Learn how Nathan Barry grew his business by teaching what he knew, taking advantage of big competitors, showing up every day for two years, and treating direct sales as the answer to everything. Brought to you by Vettery.
What's up everybody? This is Courtland from IndieHackers.com, and today I've got a very special guest on the podcast. I'll be 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 in about two years. So he's somebody you're really gonna 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 at 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 your advantage to grow your business even faster. He also talks about how direct sales are 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 found of ConvertKit. So you started a software business, your product's taking 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 Vettery comes in. Vettery, 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 are getting paid, so you can make the right offers and build a great team. It's available to Indie Hackers listeners for free at vettery.com/indiehackers. Again, download your free engineering salary report at vettery.com/indiehackers. Cool! I'm here with Nathan Barry of ConvertKit, thanks so much for coming on the show, 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 built for the content-creator, rather than, you know, for the generic business that could be anything from, I don't know what, a -- 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 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 $0. 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 Baremetrics 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, before this conversation, went back into my Gmail, and I googled Nathan Barry, and my first email from you was October 2013. So after you'd 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 Baremetrics is 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 was to share the metrics publicly from the beginning. Or, as close to the beginning as possible. So our Baremetrics dashboard has been public since when we were making $2,000 a month in revenue. And so it's not like a, you know, bragging, well, things are going well type of idea. It's that, no, 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 were doing when there was really no guarantee of your success is really cool. And I think, you know, there's some risks there, cuz I've done the same thing with Indie Hackers, and 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 ConvertKit story, can you give us, kind of, an abridged version of how you grew ConvertKit 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 in user experience design and building web and iOS applications. And then I'd gotten into teaching that, so I wrote a couple books on how to design software, and then was using email marketing to sell that software. Or sorry, to sell those books. And I wanted to get back into software. So ConvertKit started out as something I call "The Web-App Challenge". And that was basically, hey, I wanna get, I wanna 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 1st, 2013, and my goal is to get to $5,000 a month in monthly recurring revenue by July 1st, 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 to fund the development with that. So that was the goal. I blogged about it all publicly, you can go onto NathanBarry.com and read posts about how I chose the name, how we acquired the domain name, how I found the developer, et cetera, and then six months in, we had made progress, but we were sitting at 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 is not bad, even though, officially, it's a failure. And I kind of expected that we'd just kind of make this slow, steady progress, going from 2,000 to 3,000, and it might take another six months before we cross 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, so I was just splitting my time, and fast forward, like, a year later, ConvertKit hasn't grown at all. In fact, it's actually shrunk a little bit, I think it was down to, like, $1,700 a month. And I was talking with a friend of mine, his name's Hiten Shah, and he's very involved in the SaaS world, if anyone knows Kissmetrics or Crazy Egg, those are both companies that Hiten founded. I was talking to Hiten as we were walking back from dinner at a conference, and he just said, you know, I think it's time that you shut down ConvertKit. And first, that's not a nice thing to say to someone, like, hey, this project that you've put all this time into, you should shut it down.
Yes. That honesty is pretty important though. Cuz 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 Hiten was just like, meh, shut it down. You'll be successful at whatever you do, you've put in a good amount of time into ConvertKit, you've tried, you know, you're 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 kinda 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, we're at October 2014. The revenue's declined down to $1,300 a month, and I just had this decision, shut it down or double down. And, you know, I had a whole framework for it, that's all on my blog if you go to NathanBarry.com/quit you can read the whole post I wrote about that. But basically, I decided to double down. And so, I put my other business on auto-pilot, 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 over the last two years or so, is ConvertKit went from 1,300 a month to 1,600, 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 late, based on the original goal! But then that 5,000 turned into, you know, the next month it went up to six, and the month after that it was eight, 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. Cuz people would refer, 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 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 through to 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, 5, 6% monthly churn, you start to really feel it. Like, now at this point it's over $1,000 a day in churn. And so, like, that's out 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, you know, we pulled off, like, 37, 38,000 of net growth after churn.
