Category: Blogs

MailFinch Product Roadmap

**1) Core Product: Create Letter and Accept Money
**

• I wanted people to be able to upload a letter and send it.
• Before they actually could send it, they need to pay me. Paypal made it easy to accept money on day #1. (Incidentally, I made my first sale about five hours after the site launched.)

**1A) Analytics **

• Google Analytics is free. Install it.
• Setup goal tracking. (In my case, the goal was to successfully create a letter and pay for it.)
• Start reviewing the sender and recipients of each letter to see if a pattern emerges. (In my case, we collect physical addresses for both and we’ve got the sender’s email address.)

**2) Focus on Repeat Users: Same Users + More Letters = $$$
**

• Talk to users. (I can’t stress this enough.)
• Review analytics. Daily. You’re looking for any patterns that appear — common email domains, common sender/recipient address attributes, etc.
• Reach out to users that have sent more than one letter. Why are they using us? How did they do this before? What else do they want to see?
• Prioritize bugfixes and feature requests by the amount of money a customer spends with you.

**3) Increase Traffic and Stickiness: More Users + Same Users = $$$!
**

• Once the core product is done (major bugs are dead, new features are coming/deployed), it’s time to think about how to grow. Do this by making the product stickier and/or increasing traffic. (Ideally, do both.)
• Lightweight CRM capabilities — manage contacts, tasks, lists and campaigns from one portal.
• Easy one-click contact importing via Highrise, Salesforce, Batchbook, etc.
• Find as many local newspapers as possible. Start cold calling real estate agents and insurance agents that have a half-page (or larger) print ad — these people have money and presumably understand the value of direct marketing.

3A) Analytics for traffic growth features

• A/B testing frameworks are nice, but expensive to setup. Focus on quick “deep dives” into your database to answer specific questions. (eg, for a user that has more than 1,000 contacts uploaded, how often do they login? How many letters do they send each day/week/month? How have they segregated their lists?
• Basic cohort analyses are really helpful for tracking new user signups each week. They’re even more helpful when you know what new features were deployed on a given week. Use Excel, you don’t need anything fancy.

This road map isn’t designed to be some sort of checklist that you work your way through. Instead, you’ll probably find yourself doing the same thing I did — repeating #2 for while until it’s becoming clear that a real customer need exists. Item #3 is still a work in progress for me, we’re about halfway through that list of things but it’s looking pretty promising so far.

If nothing else, remember the core of this road map:

1. Launch the first version ASAP. Ugly is fine, it just needs to work.
2. *Start talking to *customers. **Your mom/wife/dog is probably not a customer, go pick up the phone.
3. Repeat and Iterate.

Now, go make some money.

1. Who’s looking at your site anyway?

A look at your traffic sources can help you measure the mix of traffic arriving at your website and see the effect of marketing activities, both online and off. Normally, the biggest chunk of a site’s traffic comes from search engines, followed by roughly equal streams of traffic from referring websites and from direct traffic — that is, people who type in a Web address. If your numbers to look like this, it could be reflection of where you’re actually getting noticed the most. (e.g. If direct visits are up and you recently invested in a full page spread in the NYT, there may be a correlation there — use better tracking codes in the future so you can measure this properly.)

If you’re a business and your graphs look spiky, that’s not a good thing — your goal is build long term traffic. I’m not telling you to ignore StumbleUpon, Twitter or any of the other social media tools out there, just make sure that you keep a close eye on your daily conversion rate. If you’re using Google Analytics, setup the Goals feature immediately and you’ll have instant access to your conversion rates.

2. Are visitors finding what they want?

Pay attention to the average number of page views for your site. Most people may think that higher page view counts are better — but that only holds true at big entertainment sites, such as YouTube and MySpace, where clicks directly translate into more ad revenue.

If you’re running an online retail store or your general company website and the average page views seem high, things get a little trickier. In most of these cases, you’ll find that the site bounce rate is also high (relative to avg. page views) which can sometimes indicate that people simply aren’t finding what they’re looking for.

