The SaaS Podcast
How to Quit Your Job, Build a SaaS Product & Raise a Family in Japan – with Patrick McKenzie 
Patrick McKenzie is the founder of Kalzumeus Software. He's best known for two software products – Bingo Card Creator and Appointment Reminder, both which he has bootstrapped. Patrick's also a well known blogger who has been very transparent and open about his experience bootstrapping a software business. Patrick currently lives in Tokyo with his wife and newborn daughter.
Host: Omer Khan
Guest: Patrick Mackenzie
Hi everybody, this is Patrick Mackenzie for Omer Khan's ConversionAid Podcast.
Welcome to the ConversionAid Podcast, where we help software entrepreneurs to take their business to the next level. Each week we interview proven industry experts who share their strategies and insights to help you create software that sells! Here's your host, Omer Khan.
Omer: Hey everyone, welcome to the ConversionAid Podcast. I'm your host Omer Khan and this is the podcast for software entrepreneurs and companies who want to grow their business to the next level and create software that sells! Today's interview is with Patrick McKenzie. Patrick is the founder of Kalzumeus Software. He's best-known for two software products – Bingo Card Creator and Appointment Reminder, both which he has bootstrapped. Patrick's also a well-known blogger and he is joining me today from his home in Tokyo where it's currently 3 a.m. Patrick, welcome to the show.
Patrick: Thanks very much for having me Omer.
Omer: Now, before we get started, I think you should probably explain why you're doing this interview with me at 3 a.m. in the morning?
Patrick: Why I'm doing at 3 a.m. in the morning? Mostly the time zone difference and why I am willing to do it at 3 a.m. in the morning, I really really love talking to smart people about software and that's…it's my business, it's my job, but it's also my hobby, so I generally solicit opportunities to do anything I can to talk about this stuff. It's one of the reasons my website has a standing invitation, you know, if anybody has ever out in the Tokyo region, I'll literally like buy coffee, just to have an excuse to talk about this; otherwise, a crippling social loneliness from being the only software person within a quite a wide radius. Where I used to live in Tokyo, there's more software people, but less ” like us”, you know, doing their own thing as opposed to working at a big mega-corp.
Omer: So when you moved into Tokyo, did you get a lot more people taking you up on your offer?
Patrick: You know, I've been thinking, you know, prior to moving to Tokyo, I was a little worried, because the population is probably two orders of magnitude bigger than Ogaki which is the small town that I used to live in and so if I'm doing a meeting every day, I might have to walk it back a little bit, but it's been heavy but manageable so far, so now going to, you know, try keep doing it.
Omer: So while we are on the subject of talking to smart people, one of the guests that I had on, a while back, I can't remember which episode it was, was Paras Chopra, the founder and CEO of ‘Wingify' – the makers of the Visual Website Optimizer and Paras told a great story of how, you know, he quit his job, and he bootstrapped this business and he had very very modest goal. I think at the time he just wanted to be able to generate a $1000 a month from this business to cover the salary he was getting from his previous job and you know, today, he's turned that into a 7-figure multi-million dollar business and he credited you as being one of the people that were key to helping him in the early days figure out what product to build. So I think that alone was a great story and so, tell me a little bit about how you got involved with him and…?
Patrick: Well, back in the day, I really loved Paras from a…one of my favorite entrepreneurs, certainly my favorite software person from India and has done an incredibly successful business over the years and it's a product that I really love and is genuinely useful. Way back in the day, when I was…my business was a little smaller than it is right now, I had been blogging for a while about Bingo Card Creator and blogging about doing A/B testing for it and Paras dropped me a line one day and he says, “Hey, I'm an engineer in India. I'm thinking of doing a analytics software called ‘Wingify' and you seem to be like the analytics guy, so can I run it by you?” And I said, “Oh, yeah, sure, but right now, it's my busy season – October, so can't do it right now, but…' and he pings me again two weeks later and says, “Okay, if you’re busy season is over, I would still love to run the same by you,” and he was pleasantly persistent like that for probably about a month, until I installed the tracking code in our website and actually, you know, trying to put it through its paces. I came back to him, you know, two weeks later and said, “Alright, I never wanted to prevent any entrepreneur from doing what they want to be doing, but I do know a little bit of this analytics things and I've taken a look at your product and here's my honest feedback because I think you need to hear it. This doesn't do anything better than Google Analytics does and they're already giving that away for free, so it would be very hard for me to see a fast forward for this business right now,” and at the time, it did like 15 things, and he said, “Well, I'm going to do a 16th thing,” and you know, that feature will be the thing that makes it…I said, “Well, rather than being a collection of 16 things that are all, you know, executed like the C minus, I would really prefer it to be like a business that did one thing at A Plus that I could recommend it over Google Analytics for,” and turned out the 16th thing was that, which he showed me a week later, was Visual Website Optimizer! And as soon as he said that, I said, as soon as he showed me that, like within a minute of seeing the interface, I said, “You should forget about the other 15 features, and just sell this as a stand-alone product.” And then the same day I emailed a bunch of my buddies and said, “Visual Website Optimizer is going to make this chap a millionaire!” I was right!