It sounds like there's really two phases to the ConvertKit story, there's this kind of, the first two years, where you went from zero to 5,000 in revenue, 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 doubled down on ConvertKit, and ended up building a humongous business in 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, we'll have to bribe you to come back onto 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 on the very last day of 2012, you wrote this blog post saying, hey, here's what I'm gonna do, I've made a lot of money from book sales, but I wanna make recurring revenue so I'm gonna start a software service application and try to do that. And as you mentioned, you set a deadline to hit $5,000 a month in recurring revenue in six months. But you're starting from scratch, you didn'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, cuz I wanted to give myself an extra day. Because, you know, use all the time you have. And, let's see, immediately after that, I started working on coming up with ideas. Once I put it out there, hey, I'm gonna do this, I'm gonna do it in public, you know, what I did immediately after it was I probably responded to all the comments on Hacker News and, you know, all the distraction from Twitter, people going, like, wow, this is so cool that you're gonna do this! Cuz you get caught up in, like, yeah, it is so cool that I'm going to do this! And you know, 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 you Web App Challenge post, and there's all sorts of influential people who I follow on Twitter now who commented on it, so, David Hauser, the founder of Grasshopper who I interviewed for Indie Hackers in January commented, Mubishar Iqbal, who was Producthunt's Maker of the Year for 2016, commented on your post back in 2012. Justin Jackson, who I'm talking to for Indie Hackers this week, even Amy Hoy was helping you out back then. So I'm sure it was super distracting just talking to all these people.
Yeah, so the first thing that the web app challenge helped me with was, by publicly setting a goal on where I wanted to go, and that allowed a lot of, you know, 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 know? You're like, well, here's another bit of start-up 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 gonna fizzle out and never follow 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, Hiten Shah and Amy Hoy and others that I don't think would have been available if I'd 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 had this kind of track record of launching your books too, so people knew that you weren't, you weren't just messing around. You were actually serious about getting things done. And I think, you know, in my experience, I've seen people kind of fall into one of two camps, where you've got some people who have a lot of trouble with, like, motivation or finding the time or the money to get started, and then you've got other people who are pretty good at getting started, and they just need 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 ConverKit? Cuz, like I said, you had no idea what you were even gonna work on, January 31st, or, December 31st of 2012. How long did it take you to come up with the idea for ConverKit, and how did you go about validating that idea?
Yes, so initially, I was trying out this concept called Idea Extraction that I first heard about from Andy Drish and Dane 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, that maybe you could build the industry version of, maybe it's Basecamp, 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, I actually don't remember if I published notes from that or not. But then, at the same time, I heard from people like Amy Hoy and read stuff from the guys at Basecamp, and they're saying, you know, scratch your own itch. And one thing, like Amy Hoy said two things to me that stood out. One was, do you really want to spend the next five years, or 10 years, working with real estate agents? Are you passionate about the real estate space? Or, you know, fill in the blank with any random space where you think you can solve a problem. And the answer's, 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 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 onto 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. 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 thinking about ideas in this time period, huh.
Yeah, and, you know, responding to comments on Hacker News, cuz that's important.
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 here you were going to create a MailChimp competitor that was basically starting from scratch. Did that worry you at all?
No, cuz 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 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 an Uber's asking what I do, then, you know, I always say, well, you do email marketing for professional bloggers, and then I might ask, have you heard of MailChimp? Cuz that gives a nice frame of 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 MailChimp is the biggest, but not even by that much. Like, they put out, this last year, or 2016, I think, 400-million in revenue. And Campaign Monitor announced that they did something like 200-million in revenue. And so if Campaign Monitor is doing that well, and then like AWeber, for example, this isn't based on a ton of facts, but I'd estimate their revenue is somewhere between 40 and 60-million a year. And then we haven't even gone into ActiveCampaign and Drip and Mad Mimi and, you know, I could sit here and 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 that 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. It's also pretty cool, what you mentioned earlier, that having kind 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, they're already ready and conditioned to buy, because they know what MailChimp is, and because they 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, where I was having to tell people, this is the tool, and 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 fun of everyone who says, like, I'm building the next Uber for this, or AirBnB for that. But like, it's a useful tool, or a useful, like, mental model, to help people quickly know what you do. And so I can just say, yeah, we're building MailChimp for professional bloggers, or I could bracket it further for someone who knows the industry better, and I could say something like, ConvertKit is the power of Infusionsoft 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 days, 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-- 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 then so I got 10 people who did email marketing, you know, pretty well, and these were people like Josh Kauffman, who wrote the book, The Personal MBA, 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 you know, I'd known him years ago, before he started that blog. And then like Hiten Shah from Kissmetrics 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? And they would kind of describe it, and then I'd ask these two more questions that I learned from Andy Drish, and that's 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 really a pain to set up auto-responders, 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 get to the real pain and frustrations to solve.
