Baremetrics - Growing A Million Dollar Company by Josh Pigford
Baremetrics - Growing A Million Dollar Company by Josh Pigford
Baremetrics - Growing A Million Dollar Company by Josh Pigford
Foreword
When I first had the idea for Baremetrics in October 2013, I couldnt have
imagined Id have a team of seven spread out across the world making our
way to over a $1 million in revenue barely 18 months later.
What started as a little tool to scratch my own itch turned in to something
much bigger and much more impactful than I could have planned.
Weve had some successes (and even more failures) over that time and
have tried to document as much of it as we could. Thats what this book isa
collection of lessons on the success and failures weve had and how they
can apply to you and your business.
Its been an amazing journey so far and I hope the lessons weve learned
will help you as you figure things out.
Just remember: everybody is winging it.
Josh Pigford
Founder of Baremetrics
Chapter 6: Growth
How we grew from $0 to $25,000/month in 12 months192
Bootstrapped to funded: What's it like?.199
3 things we did to reduce churn by 68%206
How we scored Baremetrics.com for $616.21
Chapter 1
The Early Days
Shortly there after, the article was posted to Hacker News and roughly 15
minutes later was on the front page.
In the 48 hours after the post was made, we added over $1,200 in new MRR
and a few hundred more over the next couple of weeks.
business. Heck, most people on Hackers News dont even have an actual
business. Theyre in some mystical stealth phase that theyll likely never get
out of.
But this particular article was useless to those people. They cant possibly
relate to or even have an opinion on ad retargeting because to do
retargeting you have to have money in the bank to spend.
And thats the kicker here.
The subject matter of the post drove businesses with real money to our site.
Which was perfect because businesses with real money pay for solutions to
real problems.
Its not that Hacker News doesnt have any legitimate business owners that
can convert to paying customers, its that most of the content that gets
posted there targets the wrong peoplethe early stage startups and
wantrepreneurs with no money who argue about inconsequential things
while the real business owners are out building real businesses.
Building those sites showed me there were other ways to make money and I
was hooked.
and when they were coming in, so I decide to build a little internal tool to do
just that.
It stayed internal for a while but then I decided to throw it out there and see
what happened. It was called TrackThePack and you could track packages
from dozens of different carriers all in one place. It even had some jazzy
features like forwarding shipment confirmation emails where wed parse out
the tracking number and add it to your account. I even got to dabble in the
madness that is the App Store with a pretty solid iOS app.
Then, one day, I got an email from David Hauser. Hes a bit of a serial
entrepreneur (co-founder of Grasshopper, among tons of other things). He
was starting up a new business that relied heavily on tracking packages and
I had kind of become the guy for doing that.
I did some consulting for them and then that led to another thing he and his
Grasshopper co-founder were starting up called PopSurvey. They wanted to
re-invent the way online surveys were built and taken and wanted me to be
a part of that.
I eventually assumed the CEO role. We continued building PopSurvey and
eventually Temper and focused on those for a couple of years.
Then, in October of last year I found myself frustrated with the tools
available for SaaS products when it came to finding and understanding
metrics. Things like MRR, LTV and Churn were such a hassle to calculate
and stay on top of.
So I found myself again building an internal tool. This internal tool, one
month later, turned in to Baremetrics.
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Stepping stones
I give the story of how all these previous businesses tie in because this idea
of an overnight success is just not reality. It took a decade of shipping
things to finally land on something that had real traction. And I didnt even
mention the dozen other businesses and products I shipped and killed that
werent part of that line of stepping stones.
Baremetrics is not an overnight success. It was 10 years in the making.
My friend Startup L. Jackson says it well: Most successful startups are
overnight successes. That night is usually somewhere between day 1000
and day 3500.
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Brief History
Baremetrics was birthed out of my frustrations with the other solutions out
there.
Nothing ever worked quite right. They all required a lot of dev work to hook
up correctly, and I didnt trust myself that I was actually sending over all the
data those tools needed to give me the metrics I wanted.
Plus, digging in to each metric was borderline impossible.
Id been using Stripe for a couple of years on two other products and so
knowing Stripe had all this data (really, just about everything Id need to
calculate what I wanted), it made it a no-brainer to just build a tool that
crunched all the numbers from there.
And so it began
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Month 1: $0. Building the thing like a mad man. Not available publicly yet.
Month 2: $1,000. This is the first month Baremetrics is out in the wild. I
charged from day one (and you should toomore on that in a bit).
Month 3: $1,650. Learning more and more about how people want to use
Baremetrics and slowly but surely growing.
Month 4: $3,200. Well, well, well. What do we have here? Doubled MRR!
Thats what! Ill cover how I did that later in the article.
Month 5: $5,300. I crossed my personal goal of $5,000/mo in 5 months to
the day.
Month 6: $8,300. This is basically where were at today.
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5 Takeaways
Lets jump in to a few takeaways/tips/methods that you may find useful in
your journey towards making bucket loads of cash.
1. Build what you need, not what you think others need
We could debate in to the ground whether you should scratch your own itch.
Me personally? I think scratching your itch is a fantastic start.
Does it guarantee success? Heck no. But scratching your own itch gives you
a leg up on people who are just picking things out of thin air based on their
perception of problems in markets they have no experience in.
At the very least, youre able to learn faster if a product is a good idea
because youre able to talk to more customers more quickly and can relate
to them more readily.
Worst case? Youve solved your own problem.
That Reid Hoffman quotemoney. Literally will print money for you early on
if you take it to heart.
No one will remember how polished your product was/wasnt when you first
launch (hardly anyone will even know you launched). Theyll only remember
if your product created value for them.
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Going back to the previous pointyou need validation for your business. By
shipping as fast as possible youre able to find out as soon as possible how
to best serve your market.
The first version of Baremetrics was rather lacking
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You want customers who arent price conscious. That $99 customer is
happy to fork over the cash because theyre mature enough to know that
anything that saves time/money or creates value is worth paying for.
Theyll also be exponentially more loyal. They dont waste their time looking
for things that are marginally betterthey pay for what works the most and
then they get back to building their business.
As a general rule, if the businesses youre targeting dont charge much
money, dont expect to make much money from them.
There we have it
So, there you have it. Some takeaways and methods I used to get
Baremetrics out the door and making money.
As usual, you can always spy on how were doing at our live demo, which
uses our actual numbers.
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What I didnt do
Typical wisdom tells you that you need to build hype and generate buzz.
Start a blog! Collect email addresses! Build a landing page and people
magically drop in their email address! Have a private beta! Give out free
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accounts! Give out coupons! Invite influencers to try your product! Send out
press releases!
I did (and have done) none of those things to grow Baremetrics.
Do some of those things work? Sure. They have the potential to work. You
also have the potential to win the lottery.
I like better odds than the lottery, so I chose not to go those routes. Given
most startups fail, conventional wisdom sounds like a pretty bad path to
follow.
why has that driven new customers and, more importantly, new
revenue?!?!
Well, I think theres an explanation. And lucky for you, it has nothing to do
with the number of Twitter followers you or I have.
Twitter is the whatnow, heres the why (and its what you promised to
hang with me for).
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Those are all Baremetrics customers who, with no prompting, posted about
Baremetrics shortly after signing up.
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Save time
Save money
Create value (i.e. print money)
Baremetrics does all three. We save businesses the time of manually
entering data in their spreadsheets, we save them money from having to
develop their own solution and we create value by giving them financial
insight in to their business that they didnt have before.
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The combination of doing all three is whats a big win for us and why getting
those first customers (at a premium price point) was relatively easy and
done all via word-of-mouth.
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was able to do build the right tool based on the feedback I received from
paying customers.
Within a month of launching that next version, I doubled recurring revenue.
Baremetrics solved an even bigger pain at that point.
For your business, maybe youve got a few paying customers. Maybe
feedback overall is generally positive. But things are moving slow. What can
you do?
Youve got to get to the root of the pain. Maybe youre partially solving their
pain, so what can you do to fully solve it? If youre automating something for
them, maybe you havent completely automated it and so theyre using you
to save a little bit of time when in reality you could be saving them a lot of
time.
