Hello Ladies! Patrick McKenzie’s 362 day working year & other secrets of his success. A guest post from @Patio11

Does anyone remember an incredibly nervous looking geek at Business of Software 2010? As he stood, gulping air and muttering to himself at the back of the auditorium, the contrast between the bright blood red Twilio jacket he was wearing and the white, bloodless face, was remarkable. This was a shy introvert on the brink of exposing himself to 300 of his peers. Eventually, his turn to deliver a Lightning Talk arrived…

Boom!

A star was born (or at least another element of Patrick McKenzie’s remarkable personality was revealed).

Patrick, has been a long time supporter and attendee  of Business of Software, as a speaker and a delegate, and kindly agreed to write our first ever ‘BoS guest email’ – I hope it won’t be the last.

From Patrick McKenzie…

‘Remember the Social Network?  God, was that a great movie.  That kid from Scott Pilgrim had a great idea, got a zillion users, raised a billion dollars, and then had a falling out with his co-founder exacerbated by Justin Timberlake’s coke habit.

The real life of running a software business isn’t anything like the movies.

It’s a day-in, day-out slog.

A battle of inches.

It’s the “Long, Slow SaaS Ramp of Death“, to quote Gail Goodman.

362 days a year in the trenches

I spend 362 days a year in the trenches, building systems, writing emails, talking to customers, winning sales, tweaking landing page copy, and dealing with all the boring Grown Adult Running A Business stuff.  I-Can’t-Believe-Its-Not-Scott-Pilgrim sure never had to document his network infrastructure to get liability insurance.

What do I do the other three days?

I go to the Business of Software Conference, to learn from folks who are a few steps down the road from me, and to teach the folks coming up behind.  It’s headlined by industry luminaries and attended by folks who run real, sustainable software businesses and are in it for the long haul.

A small sample of the things I’ve learned at BoS over the years:

How to grow through the Long, Slow SaaS Ramp of Death

A talk Gail Goodman gave, in 2012, the best presentation on growing SaaS businesses that I’ve ever seen.

It was a blow-by-blow account of Constant Contact’s rise out of the ashes of the dot-com bubble to a sustainable, wildly profitable SaaS business.  The single biggest problem for my software business, and often those of companies which I’ve worked with, is finding a way to reach smaller businesses in a scalable fashion.  Gail gave a combination of excellent tactical advice — from funnel optimization within the product to hiring a team of onboarding coaches to using IRL events as a customer acquisition strategy — and strategic insight.

It was also very motivating to me.

Appointment Reminder, my SaaS business, was two years old when I heard Gail talk, and I felt like it was stagnating.  Where’s the hockey stick everyone keeps talking about?  Crikey, I thought I was supposed to be *good* at this marketing thing.  Attending BoS was a much-needed kick in the pants to get me re-energized, back to work, and focused on the next drivers to the business.  (Appointment Reminder has grown by 40% in the interim in terms of proven revenue, and our pipeline is finally starting to shake out and has more money in it than the business has seen in total.  Thanks, Gail.)

The most effective tactic I’ve ever learned for marketing software

Rob Walling did a presentation a few years back which clued me onto email marketing.  It was a deep, deep dive into the conversion math of asking for a sale straight-off a new visit to the website versus asking for permission to email the prospect, educating them about the problem domain at scale using automated email, and then asking for the sale after you had demonstrated your expertise.

I was skeptical it would ever really matter.  I’m an engineer!   Who still reads email?  Maybe that works for Salesforce but that would never work for *my* business.

But Rob was a smart guy, running a business very similar to mine, and he speaks my language: experiments, testing, and verifiable results.  So I tried it.  And it revolutionized my business, and that of several consulting clients.

I’ve used the strategy Rob outlined (in 45 value-packed minutes) for more than ten different software products now, and advised more companies to use it besides.  I literally can’t tell you how many millions of dollars it has made, because some very serious lawyers will break my kneecaps, but suffice it to say that it’s the single largest tactical win that I ever pulled from a conference.

Speaking of NDAs…

we’re fortunate to be in an industry where the norm is sharing what you know, but the blog posts and conference speeches and what not are the tip of the iceberg of institutional knowledge.  The really good stuff is passed along peer networks and over drinks.  Ever it was thus and ever will it be so.  BoS is the densest, most intimate gathering of people running successful software companies that I know of.

