Finding Your SaaS Flywheel – Rob Walling – MicroConf 2012

0:00[Music]

0:07[Music] Um, I don't know why I insist on speaking at an event that I throw because I got to be honest, like my, you know, I'm just elevated, right? I'm like trying to get the conference done and then it's like, oh, and I got to talk too. Really? I should have just found someone to to fill in for me. Maybe my wife. She'd probably do a a good job of it. Um, today I'm going to be talking about three topics that uh some of

0:33Here's a USB over here.

0:40Three topics. Um, there's going to be some kind of inspiration in it and some here's what I've done and here's why it's okay for you to do the same. And then there's going to be others that are really applicable and and things you can apply hopefully tomorrow or next week when you get back. So, I have a mix of stuff. Um, and I'm gonna I'm breaking up into three acts and we're gonna have Q&A after each act. Just a couple questions because they're pretty disparate. And Heat and Shaw mentioned to me that, you know, he's like, if you're talking about different things, you should really give

1:08people a chance to ask questions. So, I'm going to be talking uh finding a flywheel. Um, the flywheel is a concept that I've I've heard now that it's it was from the book. Um, anyone remember the book? Good to Great, I think, is where it comes from. Yeah. I didn't realize that. So, I had this whole concept I come up with. I'm like, "Oh, this flywheel versus hamster wheel thing. This is awesome." And then I found out that I kind of ripped it off from someone. So, that that's always a bummer. But, um, so the concept of a flywheel is finding a part that, uh, typically a marketing approach that

1:40makes your business run. And often you'll you'll find something that you can uh a marketing approach you can use, a way you can get customers, but you'll find that it like tops out pretty quick, that it doesn't scale, that it's a lot of dollars for hours. And so even being a consultant tends to be kind of a hamster wheel, right? You're kind of running and running and when you stop, you stop making money. Um, but building a product is more of of a flywheel approach. And then there are certain marketing approaches that are flywheel approaches as well. And we're going to look at them at them in here. So this is

2:07this is my process of uh of finding a flywheel. Anytime you consume media, you read a book, you listen to a podcast, you should be thinking what's in it for you because you're giving your time to someone. So right now you're giving me about it's about 354 minute talk. So you're giving me that time. It's very valuable because the people in this room obviously make a lot of money and I appreciate that. So, what's in it for you? First thing I'm going to be talking about is how to double your rate of success. The second is why boring products have a higher chance of success. And if you've ever yeah heard

2:37me talk about stuff um I I hold this viewpoint pretty hard, you know, pretty dear to my heart, but I'm going to go into deeper detail than I've ever gone into on this topic before. And then the last one is how to double the revenue you receive from each customer. And I'm going to give you some specific examples of things that I've done and a couple other entrepreneurs have done to do that. So that's the really, you know,

2:56rubber meets the road the last section. So I cut this background slide out al together and I wasn't going to do it today. And then last night we got into a discussion and I felt like I had to add it back in because a couple people um you know came to the conference. I just figured if people had come that they had read my book or or listened to the podcast or something, but felt like it's it's good to have a refresher. So, typically I say, you know, I'm I'm a software developer by training. I've been writing code professionally for about 13 years. And I've recently been

3:24told that you're not a software developer anymore, dude. Like, who are you kidding? Is that some kind of badge you hold or something? Because I I don't do design patterns anymore. I I really I'm more of an entrepreneur, but I still have that that hacker ethic. So, I really like hacking away. I've been writing code about 20 hours a week for the past seven months. But then someone called me on that and they said, "Well, but what language are you using?" and I said um classic ASP and VBScript bec because I acquired a product tail that's written in classic ASP. So that's what I'm using. It's not my language of

3:55choice but I think for for the next six months I'm probably a ret a retro hacker. Um I have a portfolio of kind of smaller web apps. That's just been my approach. Uh very tight niches and altogether they make you know my kind of my full-time income. And one of them is Hitale. It's the most recent app that

4:11I've acquired. It's an SEO keyword tool. I bought it from the previous owner and I'm fixing it up. And that's become a pattern. I really love building and launching, but I found that I I'm actually kind of gifted or or I've just learned the the the process of buying and and uh fixing up and that it's actually a faster way to get to market and it's a way to skip a lot of steps like to buy something that already has problem solution fit gets you, you know, 600 800 hours ahead of of of time. So, if you can do that, you know, for 510,000, it's totally worth it. Um, I

4:42also own invoicing software written in.net and I, uh, wedding toolbox. It's a wedding website builder. I own about 10 in total in just bizarre different niches. Um, and then I have the blog Software by Rob and I wrote a book. So, I'm going to dive into some stuff. Oh, yeah. So, I think this is going to be a trend. So, I'm going to be talking today in three acts. First act is to double your rate of success, double your rate of failure. And we're going to start with a little video. Let me get this going

5:22here. This is a TED talk. Oh, and you know, I should intro this. Uh, basically this guy had it was like 1992 and it was before the first web browser was built. Oh, it's totally playing. Dang it. Um, it was before the first web browser was built and they had a desktop HTML viewer. It wasn't a web browser, but it was you could have local HTML and you could view it and they would link up local networks. And that's

5:51what this talk is about. And my company built a system called Guide for the Apple Macintosh. And we uh delivered the world's first hypertext system. And this began to get ahead of steam. Apple introduced a thing called Hypercard. They made a bit of fuss about it. They had a 12-page supplement in the Wall Street Journal the day it launched. The magazine started to cover it. Bite magazine and communications with the ACM had special issues covering hypertext and we developed a PC version of this product as well as the Macintosh version

6:20and our PC version became quite mature. Um these are some examples of the system in action in the late 80s. You were able to deliver documents. We were able to do it over networks. Uh we developed a system such that it had a markup language um based on HTML. what we called HML, hypertext markup language. Um, and the system was capable of doing very, very large documentation systems over computer networks. So, I took this system to a trade show in Versailles near Paris in late November 1990 and I was approached by a nice young man called Tim Bernard Lee who said, "Are you Ian Richie?" I said,

6:53"Yeah." And he said, "I need to talk to you." And he told me about his proposed system called the worldwide web. And I thought, "Well, that's a kind of pretentious name, especially if the whole system ran on his computer in his office." But he was completely convinced that his worldwide web would take over the world one day. And he tried to persuade me to write the browser for it because his system didn't have any

7:12graphics or fonts or layout or anything. It was just just plain uh text. And uh I thought well you know interesting but guy from certain is not going to do this. So we uh we didn't do it. In the next uh couple of years the hypertext community didn't recognize him either. In 1992 his paper was rejected for the hypertext conference. In 1993, there was a table at the conference in Seattle and a guy called Mark Andre was demonstrating his uh little browser for the worldwide web and I saw it and I thought, "Yep, that's it." And the very next year in 1994, we had the conference

