[Patrick notes: As always, I include inline notes in my transcripts, called out like so.  If you'd like to see my 2011 talk, see here.  It focused on how to run a software business in 5 hours a week, including scalable marketing strategies like SEO/AdWords/etc.

Video & Slides (Transcript follows)

Transcript: Marketing, For People Who Would Rather Be Building Stuff

Patrick McKenzie:  Hideho everybody, my name is Patrick McKenzie, perhaps better known as "Patio11" on the Internet.

I sometimes get asked what I do, and I'm kind of confused at it myself. I was going to Town Hall recently to file my taxes, and I was across the street from Town Hall, the light was preventing me from getting across the street. By the way, I live in Japan. A guy comes up to me on a cycle, stops right next to me and says, "Psst!  日雇い労働ですか？" [Patrick notes:  I corrected the Japanese here with reference to a dictionary, but don't remember this as being his phrasing.]  My brain started to flip through all the possible things that could be, and a high probability for those characters, hiyatoi roudou is day labor, “Are you a day laborer?”

I was like, “Wow, there’s only one way I can answer that. ‘Yeah, but my rates are probably a little high for you.’”  [Patrick notes: Unstated background knowledge here: I live in Ogaki, where roughly 90% of foreigners -- who are rather scarce -- are blue collar Brazilian Japanese who largely work in electronics/car parts factories.  Unemployment among these folks has been rather high for the last couple of years, so if you were doing things purely on a statistical basis, "Day laborer" is a much less insane guess for a foreigner standing outside city hall than "Owner of a software company."]

[laughter]

If you were here last year, you heard the grand arc of my transition from really overworked Japanese salary man to totally‑not‑working‑all‑that‑much Bingo Card empire guy. It’s really not all that great shakes compared to some of the things that people have done up here, but it’s the little website that could. It has over 200,000 users and 6,056 paying customers.  [Patrick notes: Current counts as of posting are ~300,000 and 8,249.  The last twelve months have been pretty good.] I’m pretty happy with where it got me to, and just for a little update on this story for last year, if you weren’t here for last year, it’s on the blog somewhere.

I’m sure people will tweet out the link to that video if they’re very, very nice and kind to me. [Patrick notes: The Microconf 2011 writeup is here.] Just an update. The blue bars here are the 12 months before attending Microconf, and the red bars are the last 12 months, so after attending Microconf. Since my business is crazily seasonal, if the red bar is above the blue bar, I’m doing something right. As you can see, in the last six months, the red bar is routinely exceeding the blue bar, so I was doing something very right. The thing that I was doing was stopping working on Bingo Card Creator.

So my first actionable tip is, “If you have me in charge of your marketing,” like say Jason Cohen does, “you need to fire me, and your sales will go up by 50 percent.” We’re not going to talk too much about Bingo Card Creator today, we’re instead going to talk about systems. You heard earlier about building the flywheel, being a growth hacker. This is probably one of the most important things I’ve ever come across, but a job is a system that turns time into money, and a business is a system that turns systems into money.

I was once talking to a Japanese guy at a large automobile manufacturer in central Japan that you might know of, and I said, “T‑Corp is known in America as a company that makes cars, and Ford, or whatever, is a company that sells cars.” He patted me on the head like, “Oh, nice. Silly American. Ford might well be a company that sells cars, but T‑Corp is a company that builds organizations that builds cars.”

Why Engineers Get A Cheat Code For Starting Businesses

I thought that was a very profound distinction. All of us are in the business of building things that help us sell things that we build. I think we are ideally situated to this, because, as engineers, we build systems. You heard earlier about the term “growth hack,” which is just on the cusp of becoming a meme, by the way. You’re going to hear a lot about that over the next coming days, because there are huge platforms these days, everything from Pinterest to Twitter, to Google, to the App Store, that give you ready access to hundreds of millions of users, billions of users, many of whom have credit cards and will actually pay money for things.  [Patrick notes: I'm stealing this from 500 Startups' investment thesis, but I think it is equally applicable regardless of whether one is doing a high-growth startup or a one-man bootstrapped software company.  Again, the most niche app you could think of, run by an unknown guy living in Central Japan, just added 100,000 users last year while in maintenance mode due to effective use of Google as a platform.]

As engineers, we have the capability of exploiting those platforms in a scalable manner. Some of the ways to do it I talked about last year, and I don’t want to give all old content, so if you want to hear about SEO, which is the main reason my sales went up for this year, just watch the thing from last year. [Patrick notes: Or you can read my copious writeups of it in the Greatest Hits section under SEO or Content Creation.] We’re going to talk about new stuff. Oh, totally stealing a slide from last year. In addition to Bingo Card Creator, there were three really big things going on, and I just want to give you updates on them.

The most important one, down in the bottom there. Last year I said something out of school, it wasn’t planned for the talk or anything, it just slipped out of my mouth. I said, “The most important thing in my life right now is I’ve recently met a beautiful young lady, Miss Ruriko Shimada over there, and she is going to be the future Mrs. McKenzie.” That was the first time that thought ever got verbalized, even in the deepest recesses of my mind, so luckily it was not simulcast or anything. That’s official now, it’s happening June 26.  [Patrick notes: Ruriko's only comment on the presentation was "The 23rd, dear.  Be there."]

[applause]

Thanks very much. I don’t have a picture of kids, for obvious reasons, but can I just make a note about this? Everyone has shown a picture of their children or significant other. At a less charitable conference, people might be, “Oh, that’s the boring stuff, skip that, get to the good stuff.” All those other pictures, that is the good stuff. There’s a word in Japanese called mono no aware (もののあわれ）, meaning “an awareness of the impermanence of things.” All this conversion rates and equity grants and profits and all this… Vegas?

[laughter]

This will all be dust and memories. The important part of our lives is our families, our friends, that is what we will be known for. If you have a successful business, and your family isn’t feeling it, something is going terribly, terribly wrong. I can’t just stand up in here and say, “My fiancee is the nicest, smartest, most wonderful, beautiful woman in the world,” for the entire hour.

[laughter]

#include <platitudes.h>… wait, the word I wanted is not platitudes, it’s compliments, drats. I don’t speak the Engrish. Anyhow, updates on other things that are going on. I got a slide up from Fog Creek, which was one of my favorite clients I can publicly talk about, but I don’t really have much content in this presentation about running a high‑priced consulting business. Is that something you guys are interested in? Let’s have a show of hands.

I’m a marketing guy, so let me give you the quick elevator pitch, and if you want to hear about this, we can talk about it at the question‑and‑answer session. Is it interesting to you how I turned down $700,000 a year to do conversion optimization for big software companies? Just raise a show of hands. Would that be fun? Oh, OK. We might talk about that before questions. We’re going to talk a little about “Appointment Reminder” stuff that I learned the second time I tried to make a software business from the ground up, and how you can apply it to your businesses.

This is my new thing, which is, by the way, in almost direct competition to somebody who was in the first session of tear‑downs. You might compare and contrast to the way I do it and the way he does it. I actually went up to him afterwards and tried to teach him what I know about this, because people helping people is what this event is all about. We all get better, even if we’re competitors, sharing knowledge. Anyhow, it makes “Appointment Reminder”, phone calls, text messages and email messages to the clients of professional services businesses.

Don’t Make My Mistakes In Picking A Software Business

This is a wee bit more sophisticated than my bingo thingy. Why did I pick this problem? This is the slide in which I give bad advice. The way you should actually pick a problem, skip back to your notes from Amy Hoy’s presentation. That’s the way you should pick a problem. This is not the way you should pick a problem, but it’s true, so I’ll tell you it anyhow. You see this jacket that I wear in all of my presentations, because the color red looks good on me, and I love this company, Twilio?

Twilio came out with this product that let Web developers basically script up phone calls and SMS messages. I thought, “Ooh, that’s kind of awesome.” I like to view the market, “The market” in the sense of the broad, capital‑C Capitalism sense of the market, as a placid lake, which incorporates everything we know about the world right now. When new information gets added to that, it’s like dropping a rock in the lake. Ripples in the lake are change, and the larger the ripple is, the more change there is, the more possibility there is to get outsized profits over the course of the world right now.

Because we learned from microeconomics 101, the natural state of profits in the system is zero. The steady state. Twilio was dropping a big F‑ing rock into the software world, because you can finally interface with the plain old telephone system without having to understand what an Asterix server is, and if anyone here has ever tried to hack Asterix, I’m sorry for you. What could I do with a telephone that I couldn’t do before? I made a list of 400 ideas and just sat on it, because I was still at the day job at the time. Since I spend 16 hours a day in front of a computer screen, my shoulders ache like crazy, so I sometimes go to massage therapists.

This one day I went into a massage therapist, and asked, “Hey, can I get a shoulder massage, because I’m an engineer, my shoulder aches like crazy.” She said, “It’s going to be about two hours,” and I’m like, “Oh, well I’m gainfully unemployed, so that’s no problem. I’ll just take my iPad, browse Hacker News in the corner here for a little while, then we’ll get the massage when you can do it.”

15 minutes later, she comes back to me and said, “Hey, I know I told you it would take two hours, but it would be really, really helpful for me if I could massage your shoulders right now.” I said, “Sure, no problem, can I ask why?” She said, “I had this slot booked up with somebody else, but he didn’t come in, and now he’s 15 minutes late. If I don’t start massaging your shoulders now, that’s going to throw off the schedule for the rest of the day, and I’ll never get the revenue from these next 45 minutes back.”

I’m like, “That’s interesting. Why don’t you call him?” Notable and quotable line from her, she says, “I’m a massage therapist. If my hands are on a telephone, they’re not on someone’s back, and if my hands aren’t on someone’s back, I’m not making money,” and I thought, “That’s interesting.” I asked, “If I had a system that could call someone automatically before their appointment with you, would that be motivational to you?” and she said, “Yeah.” I went through my list of 400 things, and thought, “This is the first one I’ve had an actual customer need for.”

How did I know it would sell, though? That’s one person. I did two things. One thing I did was just whipped up the MVP, Minimum Viable Product, read Eric Ries’s book “The Lean Startup.” Everyone should read that book, it’s amazing. I whipped up the MVP, which is a website, you can get to it, I’ll show you the link later. You give in your phone number, and it calls you, just like you had an appointment, and says, “Hey, you’ve got an appointment. Click ‘One’ to confirm.”

If you confirm it shows right on the schedule here, “This person confirmed.” If you cancel, it says, “This person canceled.” We would email you right now so you can re‑book the slot and save the money. I just threw this up on the Internet, and waited. People signed up for my pre‑launch list, and said, “That is exactly what my problem is.” The other way I did, was I went home to Chicago, which is where my family is from, and took out $400 from an ATM, and walked around downtown Chicago and looked for salons and other massage therapists, that sort of thing.

I walked in and said, “Hey, do you take walk‑ins?” “Yeah.” “Are you free right now?” “Yeah.” “Are you the business owner?” “Yeah.” “OK, I’ve got a weird proposition for you,” and no, not that kind of weird.

[laughter]

“What’s the rate on a 30‑minute shoulder massage?” She would tell me. It’s almost always a she. I would say, “OK, I’m going to pay you the rate for a 30‑minute shoulder massage, but what I’m really interested in, I’m a small businessman, I live in Japan, I’m interested in the business of massage therapy. How about we just skip to that post‑massage cup of tea that you’re going to offer me,” I have learned this over the years. “Skip to the cup of tea, I’m going to pick your brains about how you run your business, and then I’ll go, no massage needed, and you get your money?” Almost everybody took me up on that, and nobody called the police. Yay.

[laughter]

I would ask questions, like, “What do you use for your appointment scheduling right now?” “Pen and paper version 1.0.” “How many people cancel?” “Lots.” “Do you not like when people cancel?” “Yes.” “Do you phone call people every day?” “Well, yeah, I kind of do, but I sometimes forget,” yadda yadda yadda.

Then the money question. “If I had something that I could show you right now that would call, would you pay for it?” “Yes.” “Would you pay $30 a month for it, because $30 a month is close to your rate for just saving one appointment?” “Yes.” “Can I get your email address right now? As soon as this is ready, I’m going to come back to you and say, ‘It’s ready. Let’s get that $30 a month,’” and I just collected those.

I actually didn’t end up selling any one of those people, but the need was clearly demonstrated to me there. I’ve got a better way for doing it these days, because as I mentioned, I am in the talking‑to‑people‑about‑wedding‑things, and I’m learning stuff about selling wedding dresses, because I am the unwitting victim of that. There’s this thing called the iPad, and every salesman at a wedding venue or a wedding dress shop, or whatever, in Japan, is using the iPad. I predict within five years, that every salesman in the entire world will consider that their key sales tool.

The reason is, when you have a sales discussion with someone with the iPad, you’re sitting next to them, standing next to them, hunched over the shoulder in a very intimate, psychologically‑reassuring way, while they drive the iPad and flip through. “Oh, that’s a lovely dress. Oh, that’s lovely, I really like that one.” “You like that one? I’ll show you more like that.” When they get confused, you can just take over for them, do the little slide‑y slide‑y thing, and it is a very, very persuasive technique.

If you don’t know whether a software will sell or not, go to WooThemes, or go to ThemeForest, pay $15 or $70, or whatever it is, mock up three screens from it, or even mock up two screens plus the final output. Put them in a photo gallery on your iPad, and take it directly to people in real life. Stand out and then listen over the shoulder, it’s like, “Do you really have a wedding dress problem? We got these.” If you’re solving a problem people actually have, they will say at this point, “Shut up and take my money.”

[laughter]

If someone says, “That’s kind of interesting, tell me when that exists,” you have not successfully identified a problem that people actually have. Fail to identify problems prior to spending six months of your life building the solution to those problems that no actual human being, aside from you, actually experiences in their life. You will have much better success that way. Brief interlude on pricing. This was brought up in a few things, and we treated it at a high level, so I thought I would dig into the nuts and bolts, considering many of you are in the software‑as‑a‑service business.

How To Read A SaaS Pricing Grid (And Why You Should Charge More)

I thought I’d read a pricing grid. This one’s from Wufoo. You have seen similar things all over the Internets. I can’t tell you about exact results I’ve gotten from customers, but I talk to a lot of people about this sort of things, so if we’re just kind of anonymizing, here’s how you read it. Find the largest dollar‑amount plan. That plan generates 33 percent to 50 percent of gross revenue. Why? Because it’s sold to people who are not spending their own money, they’re spending a corporate budget. Spending your own money hurts, but spending a corporate budget is kind of the happy thing for a lot of people.

[laughter]

Because, check this out, if you don’t spend your budget, it gets taken away from you. If you’re trying to protect your home position at a company, you want to spend as close to the top of that budget as possible, so help people out. They’re trying to protect their status and job security, by helping them spend their budgets. $200 a month is nothing to a company that has actual employees. The cheapest possible fully‑loaded cost for a college graduate is about $4,000 a month.

$200 a month is five percent of that, so if you’re only spending one or two hours of employee time a month, $200 is a total no‑brainer. So’s $250. Anyhow, the one that has the most users. Nobody likes to be a cheapskate, boom, it’s this one. The one that has the highest support costs. Wufoo has a free plan, I’ll guarantee you they get more annoying emails from people on the free plan than anything else put together, probably squared.

[laughter]

The worst customers, I call them pathological customers, are attracted to things that don’t have a lot of money. It’s amazing how many people have told me this. You raise prices, and you deal with less crazy people. At 99 cents, people have very unreasonable expectations. “What? This flashlight app didn’t do my taxes! One stars!”

[laughter]

When you’re charging people tens of thousands of dollars a month for an enterprise‑level service, they say, “Hey, our business really needs this feature.” “Oh, thanks for the email. I would really love to implement that feature, but we are kind of constrained on time right now. Can I get back to you in the indefinite future, if we get time to do that?” You’ll get a one‑line email back, “Sure, that sounds great.”

Would you rather deal with the no stress and get the tens of thousands of dollars, or “One stars!” for 99 cents? It’s almost self‑explanatory. By the way, I’ve sold a semi‑B2C product for most of my life. I really do love teachers, even when they’re kind of exasperating, and can’t tell the difference between the blue Googles and the green Googles, and don’t understand why they can’t get a CD of the Internet. It actually happened to me today.

[laughter]

In terms of, if I had known then what I know now, I would never go into B2C. Charge businesses, charge them a price appropriate to the value you’re providing. By the way, big surprise about software‑as‑a‑service companies, almost every one has enterprise pricing available. Some of them don’t put it on your things, but I guarantee you there’s a way to go up to Wufoo, go up to almost any software‑as‑a‑service company, and pay arbitrary amounts of money for their product. For example, if you have a $500,000 budget, and you talk to somebody at Wufoo, I will guarantee you that they will find an option to spend $500,000.

Maybe it’s we send a trainer and teach everyone how to use their drag and drop form‑building interface, and then the cost of the trainer’s time is $500 an hour, and the business will say, “Oh sure, yeah, whatever.” By the way, you need to purchase a service level agreement with them, and the service level agreement runs $20,000 a month, and there are businesses that will happily pay that.

Software‑as‑a‑service economics 101, why do you want to charge closer to the top of these pricing points, instead of the bottom of the pricing points? Because you have to get a lot less customers to generate the revenue that you want, to either replace the day job, or to meet whatever your own personal goal is. How do you segment plans? First, align it with customer success.

Getting based‑on features can work, but if there’s a numeric thing that allows you to discriminate between customer classes, such that the more value they get out of the product, the more X number that they need, segment primarily based on that X number.

It doesn’t have to be linear segmentation, because the ability of Fortune 500 companies to pay is not linear, with respect to the size of the company. A 1,000 person company is not the same as collecting 1,000 one‑man companies and putting them all in a room together. They have orders of magnitude more money, so you should probably be charging them orders of magnitude more money.

“Names matter.” Back in my time as a Japanese salary man, I was given a project to run by my boss, and I was trying to buy, I think, “Crazy Egg” for it. I did the projection, I wrote up the proposal for my boss, and said, “By the way, we need the $9.99 hobbyist Crazy Egg plan, and could you please approve the purchase for that?”

Boss takes my printed out proposal for the project, looks down at “Hobbyist,” goes over to crazyegg.com, strikes it out in red, writes “Enterprise,” picks the top plan, which was $250 or $500 or something a month at the time, something like a quarter of my salary, and says, “OK, here’s the new proposal. Sign off on it, and then I’ll sign to my boss.”

I said, “Boss, boss, we don’t need the enterprise plan, our projected traffic is clearly under the hobbyist plan.” He says, “F if I’m going to tell my boss that I want a reimbursement request for the hobbyist plan, so we are under the enterprise plan.” I was like, “Can I get the enterprise salary?”

[laughter]

That did not work out so well. That’s why I no longer work there. Anyhow, feature segmentation can work, particularly if you have features where there’s a hard requirement among some customers, that they must have a particular feature. That segments people into, “Has a little money” vs. “Has a lot of money.”

For example, healthcare in the United States has more money than God, and something that a lot of healthcare customers are going to be very particular about is, “Is this HIPAA‑compliant?” Talk to me later if you want the full story on that one, but the magic words, “Is this HIPAA‑compliant?” means you can charge them as much money as you want.  [Patrick notes: The one-sentence explanation: Healthcare providers in the US are obligated to follow the Health Information Privacy and Availability Act to safeguard patient health information, which imposes some technical and process safeguards on anyone who handles most data for them.]

By the way, you can have a system where all accounts are actually HIPAA‑compliant, but you only tell people that the most expensive plan is HIPAA‑compliant. Because they’re not actually caring about HIPAA‑compliance, they’re caring about being able to sign off on the fact of HIPAA‑compliance. If you simply refuse to sign off on that fact for anything that costs less than $1,000 a month, all of your healthcare clients are going to go for the $1,000 a month plan. Which is, by the way, nothing in healthcare.

The Most Important Pricing Advice Ever: Charge.  More.

