# Paint By Numbers: From Productized Service to SaaS – Patrick McKenzie – MicroConf Starter 2017

Channel: Rob Walling
Video: https://www.youtube.com/watch?v=_h8IhbR2Iqk
Duration: 47 min
Language: English
Words: 9184
Transcript page: https://viewrankai.com/tools/youtube-transcript/_h8IhbR2Iqk

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[0:00] [Music] howdy-ho everybody so let me tell you a quick story about that petit 11 thing so I've lived in Japan for about the last 13 years and I get confused for people a lot so I went through a bit of a harry potter phase and it was kind of fun when kids actually thought I was the character rather than Daniel Radcliffe but sadly both of us grew out of that I got confused a lot for fellow microcurrent Andy Keith who was with me in a gawky our little town century Japan for about 10 years and most of the people in town were unaware that they were in fact two white software

[0:40] entrepreneurs in town and when they were apprised that we're in fact 2 they would tell us things like hey can you get a message to Keith for me because I have a meeting with him at 6 o'clock and clearly you must know him and because it so cocky that was actually rights and he was the best man at my wedding worked out I don't know what the moral was there I get confused for mm and I'm not sure how I feel about that there's a lot not to like about mm there is one thing to like the song lose yourself is the best startup song ever and actually

[1:12] singing a little bit to myself before I come around stage here because I'm nervous but on the surface all-too-common ready and so last year I started working at stripe and I've picked up a new doppelganger so I was literally at the launch of stripe Japan and introduced myself to a reporter as hi my name is Patrick and I work at stripe that is a mistake I will not soon make again so they call me petiole evidence stripe and Patty 11 virtually everywhere else and the only people who call me Patrick are my wife and my little daughter except she pronounces it Patrick I've never been confused for

[1:51] Liam Neeson but if I was that would be kind of badass and I don't need to look like him I would just love his voice because I have a very particular set of skills gained over the course of a long career skills that make me good at basically one thing and that is selling software over the internet about that much softer and I don't say that to to pump myself up I know there's some folks in the room haven't dollar number one yet and you look at over a million dollars and feel my love that's impressive not really it took me about ten years and that's a revenue figuring out a

[2:20] profit figure you might say wow I can never be there I think nope you really can and you might think that it's been easy sailing for the past ten years know one of the things I like about my Kroc office we can kind of be real about things be a bit honest even when honesty is kind of raw so I have a story going to steal a slide from a presentation I did last year when everything in my career to look like it was up into the right I made bingo card creator I sold bingo cards to elementary school teachers and then I got good enough at selling

[2:52] software for company is that companies you've heard of like fog Creek would bring me in to consult with them under the umbrella of calcium yes geo Spolsky actually told me you seem like something of a guru and this SEO and marketing thing how about doing that for a company that is not I love Joel and I stopped consulting after a while I started up another SAS company and went in kind of nice places and then I started starfighter and it was starfighter was going to find engineering recruits for software companies and it was a beautiful beautiful business model I worked very hard for a year and a half I built the

[3:26] coolest thing I've ever built it was genuinely good software the first time in my life I built a Stock Exchange and a world simulation that was robust enough to find insider traders on the stock exchange and people actually did it and they played it and they loved it starfighter failed totally and completely and it was mostly my fault asked CEO I never liked to tell you more about that story because I love telling stories even the hard stories but I can't really tell you so much about the stories for the two companies I've sold I can't tell you the story cuz I don't own it anymore and for that one I had

[3:57] two co-founders along for the ride and when things break up as they do you kind of lose ownership over that story so out of sort of concern for their feelings on it I'll just tell you some anecdotes about the McKenzie family story for last year this is my wife verdict oh my daughter Lillian and Liam who was born two months ago last year thanks last year I don't remember exactly when we had this conversation because 18 months of my life kind of blurs together but Rico came up to me and she said hey I know you've been working really hard recently and I appreciate all that you

[4:37] do for the family and working very hard maybe you should stop and do something that makes you happy and I said what I'm very happy you know we've just been going through a bit of a rough patch the last couple weeks she's like nope nope we've been married for too many years for that I've seen you through rough patches I've seen you depressed I have never seen you unhappy and you were unhappy right now I would like to say that I looked at the love of my life and said darn it you're right that that took a couple months I would like to say that I listen to all my friends who said