7:45here in Edinburgh and I had no opposition in having Tim Bernard Lee as a keynote speaker. So that puts me in pretty illustrious company. There's a guy called Dick Row who uh was at Deca Records and turned down the Beatles. There's a guy called Gary Kildall who went flying his plane when uh IBM came looking for an operating system for their IBM PC and uh he wasn't there so they went back to see Bill Gates and there's the 12 publishers who turned down JK Rowling's Harry Potter I guess on the other hand there's Mark Andre who wrote the world's first browser for the worldwide web and according to Fortune

8:16magazine he's worth $700 million but is he happy so it's a great talk it's called the day I turned turned down Tim Berners Lee. I just had, you know, two minutes out of about 8 minutes. If you're interested, you check it out. The reason I play that video is because obviously that could be construed as a failure, right? But this guy actually went on to do some pretty cool stuff after that. You can read up on him. And I as I've thought back about what I talked about last year and I had this uh string of like all the ways that I've failed in the past like seven,

8:44eight, 10 years. And then I went on Mixer G about a month or two ago and when we were putting the timeline together, it was downright embarrassing. like it was I started leaving failures out because I'm always saying like ah you know you should fail and learn and after about six or seven in a row I started realiz like was I not learning like what what was I doing here? So um I wanted to talk instead of about like all the stuff that maybe I've talked about before I I look back over the past six months and realize that I've had a string of basically failed attempts but

9:14that I've gotten better at something and it's about learning quickly. So, uh, Flogs is from a few years ago, actually. It's from like 2005, 2006, but it was dig for personal finance and it was my, uh, brainchild and it completely flopped and it was about 600 to 800 hours of my time and three or 4,000 bucks. And this was at a time when I I didn't have a lot of money and not that I have a lot of money now, I just it was a lot of money at the time. Um, and what I learned from that, of course, is after it failed, um, I need to figure out a way not to invest

9:43so much time before I fail. And so the next failure was feed shot. I talked about this a little before. It was in 2007206 and this was about 200 hours and it actually made a hundred bucks a month maybe. It's still live. Um I don't own it technically anymore although it still resides on my server but someone else owns it. It um so I failed in about 200 hours this time and I was thinking like huh getting a little better at this like failing faster is actually because I learned from each of these. I learned like you need to have a niche, you need to have a customer, you need to solve a

10:13problem. Feedot actually does solve a problem. Flogs didn't solve a problem for anyone. Feedot solved a problem people had, but I I couldn't market to those people because I was charging $2. My LTV, my lifetime value was $2. You can't build a product with a $2 LTV unless it's an iPhone app. And so that was a failure, but 200 hours and I learned some stuff. So I'm like, "All right, this is good. It's not too expensive to learn this way." Startup Lens, I was like, "Man, people need website reviews. Wouldn't this be cool if I just did free website reviews? I created content. I'm the Gary Vee of

10:44like, you know, startup website reviews. This is this is cool. So, I did 12 episodes and then and closed it because no one else cared. I got 100 100 subscribers, you know, and the blo my blog has 20,000. The podcast has I don't even know 3 4,000. And so, 100 subscribers after two to three months of of doing this was just not worth continuing. It was obviously I was not

11:04filling a need for people. But I failed. This one I got better, right? I hired an editor and they were only seven minute screencasts. So I spent about 30 40 minutes once or twice a week for two months. Bam, closed it down. If it had taken off, I would have kept doing it and added to it and expanded on it, but

11:20it didn't solve a fundamental problem. So I shut it down. I decided not not to try to pivot it. Um, I own a a job board called apprentice lineman jobs and it does pretty well for me. And so I started expanding into other niches. Um, friend of mine in here was doing the same thing. We were both going, we would like claim I'd say, "All right, I have pipe fitters." and he'd say, "I have uh

11:40electricians and I have plumber jobs." And so we're trying to start these niche job sites to duplicate the success that I'd already had. And so I went after apprentice electrician jobs. And this one I started getting smart. Apprentice lment jobs make a good chunk of of the incoming traffic is is pure SEO. And contrary to popular belief, not all of my businesses are pure SEO, but this one it's like 80 to 90%. So I figured if I can rank for certain terms for this one, it's going to work. And if I can't, it's not. So, all I did was I hired someone

12:08to write an article and I did SEO on it. I just posted it up there, got a couple links built and sat and waited and I started getting some some visits. And after I had about 4 to 500 uniques a month just on this one page article that I had slapped up that was just ugly as hell, I went and bought an off-the-shelf job board for a few hundred bucks, frankly, and had someone install it. And then I got a VA to start populating the jobs. You know, I went through the process. So, my total cost on this one was was about 12 hours of my time and

12:37then I paid uh about 400 bucks and it failed. But again, I I learned some stuff. I learned exactly why this didn't work. And it's totally it's about the way the n how big the niche is and some other stuff that you don't care about. But the point is that I'm now getting my failure. It was 200 hours, then it was a couple months, and now this one was uh 12 hours and 400 bucks. And so it goes on and on. Um, I spent I mean, these kind of get repetitive, so I'm going to go through them quick. But like this one, I spent 1,300 bucks. I thought I

13:06could monetize it. It didn't work, but it was 1,300 bucks out of pocket. This was a a job posting I did. I hired a virtual assistant about four or five months ago. I invested a lot of time into it. It's a odesk job posting. And she was awesome. I hired her and she was just cranking away. And then after and I trained her, did the whole deal, got her up to speed. She had all the processes

13:26in. I was like, "Tier one email support. There you go." And two days later, she just went off the grid. I guess she's like living in Montana in a cabin or something because I texted her. You know, I did all like seven ways of contacting her. I didn't hear from her. So, you could say, "Well, that was a pissed away a bunch of time." But what I had saved on this one is I'm learning that when I fail, if I'm going to at all need to to backpedal a little bit like I did on this one, I had not Skyped with her. I had Skyped with her once just to

13:56chat, but I had not Skyped and said, "Here's how we do support." I had recorded screencasts and I had created some Google Docs. So, it was all repeatable process. So, even in this failure, it took me just a couple hours. I picked the number two candidate and I put him in the place, gave sent him an email to all the same screencast. So, all the time I had invested, almost all of it went to to uh you know, getting the new guy up to speed. So, while it was, you know, a failure or just kind of a stucky situation, um, I'm learning to recover more quickly from this. And

14:25that's I think over the course like in 2005 when I was launching, I didn't even I was so scared of failing that I really wanted to just push it off. Push it off. So, longer I could wait until launch, the longer I was successful because I hadn't failed yet. Whereas now, I'm okay with failing fairly quickly because it's not a fail and give up. to fail and take

14:46a step back and reapproach it, pivot it. The next one, uh, I mean, gosh, this is my blog. Like, who in their right mind, it's a success now, but who in the hell would stick with a a thing that is this a pointer? Oh, man. That's not what I wanted. Let's see. I need a laser pointer here. You know what? There isn't

15:05one. All right. Middle but Oh, the big one. The huge one that says laser pointer. These things need a UI rework. Okay. So, who in their right mind starts a blog um September of 2005 and that's about a year. A year. This is my RSS subscribers. Yes, this is it's great to be over here and be um you know, right around 20,000. But look at

