The surprising advice from a founder who built 2 unicorns | Jason Cohen (WP Engine)

A lot of product teams, a lot of founders build something, it starts to show some success and then all of a sudden it just stops growing.

>> There's a series of questions that I ask to diagnose why is growth slowing. The

first question is, are customers leaving? Think about the gauntlet they

leaving? Think about the gauntlet they went through to get to the product. How

do they even find out about me? That was

hard already and improbable. They didn't

just bounce off the homepage, which is again improbable. And they got to the

again improbable. And they got to the pricing page that didn't scare them off.

They actually had the budget and bought the stupid thing. And after all of that, which clearly means they wanted it to work, they're like, "No, buy what?"

Like, like just on an emotional level, you got to go, "Wait a minute, that's terrible."

terrible." >> Step two is pricing positioning.

>> Your prices are way too low because you just guessed and you haven't changed them. What often happens is you raise

them. What often happens is you raise prices and signups don't change. Just

think about a company with a,000 employees and 400 million in revenue or whatever. If they see a product that's

whatever. If they see a product that's $2 a month or even $100 a month, thought is like, "That can't be good enough." We

position this conversation as how to deal with stalled growth, but it's actually just as useful for how do I grow more?

>> Do you know right now which channels are saturated and which aren't? You can't

just rely on marketing forever. Just

adding one little feature and then hoping we can flog Adwords is not going to work.

>> What comes next?

>> The last question is, do you need to grow? We all have heard the phrase, if

grow? We all have heard the phrase, if you're not growing, you're dying. Is

that true or is that the kind of thing that investors use to make founders try to grow even when they shouldn't?

>> Today my guest is Jason Cohen. Jason is

a four-time founder, including two unicorns, one being WP Engine. He's not

just an incredible builder and entrepreneur. He's also an incredible

entrepreneur. He's also an incredible writer and share of product wisdom. He's

been sharing his advice online for over 20 years now. I've been a huge fan of Jason's from afar for so long, and it was such a treat to have him on the podcast. There are a million things we

podcast. There are a million things we could have talked about. I'm definitely

going to have him back. In this

conversation, we spent the entire time talking about his very actionable and a very helpful framework for what to do when your product's growth stalls. I

found his way of looking at the problem incredibly practical and real and actionable. And if you're looking for

actionable. And if you're looking for ideas for how to rekindle your product's growth or just accelerate the growth of your product, you're going to walk away from this conversation with your mind

buzzing. Also, I'll add that after 20

buzzing. Also, I'll add that after 20 years of blogging online, Jason is about to publish his very first real book.

It's called Hidden Multipliers. You can

now pre-order it online at hidden multipliers.com.

multipliers.com.

I am going to grab a bunch. I bet after listening to this conversation, you will too. If you enjoy this podcast, don't

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Jason, thank you so much for being here and welcome to the podcast.

>> Thank you. It's an honor to be here.

>> It's an honor to have you here. I have

wanted to get you on this podcast for so long. You are both an incredible builder

long. You are both an incredible builder and a founder and you are such a great communicator. You have been writing at

communicator. You have been writing at uh a smartbear.com which I want to get the backstory on for so long. How long

have you been writing uh there by the way?

>> Almost 20 years. I started when blogging was cool and I'm still I'm waiting for blogging to come back and be cool again but it's not yet.

>> I think it is cool when newsletters are cool now. Yeah,

cool now. Yeah, >> newsletters are cool.

>> I don't know if you saw Twitter now is encouraging long form writing. There's

like this articles feature. So I think it's cool. I think you've survived the

it's cool. I think you've survived the >> rough. Okay.

>> rough. Okay.

>> Uh I was also talking to Gemini trying to figure out how many posts you've written. I was like count the number of

written. I was like count the number of blog posts on a smartbear.com. How many

do you have a sense of how many things you've written on there?

>> Yeah, it's not that many. Uh it's

something like maybeund well I would say between 150 and 200 that I'm proud of and probably about 300 350 and that's it over you know about 18 years and that's

because I only write uh in depth some are long not all are long but none are short I guess and um I I've always had a rule even though you're supposed to write really regularly and not just for

algorithms but they used to say again back in the as where I started oh yeah it needs to be like really regular so people know when to expect your thing and they they plug it into their day and all this. So, it's always been true that

all this. So, it's always been true that you should be that you should be regular and I never was because my attitude was was always I will only put out stuff if if it's the best that I can do. It's up

to the reader to decide if it's good or useful. Um, and if so, if I don't have

useful. Um, and if so, if I don't have that, I'm just not going to publish.

That's the way it is. And so, there's years where I've published once or twice only the whole year. Maybe I was busy or didn't have the energy. other years were yeah I posted you know 40 times or something but even then it's only that

because I can't I can't do something of that magnitude and also found unicorns which I did during that same time and run them you know I can't do that all at the same time um and produce a lot so

it's fewer and hopefully better but that's in the eye of the reader of course >> I like when you say I've I've done 300 not too many >> well not for 18 years that right like over that time you >> but I think this actually this is where I was going to go but I think this is a

really important lesson I've also learned I always used to tell people the the key to being successful writing stuff online and just content in general is quality and consistency. But I've

just more and more realized quality is actually the only thing that matters and the consistency doesn't matter. So the

only difference is like the more rarely you write the more awesome it has to be.

It is a lot of pressure. I feel that and then I tell myself you that will just prevent you from writing anything and that's not good. So yeah, you tend to want every thing you make to be the best

thing you've ever made. And on the one hand, I want to hold on to that because it its motivation to be good and not to let the bar slip. On the other hand, it can go into paralysis, which is

obviously bad. So yeah, I still struggle

obviously bad. So yeah, I still struggle with that, but I think that's that is the tension.

>> Okay, so with 300ish posts, 200 you're proud of, there are so many directions we can go. There's a few that I've picked that I want to spend most of our time on. The first is you have a really

time on. The first is you have a really pragmatic way of approaching uh growth stalling. And the reason I want to spend

stalling. And the reason I want to spend time here is because a lot of product teams, a lot of founders build something, it starts to show some success there. It's it's going, it's

success there. It's it's going, it's growing, and then all a sudden it just stops growing. And I think that's one of

stops growing. And I think that's one of the most painful things to go through.

And there's never I've never come across a a way to think about how do I solve this because I think a lot of people are just like, okay, I guess that is not working. Let's move on to something

working. Let's move on to something else. you have a very specific way of

else. you have a very specific way of approaching this problem and I want to I want to read actually a quote from Will Smith and this is something that has stuck with me ever since I read it

because it's so true. So in his biography he has this line. People ask

him what's it like to be famous and his answer is becoming famous is amazing.

Being famous is a mixed bag. Losing fame

is miserable.

>> That's funny. So first of all, I think a lot of people are experiencing this right now. You have a lot of companies

right now. You have a lot of companies have reasonable products and they've they've their growth has slowed. Why?

Could be the economy because it's not as good as a lot of indicators say. We all

know that for example jobs are not as good as the indicators say. It could be because AI or the threat of AI or the expectation of the of AI blah blah blah.

Who knows? It also can just be size. As

you get bigger, growth slows because you know what? You're not going to grow 2x a

know what? You're not going to grow 2x a year forever. So it slows. um there's

year forever. So it slows. um there's

like just mechanical things. So there's

many reasons why things slow and sometimes it's all of a sudden although then maybe there's some event like an algorithm changes or you know something happens but actually I think what's really common is it just slowly gets

slower. In other words, it decelerates

slower. In other words, it decelerates but just it it kind of I don't I wouldn't say sneaks up on you because most people are looking at growth all the time. So, it's not sneaky, but it is

the time. So, it's not sneaky, but it is it is sort of um uh a little bit more gradual, right? Just like you just feel

gradual, right? Just like you just feel more like you're running through mud, like ah god, we're just still doing so much work and it's not having as much of an impact. And so, um that's what I see.

an impact. And so, um that's what I see.

And when I say that's what I see, so I've built four companies. The last one is a unicorn. The one before that was also a unicorn. The boot the the previous one was bootstrap. This one was VC funded. And I've invested in about 60

VC funded. And I've invested in about 60 startups. Some of them failed

startups. Some of them failed completely. Some of them were very

completely. Some of them were very successful, some in the middle cuz of course, right? Um, and uh, so when I say

course, right? Um, and uh, so when I say that's what I've seen, this is that's the the context of what I mean by what I've seen. So there's a there's I

I've seen. So there's a there's I wouldn't say a checklist, but there's a there's a series of of questions that I ask to to diagnose why is growth slowing in this order because it's one of these

things where the first one that's a problem, if you don't fix that, it doesn't matter if you fix one of the ones below. Um, just like if I don't

ones below. Um, just like if I don't know, maybe if you had a marketing funnel and there's a step where everything falls apart and you're like, well, I'll I'll just uh tune the bottom of it a little. It's like that's not going to work. It's not going to help

enough like you got to you got to go where the biggest issue is. So, this is in that sort of order.

So, the first question is uh is are customers leaving? I.e. logo churn,

customers leaving? I.e. logo churn,

right? Churn with N. You can do churn with MR2, but just for simplicity, let's say uh let's say with customers and it's the worst problem for a couple reasons.

One is there's nothing you can do about it once it happens. Like they're gone.

There's no saving them, increasing their revenue. Like there there's nothing in

revenue. Like there there's nothing in the future you can do. Also, it's often correlated with things like negative reviews or other things on social media, which is another kind of preventing

growth. So, it's kind of the two two a

growth. So, it's kind of the two two a two punch thing of like they're not here and they may be like actively hurting your growth. So, that sucks. The math is

your growth. So, that sucks. The math is undeniable, which I want to talk about because this is something where there's a metric I like that is unusual and um people find uh useful. But before I get

to the metric, there's also this kind of visceral thing which is the customers saying this product I don't want it. And

when I think about the gauntlet they got they went through to get to the product, they how do they even find out about me?

That was hard already and improbable that they see an ad or hear it and then they clicked which is improbable and then they they didn't just bounce off the homepage which is again improbable.

They actually were like oh yeah this sounds pretty good and then they got to the pricing page and that didn't scare them off. They actually had the budget

them off. They actually had the budget and bought the stupid thing. Then they

went through onboarding and invested their time etc etc. That is a crazy gauntlet that almost no one gets through. And after all of that which

through. And after all of that which clearly means they wanted it to work.

They're like, "No, bye. What?" Like,

like just on a just on an emotional level, you gotta go, "Wait a minute, that's terrible. I'm I'm fundamentally

that's terrible. I'm I'm fundamentally not fulfilling whatever promise I made or they thought I made, which is whether that's a product issue or a communication issue." Okay? Like there's

communication issue." Okay? Like there's

lots of But one way or another, like something is really fundamentally broken just in terms of like I'm a product person. So, what I want to do is make a

person. So, what I want to do is make a product that other people want to buy and use. And if they don't, like no

and use. And if they don't, like no matter what the metrics say, I'm, you know, I'm a I'm we're failing our mission, our customers, whatever. So

there's just even that non-mmathematical reason to go, oh my god. Right? So uh so to me that's already enough reason, but the the the math is very interesting.

And what I find is when I talk to people, especially on Twitter or something where people are just, you know, yapping around whatever they're doing, you you say thing I say things like, you know, anything above 3% per

month cancellation is is is terrible.

And people like, oh no, it's okay. Five

is fine, seven, six. Everyone's yapping

about what they and it's very abstract like who is four better much worse than five? Like I don't know. And I heard

five? Like I don't know. And I heard someone else and blah blah blah. So it's

very um I don't know like like generic and rough. So there's a different metric

and rough. So there's a different metric that I like to use which is uh- which which um which keys off of this idea that I think again people uh don't

appreciate which is cancellations grow faster than marketing and so cancellations overpower the growth of the company and slow it to a halt i.e.

growth slows right to where you literally cannot grow anymore. there's a

maximum ceiling of how big you could ever be thanks to cancellations. And

when you know what that number is, it's much more real and visceral and scary.

And so, just to kind of justify what I just said, just imagine any company and imagine you just tripled the number of customers that are there and paying and the same kind, the same age, you know, just the same kind of stuff just

tripled right overnight.