You have to dig. You have to get on the phone and talk to your customers
(current and potential).
Thats the hard part and its why most businesses fail. They assume. Making
assumptions about business pain is like a surgeon assuming which limb
needs to be amputated. The wrong assumption will have a detrimental
outcome.
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Chapter 2
Your Customers
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One of the first things I did after joining Baremetrics was get us
setup with Help Scout. As I was working my way through getting it
all setup, I paused when I reached the satisfaction surveys, and
decided not to use it. But why leave behind a oft-used tool in the
customer support tool-belt? Lets see
is on the way, I promise). But support satisfaction surveys just arent worth it
in the early stages of your business.
1.
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leave, but thats where NPS comes in (which Ill talk about in more detail
in a moment).
So, just because Im not going to ask people to tell me if Ive done a good,
okay, or bad job doesnt mean Im not interested in feedback. Quite the
opposite, in fact!
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From the start of Baremetrics Ive wanted to stay away from being
a faceless company. Given were a B2B company, thats relatively
easy. Were not dealing with 10,000 or 100,000 customers here, so
making sure each and every customer gets some sort of
interaction just makes sense.
Keeping in touch with users makes for happier people and ultimately results
in lower churn. But what are some ways to do that?
Heres a breakdown of all the ways we stay in touch with users, including
the exact emails we send in the days, weeks and months after sign up.
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Onboarding
We send out a series of emails in the days after a user signs up. The
purpose of these are to convey the value Baremetrics can provide and
surface features they may not have known about.
We know that if users perform certain tasks, theyre less likely to churn, so
the goal is to funnel them in that direction.
Its worth noting that were constantly tweaking and A/B testing these, and
you should likely do the same. What works for our customers and product
likely wont work as well for yours.
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Day 5: Notifications
Another feature-push email. Notifications make Baremetrics a regular part of
a users daily workflow, so we want as many people as possible to use them.
Day 6: Plans
This email comes from me instead of Kaegan. No particular reason here
other than to mix it up and reiterate that the lines of communication are
always open for both of us.
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Follow Up
We do a series of follow up emails after theyve been using Baremetrics for
a while. Youll notice there are two from me and two from Kaegan.
The ones from me go to the account owner (whos typically also the
business owner), while Kaegans go to the additional users on each account.
We want both the business owner and their entire team to get as much
value as possible out of Baremetrics.
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Upsells
After a customer has been with us for a few months, we send an email
upselling an annual subscription. This is an example for users on our Startup
plan. Every plan level has a similar email, tweaked with the actual monthly
savings.
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Cancellations
Early on in your business, the key to dealing with cancellations and
understanding why each one happens. Following a cancellation, I email the
user to try and understand more about what we werent doing well for them,
then I save their response and some pertinent data points in a spreadsheet.
Welcome Tweet
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Weve found that NPS surveys are a great way to get actionable
customer feedback at scale. Theyre easy to send, easy for
customers to take, and give a quantifiable data point on how
customer happiness and loyalty is improving (or not).
A few months ago we ran an NPS survey after a bit of a hiatus. Within
minutes, hundreds of responses flooded in, and I spent most of that day and
the next following up, logging responses and sharing those responses with
the team. Assembly line type work. Yuck.
Since then, weve been using Promoter.io, Zapier and Intercom to fully
automate the collection of NPS scores and comments as well as initial
replies to the feedback. Doing this saves a ton of time without
compromising personal touch, leaving you more time to act on that
feedback. Hurrah! Heres how we did it.
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Followups
You have to follow up with everyone who gives you a score and or a
comment, or else whats the point of soliciting feedback in the first place?!
But responding to every. single. person gets really draining, especially when
a lot of the responses are quite similar.
When you do get comments along with the NPS scores, the first order of
business is forwarding them to a central place to do the follow-up.
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Set your filters so the messages go to the right segment. Above, youre
looking at the filters for Promoters. For Passives and Detractors, change the
NPS Score Type filter to either passive or detractor. Remember, you
need to make three separate zaps.
Fortunately, you can click on the dropdown arrow on this Zap on the main
Zapier dashboard and copy it to create a new one. Woohoo, automated
automation automaception or something.
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Make sure this is set to Contacts Email and that the Reply to is set to an
e-mail address that feeds into your Help Desk. Set the other parameters
(CC, BCC, From name, From E-mail) as desired.
Promoter
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Passive
Detractor
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Now you can do all kinds of cool stuff using those new attributes youve
created!
For example, we created a Beta Team from our Promoters, and Josh
personally follows up with Detractors a few days after the survey result
comes in. Heres Joshs e-mail for Detractors.
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Types of feedback
There are two types of feedback you should be collecting: solicited and
unsolicited.
With solicited feedback, youre actively going out and asking questions of
your customers. Youre sending surveys, emails, and in-app messages. This
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Asana
We use Asana for project management, but any list-making or project
management tool (Trello, Basecamp, etc.) will do the trick here.
We have a Product Ideas project in Asana that we add items to as
customers (or our team) suggest things. Then, we can add comments to
those items as necessary and prioritize them based on the number of
requests we receive or the business value theyll add.
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Intercom
Intercom is great for understanding the context in which feedback was
given. Was it the result of a bug? Were they frustrated when they sent in the
request? How did we leave the conversation with them?
When doing product research, well tag messages that customers send in,
so its easy to find them all later. We also will tag customers for beta features
so we can automatically message the correct segment of users when we
start beta testing something.
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Finally, at our team retreat in January, we started throwing around the idea
of changing the basis of MRR and Customers from charges to
subscriptions.
The more we researched this and the more we tied back the pros as
solutions to the complaints we were seeing from customers, the more it just
made sense. Using this method lets us surface significantly more detailed
and reliable insights, which is ultimately what customers wanted.
So whats the takeaway here? Its crucial to not only listen to customers but
also to understand the motivation for their feedback. Without understanding
the motivation, you could very well build the wrong product.
None of these changes would have happened had we been overly
dogmatic about the path we were on. Listen, understand and take action.
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results were for our survey. Well also cover some tips on getting the most
out of sending one yourself.
Promoters: 9 or 10
Passives: 7 or 8
Detractors: 0 - 6
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Promoters (910)
These customers are your most loyal. They love the product, they love your
company and theyre more than happy to recommend you to others. Keep
them happy.
Passives (78)
These customers are generally satisfied but may have a small issue or two
that keeps them from really loving your product. This is low-hanging fruit for
you to knock out of the park and turn in to a Promoter.
Detractors (06)
These customers are a major risk. If they stay as detractors theyll likely
churn in the next 3090 days. They need quick attention to resolve the
issues theyre having.
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First responses
We sent the survey out to the first group on a Tuesday morning. Ratings
started coming in. The first few were greatthen a string of bad ratings
came in, along with feedback on why they werent happy.
The feedback revolved primarily around two things: stability issues and lack
of progress. Both of which weve been working tirelessly to address.
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Our growth has created a lot of stability and performance issues with the
platform and weve been working literally day and night to tackle them (this
past week we actually made a major database upgrade that has almost
completely eliminated performance problems).
In addition to those performance issues, the perceived lack of progress is
something I knew was an issue, but the Net Promoter survey brought to light
just how big of an issue it has been.
Many customers felt that after months and months of big product additions/
changes, wed kind of stopped actually progressing and making it better.
That couldnt be farther from the truth, though.
Then something interesting happened in the middle of sending these NPS
campaigns: we shipped a major new feature.
So, how did that affect future feedback?
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What youll notice is that the percentage of Detractors didnt change much
(though it did go down), but the percentage of Passives changed quite a
bit.
Our addressing that primary issue had a direct, positive affect on customers
view of Baremetrics, and people who were on the fence had their
confidence in us boosted immediately.
The timing was convenient from a measurement standpoint as it quickly
solidified that were on the right track.