15:29how long I just toiled. What an idiot. Like fail, fail, fail, fail. And these were individual failures. Uh this blog post I referenced here, I spent like 16, 20 hours on it. And now Twitter didn't exist at the time, but there were um 50 reads, 50 uniques on this, 15 to 20 hours. And I did this over and over and over. But you know what I did? I learned two things. One, I learned how to be a better writer. I wasn't that great of a writer early on. And number two, I learned what my audience actually wanted to hear, right? I learned what people were interested in. So I failed over and

16:02freaking over and eventually got here. And there were a couple, you know, there were a couple pretty big turning points. I got on the front page of dig like half a dozen times here and then some other stuff happened. I think like Jason Cohen mentioned being an off-hand comment once and then right there. So that was that was that I'm catching him too. He's at he's at 31,000. You're going to pass our mesh soon, man. You once a week I'm on

16:25I'm like what's his what's his RSS? What's his RSS? Okay. Um, so HitTail, this is a SEO keyword tool I bought in August of last year and um, it didn't look like this when I bought it, but basically it helps people increase their organic search traffic. During the acquisition, I ran a bunch of numbers, right? You're going to buy something, you're going to give someone uh, thousands of dollars, you're going to um, want to know how profitable it is, what the lifetime value is, cost to acquire a customer. You want a bunch of numbers. So, I ran these numbers. Their data was was iffy. And so I I had some

17:00pretty rough rough times. And frankly, even within the past couple of months, if you've been listening to the podcast, you know this. Or if you've talked to anyone who like my wife, you'll know that uh I've had some kind of rough weeks. Um so I had a lifetime value of a customer that they had and it was off by 50%. That actually no, it was off by

17:16more than that, but that really sucked. And I didn't know that until after I bought it. So I basically overpaid for it a little bit. Not the end of the world. I recovered from it. my redesign estimate. I said, "We're going to get this thing six weeks and 5,000 bucks. Boom. We're going to be out of here." And then uh almost four months later, 10,000 bucks. You know, the site looks great, but it was four months later. And

17:35so that was out the window, right? Fail. And then the last one was um I thought I'd hit it really hard with this relaunch and just start. I had a goal in six months. I wanted to be at this huge re I wanted to 10x revenue in six months. And so first month out of the gate, I'm off by 80% of what I where I need to be. And so I really was kind of questioning like but did I just make a terrible choice? Did I literally spend tens of thousands of dollars and on this app and a revamp and all that stuff and it's not going to work? And then I

18:01realized no, I haven't failed yet, right? It's still there. It's a work in progress. And the the failing fast mantra has has taught me that the failure is not the end point. Um these failures are all in progress failures. And even last month, so February was I was off by 80%. And then by the end of March, I h I hit my February number where I wanted to be. And now April's closing today, tomorrow. I don't know. I don't even know what day it is. But um April's closing very soon. And I'm looking to be like another thousand bucks above that. So I'm like climbing really quick. Um so it's good. So the

18:41early failures can be, you know, inconsequential when you get to this point. So I want to end with a quote for this section. In order to succeed, your desire for success should be greater than your fear of failure. And that is a great philosopher Bill Cosby. Um that's the end of that section. So if there are questions, I'll take two because the next part like kind of goes in a different direction. So it doesn't

19:09make sense. Any questions? Yeah. Right back here. If you throw an idea up, do you do any marketing or do you just fail on it? Yeah, the the question is if you throw an idea up, do you do any marketing or do you just let it fail on its own? Um, I always do some marketing because that's typically what I'm testing. Now, there's there's customer development, which is where you're testing if the product's going to solve their their uh problem. Basically, if you can find a solution for it, that's a whole other deal, working individually with customers. But if I'm going to put something online, I'm going to be

19:44testing conversions. I'm going to be testing some uh several marketing approaches, whether it's Facebook Paperclick, AdWords, uh even SEO, like I did with this. So, yeah, there's going to be there has to be some marketing or else why do I even have the page online if no one's going to visit it? Any other questions? Yeah, right here. How does your philosophy fit in with the

20:04idea? Yeah, so the question is that's a good question. Um, how does my philosophy fit in with what Heaton said about focusing on one thing? And the the question is that it does. And what I found is I don't focus on I try not to focus on more than one thing at once. I have all these apps, but like he's done with Crazy Egg. I have built an app up to a point where it's automated. It's like a hobby, like he said. Yeah. So I have a VA come in who do tier one support and only sends stuff to me if it needs to be. So I'm never

20:41and I actually tell people never try to build two products at once. Like I've never done that. Well, I have done that and I it's really hard. I've failed at it. So I would definitely agree with him. All right, let's see. Um little intermission here and I'll have a a fun prize that yet to be determined. Actually, you know what I do have is last year for Micro Comp, we

21:01had um Can you hand me one of these? Instead of our little USB things, we had these awesome Oh, I now I have a laser pointer. I have two. So, there's the It's a laser a lameser pointer. All right. Now, I have a All right. So, a laser pointer and it's a pen and it says micro

21:28and it's a two gig USB drive. Heck yeah. And you know what? This is so retro cool because they aren't making these things anymore. These are 2011 micro comp chopskies and I'll put everything I'll put my book in all formats and I don't know anything else that I can give you. If for the first person that uh can identify this as long as you have not seen it before you're cheating if you've seen it. So

21:55someone said pi. So I'm going to give hints. Nailed it. Was that Mr. Cohen? Who was it? Wow. Gee, he's like, "No, you can." So, it says MIT. Did you seriously just figure that out? Yeah. Rock and roll, man. So, here. Awesome. Yep. And there's nothing on it now, but come back to me. Um, so yeah, it says MIT. And the cool part, you know, if you could see this, it says established like 1861. That's a little bit of a hint, but so it's three separate equations. E= MC², Einstein theory of relativity. You solve for M. The square root of negative 1 is uh I, right? It's an imaginary

22:32number. And then PV equ= NRT is the physics equation about pressure and volume and math and all that stuff. I have that shirt. My wife wouldn't let me bring it to Vegas. She said, "No chance, pal. I like this shirt, though." Okay, so um act two, I'm gonna be talking about uh the four tiers of customer need or why boring products have a higher chance of success. Um, I'm more I'm think I'm starting on my second book and I've I've come across this like paradigm and it's it's this concept of of having four separate tiers of how badly a customer needs your product or needs a

23:08product you're going to build. And it's trying to classify um how yeah how you're able to market to them is what it is. And it goes across three axes. And the questions are is your product sold on value? And that means does it save someone money? Make them money. Save them time, make make them time. Save them money, make them money. So something like uh you know

23:31invoicing software can save them time. So it makes them money. Something like uh HTTail SEO, it'll bring even more traffic, better marketing, more money. Whereas something like Facebook, it doesn't it's not sold on value. It's not a bad thing. It's just is the value there or not. Um the second one is whether the need is obvious to someone. So when I tell people, hey, you track time, do you need time tracking software? You should go check out Amy

