might be, but it seems like it’s great. It’s working well.

Andrew: All right, great. I’m the one, though, who does need to look around a whole lot, and I hope it’s not too distracting.

I’ll ask the audience, give the audience a question. Does it seem distracting to you? I’m not talking about this echo that suddenly came in.

Why don’t I end it with this. Here is the book, “Predictable Revenue.” If you read it you will see there are no echoes in there, just clear business advice that you can use. The website is predictablerevenue.com. Thank you so much.

Aaron: All right, Andrew, thanks very much.

Andrew: You bet. Bye.

DOWNLOAD TRANSCRIPT

Master Class:
How to build relationships
(So you never have to eat alone)
Taught by Keith Ferrazzi of Never Eat Alone

Master Class: Never Eat Alone


Report Bugs



Transcript

Andrew: This session is about how to build relationships and it’s lead by Keith Ferrazzi, a tech entrepreneur whose latest start-up is [Yoi] a mobile app platform that changes human behavior in the workplace. This session is based on his book “Never Eat Alone” which redefined networking today, and has been updated and now 30% of it is new. So even if you’ve read it before, this book is going to be new to you. There you see up on your screen all the big ideas that we’re going to be talking about in this session that come right out of the book. I will help facilitate, my name is Andrew Warner, I’m the founder of Mixergy, where proven founders like Keith teach. Keith Ferrazzi, thank you so much for doing this session with me.Keith: It’s my pleasure, Andrew.Andrew: I think of you as someone to whom it all comes naturally, to whom even in kindergarten people walked up and started building relationships with you and what I read in your book was because of the car that you were driven into school in, people reacted to you differently. What did they say?Keith: Well look, well I mean I grew up in Pittsburgh, my dad was an unemployed steel-worker, my mother was a cleaning lady, and they had, as many immigrant Italian families do, they had an auspicious understanding that education was my ticket out. So they got me into a very small private elementary school where, you know kids are kids, and when you’re the only one that doesn’t have affluence in the family, you certainly stand out, you get teased. I have to tell you that in an earlier stage of my life that chip on my shoulder that was established from being teased, ridiculed for my clothes I had, the car that we drove, etc. the economic situation we were in; that was my fuel, the fuel to overcome those kind of early disadvantages.However one has to recognize, and we can talk about this as we evolve into this conversation, that sometimes what got you here won’t get you there. Late in life that very fuel, that chip in the shoulder, that drive and the ambition to be successful, can actually sometimes hold you back. And we can maybe talk about that nuance as well, but no in the early stages I think one of the reasons why we were so good at being able to identify the formula, the engineering formula for deepening your network, deepening your relationships, is because it did not come naturally to me.Andrew: And by the way, this is the car, I think this is as close as we can find to it. Just a blue Nova, we’re not talking about an RV that you lived in that you were coming into school, this kind of car is what kept others from feeling like you were one of them, and that is, if I’m reading the book right, that’s what created a bit of a rift.Keith: Well, I’ll tell you. Yes and no. first of all, kids will pick anything. It could have been a beat up green Nova with rust spots, it could have been the clothes that I was wearing, it could have been my accent; but I’ll tell you what stopped me from connecting with others. And it was my assumption that I didn’t belong.

Andrew: You assuming.

Keith: The trappings of my economic situation distanced myself from others based on the teasing, but how I internalized that… one of the things I want everybody to recognize is that how you interpret the surroundings around you will define your capacity to build a relationship with somebody. By the time I got older I no longer made the assumption that I was a part of the out-group.

So all human nature and relationships deals with the in-group and the out-group. And if you feel like you’re a part of the in-group, you will be. If you act like you’re part of the in-group, you will be. If you assume that you’re a part of the in-group, you will be. And then of course you’ve got to follow the other rules, which is how do you get into the in-group through generosity, through authenticity, etc. But if you feel that you’re a part of the out-group, if you feel you don’t deserve to have that conversation with that entrepreneur, if you feel you don’t deserve to have the conversation with your boss or with that venture capitalist, then in fact that’s exactly what will be true.

Andrew: I see.

Keith: So I wouldn’t say that it was my car that stopped me from anything, it was me that stopped me from everything.

Andrew: Okay, that makes sense. So it wasn’t this, it was- here let’s bring that up. It was you, and once you got good at it, you actually were at an event with other interns when you were in school a [Deloid] event, and you met that man on the right side of the screen. Who is he and do you remember what you did at that event that separated you from the other interns and allowed you to have a better life?

Keith: Well you skipped ahead 20 years. By the time I got to Deloitte a fresh minted MBA out of Harvard Business School, I had really mastered the art of audacity. And part of that was what my father used to teach me, which is, “Never be afraid to ask, Keith, the worse thing anybody can say is no.” So the art of audacity, and the courage to push forward, even when you don’t feel like you deserve it is a critical element. And I walked up to this man and I said, “Pat,” and by the way, I didn’t know who he was etc., but I connected with this man at a summer internship.

How many of us had ever been at a conference or an event and we meet all these amazingly powerful people, we make no impression? I made an impression on Pat. And at that impression that I made we talked about his background. I talked about mine. We talked about the fact that we were both from immigrant Italian families. And again it didn’t matter that I had that particular thing to connect with him around. I admired him, and I spoke of how I had admired him, and I asked about his pathway.

And when I found his pathway was something that I even additionally admired, which is overcoming adversity, then I delved more into that and through that connection I stuck around by the way and said, “Hey, do you have any time afterward? I’d love to grab a drink with you and your partners.” And he accepted that invitation. And so once more, another piece of audacity other than reaching up to him at the beginning. And then we hung out, and I was authentically me. I was a brash, fun kid that he connected with.

Well, spin ahead a year later, and Pat Waconto [SP] and I were talking and they’ve given me an offer to join the firm. A formal offer. What I asked Pat was, “I’ll accept the offer, sure, if in fact you give me one or two dinners a year, for as long as I’m here, just with you.” Because what I realize early on is that my success at Deloitte, and anywhere in this world, our success as entrepreneurs in the bay area is not just the success of our ideas, or even on our engineering competency or the team that we create. It’s going to be the success of our access. The success of our capacity to influence. And influence, and the permission to influence comes though the relationship. I knew that if I had a relationship with Pat Waconto [SP], that was deep and authentic that I would have a better career. Full stop.

If you have a deeper, more authentic relationship with venture capitalists, with future members of your team who are other possible entrepreneurs, engineers, super star designers, product specialists, all of those things that we all know we care. What we’re doing is our building for our future when we have goals in our life, I’m suggesting that you begin to add to that goal something that I call a people plan. And Pat Waconto [SP], while I was at Deloitte, was at the pinnacle of that people plan. So I asked him for these dinners, and instead of just asking for a raise, I wanted access. And I got it. And I joined the firm, and I became one of the youngest partners ever elected at the company.

I had a fast, accelerated path to being the chief marketing officer of Deloitte, and ultimately that was a springboard that helped me go on to have a very stellar career, chief marketing officer at Starwood Hotels, an entrepreneurial CEO for one of Michael Milkin’s companies on the west coast. Which allowed me to start my own firm, and etc., etc. And to this very day, it’s that people plan that guides my success, including my most recent launch of a new SaaS company.

Andrew: We’re going to talk about the people plan and how it impacted you and how people in the audience can do that for themselves. We’ve got a full outline here of ideas that we’re going to cover form the book. The first one is: Host a dinner that features an anchor tenant, and so, I actually looked online and I saw that you have incredible parties. And this is a photo of your 40th party.

Recognize that? Where you invited on a capella group from Yale, I think it was the oldest one in the country to come and perform. There is a stunning view of the event from outside. It’s inspiring, and at the same time it’s a little bit intimidating, because I can see someone in our audience listening, and saying to themselves, “I don’t have this kind of a set-up. I’m not a chef, I can’t cook. I can’t hire a chef. I need to still do this?” And, well, maybe do they? Do they still need to do it, even if they can’t put this whole set-up together?

Keith: Well, look. Everybody needs to find their own authentic way to accelerate and deepen relationships. I happen to believe that the art of breaking bread, over a table or a fire in the olden days. Telling stories. Curating what we call, accelerating intimacy. Accelerating connection. I remember years ago I had an accountant, young man by the name of Mark Ramsey. Mark, I think is back in New York or in Texas. I forget where he is now. Mark was similarly, even when I was younger I spent extra money to do these dinner parties, even more than I perhaps had. Mark said, well I can never possibly do that. I’ve got a single bedroom, small studio.

I said, Mark don’t be silly. It’s the act of the invitation that’s powerful. It’s the group that you’re curating that’s powerful. Go get your single bedroom studio whatever it is and take a piece of plywood and convert the coffee table into a dining table. Throw a table cloth on top of it. Go downstairs and get some rotisserie chicken which, I swear to God, from the grocery store. No one will know that you didn’t have a chef. I don’t care if it’s don’t care if it’s box wine put it in a craft and have a dinner party.

What matters is that people are stepping over the threshold of your home. There are certain acts that accelerate the connection of humans: the act of inviting somebody into your home, the act of breaking bread together, the act of storytelling, and the act of letting your own guard enough to tell another individual about what’s really going on in your life. I indeed made an art of the dinner party, but that’s not the point. It’s not about the dinner party.

It’s about the act of authenticity and accelerated intimacy through being generous with your soul and yourself. That’s not easy for everybody and I know that there are a number of introverts watching this conversation occur and you’re sitting there thinking, you know, stapling your tongue would be perhaps more exciting than and more rewarding than what I’m proposing.

Look the book has a lot of examples and ideas on how to accelerate relationships. I would recommend that you slowly and with the comfort of your time, go through the whole thing and figure out where you start. You start where things are fun. If this is an idea, great. If asking somebody for drinks down at the pub is your idea, great. If going to a workout with somebody is what you’re going to suggest, that’s great, or a run, or a cup of coffee at the local Starbucks. I don’t care what it is, but the act of connecting with others is what matters. We’ll talk a little bit more about what’s more important, which is how do you build your own vulnerability and authenticity so that people want to connect.

Andrew: Oh, we’re definitely going to talk about that.

Keith: The stories we’re going to be telling here is how do you create an environment around yourself that invites people in to build a relationship with you? Then, when you have worked on that for yourself, the answer is who? Who are you going to be inviting in? I’m asking you to be much more strategic about the identification of the individuals.

Years ago when I started Ferrazzi Greenlight the coaching, consulting, professional services arm of my organization, which still is a thriving successful company today serving most of the high-tech companies in your corridor from Cisco to Intel to you name it up there. What we recognized was. . . One year I was giving a very similar talk to this at Bill Gates’ CEO conference and the night before the speech that I was giving, I was sitting at his table as a lot of the speakers were and I asked him a simple question, who are the 500 most important people to the growth of Microsoft. Ask yourself that as an entrepreneur. Ask yourself that as a young careerist.

Andrew: So, who are the 500 most important for me or for the person listening to us in their career and we should be able to identify them. I want to get into how to create a plan for getting to them, but this point is so important, the one about hosting dinners and having people together. You’re the one who inspired me to do it. I’ve been doing dinners now for years because I read your book the first time it came out.

There are a couple of things that I want to emphasize about the process before we go on because this would have been so important to me when I first discovered the book. First is, you do say go out and buy rotisserie chicken or you gave an example of someone else who just made homemade chili which is a lot easier to make than you expect. Have people over no matter what your place is like even if there isn’t a dining room table there already. You gave an example of how to do it. You also talk about the anchor tenant and I don’t want to overlook that. You were Mark’s anchor tenant. What is an anchor tenant and how do we use that?

Keith: So, here’s the assumption all of us have to make, nobody wants to have dinner with us. Let’s make that assumption for a second. Now, what you need to do is build a group of people that people do want to have dinner with. I still think of it that way. I mean despite the fact that I suspect that there are people who want to have dinner with me, I still always ask myself who’s the anchor tenant to this dinner?

So I’ve got a dinner coming up this Friday, I do a dinner party every Friday at my home, anywhere from 16-30 people, and I do a dinner party somewhere else in the world every week as well where I happen to be traveling. But the event that I happen to have this week I had built it around one person, so there was somebody that I invited who I felt would be really interesting and I thought the connection with this was the CEO of Farmers Insurance, actually. A really wonderful guy I had met at somebody else’s dinner party and I explained to him that I love to do these dinner parties. And I said, “Hey would you like to come?” and once he said yes, then I found a date that he could come. I didn’t want until he could come to a date that I had, I found a date that he could come.

Andrew: Okay.

Keith: And then I reached out to 20 other individuals and invited them to a dinner. And I reach out to them in sets of five. So the first five I reached out to were individuals that I said, “Hey would you like to come to dinner at my home? I’ve got so-and-so coming.” And of those individuals who came, then the next set of invites I said, “Hey, would you like to come to my home? I now have the original individuals and these two others who confirmed coming.” And by the time you get to the end, you save the ones that you’re not sure that they’d want to make it, you save those to the very end. Because now what you’ve got is eight people who they might want to have dinner with.

Andrew: I see.

Keith: Think to yourself. Right?

Andrew: Yeah.

Keith: And in the early stages, shit I did this. In the early stages I thought it was a big deal that a lawyer was at my damn table. I mean you’ve got to remember, I’ve been doing this since I was a kid. I did these when I was in high-school and I said to my parents, let’s do a dinner, and the most successful person that I could think of that I wanted to have at my table was a lawyer. Right? And so I invited a lawyer, my fifth grade English teacher, I mean whoever else-

Andrew: Really?

Keith: Yeah.

Andrew: Wow.

Keith: Literally, in fact, I wasn’t even in high-school I was in fifth grade when I thought of this idea. And I’ve always thought of the first thing is don’t assume anybody wants to have dinner with you, find the first person that you can get the hook, the anchor tenant, which is you know the idea of any time you’re building a construction center for retail you’ve got the anchor tenant first.

Andrew: Right. And then all the other shops around, want to be close to him. There’s one other thing, there’s so much else that we need to cover but I’ve got to ask you one last question about this section. The one thing that I didn’t have the guts to do that you mention in your book is have people for dinner, and then have another group of people come over for drinks. I totally understand how the energy level towards the end starts to drop, some people think they have to go home or want to just take it easy.

I want to bring other people in just for drinks, I don’t have the guts to tell them, “You didn’t make the cut for dinner but you can come for drinks.” How do I position it in a way that makes them fell included, valued at the end, and then I have that energy later on in the event where people come just for drinks after dinner?

Keith: Well I have, there’s three waves at my dinners, right? I could invite friends of mine over for cocktails and let them know that there’s not seating for dinner. And that I usually do as a gift, so once I have a group of people for dinner I ask myself, “Who would benefit from meeting this person and this person?” And I’d reach into my network and I’d reach out and say, “Hey, I’ve got so-and-so coming to a dinner this Friday, I apologize I only have space for 16 at the table inside.”

So basically when I think about my dinner my table inside seats 16. Alright, and so if I wanted to do a bigger dinner, I could seat up to a 150 and have at my home. At the long table that you saw, there was like 50. That indoor/outdoor table that I’ve got.

Andrew: Yep.

Keith: But the 16 is what I can control. 16 is one table, inside, one table-conversation. Some people’s [Joe Hoey window] and I’m not sure if that’s one of the things we’re going to talk about or not, some people’s comfort level with other individuals, might have a table for four that you’re comfortable with. And that’s your sit-down dinner that you control. And that’s what we do.

Andrew: Okay. That part I got, but what about the drinks afterward where you’re telling people, “You weren’t here for the dinner that-”

Keith: Just say to people, “That’s my dinner assignment. I only have four spots.”

Andrew: Ah, I see. That if it is limited, if that’s all the space you have, and you’re already organizing the dinner, you still want to see them even though you don’t have space.

Keith: That’s it. I do dinners for four, but I think you would love to meet these folks, come on over for drinks.

Andrew: Gotcha.

Keith: It’s just as easy as that.

Andrew: Okay. All right. Onto the next big idea that I want us to cover, which is to get specific about what you want. That’s what you were starting to talk to us about, and I was really moved by how in your book you talk about taking a ten-day [Vin-Yasa] meditation retreat where you got really clear on what you wanted out of your life, and as a result of that clarity, you started focusing your meetings and calls and conferences on the goals that you set out for yourself, and all of that led to you getting to work with this man, with Mike Ovitz, guy who’s there’s so many articles, I didn’t know which one to pick. So I just picked a bunch of them and put them on there. Incredible person. How specific do we get about our goals and then who we’re going to meet and conferences that we go to to get to those goals?

Keith: I don’t mean to be awkward. I did not work with Mike Ovitz. Mike Milken.

Andrew: Oh, I thought that as a result, you got connected to Mike Ovitz and Hapgee [SP] to run Yaya.

Keith: Michael Milken.

Andrew: Michael Milkin. And I got Mike Ovitz. All right. So I need to find a bunch of other articles. I can’t believe I did that.

Keith: That’s quite all right.

Andrew: All right. So as a result of that, you got to meet Michael Milken.

Keith: Yeah. Let’s go back to the previous life for a second and focus on what’s important here.

Andrew: Okay.

Keith: It’s getting specific to what you are trying to achieve. So, listen, I use all different forms of goal setting for myself. I had a men’s support group that I go to sometimes three times a week, that I tap into here in Los Angeles, that we really won’t let each other fail. I don’t know if any of you are in YPO. There’s these things called the forums.

I feel that my second book, “Who’s Got Your Back,” very much focuses on needing to have a strong group of people around you that won’t let you fail. And that you can spar with, wrestle with, set terms and direction and vision with, etc. The other way is I look inside of myself instead of looking to others. I meditate. The policy of meditation is a very powerful tool that I use.

But whatever you do to set your goal setting, the next question I want you to ask yourself is, after you know where you want to go and what you want to go, then ask yourself who. Who, who, who. I want you to develop the most important list of individuals that you want to build relationships with. Michael Milken was on my list.

And I knew that if somebody was on my list, eventually, by putting that list out there verbally to my closest associates, by constantly being aware by writing it down, that you pick up clues on who might know who, etc. It’s quite remarkable how you will find your way into the presence of these individuals. But your people plan is so important. So if you join a new company, or if you’re a tech entrepreneur, better have DCs on your list.

Andrew: Mm-hmm.

Keith: Better have high potential talent on your list. You can have recruiters on your list. And these are folks that are connectors. Right. You need to make sure that you have strategic partners on your list. In my world, I mean, it was amazing.

When I raised the seed capital for my most recent company, I did it in two days. Two days. And that was a million five in seed capital. And it’s not a surprise that the person who’s going to be leading my series A is a classmate of mine from business school. So these are things and we’ll be talking about build your relationships before you need them which is the next step.

But the step before that is get clarity around who specifically you want to build relationships with. Now listen, do not put people like Bill Gates on your list and the Queen of England and assume that that’s all you’re going to do is aspirational contacts. Nothing wrong with aspirational contacts. Build your way up for them.

Balance your list so that they’re a combination of individuals that you can access today, people you already know that you’re looking to deepen relationships with, and instead, you know, at Never-Eat-Alone, we talk about a system that you put into place where you have A, B and C level priorities. Your A level priorities you’re going to put more time and effort to. Bs and Cs retrospectively.

Andrew: Mm-hmm.

Keith: And only label the strength of the relationship. If you’ve got a person like Mike Milken as a target individual on your list to build a relationship with, he’s starts out as a zero level relational quality because you don’t know him yet. And you can move that person from a zero to a one which means you get introduced to a two, which is an acquaintance and a three which is a real connected link.

And that system is important. What’s interesting is many of you are building these kinds of apps, you’re welcome to talk tome as an adviser. You’re welcome to talk to me as an investor. But there are no great systems out there today, not extraordinary systems, that help you manage your network in this way. There is an immense business opportunity in this space and eventually I’ll get to it. . . . [??] . . . reach out.

Andrew: Is that what you’re building now? Is that what you’re building now with your new company?

Keith: No. What we’re building now is an enterprise platform for human behavior change in the workplace. Which I can speak more of. My primary professional services firm, Ferrazzi Greenlight, is doing things like managing the behavior transformation and culture change at places like General Motors, and major corporations in this world. This is a technology platform to advance that.

Andrew: I see. Okay. On to the next big idea, which is what you brought up. You say, “Build your network before you need it,” and you certainly did that. I noticed that, all right tell me if I got this one right. Let me see if I can bring them up. This is a story from you from the year 2000 and the new job that you got. And along with it I read as I scrolled through about a guy named, where is that in the doc, Tad Smith. And Tad Smith isn’t a guy that you just happen to end up with in an article and at the same company. How do you know Tad?

Keith: Businesses. So Tad was one of those rare individuals that when you met him… first of all Tad and I both said that we probably both rubbed each other the wrong way when we first met. But Tad is a special guy. You know, he is a great business man. Today he is running the, I’m trying to remember the name of the big physical entertainment company. I’m just blanking right now. But Tad was always one of those special individuals. It’s amazing we go to business school, or we go to graduate school, whatever. We see these people who we knew were impressive then, and for some reason we didn’t proactively connect or stay in touch. It’s ridiculous.

I’ve always identified the most interesting people that I’ve ever met and then I’ve stayed in touch. I mean Fareed Zakaria was a senior when I was a freshman at Yale. And you guys see Fareed Zakaria on television today. You know, I knew back then that Fareed was on his way probably to be the Secretary of State. I consider him my era’s Kissinger. He is a brilliant man. Tad Smith was one of those brilliant amazing validatious [SP] individuals that I connected with. And that’s my desire. If any of you out there listening to this think of yourself as one of the most extraordinary people in the world but nobody has noticed it, find a way into my path one day please.

Andrew: What is a good way to get into your path?

Keith: Social media.

Andrew: Okay.

Keith: Follow me on Twitter. Let’s get connected on Facebook and LinkedIn. You know, I’m basically out there on everything. I do have an organization that manages my social media.

Andrew: Does email get directly to you if someone were to send you a direct email. Find your email and send it to you.

Keith: Yeah, absolutely. It’s not very difficult. You can just go on the web. Every one of our emails get read. What I want to say to you is you can just go to info@FerrazziGreenlight.com or FGLT.com or KF@FGLT.com. But listen, I’ll tell you how you can get to me. Develop currency. Like, create a story. Why do I want to spend time with you? And I don’t mean to be a jackass here. And I’m not suggestion I’m somebody worthy of you spending time with.

Andrew: But I get what you’re saying. I did focus a little too much on how do we actually get your real email address so we can send you a message. But that is not the important part. The important part is how do we make it valuable for you to pay attention to our message and to want to respond and connect.

Keith: So what you need to do is once you identify 25 most important people you want to build better relationships with, your next question is very simple. How do I serve them? How do I serve them? And there is three layers of service that we bring to people. The first layer of service is are you the kind of person I would want to hang around. Maybe you’re not. That’s fine. Maybe you’re an introvert. Maybe you’re a jackass. Maybe you’re whatever. I have plenty of dear friends of mine that are introverts and jackasses. What we call universal currency isn’t the only reason. But I do have to say that I’ve got a lot of friends who have no currency other than being extraordinarily wonderful people that’ll stick around.

So universal currency can carry the day to some extent. The next level is professional currency. So if you wanted to identify what professional currency do you have for somebody. Listen, like everybody else I’m out there looking for that unicorn called an extraordinary UXUI designer. That product design person that has a sense of emotional connection through design in a mobile application that can blow people away. I need one of those. You want to help me find one? Are you one of those? Do you want to volunteer five hours of your time to look at my work in our company and see whether or not there is something you can make advice to me? That’s currency. Why wouldn’t I take advantage of the opportunity to do that for you?