Omer: [Laughter] That is a great story.
Patrick: So I went around the next two months, I bang down every SEO store I knew and said, “Hey, you've been using Google Website Optimizer to do A/B testing. You and I both know that Google Website Optimizer is a terrible product; you know you are using it because you're free. I have an invite to go to this thing called ‘Visual Website Optimizer'. It'll blow your brains out!” No, that's not actually English – ‘It'll impress you very much. You should use this now,” and I think I probably gave away 50 accounts in there. Paid accounts, if I remember right. It was like basically sales rep of the product.
Omer: Yeah. I know Paras really appreciated the help that you gave him. Alright, so we'd like to kick things off with a success quote, to better understand what drives and motivates our guests. Do you have a favorite success quote?
Patrick: So I went to Adlai E Stevenson High School and they've a quote that's on the wall, attributed to Stevenson, who is an American politician. I don't know if he actually said it, but it said, “We are what we habitually do. Excellence therefore is not an act, but a habit.” And that sticks with me, particularly as the …you know, art of entrepreneurship lasts many many years. There's never a single bullet like a…you know, “I'm going to do one A/B test” or “I'm going to release one product” or “I'm going to have this one sales conversation” and then that suddenly can flip the switch on this business. It's just a long, very enjoyable journey, but at times, it's just a slug and you got to like wake up on Thursday and do the work and then wake up on Friday and do the work, then wake up the next week and do work, and then you know, a year later, suddenly when you look back at the last year and ‘Oh goodness! There is something on graph,” but it's very rarely the case that you know, there is just like one…you know, magical decision that fundamentally changes the business.
Omer: Now, your first product was Bingo Card Creator, which I believe has generated over $300,000 in revenue since you launched, and I think it was also what helped you to quit your job and start working full time on your software business. Are you still working on that product today?
Patrick: So Bingo Card Creator is pretty firmly end of its life at the moment. The product still exists; people can buy it. It might sell a $1000 over the next two days, thanks to Valentine's Day, but the only works it gets done is by my virtual assistants in the Philippines who answers technical support questions. If there's something she can't handle, I…you know, it gets escalated to me and I handle it, but very little gets through these days, so I'm focusing for the moment on the Appointment Reminder which is my second software.
Omer: Okay, so let's talk a little bit about that. Can you give the listeners a better understanding of exactly what a Appointment Reminder is and who are the target customers that you're going after here?
Patrick: So Appointment Reminder does automated phone calls, SMS messages and emails to remind the clients of the appointments that they have with professionals services businesses. And the question is: What's a professional service business? Basically it's someone who…they've a defined schedule and when things don't happen according to that schedule, with regards to meeting with their clients, the business suffers substantial economic damage. So, you know, I was thinking of Appointment Reminder back in the day and I thought, “Oh, I can sell this to a massage therapist and to hair salons,” and it turns out that massage therapists and hair salons, they have appointment books and many of them have an appointment system, you know, if they ask their clients to make an appointment in advance to dropping in. But if the client fails to show up for the appointment, they are a little annoyed, but they just, you know, take out their cell-phones, play Angry Birds for 15 minutes, a walk-in comes in and really, no harm done. But many other businesses, they've appointment books, like say trades businesses, an HVAC contractor, somebody, who, you know, repairs furnaces for a living, they have catastrophic events happen to them, when somebody misses an appointment. For example, if an HVAC contractor gets locked out of someone's home for repairing their furnace, that typically means that three people just spend 30 minutes in van to drive out to someone's house; they got locked out, they are going to drive back to the business, so the business owner only loses his 3 hours worth of wages at a professional rate plus they often lose the sale of that furnace repair because when your furnace is broken and you need it fixed, PDQ and if the appointment doesn't happen, even if it's the home owner's fault, the home owner, just, you know, dial somebody else on the phone book and gets them there right away. So that can often be between a, you know, the lower end $400 or $500 damage to the business, up to $2000 to $3000 range and I believe they are not clients that have, you know, even more riding on the single appointment.