So, the next month, would marketing deliver more new customers than a month before? No, because marketing doesn't it

before? No, because marketing doesn't it none of your marketing efforts care how many customers you have. Adwords

delivers the same number of leads and you know SEO delivers the same like it does not care how big you are these these these efforts. So you're you're you're still going to be growing at the same rate as you were the previous

month, but cancellations in absolute terms like the number of customers who leave will triple cuz you have 5% cancellation and triple. Okay, so still 5% of a tripled number is triple, right?

Like so this is the point is that cancellations automatically grow as you grow. Even if you're doing everything

grow. Even if you're doing everything right, but marketing doesn't. Marketing

grows only as fast as you can improve marketing. We all know that's quite hard

marketing. We all know that's quite hard actually. It's linear. It's hard to find

actually. It's linear. It's hard to find new channels that aren't trivial. Like,

it's hard. Of course, we're going to do it, but like it it's hard. Whereas,

cancellations grow automatically as you grow, right? So, cancellations always

grow, right? So, cancellations always overtake marketing for this reason.

>> Like the metaphor here is a leaky bucket where are you adding enough water to keep up with the leak essentially, >> right? Except the leaks automatically

>> right? Except the leaks automatically increase and that's what people don't appreciate.

>> Because it's a percentage of your entire customer base.

>> Yes. See, we say when in marketing we say things like um I'm adding 100 leads a month, but in cancellations we say 5%.

Why do you say percent? Because it's

based on your size and it's exponential.

That's what 5% is an exponential. And

and so there's this maximum size you could ever be. It's when churn equals growth, right? Like that's that's the m

growth, right? Like that's that's the m So how would you compute that? It's

actually quite simple because let's say you have this 5% per month just as a number. So it's simply the amount of new

number. So it's simply the amount of new customers you add divided by that cancellation rate. That is the amount

cancellation rate. That is the amount that that is the limit. So let's suppose you add 100 customers a month and you have 5% cancellation. So 100 divided by

5% is 2,000. So a company like that will never have more than 2,000 customers.

And by the way as you approach that number growth is very slow because you bring in a bunch of customers and almost the same number leave. So growth is slowing. Ah, look, we diagnosed why go

slowing. Ah, look, we diagnosed why go slows automatically at all SAS companies. So that's is why this is the

companies. So that's is why this is the first thing because it's so it's such a hard cap limit and it means that people don't want your product. Like these are two reasons why it's the most important thing.

>> Just to clarify, this is logo churn.

This is like number of customers, not revenue churn.

>> Yeah. Well, it is both logo churn and revenue churn. You do the same math. You

revenue churn. You do the same math. You

could say dollars in divided by dollars cancellation rate or number of co I've been saying number of customers just to keep it simple because I think when when you look at it and say wow we will never

have more than 2,000 customers. It's

just such a like a like a visceral oh my god we had to do something about that.

Now of course one thing you could do is have more marketing but you know that already if growth is slowing you're already thinking how do I get more out of marketing. You knew that. The point

of marketing. You knew that. The point

is that cancellation is this hard limit pulling you down with all these other really bad either implications or side effects which is why it's so important.

>> Cool. And when you say marketing, just to clarify, this includes basically all growth work, PLG stuff, marketing, sales.

>> Y right.

>> Great.

>> Yeah. PLG is nice, but that doesn't you still need marketing to bring the people in in the first place. PLG just means there's not a salesperson unless you're expanding or some other segment.

>> Cool. Yeah. It's like the whole bucket of just bringing new customers in.

>> Yeah. Yeah.

>> So, okay. So assuming you agree like, "Yeah, I don't like customers leaving.

That sucks." Um, so obviously you got to find out why they're canceling and do something about it. And the the the kind of root issue here is they don't want to tell you like they're already out the door. They've already like stopped

door. They've already like stopped investing in you like mentally. So the

last thing they want to do is spend time with you or like really think about it and diagnose it with you. And uh I have a funny story about this for myself. So

um at Smart Bear, people would cancel.

We put up this uh form and and uh a drop-own list, you know, too expensive, it's project ended, you know, this stuff like we do so we could gather data and um one of them did have more uh more

selection than than the rest. And I

realized it was the first one on the list and I thought, huh, I wonder if people are just picking the first one.

So then then we randomized the list so everyone saw a different order of the list and now all the items were picked equally like, oh, right, it's complete noise. And uh I know other companies

noise. And uh I know other companies have done similar things also with the similar results that this is this is a global phenomenon. So okay so what do

global phenomenon. So okay so what do you do like the point is it's hard right? So the first thing is you want to

right? So the first thing is you want to ask open-ended questions. I I know it's you want to just get a list but this is the problem. At least with open-ended

the problem. At least with open-ended questions most people won't answer but at least you might be able to get some kind of thing that they generated. And

when you do this the the wrong way is to ask why did you cancel? Because again,

this allows them to say something really simple like budget, which may or may not be true. I'll get to that in a second.

be true. I'll get to that in a second.

What you want to do is say what made you cancel?

In other words, what about the product or situation or whatever caused the cancellation? Just phrasing it that way,

cancellation? Just phrasing it that way, you get much better results. And I stole this from a company called Groove, who has this great case study online about this very thing. They had an email that

they sent out, which is a very a great email. and um and they started by asking

email. and um and they started by asking why did you cancel? They got 10% usable responses. They changed it same email to

responses. They changed it same email to why what made you cancel and it's 20% usable responses. So this is this is

usable responses. So this is this is there's like I guess maybe some anecd as as far as you can into there because most people won't talk. The temptation

is to hear what they generate at first and say that's the answer. So like a really common one is it's too expensive.

I think anyone who's looked at cancellation data at any company will agree that too expensive is often the number one or at least like top three reason in one form or another. And that

is never ever ever the reason.

How do I know? Because they already looked at your homepage, read all the stuff, saw what you promised, looked at the pricing page, and decided to buy it.

That means it whatever was in their mind of what it is is not too expensive. It

was they already decided with their actions. It was not too expensive.

actions. It was not too expensive.

Something else happened like but you didn't fulfill the promise that at least they thought you made or something else didn't work or you know now it is possible they lost budget but that

doesn't mean you're too expensive. That

means they lost budget. That's a very different reason, right? That's not that you're So it's sort of like um this happens in um in healthc care for example. So when someone dies the doctor

example. So when someone dies the doctor has to write the what's called approximate cause which is what why did they actually die? But then you try to also write down the real reason. So

let's say someone comes in and they the approximate cause of death is they stop breathing.

Well, you could stop there and that's like listening to it's expensive and going that's it. Well, why did they stop breathing? Um because they they had they

breathing? Um because they they had they they uh ran their car into a telephone pole and were injured so much that eventually they stopped breathing. Well,

why did they run their car into a telephone pole? Because they passed out

telephone pole? Because they passed out at the wheel. Why' they pass out at the wheel? Cuz they had undiagnosed

wheel? Cuz they had undiagnosed diabetes.

Now we're getting somewhere. It still

isn't just one root cause. Another as a sidebar, I hate the idea of a root cause. Complex systems do not have one

cause. Complex systems do not have one root cause. They often have many

root cause. They often have many interlocking things that could be done to detect earlier or to change it or to reduce or and not one root cause. So

root cause analysis to me is by the way an incorrect thing. I'm explaining why right now with the healthcare, right?

Because well what about the second diagnosis? Well, maybe part of the

diagnosis? Well, maybe part of the problem is we have a health care system that isn't preventative and part of it is that but they didn't go to the doctor anyway and you know okay so there's all kinds of things that could be useful and interesting to prevent this or make it

better. That's the point. That's what an

better. That's the point. That's what an analysis should be is this array of things, not the root cause. Anyway,

something along the lines of undiagnosed diabetes is much more of a cause than stopped breathing. So, when we say uh

stopped breathing. So, when we say uh it's too expensive, and that's the reason you're making this fallacy. You

got to go into well, they wanted this stuff, but it didn't work with linear, which is what they use. It only works with Jira. And so, there's a lack of

with Jira. And so, there's a lack of integration. Now, maybe we should write

integration. Now, maybe we should write that integration, maybe we shouldn't. Of

course, it depends on how much we hear about it. And you know of course it's

about it. And you know of course it's going to depend on other things but that's the reason not it was expensive right and so so this idea of like getting into not even the root cause but

let's say rooter causes >> the root >> yeah the more root um I think some people probably say five wise and just paper over what I just said with that

and maybe so but I just you know let's not be so simplistic about that because again five Y sometimes implies that there's some root cause at the bottom of the wise let's be a little bit more Let's be a little more smart about that.

So anyway, these things too expensive.

This is not it. Maybe project ended really is project ended. Okay. But even

there I see just today today on an on a on an entrepreneur forum on on I am on someone said um yeah you know uh we're starting to see more people have project

ended as the reason. And so there's nothing we can do about that.

Now see that's incorrect. That's only

true if you only look at the approximate thing which is project ended. You're

correct that you can't make that project not end. Exactly. Yeah. Okay. But wait a

not end. Exactly. Yeah. Okay. But wait a minute. If your software was more

minute. If your software was more successful and the project was more successful, would it have have ended or is that actually an indicator that your product wasn't that useful or didn't do

its job? It's possible. Like in this

its job? It's possible. Like in this case, who knows, right? But that's

possible that it really is your fault.

Um, another example is but you picked what target segments you were going after. Did you pick like a market

after. Did you pick like a market segment that was easier to sell to but their projects end like small business and consumers where very often the small business does go out of business or the

project ends etc because when things are small they're they're you know have high variance and lots of things can knock them off the the path and so on. And so

is it your fault for picking the wrong ideal customer profile or target segment? And so yes, that one case of

segment? And so yes, that one case of that one project, it's not your fault, quote unquote. But by saying that,

quote unquote. But by saying that, you're you're you're just like ignoring the fact that there is maybe something to do about it. Now, all this is maybe.

None of this proves you should like change your market, right? But but the fact but when you say it's there's nothing we could do about it, you you are closing the door on these things that might be the right thing. And very

often, as I think probably a lot of people here on this on this listening to this know, the market segment you pick has a lot to do with your retention rate because everyone acts differently,

right? And so anyway, um, so I I know

right? And so anyway, um, so I I know it's it's a lot on this topic, but I just feel constantly people make this particular mistake of not not getting, you know, not just like abdicating

responsibility or just listening to the first thing they they hear and saying that's the reason and that's not right.

So that's that's the big thing about listening. Another thing is you got to

listening. Another thing is you got to ask when people are in trouble but not yet canceled. You might be able to save

yet canceled. You might be able to save them. You certainly can learn more

them. You certainly can learn more because you can talk to them like they're they're not shut off yet from you. So this might be they never

you. So this might be they never uploaded their data so they're not being successful. They are calling tech

successful. They are calling tech support too much. They're in trouble.

They're not calling tech support enough.

You know they they they're not engaged.

um they didn't log in for a while. Like

there's all kinds of things where where now of course this is all going to the details are going to depend on the product obviously but there are signals that are correlated with cancellation.

Now if you have a lot of data you can literally correlate signals with cancellation and try to extract that um you know you know precisely but even without data you can guess and guessing

and having a theory acting accordingly and as you get more data adjusting your theory this is a this is a wise way to proceed even without data. So, if you can catch them when they seem like they're off the happy path, they're in

trouble, like that's that's a better time to do it. And then the last thing I would say about about um about this detection is if you don't know what to do or all else being equal, then focus

on onboarding.

Um all almost all companies have a whole lot more uh cancellation in the first day, 30 days, 90 days, depends, right?

