#008 – Growing a $600,000/mo Business by Starting with Direct Sales with Nathan Barry of ConvertKit

What's up everybody this is Cortland from NDhackers.com and today I've got a very special guest on the podcast. I've been talking to Nathan Barry, the founder of ConvertKit, an email marketing company that he grew from $5,000 a month to over $600,000 a month and about two years. So he's somebody you're really going to want to listen to and he's got a lot of great stuff to say that not many other people will talk about. For example, he talks about how you should cheat it online business by starting by growing your own personal audience before you even start your business. He talks about how having a giant competitor in your space is nothing to be afraid of and instead talks about how you can use that to advantage to grow your business even faster. He also talks about how direct sales with the answer to pretty much everything and how content marketing can actually lead you astray. So he's got a lot of interesting stuff to share that I think all of us can learn a lot from and I'm really excited to get into this interview. So without further ado, I present to you Nathan Barry, the founder of ConvertKit. So you started a software business, your product's sticking off and your revenue is increasing every month. But how do you hire the best engineers to keep your business growing? The competition is fierce and it's hard to find up to date information for hiring the top engineering talent. That's where Vetterie comes in. Vetterie, the hiring marketplace that connects top talent with growing companies, has put together a comprehensive engineering salary report for 2017. With this report, you know exactly how much engineers you're getting paid, so you can make the right offers and build a great team. It's available to IndieHackers listeners for free at Vetterie.com/IndieHackers. Again, download your free engineering salary report at Vetterie.com/IndieHackers. Cool, I'm here with Nathan Barry of ConvertKit. Thanks so much for coming on the show Nathan, it's super cool to be talking to you. Yeah, thanks for having me on. Yeah, so for those of you who don't know, ConvertKit is an email marketing company targeted at professional bloggers and it's sort of a more powerful mailchimp so that people running blogs or podcasts or any other sort of website can send emails to people in their audience. Is that an accurate description, Nathan? Yeah, exactly. So it built for the content creator rather than for the generic business that could be anything from, I don't know what, I feel like people using mailchimp could use it for anything from a cupcake shop to a design agency to, who knows what, we're trying to build something specifically for the bloggers and content creators out there. The reason that I'm so excited to have you on the show is because, and I think the reason that ConvertKit is so interesting is a combination of two or three things. Number one, the growth of ConvertKit, specifically the revenue growth. In 2013, you were making zero dollars. You just started, you didn't even have an idea for the app. In 2015, you're making $5,000 a month. And today, two years later, you're making almost $600,000 a month, which is humongous. Number two, the transparency. All of the revenue metrics for ConvertKit are public. So anybody can just go to the ConvertKit dashboard on bare metrics and see exactly how much money you're making from day to day. Yesterday, it was $588,000 a month. Today, it's $590. And number three, the story. You've been writing about ConvertKit from the beginning of your journey. And I had before this conversation, I went back into my Gmail like Google, Nathan Berry. My first email from you is October 2013, so after you've gotten started with ConvertKit. But you've been sharing your story from the beginning, and a lot of people will share their story and talk about what they're doing for their companies. But it's not often that you can follow along with somebody from the beginning and see them build a company that goes on to make millions and millions of dollars. Yeah, I think that's something that's been particularly interesting with having the public metrics, because people will see, like, because we're growing at a really good pace, you know, I think with bare metrics showing that we grew 6% in the last month. And so they're like, oh, well, it's easy for you to share your metrics publicly when everything is going so well, or like when it's so successful, but one thing that we made sure to do is to share the metrics publicly from the beginning, or as closely the beginning as possible. So our bare metrics dashboard has been public since when we were making $2,000 a month in revenue. And so it's not like, you know, bragging, well, things are going well type of idea. It's that, no, this is this is a story and metrics add like all the context and detail to the story, and hopefully it'll help other people learn. Yeah, exactly. The fact that you're actually talking about what you're doing when there was really no guarantee if your success is really cool. And I think, you know, there's some risks there, because I've done the same thing with Andy Hackers, and it's there's a lot of anxiety that you can get from so publicly failing to meet your goals. But I think at the same time, it's so helpful for other people to actually see something that's presented transparently from the beginning. So on that note, I've got a ton of stuff I want to ask you, but to start off and to kind of provide some context for listeners who may not know the convert kit story, can you give us kind of an abridged version of how you grew convert kit from nothing into a company that's doing $7 million a year, four years later? Yeah, so I started the company in 2013. My background is as a, both as a blogger and content creator, but also as a designer. So I used to work and use experience design and building web and iOS applications. And then I'd gotten into teaching that. So I wrote a couple of books on how to design software, and then was using email marketing to sell that software or started to sell those books. And I wanted to get back into software. So convert kit started out of something that I called the web app challenge. And that was basically, hey, I want to get, I want to start a SaaS company and I'm going to do it all in public. So I'm going to blog about the entire process. I don't know what I'm going to build yet, but I'm going to start January 1, 2013. And my goal is to get to 5,000 a month in monthly recurring revenue by July 1, so six months later. And I put some constraints on that. You know, the first constraint was that I could only invest $5,000 of my own money. And the reason was I'd seen a lot of people come off of one success and then waste, you know, $50,000, $100,000 in their next big idea. And that money effectively bought them the ability to not talk to customers or to not make sure that they were building something people wanted. So I gave myself a tiny bit of money to start, you know, and I was going to augment that by doing a lot of design and front end code myself, but really to force myself to actually get pre-sales from customers and fund the development with that. So that was the goal. I blogged about it all publicly. You can go on NathanBerry.com and read posts about how I chose the name, how we acquired the domain name, how I found a developer, et cetera. And then six months in, we admit progress, but we're sitting about $2,000 a month in revenue. So I don't know what that is, 35, 40% of the goal. But, you know, from idea to two grand a month in revenue in six months, it's not bad, even though officially it's a failure. And I kind of expected that like we just kind of make the slow steady progress going from $2,000 to $3,000 and it might take another six months before we crossed $5,000, but like that's okay. And that's just not what happened. Instead, I found it was really