Omer: That's a really good lesson on finding a really painful problem that people have and the difference between the hair-dresser you just described, who, you know, if a certain appointment, the client doesn't turn up, it's not the end of the world whereas for somebody else, it could be a bleeding neck kind of problem. And so, how did you go about figuring that out?
Patrick: Not one single bullet kind of thing. I actually launched the appointment reminder thinking that it would be mostly targeting the lower end of the market. I thought my…you know, the biggest thing that my software was doing was making it that this…so there exists other solutions that do substantially smaller things and they typically start at $1000 per month and are launched pretty much solely into the medical industry because the medical industry is the lion's share of businesses which are prepared to pay $1000 plus a month for this and I thought, ‘Okay, I'm going to make it radically cheaper” and I, you know, core customer will be paying about $30 a month and then that opens it up to everybody who has an appointment book and so massage therapists and hair salons will be able to use this and some of them did, but a couple of months after launching, I was like looking at my…you know, looking at the recent accounts sign ups, and you know, just summing a few bars, just like Bugs Be Gone Exterminator, blah..blah…Carpentry Services, you know, New England Heating and Ventilation, some of the extermination firms ….and I just picked up the phone to one of the customers and I said, “Hey, it's Patrick, founder of the company that you use for appointment reminder stuff. I just wondered if I could talk to the business owner…” and I said, “Hey Bob, can you clarify something for me? Recently I discovered a lot of exterminators using appointment reminder and I don't quite understand why? Why do you use appointment reminder?” And he said, “Oh, well…” and he tells me the story about if I get locked out of somebody's house, that means I just spend, you know, an hour in a van with these two other guys who smell bad and bad toxic chemicals and then I go into the house, get locked out and make no money and then come back and he was like, “And that thing happens all the time in the trades businesses”; like the trades businesses, that is like..that is the magic thread that connects all these customers that I'm seeing. So trades makes up about 25% of our book of business right now; medicals about 25%, professional services like Accountant say about another 25% and the remaining 25% is the grab bag of, you know, hair salons and massage therapists, tutors, random folks.
Omer: How long did it take you to build that first version of the product?
Patrick: So let's see. Very exciting answers for this! I quit my day job and April 1st, I spent two weeks building a prototype version and showed that around to people in Chicago and tell you that story in a second and then I basically spent six months just burned out from my day job, so didn't do anything and then I spent six weeks of hard charging…to get the version 1.0 out the door, to stay where it could actually take money, so a total of eight weeks for launch of Appointments Reminder, I guess. The story about Chicago is interesting and I mocked up a two-page demo and took it on an iPad around downtown Chicago. I didn't know whether there was like a market for appointment reminder, so I had this idea, “Okay, it's going to be massage therapist and hair salons.” I can't really, you know, cold-call them from Japan, but as long as I'm going back to Chicago anyhow to see my family, I'll just put a bit of money in my pocket from ATM and walk around the very nice section of the city and I just walked into every hair salon and every massage therapist that I saw, and said, “Hey, you know, can I just do a walk-in for a 30-minute shoulder massage?” “Okay, we can do that.” “Alright. So in lieu of the 30-minute shoulder massage, may I just talk about massage therapy for 30 minutes because I'm interested in the industry? Still happy to pay you.” And I did that for 15 people and had, you know, like a dozen conversations about “How does the appointment system work here? Do you use a computer? Do you even have a computer on the premises? Do you have no-shows? Are you vexed about your no-shows? Do you give people phone calls to remind them about their upcoming appointment? Who does that at the office? What doesn't work about that thing for you? Blah….blah. Okay, so let me level with you. I'm a software guy and I've this thing on iPad that I would like to show you. Can I ask you to take out your cell-phone for a second?” And then I would just type out their cell-phone number into this faked appointment screen and you know, this two-page demo. Page one was typing your cell-phone number and Page two, just showed, you know, your name here literally.