But the first period than the whole rest of the customer's life. And also small changes in the onboarding can have large effects on cancellation. Whereas later

on that's not necessarily true. It could

be but it's not necessarily true. So uh

a really dramatic version of this is if you've ever done YouTube videos which I I mean I know you have but if a listener has ever done YouTube video and you see the retention quote unquote of the of the viewer on a YouTube video, it has

this thing where it it falls like just so much you can't believe in the first 30 seconds and then if if it's a decent video, it'll flatten out as people you know decide to watch the video. So, in

that in that crazy looking curve, for the people that watch it for 15 minutes, maybe there's something you could do to keep a few of them staying to the end, but that's not going to change very much

how many people get to the end. Whereas,

like for me, I've only done a few, but I what what I see is about 50% fall off in the first 30 seconds. Well, if I can get that from 50% to 55% stay,

um, that's an additional and and at the end of of the line, I only have 20% still there, which is pretty good for a long longer video. But if I get it from 50 to 55, I might get it go from 20 to

25% staying. In other words, if I shift

25% staying. In other words, if I shift to 10% at the front, which maybe I could do, like I can't be dramatic, but maybe a little, then in the output, I might be able to increase it by 20 30%.

So that's a huge change. And so in the SAS equivalent is, as we all know, if they leave early, not only is it bad, but it's super unprofitable because you spent all this money to acquire them and then they never stayed around long enough to pay it back, much less to be

profitable. So if you can do a little

profitable. So if you can do a little bit in the onboarding or shift the onboarding percentage a little bit, it pays off enormously in revenue and profit over time by by uh by making them

successful. And uh so again, if you

successful. And uh so again, if you don't know what to do, onboarding is is a good bet. And even if you do know what to do, I'll I'll still bet that onboarding is a good bet for where to go.

>> Oh man, I'm so happy we're spending so much time on this very specific first step of logo turnurn because the way you described it is so visceral. You've

spent it took so much. It's like

impossible how far this customer got already. Like they are using your

already. Like they are using your product and understand it >> mostly and then they still decide to leave. so brutal the way

leave. so brutal the way >> and you're going to believe them when they say it's because of the cost, >> right? Like it just doesn't even make

>> right? Like it just doesn't even make sense when you put it that way, right?

>> So, let me uh let me kind of uh summarize the advice you shared here because this is so good. So, step one is look at logo churn. The way to understand and essentially to understand

how big of a problem this is and why you need to spend time here is uh look at this basically do the math uh what's how many new customers you're getting divided by the cancellation rate and that essentially tells you what's like

if that doesn't change what's the maximum number of customers you will ever have >> exactly >> that's going to be a sad number and then the question is okay cool how do I reduce the cancellation rate obviously as you said everyone wants new customers more new customers >> yeah and you'll I know you're going to

do that anyway but you got this cap >> exactly okay so the Okay. So, a few things you've shared here. One is

instead of asking people in option uh multiple choice, why did you decide to cancel? You make it free form and you

cancel? You make it free form and you make the question, how would you say it?

Was it what made you cancel?

>> What made you cancel?

>> What made you cancel? Great.

>> Yeah.

>> And then you could use AI to help summarize these things, I imagine, instead of >> Yeah. Um I think what I find with AI is

>> Yeah. Um I think what I find with AI is this with this sort of thing with surveys, um is this >> AI is good at picking out themes.

>> Yeah. It is bad at picking out details that are actionable.

>> When I say AI, of course, I mean LLMs, which is probably what we mean when we're looking at natural language, right? Um, and if you think about it, it

right? Um, and if you think about it, it sort of makes sense because the LLM is an averaging machine, right? It's

predicting the most likely that's an averaging kind of a thing. And so when what you're looking for is a kind of average, it's usually pretty good. So,

summarization, topics, themes. But when you're asking

topics, themes. But when you're asking for like what is interesting and not average, it's actually pretty bad at it.

One uh one way that I found that's sort of useful is yes, I'll ask it about themes, but then I'll say now pick out every specific detail that goes under one of these themes, put it along with

like which customer said it and the link to, you know, blah blah blah. So, you'd

have to, you know, play with this to tune it, right? But like that kind of thing so that a human being can then still see the detail which is what triggers in your mind. Wait a minute but that means we should do that right cuz

the topics won't do that. The topics

will be I already know what the topics will be. It'll be stuff like I couldn't

will be. It'll be stuff like I couldn't figure out how to do this this integration right like the the the topics are actually not going to be that surprising probably. It's the details

surprising probably. It's the details that are going to be the triggers for action actionable stuff or patterns or something like that. So yeah, AI is not

useless, but it's not as useful as it sounds. It's probably still a good idea

sounds. It's probably still a good idea to just read all this stuff. Although AI

might be able to clean up, you know, maybe people's grammar is bad. It's a

weird language. Okay. Yes. Like that's

annoying. You could clean that up, but I wouldn't rely on AI to do the thinking for that reason.

>> That's such such good advice. I actually

have a really cool guest post coming out soon that gives a bunch of really specific techniques to avoid AI uh hallucinating or just giving you really

bad uh results from this very specific synthesis work because it turns out AI is very uh not great at actually being honest about some of the stuff. So

>> we'll link to it if it comes out before this. And like I think in real life most

this. And like I think in real life most people don't have that much the volume of these cancellations unless it's like a super consumer app is not that high.

So, you don't even need AF for this.

Just like read it. And then this is a good segue to your next piece of advice, which is uh essentially the five W's, but not the five W's where you kind of force yourself to dig into what's the real reason that forced them to cancel.

It's probably not pricing. It's probably

not the project ended. There's something

deeper.

>> Yeah.

>> And then, uh, advice number three is try to catch people early. Try to catch them before they turn. If you don't have a lot of customers, it's a lot easier. If

you have a lot, it's obviously harder.

Uh there's always been this like holy grail idea of a product that just like watches metrics and tells you this person is about to cancel. I see that.

>> What I would say is it's it it is it is not hard. You don't need a lot of

not hard. You don't need a lot of customers in to to go talk to the ones who are in trouble.

>> Mhm.

>> You do need a lot of data or customers to mathematically know what behaviors are correlated with cancel and therefore to spend your time wisely. Then you need a lot more data. But to your point, even

if you have the data, it's not entirely clear whether some kind of mechanistic thing is all that important. One way I look at it is, you know, it's it's very common advice. You should try to get

common advice. You should try to get more good customers and fewer bad customers. Of course, you should. And so

customers. Of course, you should. And so

therefore, it they say you should see what the good customers have in common.

But that's not the end of the sentence because a lot of the things the good customers have in common, they also have in common with the bad customers because it's just what your customers do. just

what anybody does. So, it's what the good customers have in common that are different from what the bad customers have in common.

Okay. So, with that in mind, this kind of like it has to be both or else you're you're sort of not getting you're just getting correlations that are that are not helpful. Um the cancellations or or

not helpful. Um the cancellations or or talking to people who are in trouble is is another application of that. So, what

is correlated with people who actually end up cancelling, not just what you know and so um I think that mindset is is correct. if if you add the other side

is correct. if if you add the other side of that to it.

>> A really important nuance.

>> Yeah.

>> Okay. And then the final step just to close this out is onboarding. Work on

onboarding activation. Uh something

that's one of the most recurring themes on this podcast is just the power across every dimension of improving onboarding.

Improving activation.

>> Yeah.

>> Sweet. Okay. So, this is just step one, which is already full of gold if your growth has slowed. So, step one is focus on or your logo churn, the number of customers leaving, people leaving, actually canceling your your product. So

I I kind of look at it like a question.

So like the first question is are are people leaving it too much? Because if

your if your monthly cancellation is 2% for SMB, that's good. So you could try to work on it, but since it's already good, it's still probably a good idea to work. It's it's probably a good ROI for

work. It's it's probably a good ROI for you to work on it, but it's possible that you're got diminishing returns and that this isn't really the reason or it's not really reasonable for it to go.

I mean, how low can it go for SMB? Like

there's some floor and you might be near it. So the first question is like is is

it. So the first question is like is is is logo turn too high and trying to set a threshold that you know lower than what people normally want to do. So the

next the next question I have is is the pricing correct which of course pricing is a perennially interesting topic. I

know there's this funny thing of uh especially with newer companies that the pricing is always too low. It's not

always but like that's the common thing.

Patrick Campbell who has 4,200 data points about startups. Let that sink in a little. Um has this great quote which

a little. Um has this great quote which goes like this. Your prices are way too low because you just guessed and you haven't changed them. It's like yeah, if you really like look look deep within

you realize like yeah or we just picked whatever our competitors are doing and and and that's it or we added or subtracted something because reasons and right that's probably not good. And

people are scared to raise prices for obvious reasons. But the but the if we

obvious reasons. But the but the if we set aside the emotional reasons whether they're correct or not, the the sort of economic reason people normally give is they have in their mind this e this microeconomic supply and demand curve

thing. And the demand curve says that if

thing. And the demand curve says that if you raise the price, demand goes down.

That's why demand curve is always going that way, right? And so they understand, I think everyone understands, right? But

maybe you raise prices by 10%. But

signups go down only 5%. So overall,

it's better. But the opposite could happen too if I'm on the other side of the demand curve. And okay, so that's that's how most people think of it.

However, this is not how it works.

So that's how it works in microecon microeconomics 101 textbooks. That's not

how it works in the real world often. So

what usually h what often happens is you raise prices and signups don't change.

When I say signups, I mean the like signups per month, you know, the rate at sign or signups go up.

This happens all the time. Even even for like soloreneurs on Twitter who have, you know, strange projects or everything. Happens all the time. They

everything. Happens all the time. They

raise prices. They're like, I was scared, but then then sus went up. I

once talked to a guy. This is this is really funny. I'm not I'm going to not

really funny. I'm not I'm going to not say the name to protect the protect the name, right? But but um but uh so he had

name, right? But but um but uh so he had a product that was that he was selling essentially to enterprise and government, so larger companies. And it

was to me way too cheap. So he said something like, "Yeah, I charge $300."

I'm like, " $300 a month? That's not

enough." He goes, "No, per year." Like,

"Okay, wait." I said, "Okay, just do me a f how many signups do you get a week?"

And he's like, "One or two?" Because

this is enterprise and it was a startup.

I said, "Okay, um, just for fun, just change it from per month, per year to per month." So, in other words, we're

per month." So, in other words, we're 12xing the price, right?

So he did and he still got one or two per week. Like nothing changed. I'm

per week. Like nothing changed. I'm

like, "Okay, what what are you going to do next?" And he goes, "Oh my gosh, well

do next?" And he goes, "Oh my gosh, well now I have so much more money and profits. I'm going to like hire an

profits. I'm going to like hire an engineer. I'm going to do this

engineer. I'm going to do this marketing." And I'm like, "Time out.

marketing." And I'm like, "Time out.

What you're going to do is raise prices again." Like you just told me you you

again." Like you just told me you you 12xed the price and nothing observable changed. That means you're not near the

changed. That means you're not near the price yet, right? You're going to you don't have to 10x it again necessarily.

maybe 2x, maybe 50%, but like you're not done. I mean, you can do those other

done. I mean, you can do those other things too, but you're not done with the price. Like, it didn't even occur to

price. Like, it didn't even occur to them still. Okay. So, why does this

them still. Okay. So, why does this happen? Um, the reason is that pricing

happen? Um, the reason is that pricing selects the market.

So if you only think of the market as people with very limited budgets, barely can do anything, not getting much value out of it, then it is true that if you raise prices, you'll get fewer of them because they were never getting that

much value out of it anyway. They don't

have that much money. So if you raise prices, they're gone. But think about just even a mid-size company, forget about enterprise, just think about a company with a thousand employees and 400 million in revenue or whatever. And

um if they see a product that's, you know, $2 a month or even $100 a month, their thought is like, well, that can't be good enough. They're not mature enough. It's not going to do enough. The

enough. It's not going to do enough. The

support's not going to be good enough.

They probably don't have good governance policies or other things that we need, you know, etc. Whether that's true or not, like this is what it looks like is it's lowquality, cheap, whatever, aimed

at SMB. So, they just won't buy. They're

at SMB. So, they just won't buy. They're

not in the market for the thing. So it's

not true that they have this demand curve where oh since it's cheap they all want it. That's what that's what micro

want it. That's what that's what micro economics curve says. It's so cheap that they should all want it. No, they don't.