Charge more, charge more, charge more, charge more, charge more. Anyone have a question about pricing? You should charge more. You’re probably ridiculously underpricing. $4,000 a month is the cost of the cheapest possible employee, you are less than a tenth of that. You are probably creating a lot more value than many employees in the organization, so charge for the value you are creating.

I was doing tear‑downs earlier. Here’s what I put up for my pricing grid about a year ago, and since I haven’t had all that much time to work on “Appointment Reminder,” I made a lot of mistakes. I haven’t fixed them yet, so I’m going to tear‑downs some of my own pricing grid.  [Patrick notes: Compare and contrast this slide with the current version.]

I have a $9 a month plan.  That was a mistake. I actually have a lot of customers on the $9 a month plan. They account for about 80 percent of my customer support requests, and approximately 95 percent of my headaches, and they pay me approximately nothing, and don’t stick with the service for very long.  [Patrick notes: When I did the math recently, customers on the Personal ($9) plan had a churn rate which was literally double that of the Professional ($29) plan, meaning a single signup on Professional was worth more than 6 Personal signups.]

I have an enterprise plan that’s coming soon, any day now, a year later.  [Patrick notes: Appointment Reminder closed its first Enterprise account a few weeks after Microconf.  If you want to hear about this topic in a lot of detail, I talked about it at a presentation for Twilio several months later -- I'll post it in a week or two.]  There’s actually a plan that isn’t even on here. It’s $200 a month, I call it “Small Business 2,” because I’m very creative like that. It’s just small business, and I bumped this number up a little. Small Business 2, plus Small Business, create over half my revenues that are based on this plan. Oh, quick update on “Appointment Reminder,” it quadrupled in a year without me doing much work on it at all. Thanks. End story, just make systems that really help. A tactic you should all probably steal.

The Tactic All The Savviest Software Companies Use: Automated Marketing Email

Can you raise your hands, everybody? Just get a little stretching. Put your hands down if you have not emailed a lot of customers all at once this month. If you look around the room and you’re looking for speakers, you will find almost all of the speakers still have their hands up, and this is one of the things that consistently segregates the really savvy people from people who are not quite at that level of savviness yet, so of course I didn’t really seriously start collecting emails for six years.

This guy Ramit Sethi, one of the smartest people on the Internet in terms of marketing, he says “The one d’oh moment is that I was not building up an email list.” You heard earlier about an email list is creating your own recurring stream of earned media, because they are people who want to hear what you have to say. They trust you on a subject, and they are begging you to sell them on your solution, so you should be getting those emails. Let’s talk about how.

Why does email rock? Some people, because we’re all techies, might say, “If I want to get in touch with someone about a new blog post that I wrote, there’s RSS feeds for that, right?” Email is like RSS, except better in every possible way. Email is actually read. RSS is not read. Quick show of hands, who here is over 10,000 unread items in their Google Reader?  [Patrick notes: Dramatically less people than when I delivered this talk, I would expect. </rimshot>] I rest my case.

Email is actually read by real people too, and by “real people,” I mean folks who don’t come to conferences like this, and who have authority to sign off on $500 a month purchases without breaking a single sweat.

Email is a necessary time, whereas RSS reading is, “I don’t have anything important to do today. If I don’t have anything important to do I might read some RSS stuff,” whereas emails, if you’re an information worker like all of us, email is your job. You live in your inbox. Many, many things in the inbox get read, particularly when they sound interesting.

The psychology of email is really important. If I put a diamond in a trash store, you’re probably going to think that diamond is not worth so much. Think of the things that will be around your message in somebody’s inbox. It will be a lot of important work. If that’s all important, your message is probably important as well. Think of the things that are probably going to be around your blog post or content in someone’s RSS feed, or someone’s bookmark manager.

It’s probably going to be a lot of commoditized Internet dreck that they’re going to get to the first day after never. [Patrick notes: The following is a little brusque for my typical humor, but was an in-joke for attendees of Microconf from the previous year, where Hiten Shah and I had done live analysis of websites of several attendees.  One had a bookmark manager system with a bovine theme.] If you do free association for, say, “What’s the spirit animal of email?” It’s Thunderbird. It’s fast, it’s powerful, it does important shit. If you do free association with, “What’s an animal we can associate with bookmark systems?” What would it be, a cow? It’s fat, it’s stupid… it shits.

[laughter]

Do email instead. When I say “do email,” what do I mean? Really simple. Collect their email addresses, educate them over the email, and then sell them stuff. Let’s go into detail on that. For a successful landing page, you really only need a few things. Just ask for the minimum possible information from them.

Probably their email address and their name, because everyone likes hearing their name, and you should probably put it in subject lines, because that’ll increase open rates on your emails quite a bit. Give them a nice, attractive button that promises value, not pain. Get something cool. Does anyone here run a website for sadomasochists?

[laughter]

There are no hands up in the room, which means that nobody should have “Submit” as the text on their email button.  [Patrick notes: I use this line because it is punchy and inevitably gets a laugh, but seriously, you can pick up totally free double digit improvements by switching to [Get My Free Guide] or similar benefits-focused copy.  Try it in an A/B test if you don’t believe me.]

[laughter]

Minimize distractions on that page. You generally don’t want to be collecting email from your home page. Why? Because your home page has to serve many masters. You’re probably trying to get people into the trial, get them into the pricing grid. You should generally be collecting email on dedicated landing pages. What will you have on your dedicated landing pages? A sweetener. Because people don’t really care about you, they care about themselves, so tell them that giving you their email will accomplish something for them. Let’s go into ways to do that.

The simplest possible way to get permission from someone to send them email is when they’re signing up for the trial, say, “Hey! In addition to that trial, can I send you email?” Just takes adding one box. Downside, it’s going to minorly decrease your conversion rate to a free trial. Upside, you’ll get crazy conversion rates on this. By the way, who here hates email, and thinks, “Man, I hate getting email. I would never click on ‘Yes, I want to get email from you.’” Yeah, hands up. Real people don’t hate email. Some people like email a lot.

I have a newsletter that goes out to the bingo card people, and it goes out about monthly. I sent it out for October and said, “Hey, Halloween bingo cards! You make them by going to Bingo Card Creator and typing about Halloween stuff!” Then the November email is, predictably, Thanksgiving bingo cards. “You make them by going to Bingo Card Creator and typing about Thanksgiving stuff.”

I didn’t hit the “Send” button on the November email, because I just got busy that month. I got three messages from teachers in America, all of them saying, “Hey, I didn’t get the email from you in November. I must have missed it or something, or it got eaten by the Googles.”

[laughter]

“Can you please send me the email for November?” I wrote back, and I said, “There just wasn’t an email for November, because I got busy, but it was just going to be about Thanksgiving stuff.” They’re like, “That’s sad! I want to read about the Thanksgiving stuff?” Whoa! Missed opportunity. A better way to do things than collecting emails with your trials is to create some specific incentive. For example, Ruben from Bidsketch uses beautifully designed templates of proposals, and says, “OK, I will give you a beautifully designed template of your proposal.

You can turn around and make this into money, and all you need to do for that is to give me your email address, so I can email you a link to it.” Works very, very well. You can see incredibly high conversion rates to this, and the people who convert to, “I care enough about beautifully designed templates to give an email address, just to get a link for a download link for them” are not the kind of folks who hang out in Hacker News like it’s their job. It’s the people who really care about this. They make really great prospects for selling to. Third way…

Male audience member:  [Paraphrased] That doesn’t mention that he’s going to send you an email, though.  Isn’t that a no-no, permission marketing wise?

Patrick:  I think it actually does, I just cut it off with the screen grab.

Male audience member:  OK.

Patrick:  A different way, and this has vastly higher development costs, but you should consider doing it. Make a one‑off tool, gate access to the one‑off tool based on giving your email address. For example, WP Engine does this kind of well. [Patrick notes: See here.  Disclaimer: client.] They have a tool that will tell you if your website is slow, and it takes a few seconds to run and whatnot, so rather than just doing Ajax refresh, they’ll say, “Hey, we’ll send you a link to your report when it’s ready,” and they give you a little option there. “Hey, in addition to hearing whether if my website is slow, I’d also like to hear a one‑month course about how to fix that, and make it more scalable, make it more secure, and whatnot.” Get Jason drunk later, and ask if this works or not. This sort of thing can provide very focused, valuable leads for you, and it’s like a great transition moment into the first couple of emails from you. Let’s talk about that.

There’s a cycle here, of how sales‑y you get. Someone’s coming off the Internet, they don’t trust you, they don’t know you from Adam. For your first couple of emails over the course of a month, and you might send six emails or eight emails over the course of the month, depending on how much of a high‑touch complex sales process your service requires. For the first couple of emails you focus on trust building and education, and that’s it.

If you were just talking about someone’s website is slow, say, “Hey, thanks for signing up for the WP Engine one‑month course on improving your WordPress site. Here’s three ways you can make your website faster.” Very focused on value for the customer. Minimal, if any, sales content for WP Engine.

Then, over time, as you have built up credibility with the customer over three emails, they’ve seen your name in their inbox, they’re starting to associate it with your problem domain, and they’re getting value out of it, you start getting a little more sales‑y, and you push up that sales‑y to the maximum point. Then if they don’t buy it by the maximum point, they’re probably not ready for your offering. Back down a little bit, go more on the education again, and then try it again, but sell a different product offering. For example, a different plan.

I just threw up a random thing here for a template for an email that educates someone about something. It’s not really rocket science, it’s the three‑paragraph hamburger essay that you all learned to write in sixth grade. I hesitate to say this, but don’t be afraid of dumbing it down too much. You all live in your problem domain many, many hours a day, for months, weeks at a time.

Most of your customers are not super‑awesome ninja rock star experts at your problem domain, so teach them the basic stuff, because most people in your problem domain are beginners or intermediate, not super experts. Feel free to share of your knowledge, and answer basic questions that they have, and then at the end, just say, “Hey, do you have a question about this? Send me an email. I read all of them.”

Almost none of you have less than hundreds of thousands of customers, would feel any burden from getting email back from this, because most people think, “Oh, he doesn’t really mean that.” In fact, you will get emails saying, “Do you actually read this?” and then you fire back, “Yes! Signed, CEO.” I guarantee you if they have money, you’ve just got a customer for life. Even if you have hundreds of thousands of customers, like this for “Bingo Card Creator,” the email load is manageable, and you can give options for more and more things to do to convert.

When you’re getting into sales‑y hump on the graph, what do you do? First, you eliminate all decision making that they need to do, aside from, “Do I accept the offer, or no?” which means, if you have four plans, you don’t say, “OK, go to the pricing page and pick which of the four plans is worth it for you.” No, give them a recommendation.

Say, “Most of our customers find that this is the best value, you should buy this. Here’s the reasons why you should buy this. It will solve your problems, it will solve your problems, it will solve your problems, your life will get better, your problem’s solved. You, you, you, you, you, you, you, you.” Offer them a time‑limited bonus. “Yeah, you could have gotten to that pricing page at any time over the last 365 days, but if you take me up on this offer in the next seven days, I will give you something cool.”

It’s up to you what that something cool can be. For many of you, assistance directly from the CEO in integration is a really compelling offer, because wow, you can’t get that anywhere else. Wow, their perceived value for that is very high, and it immediately addresses one of the objections that they have for using your software. It’s like, “Oh god, I have to integrate that. I have to copy‑paste scripts into my web page.”

We’ll do the copy‑pasting for you, and thereby earn your loyalty for the next several years, and several thousand dollars of customer lifetime value, and it will actually be done by a freelancer that we’ve hired and told them how to FTP stuff. I think I stole that one from Rob, works pretty well. Pre‑answer all of their objections in the email, and on any page that you link them to. This is what we were talking about earlier in the tear‑downs.

When you’re talking to customers, you’re hearing their objections, “The price is too high.” Find the customer testimonial that says, “Oh yeah, I winced, but man, it’s so worth it,” and put that right on the page about answering the pricing objection with, “OK, here’s how you calculate the value for this. It’s a screamingly good deal for you. It will save you hundreds of hours of employee time, for only tens of thousands of dollars.” How do you learn about writing email and copy‑writing better? I suggest signing up for a lot of email and getting it from people, because they will convince you to buy all sorts of stuff.

Seriously, Ramit Sethi, did a call out to him earlier, he is a genius at this. He’s a friend of mine, I know he sells info courses for a living, and I’ve never bought an info course on anything. I was reading his email, I sent him an email at the end of it, because he says, “I respond to all of my emails.” I’m like, “Hey, Ramit, this is Patrick. I would crawl over broken glass right now to hand you my credit card. Wow.” Seriously, get his emails. They’re good stuff.

In addition to teaching you how to write email better, they are genuinely worth your time if you’re concerned with increasing your career and/or freelancing business. The Motley Fool does investment advice. It’s bad investment advice, but they sell it really, really well. For any sort of scummy market, like online nursing degrees or anything, people who are paying $100 plus just to get an email for that, probably know what they’re doing or they would be bankrupt already. See what works and use your powers for good, not evil.

Improving The First Run Experience Of Your Software

[Patrick notes: If you'd like to hear me talk about this in a lot more detail, go to training.kalzumeus.com and give me your email address.  I'll give you a 45 minute deep dive into this topic, totally free.]

More specific to software people, let’s talk about the first‑run experience of your software. Hands up, who here knows how many people come back to using their software after the first time, like that is something we check? OK, there’s a few hands going up here. Almost everyone should check that.

For those of you who aren’t checking it, I’m just going to tell you the numbers right now. It is between 40 and 60 percent of people come back after using it the first time. Which, subtract from 100, 60 to 40 percent of people never use the software a second time, because they did not perceive much value in the first‑time use of your software.

They got bored of it after 10 seconds, or within five minutes, so you should make that first five minutes of the software F‑ing sing. It is the most important five minutes in your lifetime, because every subsequent use of the software is gated based on surviving that first five minutes that most of your users are not surviving right now.

Can you just show your software here? Who here thinks that this is a fun first five minutes for software? Microsoft can get away with this, because your first five minutes with using Microsoft Word were probably in 1992, and you had to do it to pass a class, and Microsoft is Microsoft, and you absolutely have to use this if you want to work in the information economy, but it’s kinda sucky.

There’s just so many options here, it starts you with a blank screen, and you have no clue. If this was a free trial product, what do I do to get value out of Microsoft Word, to make the decision on the go or no‑go for buying this? Microsoft, that isn’t really a problem, because you’ve already bought this if you’re seeing this screen. If this reminds you of your software at all, if you drop people into a blank screen, that is a huge failure mode. You’re going to fix that. How?

You script their first five minutes like it is the invasion of Normandy. “You are going to do this, and then you are going to do this, and then you are going to do this, and then you are going to do this, and then you are going to be F‑ing happy.” Can I give you a great example of that? Who here has played “World of Warcraft?” OK, a few hands. Who here managed a raid guild in “World of Warcraft” for a few years? OK.

The first five minutes of “World of Warcraft” is literally, you talk to this guy, there’s a big exclamation point on his head, and it says, “Right click the guy with the big exclamation point.” You right click him, and he says, “You need to save the world from a wolf. There’s a wolf behind you, you can kill it with Z. Z! Z! Z! Z! Z! Z! Z!” So you Z, Z, Z, Z, Z, you kill the wolf, you go back to the guy, he’s got another big exclamation point, you right‑click, because you’ve learned that that works in the world.

He says, “Great job! Save the world, there’s 10 wolves, kill them! You get Z and X this time. ZX! ZX! ZX!” So you ZX, ZX, ZX, and you have a feedback loop where it’s both teaching you on how to use the software, and you feel like, “Yeah, I’m the powerful level one gnome mage that’s has got to spend the next 3,000 hours of my life playing this game,” but it’s a great, awesome experience for you.

At the end of five minutes, you’ve accomplished something, and you’ve learned how to use the software. All of your software should be that addicting. Sign up for the free trial of “World of Warcraft,” play the first five minutes, then stop!

[laughter]

You measure their activity, then you use A/B testing, like we talked about last year to change their activity. This is where the growth hacking comes in, and making sure the designing of their first user experience with the software is actually motivational. Here’s the, “If you’re going to do this, then you’re going to do this, then you’re going to do this, then you’re going to do this” funnel for “Bingo Card Creator,” instrumented out in KISSmetrics, which is, by the way, the way I would go if I had any budget at all to spend on it.

I don’t know what I spend on it, it’s probably like $150 a month, or, you know, nothing. [Patrick notes: I literally was unsure of this until I checked with my bookkeeping software a moment ago.  It was indeed $149.  Relevantly to other SaaS businesses: what does this suggest about the resistance to spending any figure between $50 and $500 at my business?  Right, I don't care in the slightest. So charge me closer to $500 than you do to $50.  If you provided as much value as KissMetrics does I'd pay without a second thought.] You can write arbitrary code to do something like this, and just throw it into a file if you need to. You can see here where people are falling out of the funnel, if you’re into Bingo Cards, like that’s your life, and you can try things to get them to actually work.

I don’t really have enough time to talk about what really worked here, but the punchline here is that a particular intervention increases the amount of people who successfully get through to printing a bingo card with “Bingo Card Creator” by 10 percent. From 60 percent to 70 percent, which is really powerful for me.

If you read my blog, I’ve blogged about what exactly this was. It actually didn’t increase sales, weirdly enough, but similar things that I did with only two hours of work increased sales by 16 percent for two hours of work, durably. About tens of thousands of dollars for two hours of work, very motivational, you should probably do it. You fix the weak spots in the funnel that you’ve identified, once you have the funnel‑analytics in.

Here’s just some examples of things that work for Bingo Card Creator. Probably not too motivational for you, but they paid for my wedding, so motivational to me. Dan gave a great example earlier in the Growth Hacking talk [Patrick notes: Dan Martell's talk is available here], about people that have just signed up, and they can tweet something, but they weren’t really planning on tweeting something, and they don’t know what to tweet so they don’t tweet, and then they go away and never use the app again.

You say, “Hey, you should tweet something right now. Let me give you 10 suggestions. Pick which one you like.” From six percent of the people went through and actually tweeted something, to 70‑plus percent of people tweeted something, which is a huge, epic win in activation. “Activations” means happy use of the software. I guarantee you if you haven’t optimized this at all, you can achieve extraordinary gains in activation for not all that much work.

The thing that worked for Appointment Reminder was implementing a tour mode. What’s a tour mode? Appointment Reminder has sub‑optimal things about the way the market uses it, in terms of getting people through their 30 day free trial. I actually collect credit card at the start, and then they get 30 days to decide whether they want to cancel or not. The problem is that people typically make their appointments for the customers well in advance.

By the time the 30‑day mark rolls around, Appointment Reminder might not have actually reminded a single customer about appointments, because they were scheduled that far in advance, so that’s sucky. They get to the last day, they get to the email, it’s like, “Hey, we’re charging your credit card in 24 hours. If you don’t want that, cancel.” They think, “Oh, this hasn’t really done anything for me, cancel.”

Rather than making it take six weeks for them to perceive value from Appointment Reminder, and to have people come in to their massage therapy practice, or whatever their business is, I wanted to expose that value to them in the first five minutes. So I dragged them by the nose through using the software. Instead of calling their customer, I made a special little mode that would call them instead, and say, “Hey, this is your fake appointment reminder. If you actually had an appointment, it would be five minutes from now. Click ’1′ to confirm it.”

Bing, they click ’1′. “Great. That’s the experience your customer gets, now let me show you how to do that generally.” It walks them through this crazy, obtuse interface, because I’m not an interface designer. Says, “Yeah, put in (555) 555-5555 for one of the clients, and we’ll schedule an appointment for them.

It walks through every step of the work flow, and tells them, “OK, and this is where someone might actually cancel your appointment. Normally that sucks, but we’re going to send you an email, and that’s going to make you money. Isn’t that great? You’re having fun now.” Tell people they’re having fun now. That’s a big secret in Vegas. I bet there’s people running around in skimpy dresses with a lot of alcohol in their hands, trying to tell you all the time, “Hey, you’re having fun! Hey, you’re having fun! Hey, you’re having fun!”

