I have never been better and we’re delighted to see that he’s wearing a green sweater just for me. So we’ll get straight into it just to give everyone idea. Can you tell us about hotspots brief startup to scale up story? So what’s what is around nine, 10 years old now? And can you tell us just a little bit of the history of how you got to where you are now? And the way I kind of think about companies that go through different phases.
Setting Up a Startup
It’s like an S curve that go through the beginning. The tough part is, can you get product market that can you build something that another human will part at least a dollar with Zubi? And then you got some customers, you get the product market fit. They can you can you acquire some customers and get the man to work a little bit so I can acquire a customer for X and get the value of at least three cents out of that. And then the next phase is what I call the scale up phase. Those first two phases are kind of the startup phase. Skill phase is can I pour a lot of resources into the top of my funnel and acquire customers at X for at least three X at scale and not break it, not completely shake the machine and have the wheels fall off so it took us probably six, seven years to kind of get out of startup mode. And we’ve been in scale up for the last couple of years where you acquire customers for plus or minus $12 thousand dollars and our total value for customer plus or minus $55 thousand dollars, you really hit the gas and not have the car fall apart.
That’s kind of the journey. Is there a magic number around the three X? Is that what you were aiming for? Or that’s kind of just how it worked out over time. Is that like a solid number to aim for? I think that’s a solid number to aim for. I don’t think there is a right number, but I think it helps. But it’s sort of like an ATM where I put a dollar in and if I can get five dollars out, that’s a good machine and I want to put more dollars in there, which you want to do is able to put more dollars in there and have that ratio stay the same. So we’re being scaleup stage for the last two years. Does that mean opening international offices does not mean just growing the employee size? Does that mean increasing customer numbers? What is how long do you think this will last? Hopefully for a long, long time, because the next phase in my s curve is the disruption, because when you get disrupted or you run out of market. Now, I think we’re lucky at Rulership because we’ve chosen a vast under penetrated market. So hopefully we got a long way to go and hopefully if and when disruption happens, we disrupt ourselves versus somebody disrupting us. So hopefully we’ll be in the scale of mode for a very, very long time. So when it comes to the disruption side, you have to be very light on your feet when it comes to being able to build new products and being able to add on what people are looking for. So this is a question I had about the MVP, which is one of the first things people always go to. You get the minimum viable product product market fast, but over time that product can change.
Startup Versus Established Business
So are you constantly actually going for an MVP year on year or over time? Does it change or at the core of Rulership stayed the same? I think that idea of an MVP in being very lean and very agile doesn’t go away. I still feel like some spots, a bit of a start up and I run it like a bit of a startup. So we have our core marketing business, of course, is going quite well. But within the marketing business, we’ll build new products. We built a new ads product and we build the new ads product. We have that same sort of MVP attitude of can we build something that at least one of our customers will want to buy? Can we build it compelling enough that a bunch of our customers want to buy? Can we get that math to work? And we measure things like what’s the percentage of people who start using our ads application and then what’s the percentage of those users where it’s sticky? So we still treat that like a little startup. We started a sales business and started selling the same type of approach. We were like, how do we get to MVP? How do we work through all that? So you’re still a startup? I actually think what’s interesting about tech is so many of the great tech companies, I went into the great company category, but I look at Apple, I look at Microsoft, I look at Google. They’re still run by entrepreneurs. They don’t bring in some seasoned person who’s run a giant GE kind of thing before. Is that entrepreneurial mindset of continuing to innovate, continue to question conventional wisdom, continuing to have that real startup mentality that I think benefits? It turns out.