None of them want it because it looks bad. So as it gets into a price range

bad. So as it gets into a price range that makes sense for the kinds of things that they need. Then their demand actually goes up. Then it can stay up while it's in a good range. And then of course at some point you are priced out

of them that that particular kind of company's like I'm not going to spend $10 million a year on it. Are you

kidding? So yes, it does slope down and go away. So it's not a normal curve, but

go away. So it's not a normal curve, but it is like it slopes up and then it's something and slopes down. Who knows

exactly what it looks what what shape it is? Probably none of us know, but it's

is? Probably none of us know, but it's more like a messa and not a line that goes up to down like we like in the textbook. For that market, it's only the

textbook. For that market, it's only the very lowest, you might even say worst in terms of metrics end of the market that has the microeconomic slope that you're worried about. So what happens is you

worried about. So what happens is you raise prices and you enter a different market and that's why the signups go up or okay uh you leave behind perhaps a worse market anyway and of course everyone

will tell you you know the more they pay the higher retention is and that you know like all the all the kinds of stuff gets better when you when you u when you charge more. So this question is pricing

charge more. So this question is pricing correct? This is kind of what what's in

correct? This is kind of what what's in my mind when I ask that question. It's

like probably the answer is no because pricing is very hard. It's just as much art as it is science. Um, you've had some really good people on here on pricing. In fact, so good that I've

pricing. In fact, so good that I've bought some of the books that those people have talked about because I I love the interview so much. Right. So,

so like um so I I believe in all that.

No pro no problem. I believe in it. Um,

nevertheless, they also say it's art and science and it's it's it's very difficult to uh and and also once you augur it in the world changes like 5 10 years later, the market is different.

The world's different and uh so it's still it's still unclear. Also, price is not just the number on the web page.

It's easy to think that, right? But how

it's structured is just as important.

How the product's positioned is just as important. So, for example,

important. So, for example, this example I've written about before um online is uh uh this example it actually was something that um that I

that happened in my life, but I I changed the story to make it like simple and and real and clear without having to get into lots of detail. So, the the sort of story version is uh how this

company was able to charge eight times as much for the same product just by talking about it differently.

So just by positioning it differently, eight times as much. Again, this

happened to me, but it's it's too complicated. It's not not interesting.

complicated. It's not not interesting.

Those details are not interesting. So

say there's this company called Double Down, and the idea is that it hves the cost of your AdWords because it makes it so efficient.

So that's what it says on the web page.

Cut your AdWords cost in half.

Which is a very good pitch, isn't it?

Simple, obviously valuable. But when you think, so let's suppose uh I have a I'm a customer and I spend $40,000 a month on AdWords.

What am I willing to pay for Double Down? Well, if you do cut my AdWords in

Down? Well, if you do cut my AdWords in half, then all right, I save I save 20K, but I'm not willing to give 20K to Double Down because then I'm not saving any money. In order to actually save

any money. In order to actually save money, I need to give Double Down less money. How much less? I don't know.

money. How much less? I don't know.

Let's just call it a quarter. So, I pay Double Down 5K to save 20. So, I'm s I'm really saving 15. Doubled down's making 5K a month. That's pretty good.

Everyone's pretty happy at this 5 grand a month price point. So, there's nothing wrong with this. No one's doing anything wrong. Like, that's a perfectly valid

wrong. Like, that's a perfectly valid company. However,

company. However, think about these two situations that the CMO might be or the chief product officer might be in in talking to the CEO at the end of the year. Well,

scenario one goes, we started using this tool, doubled down, and it haved our cost. So, we got we able to spend that

cost. So, we got we able to spend that money on some other stuff. We were able to save money. And the CEO go would say, great, that's good. Let's we're going to renew and I'm happy to hear it. Again,

nothing wrong here, but let's take a different tact altogether. What does the CEO want to hear more? Growth or saves money? Both are good, but I know which

money? Both are good, but I know which one is healthier for the company, increases market share, is better competitively, and also makes the

company more valuable. It's the growth.

So, what we'd really like the CMO to tell the CEO is, I increase the growth rate of the company, not so much I save money. That was way better. So, here's

money. That was way better. So, here's

how we could do that with Double Down.

Yes, Double Down has the cost, but what that means is right now, right now, the company is paying 200 bucks per lead.

Let's call them leads, right? Whatever,

whatever this is outputting, right?

Well, if I have the cost of a lead, I could get twice the leads for the same money. I'm already willing to spend $200

money. I'm already willing to spend $200 a lead and I'm already spending 40k a month for it. So, if Doubledown has the cost, it means I can get more leads.

So what I the way I could pitch double down is double the leads per month with period.

Now if I'm willing to spend 40k for this number of leads, how much am I willing to spend to double the leads? 40k.

I just said I'm willing to spend 40k for this number of leads. So doubling it.

I'm willing to spend 40k to double it.

So if I give double down 40k not five for the same product which is the leads are cheaper but then now the pitch is I doubled the leads for 40k instead of h

instead of having the cost for 5k so double down gets 8x the money because it gets 40k for this product not eight not not 5k for this product >> amazing story >> and everyone's happy because the CEO

goes what did you do and they said like oh my god I doubled leads what yeah I mean at the same at the at the same ROI as we had before, same CAC, I doubled leads. CEO goes, how could we do more of

leads. CEO goes, how could we do more of that? Like, I mean, just everything is

that? Like, I mean, just everything is so much better, same product. Now, I

know it's a little bit of an exaggeration, etc., because I'm trying to make a point, right? But the but the the big point is uh or the the largest point is pricing

is not just the number on the page.

It's positioning. It's how their budgets work. It's how it's structured. like

work. It's how it's structured. like

it's per site or it's per usage or it's per seat or it's per all of this stuff is part of what pricing is. And often

even if it's the same price or the same product, depending on how that's structured, it's either seems um fair and and and good or it seems like unfair and too expensive or whatever. Um and so

in particular with the positioning, the big lesson for product managers is sell more of what the company values like growth. It doesn't have to be

like growth. It doesn't have to be growth. It could be something else.

growth. It could be something else.

Their the retention for their customers comp their competit how competitive they are in the market. Like there's various things they could value. Growth is an obvious one. Sell them that they're

obvious one. Sell them that they're going to get more of what they value as opposed to saving cutting ROI

saves time saves money more efficient.

And again there there's nothing wrong with saving money saves time. It's just

that it caps this price and this value that is they perceive that you do.

Whereas if you deliver more of the value that they already value, it's I don't want to say uncapped completely, but like the cap is maybe an order of magnitude higher than saving. So again,

it's it's valuable to save. You're not

doing anything wrong. Like that's not how to talk about what it is and therefore help set the price. So yeah,

so it's a it's a long way of saying so when again when I think is your pricing correct I'm thinking in a maybe a more general way than just like the number I'm thinking about the structure the positioning and all that and my guess is

when growth is slowing um no that there's a lot of improvement that could be that could be had there.

>> Oh man this is such this story is so powerful who does not want to change some copy on their website and double their growth and triple their price. Um

and the the biggest takeaway here is when you say is pricing correct isn't like what is the number 20 or 25 or 100 it's it's almost is the market we are

going after correct is the way we are selling to them correct is this price communicating the right sort of story and then also is the positioning of what problem we solve for you correct so

there's a lot here and luckily I've done a bunch of episodes along this stuff which we'll point people to >> to go much deeper cuz This is a very >> this is a deep skill and there's a lot to do here.

>> One thing I'll mention specifically, so Jen Ael, a recent podcast guest, it was her second visit to the podcast. She has

a lot of really good advice on this of just how to price and how to reposition the way you're selling it. Specifically,

she had this really interesting insight that enterprises their sweet spot for contracts is like 75 to 150K. That's

like how they normally buy SAS software.

And it sounds absurd, but that's kind of what you want to you want your product to be in that bucket versus like a thousand a month, 2,000 a month, and everything just gets easier if you're like, "Okay, this is one of those. Okay,

cool." It gets easier. Um the thing, uh I don't want to go off too much of a tangent, but the the the thing you have to remember is that pricing is not this

knob that you can turn separately from the rest of your strategy.

So when you say like even when I just said raise prices or whatever um but you can't just raise prices like these new customers have different demands now

maybe you need sock too now your other governance stuff matters now integrating to certain systems you didn't know about matters maybe now they need professional services like you can't just raise

prices and change market and like that's it and maybe that's wise to do but maybe it's not maybe you realize that sure, of course, that other market has certain advantages, but they also have

disadvantages, and we don't want those either because we'll no longer be competitive because the way that we're distinguished competitive special interesting, valuable is only valuable in the market we're in. The the next

market does not value it like that. And

so, uh-oh, um, actually, that would be really bad for us. Or it could even be cultural. We're a company like Buffer is

cultural. We're a company like Buffer is a great example. Buffer could go up market and try to sell, you know, social media tools or whatever. But they

realized we are a company for the little people. I don't want to sell to a big

people. I don't want to sell to a big company. We're never going to make a

company. We're never going to make a product for them. We don't want to. This

is who we are. This is what we want to do. This is what's fulfilling to us. So,

do. This is what's fulfilling to us. So,

we're not going to go there. So, it can be cultural. It can be certain goals. It

be cultural. It can be certain goals. It

can be it can be other aspects of of the business model or the strategy, but you it's not this kind of like, oh, I'll just I'll just change this. It's a

decision about the whole strategy and that too we could talk about for hours.

Um but um I'll just let's just caution that. Uh oh, I'll just go enterprise

that. Uh oh, I'll just go enterprise like is is of course not how it goes.

Sorry. We got this.

>> Yeah, I love Jen. Her pricing and and sales stuff is good. She's great on Twitter, too. She's I love her. I love

Twitter, too. She's I love her. I love

Jen.

>> And that is such an important nuance, you know. Don't build the thing you're

you know. Don't build the thing you're miserable building and just like, okay, I listen to a podcast. We're going to raise our prices 10x and life will be grand. There's also downsides.

grand. There's also downsides.

>> Yes.

>> Yeah. Okay. Uh, amazing advice. Okay,

there's so much here. Again, this could be its own conversation. Pricing,

positioning. Yeah, we'll link folks to a bunch of cool advice that um we've covered on this podcast, too.

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>> Let's keep going through this uh checklist. So, one was look at logo

checklist. So, one was look at logo churn. Yeah. Two is look at is your

churn. Yeah. Two is look at is your pricing correct?

>> Is pricing right? And why do we why do we think it is? Because we probably don't have good reasons yet.

>> Okay. So, the third one is are existing customers growing? I think everyone

customers growing? I think everyone probably knows this but just to say it um okay if if cancellations overtake marketing in in in in u magnitude

one way to combat I mean one thing is okay make cancellations lower but they can't be zero so another what else do we have to combat cancellations that would be proportional to our size so that it

keeps up unlike marketing right or you know basic direct marketing so one would be all right 2% left but of the remaining 98% some of those upgraded or

otherwise paid us more. Maybe it's usage based, whatever it is, they're paying us more. And so that that covers the gap

more. And so that that covers the gap and that's and and yes, if I tripled the company overnight, that would triple.

And so that's the answer. So that is an answer. And maybe that's obvious, but

answer. And maybe that's obvious, but you know, it's useful to tie it back to the the sort of model mental model we've got going. Um, and of course the the

got going. Um, and of course the the metric here is NRR net revenue retention. And the way that's computed

retention. And the way that's computed is you say what is the revenue of customers right now like so existing customers existing whatever just the

whole total and then one year from now what of that remains so not new customers coming in not talking about them because we're asking about the cohort that exists what remains so with

cancels it goes down with downgrades it goes down but with upgrades it goes up so when I say remains it could end higher than we started if upgrades exceed cancellations and downgrades and now we

are talking about MR and not N because N doesn't have this N doesn't have an upgrade and just only goes down which again is why I think the N is actually the most important one

because think about it like a lot of times people think so if you've heard of NR you might think well that's my golden metric I'm done but the issue is if NR is positive but N

goes down too fast it doesn't matter because not enough people are left and so there's not enough people left over to upgrade and so actually you're wrong and so NR does not does not

include that and therefore it actually underounts what's going on in a bad way like in a way that's that that hurts you. There's yet another way to see why

you. There's yet another way to see why what I'm saying is right. You know,

there's this this thing in investments where let's say I started out at $100 and the stock goes down 5%. So now it's at 90 or no, it goes down 20%, now it's

at 80. Then it goes up 20%. Is it back

at 80. Then it goes up 20%. Is it back to 100?