If you want to say to me, “Keith you’re hiring extraordinary people in the bay area for your new company. I want to curate a dinner and I don’t even friggin’ pay for it.” If you want to curate a dinner with the smartest individuals, that will blow away the world in mobile SAS [SP] platforms, into the future. And you want to do the research and identify the individuals, and invite them to a dinner and use me as a-

Andrew: Anchor tenant?

Keith: Anchor tenant, I’ll be there! Like that’s currency. You’re doing the hard work to build my network. Right? Now at the top, you can also deal with what’s called personal currency. If you research on me you would l realize that I care deeply about foster care. I have two foster sons. And I’m trying to reinvent the foster care system in America. It’s 80% of the US prison population came from foster care. I’ve got some blow away ideas there.

One of which is, imagine this for a second, and it’s a crazy idea. That here you are, out there, and anybody I hear can fulfill this. Imagine creating a marketplace for adoption for kids. So imagine foster kids who are dying for adoption and may have been passed up, that they can put themselves out on an open marketplace and say, “I am that kid worthy of your adoption, and let me tell you why.” And they could even have a program where the kids can put them out there, and their foster parents could rate them relative to whether they’re actually good kids. Where they could prove and market themselves, and they could sell themselves to future adoptive families. So that folks like myself, who would love to adopt amazingly talented young kids that are lost in the foster care system, could come along and find foster children. I mean that’s a crazy idea that I’ve had, and haven’t had the time to do it.

Anybody want to build something like that, Give me a ring. So that’s the kind of stuff that if you went online and saw my foundation’s commitment to fixing foster care, you can develop currency. Figure out what you can do to serve others, and then you’ll get their attention.

Andrew: I see, that makes a lot more sense than what I was going after. Which is, it’s so tempting, you know Keith, to say, “How do I get your e-mail address? Or what social network are you really on?” It’s a lot more meaningful to do what you just showed us, which is to say, “What does he care about that I can help with?” And then build a relationship off of that. All right, on to the next big idea.

Boy, we have a lot here to go. I wonder if maybe we pulled too many, but we can make it work. Number four: if you want something, be audacious and ask about it. We talked a little bit about this, about how you went to this school, and look at how beautiful that school is. But it’s not like you came from a family that was flush with cash, it’s was because of this man you got into that school. Who is that man next to you and what did he do that allowed you to go to that school that helped change your life?

Keith: Well that’s my old man. That’s my dad. And Dad introduced me to the headmaster of that school. And then Dad, and the way that happened was, Dad went into the CEO of the, my Dad was a construction worker, tow motor operator, he went into the CEO of the company that he worked for. Because he did his research and found out that that guy was on the board of directors of that school, and he walked in and he said, “Mr. McKenna, I’ve got an amazingly bright kid, but he’s lost in public school. I want him to go to this school. I know that no poor kids go to this school. Will you meet him? I want him to not have to work as hard as I do.” And his boss’ boss, the CEO of the company met with me, got me introduced to the headmaster, got me a full scholarship to the school.

Andrew: Wow.

Keith: Look, I mean, here’s the thing that I want you all of you to think about. And this is what I said earlier. Don’t ever be afraid to ask, the worst anybody can ever say is no. I promise you, if you’re a coward, you’ll get cowardly results. Grow some courage. And get out there, and ask for what you want.

Now mind you, people won’t give it to you if you don’t have some currency. My father had the amazing currency of a humble father who cared deeply about his son, and probably the vulnerability of that moment in front of his CEO, gave that CEO a good feeling about himself. You can’t always assume you’re going to tug onto the heartstrings. And then make the audacious ask.

Sometimes the audacious ask is the ability to help. Going to somebody and saying, “I would like to give you all my weekends for the next three months. To serve your company, if I could just be a part of it and be given the opportunity to get to know you and learn from you. That’s an audacious task. Those are the kinds of things that you can do but it takes you growing some courage.

Andrew: An incredible man and incredible thing that he was able to do for you. You know I’m wondering what is it that you said to the CEO of the school that encouraged him to let you in?

Keith: I have no idea. I remember things.

Andrew: He never met you, and he says-

Keith: I was just a little baby, I was this little kid, right? Yeah. It was not what I said it was what my father said. And that was the audacious aspect.

Andrew: All right. Onto the next one which is to do your research, and if you do you’ll be able to make more meaningful connections with people.

Keith: So I came back to the point that we’re making.

Andrew: Yeah.

Keith: Oh yeah, John.

Andrew: Yeah. This is John Pepper, excuse me I couldn’t think of his last name for a moment there, he was the CEO of Proctor and Gamble, you walked up to him and talked to him and it wasn’t just about Proctor and Gamble. And the reason that you were able to connect with him on a personal level and talk to him about the school that you both went to, was you did your research. What kind of research do you do that allows you to get to know where you could connect with someone?

Keith: Listen, I am so pissed off at this young generation. The tools that you have available to you is amazing. I mean we had card catalogs, not Google. Right? Let alone all of the amazing research that you can do around LinkedIn and there’s a wonderful company out of New York called [Relsie] that talks about how to find mutual connections among the most powerful people in the world. I mean my buddy, ‘Anchor Jane’, has got a new technology called ‘Hooman’.

I mean, there’s so many really cool things being created all the time, another Nick’s got [Here on Biz]. The research ability to find the details of somebody. But here’s another thing, you’re not always trying to find shared passions. You’re trying to find ways to share your passion. Let me explain that. So yeah, I happen to have a mutual school under-graduate education with John Pepper. But the ability to do research on somebody and find ways that you admire them authentically, and then do research on people to find ways to serve them again, right? The research you’re doing is ‘how do I serve’.

One way to serve is to find the things that you might have in common, things that you admire, things that you want to say that are flattering when you meet them authentically. But that’s only the first level. Then, professionally and personally, how do you serve them? Who can you introduce them to? What are they doing, where is their passion and how do you make them more successful? That’s the basis of your research. Bust your ass, and find ways to server people through your research.

Andrew: How do we avoid this, I’ve noticed that there are some people online who just want to help as a way of connecting, and they will send me an email, they’ll send me an email and say, “Andrew, I want to do whatever I can, can I come over to the office and help out, can I send out emails on your behalf, can I do this, can I do that?” The danger of being so available and so eager to help is that you seem too needy, you seem to obsequious. How do you do that help, without seeming needy?

Keith: Well let me ask, if somebody reaches out to you and says, “I’d like to be of service in any way and here are some ideas.” Is that your reaction? Have you reacted, “Boy this person seems needy, I don’t want to get to know them.” Is that how you’ve reacted?

Andrew: No, I guess when you put it that way, no it isn’t. But I do worry that if I were to offer people help and just email them and say, “Hey I saw that you were having this issue, can I be the person to come in and help?” that I might seem a little too needy, a little, too over-eager.

Keith: I was just asking if you feel that for yourself, I wouldn’t, I mean. The person who was running my foundation until very recently got to know me by volunteering in my foundation. I’ve got interns and young friends who have become MT’s of mine and almost little brothers and sisters of mine, who I take under my wing because they offered to volunteer. I don’t think so, I don’t know, I haven’t met anybody yet where they’re… Look, I have met people who have volunteered, I’ve given them the opportunity to be of service, and they sucked. And I don’t want their service, but that’s different, I’m not sure that the outreach is interpreted that way.

Andrew: All right, fair enough. Maybe I’m getting worried about things that aren’t going to happen and it’s keeping me from being helpful. Just to close a loop on that story, because of that connection that you made with him on a shared interest he ended up helping you by making connections when you were running a tech-company Yiya [SP], right?

Keith: Yes. John Pepper you mean? John’s been . . .

Andrew: Yes. John Pepper. Excuse me.

Keith: John’s had a lifetime of generosity and a great friendship and a mentor of mine and such wisdom and what a joy to be with.

Andrew: All right. The next big point that I want to cover is to master the art of small talk by being authentic and vulnerable. I so hate conversations at events where people just say what do you do for a living and they do nothing but tell you what they do for a living. And so you had an event, a dinner party that you went to. You were sitting next to a woman named Sherrie. Do you remember what you said to her that allowed you to have that open conversation and had something to do . . .

Keith: Yes. I get it. I’ve got to remember. It was a dinner in Minneapolis, I think, and there was a whole set of individuals and I’d just broken up with a really [??] breakup after a two year relationship and I just asked Sherrie “Have you ever had your heart broken” or something like that. I forgot what exact conversation I had but it turned into a table of fourteen of us sharing our stories of love and challenge with that and break-ups and it was very powerful. Sherrie was suffering. Less than a year away from I believe a very similar situation for herself.

Look, I hate small talk. Who gives a damn? It’s Los Angeles. The weather’s lovely. Let’s not talk about it. Let’s talk about what matters. I advise people that if they go to an event they should do two things. We’ve already talked about one, generosity. Find a way to help and find a way to care. The way you find a way to care is to be curious.

Now you can’t be curious by interrogating somebody because by interrogating somebody, if you are not a journalist interviewing them, you don’t have that right. Your job perhaps is to share some of yourself which gives somebody the safety to share themselves. So some of the time it starts with me telling a story. I have two foster kids. I always have something vulnerable to share about a struggle I’m having with my boys. So I can always go there. I can talk about my relationship. I can talk about “listen, we’re all entrepreneurs, folks. Walking around pretending like everything’s great is bullshit. The ability to talk about how difficult it is to recruit the right talent, maintain the right talent . . .

Andrew: Does that weaken your power when people look to you as the CEO, as an authority, as the person who is running the show who they might want to partner with or maybe work for. If you were at a dinner party and saying “you know what, I can’t make my relationship work out or I’m having this trouble at work”. Doesn’t that vulnerability make you look weak to other people?

Keith: Vulnerability is courageous, not weak. I’m not talking about pathetic.

Andrew: You’re not saying cry at the dinner table.

Keith: I’ve cried at plenty of dinner tables.

Andrew: Really? So you are saying cry at the dinner table. So how do you do that without seeming weak? Without having that be the story that people tell?

Keith: I’m not saying I walk into a dinner table and cry.

Andrew: I see.

Keith: Let me step back.

Andrew: Okay.

Keith: The key is to create an environment that lets people be people. And if you are courageous enough to be the first human at the table who talks about what you really have going on the context with which you bring it up, because I’ve got a bad relationship at a point of time in my life, does not make me a bad business man. It doesn’t make me a bad leader. Because I’ve got an employee who is a challenge to me doesn’t make me a pathetic individual nor an individual unworthy of [investment].

There’s not a single one of us who hasn’t experienced challenges and those challenges make us human. Our courage to share the things that we’ve got going on in our lives and invite people in to do the same is an art form that I recognize in that you don’t lead with “Let me tell you how vulnerable I am”. You grow the trust and you grow the safety in a conversation. I’m just suggesting you go deep quicker and you have to figure out for yourself what’s comfortable.

Some of you would never feel comfortable sharing intimately or deeply in a first meeting with somebody. For some people it takes ten meetings. I am quite confident with who I am and my capability of walking into a room courageously and opening up a dialogue that is much richer and deeper than most people can. But that’s my art-form. Yours will be different. And you’ll navigate yourself to it, but what I tell you is this.

Nobody will trust you, until they can feel that you’re also human. Nobody will be vulnerable with you and share what their real needs are in this world, until they feel that you’re not judging them. And one of the litmus test for whether or not you’re going to judge them is whether they’ve experienced you as a real human.

Empathy needs to be created in advance of the relationship solidified. And empathy is about shared tribalism. A sense of being connected in some way. And the best way we’re all connected, is that we all struggle. And another way that we connect is that we all share passions and excitements. We are more connected around our struggles than around our passions and our excitements, but nothing really connects you around the frigging weather, or small talk.

So my recommendation is, find how good you are, and comfortable you are at going deeper quicker. Asking people about their kids, asking people about their weekends, asking people about their hobbies. Are a shitload better than asking them about their golf game or just staying on sports conversations. Those are early level connectors. There are deeper ones, gain some courage.

Andrew: All right. And I’m pushing back just to play devil’s advocate on behalf of the audience, but I have to tell you that I do that too and people push back on me sometimes. Or they say that maybe I get a little too vulnerable but, it bonds me so quickly with people, and it bonds them to me. And we understand each other so much more. I had a few people here for Scotch Night last night, and we talked about break ups, we talked about first time that people had sex, we talked about those messy parts of our lives that have nothing to do with business.

There’s no sale that happens as a result of it, but there’s a deep connection that happens because we got that kind of open. And I’m a huge advocate of it, and maybe it’s because I do feel comfortable with that. I do have enough practice with it to realize, people aren’t going to hate me or feel too exposed. Or that I’m too exposed for them.

Keith: I’m going to make one suggestion, and that’s if you can’t imagine any of what I’m talking about as being possible, then start to go to therapy. Because your ability to connect with yourself, your feelings, your issues radical accelerate your ability to connect with others. If you have the good fortune of being an addict of some sort, and there’s actually a 12 step program out there for you, go. I recently, and I’m joking about the good fortune of being an addict, but the 12-Step methodology is very powerful.

When I wrote my book, “Who’s Got Your Back,” we studied the art of peer-to-peer support. And how critical that is in advancing ourselves as humans. And ideally you bring that methodology into your team. If you’re a team leader, go buy Who’s Got Your Back after you finish Never Eat Alone. Because Never Eat Alone talks about building that network, Who’s Got Your Back talks about building that group around you that wont let you fail. Including your own team, in the work place. And we studied 12-Step programs. I wrote an article on HBR that’s in the August issue, 2014, on how 12-Step programs methodology can be used in our business workplace. [??] bad behaviors, and changing culture. There are lot of places to go out there, to get grounded and to look internally, and be a better you so that you can connect externally. Go on that journey.

Andrew: All right. On to the next big point. Make a deep connection by helping someone with health, wealth and children. You did that with Jack Valenti. There he is, confidant of presidents, stars. You helped him with his son, and then you followed up with him by checking in just a little while later saying, “Hey, I helped you with your son. Wanted to see how he was doing.” And he stopped everything to have a conversation with you, because you helped him with family.

Keith: So this gets, I think we covered this point pretty strongly.

Andrew: Yeah.

Keith: No matter who you want to get to know, find a way to serve them. Universally, professionally and personally, help health, wealth and children. Children being, health being two ways that you can serve somebody personally. I learned that from Mike Milkin, and that was his phrase, learn how to help somebody through health, wealth and children.

But the key is to be as generous as deeply and as richly as you can. That gives you permission to get to know somebody better. Once you get to know somebody better you learn more about them, you can find ways to serve them more. Once you serve them more they’ll give you more time to get to know them, once you get to know them better you can serve them more. And it’s a lifetime pursuit of being of service and deepening relationships.

Andrew: Cool, on to the next point, which we kind of covered but also there’s a story in here that I think is important for us to talk about, which is you say get out there, connect with people, you tell the story in your book of this man, there he is. His name is Hank Birnbaum he was the CEO of High Sierra Small Bag Manufacturer, called you up over the phone, asked for help, you worked with him, and you started making connections on his behalf, and as a result of that you sent a few notes to a fast company, and you got them to cover him, but you pushed him to do this on his own.

The reason I brought this up is, and he did end up doing it on his own by the way, and he did very well with his company as people can see, where is that? Look I’m bouncing all around. The company was bought for 110 million dollars. The reason I wanted to bring up Hank’s story is to ask you is it possible that if we’re not especially good at this that we could just say I’m going to find someone who’s like Keith Ferrazzi, maybe it’s a smaller Keith Ferrazzi, someone who’s just getting going but has a talent for it. I’ll ask them to make the connections for me while I focus on the technology and the other parts of the business, can this be outsourced or delegated?

Keith: Well I mean we have a professional services firm that helps CEO’s of the most prominent institutions of the world we you know served. I would say in some form or fashion we have served the Lion’s share of the fortune 500 companies and their CEO’s. So of course you can outsource elements of this, but paying it forward and helping others helps enrich the network. You can I think ultimately instead of outsourcing you really should insource this. Even the companies that we serve we ultimately help them think about how they’re building a system internally.

One of the largest telecomm providers is a recent new customer of our professional services firm, and again our intention is to have them bring this in house, how do you figure out who the 1,000 most important people are to the good of the business, and then through all of the touch points make those connections? So I think this is something that is what we do. I mean I’ve got a marketing department at my organization that a big chunk of it is what we call high touch marketing, and we go I think you should bring it in house.

Andrew: Okay, but bring it in house does that mean that we as the founders have to do it ourselves too, or is it something that we can say someone in the company. We do it in house, we’re really good at building relationships, but Steve over there is the guy who’s a natural connector, he’s the guy who’s doing it?

Keith: Yes, and yes. It’s very difficult for the founder to outsource totally the connectivity on the vision of the company. I’ve absolutely seen partnerships where one partner is the Mr. Outside, and the other one’s Mr. Inside. So that’s absolutely possible, but I want to make , recognize whoever is the person building the network on behalf of the company is accruing the Lion’s share of the value personally.

So if you have the key the growth of the relationships to your partner, and your partner exits the company you’ve not curated the relationships, because they’ve not been curating relationships with your company they curate relationships with themselves, and then leverage that for the company, and if they walk out the door it’s still there relationships, which you might be able to accrue if they’re clients, but if they’re just relationships they’re not your companies relationships. Companies don’t have relationships only people do.

Andrew: All right final point is to become king of the content and grow your following online this is one of the new ideas from the book, the internet and social media weren’t nearly as big when you first wrote the book as they are today, how do we use content creation as a way of building relationships?

Keith: So, I just went and got the book, so this is the new book.

Andrew: Yeah.

Keith: The green starburst on it, make sure if you’re getting it you get this one. It’s been 40% rewritten, and one of the things we’ve recognized is that your network starts in social media. Your identification of lets…in social media you can have 5,000 people you want to build better relationships with, and your outer perimeter, all of broad ties, loose ties you can connect and stay with them online until you decide to migrate them closer to the epicenter where you might migrate them into a physical relationship, but the idea that you can follow people on twitter, retweet them, connect with them, share your content, establish a brand through blogs, et cetera, All of the things that you can do to establish a following, as you see. I mean, look at all of the YouTube sensations, the Twitter sensations. People have gained really extraordinary followings. They came from nowhere. They have established a following, and those following are just people. People are not any less people when they following you online.

Andrew: What do you do to make that connection more personal and bring the online relationship off line so you can see each other in person and have more personal, more connected conversations

Keith: So if you’ve got a target list and that person is then connected with you on, say, LinkedIn or Facebook or something, then reaching out to them and connecting them to a blog you’ve written through a link and see if they follow to that link. Then following them on Twitter, retweeting them is a generous act, taking their published content, and reaching out and sending it to others. Ultimately if you have a blog that’s established sufficiently, you could reach out to them and ask for a quote from that blog.

Now all of a sudden you’re in a real email conversation. You might actually move it to email at that stage. And if you’re local to them, you might ask whether or not a cup of coffee is reasonable and talk about other opportunities that you could advance their content or their agenda if you’ve done your homework and you’ve figured out what they want. What could you do to be of service to them?

So the generosity doesn’t only have to kick in when you’re face to face. It can kick in virtual, same set of rules.

Andrew: All right. One of the things I do, by the way, because I do interviews I invite people who I have interviewed to dinner at my house. I’m telling you I take that advice so directly and seeing them in person and having them over at my house is a way of connecting. Even if I don’t see them for the next five years that connection is there and we reconnect like old friends. [??]

Keith: I would hope so. After the physical dinner you’ve moved the relationship score from a zero to a one to a two, right?

Andrew: Yeah.

Keith: And then how do you move it from a two to a three? You might be able to do that through email communications. You might be able to do that through online communications by continuing to go back into the social media world and using that as the mechanism by which you’re going to move the relationship forward once you’ve got some form of a connection. You can go from zero to a three and never have met them physically.

Andrew: I guess I’m putting a lot of emphasis on the in-person. I feel like no one has a deep connection to me or a three as you say unless I’ve seen them in person and you’re saying that’s not necessarily true. It can all happen online.

Keith: I think increasingly with video and other forms of connectivity that we’re going to be moving into, I do believe that to be true.

Andrew: All right. The book is “Never Eat Alone.” It’s out. Thirty percent of it is brand new. It’s worth getting. It’s been the basis of my relationships over the last few years, and I urge you to get it if you … Frankly not just if you haven’t. If you have, even get it, lots of new stories, new examples in the new version, the new edition.

Thank you so much for doing the session with us.

Keith: It’s my pleasure, Andrew. Thank you very much and I look forward to seeing who’s going to take us up on our various offers and the various ideas that I threw out there. It’ll be exciting to go back and take a look at kf@ferrazzigreenlight.com or fglt.com, lots of things that I put out there. I’m looking forward to following up with all of this.

Andrew: I know I’m going to be following up with you. I know that your interest, your passion now is mobile app development, user experience specifically. I know I’ve interviewed a lot of people in that space and I have a lot of people in the audience here who are in that space. I’m really looking forward to helping you by connecting you with some of those people.

Keith: I’ll see you for dinner in San Francisco.

Andrew: Thank you, Keith Ferrazzi. Thank you all for being a part of it. Bye guys!

 

Master Class:
How to buy profitable businesses
(So you can make money on one day)
Taught by Ace Chapman of Business Acquisition Consultants

Master Class: Buying Businesses


Report Bugs



Transcript

Andrew: All right, guys. This course is about how to acquire an existing profitable company so you can make money from day one. The session is going to be led here today by Ace Chapman, who helps entrepreneurs buy companies. He is also the founder of Partners Equity Fund, which, as the name suggests, is a private equity fund. You can see his website. . . Well, that is not his website. That is my whole screen. You can see his website on AceChapman.com.Ace, thanks for doing this. Welcome to Mixergy.Ace: I am glad to be with you. Thanks for having me on.Andrew: Thanks for being the guy who’s going to come here even though I’m now using new software to record, which, as you can see, still has a few issues. But, the important part is that we have the key ideas here. They’re up on the big board. This is what we’ll be talking about to help breakdown the process of buying a new business.

The first thing I want to ask you about, before we even get into those tactics, is this. Right after high school, you went into this place. Do you recognize this building?

Ace: Yeah, that’s my. . . The front of it is my home. This is the back of my childhood house.

Andrew: And in that place, you tried to create a profitable business. What was that business, and what happened to it?

Ace: So, this is back in ’98. Things are just getting roaring with the internet, and businesses are wanting to start, websites, and so, me and a couple buddies decided that we were going to start a web development firm. We found the guys that we wanted to partner with. It was about four of us. We decided to come up with an agreement that we could all be happy with and we put the agreement together. Then we decided, all right, we need a website. So we started to build out our own website.

Well, it was a long time before we hit the ground and actually started talking to potential customers. Maybe two months passed before we talked to potential customers, but in particular, there was probably a week period where we were building our own site, and so we had a web guy who was putting that together, and he was taking a lot of time to do it. We’re like, “Well, we’ve got to have a great website if we want to go sell them, so take your time.”

After a week or so, we hadn’t seen or heard anything from the guy, and so, we asked him, “So what have you been working on for this week? Let’s see the progress from last week.” He was really excited to show us. He pulled out this gif that was basically for the yellow page, just to tell people that we could put a link to the Yellow Pages, and that kind of thing. But, he had spent that week putting together this gif that was basically the Yellow Pages fingers walking like this.

Andrew: Ooh, that was his whole thing, and he spent that whole time and just created that animated gif?

Ace: Yeah. Yeah, so we spent a whole week. It was little things like that, and basically two months into the summer, we finally hit the ground and started selling these websites. The fortunate thing is it was actually really easy to sell websites back then.

Andrew: Mm-hmm.