In general, focus your efforts on improving your daily conversion rates by A/B testing to determine which pages result in higher conversion counts. This is dirt simple — use Google’s Website Optimizer for free. It takes 5 minutes (seriously! read this: how to pick A/B test candidates) to setup a test page, insert the code and kick off the test. Depending on how much traffic you have, you’ll be able to generate reports on how your new page compares to the old one.

3. Keep an eye on your bounce rates.

A bounce rate in the 20-30 percent range is pretty good. Though, most unoptimized websites will have bounce rates that top 50 percent — certainly not good. Spend some time figuring out what your users are looking for and give it to them. Use a free service like Crazy Egg for a super-easy way to visualize what users are clicking on and make more of whatever it is.

If you’re using Google Analytics, keep a close eye on your bounce rate by traffic source. In my experience, this one report can help you make the biggest improvements. For example, if your search traffic is more likely to bounce than direct or referring traffic, you should start digging into the search terms that visitors are using to find your site — it’s likely that the page they’re getting dropped on to doesn’t match up with what they were searching for.

If you can bring your bounce rates down while simultaneously maintaining (or, better yet, increasing) your conversion rates, you’ll make a ton of money.

4. Track your goals!

I already told you to setup the goals feature — if you haven’t, go back and re-read #1. The Goal Funnel tracks customers during the sales process and gives you the ability to determine where they dropped off — this is the rate of abandonment and you should keep a super-close eye on it if you’re really trying to get users to sign up or buy something on your website.

Use the info you learn here to improve the individual steps your visitors take to complete a goal on your website. It’s easy and you’ll probably smack yourself for not doing this one thing earlier. A friend of mine did this on his website (selling tax services, of all things) and he made an extra $10,000 in the following month simply by reducing his rate of abandonment. Easy money.

5. People don’t have to know your name — get over it.

It’s so funny to watch people searching for the name of their own company on Google, Yahoo or whatever other search engines are out there. If you’re one of those people, listen to me: STOP. The people that search for your company’s name to find you are not the people you need to worry about! Be concerned about all the people searching for the stuff you sell that never find you.

If you sell shoes, then people should be able to find you when they look up the specific shoes they want. After all, no one (that I know) cares whether they buy their shoes from Sports Authority or Foot Locker — they just want to know who has the damn things so they can go get them.

Conclusion

Simply having a website doesn’t cut it anymore — set aside an hour a week to review your key metrics and setup some tests for the following week. That’s really all there is to it. You don’t need fancy reports or custom-made analytics! Stay focused on conversion rates and goal funnels — you’ll make a killing out there.

So, the above is a pretty basic list — what tips do you have?

So, in no particular order, here are my top tips for running your own small business:

• Make sure you have plenty of money. Cash flow is the life blood of your company. Unfortunately, I’ve seen far too many first timers make the mistake of spending their cash before they had it in their bank account. (One of my favorite books on finance for first timers: The McGraw-Hill 36-Hour Course In Finance for Non-Financial Managers)
• Remember who’s boss. When I first started running the business, the field staff was telling me how to run the business. They’d say, “I’m not working on weekends!” or “You need to pay me overtime for weekend work.” I was inexperienced and I let people tell me what to do — the tail was wagging the dog.
• ** Staff with care.** Hire for people skills, you can train the rest. You want people that aren’t just looking for a paycheck, they have to want to be there. Give me someone that can effectively talk to people, I’ll teach them how to build a patio.
• Don’t be afraid to fire people. It takes a lot to make a business run smoothly. In the first year or two, don’t be surprised to see 300%-400% employee turnover. By your third year, you’ll figure things out and turnover will drop to 10%. If someone isn’t working out, let them go — it’s better to be short-staffed than to give bad service.

That’s pretty much all there is to it. When in doubt, just remember that being successful is really about doing a few simple things right and learning from the mistakes you make along the way.