No. Because 20% were then 80 is 96. So

if it goes down 20% and up 20%, it does not come back to zero. It's worse.

When you have a loss, a percentage loss, you have to have a greater percentage gain just to get back to where you were.

In this case, a loss of 20% requires a gain of 25% to get back to where you were. This is why NR isn't quite right

were. This is why NR isn't quite right because NR is saying that a loss of 20% from cancellations is offset by 20% from upgrades.

As we just saw, no, it's not. That only

gets us to 96% actually. So, this is why like again, I believe in NR. saying you

got to lo track it like it's good just in the back of your mind realize it's not quite that good and looking at N helps me keep keeps you honest about what's really going on with these

customer cohorts right so that's why they're both useful in fact but that's this is why they're both useful so NR of course is important a nice way to see this is it if all this is if everything I'm saying is true and there's these

limits and stuff because of cancellation then there should be no way to get a big company like a public SAS company Unless NR is greater than 100, like otherwise cancellation should just win. And that

is in fact the case. There's over a hundred SAS public companies and something like two of them have NR less than 100%.

Like that's how it goes. And those

companies have horrible financials and their values valuations are are bad.

Like it's not good. It's not a good thing, right? So, and in fact the median

thing, right? So, and in fact the median for a IPOed SAS company like at IPO the median NR is 119%.

So that's so yes that's what it takes.

You can't do this. You're limited in less. Now your your goal may or may not

less. Now your your goal may or may not be to get that big but the point being it's mandatory for growth. Now if the literal customers are just leaving like you know that you got to you got to plug

that hole first like you said. But okay,

if they're okay, that's why this is in order. If that's generally okay, now we

order. If that's generally okay, now we turn to NR to say, okay, but the ones who stay, they're hopefully happy. They

need to grow. Okay, so that's the kind of the full story of NR. I think people don't quite people who've heard of NR don't necessarily think about all those things and realize that. So a good

question is, okay, what do I do with NR?

But I think the answers are pretty clear like you add features, you have different tiers, you change the pricing in some way uh with usage or seats or something that kind of goes up automatically as they get more value out

of it. So I I don't think that's

of it. So I I don't think that's terribly interesting to like double click into. It's it's sort of obvious. I

click into. It's it's sort of obvious. I

would say oh look it's tied into pricing because their behavior. But the main thing is you want it to so to where the customer themselves would agree when they pay more that they are getting more

value. Hopefully, they even think

value. Hopefully, they even think they're getting far more value than the price going up, right? That I'm I'm I'm gonna say this as if it's precise, which it's not. But they need to feel like if

it's not. But they need to feel like if the price doubles, yeah, but I'm getting five times the value, so that's fine.

Like that should be the feeling whether they can measure it or not. A a good way to do that is to say, well, then you should be measuring whether they're getting value out of it. Often we

measure like usage metrics and other kinds of metrics within our product because we can. But actually what's really important is to measure how does

the customer value this and we need to measure that so that we make that go up because if we make that go up they'll be willing to pay in whatever structure.

And if that isn't going up they won't be willing to pay. So even if we start making them they'll leave. And we all know we've all probably done it ourselves. We've all had products we

ourselves. We've all had products we love, but then as we scale, the price goes up faster than we feel the value is, and then we start looking for other products. Like we've all experienced

products. Like we've all experienced that. So that's what I'm saying. To do

that. So that's what I'm saying. To do

that, you want some sort of measure of the value the customer is getting. If

you're really lucky, that can be a number. That would be wonderful. Then go

number. That would be wonderful. Then go

do that and maybe that's your northstar.

But um admittedly, it's not always possible. So then the question is the

possible. So then the question is the usual questions of metrics. Are there

proxy metrics that we understand?

They're not the full picture, but they're helpful. they're part of the you

they're helpful. they're part of the you know um and and I'm a big believer in saying not all important things are numbers I mean even things like how differentiated are we in the market not a number but it's very important so this

might be one of those things that's important but not not a number so okay can we get some proxy metrics even of behavior other things that's something um something better than some metric

that's you know just operational and even if it's qualitative okay can we do that can we talk to customers and ask them qualitative questions to try to say like you know I would just say like do

your best here because only when you generate more value for the customer you can then decide how to split that with the customer in terms of things like price you know right um but that's

that's my um that's in fact how I think of it that very phrase how do we create more value for the customer and then split that with them and when you do that you're keeping the customer

forefront in mind you are taking some like splitting means you get some like like let's not forget it's not a charity and on the other hand first we should think how are we generating value for customers and then think and then we can

take a little we've now earned the ability to take a little piece of that so to me this is the right way to think about NRR not just we'll add a feature and make them pay true but let's actually take it from this different let's get there from this different

perspective >> amazing there's uh in the recent modavon episode where we go into pricing you actually have some really good tactical advice for measuring the value that you're giving to a company to quantify

that uh which feeds into this idea of how do I create more value for you and then how do we split it?

>> Yeah.

>> The other element of this that's top of mind is just this land and expand strategy. There's a lot of companies

strategy. There's a lot of companies that are just like okay cool we'll get in with some price we'll expand that'll be amazing which is essentially expanding is NR going above 100%. Yes.

Something Jen actually shared on her in her chat that was really important is that you can't expand that much in ter at least for a while because if you get in for like 10k uh if you go up to okay

now it's 100k someone's going to be like what is this why is this can't go up 10x are we getting 10x value from this you can't just raise prices later you're kind of stuck at that reference point so you have to be really careful there.

Yeah, I think that's right. Um, and

maybe you don't deserve it. Like, in

other words, especially when there's investors or other sort of forces saying like, "Hey, we need a x, y, and z." The forces that

are not the customer saying that um yeah, we you can you can be you can be coerced into making pricing or other kinds of policies that in fact are not

good for the customer. So, so one one uh tool I use uh is when when anyone claims anything really is is is that really true or is that really actually good for

the customer? Because look, we are going

the customer? Because look, we are going to do things that are selfishly good for us. We have to we can't just do things

us. We have to we can't just do things that are bad for us. But but is this in fact good for the customer? Because

often often even in an internal proposal, we say it as if it is. Oh,

this pricing will be good. It'll raise

prices on everyone, but it's better because of this reason that we we're sort of justifying, right? It's like,

well, is it will the customer say this is better? If the answer is no, it's

is better? If the answer is no, it's like, okay, it's not it's better for us, but sorry, we have an equation where it has to be better for us and better for the customer. Sorry, it's an AMP, you

the customer. Sorry, it's an AMP, you know, and of course, not all companies do that. And we and we experience that

do that. And we and we experience that on all of us um as as consumers on the other end of that, and we don't like it.

and and that's not a good long-term strategy even though it might work in the short term as many bad long-term strategies are.

>> I love just how uh this third step just reveals how powerful the sequence is that we're going through. Step one is this logo retention essentially do we have product market fit? Step two is

pricing positioning essentially are we going after the right market and charging them the right amount roughly.

And then here it's just can we can we grow? Is there something here that can

grow? Is there something here that can continue to expand because you're going to get eaten alive if you're especially and this is just to be clear this is B2B SAS primarily that we're talking about here. It's harder to grow an or if

here. It's harder to grow an or if you're consumer product that has I don't know just like a tier two.

>> What what I would say is the the rules are true everywhere because they're based in the mechanics of finance in the business.

>> Now you are right that a cons that in the consumer segment or small business segment for that matter um they tend not to grow.

So that doesn't mean the NR question is invalid. It means dang, we can't think

invalid. It means dang, we can't think of anything.

>> That's okay. Then you go on to the next question because you can't think of anything. But you know, but it would be

anything. But you know, but it would be more strategic if we could.

>> Mhm. Yeah.

>> And are we trying hard enough? As a

consumer, I do not want to spend more with AT&T, but they're also not giving me any more value.

>> But there are other products as a consumer like Amazon where they do. So

you're right, but it would be as a product manager, it would be 10 times more valuable for you to think of something like that, you know, than to move on to other things and etc. Or

there's other ways like other products like we didn't talk about it and it's okay because of course each one of these is you could go on forever, right? But

another way is a second product.

A second product sold to the same segments that you're in so that your existing customers can buy it. Well, I

don't know why that wouldn't work in consumer. It certainly works in consumer

consumer. It certainly works in consumer and apparel.

>> I think about AG1 which has all these new like I'm doing their sleep uh supplement and there it goes. They're

just like here's a new thing you can buy.

>> Yeah.

>> So like like so is it harder? Yeah. Of

course. Of course. Like all of these are like easier or harder in different segments and ways like of course of course. I'm not trying to say otherwise.

course. I'm not trying to say otherwise.

>> I but I would say the mechanics of how the finances work is the same. You're

just saying I don't have this lever to pull. And then I would say okay then you

pull. And then I would say okay then you need different levers. Um, one that we didn't talk about, um, is one way to offset the cancellations is existing

customers grow. But another way is if

customers grow. But another way is if existing customers bring in new customers. So they didn't grow, but they

customers. So they didn't grow, but they brought their friend. Now this is absolutely something that happens in consumer. But it's also an answer to

consumer. But it's also an answer to this thing where cancellations grow exponentially. You know, because

exponentially. You know, because existing customers bring in new does triple if you have more existing customers. Aha. So this is stuff like um

customers. Aha. So this is stuff like um you know refer a friend and all this kind of stuff. Again like some of this is is obvious. We don't need to enumerate that but uh so so those things are good. And so in consumer you might

are good. And so in consumer you might say oh it's easier to try to get someone to invite a friend with a coupon and blah blah blah blah than it is to try to get them to grow. But in B2B that may not be true, right? I don't get a

mid-size company to refer. Like that

doesn't make sense. So, so once again, this question of how do we have the existing base help us grow is still correct in consumer but its manifestation could be very different.

Of course, I agree with that. But um I mean how could how could we not say I mean of course things like word of mouth and inviting friend of course that's enormous with consumer and this is this is one of the reasons why >> I'm uh I just love picturing the people

listening to this especially product folks founders I I imagine many of them are just sitting here taking all these notes of how to help grow their product because as this is we've positioned this

conversation as how to uh deal with stalled growth but it's actually just as useful how do I grow more >> oh for sure right right it's more growth It's just maybe a little more evocative.

>> It's It's because if growth is good, yeah, sure you want to grow more, but it's not the problem.

>> Like if growth is really good, the problem is generally operationally scaling to meet the growth. Uh and so you're focused on that. It's when growth slows, you're like, whoa, wait, wait,

wait, wait. Right. We we have to focus

wait, wait. Right. We we have to focus on growth now. Must as opposed to of course it's always nice. So yeah.

>> Yeah. And I was thinking as we were talking about consumer NR, if you look at Duelingo, they've done a great job here. There's so many ways you can pay

here. There's so many ways you can pay them more for all these little >> advances. Get all these gems. Change the

>> advances. Get all these gems. Change the color of your app to like something fancy.

>> Yeah. Yeah.

>> Yeah. Okay. So, there's more. Let's keep

going. So, we've done three. There's

more more you can do.

>> So, okay. Logo churn. Um uh uh >> pricing >> pricing >> NR and then maybe it's stalled. So, this

is really a stalled question. Maybe your

acquisition channels, your marketing channels are saturated. We're done. I

mean, we're what we tend to do is flog the people doing AdWords, get more flog the SEO people, get more searches, right? It's possible that this is it.

right? It's possible that this is it.

Maybe this is it in some sort of physical law. There literally isn't

physical law. There literally isn't anything else. Or maybe this is it just

anything else. Or maybe this is it just this is how good we can be. We're just

not this is it, right? But there really are limits. You know, they it's there's

are limits. You know, they it's there's different words for it. Inventory is is sort of the old word like with magazine ads. uh inventory was the word, but

ads. uh inventory was the word, but there's just this amount like there is only so many searches in your area and you can only appear once in the search results for a given keyword. So there is

this limit of like what you can get.