I remember going out to lunch my first year and asking the gentleman next to me what he did for a living.  “Oh, our company has X0 employees, $Y0 million in annual revenue, and it develops nuclear power plant control software.”  I wondered if I was in the right room… and shockingly, I was.  The spirit of community and level of sharing is amazing, at all levels.

I didn’t have the opportunity to get an MBA from MIT

So I had to listen to Dharmesh Shah talk about growth curves, gross margin, and cashflow management at Hubspot instead.  My business was, at the time, bootstrapped and at low enough scales such that I could comfortably fit my AdWords spend on my personal credit card and never worry about financial modeling more than a week ahead.  That would have upper-bounded what I learned about the SaaS business model, and caused me *considerable* pain when we introduced a new product with longer sales cycles and large customer acquisition costs, but for the opportunity to hear Dharmesh speak a few times.

I won’t bore you with the math in your inbox, but suffice it to say that if you require in-house sales teams or have large advertising expenses, it is likely that you’re purchasing growth in such a manner as to be cash-flow negative.  Without a good handle on the numbers, you can grow your way *straight into bankruptcy court*.  You did everything right, the numbers went up every month, and then *bam* you’re out of money and can’t make payroll.

Dharmesh went into substantial detail on how to address this, from tactical advice (like making it a practice to ask customers to prepay for their first year, which is something that I’ve since implemented to considerable success in a few circumstances) to the strategic questions of what it means to have a marketing/sales-heavy organization, what sort of products you can’t deliver without one, and whether (and when) to raise outside capital if you know you’re going to need that runway.  (Jason Cohen, who has also done bootstrapped and funded businesses, also touched on these points last year.)

These talks were major eye-openers for me.  At the risk of stating the obvious, entrepreneurs who have built companies with hundreds of employees and $50 million a year in revenue are sort of thin on the ground in my neck of the woods.  I don’t get the opportunity to sit down for lunch with them every day.  Dharmesh is that guy, and while he is graciously at BoS he’s one of the most approachable people I’ve ever seen.  (He’s an introvert like I am, but last year he was holding court until 11 one night regaling a mixed audience of engineers and founders with stories from the trenches.)

The best reason to come to BoS isn’t the speakers, though.

(God knows it isn’t to see my smiling mug.)  It’s the fabled “Hallway Track” — the opportunity to connect to attendees.  If you went to BoS last year you might have run into Matt Wensing.  He’s the co-founder of Stormpulse, a bootstrapped company which does weather risk management for enterprises.  You might have heard Matt express some frustrations with the run-around he was getting from VCs at the time.

You should come this year, too, and if you see Matt, ask him about how he landed the White House Situation Room as a client (Obama praised his company in a speech), how they raised a pair of seed rounds from some of the top angels in the Valley (after years of being told “No”), and how switching from freemium to enterprise was their hockeystick moment.

Another person you should keep an eye out for is Dirk Paessler, CEO of Paessler Software.  Dirk is a friend and former client of mine, who I met at BoS in 2011.  (Dirk’s takeaway from the conference that year: implement A/B testing.  Ask him how that worked out, but I don’t think I’ll spoil too much if I say that they paid for the conference ten times over with the sales gains from the first month.)  Dirk generally makes it out to BoS for the same reason I do: Nuremberg, Germany and Ogaki, Japan are a bit far away from the tech-industry in-crowd, and we don’t have awesome opportunities to connect with people who have been-there-and-done-that locally.  BoS is a great avenue to meet people who have.

I can’t recommend Business of Software enough.

If you have a successful software business, at any level from “I’ve quit the day job” to “We’re doing tens of millions on our main product”, and are wondering what is next, I can’t recommend Business of Software enough.  I’ll close with oft-repeated words from the speakers: we’re all here to teach and we’re all here to learn, together.  I look forward to seeing you there.

Regards,

Patrick McKenzie
Founder
Kalzumeus Software

@patio11

P.S. Did you know that the P.S. of emails is the part which is most read (after the first paragraph), which makes it a really good place to put call to actions?  Well, now you do.  Book your tickets here for Business of Software Online Fall.

Psst, use my speaker code, patio11, and you’ll get a 20% discount – use it to buy dinner for someone you want learn from and someone you could pass something on to. Just a thought…