A review of Obviously Awesome by April Dunford
Nothing has led me to read more business books than Co-founding Outseta. As a founder the need to “go deeper” and figure things out for yourself is very real—if you don’t do it, nobody else will!
While that’s the case, I tend to agree with the sentiment that most business books really just share an idea or two that you can take and apply to your own context and business. On top of that it seems like publishing a book is more en vogue than ever before—if you haven’t published a book yet what sort of self-professed guru are you? All of which is to say that I don’t feel compelled to write book reviews very often… but here I am doing just that!
April Dunford’s Obviously Awesome: How To Nail Product Positioning So Customers Get It, Buy It, Love It is a must read for any marketer or founder that’s struggling with product positioning. What I love about this book is that while the concept of positioning is frequently discussed in the marketing world, I agree with the author’s assessment that there’s a remarkable lack of resources out there that teach you how to actually do it. In a nutshell that’s what this book does—it’s a straightforward, no-nonsense, and highly tactical guide that any marketer or founder can use to sharpen their positioning.
Why I care about positioning (and why you should, too)
Over the past few years as we’ve been building Outseta I’ve chatted with hundreds of founders that are bringing new products to market and consulted on growth strategy with many others. In both instances the ask that I hear most often is unequivocally “we need more leads.”
In my experience, probably half of the time that I hear “we need more leads” the company actually needs to do a better job of executing lead generation campaigns. The other half of the time I find that the company really needs to revisit their “positioning”—they’re simply pushing a message on the market that’s not resonating or showcasing their product in the best light possible. When companies sharpen their positioning, all of a sudden their existing lead generation channels start delivering a lot more leads (and sales) without any increase in spending.
As a result, a significant percentage of my consulting work has actually turned into positioning work. The process that I’ve typically used has been heavily influenced by David Skok and Mike Troiano’s article Clarity of Message: Why You Need A Great Message And How To Create It and has ultimately resulted in a positioning statement, a series of key messages, a value proposition, and a few other outputs. My process has been built on a lot of trial and error—the magic of Obviously Awesome is that it provides a step-by-step blueprint to tackle positioning that anybody can easily follow.
I’ll start by sharing my own summary of the book before offering a few minor criticisms on how this book could have been even more helpful to me as an early stage SaaS founder.
My summary of Obviously Awesome
Here’s my summary of Dunford’s book—this is literally the lines of text that I highlighted as I made my way through the book. You should buy a copy yourself, but this will give you a good flavor of what you’re in for and can act as an abbreviated version for you or folks on your team.
Definition of positioning
Context enables people to figure out what’s important. Positioning products is a lot like context setting in the opening of a movie.
Most products are exceptional only when we understand them in their best frame of reference.
How to know if you have a positioning problem
Talk to people who would be great prospects for your offering. Show them the product and explain what it does. Now ask them how they would describe what you do.
Likewise, ask existing customers about your offering and see what they say. If you see a disconnect between how your happy customers think about your product and how prospects see it, you likely have a positioning problem.
The 5 components of effective positioning
Competitive alternatives—If you didn’t exist what would customers use?
It’s important to really understand what your customers compare your solution with because that’s the yardstick they use to define “better.” Understanding what your customers see as true alternatives to your solution will lead you to your differentiators.
Unique attributes—What features/capabilities do you have that alternatives do not?
Value (and proof)—What value do the attributes enable for customers?
Value is the benefit you deliver to customers because of your unique attributes. If unique attributes are your secret sauce, then value is the reason why someone might care about your secret sauce.
Target market characteristics—Who cares a lot about the value? Try to identify the
characteristics of a group of buyers that lead them to really care a lot about the value you deliver. Your sales and marketing efforts need to be focused on the customers who are most likely to buy from you. Your positioning needs to clearly identify who these people are.
Market category—What context makes your value obvious for your target customers? This is the
market you describe yourself as being a part of to help customers understand your value. Market categories serve as convenient shorthand that customers use to group similar products together.
Because these relationships flow from one to another, the order in which you define the components is very important (follow the order in which they are presented above).
The step-by-step positioning process
Follow this process to define your product’s positioning.
Understand the customers who love your product—
Your best fit customers hold the key to understanding what your product really is—look at ecstatic customers and their opinions vs. your overall customer base. Make a short list of your best customers—if you don’t have super happy customers already, hold off on tightening up your positioning. Until you have more experience with real customers, it’s better to keep our minds open and our positioning loose, and see what happens.
Form a positioning team (3-12 people)
Let go of positioning baggage—
Get agreement from your team that although the product was created with a certain market and audience in mind, it may no longer be best positioned that way.
List your true competitive alternatives—
The features of our product and the value they provide are only unique, interesting, and valuable when a customer perceives them in relation to alternatives. Start by asking customers what problems they are trying to solve. Understand what a customer might replace you with in order to understand how they might categorize your solution. Teams usually end up with 2-5 groups of alternatives.
Isolate your unique attributes and features—
Strong positioning is centered on what a product does best. Once you have a list of competitive alternatives, the next step is to isolate what makes you unique or better than those alternatives. In this step stay focused on features and capabilities (attributes), rather than the value those features drive for customers. List all the capabilities that you have that the alternatives do not.
Map the attributes to value themes—
Features enable benefits, which can be translated into value in unique customer terms. Cluster the value into themes—look for patterns and shorten your list to 1-4 value clusters.
Determine who cares a lot—
Once you have a good understanding of the value that your product delivers versus other alternatives, you can look at which customers really care a lot about that value. An actionable segmentation captures a list of a person’s or company’s easily identifiable characteristics that make them really care about what you do.
Find a market frame of reference that puts your strengths at the front and center and determine how to position in it.
Make your value obvious to the segments who care most about that value. We position our product in a market to trigger a set of assumptions—about competitors, features, and pricing—that work to our advantage.
There are 3 types of positioning as you consider how to position in a given market
Head to head (to win a market)—You aren’t claiming to be better for a certain type of customer; you’re claiming to be better for most if not all customers. Only do this with a new product if a market leader has not been established. The advantage is you don’t need to convince people that the category needs to exist.
Big fish, small pond: positioning to win a subsegment of an existing market—You get the advantage of a well defined category without the stiff competition. Your focus is showing there’s a subsegment of the overall category with a specific set of needs that the current category leaders are not addressing. The subsegment needs to be easily identifiable—meaning if you had to create a list of prospective buyers, you could figure out a way to do that. First educate the targeted subsegment about how a general purpose solution is not meeting their needs.
Create a new game: Positioning to win a market you create—Sometimes a market can be created by combining one or more existing markets to form one with different buying criteria. Only use this when you have evaluated every other possible existing market category and concluded that you cannot position your offering there, because doing so would fail to put the focus on your true differentiators and value. To credibly create a new category, you need a product that is demonstrably, inarguably new and different from what exists in other market categories. Category creation is about selling the market on the problem first, rather than on your solution.
This is simply a document or set of questions that you should complete as you begin the work of figuring out your positioning.
Putting positioning into play
Once you finalize your positioning, putting your positioning into play typically starts with developing your sales story.
Starts with the definition of a problem your solution was designed to solve
Introduces what the “perfect world” would look like
Introduces the product or company and positions it in a relevant market category
Flows into the value themes and a bit more detail about how the solution enables that value
Where Obviously Awesome could be even awesom-er
Ultimately I loved this book and found it extremely useful. However, there’s two specific instances where I felt like this book left me hanging a bit.
Positioning for an early stage start-up
Dunford writes, “If you’re a start-up and don’t have super happy customers already, hold off on tightening up your positioning. Until you have more experience with real customers, it’s better to keep our minds open and our positioning loose, and see what happens.”
I understand this sentiment—it reminds me Alex Turnbull’s article Attention Start-ups: Stop Selling To Start-ups where he makes the point that companies should widen their net rather than focusing at an early stage on the markets that are most familiar to them. Keep your positioning loose and your targeting wide and you might be surprised to find who is actually getting the most value out of your product.
While I appreciate that you don’t yet know who your best customers might be, I find that this advice isn’t terribly helpful. You need to think about positioning to some extent even as an early stage start-up, and I can’t imagine that loose positioning—we offer a product that’s CRMish—could possibly be helpful.
My own take is that you need to start with an educated guess with regards to your unique attributes, who cares about them most, and the market category you think you can most effectively position your product in. From there you should plan on running experiments to test the effectiveness of your positioning, moving rapidly to test new positioning if it doesn’t seem to resonate. In other words, systematically test new and different positioning until you find a position that seems to resonate rather than over-generalizing your product.
Positioning a platform solution
I didn’t read this book under the context that we have a positioning problem at Outseta—if anything, I’ve gotten feedback that prospects “get it” pretty quickly when looking at our website. What I have heard is that most prospects either consider us a “CRM” or look at us as an “Authentication and subscription management solution.” I think both categorizations make sense, but all things considered our positioning has been best articulated by this image.
Obviously Awesome is an incredible resource if you’re marketing a CRM, or an email marketing tool, or blueberry muffins. But when I turned this book towards our own business it wasn’t particularly helpful in helping me think about Outseta’s positioning—as all all-in-one platform solution, I was still left scratching my head a bit. Let’s talk through that.
First, I need to decide on how to position in a given market. Again the choices are:
Head to head (try to win a market)
Big fish, small pond (try to win a subsegment of an existing market)
Create a new category
Given that Outseta plays in a number of very mature and competitive markets—CRM, subscription billing, customer messaging, and help desk—I can easily rule out head to head positioning. We’re not going to win outright if we take on Salesforce. Or Intercom. You get the idea.
I initially thought about creating a new category—there really isn’t another product out there that offers the scope of capabilities that Outseta does to early stage SaaS businesses. But while our platform is unique in that sense, each of our key capabilities is already well understood as CRM, or email marketing, or subscription management, for example. Slapping a new label on these features in the vain of “creating a category” just doesn’t feel authentic to me.
That leaves us with big fish, small pond positioning—I can get behind that. We need to choose a market or category and fight for the subsegment of customers at the lower end of that market that’s typically defined as makers, indie hackers, or bootstrapped SaaS companies. Game plan!
But choosing the market category—and all the assumptions regarding features, pricing, and competitive offerings that comes with it—proves to be really challenging. Are we primarily a CRM? A subscription management platform? A customer messaging platform? A help desk?
The reality for us is that we offer the basic features and capabilities expected of software products in three or four preexisting and well understood software categories. In a lot of ways I don’t think it makes much of sense for us to have to choose to align ourselves with just a single one of these categories.
The fact of the matter is whichever of those existing markets we choose, our product is not going to be the most compelling when evaluated against the criteria that products in that chosen market are measured against. Outseta’s value comes from the breadth of the features we offer across the different categories of software that all early stage SaaS businesses need.
If we have to align ourselves with a pre-existing category, I’d choose either “CRM” or “subscription management.” But those markets themselves are pretty different—are we competing with Hubspot CRM, Pipedrive, and Copper or are we competing with Chargebee, Recurly, and Chargify? That’s a big decision with lots of trickle down consequences.
My gut tells me that at our core we’re primarily a subscription management platform, because our customers find us early on to help them manage subscriptions—the contact management and CRM aspects of the product come into play at a later stage. The alternative solution we hear a lot about at an early stage is companies building their own subscription management logic and other required scaffolding on top of Stripe.
But beyond just subscription “management,” I think our positioning likely needs to be something closer to a subscription “growth” platform. We’re not just managing subscriptions, but actively providing a series of tools to help you grow and support your subscriber base that the other subscription management platforms simply don’t offer. I’m not sold on that yet, but it’s the way I’m leaning.
These challenges or criticisms are fairly unique to our context and product, but in the vain leaving a balanced review they were the shortcomings of Obviously Awesome for me specifically. April Dunford’s book is gem—if you’re working on your positioning, it’s the best place yet that I’ve found to start.
One of the questions I field most often from other start-up founders and companies I help with content strategy is, “Should I start a podcast?” Podcasting is undeniably hot at the moment, especially with younger consumers—according to the New York Times 40% of people between 12 and 24 years old listened to a podcast last month, up 10% from 2018. Droves of people and companies are launching podcasts, but just as with any new marketing channel many of them are simply following the trend rather than thinking critically about whether a podcast makes sense for their business.