“Your name here was scheduled for an appointment five minutes after the…whatever the current time was,”and then their cell-phone would ring and a young lady, college student, who was willing to record something on Fiver for $5 said, “This is your automated appointment reminder. Your appointment with Patrick is at 5 minutes from now.” My computer would agree. “To confirm your appointment, press 1,” and then I would say, “Okay, you press 1 on your cell-phone now,” and then as soon as they press 1 in their cell-phone on my iPad, it would flash with, “They confirmed the appointment.” And I said, “Now, if you would cancel the appointment, we would have sent you an email or an SMS right away, and then you could reschedule that slab and not lose the revenue for it,” and people were so mesmerized by the whole…like, “Wow! A computer is talking me. That's awesome!?” So “This doesn't exist yet, but it will in six months. Would you be interested in using it when it exists?” And then if they said ‘yes', I just got their email address and then we probably lost all the email addresses a few months later, but I had, you know, enough proof going after a day of shoe leather over downtown Chicago that I thought, “Okay, there is certainly a market for this.” And unfortunately, because you know, my statistical distribution road…like selection strategy for whoever I was talking to, was guaranteed to get me only hair-stylists and massage therapists, that I was, like I think like, “Okay, appointment reminders can be for hair salons and massage therapists for like the next six months, as I was building it,” which turned out to blow-up in my face, but still glad to build it…
Omer: Okay. So I want to talk about the part about blowing up in your face, but before we do that, I think this is a great lesson for people listening out there. I mean, you know, we can all get caught up in this situation of, “I want to build this product. I need to go, talk to people. I don't know how to reach them,” and not everybody is as accessible as, you know, just walking down the street and walking into their business. But in this case that was possible and you know, I assume you ended up spending what…a couple of 100 bucks, few hundred bucks on this?
Patrick: [Laughter] You would be surprised. So I had budgeted $400 for the day and only 1 person out of the 15 I talked to would actually take money for it. The others were just happy to have a tea with someone who was listening to them, and cared what they had to say.
Omer: Wow! So you spent almost nothing. You got to talk to 15 potential customers and you know, got a ton of data and feedback in one day, right? So I think we all get caught up in those excuses and I think this is a great story that people should kind of remember and whatever business you're in, figure out how you could do something similar. Thank you for sharing that.
Patrick: Thanks a bunch. By the way guys, I'm an “introvert introvert”. I used to run a ‘World Of Warcraft' Raid Guild; is how geeky I'm! This was totally something you could do even if you don't feel like, you know, a big, “Go out and get them, turning around sales guy!” You can do this for like your mornings, it's not that hard.
Omer: Yeah, I think that, you know, I'm a pretty introverted guy as well and I hate the idea of just kind of going up to strangers and just trying to talk to them, but one thing I found is the fear that you get thinking about talking to people is a lot worse than actually going and talking to them, right? So it's almost like you've to just push yourself to do that first one and then things tend to get a little bit easier after that. [Laughter]
Patrick: Yeah, and particularly for this kind of stuff. It's not a sales conversation; it's just that you want to talk to someone about themselves and people love talking about themselves and will do so at any excuse or provocation. So you're giving a lot of people exactly what they want! So it's…you know, “Hey, you're a massage therapist? That's very interesting. I'm interested in massage too! Why don't you tell me a little bit about it?” and then you just, you know, jumping down to the conversation and the direction you need to go in, but like, it was hard getting out of some of their offices.
Omer: [Laughter] Alright, so you mentioned something about blowing up in your face and I guess that even though this was a great example of how to get out there and talk to customers, I guess eventually you realized that they didn't really care that much about this problem.
Patrick: Right. So what I eventually learned over the coming years was that the…how to put it?… Many massage therapists or hair salons etc are not exactly run in a very business-oriented manner, like they are businesses, but they are not run super-professionally. There is no one whose job it is to, you know, take a look at the metrics of the business and make them better, and so if you're trying to sell something and this will take the metrics for your business and make it better, that's sort of difficult. Also, this is…I think that I did not think to ask about, you know, hair salons but useful information. If you're trying to sell something, a lot of the people who are in a hair salon do not work for the hair salon. They've a business that is just them as an independent contractor and they rent a chair from the hair salon for the day and the hair salon often has some like protocol by which they, you know, parcel out walk-ins and like parcel out booked appointments to the various hair stylists, some like round-robin basis, so it's like literally ‘no-skin off their nose' if somebody doesn't come in or they come in on time or…just like, “Oh! I'll get the next walk-in that comes in anyhow, or I won't, based on whatever my position in the round-robin is.” So they just don't care and not caring about the core value proposition makes it rather difficult to sell things.
Omer: Do you think you could've done anything differently when you were talking to these hair-dressers to figure that out sooner?
Patrick: So I had like my rough list of things that I wanted to ask them about and it was largely things that I thought I needed to ask rather than these things that I actually needed to ask. What probably would've served me pretty well is leaning on like one person, like I don't happen to know hair salon, hair stylists off the top of my head other than well…the lady who cuts my hair, but you know, finding one person within like six degrees of social separation for me and just ask to shadow her for a day. Then I want to figure that out, like really freaking quick. You know, a minor missed opportunity.
Omer: Alright. Now, one thing I know about you with Appointment Reminder is that for some time, you weren't really very excited about this business.
Omer: Why is that?
Patrick: This is my single biggest challenge for Appointment Reminder, so I think we're mutually friends with Peldi from Balsamiq; great guy, very talented software entrepreneur.
