Omer (00:11.840)
Welcome to another episode of the SaaS Podcast.
I'm your host Omer Khan and this is the show where I interview proven founders and industry experts who share their stories, strategies and insights to help you build, launch and grow your SaaS business.
Today's guest is John Warlow.
John is the founder of the Value Builder System, a company that helps business owners improve the value of their company.
Prior to starting the Value Builder System, John started and exited four companies, including a market research business that was acquired in 2008.
John is the author of the best selling book Built to Sell, Creating a Business that Can Thrive without you, which was recognized by both Fortune and Inc. Magazines as one of the best business books of 2011.
His latest book, the Automatic Creating a Subscription Business in Any Industry was released by Random House in February 2015.
John has been recognized by B2B Marketing as one of the top 10 business to business marketers in the US in this episode we talk about John's latest book, the Automatic Customer.
We discuss the nine subscription models that John's identified in his book.
We discuss case studies across a variety of industries that are using each of these models and we talk about how any industry can build a subscription business.
A lot of the businesses that we discuss today are not software or SaaS businesses, but I think a lot of the times the really innovative ideas come from looking at places outside of our own world.
And that's really what I'm hoping that will achieve with this interview is to give you some insights that maybe will help you think a little bit differently about your own SaaS business.
John, welcome to the show.
John Warrillow (02:03.310)
Thanks for having me Omer.
Omer (02:05.310)
Now I gave the audience a brief overview about your business side but tell us a little bit more about yourself personally.
Who is John when he's not working?
John Warrillow (02:15.310)
He's a dad for the most part.
I've got a couple of boys and they are very, very busy into sp.
One's into big ski racing and another one's pretty big into tennis.
So that has me ferrying the kids around to various competitions.
And I guess I'm a husband as well so my wife and I share the ferrying duties.
But yeah, I obviously very committed to the kids and spent a lot of time on sports fields of some sort.
Omer (02:49.370)
Awesome.
We like to kick things off with a success quote to better understand what drives and motivates our guests.
What is one of your favorite quotes?
John Warrillow (02:59.540)
You know it's the quote behind in the arena.
You may have recall this quote by President Roosevelt I believe and it talks about it's too long to discuss now, but it's called in the arena you can Google.
And it really talks about the fact that criticizing from the sidelines is so easy to do, yet really the credit goes to those people who are quote unquote in the arena, the people who are making mistakes, who are skinning their knees, but at least they're trying.
And the kudos goes to the people that are trying because even if they fail, they failed while doing something, which is a major challenge.
Whereas the worst thing to do is kind of sit on the sidelines and just kind of criticize, be a Monday morning quarterback.
And it's called in the arena and you can Google it, but it's just a great quote.
Omer (03:57.610)
Yeah, I like that one.
Great.
So now, before we, you know, I read your book Built to Sell last year, and I've got to say that it made me think completely differently about how to build a business.
Um, as you said in the book, most business owners start their company because they want more freedom, but they often find that the business just can't operate without them.
And, and the lesson for me was that even if you're not thinking about selling your business, you should be using the same principles that you describe in the book to build your business and create value.
And I often hear from entrepreneurs, particularly those running a services business, complain how hard it is for them and how they have to work all hours just to keep things going.
And the fictional story that you described in the book about a guy who owns a marketing agency, it was, I think, a really effective way to communicate those important lessons.
So I wanted to thank you for writing that book.
It's one of my highly recommended books that I always tell others about.
And if folks haven't read it, then make sure you do.
I'll include a link to that in the show notes.
But we're not here to talk about Built to Sell.
Today, we're going to talk about your latest book, the Automatic Creating a Subscription Business in Any Industry.
Can you start by giving our listeners an overview?
What's the basic premise of the book?
John Warrillow (05:30.450)
The basic premise is that any business, both software businesses obviously, but also businesses of any industry, can benefit from creating recurring revenue.
And so in a software context, I mean, your listeners will all know kind of the cloud based SaaS model, but other industries often think, well, subscriptions are just for software businesses, but really to become a valuable business, you've got to build in some recurring revenue.
And you can do that in virtually any industry.
And that's what the book is trying to do is communicate that.
Omer (06:03.470)
I think that's a really good point that you made there.
I think that a lot of the times I hear entrepreneurs or aspiring entrepreneurs who are not in the software industry who'll say, I want to get into building a SaaS product.
And I think from what you just said, it hit me is that it's not really about building a software product that they really, they're really after.
They're about the idea of building a subscription business.
John Warrillow (06:36.940)
Right.
Omer (06:37.300)
Which automatically generates recurring revenue for them.