[5:08] things are going really poorly for you you should look at other options don't listen to them either I would like to say listen around professional advisors that said this was affecting my health didn't listen them it took me months to realize the whole we were kind of in an anecdote from that I think it was last year annually although it all blurs together for me last January I was at a quote unquote real financial services company talking to someone who controls a very very large budget there for hiring engineers I was the CEO of this recruiting company that they were bringing in I had just built and

[5:41] launched a stock exchange life looked like it was going grand and I stepped out of the room to take a call from my landlord my landlord said hey Patrick I didn't get the rent this month and I said oh sorry banking issue I will fix that when I get back to Japan technically correct is the best form of correct I had no money in the bank and that was an issue well we folded up the company I owed about $25,000 to MasterCard and about $10,000 to Amex and I'll save you the whole butcher's bill but it sums to about that and was this in the mists of

[6:18] prehistory no this was last August and the story has kind of a happy ending but I don't want to spend all this time up here telling my story I want to tell your story I want to talk about the business that many of you want to run over the course in the next couple years how many of you think I really really want to run a software business I think you're gonna get there eventually and I'm a sassy guy I love software as a model I've been doing it for ten years and I don't want to discourage you at all but I want to tell you don't start a business in sass yet

[6:52] run another business first and here's why I think that you think or some of you might be under the misapprehension that Stephin number one and starting a software business is to write some freaking software this is an easy mistake to make there's actually a lot of things you need to do before you can take dollar number one in the SAS business this is my shock-and-awe slide don't try to read it all you'll go blind you need to do all of that before launching to customer number one and if you spend six months on grinding it out you make your ansible scripts you get your account at AWS you deploy you

[7:29] figure out how to do testing you have your backup strategy in place you do all this work do you know how much revenue you will have after six months big fat zero and I have lived the big fat zero before I have come to realize something about starting businesses and this isn't my own realisation this is something that people who actually do that for a living in the time before and was it 2006 I suppose there were businesses before 2006 they will tell you that a business is a simple thing it is a search for repeatable sales process you find customers you convince them to give

[8:01] you money you satisfy them you bring them back and then you do it again and you do it again and you do it again and that's what you're building in the business a process for finding those customers and the satisfaction of them is kind of a detail that you can figure out later after you've figured out how to find them people tell me that I kind of have a knack for this whole marketing sales thing absolutely untrue I was nights and weekends on bingo card creator for a very very long time it took me about five and a half years of nights and weekends before I was getting

[8:30] to the point where I would feel comfortable doing the business as my main source of income this is the profit graph for the first five and a half years of my business and only in that last year after I'd quit the day job and was kind of tightrope walking without a net was it at a point where I could feel pretty comfortable of where I was financially so I wanna convince you all to make your business first and then write your software later and I appreciate that then open the conference up with the talk of let's take a quick survey and see where everyone is I don't remember

[9:04] the exact numbers off to top in my head because I know there's some folks at zero some folks were at a couple hundred dollars a month some folks were at two grand a month etc etc I want to give you the target for next year and that target is $12,000 a month I think that is within reach for people here who execute just do meat and potatoes execution on a business model you don't have to be a genius and you can do this just make better mistakes than I made over the years and not the same mistakes which is legal of all these presentations too we

[9:37] made the mistakes so you don't have to you can make your own mistakes better mistakes preferably mistakes after you know you know where the rent is coming from I didn't just pick $12,000 out of the air and then just take the $10,000 that has been thrown around to previous micro comps and adjust for inflation and twelve thousand dollars comes from a relatively simple calculation you're good you're going to spend about one third of your business take on overheads I'm paying others asking for hosting yada yada that leaves you with about eight thousand dollars a month which will feel like you're a gainfully employed programmer in the United States

[10:08] you won't feel like running your business as a hardship and I want you to get out of that hardship for money mode as soon as possible and then after you're there you can do whatever you want if you want to make a video game you can make a video game if you want to make software for hobbyists you can make software for hobbyists if you want to make software for issues you can make software for churches but until you get up to twelve thousand dollars of predictable repeatable revenue a month going to give you a very opinionated piece of advice brought from the voice of long experience in selling $24.95