Because if you tell people they are having fun and getting value from the software, they will tend to believe you. Create value, but also tell them that you are creating that value. If there is a social or viral component in your software, if you tweet about using the software, if you invite your friends, if there’s some sort of friends‑list management, first you should probably pre‑populate that friends list using anything that you can possibly do, because people hate managing friends lists.

Make sure that that goes in in the first five minutes, because it will greatly increase your viral factor, and that literally makes or breaks businesses. Zynga obsesses about this. Not a win for the world. Dropbox obsesses about this, that was a win for the world. If, on the other hand, your software requires a lot of data entry, like you’re mocking up things, or creating documents, or making bingo cards for people, figure out a way to eliminate the data entry as a prerequisite for actually getting the fun use of the software.

Maybe give them sample templates that they can use, or just put in fake data, and give them a “Blow away the fake data” button. This is a very deep topic. I have a 45‑minute deep dive available at training.kalzumeus.com. I’ll tweet a link to that later. If you give me your email address, you can download the video at any time. I’m actually not trying to sell you stuff. In fact, when I actually have something to sell you, send me an email and say, “I was at Microconf,” I’ll give it to you for free.

A Brief Digression Into The Scintillating World Of Running A Software Marketing Consultancy

Patrick:  [After consulting briefly with the audience, I decided to talk about consulting for a moment.] What do I do? We talked about this earlier, the way to extract money from any company is to promise them one of two things. Either you’re going to increase their revenue, or you’re going to reduce their costs. I’m kind of terrible with firing people, and that’s the best way to reduce costs for most software companies. But I’m kind of good at scalably increasing revenue, so that’s what I do. By trade, I am a programmer. If I was less savvy about this, I might describe myself as, “I’m a Ruby on Rails developer who knows a few things about a few things.”  Ruby on Rails developers might be hard to hire right now, but they’re hireable. If you have $200 an hour, you can find Ruby on Rails developers. But don’t compete with all the Ruby on Rails developers in the world, because Github is lousy with them.

Instead, say that you are giving an offering that will increase their revenue by a lot.  I can point to particular customers of mine, that they will find very credible within their space, and say, “We worked with Patrick and then our revenue durably did a stair‑step function.” I said, “What is stair‑step 100 percent increase in sales of your software as a service product worth to your company, if you have $10 million of sales right now?” “Oh, that would make our sales $20 million.”

“Oh, great. Then I’m pretty cheap compared to the $10 million marginal revenue you’ll get,” and you get very little push back on prices, no matter how much you bump it up. Scarily low. Yeah?

Male audience member:  When you make that sale, how do you guarantee it, or say, “If I don’t reach this, you don’t pay more than that,” do you know what I mean?

Patrick:  No. [laughter]

I’m sufficiently credible about this thing. I think most of my customers actually succeed, because most of them invite me back. Let’s say a week of my consulting rate is similar to the fully‑loaded cost of hiring an engineer for a month. [Patrick notes: That was a good ballpark figure a year ago.  My consulting rate tends to increase over time as I get more successful engagements to use as references, get pickier about what clients I take on, and just start writing higher numbers on proposals.] If you have an engineer work for you for a month and the product fails, like most products do, the engineer doesn’t give his salary back, right?

Plus the pricing structure would be very radically different if there was downside to me, if it didn’t work out. If there’s downside to me if it doesn’t work out, there should be substantial upside to me if it works out, so if I double the sales for the company, I think as a close approximation I should own half the company afterwards. I’ve actually used that line on people before [Patrick notes: In case it is not obvious, no well-run company anywhere would even consider that payout structure], and they’ve been like, “Oh, that’s cheeky! But we’ll go with the cheap option.”

[laughter]

Where the cheap option is $20,000 a week, or whatever. That is just a representative number, that is not a quote.

[laughter]

How did turning down $700,000 work out? I went to a company in a far‑off land, which is not the United States, because the United States is a far‑off land for me, but a different far‑off land, and I did some stuff. Can I talk to you about what the stuff I did? Hmm. I can’t talk about specifically what the stuff I did, but if you’ve listened to my conference presentations or read my blog, you know that I really like A/B testing, and I really like Search Engine Optimization.  I really like, say, designing the first five minutes of software, and I really like, I don’t know, redesigning purchasing pages to extract more money from businesses that don’t care about how much money that gets extracted from them.

I did some combination of those things for a particular software company, and made them a lot of money. A company that was making X, so say eight figures of revenue, went to a different eight figures of revenue. But there’s a lot of play in the eight figures range.

[laughter]

That was after working for them for two weeks. The CEO said, “Hey, at the rate…” It’s kind of embarrassing for me, but the rate I quoted them was $20,000 a week. Why am I embarrassed? Because part of me has always thought that I’m really not worth that, and I’m just good at bamboozling people.  [Patrick notes: Nagging doubt monster!]

[laughter]

This engagement was the one that turned it around, because one of the things I generally insist on is, “OK, I like this metrics stuff, I’m going to get metrics for the before and after. We’re going re‑test, and we’ll see if this actually worked.” We came back two weeks later and we looked at the metrics, and I’m like, “Oh, I must have mis‑implemented that,” and he says, “The bank account disagrees with you.” I’m like, “Oh, oh, wow. Oh, wow. Oh, wow. Oh, wow.”

He said, “So, what was it? $20,000 a week, or whatever we’re paying you?” A CEO doesn’t even know, that’s not a motivational amount of money to a CEO at an eight figure‑a‑year company, despite the fact that it’s kind of a motivational number for me. He said, “What was it, $20,000 a week? So if you consult 50 weeks a year, that’s a cool million.

“But you can’t actually consult 50 weeks a year, so there’s overhead and whatnot, and you have downtime, and you have to go to conferences to meet people like me, so let’s call it a 30 percent haircut to that, so that would be what, $700,000? Is $700,00 a motivational amount of money to you?” [exhales loudly] I’m like, “Wow, wow, is that on the table?” It’s like, “I’m the CEO, we’re sitting at a table, bam!”

[laughter]

My life flashed before my eyes, and I’m like, “Wow! Wow! Wow! Wow! No, Wow!” I guess the follow‑up question to that is, “Why did I say no to that?” Consulting is the right thing for me right now. I have a wedding to plan for, I have two weddings to plan for, one in Japan, one in the US. People with iPads are successfully convincing me that I’m probably still in your position, but for the consulting business.

I’d love to help you by coming here and spreading knowledge, and talking to you, and taking your emails any time my email is up on the screen. Doing it as a day job again is not something that’s motivational for me, even for more tea than there is in China, I think is the expression. $700,000 is a lot of tea!

[laughter]

Patrick:  Sorry, not meaning to brag there. OK, questions?

Rob Walling:  Can we get a round of applause first? [applause]

[Patrick notes:

My recollection is that I said something here which unfortunately did not make it on the video, but it is more important than the rest of the speech put together, and since this is my blog I think I'll take a moment to say it again.  All the speakers at Microconf, and many of the attendees, receive substantial support from their spouses and families, both in the sense of "Hey honey, can I fly to Vegas to talk with some quirky software people?" and in the day-in-and-day-out support for the entrepreneurship career choice.  That's sometimes risky and sometimes involves annoyances to families that people don't generally have to deal with when their spouse is in 9-to-5 employment, in everything from quirky hours to weird comments from friends/family to the inconsistency relative to biweekly paychecks.  We should recognize the support of our families as being instrumental to our business/careers, and also keep in mind that they are, ultimately, stakeholders in the business, with a claim superior to even employees/investors/customers, because at the end of the day they'll be with us when the business is, as mentioned earlier, but dust and memories.

The attendees at Microconf joined me in giving a standing ovation to the (numerous) family members who had made it out for the conference, and also for the folks who were supporting attendees from home.]

Obligatory disclaimers: It is a good thing that I’m CEO and not the bookkeeper, because if I were bookkeeper I’d be fired for incompetence. When I do the official accounts for tax purposes I virtually invariably discover a few thousand dollars of extra expenses. (You might reasonably think “Then shouldn’t you outsource this?”, and you’re smart for thinking that, but sadly my part-time bookkeeper can’t always catch problems like “Patrick forgot to hand her a business trip worth of receipts.”)

On transparency: I’m weakly committed to transparency: it is nice to have but not one of my core values. I don’t impose it on other people, so when my business touches a partner or customer I generally err on the side of keeping their details private, absent specific permission to share. I also politely decline to discuss stats for Appointment Reminder, largely justified by “I don’t want this post quoted against me in a partner meeting” should I ever decide to raise money for it.

Capsule summary of 2012: I had a very good year, across all lines of business, in terms of personal satisfaction, value to clients, and profitability.   The big story was meat-and-potatoes execution: taking things which I knew how to do and knew to be effective, and applying them in fun new ways.  Some examples follow.  Profits roughly tripled from ~$70k to ~$200k (on total sales of ~$275k), exclusive of Appointment Reminder.  2013 looks to be very exciting indeed.

The Year In Brief

Bingo Card Creator was in maintenance mode for approximately 48 weeks of the year again, with two experiments done with a site redesign and incorporation of direct ability to charge credit cards (via Stripe) rather than using Paypal or Google Checkout. The experiments were, taken together, a smashing success.

I once again planned on spending most of my time working on Appointment Reminder, and (once again!) life decided to get in the way. Last year it was losing two months of the calendar to immigration issues. This year’s “distractions” were much happier: I took off approximately three months for my wedding and honeymoon, and my consulting business decided to grow like gangbusters. In any event, I was able to repay a lot of AR’s technical debt, fix the occasional technical issues the service had been experiencing, knock off a few new features, close my first enterprise contracts, and approximately triple the paying customer base on the published plans.

Speaking of consulting: As planned, I spent less time on acquiring new clients and assorted promotional activities (conference speaking, etc), and roughly the same amount of time on the boring mechanics of scheduling and delivering engagements. I also walked my rate up a few times.

There was an interesting outgrowth of the consulting business: over the last two years I’ve delivered engagements regarding email strategies for SaaS businesses several times, and had to turn down many more due to lack of availability, so I tried my hand at productizing consulting via creating a video training course about that subject. This worked out very well, both for myself and my customers.

An opportunity fell into my lap to try angel investing (as angel, not as entrepreneur). It’s a bit of a long story, so I’ll probably cover it some other day.  I also wrote a book, as previously covered on the blog.  It launched very late in the year, so I’ve got no interesting numbers to share about it yet.

Bingo Card Creator

Bingo Card Creator makes bingo cards, mostly for elementary schoolteachers. It had far-and-away its best year ever, despite being in maintenance mode. This was largely driven by organic growth of the business and huge increases in conversion rates following the redesign and Stripe integrations, covered here. The differences are very apparent if you look at conversion rates for any month after May and compare it to the year previous, which is necessary since BCC traffic and sales are very heavily seasonal. Or you could, you know, just take a look at the sales graph.

Stats:

Sales: 2,254 (up 55% from last year’s 1,451)

Refunds: 89 (up massively from 14 — the story is so good you’ll have to read it below)

Sales Net of Refunds: $64,791.81 (up 40% from $46,233.68)

Expenses: $26,193.40 (up from $23,003.19)

Profits: $38,598 (up 66% from $23,230)

Wage per Hour: Approximately $1,000, given that I worked for approximately 15 hours integrating the new design and spend approximately 20 minutes a week doing support.

Web Stats:

(All stats are from bingocardcreator.com unless otherwise specified.)

Visits: 1.08 M (up from 821k)

Unique visitors: 875k (up from 670k)

Page views: 3.4 million (up from 2.9 million)

Traffic sources of note: Google (56%), AdWords (12%), Binghoo (11%)

Trial signups for online version: 87,000 (up from 83,000)

Approximate online trial to purchase conversion rate: 2.4% (up from 1.8%)

Narrative version:

Overwhelmingly the best thing that happened in 2012, or for that matter the last several years for BCC, were the A/B tests where I reskinned the application and marketing site and where I introduced Stripe charging individual credit cards. This breathed quite a bit of life into a business that had previously simply been running on autopilot. I’m incredibly happy with how that worked out, particularly as I was able to get the actual design work done by someone else, and only had to do the Rails integration and a few tweaks to get it working.

What Went Right:

• I’m almost totally superfluous to the day-to-day operation of the business.
• The aforementioned A/B tests delivered major wins, on top of a half-dozen more minor ones. (A percent here, two percent there, it adds up when you keep doing it for six years.)

What Didn’t Work So Well:

• I used the Stripe quick-start code to do my integration and did not build in server-side validation to stop duplicate transactions, trusting the client to only submit once, using Javascript to guarantee that. This is reliable as long as your client is not the IE Javascript engine running on a machine while it is being struck by a bolt of lightning. My poor customer got charged 36 times for Bingo Card Creator. I, of course, refunded the purchases when I caught them. (In case you’re worried: while a lot of electronics got melted, my customer was physically unharmed.)
• In addition to the above, switching from Paypal to credit card orders increased the number of duplicate orders customers put through by more than an order of magnitude. Previously I just trusted people to not do this. Apparently… it is time to algorithmically suggest to customers that just because they didn’t get an email in 30 seconds doesn’t mean they should try the purchase again.
• At some point in 2012, I started dreading doing customer support. I’m not sure why — I think I’m just really tired of answering the same questions for six years now. I’m going to try to pass off L1 support to a VA in 2013. I probably should have done this 5 years ago.

Appointment Reminder

Appointment Reminder does appointment reminding phone calls, text messages, and emails to customers of professional services businesses. I launched it in December of 2010, so it is just turning 2 years old right now. I go back and forth on whether I want it to be the Next Big Thing for me. Since I want to keep my options open on that score, I refrain from quoting numbers about it publicly.

My idea was that AR would be my primary business focus at the start of the year. That was the plan last year, too. Once again, my execution on it left a little to be desired: I think I got done about 60% of what I wanted to get done. This was partially due to distraction from the rest of the business, and partially from not understanding the difference between “single”, “engaged”, and “married” as well as I thought I did. (That’s not a complaint so much as it is a reflection about reality — marriage is far and away the best thing that ever happened to me.)

Revenue: Undisclosed.  The monthly revenue run rate on the publicly available plans is approximately quadruple what it was in December 2011. Enterprise sales went from “zero” to “non-zero”.

Expenses: Undisclosed.

What Went Right:

• Technical issues: Last year AR had multiple customer-visible failures, and when AR broke it broke very badly, with failure modes like “DDOS someone’s home phone line” or “Failure to deliver time-sensitive reminders sent to patients by their doctors.” I spent quite a bit of tightening the system up, and had a much, much more stable year. We still had one major incident (the VPS it runs on became unable to boot after a distribution upgrade) which caused six hours of wall-clock downtime, but thankfully maintenance was timed so that this only resulted in about 15 minutes of downtime relevant to customers, and we only dropped ~6 calls. I’ve figured out a lot of architecture / tech stack problems prior to reaching extreme scale, which is probably for the best.
• Email marketing: AR sent precisely one marketing mail on January 1st of this year: “Thanks for signing up for the free trial.” I frequently do email marketing for clients, and it is always more sophisticated than that, but I figured AR didn’t have trial numbers to justify extra work. When I was writing my video course on email marketing, though, not taking my own advice felt very disingenuous, so I implemented most of what I was advising. Wham, conversion rates and customer happiness up, just like advertised. (Best single win? A checkup at 3 weeks into the trial which, if the account looks likely to convert, tells them how much money they’re saving. If they’re unlikely to convert, it offers a one-month extension to the free trial if they speak to me about it. That single email has been worth low five figures. Want more suggestions? Buy my course about lifecycle email marketing.)
• Redoing pricing/plans: Appointment Reminder launched with $9/$29/$79/Call Me Maybe pricing. (Hey I just met you / And this is crazy / But pay me ten thousand dollars / It’s enterprise software, this line won’t even rhyme.) The $9 personal plan was a mistake, and I knew that when I created it, and even despite that I suffered a year and a half of it anyhow. D’oh. That wasn’t the worst mistake, though — it turns out there was a substantial market segment who were at above the quotas that the Small Business ($79) plan addressed, but were unwilling to play the Enterprise pricing game. They do, however, fit in the Office plan ($200). The (new) most expensive plan now accounts for over 1/3rd of revenue from the publicly available plans.
• Enterprise sales: It’s a long story, but surprisingly it isn’t impossible to win them as a one-man firm calling from Japan… you just have to make the most out of the utterly unfair advantages that gives you.  (A trump card I lay early and often: “I’m the founder.”)  If you’re interested in this topic, I recommend signing up for my mailing list, since I seem to write more about B2B topics than on my blog.

What Didn’t Work So Well:

• My responsiveness: I have not been doing a great job this year at pursuing enterprise sales (i.e. only successfully get a decisionmaker on the phone a low percentage of the time even for inbound leads), partly because I get a lot of leads via voicemail, which I don’t deal with very well. Many of them are poorly qualified, and as a result I find myself dreading listening to voicemail to call back and talk for 10 minutes (at 2 AM in the morning) only to discover that they’re not good fits for AR. This is something which rationally speaking I should want to do, since it the path forward for the business, but I have been only sporadically successful at forcing myself to do it. Ideally, I will systematize the sales process and then offload it to someone, but this requires consistently executing on it myself first, and at the moment my successful sales have been all one-offs rather than anything resulting from a repeatable process. (n.b. Welcome to sales at any early-stage startup.)
• Technical issues: Did I mention I had six hours of downtime and nearly gave myself a heart attack resolving it prior to the business day starting for my EST-based customers? That isn’t acceptable going forward. I still have more to learn about this (and likely always will).
• General level of interest: Even in weeks that I have blocked off to work on AR, I often find myself just lacking any desire to do it. The business isn’t intrinsically more boring that e.g. Bingo Card Creator, but the sort of things that I need to do to move it forward seem to hit my desire to work with a damp towel. On the plus side, not having investors or employees means that I have 100% control over the schedule. On the minus side, not having investors or employees means that I have 100% control over the schedule, and AR has frequently lost out to pressing matters like consulting engagements, League of Legends matches, or wonderful opportunities to clean drains around my apartment.

Consulting

Like 2010 and 2011, I did a bit of consulting in 2012 for software companies. I increase sales of SaaS companies, and that’s all. Under that fairly broad brief, I do everything from writing software to support marketing objectives (Fog Creek has a case study coming out eventually, I believe) to doing lifecycle email campaigns to repricing plan offerings to A/B testing copy tweaks to… you get the general idea.

My guests and I on the podcast ended up talking quite a bit about consulting in the last few months, and I wrote an article about it.

Consulting Sales: ~$140,000  (this includes something like $20k of Accounts Receivable, for delivered engagements whose payments I will not constructively receive in 2012)

Consulting Expenses: $~40,000 (travel, conferences, and catch-all for anything which isn’t obviously for another line-of-business, like e.g. buying a business iPad)

Narrative Version

Where do clients come from?  I primarily source engagements by participating on the Internet (Hacker News, my blog, etc), speaking at/attending conferences (most relevantly to consulting, Business of Software), having word-of-mouth from previous happy clients or other folks who know me, and occasionally from nebulous reputational factors.  A new client and I would typically talk for an hour or two, and if they look like a good fit, I send them a one-to-two page mini-proposal for the engagement.  The prototypical “good fit” for me is an established software as a service company with revenues in the eight figure range, a few dozen employees, and a company culture which focuses more on the product/engineering side of things than on the marketing/sales side of things.

What are engagements structured like?  It depends on the engagement, but a fairly typical proposal for a new client would be for a 1 to 3 week engagement, delivered contiguously and on-site.  (I do remote engagements, too, but largely for existing clients.  Being on-site is a bit higher bandwidth, which is helpful in the getting-to-know-you-and-your-systems/products/people stage of a relationship.  People also generally tend to trust folks they’ve met in the flesh and broken bread with a heck of a lot more than they trust an email address with attached wiring instructions.)  I charge a flat weekly rate, generally in the five figure region.  The beautiful thing about the choose-your-engagement-length structure to proposals is that if the client has budgetary issues then we can address them by moving particular deliverables out-of-scope and shortening the engagement, rather than by compromising on the rate itself.