I absolutely agree and we’ve done pretty well over the years for it, which is great. It’s really exciting to see how we’re now starting to branch out into different languages and so on like that and dealing with the localization issue and so on and so forth. A lot of staffers want to get to that phase. When you were talking about the. Adopting InTech and constantly reinventing the product or adopting it, some people will still want it. When I worked in startups, one of the difficulties we had was how much of the resources and time to be put into the engineering side of things and then sales, marketing. And how do you start to figure out when you very limited how to balance those two? Which one deserves more time? Where do you, like, stop focusing on product so much, maybe put more money into marketing of it? How did you deal with that issue as it came up? Well, we made it this was one of our really big mistakes we made. And I think it’s maybe useful. We before we really got into scale up mode, we started hiring sales and marketing people at a pretty rapid clip. And I think that’s part of the reason is I’m a sales and marketing person by background. Most of these tech companies have become great or not run by someone with the sales and marketing background. They’re actually run by product people and so I think I jumped the gun, started hiring, sales and marketing people to quickly hitting the gas and sales marketing too quickly when we hadn’t sort of really started up the product market fit in the value we provided to customers. And I think that cost us I think it cost us I think it cost us some time and a lot of money and a lot of market cap.
By doing that, we wasted way too much money. My advice would be keep it really product engineering, get to product market fit, get those early customers, maybe hire one or two salespeople and get some marketing going, get the marketing going earlier than the sales. And then once you start to get that machine working and you’re pretty sure you could stick a dollar in and get three, four or five dollars an hour, you can you can get that ATM go, then pour on the gas with sales and marketing and add them quickly and scale them up as quickly as you can without breaking the business. We started too early, but luckily survived. So one of the things that you mentioned in a great article you wrote for Rethink was being sometimes described as a chief pothole prevention officer and by a panel, you meant something similar to this where this could have swallowed you whole, could have taken over. Another one you got into was something that we in the embed methodology, we talked a lot about the persona and targeting. How did being unfocused on a persona also be quite a big part of look at us, all of us? How did you end up deciding to focus on that single Marimo through monetization, persona or strategy? Sure. The Chief Power Prevention Officer is very true. Still am the chief prevention officer and at scale. Here’s the thing at scale. You have to get almost everything right almost all the time. No pressure because everything kind of it’s together and I’ll give you an example. You know, your support organization, so we have a support organization and we want to answer every call within 60 seconds, give dynamite support if you’ve got some product issues, your Russia products or market or did something on the product side, those supporting issues can really know people can wait a long time that we don’t want them to say, wait five, six minutes for the call.
Organizing Your Business
They’ll hang up on the call and then they’ll call their sales rep and they’ll start asking their sales reps technical questions. And guess what? Sales reps stink and asking answering technical questions. And then then the sales rep just points them back to support. So you have this negative flywheel essentially that happens where maybe you release the product wasn’t quite right. You didn’t roll it back quickly enough. Support backs up. People are relatively unhappy. When the support backs up, then they’re calling the sales reps. Sales reps aren’t selling right. And then they’re back and support back and support back up. And you can be a negative. You kind of have to have all the pieces of the organization operating at nearly full speed nearly all the time because everything is so wired together in scale up mode. And so you’ve got to be super vigilant about looking for, I call them little cracks in the pavement. If you can find a little crack in the pavement, you let them go, particularly in Boston, rain, sleet, snow. The next thing you know, your giant sinkhole that will swallow your whole goddamn company up. And so I try to find them early and patch them off. Right. So that’s the one of the things that it becomes systemic in every part of the organization becomes damaged by this, something as simple as not getting to those support calls on time and is super cliche, but you’re only as strong as your weakest link. If you’re bad at marketing, rip through the whole funnel. If you’re bad at support or rip through the other way, everything is completely tied together. This is our time together. It’s I guess, yeah. A lot would have thought that. Well, the product is critical of itself.