My objective with this post is to provide some practical advice on whether a podcast is right for your business. I’ll share why we’ve decided not to start one, and will assess the relative opportunity podcasts, blogs, and video content offer to SaaS start-ups.
The benefits of podcasting
Podcasting comes with many benefits, aside from the simple fact that more listeners are tuning into podcasts every day. Here are a few of the most significant.
Podcasts are easy(er) to produce
Generally speaking, podcasts are easier to produce than video or written content. I know that this comment will draw ire from some folks, and I’m the first to agree that writing, podcasting, and producing video content all come with their own unique challenges and requisite skills that must be developed to do them well. I’m certainly not in the camp of, “podcasts are just two people talking to each other for 20 minutes.” That’s a naive perspective that’s disrespectful to the people who have worked hard at perfecting the craft of podcasting and growing their audiences.
While that’s the case, I do believe that podcasts are generally easier to produce than written or video content. Video is without question the most difficult, as the actual substance of the content, the audio, and the visual elements all must work together in harmony. But I believe truly writing well is more difficult, too—for most of us “writing” is a process reserved for bad memories of drafting essays in some long ago forgotten English class. I know many more people who can carry great conversation but can’t write to save their lives than vice versa.
Also, consider the relative time involved in creating a podcast episode versus written or video content. Some points of reference:
Noah Kagan’s podcasts typically last 45 minutes to an hour—he says each episode takes 8-10 hours to produce.
Nathan Latka’s Top Entrepreneurs podcast features short, 15-20 minutes episodes. He books two six-hour long recording sessions each month where he records the content for 30 new episodes, and has outsourced the rest of his process (including editing, which he pays about $1 per minute for).
Paul Stephenson’s SaaS Marketing Insights podcast features 20 minute episodes that take about four hours each to produce.
Justin Jackson and John Buda’s Build Your SaaS podcast features episodes of 45 minutes to an hour—Justin estimates each episode takes just over two hours to produce.
For sake of comparison, many of the blog posts that I’ve written for Outseta focus on our own company and entrepreneurial journey. Because I’m writing on a topic I know well, where I’m the expert, it’s routine that I’ll spend 4-6 hours in total on these posts. But when I’m writing similar length content (2,500-4,000 words that takes 15-20 minutes to read) that requires interviews, research, and several rounds of revisions it often takes me 12-18 hours to create a great post.
"In my experience as a writer I can either write a story that leverages my existing skills or expertise in a couple hours or I can write a story that requires new research and interviews that can take anywhere from 10-40 hours,” agrees Michael Thomas, Founder of content marketing agency Campfire Labs.
Video content—assuming you’re not making selfie-style Linkedin videos—typically takes even longer to produce.
Podcasts can be consumed while multi-tasking
Podcasts can be consumed while performing other activities in a way that video or written content can’t—for example, you can listen to a podcast at the gym, while cooking dinner, or while driving. I think many people glaze over this benefit far too quickly.
That’s too bad, because in my eyes this is the single greatest benefit of podcasting! As marketers we are all competing for the attention of our audiences and there’s a limited amount of our audience’s mental real estate that we can occupy. Everybody has time throughout their day whether it’s in the car, at the gym, or while you’re simply walking down the street where you can listen to a podcast but you can’t watch a video or read written content. That’s a very real marketing opportunity—there’s a bigger lot of time that you can potentially occupy, as well as less competition for a listener’s mental real estate. Go fill it!
Podcasts are more personal
The auditory nature of podcasts ensures that personalities, point of emphasis, sarcasm, and other nuances of language aren’t lost in translation. We’ve all read a text message and misinterpreted it without the benefit of these important contextual triggers, so this is significant in communicating your message and points well. Hearing someone’s distinct voice and tone makes podcasts more personal than written content, which helps brands build a more authentic connection with their audience.
Podcasts are very guest friendly
Having been a guest on several podcasts now, I can say that being a podcast guest is pretty great—it’s quick, efficient, conversational, and typically less involved than co-authoring a blog post or producing a video with somebody. When someone asks you to be a guest on their podcast, it’s very easy to say yes.
When you’re on the other side of the table and you’re the one recruiting podcasts guests the ask is simple and straightforward—show up and have a conversation with me for 30 minutes or an hour. The conversation is the product—it will need some editing and production polish, but it tends to be closer to the finished product than you’d be if your were writing a blog post or producing a video.
Podcasts are an easy way to produce long form content
Podcasts are a fast, direct path to creating the long form content that search engines love. While I don’t profess to be an expert on the extent to which podcast content helps with SEO, I do know that Google wants podcast content to be searchable. If there’s a north star that’s served me well when it comes to SEO, it’s that Google’s intention is to surface the best and most relevant content in response to any given search query—of course that content could be delivered in the form of a podcast (or a podcast transcription).
A 15-minute podcast transcription tends to be about 2,000 words—try writing a 2,000 word blog post 15 minutes. Podcasting is a much more efficient path to generating long form content for search engines to crawl.
How do I decide which form of content to invest in?
Now that we’ve covered the benefits of podcasting, the question for start-up founders remains; which form of content should you be investing in? For bigger, less resource constrained companies the answer is often “all of them” and that’s totally appropriate; serving up content in a variety of formats likely makes sense. But for more resource constrained SaaS start-ups, this can be an important strategic decision.
My leading piece of advice is to follow the skills that you have on your team—if you have a savvy writer on your team, write blog posts. If someone on your team is a great conversationalist or interviewer, launch a podcast.
When it comes to the content we’ve produced so far at Outseta, I’ve primarily chosen to invest time and effort into generating long form blog content. While I can film a Soapbox or Loom video, I’m definitely not a videographer. And while I have a lot of experience conducting interviews, I’m much more effective taking the rough output of those conversations and weaving it into a compelling narrative than I am leading an interviewee intentionally and smoothly through a conversation. I’m no Bob Costas, so written content has won out for us.
Aside from the skills on your team and the content consumption tendencies of your audience, you also need to consider your product and the market that you’re trying to reach. For example, if your company serves the travel industry listening to a podcast that speaks about “the cool blue crystalline waters of Bora Bora” probably isn’t going to be as compelling as watching video content showing those waters gently lapping up on the island’s shores. This sort of market probably lends itself to more visually oriented video content, just as a company building word processing software might lean more towards written content.
Why blogging will make a comeback
I’m personally betting that blogging will have a resurgence of sorts, as the market for both podcasts and video content continues to expand. Why? Because whether we’re talking lead capture forms, or blogs, or bell-bottom jeans these things are largely cyclical—especially in the world of B2B SaaS.
As more content producers focus on channels aside from blogging, I also see the number of capable writers dwindling. We’re living in a time where written communication is increasingly taking the form of emojis and shorthand, where technology bootcamps are generally more interesting to students than English classes. Google’s smart reply feature is even trying to write our email responses for us.
While consumption patterns are undeniably growing faster for video and podcast content, movement in that direction will result in an even shorter supply of writing talent—providing an opportunity for companies that choose to invest in superlative written content.
Why video content is King
Writing and podcasting aside, it’s very clear to me that video content will eventually reign supreme. I thinks this is the case for two reasons:
The barrier to entry with video content is the highest. It’s simply more difficult to put together well produced video content than written or audio content.
Video is as engaging, vivid, and rich of a format as content can take. For these reasons it can more effectively build brand authenticity, appeal to the emotions of buyers, and move an audience to action.
Because the barrier to creating video content is highest, there’s less of it out there. Type almost any search query into Google, then specifically search Google Videos for the same search terms. The difference in the quality, number, and relevance of the responses is significant. This is why SEO experts like Neil Patel have chosen to go all-in on video content recently—there’s simply more real estate and top search positions easily up for grabs with video.
There’s no simple answer to whether your company should be investing in video, written, or podcast content—but if you understand the unique benefits of each format, your target market, and your team’s internal skill set you can deliberately build your audience by investing in the content format that makes the most sense for your company.
Our approach to pricing experimentation
When we began working on Outseta our product vision was fairly straightforward—bring together the core software tools that all early stage SaaS start-ups need. We deliberately set out to build tools to serve the lower end of this market, intercepting companies shortly after they’re founded and scaling with them until they reach about $5M in annual recurring revenue (ARR).
While our vision for the product has always been clear, one thing we realized early on was that pricing Outseta was going to be particularly challenging. On one hand we saw a clear opportunity that we could attack—most of our venture-backed competitors offer some sort of “start-up plan,” but their products become expensive really quickly once you graduate from that first pricing tier. On the other hand, by serving bootstrapped SaaS founders we’re selling to a price conscious audience and opening ourselves up to competition from freemium products.
But perhaps our biggest challenge has been finding the right pricing structure given the breadth of our product:
Most CRM and help desk tools offer seat based (per user) pricing
Most email marketing tools charge based off of subscribers
Most billing systems charge a percentage of revenue processed
Given that we offer all of this functionality, what value metric should we hinge our pricing too? And how can we implement pricing that’s both fair and easy to understand for our customers?
If we’ve learned anything about our pricing so far, it’s that we haven’t quite gotten it right yet—this post details for our prospects, customers, and anyone else interested in pricing SaaS products what we’re going to do about it.
Why I’ve always leaned towards “charge more”
A couple of weeks ago I attended MicroConf for the first time, a conference filled with self-funded software entrepreneurs that match Outseta’s ideal customer profile. My objective at the conference was clear—get as much feedback on Outseta’s pricing as possible. If there was a mantra coming out of the entire event it was “charge more,” a message perpetrated largely by Patrick Mckenzie of Stripe. Then just last week Justin Jackson published an article entitled Should We Always Charge More, noting the benefits of lower pricing that gives your customers value above and beyond the price they are paying for your products.
I tend to lean more towards the “charge more” camp based on my past experiences. When I was head of marketing at Buildium, we entered the market with a product that started at $20 per month. Soon a new incumbent and Buildium’s biggest competitor, Appfolio, entered the market with a price point starting at $200 per month. The products were nearly identical in terms of functionality.
Our pricing was deliberately defensive and it was really effective in helping Buildium capture market share—we signed up over 10,000+ new customers over 5 years—far more than Appfolio. But we found that many prospects immediately assumed Appfolio was a better product because of their price point, which led to many larger companies choosing Appfolio over Buildium. Both companies have gone on to do very well, but in retrospect a lot of the bigger companies Buildium would have loved to serve in later years had already signed on with Appfolio.
When I left Buildium, I made a short list of the most important lessons that I’d learned over the previous five years. Included on that list was, “If you have the opportunity to do something similar again, start off with a higher price point like Appfolio did.” Not only do you reap the benefits of being perceived as a better product simply on the basis of price, but it also allows you have equivalent revenue with fewer customers to support. And your customers will be subjected to pricing increases less frequently as you work to monetize your customer base.
As Justin Jackson’s article points out, most pricing advice (like “charge more”) is fairly generic and lacks context on both the stage of your company and the market you’re serving. While I have a bias towards “charge more,” competing in a market with so many freemium offerings and where our customers may not yet be generating revenue dictates that we have a price point that’s very accessible. Our pricing to date has tried to serve both objectives.
The “Founder’s Plan” eliminates any barrier to entry for our product, giving start-ups access to all of our features and as much time as they need to adopt the platform. They can setup their pricing plans, track their sales pipeline, receive support tickets, send emails, and invite as many team members as they like without incurring any charges.
Once a user has over 250 contacts and starts using the product in earnest, they’ll move up to our $99 per month “Start-up Plan.” This plan is designed to be a fantastic deal opposed to the alternative of buying a handful of point solutions, while still charging a healthy rate that we believe is fair given the value we’re providing.
We added the $249 “Growth Plan” after hearing from a prospect whose company was at $1M in ARR that our existing pricing was “too start-uppy” and left him with the impression that we couldn’t serve his company’s needs—an impression that he said was not at all correct once he took a look at our product.
What we learned about Outseta’s pricing
Over the course of 2018, my conviction grew that we didn’t quite have our pricing right—over the past few months I set out to capture as much feedback on our pricing as I could. I created the document below that outlines our existing pricing, the feedback we’ve received, and some pricing experiments that we’re considering running.