“What is it you do, exactly?”  It varies extensively depending on the engagement, and the specifics are often NDAed.  Broadly speaking, I make software companies money, primarily by increasing the sales of their SaaS products, usually through either a) applying engineering expertise to solve a particular marketing problem or b) just straight-up marketing expertise.  (If a client were to theoretically ask me to just crank out features for their Ruby on Rails app, I could theoretically do that, but more talented programmers are available for cheaper, so I’d advise them against it.)  Some specific tactical examples might be:

• Designing and implementing the first-run experience for their SaaS application, with the goal of increasing conversion from free trial signups to paying accounts and increasing lifetime value of paying accounts
• Implementing a drip campaign, such as allowing potential customers to sign up for a free one-month mini-course on $PICK_A_TOPIC, where the mini-course also duals as a sales channel for the SaaS product the company sells  (One of the rare engagements I can actually talk about was doing this for WPEngine — it meaningfully and permanently increased their sales.)
• Re-writing marketing site copy or re-doing design (I do wireframes, their designers make PSDs and working code, most of the time) to increase conversions to a SaaS product, generally with the new work getting A/B tested versus the old stuff so we know whether it is working or not
• Re-doing pricing / packaging options, or presenting them in a more effective light, to increase sales, average order value, and average customer lifetime value.
• Teaching teams at clients to implement A/B testing, email, better pricing/packaging options, etc etc so that clients can get good at these rather than needing to rely on me.
• Being a sounding board for product / UX / packaging / etc decisions.  (e.g. “We’re considering moving a very successful desktop application sold on a licensed model to the SaaS model.  That will cost us millions of dollars and, if we commit to it, would be our #1 strategic priority for next year, to the exclusion of all others.  Prior to committing to doing that, we’d like to have external confirmation that this isn’t insane.”)

What Went Right:

• Leveling up: The advice I gave in the podcasts and the above article is largely distilled from my own experience. In general, as compared to earlier in my consulting career, I’m a bit smarter with regards to client selection and to the kind of projects I work on, and I charge to match. The increase in sales is totally driven by an increase in average bill rate — I actually cut down weeks worked. (There are broadly speaking three ways to increase consulting revenue: increase utilization rate (percentage of time you spend doing billable work), increase your bill rate, or hire people. I could schedule as many weeks of work as I wanted, but don’t really feel the urge to do so since it would conflict with my software businesses and life in general, and don’t really see myself managing other consultants… at the moment, anyhow.)
• Working with great clients: I’m privileged to have had the opportunity to continue working with smart companies, with excellent products, which had good opportunities for applying my skills to our mutual benefit. A lot of the stress of consulting is dealing with client relationships which you shouldn’t be in in the first place. Being picky and choosy has been a major win for me, and as time goes on I’m getting better at it.
• Delivering for clients: I have my own personal Nagging Doubt Monster. NDM often wonders whether e.g. I’m worth what I charge to clients. On balance, I’ve always thought the answer was Yes, but I have had troubled sleep about it, particularly as my bill rate hit arbitrary threshholds that flipped my “comfortable” bit. Earlier this year, a particular engagement, whose results I’m unfortunately not at liberty to disclose, sent the Nagging Doubt Monster into indefinite hibernation. In addition to that particular engagement, it has in general been a very good year. Clients are generally thrilled with what they got out of working with me, and I feel likewise.

What Didn’t Work So Well:

• Legal Stuff: You know how every consultant ever tells you “Hire a lawyer to do contract review”? You should hire a lawyer to do contract review. Some clients and I had differences of opinions with regards to the meaning of some boilerplate, which (while they eventually were resolved amicably) caused me way, way more stress than necessary.
• Scheduling Issues (Client-side): I had about three-ish weeks of availability this year where I intended to be doing consulting work, but didn’t end up billing anybody, because I didn’t move engagements through the pipeline fast enough. (That would be a decent-sized hit if I were a traditional consultant, who generally aim for about 35 weeks of work in the year, but since I generally shoot for about ten-ish…) In the future, I’m going to revise the proposal-and-present-contract dance to decouple it from engagement delivery dates. Previously, I’ve generally gotten the final greenlight within 2 weeks of an engagement starting, and if I blow that date that generally means I blow that week of availability. Random events can delay both contract signing and delivery, so I think decoupling them in the future will result in not having to spin my wheels.
• Scheduling Issues (My side): Relatedly, I occasionally have anticipated availability evaporate. I took three months off for my wedding, but that was planned. I also had August marked off on the calendar for working on my course, but that ended up swallowing a lot of September, and that delayed contract negotiations scheduled for September and thus cost a week or two of my fall consulting season when that bubbled down the line.

Productized Consulting

I created and sold a video course which teaches SaaS businesses how to use lifecycle emails.

I have, historically, intentionally avoided selling anything to software developers. Partly this was out of wondering whether I had anything of value, partly this was thinking the market was terrible (penny-pinchers with not-invented-here syndrome), and partly this was out of lingering distaste regarding “selling shovels.”

There’s a persistent meme among software developers which says “The way to get rich in a gold rush isn’t to mine for gold, it is to sell shovels to gold miners.”  This meme is often deployed to suggest that shovel-sellers are exploiting naive gold miners.  I want to eventually write an anthropology paper on the gold rush narrative as applied to startups, because it is fascinating, but my brief sketch is that people often use an incorrect syllogism along the lines of “If you sell shovels, then your customer must be a miner, then there must be a gold rush, but gold rushes are either intrinsically bad or there is in fact no gold rush, so your business is either doomed, distasteful, or distastefully doomed.”

After seeing 37signals, Fog Creek, Ramit Sethi, Amy Hoy, and others all produce information products which actually seemed to create customer value (in many of those cases directly to technologists), I started to feel a little more open to the idea of doing it. So early in the year, I created an email list for folks running software businesses, with the idea being that I’d continue cultivating an audience by producing free things that they’d enjoy, and eventually offer them an opportunity to buy something a little more in-depth than my typical writing.

Concurrently with this, I was doing consulting engagements, and I kept my eyes open for recurring customer needs. One major one was that most SaaS companies don’t make effective use of email marketing. In particularly, they send next-to-no lifecycle emails (emails triggered off of customer actions in the software), and those are an incredible opportunity if you execute well on them. I implemented lifecycle campaigns for fivish consulting clients, in some cases making hundreds of thousands of dollars in sales off of individual emails, and thought that rather than hiring out that expertise by the week I could probably package some of it as a training product, so other companies could implement the campaigns without needing to hire a consultant to do it for them.

(Here’s a replicatable strategy for making several hundred thousand dollars with a single email: start with a revenue base of $X million a year.  Email all customers asking them to switch from monthly billing to annual billing, in return for some incentive you can offer, which can range from “a month free” to “15% discount” to “Hey, you can book the expense this calendar year, so that will save you money on taxes.”  Feel free to try this with any client or day-job of yours if they’re already at scale — “We made so much money the accountant/bank called us to complain” will make for a great bullet point at your next contract/salary review.)

Why bother doing a productized consulting offering when I have software businesses and standard consulting to keep me busy? Partially, I love trying new things and just wanted an excuse to experiment. Also, consulting is working out fantastically well, but it routinely requires me to spend multiple weeks abroad on business, and that is less and less attractive to me as I get more and more married. So if I could replace on-site consulting with a consulting-like offering that I could execute on here from Ogaki, that would be a bit of a win.

I eventually decided on making a study-at-your-own-pace video course as opposed to e.g. an ebook or a series of webinars, and then wrote out lesson plans and started recording. I anticipated about two weeks to do the recording (I was shooting for about 5 hours of video after editing, so perhaps six or seven hours of raw video) and two weeks for a freelance video editor to get things ready for me. (I wrote all the courseware and payment processing code myself — rationally speaking that should have been hired out, too, but I was really looking for a programming project at the time.)

The course was eventually delayed a few times (my original estimate was two weeks of work and a three week shipping schedule, but it ended up closer to four weeks of work and an eight week shipping schedule).  Nonetheless, it did successfully ship, and seems to have worked out pretty well for customers.  (Amy Hoy interviewed me about the process in detail, in case you want tactical advice.  I expect that interview to be up in a week or two.)

(You can find the course here.)

Course sales: ~$60,000  (My mental target was $20k, so this was a pleasant surprise.)

Course expenses: ~$6,000 (freelance video editing, payment processing, video hosting, etc)

What Worked Well:

• Building an email list: About 5,000 folks asked to receive email from me. They mostly get free advice along the lines of what I’ve often blogged, except in a bit more detail. For example, I wrote about SaaS pricing and consulting, and subscribers have told me that they’ve used advice in those emails to substantial effect in their business. My basic brief is “Don’t ever waste their time”, mostly because I respect that people have invited me into their inboxes. (Also, I pay MailChimp about $100 every time I hit the Send button. That would probably change the character of my blog posts a bit…) In any event, when you have a “warmed” email list of people who have pre-existing reasons to like what you have to say, since you’ve been creating value for them for months/years/etc, doing product launches is a lot easier than “Build it and pray that they’ll come.”
• Value for customers: One of the reasons I avoided doing this for so long was that I was concerned whether customers would actually get value from it or not.  For both genuinely compelling ethical reasons and not-nearly-so-compelling Nagging Doubt Monster reasons, I greatly prefer doing things which have highly obvious ROI for customers over things that don’t.  Feedback about individual companies’ results with lifecycle email has been tremendously positive, ranging from “We had this on the list for 2 years but never knew where to got started, but then we bought your course, gave it to an engineer, and shipped within 3 weeks” to “This made us six figures.”  (Seriously mindblowing: the sales copy made one customer six figures.  An engineer reading it thought one point I mentioned in passing was worth repeating and forwarded the mail to their bizdev guy.  The bizdev guy used it the next day to close a 500 seat license.)
• Stripe: Despite some issues with, primarily, corporate American Express cards thinking that $2k charges for training materials were a little suspicious, Stripe was extraordinarily easy to integrate and reasonably priced, like usual.  In addition, unlike one might reasonably expect for a merchant account or Paypal, Stripe didn’t require either advance warning or an after-the-fact investigation when I suddenly had a considerable volume spike.  (I was expecting plus-or-minus $20k in sales in a short period of time and, if one goes from $3k a month of sales to $20k a month, Paypal will have words with you, sometimes freezing your account in the process.  This is, I rush to add, totally rational and solvable by e.g. submitting them a bit of documentation and waiting, but I had a lot on my plate, and not worrying about that was a boon.)

What Didn’t Work So Well:

• Workflow issues with video: I’m a good writer and a fairly decent conference speaker / classroom lecturer.  It turns out that lecturing to a camera is another skillset entirely, both in terms of maintaining pacing / energy / interest / etc and in terms of stupid technical issues like “You need to worry about having scads of hard drive space and, by the way, good lighting for taking the video.”  I’d give the content quality (in terms of advice) an A- or an A, but the presentation was often a B-.  This will probably improve as I get more experience with projects in this form-factor.  For example, while I like my decision to avoid word-for-word scripting the videos, the next time I’ll probably create e.g. Powerpoint slides or something to give people something more meaningful to look at during the lessons than me talking at them.
• Outsourced video editing: I hired somebody to do all the editing for these videos, which was a tremendous time-saving measure over doing it myself, considering that teaching myself the Adobe toolchain would have been a terrible decision.  Unfortunately, my freelancer (a good friend of mine from high school — and yeah, I hear you and you’re probably right) had a run of “bad luck” with regards to e.g. hardware failures and scheduling issues, which resulted in the work getting delayed quite a bit and only about 90% of the way finished.  (There are, e.g., videos which I shipped with known editing bugs in them, on the theory that shipping today was better than delaying launch by a non-deterministic amount.)
• Writing my own courseware: The site (which handles both sales and fulfillment) is a built-from-scratch Rails application which probably took a week or two to write (I was doing it concurrently with filming videos so I don’t have a great breakdown of hours used).  It is, basically, the best possible project to ask an intermediate Rails consultant to bang out, since the behavior is very well-specified and there are no surprises.  While I was quite pleased to have the opportunity to write it — you know, it’s like a new car, a new programming project has that smell of fun to it — rationally speaking that was a poor decision which probably cost me time and aggravation versus a) hiring it out and b) doing a totally-for-jollies programming project which wouldn’t need boring-but-important-to-get-correct glue code like user management or Stripe integration.  (Relatedly: what the heck possessed me to put it on a VPS again versus doing Heroku.)

Goals for 2013

Bingo Card Creator

• Given that I haven’t had a full year at the new-and-improved conversion rates yet, I reasonably expect BCC to coast to approximately $80k in sales on flat costs, for something like $55k in profit.
• I want to outsource 90% of the customer service load for Bingo Card Creator, because I add zero value to most interactions these days (there’s no reason other than ego to have “Thanks for your email.  Bingo Card Creator doesn’t support pictures and we do not anticipate supporting pictures in the future.” come from me rather than from a freelancer), my response times are getting longer and my patience are getting shorter with each passing year, and the cognitive load of dealing with even trivial amounts of BCC CS email makes me procrastinate about opening my inbox and dealing with (much higher priority) email for my other lines of business.

Appointment Reminder

• This goal worked out pretty well for me this year, so let’s try it again: 10X sales from 2012.
• I want to explore flying to an industry conference as a sales channel for AR.  My back of the envelope math suggests that it’s probably straight-up worth it to just show up with an iPad in a target rich environment and take orders for the $200 a month plan on the spot.  (My expected LTV is over $2k and I can demonstrate the product in about seven minutes while standing on my head, so any decent close rate makes that a very good use of a day, right?)  Plus if I successfully execute on that plan two times then I can take the best-converting demo script, write supporting software, and then hire somebody with good interpersonal skills and a desire to spend time on the road to deliver it for me.
• Now that I have a few marquis clients on enterprise pricing, I’d like to start closing more enterprise deals at true enterprise rates, rather than discounted-heavily-to-win-this-proposal rates.
• In addition to walking up enterprise rates, I’d like to systematize the enterprise sales process, with the eventual goal of being able to have large parts of it executed by people who are not me.
• I’ve neglected AR’s systematized marketing (e.g. content creation for the website, A/B testing, etc) horribly.  Need to rectify that.
• Deliver more features which are needed for higher-end customers, like “upload CSV of appointment data” rather than requiring manual entry, group appointments, etc etc.
• Continue improving service reliability.
• Strongly consider whether Appointment Reminder needs to eat more of my business attention pie, given current results and growth prospects.  (e.g. At AR’s 2012 revenue rates, an opportunity which would generate $50k in revenue for a few weeks of work elsewhere made sense.  There are plausible scenarios for AR under which that would be economically irrational after some point in 2013, versus just continuing to execute on AR.)
• Also, strongly consider gulp hiring.  Which I’ve been saying for two years now, but one of these years it will probably happen.
• Continue to wrestle with the questions of whether “I devote 100% of my work efforts to AR, take investment, and  take a shot at an eight or nine figure exit five years from now.” sounds like an attractive option and, if so, whether now is the time to pull the trigger on it or not.  I go back and forth on this.

Consulting

• $300k in sales looks like a decent number to shoot for, assuming I’m actively available for consulting all of 2013, which is not a given.  (That means that I have availability throughout the year, rather than meaning that I have 52 weeks of availability — consulting is a very part-time thing for me.)
• Continue to adjust rates such that clients and I are mutually happy with engagement outcomes.
• Schedule things better to pack work more densely into fewer, shorter trips abroad.  (Delta really enjoys me flying 100k miles a year but Mrs. McKenzie doesn’t, particularly when it means six weeks away.)  If this results in less availability, that isn’t an unhappy outcome.

Productized Consulting

• Do more stuff along these lines, since it worked out pretty well in the experiment, I can only see it working better with improved execution, and the project ended up being a lot of fun.
• Let’s pluck a number out of thin air for a numeric target: $200k in sales.
• Offer better packaging options for later products, including some sort of scheduled, scalable live component like webinars, which would provide a lot of value for customers, justify higher price points, and not disrupt family life or the other businesses’ schedules too much.
• Outsource more of the execution of collateral tasks in the future, like video editing and programming for the sales site.

A Brief Personal Note: Ruriko and I got married on June 23rd.  Words can’t express how wonderful she is, including tolerating my weird little hobbies, like entrepreneurship.

I think that, aspirationally, career/job/business/etc was never supposed to be my #1 priority, but be that as it may it sucked up a disproportionate amount of my twenties.  I have no immediate plans for retiring, but will work on having my stated priorities more closely match my allocation of time and attention in the future.

Long story short: I wrote a book on conversion optimization, SEO, and related topics, for software companies.  You can buy it here (Kindle, iPad, Nook, PDF) or on Amazon (Kindle).

For the last couple of years, folks have been asking for me to write about A/B testing, conversion optimization, and whatnot in book form.  I’ve never done it, simply because the notion of spending months of work with a publisher to write a book that would (all things being equal) likely fail to earn-out a $5,000 advance seemed to be a silly thing to do just to put “published author” on my resume.  I love writing and I like teaching, don’t get me wrong, but writing as a profession always struck me as work, and not even particularly fun work.

The folks at Hyperink convinced me to give it a try, though.  They are basically trying to make Publishing 2.0 work as a business model: provide authors with design/editing/etc using a workflow which was invented by people who grew up on Google Docs rather than manual typewriters, and create books relevant to niche audiences partially by republishing existing essays and partially by supplementing them with new material.  (The upshot for the authors is that royalties are split more equitably than 93-7-but-with-accounting-practices-that-would-make-the-RIAA-proud.)

What It Includes

• ~ 20 essays that originally appeared on my blog, covering selling software, software pricing, conversion optimization, A/B testing, SEO, and the like, mostly of interest to software companies
• ~ 4 essays which are totally new, including one on reducing churn rates
• a follow-up or two on how some experiments worked out after I had written them up… including never-before-seen tales of abysmal failure, because that sometimes teaches as much as the successes

Who Should Read This

• Solo entrepreneurs running software businesses.  (I’d suggest actually having a working product — this book doesn’t cover product development, except when it is incidental to optimizing for marketing outcomes.)
• Marketing / engineering / product folks at SaaS companies looking to synergize get some ideas of things which engineers can build that will make meaningful differences for the business
• Anybody who has ever thought “Rather than reading through 600 posts in chronological order, could you just distill your blog down into the best twenty posts and categorize them for me?  My time isn’t totally valueless.  And put them on my Kindle/iPad/etc so I can read them on a plane.”)
• My family.  (“You wrote a book?  I want to read it!  What is it about?”  ”Conversion optimization for software websites.”  ”I’ll pass!”)