Patrick: I was talking to him about Appointment Reminder a few weeks before it launched at a conference and I was saying, “This is going to be great. It's going to use Twilio integration. I'm going to be able to charge customers x,y and z, that's going to decrease their no-show rates. It's going to be fantastic!” He says, “Patrick…Patrick, stop for a second! This is what you want to spend the next five years of your life on optimizing the scheduling at dentists' offices?” I said, “No, of course not! I don't care about scheduling dentists' offices, but this is a really great business.” He was like, “Stop now! You're clearly not passionate for this. Do something you love!” And I did not listen to his advice!
Patrick: That was a mistake. So a lot like….for four years running now, it's clear that, “Okay, this is finally going to be the year that Appointment Reminder is going to be my number one thing. I am going to persuade to the…you know, it's going to be like my number one business priority. I am going to, you know, do various things on the marketing side, making out features and get in front of more customers, finally get the growth that this business clearly has, you know, hiding within it somewhere.” And for four years running, it's been like, anything else can distract me from Appointment Reminder because honestly, at the end of the day, like I love my customers, don't get me wrong. They're the reason my family can afford to live in this apartment, but I don't like lot of, you know, keeping appointment books for your dentists offices, like that's not, doesn't feel like the reason I am on this earth. Like that's something I'm passionate about, like I'm passionate about, you know, talking to smart people about software, for example, and so there's been a lot of things that needed to happen for Appointment Reminder which happened literally years after everything needed to happen just because it's like, “Oh, man! It's going to be a slog for two weeks. I think I'll go, play ‘League of Legends'!” I had some better excuses there too, like I, you know, in the interim, met my wife, married her, had a daughter, so you know, all those are totally legitimate reasons to not be working…you know, slam dog style, but I did a lot of work over the intervening four years too, just for, you know, things that were not Appointment Reminder. I got alphabetized my book collection, I played League of Legends, I think I wrote, probably literally more than a million words on Hacker News, you know, absolutely anything would like, bumped the work off the stack, because it was like, “Oh, I don't want to be HIPAA-compliant, because that's going to suck!” I can never pronounce it…would probably be able to pronounce it, if I could, but the HIPAA compliance is not nearly as hard as you think it's going to be. You're just like block off two weeks on the schedule and …it took me like three years to figure out, you know, blocking off two weeks on schedule and then adding a notification about that to my website, that's crazy! So yeah, that's probably my number one historical…I think that kept Appointment Reminder from being what it could be!
Omer: So why did you keep going with it? I mean, I guess a lot of people would have not only got distracted, they would have probably forgotten about it.
Patrick: So can't forget about it, because a long as you've atleast one paying customer, you're like committed to them. Also Appointment Reminder is very business-critical. I may talk about that a little bit, so like if it goes down over the night, that's catastrophic to somebody and theoretically speaking, it's catastrophic for me. Like “This would actually damage people's businesses; they rely on it, you know, these reminders getting off to at the right time.” So I had to, you know, put in a continuous effort on the engineering side of things and that made it, you know, it was in that weird twilight like where I wasn't putting in the work that you need it grow, but I also couldn't ignore it. And one of the reasons that, you know, it was like easy to back burner on that for a longest time was like if you have ever heard of the expression “Long Slow Saas Ramp of Death” which was by the Gail Goodman, this presentation about Constant Contact and basically, you know, we have this impression from reading the media that successful SaaS businesses have growth curve that looks like a hockey-stick, but most businesses don't get the hockey-stick. What they instead get is the ‘Long Slow SaaS Ramp of Death' where you're MRR goes very very slowly and limitedly over time until you start to figure things out. And so, you know, year and a half into the business, after I poured in I don't know how many hours and significant amounts of brain, it was making like $1500 a month MRR, if I remember or something and at the time I was doing consulting and the two week consulting engagement was over $60,000 and so, you know, I get the check from a consulting engagement, little exhausted but very happy with how it worked out no doubt, it was a very intellectually stimulating exercise for me, and I've got a check for 60 grand in my hand, which was more than I made in two years of my old day job and I was feeling fantastic and it was like, ‘Great! What do I do for the next two weeks? I can either work on Appointment Reminder little bit and increase the monthly recurring revenue by a $100 or I could play League of Legends.” League of Legends happened! I got pretty good at that game. But did not wind up on the business nearly as well.
Omer: Now you mentioned that Appointment Reminder really is mission-critical for many of your customers. What kind of challenges did you face with that, over the last few years?