[10:38] software to teachers elementary school teachers and retirees and that is you want to be selling to businesses and I'm going to totally steal something from Nick DeSalvo he said once that he sells to the economic engine of the planet and darn it is that a good quote you should sell to the economic engine of the planet you have if you've not run a business before you might not have experienced the truth of this yourself but oh my goodness our business is capable of spending lots and lots of money on things for those of you whose business come to this to this travel you know like they're probably folks in this

[11:16] room who are worried whether you can whether you can sell their SAS for even twenty dollars a month I was like that one day I was worried about selling selling software for twenty dollars once I thought that was highway robbery and then paid thirty five dollars a night for the Wi-Fi at a business at a business conference and think that's yeah you know cost of doing business whatever you want to be selling to businesses as well and what is the thing that you get well who here let's say take out a show of hands who here feels confident I can do enterprise sales right now let's say I feel pretty

[11:46] confident I can sell at least one business on paying me six figures show of hands not so many okay let's rephrase that who here has ever sold at least one business on a business proposition which sounds like I show up at your office every day and you pay me at least three thousand dollars a month Wow lots of hands you thought that was a job no you were just a consultant with a really really poor client pool but you had sold one company on a proposition which is going to cost them six figures over the expected lifetime of yourself at that company you can do that again

[12:23] but you can sell a better thing for more money let's talk about productize consulting so everyone knows what a product business looks like versus a services business and a product business you get something I mean a service business you get something done and privatized consulting is kind of like the weird lovechild of these two and it's basically a service someone is doing something for you but you can point to it on a price list and say yep that is what I want and you get exactly that I want to get a haircut in Tokyo recently and my little my son's name is Liam and so my wife gave me the

[13:04] instructions go to the barber shop and get a haircut that makes you look like the Liam from new direction and so I went to the barber shop and I asked how much does a haircut they said $60 or whatever that isn't yen I said great can you make me look like Liam new direction the guy looks at me and he Google's Liam from new direction it's like for $60 I can poof up the front and trim a little bit off the sides and that's what you get because I'm not a miracle worker and I said that's exactly what I want and I went home I told my wife I tried

[13:36] to look like Liam from new direction and she said that was awesome and justice was served for that day and the guy totally got his $60.00 what didn't happen there there was no long discussion with him about okay I need to run your MSA for the haircut past my legal department there was no you know deep meeting of the minds and let's talk mr. McKenzie when you say you want to look like Liam from new direction what is your spirit motivating you to look like Liam from a new direction what problem in your life brought me to this haircut place to look like a new direction no no no just like this is

[14:10] what I want that's the thing you routinely sell I want it let's go you can do that in privatized consulting what businesses typically make are typically a good fit privatized consulting doing operations for companies operations is a repetitive task in the business that they do all the time if you're not aware of operational tasks at a representative set of companies a good place to look is at Seth's that already exists there's a service that's called tar snap it does backups and this is true of tar snaps and true of MailChimp and true of every other SAS that exists if there is something that people can log into it is

[14:54] someone's job to log into the thing and to do something in the thing that is an operational process and it many many SAS companies as anyone who's ever run a SAS company can tell you a lot of their clients really really suck at their job they don't actually log into the thing they don't actually do the work you can go to clients and say clearly you understand that doing Indra in Rob's case business email is relevant to your business because you're paying hundreds of dollars a month to an email provider but you're not actually doing the work I will do that work for you we will take

[15:24] that business process away from you give it to me and for a reputable amount of money for a repeatable amount every month I will do it reporting and analysis as another good signs there is a product a privatized business simply a lot of businesses know that they are drowning in data they don't know exactly what data is relevant to their needs and they don't know what that data actually tells them to do is the business owner what decision can I uniquely make based on this data you can say I will find the data source for you from your existing data sources I will do the analysis and

[15:54] I will tell you some suggestions going forward based on this data source and now you being the guy who gets a lot of money for running the business you implement those suggestions it's a great thing training is also a privatized business a very product eyes'll consulting service rather you teach people how to do their jobs better I'm going to share a slide it is the most important two words that I say almost every year at micro cough I hear chuckles here because people have heard this one for me before but I will put in my slide deck every year until I die because almost nothing else has as much