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Chapter 3
Managing a Team
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Ive long considered myself a maker. Heck, its the first word in
my Twitter profile, so you know its official. Ive been making things
for the web since the late 90s. When I was splitting my time
between building my own products and doing consulting, Id tout
myself as the guy who could do everything. I took pride in my
ability to do design, frontend, and backend, selling myself as the
quintessential maker of things.
Then, Baremetrics started taking off. I quickly realized that being the only
maker wasnt going to cut it, and started hiring. As I hired out all of the
things I had been doing, I found myself transitioning from maker to
manager. I started the transition a year ago and, while Im certainly no
expert, I thought it might be useful to other entrepreneurs making the
transition to get some insight into what it has been like for me and how to
apply to your business.
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Product management
A big chunk of my time is writing project briefs and figuring out our product
roadmapessentially a Product Manager role.
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What comes next? What problems need solving? How do we solve those
problems? What bugs need to be fixed and when? Who needs to be working
on this? Whats an appropriate deadline? What customers should I talk to
about that potential feature?
My day is packed to the brim with answering these types of questions. To
the best of my ability, Im decisive and borderline dogmatic about these
answers. You have to be. Otherwise, youll be buried in half-answers that get
you half-results with no real progress on anything.
Apply It
The more clearly you define projects and work to be done, the less time
product management will take you in the long run.
Define the problem and what the success metrics are (increased signups,
decreased churn, etc.) and then work with your team to figure out the
solutions.
Writing
Our blog is a significant source of traffic and customer referrals for us. Thus
far, minus a couple of great articles on customer support, Ive written all of
the content.
It takes up a large chunk of my time (roughly 20% of my week), but weve
tried really hard to avoid the typical generic content you think about when
you hear the phrase content marketing. Our market is founders &
entrepreneurs, so the best way we know to reach founders & entrepreneurs
is for our local founder & entrepreneur (me!) to write about the ups and
downs and what were learning as a company. Things that are harder for
others to write without having been there and done that.
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Apply it
Not everyone has a target market of founders so this game plan wont
necessarily work for you, but I do think its crucial to actually produce
genuinely helpful stuff if you want to use content as a marketing channel.
Find your content niche and own it.
Customer support
I dont do nearly as much typical customer support these days since Kaegan
came on board last year, but I try to schedule a phone call with all of our
customers regularly.
As part of the lifecycle emails we send, I try to schedule calls with customers
at the two-week, six-month and 12-month mark to see how business is
going. Its not a sales call on any level. I genuinely love to hear how other
founders businesses are going and to see if I can help in any way.
This is high-touch and not scalable in the long run, but as long as I can do it,
Ill keep having calls with customers.
Apply it
Being the face of your company will go a long way in the early days. Do
this as long as humanly possible.
Team happiness
While making our customers happy is crucial, making sure my team is happy
is arguably even more so. Right now, I do a lot of information gathering
with bi-weekly 1-on-1s and tools like 15Five. But Im admittedly not great at
putting the feedback into action consistently.
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The feedback I get from our team affects decisions I make on a day-to-day
basis and I spend a lot of time pouring over Slack chat logs looking for signs
that people are frustrated or in need of help with something.
Apply it
Pay close attention to your team both in passing conversations and in
feedback sessions like 1-on-1s and look for signs that anyone is unhappy
or feeling burned out.
Hire
It comes in waves, but every few months we need to hire someone. Hiring
can be a lengthy and time-consuming process (our Customer Support role
had over 800 applications and took three months to fill).
When Im in the middle of hiring someone, I spend a lot of time reading
applications, doing video interviews and pouring over test projects (for
engineering & design positions).
Apply it
As best you can, try to organize and standardize the hiring process. Use
tools like Workable to keep the pipeline in one place and use a simple set of
starter questions to quickly weed out applicants that are clearly a bad fit.
Financial planning
I think we make a pretty great tool for staying on top of revenue, but at this
point I still have to spend a lot of time in spreadsheets to look at the full
picture of both revenue and expenses (of which you can peer in to).
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Apply it
Knowing where you stand financially seems like a no-brainer but a lot of
startups fail because they run out of money. Use a service like Bench to
automate the bookkeeping (as manual entry on almost any scale is a bad
use of your time), and then spend your own time forecasting the upcoming
months so you know where to adjust things.
Apply it
Find a group of people who are a couple of steps ahead of you in particular
areas and meet with them regularly. They wont be so far ahead that its a
one-way relationship, and the advice they give will likely be a lot more
applicable.
Also, get a subscription to Blinkist. All business books are mostly fluff.
Blinkist distils the fluff down to the juicy bits, and you save yourself a
massive amount of time.
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If theres one thing Ive found to be true over the past year and half
of building this company, its that Im completely winging it. Sure,
Ive read articles and books on how to build a company, but Ive
never actually done this before and I learn best by doing. So, every
time I come across something that works for us, its a huge win for
me. Doing 1-on-1s has been one of those huge wins.
A few months after I started building our team, I really wanted a regular way
to make sure everyone was happy. I pick up on little grumbles and or
frustrations in our Slack chat, and would make a mental note or would just
talk to that person right away. But I wanted a consistent and predictable
opportunity for our team to talk about things.
Enter the 1-on-1.
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not you and dont think the same as you. Hearing how they think the
business could be improved or ways it could grow are always good things to
get feedback on.
Happiness At the end of the day, if your team isnt happy, whats the
point? If theyre really happy, is it because of recent progress on the
product? If theyre unhappy, is it because youre overworking them? Find out
whats making them happy (or unhappy) and youll get a lot of perspective
on what makes them tick and how you can help.
Team Making sure your team is moving along as one cohesive unit is
crucial and 1-on-1s are a great time to find out if there are any issues you
can help resolve before they become a real problem.
Management This one topic is about you. I specifically ask about ways
that I can improve as well as things I can do to help them work better.
Performance Talk about a job well done, or an area that needs
improvement.
Each week I try to ask a different set of questions. Heres a sampling of
some Ive been asking over the past few months.
1.
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We also use Sqwiggle for indiviual and team video chats. It shows whos
working at any given time and helps give a bit of a were all here working
and making junk happen feel.
Your role at this point is to steer the ship. To instil in your team the direction
things need to head and then step back and let them work.
Kindle Paperwhite
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Most days now I wake up before my alarm goes off (at 5am) and I
immediately hop out of bed, excited to get the day started. But that
wasnt always the case, especially when things werent going so
well. Its easy to be excited when the skies are blue, but what
about when theyre gray? How do you stay motivated then? Or is
there even such thing as motivation?
For 10 years I was on a perpetual journey to kick the consulting habit and
just focus on my own products, but minus a few 3-month spans here and
there, it just wasnt happening. I couldnt get over that hump. A couple of
years ago, before Baremetrics was even a spark in my brain, I had 2 other
SaaS products I was building and I was having a rough time on the
consulting side of things. It was such easy money but I was over it and just
tired of working on things I wasnt fully invested in.
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Choosing motivation
And few months after, I realized I was just procrastinating and made a
conscious effort to change that. I buckled down on the 2 SaaS products I
had at the time and vowed to simply make them work. Part of that
determination was getting a handle on what metrics were or were not
workingand thats when Baremetrics was born.
Had I not resolved to show up and work and ignore my feelings, had I
waited for motivation to knock on my door, then Baremetrics wouldnt exist.
Heck, a whole industry of platform-specific analytics tools might not exist.
Its easy to be excited about showing up and working when youre growing
fast and when customers love what youre doing. But what about showing
up and getting the job done when youre not even sure what that job needs
to be?
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I started looking for a customer support person and ended up finding one in
my own house. My wife and I have worked together for years on previous
business ventures, and I knew what she could bring to the table. So, to test
the waters on if I really needed someone to pull this off, she came on board.
Turns out, I wasnt really ready for it. The support load quickly died down
and there just simply wasnt much work to do.
Takeaway
Make sure theres a real, substantial need before you even start the
process. It should be absolutely, unquestionably clear for at least a couple of
months before you start hiring.