I then shared this document with the following groups and asked for their feedback.
Justin Jackson’s “Mega Maker” group—a private, pay-to-play Slack community with a lot of bootstrapped SaaS founders
Existing Outseta customers
Prospects that are on our free “Founder’s Plan” that have been consistently using our product
The feedback we’ve received has been wide ranging, and interestingly enough several people have shunned pricing models that would actually result in them paying us less money. Here’s a smattering of the feedback we’ve received.
After gathering all of the feedback that we could, no obvious answer emerged. Some people thought contact based pricing was a no-brainer, while others thought contacts had no real correlation to growth. Most people ignored the notion of user based (per seat) pricing, despite the fact that it’s the norm for CRM and help desk products and in most cases would have been the cheapest alternative. But out of all the feedback we received two themes surfaced most consistently:
Going from a freemium plan to a $99 per month plan is too big of a jump—it causes some sticker shock. We need to make our entry level paid plans more accessible.
Our customers want the price they pay us to scale in tandem with their own revenue growth.
We’ve since designed two pricing experiments designed to address this feedback.
Outseta’s upcoming pricing experiments
Going back to our product vision, one of the problems we set out to solve when designing our own billing system is exactly what we’re living through right now—most SaaS start-up’s really have no idea what their pricing should be when they’re just starting out. Our “Start-up Plan” pricing was loosely based on looking at the price of alternative solutions to Outseta, but for the most part the $99 per month price tag was pulled out of thin air. What start-ups really need is the ability to iterate on pricing quickly to figure out what works and what doesn’t.
With this in mind we designed a subscription management and billing system that supports the billing scenarios and pricing models most commonly seen in start-up SaaS companies:
Monthly and annual subscription payments
Metered (usage based) pricing
Unit based (per user, per seat) pricing
Freemium and free trial models
Requiring credit card information upfront or at free trial expiration
Based on the feedback we received, I seriously wrestled with the notion of offering a “pay what you want” plan allowing customers to name their own monthly price as long as they provided us with feedback on why they chose the price that they did. I think this would have been a great way to capture further feedback on our pricing, it would consider every customer’s unique financial situation, and it would also give us an opportunity to create a bit of a PR splash.
While that’s the case, I ultimately decided against this option—other companies have tried this before with mostly lackluster results, and I think it could send the wrong message about our product and erode our credibility. Instead, we’re going to be running two 60-day pricing experiments.
May-June 2019 Pricing (Experiment #1)
Throughout May and June we’re going to launch “Experiment #1”—contact based pricing with smaller tiers. We’ve maintained a freemium tier with a smaller contact limit to give start-ups as much time as they need to implement Outseta, but the paid version of Outseta will be much more accessible—$29 as opposed to $99. Companies can continue to invite as many team members as they want. This pricing is now live on our website.
These plans were designed to alleviate the sticker shock some prospects mentioned when our entry level paid pricing plan was $99 per month. That plan also provided a much greater volume of contacts than most customers actually needed, so the smaller pricing tiers help to ensure that customers are only paying for the number of contacts that they actually need.
Beyond 5,000 contacts we’ll eventually add a pricing calculator on our website where prospects can enter their number of contacts to get a pricing quote.
I think this experiment solves most of the issues we’ve outlined, but I still have two points of hesitation.
“Contacts” isn’t always understood by prospects.
Pricing based off of contacts may deter some companies importing all of their contacts during onboarding (an action we want them to take).
July-August 2019 Pricing (Experiment #2)
Throughout July and August we’re going to launch “Experiment #2”—user based pricing that allows companies to add as many contacts as they like without moving through pricing tiers. This pricing is extraordinarily simple and mimics what most other CRM and help desk tools are doing, while again helping to alleviate the sticker shock of the $99 per month price point.
$19 per user per month
For a single founder or two co-founders, Outseta will represent an amazing deal at $19 or $38 per month, and once a company has 5-6 employees using the software they’ll have grown to our original $99 per month price point.
This pricing model is the norm for the industry, so I think it’s worth testing. But this also opens us up to some vulnerabilities most CRM products don’t face—if we allow unlimited contacts, we’ll need to put a cap on email usage because we incur costs when emails are sent. Most CRM products don’t have to worry about this because they don’t also offer email marketing.
Subscription billing update
In addition to making our paid plans more accessible, we also wanted to better align what are customers are paying us with the revenue they’re generating. To date we haven’t made any money on payment processing—we’ve instead simply covered Stripe’s 2.9% payment processing fee.
Going forward we’re going to charge a 1% payment processing fee in addition to Stripe’s 2.9%. Payments processed by our other payment processing partner, Forte Payment Systems, will continue to be charged at a flat rate of 2.9% per transaction.
We’re also excited to announce that Outseta recently became part of Stripe’s Verified Partner Program. You can learn more about Stripe and Outseta here: https://stripe.com/works-with/outseta.
How we’ll handle existing users and customers
A hallmark of our pricing strategy will always be honoring and celebrating our existing users and customers—what that means in practice is that while these experiments are running, our existing users and customers will be given the option of staying on our original pricing plans or changing to either of the new pricing structures that we’re experimenting with. That gives them options, flexibility, and we think it’s the right thing to do.
For new users considering Outseta for the first time, we’re publicizing these experiments ahead of time and you’ll be subject to the pricing that’s advertised on our website as we go through the process of running these experiments.
This process is imperfect, but we’re excited to see which pricing plan and model drives the most conversions. We asked for a lot of feedback, but we’re excited to now let the data do the talking.
-Dave, Dimitris, Geoff, & James
Why most SaaS companies are blind to some of the best talent on the market
By Geoff Roberts 9 min read
I believe that most SaaS companies are missing out of a major opportunity when hiring—the opportunity to hire more part-time help, where the employee acts as a fully integrated (albeit part-time) member of the team on an ongoing basis. I think that this is likely true in most industries, but it’s particularly true in SaaS where there’s a rapidly growing population of extremely talented people—call them bootstrapping co-founders, indie hackers, makers, etc—that are working on their own side projects.
This group tends to be talented, extremely driven, and more often that not is looking for ongoing work with a company that can provide more stability and income than their side project does. Ignore them at your own peril.
I think this will be one of the next major hiring trends that you see in the world of SaaS start-ups. Just as hiring remote employees has opened the door for smart companies to dramatically open up the talent pool they can pull from, I think hiring managers will soon come around to the notion that not every employee needs to be hired in a full-time capacity. In fact, there are huge benefits to hiring folks that aren’t full-time that I think most employers never stop to fully consider.
Let me be very clear—this is not an argument for consulting or the so-called gig economy and I’m not arguing against the need for full-time employees—if you’re hiring a COO, for example, you’re probably going to need that person full-time. This is an argument for being more open to hiring part-time employees that work with your company on an ongoing basis. For the sake of this discussion let’s consider that employees who work with your company 2-3 days per week.
My own part-time path
I want to start by clarifying my situation up front—for the past two years I’ve been splitting my time between working on my own start-up, Outseta, and working with another SaaS company in an ongoing, part-time capacity. We’re bootstrapping Outseta and are deliberately taking a long-term, organic approach to growth—it will likely be another year or two before Outseta can support a full-time salary for myself and the rest of our team. Until that day comes I’ll continue to work with another business; it’s something that I need to do to cover my living expenses, but it’s also been hugely beneficial to me.
I’m not writing this post with my own self interest in mind—I’m writing it because I just returned from MicroConf, an event attended by hundreds of other entrepreneurs who are working on their own start-up projects, most of them in a part-time capacity. Most of the people that I met at the event were super talented, exceptionally driven, and would jump at the opportunity to work with a great company in a part-time, ongoing capacity.
This group would benefit from greater stability and consistent income—a situation far preferable to consistently looking for project-based consulting work. And employers benefit from bring top-tier talent onto their teams, while building a long-term working relationship that allows the employee to maximize their impact. I know this not only from my own experience but from talking to countless other folks last week who expressed this sentiment, and best of all there’s a lot of these people out there. If you’re not open to hiring them, I think you’re missing out. Let’s dig into the reasons why.
A small team of “A” players outperforms a larger group of “B” players
Most of us agree that we can accomplish more with small, superlative teams than we would with larger, less remarkable groups. I’d follow that up by saying that someone that’s a top-level talent will most often make a bigger impact on your company in 2-3 days per week than a less talented colleague would in a full-time role.
Think of the best CTO-level software developers that you know—do you think your product would progress faster if they were building it 2-3 days per week, or if you hired an average developer in a full-time capacity? Consider how much time is typically wasted or unproductive for any employee working in a full-time role—time spent checking social media, chatting at the proverbial water cooler, etc. I’d err on the side of working with the better developer every time, and I think this holds true across most job functions.
I’ve seen this play out firsthand in the context of my own start-up, where the first employee that we added outside of our founding team was James Lavine, who leads design for Outseta. James is an experienced designer who is helping us in a very part-time capacity—20 hours per month—but on an ongoing basis. He’s been able to build our brand and product design from the ground up, chipping away at our most important design work with the benefit of ongoing context and immersion into what’s happening with our business. Because of his experience and expertise James delivers good work that requires minimal revisions the first time around, and I know the output we get from James in just a few hours per week beats what we’d get if we hired a junior designer into a full-time role.
Tap into a greater diversity of experience and expand your network
Perhaps the most unsung benefit of this approach is that by working with people who are also working on other projects, you get the benefit of their other experiences and their networks.
For example, maybe your company sells its products primarily online using a low-touch customer acquisition model. If someone on your sales or marketing team is also working with another company that has a much slower moving, high-touch sales cycle, then that experience may come to directly benefit your company if you eventually move up-market to sell bigger deals. Or maybe it’s as simple as you’re getting ready to experiment with Facebook Ads and the marketer that’s helping you in a part-time capacity has already been running Facebook Ads for another business. Those experiences are very real benefits to your company.
Additionally, by working on more than one project on an ongoing basis part-time employees are part of multiple teams. They get to know more people, make more connections, and work with different agencies and partners. They’ll have opinions, resources, and people that can help your company that employees who are more insulated by being a full-time employee at your company can’t bring to the table.
Think of your own past jobs and the relationships you’ve built at each—you likely lean on the network that you’ve built whenever you need it in your current job, right? When people have a greater diversity of experiences, their networks (and subsequently your company’s) grow faster.
You get access to better talent for your money
Your money also goes further when hiring part-time employees—an MIT study found that benefits and other related costs often cost employers an additional 25%-40% of a full-time employee’s salary. So if you’re paying someone $100,000 per year, your actual costs are likely $125,000-$140,000 annually. Most companies that hire part-time help bring on part-time hires as 1099 contractors, saving these expenses.
Consider the alternative of hiring a Junior Software Developer at a salary of $80,000 per year. Add 40% for benefits and other costs, and that person is costing your company $112,000 per year. What if instead you can hire that CTO that you’ve always admired, who has a track record of success with several previous ventures. The person would typically command a $200,000 annual salary, but you can work with them 2-3 days per week for $100,000 per year.
Who do you want on your roster, the experienced CTO with a track record of success (and the $12,000 in savings you just bagged to invest elsewhere) or the junior dev?
People working on their own projects tend to be ambitious people well-suited to start-ups
We should also be attracted to employees looking for part-time, ongoing roles specifically because many of them are working on projects or start-up ideas of their own. If your company is a start-up itself, it will likely flourish when it’s filled with other entrepreneurial people who are less risk averse and are comfortable working without much structure and heavy doses of ambiguity.
When I look to hire for almost any role in a start-up (and particularly marketing roles) the number one thing I look to assess is the ambition and fire in the belly of the candidate. People who are working on their own start-up ideas tend to have more than ample doses of both.
We’ve misunderstood what people want from the gig economy
Finally, I think this hiring strategy represents a very real opportunity for hiring managers because I think we’ve fundamentally misunderstood what people want—and what’s led to the creation of—the so-called gig economy.