Even if you were number one position for everything, you know, other things that are that are not even practical, uh there's still a limit and there's some kind of practical limit that's below there that we we don't really know. But,

you know, maybe we're there or maybe we're close. And worse, channels tend to

we're close. And worse, channels tend to decline over time. So, I think people talk about S-curves, right? Oh, I uh I didn't figure out this market, then I

figured it out. You know, we we we we unlocked it. Now, we're getting, you

unlocked it. Now, we're getting, you know, 100 leads per month through Facebook or whatever. But then it kind of taps out and then we go into this optimization mode. Can we ek out another

optimization mode. Can we ek out another blah blah blah blah, which is right, that's right. And you call that an

that's right. And you call that an S-curve because it's shaped like that.

But that's not what happens. What

happens is it starts with an S-curve and then it starts sagging. Its butt starts sagging down. So, I wrote an article

sagging down. So, I wrote an article about this called the elephant curve, which is what I named it, right? Because

it's like this trunk and then but then it's this butt. And what and and there's different reasons why this happens, but if you talk to any marketer, they'll they'll all tell you, "Oh my god, let me tell you this story, right? They all

have stories about it because yeah, this is what happens." Um there's different reasons that um first of all, the the audience gets saturated, you know, because there's all these little marketing isms and I don't know if they're true or not. I don't I don't

think any of it has any data that actually proves it, but whatever. Like,

you know, if worms if words uh start with the same letter, that's better. I

don't think I don't think anyone's ever proved that's true, but marketers seem to think so. Okay. Well, one of the things is someone has to see it seven times before they act. Okay. All right.

Well, maybe they saw it seven times already, so they don't want it, you know, or they saw it 20 times, right?

So, so, so you you initially you got you hit people who hadn't seen it yet, right? But now you have and you know

right? But now you have and you know especially with magazine ads as I used to do before there was no such thing. Um

that's exactly what would happen. You'd

have this nice surge and then like well we've seen this we've seen it before. So

you still get a little trick. You still

get some because you know it was just that moment they needed to see it again.

Okay but like there's this sort of um but a lot of people have already seen it and they don't want it or the channel is declining and they'll never tell you.

When I did magazine ads, every year they would tell you what their circulation is, and every year it would go up and then the magazine would go out of business. Conferences are the same way.

business. Conferences are the same way.

Attendance is great. Attendance is

great. Oh, wait. We're out of business because we couldn't get enough people to come. What? What they said? It was

come. What? What they said? It was

great. And but at but you know, more quietly, Adwords, Facebook ads, even SEO searches, it's this does happen all over the place. Affiliates, it can happen.

the place. Affiliates, it can happen.

And now with AI, I mean, I don't even know, right? It's disrupting everything.

know, right? It's disrupting everything.

I, you know, we've all heard stories going all different directions. I think

the answer is I don't know. Shrug is the answer. And what will it be like in two

answer. And what will it be like in two years? Another shrug. But the point

years? Another shrug. But the point being they're not all they're not all going to be growing a lot. Like that's

not that's not one of the futures that AI will bring. So it has this sag.

That's just a very long way of maybe trying to prove this point. But it's yet another reason why you can't just rely on marketing forever because they not only you try to stack things, but there's not like infinite number of marketing channels you could advertise

in that your customers are actually going to and they sag. Oh no. Like it's

even harder to keep up. So it's kind of like the secret like reinforcing my very first point here with with this. But

here are they all saturated because we could fogg marketing all we want. It's

not going to work. So maybe growth is slowing because this is all our channels are saturated. possibly even sagging,

are saturated. possibly even sagging, but even if not, okay, not growing. And

so, we can't just flog the marketing department.

It's going to take something else, right? Um, then the obvious thing is get

right? Um, then the obvious thing is get more channels, but again, maybe there aren't any. So, again, there there's

aren't any. So, again, there there's many possible things to do, but this is like this critical thing to notice because I guess I would put it this way.

Do you know right now which channels are saturated and which aren't? If the

answer is no, I'm like, well, okay, maybe that's because the answer is all.

You know, that needs to change what you how you think. Just adding one little feature and then hoping we can flog Adwords is not going to work. Even if

the feature is great, not going to work.

So there's there's different things that could work, but that's not one of them.

And yet, that's probably what we're doing. Let's add another feature and

doing. Let's add another feature and marketing can fogg it is is often the answer. But if you're in this state,

answer. But if you're in this state, that isn't the answer. So this is this is why like you could say it's obvious to say this or that but if but are are you acting like this is true

you know often we don't um okay so so there are many things to do again we don't have to enumerate all of them or something um it's just simply the right question to ask but for example uh some

people are like um we've done direct maybe we should try things like SEO and social and these other indirects or vice versa we're really good at SEO but we've never taken out ads often if you've done ads and they're optimized you know what

content might be good to write stuff for SEO and maybe even vice versa maybe. So,

it's a good idea and sometimes it works, but here I have no data. I only have my my feeling here and actually you probably have a lot more visibility into this, but my experience is a product that's sold really well direct actually

doesn't do well in things like social and SEO and vice versa. If you're

getting a lot of traffic through SEO, adding ads often like costs a lot and doesn't really move the needle. like you

can tell me like is that because I don't have data to support that that theory.

>> Yeah, my take is like you can always get some percentage of win from all these different channels. Usually one channel

different channels. Usually one channel is where most of your growth will come from and so over time everyone just adds every channel. Everyone's doing ads.

every channel. Everyone's doing ads.

Everyone's doing SEO in some form. But

it's usually like sales or word of mouth or ads that drives everything.

Everything else is kind of like little layer on top.

>> Yeah. So, you know, should you do that?

Yeah, probably. especially if you're at some scale and you can just afford to because it's such a clear thing to do.

But probably you'll have to get more creative about what it means to add a channel or something like a new product or a new market where it's it's it's actually new. It's expanding in a new

actually new. It's expanding in a new way rather than trying to incrementally expand what you're already doing. So an

example of getting creative on a channel is what Constant Contact did when they had this very problem of growth is slow.

We don't know how we sell email marketing newsletters to small business before all these modern tools existed.

And one of the things they did that restarted growth is they physically went to a bunch of cities and held workshops showing here's how to do email marketing for your small business. So the

restaurant tour and the dentist and every would come to these sessions and they teach them how of course teaching them how with constant contact. So they

became customers, right? that you would think there's no way this is cost-effective physically being in these cities and dragging people in for a you know $20 a month product like no way. It

was very effective and actually solved in that moment their their restarted growth. They were very clever about

growth. They were very clever about first of all it's a clever idea but then they were clever about how to do it.

They took like power users who were also agencies. So like these could become

agencies. So like these could become customers of their okay all like you could be clever about like how is it that we do something uh something different something new. So that's

possible. Of course, it's always hard to say, "Think of something clever." That's

that's a weird finger wagging thing to do, but okay, it's true. But, uh, yeah, it it could be a different type of channel. For example, um, HubSpot

channel. For example, um, HubSpot famously, uh, tested selling through agencies instead of direct. It ended up being 50% of the revenue after four or five years. So, it's one of the main

five years. So, it's one of the main reasons why they're able to continue growing. Um, same thing happens with my

growing. Um, same thing happens with my company, WP Engine. Tons of our uh websites are sold through uh uh agencies that create WordPress sites. So um there could be something

sites. So um there could be something that's not direct anymore that's you know another channel of human beings or something like that could be could could in fact dramatically change your growth

rate. U there's lots of examples like

rate. U there's lots of examples like those. So but but it could be like it's

those. So but but it could be like it's time for the next product like and I said that earlier because it's always possible. Of course we all know that's

possible. Of course we all know that's very hard. It's it's risky. I have sort

very hard. It's it's risky. I have sort of a framework that I use to think about that kind of expansion which I'm happy to happy to provide. I've also written it up but I'm happy to say it right

here. But uh usually you want to stay in

here. But uh usually you want to stay in the target in the target market you're already good at and grow from there. But

sometimes the whole point of the expansion is to change the or change target m or add something where you're leveraging something else about the company that you have as an asset going somewhere else. So this is what this

somewhere else. So this is what this framework helps decide. But um one way or another you probably want to uh plant one foot into some strength or asset that you have move the other foot which is the risky Bart but the idea is that

yeah well we have this big upside so we're we're taking that bet and like that becomes a smart bet. Um so with things of course that's true for any of these things but especially if

acquisition channels are full and it's like we literally can't ask the marketing department like that's just not one of the choices. It almost forces us to start taking these more drastic bets to say, "Well, we got to do something and that's not one of them."

>> I just want to keep saying how awesome this advice is and how many people are going to benefit from like, you know, none of this is like, "Oh, I've never ever thought of any of this." It's just

like the very methodical uh sequence of questions you should be asking yourself to help you not just undo stalled growth, but also just come up with a bunch of great growth ideas. And this

specific section, it like it makes sense. somebody's discovered alpha in a

sense. somebody's discovered alpha in a growth channel. Say, uh, SAPI just

growth channel. Say, uh, SAPI just launched. Tik Tok just, you know,

launched. Tik Tok just, you know, there's like, oh, cool. What's the new thing? Okay, let's get there quick. And

thing? Okay, let's get there quick. And

then you drive a bunch of growth. It's

awesome. Eventually, everyone's going to start doing that. And so, you should assume everything that is working for you now will slow down. Uh, I've never uh I've missed your post on the the

elephant uh scurve. What do you call it?

The elephant curve.

>> Yeah, elephant curve.

>> It's so Yeah, that's so real. just it's

not just this S-curve that will forever continue to drive win. It will actually dip and decline over time because other people discover it and start using it.

>> Yeah, >> I love that. So, the idea here is and the classic advice is like not whether it's an S-curve or an Lin curve, think

about are you starting to approach the the the apex of that and start to explore other channels before you slow down or start to dip. Yeah, it's easy to hear stuff like, "Oh, if marketing is is

full, do something else." And you go, "I know." But then you look at people's

know." But then you look at people's behavior and it's like, "Well, you're not acting like you know, you know, so maybe what needs to be said in enough detail that you actually do something about it."

about it." >> And this is it's important to note this is a very hard problem. Most companies

do not really solve this. They something

worked for them.

>> Sure.

>> And then it stops working and then like, "All right, well, we found something and then it just kind of went away." There's

a couple posts we're going to link to in the show notes that will help you come up with ideas that are all around new growth channels that are emerging. One

is by Emily Kramer around ecosystems as a new growth channel. And there's a lot of really cool advice there around this kind of emerging combination of

influencers and content and partners where it's your ecosystem that helps grow. Basically, there's a quote from

grow. Basically, there's a quote from the head of growth at Whiz where it's like, "Why start with zero when you can start with 10,000 essentially growing through someone with an audience already?" And then there's going to be a

already?" And then there's going to be a post out by the time this comes out around Chad GPT's app store, which is going to let you submit apps. And that's

a really interesting, potentially huge new growth channel for companies. So,

cool stuff happening there. So just to summarize logo retention, pricing, NRR, marketing, channel saturation, what

comes next? The last question is, do you

comes next? The last question is, do you need to grow?

So okay, growth is stalled. And if we assume every question before has been answered in a satisfactory way,

you could ask, hey, is that a problem?

What do we mean by grow? What do we need to do exactly? Now of course you should know these kind of things with goals all the time but and again like obviously the answer could be once again oh new products

these other things where like this company when we say do you need to grow if we define you as this product in this market in this company the answer might be no what what we need to do is have a

different product or in a different market or a different thing or you could you could change the word uh revenue if you say do you need to grow revenue you could change the word revenue and say

you know But what we could do is maximize profit instead of revenue now.

We've been maximizing revenue, but maybe we maximize profit instead. And so this is a company like 37 Signals or really lots of bootstrap companies who have hit some sort of limit and realize that's okay. Like the founders are getting paid

okay. Like the founders are getting paid millions of dollars a year in dividends and like it's okay.

I don't have to get in fact if I got bigger it might be an organization that I don't like or serving a market segment that I don't want to serve or whatever.