So the goal is kind of to keep them talking rather than directing the conversation yourself.
Well yeah, you direct the conversation by asking questions rather than making statements. Cuz too many people are just listening for the slightest door to open, so 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, kinda 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, like, 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 two or three hundred dollars a month. And it usually just depended on their business. And then from there, the next question that I asked was, actually, I stopped at that point, you know. 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 the time so I went off on my own and, you know, kinda came back and, well, I went off and started building the product more. Because I had these wire frames, but actually 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, will 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? Sure, 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, 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. Cuz it kind of brings them into it slowly. Like, would you buy this, and they're like, yeah, cuz people do think through it. Is it 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 a little Square reader plugged into your phone, or you could do it online with, 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. Cuz when I went back to get people to, out of those 10 people, all of whom said they would pre-order, only one of them actually did.
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 customers, since the people that you were confident that would buy ended up not buying? Or did you kind of go along with the fact that 30 or 40 people on your mailing list bought and thought, you know what, I'm onto something regardless, and so, full steam ahead?
Yeah, so, the people I was talking to for the pre-sales, those were all, like, higher-end accounts, those were all people who had 5,000, at least, maybe 5,000 to 100,000, eh, 5,000 to 50,000 email subscribers already. And so I kinda 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 500 or 300 or 1,000 email subscribers. And so I kinda made that pivot, and we basically spent the next two years focused on beginners,
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, cuz you can't actually offer the best product 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 product or the best functionality, so you have to compete on a great user experience, and then on fantastic support and a great onboarding experience. Like, all the intangibles of hey, 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 a $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, when I started to focus full time on ConvertKit, two, almost two full 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 coaching and expertise, and, oh, you have a course launch coming up to your 10,000 subscribers? Well if you're using ConvertKit, why don't we get on a call and 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, cuz, like, MailChimp can't ever compete with me on that. And they have no desire to. And that only pays off when you go after larger customers who are already successful. And the churn'll be a lot lower.
So at the end of June in 2013, you'd basically reached half of your $5,000 goal, you hit, you know, $2,480 a month or something in that ballpark. What do you think were the biggest reasons 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 that would love to be able to hit that goal, and it's not nothing.
Okay, biggest reasons I 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, cuz effectively I just needed to double the number of pre-orders or double the number of people I was reaching out to, like that kind of thing. But that's a tall order to do while building a product. I really think that, for where I was at, the $5,000 a month goal was a little too ambitious. So I actually felt pretty good about reaching $2,500. And maybe someone who is better at outreach, better at marketing, et cetera, 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 theoretical blog posts. Like, if this were to happen, then you should do this. And instead, I just said, hey, this is what I learned last week, this is how I picked the domain name. Oh 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 so that story that went all the way through, people really liked that and that got attention and that helped a lot. The other things is, there's a bunch of stuff I didn't waste time on. So, for example, ConvertKit didn't have a logo for probably the first, I'd have to go back and look at it, maybe 2.5 years?
That's so funny, cuz I've talked to so many companies who have that exact thing, where, yeah, we didn't have a logo at all, and it's like pretty consistently the companies that do the best go the longest without a logo.
Yeah, and there's probably like a survivor's bias there, cuz there's someone else who's terrible at design who's like ah we don't need a logo, screw that! You know, and then their business fails and we never hear about it. But at the same time, it wasn't just a logo, it was business cards, you know, we didn't have business cards. I'm trying to think, we were probably doing 25 ... No, when did we do business cards? We were doing well over $100,000 a month in revenue before we designed business cards.