So I think, you know, if we do have folks listening who maybe are not in the software industry, who maybe want to get into a SaaS business model and maybe aren't even excited about a software business, well, there might actually be an opportunity for you to build a subscription business doing what you're already doing today.
So I think that's, that's one thing.
The other thing is that as we discussed earlier, a lot of the folks listening to this podcast are software Entrepreneurs with a SaaS product in market or they're about to launch one.
And so most of those folks have a pretty good understanding of the fundamentals of a subscription business, and they understand terms like customer acquisition cost, lifetime value, monthly renewal rates, and churn.
They may not actually be measuring all those metrics and applying them, but they know that they should be since those metrics are so key to growing a subscription business.
So I think the value that I'm hoping we'll get for those folks from this interview is really about taking the insights and the research that you've done with companies, both in the software business and outside of the software business, to try and really get everybody to think a little bit differently about how they're looking at their businesses and, and hopefully inspire them to think a little bit differently.
So let's start by why did you decide to write this book?
John Warrillow (08:08.820)
You know, in Built to Sell, the premise is creating a business that can thrive without you.
And one of the essences, one of the main pillars of that idea is to create some recurring revenue so that the business has this annuity stream without you, the owner having to be a rainmaker.
And, and I realized that in Built to Sell, I kind of gave that short shift.
I didn't spend enough time talking about recurring revenue.
I kind of touched on it, but moved on pretty quickly.
And the years after the book came out, I realized that was a bit of a mistake.
I wanted to right that wrong with this book, the automatic customer, and really drill into, okay, so you want to create recurring revenue.
You don't have to be a software company.
If you are a software company, you're halfway there because most people are used to buying software on a SaaS model today.
But if you're not, there are other ways to apply the same subscription model to your business.
So in a lot of ways, the Star wars movie started at Episode four.
Right.
I think Lucas had nine movies planned out and he started with number four.
And I kind of feel a little bit akin to that in the sense that Built to Sell.
I should have probably written after the automatic customer because putting cart before the horse first creates a recurring revenue, then go to sell your business.
But anyways, I did it the wrong way around.
Omer (09:25.030)
So we have George Lucas to thank for that.
John Warrillow (09:26.870)
Exactly.
I'm in good company, hopefully, if he'll have me.
Omer (09:32.070)
So how did you go about researching this book?
John Warrillow (09:37.750)
It was really a lot of just analyzing different recurring revenue models, interviewing people, interviewing venture capitalists, interviewing private equity folks, interviewing the entrepreneurs themselves.
And it sort of took on a life of its own.
You know, the venture capital community is interesting because they're looking for, you know, a very specific kind of subscription business.
You mentioned metrics off the top.
You know, probably the single most important metric for any recurring revenue company to look at is their LTV to CAC ratio.
The comparison or the relationship between the lifetime value of a subscriber and the cost of acquiring that subscriber and, you know, professional money.
Whether it's investors, venture capitalists, you know, private equity, they're all looking for at least a 3 to 1 LTV to CAC.
So for the data guys listening to this show, clearly that's a metric you should focus on.
But it was interviewing people like the venture capitalists and the entrepreneurs running these businesses.
Omer (10:42.740)
Okay, so in the book you describe nine subscription business models.
So I thought it would be good for us to walk through those, maybe just briefly describe what each one is and talk about some real world examples of companies that are using those business models.
And from your research, what you've seen, what works and what doesn't work.
John Warrillow (11:06.350)
Sure.
And you know, of the nine models, depending on what software company you run, you could probably find elements of a lot of software companies in these nine models.
But the first one I talk about is the membership website.
So here you're putting your content, your expertise behind a paywall.
A good example of that might be dancestudio owner.com.
it is a membership website for dance studio owners.
It's a very specific niche run by Kathy and Suzanne Blakely.
They run a 900 square foot dance studio up in New Hampshire, and they've developed a system for running a profitable, successful dance studio.
So if you've got some expertise in your industry that you are prepared to sell or share with other people in your industry, it's the great, you know, groundwork for a membership website.
Omer (11:56.480)
Okay.
I think the membership website is, I think a lot of folks will be pretty familiar with that concept.
And in fact, I think, you know, it's something that, you know, as I think about this podcast, for example, I think, you know, I've often wondered what are other subscription models that might work beyond what, you know, 99% of podcasters are doing out there?
And I think certainly the membership model certainly has some, some legs and some potential.
John Warrillow (12:33.720)
The, the trick, I think, is to find a niche so narrow and so specific that people are willing to pay for that information.
Because, of course, information is everywhere, right.
And, and a lot of it's free.
And so find something that is so valuable that people will be willing to pay money for and not easily Google a membership website.
Your biggest competitor in a lot of ways is Google.
You can Google anything.