hard to grow. I lost a lot of inspiration and a lot of momentum, you know, once the initial push kind of wore off. And I had this other business selling books and courses that was doing great. And so I was just splitting my time. And fast forward like a year later, Converka hasn't grown at all. In fact, it's actually shrunk a little bit. I think it was down to like 1700 a month. And I was talking with a friend of mine, I was named Heaton Shaw, and he's very involved in the, in the SAS world. If anyone knows, Kismatrix or Crazy Egg, those are both companies that Heaton founded. I was talking to Heaton as we're walking back from dinner at a conference and he just said, like, you know, I think it's time that you shut down Converka. And first, it's not a nice thing to say to someone like, hey, this project that you put all this time into, you should shut it down. Very blunt. Yes. That honesty is pretty important though, because otherwise people are just like, you know, man, just keep hustling, keep working on it. You'll get there eventually. You'll get your break. And Heaton was just like, shut it down. You'll be successful at whatever you do. You've put in a good amount of time into Converka, you've tried, you know, you're like a year and a half in at this point. It's not working. It's time to call it and shut it down. And then he kind of let me think about that for a minute and then after a little bit of a pause, he said, or you can take it seriously and give it the time, money and attention it deserves. But you're not going to build a meaningful business by working on it on the side. You know, the 10, 20 hours a week that you're doing, you're just not going to get the results that you want. And so I did what anyone does when they hear really good advice. And that's that I waited six months to act on it at all. And so by that time, where October 2014, the revenue is declined down to $1300 a month. And I just had this decision, like shut it down or double down. And you know, I had a whole framework for it. That's all in my blog if you go to Nathanberry.com/quit. You can read the whole poster about that. But basically I decided to double down. And so I put my other business on autopilot, which is code for letting it go to zero. Then I put $50,000 into ConvertKit, hired a core team, and started doing direct sales. And the short version from there, you know, basically the last two years or so, as ConvertKit went from $1300 a month to $1600 to $2,000 to $2,500. And six months after that decision, we hit the $5,000 a month in recurring revenue. So only like 20 months. slate based on the original. But then that 5,000 turned into the next month that went up to six, and the month after that I was eight, and then 10, and then like that July, we hit a big month, and went from 10 to 15 in a single month. And we started getting bigger customers to trust us, and I found that even though direct sales was still driving so much of the revenue, for every sale that I made, the next sale got easier. Because people would refer, you know, they would be like, "Well, who's using you?" And then I could name drop bigger and bigger names. And then as we got into, like those referrals really started to kick in, and then we did a little more affiliate marketing, the growth from there went from, you know, that 15,000 a month to 20,000 the next month, you know, to like 24, and then 30, and then, you know, then we started making bigger and bigger jumps, where it went from like 30 to I think 45 or 50 in a single month, and then 50 to 80 or 50 to 70 in a month, and we basically closed out 2015 at 98,000 MRR, and then from 2015 to through the end of 2016, we went from basically that 100K to 500K MRR, and then we've added about 100K since then. I don't even know how I would react if I had a company that was growing that fast. Yeah, so now we've kind of settled into a nice pattern that works pretty well. So like, you reach a certain scale and the churn starts to kick in, right? So, you know, five, six percent monthly churn, you start to really feel it, like now at this point, it's over a thousand dollars a day in churn, and so like that side of it sucks. And so we've kind of reached this nice pattern of growing anywhere from 30 to 50,000 a month net of churn. And so that's felt pretty consistent. We want to be able to accelerate that, obviously, but kind of our average is about that, you know, today's the last day of February, I think we pulled off like 37,000, 38,000 of net growth after churn. It sounds like there's really two phases to the ConvertKit story. There's just kind of the first two years where you went from zero to 5,000, never knew pretty much, or before that, basically zero to 2,000 and then back down to 1,300. And then there's the super high growth period where you kind of focused and double down on ConvertKit and ended up building humongous business and only a couple years. And I want to focus on the first half of the story first, just because I think a lot of listeners are probably in the beginning stages where they might not have an idea or they might have an idea, but they're not sure how to find their first customers. And hopefully we'll have time to get into the latter half too. And if not, I will have to bribe you to come back on the show for another hour at some point in the future. But in the very beginning, you mentioned that you started this thing called the web app challenge. And it was very last day of 2012. You were at this blog post saying, "Hey, here's what I'm going to do. I've made a lot of money from book sales, but I want to make recurring revenues. I'm going to start a software as a service application and try to do that." And as you mentioned, you said a deadline to hit $5,000 a month and recurring revenue and six months. But you're starting from scratch. You don't even have an idea yet. So what did you do immediately after you released that blog post? Yeah. Well, first, I started on the last day of 2012 because I wanted to give myself an extra day because you know, use all the time you have. And I would see immediately after that, I started working on coming up with ideas. Once I put it out there, the "Hey, I'm going to do this. I'm going to do it in public." You know what? What I did immediately after it was I probably responded to all the comments on hacker news and all the distractions from Twitter, people going like, "Wow, this is so cool that you're going to do this." Because you need to get caught up and like, "Yeah, it's so cool that I'm going to do this." And you're like, "Wait a second, I haven't done anything yet. I just said I was going to do something." Okay, let me get out of the comments, let me get off of Twitter and start coming up with an idea of what to build. And on that note, I was looking at the comments for your web app challenge post. And there's all sorts of influential people who I follow on Twitter now who comment on it. So David Houser, the founder of Grasshopper who I interviewed for Indy Hackers in January commented, Mooshart Ikbal, who's Product Huntsmaker of the Year for 2016, commented on your post back in 2012, Justin Jackson, who I'm talking to for Indy Hackers this week. Even Amy Hoy was helping you out back then, so I'm sure it was super distracting and just talking to all these people. Yeah, so the first thing that the web app challenge helped me with was by publicly stating a goal in where I wanted to go. And that allowed a lot of successful, influential people to kind of rally alongside and say, "Hey, if you need anything, let me know. Happy to help." Because all these people get questions and comments from someone who's like, "What advice do you have for me on how to start a company?" or something like that. And there's not really anything that you can do with that. You're like, "Well, here's another bit of startup advice. But if someone comes to you and they're already in motion, then there's something that you can work