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If your company is more than just you, start a rotation of support to lesson
the load and delay hiring as long as possible.
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Takeaway
List out the actual jobs and tasks a potential hire will be doing. Depending
on the stage of your company, that list may be very lengthy and quite a mix
of stuff. Thats fine. Thats exactly what ours was like.
Push the role of the position outside of the typical box. Hire someone who
can do the job youve outlined as well as someone who will define and find
new ways to help the business and customers.
Purpose. Talk about the overall purpose of the job and why its so
vital to your company along with some things theyll be responsible
for.
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4. Benefits. And then finally, list benefitsthe things that would set you
apart from similar companies/jobs theyre looking at. For instance,
some of our perks are working from anywhere, loose vacation policy,
flexible work hours and certain perks (like home cleaning, movie
tickets, books, music & video subscriptions, etc).
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I would have loved to be able to automatically filter out and delete any
applications from those sources.
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A lot of people just use a jobs email address, but I wasnt jazzed about
organizing and responding to the applicants just via email. Workable has
some additional tools that make it really easy to handle larger volumes of
applications, and it saved a ton of time.
So, what did the process of managing the applications look like?
First, a user would go to the application page. For instance, heres our Data
Scientist job page. They can read about the jobs and then apply (big green
Apply for this job button).
The application is pretty straightforward. The applicant drops in some basic
info, their work history and a few other bits.
Then, in the case of the Customer Support position, I asked two key
questions
How do you think your skills and experience can help our customers?
I wanted to know what they were bringing to the table. How did they
see themselves fitting in to the business and helping our customers
succeed? Being self-aware is a big deal at this stage of our company.
Having confidence (and maybe a bit of over-confidence) goes a long
way as it means youll pull your weight and then some.
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Tell me more about your current job. Are you happy there? Whats
their current situation? Specifically, whats making them look
elsewhere for a job? Helps to know this so I can show how
Baremetrics will or wont be a good fit for them.
3. Any side projects or hobbies? This is a big one for me. I need
people who are capable of existing outside of my company. The last
thing I need are folks getting burned out because they overwork
themselves.
4. Why a startup over an established company? Everyone has
different motivations for picking a startup over an established
company. Knowing those motivations helps me understand how to
make sure their expectations are correct and that Im able to help
them succeed. For instance, if theyre interested in a startup because
they want to learn the ropes before doing their own startup, thats
great to know as it helps me provide more guidance along the way.
5. What kind of work schedule do you prefer? This one is about
setting expectations for both sides. Are they a night owl? Do they
prefer to do some work in the morning and then some later in the
evening? Asking this starts the conversation about how we, as a
company, tend to work.
6. Have you ever been self-employed? Since were a completely
remote company, hiring people whove worked on their own at some
point is a major plus as they tend to understand the ebbs and flows of
business more and are less affected by the ups and downs.
7. Have you worked from home/coffee shop/co-working space before?
Its a big adjustment to go from working in an office surrounded by
coworkers to being largely on your own. This question helps me
know if its something Ill need to help walk them through.
8. What are some out-of-the-ordinary things youve done to help out
customers and make them happy? I dont want support ticket
monkeys. I want folks who go out of their way, completely on their
own accord. Hearing about some out-of-the-ordinary things theyve
done helps surface that and shows how creative they are as well.
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After that series of questions gets covered, I make sure to answer any
questions they have and well usually exchange a few more emails.
Once weve exchanged those emails, I have a pretty good idea of if Id like
to chat more with them. At this point, its video chat time!
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Out of a group of 18 people I did video chats with, one guy really stood out.
We discussed start dates, salaries and various other logistics and then made
an offer.
He accepted it, and here we are. :)
Who we hired
Out of 800+ applications, the one who ultimately made the cut was Kaegan
Donnelly. His application came in on the tail end of our search and his initial
answers to those 2 questions we asked in the first application was what
ultimately sold me.
He communicated really well, was super laid back and easy to talk to. Plus,
he had more customer support experience than just about any other
applicant having spent 5 years as a Genius at Apple and nearly 2 years as a
Lead on the customer support team at Hootsuite.
Hes one of the most proactive people Ive ever met and really wanted to
build up the part of our company that teaches and supports our customers
well. Also, hes Canadian, so thats worth something. Maple bacon donuts
anyone?
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Communication is tough
Yes. Yes it is. But I think thats a human nature issue, not a location issue.
This goes back to hiring for a remote setup. If you hire people that are bad
at communicating in written form, you will all hate each other within three
months.
that get your team out from behind a desk. As long as youre intentional
about this, its a non-issue.
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wing it? Yess to all of those are great indicators of functioning well in a
remote setting.
Great writers
Since most of your communication will happen over chat or email, being
impeccable at writing will go a long way. Brevity is a negative quality for me
(though verbosity can also be a problem). Theres a balance between saying
too much and not saying enough that needs to be found and people who do
a lot of writing (blogging or otherwise) tend to know that balance. A major
positive for me when hiring is having a personal blog.
Non-industry hobbies
Ive found that having hobbies outside of their field are also really positive
signs. When youre working remotely, its easy to feel isolated and totally
consumed by work. People who get involved in hobbies outside of
programming or design tend to get burned out much less frequently.
Communicating remotely
Youve hired a great remote team, but if you dont take communication
seriously, youll implode.
There are a lot of great tools you can use (which you can find below), but
communication is less about tools and more about intent and purpose.
Theres more thought that has to go behind each interaction.
Youre no longer having passing conversations around lunch, youre
keeping your team in the loop so they arent left in the dark. Youre writing
so that others know clearly what work needs to be done. Youre saying
things that, in many cases, will be saved in the archives of your company
forever.
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Have set work hours and stick to them. Without boundaries, youll
work all the time and get less done.
2. Exercise every single day. Even if its just a walk around the block.
Youll have more energy and just plain feel better.
3. Alternate between sitting and standing. Every study under the sun
has shown that sitting all day, every day will quite literally kill you
sooner. On the inverse, standing all day can also have downsides.
Swapping between the two, using something like a GeekDesk, is
perfect.
4. Eat well. Loading up on sugary snacks and caffeine all day will result
in a major crash in the afternoon. Keep your work area stocked with
healthy snacks and eat them throughout the day.
5. Take frequent breaks. You should be stepping away from your
computer at least every hour to let your mind clear and your eyes
focus on something other than a screen a few inches from your face.
Usually when you come back youll have a clearer understanding of
how to tackle whatever problem youre solving as well.
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Sleeping space
Make sure youve got enough space for everyone to have their own bed,
and if possible give everyone their own room. We werent able to quite do
that in the house we choose. Everyone had their own bed, but a couple of
people had to share a room.
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Fun
Make sure there are things to do around the house to blow off steam and
clear your head. This place had a pool, hot tub, pool table and putting green
and everybody definitely made use of those things.
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Kitchen
Cooking was a big part of the retreat and a great way to spend time
together. We had both an indoor and outdoor kitchen and spent a lot of time
(especially at breakfast and dinner) cooking.
Make sure your team eats welldont skimp and buy cheap junk that leaves
everyone feeling bad.
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Birmingham, AL - $335
Lexington, KY - $664
Denver, CO - $491
Santa Fe, NM - $411
San Luis Obispo, CA - $327
Vancouver, Canada - $320
Yes, the Canadians plane ticket was the cheapest. Sigh.
After we got to the airport, we threw down mom-style and rented a minivan.
Side note: I love minivans. That set us back $418.
As a team we spent an additional $300 on taxis and airport parking.
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Day-to-day
Most of each day was just us, as a team, working together in the same
place. Mixed in there Id do 1-on-1s, people would take breaks and go for a
swim or go to the gym, wed talk through programming and design
problemsthings like that. The kind of things youd do in an office setting.
Be careful not to over schedule your time.
We did have a few times scheduled out for specific things though
Kickoff
On the morning of our first full day, we had a retreat kickoff. I did a short
presentation on all the things we accomplished in 2014 and then our goals
for 2015 and how wed reach them.