Ace: So we actually did really well for that last month of summer, when we sold several. We sold about five websites. I, personally, made about three grand, had three grand leftover at the end of the summer. It actually went well, but what if we had skipped that whole process and started a little bit earlier in the summer and been able to hit the ground running?

Andrew: And that’s what we’re trying to avoid for people here today, and the reason that people come to you. Instead of setting up and hoping that things will work out and dealing with a lot of these upstart issues, like, “What is the website going to look like?” and “Is the guy going to give me nothing but an animated image on the screen?” Instead of that, you want to help jumpstart people’s businesses by saying, “Buy a company that already exists, that is already profitable, and if you do, you can make money from day one and grow without having to deal with the smaller upstart issues that people have,” right?

Ace: Absolutely. Absolutely,

Andrew: And you actually did that.

Ace: [??]

Andrew: Sorry to interrupt. This is where you did it. I found an article on the Chattanoogan.com. Here, let me see if I can zoom in for people so they can see this.

Ace: Yeah.

Andrew: This is one of your earlier acquisitions. What’s the business that you bought here?

Ace: Yeah. This was a website. When we bought it, it was actually called Making, with a dash, and then cash.com and a very neat little website but the owners of it weren’t doing a very good job running the site. So me, as a user, I grew up loving the idea of the stock market and investing and all of that and so, the whole idea of being able to invest in a pretend stock market was still pretty novel in ’99.

Andrew: That’s what that business did. Allowed people to invest in a pretend stock market so that they can play around and see what it’s like before they actually go in there and put their money in, right?

Ace: Yep. So, it’s taking play money and investing it in the real market. Money was generated with advertising dollars and that kind of thing.

The business was profitable but for the guy that owned it was a side project. You know, it made an extra 30 grand or so a year for them but it wasn’t anything that they really wanted to focus on. They were a pretty big web development firm. So, I decided to approach them and try to see if they might be interested in selling the business and it turned out that they were at least open to the idea.

At the beginning, I definitely left out the fact that I was a 19-year-old who didn’t have any money at all and I definitely didn’t want to tell them when they told me the price was going to be 70,000, that, you know, I still had that 3 grand from the summer before and that was about it. So, that was the first time that I had to get creative to figure out, okay, here’s this business that I want, how can I buy it?

Andrew: Yeah. So how can you buy it? I don’t want to get too deep into the process because that’s what we’ll be spending the rest of our conversation on, but if you can give me an overview; how did you end up buying it and what happened? Then we’ll talk about how the audience can do the same thing. How did you end up buying it?

Ace: So, I figured I didn’t have a lot to lose, so my first thing was to go back to them and to get them to owner finance a portion of it. I basically said, “Hey, if I can come up with half of it, would you guys finance the other half.” They were agreeable to that. Then I ended up having a buddy that wanted to invest some cash, so actually one of my friends who was involved with the web design firm the summer before; he liked the idea as well, so he put in some money and the rest of it was literally that 3 thousand that I had. Then some credit card debt, which I avoided telling my parents about because they would have killed me because they would have known that I was going out and getting these credit cards to buy a business.

Andrew: So you pieced all of that together and you ended up buying this business. Did it actually make money from day one? Was it profitable the way that we imagined it was?

Ace: It was profitable from day one. That was where my transition happened because I remembered that summer before. I remember spending two months just trying to figure out how we were going to do this thing and how we’re going to sell and what the prices were and all those little details for just a simple web design firm. So, when I bought this thing and the closing came and, you know, I loved having this experience through my clients for the very first time that I work with now but, you know, the very first day after closing and money is deposited into your account, you realize, “Wow. Like I’m really making money.” That was a huge transition and I knew, okay, this was a much better way to get into business.

Andrew: All right, and this is what we will be talking about here today and we’ll see that there are some issues with this process, with the idea of buying companies and Ace will walk us through how he overcame them and how you more importantly can avoid them completely.

Let’s take a look at the big board here, the very first idea we want to talk about is to come up with a strict set of rules that are going to keep you on track. Ace, when I said that you’ve made mistakes before and you’re going to help people avoid it, this is a mistake that you had, that you made, when you saw an online clothing business for boys. What happened there?

Ace: So, this was something where, you know, you get excited, you get one deal and you’re like, I’m bullet proof. I think I had done another deal even before this one but I was just excited about going out, buying these businesses and being able to generate more income. You get this kind of snow ball effect because you’re able to use the income from one to buy another. So, I bought this deal and it was something that hadn’t been around a long time, but it was such an attractive price. So, you know, I usually like to buy deals that have been in existence for at least two years and this business didn’t meet that rule. I ended up buying it any way although it had only been around for six months. Bought it at a really low price. But it didn’t matter because after about three months it petered out and died. And so I definitely learned my lesson there. Another real quick deal that I had with another rule of mine, which is just having some systems in place or really not being dependent on any one person, I was buying a mortgage company years later and they had a couple of producers that were really huge. But give them a great yield and . . .

Andrew: You mean a couple of individuals who were huge producers?

Ace: Yeah. Yeah. A couple of individual producers. And so I ended up buying the business. I was a little smarter on this one. I had some items in the contract that basically allowed me to almost have a warranty on the business, and give it back if anything looked weird within 90 days. It turns out that those guys were secretly hanging on with that company until the transition. I got word of it. They were going to try to wait until the end of the 90 days to leave. I got word of it and ended up getting out of that deal. But that was a case where I didn’t follow the system.

Andrew: What is the rule that you had that you did violate?

Ace: Yeah. It’s having businesses that are run with systems and not run by people.

Andrew: Okay. So the clothing company for kids, the rule that you had set up for yourself was you wanted a company that had been around for at least two years before you bought it. Otherwise you didn’t know whether it was likely to continue or not. The other rule was you wanted to buy systems, not people, because systems can stay in place and develop. People can walk out the door. And you violated that rule. The big lesson here that you want us to walk away with is that we should have a list of criteria, a list of rules for ourselves about what businesses we want to buy, and stick with that. Or else we’ll end up suffering the way you did. You gave us two of those rules. Could you give us maybe two others?

Ace: So one of the things is really knowing yourself, and getting really clear on what you want out of a business. So I think that can be the very first rule, because most people, they understand the fact that if you walk into a grocery store, and you don’t have a list, even though it’s just groceries, you’re going to walk out of there with either some things that you don’t need, or some things that you forgot. So the real key is getting clear on what you want out of a business. But some of the other things that I look for in a business is scalability. I really love when a business has a database of users or clients.

So I’m looking at a business right now. Just to give you an idea. After that deal that I mentioned on Tom, a lot of times I have a tendency to go in the extreme. So the last two businesses that I bought that were off line deals. One of them is 33 years old. The other one is over 20 twenty years old. I’m looking at a business right now that’s over 15, and each one has large databases of clients. So the deal that I’m looking at right now has a database of 15,000 clients and customers. So that gives me an instant way to go in and go back and win over those clients again.

Andrew: Okay. I guess if someone-, there isn’t a universal list of rules that entrepreneurs should have for themselves before they go and buy because everyone is different. Everyone’s looking for a different kind of life. A different kind of business. When someone goes to your site, which I can now bring up properly because I took a screen shot, I should always have a screen shot as backup, there it is. If we go there and we contact you using the number at the top, do you help us come up with our list of criteria that we use as our rules before buying companies? Or is that something we need to walk in the door with?

Ace: No, yeah. So one of the things that I’ve started to do over the years is we go through a personality test and a skill set test. And that tells us a lot about the individual. Because each person-, I bring different things to the table when I’m buying a business than another person will. So you have to take those things into consideration. And the neat thing is you can literally buy a deal that complements who you are as a person. So when I’m looking at a business, I want operations to be handled because I like to go in, grow the business, I want to be able to focus on marketing. And so a lot of the businesses that I focus on operations is really put together really well. But they may not be doing a lot of marketing. So one of the businesses when I mentioned the 20-year-old business, that business they had a database of 14,000 people. And they had never contacted them at all.

And so that’s a great opportunity for me because I know how to go in and revitalize that list and get those people back in the group.

Andrew: And I can see how that would be a criteria for you, a business that has a lot of potential users or a lot of existing customers. But they’re not taking full advantage of it by marketing. You can go in there and bring your marketing skills and help grow the business. All right.

I have so many other ideas here on the big board that I want to get to. The second one that we want to talk about here today is to prepare your entity to expedite a fast acquisition. You actually, again, this is a mistake that you made in the fast that we are all going to learn from. There was a company that you were interested in buying, and you lost it because you didn’t have your entity created. What does that mean to have an entity created? Can you talk more about that?

Ace: So before you close on a deal, one of the things that you will have to do is have a business that you’re going to buy the assets of the other business into. So especially in this day and age when we’re doing more internet deals. There’s a lot more competition. You have to be as prepared as possible. When you get to the closing or you get to contract and you say, “Oh, by the way, I’m going to need 30 days because I’m going to need to create a LLC and that kind of thing. It just holds up the deal.

Even more than that, it makes you look like an amateur. And so in addition to just having it set up what we want to do is have the entity, not only be ready to go, have a website, even if it’s just a website that says you’ want to go out and buy businesses. That kind of thing will set you apart from the people that are really kind of amateur business buyers. And a lot of times, even if you’re paying cash for a deal.

I love to buy businesses where the owner is willing to finance at least a portion of it. And it makes a difference. Even if they’re not going to finance it, they want to feel like they’re handing their business over to a professional and not a newbie business owner.

Andrew: But, Ace, if we’re about to buy a business, maybe it is already a LLC, why do we have to have our own LLC? Why can’t we just say we’re going to pay money and buy your company instead of having our company buy your company?

Ace: Deals under $2 million, it’s probably less than 2% of the deals involved buying the other entity. It just doesn’t make sense. So you’re buying the assets of the entity. So that’s the way that those deals work is you’ve got two LLCs that are going to buy the assets. It’s really around tax reasons. If you buy the shares of that entity whether it’s a LLC or a corporation or whatever, you’re buying those membership interests or the shares is a huge tax ramification for the seller.

So on these smaller deals, most of the time it’s going to be buying the assets of that business, not the entity.

Andrew: You know what? I didn’t realize that. I don’t want to get too deep into the tax implications, but I thought when you sell a company you have capital gains taxes which are lower versus selling assets which could trigger income taxes, no?

Ace: It really depends on your cost basis. So if you have a stock, if you basically have started, if somebody started this business and obviously their cost of that stock would have been zero and yet they’re selling it for this really high price, they’ve got a very specific cost on the assets. So it really just works out, like I said, about over 95% of the time that it makes more sense for that person to sell the assets than the . . .

Andrew: Sell the assets versus the company.

Ace: The other thing that’s even bigger than the tax issue for the buyer, it’s not worth taking all the liabilities or having to do the research involved with the liabilities, potential lawsuits, and everything that’s involved with that entity to pay attorneys to go out and figure out, “Okay when I buy this entity [??]

Andrew: There’s a huge due diligence. If the small company somehow got itself into some kind of obligation that now you, as a person who buys the whole company, have to take on, and that’s a whole lot of hunting even if the person is not trying to cheat you. They might just have forgotten. Small business owners sometimes make commitments that they forget about or they just assume aren’t important but they are. I see.

So that’s why we want to have our entity set up before we go out there to start making offers. And by doing that we can come across as more professional and we’re much more likely to get owner financing which is tremendously helpful.

Ace: Yeah.

Andrew: On to the big board and the next idea is to create deal flow to find businesses. Oh wait, we did talk about that. Oh great. You had a situation about divorce that helped you get deal flow. How did that work?

Ace: That’s probably one of our top sources of deals for everybody in our business buy network. We get a lot of deals from divorce attorneys. The bottom line is there are a lot of places to go to look for businesses on the market. Any anytime you are looking at anything on the market you know that that is not going to be the very best deal because the very best deals for anything, whether it’s a house, a boat, a car, or whatever are sold before they ever take it to market when a realtor gets the call on a house that’s absolutely rock bottom and the seller’s really motivated. They’re just going to call their friends. They’re not going to put that up on the M.L.S.

So it’s the same thing when it comes to businesses. So what we try to do is go out and look for the different sources of deals where we can find people that are going to be really motivated to sell their business. And obviously you’re going to get a lot better deal when you find a motivated seller. So we’ve got a lot of these examples, but now we’ve got a couple of these where people have just really gotten so depressed and I think about one guy in particular. He hadn’t been to his business since the divorce started which I think was about a year and a half before we started talking to him.

But the crazy thing about that example was that my client had contacted him several times, set up a time to meet him at the business. We didn’t realized that he hadn’t been back to the business. And so he just stood him up. So he thought that the guy really didn’t want to sell, and after the third time I contacted the divorce attorney. I said, “Hey, your guy obviously isn’t interested in selling. He stood up my client who wants to buy it.”

And it turned out he was just so emotionally distraught. He and his wife had built this business together. He, like I said, had not been back to the business. He couldn’t bring himself to go back to the business. And so it ends up being a very neat case too because obviously we are able to help him. We are able to help him because he needs to sell that business as quickly as possible because although he had some really amazing employees that kept running the business.

They really could have taken advantage of the situation and they didn’t. And so that was great to get in on that deal, but it wasn’t going to last like that forever. He needed to sell as quickly as possible.

Andrew: I see. And because of the divorce, the couple that just split up, aren’t going to share equity in this business and talk about running it every day. They want nothing to do with each other. They have to sell the business, and they want to sell it quickly so they can move on with their lives. And that’s why they are more likely to sell.

But there are other ways, and actually before I show the screenshot of the other ways, would you mind just tilting your camera a bit? I want to make sure we get your chin in there all the way. Maybe just a little. There, that’s work. Now you’re centered nice on the screen.

Here are a few other places that you recommend people go if they want to buy businesses. We’re looking up here on the screen at is BizBySell. We’re looking at Flippa, and we’re looking at BizQuest. You actually go to these sites to look for businesses that you want to buy?

Ace: Yeah, yeah. So I go to a lot of sites. Those are three of them and I want to know everything that’s on the market everywhere because you never know where that unique opportunity is going to be. And so I’m on a lot of lists, and I network a lot with other people that buy and sell as well. So I’m getting deals from a lot of different sources, and I can hone in on that deal that meets those rules that we talked about.

So it’s a lot. One of the mistakes that a lot of people make when they start to look at deals is not looking at enough deals. The average person, they say, looks at six businesses. The average business buyer looks at six businesses before they close on a deal.

Andrew: What about you? How many do you look at?

Ace: Over a hundred.

Andrew: A hundred to one? Wow!

Ace: Yeah.

Andrew: I see.

Ace: So the buyers that we have on our network. The average is over 100.

Andrew: Wow. All right. On to the big board. The next issue to talk about is to make sure there are no hidden land mines. You taught us one way to avoid that, and that is by doing an asset purchase. That way you’re not buying a big company that might have some mysterious liabilities.

Another way that you learned is when you bought your mom one of these.

Ace: Yeah.

Andrew: We’re not talking about a Subway sandwich. You bought her a franchise.

Ace: A lot of Subway sandwiches.

Andrew: A lot of Subway sandwiches and what happened there that we should learn from?

Ace: So we did a deal on a Subway. We had a motivated seller. Everything looked great. They were willing to do some seller financing. And we kind of looked at a lot of different things. One of the things that we didn’t look at though was what the zoning commission had in for that area.

And so after about a year we got a letter from the city saying that they were claiming eminent domain and taking over our land. And they wouldn’t give us an offer for what they felt was fair which at our own cost tried to fight, but there was basically no option. We had to sell that business. And so fortunately they were valuing the land and the building. They were going to tear it down, but they weren’t going to value the business.

So we fortunately ended up changing locations and got another franchise in another place that was nearby and actually cost more money for us to do. It turned out, and these are the things that you can’t plan for, that the income for that other location was double what it was where we were. But it could have been a lot worse, and we were fortunate that somebody else didn’t already have that territory for Subway. We would have just been really out of luck with them, a very big six figure loss on that deal.

Andrew: So how could you have known that the government was going to want to take over your land and pay you just for the land and not for the value of the Subway franchise on top of it? How could you have known it? And more importantly what could the person listening to us now who says I want to buy a business . . . What could they look for that would allow them to look for all of the land mines and be fully prepared?

Ace: One of the things is now we do that. We actually will pay attention to what’s going on in the zoning level and not only try to figure out if there are issues that are coming up. But more importantly try to target where certain things are planned and try to buy businesses that may benefit from those plans.

Andrew: How do you know they even exist? I wouldn’t have even thought of eminent domain. I wonder what else I’m not thinking about that could be a “gotcha” that is just sitting out there.

Ace: By going to the zoning commission and seeing what plans are, talking to them. They’re actually, now that I do that a lot more, they love when citizens come in and want to talk to them. And are . . .

Andrew: Are there a list of things like that because that’s just one land mine.

Ace: Oh yeah.

Andrew: And I know there are many others hidden underneath the land. That’s why they’re called land mines.

Ace: Yeah.

Andrew: Is there a checklist of land mines? I know you and I connected because an entrepreneur whose software I was using said that he was getting into another business. And he was talking to you about buying a company. I know he was going to go into software or something digital, I believe. Is there a checklist for someone like that that allows them to be aware of all the potential land mines, all the things that they should go over before they buy?

Ace: Yeah. And actually I would be willing to share that with you guys. We’ve got a list of over 90 different things that you want to check. Some of them apply to certain businesses but I’ll share because I know a lot of your folks are going to be looking at Internet businesses.

Andrew: Yeah.

Ace: So I can send that over to you. It’s a checklist of over 90 different things that you want to look into when it comes to buying a software Internet business.

Andrew: I’m looking at your site which I’m having trouble showing up on the screen, but I can still show sections of it. Here we go. This is it. This is your contact information. It’s up right there so if anyone wants to reach you can they just send you an e-mail?

Ace: Yeah. Absolutely. Absolutely. So if anybody wants to get that list, if they want to shoot me an e-mail I’d be more than happy to share it with them.

Andrew: All right. Cool. I just saw that on the site and I’m glad that you’re up for sharing it. Back to the big board and the next thing we want to think about is valuing the deal by looking at return on investment. This is something that you did at actually Plato’s Closet. What is Plato’s Closet? Let me bring it up on the screen, and what is it and what’s your connection to it?

Ace: So Plato’s Closet is a store for teenagers that resells clothes. So it buys clothes and then sells clothes. And I bought a franchise in Chattanooga and also one in Huntsville. And the neat thing is, I bought that business, ended up growing it and everything went really well. The really cool thing was I was able to work with a motivated seller at one end, and then I was able to sell it, and give the people that I sold it to a really great deal when I sold it to them as well. One of the things that a lot of people don’t realize is that when it comes to owner financing I’m not just saying that, “Hey I want to go out and get a deal and do that.” I really do believe that it’s in the seller’s interest to increase their RY on the deal when they sell it by having some interest that’s coming into them and align the purse, being able to charge a little bit more. . .

Andrew: Let’s get into that. Owner financing is what the basic level of what you talked about at the start of this program. You wanted to buy a company. You didn’t have enough money to buy it and so you said to the owner, “Please”, not please necessarily, oh pretty sure, ” please let me buy this business but also I won’t be putting up 100 percent of the money. I’ll put up some smaller percentage and then over time I’ll pay you the rest.” To make that worth their while you have to give them upside right?

Ace: Yeah.

Andrew: So how do you structure the upside for owner financing to make it worth the seller’s while?

Ace: So the easiest thing is to offer them some interest on the money that they’re loaning.

Andrew: Just a straight up percentage. Not even a share of profit. . .

Ace: That’s always number one.

Andrew: That’s the easiest.

Ace: That’s the easiest. That’s number one. So I try to get some kind of deal where I’ll let them know the total amount that they’re going to make. So when I give an offer to someone, I want to give them an offer based on their total RY. So I’m not just telling them, “Hey, here’s the amount of money you’re going to get.” I’m going to add up the interest that they’re going to get. If there’s some equity, I’m going to put that in there. What the potential is and all that so they so see, all right, this is how much money I can make if this guy buys my business overall. The second part is equity. And the thing that I would like to try to do, and this is just a negotiation, is I want to ask them what is most important to you when you sell this business. Is it price? Is it the structure of the financing? Is it that you want to hold a little bit of equity back?

What’s most important to you? And they’re always going to say price. And so what that allows me to do is say, “Okay. I’ll give you price but I need to control everything else in the deal.” And it’s all about the terms. And so when you talk about the oh why when you’re buying the deal, what you want to look at is, OK how can I control the terms. And their bottom line is if I’m going to buy a $2 billion company and they want me to pay $3 billion for it but I can control the terms and pay half a million down and $50,000 a month for a thousand years, then that turns out to be a really great deal. So a lot of people before early on when I started working with other folks to help them buy businesses, I was very proud of the fact that we used the top five metrics most used to determine the value of a business. And we just realized that this bar is basic bullcrap. What matters is what’s going to be your return on the deal. And in order to figure it out, you’ve got to look at the terms, and hopefully control the terms of the deal.

Andrew: All right. We’ll talk in a moment about how to control them. But what you’re saying is that it’s not just the single price. It’s the way you structure the deal that determines your return on the investment.

Ace: Absolutely. Absolutely.

Andrew: All right. And you showed us different ways to structure it to increase our return on investment. One exaggerated example you gave us is paying $1 billion over a thousand years which of course reduces the present value of that money. You were going to say something?

Ace: Yeah. So one of the other things is once you become a seller, you want to make sure that you’re paying attention to that as well. And that same Plato’s Closet deal is a case where that happened. I go out and I buy a lot of businesses. So about 14 offline businesses, over 20 Internet businesses, and since that’s a lot of what I focus on, a lot of times I don’t spend as much time growing each business or figuring out ways to grow them. So when I sold that business, I felt like it had a lot of potential. When I owned it, it was doing about $600,000 a year in gross revenue the earning channel. I sold it back and I felt like it could get a lot bigger. I just didn’t have the ability to do it. I felt like it could be easily an $800,000 a year business.

Well, I ended up talking some equity in that deal, and it turns out that it actually grew to $1.25 million and those guys recently set me down and like, “Man things are going great.” They told me, “Oh yeah. We’re about to go into a bigger space. We’re going to do even better next year.” I’m like, “That’s great. So what did you guys want to meet about.” And they basically said, “We’re tired of sending you money so we want to buy you out.” And that was a winner as well.

Andrew: I can see that. All right back to the big board. We’re going to look at the pen ultimate point which is to control the conditions by finding a motivated seller. I like to always use examples from the guest’s actual business and here’s one that you got an opportunity to do. You bought a business that does this. How’s it pronounced? Fort Oglethorpe, Georgia.

Ace: Yeah. Fort Oglethore.

Andrew: You bought Maxim Tan?

Ace: Yeah. Yeah.

Andrew: Maximum Tan. Excuse me.

Ace: Maximum Tan.

Andrew: Yeah. So how did you find a motivated seller and get to control more of the deal?

Ace: So on that deal it was really interesting. I’ve been buying this whole business for long now, so I’ll get people who will just contact me. So I had somebody contact me. They were interested in selling their business. It was one that had been around for 18 years. He wanted me to come and meet with him at his house to give him the offer. And I really prefer to meet on neutral ground. But he was insistent. Come by. Let’s have dinner. . . I guess he figured he was going to butter me up. And so we get to the end of dinner, and I lay out what my offer is, and give him all the specifics. . . and then I just be quiet and I can tell that he’s just sitting over there steaming. His face is turning red with anger.