[16:30] leverage for moving your business it's charged more and I'm so well known for this that even before I joined stripe apparently there was like talk of making charge more mode at sorry patio 11 mode in the stripe subscriptions product where you would put in the price for this plan is $100 and a little pop-up with patio 11 in like the HTML would would pop up and say don't you mean $1.99 that was like seriously thing I dropped by the strife office a few years ago and talked to Patrick Allison I don't remember what about and John like tweeted out this joke after it and Patrick Collison has a mind like a steel

[17:13] trap and he's like no you really did tell us to charge more it it works so well there is almost nobody in this room who is charging the optimal amount of money for this project and I think there's probably nobody who's charging too much but that's not a tional izybelle I can't just tell you double your prices well I can just tell you double your prices double your prices but if you have no price already then doubling in nil is just going to get you some error in your language of choice if you just need to steal a pricing grid written by somebody who wrote these four

[17:46] people and charged a lot of money for doing it if you're selling info products just steal this pricing the e-book I'll teach you to do something $49 the e-book plus interviews for example $99 the ebook plus interviews plus code samples or templates or prefilled workflows etc $249 steal it move on this is good enough to get started if you want the advanced class the big problem in the infra product business is that folks buy the thing and then don't actually do the work so if you can invite them to a group lesson or an hour on skype with you to say okay you've read the thing

[18:24] you've watched the videos you've seen the sample code have you actually shipped that application just the active ask asking that have you shipped that is worth money to them it's worth quite a lot of money and your time is valuable so charge $200 for asking that question if you were doing a training business model your stuff that works this is a little sensitive to what area you're training in both in terms of what technical topic you're teaching I'm assuming technical for this audience and what geographic region you're teaching just steal these numbers the subtlety I won't read the entire slide to you but you're mostly going to be technical

[19:02] training for software companies and software companies are really paranoid about intellectual property and I was doing a training event once and the CEO of the company said do you mind if we videotape this training of I said of course I don't mind record scratch freeze-frame let's step back from that for a moment the performance I'm giving as a trainer has value I have developed it over the course of a very long career and giving it to a client for the training produces the value for them as well because there are some people who will eventually be doing programmer work on behalf of their company who are not currently in the

[19:40] room they might not be hired yet they might be in a different job at the company they might just be out today it is valuable for them to receive the training without flying me on a plane back from Japan - in that case New York City to receive the training again so they would be happy to pay additional money for videos of the event and because they are a software business and they are religious about intellectual property they will say do you own this intellectual property and you will think to yourself say yes but I will sell it to you I listens it to you and they will

[20:13] pay just for that license and nothing else and if you wonder do I need to bring in a video crew no you don't need to bring in a video crew you don't need to host the videos they've already got that handled just charge them for it for doing an online event for a single company I would like to charge $250 two-seat or $5,000 for the event regardless of what depending on which one they want and again this is for the live training if you want the videos I'm happy to give you a copy of the videos taken from Skype or whatever I'm using to deliver the live training and that

[20:45] will cost you $3,000 you can host it on your SharePoint or whatever you use internally till the end of time for online training that you deliver to the public or your selling tickets I like selling them for $99 again you're selling to the economic engine of the planet I mean if you're selling to an individual Drupal engineer individual drupal engineer has you know an income high in the 5 or low six figures and they're learning about something to make their business work better they are probably expensing it to an employer or they're expecting it to the business and the huge amount of money that goes into

[21:16] running a business every month charge $99 for a lecture even if that lecture is an hour long and if you do a half-day charge $249 I suggest not doing training longer than a half-day online and the reason is Oh God you get bored after a while you're sitting in the chair and it's just a miserable miserable user experience I have sold people to day training events for 500 dollars before thinking I need to like be felt the amount of content to get up to that 500 dollar price point that I want that was a mistake many as people didn't even show up for day number two a lot of

[21:49] people were like I'm totally checked out after the first 4 hours of this why keeping me here I was torturing my customers to get them to give me more money not a repeatable sales process instead give them the curated very focused version of the training and then move on what if you are running an a process for business and you don't know what to charge you just want to put one price and try testing that with people I have a great price for you is $800 a month did I pick that randomly almost divided divided 12 K by 15 because you can all get 15 people to say yes to

[22:27] anything and then that's it that gets to 800 and if you think the thing I think I am thinking of doing is not rationally worth $800 a month I think you underestimate how many things that businesses will pay $800 a month for I think you could probably convince a business I will take out the trash for you for $800 a month and I don't say that as a joke I mean that every business with more than 20 employees pays much more than $800 to have someone come in every day and take out the trash because their employees time is worth too much to actually walk an extra