Chapter List

• Preface
  • Preface (new essay)
• Selling Your Stuff
  • Introduction (new essay)
  • You Should Probably Send More Email Than You Do
  • Does Your Product Logo Actually Matter?
  • Dropbox-style Two-sided Sharing Incentives
  • Two-sided Referral Incentives Revisited! (new essay)
  • Engineering Your Way To Marketing Success
  • Selling Software To People Who Don’t Buy Software
  • Increase Your Software Sales
  • The Black Arts of SaaS Pricing
• Increasing Conversions
  • Introduction (new essay)
  • Stripe And A/B Testing Made Me A Small Fortune
  • The Most Radical A/B Test I’ve Ever Done
  • Keeping The User Moving Towards Conversion
  • Practical Conversion Tips For Selling Software
  • Minor Usability Errors In Checkout Funnel = You Lose Lots Of Money
  • 10-Minute Tweaks to Boost Your Conversion
• All About SEO
  • Introduction (new essay)
  • SEO for Software Companies
  • Strategic SEO for Startups
  • The Big Book of Getting People to Link to You
  • Developing Linkbait For a Non-Technical Audience
  • Why You Shouldn’t Pay Any SEO You Can Afford
• Conclusion
  • Thanks for Reading, Lets Talk Churn Rates  (new essay)

Luckily, Hyperink Was In Charge Of Design, Not Me

If you’ve followed my blog or products for a while, you’re probably aware that I have the design sense of an addlebrained squirrel who fell into the Christmas eggnog and drowned.  Luckily, Hyperink took care of the book design and typesetting, so that it looks better on your e-reader or screen than anything I would have natively produced.  Here’s a sample (click to enlarge):

Formats Available

• Amazon Kindle (direct link to buy)
• B&N Nook (direct link to buy)
• .epub, .mobi, .pdf (i.e. suitable for Kindle, Nook, iPad, and reading on your computer screen) available to buy directly through Hyperink

In Which I Explicitly Ask For The Sale

If you generally enjoy my writing and think a curated collection of twenty essays on the topic of making more money for your software business is of interest to you, please buy the book.  (It is, as far as I know, $9.99 everywhere you can buy it, but vagaries of the publishing industry mean that I can’t guarantee that this is true for you.)  If you don’t want to buy it, don’t worry, I won’t think any less of you — enjoy the blog, come back for more next year.  If you buy the book and enjoy it, I’d encourage you to leave a review on Amazon, as folks are really keen on seeing them.

Note to other potential authors: the folks at Hyperink are Good People and were a pleasure to work with in the discussion and editing process.  If you’ve considered trying your hand at writing a book but, like me, thought the traditional publishing industry is largely toxic and exploitative by construction, I’d encourage you to give them a whirl.

P.S. I traditionally post a Year In Review for my businesses, covering what worked and what didn’t as well as statistics, shortly before Christmas.  See, for example, 2011′s edition.  I will do it again this year, but owing to some bookkeeping hold-ups, it will be shortly after Christmas rather than before.  May you and your families have peace, love, and health this Christmas and always.

Traditionally, right before Christmas every year I release an annual report.  See, for example, 2006, 2007, 2008, 2009, and 2010.  (Crikey, have I really been doing this for that long?)  I’ve also traditionally published live stats for Bingo Card Creator, but not my other lines of business.

Writing the annual report is partially to keep me grounded, partially to talk through my thoughts on the year and goals for next year, and partially to (hopefully) give other folks ideas that they can use in their own businesses.  I hope you find it interesting or, at the very least, mildly amusing.

Obligatory disclaimers: Assume any statistics that I give are “roughly accurate, to the best of my knowledge, at the time this report was written.”  There are still a few weeks left in the year.  Sales are typically low in the last two weeks, but the exact timing of credit card charges can cause a bit of jitter in the December stats.  From past experience, I have a high degree of certainty that there are about $1,000 or $2,000 of expenses (across all lines of business) which aren’t in the bookkeeping  system yet and won’t be until I sit down in March and check things for taxes.

Capsule summary: Best year ever, by a lot.  Broke $100,000 in sales for the first time and increased total profits to ~$70k.  2012 has inflection points coming for life and the business.

The Year In Brief

I put Bingo Card Creator into maintenance mode for approximately 48 weeks out of 2011: I only answered emails and kept systems running, but took no action to improve the product or marketing.  (The other four weeks I tried a few minor things out.)  This was, theoretically, supposed to free me to spend most of my efforts on Appointment Reminder…

… but that didn’t end up happening.  For a variety of reasons, most of my focus business-wise went into consulting.  Although I technically only did about 10 weeks of consulting during the year, I spent quite a bit of overhead time on e.g. arranging deals which ended up falling through, arranging the deals which did actually go through, and doing general promotion activities like speaking at conferences.  (I had the opportunity to speak at about a half dozen conferences this year, and assorted other events.  It is great fun, but since I generally have to fly to America for them, they tend to munch a full week out of my schedule each.  I spent almost three months of the year in the US, doing a combination of family events, consulting, prospecting, speaking, and meeting some Internet buddies to discuss plans for later.)

I also lost two solid months due to dealing with legal issues, mostly centering around Immigration.  I’d love to fill you in on the nitty-gritty, but have been asked not to by people close to the situation.  Suffice it to say that I was a shoe-in for a Japanese visa back when I worked at a large megacorp, was not a shoe-in for a visa when doing my own thing, and had a very hairy experience with getting them to approve me as a “self-employed engineering consultant.”  Tips of the hat to my Japanese clients, particularly Makeleaps / Webnet IT and myGengo, whose support was instrumental in getting Immigration to approve my renewal.

Despite not having nearly as much time to work on Appointment Reminder as I would have liked, I did manage to firm up its technical underpinnings, add new features requested by clients, and do a small amount of work marketing it.  I hope to make that more of my focus in 2012.

Bingo Card Creator

Despite being in maintenance mode, BCC continued performing like a trooper.  People always ask “Could you afford to live on it only?” and the answer is “Yes, but barely, and it would require a lifestyle adjustment, mostly in the don’t-fly-across-the-Pacific-so-often department.”  BCC did not meet the numeric goals that I had for the year.

Stats:

Sales: 1,539 (up 6% from last year’s 1,451)

Refunds: 14 (down from 22 last year, to .9% of sales from 1.5%)

Sales Net Of Refunds: $45,479.93 (up 5% from $43,398.55)

Expenses: $22,560.00 (up from $18,287.93, but largely just due to an accounting issue — I can’t split costs in my homegrown bookkeeping software, so the ~$3,000 I paid for servers for AR is hiding in that number)

Profits: $22,919.93 (see above accounting issue, essentially flat from last year’s $25,904.66)

Wage per hour: Let’s see, ~15 hours of programming, 20 minutes a week on customer support…  about $700 an hour.  Not too bad.

Web Stats:

(All stats are from bingocardcreator.com unless otherwise specified.)

Visits: 821k (up from 777k)

Unique visitors: 670k (up from 655k)

Page views: 2.9 million (up from 2.7 million)

Traffic sources of note: Google (46%), AdWords (18%), Binghoo (13%)

Trial signups for online version: 82,000 (up from 72,000)

Approximate online trial to purchase conversion rate: 1.8%

Narrative Version:

Aside from kicking up AdWords spend modestly (to no good effect) and running a few A/B tests, nothing really substantial happened with Bingo Card Creator this year.  I lost probably $1,000 to $2,000 of sales when the site crashed right during the middle of the Halloween rush for ~9 hours while I was on an airplane.  That was a little disappointing, but while it broke my candy budget it won’t exactly put me in the poorhouse.

Projections that BCC would continue to grow despite not being actively worked on turned out to be totally wrong.  I forecast 50% growth, reasoning “Hey, most of the systems work pretty much without my intervention, so I think the overall growth of the Internet plus a few A/B test means, oh, 50% or so.”  It mostly tread water.  I’m not hugely disappointed.

What Went Right:

• Not having to work hardly at all for it.
• Aside from the Halloween crash, the system was largely stable for the year.  I think I got woken up by the automated alarm maybe once.
• SEO, AdWords, email marketing, and the usual scalable marketing stuff continued to be my bread and butter even when I was too lazy to actually cut and butter bread.

What Didn’t Work So Well:

• Crashing on the third busiest day of the year, in such a way that it depresses my AdWords campaigns for the first and second busiest days of the year.
• I integrated Stripe and expected a huge lift in conversions for going from Paypal to a simple CC-based payment system.  I tested this extensively in A/B tests.  I love everything about the Stripe system, but I have no evidence for “Stripe is better than Paypal/Google Checkout”, “Stripe/Paypal/Google Checkout is better than Paypal / Google Checkout”, etc etc.  That said, it might be something as simple as my buttons being ugly.  I’ll probably take a whack at it in the future, or better yet, have my designer take a whack at it.

Consulting

I did a few weeks of consulting this year, for several different clients.  Mostly, I do my engineering / marketing shtick for software companies, although some of my clients have been a wee bit farther afield.  I wrote up a fairly typical engagement with Fog Creek.  That one was a mutual success and we’ll continue to work together in the future.  (To the best of my knowledge, all of my consulting clients are happy with my work.)

One thing I’m going to do differently in the future is to work for less clients.  Don’t get me wrong: I love all my clients.  I was privileged to work with them.  However, it takes approximately X units of work to set up an engagement with a previous satisfied customer, 5X units of work to get a new prospect to the go/don’t-go decision on a new engagement, and I generally have to get three to four prospects to that point to actually wind up with a signed contract.  As my buddy Thomas at Matasano says, “That is life in the big leagues.”  However, since I’m not in a position where 100% utilization is a huge overriding goal of mine, I don’t need to keep the new prospect pipeline totally full… so I’m probably going to cut back on it quite a bit in 2012.  I’ll continue doing follow-up engagements for established clients where it makes mutual sense to do so, and I’m still of course available for interesting projects, but I’m not going to be doing six-week fly-across-America-four-times tours to drum up new business.

The following numbers are approximations only.  NDAs and having the sense God gave a tadpole constrain me from revealing my “going rate.”

Consulting sales: $55,000

Consulting expenses: $13,000  (mostly hotels and airfare for prospecting, which I pay for out of pocket.)

What Went Right:

• Client selection.  I was, again, privileged to work for people who have interesting businesses, problems that I could make substantial contributions on, and the willingness and ability to pay all invoices in a timely fashion.
• Raising rates.  My first guesstimate at my rate, back in 2010, was $X.  It turns out that I could do just about as much work as I wanted regardless of whether I charged $X, $2X, or $5X.  As a result, I typically quote fairly high rates and mostly stick with them, unless there is another reason I really, really want an engagement to happen.

What Didn’t Work So Well:

• Disorganization.  At one point I was juggling something like five simultaneous proposals out while preparing for three conferences, two engagements, and six weeks of travel.  It got so bad that I showed up at a city once and checked at the airport for where I was staying, quickly seeing that I mistimed a conference by three days and thus had no hotel booked, booking a hotel from the taxi, and then arriving at the hotel to recheck my schedule and discover that I had used the previous year’s schedule and was actually simultaneously at a different hotel across Brooklyn.  (Shoutout to the Brooklyn Beta guys for saving me from my own stupidity that week.)  There were multiple points in the year where I found myself wishing for either a boss or a secretary or somebody to just say “Show up to X on Monday and Do Stuff and all the stuff that is not Stuff will be taken care of.”  My occasional slipups in dealing with the demands of a growing business caused me to drop balls in ways that were sometimes client-visible, too.  This is a major part of the motivation for cutting back next year.  (There is Plan B, of course: hire folks to do either the execution or the admin and take whichever part they’re not doing, but I don’t think I’m moving in that direction.)
• Too much work!  Largely due to overhead and travel, plus the outsize distraction generated by the same, consulting munched a heck of a lot more time than I thought it was going to.  I wanted to have a solid eight months of the year to work on AR.  I think I probably got maybe two.

Appointment Reminder

I launched Appointment Reminder last December, with the goal of having approximately 200 customers and $10k in monthly recurring revenue by now.  I had planned on focusing for most of 2011 on marketing and selling it to more businesses.  That largely didn’t happen, but since I got the fundamentals of my SEO strategy in place (while largely ignoring the modestly more advanced content creation / etc that runs BCC and that I usually help clients with), the business grew despite my best efforts at totally neglecting it to focus on consulting and not getting deported.

AR has been hanging around at a crossroads for a while now.  There are two very different trajectories it could go down.  In one, I grow it organically, and it grows into a modestly profitable software business which will provide handsomely for my family and (in the fairly near future) employees.  In two, I take outside investment, and attempt to grow as quickly as possible to $N million a year in revenue, at which point options would include either a) selling to one of the larger players in the small business software space or b) continued operations at scale with a focus on growth.  Luckily, I have  the luxury of waiting on making that decision: my runway is infinite, the market opportunity is only getting bigger, and the perceived value of my involvement with a startup among investors does not appear to be depreciating.

This is one of the reasons I can’t be as open as I would like to be about the current status of the business.  BCC has essentially no secrets, and would not really benefit from having them, as — aside from elementary school English teachers — there is nobody out there who has something I want for BCC.  However, if I hypothetically wanted to take investment, then accredited investors suddenly have something I want very much and having secrets about AR gives me something with which to trade to get it.  (It is similar to not putting prices on an Enterprise Software website.  You can trivially get them, but the price of getting them is giving a salesman permission to give you the spiel.  Similarly, folks who ask about AR’s numbers these days are generally asking in the hopes that they eventually receive a phone call asking them for a check.)

The other reason I can’t talk about AR numbers so much is that I radically underestimated how important the enterprise market would be to the business, and you can’t spell enterprise without NDA.

So: I wanted to have two hundred customers by now.  For the publicly available plans, I currently have a few dozen paying customers.  There are ways to get things from me that don’t involve paying the numbers on the Pricing page.

AR is modestly profitable — it covers all of its own costs.  I plow most of the money it generates back into the business, though, rather than taking distributions.  For example, I’m now about 95% certain that I will have significant contractor or employee involvement on it in 2012.

Revenue: Undisclosed

Expenses: Undisclosed (very modest ongoing expenses, reinvested most profits)

Profits: I took about $5k just to have a number that would minimize disbelief at the tax office.

What Worked Right:

• Twilio.  The Twilio API and service have been unalloyed epic wins for Appointment Reminder.  I had zero disruptions in service attributable to them, their customer support has been fast, responsive, and technically savvy (even helping me debug my own code at points), and they’ve been very supportive of me.  Plus they have these awesome red track jackets that they keep sending me, which you’ve probably seen if you’ve seen a picture of me doing any talk this year.  (I actually wear them mostly because I love the color red, but apparently I wear them so often that folks at the Fog Creek office thought the Twilio logo was my logo.)
• Sendgrid: It’s like Twilio, except for email.  Great service.  No red jackets.
• Unit testing & staging servers.  I am gradually getting more sophisticated in my engineering practices, and have been ramping up my testing activities since starting to code AR.  It has transformed the way that I do development, for the better, and made it easier to respond to customer requests to change things while decreasing the number of problems I have caused.  Total win.  See my presentation at TwilioConf for examples of the specific ways I use it for AR.
• Exact match domain names.  ”Hey Patrick, how is it that with no marketing budget and nearly no marketing work you rank #1 for [appointment reminder]?”  I told everybody that I was buying the .org specifically because that would happen but apparently folks didn’t believe me.
• Using the self-service site as lead generation for enterprise sales.  Fairly self explanatory.
• The service itself: AR solves a clear customer need, and my customers are raving fans of it.  There exist many services businesses which incur hundreds in direct costs and thousands in forgone revenue for a single missed appointment.  (Think, say, an HVAC company which sends a three-man team of tradesmen out to your house to replace your heater, which is a $2,000+ job, only to discover that you aren’t home to let them in.)  One of my customers reports that just the delta in no-shows since starting to use AR would pay for his mortgage and his daughter’s college education.  Many of my other customers report that their office managers, who previously did telephone reminder calls manually, are ecstatic to not have to do them any more.  Customer retention among folks who actually use the system (as opposed to signing up, doing a test call, and forgetting about it) is virtually 100%.
• Talking to smart people for advice: Since I’ve been going back and forth on the investment question, I talked to a lot of entrepreneurs and investors whose opinions I respect.  I really appreciate their feedback, which ranged from “Are you kidding?  You’d hate it.” to “I want to invest in you, but realistically, you would lose nothing by waiting until you are sure.” to “Best decision I ever made.” and helpfully included a lot of actionable advice on how to do things in the meanwhile such that options remain open.

What Didn’t Work So Well:

• Catastrophic engineering failures.  I had one combination outage/catastrophic failure in February (the details are recounted in that TwilioConf presentation) and a ~3 day period of sporadically degraded operations after my move to Rackspace, which I finalized over the Thanksgiving holiday.  Both of those were my fault, for architecting the system in a way which did not gracefully handle its multiple moving parts getting out-of-sync with each other.  I’ve since done significant work on making it more stable.  (Overall reliability for the year has been excellent, but those periods were easily the most stressed I’ve ever been about any business issue.)
• Lack of focus: I’ve been commenting above on this, so I won’t belabor the issue, but I really didn’t get to work on AR as much as I wanted.
• Enterprise sales: I’m actually fairly decent at Enterprise Sales, and am working with someone in the industry who has a deep Rolodex among folks who would be great candidates for AR, but (partly due to the focus issue and partly due to my own comfort level) I didn’t put nearly enough effort towards it this year.  What I should honestly do is go to a conference some time, prospect like a madman, and then make following up on those leads my only job until I’ve got contracts signed.  (The prices for enterprise SaaS make this very economically viable.)

Goals For 2012

Bingo Card Creator

• I’d be happy with continued flatness ($~30k profits on $50k sales), maybe.  It isn’t the source of growth for my business anymore.
• Continue using it as a laboratory for weird ideas I have on conversion optimization.
• Don’t break it during Halloween.

Consulting

• Do less work prospecting for new clients.
• Do more work for existing clients.
• Modestly increase billings, if that makes sense for where my overall business is.  (If I take external investment in AR, that will likely require shuttering the consulting business.)

Appointment Reminder

• Figure out whether I want to take investment or not.  If so, do so.
• Convince Keith (who I do my podcast with) to work with me, if possible.  (Don’t worry, he knows this is on the agenda.  We’re best friends.)
• See about transferring responsibility for the engineering (particularly front-end) side of things so I can focus on marketing/sales.
• 10x current sales numbers.  That seems to be a fairly safe bet regardless of whether I shoot for a small business or for a high-growth business.  (1,000x-ing would be another story.)

A personal note: The last 3,300 words ultimately matter much, much less than the next 3: she said yes.  We’re announcing to our family on Christmas, as per our family tradition.

The conversation wandered into the softer side of things: psychology, and how running businesses has changed us as people.  I told Ramit a story, and he encouraged me to share it a little more widely, so here we go.

Knowing What Motivates You

Have you ever heard the expression “That really pushes my buttons”?  The notion that there is a particular set of things that uniquely motivates a person has always been a very powerful one with me.  I don’t always have the best handle on what I want in life, but I have enough introspection to know where my buttons are.  A big one, for as long as I can remember, is labeled “Praise To Release Dopamine.”  When I was growing up, I was a praise-seeking missile.  I got very good grades.  I got very good at getting very good grades — not because I wanted good grades for their own sake, and not out of some notion that good grades would get me something valuable in the abstract future, but mostly because I learned very early that parents, teachers, and other people I respected would say “Attaboy, Patrick” if I brought home the A.

That particular story might evoke shades of Tiger Mom parenting.  That would be overstating it: I love my parents deeply, they never pushed me into anything I didn’t want to do, and we’re rather paler than most of the folks in the Tiger Mom crowd.  (Though friends in high school often joked that we’re the most Asian white people they know — and seeing as how my siblings and I can together handle Japanese, Chinese, and Korean, that might not be totally off the mark.)

I realized something fairly early on, though: being a good, hardworking student and getting good grades are two very distinct skill sets.  I was not a particularly “good student”, I just got particularly good at being a student.  I got hooked on a lifetime love of optimizing systems when I realized that 89.5% rounds up to 90% rounds up to an A. That meant I could blow off one more homework assignment than if I didn’t understand decimal arithmetic. Math gives you superpowers.

That’s also why I got started writing.  You see, after you set a multi-year expectation of always getting good grades, the praise mostly dries up.  Drats!  But if you particularly impress a teacher with your flair for writing, and she reads it out to the entire class, then you get to beam a little bit and you collect a story redeemable for an Attaboy at the dinner table.  So I got hooked on writing.  Roughly contemporaneously, I got introduced to the Internet, which if you write well and enjoy having an audience praise your ideas is like your own personal Skinner box.  (If anyone ever wonders why I spend a wee bit too much time on message forums, well, there you go.)