Patrick: Sure. Let me tell you a anecdote, single worst day I have ever had in business, both from the perspective of the business…funny that we can laugh about it three years later and also, you know, if this is as bad as life gets, life isn't all that bad, although it felt like it at the time. I was moving apartments and so because I was silly with moving apartments, my cell-phone managed to get packed up in one of the boxes and then my cell-phone gets all the monitoring alerts for Appointment Reminder for things like, you know, ‘The servers are down' or ‘The queue workers are down.” The queue workers are part of the system that actually sends out the appointment reminders, so they have to be up. And stupidly, I decided right before, you know, packing my cell-phone up for the apartment move, “I think I'm going to, you know, try to get a little work done today. I'll just add one little like I would check for an error case in my queue worker class,” and that check from the error case made the queue workers unable to boot, but only after they went down once, so they went down right away, later in the evening after I was ensconced in my new apartment and the computer immediately started complaining to my cell-phone, which was off and in the box.
Patrick: And so several hours later, I just woke up with a…just an uncomfortable feeling of unease, like, “I wonder if I am forgetting something?” You know, I pull out my kindle and check my email and my email has exploded from people wondering what the heck happened to their appointment reminders today? “Oh, no!” And you know, I started to like put together what series of events could possibly be valid and like “Oh God! It must be with the queue workers are down,” and so I like maneuvered from my kindle to whatever the magic page that I need to reset the queue workers and I like reset them and I checked to see if the queue are up and they were up now, like “Okay, great, I'm done!” I go to sleep. I spent the next day like partly unpacking, but I don't have my laptop out and then I checked my email and my email was bad the day before, but it was now incredibly bad, because what I had not realized when I hit it like the ‘queueworker.restart', after they had been down for 8 hours, was every 5 minutes during that 8 hours and before, my computer said, “Have I called Kathy Smith yet? Oh, I haven't! Okay, add a call to Kathy Smith on the queue.”
Omer: Oh, my gosh!
Patrick: So everyone who was supposed to get phone calls from Appointment Reminder got, you know, 12 hour times…is like 96 phone calls! All at once. And typical residential phone doesn't handle 96 simultaneous phone calls happening that well and they just stack up and wait, so you can imagine my customer's customers phones are ringing off the hook and every time they, like, you know, they hang up, “I don't want them hang up”, they get another phone call instantaneously to the point where…so this happened to a few dozen people, they had to, you know, like take their phone out of the wall to get it to stop ringing.
Patrick: And so, I find out about this because after the email has started in America, you know, work day starts in America and people start coming into their appointments and carrying a new one to their like doctors and like that, so the doctors start, you know, writing me in emails and I get the emails again, and my phone can't really do too much at 3 a.m. Japan time and I don't have internet in my new apartment yet. So I pack up my laptop and the space heater and I walk, and by the way, the town I was living in, at the time, there were no taxis that operate at 3 a.m. So the only place I knew that had internet working at 3 a.m. was my old apartment, which didn't have heat and it was raining and in the middle of winter and so, I was carrying my laptop in one hand, this space heater in the other, walking across town for 45 minutes, feeling like the most terrible failure of an entrepreneur in the world, crying my eyes out. I get to my old apartment, plug in the space heater, plug in the laptop, and I just lost it. Like because I knew what I had to do. I had to call up 60 people and you know, whatever the number was and apologize to them for, you know, ringing their phone off the walls for the day and say, “No, it wasn't Dr. Smith's fault. I'm the CEO of the company that made the 60 phone calls the other day. I am the only person that was at fault here. I am really sorry. If there is any way I can make it up to you, please tell me.” And do that call 60 times in succession and I got done with about 2 of them and got chewed out a little bit, lost it again, had to call my father because I was…I just could not continue. He gave me a nice little pep-talk and then I made another, you know, 40 calls and then called them in the evening and I am the only person who remembers that day, aside from may be people who heard about it. We only ended up losing 2 of our customer accounts. One came back after they were satisfied for the way I dealt with it, and their patients came in the next time and said, “hey, you know, figured out what happened with their phone call thing. It was Patrick; like he miskeyed something, but he seems to be a really standup chap. You know, totally no harm done.”
Patrick: So was like if I showed you my revenue graph right now, you couldn't tell what day happen, even if I showed you my phone graph right now, you couldn't tell the day it happened because we process, you know, more phone calls every morning, like it's 7:30 a.m., then that entire day of blow up did…I am glad it blew up early in the life of the business and not later in life of the business because if we did 60 phone calls for every person we call on an average Monday these days, that will be, “Oh God, a lot of phone calls!” Twilio would have a blockbuster quarter.