Everyone jumped in with questions, suggestions and concerns and we
hashed all that out. Doing that helped get everyone on the same page for
the week.
Discussions
A couple of days in we had set aside one afternoon to talk out some bigger
company-wide processes and issues. Things like figuring out a better way to
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handle bugs, ways to reduce distractions in Slack, how to better manage the
product as a whole in Trello.
We spent a couple of hours focused purely on this and got a lot of things
nailed down that were now putting in to practice.
Big project
Initially I hadnt intended to do a big project push, but early on we realized
we were really close to having our new Forecast feature done, so we did a 1day push and launched our Revenue Forecaster mid-week.
Id be careful doing a project that takes the entire week to pull off, though. I
think itd probably take away from the team as a whole spending time
getting to know each other and just hanging out, given everyone would be
so focused on getting the project done in time.
Story time
Each night, after dinner, someone from the team would tell their story.
Generally a mix of your personal story but also how you ended up at
Baremetrics. Super low pressure and lighthearted.
Almost everyone mentioned to me afterwards that this was their favorite
part of the retreat and that it helped a lot with getting to know each other.
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Turns out Palm Springs has a lot of 2 things: golf courses and retirement
communities. Neither of which were very appealing and we had a really
hard time finding fun things to go do.
There was a lot of hey, what do you guys want to do tonight? when in
hindsight I should have pre-planned some things to go do.
Definitely will change that for next time.
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Contexts
In OmniFocus, theres the concept of Contexts. These can be anything: a
place, situation, mindsetwhatever.
These are my Contexts:
Waiting Tasks that are waiting on
someone else or some event before I
can proceed.
Home For when Im at home doing
non-work tasks.
Office For work-specific tasks.
Errands When Im out running
errands.
Someday Things Id like to get
done one day. Mainly a catch-all so I
dont forget about random ideas.
GTD For Daily Review tasks (which Ill talk about shortly)
You can go really fine-grained with the Contexts, but I prefer to keep them
higher level.
Contexts are the way to answer the question, What should I be doing right
now, given my current location/situation/mindset?
Projects
Projects in OmniFocus are simply collections of tasks, but theres one little
thing that makes them really powerful: the project type.
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1.
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forward. Doing this first thing in the morning means my team can
keep moving forward as well.
3. Process Intercom Inbox We use Intercom for both support and
automated emails and usually there are a few tickets/emails that
need a response from me.
4. Process Email Inbox I try to keep my email inbox empty and the
key to that is not using it as a to-do list. OmniFocus has the Clip-oTron tool for Mail on OS X that makes it dead simple to create items
out of your emails.
5. Check all projects have a Next Action You should always know
what needs to be done next on a project, otherwise you need to
pause the project until youre ready to pick back up on it. Without a
next action it will sit there for all eternity and youll feel bad about
yourself.
6. Flag priority actions for today The last thing I do is go through and
flag items that I plan on getting done today. Anything thats flagged
gets done and if I finish all of the flagged items, then I can move on to
other items.
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The set up here is that the Daily Review project is set to repeat every
week day. Then you tick the Complete when completing last action
checkbox for the project and it will hide the items until tomorrow! Magic!
The Daily Review is crucial because its the time where you plan out your
day. Its your time to be proactive instead of reactive. You decide what
needs to get done based on your context and when something is due, and
you get it done. Simple as that.
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1.
Takeaway
Your biggest weakness at the get-go is a lack of understanding of the ins
and outs of the product, and thats fine! Take advantage of the time you
have early on to read everything you can get your hands on. However, you
can only learn so much by reading, which leads me to
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probably (I hope) spoken to other humans before, so youre all set on that
front. So why not jump right in?
Answer tickets Use your resources (chat history, ticket history and
API documentation) and have a crack at it. Ask lots of questions, but
try your best to find the answers yourself. Youll remember a lot more
than if youre handed the answers (teach a man to fish and so on).
Plus, your new team will think youre awesome, which is never a bad
thing.
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Takeaway
Dont wait too long to get started. Take that new job excitement and channel
it into something. Of course, make sure to check with your team that its
okay, and have someone look over your work for the first little while.
Not only will your notes be great to draw on later when the same question
or problem inevitably comes up again, but you can look back on them and
get some self-assurance (Hey! I know that thing now!).
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The most important thing here is that you are in an incredibly unique and
never to be repeated situation. Youre both a new customer of the product
(in that youre experiencing it for the first time) and youve got a behind-thescenes look into the inner workings of the company. So youre going to
notice thingsbroken things, confusing things, wonky thingsthat youll
never notice the same way again.
Now, why not just blurt these things out as you come across them? Well,
theres a few reasons for that.
1.
Youre still learning the ropes The other side of the newness coin
is that youre, well, still new. Some stuff may seem weird, but you
dont yet know enough to know why things are the way they are. So
hang tight.
2. You probably dont have the answer yet On day one youll notice
some things that could use a little elbow grease, but you probably
wont be able to craft a solution right then and there. If all youre
doing is identifying problems, youre putting the onus on the other
guys to fix it. But youre here to make things better!
3. They know Startups grow quickly, and things that worked six
months ago may not be working now. But theres sooo much going
on, that fixing it has probably just fallen off the radar.
Heres an example: when I started, we were using Intercom to handle
customer support questions. Intercom is fantastic and does a lot of
great things, but once you need to start tracking bugs, feature
requests and answering lots of questions in a day, it starts to show
some cracks. I recognized this almost right away, but I decided to
stick with it for a while until I could propose something better.
Fewer than two weeks in, Josh messages me
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Takeaway
Youve got a fresh pair of eyes and they wont last forever. Soon the quirks
will become the status quo. So take notes and start thinking of solutions!
Youll come away with a smorgasbord of projects to work on for the next
while.
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Chapter 4
Know Your Metrics
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If you churn more MRR than you get from New or Expansion MRR, you end
up losing MRR that monthwhich would make you sad. Very, very sad.
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Im sorry I just used the word formula. More plainly put, say youre
calculating user churn for the month of May. You had 100 customers at the
start of May and 5 cancelled during the month.
Youd say (5 customers / 100 customers) * 100 = 5% user churn
Important note: you ignore any new customers added during that time
frame.
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indicators but that phrase is boring enough that you and I both would have
more fun gouging our eyes out.
Depending on the stage and the end goals of your business, what exactly
these metrics are could vary quite a bit.
For our example here, well use Baremetrics. When we launched, there was
only one metric that mattered more than anything else: monthly recurring
revenue. If monthly recurring revenue wasnt going up, then we were doing
something wrong.
But why? Why did that one metric matter so much? Because without, we
couldnt keep working on the product. If we didnt get paid, we didnt stay in
business and our customers no longer had the product they wanted.
You have to find that metric for your business. It could be revenue, it could
be lifetime value, it could be customer growth. It could be literally anything.
But you have to find it and then you have to track it obsessively. Because
knowing that metric means you know how your business is doing and if
something needs to change.
Thats what metrics are ultimately about: identifying what needs to change.
Dont overwhelm yourself with metrics that wont help you run your business
in the stage that its currently in.
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Chapter 5
Money
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Payroll: $200,000
The large majority of our expenses have gone to payroll for our team and
contractors.
We spent roughly $50,000/mo on payroll, payroll taxes, payroll processing
and contract workers. In the 4 months since the funding, this added up to
roughly $200,000.
This is the biggest internal struggle for me. We arent spending Silicon
Valley-amounts on salaries, but were certainly not on the low end. From the
perspective wanting my team to love where they work and not have to
worry about money, Im very happy with the salaries everyone gets.
From the perspective of making our funding stretch as long as possible,
were spending too much here.
This isnt a topic thats black and white, though.
We could have gone the extreme-cost-savings route of outsourcing the
entire development to a dev farm on Elance for a microscopically small
amount, but I guarantee you wed have an awful product. We can all agree
thatd be a bad idea.
On the other end of the spectrum, you can certainly spend too much on
salaries. We fall somewhere in the middle of that spectrum, probably on the
higher side.