And after a while he’s just like, “That is absolutely outrageous. How could you offer me such a ridiculous price? You can’t expect me to even dignify that with a counter, and. . .” I had a partner there with me who was going to be operating that deal. And so we get in the car and he’s like, “Wow, we’re definitely not getting that one. We need to go out and find another deal.” I was like, “Let’s give it a few weeks and see what happens.” He’s like, “Dude, there’s no way that guy is ever coming back. Did you not hear, he was on the verge of cursing us out of his house.” And sure enough, a few weeks passed, and he couldn’t come back so he sent his wife to come back and let us know that they were willing to accept the offer at that point. We were able to get it for actually less than that original outrageous and ridiculous price.

Andrew: I see. So is the way that you figure out who’s motivated is, it seems like by talking to a 100 sellers for every one that you potentially buy, you end up throwing some of them really low offers to see if they respond. And if they respond the way this guy’s wife did, then it means that they’re more motivated than the others. Right? What else can we take from it?

Ace: So a couple of things. One of them is the more offers you make the more likely you are to-, it’s like anything else, the more you throw out there, the more likely you are to get something really good back. And I do want to correct it. We don’t talk to a hundred [??]. That would be very difficult.

Andrew: Oh, we…

Ace: …One of the keys to the whole thing is, almost creating a funnel, so what each of us in the network uses is a funneling process where you’ve got 100 deals that kind of go into the top of the funnel. Some of them are coming from older market, and some of them are coming from direct solicitation, some of them were referral sources, like divorce attorneys. So you’ve got all these deals that are coming into this, and at each level, whether it’s listing, perspectives, talking to the seller, due diligence, evaluation, all those things, you’re, we’ve got filters at each step. So by the end you may have ten or 15 sellers, but, you’re right, the idea is to look at more deals, make more offers, and find the really great deals.

Andrew: I see, all right, and then once you find the one’s where the seller is really motivated to sell, then you have more control over the deal, and that’s the big take-away from that.

Ace: Absolutely.

Andrew: All right. On to the final point, and that is to follow up, even with sellers who say no. And you had a client, you were helping them buy a granola company, and he was actually turned down when he tried to buy that granola company, and you told him to do what?

Ace: To…so we want to build a sense of reciprocity with our sellers. And one of the ways we do that is, in his case, he really loved this business, and you know, you don’t go around and do this for every deal, but when you really like a deal, eventually we know that they’ve got to sell that business. And so, this guy was older, so what we did in that case was go out and get him a couple of wholesale accounts. It was actually pretty easy, he had some friends that owned some coffee shops, they went and, basically went to his friends and said, “Hey, I need you all to order some of these granolas.” And he went back to the guy and said, hey, I got you two wholesale accounts, I don’t want anything, I just want you to know that I love your vision, I love what you’re doing, I love your business, if there’s anything I can ever do, I would love to work with you. Or, you now, whenever you do decide to sell it, I would love to talk to you about buying it.

And sure enough, this guy’s wife ended up getting sick, and he got a call, and basically the owner asked my client, are you still interested? He said yes, and he said, well just let me know what I need to do to sell you the business, in order for you to be able to buy it, I can’t imagine selling it to anyone else. And he called me, excited, and he said, “Well what should I tell him?” And I said, well let’s start off with meeting his price and getting 100% seller financing. And the guy, basically, accepted it. And he got a…one of the rare times, you know, don’t get many of those, but one of the rare times that we actually got 100% seller financed deal.

Andrew: And the reason he got, or part of the reason he got 100% seller financing is that the seller felt so comfortable with him after having this buyer, before he was even a buyer, introduce the seller to his friends and help him get his granola into his friends coffee shops. It’s that goodwill that led to 100% owner financing.

Ace: Absolutely, one of the biggest mistakes that most business buyers make, is that they think that it’s about being hard. A lot of people think that I’m this, kind of, cold-hearted and just hard-core guy. And, you know, I get that…

Andrew: …And frankly, when I saw some of these tactics I thought maybe you would be, and then with a name like Ace, I thought this guy’s clearly going to ace people out. I don’t want to play pool against him, and I don’t know that I want to sit at the other end of a table with him. I would much rather have him on my side. But that’s not the way it works. [laughing].

Ace: [laughing] Yes, yes, it’s really more about building a relationship. You know, even in that deal…I want people to be happy, a lot of times before I close a deal, you know, I kind of check in with them. And even in that last case, where they weren’t happy, you know, I kind of say, hey, I do not want to close a deal where my sellers aren’t ecstatic to sell to me, and to get the deal done. If you feel like you can go out and get a better price or get a better structure somewhere else, whatever, go ahead and do that.

But one of the things that a lot of people make the mistake of doing is coming into these deals and, you know, they get on the phone with the seller, and it’s really hard-core, and they’re like, oh, I’m going to, you know, steal this guy’s business, and all of this, all that kind of thing. And the truth is, these things are done by building positive relationships. So as much as you can, it’s great to not ever get nasty, always be very professional, always really be positive, and building as close a relationship possible, so we have kind of the three Rs. We want to show the seller respect, we want to hopefully create a sense of reciprocity and we also want to build a rapport. So, we focus on those three things with each seller.

Andrew: All right, people want to follow up with you, the best place for them to go is just to the website, which actually has your name. Like me you bought your own domain. Mine is AndrewWarner.com you got AceChapman.com. And when people go to AceChapman.com there’s one section I recommend they check out before anything else. Yes all your contact information’s there, yes they can follow up with you if they want to buy a company. But I like that tab at the top about your story. I especially like how you talk about how you built the first million dollar business using ugly as a lure and I’ll let people discover that story for themselves, it’s great AceChapman.com.

Hey, just so I give the audience a good sense of who’s a good contact for you, what size businesses are you, do you help people buy and what do they need to have in order to work with you?

Ace: So, most of the businesses that we do are under $2 Million, there are specific reasons around that, on the website you saw me mention Micro Private Equity which happens to be a term I got to coin on dubsepedia [sp.] but we focus on deals that are under $2 Million because the multiple is just drastically lower than what the private equity guys are competing for once you get above that amount. But we help all kinds of folks.

Andrew: I don’t want someone who’s listening to this who says, “You know what I never started a business before, I don’t have any money but maybe this guy Ace can get me 100% donor financing on some businesses already profitable from day one. I’m going to contact him and he’ll set me up in business for free.” That’s not the way it works, right? I want to make sure that we only connect you with the right people.

Ace: So, the ideal person is someone who understands that this is work, I mention a little bit about our process, as you can see it is work and so the truth is even if you’re in a tough situation, we’ve helped people that have gone through bankruptcy and that kind of thing, if you’re willing to make up for that with looking at a lot, you know you may have to look at 300 deals in order to close one.

The thing that I don’t promote, and that I don’t want to contact me are the get rich quick type of folks that think this is the new path to just instantly become a millionaire or that kind of thing, so as long as people are serious about buying a business and are willing to do the work involved with going out looking at deals, finding the right deals, getting a motivated seller. Right now there are just a lot of opportunities.

One of the things that I did want to mention is that we’ve got a tremendous number of, actually 2 million baby boomers that own businesses that are going to have to sell those businesses at some point or get rid of them or pass them down or whatever and a lot of them are having trouble finding buyers. And so especially, it’s a little bit more of a competitive market when it comes to internet business but if you’re able and interested to go into offline business, that’s where a lot of opportunities are and what I tell people is the internet we’re used to competing with other internet [??] and the cool thing when you get offline is that you’re competing with people who have no clue. Like I mentioned, they’ve got a 14,000 person database, and they just don’t use it. We’re not going to find that a lot, so that’s what the opportunity is, it depends on what your interests are as to how, what position you need to be in but a big part of it is being able to do the work.

Andrew: All right, Ace Chapman, thank you so much for being a part of this and for teaching us, everyone out there if you’ve got anything of value I always recommend that you contact the person who you heard and let them know by just saying thank you. I’ve seen incredible relationships built up here on Mixergy with people who said, “I got something of value out of this interview, I got something of value out of this course. I’m going to contact this person just to say thanks.” And down the line, when it’s time to build a relationship or do some business together they have that warmth that just starts with what I’m about to do right now which is saying, Ace, thank you so much for teaching us.

Ace: Great to be on, man.

Andrew: You bet, thanks for being a part of it, bye everyone.

DOWNLOAD TRANSCRIPT

Master Class:
How to pick the RIGHT idea
(Because a great idea isn’t enough)
Taught by Sarah Thrift of Insight

Master Class: Picking the Right Idea


Report Bugs

Master Class Toolbox

Course Cheat Sheet



Transcript

Andrew: This session here today is for the person who has way too many ideas for businesses, products, whatever, and needs to find a way to narrow them. Is that you? If it is, this is going to be perfect for you. The session today is going to be led by Sarah Thrift. She is the CEO and founder of Insight, a consultancy and training company that helps organizations be better. They partner with them. They work with them. They help them improve.I’ll be here to help facilitate. My name is Andrew Warner. I’m the founder of Mixergy where proven founders like Sarah teach. Sarah, it’s good to have you here.Sarah: Great to be here. Thank you.Andrew: I want to show people the problem that we’re here to solve. The problem is that a great idea isn’t enough. In fact, you told me about a business that tried to work with this organization. What’s this organization?

Sarah: So this is the National Health Service in the UK. The National Health Service provide all public healthcare in the UK, and they’re actually the second largest employer in the world after the Chinese Army.

Andrew: Wow. All right. So then there were telling me about an entrepreneur that tried to do what with them

Sarah: So one of the big problems has been cleanliness in hospitals and a bug called MRSA. And this was causing hundreds of death a year that could be prevented. It was causing a lot of heartache and also a lot of political problems. And so this entrepreneur, her background was as a nurse, and she came up with a protocol. It was a very simple protocol for the way, a protocol to wash hands in a certain way with a certain product that significantly reduced the chances of the bug being passed on.

Andrew: Yep.

Sarah: She had tons of scientific evidence proven. It was proven. I think she had done it already in Dubai. It was proven evidence.

Andrew: And that means great idea proven, will save lives, going to sell to an organization that had lots of money and lots of people. How much money did this entrepreneur make? What kind of killing did she create?

Sarah: Nothing.

Andrew: Nothing. Okay.

Sarah: In fact, she lost money.

Andrew: And that’s exactly the kind of thing we’re trying to avoid that it is not just about picking an idea, it’s about picking it in the right way. And we’re going to help people do it. I want to give people a small taste of what it’s like when it’s done right.

And here’s another entrepreneur that you told me about earlier.

Sarah: Right.

Andrew: What are some of the ideas that he could have picked? In fact, what’s the business, and then what are some of the ideas that he had for products?

Sarah: So this business is the Chocolution. It’s a raw chocolate business. So this is Kieran and his other co-founder, Jake. They both lived in South America. They’d fallen in love with raw chocolate and also saw the big market sort of three, four years ago to come with natural raw products. And so they started to import the ingredients and create their own raw chocolate.

And they were very creative with flavors, very exotic lavender chocolate, all sorts of different types of chocolate. It ranges from these very pure three or four ingredients, no sugar, just some agave nectar.

Andrew: Yep, and I could see a business like that were starting to plateau or were looking for a way to get to the next level. I could see them saying, “You know what? Let’s pick another kind of flavor. What are people into right now? Are they into acai berries? Let’s do that.

Sarah: Exactly.

Andrew: Are they into pomegranate? That’s going to be our next answer. And so he had lots of different options. Which flavor ended up being the big winner for him?

Sarah: None really. Not only that they did flavors, but they also did different shapes. And they were like, “Maybe we need to make the shapes a bit different. So they invested in all sorts of molds.

Andrew: Yes.

Sarah: The individually created for their business to create different shapes of chocolates to make them innovative.

Andrew: Shape wasn’t the answer. Numbers didn’t end up being the answer.

Sarah: Shape wasn’t the answer.

Andrew: Today what did the answer become, and we’ll talk about later on the process. But it was the answer.

Sarah: Right. The answer was to sell a raw chocolate making kit.

Andrew: That allowed other people to make their own finished chocolate to eat and enjoy and share.

Sarah: Exactly.

Andrew: And as a result of that, do you know how well the business did?

Sarah: The business did much, much better. They’ve done tons, not only did they sell loads of these kits but I think they’ve done, I think, 4,000 workshops where they think people to make chocolate. And so you can buy different kits, some with just the ingredients but also some with molds.

Andrew: Yeah.

Sarah: And so you can create your own. It makes a beautiful gift for people.

Andrew: Perfect. And the reason I wanted to talk about that at the beginning was to show that when you have a lot of options sometimes those aren’t even enough. And what we’re going to talk here today is how to not just pick within your collection of ideas floating through your head, but how to pick the right one and understand that sometimes it comes from outside the pool of ideas that you’re currently thinking about. And I invited Sarah here to do it because that’s what she does. She goes into organizations. She helps them do it, and I asked her for what are the steps that you, and I when we’re wrestling with a collection of ideas, what are the steps we can go through, and here is what she said to me. The first one, I kind of rephrase this. I hope it’s okay. Is to talk to people, and do some research. You told me before we stared about this organization, and how they did it.

Sarah: Absolutely. This is Zippers. They are a fashion company based in here in the San Francisco Bay area.

Andrew: Okay.

Sarah: Their two founders, who have a great passion, and experience in fashion. They have an idea that they wanted to create something really striking, something innovative. They talked about transforming dress shirt using zippers, and putting magnets on the sleeves for the cuffs.

Andrew: Okay.

Sarah: They really, in the beginning we’re talking about it this big dreams. If I look, and I’m really blunt about this website I feel I’m looking at the front cover of a (inaudible) novel. I don’t really know what they’re selling me. I think if I read in the detail. There’s a shirt down at the bottom, but I have to really look. Great dream, but what are you selling to me?

Andrew: Yeah. I get that. In fact I’m looking at the site right now. I’ll leave it up for another moment. It says clothing for mankind. I can understand it makes clothing. Maybe through the name Zippers I might assume that what they’re doing is creating zippers for zipper companies that are clothing mankind. That’s not it at all.

Sarah: No.

Andrew: You talk to me about how the first thing that they did was they went out, and talked to people. You said, you would show it to individual people. How would they do it, and why is showing to individual people important?

Sarah: How they would do it is they did it first of all with friends. They said, try this shirt on. Watch me do it. They also went to a set of fashion shows, and did fashion stores. They went into stores, and actually demoed the product.

Andrew: Okay.

Sarah: Both wearing it themselves, and had products of different colors on display. People could try them on, and see how it felt.

Andrew: Okay.

Sarah: The reason this is really important is certainly in my experience is that people want to tell you what they think it is. It’s not always what people tell you. It’s what they do that you should watch for.

Andrew: Okay.

Sarah: That’s really important because people will say, oh, yeah, yeah. I really like your shirt. Watch them put it on. What’s their body language? What works? What doesn’t? Then ask your questions from there. Not necessarily from what they tell you.

Andrew: All right. You know what? I’ve actually heard that enough to know that that is the truth. That I need to do it, and at the same time I have to accept it, and actually do it because it is intimidating when you’re starting out. I imagine here’s my first interview, giving to somebody, and saying, hey, will you watch it? Is so scary. Frankly, just putting it out online, and letting strangers do it without me watching was scary. Can’t imagine.

All right, but you’re saying they took it out. I also pushed before we started, and I said, all right. You show it to a handful of people. You get to watch. Is that enough, and you said, all right. No. It’s not enough. What else do we do? What’s the other part?

Sarah: At the same time for nearly every business you need to look at the market size. What size is this market? You got anecdotal evidence that starts to build from people face to face where you might do Survey Monkey to get data. Then, you also want to look at the market size, the competitors. Understand is there really an opportunity? Is there growth in this market? Is there a way to take share in the market?

Andrew: Okay. Most of the people who are watching, in fact, I’m going to say all the people who are watching are not going to be in the zipper industry.

Sarah: Right.

Andrew: Maybe a handful of them are in the clothing industry. I want to go deeper in here just to learn how it could be done there, and then we’ll bring the ideas back to our tech companies. Where do you get research that shows you how many people want clothing that have zippers, but not regular zippers, and unique zippers. It’s so easy to say everybody is a potential customer. The market is infinite. Perfect. What kind of research are you talking about?

Sarah: You want to look at research for the clothing industry as a start. In this case the main thing is shirts. What’s the market? Is it growing? Is it not? What’s the needs?

Andrew: Okay.

Sarah: Get data on it. First of all, you ideally want to be in a growing market. You also want to look at trends. What’s been happening? That’s what you would want to look at because if you can get a growing market then your chances of success are already better.

Andrew: I see. Of course, growing market. It’s to see how much money is being spent, again, in this case, clothing in general, or is it more innovative clothing, or is it more clothing for runners, or clothing for athletes?

Sarah: In this instance it’s, actually, it’s clothing, and then it’s both innovative clothing, but also, business clothing. Because the big idea here is it’s a dress shirt with a twist, and it can be worn to work. You want to look at that, and say, well, what’s the trend? How much is that needed. Because something that crosses the line that’s, sort of, semi-formal, but also fun at that same time.

Andrew: Gotcha. Okay. All right. Where many that I’ve talked to will say, “Talk to customers.” Put it in their hands. You’re saying, “Yes, absolutely do it” but think beyond it and do some research to see how big this market is. Are there other people like your friends or like the people who you’ve shown it to? Great.

Sarah: Exactly.

Andrew: Let’s go back to . . .

Sarah: And also things like fashion bloggers. Look at what they’re saying and what they’re promoting, like something we also did was like talk to them. Would they promote this product? Because that’s a big line specific in the fashion industry. If someone will promote your product and they’ve got a million readers, then that’s going to do something big for you. So send them the product. Do they like it?

Andrew: You know, that’s an interesting idea. I think that when I started doing a course on how to do interviews, I did it because a lot of people were emailing me about interviews. And I said, “Would you want this? And they said, “Yes”. And I said, “All right. Fine. Will you pay for it?” and they said, “Yes”. So I felt I had my proof, but now I’m realizing that was my proof within a small pool of people. Maybe it’s the hundred people who I happen to know are the full market. Maybe there’s a bigger market. I didn’t even think to look beyond it. I just said, “There must be something here because people are coming to me.”

You’re saying, “That’s enough.” I mean, that’s not enough. That’s a good first half. The second half, Andrew, what you would have advised to do is look and see if this is going to appeal to bloggers. How many bloggers are out there? How big is that market? Is this going to appeal to software developers? How big is that market of software developers who need content for their site that the two matched together will give us a really big picture in understanding of how our potential is. All right.

Sarah: Exactly.

Andrew: I will move on then to the next big point which is to get them all out there and narrow them down by them. What we mean are the ideas. I think you’re actually doing this from your notes. I like this too much. I had to go back into Google and bring it back.

Sarah: Okay. Yeah.

Andrew: This is something we could relate to because it’s in our heads, but very few people put it up on a wall. What are we looking it here?

Sarah: We are looking at ideas, all ideas put on paper. So essentially the common thing I see . . . Often an organization has tons of ideas. It’s not a shortage of ideas that’s the problem.

Andrew: Mm-hmm.

Sarah: It’s like for which idea and someone was like, “Can’t we do all of them?” Well, no. Actually you can’t. I struggled to find examples where people can see multiple ideas that worked. But it’s really important to go through the phase of articulating all of the ideas first because people want to hear them.

Andrew: I’m sorry to interrupt. Why . . . By the way, I get so much feedback on the fact that I interrupt so much, both negative and positive. I apologize to people who are negative. I say, “Hey, hoorah” to the people who are positive about it, but. All right. Why is it important to put it up on a board like this instead of understanding, “Hey, you know what? I have a lot of great ideas that . . .”

The two that maybe stand out today are and then listing those or speaking them out loud. Why do we have to have them up here? Why is that such an important part of the process?

Sarah: Well, two reasons. One, it sort of makes them real, the fact that you have to write them down. It sort of crystallizes them and articulates them like, “This is specifically what I mean.” If there’s vagueness in the idea, it sort of forces them to come clean. So that’s the first thing.

And secondly often people assume that, Andrew, I think you’ve got this idea about this, but actually I don’t really understand your idea. I just assume I do. And I assume you like my ideas better.

Andrew: I see.

Sarah: And so it needs to be heard and like exposed and taken in. And so there’s something in the process of seeing it and verbalizing it that’s really important set for people to acknowledge and heard but also for others to really take on the idea. I was just facilitating a leadership meeting two days ago, and what was really clear that when we got into it, we had done a Survey Monkey of the leadership team in advance.

Two big ideas, one was geographical expansion, this is the education sector. And the other was expansion of services. We had 48% voting for one and 52 for the other. Sounds like a diametric split.

Andrew: Yes.

Sarah: What are we going to do? We can’t do either one. What happened is when I got people to explain what do you mean by expansion of services, everyone had a different view of what that meant. And actually they weren’t really that far apart when we got through it, but it took a few hours of articulating what this means. And actually mapping out, “Here’s the full spectrum of services we could offer.”

This is what we did today. Are we saying we’re going right to here? Actually no one is saying that. People were saying it. Let’s say we’re going from here to here, and then, in fact, we’re already beta testing this. So are we staying stop? Oh no, but I thought you meant we’re going over here because we just talked about that question should we expand our services. Well, that wasn’t specific enough for people to understand what it meant.

And also the other thing we often involve an idea in our head. So even for ourselves, even if you’re on your own, I still do this myself because I realize getting myself to write it down gets me to be clearer.

Andrew: What a great example of how even within an organization where it seems that half of the organization agrees on one idea. When we really dig in deep, we realize that they don’t. I had a similar situation here internally at Mixergy where I hired a developer who happens to be my brother. We are on the same wavelength. In fact our voices sound alike. I said “Michael, we need to be able to allow the audience to add media; to add an image to each of their messages on the message board” and he said “Great. I can do it”. He went out and he put it together and he came back in and what he did was attach the image as a file underneath. I meant no.

The image should be in line so the people can include the image and write underneath it. Small distinction but because we didn’t clarify it, it was confusing and I can understand that when you’re starting out in business or frankly when you have a team of people and you are trying to figure out what product to focus on, that kind of confusion, when there is nothing there becomes even bigger. Actually, I took that screen shot or the photo that you sent over and then the next step is in this photo that you sent.

Sarah: Right.

Andrew: It’s not enough to just put them all up on that board like we saw a moment ago. You want us to do this. What is this?

Sarah: This is prioritization and this happens in one of two ways. The first is either you take the ideas and as a group so in the example I was just giving the actual prioritization happened quite naturally as we talked more and we had quite a bit of information and data amongst the leadership team to prioritize. So in that way we picked out, in this case, three ideas to take forward but you certainly don’t want more than three ideas typically. Sometimes you just want one to really focus on.

Andrew: Okay.

Sarah: Other times you don’t necessarily know so you say “Okay. This is what I think of the likely three. Now let me go and do some work to test that”. So that comes back to some of the things we talked about earlier in terms of okay, go and talk to customers. Talk to suppliers. Go and do some further research and then come back and say “Is this the right thing” and be ready to be wrong. So go in like “I think these are our two best ideas but let’s go and see and maybe we’ll be wrong. The important thing is you don’t lose the other ideas we had on the other bit of paper. You keep those because you might want to come back to those but what you are trying to do is to choose where do you think you are most likely to when at this point and you take those.

Andrew: The company that you talked about earlier, what happened to them? No. It might be too early in their story because you were just working with them. Right?

Sarah: I was just working with them. But what was great is they commented they had been stuck for 3 years with this question and they hadn’t been able to resolve it and actually this meant ‘Oh, we thought we all disagreed but we don’t really’. What we managed to do is we said “Okay. We are back to the spectrum of services”. What we’re saying is what we’re going to do is we are going to limit the spend the X K and then from there we are going to do the other idea which is geographic expansion. So in this case it was actually all possible but the language had sort of made things almost acrimonious because it felt like there was a big slip.