To what extent is what you have so unique to your industry and so unique perspective that people are willing to pay for.
In my last company, which was a subscription business that was acquired in 2008, it was a market research business.
We had a very specific niche where we researched the SMB market, small medium business market, and we provided those research results back to a very large enterprise group of subscribers.
Companies like Microsoft and IBM and others in that business.
Those very large enterprise companies were paying for some proprietary data they could not get elsewhere.
And so I think that's a very high bar for you to climb over if you're going to create sort of a membership website.
Omer (13:41.350)
That is a really useful insight, I think, in terms of if you're going to go down the membership route, can you be so specific in terms of the niche that you target?
Because you're competing against free content and Google?
John Warrillow (13:55.340)
Yeah.
And most membership websites aren't profitable on their own.
It's usually a Trojan horse to another business model.
So, for example, contractorselling.com is a membership website for contractors, plumbers, electricians, and it teaches them how to do a better job with their sales and marketing.
Joe, the guy who runs it, makes money off of the membership website, but the lion's share of his revenue comes from the events he produces.
But it's a lot easier to get somebody to go to a live event if they're a member of a online community than it would be to just try to sell the live event on its own.
So for a lot of membership website folks, the revenue is nice, but it's really the kind of front end to a back end product that they're keen on selling.
Omer (14:40.360)
Okay, so the second model you describe is the all you can eat library model.
Can you talk a little bit about that?
John Warrillow (14:48.600)
Very similar to the membership website model.
The only difference is that the all you can eat library is a library of content designed to be consumed like a Chinese menu.
So for example, Netflix is the ultimate all you can eat library.
Right.
So there's more content that you could possibly consume in one sitting or probably in a lifetime.
But the value is in the library is in knowing that virtually anything you want is there.
New Masters Academy is an all you can eat library website of a smaller nature but equally similar model.
What they do is they help you do art lessons.
Sorry, they provide art lessons.
So if you want to learn how to become a painter or sculptor, et cetera, you can subscribe to New Masters and get content on an all you can eat model.
It's different than a membership website, at least in my mind, because a membership website, the value proposition is the content is always changing, there's always dynamic content, and while there's new things being added to an all you can eat library, it doesn't always change quite the same degree of frequency.
So they're very similar.
The degree to which they are updated tends to be slightly different in the all you can eat model.
Omer (16:06.160)
Yeah.
And I think that certainly with Netflix there was a lot of criticism certainly in the early days that there wasn't a lot going on in that library.
Right.
In terms of new content being added, Is there another example you can think of other than Netflix that maybe is using that specific business model?
John Warrillow (16:27.970)
Well, lynda.com would be a very high profile example where lynda.com, l Y N D A allows you to learn anything.
And, and they've got.
It's basically a community of, of content providers that provide how to lessons on everything from how to how to work Adobe to, you know, every possible sort of how to information is available there.
They were just acquired by LinkedIn to my, as, as I recall, a couple weeks ago.
Omer (16:59.370)
That's right, yeah.
So is, is there a certain bar that you think a company needs to meet before adopting this specific model?
I mean, do you have to have, you know, an incredibly vast library of content or what's the way to think about this?
What's the kind of the insight here,
John Warrillow (17:21.370)
Yeah, I think it's how do you get the content?
You have to have a way to do that.
You know, if you look at so many of the most valuable companies today, they don't actually own the content.
Uber doesn't own the cars, Facebook doesn't own.
It's the content that people publish there.
They're just basically a middleman for the content.
And I think that's the way to think about the all you can eat model, is you've got to have a way to aggregate content in an inexpensive and an inefficient way.
In the case of new masters, the art guys, what they do is they go to people who teach art for a living, people who teach sculpting classes, for example, and say, look, you're doing this on a low scale, very tough to scale way.
You're doing it at community colleges and you're reaching six or eight people at time.
Let us come and shoot your community college workshop.
We'll actually take our video cameras and create the content and then we'll share in the revenue that we get from that.
So I think that's their model.
So you've got to have a way to accumulate the content in an efficient way because it does rely on the depth and breadth of the content library.
Right, like you've got to have a lot of content.
Omer (18:34.910)
Sure, yeah.
Okay, so that's the all you can eat library model.
What's next?
John Warrillow (18:40.830)
The private club model is the third.
And here we're really talking about where that which you're accessing is limited and an exclusive value.
And so, you know, the old, you think of the old very exclusive golf club is a version of the private club model where you take something, access to a very expensive, very rare piece of ski hill, for example, and provide access to that to a limited number of subscribers.
And it works in a B2B context as well.
There's a group I wrote about in the book called Tiger 21.
Again, let's see if I can get the acronym right off the top of my head.