This has unquestionably been the area Ive had to learn the most. Figuring
out what everyones salaries should be is unbelievably difficult.
In hindsight, doing what our pals at Buffer do with their Salary Formula
would have been really nice.
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Infrastructure: $8,500
The infrastructure to run Baremetrics, while not huge by any real
measurement, still isnt cheap. It takes a decent amount of computing power
to crunch the numbers for our data set, which is over 55,000,000 records
and just over 65GB in size, and growing daily.
Most of our hosting costs are tied up in Postgres (on Amazon RDS) and
background workers (on Heroku). Were working on moving away from
Heroku, which should reduce hosting costs a good bit.
We typically dont hold back on spending more money on infrastructure as
thats a key part of making sure Baremetrics is useful. We certainly havent
aced this yet, but were worlds better in this department than we were a
year ago.
We also have a surprising number of domains (34, to be exact). Between
purchasing the .com, a few variations on the domain (to handle
misspellings), and domains for some big marketing campaigns in the future,
weve spent around $1,500 on snagging the domains we needed.
Tools: $6,000
We use a lot of tools to make running our business easier. Tools that, in
many cases, replace the need to hire people.
Tools are an area many founders get hung up on. They make the mistake of
thinking its a good use of their time to build internal tools as a method of
cost-saving instead of focusing on adding more value to their own product.
Its one of the things we fight against here at Baremetrics. Some companies
leave saying, Were just going to build our own internal revenue tools.
Then, 3 months later they come back having wasted hundreds of developer
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hours and realized how hard it is to do correctly and they reactivate their
account.
Building something for weeks (or months) just so you can save a couple
hundred bucks is an intensely bad use of your teams time. Youre much
better off spending that time adding more value to your product, which in
turn makes you more money.
Travel: $8,300
The large majority of our travel expenses were wrapped up in the plane
tickets and lodging expenses associated with the retreat we did last month.
Yay plane tickets!
Teams of our size that arent remote wont have these types of expenses,
but its a necessary part of the game for us and something Im happy to
spend money on.
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Advertising: $7,800
The primary form of advertising we do is retargeting (via Perfect Audience).
In the past its gotten us new customers for as little as $6. Lately its been
more expensive, but its still very much worth it for us.
Weve tried Twitter Ads and Google AdWords, but in general those require
sacrificing a limb per click and arent worth it.
This is an area that in hindsight I could have saved a solid $3-4k, especially
on AdWords. I wanted that to work so badly and didnt cut ties soon enough.
Insurance: $2,000
We used Founder Shield for that and it was entirely painless. I dont have
more to say about this because Founder Shield literally made it a no-brainer.
For us that means everyone gets a Kindle Paperwhite with unlimited Kindle
books, a Jawbone UP, minimum vacation days, random gift cards and a
$250/mo remote stipend that can be used for anything (phone, internet,
food, gym membership).
Runway
Above I broke out how we spent money for the 4 months following our
funding round. Thankfully, weve brought in over $100,000 in revenue
during that time frame as well, and were growing revenue about 10%
month-over-month.
A common scenario when you take on funding is that you operate at a loss
for a while. The idea being that spending a bunch of money now results in
making more money later. More than you would have otherwise. You
obviously cant operate at a loss foreveryou only have a limited amount of
money to burn through. This is your runwaythe amount of time you have
until you either need to be profitable or find some new influx of cash.
At our current rate, well actually be profitable again well before we burn
through the cash. The only real scenario that would change the situation is if
we make another full-time hire soon. In that case wed effectively end up
with a 12-month runway.
This post is honestly a bit scary for me. It opens the doors wide for extra
scrutiny from potential customers, competitors and other entrepreneurs. My
hope is that offering some insights in to how were spending money will
help both other startups and us to spend our money more effectively
instead of all things money being kept private.
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Blog
Friend or colleague
Search engine
Facebook
Twitter
Other
You are trying to understand how all of your current customers are finding
you. This will also help you segment the responses later on to figure out
where your most qualified customers are coming from.
2. How would you feel if you could no longer use Baremetrics? (multiple
choice)
Very disappointed
Somewhat disappointed
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No
Yes (Please explain how you described it)
Similar to the previous question, it helps surface what your customers find
most valuable about your product as well as the language they use, which
you can then work into your own marketing.
Not disappointed
If the majority of customers would not be disappointed if they could no
longer use your product, youve got a problem, and not one you can ignore.
Customers do not care about your product, and when youre building a
business on your productthats a significant problem.
Dig through all the responses, try to find out why they dont care. Also, look
at the people who said very disappointed or somewhat disappointed
and see if their responses can give some guidance on how to overhaul your
product.
Youve got a lot of work to do here.
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Somewhat disappointed
When the majority say somewhat disappointed, youre close! Spend a lot
of time segmenting the responses based on the other questions to
specifically identify the customers that said somewhat versus very and
compare them.
Learn what the difference is between those segments, spend time talking to
those customers and make a game plan for improving the product.
Very disappointed
If the majority say they would be very disappointed, then congrats! Youve
got product/market fit! You are likely about to or already have started to
experience some solid growth.
Spend time optimizing marketing messaging based on the responses to the
other questions in the survey. Dont hold back on resources (money, time,
etc) that fuel growth.
If youve ever thought about raising money, this is a prime time to do it as
investor cash can be fantastic when used to fuel an already burning growth
fire (I feel like I should hashtag #growthhack that phrase).
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The main relevant number there is the aCPA, which is ultimately the cost per
acquisitionhow much Im spending to acquire a new customer.
The average over the past 2 months has been about $13 across the 2
campaigns Ive run. Typical banner ads have run around $21 per acquisition
and Facebook ads have been about $6 a pop.
Considering the LTV of the average Baremetrics customer is around $650
Im practically printing money here. $6 to acquire a $650 customer is
phenomenal.
But why has this worked so well? Glad you asked.
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For reference, here is a smattering of the various banner ads weve have or
have had running.
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the value youre providing, and the more value you provide, the more
money you should make.
With that in mind, does unlimited makes sense? No. Because they get
unlimited value while you just capped how much revenue you can make
on any given customer. Now would be an appropriate time to facepalm.
Do you realize how bad of a move that is? The type of customers who will
make use of that unlimited plan are exactly the customers who will be
more than happy to pay you exponentially more than youre charging!
Theyre the ones who stand to get the most value and the more they use
your product, the more value they get! Charge them accordingly.
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When you consider that those $3/mo customers are usually the most
demanding and least loyal customers youll ever have, you can see why
having a low ARPU can quickly drive your business in to the ground.
So how do you resolve this? Charge more.
If youre B2B and charging less than $20/mo for any plan, youre just grossly
undervaluing the service you provide. If you provide even an ounce of
business value, you should be charging over $20/mo. End of story.
If users wont pay more, then youre not solving a big enough problem or
arent solving it in a way that provides enough value.
If youre B2C, theres honestly very little you can do. Most B2Cs have a
notoriously hard time breaking even. The stories of B2C products surviving
(without being propped up by millions in VC funding) are few and far
between.
Baremetrics ARPU is currently around $6570. Id like to have that closer to
$150200 as it means Im able to offer better support and service to our
customers and also means needing fewer support folks down the road.
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The problem is that growth rates plateau. You wont have high growth rates
for long and eventually the charts invert and within a few months youll be
running in the red.
To decrease churn you provide more value and increase engagement.
When you increase engagement with your product, you make it less
disposable.
A couple of quick-fixes to increase engagement are to provide something
like a daily/weekly/monthly email report (which conveys the value your
product offers) or adding multi-user support (which gets a whole team using
your product, making it hard to part ways with).
Baremetrics user churn is around 10% right now. Its double what I want it to
be, but its declining, so were headed in the right direction.
Im not talking solve world hunger impact. Im talking the type of impact
that changes your world, the world of your family, your kids, your friends and
the businesses your serve.
I worked on my past two SaaS products for over 3 years, many times
pushing through what I just assumed was par for the course. And then I
launched Baremetrics and realized how much better things could be. In less
than 3 months I surpassed what took nearly 3 years to build up to with
previous products.