The economy is in shambles, real estate valuations are tanking and most “brick & mortar” business models depend on unpredictable things like weather and fuel prices — add all that up and you’ve got a recipe for tight margins and bankers that are unlikely to lend to you. No big deal though, keep reading to get my best advice for first time buyers — though not easy, it is possible to make a good deal on a business, even in today’s market.

KNOW THE LOCAL CONDITIONS

You don’t need me to tell you that the real estate market is — how should I put this — shitty. The same thing that happened in subprime home lending happened in the commercial property sector, the property values were (and, in some cases, still are) inflated. Take a brief look at BizBuySell and you’ll notice that a ton of businesses are for sale. As someone who has been checking the site regularly for months, I can tell you that the number of listings on there have steadily increased over the past few months.

You can spend $15 million to buy a chain of pizza shops in the DC Metro area or $400,000 for an equivalent business in rural southwestern Virginia. The key is to understand that virtually every sale is happening at a steep discount from the list price, just as in the housing market. There’s plenty of inventory and lots of time to shop around for the right fit. In one case, I called up a car wash listed for sale at $5 million — the current owner dropped the price to $1.7 million on the first phone call. (If you know of a better way to save $3.3 million in 15 minutes, I’d love to hear it.)

The best strategy for a first-time investor is to buy a business in a familiar geographic area and be wary. Have a realistic understanding of the business’ competitors, challenges and potential. If the seller’s (or your) business plan calls for substantial improvements or, more commonly, raising the current prices, make sure the business is still appropriate for the area. (e.g. Don’t buy a car wash 30 miles outside a big city, build the most luxurious customer waiting area and expect customers to come running.) Most importantly, make sure that your business plan makes sense even if you’re not getting as many customers as the current owner is.

One more thing: More isn’t always better. An attached retail store, gas station or anything else along those lines is just an added complexity that the first time buyer should avoid like the plague. You’ll probably pay higher property taxes, more insurance and have the headache of dealing with more than you can probably handle the first time around. (It’s common practice in gas stations and laundromats to have other businesses sub-leased inside the main property — if you encounter this, run the other way. A good example of this: laundromats that sub-lease space inside the building to a tailor.)

JUMP THE FINANCING HURDLE

First things first: there is no such thing as 100% financing in the commercial world — plan on putting in at least 20% down on most deals. Taking today’s credit markets into consideration, first time buyers should be ready for bankers to ask for up to 50% down payments on some deals. Yes, it sucks, but it does two things:

1. If your business plan turns out to be too aggressive (i.e., you’re not as successful as you anticipated), having the additional equity gives you a smaller debt service payment while you work out the issues.
2. Lenders are more likely to give you the loan because you’ve got more of a stake in the business.

Fight the urge to borrow more than you need, even if the lender wants to give it to you. (Yes, this happens more often than you would think.) Start conservative — you can always re-do the marketing materials or buy more advertising later. The key here is to simply get into the business first and get a handle on what you’re actually working with. You don’t want to put yourself in the position where you spend $25,000 on some huge improvement but you’re still underwater in terms of revenue.

Rule of thumb: Always, always, always keep the seller’s skin in the game by asking them to privately finance some portion of the deal. Of course you’ll want a lawyer or accountant to review the terms of the deal, but you’ll thank me later if you find out that the previous owner “massaged” some of the revenue or expense numbers. Believe me, this happens much more than you think. (A friend of mine bought a service company in the DC area a few months ago. Three months after taking over the business from the previous owner, she realized that the revenues were nowhere near what the previous owner had disclosed. Luckily, the previous owner had financed 20% of the deal — when my friend had her lawyer contact the previous owner to understand why the revenues weren’t adding up, the guy simply offered to “forget” about the 20% loan he had made to my friend.) Owner financing helps keep the seller’s skin in the game — don’t forget that.

FIND THE HIDDEN COSTS

The business plan is only a small part of the ownership equation. If you’ve never been in business, you need to educate yourself about the things that can and do go wrong. If brick and mortar businesses were really as simple as most people think, more people would be doing it. Keep your eyes wide open.