Omer: That is a great story and it says a lot about you as actually going and calling all those people up. Let's talk about the business today and what 2015 looks like. Now you became a father recently, right? Your daughter was born when…?
Patrick: Daughter was born back in October.
Patrick: Thanks very much.
Omer: Now in one of your blog posts, you said that the birth of your daughter was the turning point for you in how you thought about Appointment Reminder. So tell me about it, yeah.
Patrick: So like in the run up to the birth of my daughter, I was thinking, “Okay, you know, I've Appointment Reminders not where I want it to be and I want to both have it a like numerical in place where I may have to visit and work and support my family without me having to, you know, go out and do the consulting, where making dance once every year or without having to do additional products and at the same time, I also need to get some off my plate because Appointment Reminder being rather mission-critical and sales that are only happening when I, you know, push the sales through myself, which just was not an unsustainable work load, but an unsustainable work load if you put it on top of being a new father! So I thought, “Okay, I've got a…you know, make the changes in business as necessary to make this sustainable, both for myself and for the business,” and so I thought, “Okay, I've been, you know, doing the software business basically by myself for the last 8 years and the closest thing I have to an employee is the single virtual assistant who works for me from the Philippines for, you know, probably less than an hour or two a week. Alright, I need to have someone help on Appointment Reminder and particularly the sales side of things and I need to get Appointment Reminder in a position where someone could actually execute on the sales, so how am I going to do that?” And I put on my thinking cap and figured out, “Okay…
So, sales. I am really good at automating things. I'm not, you know, a pick up the phone and have a really like a, chest pumping, “You should really buy this today” and “You buy by the end of the quarter, it will all be 25% less” kind of sales guy personality and so, work for me is, you know, being very connected to customers, exercising my engineering smarts in terms of like having cron jobs, do a little bit of sales and directly tying into how the application works, but not so much on the, like actual call. So it's like, “Okay, I'm going to have somebody do the actual calling and I'm going to have a CRM so that we can, you know, be on the same page for that, and then I have to do deep integration between the CRM and Appointment Reminder proper, so they get all the information they need to do jobs and from the customer's perspective, it seems like a seamless experience between using the app, having a person on the phone with them, who knows exactly what they are going through and what the next steps are, and having features available for the sales rep/ person doing customer on-boarding to be able to on-board customers and like, a minimally painful fashion.” And so, I built, after that…before my daughter was born, my daughter showed up a little bit early, so I pushed the ‘pause' button on the development for another two months and then got back to work, got binged out lot of it and so sales efforts started in earnest back may be in like early January and right now, I am, you know, looking back on the last month of it and that I was going to retreat now. Said, “Okay, this went well, this is perhaps a little less well. I've been talking to my sales rep on what she needs to do her job better and then getting that added to the business.”
Omer: How much revenue are you doing at the moment with Appointment Reminder?
Patrick: We just did 7K MRR and so annualized… and you're adding….so I've got a few enterprise accounts; enterprise accounts are a little annoying…they are NDA'd and I would say an enterprise account can be anywhere from like, you know, a single digit thousands a year to few…strictly speaking we could probably like service an account that paid a $100000 a year, but in pracitce I've never actually signed one for a $100,000. I think we represent..we are the largest enterprise account ever signed, was at $75,000 for a multi-year contract.
Omer: So are you doing over 6-Figures with this business when you include all of that?
Patrick: Yes, 6-Figures. I would say that.
Omer: And what is your…so from the 7K you're doing with the MRR right now, what's your goal for 2015?
Patrick: So I'm trying to shoot for the end quarter two; I want it to be up to a 15K which is a little…it's on the aggressive side but I think doable, now that we have somebody who's actually doing sales work every day rather than just me passively responding to emails. And so doing the, you know, short term SaaS cash flow deficit thing where this happens in a lot of SaaS businesses, but since commission earning sales force earns let's say three months or four months of the revenue from a customer upfront, as of, you know, the day that they sign up or like thirty days later, but then you actually like physically earn that four months of revenue over the next four months, right? So if somebody increases MRR by $1000 in January, so that means I owe them whatever their base pay is plus let's say, three and a half month's times thousand is, $3500, so you know, you can do the math for that first 7K that comes in very close to the bone, but you know, six months from now then, the magic of calculus takes over and the business is grossing a lot more than what it would have been without the sales rep. So in that kind of like…so we were pleased for a bootstrapper to be like doing this totally out of, you know, my own revenue, slash my own pocket rather than doing additional thing and you know, taking, “Okay, I've working sales process a product which hundreds of customers use to have non-trivial revenues and demonstrate capability to earn a $75,000 check with it. Okay, can you write me a check for $500,000 so I can hire five sales reps?” But it's a, you know, fun challenge.