Its a tough decision to cut your losses and move on, but pushing through
something that isnt working doesnt end well for you or your customers.
If I can help with thinking through any of those decisions, feel free to post
comments below or send over an email.
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predict if someone may be churning soon. This gives you a list of customers
that you can reach out to and hopefully mitigate them churning at all.
Increase engagement
Engaged users dont churn. Customers using your product on a regular
basis are doing so because they get value out of it. But as soon as their
engagement starts dropping off, theyre much more likely to churn.
Give your customers reasons to keep coming back. Provide a way for them
to get value on a daily basis. This could be in the form of a daily report
showing them whats changed/happened in the last day or showing them a
list of things to do in the coming day. Provide something that makes you part
of their daily workflow.
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business is doing.
The emails not only give them information they want to know, but also tend
to have an I love getting this email from Baremetrics! reactionand you
want people loving what your product does for them.
Summary emails are a fantastic way to convey the value youre providing.
Many people who do ad retargeting filter out users who are already
customers, but we actually show ads to our current customers for the sole
purpose of keeping Baremetrics top-of-mind.
Your product is likely one of dozens of services they use on a regular basis
and it can be easy to get lost in the mix. Using ad retargeting youre able to
gently remind them (especially early on) that theyre getting value from you.
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When youre just getting started and youre strapped for cash, you
typically do all sorts of things to pinch pennies. Its just part of
surviving, and its a healthy thing to do when youre not actually
making any money. The danger, however, is keeping that mindset
after youve got a steady stream of cash flowing.
Its a danger that creeps in to a lot of startups and never goes away, causing
generally sane people to do insane things in the name of not spending
money.
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Buyers
Buyers are the ones who decide to just spring for existing tools out there.
They realize that, while spending $250/mo for A/B testing stings a little, it
will ultimately help them make more money.
Builders
Builders are folks who balk at that $250/mo A/B testing suite and decide to
use their engineering resources to just whip up a little homegrown A/B
testing suite during a weekend hackathon. That $250/mo stings far too
much and cant possibly be worth that.
The Problem
But heres the problem. That weekend hackathon turns in to a few weeks of
getting it just right which turns in to a couple of months of distractions for
the engineers as they tweak all the random edge cases no one considered.
Next thing you know, youve spent literally hundreds of hours building a tool
thats not core to your business. Hours that really hardly saved you any
money. But worse that that, it was hours that werent spent making more
money by improving your core product. Not only did you save an
insignificant amount of cash, you actually stifled future cash. /facepalm
much money you made last month and should make next month, upgrades,
downgrades, etc. A dumbed down version of Baremetrics. ;)
Say youve got a few thousand customers, so youd be on the $250/mo plan
at Baremetricsand no way on earth ever in your life would you pay $250/
mo for anything ever anywhere. Absurd! So you decide youll get your team
of engineers to build something internally. How hard to could it be, right?
In reality, it will take at least a month of engineering time. Maybe not all at
once, but the fact is, building an analytics tool correctly is difficult. Especially
when you get in to the really useful stuff. Its just time consuming, whether
you like it or not.
Lets assume those three engineers are getting paid, on average, $90,000/
year.
My 6AM-in-the-morning math tells me thats $7,500/moper engineer.
Multiply that by 3 and weve got $22,500.
Congratulations, you just spent $22,500 to save $250/moa Baremetrics
account for 7.5 years. Statistically, your business wont even exist in 7.5
years.
But! It gets better! Not only were your engineers focused on building that
internal analytics tool, they were not focused on making your actual product
any better.
Say you were at $50,000/mo in recurring revenue and growing at a steady
10% month-over-month. That means in 12 months youd be at roughly
$155,000/mo in recurring revenue.
However, spending a full month, heads down, building a major addition to
your product that reduces churn and expands your market size could have
potentially bumped up that growth to, say, 11% month-over-month. That
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And, if we take the actual earned revenue over that 12 months, in both those
growth scenarios, theres an $85,000 difference.
That means, in the first year after your cost savings experiment, you spent
$22,500 in engineering resources plus $85,000 in lost revenue, for a grand
total of $107,500. Sweet goodness.
Across the board, nearly every single time someone got hung up on price,
they were a consumer-focused business. Most were charging less than $10
a month for their product. Many were charging more like $2 a month (in the
form of a $25/year plan).
The interesting thing is that these companies werent struggling on the
revenue side. Many were making 6-figures per month. Instead, it was a
value problem for them. Their entire business revolved around selling a
relatively low-value product to a high-volume of customers.
They were primed to not place a high value on things that solved business
problems for them.
This is a realization thats held true across four separate companies in four
separate industries that Ive run and, talking to other startups, this has also
held true for them.
Be careful who you take product roadmap queues from. All feedback is not
equal. The value-perspective your customers come from is crucial when
deciding how much weight to place in their feedback.
So whats the takeaway here? Its simple, really. Either spend the money to
get the tools you need, or just focus on making your own product make
more money. But dont waste your engineering resources on things that
dont make a big, long term impact.
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A couple of years after that, in 2011, I built a survey platform. But unlike the
ad serving industry (which had virtually zero competition when I started it,
minus some crummy self-hosted stuff), the survey industry was
overwhelmingly crowded. There were quite literally thousands of
competitors.
What changed in three years? What mental barrier dropped that made me
okay with going head-to-head with such a crowded industry?
The change was the understanding that competition does not matter. In
fact, Id go so far as to say you should completely ignore it.
A touch dogmatic? Maybe so. But I think the inverse is much more
dangerous.
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Laser focus
What you and your customers need is focus. Having a strong belief in what
youre building and how youre helping your customers ultimately results in
a better product that solves real problems.
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You wont figure it all out right away. It takes years to build a solid product.
The way you solve business problems on day 1 will be vastly different from
the way you solve the problems on day 1,000.
Competitors will come and go. Youll likely find yourselves heading down
different paths the longer youre in business. Youre each incrementally
improving your product and doing so in different ways.
If youre in it for the long haul, as long as youre laser focused on solving
your customers problems, youll do just fine.
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Chapter 6
Growing Your Business
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We spent much of the year focusing on increasing value and it paid off. We
grew ARPU by nearly 70% from $55 to $93. Everything from more features
to solid customer support all contribute to a higher-value product.
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Our partnership with Buffer permanently changed the growth curve for us,
all thanks to a 10 minute conversation on the way to dinner at a conference.
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Raising money
Its slightly counterintuitive, but the process of raising our $500,000 round
of funding had a noticeable impact on growth. Raising was definitely the
right move, but the process of wrapping that up was draining at best.
As Paul Graham says (paraphrased), either youre raising or youre
buildingbut you cant do both. That was definitely the case for me. All the
paperwork, calls with lawyers and the mental roller coaster of the entire
experience took a toll.
Hiring quickly
I hired four of our five employees in less than two months. Given I had nearly
no hiring experience, there was a major learning curve. Getting all the things
in place to properly support a team is a surprisingly huge amount of work.
Payroll, benefits, on boarding, design and development processes, and a
thousand other things.
Bringing everyone on was definitely a good move, and were now starting to
see the byproduct of having a really solid team in place, but it was basically
my only focus for 6-8 weeks.
Tack that on to the tail-end of raising money, and there were about four
months there where growing the revenue part of the business just couldnt
happen. Thankfully were on the upside of that now.
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Everyone on the team is firing on all cylinders and the big features weve
had in the pipeline for the past few months are about to start rolling out.
Those big features, plus a slew of other things in the works, will make that
$1M run rate a real possibility.
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Naivety
Prior to 2011, I honestly had never given VC money a single thought. I was
blissfully unaware that it was common. My entire thought process behind
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building something was heres a problem, now let me figure out how to
build it. Id teach myself the skills necessary to get it off the ground and
then charge money for it.