23:55Hoy's Freckle time tracking software. You know, it's that's a pretty obvious need, like you know that it's going to track your time. Whereas if I say, do you need a digital document management system that you know does XY andZ and all types of fancy stuff? People can get confused and not even realize that they have this need because it's it's so complex. So this is typically the realm of enterprise software where there's no uh no obvious need. And then the last axis is where No. And that's a there is

24:20a need. It's just not obvious to people. Yeah. No, I like enterprise software. Um actively and then whether people are actively looking for it. Are they actively coming out and looking for it in generic terms, whether it's in Google or whether it's in the app store or something. And so four tiers are going to cut across these three things. So the first tier, which I've called tier four

24:38for some odd reason, is entertainment. Entertainment stuff is games, Facebook, uh they're not sold on value. They don't need to be, right? They're they're for hobby stuff. The need is not obvious for your specific app. If you launched a game and you called it, you know, Rob's cool Where's My Water app, there's no obvious need for that person to come buy that app. And then people are not actively looking for it. No one's going to, if I launched Rob's Where's My Water app, no one's going to go search for that app. So, it's the sales process is entirely different than as you get to higher higher levels of need. Uh, tier

25:11three. I'm having struggling naming this, and the naming is probably going to change. I used to call this enterprise but it's not limited to enterprise so I'm calling it complex new complex new right now is this sold on value well yes like if you think of enterprise software it is sold on value it saves money or makes money I mean that's why a company would buy it but the need is not obvious because it's so complex or it's so new that that's when you get involved with like hight touch sales you know and you're have inerson sales salesforce and people are not actively looking for it as a result

25:38because they don't even know what it is or or how to find it then tier two is vitamin and this is where it is sold on value. The need is obvious like hey time tracking software but maybe and you know imagine a world where there were no people searching for time tracking software on Google in the iPhone app store in these other areas. Um then then you know then the answer would be no and and time tracking software would be a vitamin and then the last one is aspirin and this is the one it is sold on value right it's like you know you need it uh the need is obvious and

26:11people are actively typing into some type of search mechanism or they're out looking for it and they're going to bang your door down to get this thing. Okay, I want to be clear here. This is not I have gone tier four to tier one. I'm not trying to say that oh tier one is the best. It's not necessarily. It's just um it tends to be an easier you Yeah, it tends you tend to have more incoming traffic. You can do a lot more inbound marketing than than you have to do outbound. And so my experience

26:38oops my expertise is in these two areas. I'm going to focus most on these. I know there are single founders who have done enterprise software and been very successful at it. Um but I just don't have enough experience in that area to talk about it. So, I'm going to talk about one and two here over the next couple minutes. And to give you more

26:55concrete examples, so this makes sense. Um, tier two was vitamin, right? So, it's like they know they need it. They It's bas sold on value, but um they're not searching for it. And so, that's something like AppSumo, right? Is it sold on value? Well, yes, because it saves you money. And do people know they need it? Well, yeah. As soon web, what is it? Daily deals for web geeks. Like, as soon as I heard that, I was like, "Well, yeah, of course that's cool. I totally need that." Like, I didn't need a long sales pitch. It was like one sentence. But I never searched Google for that. I never searched anywhere for

27:24that. Like it had to become to me, right? So it's a vitamin. The other one is uh just another random example. A friend of mine has an app that's salon management software. Sold on value provides value to them. Uh people it's pretty quick if they own a salon that they know that they need it, but there's just a tiny tiny trickle of traffic on it. So it's really hard to do totally inbound uh marketing that he's doing. So um aspirini, I mean there's a zillion of these, right? I mean, even apprentice lyman jobs, my site is since I get so much SEO traffic, it's it's an aspirin

27:53thing. But invoicing software is similar, time tracking software, kind of anything that that people are commonly typing generic terms into search tools. So really, the only difference between, you know, this tier one and tier two is the whether someone's searching for it, right? I mean, they're the same thing other than that. And what's on this slide? Oh, yeah. The that's the thing. So, if you can build a

28:16tier one business, that's awesome. The thing is there's a couple drawbacks. Well, there's one positive thing that fulfilling demand really is easier than creating it, right? Than educating. Uh it requires inerson sales or phone sales or any of that type of stuff. It's going to increase your cost to acquire a customer with that's your tier two. So, it'd be great. Well, why don't we all go after tier one businesses? Well, the problem is is a there aren't there aren't that many like there aren't an infinite number. There's only so many keywords to go around in all of these different engines I'm going to look at in a second. Um, and it's not just

28:47Google, contrary to popular belief, but there are only so many to go around. And in addition, they they tend to plateau at a certain point. There are only so many monthly searches in any given engine. So, an aspirin business at a certain point does just peak and then it flatlines. And if you do want to grow it, you are going to have to start resorting to some some outbound like vitamin techniques. Okay. So, I've done this presentation a couple times and I had several people say, "Well, besides Google, you in the Q&A, it's like, well, you've said Google like four times. What else is there? If there's no keywords

29:16for it in Google, where can I put my stuff? And so, I sat down for about three minutes and I carved out 10 of them off the top of my head. So, I know there are others, but Google's the obvious one. You go to the keyword tool, figure out some keywords people are searching for, and it's a pretty cool

29:28inbound traffic stream. Bing and no, not that one. So, Bing now owns 29 between Bing and Yahoo. It owns 29% of the market. So, it's actually pretty substantial. There's very little competition there. Um, it's I actually think it's up and coming. I don't know with market share per se, but as an example with um HitTail, I get onetenth of the traffic from Bing that I get from Google, right? So I get 10 times the traffic from from Google that I get from Bing, but my Bing traffic converts three times higher, which got me really thinking, right? So it's actually kind of a third of my new

30:04customers got it was very intriguing. And I don't know why yet. I know more women use Bing. I know like there's some specific things, but I don't know why that converts. YouTube's the third largest search engine. They have a keyword tool that sucks. But I know people who are getting literally hundreds of thousands of page views a month by taking any they have a blog. People email them questions and then they just put the question in a video title and they answer the question

30:28with a screencast and they post it up. And they do that once a week. So there's maybe four per month. But the dude's been doing it for a year and he gets literally hundreds of thousands. It's crazy. Um, you could build you could build an entire business on traffic like that on common stuff. Um, and this is something like, you know, a lot of

30:44people aren't talking about. WordPress.org. There's a number of people in this room who are making full-time livingings purely based on um traffic they've gotten off WordPress.org. Basically, it's it's free plugins that they, you know, have upgrade to premium later. Uh, Amazon's an awesome search engine. Just Yeah, people who rank high for generic terms in Amazon are doing well. the iPhone app store. I know there's a number of people in here

31:08making a full-time living off it. Craigslist. Most people don't think about it. People searching for stuff on Craigslist. Anyone remember the Airbnb story of how they got started? Yeah, it's really interesting. Search for Airbnb Craigslist. Um I don't want to say it wasn't a scam, but it was a it was frowned upon. It was on Hacker News and it was kind of like they were maybe put Airbnb Craigslist spam and it was they were accused of spamming Craigslist, but that's how they got Airbnb off the ground. The reason that company exists today is because of what they did. Like they built the entire thing early on on Craigslist, the