with. You know that, "Hey, there's a decent chance that if I invest 30 minutes into this person, they'll actually bring it to fruition." And it won't be just another 30 minutes that I wasted on someone who's just going to fizzle out and never fall through and never put in the work. And so by having that clear goal, a bunch of people rallied alongside, and I was able to get access to help from people like, you know, Heaton Shah and Amy Hway and others that I don't think would have been available if I projected the same idea of like, I don't know. I'm just out here to try something for a month or two. Right. And you have this kind of track record of launching your books too. So people knew that you weren't just messing around. You're actually serious about getting things done. And I think, you know, in my experience, I've seen people find it kind of fall into one of two camps where you've got some people who have a lot of trouble with, you know, motivation or finding the time and earn the money to get started. And then you've got other people who are pretty good at getting started and they just need like, help with what they're actually doing. And this latter half of people are a lot easier to give advice to. How did you end up deciding on the idea for ConvertKit? Because like I said, you had no idea what you're even going to work on. January 31st or December 31st of 2012. How long did it take you to come up with the idea for ConvertKit and how did you go about validating that idea? Yeah. So initially, I was trying out this concept called idea extraction that I first heard about from Andy Dreschen, Dan Maxwell, who run a program called the foundation. And basically the idea behind it is, you know, pick any business. I don't know, real estate agents, lawyers, accountants, et cetera. And really dig into their business, like interview them and really dig into their day to day workflow, what problems they have, et cetera. And look for these frustrating problems that could be solved by software. And it's a lot of stuff that maybe they're using Excel for or that kind of thing that you could build the industry version of maybe it's a base camp or like a project management tool or a workflow solution or something like that. And so it's kind of the path that I started down. I think I had about 10 interviews lined up with different people in those industries. And those calls went well. I definitely learned about a handful of different ideas. I think I actually don't remember if I published notes from those or not. But then at the same time, you know, I heard from people like Amy Hoi and then read stuff from the guys at base camp. And they're saying, you know, scratch your own itch. And one thing like Amy Hoi said two things to me that stood out. One was, do you really want to spend the next like five years or 10 years working with real estate agents like are you passionate about the real estate space or you know, fill in the blank with any random space where you think you could solve a problem. And the answer was like, well, no, not really. And the other thing she said is this is really, really hard. And so don't underestimate any or don't throw away any competitive advantage that you already have. So in the world of designers and marketers and developers, I had an audience of about 5,000 people already. And so she's saying, don't throw that away because like that's worth something. And this whole process of building a SaaS company is going to be 10 to 100 times harder than you think. And so hold on to every advantage that you have. So then I started looking at my own problems. And I was like, well, I'm really frustrated with Mailchimp, you know, email marketing is doing amazingly well at selling my books and courses. But I'm having to fight with Mailchimp every time I want to implement a best practice. And so maybe I can build effectively Mailchimp, but for people like me. And so I think that whole process took like 10 days or less. And you were just doing nothing but just thinking about ideas during this time period, huh? Yeah. And you know, we're trying to comment on hacker news because that's of course. So were you at all intimidated by the fact that Mailchimp was this huge behemoth company that had a ton of users and that here you were going to create a Mailchimp competitor that was basically starting from scratch. Were you at all? No, because I don't think people should be afraid of bigger competitors. And I've had this perspective for a long time. And so it didn't worry me one bit because that that bigger competitor just demonstrates that there's a big market there. And you know, there's going to be a lot of people that they don't serve well, but they can create the market. They can popularize it. You know, to this day, people are like, what do you do? You know, if I'm meeting some random person or someone in Uber is asking what I do, then you know, I always say like, well, you know, do email marketing for professional bloggers. And then I might ask, have you heard of Mailchimp? Because that That gives a nice frame. reference so that I can bracket it in with something that they've already heard of. And so I think it's really helpful when one company gets a really huge market share. And then especially in the email space, like Mailchip is the biggest, but not even by that much. Like they put out this last year that 2016 they did, I think, 400 million in revenue. And campaign monitor announced that they did something like 200 million in revenue. And so campaign monitor is doing that well. And then like Aweber for example, this isn't based on like a ton of facts, but I would estimate their revenue somewhere between like 40 and 60 million a year. And then you have even gotten it into like active campaign and drip and madmimi. And you know, we could I could say here name off 20 plus email marketing companies that are making over like five to 10 million dollars a year. And so there's clearly tons of room. And so that just got me excited. There was potential. And early on I was just trying to carve out like my little business doing 50K MRR. That was my goal. And so there's absolutely room for that. Yeah, that's awesome. I tell people a lot that they should avoid these winner take all markets like trying to compete with Facebook and the social networking game because there's so many other markets where there's a ton of companies that are making a lot of money. And if your goal is not to not necessarily to be like a billion dollar company, but to make like you said, $50,000 or $20,000 a month, there's no reason to pick a winner take all market. And it's also pretty cool at what you mentioned earlier that having that of a big well-known competitor in the space saves you from having to educate and explain to people what the market is or what your product is. And in fact, like there are already ready and conditioned to buy because you know what mail champ is because I know what these other tools are. So it's kind of an advantage to have a big competitor. I think so and I would never go into a space where I was defining the market, whereas having to help people, this is the tool and we have to explain what it is and why you should use it and all of that because it just saves so much time to be able to make comparisons. And you know, we make we make fun of everyone who says like, oh, I'm building the next uber for this or Airbnb for that, but like it's a it's a useful tool or a useful like mental model to to help people quickly know what you do. And so I can just say, yeah, we're building Mailchimp for professional bloggers or I can bracket it further for someone who knows the industry better and I can say something like Converka is the power of infusion soft, but easier to use than Mailchimp. And now people are like, oh, I know exactly where you fit. And actually, that sounds pretty good. So I like being able to make those comparisons. Yeah. So what was your strategy for finding your