I then started building a survey platform and my co-founders put a bunch of
money into it and we started looking to raise a small seed round. I was
dropped into shark-infested waters and it was intensely uncomfortable. Lots
of meetings with VCs who were nice enough, but I always felt like my goals
for the company never jived with their expectations.
I had also only surrounded myself with people who thought like me, which is
great when you want a single line of thinking, but not great when you want
full perspective.
So, after that, I was staunchly opposed to raising money. I went from being
naively unaware of VC money to naively categorically opposing it. Neither of
which were particularly useful or healthy.
Then I launched Baremetrics.
Coming around
Things took off much quicker than anything Id previously done. After
making our metrics public, and then Buffer doing the same, Baremetrics
began to get a lot of exposure.
Our financials were public, which meant our 30%+ growth rate was also
public. Quite a few investors started reaching out.
At first I dogmatically turned down all the calls. I was laser focused on
building Baremetrics and I wasnt about to let some sleazy Silicon Valley
used car salesman try to force my hand.
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Then I realized I was being too harsh. Not on the focus part, but on investors
in general. I was talking to a few pals whod taken on seed rounds and
instead of it being an awful experience for them, it was completely positive.
It wasnt the nightmare scenarios Id pictured or read about and I realized
that there are actually great investors out there who arent greedy and
overbearing.
So, I started taking some of those calls I had previously turned down. I
started having some legitimately great conversations with investors who had
interesting insights. Investors who had perspective and experience in
certain markets that I didnt and many who had built quite a few businesses
themselves.
It changed my entire view on investors.
A unique position
The more conversations I had with investors, the more I realized I was in a
relatively unique and favorable position. I had the power to walk away. I
didnt need their money. I was a one-man show with very little overhead who
was profitably running a fast-growing business.
I was clear about the types of deals I wasnt interested in and was able to
avoid wasting time trying to make deals happen that just werent in my best
interest.
I wasnt interested in giving up board seats or lots of equity and so until I
found an investor who was inline with that and could agree to those terms, I
would walk away.
This past July, I was having a conversation with Patrick at Stripe, which led to
conversations with the good people at General Catalyst. They were
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completely on board with the way I wanted to run things and the type of
deal I wanted to do.
We closed a $500,000 round of funding with really great terms. This was
the deal I wanted.
Money
The most obvious/literal thing that changed going from bootstrapped to
funded is that my bank accountgrew.
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Maker to manager
Growing from a team of one (me) to a team of sixthats been such a major
shift for me. I went from literally handling all design, development, support
and marketing toalmost none of that.
I now spend my time making sure our team has everything they need to
keep moving forward, planning the future of the product and marketing. If
youd have told me a year ago that Id be doing employee 1-on-1s and
planning a company retreat, Id have laughed at you and kicked you in the
shins because thatd have been ridiculous.
High stakes
Most of the time, building a startup isnt stressful. Sure, it can be nailbiting at
times, but for the most part Im 100% stoked to be building something that
people love.
That being said, there is certainly more I worry about. Or, worry may not be
the right word butI certainly have a lot more I need to take in to
consideration.
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Theres just a heck of a lot more at stake now. The biggest thing being that
there are now 5 people on our team who are depending on me to not run
this ship in to the ground. As much as I want to build a great product, I want
even more to do right by my teamthe people whove chosen to make
Baremetrics a major part of their lives.
I want them to look back on their time here and to have loved it and for it to
have been absolutely worth it.
And what about high stakes with our investors money? Thats the argument
many times against VC money is that you become a minion for the investor
and have to make every decision based on their unreasonable desire for
wealth.
That may be true in some situations, but thats completely a byproduct of the
deal you do and who you do the deal with. Thats just not the case for us.
General Catalyst isnt that type of investor and the terms of our deal simply
dont allow for that.
Who you do a deal with changes everything. All money is not equal.
Going bigger
One surprising thing the funding has done is changed my perspective on
what Baremetrics could be long term. Baremetrics started out as a side
project and for a while I had a bit of imposter syndrome, each month
thinking surely this is the best Baremetrics will do, this cant become an
extremely profitable business.
But what Ive realized as the team has grown and our customer base has
grown is that Baremetrics can in fact be a very big business.
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Its motivated me to build something larger than myself and to me thats one
of the most exciting parts.
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Weve certainly seen business with much worse churn, but neither number
were acceptable and they were just making it harder to grow. The problem
was, we just didnt really understand why this was happening.
So, at the end of February, we started Operation Churn Reduction.
The result of this was a 68% reduction in user churn to 3% and a 63%
reduction in revenue churn down to 5%.
But what did we do to reduce churn so much?
How we fixed it
We needed to fix our churn problem ASAP, so I didnt write any content on
the blog for all of March and ignored most email and phone calls that didnt
have a direct correlation to us figuring out what was wrong. Then we did
three things over the course of two months.
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These were the same people who would just put something to the affect of
Didnt fit my needs in that cancellation text box and wed never hear from
them again.
Definitely a huge win for us on both understanding the why but also
actually saving a substantial number of customers from churning at all.
Now, the common assumption here is that making users contact you to
cancel will result in lots of angry customers beating down your door and
setting your house on fire. For us, this hasnt been the case at all. Theres
been literally one person who was slighlty upset, while many more actually
used contacting us to cancel as a way to thoroughly talk through how they
wished we could have served them better.
Talking with a number of other companies that do this, their experiences
have been nearly identical. I can see this not working well with a B2C
product, but with B2B Id suggest trying it for even just a few weeks to get
some solid feedback on why users are churning.
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Just by reducing churn, not even increasing our revenue growth rate, the
outlook is much different. Taking that same example, but reducing churn to
5%, our MRR after 12 months is a much nicer $62,000.
If your churn isnt in the single digits, its absolutely the only thing you
should be focusing on fixing right now.
What are some things youve done to reduce churn? Need help reducing
your churn? Post in the comments about what youre having trouble with
and Ill be happy to help!
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This went on for a few more months until I was finally resolved to the fact
that it just wasnt in the cards.
Then, in August, that $500,000 investment showed up. I figured I had a bit
more money at my disposal, so maybe I should just offer more?
I sent Mr. Thug Street Preacher another email offering $2,000, but was met
with more, you guessed it, silence.
I started looking around for a bonafide domain bounty hunter (who hopefully
looked something like Dog the Bounty Hunter) to try and snag it. I used a
guy quite a few people recommended, and even he was no match for
ThugStreetPreacher4Life. We were offering up to $5,000 at this point and
never got a response.
Emails and phone calls were all met with silence. It was maddening. I just
wanted some sort of acknowledgment. Some iota of hope that we could
make it happen. Then GoDaddy came in the picture.
GoDaddy. Ewww.
I transferred all of my domains (and business in general) away from
GoDaddy a couple of years back and have kept my distance since. But that
was the comfy home of baremetrics.com and GoDaddy was my last hope
here.
Initially the domain was set to expire in November 2014, so I paid for their
domain backorder service, hoping to instantly snatch it up when it expired.
But shortly thereafter, the domain was renewed for another year. Thats
when I stumbled upon GoDaddys Domain Buy Service.
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You tell GoDaddy what price range youd like to try to get the domain within,
then they reach out to the domain owner and negotiate a sale. Given the
domain was hosted at GoDaddy, they had much more efficient means of
getting in touch with the owner past the WHOIS data.
So, I put in my price range ($500 - $5000), paid the $70 service fee, and
waited. I had no idea how long the process would take (or if wed have any
luck at all).
Then, 9 days later (and over 11 months since I first attempted to get the
domain) the email came.
SCORE!
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The takeaway
I wish there was some sort of magic voodoo recipe I could give you for
getting any domain youd like. The fact is, I lucked out. Big time.
If you want another human with far more experience than you at acquiring
and negotiating domain sales, talk to Kellie Peterson of Dotology.
However, if you ended up in a situation like us where the WHOIS info was a
complete dead end, its worth looking in to whatever domain auction/buying
service that domains registrar has.
For us, GoDaddy came through like a champ. I really cant recommend their
Domain Buying service enough as it worked beautifully for us.
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