People generally don’t want to be freelancers for the sake of being a freelancer. Maybe they’re hoping to build their experience, maybe they’re working on their own start-up and need some additional income, or maybe they place great value on their ability to work remotely and have a flexible schedule. Whatever their reason may be, talk to anyone who does freelance work and the last thing they typically want is a series of short-term contracts that require them to be consistently spending time looking for new work. There’s a huge opportunity cost there—time spent searching for work rather than making money.
The final problem with the gig-model is while consultants or people working on short-term contracts can provide a new opinion or perspective, they typically don’t have the time to work with the company long enough to get to know the market and the nuances of the business, to build relationships, or to optimize performance on an ongoing basis based on past learnings.
Building long-term relationships with part-time employees allows you to realize these benefits, and it’s actually what the employee is looking for, too. They reap the benefits of greater stability and can afford to spend more time helping your company at a more competitive rate because they don’t have to factor in time looking for new work when setting their fees. Typically they can also make a bigger impact on your business when they have the context and ability to implement long-term strategies that can only come with a longer-term working relationship.
Not everyone needs to run out and hire experienced, part-time help—there will always be roles that require full-time hires, just as there are roles and industries much better suited to co-located rather than remote teams.
But start-ups themselves are based on the notion of doing more with less, and I think better talent can accomplish more in fewer hours. With the market for top-level talent as competitive as it is in the world of B2B SaaS, I’m surprised that more companies don’t see the allure of this approach as an alternative to seriously consider.
The market of top tier-talent that’s looking for part-time, ongoing work is very real if you’d open your mind (and company) to it.
Wes Bush is a SaaS marketer who has quickly developed a reputation as “the free trial vs. freemium guy.” He helps SaaS leaders launch and optimize free trial and freemium models via his consultancy, Traffic is Currency, and is also the founder of the Product-Led Summit.
I caught up with Wes to talk about his free trial vs. freemium framework, our own customer acquisition process, and the start-up scene in Waterloo, Canada.
Geoff Roberts: All right, so first thing's first—before just a moment ago we’d never met, but I have come to know you in online circles as the free trial vs. freemium guy. Tell me about your early career path and how you decided to zoom in and focus on this one particular problem.
Wes Bush: I feel like I really stumbled into this space and I've been doing marketing and demand generation for the last seven years now. I’ve tried virtually everything when it comes to generating demand and leads for a business. But it wasn't until I launched a freemium product and we went from 0 to 100,000 users in six months, where I was just absolutely amazed by the fact that that was possible. We were delivering so much value and I really came to see freemium and free trial models as a supercharged lead magnet for a business. You can make that lead magnet also turn into customers for your business. So once I realized that I just saw that this is the future.
People want to try before they buy and even if you look at a business like Costco, you want to get a sample of something to test it out and see if you really like it. Or you're thinking of buying an expensive cologne or a perfume, you want to try it before you actually buy it because you might hate it and never want to wear it again. So it's a really great way to build trust as well as find out if the solution is right for you or not.
Geoff Roberts: Good analogies. What was the business that you mentioned that went from 0 to 100,000 users in six months and what were you doing previous to offering a freemium model at that company?
Wes Bush: That was at Vidyard and we did have a free trial at the time but it wasn't the most successful. A lot of free trials for B2B SaaS products, when you sign up there really isn't too much value right away unless you connect your data or maybe you upload something and in Vidyard this was the case. You wouldn't be able to see value quickly because you didn't have any videos and unless you signed up for the free trial with the expectation that you’d upload a video right away, you weren’t going to see value. So we built a freemium product to help people create videos very quickly—it would take three seconds to record a video and then the video would be logged in your free trial. So it was actually a freemium product that complimented your free trial.
Geoff Roberts: Got it, makes sense. When you talk to early stage SaaS companies today, what are the one or two most common mistakes you see them making when it comes to deciding on a free trial versus freemium model?
Wes Bush: The biggest mistake I see people make is talking to other founders. I know that sounds really weird, but just taking someone else's opinion on what you should do is really a bad framework for deciding what you should do. A lot of other founders are basing what they're recommending on their personal experience and the fact is you have a different business, a different market, and a different audience. There are so many things that you need to look into in order to make an educated decision for yourself.
Geoff Roberts: One of the things that I think a lot of companies struggle with that do decide to go with a free trial— and something I'm wrestling now with one of our businesses—is do you collect credit card information upfront or at the end of the trial? When does it make sense to ask for payment information upfront?
Wes Bush: As a general rule of thumb I always recommend against asking for the credit card upfront. There's been quite a few studies done about the overall conversion rate, and if you're looking at bottom line revenue it's typically much higher if you don't ask for the credit card right away. You're just going to have more people coming into your free trial, and although the percentage of them who become paying customers is going to be a lot lower, the overall volume is going to be much higher.
However, there are some cases where it makes a lot of sense to collect credit card information upfront. There's companies that deal with a lot of spam and that's a perfect use case—if you get a ton of spammers signing up for your product that's a really good stop gate. Also with products that have a lot of seasonality to them. So let's think of a SEO product, if you’re a one man band or product, then you might just want to do an SEO audit on your site maybe once a year. So you'll just sign up for a free trial and then you'll never come back because you don't want to pay the recurring costs. A lot of these products will see that people are coming back and just using a different email to sign up for the same product. So they’ll just say okay, you’ve got to pay to play because you’ll just keep signing up for this free trial indefinitely unless we add some friction here.
Geoff Roberts: Good point. So for people that decide to go the freemium route, the problem quickly becomes okay, how do I create a sense of urgency in the sales process? We're giving people access to the product for a longer period of time but we still have customer acquisitions goals and need to get buyers to act sooner rather than later. What do you recommend for freemium companies in terms of how they can go about creating that urgency?
Wes Bush: There's a couple ways I've seen companies do it. You don't have to have just a 100% freemium product, you can create a hybrid solution. I've seen companies do this very successfully where they'll lead with the free trial that gives you access to a lot of the key features for 7 or 14 days but then at the end if you don't upgrade, you actually get put on a free forever plan.
For example, Clearbit’s free version goes into your Gmail and enriches your contacts. I thought that was a really smart way of offering a free plan, because it’s essentially free advertising. They sit inside your Gmail and how often do you check your email? If you're a working professional you're in there multiple times each day seeing Clearbit again and again. You should also think about how you can make your freemium product amplify your paid product. So Clearbit sits inside your email and what they're doing is using a lot of your data to enrich their own data. So by giving away a free product Clearbit makes their own paid product more valuable.
But to get back to your question about how do you get people to the upgrade from your freemium product... A big part of it comes down to pricing and if you lead with your product, one of the interesting things is that your customer acquisition model is really tied super closely with your revenue model. If you don't give away a bunch of features, your customer acquisition model suffers because now you have a less powerful offer. On the other hand, if you give away too much and your freemium product has everything people have no reason to upgrade and now your revenue model is shot. You need to fix that and hold back some features, so the best way to look at it from a upgrade perspective is to base your pricing on value metrics.
Patrick Campbell from ProfitWell says there's two types of value metrics, starting with functional value metrics. If I'm Wistia, this is the number of videos you can host on the platform, so you can use that as a value metric. If someone gets three videos uploaded, okay now you're going to have to upgrade and once those three videos are uploaded you should be able to really understand the value of the product anyways. On the other hand, you could use an outcome based approach to value metrics. So it could be how people actually viewed your videos, or how many people came to your website—you're really just trying to pick metrics so that when the product is used you grow with the customer. That's a great way to increase your expansion revenue as well as upgrade rates.
The free trial vs. freemium framework
Geoff Roberts: Awesome. Let’s transition to the free trial versus freemium framework that you shared with me. What is it, why did you develop it, and how do you use it in your day to day work?
Wes Bush: Yeah, so the framework that I built to decide the free trial versus freemium question focuses on four main areas of your business. The first part is your market strategy, so it really focuses on understanding how you want to position your business in the market. For example, say you want to disrupt an existing market dominated by a tool like Adobe Photoshop. Photoshop is really complicated and you can take a full year of learning the program and still have a lot of ways to improve your Photoshop abilities because there’s just a ton you can do with it. But the fact is a lot of people don't actually use anywhere near the full capacity of Photoshop and that's why a company like Canva, which makes it really simple to do graphics, was able to claim huge part of this market.
Second, there's the ocean conditions—is it a really competitive space you're in? If it's a competitive market like say email marketing and everyone has a free trail or freemium offering, it's almost the expectation in the buying process that offer a trial or freemium product. If you're creating a new category, that's a really great place to be but oftentimes a free trial or freemium model isn’t the best fit because you have to educate people so much. It's like Salesforce with the cloud—initially a lot of people didn’t get it. Their sales team had a ton of objections and when you're creating a new category, you actually want to hear those. If you try to automate your entire funnel right away, you're going to miss out on so much valuable feedback.
Next there's the audience are you trying to focus on—do you need a bottoms up or top down approach? What I mean by top down is are you trying to target the executive team, or from a bottoms up perspective are you targeting managers or day to day workers? If you're targeting a top down approach and using a free trial or freemium model, it's going to be pretty hard for those executives depending on how complex your tool is to really get up to value because they're probably not using the tool day to day. A bottoms up approach pairs really well with a free trial or freemium model. That's why you see companies like Slack grow from the bottom. Someone on a development team will say, hey let's start using Slack. They'll send it to a bunch of their coworkers and it spreads internally to other teams. Then when it comes time to upgrade it's really a no-brainer because they already have maybe 30, 40 people on a team who know and love the product and have gotten value out of it.
Then the last part of the framework is time to value. Now if you have a really long time to value, it's going to be really difficult for a free trial or freemium model and I’d actually recommend against it. You want to make sure that your time to value is quick as possible. Freemium models need to be even quicker I'd argue, because you’re using this no hand-holding approach for the most part and you need people to realize value as soon as possible without human intervention. So that's my framework at a high level—I'd love to take your thoughts on it. How did you find it walking through it?
Geoff Roberts: Yeah, so it made logical sense to me—I sort of understood in most cases what was behind each of the questions. I decided on a freemium model for Outseta for a couple of reasons and your framework gave us a score of 10-2 in favor of freemium, so it validated my thinking in that sense.
A couple of factors that went into that, starting with the market we are selling to. We’re targeting very early stage SaaS start-ups, who are often finding us the day that they open their doors. These companies tend to have very different timelines in terms of when they're going to start using the CRM, versus when they're going to set up the billing system, versus when they want to send their first email campaign. So we wanted to provide enough time for companies to sort of grow into the product and adopt each of its core features as their need for it arose, rather than saying hey you've got 7 or 14 days to kick the tires on all these different aspects of the product.
The second factor is just the product is really big. It's basically three or four well known software categories delivered in one platform and when we think about the onboarding process, everyone's going to start in different place. It's not like everyone wants to send an email campaign first, some people want to start logging deals in the CRM first, some people want to set up billing first. So I felt like we needed to expose people to each of our core features during the onboarding process.
One of our struggles as a result is with people starting at different points, how do we show them value quickly? What action should we present them with first when we don’t know exactly what it is they want to do first? If you look at the initial onboarding screen when you first log in to our product, we say hey you can import your contacts, you can set up your customer support email inbox, you can send an email campaign, author a knowledge based article, each of these being key actions that the product helps with. What’s your take on this approach versus being more specific about what we want users to do?
Wes Bush: I always like to think of onboarding in terms of dominoes—what’s the smallest action you can get people to do that sets them up for success in the future? If you think of Hubspot, it's similar to Outseta in the sense that there's the marketing side and the CRM. Hubspot’s sales product is really great to lead with because it's a Chrome extension that you can setup in less than five minutes. By leading with that product, what happens is your CRM fills up with all your contacts so you now have people to market to. So it's just like a step ladder or you're pushing one domino at a time and it just gets kind of easier as you go.
With your product what I would recommend is seeing out of all the features you have, what is the first thing you need someone to do in order to take them to that next step? Maybe you lead with sales, then you follow up with marketing, and then it's subscriptions or something like that.
Geoff Roberts: I think the obvious one is import contacts. You need contacts in the CRM to send an email campaign for example; it’s also what our pricing model is based on. The only case I would say where that probably isn't the right initial action is a company that doesn't have any contacts yet, which is common in our user base, but the domino analogy makes sense.