I think it stands for the investment group for enhanced results in the 21st century.
Essentially what they are the world's most exclusive investment club.
You've got to have $10 million of investable assets to get into Tiger 21.
And then you meet once a month, they mastermind group of other people that meet this very high bar of investable assets and you discuss amongst each other how you invest your money.
The hallmark of the private club model is there is a very high barrier to entry.
It really applies to something where there is scarcity, where you don't want it available to everyone.
Part of the value proposition of joining is the fact that what you're joining is not available to everyone.
So again, scarcity is what really drives the private club model.
Omer (20:13.600)
Is there anybody in kind of more of a services business maybe applying something like that?
John Warrillow (20:20.160)
I mean anyone in the mastermind sort of arena.
So for example Mastermind, Napoleon Hill's book Think and Grow Rich.
The idea of bringing together a group of like minded individuals.
So they're groups like Vistage in the United States, like eo, like ypo, where they bring these entrepreneurs together.
Another good example is Joe Polish's group, it's called genius network.
For 25 grand a year you can come together with two or three times a year with a group of kind of like minded entrepreneurs.
Again, what makes those groups work is there are barriers to entry.
At ypo you've got to have a certain amount of revenue and a certain amount before the age of whatever it is.
And I think it's 44.
But again it's exclusivity and the rareness of what you are offering which drives it.
Omer (21:08.220)
Okay, so we call that the private club model.
John Warrillow (21:11.820)
That's correct, yeah.
Omer (21:12.580)
Okay, what's the next business model?
John Warrillow (21:15.179)
It's called front of the line and it really applies to anyone in the software business.
In fact it was really pioneered by the software guys.
And what it is is offering sort of 911 for you Brits, 999 level of customer service in return for subscription fee.
And again, think of Adobe.
Adobe made a big stink last year when they announced they were going to subscription model as opposed to perpetual licenses for their software.
What was interesting about that announcement is the fact that Adobe has been selling subscriptions for a decade.
The only difference is they weren't selling subscriptions to their software, they were selling subscriptions to their service packages.
So if you for example, are an Adobe service package subscriber, you get a preferred expedited support ticket treatment.
So you might get your support ticket treated in one hour as opposed to two days.
And so increasingly we as a society are more inclined to buy our way to the front of the queue to sort of pay to play to Bud, if you will.
You can see that at Disney where you go and you can buy this speed pass now and actually jump the queue, really monetizing that notion where you're saying to your subscribers, look, we offer two day support ticket treatment or dealing with issues, but if you want to pay and jump the queue and get one hour support.
Well, we'd be happy to sell you a service package to do that.
And that's what the front of the line is designed to do.
Omer (22:46.460)
Got it.
Okay.
Is there another example that you can think of maybe in the software business where somebody else is doing something?
John Warrillow (23:01.080)
Yeah, I mean, front of the line is used by salesforce.com right.
So when you subscribe to salesforce.com, they'll say, look, we offer support, we've got this online community.
You can go log your query in and maybe someone will get back to you, maybe someone won't.
But if you want to pay for a support package, you can do that.
Last time I checked, they offered a range of support packages all the way up to one that gives you sort of one hour response on mission critical problems.
But again, you're paying for that on a subscription basis.
Omer (23:35.970)
Yeah, actually that reminds me, I was looking at, excuse me, I was looking at Heroku the other day, which is owned by Salesforce and it was an interesting support model I think they had there, which was like, hey, you can have the basic option which is like email support and free, and you can start hosting your app with our cloud infrastructure.
And I think the third tier in the package was like, you know, $2,000 a month plus for support.
And obviously I think, you know, it's interesting that they have a very broad appeal where, you know, somebody who has is maybe kind of a hobbyist developer can go and use that same service and that same infrastructure in a very different way to maybe an enterprise who has a whole bunch of scaling requirements and maybe wants an SLA and wants a response time and will happily pay that money.
John Warrillow (24:35.080)
That's an interesting way.
Yeah, no, for sure.
It's about knowing who your customer is for sure.
Because you're right.
Enterprise customers spending 2, 5, 10 grand a month on support is nothing.
I mean, they do that all day long.
But you ask a consumer to spend two grand, I mean, they'd laugh in your face.
So it's about kind of knowing who your subscribers for sure.
Omer (24:53.190)
Okay, so that's the front of the line model, the next one you describe as the consumables model.
John Warrillow (25:00.550)
Yeah.
So here, anytime you've got something that runs out and the act of replenishing it is of no inherent value, then that's the ideal groundswell for the raw material for consumables models.
So a good example of that would be dollar Shave Club.
So on a subscription basis you can subscribe and get dollar Shave Club.