[23:00] hundred feet to the trash themselves find the valuable thing pitch them I need $100 a month if no one bites on this find a different more valuable thing so what you need to build to do a privatized consulting business do you have to write an enormous number of scripts do you have to build up software before you can ever pitch this to somebody no here's what you should implement in order first a landing page I like to call this my flag in the Internet hey Internet you don't know me yet but my name is blah and I intend to be the person to go to on this topic

[23:36] you don't have to write a whole lot of copy just if you want to be the productized consultant in rails active record optimization hi my name is Patrick and I do rails active at record optimization and that's it if you if you know where you're interested in this give me your email address and then you were going to write writes or produce three artifacts to demonstrate your expertise you said Patrick what is an artifact an artifact is a way for me to convey that something has value so there was a civilization that happens to be geographically cool a look co-located with Japan but predates it by a lot called the general and

[24:16] civilization the German civilization produced artifacts in pottery and if you go into any museum it will say this is an artifact of the gentleman civilization that's just some clay and some rope which someone put together for the purpose of defecating in but we say it is an artifact because we know that is valuable these guys got to the whole clay rope defecation outside of your own Hut thing before anybody else did they were very good at what they do but because they fixed that in a physical form we now know that they were able to do that because this speech might be fixed in a physical form 3,000 years

[24:52] from now some civilization we haven't met yet might realize that both the German and the American were aware of the not defecating and Hut principle so don't just write blog posts don't just write content it's on my business cards but man do I hate that word write something valuable which tells the world I am good at this thing then after you've produced three little things to say I know my stuff move on to writing a sales page for the offering sales pages just I know my stuff as evidenced by x and y and z i can do it for your company for a certain price here's what it'll

[25:26] look like if you're interested by it then you write a one-month email course I could talk a lot about one month email of course this actually did a course on writing one month email courses I will give it to you for free link later then write a premium which just means an artifact which exposes people to the existence of the email course but give me your email address that will hand you an artifact it will not be pottery you will not difficut in it it will tell you how to do something for your business and then you can actually start implementing the offering after you've got paying customers for it what does

[26:03] this actually require what does it look like a little more concrete

[26:12] just like almost everybody in this room insufficiently expert at enterprise sales to convince one company to stake six figures on a relationship with you almost everybody here is capable of doing anything that a company values that's what you do every day when you show up to work or show up to consulting just do you do that thing that is valuable it's a good sign that people are already paying you to do it and you probably went probably means that there are other people in the world that would pay you to do it to find repeatable outcomes of that thing you do that you can sell to folks align that I saw in

[26:48] Indy hackers comment on the sidekick business was that the owner of the sidekick business turned a repeatable outcome into her P double income ooh I love that line it sounds a little cheesy but it's totally true find outcomes which are visible to clients it's not good to all yourself off in a little room and do your thing way that clients does not perceive and then to send the client an invoice say okay I want my $800 a month for doing my magic in the room say nope here's the value that I produced for you this month like like every month it's awesome you don't even have to think about that thing I will

[27:26] charge your credit card like normal and then you create process around the thing you are doing let's go ahead a little more concretely Vegas is towns very inner performances and those performances are a routine they are scripted they were done once by someone who is like that kind of worked and then they wrote that down and they can reproduce that performance on command every night the same freakin way and people pay the money every night to say to see the same thing and they don't even pay the original performer money to say the thing they will pay people who's like literal job titles I am an

[28:06] impersonator of that performer you like and I will perform the thing exactly like they did except kind of a little worse than maybe I'll have a little hammy dialogue with my announcer before it and people will pay $90 for that tonight in quantity you're going to figure out what part of your performance can be turned into a routine and then you are going to make it into a routine that can be performed by someone other than you that might be an employee of yours or that might be a computer so what are you going to sell if you don't have a concrete idea already sell things that the market

[28:38] already buys sell things that the market already buys from you if you are a rails developer and you teach other rails developers at the office about rail security sell people training on rail security if you notice that people are using a substitute for example they are paying a lot of money for a more kiddo they are buying in the hopes that paying a lot of money to marquetta will improve their marketing outcomes you can go to them and say I will improve your marketing outcomes like this if Nick DeSalvo had a great great thing he noticed that the market was paying a gratuitous amount of money for AV