Wes Bush: Okay, awesome.
Geoff Roberts: So when I went through your framework, one of our answers that came back as “free trial” was based on the size of the total addressable market. If you have a smaller total adjustable market, you’re suggesting a free trial rather than freemium. Why is that?
Wes Bush: One of the problems here is that freemium has a very low conversion rate—typically you'll see anywhere from 1-3% of people who sign up for your freemium product actually turn into a paying customer. So in this case it's a good indicator of saying is your market big enough to support this? If you have a really small market and that low conversion rate of 1-3% percent, you might end up with 100 or 1000 customers and then be capped.
Geoff Roberts: That makes sense. So going back to our own pricing model, one of the pieces of feedback that we've heard about our own pricing is there is a segment of buyers... let's call them solopreneurs, or indie hackers, or makers, who are pretty much unwilling to pay for any product until they get to a point where they're bringing in revenue. They’ll use a Trello board to track their sales process, Hubspot CRM, the free version of MailChimp, and will live with whatever pain exists until they're bringing in money and then will build a real tech stack.
We offer a freemium plan where we give you 250 contacts but access to every feature—the idea here is knowing these businesses have different implementation timelines we give them all the time they need to get everything set up, configure their account, and figure out if they like all the features. Then once they start using the product in earnest, they will very quickly go over that 250 contact limit and upgrade to a paid plan. The feedback we’ve heard is many of these folks intend to go over 250 contacts well before they’re bringing in revenue, so they don't want to incur a $99 per month charge before they really need to.
One experiment we’re considering is giving the entire platform a way for free, but then taking a larger percentage of payments processed through our payment processing system. This would align our pricing model with the most important outcomes based value metric—revenue— and we’d take a cut that's a little bit larger than the 2.9% Stripe charges for example. Curious what your take is here and how we can better appeal to that segment that's very price conscious upfront?
Wes Bush: I definitely recommend leading with whatever that product feature is that's going to help someone get that revenue. So in most cases that's going to be the sales tools and you just want to help them get to the point where they’re willing to pay because your product has helped them generate revenue. I definitely do agree with some of the sentiment around the 250 contacts. In this case I’d definitely think about what are those first tools that you could give people? Maybe you give one of them away for free, it's a sales tool, and then you help them build those contacts so they don’t even have to import any contacts—they’re already there. So then you get that stepping stone where the next upgrade is the marketing product and it’s just a natural extension of the journey.
Geoff Roberts: Yeah that makes sense. I think the other challenge for us is just putting pricing out there that, given the scope of the product, maintains some semblance of simplicity. Contacts seems like a fairly well understood measure of the value people are deriving from the product. What we've heard and seen with our customers is once you move onto our paid pricing plans, the product's a bargain and much cheaper than the competition. The part we’re still wrestling with is that entry level customer and how we can get them in and show them value relatively quickly while still not taking forever for them to upgrade.
Wes Bush: Okay got it.
The start-up scene in Ontario and Wes the bad Canadian
Geoff Roberts: So let’s switch gears a bit—I saw you're in Waterloo, Ontario. What can you tell me about the start-up scene in Waterloo?
Wes Bush: The startup scene in Waterloo is actually really exciting. Out of all the cities in Canada it's has the highest density of start-ups and I think that's really fueled by the fact that there's some really incredible engineering universities around us so there's lots of really great talent that you can hire as a start-up. There’s beginning to be a lot more of these successful companies that are growing and then their employees move on to other companies, build them up, and so what's really exciting about it is just seeing the snowball effect and how it's growing bigger and bigger.
Geoff Roberts: Are you born and raised in Ontario or...
Wes Bush: Yeah, so I was born and raised in Ontario. Have you been?
Geoff Roberts: I haven't, I'm from the Boston area. I've been around Canada quite a bit, but I haven't been to Ontario or Waterloo.
Wes Bush: Make sure you go during the summer.
Geoff Roberts: Yeah, no kidding. What's the most Canadian thing that you love? Are you a hockey fan? What do you love about Canada in general?
Wes Bush: So I feel like I'm not a good Canadian. I don’t like the winter, I'm not big into the sports like hockey. This is not very Canadian at all but I like mountain biking, and forests, and hanging out in the nature, and lakes. There's so many lakes in Ontario. I love that part.
Geoff Roberts: Very cool. If you weren't the free trial versus freemium guy, what else could you see yourself doing? What other direction could you have gone with your career?
Wes Bush: I think I'd still be doing something very similar. I like behavioral psychology, because just figuring out what makes people do certain things and deconstructing it is so fascinating, whether it's deconstructing habits or just why people bought a product online. But yeah I'd still probably be doing something in a similar field.
Geoff Roberts: Outside of work, tell me something else about yourself that your online audience doesn't necessarily know that's going to bring Wes to life.
Wes Bush: So couple things about me, I travel quite a bit. I actually built my business to be location independent, so I'm actually in Thailand right now. I really try to avoid the winter as best as I can and so there's a lot of things I do to just try and explore new places, and try new food at a bunch of these other places which is exciting. I'm also trying to learn how to ride a motorbike. That's fun.
Geoff Roberts: How's the food in Thailand been so far?
Wes Bush: It's really good. I'm not sure if you like Thai food or not-
Geoff Roberts: Love it. How long have you been in Thailand at this point?
Wes Bush: I've been here for a couple months and I usually typically I travel between here or the Los Angeles area so hopefully we can meet up one day in person. And then Toronto, so I kind of make my rounds every year.
Geoff Roberts: Awesome, well that’s all the questions I have for you so I'll let you go. Go get some Thai food! It’s been fun.
Wes Bush: Likewise, thanks so much for having me.
By Geoff Roberts 4 min read
Hi-dee-ho! Two months of 2019 are already behind us—here’s an update on what we’ve been cooking up at Outseta so far this year.
New Feature! Lead Capture Form Builder
We’ve long offered forms to help you build your email list as well as product registration and authentication forms that allow users to sign-up or login to your SaaS product. But we recently released a new lead capture form builder to all Outseta customers. Our form builder allows you to generate form code that can easily be dropped into your website pages, or we provide hosted web pages where your form lives as well.
Forms can be customized to capture whatever information you see fit, with form submission data automatically syncing with Outseta CRM records. You can also easily specifiy a post-submission display message or redirect users to a new URL, allowing for easy conversion tracking in Google Analytics or similar tools.
You can learn more about Outseta forms here.
Outseta SaaS Consulting
Throughout the final quarter of 2018 we saw a significant uptick in user engagement with our product. More companies have been signing up for Outseta each month and we’re seeing broader feature usage and more complete implementations of the product than we’ve seen before. We expected that we’d see these signs as the product continued to mature; it’s a pretty good indication that we can prudently start to make more significant investments in growth.
With this is mind, we’re exploring a number of ways to raise some growth capital for the business. A couple of options we’re considering include:
We’ve also taken on some consulting work in the past to provide seed funding for the business. This is something that we’re excited to formalize—we’re committing to helping one company bring a new SaaS product to market each year. If you know a entrepreneur looking for a technical co-founder, a team in need of more development firepower, or any start-up that needs help building their MVP we have a very attractive consulting package to offer.
Here’s the scoop: https://www.outseta.com/saas-consulting.
We’ll be accepting applications throughout the month of March and will plan on selecting a 2019 project shortly thereafter. See that form at the bottom of the page? That’s one of our new lead capture forms in action.
New Feature! Product Engagement Tracking
While we’ve seen a significant uptick in user engagement with our own product, it was initially a pretty manually process for us to get a sense of which features were being used and how often. Our login forms have always provided some stats on login activity on Outseta’s primary dashboard, but we found ourselves needing to build dashboards in Amazon Quicksight to get better insights into feature adoption and usage.
There are a number of other product engagement tracking tools on the market like Heap Analytics, Mixpanel, and Kissmetrics, but they’re all fairly expensive and overkill for a start-up company. Pretty much every company that’s using Outseta would benefit from better understanding user engagement with their own products, so we built the engagement reports that are the most valuable to early stage start-ups into the platform where they’re nicely tied into the CRM. Outseta customers can now set up and track their own custom events, and can track product engagement based on billing stage, cohort, or month.
For our own use we created custom events that correlate with Outseta’s primary features to help us track events like imported contacts, email campaigns sent, support tickets received, companies that have activated e-payments, and knowledge base articles authored.
Documentation on setting up engagement tracking for your own product is available here.
New Outseta Explainer Video
We recently filmed a new Outseta explainer video that we’re leveraging on our home page. We’re not sharing because this is scintillating creative work—far from it—but as a bootstrapped company we had this video created for $32… Yes, $32. If you’re a start-up in need of an explainer video on the (very) cheap, feel free to reach out and we’ll point you in the right direction.
That’s a wrap!
So who do you know that needs help building a SaaS product?
-Dimitris, Dave, James, & Geoff
For the past two years we’ve been hard at work building Outseta, an undertaking that was a direct response to our own experience launching and scaling a successful SaaS start-up.
As an early stage company, we found that a lot of stuff we had to build had nothing to do with our core product; authentication for existing users, lost password workflows, subscription management logic—that kind of thing. Then we did what everyone else in SaaS does—we evaluated, bought, integrated, and maintained a whole bunch of other SaaS products. A CRM. A billing system. Email marketing software and a help desk. Should we build our own subscription management logic again?
At the end of the day we decided to build Outseta because:
We saw an opportunity to help SaaS founders get products to market much faster.
The status quo was ridiculously inefficient—we saw an opportunity to give SaaS start-ups the tools they need to scale to about $5M in ARR for a fraction of the price.
If you’ve been following our progress something exciting happened since our last company update—we launched an entirely new SaaS product of our own. Here’s how we got that product to market about 50% faster while also gaining significant efficiencies that will help us scale well into the future.
Let’s get a few things out of the way first—yes, we launched this product partially to highlight how easy it is to launch a SaaS company with Outseta.
Second, while that was the case, this is a legitimate product that we only built because we realized a true need for it ourselves—this was not a creative exercise.
Finally, there are all kinds of “Launch your product today” or “Launch 10 products next week!” contests flying around the internet of varying pedigrees. The product that we launched is not a one page website, and it’s not a hack to validate your idea overnight. It’s a full-fledged, well designed, and fully functional SaaS application. You can call it a micro-SaaS project if you like or you can check it out for yourself by signing up for a trial at CompareRentalBookings.com.
The idea behind the product
My Co-founder Dimitris has built software products for the real estate rental market before, Co-founding Buildium in 2004. While he’s still actively involved in the company as a board member, more recently he’s been working on Outseta as well as an Airbnb rental business in his hometown of Athens, Greece.
Unsure of the nightly rate he should be charging for each of his rentals, Dimitris began using Airbnb’s own smart pricing tools. He found that the tool consistently told him to drop his prices down to his base price—the lowest nightly rate he’d allow his property to rent at. He had a hunch he was leaving money on the table.
Next, he tried a number of the other Airbnb pricing tools on the market. Again, he found his nightly rates were dropping prematurely. These tools were also expensive and they didn’t tell him anything about how often competitive properties were being booked and at what nightly rate. He wanted to know exactly how his property was performing against the properties he was most often competing with for bookings. He could get at this information but it was a manual process that he found himself performing over and over again—a perfect problem to solve with software.
That’s the problem we set out to solve with CompareRentalBookings.com—a tool for hands-on Airbnb hosts and management companies who, armed with the best data possible, can make better pricing decisions to maximize their Airbnb hosting earnings.
The very first version of the product pulled data from Airbnb’s API into a Google Sheet. Dimitris was finally able to see how much competitive properties were actually making, so he could benchmark his own performance and price his properties more appropriately.
Realizing that this data was proving valuable to him, he pulled together a prototype of what the product might look like in Moqups and shared it with Dave and I in late October.
“This is a product we could build pretty quickly, and it’s been really valuable to me,” Dimitris said. “What do you think?”
We were all a bit gun shy about taking time and energy away from our product backlog at Outseta, but we realized that by using Outseta we could dramatically cut down on the time required to deliver the product.