To send you razor blades so you don't have to leave your house, trudge down to Walgreens and buy Gillette blades.
They'll just send them to you.
A B2B example that might be the HP toner cartridges replenishing or be a good example where you've got a toner cartridge that needs replacing.
They'll do it on a subscription basis.
So those are really ideal when you've got something in your business that you offer that customers just have to buy on a regular basis.
Where there's no enjoyment in buying it, there's no romance in buying it.
I mean when you buy a car every four years or whatever, you get to test drive it and sit in the leather seats and smell the new car smell.
I mean there's a real excitement associated with that.
There's no excitement about replenishing your razor blades or buying dish detergent or Pampers diapers for your kid.
It's basically the value proposition is, look, this is a boring thing that you just have to take off your to do list.
So let us do it for you.
Omer (26:26.450)
Yeah, and I think folks like Amazon are doing a really good job at helping you buy those consumables with hey, you can buy these Pampers.
Actually we don't have to buy Pampers anymore or any kind of diapers thankfully but, or you know, there's the option of hey, you know, instead of buying a one off purchase, just click here to subscribe and you won't even have to think about it, we'll just send it to you.
I think the Dollar Shave Club is actually very interesting because with the way that they've marketed those, those blades, it's almost made, made it exciting to be a customer of the Doll Shave club.
John Warrillow (27:10.280)
And that's actually what you need to do.
I think if you're going to create a consumables model because the likes of Amazon, because Amazon is the everything store.
And Amazon basically has almost every SKU you could ever imagine.
Every product service they're either thinking about or have offered today, millions of them that they own in the mind of the consumer, breadth of product selection, speed of delivery, responsiveness, et cetera.
I mean they own all those categories.
It's very difficult for you to flank them.
And I think the way to flank them and the way to compete on certainly something like something as boring as razor blades is injecting some romance, creating a brand, giving people a reason to subscribe to you as opposed to doing the clinical boring but effective Amazon.
So with Dollar Shave Club it's no surprise that the two founders come out of the entertainment and advertising space.
If you've watched any of their videos, they're hilarious and they create, you kind of want to root for them because they're so funny and enjoyable to watch.
I think that's if you're going to go down to consumables models, by definition, one of your competitors is or will be Amazon.
Omer (28:25.560)
Yeah.
I think one insight for me from talking to you about this particular model is that Even in the SaaS world, I think there are situations where entrepreneurs are getting into a field where, you know, there's an entrenched incumbent, there's somebody already doing a decent job.
Maybe you are trying to get a very specific sub niche within that market, but your product maybe isn't that different to what else is out there.
And maybe, you know, if you're struggling to figure out how to differentiate with the features that you offer in the product, maybe there's something else outside of the product that can help to differentiate you and attract those customers.
Maybe like the Dollar Shave Club has done.
John Warrillow (29:24.550)
Right.
Omer (29:24.670)
I think maybe you know, something to think about.
John Warrillow (29:27.750)
No, for sure.
Omer (29:28.870)
Okay, so the next one you call the surprise box model.
John Warrillow (29:34.790)
So here you're curating a selection of products around a theme that people have a passion for.
So a good example of that would be Barkbox.
So if you are an absolute lover of dogs, you can subscribe to Barkbox and they will send you every month the box full of unique dog treats, dog bones, dog toys, et cetera that are intended for your dog.
And again, there are very few people that are that passionate about their dogs.
But there's a sub segment out there.
Barkbox happens to call them dog parents to distinguish them from dog owners.
But dog parents are people who will pay, you know, 20, 30, $40 a month for a bark box to be delivered to them once a month.
Birchbox is another example, very high profile example of a group that will send women a curated box of cosmetic samples for once a month.
And they actually have a men's box now, but not nearly as popular as the women's box.
But they are examples where part of the value about being a subscriber is the surprise is the inherent enjoyment about opening something you don't know what's inside.
We've all done that as kids around our birthday.
Part of the excitement is wondering what's inside the box.
That's what people are playing off on the surprise box model.
Omer (30:59.170)
Do you think there's potential there to build a sizable business or is There a limited market for people who will pay for.
I guess you're paying for something and you don't really know what you're going to get.
John Warrillow (31:14.050)
Yeah, there's two ways to monetize it.
One is getting enough subscribers and having the cost of what you distribute being low enough to do it.
So that basically you're collecting almost all that subscription revenue with the exception of the shipping costs for your bottom line.
A good example of that would be Birchbox.
Birchbox, last time I checked things, about $10 a month.
They're getting the samples from the cosmetic companies for free.
So there isn't a hard cost associated with the collection of what's in the box.
Whereas in many cases Barkbox is actually paying.
So that can be a problematic to scale very large.