It’s fine. We just focus on that. We don’t do anything else around that and some have been lucky. That’s impossible. Another big decision that Rulership came up against was switching from the tofu to the food. So Tofu is our acronym for top of the funnel tools to middle of the funnel tools and really diving into being a marketing automation platform. You walk us through a bit about how you and first of all, decided to build those more like traffic type tools and then move on to something that was more deeper about nurturing and about giving people a good experience. Sure, the early days were really focused on solving one simple problem. How do you turn a complete perfect stranger up there in the world into a visitor, into your site? And we really spent four years on that mission to to pull that off. That went pretty well and we noticed what the problem people had is they were like, all right, now I’m getting visitors. I’m starting to get leads. I need to manage this better and they’re trying to buy these things called marketing automation solutions. So then we decided, let’s jump into marketing automation. We’ve made a little acquisition around it, built out a big team, and we spent the next four years of our life really working on how do we turn a visitor into a qualified lead for a sales rep. And that went quite well. And then we’re about a year into the third chapter and Rulership was how do I turn a qualified lead into a delighted customer? So we’re building CRM tools like this. And the journey has been very, very interesting. We did the exact opposite of what everyone tells you to do, but everyone tells you to do it.
One little thing, you get very, very good at it and then maybe expand from there. We got very good at a very wide set of things and that has served us well to serve our customers very well. I think one of the things like if I look at Rulership and when he talks about is your company has to have a secret, you have to be right about something that everyone thinks you’re wrong about. And I think we were right about a couple of things. One, we were right about going very wide and all in one in serving businesses. That way, I think we were right about you can build a scalable, big, profitable business in the SEO software space. I think we’re right about this idea. The world is going to move to a much more inbound world away from an outbound world. So we were right about a few things people were wrong about. When you write about things, people think you’re wrong, but it gives you cover of the night to run very fast while everyone’s chasing you. I think that’s important in breaking from startup to scale up. Nowadays, would you say people have to run that little bit faster because they say 10 years ago might have been a good spot before people had the ability to jump in and learn and adapt and like, let’s say, make imitation tools, make imitation companies and distract from other ways. Can startups today assume they can be in a similar position, like being right about one thing, or would you say they have to just move that bit faster? I think it’s the world’s best time to start a company in the world’s worst time.
Start a company. The best time to start a company, because, man, you can build software compared to 10 years ago. You can use the best you can use open source tools as so many powerful programing languages and libraries out there that developers can use. And it’s amazing what you can build in six months today versus what you could do with hardware like you came up with a prototype. You can go to China, they will build at scale your piece of hardware or your piece of clothing or your piece of whatever. Exceptionally quickly, the hard part has shifted to sales and marketing because there’s so many products out there, so much choice for buyers, B2B, B2C, that you have to become a black belt in. How do you market in a way that stands out? How do you market and sell in a way that matches the way people buy? That’s turned out to be the long pole in the tent. The long haul used to be building a great product, a long poles move to boy, how do I sell in the market that product in an effective way? Controversial. I love to debate about that later on in vogue, if you have any questions. One other big chili in your article is about how changing the pricing model actually was really critical to getting it right because there were issues around. So one part was about retention was one critical cornerstone and then actually changing the pricing model. Can you talk us through how the change of the pricing model and why it worked and then why retention became the thing you focused on so hard, like 2012, I believe. Sure. The thing that enabled us to skip from or move from start to Skalp was really improving customer value and improving the retention rates.
And lots of companies have this problem and it holds 99 percent companies back from going from start to scale up. And so we are laser focused on that in terms of fixing retention. What a lot of companies do is they just turn to their head services and say fix the darn problem and the services can only do so much. And so we did it. We said, well, first of all, we did that didn’t work. And then it didn’t work. We said, let’s make retention and customer value a a team sport. And so we asked for VP of sales, change the way they sold and change the commission structure to be tied to customer value. We asked our head of marketing at the time to to start scoring leads in a whole different way in raising the score of leads that are most likely to buy but are most likely to stick around and have a lot of value. We changed our pricing and packaging. We changed the part of our product. We invested it. That is the sticky part. We changed the way we delivered service, change everything, pricing and packaging. The part we changed there that I thought was that worked was we aligned our pricing model with customer success. And I really liked having the company’s success aligned with customer success. As our customers are successful, we participate in a small way in their success, essentially. And so the way that works for us is the size of your leads database, your contacts database, so that the better our customers do with inbound marketing, the more leads they get, the more customers get, the better they get, the better we do. So that part of the pricing model change worked really well in allowing our developers and our salespeople and everybody with our customer success.