We looped in our design lead, James, and decided the product would consist of a SaaS application that allows hosts to choose the competitive properties that they want to track as well as email notifications highlighting new bookings. We decided hosts could track 5 comparison properties for each of their own for $5 per month—if hosts get even one additional reservation by using the tool, the product likely pays for itself 20 times over.
James delivered some final designs for the email and SaaS product using Invision. Here are the design files.
With the designs in hand, Dimitris and Dave began development in mid October. Dimitris had already requested access to Airbnb’s API, which we use to pull in the pricing and occupancy data the product relies on. In terms of technical architecture, the product is built using .NET and the base angular framework.
The product would likely have taken 3-4 weeks to build if we’d focused on it full-time—instead we built it over about 6 weeks in a very part-time capacity. Here’s how that time was split up.
1-2 days to setup the development environment
1 week to create the algorithm that downloads the data and creates summary data
1 week to build the APIs
2 weeks for front-end development
2 weeks to build the email notifications
Standing up the business and implementing Outseta
During product development, Dimitris and Dave were able to spend all of their time and energy on building “core” product functionality because they knew we’d be launching the product with Outseta.
As a relatively non-technical person, I was able to instrument much of the functionality they would have otherwise had to build. First, I bought the domain comparerentalbookings.com and created a Squarespace website using the “Bedford” theme. I paid $20 for the domain and the website is $18 per month.
Next, I decided that we’d offer a 14-day free trial prompting users for payment after the trial expires—I set this up as well a pricing plan to charge $5 per month per property tracked. I was able to do both of these tasks within Outseta, which can be connected to a payment gateway in seconds. If you have an existing Stripe account, here’s how to connect Stripe to Outseta (all you need is your “secret key.”)
Without using Outseta, we would have had to build the free trial logic manually. We probably would have billed manually for some time, as we would have had to write something automated to handle billing based on the number of properties tracked. This logic easily could have taken 3-4 weeks to complete and integrate with Stripe.
Next, we needed a way for people to sign-up and login to the product from our website. Using Outseta’s sign-up and login widgets, I was able to easily drop this code into our website pages.
Here’s documentation on how to integrate Outseta’s sign-up and login widgets with your website and product. I embedded the sign-up widget directly on our free trial page, which you can see here: https://www.comparerentalbookings.com/free-trial/. I used a pop-up for the login functionality so that users can come back to our website to login to their Compare Rental Bookings account.
Using these widgets also meant we didn’t need to build lost password workflows—realistically it could have easily taken a month to build the functionality that these widgets gave us out of the box.
We can also see who has registered for the product and who is logging into the product without needing to access our database or integrate with a CRM system. This is something we likely would have done further down the road if we weren’t using Outseta, but it’s a nice added benefit at this stage that makes it really easy to identify which accounts are engaged.
With the technical implementation of Outseta complete, I set out to prepare us to bring on and support new customers.
First, I set up our sales pipeline stages within Outseta CRM so we can track sales.
Next, I added Outseta live chat to our website. All I needed to do here was add a script to the <body/> tag of our website pages. I also set up our shared customer support inbox so users can submit support requests by emailing us at at support(at)comparerentalbookings.com.
I then used Outseta’s knowledge base to author some articles that I thought would be helpful to our early customers. We mapped the knowledge base to a custom subdomain that’s accessible here: http://support.comparerentalbookings.com/support/kb#/categories.
As a final step, I set up activity notifications so that Dave, Dimitris, and myself get email updates whenever an account is created or updated. Again, this callback functionality is free and available to us out of the box.
Just like that, we had a fully operational business ready to scale.
Using this process, we were able to launch CompareRentalBookings.com in about 6 weeks while working part-time. We have the tools in place that we can easily use to scale the business to thousands of users and millions in revenue. Perhaps most importantly, we have known, low overhead of $99/month and far fewer manual processes and disparate software tools.
How Outseta Helped Us Get Our Product To Market Faster
- We saved time by not needing to build free trial logic.
- We saved time by not needing to build sign-up (product registration) or login (product authentication) functionality.
- We saved time by not needing to build lost password workflows.
- We saved time by not needing to build infrastructure for activity notifications.
- We saved time by simply adding a script to our product that handles account upgrades, downgrades, cancellations, user management and permissions, and updates to billing information.
- We saved time by not needing to spend any time integrating software solutions—our CRM, help desk, marketing automation, and live chat tools work seamlessly together from the get-go.
Key Benefits Realized By Launching With Outseta
- We increased efficiency by not billing manually to start. We didn’t have to write an automated script to handle billing based on the number of properties tracked.
- We can now change pricing models and experiment with new pricing plans without any development help. We can change our pricing plans from within Outseta and our website and registration workflow will update to reflect the changes automatically.
- We can see who has registered for our product and who is logging in consistently (a useful barometer for user engagement) without accessing our database.
- Our technology stack is completely free and likely will be for several more months. Once we cross 250 contacts in our CRM, all of this functionality will cost us just $99 per month with no limits on users, contacts, emails, or conversations.
Have any questions about the process we used to launch CompareRentalBookings.com? Wondering if Outseta can help you get your SaaS product to market faster? We’d love to hear from you—just drop us a note as a comment below!
By Geoff Roberts 12 min read
When we first started building Outseta we stated outright that we weren’t interested in raising venture capital—instead, we planned on bootstrapping the business and remaining independent. It wasn’t that we had any issue with venture capital per se, it was simply a reflection of never wanting to have our hand forced in pursuit of growth if we thought it wasn’t what was right for the business. There’s a lot of advantages to organic growth that aren’t discussed enough.
Over the past 12 months there’s been an explosion of new financing options and models made available to companies that feel like us. And many of them are attractive to the extent that they’ve flipped our own internal dialogue.
This post is for other early stage SaaS companies who are similarly considering whether some of these new forms of capital make sense for their business. I’ve read the fine print to highlight the unique attributes of each fund and who they are best suited to—and I’ll share our own thinking in terms of each model’s appeal to our own business.
Key Personnel: Bryce Roberts
Revenue Requirement: Post revenue, but no minimum requirement.
Equity Stake: Yes, but diminishing to 10% of Indie.vc’s initial equity stake.
Board Seat: No
Investment Docs: https://github.com/indievc/terms
Application Deadline: March 1, 2019
Apply Here: http://www.indie.vc/apply
Indie VC is the OG on this block and describes itself as “growth revenue for post-revenue companies.” This is the company’s third fund, which is designed to support founders on their path to profitability.
The program is an accelerator that lasts for 12 months, with investments ranging anywhere from $100,000 to $1 million—the historical average for the fund has been around $285,000. Included in the investment docs is a predetermined percentage of ownership allocated to the fund should you choose to sell your company. Your company will begin repaying the fund 12 to 36 months after the investment is made.
Typically founders will pay 3%-7% of monthly revenue until they have repaid the fund 3x the amount invested. Each time a payment is made, the fund’s ownership stake is reduced with the founders’ ownership shares increasing. Founders can repurchase up to 90% of the fund’s ownership stake via these payments or lump sum payments, with the fund maintaining 10% of the equity that it was initially allocated.
How They Help
Indie.vc helps founders primarily by exposing them to one another and organizing quarterly events and retreats for portfolio companies. The fund also has monthly meetings with each portfolio company.
The Indie.vc model is really appealing to me—they’ve done this a few times already and I suspect they’ve worked out many of the kinks. I’m also attracted to the simplicity of their model—the predetermined equity stake in the business, the 3x payout that you need to return to the fund, and the fact that you can earn back 90% of the equity the fund initially takes.
I even like that the fund hangs on to a residual equity stake, so that they will continue to be in your corner for the long haul. The 10% of the equity they were initially issued that they do hang on to could potentially be seen as steep, particularly if they are funding companies that already have $20,000+ in MRR so that’s something to consider. But it’s always good to look at the companies and people that you take from money as long term business partners.
Revenue Requirement: No minimum requirement
Equity Stake: Yes—8%-15%
Board Seat: No
Investment Docs: https://tinyseed.com/faq/
Application Deadline: February 15, 2019
Apply Here: https://tinyseed.com/apply/
Like Indie.vc, Tinyseed is not just a funding model but a 12 month accelerator program. The fund focuses exclusively on subscription software companies and is willing to invest in pre-revenue companies.
Tinyseed invests $120,000 for your company’s first founder, then up to $20,000 per additional founder. The fund does take a permanent equity stake in your business of 8%-15%, although they do not take a board seat or hold any voting rights.
Of the money invested, a lump sum is delivered upfront to help out with start-up costs, with the remainder being paid out to the founders as salary on a monthly basis for the duration of the program. Founders agree to a salary cap (based off of the average salary of a software engineer in the nearest major city), and can increase their salary up to that cap as the business makes money. Any revenue beyond that salary cap is paid out as dividends, which are paid out to founders and the fund based on their percentage of ownership in the company.
The founders maintain complete optionality in terms of when to take dividends—if they prefer to invest revenue back into the business they have the option to do so. The idea here is that the fund gets paid when the founders choose to get paid. If the company sells, Tinyseed receives the initial investment back (minus any dividends paid to date), and then the proceeds are divided based on percentage ownership in the business.
How They Help
Tinyseed invests in cohorts of 10-15 companies at once so that portfolio companies benefit from exposure to one another—this includes weekly calls with other portfolio companies. They also have a network of mentors that’s about as strong as could be if you’re looking to build an early stage SaaS company. Mentors are available during scheduled office hours calls.
Tinyseed is particularly attractive to me because of the money, the advisors, and the ecosystem it would plug us into—the companies Tinyseed is funding represent our exact target market at Outseta. While it would be nice to have some additional cash to invest into the business and begin taking some salary, the $160,000 total doesn’t go very far when split between 3 founders. It would probably allow us to each take a salary of around $3,000 per month—not nearly enough to live on—making the fund’s money a more attractive option for single founders.
The advisors are a huge reason, in my eyes, to apply to this fund but they are also probably the biggest variable. How much interaction does a portfolio company actually get with each of the advisors? It’s not like Rand Fishkin has the time to work with 10-15 companies on SEO or Hiten Shah has the time do so the same with each on product strategy. I know the advisors are more than names slapped up on a marketing website, but the extent of their involvement is certainly an open question. The ecosystem, for us, is a no-brainer.
It’s worth noting that Tinyseed takes and keeps the largest equity stake of any of the options on this list, but the stake seems reasonable given that they are typically making earlier stage (riskier) investments. If I was an investor, this model would be hugely attractive to me—spending $120,000 to buy a 8%-15% stake in a company could prove to be hugely lucrative if a company does reasonably well. I’m sure this fund will see a huge volume of applications from some awesome companies.
As an operator, I love the model of the fund gets paid when the founders get paid—I think Tinyseed nailed this aspect of their investment model. While I’m not crazy about giving up 8%-15% equity in the business, paying dividends based on percentage of ownership in the company makes logical sense to me. I’m comfortable with the equity stake because it means that the mentors and other folks involved in this fund are going to be on your side for the long term, which is a pretty amazing benefit.
Side note—we’re applying to Tinyseed. Here are our application answers.
Revenue Requirement: No minimum requirement
Equity Stake: Yes, but diminishing. In their default terms Earnest holds a small residual stake.
Board Seat: No—upon request Earnest can become a board observer without voting rights
Investment Docs: Shared earnings agreement V1
Application Deadline: Open applications beginning in January 2019
Apply Here: https://earnestcapital.com/apply/
Earnest Capital makes seed stage investments in “bootstrappers, indiehackers, makers, and real businesses.” Their investment model was developed to align with founders who want to build sustainable, profitable businesses.
Earnest invests upfront capital in businesses typically after a product has launched, but before the founders begin working on the company full time. The investment model has two main components:
Businesses pay back a “Return Cap” which is 3x-5x the amount invested in their company.
In their default terms, Earnest will maintain a small residual equity stake in the business even after their Return Cap is paid back—this amount scales down as the fund is repaid, but never reaches 0. This means that Earnest and their advisors are still incentivized to keep helping you grow the business after the Return Cap is fully paid because they would participate in a sale if it ever happened. “We will likely still offer and do deals that have no residual stake after the Return Cap is repaid, but that will likely entail a higher total Return Cap to compensate for the lack of residual stake,” says Principal Tyler Tringas.