[29:13] testing services from this guy and he said I could do that like on a monthly basis for a whole lot less money and get probably almost as good results and he got some people to sign up for that and did indeed get very good results for them and I created a very good result for Nick and his wife and dog as well I'm minorly jealous of Nick that I didn't think of that business model first I would probably not have a day job if I did don't tell it like all since I said that um I like to get concrete at my craft so it can create

[29:49] but totally hypothetical business I would call it back up Zarah not for any reason just cuz that sounds cool so I've run a business based on data for the last couple years a regulated business based on data and I toss and turned at night thinking what happens if I lose my data center one here actually like run a SAS business Esav today I'm gonna pick on random person in the front row do you have backups when's the last time you restored your backup you don't have backups hence backups are I will make the backups and I will test restoring the backups and you will never have to worry

[30:30] about backups again what does this look like when I'm talking to a client that has data a 45-minute call tell me about what data you have that you would actually care about losing okay give me access you're on AWS give me access day ws I need this level permissions whatever I'm going to log into a dub us I'm going to set up backups yes they will be a cron job yes I know you have someone at the at the place that could have implemented cron jobs they haven't I will boo-yeah backups are and I'm good then I'm going to tell them two weeks from now you will have backups and they will

[31:03] be tested and they will be working backups are two weeks later I write them an email I've done your backups because I am the backups are here's your invoice we will talk next month whatever we're going to talk about next month the backups that I did again and test it again and the invoice that you are going to pay I love giving clients beautiful reminders of why they are paying you money so don't just do the backups in a cron job produce them a report about what you backed up great way to make reports gentlemen the front row runs a service called remark do which turns

[31:38] mark down into markdown into beautiful PDF reports by the way never tell a client I'm going to provide you a beautiful PDF to report because PDF doesn't service any surface any value say that you are going to produce an artifact telling them their reports are better so that they were backups are better you don't have to call it an artifact that come it's kind of sounds a little hoity-toity but better and you should think about how you're going to charge clients money every month but not for very long there's companies that can help you moving right along we have this word internal abstract called toil I think we stole it from

[32:15] Google toilsome bits about your job are the parts that don't really bring a human worth of value but have to get executed by human so for example if you're manually doing work every month like manually doing backups you're bringing an entire highly educated human to the hard hard problem of can I execute this particular set of commands every month that's toil it's repetitive its grindy and it never gets better doesn't surface ending value to your come to your customers to their your customers customers but it just has to get done you should automate toil we give you an example of automating toil which I'm stealing from stripe so part

[32:56] of my job is I run a forum for Atlas atlas as our incorporation product I'm a charging for content artifacts I'm in charge of artifacts and community and for the community we have a forum and because stripe is is composed of a lot of smart people who like to see graphs that go up and to the right I was responsible for making a graph that went up into the write about the forum and I picked the obvious things I graphed daily active users and monthly active users and amount of posts on the forum but because I did not want to write software to do something that didn't

[33:29] really require software I get written I did this by just logging into the forum every month actually on a weekly basis daily basis at the time it was just launched and Counting Cindy posted today that's one day the active user Jon posted today two daily active users but I felt that and I would count and then I would transcribe it into a Google spreadsheet and do you think I'm joking oh I actually did this until my son was born and then after my son was born and I came back to work I sent an email hey our forums are doing kind of well and I got asked by somebody else's name is

[34:01] Patrick cool where's your graph and I said oh it's maintained manually in a spreadsheet and he said awesome it hasn't been touched in seven weeks well I was kind of busy you know having a baby and everything and then I thought oh I should toil less on this so I looked at my options for discourse and just running sequel queries against a hosted instance the discourse didn't work so what I started doing was I would load the back up of the discourse that's a form softer download the backup for perform software restore it to a database locally typing my sequel queries locally and then transcribe that

[34:34] into a spreadsheet and then I did that for a couple of weeks and that's still kind of boring so I started doing it like this I wrote a Rick tasks a Rick tasks would execute the school queries for me rather than me having it like type them out into IRB by myself every day and most of those stuff stay the same and in the Rick tasks would output a CSV file and that I could copy and paste into the spreadsheet and something I'm going to do and then near future is to just integrate with discourse directly run the sequel queries take the CSV and then shove it into our reporting