So to the extent you think you’re thinking through your pricing model and everyone’s constantly thinking through the pricing model, try as best you can to align incentives. Right? Don’t just go for the enterprise model, the unlimited free model and so on without actually having a strategy around why it matters and why we’ll actually have that positive knock on effect. Sure. Regards to the way you’re building your teams out, sort of like what AdWords did you think about what AdWords did? You had Yahoo before is a list of links. And then Google obviously moved to a model where you’re paying not for the impressions, but you’re paying for the click through. Yes, there was an auction model and so they really tied those incentives together really nicely. We were inspired by Google’s pricing model. We created pricing. One of the big things and over all this change over all these years has been how you’ve been able to navigate the leadership issue, like how to spot the right people to bring a company like this to the fore, to bring it to the stage. Right now, how often do you go around, like taking the temperature of how team leaders and managers and people are feeling? And how do you deal with the feedback? OK, one interesting factoid about Rulership is if you look at our the people who report to me today where two people are reported to me. Six years ago, it’s mostly a brand new team, and this surprised me, I didn’t expect that some of the all those things are important to me back then are terrific people. I would start companies with them. I love them. And most of them left Rulership and gone on to do very entrepreneurial start. You think some people are just startup people and they like that? Totally cool that there’s nothing wrong with them.
They’re fantastic. But we have swapped the whole team out the way the way we find out whether a leader of a team is scaling well is someone interesting. We survey all of our employees once a quarter and we’ve done this for the last eight years and and do a net promoter survey. We say to you, scale of one to 10, how likely you to refer a friend to work it up and then why? And what we do is we look at we look at it by department. So we look at the VP of X, Y, Z, Department of VP of X, Y, Z Department as a very high net promoter, score for quarter for quarter and bam, it goes down. Well, that’s a problem. What are the employees saying there? Are there leadership issues of the problems? So we’ll typically go and we’ll gather up the feedback from there presented to the leader in question, ask them to work on it and they crank away and they work out the way kind of with bated breath for the next quarter and the results come back and bam, typically false again, kind of disappointing. Now, what I learned from that is once your team. Once your team has lost confidence in you, it is very difficult to win that back and that’s an unfortunate conclusion I’ve come to. But it’s happened multiple times in my history. That’s my first half. My second aha is once we hire a capable replacement for that person, we typically try to find a new role for that person. The score will bounce all the way back to where it was, so you can recover it quite quickly with the right capable leader. So I found the whole team thing to be very interesting.
The team we had in the startup mode is very different than the team. We have it scale up mode. It’s it turns out it’s a slightly different skill set. The way we found out whether our startup leaders were scaling or not was really their employees told us through the service. So that’s one big challenge is then to be able to have that realization where you can change this out and it is not a bad thing, even if the guy’s been there from the beginning, it’s like they’re not fitting the position of competing right now. And that’s OK. It’s far. They’ve played their part and they’ve done really well and they’ve done great. And financially, they did great and they learned a lot and we learned a lot. And what we hope is they leave and start another company that’s bigger than what somebody that’s what would make this really proud. And for all these folks who have left, if they start companies. My co-founder and I were investing in them and we we wish them the best. But it is slightly different profile as you scale for me even to like I’ve had. I have plenty of issues on the leadership side and we hired quotes. It’s kind of compliment me. Marcelo’s sort of get complimentary skills to me and it’s helped a lot. And so it’s hard to get the skills you needed. One hundred employees, turns out, are different than a thousand. It’s a bit more so you get complimentary people who can fill those like less not lesser strengths, but just like parts where maybe you’re not cover your weaknesses, cover your weaknesses or lean into that and find good people who can do that. Yeah, one of the things I personally found myself doing is like I’ve worked on my weaknesses are working with weaknesses and working with weaknesses.