So, I just didn't waste time on a bunch of nonsense that didn't matter.
That's the end 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 ConvertKit, and I've got 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 ConvertKit. And it was a 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, that's when I started following you, it was like, the first email in 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 two, I don't know if, they're not really core values, maybe they're mottos, at ConvertKit. And they're basically the secrets to growing an audience. There's actually three of them. And they're, if we're doing a video call, you see them as posters in the wall behind me. 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 was, you know, I wrote about design, I wrote about what I was working on that day, you know, as I'm building ConvertKit, 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," 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 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." And I've also heard this phrased as "Show your work." So if you've ever, you know, going back to your original, like, math homework 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, if you want to do that in business, where you don't just want to say, hey, here's how we got to 500K MRR or whatever, you wanna say, you wanna 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 or that in customer support. We're trying to be transparent about everything, because that, combined with creating every day and teaching everything you know, 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 a month, and launched it in 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 that's pretty much all it takes. And that consistently just has to be over, like, two or three years, not like consistently over two weeks like most people seem to think it is.
Yeah, I've heard it said, I think I saw a quote on Twitter the other day, that people greatly overestimate what they can do in a week, and they greatly underestimate what they can do in a year. And I find that to be extremely true, because people always make these ambitious plans about, you know, what they're going to do in the next month or two. But going back to your three principles, all of those are dead on, and I find 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 this kind of weird, negative 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 that 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. Teaching what you know, a lot of people I talk to 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, then you probably have something that you know that at least 50% of the population is 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 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 people who aren't working on that stuff, or maybe who are, but to 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 about how they did what they did, and they dive into the specifics, it's always way more popular than people who are just, very press release-y and just say, oh yeah, we're doing this and we're so great, we made this much money, and it's just because we've, you know, did hard work. I think it's, there's something about diving in to the specifics and showing people how you got to where you got that really resonates with people, and it's why I always recommend that people actually start a email list or blog 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 that things that they're working on, and I can tweet just random stuff. I can tweet, hey, here's how my affiliate marketing links are going, or, 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 in whatever area that they like.
You know, I want to add to that a little bit. You said people refer to having an audience as 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 to 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 list of 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, like, in your case, if you do something after Indie Hackers, you have this email list and 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, and the audience that you built now. And so I think everyone should do it.
Exactly, if you can cheat, why would you not cheat?
Right, especially cuz you're doing it in a way that helps everyone who comes after you.
Like, we ran into this, you know, I actually run into this probably every couple of weeks, where someone's like, you are an idiot for having your Baremetrics totally public. Like, all your competitors can go through that, and they can see exactly what your churn is, they can see which plans your churn 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 for your numbers to be public, you should really shut that down. And I thought about it for awhile, and I actually thought once we hit 100K MRR we would turn off the public metrics. And the reason is cuz I was thinking, you know what, it's not that helpful to beginners anymore. And it's not as helpful to the masses, because 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 Baremetrics 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 ConvertKit, 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. In a way, that's also self-serving, because people are also inspired by and wanna talk about the companies and the people that helped them. You know, I'm having you on this podcast in part because you've been so transparent about ConvertKit, and part because everyone 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. You're giving them information, but ultimately, if the competition is just following in your footsteps and copying what you're doing, then it's not a bad position
So, ConvertKit 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 writing more ebooks, Authority and other things, and promoting those, and working on other projects, and it wasn't until your conversation with Hiten Shah that you decided, hey, I'm gonna double down on ConvertKit and actually grow this into a big business and focus on it 100%. And one of the parallels that I've noticed between both the early phase of ConvertKit and this later phase, high-growth phase of ConvertKit, is that they kind of started in the same way, and that's with direct sales. With both businesses, you're actually, or both times, you're actually finding target customers and people that you wanted to be ConvertKit 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 with similar problems to me, similar problems to these first few customers, related to email, and that's a very generic thing. "Email marketing for people who have problems like Nathan" is 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. It ended up that, you know, after two months or so of that we decided authors is the wrong term to describe who we were trying to reach. A lot of people who had self-identified as authors were like, in the category of, "some day 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 I was trying to reach were like the course creators and the professional bloggers and, you know, the people who were making 100,000-plus a year off of their audience, sites. And so we played around with a bunch of 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 could 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. Then it made it easier to get into calls, because people were 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, you know, 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 that 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 evaluate it from a distance for very long. So, for example, with authors, I thought that was going to be the best, or a 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 had 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 a distance, I think you probably need to pick one and dive in, and then, conveniently changing your tagline on a website is really easy to do. So if at first you don't 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 ConvertKit is for 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, our thing is for everybody! Or, you know, anybody who needs to send email can use our product, it's easier than the competition, or it's better-designed than the competition, or it's cheaper. Why go after a specific niche rather than advertising based on these 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 could 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've seen a ton of people not getting any traction because they're going too broad.