[35:07] infrastructure and have gone from toiling lot from my brain sweat being used every day to run this business process to toiling zero I will be not involved in this business process at all and if you slapped a credit card form on that that would be a SAS business pretty cool right so when you do your SAS business you're going to start by integrating with lots of things and you're going to integrate two things first sorry that wasn't pause for dramatic effect that was possible were actually being able to deliver the next two lines number one going to integrate with zapier because an integration with zapier buys you an integration was like

[35:52] six hundred things for one time engineering investment number two you're going to integrate with slack I'll tell you why later but why are you going to do integrations because integrations both help you scope to people who are already paying for the thing that you want to buy because they are paying for something directly adjacent to it scopes to people who are happy paying for software and it gives you easy ways to get into the hands of those folks because you can go to the folks you integrate with say I have extended your software in a meaningful fashion without you doing any engineering work by integrating it with

[36:25] it in a way that is fantastic your customers will stay on your software longer and make you more money and be happier with your product if they adopt my product as well will you send an email out to your entire mailing lists announcing that we are now you're blessed option for doing whatever it is that thing you do and not everyone will say yes to that but not many people have to say yes to that for it to make a huge huge impact on your 12 K a month goal a very important thing not quite as important as charge more it's the fundamental theory of cess and you want

[36:59] to memorize this and have it inscribed on the inside of your eyeballs for the rest of time at revenue or LTV lifetime value is the word we sometimes say is the product of your acquisition how many leads you get in a month might be how many visitors you get in a month might be how many trials again in a month whatever you want to call that times your conversion rate from lead visitor trial whatever to paying customer times your average price point for those people divided by your churn rate so if your turn rate is five percent for interval per month then your average lifetime is going to be twenty months

[37:34] and so the revenue from a single customer is going to be twenty times whatever you're charging them in the month you need to understand this equation and understand what changing variables in the equation does for the revenue with regards a single customer a cohort of customers business it's all the same it's multiplicatively effective to touch any point and this graph you're going to think wow can I start on conversion really tough from where you're coming from right now optimizing for conversion rate is tough unless you're both sophisticated doing it and you have lots of conversions already you can do that after you're in the growth track next year for the

[38:11] moment you're going to optimize on price because it's so easy just double your prices you're going to optimize on position and you've heard a lot of talks about how to do content marketing better how to do advertising better it was fantastic advice this is one of the best micrographs I remember and I've been to a lot of them and they've all been great but this has been like a particularly great year for that you're going to optimize unsure optimizing and churn is a little harder but you can do it a little bit through the product I want to give you a North Star in all of your

[38:44] product decisions after you have a product that people are actually paying for I will implement this feature if it produces radically more value faster for my best customers and until you hit your 12 K a month I will implement no feature which does not produce radically more value faster for my best customers will I implement a new setting because someone asked for a new setting he wants to see his this literally happened an appointment reminder I would like to be able to see the text in your webpage in gray instead of black not because I have difficulties seeing black but because black just doesn't agree with me and and

[39:19] I was stupid and thought well that's 10 minutes of work so yeah what why not I'll do it and I did it that's 10 minutes that didn't bring the business forward at all mistakes I'm in a few but you wish the 10 minutes is the only amount of time you use too stupid features that don't move the business ever anywhere but there are companies that spend years and years development time on stupid features that don't move the business anywhere if it's one of your best customers asking for it and it would unlock further business in the entire class of customers they represent implemented if it gets your customers

[39:50] closer to value if it allows them to get to a happy point of your software earlier in their use of it implemented if it radically radically transforms your your application into something that they would be happy paying ten times as much money for implemented if it is not one of those things do not implement increasingly software is social back in the day you would run that in your own desktop and you would be the only person interacting with it and maybe maybe you would share the exported version of your data with somebody over email that day is dead software at a business is like everything else at it but as a business

[40:30] it is between people at the business who work together around the shared enterprise of the business that enterprise and like enterprise software like enterprise and the other enterprise that isn't from Star Trek the third and price this is why slack is one of the first things you should build in first because slack is adopted by technically savvy teams like to adopt software and because software that you can access from slack allows you to have conversations around the things that are happening in your software conversations happening around the things that are happening in your software or one of the things that is going to increase user satisfaction with