first customers in the early day? And why did you end up picking that strategy? Yeah. So in the early days, I really looked to the web app challenge to drive those customers. Well, okay. So I take that back right at the very beginning, I was doing direct outreach. And so I knew that I was going to focus on email marketing or I thought I might. And so then I got 10 people who did email marketing, you know, pretty well. And these were people like Josh Kaufman who wrote the book, the personal NBA James Clear, who is now very, very famous for his blog on Habits. I think his is like the fastest growing single author blog of all time or something like that now. But I, you know, I'd known him years ago before he started that blog. And then like heat and shot from Kismetrics and Crazy Egg. And I just asked them all, like, hey, you're using email and what are your frustrations? What are your pain points? You would kind of describe it and then, and then I asked these two more questions that I learned from Andy Dresch and that's just, you know, asking what else and tell me more. And so instead of saying like, what are your frustrations? And the person says, oh, well, it's a really, really a pain to set up autoresponders or set up these email courses instead of jumping in and saying like, oh, my system is going to solve that by making it really easy. Instead you just wait and listen. And when they stop talking, then you say like, okay, tell me more or elaborate on this part of it. And then you'll get to the real, real pain and frustrations to solve. So the goal is to kind of keep them talking rather than directing the conversation yourself. Well, yeah, you direct the conversation about asking questions rather than making statements. Because too many people are just listening for the slightest door to open so that they can start talking about how awesome their solution is going to be. But if you don't truly understand why something is frustrating to someone, then I don't know, you haven't done enough listening yet. So I went to those 10 people kind of mapped out what the solution would be. And then I even asked like, hey, is this something you'd pay for? And they're all, you know, absolutely yes. You know, I asked how much would you pay for it? And there were varying answers anywhere from like $50 a month up to $200 or $300 a month. And it usually just depended on their business. And then from there, the next question that I asked was, you actually, I stopped at that point. You know, what would you pay for it? And how much would you pay for it? And since I had a yes and a dollar amount, I thought, awesome, I have 10 pre-orders. Now, I didn't have a way for people to pre-order at that time. So I went off on my own and kind of came back and well, I went off and started building the products more because I had these wire frames, but actually like turning it into something. And then like a month later, I had a way for people to pre-order. And so I came back to them and said, hey, okay, this is a more clearly defined product vision. We actually have some working samples where you pay to pre-order it. And that's when the real feedback came out. Because I realized there's a difference between asking someone, would you buy this and asking someone to buy it? And so in one case, it's all hypothetical. Would I buy this shirt? Yeah, I'd buy it. Is this a good idea? Absolutely. It's a great idea. You know, and then it's like, okay, credit card please. And they're like, well, does it have this functionality? Or in order to switch from Mailchimp or Aweber, I would really need it to have this other thing. You think if you could go back, you would have kind of done it differently and skipped the entire, would you hypothetically buy this section and just immediately start asking people to buy it from the beginning? Or do you think it was useful to kind of have two stages? I think the two stages is totally good because it kind of brings them into it slowly. Like would you buy this? And they're like, yeah, because people do think through it. Is this something that I would want? Yes. Okay. And you say, how much would you pay? I'd pay this amount. Great. Can I have your credit card? And like, you could do this in person with like a little square reader plugged into your phone. Or you could do it online with, you know, just a payment form through Stripe or whatever. And so I think it's useful to walk people through that as they're thinking, yes, I would buy this. And then when you actually ask for their credit card, they're making a purchasing decision and the real feedback comes out. So yeah, I think it's important to walk through that. You just can't forget the last step like I did because when I went back to get people to others, 10 people, all of whom said they would pre-order only one of them actually did. Wow. Well, on the other side, I also launched the pre-orders to everyone who'd been following along and to my email list and got like, I don't know what the numbers were, 30 or 40 pre-orders. And so it was successful. Just the group that I thought was guaranteed actually wasn't because I stopped asking questions way too early. So at that point, did you worry that perhaps you misunderstood your customer since the people that you, you know, that you were confident would buy and ended up not buying? Or did you kind of go along with the fact that 30 or 40 people in your mailing list bought and thought, you know what, I'm on to something regardless. Full steam ahead. Yeah. So the people that I was talking to for the pre-sales, those were all like higher end accounts. These were all people who had 5,000, maybe 5,000 to 100,000, 50,000 email subscribers already. And so I kind of thought, well, maybe this isn't a good fit for people who are more advanced. And what if instead I've targeted it more at beginners, which by the way is a terrible way of thinking, don't do that, but that's what I did. And so a lot more of the people that were responding to the pre-orders were beginners or they had, you know, 500 or 300 or 1,000 email subscribers. And so I kind of made that pivot and we basically spent the next two years focused on beginners, not very successfully. Why was that terrible? The amount of revenue per customer is very small. Beginners are, they're going to churn a lot more frequently, they're going to ask a lot more questions. And in general, they're just going to be a lot more demanding. And so early on, there's not a lot that you can offer because you can't actually offer the best products because, you know, maybe you've only been building it for three months or six months and your competitors have been working on their products for 15 years. And so you can't necessarily offer the best products or the best functionality. So you have to compete on a great user experience and then a fantastic support and a great onboarding experience. And like all the intangibles of, hey, if you have an issue, you can call me. Here's my cell phone. And if you do that for bigger accounts, they'll respect it. They won't use it much. And even if they do use it, they're paying you enough money that that could even still be profitable. But if you do that with a $29 a month account or in some cases, like a $10 or $5 a month account, like that's a disaster. And it takes so many of those to add up to be any kind of meaningful revenue that it's just really, really rough. One of the other things that we did it when I started to focus full time on Converkit. To almost two four years later is that I started going after larger and larger accounts Because I thought you know what I can't compete on all the functionality But I'm pretty damn good at email marketing and I can augment it with like coaching and expertise and oh you have a course launch coming up to 10,000 subscribers. Well, if you're using ConvertKit Why don't we get on a call and I will you know, I'll teach you how to make that a fantastic launch So I would augment it