The most common hidden costs are dependent on the type of business, but here are some examples:

• Golf courses are heavily dependent on weather. Get a few consecutive rainy days, common in the Northeast, and you’ve got a cash flow problem.
• Car washes need some pricey maintenance every few years. If the previous owner “can’t find” the maintenance records, you should run away screaming.
• Laundromats suffer from vandalism more often than you would think. The previous owner should have invested in a video surveillance system or, alternatively, should provide you with a list of equipment that had to be repaired/replaced in the last 12 months.
• Lawn care businesses need fertilizers and other chemicals that are oil-based — you’re at the mercy of oil prices. Good luck to you.

From my own experience, I’ll tell you that the most stressful times you’ll face are going to be related to hidden costs. Spend the time up-front to discover the hidden costs of any business you’re looking to get into — you’ll never be prepared for 100% of them, but it’s your responsibility to discover anything that the previous owner might be hiding.

PUSH THOSE ADD-ONS

Most first time buyers buy a bar or some other business because they got caught up in the romance of it and forgot to pay attention to the fundamentals. Never forget that, as a private business, your business’ goal is to make money.

In addition to the heavy lifting that comes with managing any business — agonizing over profit-and-loss statements, meeting a payroll, and deciding how much to spend on improvements — understand that running a brick & mortar business is more than just about your primary product or service. I’d say that 99% of businesses out there have a secondary product or service that can contribute a huge amount of revenue to the top line — if you own a golf course, you should be pushing food and beverages. (After all, what kind of golfer says “Oh, I’ll just grab a beer at home once I finish off these 9 holes.”)

Most first time buyers don’t have a problem identifying the business’ secondary products and services — but they do underestimate the time and hassle involved with getting the liquor licenses or negotiating contracts with distributors.

DO YOUR RESEARCH. AND THEN SOME.

If you remember nothing else from this post, understand that you’ll never finish doing your research. The absolute best way to make a better deal is to know what you’re getting yourself into. Here’s how I do it:

1. Go to BizBuySell and do a search for the type of business you’re interested in.
2. Contact 10 of the brokers and sign their non-disclosures.
3. Read the sales documents and compare the business’ financials.
4. Pat yourself on the back — you just learned more than most people and you spent nothing.

Be patient, do this 3 times (yeah, you need to look at ~30 deals) and you’ll be in a great place to pick up a business of your own. Once you’ve looked at the financials of a few businesses, you’ll start to see some patterns emerge and you’ll avoid getting suckered into some shady deals.

Update: Here’s my next post on how to actually run a small business.

The Milgram Experiment

The Milgram experiment was a series of social psychology experiments which measured the willingness of study participants to obey an authority figure who instructed them to perform acts that conflicted with their personal conscience. In Milgram’s own words:

I set up a simple experiment at Yale University to test how much pain an ordinary citizen would inflict on another person simply because he was ordered to by an experimental scientist. Stark authority was pitted against the subjects’ [participants’] strongest moral imperatives against hurting others, and, with the subjects’ [participants’] ears ringing with the screams of the victims, authority won more often than not. The extreme willingness of adults to go to almost any lengths on the command of an authority constitutes the chief finding of the study and the fact most urgently demanding explanation.

The results: 65% of participants administered the final 450-volt shock to another person — simply because an authority figure told them to do it.

Milgram says it’s our deep-seated sense of duty to authority. We’re trained from childhood to respect authority, and the obedience that comes with it stays with us throughout our lives, even when we feel something may not be quite right.

Dress the part

Our deference to authority is driven mostly by perception. That’s why a lab coat, police officer’s uniform or $4,000 bespoke suit alone can facilitate influence over or control of others. We even act differently toward other people depending on our perception of their authority level, sometimes even adopting their mannerisms and speech patterns.