Is there a point to that anecdote?  Sort of.  If you have a good handle on what really motivates you, you probably have a good handle on things which do not really motivate you.  At the top of the list for me: money.  Don’t get me wrong, I am fascinated by money, in the same fashion that the engineer in me is fascinated by bits and electricity and experience points and red blood cells and everything else that whirs around animating interestingly complex systems.  The notion of seeking money strikes me a lot like the notion of seeking red blood cells: ewww.  As long as I don’t drop dead from lack of them, honestly, I could take it or leave it.  (At least qua currency.  Money is also the convenient method of keeping score for optimizing businesses, which feels like a game to me.  I really enjoy winning games with complicated rules sets, especially by optimizing the heck out of play, because optimization is often as much fun as actually playing the game.)

Careers as a Multi-Dimensional Preference Space

My preference set is more complicated than the above micro-sketch, but suffice it to say that I have a good handle on what I value.  One would think I used that introspection to actually achieve happiness.  Was I happy a few years ago?  No, I was very unhappy.

There was a point in my life where I thought what I really wanted was a safe, comfortable, professional career at a big freaking megacorp.  I even had the position picked out: I wanted to be the Project Manager in charge of the Japanese version of Microsoft Office.  If that sounds like a curiously specific goal in life, just call me quirky: I had set about optimizing for a safe middle-class career and that looked to be the high-percentage route through the maze to the cheese.  Why was I so concerned with security at the time?  That’s a long story, but suffice it to say it was a combination of encouragement from my family, a culture that I was in which emphasized good grades to good college to secure employment as the thing to aspire to, and some other factors.  So, true to form, I did what I thought I needed to get to that pot of goal at the end of the rainbow: got into good university, check.  Studied Japanese, check.  Went to Japan to perfect business Japanese, check.  Got a job at a Japanese megacorp, check.  Became totally miserable, check check check.

Along the way, almost totally by accident, I discovered that you could open a small software business on the Internet pretty much without asking permission from anyone.  I discovered that I really, really liked almost every aspect of doing business, in the same way that I really, really did not like most aspects of working at a megacorp.

I worked for several years as a Japanese salaryman.  For those of you not acquainted with the term, it basically means that a company owns you body and soul in return for guaranteeing you gainful employment and social status until you die.  I was working 70 ~ 90 hour weeks for very little money doing “fun” things like translating Excel design docs into Java code and valiantly trying to fix programs delivered by an Indian outsourcing team working from design docs translated via Babelfish.  Why does anyone put up with this?  A lot of people, asked that question, would say “Well, that’s just the culture in Japan.”

Let’s talk about a different quirky culture for a moment: you go from a place you like being, surrounded by people you love, to a place where you do not really enjoy being, surrounded by people who you pretend to like but honestly wouldn’t choose to be friends with.  You stay there for half of your waking hours, five days a week.  Why does anyone put up with this?  I don’t know, it’s the culture or something.

I may have said this before becoming a salaryman, but I never truly understood it: the way we work is, essentially, arbitrary.  40 hour work weeks for middling-good salaries are no more a law of nature than 90 hour workweeks for middling-poor salaries.  The story we hear growing up about working hard to get into a good school so you can work hard at a good job so you can be well rewarded isn’t a lie, per se, but it is a story.  A narrative.  There’s a core of truth buried in it somewhere, but we don’t tell it because it is a true story, we tell it because it is a crackling good story.  If you’re committed to the world being a meritocracy, that story isn’t just good, it is practically mandatory.

The world isn’t a meritocracy.

Here’s a story which we’ve all heard before:

This isn’t a particularly true story.  I mean, let’s start fitting some points to the line:

The  graph isn’t to scale and the points don’t matter: pick your own examples if you disagree with these.  The point is that “work harder and you’ll make more money” is bunk, and we know it to be bunk, and yet we tell that story anyway.

There are many, many more points that we could add to that graph: you could theoretically pick from uncounted thousands of tradeoffs on making money versus working hard.  And that is with only two things under consideration!  What if you considered just one more, such as “Where I want to live?”  Maybe you so want to live in a particular small town in Kansas that you’re willing to accept a smaller salary.  Now we have a three-dimensional preference space.  The true preference space for careers has more dimensions than you can imagine, and sliced along most of them, the straight lines are a just a story.

So if we’ve got a mindbogglingly large solution space of possible jobs, some better in some areas than others, and some areas mattering more to us than others, why don’t we just we just make our mental graph just one wee bit more complex, and add in the 3,207th dimension, how happy we are with our lives if we work at that job?  And then optimize for that?  Heck, since the straight lines are basically not real, would that point even be a job, per-se?  Running your own business is an option — and a laundromat is very, very different from selling software to elementary schoolteachers is different from building the next Google.  Would it even be a point?  Maybe it bobs and weaves a little bit (or quite a lot), as we find out more about ourselves, as we explore new options, and as our preference set changes over time.  I cared about job security once, or at least thought I did.  I honestly could not care less about what “normal” people would consider a secure job now.  When we re-rate that, the points which look like good options for me change dramatically.

I’ve been an engineer, and a technical translator, and a teacher, and a paperboy.  These days, I guess I’d answer to “I own a software company.”  But my job, on any given day, is doing something which makes me happy.  (For, again, a complex definition of “happy”, which includes things not strictly related to me, such as “Is the world better for this having been done?” and “Are the people who matter to me well taken care of if I do this?”)

Because if you’re not happy, and you’re not moving to happy, you should do something else.  We should be happy.

It’s All Negotiable

I grew up in a world of simple stories with clear morals.  As far as careers were concerned, straight lines abounded.  Does anyone remember the day we learned that, say, a middle class man goes to work every single day, Monday through Friday, and that days not like that must be celebrations because they’re clearly the exceptions to the rule?  Were we ever told that, or did it just seep in, somehow?

Here’s a radical notion, let’s try it on: never work Thursdays.  Why?  It has a T and an H in it — T +H = no work, that’s just the way it is, end of discussion.

Would any company ever go for that?  Five years ago, I would have said that is ludicrous.  Everyone works Monday through Friday.  Well, OK, technically speaking university professors could schedule classes and office hours such that they never did anything on Thursday.  And most of the cafes in my town are closed on Thursday.  And teachers get three whole continuous months of Thursdays off.  But that doesn’t matter — the rule is, you work on Thursday.

There may well be excellent reasons why people work on Thursday.  Other people also work on Thursday, so that is very convenient to their company if their workers are around to answer inquiries on Thursday.  But what if the company just said “Sorry customers, no service on Thursdays.”  That would work much of the time — it does work, if you’re a sushi shop in Ogaki.  And it wouldn’t necessarily even be the entire company.  It could just be Bob.  T + H = Bob isn’t there on Thursdays, deal with it.

But what company would deal with it?  Isn’t it written in some book of laws or manual somewhere that Bob has to work on Thursday?  Probably not.  Actually, it might well be written down somewhere, but we ignore things that are written down all the time, so Thursday seems as good a thing to ignore as any.  This is one of the things being a business owner has taught me: there are two parties in any negotiation, and if they agree on one particular point, then that point goes the way they agree.  If Bob and the company agree that Bob doesn’t work on Thursdays, then Bob doesn’t work on Thursdays and damn what the “standard” contract says.  All Bob needs is negotiating leverage to convince his company that agreeing with him on the Thursday issue is in their interests.  Maybe he trades them a salary cut.  Maybe he’s just the best Bob there is and putting up with his idiosyncrasies is worth having him on board.  Maybe just, when push comes to shove, nobody really cares about Thursdays at all.  Whatever.  If Bob wants it, and asks for it, and gets it agreed to, Bob gets what he wants.

You can often get what you want.

Let’s take an example a wee bit less far-fetched than Thursdays.  Let’s say you’re an engineer and you want to be able to pick your technology stack, always.  You have many options here.  You can found your own company, and then you use whatever technology stack appeals to you.  You could consult only on the technology stacks you like.  You could work for a job and just tell them “I quit if you ever put me on a project using a stack I don’t like.”

That might be considered a little disloyal, for a certain value of disloyal which occurs only in the context of a particular type of commercial relationship.  Nobody expects the company to be loyal to their suppliers.  The company expects you to be loyal to them, largely because it is in their interest, and they will often do a lot to convince you that their values are your values.  Is this synthetic, external value really one of your values?   After much consideration, I’ve come to a conclusion about company loyalty: stuff company loyalty.  Companies are legal fictions which we find convenient to use to move capital around and balance accounting ledgers.  I’ll save my loyalty for people.  You’re welcome to your own preference set on this: stick with the company if that is more important to you than working with your favorite technology stack, but make that your choice, not somebody else’s.

Working five days a week?  Your choice.

A job which doesn’t excite you?  Your choice.

Money insufficient to buy whatever it is you want?  Your choice.

Thinking About Money

I come from a fairly modest background, and remember distinctly that one of the perks of my first job was that I didn’t have to worry any more about buying something below $5.  Then I got my first real job, and my care floor went up to $20.  Then my business started doing well, and video games slid under at $60.  Sometime recently I realized that trans-Pacific plane tickets were no longer an expense I needed to save for months for.  So it goes.

You can imagine that if $3.50 is a meaningful amount of money to you, you lead a fairly frugal existence.  I used to live like a monk, and I even idealized that a little bit, but I’ve come to realize that not-spending-money is not something I particularly value one way or another.  Back when my business had no budget, I would gladly do web designs by myself, even though I don’t particularly enjoy it and I am not particularly good at it.  These days, the business is doing rather well, so if I need a web design done I’ll just pay someone who is good at it and likes it, and I’ll get back to doing more important things like strategizing or doing marketing or maybe reading a supernatural romance.  (internal monologue: “But Patrick, you’re not allowed to read in the middle of the day! … Oh wait, I guess I am.”)

For a business, money is a tool to get things that you want.  That started creeping into my personal life as well.  Consider my apartment move in February.  I could have spent a week boxing things up and cleaning my apartment.  Or, I could have paid $2,000 and gotten people to do it for me.  Earlier in my life I would have thought $2,000 is an incredible amount of money (almost a month’s salary!) and that there was something vaguely lazy about not doing the work myself.  The businessman in me made the fairly simple calculation that I could pay the movers $2,000 and get back to charging customers something rather more, and I would not be exhausted and bored at the end of the day.  Here is the money, gentlemen, I’ll be programming at the cafe if you need me.

Confidence Issues

I have longstanding confidence issues.  I often feel like maybe I’m just getting praised for playing the game really well as opposed to demonstrating actual merit.  (I have since found that many, many people I respect likewise worry they’re faking it.  Anybody in my audience got the same issue?  If so, and if you respect me, there you go — you’re not alone on this one.)

I have found that actually showing confidence issues, on the other hand, does not do great things for one’s business.  For example, let’s say you’re doing pricing for a product or service your offering — maybe your software, maybe your labor, whatever.  If you have confidence issues, you will undercut your own negotiating position by underpricing.  Been there, done that, got the T-shirt.

I do consulting, on occasion, and it makes up most of my income and rather little of my day these days.  Consulting is a topic for it’s own post some other week, since I learned by a combination of mentorship and making expensive mistakes and would love to save other folks with less access to good mentors some pain.

At some point in discussing a consulting engagement, you have to quote a price to the client and get them to say “Yes.”  You could write entire books about the psychology of that fifteen seconds, but in a nutshell, you don’t want it to cause you to think “Oh my goodness I’m not really good at this and charging any money is basically stealing so maybe I’ll give them a discount to my lowball offer and then work extra hours to make up for how terrible I’m being right now.”

I got clued into consulting by Thomas Ptacek at Matasano, who has gone from Internet buddy to client to personal friend.  It’s a funny story: I spend too much time on Hacker News, he spends too much time on Hacker News, we both had reason to be in Chicago, so I suggested we get coffee and talk about… whatever message board geeks talk about when they get coffee, I don’t know.  He was very receptive to the idea, so back in December 2009 we grabbed a coffee and went back to his office to drink it.  He then locked me in his conference room for three hours and proceeded to interrogate me with one of his co-workers about everything I knew about SEO and marketing.  It was, seriously, the most fun I had all year.  (Remember, praise-seeking missile.  That entire situation was basically pure brain crack for me and I was getting a free drink out of the deal.)

At the end of the discussion, Thomas mentioned that, if I had phrased my invitation as “Why don’t I consult for you” rather than “Why don’t we grab coffee”, he would have gladly written me a check.  I had a vague idea that a semi-decent engineer (my mental positioning for myself at the time) was worth about $100 an hour, and mentioned that $300 didn’t seem to be enough money for either of us to worry about.  He told me that he would have paid $15,000, and it blew my mind.  (There was a bit of discussion on that point — his coworker thought that to justify $15,000 they’d really need a written report, but the petty cash drawer could have maybe swung $5,000 for it — and my mind got blown again.)

I would like to say that after starting consulting I went immediately to charging $5,000 an hour, but sadly for my bank balance, not so much.  I distinctly remember the first time I quoted someone, though, over email.  I typed a number, agonized over it for ten minutes, then typed a number 50% higher, then curled up in the fetal position for a few minutes, then impulsively hit Send and started hyperventilating.  Ten minutes later I got an email back and, to my enduring surprise, they did not hate my guts for picking that number that was 50% bigger than a number I was already barely comfortable with.

Since then, I’m gradually getting better at the confidence thing.  Partially, it is as a result of trying new things for me and realizing that, no matter how intimidating they were when I started, I largely don’t end up dead.  Consulting engagements go well.  When a new client asks what my rates are, I pick a bigger number.  They’re generally OK with it.  If not, oh well, it turns out there are often many ways to negotiate such that we’re mutually happy.  (Including me just letting them go.  I mean, I don’t need to work everyday.)

Speaking of confidence, sending email to people used to be a bit of a hurdle for me.  Even asking Thomas out was on the edge of my comfort zone.  After trying it many times since then, and observing the behavior of other people in business who I admire, I have come to realize that it is not a big deal.  (Relatedly, almost nothing is as big a deal as we think it is.)  This comes up over and over for young engineering-types on Hacker News so, if you get one actionable piece of advice out of this, get comfortable with sending email to people and asking them to give you what you want.  This will virtually never cause a mortal catastrophe.  I still have a ways to go to do it routinely, but it gets easier every time I do it.  Definitely explain to them why giving you what you want is in their interest, but ask.  They might say “Not interested”, or they might not reply, but they’ll very rarely put a contract out on your head.

Can Your Job Change Who You Are?

After you have asked a CEO or two to coffee and not gotten your hand bitten off, you would be amazed how less scary “Say, why don’t we have dinner together two weeks from now?” is.  That could, possibly, have been the most important sentence of my life to date.  She didn’t put a contract on me, either.

(I generally keep my work life and personal life fairly compartmentalized, so I won’t talk too much about that, but a funny anecdote: we were talking about money one day and future career plans.  She told me she’d continue working at an office job which she doesn’t particularly enjoy so that we’d have enough money to support a family.  I was confused for a few seconds and then started laughing: I had shared less with my girlfriend about my finances than I routinely publish on the Internet.)

And if you’re getting comfortable with addressing folks as your equal and reaching mutually acceptable solutions, why ever stop?

I have to deal with city hall from time to time.  I used to be very timid about it, afraid that I was wasting their time or about to step on a bureaucratic landmine.  These days, they’re a service provider and I’m a customer — a customer with limited options for changing providers, granted, but a customer.  CEOs get what they want.  When I go to city hall, I put on my suit, slide into professional mode, and get things accomplished.  They can’t do something?  Of course they can, or they can find someone else to do it, or there is a particular fact which they need from me to justify doing it, or maybe I’m just asking the wrong way and I should try again.  And I don’t have to be intimidated or embarrassed about doing this — it’s just a negotiation, and not even a really important one, at that.   Plus, if worse comes to worse, I could always just send a lawyer to do it.

I missed a flight a month ago, and got one sentence of a very stern dressing-down from the clerk at the Delta counter.  Years ago, that would have paralyzed me.  I was totally unphased: my brain immediately supplied “They likely sold the seat to someone on standby and, if not, Delta’s revenue maximization is not your moral imperative.  You paid them for a service.  The price of your ticket and standard social graces is the maximum extent of your obligation to them.”  I immediately cut in with “Sorry for the inconvenience ma’am, these things happen.  What are our options?”  (It turns out that if you fly ~100,000 miles a year, your options include them putting you on the next flight, for free, and getting a discount on your hotel room that evening.)

My friends also tell me that I’m almost a different man these days than even two years ago.  The most striking quote to me, from my best friend: “You look… healthy.”  Apparently the old day job was beating me down so thoroughly that I looked about as bad as I felt, and even on those days when I wasn’t dog tired I walked with a bit of a stoop.  These days, I even stand straighter.  I think that is almost too convenient to be true, but hey, it’s a story.

This Actually Can Matter

If you don’t have a good handle on what you want, or even worse, you don’t actually consult it, you could make decisions which are not really in your interests.

I have been somewhat seriously kicking around the idea of taking investment recently.  Thankfully, at Microconf, I got the chance to bounce some ideas off some smart people, including Hiten Shah.  He asked a very perceptive question: why did I want to take investment?  And honestly, I didn’t have a really good answer for that.

“I have the ‘ran a small business’ merit badge already, and am looking for new challenges.”

“Is 10x-ing your business a challenge?”

“Yeah.”

“Do you need investment to do it?”

“Nope, I have done it before.  Besides, even 10x-ing it wouldn’t produce a favorable outcome for most investors.”

“Then why not skip investing and continue doing what you love?”

“…”

The business is growing quickly.  I’m bringing someone on in August.  My life is better than it has ever been.  Taking investment would commit myself to a few years of a very different trajectory, including some things that I have no reason to assume I would enjoy, like managing employees, getting involved with intrapersonal conflicts, and having to give up ownership (not the equity, the responsibility) of parts of the business that I genuinely enjoy to focus on CEO-ing.  In return, yeah, I guess you get a quirky kind of social status and a shot at getting a lot of money, but if I had so much money that a dragon would be embarassed sleeping on it, very little about my life would change.

I’m pretty happy with where I am.  Today rocked.  Bring on tomorrow.

If you have an hour free, I recommend the video.  I am told that it was funny, though the genre of humor was very different than my Business of Software presentation.  If you can’t take an hour to watch it, though, you can certainly just read the slides and my commentary below.

How I Ended Up In Central Japan

I have long wrestled with fairly severe self-confidence issues.  (The psychology of entrepreneurship is the major theme of an upcoming post, inspired by a talk I had with Ramit Sethi, who also spoke at Microconf.)  When I was in college, I knew I wanted to be a software engineer, but I was worried about my job prospects competing with 100,000 engineers graduating every year in China and India.  My family was very big on me getting a nice stable job at a megacorp, and I didn’t think I had the chops for it.  So I played the Venn Diagram game: if I could do one very hard thing plus engineering, the intersection of those two would be only a half dozen people, and I’d be set for life.

Learning languages is very hard, so I went down the list that my university offered, and Japanese jumped out at me.  The US and Japan trade billions upon billions of dollars of high-tech stuff every year.  Virtually no Americans speak Japanese.  Practically no Japanese people are fluent in business-level English.  Bingo, if I spoke Japanese and can do engineering, I thought Microsoft (my favored employer at the time) would have to put me in a nice safe job in the Office group for the rest of my life.  So I doubled majored in the two.

Quick tangent: A major multinational advertising firm with an anomalously high number of PhDs on the payroll recently approached me about being a Product Manager in Japan, so this strategy really does work.  It’s funny, three years ago that would have been my dream job and now it was totally untempting.

Anyhow, after graduating college, I was still not confident in my business Japanese, so I decided to go to Japan, work in a Japanese office, and firm it up.  Did I think I could actually call the VP of the multinational who gave me his card and said “Call for a job when you graduate?”  No, confidence issues.  So instead I applied to an international exchange program, which places mostly English teachers and, crucially, some translators at Japanese governmental and quasi-governmental institutions.  One of them was the prefectural technology incubator in Gifu.  (I’m not comfortable telling you which one, but suffice it to say that really narrows it down.)  They took me on as a technical translator, in the expectation that their quickly-growing incubated companies would need technical translation to close big deals with foreign companies and governments.