Earnest calculates “Founder Earnings” which is net income + any amount of founders’ salaries over a predetermined threshold. Similarly to Tinyseed, this model is designed to give founders the option to continue investing profits in their business if they see fit and the fund is only paid when the founders are paid.
How They Help
Earnest also has a strong network of mentors, all of whom have skin in the game having invested in Earnest companies. There is no curriculum or prescriptive structure to mentorship; Earnest companies are expected to tell the fund what they need and ask for help. All mentorship is handled remotely.
I’ve really enjoyed following Earnest Capital’s story and the research that went into them coming up with their investment model. I also like that all of their advisors have skin in the game—it definitely makes me feel like they’ll be accessible and helpful. Like Tinyseed, I love the alignment of the fund gets paid when the founders get paid, but Earnest is much more appealing to me if returning 3x the amount invested to the fund rather than 5x.
As with Tinyseed, I understand the reasons for this as they are making early stage bets, so it’s sort of pick your poison—a bigger return multiple or a larger equity stake. But I’d be hesitant to take too much money; the idea of taking on $200,000 and needing to repay $1,000,000 is a little daunting.
We are considering applying to Earnest as well—we prioritized the Tinyseed application given the pending deadline. Earnest also asks founders for some additional materials including a video overview of the product that we’ve yet to film. Stay tuned.
Key Personnel: BJ Lackland
Revenue Requirement: $15,000 monthly recurring revenue and gross margins of 50%+
Equity Stake: No
Board Seat: No
Apply Here: https://www.lightercapital.com/apply/
Lighter Capital provides “revenue based financing” to SaaS, tech services, or digital media companies based in the United States. They have provided funding to over 300 start-ups to date.
Lighter Capital makes investments of $50,000 to $3 million—up to ⅓ of a company’s annualized revenue run rate. The money borrowed is typically repaid over 3-5 years, with payments ranging between 2%-8% of your monthly revenue. Typically the money returned is between 1.35x-2x the amount borrowed.
Companies do not need to be profitable to secure financing, but there should be a clear path to profitability in the company’s future. Funding is typically received within 4 weeks of application, and follow-on rounds can be distributed in 3-4 business days. Lighter Capital only funds companies based in the United States.
How They Help
Lighter is not an accelerator and does not offer a network of mentors—instead it’s more of a true financing option. “Aside from the reporting, where we are most helpful is planning out a company’s financing, frankly” says CEO BJ Lackland. “As opposed to a VC we don’t necessarily need to know the best VP of Sales candidate in healthcare tech in South Carolina. What we know is if you’re doing X million in revenue and have this kind of burn rate and this kind of growth rate, what kind of capital is available to you from which different sources? Whether it’s angels, VCs, or banks, we probably know how to introduce you to any of those sources. So we can help with strategy, mostly on the capital side.”
Lighter Capital is without question the most attractive of these models is you’re simply looking for financing given the speed at which they make funding decisions and that you’re only on the hook for returning 1.35x-2x the amount borrowed. That said, there’s a reason for that—they’re taking on far less risk by only funding companies with $15,000+ in MRR and otherwise healthy financial metrics.
Outseta isn’t there yet, so at the moment this option is out of reach for us.
Key Personnel: Mitch Kessler
Revenue Requirement: $10,000 monthly revenue
Equity Stake: No
Board Seat: No
Application Deadline: Open applications
Apply Here: https://metcalfe.fund/#signup
Metcalfe Fund is a new financing option that “provides growth capital to online businesses using actual business data instead of a credit score.” The company invests in SaaS, e-commerce, and other types of online businesses.
After providing funding to your company, Metcalfe is paid back over time using an agreed upon percentage of your future sales. Repayment occurs daily with a small fixed percentage of daily sales being automatically debited from your bank account—they refer to this investment model as a Structuralized Future Revenue Purchase, or SFRP. The company provides financing in the range of $10,000-$500,000, which is typically paid back within 6 months for a 6%-10% fee (12%-20% annualized). Loan decisions can be made in a matter of days.
I asked Founder Mitch Kessler what factors are considered when making loan decisions. “In general we are assessing a company’s marketing sophistication and their financial health,” says Kessler. “We can cross-pollinate marketing and financial metrics, such as conversation rates, CAC, LTV, AOV, and Revenue forecasts to get a better idea of their potential future revenues aided by marketing, and if they are able to do this themselves or if they will need help from marketers in our network.”
Businesses must be based in the United States and have been in business for at least six months to qualify.
How They Help
Metcalfe’s funding model is focused specifically on delivering funding to be spent on digital marketing and growth. Metcalfe is essentially a marketplace of vetted marketing agencies and talent, which it will in turn introduce to the companies that it’s providing funding to. By playing matchmaker, Metcalfe seeks to provide agencies with clients who have money to spend while providing companies with pre-vetted marketing partners who will deploy the provided capital as efficiently as possible.
Of the alternatives on this list many are new and Metcalfe is the newest. Like Lighter Capital, this option will be out of reach for earlier stage companies that don’t yet have the $10,000 monthly revenue that’s required. For businesses needing a short term injection of cash to spend on marketing, this is a strong option with reasonable payback terms. It’s also a model that’s well aligned with more technical teams that don’t have in-house marketing expertise. Taking financing from a company that’s also pairing you with an agency partner they believe in is reassuring.
A new generation of financing options is here
All of the alternatives on this list are new and interesting options that allow founders to raise capital while maintaining control of their businesses—and more alternatives seem to be hitting the market every day. Rather than being shackled by cookie-cutter financing models, a new generation of entrepreneurs is learning that if you can dream up a new financing structure you can probably make it happen. But more importantly, there seems to be a new emphasis on building real, profitable businesses. I for one believe that’s a good thing that will ultimately result in stronger, more durable businesses.
By Geoff Roberts 10 min read
Today marks the two year anniversary of when we published our launch announcement, telling the world of our plans to build Outseta. While we’ve consistently published monthly updates to keep our customers and audience abreast of our progress, the two year milestone is a good opportunity for us to share more broadly some of the decisions we’ve made and what we’ve accomplished. I hope this is a useful barometer of progress for other bootstrapped SaaS start-ups with equally ambitious projects.
Let’s get right into it starting with how much we’ve spent on the business.
We’ve written in the past about our decision to bootstrap the company and shared our operating agreement publicly so that customers and potential employees alike understand how we make financial decisions. Dimitris, Dave, and myself have yet to pay ourselves any salary and are instead trading our time for sweat equity in the business. We’ve tried hard to be extremely financially disciplined and fight the urge to invest in growth prematurely.
2017 2018 Total
To date we’ve spent $32,179.72 building Outseta - roughly $8,000 in 2017 and $24,000 in 2018. The majority of our expenses in 2017 were related to software and development infrastructure required to build the product. Food and dining represented our biggest line item for the year - we admittedly got a little carried away there so we pulled back heading into 2018. Remarkably, Dimitris is still invisible when he turns sideways.
In 2018 you’ll notice some line items grew significantly. The $11,123.75 we spent on consulting services was primarily design related expenses, as James Lavine began working with us. We knew we needed more design bandwidth than we could afford, so James has been working for a combination of salary and equity (more on this shortly).
Forte fees represent payment processing costs associated with one of the payment gateways we support, Forte Payment systems. We invested about $3,000 in marketing, the majority of which was related to paid customer acquisition experiments we ran with Linkedin, Twitter, and Google Ads. We also signed up to attend MicroConf for the first time - an expense incurred in 2018 even though the event is this upcoming March.
One of the reasons we’ve been able to keep our expenses so low is that Dave, Dimitris, and myself have not yet taken any salary. Any time and money we’ve invested in Outseta has been in exchange for equity in the business. When we added James to the team at the beginning of 2018, we asked him to help us out 20 hours per month. We’ve been paying him for 8 hours of his time each month and he’s been earning 12 hours worth of sweat equity in the business each month. Here’s how equity in Outseta shakes out today.
Dave and Dimitris spent some time setting up our development infrastructure at the end of 2016 and invested more time in the business throughout 2017 as they worked to deliver our minimum viable product. Our founding team worked an equivalent number of hours throughout 2018, but Dave and Dimitris also kicked in some cash to cover our operating expenses which explains the differences you see in the equity allocation between each of us.
Dave, Dimitris, and myself will begin paying ourselves a nominal salary in 2019 - more on that in our next company update.
On the product front, we’re all very excited about the progress that we’ve made. 2017 was spent entirely focused on delivering our MVP. We began marketing and selling our MVP on January 1, 2018 while continuing to build out the product’s core functionality.
Dimitris has focused primarily on back-end development while Dave does both back-end and front-end work. James’ design work dramatically leveled up the usability and polish of the user interface throughout 2018. So far, we’ve built functional product that includes…
Customer communication tools
Other “scaffolding” SaaS businesses need
Widgets to sign-up or login to a SaaS product
Lost password workflows
Lead capture forms
When we initially scoped Outseta, we envisioned SaaS metrics and reporting as a key part of the platform. While we still intend to build these features, we de-prioritized them as there were (and continue to be) a number of features more immediately relevant to our customers. We have the infrastructure and designs in place for reporting, but will be focusing primarily on additional improvements to the CRM moving into 2019.
Generally speaking the product’s core features are in place. We’ll now focus on taking each of them deeper by adding functionality to draw us closer to feature parity with the point solutions we compete against (as long as it’s specifically relevant to SaaS start-ups).
Marketing Strategy and Results
With the exception of about $2,000 spent testing paid online advertising, we’ve focused our marketing efforts over the last two years entirely on “free” channels. This has included:
Launching Outseta on Product Hunt and BetaList
Launching on Product Hunt and BetaList is worthwhile - these channels provided a one-time spike in website traffic and account sign-ups and are a great way to stir up some early users. The day we launched on Product Hunt we saw more website traffic than any other day in the last two years, and both the Product Hunt and BetaList launches resulted in 30+ account sign-ups each.
In addition to these launches the other major spikes in traffic were a result of another company’s blog post published on Hackernoon that did really well and linked to one of our own blog posts and one of the most successful articles that we published on our own blog, 4 SaaS Start-ups And Their Quest For Independent Growth.
Email prospecting was our second biggest undertaking from a marketing perspective. My approach to email prospecting is very time consuming, but it was effective in starting sales conversations.
Emails sent: 452
While email prospecting did start the majority of our sales conversations in 2018, in retrospect I wish I had spent less time here. While it’s a strategy that I think was appropriate given our stage - my goal was basically to stir up a small number of early accounts without spending any money - if I could do it again I’d focus more time in areas that would deliver longer term, sustainable gains. Like content marketing.
Content Marketing Results
Content marketing is where I’ve spent the vast majority of my time and energy over the last two years - I began these efforts a full year before we had any product to sell. Our strategy has been pretty simple - we publish a monthly company update (only if we genuinely have something worth our audience’s attention) as well as one other post per month on topics primarily related to growing SaaS start-ups.
We published a total of 27 posts in 2017 and 16 posts in 2018, including a few guest posts on blogs from companies like Kissmetrics, Crazy Egg, and Capterra. Here’s our content calendar with a history of all of the posts we’ve published or you can check most of them out on our blog. Most of the content we’ve published either highlights our own entrepreneurial journey or is heavily researched, long form content of 2,000-3,000 words. Our top performing posts to date are:
I chose to invest in content marketing for a few reasons.
We have some internal competency in writing. I was a writing major as an undergrad and see writing as one of my strengths.
We’re playing the long game - we set out to build Outseta with a genuine 10+ year mindset. We started to feel the impact of our content after about 18 months, which was OK because of this mindset.
I view content marketing as an investment in our brand.
I view content marketing as a long term investment in building sustainable, organic traffic.
So how has it worked out for us?
In short, I’m really pleased with what our content marketing has done for our brand. In a relatively small period of time, we’ve developed a small but highly engaged audience. I’ve gotten a lot of positive feedback on the articles we’ve published from people I admire and whose opinions I trust.