31:39Android app store and Pinterest, etc. There are a lot of places where people are looking. There are a lot of untapped aspirin niches out there, aspirin markets. And um I guess that this kind of closes this section down, but the the final question is why is all of this important? Like why do let's say you you realize, wow, my the business I'm going

32:02to start is actually a vitamin business. It's not an aspirin business. Um you got to realize a couple things. One, you're going to be doing more outbound stuff, right? You're going to be doing more uh medium-touch sales where you're going to have to talk to people and stuff. Do you have time and willingness to do that? Because if you're a hardcore coder, you want to be in your basement, you just want to sit and hang out, you're not going to be able to do a a vitamin business. So figure out early on if it's a vitamin business. The second thing is um it really just dictates what your

32:29lifetime value of a customer must be in order for you to make money at this. So it almost dictates your pricing. Um I'm going to give some examples here because I like being specific. So with entertainment, I almost have to take a mulligan on this because it's like it's no touch. I mean I'm thinking of like games and Facebook like there's no touch. The CPA, LTV, like it doesn't even make sense in that paradigm. So I'm

32:51going to skip it. Complex new the touch. Think of enterprise software very high touch right CPA the cost per the cost to acquire a customer the cost per acquisition is by definition going to be high because it's hight touch sales and so your lifetime value of a customer when you're selling enterprise software or something that's complex new and requires inerson visits and such minimum minimum you're talking five grand like if you're not making five grand from a customer over their lifetime you are screwed and I'd say that that's low if anything 10 20 grand is probably where it really starts and then it's up into hundreds of thousands and it's frankly

33:24into the seven figures. And then uh the vitamin you're going to have moderate to low type sales. CPA can be the same. The lifetime value. So this is where I kind of take a leap. This is based on my apps and the apps of people who I know who will tell me this. LTV and CPA lifetime value cost per acquisition. These are numbers no one will tell you. Like you go up to any of the speakers and ask them that and they will walk away and say bad things about you on Twitter. You just don't. It's kind of like asking like how old I am or

33:52how much I weigh. Like it's very private stuff because it if you know that about a competitor, you can eat them alive. It is these are maybe the two maybe at least for me the two most important numbers behind my businesses. So most people don't tell you, but I have stuff in confidence and so I can give ranges and and I can actually tell you what hit tales is. I think I do later uh just for kicks because I like being wild and crazy. Um, so yeah, the LTV, man, if you're not above 150 bucks on a vitamin business, you're you're screwed. Like, if you're not going to make 150 bucks

34:22over the lifetime of of a customer, you're you're hosed. And actually, when I acquired Hit Tail, it was I thought it was 165. So, I was like, "Sweet, I'm right above it." And when I got it, it was about 105. And that's tough. It's tough to make money at that at that price point unless you're just getting ma, you know, mad stacks of of incoming traffic. And then with an aspirin business, it's low touch, low CPA, and your lifetime value can be as low as a buck. I mean, this is an iPhone app, right? 99 cents. Um, apprentice lineman jobs, which is has all this incoming traffic. My lifetime

34:51value is like 20 bucks, 25 bucks on people because they don't look for jobs for very long. It's a subscription service, but you don't have to make a lot of money as long as you have a lot of folks coming in. So, it's important to know before you launch a business, if you want to launch a new crime tracking software and your competitive advantage is, I'm going to charge 99 cents a month, you're done. and it won't work because of this. Like, I'm telling you now, you can't charge a dollar a month

35:13and and make a vitamin business work. So, oh, oh yeah, this slide. I forgot about this one. Man, this is this might be the most actionable slide of like any talk I've ever done. This was going to be seven slides and I combined it into one. I had to put it in here just because I like giving people stuff. This is stuff that's working for me and a couple other entrepreneurs that I know like over the past couple months and it ties into marketing this vitamin and aspirin businesses. So, we're going to look at the tactic and the cost to acquire a customer and then whether it's a

35:43flywheel or not. So, I've been going on podcasts with Hitale and every time I go on, it's like uh no prep, right? 30 to 45 minute interview. So, I don't spend any time and my cost per acquisition is zero because I'm not I mean, I'm spending 45 minutes. So, there's a little bit of cost there, but every time I'm getting between 10 and 100 signups, Mixer, you give me a little more than that. And um based on how many of those I'm converting, like I'm literally making several thousand dollars per hour. And if if I was ventureback, that may not be enough, but given what I do,

36:14that actually has worked really well. It's not a flywheel. It does not sustain itself. The traffic dies off. But that's okay because it's early days. Joint mailings have been a big one for several people in here, including me. It's you find someone with a similar audience. These are also called partnerships, other things like that. You find someone. If I cater to designers, I find someone with the list for designers. We email each other's lists. Z cost aside from writing the emails. And again, you don't get a zillion signups, but you get 10 to 100. And if you convert 30 to 50% of those, you start and your LTV is 100

36:45bucks, 150 bucks, you start making some really good money per hour. Guest posts, you guys already know about this. similar um integration integration marketing I think is like I kind of want to write a chapter about this but I've seen actually Ruben does this really well bids sketch if you guys know bids sketch.com he um does these awesome integrations with like bign name things like high-rise uh base camp it's only one of those um what's the other one like Mailchimp I don't remember but it's like bign name things but then he creates a really cool landing page with a video and he emails them and he says

37:18hey I'm gonna do an integration like check out this page and evailed their entire lists. So there's been quite a bit of success and I've seen other people do this as well. Now the cost per acquisition there is a cost because you're either writing the code to do the acquisition. You're creating the thing or you're paying someone to do it. So it's somewhere in there but it's not tremendous, right? Can be five bucks, it can be 100 bucks. SEO cost per acquisition tends to be very low and it can be a flywheel. So now we're transitioning into flywheel things that actually can take your business. The

37:47first four or five is when you're like bootstrapping and you're trying to get that first hundred customers. And then as you transition into more, you know, past that point, that's when you start doing these kind of crazy things like SEO, Facebook ads, Adwords, and uh cold calling potentially if you want to do that. I got these. You know why I like this slide is because I wished I had I wish I had understood all of this like five years ago. I didn't understand what a cost like what cost

38:13per acquisition was and how it varied. And so Facebook ads right now really are like AdWords five years ago was like where Facebook ads was, but it's growing. Google is way smarter than us. They're always going to make more money. And the way they do that is by getting people to pay more for Adwords. It's how they grow their bottom line. So this is um these are the techniques that I've me and other entrepreneurs have been using recently and it's working out pretty

38:36well. So I'd say use them. Okay. I have a little video, but before that I'm going to take a few questions. Mr. Rodenba. Yeah. So you say that the last four techniques here are flywheel techniques. But if the flywheel is that you stop doing it and drops off got it snowball down the way. Yeah, that's a good point. So the question is what makes Adwords a flywheel technique? Because SEO you can invest a bunch of time up front and then