Um, and so maybe maybe growing forever isn't the goal actually or growing revenue isn't. Um, you could ask

revenue isn't. Um, you could ask philosophically, why grow anything? Why isn't it just okay to have stasis? And we all have heard the phrase, if you're not growing,

you're dying, right? This is a classic company thing.

right? This is a classic company thing.

Is that true or is that the kind of thing that like investors use to like make founders grow or try to grow even when they shouldn't?

It might be, but I would submit that even at a bootstrap company that has other values and culture um other than growth at all costs that that phrase is

still fairly relevant because if the company's stagnant for years, is that a great environment for everyone as the founder? Did you start this company in

founder? Did you start this company in order to do the same thing every day? Is

that is that why you did it? Do you

really want to do is that fulfilling for you? What about everyone else? Nobody

you? What about everyone else? Nobody

Nobody wants to further their career.

They just want to do the same thing every day and never further their career, not really learn anything, not really innovate. Does it feel good to

really innovate. Does it feel good to just not be not not be growing? The

answer could be yes. Uh, you know, if I'm a CPA and I have some clients and life is good. Um, the answer could be yes. Like, you know, I'm not saying I'm

yes. Like, you know, I'm not saying I'm not dictating the answer here, right?

I'm just asking because a lot of times whether it's our careers or as founders, our companies, a lot of times we've just been in the mode of I've got to grow, I've got to get promoted, I've got to do

more, I've got my resume. We've got in that mode for so long, like maybe our whole life that I was going to say lose sight of, but maybe we never had sight of, wait, does this make me happy? Is

this what I really want? Am I fulfilled doing this? or even if I do have these

doing this? or even if I do have these goals, have I gotten stuck in a rut where my goal is growth and you know, I don't know, more money, more everything and I'm but I'm stuck in a rut here like what sometimes we forget to take a step

back and go, wait a minute, what is this? Is this still right or do I need

this? Is this still right or do I need to turn the page and have a new chapter of life right now, you know? And so this question, do do you need to grow or if you're not growing, you're dying. Well,

for some people, no, they like doing the same thing forever. And and and that's great actually. That's a that's a that's

great actually. That's a that's a that's nice. But for many people, especially

nice. But for many people, especially the kind of people who want to get into product and build stuff and innovate and people who start companies, a lot of people like that are not the kind of

people that want to just, you know, kind of do wrote things for 20 years. And so

the not growing part, what I like to say is maybe the you and if you are not growing, you're dying is you the person as opposed to you the company. It's also

you the company, right? But like what if we took it to mean you? If you are not growing, then in some sense maybe for some people you're dying. Maybe if

you're listening to this, that's you.

You got to you're a shark and you got to go. And we all know people too who claim

go. And we all know people too who claim they hate work or maybe they do hate work. Let's not say claim they do hate

work. Let's not say claim they do hate work, but then they retire and and and kind of go downhill because they don't have a purpose or this or that and the other thing. In that case, it was true.

other thing. In that case, it was true.

If they're not growing, they're dying.

literally.

So you again I don't mean to overstate this and I certainly don't mean to claim that there's some answer that's right for everybody of course but surely this is the right kind of question and surely

for many people who are listening to this the answer is yeah I mean in some sense some very rough sense that's probably right for me and so if I'm in a stagnant situation and really every

other option has been exhausted and isn't going to happen this is simply a stagnant thing maybe there's something else needs to happen I I need to leave.

The company needs to change some drastic way. I sell the company. I change jobs.

way. I sell the company. I change jobs.

I I don't know. Like, of course, it's going to be super context specific and and and personal, right? But like

something dramatic may need to change because nothing incrementally is changing.

So this final question, do you need to grow or if you're not growing, you're dying? Is that true? And are you

dying? Is that true? And are you therefore dying? And what needs to

therefore dying? And what needs to happen? You know, so if you were looking

happen? You know, so if you were looking for more metrics in another framework, sorry, that's ex is ex existential, but it is it is existential. So, uh,

uh, do you have to only ask this at the end of the chain? No. Of course, you should feel fulfilled. And, you know, of course, you want to be checking in with yourself at least annually, of course.

But, um, I sort of put at the end of my list in the sense that I'm assuming the original question is about the company, you know. Um uh but but especially with

you know. Um uh but but especially with smaller companies, but but also also with big public companies. There's

plenty of big public companies that aren't growing, aren't there?

So like this is this is uh this is true of all scales because there are natural sizes for things. Um so yeah, it's a little philosophical, but uh I think

it's quite important.

>> Such a beautiful way to wrap up this piece. Uh, a lot of people listening to

piece. Uh, a lot of people listening to the podcast are bootstrap founders and for them this is actually very much an option. They can just be happy with the

option. They can just be happy with the revenue they're generating. Like with my newsletter right now, I'd be very sad if it stopped growing, >> but also just it's uh amazing the life

it has created for me. And even if it did stop growing and just stay flat and doesn't become an elephant curve, that'd be incredible in like in practice psychologically still hard for that to

be the case. And that's why this component of the of the sequence is really important. Like why do you

really important. Like why do you actually need it to grow? Is that just your ego? Is that just like I'm used to

your ego? Is that just like I'm used to growth? It can also help you help you

growth? It can also help you help you avoid doing unnatural things that you actually regret to grow. So like if growth at all costs is just the the thing like there's probably ways you could quote unquote

grow the newsletter that you would just say I just wouldn't be proud of that and the newsletter is doing so well I don't need to do that. And so again, maybe that's a softer version because growth hasn't actually stopped. But okay, it's

a softer version of um I certainly don't agree with grow. You you might say, I certainly don't agree with growth at all costs. I want to grow as much as

costs. I want to grow as much as possible within the things that I'm proud of. Like if we grew fast, but the

proud of. Like if we grew fast, but the content was crappy. I'm just not willing to do that. It's like not the point, you know? And so it helps set up these

know? And so it helps set up these boundaries of like, wait a minute, not if dot dot dot. And uh you know, early on we may not have that um that flexibility. You could argue that you

flexibility. You could argue that you should have those values early on because that's who you are and that's what you're doing and people respond. So

I could argue you should have that all along. But I could also argue that at

along. But I could also argue that at the beginning you're just trying to do something where you don't die. You're

starting to blog. You're probably

copying other people's style. You

probably don't have that much uh unique things to say. So there's a lot of reg.

That's okay. You're just trying to get going. It's okay. Now 20 years later if

going. It's okay. Now 20 years later if you have no style and no voice of your own and nothing new to say that's probably not good. But to get going, sure. So um sometimes we have this thing

sure. So um sometimes we have this thing where we get going with maybe looser I don't want to say values I'm not saying it's unethical but like looser sort of bar or a pride that we have in our own

work and we tighten it up as we're sort of able um as we can afford to you might even say so good but that's a then that becomes a nice filter here of like what

what is it in a greater sense I'm trying to do here I'm willing to do here. Um,

so if you're not growing your dying, fair, but like that has to come with these limits and and the the more successful you are, the more you can be serious about those limits.

>> I think an important element of this is also the product you're currently working on. Maybe it's okay for it just

working on. Maybe it's okay for it just to not grow. There's a good opportunity to do something else, have this thing maybe running on the side, maybe sunset it at some point, but it's a good opportunity to be like, okay, wait, what

else is out there? We had a a recent podcast conversation with Matt McKinn McInness uh CPO at Ripling and there's some really good advice he shared on just when to quit when to quit your startup. Just like you know if it's like

startup. Just like you know if it's like four or five years in it's just not clicking maybe it's time to to move on and even though people do succeed years in uh most likely it's not going to be you. I have a book almost out now that's

you. I have a book almost out now that's on pre-order about topics like what we've been talking. The next book I want to write is on this topic of how do I make these decisions of

uncertainty like maybe it is time to quit, maybe I should move to a different city, maybe I should marry this person, maybe I should launch this company, maybe it's time to maybe I should use this strategy where you want to you you

want to use probability and expected value. It's unlikely that dot dot dot,

value. It's unlikely that dot dot dot, right? But the truth is we don't know

right? But the truth is we don't know what the probability is. We don't know what the probability curves look like.

We actually can't use expected value.

And anyway, even if you could have expected value, I am a human being. This

is my life and I either sell the company or I don't. And so all this stuff about probability and like that's not that doesn't apply to me. I need other ways of of sorting this out. So I guess I

would just say briefly um probability is not going to work for these decisions.

So that doesn't say what is right. Um,

but it's not that. And so, uh, which is nice because you can put those tools down. I'll do some market research to

down. I'll do some market research to see if I'll I should sell my company.

Nope. That's not where the answers are.

>> More uh more questions than answers on that one.

>> Yeah.

>> Um, speaking of the book, um, let's give you a chance to share what is what you're working on and when this is coming out and when where folks can find it.

>> Sure. So, the book is called Hidden Multipliers, and you can pre-order it at hidden multipliers.com, or I guess if this is out long enough, I'll you order it, I guess, depending on when

you're listening to this. And it's it's a lot of stuff kind of like we were talking about today. Um, these questions of uh it's called multipliers because the idea is little things that you can

do or little decisions you can make that have a huge impact. And like moving the cancellation rate from 5 to 4%. sounds

small has a huge thing onboarding as opposed to later used huge thing. So

those are some examples but the book is is of course full of different kinds of topics but all of this idea of this stuff that has such a big impact on things like revenue and profit. Um, and

either just as you said earlier, either like either maybe you have never thought of it that way, so you didn't really you weren't thinking about it right or yeah, you you've heard that you say I know, but your actions don't reflect it. And

so if we go deep enough with examples and specific things to do, then you can actually act on on that supposed knowledge and and and realize those multipliers.

>> And uh just to remind people, you're all hidden multipliers.com.

hidden multipliers.com.

>> Yeah.

>> And there's an S at the end. H h h h h h h h h h h h h h h h h h h h h m m m m m m m m m m m m m m m m m m m m m multipliers, >> right? There's more than one.

>> right? There's more than one.

>> Many. There's more than one.

>> Yeah. Yeah.

>> Jason, I had other things I wanted to talk about, but I feel like this episode's actually going to be stronger if we just focus on the thing that we've been talking about, which is unstalling growth.

So, if we do that, is there anything else you want to mention or leave listeners with before we get to a couple corners and then the lightning round? I

think if you if you tried to find a common thread throughout all this stuff about growth, it comes back to the customer getting value.

And I know we just we already talked about that, but I think if if there could be one thing where it would help solve kind of all of it, it would be that they really are getting value. your

product actually promises the right thing and then it actually delivers on that thing and the customers can onboard so that they can do the thing and the customers know they realize that they're

getting the thing and you're measuring the thing so you know it's increasing um that is probably if I was an LLM I'd probably say that's the common thread or if you know there's many ways that

manifests of course but but but but if that's your northstar is how are we actually creating value in the way the customer values it and their language and their way and their way of

understanding it. I wouldn't say all the

understanding it. I wouldn't say all the pieces magically fit into place, but certainly isn't that sort of the root thing that that is going to make all the stuff work then there will be a good way to do pricing and they will stay as long

as possible and you know like these things will probably be right if if that so this idea of creating value for the customer and split and then figuring how to split with them is probably the root idea and of course I hesitate because

platitudes like that are actually not actionable not very actionable like all right well I'll move on with my day and that's why Twitter's not so useful but given that we've gone into so much detail. Perhaps that's a nice way of

detail. Perhaps that's a nice way of summarizing it.

>> I think that's such an important point.

I think what's also interesting is some of your advice is the value may you may be picking the wrong customer, the wrong market. You may be positioning it wrong.

market. You may be positioning it wrong.

So the value may be there. You're just

trying to convince the wrong people about it.

>> Yeah, there's so many ways to get it wrong. Uh, right? Because because all

wrong. Uh, right? Because because all like we said, all these things have to be right. You just said another one

be right. You just said another one which is and you have to say it in a way that when this person hits the homepage, they know it.

It's true. But do they know that?

>> Just so many things have to go right.

>> What a what a tough job we've got over here just solving people's problems. Come on.

>> Well, thanks for growing.

>> So now we will be after this conversation.

>> Okay. So I'm going to take us to uh a recurring corner, a recurring segment on the podcast that I call AI corner.