with those other services that only I could offer because like Mailchimp can't ever compete with me on that There are the end they have no desire to and that only pays off when you are after larger customers who are already successful And the turn will be a lot lower So at the end of June and 2013 you would basically reached half of your $5,000 goal you hit $2,480 a month or something in that ballpark What do you think were the biggest reasons that you didn't get to 5,000? Also on the flip side, what do you think are the biggest reasons that you were able to get to 2,500 because I know a lot of people who would love to be able to hit that goal and it's not nothing Okay, biggest reason that didn't get to 5,000 I think it was just a lot more work than I first thought I didn't have the reach or the scale You know because effectively I just need to double the number of computers or double the number of people I was reaching out to or like that kind of thing But that's the tall order to do a building a product I really think that for where I was at the $5,000 a month goal was a little too ambitious And so I actually felt pretty good at about reaching 2,500 And maybe someone who was better at outreach, better at marketing, etc. I'm sure could have pulled it off but That's where I ended up As far as what was most helpful in reaching that number I would say blogging about everything publicly Because so many people are writing like theoretical blog posts like if this would happen then you should do this And instead I just said hey, this is what I learned last week This is how I picked a domain name. Oh, here's a Here's a photo of my notebook full of all kinds of scribbles that I plugged into lean domain search to try to come up with a name and Here's how I picked a developer and and so that story that went all the way through People really liked that and that got attention and that that helped a lot the other thing is there's so much stuff. I didn't waste time on So for example convert it didn't have a logo for probably the first I'd have to go back and look at it maybe two and a half years That's so funny because I've talked to so many companies sort of like that exact thing where Yeah, we didn't have a logo at all and it's like pretty consistently the company said to the best go the longest without a logo Yeah, and there's probably like a survivor's bias there because there's someone else who's like terrible at design is like Oh, we don't need a logo screw that you know, and like their business fails and we never hear about it But at the same time like it wasn't just the logo is business cards, you know, we didn't Have business cards. I'm trying to think we were probably doing 25 No, it went to be two business cards We were doing well over a hundred thousand dollars a month in revenue before we designed business cards Wow, so I just didn't waste time on a bunch of nonsense. It didn't matter That's the end of of your web app challenge. It's been six months You've hit half of your goal, which is absolutely awesome But not you know the exact outcome that you wanted to see and so you decided not to double down on convert kit And I've got kind of one more question about this beginning area because one of the bigger advantages that you had That I've also seen a lot of other people who've launched successful SaaS applications have Is that you had this audience before you started Convert kit and it was very engaged audience that followed you and Really wanted to see you succeed and it's something that you put a lot of effort into building up And you ended up actually writing a book about building an audience. I think authority, right? Yeah Yeah, that's when I started following you. It was like the first email my inbox is authority is launching and here's where to get it What tips do you have for people who Today don't have an audience and are maybe considering building a SaaS app But they want to get started by building an audience first. How do they go about doing that? Yeah, so We have to I don't know they're not really core values. Maybe they're models I'm at convert kit and they're basically the secrets to growing audience Right, there's actually three of them and they're if we're doing a video call you'd see them as posters on the wall behind me Um, the first one is teach everything you know And so people are like I have no idea what to write about And so we just say teach what you know and so for me that that was um You know, I wrote about design. I wrote about what I was working on that day You know as I'm building convert kit I wrote about every step of the process that was the web app challenge And people loved that transparency and it came from a really authentic place So teach everything you know The next one is create every day Uh, because you end up with a lot of people who They have a lot to teach but they'll run out if they're not actually making stuff And we all run into people online who are just blogging they're just podcasting and they're not really actually making anything And after not very long they get pretty boring to follow because They're not on their own journey themselves and they're not learning and creating new things and so I think the second tenant of building an audience is to create every day And then the third one is one that we call work in public I've also heard this phrase as show your work So if you've ever You know going back to your original like math homework and in uh Maybe in high school or Junior high or something like that I would always get in trouble because I would solve a problem in my head and I would never show the work of how I got there And so you want to do that in business where you don't want just want to say Hey, here's how we got to 500 kmr or whatever you want to say You want to show the process and be transparent about it So that's why we're public with our numbers That's why we'll write a blog post about how we're doing this through that and customer support We're trying to be transparent about everything because that Like that combined with creating every day and to cheer everything you know Um will get people to follow along And so even if you're at a really small scale Like How I built an iPhone app in the month and launched the app store and what I learned along the way like that's great Even if the iPhone app makes $50. I mean, whatever it is telling the story and putting it out there Of how you do something working in public That's how you build an audience and then you do that consistently and uh That's pretty much all it takes and that consistently just has to be over like two or three years Not like the consistently over two weeks like most people seem to think it is Yeah, I've heard it said uh, I think it's all quoted on Twitter the other day that people Gradually overestimate what they can do in a week and they greatly underestimate what they can do in a year And I found that to be extremely true because people always make these ambitious plans about You know, what they're gonna do in like the next month or two but Going back to your three principles all of those are dead on and I've had a lot of people Read interviews on indie hackers about people who built an audience beforehand and then use that to help their subsequent businesses And there's just kind of weird negative Like ethos around it like oh, that's cheating, you know, it's cheating to start with an audience as if it's something that you just magically do And it's pure luck and that not everybody can do it But there really is like I don't want to say a formula, but the tips that you gave are dead on um Teaching what you know a lot of people have talked to you say that they have Anxiety because they don't have anything to teach or they don't feel like they're qualified to teach But if you have a job if you're Working on anything and you probably have something that you know that at least 50% of the population is like not that great at Or doesn't have