39:10it'll it'll carry on for a while, right? Whereas AdWords as soon as you stop paying money it goes away. I was using flywheel here. it to mean scales is what I was I was using it. Maybe I'll change that headline. Um probably need to define flywheel a little more concrete. I do feel it's it's a way to scale your business. Does your business can you scale a business on this marketing approach? So if we go back here, we could say can you scale can you grow a 10 20 $30,000 a month 50 $100,000 a

39:39month business going on podcasts? No. There's just not enough big of an audience. joint mailings, guest put like these are not infinitely scalable. These are scalable. So that's what I was saying when I was saying are they flywheel? Um but but you bring up a good point in that last year I think I defined flywheel more as something that you invested time in and then let go and it kept moving. So good point. Fix that in my book. Yeah, that's why I do these

40:02things. Right. Failure. Should I put a fail on this slide? All right. Only if you don't fix it. Yeah, exactly. Any other questions? Wow. So, did I confuse everyone or did it just make sense? Does everyone's like, I already knew all that crap. Say something I don't know. All right. So, this is the intermission. I Oh, man. I love this guy. Um,

40:31Lewis CK. It's about a twominut thing. I'm going to play it. He went on Conan and uh I'm trying to think if I need to intro it. You can find that on YouTube. It's like a four or five minute clip, but I edited it down. The reason I like this because Louis CK is a comedian and he has um done awesome entrepreneurial experiment where he instead of going to uh he was going to go like with Colombia or someone to do um Columbia pictures to do a DVD and they were going to charge 20 bucks for his comedy DVD and instead he hired he paid a quarter million bucks

41:00out of pocket and he hired people to find follow him around with cameras at his shows and they they filmed it and he put out his own DVD but he didn't put out a DVD. He put out a $5 digital download with no DRM and he just launched it to his blog and news people picked it up and um within a week or 10 days he had sold a million dollars of this thing and he has an audience. It's not like he's some nobody but the dude just totally stepped up, right? and he um wound up giving he paid quarter quarter million to uh to get it produced

41:33and then he gave a quarter million to charity and then he gave a quarter million to the crew and everybody who helped him do it and then he kept the quarter million and he said I'm going to you you know um what did he say? Oh, I'm going to do like despicable things with this and you have no right to know what it is. Because he's a comedian so he's being funny. But the cool part is he um crap. What is the cool part? Oh, the cool part is he like stepped up and did the right thing, right? and that he's that he was rewarded for it and made mad

41:56stacks of cash. And so the dude's funny, but like I love I love seeing people like buck the industry trends, you know, and not do DRM and all that stuff. So, and I have Louis CK in there because I'm not funny, so he needs to be funny for me. So, there's at least one laugh

42:09during my talks. That's my goal. Okay. So, yeah, little stretch. This is the last section. Act three. We got a question. Yeah. About Louis CK, huh? Earlier. Yeah. Cost per acquisition. Yes. How exactly that? Uh really? No. Uh like how did I calculate it on the slide or how do you calculate it in general? Oh, got it. Got it. Okay. Because I was like these are like estimates, right? Like um you calculate cost per acquisition by that was actually another segment of my talk that I cut because of time. It was all about CPA and how you do it. But basically, let's say you put a Facebook

42:50ad up and it's 20 cents a click and every hundred people that come from it, you get one new customer. Then it's just a simple multiplication. 20 cents a click times 100 is 20 bucks. Now, getting Facebook ads down to Yeah, 10 might be a little low. There's like I I I have gotten 15 cent clicks in the past four or five months um with using some special techniques. But yeah, if you just kind of put it in there, you're going to get about 80 to $100 uh $80 to $100 CPA if you close at 1%. If you close 1% of the people who arrive through there, you're going to get about

43:2280 to $100 CPA. So that's it. All right, last section here. It's about lifetime value. And what I'm going to cover here is I this is a this is an actionable part. I'll put it that way. And whether you're whether you have a SAS app or whether you have a one-time sale app that I'm going to provide at the end of first I'm going to define lifetime value and show you how to calculate it and then say like here is how I've been improving it and here's how some other entrepreneurs I work with have been improving it and increasing the lifetime value they receive. So lifetime value of a customer, what is

43:55it? It is the total profit that you receive from that person over the whole lifetime that they're hanging out buying stuff from you. And they aren't a person like I I'm going to talk about metrics here, but like customer I mean I know like a lot of my customers some of them personally and it's not just about metrics but this section you know is so the way to be profitable is to have a lifetime value that's higher than what it takes you to acquire a customer. I mean this is a simple simple equation. Now, this means that you have to include expenses. Jason Cohen points out every time someone

44:27because everyone forgets this, but it's like lifetime value has to have expenses subtracted out. Has to have all kinds of stuff subtracted out. There's a pretty complex equation for it. But um uh yeah, in order to be profitable, you need a lifetime value that's higher than a cost per acquisition. So, you might think, well, this is obvious, right? Why is this even important? Why do I have to think about this? And the reason is that if you sell a product for 19 bucks, let's just say I have a whether it's an ebook or just a little WordPress module or something 19 bucks. My competitor sells it for 19

44:56bucks. All right, we're in a little war here. Can I drop my price? Whatever. But let's say I have one other offering that I have and maybe it's a one hour of consulting. Maybe it's a special membership side something. And 20% of the people who buy my $19 thing also buy this other thing that's more expensive.

45:13So just a little backend offer, right? One more thing to offer. Then suddenly my lifetime value is not $19 anymore. My lifetime value is actually almost 85 bucks. So the question becomes I'm selling something for 19. My my competitor is selling something for 19. Could I start breaking even on that 19? Meaning let's say my cost was nine bucks. Could I start lowering that original price to nine bucks and just smoke my competitor? Assuming people are are deciding on price. Could I lose

45:39money on the 19? Could I drop it to $2? Could I drop it to a dollar and sell a bazillion of these things purely to get that backend money? Could I give it away for free? Yeah, probably. And all these things if if they really do feed into your backend um can can make a business and actually all the large businesses like massive businesses like cell phone companies and uh banks and big information marketers and big startups who know what they're doing who aren't startups anymore, they know this like they know the backend thing and it's not something that a lot of us think about. I tend to think in I

46:11want to build a product. I want so many people to buy it and you're done. But realizing that you can increase that lifetime value is pretty a pretty powerful tool. This is how businesses I don't know if you guys get these in the mail. I get them like once a month, but basically it's like 50 bucks just to listen to a webinar. Well, why can they give me $50 out of their pocket to do this? because they know that enough people who watch that webinar will convert and that the lifetime value they will receive from them will be more than the 50 bucks you know that they gave out

46:40to these 10 people. So they know their cost per acquisition. They know their LTV. I mean it's it's critical to know this. It's also why HostGator or any of these uh web hosting companies look at some of these referrals. You know you get over 20 referrals per month and suddenly they will pay you $125 per person that you refer to them that signs up for hosting. Again, they know that's they're basically cutting their cost per acquisition to, you know, it's 50 bucks or it's 125 bucks and they know that the lifetime value they're going to get from that customer is going to be a heck of a