Andrew: Okay. All right. I should say that we are intentionally not saying the names of some of the organizations that you worked with. Internally you are friends with them. [??] works and sits right here at the office.

Sarah: Right.

Andrew: So she knows you. She knows the companies that you work with and we also understand that you promised them that you wouldn’t talk about their business in public so these are stories that we checked out but that we can’t say specifically the company names. All right. On to the big board here. The next big thing that you want us to do is align or waste time. You did this mysterious thing that we’ll understand in a moment with an organization that was working in education.

Sarah: Yes.

Andrew: What did you do there? Again, another company that we won’t mention the name but what did you do there?

Sarah: So actually here was this plethora of ideas. Like a sea of ideas and what we did there was to actually go through and work out who was aligned to what. So I went and pulled that sheet first of all on the alignment point. Alignment is not the same as agreement.

Andrew: Okay.

Sarah: I think if you want to all get consensus [??] then get agreement then the risk is you dilute some of your ideas.

Andrew: Okay.

Sarah: That’s not what I mean by this. What I mean is that you can get the important stakeholders around the room or on the phone or whatever and get people behind an idea. Then you work through that to go okay. Maybe that wouldn’t be my 100% choice but I can align behind that. That’s what you need to get to because then you are moving in the same direction. What I see is really a waste of time and money and effort is where people are working on different things. Even if they sound fairly similar at one level you iterate that. When people are working on different things they are not focused on the same thing.

Andrew: I see.

Sarah: That no only gives mixed messages to [??] people but you’re not focusing all your effort where it could be and really we want this to work and we are going to focus on this and make it work.

Andrew: I see and so actually the education organization that I’m talking about it seems like is the company you mentioned earlier where they weren’t all aligned. Okay So. Even if . . .

Sarah: Exactly. Spin off for Example is [??]

Andrew: Got you. Oh, Sure . What else?

Sarah: Another example would be e-Commerce company , a very large e-Commerce company.

Andrew: Yes.

Sarah: And they were trying to grow their affiliate business, meaning the business they get through other sites online and they get business to them.

Andrew: I know this company. That’s a big part of their business. Yes.

Sarah: That’s a very big part of their business. And If you look at their market, the market is growing, they had not, they sort of recent time not really fulfilled their growth potential. There were lots of concerns internally about their business. What needs to happen? When I get involved the first, there was a sense of may be what to do, there is a lack of ideas. My first observation spending just a little bit of time with the team was they have tons of ideas. The promise that ideas have not been able to translate in to anything real. More than that no one understands these ideas, because they are too many. Like everyone is different things, there has been a switch-off. And because there has been no transaction to resolve it’s bit like Okay, senior leadership is focusing on something else.

Andrews: I see.

Sarah: And so the problem was they were stuck in these sea of ideas. And not able to translate in to results. The ideas don’t mean anything if it can’t translate in to financial impact or other results.

Andrew: Okay. When you try to get an organization to align, I have got a photo of you standing with an organization, I think I can show this. In fact No I can’t. If you put in the Google Docs, I am showing it. When you get in there, how do you get everybody tell lying right away? I mean, frankly, it is tough for two entrepreneurs to say we are going down this path together. I know this is not 100% what you wanted. It’s not 100% what I wanted. But this is the one this is the path that makes the most sense. Let’s do that. It’s hard to do that. It takes days if not weeks or months and sometimes it never happens. When you have a room for the people the way you have when you work with companies. How do you get them to all align so quickly?

Sarah: It’s a really good question. This and I am wondering how to put that in to words. Because it’s a sort of an alchemical question that happens. So essentially, First of all, it gets messy before it gets easier. So the main thing is that everyone feels they have been hurt. That’s why in this picture, this is an action shot , its actually from the education organized [??]. And you can see the flip chart on the wall like and our main discussion I think like everyone like thinking, what do we want? You know, Everyone has to get their ideas[??]. And so that’s the every first starting point. If we don’t have that and also a chance for other people to say, Oh, I don’t realize that was it, can I ask you a few questions? So the starting point is a common understanding and I think we are not trying to make a decision, we are just, let’s be clear what the options are.

Andrew: I see.

Sarah: Because, I would say in trying to give least of third of cases possible more. Once you get on the table, you realize you are not so far apart. You were a bit apart, but not where you thought you were.

Andrew: I see.

Sarah: And that’s extraordinarily common.

Andrew: So, what you are saying is that by agreeing right away to the ground rules and one of them being, we are not necessarily going to pick the right answer. What we are going to do is at least be clear about our options. That takes away people’s fire power and allows them to just come in and explore it as opposed to saying we are going to get in this room, we are going to pick what we are going to do the rest of our lives with our business and then one person inevitably is going to want to drive the conversation over to where he wants, because that’s the goal for the meeting and they have to be that driven.

Sarah: Exactly. Two comments on that. One is that’s why sometimes it helps to have someone external to be in the meeting. Often if there is someone who is leading it who has the idea whether fairly or not fairly he will think what you are trying to get your agenda. Right So that’s why it can be helpful to have someone could be someone in the organization, but he is not so involved or someone totally external. The very thing you described. The second thing is that you say you want to take the pressure of having to make a choice right now for saving some people’s head. For at least now we have the choices. I need to know what do you need to be convinced of these ideas or what do you need to make a decision. What would you have to believe for this to be true? So you focus on what they need to know.

Andrew: Okay.

Sarah: They to believe which somehow de-emotionalizes the decision. Because if it’s like, I have got an idea and you have got an idea and then it hits back your idea versus my idea. We are taking at a certain level that can be quite emotive. Especially if we are very in to that, whereas this is like Okay, well, what would I, Let me just say, Sometimes I get people who have to sell each other’s ideas like I split people into small groups. Okay, I need to take Andrew’s ideas. How would I persuade someone else that Andrew’s idea is right? What would I put in favor of Andrew’s ideas?

Andrew: It’s not going to be a theoretical decision out there so that we can see how it would work with it. Let’s suppose my co-founder and I have different phones. I am Android he is iPhone and we have to decide what we build for first. I say, “Obviously, Android because there are so many different people out there who are using it. That’s the majority. I mean, that’s what more people are using than the iPhone.”

The other person says, “Well we don’t want all these different models. We should go with the iPhone because everyone builds for it. I love the iPhone. People are willing to pay. There’s a good ecosystem.” They both have good arguments. They could butt heads all day. How would we use this, “What would you have to believe” approach to settle this agreement?

Sarah: So, I would ask you what would you have to believe to say that iPhone would make sense for the business? What would you have to know or believe?

Andrew: Okay, so then in that case if my goal is to get the product, the app, in as many people’s hands as possible, what I would have to believe is that more people are going to go into the App Store and download it if it’s free in there.

Sarah: Exactly, so then my question is can we get data on downloading of apps from the Apple Store versus Android.

Andrew: Gotcha.

Sarah: Can we fund that venture? That would be the data.

Andrew: Right, so we’re no longer talking about, mm-hmm?

Sarah: I always go, okay if we can’t get it, what else because sometimes you can get very specific data. Sometimes you have to have a weight of evidence. What would be a proxy for that, for example?

Andrew: That makes sense. Alright, so direct evidence might be we have some research tools internally that allow us to get a sense of how many downloads there are for an app. Nothing’s perfect and I haven’t found anything even that great, but that’ll work.

So we walk in there and say our app is similar to these apps let’s see how many downloads they each got and that helps us settle it. If that’s not enough the proxy might be advertising. If an ad company is willing to talk about how many views it has for apps within each ecosystem, then we use that as a proxy. Neither one is great, but at least now we’re talking about data, not opinion. At least now we’re talking about data that aligns with our goal.

Sarah: That’s exactly different. We’re talking about data, not opinion. That’s exactly what we’re trying to do. We’re trying to de-emotionalize these things and say, “Well, what would you have to believe?” That’s why it’s almost helpful to switch around and say so now prove, try and get evidence to show the counter-argument like for someone else. What would you need to show?

Sometimes you’re like, oh, now I have to do it. It’s not such a bad idea because I’ve found some data that supports this. Your job is like be the other person, role-play it. Persuade me. So, you make it fun and suddenly you’ve forgot it was someone else’s idea. You’re much more; okay what’s the best thing for the organization.

Andrew: You know, these kinds of issues actually cause friction within organizations and not just within organizations, within my scotch night. I have entrepreneurs coming here for scotch. They were having a great time and then I left because I had an appointment. I left them here to just continue the conversation that got very open. This open conversation about a rift between two people about work ended up causing this big argument here within the office that I unfortunately missed because I’m curious about why people argue and I believe I can solve it.

The important point is, not that I believe that I can solve anyone else’s arguments or that I’m very Butt-insky and need to understand what people are arguing about. The important point is, these little arguments about which direction a company can go in, Android, iPhone, build this app, or that app, end up causing rifts that cause a company to separate.

Sarah: Absolutely.

Andrew: Cause people to just lose time and lose friends.

Sarah: I couldn’t agree more. I could not agree more.

Andrew: Yes.

Sarah: Absolutely. They sort of escalate beyond the original point. At some point, often we’ve lost sight of what the original difference of opinion was and it’s gone way beyond that. [??] hard to come back to, well hang on, was this really so significant that we couldn’t work together anymore?

Andrew: Yeah. Frankly even for a one person operation starting out the wrestling match might even be worse because it goes on in our heads. It is should I do this, should I do that, I have this other idea, should I do this? Then we’re arguing with ourselves over and over, again, a big waste of time. Alright, back to the big board here and the next big point for us to talk about is KISS or diss. I know KISS, that’s keep it simple stupid. We’ll understand how that applies here, but what’s diss?

Sarah: Oh, that just means dismiss it basically because. . .

Andrew: Oh, like hip-hop diss. Don’t diss me, brother. I see.

Sarah: Yeah! Exactly because essentially here. . . Let’s suppose, now you have alignment, you have the idea of okay we’re going to align behind. We’re going with Android phones. We’ve done the research. We’ve done the data. We can align behind that decision because the data says that makes sense. Now, we need to have a simple way to articulate it. So, this is particularly important when we have a very technical product in the sense of, if we make it very complicated. . . So, the idea can be very complex. There needs to be a way to articulate it in a simple way.

Andrew: Let’s see how that plays out. I have a screenshot here. I keep calling it screenshot. I have a photo here of a binder. This is one of your clients who happens to be a doctor who is working with a team of other doctors and here’s the part that’s most relevant for us, they were working on a medical device that he wanted to sell. So what is in this thick binder that he’s got?

Sarah: He had all sorts of technical details about the product, information from working with patients, scientific tests. He had an incredible amount of information. Incredible.

Andrew: Mm-hmm. So it’s all this technical information and that’s the part that you are saying is not [kiss].

Sarah: Well what the challenge really was is, he needed investors and his investors typically weren’t a medical expert.

Andrew: Okay.

Sarah: They might have knowledge about the market but they don’t have the very intricate details that he was going into on the intricacy of why this product very technically makes sense. We needed to know the differentiators but they needed to be a way to translate that into language that made sense. Simply in one line or two, what is this product? Simply what need is this product meeting and why is it important. Like why is it different from other products already on the market? What do you need to be able to deliver it? What investment do you need very simply? Tell me that. You can give all the technical details but don’t lead with that because if you lead with that, unfortunately rightly or wrongly, often you’re going to lose people. They can’t see the wood for the trees and work out how to respond.

Andrew: I see. So you are saying it’s not enough to get our ideas out there, narrow down to the ones that we think make the most sense and research them if we can’t articulate them clearly enough then we can’t get the buy in that we need. In this case he was looking for investors. You helped him articulate his product and be clear about it the way you just described. So what happened?

Sarah: So then he was suddenly able to get investors [to say] “oh wow. Okay we get it. This could totally revolutionize the way… it was for testing purposes for cervical cancer in a way that’s much more accurate and also cost effective, less intrusive but we needed to bring out the sort of pain points and the need it was meeting, rather than the very technicalities of it, the system and the electronics of how it actually worked. That’s important but that was more to substantiate that it’s real not how you want to lead with the investors.

Andrew: I see. And so he got investors after that, after he clarified it?

Sarah: He did.

Andrew: Can I say the name of that company? Okay. I don’t want to get…

Sarah: Not sure. Sorry.

Andrew: Alright. Because I have a screen shot and I thought, wait she’s allowed to talk about it, I have the screen shot here. I have a screen shot that includes an award that he won. Fine. Fair enough. It’s the clarity that helped. I keep remembering my conversation with, my interview with Fred Wilson here for Mixergy where I asked him what his challenge was when he was raising money to build his venture capital firm. This is the guy who investing in Twitter, investing in Etsy, investing in tons of the most successful companies out there. What’s the other one I am thinking of? Four Square? So many others. He said, “You know, I was explaining it to my own investors, my theory, my thesis, what I was going to do, explaining it to them in too complicated a way.

These are smart investors and it was still too complicated for them.” Once he started explaining it simpler and simpler and simpler he was able to raise money from his LPs, from his limited partners and was able to then go and make these investments that I talked about. Frankly that’s a very good interview. If someone out there hasn’t seen that interview, or heard it, we didn’t do video, it’s worth going and hearing it. But the big point here is keep it simple or diss. Kiss or diss.

Sarah: Exactly. Something I sometimes say to people is could you explain this to a ten year old child, just really simply, and they go “oh I get it. It’s a device that does this in this case.” Can you explain it in one or two sentences? If you can do that then you are getting somewhere. If you can’t, it’s not that your idea is not good, but it’s that you need to find a way to express it that people listen and then get it straight away.

Andrew: You know the interesting thing is, I did that with you when we started. That’s how we ended up with that 1 sentence I mangled when I started. I said it’s led by Sarah Thrift, C.E.O. and founder of Insight, a consultancy and training company that helps organizations be better. That is 1 sentence and that last part came directly from you. I’ve noticed that experienced entrepreneurs do it better. I always ask that before an interview. I say what’s one sentence that describes what you do. The experienced entrepreneurs always do it better. Series like the first one hundred thousand in revenue that an entrepreneur did or when I talk to an entrepreneur about how the business failed often they can’t do that. Andrew it’s this complicated thing, we did lots of different things. Or Andrew we work on this but were also thinking that and it makes it really complicated. I have noticed that being able to summarize it seems somehow connected to success.

Andrew: All right, well it’s certainly does here and we are going to continue on to the next big point, which is… fail small or succeed big. Now this is where I’m going to bring back our old friend from the top of this conversation. There he is.

Sarah: [Aaron], yeah.

Andrew: So how did he fail small?

Sarah: Basically what they started out by doing, we talked about there, the Royal Chocolate Organization and they were creating all sorts of fantastic exotic flavors of chocolate and tastes, and different shapes.

Andrew: Yes.

Sarah: Effectively, they had a big problem. The shelf life of this chocolate is four weeks. So, what would happen is, they’d make a big batch for a show, and often they had, like, a weekend show, and all of it would be sold out by Saturday lunch time. And then, like, “We have a store, but we don’t have any more chocolates made up, we can make a few, but not the level we need.”

Or, we’d have loads left over, and like, “Now, what do we do?” They’ve got limited shelf life. They’d try and do things, but they couldn’t always. They had a lot of wastage.

Andrew: Yep.

Sarah: So they were sort of doing things, and they were sort of…It wasn’t really working. It was, I guess, the sort of failing small. They were spending a lot of money. They certainly weren’t making any money at all. They were making a loss. And so, they kept iterating, thinking, “Well, we’ll try different things. Maybe it’s this. Maybe we have something really unusual and catchy. That’s going to do it.”

Andrew: Yes.

Sarah: At the same time, what they started to do, is they started to make chocolate when they went to exhibit. They might do that at a show. They had certain stores where they’d go in for the afternoon. They’d make some, so they’d be doing it to get people to come and talk to them. Well, what happened is people became really interested in the actual making of the chocolate and how that worked. “Wow, so it’s just like three ingredients?”

Andrew: Uh-huh.

Sarah: “Is that what you do?” And has, “Oh.” Then, the kids, especially, like, “Wow! Look at this.” So their feature became much more the making of the chocolate, rather than the chocolate itself.

So, what was good was had they just spent everything on developing more and more flavors, at some point they would have totally run out of money, and that probably would have been it. What happened, almost by accident, but beautiful design, they , “Hang on, I think there’s a market in selling more chocolate making kits because people are interested. They said, “Oh, I’d love to be able to do that. What about if we teach people how to do this, but also sell the kits with the raw ingredients, and that takes away our biggest problem, which is shelf life because we put that into the customers’ hands, and then, thus, they can deal with it and they can make the chocolate when they need it. ”

Andrew: I see. And so, if they’re failing small, are you saying that their first test is just one workshop, something like this? Let me zoom in. No, that’s not the workshop. Here is the. . .

Sarah: [??] the other one. Yeah, that’s it. That’s it.

Andrew: There it is. This is the workshop, right there.

Sarah: Yeah, exactly.

Andrew: So, it started to fail small by saying, “All right. We have this idea, people seem to be liking it. Let’s try a small workshop and see what happens,” and then it becomes something as big as what I’m showing up on the screen.

Sarah: Exactly. So I went to all of their early workshops, and what they did is [Curum], one of the founders, was a former school teacher. So he had links with local schools, so we did some testing with school kids, and say, “Well, did they get engaged? Is it exciting? What’s the feedback?”

I just went and talked to the kids, like, and they’re like, “Oh, It’s so exciting! We made this.” And so, you could get to test it really cost-effectively with a local audience to see if it’s going to work.

Then, the second thing was to actually put together some demo kits and talk to parents, like, “When would you have this? Is this something you’d buy for yourselves, or your kids, as a gift?” and start to understand, well, what’s the market, and what would people pay for it? They were able to test it in a small way.

Andrew: I hate to cook. I would never cook, but I want this. I would do this. It seems like fun.

Sarah: Yeah.

Andrew: So actually, I don’t know anything about chocolate, the ingredients. This is the box that goes out.

Sarah: Yep.

Andrew: Right?

Sarah: Yep.

Andrew: The ingredients in chocolate, you said there are three of them, and they don’t go bad if I leave them around for a week?

Sarah: Not at all.

Andrew: I had no idea.

Sarah: Hmm-mmm, because basically, they’re just like cacao, the nibs, the cacao butter, and then you can put some agave in it, because it tends to be pretty bitter. It’s up to you if you want it, but it’s really that simple. Then, in the kits, you can also get flavors if you want. They also have a bunch of recipes you can do for orange, or lavender, or whatever, and also buy molds. But, they’re very simple, very, very simple, as you can take a tray, like for ice cubes. Just takes like 10 minutes. You melt the ingredients. You pop it in, pop it in the freezer.

Andrew: And then you’ve got your chocolate.

Sarah: You can eat it [??].

Andrew: Wow. All right. So, fail small, succeed big. Back to the big board here for the final point for us to talk about, which is to refine or decline…I like how some of these rhyme. For that, you’re telling me and Marie about this company.

Sarah: Yes.

Andrew: What is this company?

Sarah: This is Zhi Tea. It’s a tea company based in Austin, Texas.

Andrew: OK. And then. . .

Sarah: And they have beautiful tea, like they have. . . Actually, no, no, quite now, but something like 70, it might be more than this, but they have about 70 different types of tea. They personally blended all the flavors of tea, and the packaging, in particular, is beautiful. You get this tin. It’s got stickers embossed. It’s very beautiful and stylish.

Andrew: I see.

Sarah: And this tea tastes amazing.

Andrew: It does look really nice. All right. So then, they had an issue where this beautiful packaging was actually starting to cost them more and more money. Big problem, right. And they had to figure out what to do because they were starting to lose money this is ET. So what happened, how did they find their way to success there?

Sarah: So let me just if I may, give a little bit of context. So what was interesting here was they had success. This is more when you have a successful product. But they’ve already got that. So they’ve gone through these step, they’ve found the market, they’ve got alignment, they’ve tested it.

They test it and they were pretty successful. They have the store in Austin alongside their warehouse, they shipping products all across the U.S. But then what happened though is an external circumstance. So tea prices started to go up dramatically and also the dollar versus various Asian currencies was not in the favor of the dollar.

And so they started to the double whammy of these cost rising. But it starts to be not profitable to sell the same tea, in the same packaging. So there’s an example where they needed to evolve something about the idea or how they were marketing it or pricing it in order to respond. So this is quite a common things I see which is you have a successful idea, but you can’t necessarily leave it just as is, things need to evolve for it to continue to be successful and to grow.

Andrew: Okay, oh sorry. Is it kind of weird would I just put the camera on you and I’m completely invisible here like this? A little bit. Yeah, so then in order to evolve it, what do they do? Costs are rising their products is beautiful, so they can start to put this in a cheap cardboard box. Or can they?

Sarah: Well they can. But the first thing was it was incredibly [??] because the team was very attached to the packaging. And I understood why because it is beautiful. But I was there to be like, we are making a loss on every one of these we sell, we are making a loss. So and I don’t see that changing.

So we can continue. So there’s a couple of obvious options at this point. One is will we explore different options for packaging which are cheaper, or we cut the price out. So what we need to do is understand well which of these makes more sense. And we need to… back to something we talked about earlier. We sort of need to de-emotionalize the decision. I think we emotion was we can’t change the packaging.

And we can’t put the price up because we’ll lose all our customers. I’m like, then we need another idea because just continuing is not going to get any better. It’s going to get worse. And so what we did was we looked, well two things we looked at what different packaging would be. So for example going away from a tin to some sort of plastic or paper pouch. And secondly, we went and talked to customers in the store and asked them well, why do you buy this tea?

What’s an important part of the experience? What would you, like did you know that tea prices are rising? How would feel if the price of this went up to cover the cost? What would make more sense for you? Would you rather have the product at the same price, with different packaging? Or is this packaging an important part of the experience?

And so we went and tested and asked people. And also again back to something I did earlier we really watched for people’s body language. Because people don’t always want to sort of tell you, oh I wouldn’t buy it anymore. So you have to watch and say, how do I ask them in way that goes, okay so tell me like if this was your business for example what would you do. So turn it around so they feel they can tell you honestly the answer.

And in the case what we discovered was the customers are incredible loyal and really love the packaging. And so there was tolerance for some price rises. And we also looked to other competitors to see if it was in line.

And so what actually happened was there was a double digit price rise literally over night for all the products. And there was not any fall off at all in volume and I met Jeffery the founder was like, wow I was waiting, what’s going to happen. No change.

Andrew: I got my notes here from your conversation with Ann Marie Ward, who produced this. Said, Jeffery freaked, he saw that… can I say what the increase was? What percentage?

Sarah: Yeah, sure.

Andrew: Yeah, I can, right? I don’t think this should be a secret. Everyone who went and bought it should know. It’s roughly 25%. That’s 25% increase and people are still buying it. And that’s because of the resource that you did.

I think I as an entrepreneur would have thought, you know, 25% is a little too much it’s going to hurt our customers it’s not going to come in. But I understand now how the combination of both talking to people and hearing and getting their subjective feedback, and looking and doing resource to see that others were also increasing in their market. Increasing their prices, boom that means that both bit of information are helping me say, it’s time to raise mine.

I still would freak out, I would freak out before, and I did it. I would freak out during. And then I would freak out when you came back and said, Andrew, guess what we didn’t lose and volume, that would really be exciting.