The real, I think way these companies are monetizing the subscription box is on the back end.
They build e commerce websites with Birchbox.
For example, more than half of the Birchbox subscribers have gone on to buy a full size version of what they sampled in the box.
They bought that not from their department store, not from Amazon, but they've gone on birchbox.com to buy the full size version in a lot of ways.
Again, the subscription is a little bit of a Trojan horse for the e commerce website that Barkbox operates.
Excuse me, that Birchbox operates.
Omer (32:31.660)
Yeah, that's an interesting model there.
And I can certainly think of my wife, for example, is an avid runner.
And I know you're a marathon guy as well, aren't you?
John Warrillow (32:45.980)
Yeah, I've done a couple, yeah, for sure.
Omer (32:47.900)
Have you done the Ironman as well?
Did I read that somewhere?
John Warrillow (32:50.460)
I have, yeah.
Wow.
Wow.
Omer (32:52.780)
I am impressed.
John Warrillow (32:53.980)
Very impressed.
Omer (32:56.380)
But I can see that.
I mean, you know, I see her all the time like trying to figure out, you know, different kinds of products or nutritional supplements or is this gonna give me a better boost when I run or something.
And, and you know, being able to just kind of package stuff up and just get stuff in the mail, which gives her an opportunity to maybe just try some samples, I think would probably get her spending more money on things that maybe she isn't trying now just because she hasn't discovered those.
So.
John Warrillow (33:27.790)
Absolutely.
I mean, again, the audience is going to be a passionate runner, right?
So a casual runner, somebody who jogs five, you know, five miles a week or something like that is not going to buy that.
But for your wife who is a passionate runner, it's part of who she is, is part of, you know, deeply within her identity is the fact that she's athletic and running.
I mean, that's part of who she is.
So, yeah, that's the ideal circumstances for creating one of these surprise box models.
Right.
Omer (33:55.650)
Okay.
The next one is the simplifier model.
John Warrillow (33:58.930)
Essentially, in this model, what you're doing is you're saying to a customer, look, you're going to buy from us anyways.
You're going to be a customer anyways.
The hassle of calling us is annoying for you.
Sometimes you forget, sometimes you remember.
But let us kind of make it easy.
And why don't we just create a service contract?
And the service contract says that we'll come do the things that we promised we're going to do, and you can stop anytime, but if you don't stop, we're going to come.
So it's kind of the difference between a transaction and a subscription model in this space is simply that the customer is opting in for service and requires to proactively opt out.
So in a service contract, I mean, think of any.
These are ideal in any sort of personal service businesses.
For example, if you are a company that installs swimming pools, you can install a swimming pool, open up a shop, sell chlorine, and hope people will come in and buy their chlorine from you, not the other five stores in your local town.
Or you can set up a subscription that says, look, we have a subscription that is for swimming pool owners.
We're going to come.
You pay it monthly, it's 100 bucks a month, whatever.
And we're going to come in the beginning of the season, we're going to open up your swimming pool.
We're going to come every two weeks and send a technician to balance the water levels, make sure there's enough chlorine.
And at the end of the fall, we're going to come and close it up.
And this entire service is something you buy on a recurring basis.
Again, it's 100 bucks a month, and you just kind of set it and forget it.
So any kind of personal service business where you're kind of waiting for the phone to ring is a good example of one that can be really transformed by using the simplifier model.
Omer (35:38.340)
Would you put most SaaS products into this model as well?
John Warrillow (35:44.580)
Not necessarily, because most SaaS products, whatever SaaS software you subscribe to, currently the software is sold exclusively on a SaaS basis, on a cloud subscription basis.
Really, the simplifier model is one where today the customer is using a transactional model.
And what you're saying to them is, we're going to go out, and we're going to do these four things for you.
And instead of having to call us to do each of the four things, let us just do it for you, and we'll agree that that's what we're going to do in advance.
Another good example of that would be Mosquito Squad.
I wrote about Mosquito Squad in the book.
They are a.
A company that deals with mosquitoes in particular outdoor living areas.
So your backyard.
And this is not a problem in Seattle, but it is a problem if you're in Louisiana or in Florida, where they get mosquitoes for six months of the year.
And so what Mosquito Squad does is what they figured out is that with mosquitoes, if you wait till they hatch, you can never get rid of them.
And what most homeowners do is they wait, the mosquitoes hatch, they have a barbecue, everybody gets bitten to death.
And then they called Mosquito Squad and said, oh, hey, can you come and deal with the mosquitoes?
By that time it's too late because they've hatched.
And so what Mosquito Squad does is say, look, you're going to forget to call us.
You're busy.
You're just going to forget.
So let us come preemptively nine times a year.
We're going to spray many times.