It's almost like, charging money, people tend to underprice their 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. You'll have traction and you'll know how to talk to them. Cuz, 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 paleo recipe blogs to the slow carbs recipe blogs. 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 ConvertKit. 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 come anywhere close to saturation. And we're so far away from that, that 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 believed 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 in 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
Yeah, I think that, so we have 12,000 customers. I think that about 5% of our, like, potential market within professional bloggers even know that we exist. So not that we have 5%, or 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'll probably make you mad because I know about ConvertKit, and I knew about ConvertKit when I started Indie Hackers, and for whatever reason I just 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.
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, guaranteed, switch pretty soon, and I know it's gonna be super simple to do. Anyway, so you've ended up growing ConvertKit 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 I'd ask people, how'd 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. You have to, something has to kick-start that. And so what I'd 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 the word of mouth started to really kick in. So yeah, that drove a lot of growth.
I think that's interesting because 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 a normal person, are the businesses that are most successful, because their names are everywhere, they're huge, they're well-known. And so people 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 their pretty late stages, so they're pretty advanced. And so they see something like, you should grow via word of mouth, and look at Coca Cola, they've 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 what exactly you can rely on in the late days. And what I found is the early days almost always come down to, like, a lot of hard work and 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. Direct sales is too much work, I have to talk to people, et cetera, but with content marketing, what happens, if you're selling through that channel, people are rejecting you every day, and not telling you why. Because if I go to your blog post and it's saying, it's teaching me some great stuff and then it's saying, hey, this is why you should buy this product, and I go, eh, 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 say, hey, will you buy ConvertKit? You can't just like awkwardly walk away. You're socially obligated to respond in some way. You could say, oh, well, I'd like to but I find it really busy, or does it have this feature, or et cetera, 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 will 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. 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 content marketing is 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, professional bloggers seem to be the most enthusiastic about my product, and seem to have the most reason for using it, and here's the problems that they have as evidenced by my conversations with these 10 professional bloggers, then you're better-equipped to write a blog post that's actually going to appeal to people and get them to buy, anyways. So no matter how you slice it, even if you want to do content marketing, starting with direct sales is probably the way to go.
Yup, I think so. And everyone says, 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 more of a broad perspective, and I just want to ask you, 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 to something huge, and Hiten Shah, when he suggested you shut down ConvertKit he told you, hey Nathan, whatever you do, it's gonna be successful, so just work on something else. What do you think it is that enables you to be successful at pretty much anything you do, and 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 to other people that are perhaps starting out, or who are perhaps not as successful, who 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, um ... My friend Sean McCabe, his stuff is at seanwes.com, he has this phrase, and I'm actually staring at a poster of it that he sent me, um. And 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, you know, Sean added this two years idea to it, because so many people are like, hey, I tried to start an audience and I just didn't get traction. And you're like, wow, did you work on it every day? And they're like, yeah! And I'm like, well, how many days in a row? Like, 30 of them! And, 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 gonna take time. Like, the first two years of ConvertKit, we had almost no traction. Like, two years in, that's when we made the decision of, should we shut this down? Okay, no, let's keep going. And, you know, I also had that with the books and courses and other things, and 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 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's at nathanbarry.com, Barry's spelled B-A-R-R-Y, and same, NathanBarry on Twitter, Instagram, et cetera. And then ConvertKit is just at ConvertKit.com.
Okay, thanks Nathan!
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