And gosh, the return on calories, trying to fix my weaknesses is very poor. And so I’ve moved completely to I’m just going to lean into my strengths. I’m good at a few things. How do I get even better and lean into things I’m passionate about? And that’s served me well. Yeah, people don’t change. So and yesterday Katie had brought up at the younger age, maybe perhaps tried to lean in more to it. But then you can decide for yourself as time goes on how that works. Overall, not so insource as in software, as a service. What are the kind of big challenges you’d see for a brand new one starting off today? You’ve got a program running now, Rulership for startups. What challenge do you see? Similar challenges to an Xbox began, or has the game changed a bit in terms of sales and services such as that? I think the SAS companies go through the first challenge was can they get the product market fit hard to do, lots of noise, lots of competitors. They need a secret. They need to be able to build good products. We don’t help with that, but we help with this once they’ve got something that looks about right. Boy, how do you feel your fellow pull visitors and how do you turn those visitors into leaves? How do you from those leads and qualified leads and customers and when you’re a little tiny start you just getting going, you can’t afford Rulership turns out raise any venture funding, yet you’re trying to prove out your idea of maybe prove it to venture capitalists or investors. You just said you’ve got no dough and you’re you’re living on Romney. And so we’ve got an aggressive 90 percent discount for startups that are an incubator for startups.
And it’s basically a year subscription plus one 90 percent discount. The second year they get a 50 percent discount and then the third year they’re pricing. And we put that together a couple of years ago and we signed up hundreds of incubators and a lot of startups are taking advantage of it. I do feel like marketing and selling is hard to beat, so much competition, so much choice, so many people building products, so much funding out there that they need to become blackout’s and marketing sales that we want to help. And do we want to get in there early and help as much as we can and then we’ll grow together. That’s the idea of it is going to get to my question of what inspired you to want to offer a program to startups? Because some people might think, well, that’s not particularly profitable. They can never afford something as expensive as a big marketing, automation and sales platform. But it’s something that you you believe it’s like a long play. Yeah, I the point out in the article, when do you make the right over the fast decisions and go for the long plays in? One of the things that I think founder, co-founder Choice is is a good one. I found the near perfect co-founder. He and I are aligned on a lot of things. One of the things we’re relying on is we didn’t want a small exit, we didn’t want a quick win. We wanted to build something that would endure durable built, something our kids and our grandkids would be proud of over the long, long haul. And so every time we’ve got to make a decision, we typically lean on making the decision that benefits the enterprise value over the very long term.
So stuff like this, that is a pittance of revenue and kind of distracting in the short term. Well, it helps the community, but over the long haul and we’re self serving Kappos that will help us over the long haul as they grow up, will grow together and stuff. So we’re almost at the end. And one of the last things I wanted to ask about, so we wanted to make this week of the team and always be learning. We’re now running sales certifications, marketing certifications and all that, growing together, sharing the knowledge and getting people to nail sales and marketing. Well, it’s a bit of an unusual decision to start an entire academy. Where did the idea come from and where do you see it? Like you see, this is still an extremely valuable part of Rulership mission. Yeah, I’m psyched about the academy. We had a terrific guy named Mark Killens started and he started it as a way to skillfully train our customers on Rulership and inbound marketing. And it went really well. Our customers really liked it. And we noticed non customers kept taking the classes and really liking it, putting on their LinkedIn profiles. Because once you learn inbound marketing and learn how you become a very valuable marketer, you get hired very quickly. You end up making a lot of money and which is good, I guess. And so we started layering and more courses and then turning them for our customers. And from the outside we just layer it in the salesforce. I think the way marketing is change. Humans are changing the way we shop for products. We make decisions about products marketers needed to transform. The way they marketed to match up sales is changing to the way you sell has to change to match the way people buy and cold.
Calling people I just think is dead cold. Emailing people is not dead, but there’s a way to do that. You need to increase the value and increase the context there. How you pursue an account. Are you engaging in the sales process changes as that customer potential customer can learn so much more on the Internet, on your website, on Quora, so much more information available to them. So we wanted to build a modern methodology of how do you actually sell to the two thousand sixteen human that matches the way they buy? So we put together an awesome new course teaching people how to do that. So I’m hoping people think that would the really. Absolutely. So we offer sales and marketing courses and how to meet up come for certification.