47:08lot more than that because they have their numbers. They know their metrics. So, they know what they can pay. So, the ranges, this is the hard part. I've heard LTV talks before and I'm always like, "Okay, so what what are LTVs, right? I want real LTVs." And so for the aspirin apps, like I talked about earlier, they start at about 99 cents because that's what iPhone apps sell for and a lot of iPhone apps are aspirin apps. Um, most aspirin apps I see are in the $10 to $30 range. If you can get more, the more you can get the better. It's just

47:40the price is not infinitely elastic. But aspirin apps can be profitable at this at this range. And you know, typically you're gonna, if you're selling software that's not in an app store, you're going to see $9 things 19 b 19 bucks. And that's going to tend to be your lifetime value until you can get some type of of associated products involved with them. And then vitamins, like I talked about earlier, the range

48:02tends to be about it's like 150 to 500. I know there are probably a couple people in the audience who are like, "Oh man, no. Mine does like 800." And that's that's freaking awesome. Seriously, I talked to someone last time I did this talk and they came up and they're like, "Ours does $2,000. Our LTV is 2,000

48:17bucks. They're kind of a hosting. They're like Squarespace for a niche basically, which is awesome. I would love to get there, but most are not. Most apps do not get there. Most apps start around 100 and then you're just cranking them up. So, like I said, Hitale when I acquired it was about 105 and I'm over I think last month I was over like 165 170 and my goal is to get to 400 in the next six months, but you don't know if I'll get there." So this

48:39is the thing to keep in mind, right? Lifetime value. So now the the practical part, increasing lifetime value, there's three ways to do this. So for all of you who already have products and you want to think about it, there's really only three ways. One is to increase retention. So if your subscription service, keep people around longer. We're going to look at a spe Well, one specific way to do that. Um you can raise your prices because then your lifetime value goes up immediately. And then you can uh what is this one? Oh, sell more to existing customers. just some more things, add-ons and such. So,

49:09increasing retention is this cool concept. It's about catching them early before they're ready to cancel, not trying to talk people out of cancing after they've done it. So, Darm Shaw at On Startup or from On Startups, every year at BOS, he talks about customer happiness index. And I love this. It's calledQi. And all it is is it's a a grading or a single number that represents how happy a single customer is. And so he has a bunch of factors at HubSpot and who knows how many there are now but probably started with 10 and then just packed a hundred of them and you weight each of them and

49:45then on this end column you say customer happiness this person is a 100 and this person is a one you reverse sort and then you just start calling the people who are a one. You know before they know if they're going to cancel. You know before they know because you're looking at data you're looking at patterns how people use your app. I'm going to give you one specific example of what I'm

50:03doing with HitTail. Hittail SEO keyword tool. You sign up, you take a snippet of JavaScript, you install it on your website just like Google Analytics, right? It's tracking code we call it. And it says these keywords are coming to your your site and then we you know you get thousand keywords in a month people are fighting for and hit algorithm says boom these are the 20 out of those thousand like go after these like these are the ones you should do this month. These are your longtail keywords and they'll work. So that's how the product works. So I said what are the chi factors for this? and

50:34literally knowing the business, seeing how the process people go through. Five minutes, I sketched out 12 G factors and it's like a couple hours to build a little report that spits them out. And so here are four factors that will make easy sense to you just to give you an idea of what I'm looking at. The first thing is, has someone installed the tracking code, right? That's kind of the first step. The people who don't install the tracking code, they cancel. I know that when I bought HitTail, there was a 25% install rate. I'm between 65 and 70% now. because I'm bugging the crap out of

51:04people. I mean, it's just it's like four emails in the first week that they're if you don't install it, you keep getting emails. You can unsubscribe, right? I'm not a spammer. But it really has helped. It's been amazing. In addition, we actually do free track and code installation now. Free. We don't charge you because we want I know my LTV and I know that if I get you signed up and I pay my virtual assistant who knows how to FTP in and do stuff, if I pay him $2 to do this, that the 170 bucks I'm going

51:29to make from you is probably worth it. So knowing these these chief factors is important and then improving each one is important. So the first one is do they install the tracking code. Second one is are they actually collecting referers because some people install the tracking code and then like no hits come in either something's blocked or they just don't get any traffic. Well, they're definitely going to cancel because we can only we have to analyze traffic. If you don't have any traffic, we can't help you. And then there's a actually a pivot point at about 50 visits 50 uniques per day where you get even more

51:55value from it. So I can weight these right in my report. Next one is how recently did they last log in and then has their organic over long term has their organic traffic actually increased. So these are just four that I'm looking at to give you an example. But if you have proposal software, it's

52:11uh how long ago did they last log in? Have they ever created a proposal? Have they ever sent a proposal to a client? Have they ever won an actual um you know a a gig, a project based on that proposal? Right? So there you can go down this step because people who do these things are going to tend to stick around longer. Now I'm going off intuition here. There is a really intense data way to do it. You could look at your entire database and have someone analyze it or do it yourself, but it's very very complicated. Um so I like this approach for now. So the

52:40question for you then your action for next week is what are your chief actors? List out your five, your 10, your 15, whatever it is. Doesn't doesn't matter. It could be a hundred. If it's a dozen that's great. And then if you're a coder, seriously, four hours tops, boom, boom, boom, some SQL queries, slap it in the jQuery grid, weight them all evenly to start with. You're going to learn to tweak them. You know, you know your business. And you know, reverse sort on that on that number on the end and be like, "This guy's going to cancel." And pretty pretty soon you'll figure out, you know, you'll start and you'll say,

53:11"That guy wasn't actually going to cancel like we screwed up. So, how do we rewe the thing?" But, um, thinking about this is important. So, that was the first way. It was just retaining customers, right? how to increase your lifetime value, retaining them longer. Second way is to increase pricing. And there's two approaches to this. You can just do a wholesale increase or you can actually restructure your pricing. And I'm going to give you specific examples of of how I've seen both done. When I first acquired Net Invoice, it was $98 onetime fee. It's people download it, put it on their web server. It's 98 bucks. And actually, gosh, this was

53:442005, I think 2006. And I talked to Mike Mike Taber. We were like just getting to know each other and he's like, "Quadruple that price, dude. It should be 400 bucks." Well, I didn't have the balls to do that, but I did put it 295 and I sold the exact same number of copies the next month and the next month and the next month. It was total wing. I mean, I I was only selling a handful of copies a month, but I tripled my revenue because no one noticed, you know, it was new customers coming in. And so, in

54:08essence, I tripled my LTV right away. Was it luck? Maybe. If no one had bought though, I would have gone to 195. Then I would have gone to 149. Like, I would have figured it out, right? I may I was gonna make my own luck. I was not gonna leave that thing at 98 bucks. So, this is an interesting approach. It's just a

54:25wholesale increase. The second way I've seen it, Bid Sketch, I'm going to use him as an example again. He does proposal software um for consulting firms and designers and stuff. And he had a $9 plan, $19 plan, SAS app, and he realized that there were like big consulting firms, 15, 20 people, million dollars more in revenue, and they were using his $19 plan. and he's like, "Oh my gosh, come on." So he reworked his pricing and he, you know, he kind of doubled it, right? So the nine goes to 19, 19 goes to 29 and he added an agency plan and it's still early and I actually should have talked