time to think about every week like you do so It's not that hard to find something that you know to teach and then the the second point that you make create every day Is dead on as well. When I first started indie hackers. I just thought Man, I have like nothing to tweet about nothing to blog about And then as I started building the business. It's like every day. I'm doing all these interesting things And the number of things that I can tweet and blog and write about and email people about is countless every week I have something new that I'm working on and it's this never-ending stream of stuff that I can share with other people who aren't working on that stuff Or maybe who are but to less who less of a degree. So I think that's an awesome tip and then your last one work in public And this I think it blends really in seamlessly with the whole transparency business When I'm doing an indie hackers interview with somebody and they share All the details what how they did what they did And they dive into the specifics. It's always way more popular than people who are just kind of Very press-releasy and just say, oh, yeah, we're doing overdoing this and we're so great And we made this much money and it's just because we you know did hard work. I think it's There's something about diving into the specifics and showing people how you got to where you got that really resonates with people and it's It's why I always recommend that people actually you know start an email list or Or blog, you know consistently about what's going on behind the scenes even things that don't necessarily go well Just because I think there's just a sense in which people want to help other people, you know and see the things that they're working on And I can tweet just random stuff. I can tweet. Hey, here's on my affiliate marketing links are going You know my affiliate links are going on my website. What am I doing wrong? And I'll have all sorts of people who I know or don't know chime in with tips and things that they've learned and it helps me Not only build an audience, but improve my product So I think all three of your tips are super awesome and hopefully people listening will take them to heart and Get to work on building their own audiences and whatever area that they like You know, I want to add to that a little bit you said people referred to having an audience is cheating And I agree with that And I think that you should give yourself whatever unfair advantages you possibly can so I wrote an article a few years ago titled How Does Cheat at Online Business? And it's all about building an audience because it gives you this advantage to everything you launch after that. Like, if you have an email that's to 5,000 people, then like whatever project you do after that, some portion of those people are going to be interested in it. And yeah, you're cheating on that next launch. And it's fantastic. And I think you're foolish for not like going down that road because even if like in your case, if you do something after indie hackers, you have this email list, you have this community, and you're known for creating indie hackers that like whatever you do next will be easier. It might be 50% easier. It might be 5% easier, but it will be some amount easier because of the work you did now in the audience you built now. And so I think everyone should do it. Yeah, exactly. If you can cheat, why would you not cheat? Right. Especially because you're doing it in a way that helps everyone who comes after you. Yeah, like we ran into this, you know, I actually run into this probably every couple of weeks where someone is like, you are an idiot for having your bare metrics totally public. Like all of your competitors can go through that. They can see exactly what your turn is. They can see which plans your turn is coming from. You know, if your growth starts to stall, they'll see it as soon as you will. You know, like there's all these terrible reasons that for your numbers to be public, like you should really shut that down. And I thought about it for a while, I actually thought once we hit 100K MRR, we would turn off the public metrics. And the reason is because those thinking, you know what, it's not that helpful to beginners anymore. And it's not as helpful to the masses because like how many people are going to get to that same 500K number or a million a month or whatever. But then I looked at other companies like Buffer. They're at 1.1 million MRR. I look at their public bare metrics page because it helps me in getting to the next step. And so I now have this attitude of, hey, if having, if being transparent is going to help one other entrepreneur, then it's worth doing. Yeah, totally. I mean, you're giving back. It actually helps people. And I'm sure, I mean, I get emails all the time from indie hackers and it's way smaller than convertkits. I'm sure you get tons of emails from people expressing their appreciation that you're transparent in addition to the haters. And you can actually feel that you're helping people. And a way, and that's also self-serving because people are inspired by and want to talk about the companies and the people that help them. You know, I'm having you on this podcast in part because you've been so transparent about convertkits. And part because everybody in the community really looks up to you and respects what you've done. So I think it pays dividends and people are overly worried about the competition. You know, I mean, you're giving them information, but ultimately if the competition is just following in your footsteps and copying what you're doing, then that's not a bad position to have them in. Yeah, exactly. So convertkits kept, I don't want to say growing, but it kept going. And you, at the time, probably the latter half of 2013 were kind of dividing your focus between, you know, writing more e-books, authority and other things and promoting those and working on other projects. And it wasn't until your conversation with Heaton Shaw that you decided, hey, I'm going to double down on convertkits and actually grow this into a, you know, to a big business and focus on it 100%. And one of the parallels that I've noticed between both the early phase of convertkits and this later phase, high growth phase of convertkits is that they kind of started in the same way. And that's with direct sales with both businesses. You're actually, or at both times, you're actually finding target customers and people that you wanted to be convertkits users, reaching out to them and trying to sell them on the idea. Did anything change in the second iteration of doing this compared to the first? Yeah, so the first time I was very broad about, you know, trying to find people have similar problems to me, similar problems to these first few customers related to email. And like, that's a very generic thing. Email marketing for people who have problems like Nathan. He's not the best niche to go after. Whereas the second time around, I was much more specific. We actually landed on the idea of email marketing for authors. And that gave me a very direct group of people that I could sell to. He ended up that, you know, after two months or so of that, we decided authors is the wrong term to describe who we are trying to reach. A lot of people who I self identified as authors were like in the category of someday I'd love to self publish a Kindle book for 99 cents. But that's kind of expensive and hard. So maybe next year. Whereas the people are trying to reach were like the course creators and the professional bloggers and, you know, the people who are making 100,000 plus a year off of their audience and their sites. And so we played around with a bunch different terms and eventually landed on email marketing for professional bloggers. But that made it a lot easier to go after one to know who to go after. Because now instead of trying to reach everyone, I was just trying to go after professional bloggers. And