Gifu is the Kansas of Japan, with more rice and less white people.  I’ve lived here for the last seven years and love Ogaki, my adopted home town, to pieces.  Being a technical translator, however, was not very professionally fulfilling.  Professional ethics require you to translate everything exactly, without elaboration.  I like to think I have something to add to the conversation, so when my contract elapsed in 2007 I switched to being an engineer at a Japanese megacorp.  Prior to doing that, though, I launched Bingo Card Creator.

From Humblest Beginnings

BCC was originally the hobbiest of hobby projects.  One of my assorted job duties as a heavily-underused technical translator was to help out the prefecture’s 200-strong mailing list of (foreign) English teachers, who didn’t speak Japanese and as a result often had issues with coworkers, landlords, government, and the like to muddle through.  Someone asked the mailing list how to make bingo cards for an activity she had planned for later in the week.  I told her to Google it.  She told me that she had and that Google was showing her solutions which were grossly inadequate to her needs.  So I got permission from my boss and spent the rest of the day putting together what might today be called the Minimum Viable Bingo Card Creator.

It was terrible: a Java swing app, distributed as a .jar file, which would accept words in one text-box and, when you hit Print, dump a directory of card0.html … card29.html and ask you to print them from IE because I didn’t know how to actually do that in Java at the time.  But it did actually create bingo cards, and they were of sufficient quality to give to a 7 year old Japanese kid without feeling embarrassed, so I sent it to the mailing list, and went home for the day.  I thought that was the end of it.

The next day, I had 60 emails in my inbox when I got into work.  They were split 50/50 between “THANK YOU!  BEST SOFTWARE EVER!” and “THIS SUCKS!  IT DOESN’T WORK ON MY MACHINE! FIX IT BECAUSE I NEED IT NOW!”

So later in June 2006, when I decided to create a business on the side to try my hand at the SEO/AdWords/etc stuff I had been reading about, bingo jumped out at me as a good topic for software.  I mean, if I could find 60 people who wanted it in Gifu, surely there must have been a market back in the US.  So I budgeted $60 (one video game) and one week to rewriting and productizing it (outside the day job this time, naturally), and set myself a goal: some day, after months of work, I wanted to make $200 in sales a month.

Since I had been inspired by other tales of success on the Internet, I started blogging (you’re reading the result, 5 years later) and publishing my statistics, including sales.  You can see annotated graphs in the slides, so I won’t put them in this post.

Early Days: Filling A Hole In The Internet

BCC exceeded $200 in sales in its second month, largely on the strength of two pages I wrote about Dolch sight words bingo.  (Not an English teacher?  No problem.  Dolch was an English pedagogist who compiled lists of the 220 or so words early English learners need to know on sight.  Teachers know they should teach these but often don’t know which words are on the lists for what year.  I put lists of them online and monetized them with self-ads for the strongly-related bingo activity, on the assumption that almost any teacher wanting to teach them would want a review activity, too.)

This was a good thing, since I had no budget at the time for AdWords.  The success of the content marketing also clued me into one of the core features of the software: writing pre-made word lists that shipped with it, so that teachers didn’t have to type up their own.  So I spent the next year or so in very part-time fashion improving the software, launching new versions, polishing the site, and generally learning more about running a business.  (“Schedule C?  What is that?  Ooooh.”)

Got Google AdWords To Work

In 2007, I started trying my hand at AdWords.  It was a fistful of fail — I could not seem to get either positive ROI or meaningful volumes for the life of me. A buddy of mine from the Business of Software forums advised me to try the Content Network (i.e. ads on sites other than Google.com).  I had turned this off, as prevailing sentiment on the Internet was that the Content Network was a hive of scum and villainy, filled with spammers and MFA (Made For AdSense) sites which sent traffic that did not convert.  But my buddy was sufficiently credible that I trusted him…

… and that ruined my summer.  (His advice ended up turbocharging my business, so I’m retroactively happy for it, but try telling that to me at the time.)  See, every day after coming home from work I would check into AdWords, and every day I would have a new list of spam sites to have to manually ban.  They sent non-converting traffic and I didn’t want to subsidize them.

Towards the end of summer, Google came out with Conversion Optimizer.  In brief, it automatically increased your bid on sites/keywords which sent traffic that converted and decreased it on sites/keywords which didn’t.  This meant that non-converting traffic from spam sites essentially got optimized away without me having to manually ban it.  I loved that, and became an early adopter, writing a pair of blog posts on it.

Concurrently with adopting Conversion Optimizer, October rolled around.  Halloween happens at the end of October, and hundreds of thousands of teachers look for a Halloween activity to play with class.  (Why Halloween, over every other holiday?  Because it is kid-focused, because kids are in school for it, and because as a largely secular holiday it can’t get public school teachers in trouble.)  This meant that sites with content responsive to Halloween bingo, like about.com (which was a content farm before content farming was cool), suddenly had hundreds of thousands of page views to sell AdSense against.  And who was in the front row of the auction for halloween bingo ad impressions?  Me, because Conversion Optimizer figured out that I was making out like a bandit and aggressively moved to spend my money.

Sentiment on the Internet towards Conversion Optimizer had been primarily negative, but I was killing it with it.  My blog post also ranked #3 for Conversion Optimizer right below two posts on google.com… above much of the official documentation.  I think that was probably what clued the Product Manager into talking to me.  Anyhow, to my total surprise, Google asked to do a white paper about my experience with the product.  That was my proudest professional accomplishment for a while, actually.

Content Marketing Seems To Be Working Out… Let’s Scale It

So I was doing well for Halloween bingo in spite of not having any page about it (remember — AdWords ads only), and had done even better for Dolch sight words.  If only I could make a page about Halloween bingo, and Thanksgiving bingo, and addition bingo, and any kind of bingo a teacher could possibly want to play.  Then instead of paying Google to lease the traffic, I would get it for free myself, forever.

This struck me as an unachievably huge amount of work while full-time employed, so I decided to partially automate and partially outsource it.  I taught myself Rails and rewrote the website as a Rails application (rather than 100% HTML-written-in-Notepad), then wrote a script that would populate the Cards table by reading in text files.  Each card got its own page on the website, complete with image of the card, downloadable PDF of 8 randomly created cards, and copious oppotunities to download the free trial of my software.

Creating the GIF and PDF was originally very difficult: you had to use BCC, print to a virtual PDF-ing print driver, open the PDF, screencapture it, crop the capture manually, and then send me the words you used, the resulting GIF, and the PDF.  Repeat thirty times over.  My freelancers understandably got bored, so I had someone write a script which would use a particular Windows macroing utility to drive my laptop’s mouse and do the work.  This took about an hour to get through 30 cards, and required my presence if the script broke in the middle (which was “often”), but it still cut production time down by 90%.

This ended up working out scandalously well for me.  See Scalable Content Creation under Greatest Hits if you want the story in detail.  (I also did a video with Andrew Warner and AppSumo on the topic, if you want it described in a more organized fashion than my blog’s usual stream-of-consciousness approach.)  Eventually, after optimizing the process, I had nearly a thousand pages like this created.

I also have a variety of micro-sites written on exact match domain names, like my favorite, Halloween bingo cards.  Honestly, they’re not that material to my strategy anymore, but if you want to hear more about them see the blog from a few years back.

On Being A Salaryman

Around this time my contract elapsed at the cushy translation job, where I left at 4:00 most days, and I got a job as an engineer at a megacorporation in Nagoya.  No, not that one… not technically, at any rate.  Somewhat to my surprise, the job they offered was as seishain,  which means full-time company employee.  The more commonly known coinage for this status is salaryman, because the job is designed to take over your life.  And take over my life it did.

I rush to point out that I have no ill-will against my old employers: they treated me fairly, by the standards of Japanese corporations, and I learned a lot at that job.  I had my eyes wide open going into it, too — I just didn’t realize how bad 70 ~ 90 hour work weeks would actually be.

This was intended more as a tangent for the speech, but I did more than a bit of venting in the video, much of it humorous.  See that for the full version.

Web Applications Are The Bomb

By 2009, I had advanced sufficiently in my Rails and web programming skills that I could re-release BCC as a web application.  That decision roughly doubled sales, largely due to increased conversion rates both to the trial and from trial to purchase.  I strongly, strongly, strongly suggest developers build web applications in preference to desktop apps, for reasons I have gone into before.  Or, alternately, see this bingo card:

Web apps: do ‘em.

Quitting The Day Job

The combination of these and a hundred other smaller improvements (A/B tests, etc) eventually got my sales to the point in late 2009 where I could seriously consider quitting the day job.  I went home for Christmas, talked it over with my family, then came back and told my bosses that I was through.  They let me go with a mere four months notice.  (Theoretically, the law only requires two weeks in Japan.  In practice, well, see the video.)

Also at Christmas I had a conversation with Thomas Ptacek at Matasano (conveniently in Chicago, close to my family), who opened my eyes regarding consulting.  I owe Thomas a lot for that, because consulting turned quitting from a dicey proposition (a dip in sales could have imperiled my ability to fly home or expand the business, to say nothing of making rent) into a total no-brainer.  Last year I made a bit more from BCC than consulting.  This year I’ll make quite a bit more from consulting than BCC.  The goal is still building a software product business (my current focus on that score is Appointment Reminder), but as of late the caliber of clients, work, and paychecks for consulting has been so attractive that I have been unable to say no.

Tactical Advice

The last half of the presentation was tactical advice on running a small business in one’s spare time — over the first 4 years of doing BCC, I averaged about 5 hours a week on it.  (This last year, even less: it is in maintenance mode.  I send out customer support emails and that is about it.)

The five quick hits:

Charge more money.

Most engineers severely undercharge for their products.  This is particularly true for products which are aimed at businesses — almost all SaaS firms find that they make huge portions of their revenue from the topmost plan which is bought by people spending other people’s money, but instead of optimizing for this we optimize for charging “fair” prices as determined by other software developers who won’t pay for the service anyway.  This is borked.  Charge more.

Make it a web app.

Covered above.

Put more of your iceberg above the water line.

Businesses create value with almost everything they do.  The lion’s share of the value is, like an iceberg, below the waterline: it cannot be seen from anywhere outside the business.  Create more value than you capture, certainly, but get the credit for doing so, both from Google and from everybody else.  This means biasing your business to producing value in a public manner.  Did you write software not core to  your line of business?  Great, OSS it.  Get the credit.  Have you learned something novel about your customers or industry?  Write about it.  Get the credit.  Are your business’ processes worthy of emulation?  Spread what you know.  Get the credit.

37Signals is amazing at this.  You can do it, too.

Get good at SEO.

I talk about this extensively on my blog.  In a nutshell:

1. You need more links.  Create ways to justify people who aren’t in a commercial relationship with you linking to you anyway.  My favorite way for doing this is getting the credit for things you do, as described above.
2. Create quality content at scale which solves problems for people in your niche.  See earlier discussion on Scalable Content Creation.

Optimize Everything

I’ve blogged extensively on A/B testing and funnel optimization (see Greatest Hits).  The big take away is, as Steve Pavlina said, all factors in the success of a software business are multiplicative.  If you increase conversions to the trial by 10% and conversions to sale by 10%, your sales go up by 21%, because 1.1 * 1.1 = 1.21.  This is awesomely powerful, particularly for businesses which don’t require hockey-stick trajectories.  You can hill-climb your way to very, very nice places in life for a one-man shop or small company.  (I mean, what real company offers 70% raises per year just for doing an A/B test every week and collecting a +5% improvement on one out of every four?)

Outsource / Automate / Eliminate To Actually Do It In 5 Hours A Week

I have previously written about Outsource / Automate / Eliminate extensively on my blog, so see here and here.

Comments?

I’d love hearing what you thought of the presentation.  I sincerely enjoy talking to people about this and other topics, so if there is a topic you’d like to hear more (or less!) on in the future, tell me and I’ll try to work it in to future presentations.  I never deliver the same one twice.

I am on the way to Tokyo because a high school friend is there this week. As soon as I heard, I told him to pick a day and I would be there. What day? Literally any day. My schedule is infinitely flexible.

That is what scares me the most about this job. Like most people, I have lived an entire lifetime conforming to schedules. They exist like the Greek gods: you didn’t ask for them but they are there, there is no negotiating with them, and prolonged association means you are likely to get your dignity violated by a bovine.

But schedules are structure, and structure helps. Be at school at nine AM. Seminar starts at 10:30, do not be late. Work starts at nine, Patrick, waltzing in at ten annoys people even if you are contractually permitted to do it and even if you will still be here at 2 AM. (Regardless of start time. If you thought the gods were rational, you have been reading the wrong mythology.)

At the very least, schedules put you and everyone else on the same page as to what you should be doing. Gainfully employed young men should be working at 2 PM on a Wednesday. I was having a late lunch and reading a novel at the coffee shop. The waitress asked me, confused, whether I was a student or not. Students have social license to do bugger all for a few years prior to working for a living. I told her I run a software company, and one of the perks is that I get to have lunch whenever. She was impressed, but asked how my customers and employees stand that.

That’s the the thing about schedules: once you have one everyone else needs to, too, preferably as close to yours as possible. My customers do not share my schedule: most use my software when I am asleep, and mail me with their urgent issues at 3 AM in the morning Japan time. I spend lots of effort decoupling their happiness from my personal availability. This does wonderful things for site uptime but it also means, perhaps regrettably, that there is generally no compulsion to work today.

My freelancers largely don’t share my schedule either. I just got the front page for Appointment Reminder redone after several months with placeholder graphics. The extraordinarily talented designer I worked with (Melvin Ram at Volcanic Web Design, a web design company) “met” with me for a total of perhaps twenty minutes, and we worked (him on having graphical inspiration, me on wrangling it into a functioning product) in temporal isolation for the rest of the project. This is the arrangement I almost always use for freelancing. It is wonderfully productive except in that it lets me off the hook for causing forward progress.

That is the other part about scheduling: with the debatable exception of my consulting work, I am terrible about setting and keeping multi week schedules for milestones. This never came up when I was employed, since I had managers to crack the whip and avoided doing anything multi week for my business, but it is now biting me with a vengeance. I wanted to have AR in beta six weeks ago. Between consulting, vacation, and BCC, I haven’t made almost any forward progress on engineering.

I know that to be true for AR because code isn’t getting written, but I always think it to be true for BCC. It turns out that I am smoking something: I ran a shell script to compare my productivity (commits, A/B tests, etc) prior and post quitting. I thought it would show me spinning my wheels. Turns out I am getting more done than ever. This is normally the point where I would paste a graph but, sorry, iPad. Suffice it to say I have run more A/B tests this summer than in the last year. (Interesting finding of today: Google Checkout really does increase conversion rates over having only Paypal as an option. I strongly suspected that, but now I know.)

Sales are up, too. Why doesn’t it feel this way? I think after a couple of decades of living by the clock I have become habituated to measuring my productivity that way. Insane and irrational, I know.

I am looking for ways to hack this: the discipline and social validation of having a schedule, without actually having to work at nine. I have been considering getting an office just to have mental separation between work and non work. (They give them away in this town if you work in tech. I could pay the rent with the savings in my iced cocoa budget.) Plus, if I have an office, I have an offsetting factor the next time I am accused of being unemployed. Sounds funny until it happens from a police officer who does not quite understand immigration statuses. (You know that controversial immigration policy in Arizona? Don’t ask me my opinions about it around sharp implements. Suffice it to say I can vividly imagine what getting stopped under it will feel like.)

Another way is, and you might laugh, a little iPad app called EpicWin which gives me fake RPG loot for making progress. Will it work? No clue, but one week in, I seem to be getting more of my “boring” chores accomplished. (I had considered building this into my business for a while, but resisted because I thought it would cause neglect of my nonbusiness priorities. It turns out that, if anything, I have the opposite problem now that I have infinite scheduling flexibility.)

And I just earned 100xp for this blog post.

Every once in a while, somebody on the Business of Software forums asks whether there is any point to trying to compete with open source software (OSS — essentially, software anyone can use and modify without needing to pay money or receive permission).  This is very possible, as folks such as Joel Spolsky pointed out in the ensuing discussion.    I particularly liked one comment on Hacker News about how to compete as Enterprise software.  However, relatively few people in the discussion mentioned B2C (Business To Consumer — you know, the stuff that isn’t paid for by an expense account) software, which people often tell me is doomed, doomed, doomed.  Seeing as how I run a small B2C software business, and am experiencing a crushing shortage of doom, I thought I would explain why this is possible.

My bona fides: I run Bingo Card Creator, which makes educational bingo cards for teachers and parents.  It is about as B2C as you can get.  Sales last year were in the $20,000 range, sales this year are up substantially, and I expect profits will exceed my day job salary/benefits/etc by the end of April.  I started the business in July 2006, when there were already at least two OSS projects which did roughly the same thing: BingoCardMaker and bingo-cards.  (You can tell we really spend a lot of time thinking about naming in my niche, can’t you.)

Thus, my comments are about the other 99% of OSS projects, the low-profile projects which a) do useful things for people and b) you have never heard of.  All OSS is not Firefox in the same way that all proprietary software is not Microsoft Office.

I like OSS, too: I make extensive use of OSS in my business and at my day job.  I routinely contribute code to projects, OSS my own software when it makes competitive sense (you can download my shopping cart), and generally love the stuff.  I don’t see OSS and proprietary software as existential threats to each other.

Thus, when I give developers advice on how to compete with OSS, its not in the sense that I want to trample over the movement’s corpse, burn their homes, and hear the lamentations of their women.  I just believe in getting people to the right tools for the right problems, and often, that tool is going to cost money.  (Nothing wrong with that!)

Places Where Software Developers Can Outdo OSS:

1)  Marketing

Software solves problems.  Customers have problems.  Customers do not know that their problems are sometimes solvable with software.

Less than 1% of customers perceive their problem as a software problem: Whether your software makes bingo cards or drafts table plans or helps people improve their poker game, all it is doing is helping someone get around a problem they had long before they sat down at the computer.  After getting frustrated with their existing attempted solution to the problem, they probably Googled something pretty generic like [how do I make bingo cards].  Empirically, only about 800 people out of the 147,000 who found me from Google in the last year were specifically looking for software.  Add in another 1,600 who were looking for a download, and that’s still 97% who had a bingo problem, not a software problem.

OSS concentrates on the software, not the problems the software can solve: Take a look at an OSS site, any OSS site.  You’ll see a whole lot of talking about the software, the implementation of the software, the source code for the software, how you can contribute to the software, etc.  You’ll almost never see anything about the problem domain — the assumption is that, if you’ve stumbled upon the site, you already know you have a software problem.  

If your marketing is premised around your user knowing they have a software problem, you won’t SEO to capture people looking for solutions for the issues in their problem domains.  Your evangelists will talk with other people who are enthusiastic about software, not with people who consider software about as intrinsically interesting as toasters.  (Many of my most enthusiastic customers despise every minute of using their computers.  They put up with it because it gets them back to their kids faster than any non-computer alternative.)

2) Design

OSS projects, particularly the 99% that are relevant to this discussion, routinely do not allocate resources to creating attractive designs.  For whatever reason, opened source graphical work is still rather rare, most developers (myself included) have the artistic skill of inept mole rats, and the obvious pay-somebody-who-does-it-better solution runs into the problem that the typical OSS project has no budget and no patience to deal with “unfree” licenses, which are the only kind commercially available stock icons have.

This results in a lot of OSS software looking something like:

That design is nice and clean.  However, it looks like the properties dialog box in Eclipse — lots of functionality optimized for packing as many things onto one screen as possible.  There is little thought given to incorporating color into the design, giving the program its own logo or visual identity, or arranging the 13 controls in a user-centric fashion.  Even with those criticisms, this is a good design for OSS software.  I have seen far, far worse.  But we could do so much better, and when we have an incentive to, we do.