As we continue to grow tying our content marketing investments to revenue is most important, but as an early stage company I’ve bought into a metric called Unsolicited Response Rate (shout out to Jay Acunzo for popularizing this measure). This is simply a measure of how many people send me an unsolicited comment or note after each piece of content that I publish. We’re all busy, so if someone goes out of their way to send along a note that says, “hey this post is awesome and/or helped me,” that’s a pretty good indication that the content is resonating and providing value.
Coupled with our publishing cadence, I’m proud that we’ve earned a “these posts are worth reading” spot in many people’s inboxes. More importantly in terms of measuring ROI, almost every account sign-up in Q4 of 2018 was either a referral form an existing user or someone who specifically mentioned that they found us through one of the articles we’ve published.
While the positive feedback has been great, I definitely haven’t spent enough time investing in what I call “deliberate SEO.” I have spent very little time on deliberate link building outreach, further optimizing older posts for target keywords, or working on content projects that were designed primarily for their SEO benefit or potential. Earlier this year I asked SEO expert Neil Patel how much time I should be spending on link building and he suggested 5 hours per week - I definitely haven’t done that.
While I’ve promoted my posts fairly aggressively (without paid promotion), my hypothesis has essentially been, “Focus on creating awesome quality content and links and organic traffic will follow.” While that’s proven to be true and our organic traffic has grown, outseta.com is still a low traffic website - I know we can grow organic traffic much more quickly.
I think that we’re sitting on a golden opportunity in the sense that with a little more time spent in this area, it should be relatively easy for us to grow our site traffic substantially. As we look to grow more aggressively in 2019, this is an area that I need to spend more time on.
Without spending much time on SEO, our website traffic went from about 4,000 unique visitors in 2017 to over 10,000 unique visitors in 2018. More importantly, account sign-ups grew from 32 in 2017 to 279 in 2018.
Customers and Revenue
OK, OK, I know what you’re thinking. All of the above it great, but how is Outseta doing in terms of customers and revenue?
We’re not publicly sharing our customer count and revenue only because we haven’t really invested in growth yet. The majority of the companies that we’ve signed up so far have been opportunistic or inbound. Our numbers are still very modest, but we’re happy to share them with any prospect that asks.
Most importantly, we’re trying really hard to be patient and follow Mark Roberge’s framework:
Customer success. Then unit economics. Then growth.
Heading into 2019, the product and company is at a point where we’re now ready to invest more heavily in growth. We recently took on a project that’s essentially providing seed funding to support these upcoming investments - we’ll be detailing this decision in our next company update.
We’re also committed to sharing customer and revenue updates for the first time later this year in tandem with the launch of Outseta's reporting features. Stay tuned and you can hold us accountable to that!
We hope our reality is helpful
We wanted to share this information because topics likely equity allocation and expenses are so often secretive in the world of technology start-ups. Beyond that, our social media feeds are so often flooded with the outcomes and performance metrics of a small swath of successful, heavily venture backed companies founded by celebrity entrepreneurs.
While our metrics and expenses are in no way jaw dropping, we think from product to marketing we’re chipping away and making slow and steady progress in the right direction. If you’re a team of “normal” founders that’s bootstrapping a side project into a full-time one, we hope this post is both helpful and reflective of what reality often looks like. Any and all questions welcomed!
By Geoff Roberts 9 min read
Handling objections is something that has always been part of a salesperson’s job. The ability to overcome the most common objections that you hear about your product or service can make or break your company; particularly if you’re a start-up.
I’ve been marketing and selling a paid version of Outseta to potential customers for a year now and I’ve spoken with close to 1000 SaaS start-ups in the process. This post serves two purposes:
To share 5 specific, actionable tips to help you better handle your start-up’s objections
To highlight our approach by directly addressing the most common objections that I’ve heard about Outseta
Let’s start at the top.
5 Tips For Handling Your Start-up’s Objections
Here are some hard gleaned tips on how to best handle objections from your start-up’s potential customers.
#1 - Beware of argumentative language
Early on I found myself writing in email and saying during product demos, “I would argue that…”
I wasn’t trying to be argumentative or combative - at all - I was just trying to advocate for a different point of view. While that’s the case, using phrases like this can subconsciously create a sense of conflict that’s unnecessary - there’s no need to position your point that way.
When I first drafted one of the answers to our objections that you’ll read below, I wrote, “I would argue that this list is exactly what start-ups don’t need at an early stage.”
“This list is exactly what start-ups don’t need at an early stage,” loses that argumentative context, however slight, with the added bonus of coming across as more factual, direct, and confident.
#2 - Talk about your strengths, not your competitors’ weaknesses
Your product will almost always be evaluated alongside competitive products, so it’s only natural that you’ll field questions from prospects about how your product stacks up versus the competition. And if you’re in any reasonably competitive market, there will always be instances where your competitors offer features or functionality that you don’t or that’s better suited to the prospect you’re speaking with.
When handling objections about your product versus your competitors’, my advice is essentially don’t go there. Your competitors’ product offerings are probably changing quickly, much like your own, and staying up to date on exactly what each competitor offers is probably not the best use of your time if you’re working in an early stage start-up. Instead, focus on what you do know - your product and company’s strengths - and emphasize why those strengths are important to solving your prospect’s challenges.
#3 - Acknowledge legitimate concerns as legitimate concerns - step into your prospect’s shoes - and ask what would alleviate their concerns
Remember that prospects are people. If they’re looking to make any decent sized investment in a product or service, chances are they’re responsible for that decision. If you’re selling a B2B product it most likely impacts their job, their life, and their chances of a promotion. They should have objections!
Once you talk to enough potential buyers, you’ll quickly learn what the most common and legitimate objections to your product are - acknowledging them and showing a little empathy and understanding of your prospect’s concerns goes a long way.
But far too many companies stop short of one critical step - be sure to ask the prospect what would alleviate their concerns. Oftentimes the objection is something you can’t immediately do anything about, but sometimes prospects can surface ideas themselves that make them feel more comfortable moving forward. You never know unless you ask.
#4 - Encourage them to challenge the status quo - start-ups don’t win by doing what everyone else does
The proliferation of business advice and content on social media and the web has created a copy-cat society in the business world, one where companies flock to replicate the latest best practices. But if everybody’s doing the same thing, no one is innovating towards gaining a competitive advantage. Just because one strategy or way of doing things is widely adopted doesn’t necessarily make it the best.
That’s what start-ups are all about! Don’t be afraid to point that out and encourage your prospect to challenge the status quo, politely.
#5 - Recognize not everyone is an early adopter - leave the door open for later
Working with an early stage start-up in any industry typically comes with a greater degree of risk than working with a more established company - we’ve all heard the old adage, “Nobody ever got fired for buying IBM.” And that’s totally OK - not every prospect is going to be comfortable being an early adopter of your product or service.
Early adopters are a special breed so when you find them, treat them like gold. And for those that aren’t quite ready to take a leap on your start-up, make sure to leave things on good terms and let them know that your door is always open. You might be surprised who comes knocking a year or two down the road.
How We Handle Outseta’s Most Common Objections
With these tips under our belt, let’s look at how we’ve applied them to handling the most common objections we’ve heard about Outseta.
Outseta sounds great. But how do I know you’ll stay in business?
This is a classic objection that every start-up company must face. At Outseta we’re asking our customers to trust us with mission critical aspects of their business - their CRM records, their billing system, etc - so this is a very valid concern.
We’ve specifically built our business with painstaking transparency to help alleviate this concern. Everything from our business structure to how we make financial decisions has been designed for longevity. Ultimately, most start-up SaaS companies go out of business for one of two reasons.
They couldn’t find any traction for their idea and were never able to acquire paying customers. After a year or two the founders burn out or lose interest and shut down.
They run out of money - maybe they raised venture capital or angel funding - but their burn rate outpaced revenue growth and unable to make payroll they’re forced to shut their doors.
At Outseta we’ve done everything possible to insulate ourselves from these circumstances. First, our product competes in very mature markets like CRM, subscription billing, and email marketing - these categories represent known, validated needs of the companies we serve. The market for our product already exists.
Second, we have very specifically chosen to bootstrap Outseta and minimize all expenditures related to the business aside from our own time. Our growth is funded by our own revenue by design, rather than by investors. Our founding team is self-sustaining financially, meaning from day one we haven’t been relying on Outseta to pay us the salaries that we need to cover our living expenses.
For most SaaS start-ups salaries are by far their biggest expense - often 50% to 80% of total expenses - so this is a huge advantage and puts us in a scenario where it’s highly unlikely that we’ll go out of business for financial reasons. We’re in this for the long haul!
I’ll be sacrificing some functionality by using Outseta instead of building a tech stack of more specialized software tools. Why would I do that?
Yes, you will be sacrificing some functionality. No doubt. But for an early stage company, that’s actually a very good thing. Hear me out.
Let’s start by look at a report put together by another SaaS company, Blissfully. They’ve built a SaaS product to help you manage all of your different SaaS products, which I raise because their business relies on companies using a slew of specialized software tools. Yet in their Guide To SaaS Management they cite the problems associated with using a slew of SaaS tools as…
Human resources and finance challenges
This list is exactly what start-ups don’t need at an early stage. We all like to buy stuff. We all want more. We all live in a world that celebrates excess where nobody wants to feel like they’re missing out on anything. You want all the bells and whistles, I get it.
But is that what your start-up actually needs? When was the last time you used the seat warmer for the middle seat in the back row of your SUV?
When you piece together your tech stack at an early stage, you end up with a bunch of tools that are only fractionally used. There’s a core function or process that each tool supports and is used for, as well as a whole bunch of excess features that remain untouched. Mailchimp offers over 100 email templates - how many are you actually going to use?
This fractional use phenomenon makes logical sense when you consider what SaaS companies typically do as they grow or take on outside funding.
They build a bunch of new features to help them go “up-market” so they can sell bigger deals to bigger customers. So those extra features aren’t meant for you as a start-up anyways.
They build a bunch of new features to help them move into new markets. So those extra features aren’t really meant for you either.
They build lots of integrations with other complementary tools. You might use a few of them, but most of them won’t pertain to you.
We’re neither going up-market nor building integrations because our software tools have been built together from day one. So are those extra features really doing anything for you other than driving up the price tag? Is the price, integration, maintenance, and aforementioned problems with a slew of more specialized solutions really “worth it,” or do you just want to know that those extra features are there?
Most importantly, whatever software tools you use are ultimately designed to support one of the processes involved in running your company. You need software to manage your sales pipeline. You need software to charge your customers and to help field customer service requests. These are core needs that are undeniable and important to fulfill.
But is it the software you’re using, with all the bells and whistles, that’s going to dictate whether or not your start-up is successful? Absolutely not. The start-up game is about staying alive long enough to win. You need to design and build a product that people actually need. You need sales people who can handle objections. You need to hire a great team.
The bells and whistles of your software products is not what’s holding you back, especially in an early stage company. Having more time to focus on the aspects of your company that really matter is what will dictate your success.
Won’t I outgrow Outseta? What do I do when that happens?
You betcha you will - in fact, we’re hoping you do! We’re not going up-market - we’re here to serve you better than anyone else can now. We’ve seen companies grow from nothing to $5M-$6M in annual revenue using software tools like Outseta - that’s the journey we want to ride along with you for.
Our founding team worked together previously at Buildium, a company that’s made the INC 5000 list of America’s fastest growing private companies 7 consecutive years. You know how long it took Buildium to go from $0 to $5M in annual revenue?
The point is even if everything goes well and you grow fast you’ll be using Outseta for a long time; all the while reaping the benefits of predictable, low financial overhead that companies swimming up-market can’t promise you.
When you do get to that point, we’ll be in your corner high-fiving with you and you’ll also have a major advantage when switching to new software tools…
Because all of Outseta’s tools are fully integrated from the get-go, we have one master database that includes all of your data - every CRM record, billing interaction, email exchange, customer support ticket, or live chat conversation that you’ve had. You own that data, not us, and we can easily export it for you so it’s not lost.
Try doing that when you’re changing from using 5 to 10 different software tools. That’s… well that’s SaaS chaos!