so I can narrow that down. I could go after, okay, let me make a list of all the professional paleo recipe bloggers. Cool. Now a list of all the professional men's fashion bloggers. And like go after all those individual little verticals. You know, that worked well because I could list them in the first place. And then it made it easier to get on calls because people are like, well, I use Mailchimp and it works fine for me. But what would you do if you were to build something just for people like me? And so they'd be more likely to take the call because of that narrow niche. So I like having a really specific niche. And that was probably the biggest thing that was different between round one and round two. What were you doing to evaluate the quality of these different niches? Because I think a lot of people don't understand the advantages of targeting a niche. And so it's pretty common for people to target a niche that's not really that great and to not understand what it is. It makes it not good for them. Yeah, I don't know that you can evaluate it from a distance very well or that you should for evaluate it from a distance for very long. So for example, with authors, I thought that was going to be the best or good niche to go after. And so I started there and I tested the idea of a niche at all, basically, by the fact that I started getting more customers signing up and ahead an easier time getting on calls. And I could teach partner webinars because people were excited about that idea. And then about a month later, I started to see, okay, the churn is pretty high. These customers are asking a lot of very basic questions. So I think, you know, your lead measures are going to be, does this niche help me identify a list of customers to go after? And does it help me get in the door? And then your leg measures are going to be, do these customers stick around? Is our tool actually a good fit for them? And how much work are they to support? And how much of a pain are they to support? So I don't think you can evaluate it from distance. I think you probably need to pick one and dive in and then conveniently changing like your tagline on a website is really easy to do. So if at first you do not succeed, try, try again. And what do you think are the advantages to being able to tell people that your product is for their niche? Because there's a trade off. And I think it holds a lot of people back. If you say convert kid to store professional bloggers, then someone who comes to your site and is not a professional blogger might be turned away. And I think this discourages a lot of people from picking a niche. And so that you see a lot of people with products that say, you know, our thing is for everybody or, you know, anybody who needs to send an email can use our product. It's easier than the competition or it's better designed than the competition or cheaper. Why go after a specific niche rather than advertising based on these very broad advantages? It just works so much better. People either self-identify with it like, wow, that's built just for me or they say, I'm not a professional blogger, but and they start to find reasons as to how it could work for them. It gives that context right away. You know, they start to understand what it is. I mean, you could try it both ways. I tried it for a long time without a specific niche. I can tell you, it's so much better when you narrow your focus. But, you know, your mileage may vary. I will say it's very easy advice to give out and very hard advice to take. But I haven't seen many examples of people going too specific with a niche and failing because of that. Actually, I can't think of a single example of that. But I have seen a ton of people not getting any traction because they're going too broad. It's almost like charging money. People tend to underpricer offering because intuitively, it feels like it's not worth as much as it is. And people tend to intuitively feel like they're not going to be able to pick a niche as small as they should because it just feels like it's too small. Yeah, and I would say if you pick your niche that goes down to just say 50 people, where there's only 50 people in the entire world or 50 people in your city or whatever it is that fit into that, that's great. Go get 25 of them as customers and then expand from there. And you'll have traction and you'll know how to talk to them because, you know, like pricing, you can always raise your prices later and you can always expand your niche later. Like, you know, you can pivot from the pay the recipe blogs to the slow-carb recipe blogs. Like, you can, you can expand from there and it'll be easier if you do it when you have a little bit of traction. And who knows, we may still pivot beyond email marketing for professional bloggers and expand from there because obviously we have tons of SaaS companies and e-commerce companies and tons of other people using Converkit. But our work in this, what I would consider a very broad niche of professional bloggers is not done yet. And so we're going to stay here until. Until we've become anywhere close to saturation, and we're so far away from that, but it's not even funny. Yeah, I talked to David Hauser from Grasshopper, and he talked about his kind of 10, 13-year journey with Grasshopper, and at some point in the middle, they mistakenly believe that, oh, we've plateaued, and we're not going to be able to find any more entrepreneurs who need a virtual phone system, and they started branching out on all these different directions, doing all sorts of other things. And then eventually came back to Grasshopper and realized that they hadn't been anywhere near the plateau of the niche that they were targeting, and they were able to grow a ton more. So I think it's pretty insightful. People, like I said earlier, really underestimate the number of people that they'll be able to reach in any given niche, and they kind of give up too early and try to go broad, I think. Yeah, I think that, so we have 12,000 customers. I think that about 5% of our potential market within professional bloggers even know that we exist. So not that we have 5% of our, or like that we've captured 5% of our potential market, I think that 95% of them don't even know we exist yet, and so I think there's so much more room, and it'd be far too early to move on. Yeah, and this might make you mad, because I know about ConvertKit, and I knew about ConvertKit when I started Indy Hackers, and for whatever reason, I just immediately threw up, like, set up a Mailchimp account the first week that I launched it, and I've had it like on the top of my to do list, Switch to ConvertKit for like six months, and I just haven't done it yet, I know. You know, we have a Concierge Migration team who will do it all for you. I know, I know, I'm so lazy, I just have so much other stuff to do too, but I will guarantee Switch pretty soon, and I know it's going to be super simple to do. Anyway, so you ended up growing ConvertKit, obviously, much more rapidly during this whole second phase. What do you think are the biggest reasons that you've been able to grow so rapidly? Is it because you picked a better niche or are there other factors that factored in as well? You know, one thing that I ran into in the early days is that I asked people how did you grow, and they said, oh, word of mouth. And when you don't have any customers or you have 50 customers, like, that's a really frustrating thing to hear, because you can't just like, oh, yes, let me turn on the word of mouth channel. Why didn't I think of that? And because really word of mouth takes traction. Like, you have to, something has to kickstart that. And so what I didn't encourage everyone to do is to use direct sales to kickstart that word of mouth. So we probably did direct sales for six to nine months, you know, in that we'll call it phase two of ConvertKit before like the word of mouth started to really kick in. So