The importance of design: I don’t personally use Macs but I think everyone in B2C software needs to take lessons from Apple and the Mac community.  They have proven, again and again, that people will pay a premium for products which are attractive.  Often in B2C the first glimpse of the software makes the sale and everything after that is just justifying to the customer that their gut decision was the right one.  (Same with publishing, incidentally: people really do judge books based on their cover.)

Example: I doubled sales of Bingo Card Creator waaaaay back in August 2006 by adding some more attractive stock icons to it than the fairly staid Java icons I had been using previously.  (That first link has the before/after shots if you want to see it.) 

The workflow is fundamentally different than BingoCardMaker (more about that later), but you can see that this design makes use of bright, pleasing colors.  (Its absolutely amazing how a few bucks worth of icons makes a bog-standard Swing app look so little like a Swing app, isn’t it?)  This is more inviting to the primarily non-technical users who make up the core of my market: it promises to be fun, not painful, to use.

3)  User Experience

“User experience” is easiest to define as “that touchy-feely stuff that Apple does really freaking well”.  The more formal description is that all stages of interaction with the software — from downloading it, to installing it, to using it the first time, to using it the 400th time, and all points in between — should induce joy and contentment, not frustration and rage.

Here’s a bit of homework: find yourself a non-technical person.  Tell them the name of a piece of software on, say, Sourceforge.  Then tell them to download and run it.  Stay in the room but don’t help with completion of the task.

This is so frustrating to most users that the test should probably not be allowed by the human subjects board at most universities.  Somebody might get killed.

Here’s a true story for you.  BingoCardMaker supports one feature which my program does not (picture bingo cards), and which I have no intentions of adding, despite the fact that it is the most requested feature by far.  Accordingly, I used to tell customers who needed that feature “I’m very sorry I can’t help you, but this software can — why don’t you try it?” and I would direct them straight to the download page.

One customer (who is by no means unintelligent) was furious because she spent fifteen minutes on the page unsuccessfully trying to download before deciding it was broken.  Here’s the section of the page: can you tell me what went wrong?

Those words architecture or operating system are pretty confusing, but the word “download” is not.  My customer knew she had to “download”.  So she clicked it, and “the screen blinked away”.  (Clicking download takes you to a list of packages published by the product — totally obvious to a non-technical user, right?)  Then she got back and clicked on options, figuring that it would offer “options for downloading”, but nothing she clicked there worked either.  Finally, frustration mounting rapidly, she clicked Bingo Card Maker because that was what she wanted… and the screen “blinked” again.  (It collapses the tree of options for that package, causing the BingoCardMaker-5.5.1.jar link to vanish.  That link is the one you have to click.  This is quite obvious if you are a Java developer — not quite so obvious if you hold a PhD in English Literature.)

Do not bury the goal: I should mention that if you’re coming from the project page at Sourceforge, the above is three clicks deep after clicking download.  By comparison, downloading Bingo Card Creator takes one click for most people — its the big, blue button that says Download Free Trial.  Folks whose browsers don’t support that are showed the following: 

That was once described as “big pancake buttons” by one of the international developers on the Business of Software forums, and the name sort of stuck.  Pancake buttons work.  They are far, far, far more effective at helping users complete their task (downloading the software) that unobtrusive text links or smaller download buttons — the pancake buttons outperformed by smaller buttons by a factor of 3, and those buttons were themselves much improved successors of my original buttons which had outperformed plain text links by a factor of two.

Wow, it sounds that I’m saying that most prospective users of OSS can’t even manage to download it.  Let me be clear: that is exactly what I am saying.  It isn’t their fault — when our users can’t use our software (and websites are just a special case of software), that means we have failed in our jobs, whether we’re proprietary or OSS developers.  

On to installation: User experience scarcely ends with the download.  Oh no, the opportunities to frustrate and enrage are just beginning!  For example, that JAR file they just downloaded got dumped in a downloads folder somewhere and… well… that is about it.  To execute it, you need to be able to find your downloads folder and double click on it.  The next time you want to execute it, you have to do that again.

By comparison, if you were downloading Bingo Card Creator, you’d get a prompt from your browser asking if you wanted to run it.  It would then take you through a Windows installer which, in a very simple fashion with sensible defaults, would put links on your desktop and start menu to the program, then start it up for you.  At no point do you have to learn any irrelevant trivia like “JAR files are special things created by Java which are sort of like programs, except when they aren’t, and sometimes double clicking on them runs them, except when it causes nasty errors.”

There is a JAR file sitting at the heart of Bingo Card Creator, too — and if my users need to know that then I have failed.  Incidentally, if you do desktop Java development for Windows, please use JET or Launch4j or something.  Java developers deploying to Mac should use the JAR bundler.  (You can even do this from a Windows machine with an OSS ant task.  It is a lifesaver for all of us committed Vista users who need to deploy to OS X.)

User Experience never ends: All interaction with your program, with your site, with your community has user experience implications.  There are many, many opportunities to flub it.  I can’t cover all of them in this article, but I hope to expand on ways to not flub them at a later date.

4) Speaking the users’ language

In keeping with the “Users do not have a software problem” and “Users do not care about your technology choices” points covered above, users fundamentally do not talk like developers.  See this description for one of my OSS competitors:

GPL bingo card printing program (numeric, letter bingo and picture bingo). Also prints a calling sequence (equivalent to the output from a barrel full of balls). XML output for later linking to multimedia engine.

Let’s try that again with the technobabble removed:

GPL bingo card printing program (numeric, letter bingo and picture bingo). Also prints a calling sequence (equivalent to the output from a barrel full of balls). XML output for later linking to multimedia engine.

Those two surviving sentence fragments are all the publicly available description of this program.  Yep, that’s it.  You might have heard that OSS is weak on documentation?  That is only a problem if there is enough of a reason to suspect that the program will work for you in the first place, and two sentences is probably not enough to do it.

I want to quote a real customer of mine, who captures the B2C mindset about installing software very eloquently: “Before I download yet another program to my poor old computer, could you let me know if I can…”  Painful experience has taught this woman that downloading software to her computer is a risky activity.  Your website, in addition to making this process totally painless, needs to establish to her up-front the benefits of using your software and the safety of doing so.  (Communicating safety could be an entire article in itself.)

Incidentally, the Internet sucks the literacy out of people, so be prepared to explain the same thing several times to get the message across.  The most common question I have is “Is every bingo card unique?”  Yep, they’re randomized — that is the only reason you’d use the program and that feature has been the core of it since v1.0.  That fact is mentioned twice in bold on my front page, printed on the main UI of the program itself, etc.  And people still manage to ignore all that, find my email address, and ask me.  

Can you imagine how confused users would be if key features were documented only in blog postings distilled from commit logs, and present nowhere on the product site itself?

(I’m looking at you, Rails.)

5) Support

If you’ve been around OSS for any length of time, you know that almost every community has members who are caring, helpful, and patient.  Unfortunately, they’re not the only people handling support.  I get a lot of questions which sound something like “I clicked the button and it didn’t work” or “plz help can’t print” or “I downloaded the program to my printer and now my screen is grey.  Did you give me a virus?”

(If you don’t understand the significance of the screen being grey, look at the photo here.)

You can probably imagine how well those would go over on the typical OSS mailing list.  To say nothing of basic computer operation questions like “I bought a new computer last week and need to put your software on it.  What do I need to do?  Its not the old computer, which has your software on it, its a new computer.”

Most customers with B2C software — in my experience, about 95% as of late — don’t actually need to ask a question of you, ever.  You can handle all of their needs with well-thought-out automatic processes, FAQs, help files, rigorous improvement of any part of the software that routinely causes confusion, and the like.  However, users like know that there is someone who will be happy to help them out if they need it.  That is the main purpose of offering customer support — decreasing the perceived risk of using your software by demonstrating that there is a safety net.  (This is one reason you should write your support page with an eye to it being seen by someone who isn’t even using your software.)

6)  Technical superiority

You’ll notice I’ve been concentrating mostly on the 90% of the software busines that happens outside of the IDE.  However, there is no reason to assume that OSS is superior on a technical front, either.  I know, a million eyes makes all bugs shallow, yadda yadda yadda.  Back in my reality:

• the median number of developers per OSS project hosted on Sourceforge is 1. 
• Perhaps one project in five will ever leave beta.
• All software has bugs, OSS is no exception.
• The average software, commercial or OSS, is a usability nightmare.
• Many programs have not been updated in years and lack the benefit of significant improvements in the state of the art made recently, from modern interface design to first-class integration with the Internet.  
• Some OSS tries to be everything for everybody and ignores niche markets with pressing specific issues.  
• Other OSS is hyper-adapted to the problems of a handful of developers scratching their own itches and is unusable by anyone with other requirements.

In other words, you can compete with OSS on a technical level the same way you compete with proprietary software on a technical level: execute better.  There’s really no magic to that.

Conclusion

All of these are opportunities for commercial developers to compete with OSS.  

The world is changing all the time, but plain-ol’ commercial desktop software still has a place in it.  Don’t get worried — concentrate on doing what you do well, from development to marketing to support, and the market will take care of the rest.

If you found this article interesting, try looking around the blog or signing up for the RSS feed.  There’s a lot more where this came from.

Then on Tuesday the mailman stopped by my little apartment in central Japan and dropped off a package.  Five promotional copies for me — whee!  It turns out the book has been retitled Blog Blazers, an act I think Stephane owes somebody a beer for.  (The importance of titles is a major recurring theme in the book.)

I promptly updated ye olde resume to include “published author”, gave a copy to a friend of mine who was starting a business, and set about to reading it.

Structure 

The basic style of each of the 40 chapters is a question/answer session with the interviewee.  The questions are identical.  Representative sample:

• What makes a blog successful?
• How long does it take to be a successful blogger?
• What is your biggest tip on writing a successful blog post?
• What are your main methods of marketing your blog?
• How do you monetize your blog?

The sheer diversity of answers to these is amazing — the book includes everyone from folks whose blogging generates a full-time income from AdSense, software consultants who are looking for professional contacts, an online weightloss diary, some guy with an interesting fascination with shoes (who wrote the funniest chapter, by far), and one computer programmer who should probably listen to his own advice more:

Speaking of timescales in blogging — recognize that you will be blogging until you stop blogging.  That sounds simple, but many peopole start out with a burst of post-every-day fever, which they cannot sustain over the long haul.  Pick a pace which is predictable and sustainable.

In my defense, it sounded a lot more credible when I wrote it.

My chapter focuses mainly on blogging as a small business and practical tips you can use to achieve success that way.  (A few of the other chapters are a bit more inspirational in nature, although most of them have some actionable advice.)

In Which I Disagree With My Marketing Idol

Example from my chapter:

I personally can’t stand the “Top Ten Ways To Write A Blog Post” type articles, as aside from being boring and aesthetically unpleasant they turn your blog into a commodity provider of lists.  Instead, absorb the lessons that style of writing provides which continuing to have unique positioning for your blog.  The important lessons are “titles which promise immediate benefits are a good idea” and “judicious use of formatting such as bullet points, bold text, and pictures can turn a scanning surfer into an engaged, active reader.”

Seth Godin’s take on the issue:

Use lists.

Write short, pithy posts.

That is one of many, many disagreements the authors have with each other, and I find them fascinating.  (A few other points of contention: the importance of monetization, the ideal post length, and the importance of SEO.  You’ll find many well-argued solutions to all of these in several chapters… and the right answer in my chapter, naturally.)

Single Best Advice From Me: 

I recommend… that you get familiar with two groups of websites in your niche: the folks who have achieved something close to what you want to achieve, and the folks who are on the path to success but just a wee bit farther than you are.  The first give you examples to emulate and objectives to strive for, and the second should become your new best friends, because a) they’re not too busy yet that they have millions of admirers and b) their support can really kick start your blog and help you both get closer to your goals.

For the other 200-odd pages of advice, you’ll have to buy the book.  At $16.95 I’d honestly say it was a steal, even if I had no connection to it whatsoever, because the value a blog can drive for a small business is immense.  (See my chapter, and several others, for elaboration.)

You’ve got two options for getting it.  One is to buy it directly from the Blog Blazers‘ site (where there is an e-book option).  I’m going to encourage you to sidestep them and purchase from Amazon instead.  My big reasoning for that is that publishing is a winners-win game, and purchases through Amazon increase the book’s Amazon rank, which results in more prominent placement on the site and also results in indirect marketing opportunities (“buy Blog Blazers, currently #1234 on Amazon”).  (At time of posting they only have two copies left.  Small order to start out with = book languishes in obscurity.  Break the cycle — buy a book today ;) )

As usual, I don’t have any monetary interest in the book or in your purchase of the book.  (i.e. those are not affiliate links)  I contributed to the book because Steph asked me to, and it was a pleasure to contribute a small bit to something which will hopefully provide value to people.  If you’re one of those uISVs scratching your head thinking “So I’ve heard them say 432 times ‘Blogging helps for marketing’ but I don’t consider myself an expert at this yet”, read the book.  I guarantee you you’ll learn something.

P.S.  Seth Godin is one of the world’s best living theorists about marketing.  I am not Seth Godin.  You are not Seth Godin.  Please, for all that is holy, don’t write list posts.

P.P.S. uISVs will recognize more than a few names: Ian Landsman, Bob Walsh, and Andy Brice all contributed chapters.

P.P.P.S Remind me to get the contact details of whomever did the cover design if I ever publish anything.

Cover of Blog Blazers book, depicting man with BB on chest standing atop world.

One perpetual worry on the Business of Software forums is that some OSS developer (invariably a grungy, marginally employed coder with Jolt stains on his T-shirt) is going to come along, clone your application, and eat your lunch.  As a result there is a certain amount of hostility among small software developers towards OSS, which is a shame.  I spent some time earlier trying to address myths about it, but I thought I’d go one better and focus on ways OSS can make you money.

Concentrate On What You Do Best.  Let Other People Do Everything Else

Currently I’m finally getting restarted on my latest project, which is a web service that helps small businesses do content syndication across the Internet.  There are a number of interesting technical challenges here, including both server-side (“How do I let a person who is potentially only paying me $9 a month generate tens of thousands of pageviews without the server bills putting me in the poorhouse?”) and client side (“How do I use Javascript to make the whole process pain-free for non-technical end users?”). 

As it turns out, I’m a fair hand at some portions of the puzzle, but portions of it are complex.  Very complex.  You have no idea how far down the rabbit hole goes in web development, Alice.  I honestly think that it is impossible, flat out impossible, for any one person to be expert at all the technologies which are implicated by a trivial web application running on a modern web stack.  This includes everything from HTTP to the DOM model to Javascript to the database to relative velocities of the little spinning bits of metal that make everything work. 

Thankfully, programmers get this lovely tool called abstraction, which means we can concentrate on one bit of the problem at a time and treat the rest of the world as a Solved Problem.  For example, when I’m working on Rails, I am not thinking about the L1 cache policy on the server.  In fact, although I really appreciate my $150,000 CS degree, it is entirely possible that I will grow old and die without ever once worrying about L1 cache.  Smarter people take care of that stuff for me.

OSS Is About Smarter People Taking Care Of That Stuff For You

One key feature of my content syndication widgets is that they be able to spread without requiring user action away from the host site, to avoid antagonizing hosting site owners.  This was going to require some serious work on my part to achieve — probably several days worth, as Javascript is not my bag.  As it turns out, Lightbox Gone Wild (a variant of the Lightbox project which I’ve previously used to business-enhancing effect) took this from several days of work to about five minutes of integration. 

Lightbox Gone Wild is made by Wufoo, a company which doesn’t specialize in wild-and-crazy Javascript, but rather in selling a service which makes data collection easy for people.  Note that key word selling – OSS developers are typically not poor aesthetics who need to beg for their next cup of coffee.  Since wild-and-crazy Javascript doesn’t make Wufoo money directly, they release it back into the ecosystem for someone to extend (much as how they themselves extended the previous Lightbox project), with the added benefit that they may get to incorporate the extensions later and in the meantime people who have no interest in HTML forms nonetheless say good things about them.  (If you need form input and HTML scares you, go to Wufoo.  There, did my good deed for the day.)

In turn, I’m going to tweak their script a few times to add usability enhancing features (like backporting my “escape button closes the layer” tweak to the original Lightbox, which is a big win for non-technical customers), which increases the aggregate value of free OSS available but still gets me incrementally closer to making money from my paying customers. 

In fact, taking stock over what I’ve accomplished so far, I realize I’m doing a whole lot of this borrowing from OSS.  From classic infrastructure components (database, web server, application stack) to user interface elements (editing controls, charts) to a zillion pieces of behind the scenes wizardry, I’m probably literally using several thousand man months worth of software, adding two man months worth of glue and secret sauce, and then if all goes according to plan making a bit of money off of it.

That’s the OSS Business Model

I often hear folks wondering whether they’ll make more money if they stop charging for their main application and OSS it.  Survey says no in most cases.  Rather than being engaged 100% in the production of OSS, you can OSS contributions you make which are boring, routine, and only tangentially connected to the main business of solving specific problems for your customers.  This allows you to lower development costs very modestly, but the social benefits are very nice for a bootstrapped software company. 

Giving away free stuff directly to your customers is a time-worn capitalist tradition, but giving away free stuff to other people works pretty decently too.  We live in an era where, for better or worse, GoogleBot is a judge of character and strongly prefers people who share.  (OSS users/developers have, on average, extraordinarily high levels of technical expertise and are solidly members of the linkerati.  They make good folks to influence from an SEO perspective.  You also get direct benefits from having vocal, technically capable, engaged people interested in you personally — although those direct benefits may not extend into them actually buying your software, but then again they weren’t in your niche to begin with so no harm done.)

OSS as a Barrier To Entry

But wait, there’s more.  It seems funny to say, since OSS is making it vastly easier for me to build my website, but I think that it functions as a barrier to entry for competitors.  You can’t just whistle your fingers and snap together 15 diverse and unconnected OSS projects into a usable application — the design and integration of complex systems is still a skill, and it is one that is in many ways more difficult than straight-up application development in some domains.  This turns skill with particular OSS projects, or generalized methods and patterns of integration, into one more competitive wedge you’ve got in your arsenal.

Additionally, OSS raises something of a quality cliff in front of prospective competitors who are not using as much as you.  Consider the typical graph of development effort expended versus value to the customer.  Typically, this gently slopes upwards for the first portion of the graph (“20% of the effort secures 80% of the value”), and then it plateus for a very long time as the easy wins are exhausted and the long, arduous process of software development begins. 

The curve for a developer using lots of OSS doesn’t look different in asymptotic behavior, but it contains numerous discontinuities along the way.  Every time you spend a small quantum of effort to integrate a new feature (that you didn’t have to write), your user-perceived quality gaps up.  Someone running along on your old curve, trying to keep up, runs straight into the quality cliff-face. 

Example: assume you and hypothetical competitor Bob include analytics in your application.  Both of you decide, sensibly, that the screens require a visual component.  Bob starts coding his.  You quickly integrate Google Charts, which while not strictly speaking OSS is the same general principle.  Now Bob isn’t just running the race against you — he’s running against the team at Google doing the Charts development and you’re already done and busy working on your next feature.  It makes OSS a great force multiplier.

Sidenote

Speaking of Google Charts: wonderful output, neatly solves the problem of graphing without requiring massive server-side resources or Flash-capable browsers.  Terrible, terrible API from a programming standpoint — you write uber-ugly incomprehensible URLs and their servers return the appropriate charts.  Luckily, folks have already extended it by offering wrappers in many popular programming languages (I mentioned the Ruby one already), which is another example of collaboration making a good thing better. 

I’m planning on eventually releasing a bit of magic myself, which will let you treat the charts as if they were being produced locally.  (There are decent reasons for this, from branding issues to future-proofing your site in case Google decides to cancel the charts project and you don’t want holes developing in all your old content all of a sudden.)