Sarah: And I was still holding inside, because I want to do the right thing obviously with my, people I work with. So I was waiting for all the evidence suggested, and we said, okay we’re going to do it and we need to fee [?].” And the thing was we had to do a significant hike, because otherwise we’d be in a situation where we, we do a little bit and then, in– I said to him “It’s worse if in three months’ time we have to do it again. So given where this is going, let’s just do it.”

Andrew: Oh yeah.

Sarah: And be done. So that’s also how we looked– so it was, I would say we took a calculated risk in taking all the information, then said “now we need to do this.”

Andrew: All right. So, before we wrap it up I want to ask you a couple of questions. The first is we started out this conversation talking about a company that had an idea– an entrepreneur that had an idea that would have saved lives that was meant for an organization that had the money to pay for it, and it still didn’t work out. Now that we have a list of ideas that we know we can go through, and we need to pick the right product, or the right business out of many different options. Which of these do you think would have saved the entrepreneur that you talked about at the top of the interview?

Sarah: The most important one for them was the third one, it’s a line [?] always time.

Andrew: Okay.

Sarah: So in this case they had a good idea, they had a market need, and they had chosen the idea as quite specific. But what needed to happen, particularly with an organization of the size and the complexity of the National Health Service in the U.K. is that there need to be a lot of discussions to get enough supporters and alignment behind it.

Andrew: Okay.

Sarah: And you’re talking about a mixture in this case of, medical staff, managerial administrative staff, people that sort of trust overall government quality hospital. So you need it to be, getting buying at different levels, and also hearing concerns at different levels. And you need enough, typically I say in an organization, you, you need like an amount of support to make a big change in organization, you often need something like thirty percent of support behind it. And at that point you have a tipping point for momentum.

Andrew: I see.

Sarah: And then the idea sells itself. And so without that, in this case they had a fantastic idea, but they’re talking about a big organization to sell to where they really need buy in. So it’s not enough just to have a brilliant idea if you can’t get the people who are the decision makers and implementers to believe this is the right thing to do.

Andrew: And that’s such a painful thing to acknowledge and an important one too. The idea, the great idea isn’t enough, the alignment, the alignment and the research and everything else helps. Alright here’s the other thing. I’ve got here a map with where you do your training, right? In addition to consulting; I’m assuming that consulting is probably going to be very expensive. Do you talk about how much that costs before we get into the training?

Sarah: Sure. I mean it depends on the organization, but it’s often, you know, tens of thousands of dollars to do it.

Andrew: What size organizations do you do training with?

Sarah: Well with training it’s a real mixture–

Andrew: Oh sorry, you do consulting with.

Sarah: Sorry.

Andrew: Where, where, I know one of the companies that we weren’t allowed to mention.

Sarah: Yeah.

Andrew: It’s a publicly traded company, They’re a multi-billion dollar company, I think, right? But how small an organization do you do consulting for?

Sarah: Also do for small organizations, too. But we do it in a different fee structure in recognition that they don’t have the same resources of a large organization.

Andrew: Okay. Two person operation? Ten person company? Hundred?

Sarah: So it, yes it can be. Typically the type of work will be more tailored, so with a very big organization we might go in and do a sort of eight week project. So for the company you were just referring to we just did an eight week piece of work to prioritize a whole bunch of choices for them, that was to add one billion dollars of growth to their business. So we’re very big scale of magnitude.

Andrew: I see.

Sarah: So it makes sense for them to pay for that work to be done. If I’m talking about a two or ten person organization, sometimes it’s myself and my team facilitating couple of meetings and just giving some advice and pointers and helping people get to alignment can be the biggest impact. And that can be just a couple of days work.

Andrew: Alright and then the other thing that you offer is these “in-person courses.”

Sarah: Yeah.

Andrew: Right? This is some of the places . . .

Sarah: Yeah.

Andrew: . . . where you’ve done them?

Sarah: Exactly. So let me tell you about those. So they’re done in two ways. One is within organization, so the company we’re just talking about, the big e-Commerce company, they also bought the course. And I ran it in Termy [SP] for them, and we did that over a period of six weeks of workshop every two weeks with, they worked on the specific, you know, prioritizing of issues in between so we could get to an answer at the end. I also then do these for the general public, and anyone can come, I’m just about to fly tonight to Nebraska, starting workshops next week in Minneapolis, and Chicago, and New York.

Andrew: Okay.

Sarah: And I make those very accessible for entrepreneurs to come along and learn with other entrepreneurs.

Andrew: All right, and the place if anyone wants to go see, the website is Insight Consultancy Solutions.com, InsightConsultancySolutions.com, right? That’s the best way for them to connect with you?

Sarah: That’s the best way.

Andrew: All right. Sarah, thank you so much for being a part of this.

Sarah: Thank you.

Andrew: If anyone got any value out of this, I always say this and frankly you guys might be tired of it, but things that make sense are worth repeating. And the thing that makes the most sense is; if you get anything of value out of this session here, out of our course, or out of anything you read online, oh I’m telling you you should contact the person and let them know. Or if you go to an event live, let them know. I’ve seen entrepreneurs contact guests that I’ve talked to, and end up working for them, end up flying out and working at their office. Or, sorry, those aren’t entrepreneurs, those are students who’ve done it; students are so much better following up with this.

Andrew: But I’ve seen others get together for meals, I’ve seen others get do biz dev [??], in fact the founder of, what was that company? Olark, oh, Olark. Olark used to, the founder of Olark used to listen to my interviews to get to know entrepreneurs that he should go do biz dev with, he would shoot them an email, he would get to know them, and then afterwards he’d create these biz dev opportunities where his product, Olark, was integrated with the product the person was talking. Anyway. I’m not saying that that’s what you should be aiming for, I’m saying what you should do is start by saying “thank you, I’m going to do it right now.” And when you say thank it often is the beginning of a much bigger conversation and much bigger friendship and relationship later. So Sarah Thrift, thank you so much for being here and teaching my audience.

Sarah: My pleasure, thank you, Andrew.

Andrew: You bet. It’s been wonderful, thank you all for being a part of it. Bye everyone.

DOWNLOAD TRANSCRIPT

Master Class:
How to buy ads
(And increase ROI with social advertising)
Taught by Justin Brooke of IMScalable

Master Class: Buy Ads


Report Bugs

Master Class Toolbox

Course Cheat Sheet

FB ROI Calculator



Transcript

Andrew: This session is about profitable ad buying. It is led by Justin Brooke. He is the founder of IMScalable, a digital ad agency that specializes in supplement companies, software companies and info publishing companies. Very competitive fields and he is out there buying ads for them. That is why I invited him to teach. My name is Andrew Warner. I am the founder of Mixergy, where proven founders like Justin teach and I invited him here to teach us how to buy ads. Here is what we will be talking about today. There is the big board of ideas. But Justin, before we officially get into this, this is you. Kind of a grainy photo in the mid 2000’s. You don’t look very happy at this photo. What was going on in your life at that point that made you scowl like that?Justin: I’ll tell you, of all the photos ever taken in my lifetime, this is the only one my brother has hanging up in his house. He loves this photo. Man, this was a hard time. I was working at Wendy’s and I was working at Wendy’s because you can get a little bit of free food. I could barely afford to eat and I had the moped because it only cost me like $1.50 a week in gas and I also thought it was kind of cool. I did like riding the moped. But that was my life back then, flipping burgers, driving a moped.Andrew: And then you went and you did an internship that turned everything around, right?Justin: Yes. I went out to Idaho and I worked with an information publishing multi-millionaire and I learned the ropes there. I landed the internship by showing him that I was the hungriest guy and I was going to go out there and really work for him and my job out there was to . . .
he had this and he still has it, very, very, he is kind of known for his marketing library. At that point he had already spent $125,000,000 on his marketing library. Every book, every course, seminar recordings, DVDs, all kinds of different things in there. My job was to watch, consume, all that stuff and write affiliate reviews. It was an affiliate review blog. It was creating so he could make some money back off of those courses so I got the education of a lifetime and it was an unpaid internship so I wasn’t being paid to do all this but I did get the education of a lifetime while I was out there.Andrew: And Justin, as a result of that, you left. You went to work for yourself on your own products. A year later, where were you? You’re no longer working at Wendy’s. You are no longer working for him for free. Do you have a sense of your revenues that you can share with us?

Justin: Yes. So when I went to him, I think my online stuff was making $300, $500. I was paying a bill or two with my online stuff so it was real at that point but it was nowhere near a business. During the internship I was making about $1500, $2000. If we fast forward a year after that, I don’t know the exact figure a year after that moment but when I got back home I spent the last money that I had on advertising and I had turned that into a six figure business by the end of the year. So I went in early 2007. By the end of 2007 I had a six figure online income stream. I don’t know if it was a business yet but it was a great income stream.

Andrew: So Justin, I’ve got this big board of ideas that we are going to be covering; there it is on everyone’s screen right now but I’ve got to acknowledge something or ask something. You seem a little nervous. What’s going on? You are usually a very confident person, you’re in charge. I know that you’ve got a lot going on today. Do you want to just talk a little bit about it? What happened before we officially started?

Justin: Yes. I am a little flustered. I wasn’t on my game. Usually I am very prepared for things. I didn’t have the lighting set up right. The mike wasn’t set up right. We just landed our dream house. It is a 6 bedroom house. 3 quarter acre backyard. A pool with a built in hot tub, 3 car garage, 3 AC units just to cool this place down. Literally, like 45 minutes ago I was just approved so I was just a little spaced out.

Andrew: Congratulations.

Justin: Thank you.

Andrew: I caught you after that and we were thinking maybe we shouldn’t record today but I like this energy. I like that you are in a positive place right now and I think it is indicative of how far you’ve come from the old moped days.

Justin: Absolutely.

Andrew: All right. So let’s get back to the big board. There it is. Here are the big ideas that we are going to be covering and the first one is to create tighter targeting segments for more relevant ads. Now you had a client who, I think they did business consulting, they wanted you to use pop-up ads for them because they heard some guy did well with pop-up ads. You suddenly took over this campaign and you saw that their cost per lead was $51.00 bucks. How is that? Is that a good cost per lead for them or is that painful? What is going on there?

Justin: It was so bad I almost got fired on the first campaign that I ran. He had heard from one of his friends in the industry that they were generating leads for under $1.00 using these pop-up ads and targeting competitors.

Andrew: So someone else had done under a buck and then he hired you and you are coming in with over fifty times more expensive ads.

Justin: Yes and so that first report I brought to him, it said the leads were over fifty-something dollars each and I said wait, just give me another shot because that first time I had kind of done what everybody says you should do. I didn’t really think it made sense but that is what everybody said you should do.

Andrew: What did everyone say that you should do that you did that was a mistake?

Justin: Everybody said that you should scrape all the possible URL’s. You find every URL. That is how you target pop-up ads. It is based on URL’s that people visit so you would scrape thousands of URL’s and they were showing one landing page for all these and what I did differently though . . .am I jumping the gun here a little bit?

Andrew: No. Let’s talk about you then created a tighter targeting segment that allowed you instead, well actually one more question.

Justin: Okay.

Andrew: When you said buy pop-up ads by scraping [at], who is selling you these pop-up ads on websites that you pick?

Justin: Yes, so that is another thing I want everybody to understand. These were not like malicious pop-up ads that you get with virus or malware. You buy these through a reputable ad network. It is called [Traffic Fit.com].

Andrew: Okay.

Justin: These people wanted some sort of free entertainment online, whether it was to play games or watch TV series online and in exchange for that free content they gave the ad network permission to show them relevant ads and they are relevant.

Andrew: All right and whatever you are about to teach us is applicable, whether we are using that service or any other service, right?

Justin: Yes, you can apply this and this is going to be the theme here. You will see that I’ve applied the same lesson on every ad networking campaign and it just keeps working.

Andrew: Okay. So instead of scraping what did you do?

Justin: So we still scraped but we scraped a little smarter. Instead of just going out there and mass collecting every YouTube URL and blog URL, just all these different URL’s, instead we strategically built groups of these URL’s. Instead of just having one big mass pile of them we created themed sections so these were software sites, these were books, these were blogs, these were forums that [were in the industry]. So we created these tighter campaigns. Instead of having a big bucket of them, we had smaller buckets and then we [??] a relevant landing page to that bucket. So that way, it wasn’t just one landing page to 2,000 targets. It was one landing page to 5 targets and then we would create another landing page for the next 5 and then another landing page for the next 5 so it was relevancy that really skyrocketed the results.

Andrew: So Justin, if I understand you right, then that gave you the ability to do two things. First, increase conversions because if someone sees a landing page that’s more relevant to the page they were on before, they are more likely to convert because they connect with that page. Second thing it seemed to have done for you and you correct me if I’m wrong is it allowed you to see not an overall cost per lead which was went you first went out there was $51.22, but it allowed you to see lots of different cost per leads and you can see one bucket has very expensive cost per leads, another bucket has very inexpensive cost per lead and you can get rid of the ones that are too expensive and focus on the ones that are and as a result .. . first of all, did I get that right?

Justin: Yes, absolutely. Spot on.

Andrew: And as a result of that, what happened to your numbers?

Justin: I believe we dropped it from fifty [two or to] . . . I don’t remember the exact numbers. I think I sent you guys screen shots.

Andrew: Yes. Let’s take a look at those screen shots right now. Here, I will bring up . . .

Justin: Yes, so there it was.

Andrew: [??] shot, right. We are talking about very expensive ads.

Justin: Yes. It was $51.00 per lead basically and then we had dropped it down I think to $3.00 or $2.00 per lead using just that strategy there.

Andrew: And so afterwards you got down to $3.20 . . . actually, here is what it is. You got down to 3.2032.

Justin: Yes.

Andrew: So it’s just over $3.20 per lead and that’s the result of narrowing your buckets.

Justin: Yes, and if you’re looking at the cost of the stuff, I was keeping things pretty low right now because my neck was on the line and I really had to make sure that I was playing it safe. But yeah…

Andrew: You weren’t playing it bad actually. So if we’re going to pull that up, what we’re seeing here was you didn’t even spend 100 bucks?

Justin: No. Yeah, no not even 100 bucks.

Andrew: Not even 100 bucks, so in this case actually it’s at first you were spending 205 bucks and then afterwards your cost went down on a daily basis to about 32 bucks. Did this continue to work as you expanded?

Justin: Yes, yes it did and you know one of the other things is we were getting some of the leads, like you said, some of those buckets were lower, some of those were higher. You know, some of them were as low as 16 cents per lead and he really wanted it to be under a dollar but I told him you know, listen, there are some of these buckets, it’s a little bit more expensive, but they’re sending us tremendous volume compared to the 16 cent per lead where it was like one lead a day. One lead a day is okay, but for 3 bucks a lead we were getting like 50 leads a day from that one bucket.

Andrew: Gotcha. All right, let’s go back up to the big board.

Justin: Okay.

Andrew: There it is. The next line is, oh we should have had a way to highlight it, but I’ll just read it out. Prequalify your visitors to increase your sales conversion. There Justin, you had a client who had a weight loss pill – green coffee beans.

Justin: Yes.

Andrew: That’s what it was. They needed you to acquire customers below 90 dollars per customer, but that’s a pretty considerable amount of money.

Justin: Yes, and at this stage in my career, the other campaign I was actually working for, so I was a W-2 employee at the time and this one, you know running my own agency I’m thinking I’m a hot shot here. I thought I had everything nailed and life taught me another lesson on this one. So you want me to just give you the story on this one?

Andrew: Yeah, what happened there?

Justin: So I went and I made an ad just like I normally would. You know, it had a picture of a happy woman. I mean if you think of the audience for a green coffee bean weight loss pill, it’s female audience, young, energetic kind of audience, at least this is what I thought. Then, for a Facebook ad, you know it’s pretty well known that if you have a bright colored background, that will help you attract attention. So I had a happy, energetic, healthy-looking woman with a bright background, thought I was doing everything correct. However, you know when I came up with the numbers, we were way over target. We were not meeting the 90 dollar CPA and so I told the client, I was like you know, I’m doing everything right on my end, you must not be doing something right.

Andrew: So you went back and blamed the client?

Justin: Yeah, I did not say it in those words, but I made it very politically correct, but yeah that’s basically what I was pointing at was that there was no conversions and that’s why it wasn’t working. However, that was when he let me know that I was one media buyer among many and all the other media buyers were meeting the goal and I wasn’t, so I was the one that was wrong.

Andrew: All right. So then you have to go back in and prove yourself. You’re not going to lose to all these other media buyers when they’re running the same campaign. So what did you do?

Justin: Yeah, yeah. He said that you know, he liked me and he heard good results so he was going to give me another shot and so I went back and this time again I thought back to increasing relevancy. So they want you know the offer is a green coffee bean…

Andrew: Yeah.

Justin: The ad should probably show a green coffee bean somewhere inside the ad and instead of saying, yeah I think you have the ads there I think…

Andrew: Yeah, you want to take a look at them specifically?

Justin: Yeah, I don’t remember them specifically, but…

Andrew: There they are. So the top one is the one you were told you’re supposed to do woman because you’re reaching women, bright background to get people’s attention and it got a low click-through rate, low sales, but that’s what you did at first on Facebook. So then the next one is, hey, a green coffee bean. If that’s what we’re selling is a weight loss pill, green coffee beans, let’s feature a green coffee bean. We see that the average click-rate then increased and so did the return on investment, the ROI 200% increase.

Justin: Yes, and the real big thing to notice about these three different ads is the one in the middle, obviously that’s the one that one. The copy is about the product and it shows a benefit. It’s also a little curiosity, you know discover the weird weight-loss bean that lowers blood pressure and increases energy. Weird weight loss is the curiosity, blood pressure and increased energy is the benefit. And we then we are showing a bean so the person that is clicking on this already wants that product. Now they are just trying to find out . . .

Andrew: I see. I take it back. I misunderstood. So, on the green coffee bean, the click through rate was average. It didn’t increase. It was just the average click through rate but when people clicked over, because they were pre-qualified and understood that what they were getting was green coffee bean that would help them lose weight, they were more likely to buy which meant that overall your return on investment went well.

Justin: Yes, yes. It was framing that visitor correctly so that when they landed on the sales page, they were already wanting the product. The sales message just had to slam dunk the ball at that point.

Andrew: Got you. All right, that makes sense and then, talk to me about C, the last ad that you bought.

Justin: So C, I had heard from some buddies of mine and I had done some research on some banner ads using tools that you can spy on campaigns and whatnot. They were all using these kind of angles where they were showing either dissections of muscles or dissections of bellies and it creates a lot of curiosity. It almost tells a story and you want to click on it because you want to see what that picture is all about and what had happened there is we did get a lot more clicks and much better CTR lower price clicks but they were just curiosity clicks. They weren’t framed right when they got to the page.

Andrew: I see. All right, yeah, I could see myself clicking on that just to see a bigger version of the image that is in the ad labeled C and once I am there, I have no interest in coffee beans. I have no interest in weight loss necessarily.

Justin: Right.

Andrew: That’s what you are talking about.

Justin: So yes, it’s not about getting a lot of clicks, it’s about getting a lot of customers.

Andrew: Okay. And a big point there is you want to pre-qualify your visitors if you want to increase your conversions. It’s not just about increasing clicks. Pre-qualify them means often you will reduce your clicks but the clicks will be more powerful. All right, since we are on the big board right now, let’s take a look at the next item. Number three on our list is to test lots of segments and ads to identify the top performers. You did this on Facebook.

Justin: Yes.

Andrew: People load up a bunch of interest on Facebook. They create a couple of ads with all these different interests. Talk to me about that and how you did traffic hail Mary.

Justin: So the traffic Hail Mary is what I believe most people do when they are starting out. They start a campaign. They say, I’m going to spend $100 or $500 or whatever your budget level is. You are going to spend some money and you are going to see if this new traffic network everybody is talking about works. And so they scrape together an audience of every possible person that might want their product and they have this huge audience and they have this budget and they spend the money and they don’t get a ROI and so that’s the traffic Hail Mary. It’s kind of like, they’ve thrown the ball out there . . .

Andrew: You are seeing any possible people who want to buy from us. Let’s load them all up into, in this case it would be Facebook. In this case, it might be, hey, I’m running Mixergy. I should be targeting people who are into startups and people who are fans of hacker news and people who are fans of startup stock power and all those insights. Even Justin’s fans and that’s what you did. You called that the traffic hail Mary. That does not work.

Justin: Yes. When you spend the money and you pray that it is going to work. You make traffic profitable. Traffic isn’t profitable. We don’t all just get to go write a check and then traffic is profitable. It’s not like a lottery system. You make it profitable.

Andrew: Okay. So you had a client, speaking of, since we were talking about supplements earlier, you had a client who offered health supplements for women. The client was spending $110 per customer on Facebook. Their goal was to spend $70 per customer. What did you do?

Justin: Yes. So instead of just creating that big giant list of people, we created a lot of segments and a lot of different ads which allowed us to test. Okay, these are people who are fans of celebrities that are relative to this product. These are people who are fans of books in the industry that they might be reading, software that they might be watching. TV shows, all these different segments, all these different ads and ideally it was about 150 different ads total if you combined everything up and then . . .

Andrew: You are saying you created 150 different segments and an ad for each of those 150 segments.

Justin: 150 ads, I think there was maybe 10, maybe 15 segments.

Andrew: Got you, okay so each segment got multiply ads.

Justin: Yes, same as each segment, but multiple ads in each segment that way we [??] the same messages. With just different audiences. And so we let all that run and then we identified, okay this segment works, that segment doesn’t. This ad works, that ad doesn’t. And it’s that second round when you spend money that’s where you make money.

The first round you’re going to the data store and you’re buying what data is true and what data is false. You get rid of all the false stuff, you spend all the money back on the good stuff and that’s when you start getting ROI. And that’s what people aren’t doing. They’re just doing that first round, and saying, Facebook doesn’t work.

Andrew: I see. So is there certain number of ads segments that you’d recommend that we start off with? A number of ads designs that we would have for each of those segments?

Justin: Yeah, in our company, our policy is our standard operating procedures is we start with five ad segments and three ads in each of those segments.

Andrew: They don’t have to be … it could be a total of three ads and five ad segments?

Justin: Yes, that’s what we start off with. And if they have some other creative ideas or they have … then they can create some more, but that’s our starting point.

Andrew: Okay. Let’s take a look at the vision, I’ll bring it up on the screen for the audience to see. What are we looking at here?

Justin: Okay, this is the screen shot of the sales, the clicks that we were generating, the sales, the checkout column is sales. And then the cost per check out. Now generating sales for him at an average of about 40 bucks. Some of them for 30 some of them for 56. You know, and doing quite the volume of sales as well. Our cost per click was gorgeous.

Andrew: That click through rate is anywhere between 5.6, yeah, 5.6 and 6.8 then we see the number of clicks that went to the site, that’s what the boom is about you got clicks to the site, check outs anywhere from 172 to 340. And now you see cost per Website hit, cost per checkout, boom you went from $110 to what is it mid 30’s you said overall.

Justin: Yes, from 110 down to the 30’s lots of high fives, you gave us more budget we charge of a percentage so that client giving us more budget is great, because that means we make more money. The other thing that I really would want to point out about that image Andrew is…

Andrew: Let’s bring it back up.

Justin: If somebody does the math on the conversation rate there, most people would killed this campaign because the conversation rate was actually pretty low. I’m not great at doing math on the fly so I’m not going to try. But if they did the math there, there should be more sales with at least the 1% or 2% conversation rate.

Andrew: What are we looking at? You want me to do, oh I see the number of checkouts is a percentage of Web clicks. Is that right?

Justin: Yeah.

Andrew: If we take 340 we divided by 110 903 that’s a top line and we end up with less than 1%, a third of 1% conversation rate from hits to the site, to orders. So you’re right that does seem less than 1 would shock some people.