yeah, that drove a lot of growth. I think that's interesting because, you know, one thing I see with a lot of people is that they look at, I mean, the most visible businesses to any person, an entrepreneur or normal person, are the businesses that are the most successful because their names are everywhere, they're huge, they're well known. And so people will kind of intuitively when they want to start a business, and they're trying to figure out a strategy for growing or for building their product, they end up looking at companies that are in the pretty late stages. So they're pretty advanced. And so they see, you know, something like, you should grow via word of mouth and look at, you know, Coca-Cola, they got such a strong brand or Apple, you know, like everyone talks about Apple, and it's, it's really fascinating because what you do in the early days is almost never exactly what you can rely on in the late days. So, and what I found is like, the early days almost always come down to a lot of hard work and like getting your hands dirty and talking to customers one on one. So this whole direct sales thing that you were focused on is something that hopefully more listeners take to heart. You really should be reaching out to customers on a one-on-one basis early on and talking to them and trying to sell your product and finding out why they will or won't buy, you know, and actually understanding your customer. I think that's something where people don't have nearly enough conversations because they want to, you know, you want to sell through content marketing, right? Because content marketing is the highest leverage and, you know, blah, blah, blah. The direct sales is too much work. I've talked to people, etc. But with content marketing, what happens if you're selling through that channel, people are rejecting you every day and they're not telling you why, right? Because if I go to your blog post and it's saying, it's teaching me some great stuff and it's saying, hey, this is why you should buy this product and I go, I don't know, all I have to do is hit the back button. Whereas if you and I are having a conversation and I'm like, and I say like, hey, will you buy a convert kit? You can't just like awkwardly walk away. You're socially obligated to respond in some way. You can say like, oh, well, I'd like to, but if I'm really busy or it doesn't have this feature or etc. And then I can dig deeper in that and we have a full conversation and I get to know why my product is being rejected rather than just like ghosting out of the conversation, which is what happens with content. And so so many people have no idea why they're being rejected and it's because they have this refusal to, you know, to do direct sales. So I think direct sales are basically the answer to everything. Yeah, I mean, I totally agree. I mean, you're, as you just said, if you do direct sales, you end up learning way faster and way more and way more accurately than people who are trying to rely on some form of mass marketing early on. And then even if you have content marketing, there's something that you want to do. You can take the learnings and the insights that you get from doing direct sales and you can apply that to your content marketing later. So if you're learning that, hey, you know, professional bloggers seem to be the most enthusiastic about my product and seem to have the most, you know, reason for using it. And here's the problems that they have as evidence by my conversations with these 10 professional bloggers. Then you're a better equipped to go write a blog post that's actually going to appeal to people and get them to buy. Anyway, so like no matter how you slice it, even if you want to do content marketing, starting with direct sales, it's probably the way to go. Yeah, I think so. And everyone says like, oh, it doesn't scale. It's not profitable. And it's like, look, your product makes $200 a month in revenue. I know what that's like I've been there. Like your time's not worth anything at this point. You need to get traction at any cost. And direct sales is a good way to do it. Why don't we close out by zooming out to like a more of a broad perspective? And I just want to ask you, you know, you've done a lot of things that are super successful. You've written numerous books that have made you hundreds of thousands of dollars in sales. You've launched ConvertKit and grown it into something huge and heat and shot when he suggested that you shut down ConvertKit, he told you, hey, Nathan, whatever you do is going to be successful. So just work on something else. What do you think it is that enables you to be successful? Pretty much everything that you do. Is there anything that you, you know, that you practice personally that you see lots of other people not doing that helps you succeed? And what advice would you give for other people who are perhaps starting out or perhaps, you know, not as successful? I want to learn to emulate you and to have the success that you've had. Yeah, you know, there's a lot of different ways to answer that. But my friend Sean McCabe, his stuff is at SeanWest.com. He has his phrase, and I'm actually staring at a poster of it that he sent me. I haven't hung it up yet. It's sitting on my desk. His phrase is show up every day for two years. And I've just kind of embodied that idea in everything that I do of this is going to take time. And so I'm going to work on it every single day. And Sean added this two years idea to it because some people are like, hey, I tried to start an audience and, you know, I just didn't get traction. And you're like, wow, do you work on it every day? And they're like, yeah. I'm like, well, how many days in a row? And they're like, like, 30 of them. You know, we laugh at that, but it's so easy to get discouraged after like, in 30 days, say you put out like five or six blog posts and you didn't get traction on any of them. That's pretty depressing. And so I love this show up every day for two years because it sets your expectations from the beginning that, hey, to do something meaningful, it's going to take time. Like the first two years of ConvertKit, we had almost no traction. Like two years in, that's where we made the decision of, should we shut this down? Okay, no, let's keep going. And, you know, I also had that like with the books and courses and other things in the blog, you know, I wrote a thousand words a day every day for 650 days in a row. So I didn't quite make the two years that Sean said I should, but really that, that approach of create every day, show up every day for a long period of time. Do that and I guarantee you'll be successful. You might pivot five times in the process, but something fantastic is going to come out of it. That's amazing advice and I hope everybody follows it and I hope that I can follow it too. Nathan, thank you so much for coming on the show. I will definitely annoy you and hit you up for another episode sometime in the next six to eight months. Sounds good. I'll barter switching to ConvertKit for another hour on the podcast. Okay, for sure. This is how hard sales are done by the way. This is it. Well, you got me. Well, you let people know where to find you online and where they can follow you and hear more about what you're doing. Yeah. So my blog is at NathanBerry.com. Barry's spelled B-A-R-R-Y and say NathanBerry on Twitter, Instagram, etc. And then ConvertKit is just at ConvertKit.com. All right, thanks, David. Thanks. If you enjoyed listening to this conversation, you should join me and a whole bunch of other ND hackers and entrepreneurs on the NDhackers.com forum. We talk about things like how to come up with a good idea and how to find your first paying customers. Also, if you're working on a business or a product of your own, it's a great place to come and get feedback from the community on what you're working on. Again, that's www. NDhackers.com/forum. Thanks and I'll see you guys next time.