[41:06] your software it's going to make it stickier it's going to make it more likely that they continue on you really hacked for this one of the first things you should have an onboarding flow is give me an email address of everybody else at your company we should be using this every company every b2b SAS company which tests get more email addresses from users has a higher uptake rate on that free trial or in the likelihood of them going to a higher plan and lower turn rate this is like a cheat code for life honey badger tripled I think their their conversion rate just by putting in

[41:40] an interstitial which said hey give us the email addresses of everybody on your team so we can get them signed up with the honey badger account why does this work often the person who adopts your software is not the person who will be actually using it and if it's their responsibility to go into some settings pain somewhere and spend like 15 minutes clicking a button 15 times and adding 15 team members ain't nobody got time for that just give them a text box do the parsing and the text box never ask your user do something that a computer would be better at like say splitting email

[42:10] addresses from each other some random things that you might want to know about business before you get it deeper into burning one businesses are really really really expensive this is good for you because your customers who are businesses know that running businesses are very very expensive and therefore whatever you think are thinking of charging them is cheap that's good this is less good for you in that you're going to have to spend a large chunk of that money that you're making from your customers and various business administration things I spent last year so I'm running a business by myself I have no full-time employees and anyone

[42:47] take a guess as to what my expenses were last year nope okay 160 grand and was I you know chowing down in caviar and expensing it to the business no that's just what business's costs they it was two grand a month for servers and ten grand for international tax accounts and 10 grand for the other half of international tax accounts then I had someone answering emails and wouldn't you know if you answer emails per year that cost you about thirty thousand dollars and dot that that so charge for sheree not obvious to me that even outside of Silicon Valley the economic returns to running a business are back weighted

[43:27] what does this mean so you're producing not just artifacts for marketing your business but your business the sum of value that you create is itself capital that you get to take with you and even a few things that you're going to be in software for the rest of your life and God willing I will be in software for the rest of my life that particular business that particular bit of capital is something that you might sell one day and you might think well I'm not really building the next Facebook or Google how much is that really worth if I'm like extracting money from the business every year just

[43:58] to just to live on that's my and dream state that was my end goal stay as well but if I look at what my profit was over running businesses for ten years and then what the like single check was at the end when I sold it and it turns out that in my particular case 40% of the economic returns from my family came from that last check and this was not you know a huge business for more on this talk to Thomas mail from Fe International a very important thing for while you're at Microsoft make friends keep them close this is a ridiculously isolating line of work to be in your

[44:37] spouse might not understand exactly what you what it is you do every day because fundamentally you go every day to the internet and then money shows up your society might not understand what it is you do every day I remember sitting down in a cafe and ogaki and I would do this a lot because I had no office at that time and at the end of about three weeks this the waitress came up to me and said I'm so sorry but just keeps sending those emails somebody will employ you one of these days and well she was right but a long story I'm really really blush on you using

[45:18] micro cough to find lifelong friends I've found them here give many shout outs but it would take the next 10 minutes so find your tribe here and do you stay in touch with each other do help each other through the through the down times no matter how successful you are there will be down times contact information and whatnot I am Patrick at Kells Emmaus I'm not Patrick at stripe do not use that inbox it does not go to me do use that inbox if you want to talk to him he's happy to get emails from you seriously I'm patio 11 have strife if you want the if you want to do Atlas for

[45:57] incorporation for your business I would love to make that happen but talk to me first it isn't the right choice for all of you yet two years from now I want to be able to comfortably say that 90% of this room is on my craft but we're not quite there 90 percent this room is on my craft 100% of this room is on my craft 90% of you all should be honest some day 90% of the technology technology industry should be but we're not quite there yet if you want that course on doing email courses click the bitly link there just give me your email address in your name I also send you a

[46:28] copy a few days after Michael have no obligation yada yada yada I wrote a thing about the boring mechanics of running businesses because I really loved the geeky boring mechanics like wire transfers and bookkeeping and accounting that is fun for me because I am broken that guide is totally free and available at that link straight down slash atlas slash guide feel free to read it and if you see things in the guide that are not in the guide but really should be in the guide send me an email it is literally my job to create those artifacts and finally my email address my email list is that

[46:58] training calcium use comm you should probably be on it even though I don't send email that much anymore so you could skip it if you want to but don't skip the other stuff it's kind of cool thank you very much Patrick thanks so much for having you guys

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