What's one way that you have discovered uh using AI in your work or in your life that might be helpful for folks to hear?

>> There's a lot of data on the internet and it's often in things like images which makes it hard to do your own analysis or plug it in or etc. Come up with your own models or apply it. But I

found that AI is really good actually especially Gemini at say you just give it to it and give a chart to it and say like make this into a table that I can paste like literally say that I can paste into Google Sheets and it will do it in a way that literally you can copy

and it will actually paste correctly into Google Sheets and then you can do stuff. So especially with the book and

stuff. So especially with the book and and and my articles uh I I I love to use real data and as whenever I can of course and um um so I I do that all the

time. So, um I think that kind of

time. So, um I think that kind of interpretation is uh is very useful. And

so all of a sudden you can get 10 examples of something and test a theory where before it was kind of just too hard and you didn't.

>> That's an awesome tip because people know you can generate all these infographics with um especially with with Gemini and Nano Banana and all these things. Uh that's really cool to

these things. Uh that's really cool to know. You can just feed it. Here's a

know. You can just feed it. Here's a

here's a chart. Make it make it text.

>> Yeah.

>> Okay. I'm going to now take us to contrarian corner. The question here is

contrarian corner. The question here is what's something that you believe that most other people don't?

>> AB testing doesn't work very well and it doesn't work on most things.

It won't work on strategy or vision or insights like nothing actually important to the success of the company. You don't

AB test whether Uber is a good idea.

Um and then even when you do AB test the details where I agree like sometimes that can work. What happens is people will try things like oh I'll just you know try this verb and that verb and this ad and that ad and then like oh the

seventh or eighth one I got a positive result that must be good and what happens is um you keep doing that you pick the good best one and then you you go on and you find another one and pick the best one and then a year later you

look back and you should be like 50 or 100% better because you've stacked these things and you look back and like nothing's different. The conversion

nothing's different. The conversion rates are the same as they've always been. You see what the hell happened?

been. You see what the hell happened?

and I thought I picked the the winner.

And and the answer is in a combination of the tools not being statistically accurate, which they're not. And the

fact that you will get false positives even if the tool is statistically accurate, means that most of them are false positives. Even if the tool is 95%

false positives. Even if the tool is 95% accurate when the thing you're looking for is rare, which it is in the case of AB testing, uh it the false positives are happen more often than the actual

thing happens. And so most of the

thing happens. And so most of the results you get are false positives anyway. So, as a result, this isn't true

anyway. So, as a result, this isn't true of all AB testing, but for mo what most people do when they just do the sort of the the mundane AB testing, you can't AB test the important things and the

details are mostly false positives. So,

it's an enormous waste of time unless you're incredibly sophisticated. I know

there's special groups that actually are very sophisticated. Fine. If you're not

very sophisticated. Fine. If you're not doing that, it's sort of like the poker table. If you don't know who the psy is,

table. If you don't know who the psy is, it's you, right? If you don't have all of this information and and knowledge about AB testing, then you're the psy.

>> Bam. All right. Uh I will just say that I have found AB testing useful in my career. I think it's maybe at a certain

career. I think it's maybe at a certain scale when you're just kind of trying to optimize and continue to grow, you know, where it's like millions of users like a percentage gain is like millions of dollars.

>> True.

>> Most people are not working at that scale. Most people, right?

scale. Most people, right?

>> Yeah. So, just wanted to uh for folks that find it valuable. That's true.

>> Uh but I love it.

>> However, even so on your on your own podcast when you were interviewing the guy from Shopify um and he was saying how uh maybe a third of the things that they found with their systems just disappear. They just magically

disappear. They just magically disappear.

>> And they're they have a team of 100 people and they're really good at it >> and like their effects disappear all the time that so they double check later whether the whether the immediate effect goes away because even then, >> right? I think that was the CTO of

>> right? I think that was the CTO of Shopify conversation.

>> Okay. Yeah.

>> Yeah. Sweet. Okay. Worth of memory cuz I listen to a lot of episodes but I don't >> such a good one. I love that. Yeah.

Where they leave they leave like a hold out group essentially and then they just look back was the effect something that lasted and most times it didn't.

>> Yeah.

>> There you go. And that's with a lot of So that's what I mean. If you're doing that level of stuff, >> good for you. But if you're not, I don't know man.

>> There we go. Well, Jason, uh I'm It's always a really good sign when I'm just like I can't wait to get this conversation out the door and into people's minds because this there's so much value here. Uh I'm just uh already

anticipating all the people are going to reply and just like I had so many ideas for what to do with my product. Um which

is exactly the goal. And with that we have reached our very exciting lightning round. I've got five questions for you.

round. I've got five questions for you.

Are you ready?

>> Boy. Yeah. I mean I don't like talking a long time anyway. So lightning is great.

>> Here we go. What are two or three books that you find yourself recommending most to other people >> for writing on writing well by William Zinszer. I know I'm not the only one but

Zinszer. I know I'm not the only one but that's kind of the point. um on my best day I write like that. Um and then for for uh for product I actually like crossing the chasm which of course

everyone's heard of but what I find is no one's read it so that you know the little picture and you think you know what the chasm is. What I find is very quickly I I realized oh you haven't read the book you saw a blog post and you and

there's so much good stuff in there how to define a market and really what to do with this model. It's fantastic. So I

highly recommend reading the book. I've

had a Jeffrey Moore on the podcast. We

dove into a lot of this stuff. One of

the things that always stuck with me is um when early companies are looking for someone like them to adopt the thing.

That's something that really stuck with me. It's not like they're looking for an

me. It's not like they're looking for an early adopter to be like, "Oh, this is awesome." Like they're looking for

awesome." Like they're looking for someone that feels like them to say, "This is great." And so the early adopters are just going to spread to other early adopters and there's there's work to do.

>> Yeah. Part of that's because he defines a market in among other things as and the people in the market respect the opinions of the other people in the market.

>> Exactly.

>> And that's when you realize, oh, so jumping to a different market, it's not impossible. It's just you like like case

impossible. It's just you like like case studies aren't going to work.

>> Yeah. And then you think, okay, and then on writing well such a huge run of the book. That's like the book that most

book. That's like the book that most helped me write. And if you summarize the book for me, it's just cut. Cut more

and more of your stuff. There's always

to cut. I love this phrase where he's he's um he's on a panel with with this guy who is like an amateur writer and his his kind of summary is to that guy

is I I uh he the guy told him I never knew writing could be hard and Zenzer says I never knew writing could be easy.

I think both of those kind of summarize the the the turmoil of being a writer.

>> Yeah. The classic maybe Hemingway maybe not quote uh writing is easy. I just sit at the typewriter and bleed >> and bleed. Yeah.

>> So good. Okay, moving on. Favorite

recent movie or TV show?

>> Er from 1994.

15 seasons. Why do I Why do I say that?

Besides the fact I think it's good. I

have a 16-year-old daughter >> and we have we're now on season I think 13 watching this whole thing. She says

it holds up after 25 years and being you know gen alpha or whatever. I don't even know what it is. And so if if this is an era an era when, you know, shows were an

hour long and seasons were forever and uh and she says it's great TV, it must be great TV.

>> Wow. I've not had that on this podcast yet. Um also The Pit. I don't know if

yet. Um also The Pit. I don't know if you enjoy ER, you'll enjoy The Pit, which just won all these awards.

>> Yep. If it's good >> on Netflix. Um, fun fact, my cousin was in ER, not as a recurring character, but she was like a young girl patient and now she's a fancy actress in the world.

>> Oh, cool.

>> That was her start.

>> Okay, next question. Favorite product

you've recently discovered that you really love.

>> Um, this is probably not unique, but Whisper Flow for dictation. It's really

good. I like the keyboard shortcuts because it, you know, I just use it all the time in all the software and anything anchor makes. you know, they have like power stations and docks and recharging

>> over the K.

>> Uh yeah, ANK, right? Um and uh just all their stuff is super high quality and works really well. Everything seems to charge twice as fast when plugged into an Anchor thing. So, I don't know, whatever it is, it's really good.

>> I got a new Inker charger. I also love Anker. Uh that has like a display on the

Anker. Uh that has like a display on the side when you plug in stuff and it's got like multiple ports and it shows you like the percentage it's charging and the wattage per outlet. I love it.

They're just like, "How do we make this more fancy and fun and charge more?"

>> Yeah, >> I love it. Yeah. And then Whisper Flow, quick shout out. They are uh you get a year free of Whisperflow by becoming a uh insider. I think even just an annual

uh insider. I think even just an annual subscriber of my newsletter uh as part of the product pass. And so uh check it out. Lenny's product pass.com. You can

out. Lenny's product pass.com. You can

also check out >> I did not know that. I'm not a shill for them.

>> No, I love that. I love when people recommend products in the product pass.

A whole >> because I'm a subscriber for long enough that I didn't get that.

>> You missed out. You missed out. There's

19 products in there right now. By the

time this comes out, there will be even more.

>> Okay, two more questions. Do you have a favorite life motto that you find yourself coming back to in work or in life?

>> Yes. Be yourself. Everyone else is taken.

And it's attributed to Oscar Wild, but I've tried to look into that as I tried to get all my annotations correct for the book. And there's no evidence that

the book. And there's no evidence that he said it. But there's also no evidence who said it. So, let's say it's Oscar Wild because he said lots of things like that. I love that and it's such a deep

that. I love that and it's such a deep point like you know it's easy to hear and be like yeah yeah yeah but it's it's something I've learned to be more and more true every time especially as you see people online doing their thing and just like oh I want to be like that and

then you realize no you got to be yourself.

>> No and and the people who love you or like what you do also want you to be yourself because that's what they love and if you're changed then they wouldn't love that. So

love that. So >> final question you have this fancy award behind you on your desk. I'm curious

what's the story there? That's the

Ernstston Young Entrepreneur of the Year award for 2017 for Central Texas, which I co-un with the CEO of WP Engine, Heather Bruner. Uh, which is awesome

Heather Bruner. Uh, which is awesome because I I often call Heather our a late joining co-founder because that's what um LinkedIn that's what Reed Hoffman called Jeff Weiner because you

know Jeff was like you know four years in but was so impactful to everything the success of the company the culture d that like basically is a co-founder and that's exactly what

Heather is like at WP Engine. It's now

been 11 years since she she became the CEO. So, this is a, you know, there's

CEO. So, this is a, you know, there's lots of um data to back this up. And I

and I I used to say to people at the at WP Engine like if I just told you that Heather was a co-founder, you'd say, "Yeah, no, no kidding." I'm like, "Right, that's what that's why I think of it that way because so do you. So did

anyone because that that's the impact she's had." So, we co-win that award,

she's had." So, we co-win that award, which is nice because you almost never have co-winners. In fact, like I I can't

have co-winners. In fact, like I I can't remember another one. I mean, I know there are others, but there it's rare enough I can't think of another one. So,

it's really cool that we co-wrun that uh entrepreneur award.

>> Jason, this was so awesome. I really

appreciate you making time. I really

appreciate you sharing so much wisdom with us. Uh two final questions. Where

with us. Uh two final questions. Where

can folks find you online? Point them to your book, your website, and how can listeners be useful to you?

>> Yeah, I mean to be useful, order the book, hidden multipliers.com, or of course, you don't have to. You can uh I have all these articles online for free.

So, you can go to asmartbear.com and I'm on Twitter and other stuff that's all linked off of that website and the articles uh they're they're free. I don't have ads. I don't sell

free. I don't have ads. I don't sell courses. I don't I don't sell anything.

courses. I don't I don't sell anything.

So, like that's that's very very non-commercial. Um and so the in fact

non-commercial. Um and so the in fact the one thing I've ever done with writing that costs money is the book because you know it's a physical book.

I've got to charge something so I can ship it and everything. So, uh um but I think Hidden Multipliers is is certainly my best work. So, um so I'm very I'm

very proud of that. But, uh but you don't have to buy it. It's okay.

>> This is our chance to this is our chance to repay you for all the free content you've put out over time, right?

>> And so, I'm going to order a number of them.

>> Jason, thank you so much for being here.

>> Thank you. This is fun.

>> So fun. Bye, everyone.

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