You won't even know we were there, but we're going to come and spray so that the problem doesn't arise in the first place.
And we just take one thing, what to do off of your list, because you know we're going to come all year.
And that's just an example of taking what in the old school model, transactional model, most exterminators wait for the phone to ring and wait till you get cockroaches, and then you actually call them up and say, come deal with the cockroaches.
They took a proactive approach and adopted a subscription model.
Omer (37:36.480)
That's a great example.
And I think that really hits the point home in terms of when people say, I can't build a subscription business in the business that I'm in.
And I think the examples that you just gave showed that there is the opportunity to do that in all kinds of places.
If you just be a little bit creative in terms of how you package up that service.
Absolutely.
Okay.
The next one you call the network model.
John Warrillow (38:10.890)
So the hallmark of the network model is that the value of subscribing goes up with each new subscriber.
And so you go back to the middle of the 1800s when nobody had a telephone, and all of a sudden the telephone was invented and who got to the telephone.
So it was the local sheriff, maybe the local doctor, maybe the post office director would get a phone.
And so the utility of owning a phone, if you happen to be an early adopter and you were like the fifth person in your town to buy a phone, the utility was pretty limited.
You could call the post office, you could call a doctor, but you couldn't call your friends, for example.
But then as more people adopted the phone and it became a kind of common way to communicate, the utility improved to the point where the maximum utility happens when everybody has a phone.
And we saw that again with the mobile networks when they were introduced.
I guess it was in the 90s.
The more people who had a mobile phone, the more it helps.
So that's the subscription model again.
The hallmark is that the benefit of being a subscriber goes up with each new subscriber.
Maybe a more modern example, modern day example would be kind of the World of Warcraft, where Warcraft's a video game that's fun to play on your own, but it's way more fun to play if you get your buddies involved.
And so there is a value proposition to the subscriber to then go out and win new subscribers on behalf of the company because you indoctrinate your friends and get them to subscribe.
So again, it goes back to creating something where it gets better for everybody the more people who subscribe.
Omer (39:51.950)
Got it?
Yeah.
I think a lot of SaaS products try to build in some sort of inherent virality into the product to try and get existing customers to bring in additional customers.
But that's not what you're saying here with this model.
Right.
You're saying that the difference here is you not only bring in additional customers, but the value of the overall product increases as more of these people come on board.
John Warrillow (40:19.090)
That's right, it's the latter.
And the value increases.
Therefore you go out and ask other people to join.
So it's the fact that, that it's not like paying a spiff to people to get them to subscribe or member get member program.
It's not really what we're talking about here.
We're talking about the fact that the value increases so much as more people opt in.
Another good example of this would be Zipcar.
When Zipcar first started, they started in Boston.
They almost failed.
Zipcar being the shared ownership of a car.
You can get it by the hour or whatever.
The reason it failed was when people saw Zipcar, they thought they didn't see enough cars around Boston.
So they saw one every once in a while.
So it left them with the impression that subscribing to Zipcar, they'd never be able to find a car.
And so when Zipcar unpacked this, they realized that what they had to do is focus on density, because they said that the more people we can get using a Zipcar in a local market, in a very small msa, the more cars we can buy for that msa.
That way that everybody always has a car available to them in that msa, in that little local geography.
Instead of trying to tackle Boston as a market, they broke Boston up into, I think it was 16 or 32 different precincts.
And then instead of trying to boil the ocean, they went after each precinct, got enough subscribers in that one tiny little geographic area, so that every time anyone turned around, someone was driving a Zipcar.
And that's when they reached the point where more people wanted to subscribe because they realized that there was lots of cars in the area, and then they went to the next adjacent community.
So it's another example.
Omer (41:54.870)
Yeah, that's a very good example.
Okay.
And finally, the last business model in your book is the peace of mind model.
John Warrillow (42:03.830)
So here, really, what you're selling is the peace of mind to know that in the event a customer has a problem, you're going to cover them.
It really is a form of insurance.
So in a traditional business, if you, for example, sell a roof, if you're a roofing company, well, you could sell a roof and then you could choose to sell a subscription on the back of that roof that says, look, we have a service plan that for 100 bucks a month, we'll cover you so that in the event that your roof ever gets damaged, we'll come and replace the tiles for free.
If you ever have a hurricane, we'll come and replace it for free, and we'll take care of the insurance, down payment, etc.
That is a very simple form of the peace of mind model, where you're selling something that actually the customer never hopes they're going to need.
They hope that they will never have to call on you to take advantage of what you're offering.
But in the event they do, they're covered.
A good example of that, more in a technology space, software space, would be tag.
These are the guys who give you a monitor that syncs up with your smartphone that you can put on your dog.