54:59to you Ruben right before this, but um he restructured it and it's based on the value they receive. He actually restructured what they get. He didn't just double all the plans, but it's like you get a certain amount of login, you know, and he did research to figure out where that sweet spot was. And his LTV is up 100% or more at this point. So that's like a crazy thing, right? He has no more new no new traffic. He didn't increase conversion rates. He didn't like nothing else happened. He just

55:25doubled his LTV of all his customers. It's nuts. Of all new customers, he grandfathered everyone else in. And then I did the same thing with Hitale. I bought it last August. They had a weird pricing plan that was fixed $10 and $30. It's almost too confusing to go into, but it just wasn't very good. It wasn't tiered. You know, when you imagine HitTail, you get a lot more value. You get more value when you have more visits. If you have 10,000 uniques in a month, we can give you some value. You have 20,000, we give you a little more value. You have 100,000, we give you a

55:52hell of a lot more value. So, you should essentially be paying just a tiered graduated scale. So, that's that's what I did. And I winged it. I didn't do nearly as much re re uh research as as Ruben did, but I winged it and I just added some tiers and I made one tier the best and all this other stuff. And again, so far, this is one of the big ways that I increased that LTV and that was how I got up 50%. So the questions for you to think about, are you underpriced? Period. Do you need to do a wholesale price increase? And what will that do to your sales? And

56:25does your price increase with the value a customer receives from your app? Because if you have huge agencies using your app and you have tiny little oneperson shops and they're paying the same amount, you have a problem. You are not, you know, getting the most value out of that out of that equation. All right. So the last point of the talk, it's how to increase your LTV by selling more to your existing customers. And this is one thing that startups don't do

56:52a lot of. First thing we did with net invoice was we added uh annual fee for support and upgrades. They weren't supporting or upgrading it before I bought it from them. Uh net invoice that is. So adding it even you know it's a 20% fee that increased our LTV by a certain percentage. Worked out pretty well. So, if you're not if you have a onetime download software and you're not charging annually, you really need to think about doing doing something like

57:16that. Um, add-on modules. This is crazy cool. Um, I've seen SAS apps doing this recently where like they do have additional things that not a lot of people use. Maybe some extra credit card processing, maybe some extra digital signature something or other, like some type of feature that only a segment uses, but they're willing to pay for it.

57:36And you can do it in one of two ways. You can either just add, you know, only have that in the agency plan, so you make people pay more, or you can kind of sell it as a separate $10 add-on per month or something. With .NET Invoice, we did this. We integrated with QuickBooks. It's a totally separate thing. So, .NET Invoice sells for 329 and our QuickBooks integration is 99 bucks. Not integration, it's the app, the module that integrates with it, which is nice. And we've sold, I don't know, a lot of these. And not only that, not only have we sold a lot, but we have

58:04increased sales of the core product because people are now coming in and saying, "Oh, and it integrates with QuickBooks." So, we've really not only increased LTV, but we've actually increased sales. And then the last approach to this is to add services. So, not add on modules, but actually add services. And I originally I was going to do this with HitTail and I was going to add the tracking code install for 20 bucks or 10 bucks or something. Then I realized, no, no, no, no, not that's stupid. But what I am going to do with HitTail and it's in the process in the

58:31works now is offer one-click articles. So it's an extra service, right? You get a keyword suggestion and you can just click and in two days you come back and you have a blog post written by, you know, article writer. So that's an added service. Now it does it happens to scale well because there's a company we're using that does it really well. But some of your services may not scale infinitely. Um but that's okay because it'll probably be worth it. So the other example is Raven SEO tools does the same thing. They just do uh add-on articles, SEO suggestions, that kind of stuff. So um the question for you in terms of all

59:07these three is what else can you offer your customers that they have been asking for that you're kind of like, well that's pretty hard to do. Well, if it's hard to do, it's probably has a lot of value to them and so they may be able to pay for it. And so the first question when someone asks for something is like I like that idea. No, we're not going to. You're the only person that needs it. Not a big demand. Would you be interested in paying more for it? You got to walk a fine line there, but

59:32what else can you offer your customers? So, that's it for me. I um I'm going to take questions now. And I actually, you know, before I take questions, I have one favor to ask. I um I have a book and I sold 7,500 copies of it and I only have 27 reviews. And I know a bunch of people in here have read it. at some point in the next day if you could go to Amazon and just review it if you've read it. I would totally appreciate that. Um because there are people who've sold like a tenth of my copies, the number of copies I have and they have a hundred

1:00:00reviews and I don't know why that is. So that would be really cool. And now I'll take questions. All right. Uh yeah, you want to run around the mic? Mike will run around with the mic. I just wanted to share a quick story on pricing. When I first launched my product, I had priced it uh and didn't sell a single copy about four weeks in and then I doubled the price and saw my first sale that day. So you you can price so low that people see no value just by your price. They they infer a lot from it and it's important to

1:00:35not do that type of thing as well. Yeah. Yeah. And pricing is tricky. I mean we could do a number of talks. I mean there are entire books written on it. like it's very complex, but there are ways to toy around with it and to experiment and to fail quickly and get to where you know you're making a pretty good call on it. So, nice job. That's

1:00:53cool. When calculating LTV, um if you had an existing product like with HitTail, you had a lot of existing data that you could use to, you know, make some of those calculations. What do you recommend and what kind of assumptions can you use if you have a SAS service and you don't necessarily know yet what the churn rate is going to be and and how many months or what can you do in

1:01:14that regard? Yeah. Is your app live at all? Do you have any customers or are you just saying like before you launch how can you estimate? Is that what you're asking? Yeah, I'm saying in general I mean personally we do have some data but we're still you know until you three, four, five years worth of accurate value. How can you what can you use? What kind of framework can you use to make an

1:01:35educated guess on start? Yeah, how can the question is how can you make an educated guess about LTV on a SAS app if you don't have much data? And that's the thing I found even with Hitale because I'm looking at I have old customers and I have new customers on new billing and I'm finding that the new billing is just swinging all over the place because my churn is bouncing because I only have 30 60 I have 60 days now of like historical data on this and so churn was my churn was 30% the first month and now it's down to 8%. You know, it's like totally moving. Um, what I

1:02:04would do, see, I would use rules of thumb honestly to do it. I mean, I don't know what else you can do. And I would try to talk to someone who who is serving that niche and find out, get an idea. And I would say that if your churn uh I your churn's probably going to start out around 20%, hopefully not more. And that's a good first plug to put in. Um, I think you want to get your churn down, depends on the niche, but I

1:02:28think you want to get it down to 5%. That's my goal for HitTail. 5 to 10% is okay if you're a smaller SAS large like enterprise SAS the big guys Salesforce and those guys um their turn is 20% per year so it's like two less than 2% per month but I don't know many small SAS apps that get that that and there's a bunch of reasons why we don't have to go into but um so I would start with churn there and then you know what your monthly price is and so that's all you need is price and churn to calculate [Music]