Everything else being equal, context matters more than actual content. In other words, if a person is perceived as an authority figure, what they say is taken at face value and accepted as fact more readily. It helps someone bypass otherwise common objections. Building authority is therefore crucial to building a business, especially if you are selling services or knowledge products.

Next time you’re heading into an important meeting or simply trying to make new friends, take a minute to look in the mirror — what are your clothes actually saying about you?

Even Hyundai’s doing it — in their most recent ad, they noted that the new Genesis sedan ($33K) has the same sound system as a Rolls-Royce Phantom ($300K+). “If you’d rather have money than a hood ornament,” goes the ad, the Genesis may “look even better than a Rolls-Royce.” *Nice. *

At the end of the day, the ‘I-buy-it-because-I-can” mentality is dead. No one wants to look like the idiot who bought something because it’s expensive anymore. **If you’re selling to this market, you should be focusing on practicality, value and durability. **

Focus on hitting singles and doubles. Home runs don’t happen every day or even every decade.

Everyone knows Tiger Woods is the greatest golfer ever and most people attribute that success to something vague and intangible, like talent or sheer luck. But, did you know that Tiger works out every day, runs for miles and wins less than 50% of the time? Did you also know that he started golfing when he was 3 years old?

Tiger learned to swing the club consistently — he had to learn to connect with the ball and make it go where he wanted before he could win any tournaments. These were his “singles and doubles.”

**The things your business does on a day-to-day basis are your singles and doubles. **Use metrics to incrementally improve them.

I don’t blame people for ignoring metrics — it’s only natural to push this stuff to the end of your task list when you’ve got a million other things to do. A few years ago,* I did the same thing*.

It’s easy to get overwhelmed by the numbers, but the key to successfully taking your business to the next level is understanding how to prioritize the metrics that directly impact your success. At the end of the day, you only need to build the metrics that enable you to grow your offering, whether it’s a product or service, by hitting a number of singles and doubles.

Two types of business metrics

1. Operational Metrics. These reflect the things that your business cares about on a day-to-day basis. Inventory, cash flow, net new customer counts, etc. You alone are the expert at your business, take a minute to write down the numbers that are important to you.
2. Investigative Metrics. These are the numbers that you’re curious about. Which product/service do most of my customers buy? Where do my customers typically come from? You get the idea.

Metrics: Where to start

When it comes to metrics within the context of the small business, the general rule of thumb is that you only measure what you intend to improve upon. So, ask yourself some of these questions:

1. What are your current goals for the business?
2. What assumptions are you making?
3. What key metrics will help you track the progress towards the business’ goals?

For most of you, the best place to start is by setting up your operational metrics. This gives you a handle on where your business is on a day-to-day basis and, more importantly, helps you start hitting singles and doubles.

Breaking News: No one can create the perfect plan to get ahead.

If I could tell you the specific steps you need to take in order to get ahead and promise that you could succeed 100% of the time, you’d love me. But, I can’t. The specific road map to successfully (and consistently) grow your business just doesn’t exist. You can’t predict the future; otherwise, psychics would be billionaires.

So what can you actually control?

Your odds.

Most people succeed because they hit “singles and doubles.” These people understand that this is the single best way to make your odds of success better — you can’t hit a home run without first learning how to hit the ball in the first place.

Rather than looking for the next idea that’s going to make them an overnight success, the best entrepreneurs spend their time improving the fundamentals of their business using metrics. By learning how to consistently hit these singles and doubles, these entrepreneurs set themselves up to knock a home run out of the park.

The bottom line

Don’t waste your time or money by searching for home runs. Use the right business metrics to focus your efforts on your business’ singles and doubles — this will inevitably improve your odds of knocking one out of the park.

Don’t waste time making things perfect — follow best practices and move on. As a rule of thumb, it’s better to do something, anything, rather than sitting around and waiting longer. Follow best practices, then move on.

Build momentum by accumulating small successes. That first thing you do – from start to finish – serves as a model for you to do subsequent things. From there, repetition breeds ease: **

Do one new thing, do millions more.