Justin: Yeah, they would turn that off. But this is a six figure per month campaign for the client right now.

Andrew: Wow. All right. Let’s go back to the big board, there it is. Next, one is that center item right there. We’re going to optimize bidding strategy to match our goals. Talk to me about that. You worked with a client who teaches lawyers?

Interviewee Yes, okay I remember this one now.

Andrew: I know who this is. This is someone who I had on Mixergy. It’s Alexis Mele [SP], right?

Justin: Yes, it is, it is. So she wanted leads, that’s really what it’s all about for her. For someone who sells the lawyers, having a lawyer on your list is very valuable especially if your teaching them business coaching.

Andrew: That’s what she was doing. She’s a business coach for lawyers she wanted more leads, she need her cost to be under 10 bucks per lead.

Justin: Yes. We were struggling doing that with the normal bidding strategy, which is CPS cost per click. That’s what everybody was reading about on the Internet at that point is, you know, being able to pay per click. However paying per click we weren’t able to meet her goal of $10 per lead. When we switch the bidding over to optimized CPM, and then we were optimizing based on lead conversations and these are all setting that you can do inside of Facebook. When we made that change, I think we dropped down her cost from being all the way down to the $2 and $3 range.

Andrew: By paying, you are saying paying per impression [CPM] versus paying per click, you were able to reduce it.

Justin: Yes. So most people will pay per click because they don’t want to pay if they are not getting someone over to their website and with all that was right. I mean, that’s what most people should do.

Andrew: Makes sense. Yes.

Justin: Yes. And sometimes we start out that way but as soon as you have a good ad that you know is going to get a decent click through rate, if you switch that over to CPM you can often really reduce the cost per click. There is some math involved in that. For example, you may be paying .50 per click. That means you are paying $1.00 for 2 clicks. Well, let’s say you are paying CPM and you are paying $1.00 for 1,000 [views] well if you get 4 clicks in that 1,000 impressions, then you’ve just dropped your cost per click down to .25.

Andrew: I get that. Are you suggesting that we start off that way? If a cost per click ad doesn’t work then we should start paying for impression or are you saying if we have an ad that just starts to tear it up we should consider not buying per click and switching to per impression.

Justin: Yes.

Andrew: Only if it works.

Justin: Right. Only if it works. Then switch it over to CPM [bidding] because the risk of CPM is that you are not going to get any clicks because with CPM you are paying for impressions, not clicks, but if you have a good ad that’s getting a decent click through rate, switch it over to CPM because you’ll almost every time, drop your cost per click which will drop your cost per sale which will increase your [RY].

Andrew: The ad that she had that did so well for her?

Justin: Yes. This was one of the ones that did so well. There was another one that was a close-in on her face. I call this the case study style ad where it doesn’t look very [adsey]. It looks like you are introducing yourself to the market and it showed creditability by having her on a morning show. And so yes, when we switched it over and that’s the other thing, it’s not just CPM or Facebook, it is optimized CPM which means that they will optimize on an action that you tell them you want more of. So when we told them optimize for leads, and that is through the Facebook conversion pixel, then it was optimizing ‘show the ad to the people that it knows will or are more likely to opt in’ because Facebook has all the data in the world on us.

Andrew: I see. All right. Let’s go back up to . . .

Justin: I just wanted to make sure I made sense on that.

Andrew: I think you did, absolutely. So I get the strategy. First try pay per click. Ad does well, you can switch to CPM and when you do, tell Facebook what you are trying to accomplish with your ads that you are buying on CPM or per impression basis. If you do that, then your cost will go down and that is what you did for Alexis. Do you remember what the overall numbers were? Actually, here, I’ve got them. Justin switched his bidding strategy. Dropped cost per lead according to my screen, somewhere between $3.00 and $7.00 and her goal was under $10.00 so that is how powerful this was.

Justin: Yes. So some of the ad segments we were doing were in the $3.00 range and some were in the $7.00 range and we kept all of those because they were under budget.

Andrew: What is the minimum amount that someone needs to spend in order to work with your firm?

Justin: $10,000 a month.

Andrew: $10,000 a month in ad buys. And what is the highest that a client has paid?

Justin: So far, $100,000 a month.

Andrew: $100,000 a month.

Justin: Yes. I was a little nervous closing that sale.

Andrew: Is that the client that paid for the new house?

Justin: No. No. No. We’ve gotten quite a few clients now but that was the big one. We were doing well for them at that lower level and then they said, hey, we want to spend a lot more.

Andrew: There’s that right there [IAMSCALABLE.com]. We are going to continue and do more but, wow. All right. You’ve got case studies where you break this down and let people see how you’ve done it.

Justin: Yes.

Andrew: Oh, there it is actually. There’s the site. I’ll show it to them. All right. Why don’t we go back to the big board? Let’s bring it up. Now we are going to talk about retargeting. Retarget only, only you say, your most qualified visitors. What’s the mistake that most people make though, Justin?

Justin: You know, it comes back to the same thing. We all keep making the same mistake with every new traffic method. So with retargeting, the first thing people do is they treat it like list building because they realize they can build this big list of people who they can retarget so they put the retargeting code on all of their pages because they want to build . . .

Andrew: Okay. I am going to buy ads on other sites that will hit anyone. It will be shown to anyone who is on any one of my pages and that is the mistake that most people make and you don’t want us to do that.

Justin: Right. I did it. I did exactly that.

Andrew: Okay.

Justin: Let me make the mistakes for you. So, we did that initially strategy, and we said, ‘OK, this isn’t working. What we need to do is go back to the same thing that has worked for us over and over again, Increase the relevancy’. So, instead we took the pixels off of all the pages, and we said, ‘what page has the absolute most qualified people for us to show these ads to?’ That’s the order form page.

Andrew: Okay.

Justin: Then we went through the sales process to the point where they click the “add to cart” button, and they landed on the order form, and they didn’t complete the sale. They were interested at one point. They were more interested than anybody else on any of our other pages. So what we did was, we showed ads to those people, and then brought them back to the website, and every single time we have done that currently, it’s been in the 200 to 300 percent on RYs. This is the first campaign we do when we start retargeting. We start there, and then we start broadening from there. We use it to reduce shopping cart abandonment first, and then we back it out to, ‘ok, these are people who have become a lead’, and then we bring it out to, “Ok, its working amazing, let’s just target everybody”.

Andrew: So if I were going to buy an ad for the first time, or someone listening to us were going to buy an ad for the first time, what your suggesting they do is retargeting ads before anything else?

Justin: Yes, if you have traffic. I mean you have to have traffic.

Andrew: Okay, retargeting before anything else, assuming you have traffic, and only target people who have visited your shopping cart. That’s the easiest win. What is a site that we can go, to buy retargeting ads that you recommend?

Justin: The one that I recommend is PerfectAudience.com.

Andrew: What is it? Perfect audience?

Justin: Yes. I really like them, They have a great user…

Andrew: I’m bringing them up right here, on this monitor. This is where you recommend we buy the first group of people?

Justin: Yeah. If you do a little bit of Google searching, they usually have, like $50.00 free to start with, or something like that. Great interface, lots of good options, lots of flexibility in the way that they allow you to retarget and ideas for campaigns. They can retarget into Facebook, Twitter, out on the web. Very cool company.

Andrew: Alright. That’s great advice then. Alright, why don’t we then go back to the big board, and the next big topic for us to cover. Use Twitter cards to triple your engagement. So far, we have talked a lot about buying ads on Facebook, and some about buying ads on the general web, but Twitter cards have done well for you too.

Justin: Yes!

Andrew: Let me show…should we actually show what a Twitter card looks like? What you’re talking about?

Justin: Yeah. Most people don’t realize what they are. They probably have seen them, but they don’t realize what they are.

Andrew: There it is. On the left, no Twitter card. On the right, with card. What should we be paying attention to here, and noticing that is different before you teach us how to do this?

Justin: The biggest difference there is the amount of use space that you get. But, also the biggest difference is the amount of clickable space. I can click on that entire image. There is a read more button and the headline is clickable, instead of it being just a link in the other tweet.

Andrew: Right. Alright, so how do we do this, and what have you done that’s worked so well for you?

Justin: So with Twitter ads, it’s really not a…one thing I want to say is that Facebook is getting all the attention right now. If you like Facebook, if you have a campaign that’s working good on Facebook, move it over to twitter and do both of them because it’s very very similar. Facebook has custom audiences, twitter has tailored audiences. That’s how similar they are. They are really kind of copying each other.

Andrew: Can you say that again? What was the statement?

Justin: If you have a campaign that is doing ok in Facebook…

Andrew: And take it to twitter?

Justin: Yeah duplicate it over to Twitter because very similar targeting options and biding options. It’s very very similar. It’s a great way to double your traffic. Probably your RY as well. So the big thing with Twitter is, it is more expensive than Facebook. You pay on cost per engagement, and an engagement could be a click on your profile, a retweet, a follow , a favorite, a click. You could pay for all these different things, so…

Andrew: Do we get to pick what kind of engagement we want on this ad? So, can we say, I’m willing to pay only when someone clicks and comes over to the site, in this case its IP.Imscalable.com?

Justin: No, you don’t get to pick. But they did just release kind of the same feature that Facebook has, the optimized CPM. So if you do want to focus on website clicks, then it’s CPM bidding, but they will optimize it to show to more people who have a tendency of clicking on ads more often than showing to people who have a tendency of just following people more often.

Andrew: I see. I think now is a good time to say that all of these tactics that we’re teaching are ways of illustrating bigger strategies, bigger ideas. That if your big takeaway from this is that you should only buy this ad and only buy the way that it’s available today, the day that we recorded, you’re going to date yourself and you’re going to be outdated and obsolete very quickly. If you take away the bigger understanding, which is everyone is focused on Facebook only and you should be looking at Twitter, the bigger idea, which is in Twitter you can get more real estate than most people are aware of. Those bigger ideas are going to apply throughout no matter what changes they make.

Justin: Absolutely. So I think we had- I sent your assistant the numbers, but we had about a 1% click-through rate with no card and as I was watching Gary Vaynerchuk videos, he always kept talking about Twitter cards. I knew him to be smart and he knows his thing, so I was like, you know there must be something to these cards, let me go try that out and so I did and I got almost a 3%, I think a little bit higher than 3% actually with the cards.

Andrew: With the extra real estate right there.

Justin: Yeah, yeah the extra real estate tripled my click-through rate, which allowed me to get a lot more clicks cheaper, which dropped down my cost for acquisition. It fixes everything.

Andrew: All right, let’s go back to the big board and let’s see what we’ve got coming up next. This is the final point – leverage device bid adjustment and enable enhanced CPC. What are those?

Justin: Okay, so this is in ad words this time, in Google AdWords network. So what you want to do? Do they have a screenshot for this one?

Andrew: Yeah. Yeah, let me bring up that screenshot for everyone.

Justin: Okay, so what you want to do

Andrew: No, this is not the dentist.

Justin: Yeah, it is actually the dentist.

Andrew: And the dentist is, I see, targeting by device. Okay, so what happened with the dentist?

Justin: Right. So we were targeting, you know, key words, but what we realized was that this specific client, they need phone calls. They don’t really care about website clicks or leads, they care about can you make my phone ring and what better person to have clicking your ad than somebody who is with a phone in their hand already. So that’s why we optimized this campaign to show more on mobile devices than on desktop or tablet devices. So what you’re able to do here in Ad Words, if you focus on the middle column there just after the device titles it says 200%. So what that means is – I think our average bid is 10 dollars because this is West Palm Beach cosmetic dentistry super, super competitive. We said, when it’s somebody that’s using a mobile phone, increase our bid 200% because we want that person more than anybody else.

Andrew: I see.

Justin: And then if it’s somebody that’s on a computer or tablet, then we’ve actually now since then reduced it. We now tell them reduce our cost or our bid by 50% if it’s this person because they’re kind of still valuable, but really all the money is coming from the mobile devices in this campaign.

Andrew: Okay, and that’s device bid adjustment and that’s the third column that we’re seeing there, the one that has the 200% in it. What about enhanced cost per click? Enhanced CPC?

Justin: Yes, so enhanced CPC is basically Google Ad Words fighting back with Facebook and Twitter. You know, Facebook and Twitter have the ability for you to optimize for an action that you want and so enhanced CPC basically tells Google we want to optimize. I don’t want just any click, I want you to optimize for the clicks that are returning the calls. So it takes a little while for it to build a profile of the different people, but as more people are clicking the ads and calling, it then can start showing your ad more often to people who are more likely to call.

Andrew: Ah, gotcha. So with enhanced cost per click, we end up getting better clicks, the clicks that we tell Google are more valuable to us.

Justin: Yes, yeah you pick a goal and then you tell them, you know I want you to enhance our CPC to show more of these people. Basically it raises and lowers your bidding based on the type of people you want.

Andrew: All right, there it is. These are the big topics that we’ve talked about today. Giving people a lot to work with here. We focused on Facebook, Twitter, and Google Ad words in that last topic, but these ideas will work beyond those services. If anyone wants to follow up with you, your site is imscalable.com where they can read some case studies, see what you’ve done for others, and I like the blog too.

Justin: Thank you.

Andrew: I’ll pull that up right there. Cool. All right, thank you so much for doing this.

Justin: Thank you for having me on, man. It was my pleasure, my honor.

Andrew: What are you going to celebrate tonight the new place?

Justin: I don’t even know right now. I’m still kind of just mind blown about it all, so I’ll figure something out to celebrate.

Andrew: Congratulations. Thank you, Justin. Thank you all for being a part of it. Bye everyone.

DOWNLOAD TRANSCRIPT

Master Class:
How to find and go on a quest
(that will bring meaning and fulfillment to your life)
Taught by Chris Guillebeau of “The Happiness of Pursuit”

Master Class: How to find and go on a quest


Report Bugs

Master Class Toolbox

Course Cheat Sheet

Book Website



Transcript

Andrew: This session is about how to find a quest that will bring purpose to your life. The session is led by Chris Guillebeau, an entrepreneur and adventurer who visited every country in the world, 193 in total, before his 35th birthday. He’s also the creation among other things, unconventional guides who’s guides include empire building kit, about how to build a business in one year by doing one thing every day, and travel hacking, which shows you how to earn hundreds of thousands of frequent flyer miles. The conversation he and I are going to be having is based on this, let me bring the camera to me and show it; based on this book, The Happiness of Pursuit. We pulled out a few ideas that we’ll be covering. My name is Andrew Warner, founder of Mixergy. I’ll be helping facilitate. Chris, good to have you on here.Chris: Hey. Great to be back, Andrew, and hello to all the freedom fighters.Andrew: Yeah, thank you. Hey, I want to ask you about your story, but why don’t we start off with this woman. There she is. This is Sandy Wheaton. She was brought into an office and told what?Chris: Sandy Wheaton is a Canadian who is working in Detroit for General Motors, and she’d been working for them for long time, a number of years, and she was brought into that office along with a number of other employees, and was given some bad news. She was given the news that there was no longer a job for her, and that she had done a great job but that the company no longer was able to provide for her, was no longer able to issue that regular paycheck, no more benefits, etc. And, she had to leave right away.

Andrew: Leave the company for many people would mean, be a disaster. What did she end up doing instead?

Chris: Yeah. I mean, at first that was her thought, is, ‘This is a disaster and I am a career employee and all I know how to do is to work in this security of this kind of company,’ and especially at that time, with lots of other folks being laid off, that at GM she noticed that all of her colleagues kind of went into this panic mode and started thinking, ‘I got to contact everybody that I know. I need to go on LinkedIn and do some stuff. Really got to start sending out my resume.’ And, she decided to do something a little bit different and she hit the pause button, and she said, ‘You know, maybe I should actually use this time to think about what I really want to do for myself. I’ve spent a number of years, something like 10 years, essentially giving my life over to a company, and maybe I don’t regret that, maybe I do. Who knows? That’s in the past. Here I have this moment. Let me think about doing something for myself.’

Andrew: And what did she end up doing?

Chris: She had always wanted to travel on America’s Route 66. She was an amateur photographer and she decided to set out on this quest, camping along the way and taking, I forget, how many hundreds of thousands of photos, and just kind of going through this whole journey for herself. And, she decided to do that before looking for another job. She did eventually, of course, want to work again, but before she did that, she wanted to fulfill this lifelong dream of traveling, meeting people, and documenting her photos.

Andrew: As a result of it, from what I understand, she started to get lots of offers to speak, people wanted to hear and learn from her, she got on the cover of Prominent Art magazine. I’m looking here at my notes. She started leading groups through Maritime Provinces. So really, instead of being in General Motors, where all this creativity was stifled, because of her quest, creativity just came out of her. She had a much better life. And, that’s what we’re going for here, that kind of quest.

Chris: Yeah, absolutely. So, the external consequences were eventually very favorable, as well, as you mentioned, she created this whole new career, whole new life, that was a lot different from just going to work from maybe Ford Motor Company down the road, or something. But also, in the beginning she talked about how comfortable she felt, how empowered that she felt by pursuing this dream, and she said, ‘Even if the external consequences are not amazing later, I’m so glad that I did it. I’m so glad I did this for myself. I’d always wanted to do it, I knew I would regret it if I didn’t.’

Andrew: Yup. All right. And, that’s our goal here for today. I know it’s easier said than done. How do you find what your mission is, how do you decide what the first step to take is what do you do to keep from giving up along the way, and so on. That’s why we pulled up all these ideas directly from the book that we’ll be discussing here today. But, before we get into the specific how-to’s, Chris, I mentioned that you decided that you were going to see every country on the planet before your 35th birthday. What set you off on the path to do that?

Chris: Well, I had always liked to travel. I had been a traveler and I have worked overseas in West Africa, and had been to a bunch of countries, and I was also a list maker. I liked to write things down, and so one day I found myself writing down all the different places I’d been, and I said, ‘Huh, that’s interesting. It would be fun to combine this love of travel with my love of goal setting, and have a project. At first I thought it would be 100 countries. I thought it would be awesome if one day in my life, I could say I’ve been to 100 countries. So, I started working toward that, and then eventually I realized it wouldn’t actually take me super long to do that, and it also wasn’t super hard, because if there’s 193 countries in the world and my goal is just to go to roughly half of them, I could kind of pick and choose which countries. So, that’s when I decided to set a goal of every country in the world. And then, I think every good goal has a deadline, so that’s why I gave myself the deadline of my 35th birthday, which was 8 years ahead at the time.

Andrew: 8 years ahead. How old were you when you hit them all?

Chris: Last year on my 35th birthday–

Andrew: Wow. Right on time.

Chris: I arrived in the final country. Yes.

Andrew: All right. Let’s get into the how-to of it, and the first step that we’re going to be talking about today is to pay attention to your discontent, to your passions, to your problems. In your book – I love the name by the way, The Happiness of Pursuit – In the book, you talk about Tom Allen, a guy who just was about to graduate and something happened to him that a lot of graduates hope for. What happened?

Chris: Oh, he was offered the job of his dreams, essentially. He interviewed really well, it was his company and he was young, up and coming, and like, ‘This is going to be my first big job,’ and he found himself in this strangely uncomfortable situation in a sense that the interviewer called him back and said, ‘Hey, we want to offer you the job.’ And, he wasn’t excited about it all of a sudden, and he said, ‘Do you mind if I just think it over a little bit.’ The interviewer said, ‘Okay, sure, whatever.’ He just realized maybe it actually wasn’t the job of his dreams, or at least it wasn’t the life of his dreams that he wanted right at that time.

Andrew: One of the things you say is that he felt that he was just sick and tired of other people being in control of his decisions. I know having gone through school that that is what life was like every day. Someone else making decisions for me and every ounce of creativity they were going to stifle. Why do you want to sell candy in the school? Why do you want to read other books beyond what we’re giving you, and so on; I get that, not wanting that life to extend into your first job, no matter how ideal it is. So, that’s the discontent. What did he do with that? That’s not enough to just say, ‘I don’t want people to tell me what to do.’

Chris: Absolutely, absolutely. So, a lot of things began with this content, which again doesn’t mean that you’re miserable necessarily, doesn’t mean you’re terribly unhappy. It just means maybe you’re a little bit unsettled and you want something more, and that’s what we saw with Sandy. Tom’s situation was the same. He always wanted to cycle the world. His dream was, I would actually like to go out on my bicycle and just leave England – that’s where he was from – head south, go to Eastern Europe, maybe even go down to Sudan. I want to go on this mission of self discovery. I’m not even sure where it’s going to lead but this is what I want to do. So, he combined discontent with inspiration essentially. He was discontented with the idea of just jumping straight into this traditional way of life, and he combined the discontent with the inspiration of, here’s what I want to do instead. I would love to be out on the open road. Initially, he left with his friends, but then his friends returned to England. He continued on his own. He found his quest, essentially, which is what the book is about, by combining discontent with inspiration.

Andrew: Here’s the site where we got that image from. Is that him?

Chris: That is Tom. Yes.

Andrew: That is Tom. Way to go, Tom. These photos are beautiful. All right. So, he found his discontent and that led him to get out on a bicycle and explore the world, and through that, he’s living the life that he wants instead of the one that is basically an extension of the life where other people tell him what to do. Not everyone though, has an opportunity to travel, frankly, to even get out of the house on a regular basis. I just had a child recently and I know how tough that can be.

Chris: Sure, sure. Of course.

Andrew: Just going to see my friends is a problem at times. That happened to this woman. Let me bring Sasha up on this [right here]

Chris: That’s right. There she is.

Andrew: I think sometimes just getting to see a person gets you more connected with her. There’s Sasha Martin. She felt entrenched in her life in Oklahoma. She had a six month old daughter, about the age of my child. What’s the challenge then?

Chris: Sasha’s story is one of my favorite ones from the whole book. Sasha’s experience was, okay what can I do? How can I live this life of adventure? She had grown up overseas and then she found herself in Oklahoma. Okay, I can’t visit every country in the world like Chris does or like somebody else is doing, like Tom is cycling. She had a background in culinary arts and so she decided to cook a meal from every country in the world. She turned this into a whole process and it was kind of a weekend thing. The whole week would lead up to it, and then she would document the recipes and post them online. She would play music from that country, serve this complete meal with appetizers and the main course, and dessert. Her young daughter essentially grew up with this international perspective for the first three and a half years of her life. Every week, she’s eating all kinds of different food. People from around the world started following along as well. She had this website, Global travel for global table adventures. She talks about the transformation that it’s made in her life. You know, she wasn’t able to cycle to all these different countries but she brought the world to her home in Oklahoma. She, you know even though she was busy, even though she had this young daughter you know time was limited, she found a way to bring the scope of adventure into her life.

Andrew: What a great headliner on there: ‘Global Table Travel, Let’s Eat Our Way Around the World; 195 countries, 195 meals, 195 weeks’.

Chris: Right. She even had three extra countries to make, which I was really impressed by. I was like ‘wow, I only had 193 countries’.

Andrew: What did you miss?

Chris: She just has a different counting system.

Andrew: I see.

Chris: You know, I use the UN member states and I think she added on Taiwan and some other territory or something.

Andrew: Makes sense. Did you get to eat your way through all of those countries or you someone who’s less adventurous about food?

Chris: I’m probably less adventurous than Sasha is, definitely.

Andrew: Alright. Onto the big board, the next thing we’re going to talk about is to make your large quest manageable by breaking it into small tasks. You did that… here’s the large quest, by the way I love this piece here. You know what, there we go there it is, a plan to see every country on earth by age 35, that one we ripped from The Year 2000, about four years before you finished.

Chris: That’s right, that goes back a ways.