And when your dog leaves a predetermined geographic area beyond your backyard, essentially, TAG will send a mobile phone alert to Your phone that says, hey, Rover just left the area.
Go find him.
And nobody wants the notification that says, rover's lost.
Rover's left the area.
But in the event that Rover does leave the area, it's nice to know you'll be able to track them down.
And so that's another example of the peace of mind model where you're selling something people hope they'll never need.
Omer (43:40.770)
You know, I'd love to find a way to get that tag on my kids, but I just don't know where I would attach it.
John Warrillow (43:47.730)
On their phone, probably.
Omer (43:49.890)
Oh, they're too young to have a phone, but I have to keep working on that.
John Warrillow (43:53.250)
Yeah, yeah.
Omer (43:55.250)
All right, John, it's now time for our lightning round.
I'm going to ask you a series of questions, and I'd like you to answer them as quickly as you can.
John Warrillow (44:01.550)
I'm too tired, Omer.
Omer (44:02.390)
I'm too tired.
John Warrillow (44:02.950)
I can't go on.
Omer (44:04.430)
You're an Ironman shoot.
I'll do my best.
What's the best piece of business advice that you ever received?
John Warrillow (44:11.310)
Focus.
Focus on one thing and you know what the other one is?
Don't get too highs on the high or low on the lows.
Running a business is a very emotional experience, and it can lead you to really ramping up when things go right and really hitting the bottom when.
When they don't.
And I've learned over years to just kind of level out, not get too high on the highs or low on the lows.
Omer (44:32.590)
What book would you recommend to our audience and why?
John Warrillow (44:36.190)
If you haven't picked up the E Myth, it's a classic.
It's the single most important book any entrepreneur needs to read before they get started.
Omer (44:43.470)
What's one attribute or characteristic in your mind of a successful entrepreneur?
John Warrillow (44:48.750)
Stick to itiveness.
The idea that it's easy to look at Zuckerberg or Elon Musk and think, oh, why isn't it me?
But in realistic terms terms, most entrepreneurs have been at it for decades, and it's only after decades do you start to see some traction.
Omer (45:06.410)
What's your favorite personal productivity tool or habit?
John Warrillow (45:10.810)
I'm an Evernote devotee.
I use it for every aspect of my life.
Omer (45:18.170)
If you had to start over tomorrow, what type of market, opportunity, or problem would you go and pursue?
John Warrillow (45:26.610)
You know, I think information publishing is a space that is really blossoming.
You know, websites, like the Copyblogger guys who do Rainmaker, there's a, you know, all the E learning kind of space is just exploding.
You know, you saw the multiple Linda sold for that LinkedIn acquired them for.
It's just, you know, it's a space that is really exploding and it's one that we nibble around the edges of at the valuability system.
But we're not really directly an information publisher, but it's certainly an interesting space.
Omer (45:59.660)
What's an interesting or fun fact about you that most people don't know?
John Warrillow (46:06.460)
Fun fact.
Well, you tackled the Iron man one.
Omer (46:10.140)
I'm sorry, did I ruin that?
John Warrillow (46:15.980)
You know what?
I'm a feel good movie junkie.
So you give me a movie Rudy Hoosiers sports movies that have a feel good Cinderella story.
I am an absolute junk.
You'll see me tears rolling down my eyes watching those movies.
My wife laughs at me all the time.
Omer (46:34.640)
My wife made me watch Rudy last year.
I think she couldn't believe I'd never seen it.
So yeah, I liked it too.
Okay, and finally, what is one of your most important passions outside of your work?
John Warrillow (46:48.280)
I'm a big cyclist.
I love every form of cycling, so mountain biking, road riding.
We've got a place up north and we do lots of riding.
So I'm big into that.
Omer (46:59.160)
All right, great answers, John.
I want to thank you for joining me today and sharing your insights with our audience.
And thank you for letting us get to know you a little better personally as well.
Now, if folks want to find out more about the book, as I said, the book is called the Automatic Creating a Subscription Business in any Industry and that's available on Amazon.
I'll include a link in the show notes for that as well.
And if folks want to get in touch with you, what's the best way for them to do that?
John Warrillow (47:32.280)
I think, you know, go to valuebuildersystem.com and there's an opt in form there if you're interested in driving up up the value of your business.
If you just want to check out the book and some of the links, then you're right.
Automaticcustomer.com is probably the best way to do that.
I'm also on Twitter onworlow A R R I double L O w or facebook facebook.com builttocell awesome John.
Omer (48:00.550)
Thanks again and I wish you all the best with this new book.
John Warrillow (48:03.590)
Thanks Omer.
It was a pleasure.
Omer (48:04.910)
Take care.