Andrew: Yeah, so, that is a big challenge and you talked earlier about how it started as pieces. Can you talk a little more about that, about how you did it?

Chris: Yeah, so the quest became so much more manageable for me, or maybe not even manageable but relate-able and I could just kind of grab on to it once I started thinking ‘okay, yes there’s this big quest but it’s not like, you know, day one I begin and at the end of ten years I end’. There’s going to be lots of milestones along the way so I tried to focus on those milestones. I probably just say ‘okay, my quest for example, there’s all these countries, they’re broken up into regions you know I can probably combine a bunch of countries on different trips. I go on one trip I might be able to go to four to five countries. Just thinking logically and thinking linearly made a huge, huge difference and at the beginning of the whole adventure someone said something to me that they intended as kind of a criticism, they said ‘you know, this isn’t that complicated of a thing, anybody could do it, it just takes enough time and enough money’. So, at first I was offended as you always are, but then I started thinking about it more and I was like ‘okay, I can actually use this to my benefit this kind of thinking, if I think about how much time it takes, how much money is required, and what are the other costs, what are the uncertainties, what are the challenges? That’s actually going to benefit me’. That’s going to actually help me to achieve the goal.

Andrew: Do I have this right here? I’m looking at my notes, the estimated cost of scaling from 50 countries to 100 countries was going to be about 30,000 dollars.

Chris: That’s exactly right; 30,000 dollars you know to go to 100 countries. For me I was incredibly happy with that cost, you know, like obviously 30K is not a small amount of money. I never want to say it’s nothing, right? But, when I considered all the experiences, the value that I would get out of that, I was more than happy to spend that much.

Andrew: And that’s over, what, 5-7 years?

Chris: Yeah, that was over a number of years. You know, at the time like when I chose to make that investment I didn’t have a lot of money but I also have friends that were buying cars for 30,000 you know?

Andrew: Yeah.

Chris: Nothing wrong with buying a car if that’s what you’re into but for me I chose, you know I wanted to invest in this experience.

Andrew: What about this Chris to say ‘I want to go to 100 countries’ feels bigger than everyday life but doesn’t feel as big and epic as going to every single country on the planet. When you break down goals into smaller chunks and say ‘alright, I’ll go to 100’ doesn’t it take away a large part of the enthusiasm also? A large part of the sense of mission?

Chris: I don’t think so, I mean it’s a great question but it certainly didn’t for me. I guess for me it was a lot easier to get my head around a long term goal. I mean, I was still working toward that; you know, every quest has a destination. Every quest has an ending, and for me the ending wasn’t just the first batch of countries or whatever but I can still take pleasure in saying ‘okay, like every country in Asia completely wrapped’ you know, ‘every country in Africa’. Like I said, huge accomplishment by itself and instead of looking forward to the end but I guess it actually helps, for me at least, it helped me to really think of it in terms of a smaller task.

Andrew: You talked about the expenses… before we go to the next point what about the revenue from it? Is this, when we’re talking about a quest is it something that has to take money out of our pockets and be like a fun thing that we decide we’re going to spend money and time on or is there a way to make sure we do make back enough money and that we get the kind of reputation that you got largely because you went to every country and we all got to follow along with you and the same kind of big reputation as some of the other people in the book? How do we get to that?

Chris: Yeah, sure. Yeah, that’s also a great question because I think it’s a little complicated because I don’t necessarily think you should undertake a quest as a career move. I think you should undertake a quest if you’re super excited and passionate about something and you are willing to sacrifice to some regard, you know to achieve that goal or achieve that quest. When I say ‘sacrifice’ you know it’s not meant to be a heavy word but you know anything that really involves true adventure I believe requires some amount of trade off. You have to be able to say yes to this thing and say no to other things. In my case, I had begun the journey just from my own motivations, and I wanted to challenge myself. Nobody did follow me, I didn’t even have a blog or social media or anything.

Andrew: There was no sense right from the start where it was going to produce business results. People were going to read you more because of this. They were going to buy from you more because you’re a guy who did all this traveling.

Chris: No. Absolutely not. I’m fortunate that I was able to develop a career out of it. I think it’s great but I don’t think that was ever the goal. I think if it was strictly a business goal, and lots of great business projects – I’m an entrepreneur myself, so I’m pro-revenue – I guess if it was strictly a business goal, there would probably be a lot easier ways to make money than–

Andrew: Than to go on an epic quest.

Chris: Than spending 10 years, 10 years sleeping on the floor of airports and taking another trip to Central Africa, or going to the islands of South Pacific where there’s almost no internet access. I feel like there’s probably a better way to make money.

Andrew: Am I a big philistine for not just seeing the passion and the art of all this and saying, ‘Where is the money’ too?

Chris: No, there’s nothing wrong with money. Money’s great. A lot of people do have quests of building businesses, but I think maybe a quest has to be a little bit of a higher level. There has to be a greater passion or purpose behind it, and I think many of the great entrepreneurs, no doubt including some that have been on Mixergy, they have that passion. They do very well for themselves. They have a lot of revenue, but they’re driven by something that is greater than money, I think.

Andrew: I see what you’re saying. Right. If I were going to cycle around the world, at some point that I would realize that there are better ways to make money than that.

Chris: Right.

Andrew: It has to be about more than that to carry us through. The first step of the journey builds confidence and reliance and self-reliance, not reliance actually, that’s opposite, self-reliance. That happened to this woman here. Once again, we went online to look at these people, just like I did with your other books, to see where are they now. Is this really true? This just came right off the web. She makes hats, there’s her site, you know? I love how you use real people. You don’t use hypotheticals. Well, if somebody wants to knit, then it’s possible. No, you use real people, real examples, and this is a real person. Anyone out there who’s like me, who’s a philistine and wants to check on all the facts, can go and see Robin Devine [SP]. That’s her name. She began a quest. What was her quest?

Chris: That’s right. Robin from Omaha, was always a knitter and a crafter, and she began this project of making hats. Originally, her goal was to make something like 100 hats, and she was like, ‘Well, I can do that relatively quickly.’ She’s like, ‘I need a big goal.’ She believed in tying structure to the goal, which is a big part of the quest. At first, it was, ‘I’m going to make 1,000 hats’ but she realized that wouldn’t be a big enough of a challenge. So, her project is to make 10,000 hats, and she’s doing that over a number of years. You can go on this awesome website she has and you can actually put your name down to receive one of these hats. It may take a little while since she’s making 10,000 of them. There’s a whole charity component to it. So, it’s a way of introducing this craft that she loves with the structure of a long-term pursuit or adventure. I like stories like hers that are relatable. Again, just ordinary people embracing these values of quest and adventure. I also talk to lots of other people doing what we might think of is really, really big things. Like, In my story, I was doing this travel thing by myself. I didn’t necessarily expect anything to come of it, in terms of career-wise, but then this whole community came to embrace it, and it did become a business in some ways. But, just as importantly to me, it’s community. I feel like my work is now much more community-oriented than it ever was, and that was a direct result of pursuing a quest and being willing to embrace something than what I’d done before.

Andrew: I see. So you’re saying, don’t walk into this with the idea that I am obsessed with this cycling thing because I love reading about people who cycle or run long distances. I mean, multi-month running and cycling. Anyway, but if I were going to do that, it wouldn’t be about, I’m doing to do this so I can develop my independence, or I’m going to do this to develop my self-confidence. You’re saying just do it and allow the inner growth to happen. You don’t know where you need to grow, you don’t know what inner growth, you can’t program that inner growth is what you’re saying.

Chris: Yeah. I think what I’m saying is, if you have a crazy idea in your head, you should pay attention to that crazy idea. That’s what I’m saying. It’s not necessarily, like every person out there has to go out and do something completely outlandish, because maybe they don’t want to, right? Again, it’s not a good business model to travel every country in the world if you’re probably not going to be able sustain whatever that difficult thing is, if you’re not really excited about it. But, the converse is if you are excited about something, don’t forget about that. Don’t just put it off, don’t just say, ‘I’ll do that later when I’m out of school, when I have more time, when my kids are grown.’ I really believe you have to pay attention to that discontent or whatever you choose to call it.

Andrew: All right. One more personal thing before I go into the next point. You have one earbud in your ear, right? Not the other. And, it goes in your shirt, right?

Chris: That’s right.

Andrew: I don’t know that I could actually fully show this. I love the attention to detail. Where does that come from? Did you sit down and say, ‘How do I look good on camera, how do I make sure that I have an earpiece so that we don’t have an echo?’ What’s the thought process that gets you to do that?

Chris: I don’t know if I’m that good at that, Andrew, but you’re kind to say that. I just thought, “I’m going to be on this. I’ve been on Mixergy before. I know it’s a fantastic audience. I know it’s an audience that watches the whole interview, start to finish. Even if I screw up or say something dumb, they’re going to keep watching for some reason.’ So, what can I possibly do to better serve that audience? I know you think the same way. It’s audience-focused, it’s community-focused.

Andrew: I do. All right. Onto the next point, which is motivate yourself along the way. Track the progress with a list. You mentioned earlier that you like to make lists. Here is a woman who needed to do that. Let’s bring her up. 50 dates, 50 states. She had to kick-start a campaign for it. Tell me about her, if you could.

Chris: Yeah. This is Alicia Austerello [SP], also from San Francisco. She had just recently gone through a break-up and she had noticed that in some of the relationships she had before, she was dating the same kind of person, and she thought, ‘I want to learn more about the world, first of all. But, I want to learn more about relationship also.’ So, she started this project, which you’re showing, about 50 dates and 50 states. She would take this epic road trip together with the producer, and then eventually, of course, they would fly to Alaska and Hawaii, and just meet different people and write about that experience, write about relationships, write about dating, also about the challenge of the experience of doing something like this in public. So, it wasn’t a ten year huge mega epic kind of thing, but it was still something different for her. It was something challenging and unique. Maybe it had a little bit of a career goal for it as well, because she helped to write a memoir and maybe build a little bit of platform over it. But again, I don’t think that was the primary goal. I think the primary goal was self-discovery and exploration.

Andrew: I remember talking with Marc Suster [SP], the venture capitalist, who said, ‘If it’s important, measure it.’ And, of course, everyone says that. But for some reason, in that conversation with him, it hit me. Yes, anything in business that you really want to grow, you should measure it and you should pay attention to it. Same thing for quest, that it helps if you’re going to have a quest to say to yourself, I’m not just going to cycle. I’m going to cycle for a certain number of days, or I’m going to cycle for a certain distance, or I’m not just going to make hats until forever. It has to be 10,000.’ Why is the number so helpful?

Chris: Yeah. There’s two different things there. There’s the documentation part of it and then there’s why is the number in the first place? I really believe that the number is important. I really believe that it’s not a quest without that. It could still be a passion, it could be a hobby, it could be something you like to do, all those different things. But, I really believe that having a structure is what takes it to another level. Just in my case, if I was just a traveler, there’s Chris, he’s this guy who goes to a bunch of countries. You know? What is that? But for me, it was like, every country in the world. Okay. That’s pretty cool, right? It couldn’t just be like, going to 150 countries and then stop. Right? It’s not like I could just be, you know, “I almost made it.” here’s this guy who ran 250 marathons in a single year. Maybe that was you, Andrew. I don’t know. But, I thought that’s pretty awesome. But, most people are not going to hear about that and say, ‘Oh, I wish I could do that.’ You know? Most people don’t have that passion or that drive or that ability. But, most people, I believe, are like Robin in the sense that they do have something that they love to do. They have something that they’re interested in, and if they can focus that interest in the form of a quest, I think it will bring greater purpose to their lives.

Andrew: Let’s talk about the inner progress. We use the hero’s journey format for all the Mixergy interviews where an entrepreneur talks about how he or she built the business. And, if all we get to is, I didn’t have any money, didn’t have an idea, and suddenly I got an idea, made some money and now I’m healthy, it becomes a very boring progression. What we always look for as a team here at Mixergy, is what’s the underlying growth? What beneath the surface allowed them to get there? Was it finally overcoming their insecurity? Was it finally overcoming the fact that they felt for a long time out of the Silicon Valley structure, and because they discovered that they had enough in them that they didn’t need venture capitalists, they were able to do all this. Where does that fit in here, with Robin’s story or in general, how do we use these quests to bring out the better part of ourselves and not just be about cycling and hats?

Chris: Right, right. I think one of the other key features of quests, in addition to the challenge and the hero journey that you mentioned, one of the other features that’s usually, maybe not always, but almost all the time, something else happens along the way. Usually, there is an element of change or transformation that can’t always be predicted. I mean, you know that something’s going to happen but you don’t know exactly what’s going to happen. It’s not like I could just, you know, “Oh, I almost made it.’ You know what I mean? That’s my story is like, Chris is the guy who almost did it. So, that’s why I feel like those specifics helped. But after the documentation, you have to document, I think in some ways, in whatever way that you like to document the quest, then you should. And, different people do that in different ways. Not everyone likes to write. Some people are much better at photography than I am. There are other mediums as well, but I do think it’s helpful to kind of mark off or lineate that progress as you go along. I had a Wikipedia article that I just copied and pasted into my EverNote of every country in the world, and as I made progress over the years, I would literally go and put a little X next to it. So, I saw that EverNote fill up with X’s as I got closer to the end, and I was a little bit tired toward the end, I was focused on other stuff, but I got to keep going. I got to keep going because I’m almost there.

Andrew: I had that list. It’s going to keep me going.

Chris: Awesome.

Andrew: Push through the monotonous middle so you don’t give up too soon. This is someone who had that situation. Boy, did he? This is a better way to bring him up. There we go. There’s Gary Thorp, who had a quest. Do you remember his quest?

Chris: Yeah. Gary Thorp is a classical music DJ from Brisbane, Australia. Huge fan of classical music, of course, and one time when he was in London, many years ago, more than 30 years ago, he saw this symphony performed. And, this particular symphony was considered the largest symphony in the world, one of the most difficult. It required more than 800 performers, multiple choirs, all kinds of instruments that aren’t usually used, and therefore it wasn’t performed very frequently. You know, Beethoven, much more common. And, Gary was touched by this symphony. He thought that just the whole audacious nature of it was incredible, but he also liked the music. So, he wanted to bring the symphony to Australia. He tried and he tried and he tried. I don’t know if you were going to say something else there.

Andrew: Nope.

Chris: Took many, many, many years. There were lots of failed attempts. It’s a classic quest story because it actually took 28 years.

Andrew: 28 years.

Chris: 28 years to bring this symphony to Australia. And, during that time, by the way, it wasn’t performed anywhere else in the world. I mean, that was the last time it had been performed, was nearly three decades earlier because it was such a complicated thing. And normally, if it were to ever be performed again, it would be in London, it would be in Vienna, it would be in New York, you know, a place that had a lot more resources. Maybe more appreciation for classical music. But, his dream was, I want to bring this to my homeland. I want to bring this to my city, and eventually he was able to do it, but there was a lot of false start and failure along the way.

Andrew: Do you remember a moment in your monotonous middle where you had to really push through?

Chris: I remember sleeping on the floor of again, so many airports. I remember getting turned away in different countries. I got deported from one of them. I remember–

Andrew: Which is the one that made you feel closest to giving up, or if you weren’t Chris Guillebeau, you would be giving up; which one?

Chris: Yeah, yeah, yeah. Which one would be? That’s great. That’s great. Probably somewhere in Central Asia. One of the Stan countries. They’re beautiful countries but I think it’s just that time of my life, it was around country 140 or 150, I think. That’s when I was like, ‘Yeah. I’ve been doing this awhile.’ I think once I got to 170, 175, then I’m like, ‘Okay. Almost there.’ You know? I always want to be brutally honest with Mixergy viewers because I don’t ever want to B.S. anyone and say, ‘The whole thing was amazing.’ There were lots of monotonous moments, but I also don’t want to seem ungrateful, because I can look back and say, ‘Even though that particular moment sucked or whatever, I’m still glad to do it overall.’

Andrew: What pushed you through? Was it this feeling that you had to finish what you started, that’s who you are and you don’t stop? Or was there something else?

Chris: I think that’s a good way to describe it. It’s that I believed I could do it, I knew that I would always regret it if I stopped. I think that’s probably what drove it. I don’t think it’s always good to say, ‘You should never quit something,’ because there could be all kinds of things that you should quit, right? But, I didn’t feel that way in the first hundred countries. I didn’t feel that way until I was getting close to the end. So, since I was there, why not? You know, and I didn’t want to look back, as I said earlier, and be like, ‘That’s what I did with my life. I went to almost every country, but not quite.’ You know? That’s what drove me forward.

Andrew: Yeah. All right. Final point that we pulled out of the book is to believe in yourself even when no one does. I imagine that happens a lot when you set out on a quest. I know when I first started to interview, people didn’t believe, they thought it didn’t make sense. I remember starting my first company right out of school. People didn’t believe, and then those same people were the ones who were so proud and talked about, ‘Hey, look at what Andrew did.’

Chris: Yup.

Andrew: The Dutch government didn’t believe. We’re talking about real serious non-believer. The Dutch government didn’t believe in this woman. This is Laura Decker.

Chris: That’s right.

Andrew: She wanted to do what?

Chris: Laura Decker had always been a sailor. She was actually born a boat off the coast of New Zealand. She was a Dutch citizen, her goal was to circumnavigate the world, to sail the world on her own, solo, and to be the youngest person ever to do it. When she was 16, she had actually tried to leave a couple of times before and was stopped by the Dutch government, and then she essentially sued her own government for permission to do this, and was granted that permission. So, then over the next year, she sailed around the world.

Andrew: You know, how do you know if the Dutch government isn’t right, you know? It’s one thing if your friend says, ‘Don’t do it. It’s a jerky idea.’ It’s another idea if the government, a reasonable government says, ‘You know what? You might be too young. Why are you putting your life at risk?’ How do you know if that outside voice is something you should be ignoring or maybe it’s something you should actually pay attention to and say, ‘Let’s wait until I’m 20.’

Chris: No. Totally agree. I’m glad you brought it up. In her case, she did sue the government. She went through a legal process and eventually won that right to pursue her adventure. If she hadn’t had won that right, would she have snuck off in the middle of the night? Would she have waited? I don’t know. That’s a tricky thing. I do think though, that we often judge the riskiness of something or the worthiness of something in retrospect. We often look back after the thing has already been done, and then that’s when we determine, that was a really awesome idea, or that was a really stupid idea. I thought about this a lot when I was out there in some random countries. I thought, ‘You know, if something happens to me, there’s going to be a lot of people who would just say, ‘That’s just stupid. Why was he doing that? Why was he going to a place like that? He deserves what he gets.'” Right? But, because I went there and then I came back and everything was okay, it’s like, oh, that’s awesome. Right? So, it’s almost like we’re applying this lens, we’re applying this filter, looking back on the outcome of something, when in fact, life itself is very risky. Every decision that we make in some way involves risk of something. So, I don’t think anyone should do something fundamentally unsafe. I think, in her case, she was a sailor her whole life. She knew far more about this than many other people much older than her. But of course, you never know. It is a risk.

Andrew: Yeah. And a bigger risk, the one that we tend to fall into more often, is the one of just living an ordinary life and looking back and saying, ‘What happened?’
Chris: Yup. That’s a big risk.

Andrew: You know, the cool thing about this book is, and I want to ask you one other thing, but the cool thing about the book, let me bring the camera on myself, there it is, The Happiness of Pursuit, is that we all tend to want to emulate a little too much. I have to tell you, over the years I’ve heard your story and I kept thinking, ‘I could never do that. Frankly, I don’t even want to do that.’ So, maybe this whole thing isn’t for me, because I kept thinking of traveling to every county on the planet, instead of thinking outside the specific to the more general idea, which is to say, ‘Find a meaningful, big journey to go on.’ What I like about this book, I see you’re nodding, I’ll bring you back up here, what I like about the book is you’re showing, here are all these other ways of doing it. That happens, by the way, Chris, a lot to my interviews. I interviewed Jason, why can’t I think of Jason’s last name. Because in my head, I keep thinking JasonHeadsets.com because you sold his last name, headsets.com.

Chris: That’s right. That’s right. Surfer App?

Andrew: Is that the newest one?

Chris: Yeah. He sold his name to Surfer App now.

Andrew: So, Jason did an interview with me about how he decided he was going to wear a different company shirt every day of the year and charge the company for the right to do it. After that, I got, well I’m going to do a hat, and me and my girlfriend are going to do a shirt, and I got these shoes that I’m going to wear. You know? And it was just thinking a little too similarly to his idea instead of taking a bigger picture and saying, ‘What else is out there? What is in me?’ You’ve given us a bunch of examples. Again, as someone who talks to authors and entrepreneurs all the time, the more examples I can get, I know the more interesting and relatable it is to the audience, and I think the more it feels like the authors had the right to talk about it. You know? If it’s all just you just talking about one example, the Apple example keeps coming up over and over again.

Chris: Right, of course.

Andrew: And you maybe didn’t do your work. All right. So, here’s the final thing I want to ask you about. I was going to go to your website. Don’t worry, this is not a trap. I was going to go to your website, findthequest.com, and bring it up on the screen and say, ‘Here’s the place to go.’

Chris: Oh yeah. That’s right.

Andrew: It’s leading to Chrisguillebeau.com.

Chris: That’s right.

Andrew: Where should I be sending people?

Chris: Yes. Well, we should fix that. So, you are happy to send people wherever you want.

Andrew: Okay.

Chris: Findaquest.com, by the time that this is live, should actually go somewhere that would be great.

Andrew: Gotcha. All right. Does it bother you, by the way, that that happened and I just pointed it out?

Chris: I should fix it. I’m making a note. I’m going to go in and do it.

Andrew: I was looking at you and I said, ‘Oh. If he feels a little uncomfortable,’ (inaudible)

Chris: No, no, no. I was just like, ‘Where is he going? I have no idea.’ That’s totally cool.
[[00:04:53]]
Andrew: Findthequest.com. The site will be up. We intentionally, frankly, the team and I were just talking about how we rush this faster than any other program because I freaking love you, Chris. You’re a great guy. I see the way, the attention to detail and all the things that you put together. I said, ‘Let’s find a way and have Chris on here, even if it means that we have to rush it and we’ll make it work. We’ll put other things aside.’ All right.

Chris: I really appreciate that–

Andrew: And it is, I think to me–

Chris: And thanks to you and all your team. It’s really a fantastic team. Thank you.

Andrew: Thank you. Yeah, I should always say over and over again, it’s not just me. It’s Ben who actually went through and picked out the ideas that would work best for the audience and found and did the research. It’s Anne Marie who kept following up with you and organized this and produced it. And, it’s me who just gets to sit here and have a conversation with you. The headset, I want to say why I pointed that out. It’s the attention to detail and the little things, like the sales page that you have, like the feel of the book here. It’s not just, I don’t know what you did to it, but it feels a little bit worn, you know? It has the sense of details.

Chris: I didn’t do it myself, Andrew. I didn’t actually go to the warehouse.

Andrew: You always say that to me too, and I know you have a team too, but it’s the person who I think sends this out, the message to the team. And then the team gets to work together on it. Anyway, that’s why I wanted to have you on here. I like to see the details behind what you do, and I like the magnitude of the way you think. You think bigger, not just a hat, but how do we make a thousand hats or thousands of hats. All right. Thank you so much for being on here. The book is right up there, there. The Happiness of Pursuit. Chris Guillebeau, thank you.

Chris: Thank you again, Andrew. Thank you.

Andrew: You bet. Thank you all for being a part of it. Bye guys.

DOWNLOAD TRANSCRIPT

Get Mixergy Premium for instant access to over 1,000 interviews and over 150 courses.