Omer: Yeah. Okay Patrick, it's now time for our lightening round. I'm going to ask you a series of questions and I would like you to answer them as quickly as you can. Are you ready?
Patrick: Sure thing.
Omer: Alright. What's the best piece of business advice that you ever received?
Patrick: Only too late for me to do…best piece of business advice I've ever received – “Focus, focus, focus.” So I've run a product portfolio for the last couple of years; turns out probably not optimal. If I were doing it over again, I would try to have products which were more closely come together in terms of who they served, also be more pumped against my interest rather than like all over the map.
Omer: What book would you recommend to our audience and why?
Patrick: So it takes a little bit of tweaking for boostrapped entrepreneurs, but read “Predictable Revenue”, you know. It's about how to do an outbound sales operation where there is a lot of stuff which is useful for inbound sales as well and it's sort of the Bible of the land of the larger SaaS companies for a reason. It's about four times longer than it needs to be; after you feel like it's repeating itself, you could stop reading it then, but that…like the one quarter of the book that is repeated four times is freaking fantastic!
Omer: What's one attribute or characteristic in your mind of a successful entrepreneur?
Patrick: The biggest difference from like the people I look at as my professional peers and the folks who, you know, came up to me and talked to me like a once-a-year basis but never have a business, is that, you know, all the successful entrepreneurs were willing to like, you know, to use a Dwarf Fortress metaphor, “I am a geek, strike the earth” actually, you know, get out there and get in the market, get something in the hands of the customers, start iterating on it.
Omer: What's your favorite personal productivity tool or habit?
Patrick: Personal productivity tool – I really love Trello for the ‘To-Do List' and for like giving me that little dopamine burst that, “Okay, stuff is happening in the business clearly because like pixels are moving from the left side of the screen to the right side of my screen – boom!” and have advice; I check email only twice a day. I check it in the morning and then I check it once before I clock out for the day, whether that's clocking up to go to bed or clocking up to just you know, have meetings with my family and if you leave your email clients giving you desktop notifications all day long, it just, you know, drops your out of flow state too often.
Omer: If you had to start over tomorrow, what type of business market or problem would you want to go and tackle?
Patrick: So I am software guy at heart…but rather than doing a SaaS business where with like the traditional SaaS price points, you know, $29 to like $250 or $500 a month, I probably would be looking at something like a SaaS business on the low end that is closer to SaaS, plus privatized consulting on the high end, where it's basically a wrapper for …start with you, but eventually some other experts are delivering service. Great example of this is Bench, which is basically like a software wrapper around book-keepers. The thing that I've been thinking of doing is, for the next few years, probably won't happen, so feel free to steal this, is like a SaaS pricing pages as a service, because I love SaaS so much! I know a lot about software, love talking to software people, like “Okay, at the low end, it will just be, you know, a hostable page that will allow you to create, you know, really nice pricing pages and A/B test against each other. Towards the middle end, like I will be giving advice about exactly what you should put on your pricing page, and at the high end, you can give me access to your backend database so that I can create the plans and I'll be your like company's Chief Revenue Officer, and that's going to run you, you know, $3000 or $5000 a month,” and the reason I would do it that way is it takes an awful lot of time to hit, you know, day job equivalent of salary if you were building that up 30 bucks up for your customer, but it doesn't take an awful lot of time if you just got it, you know, go to three or four people you've worked with successfully in the past and say, “Hey, buy this 3K package from me. that will be worth your while.” and so you know, you will have…a built-in base revenue which is day job competitive as of, you know, few weeks into running the business and then you can build from there, with …that fall back on in that two week ….in the business rather than having to go on the…Long Slow SaaS Ramp Of Death …
Omer: What's an interesting or fun fact about you that most people don't know?
Patrick: Interesting or fun fact about me that people don't know? Play King – so I play League of Legends and my favorite character is AD Jungle Evelynn; if any of you guys get the reference, high-five, my name is “Police on League”; drop me a invite any time. Hopefully I play a little less these days and more of a family man than a gamer.
Omer: Alright. And finally, what is one of your most important passions, outside of your work?
Patrick: I really think this gets too attaching to our community by a lot of people, so I always try to mention that I am very very serious about being like a husband and father first and entrepreneur like third or second, compared to those two and I think that's true of a lot of the entrepreneurs that I most admire…When I look around, I see, you know, there's an impression, if you read the magazines, or in the internet that their core, like the energy of entrepreneurship is a 24-year old [over-working] themselves, and having not enough time to even take somebody on a date, but when I look at the folks who were around me spiritually speaking, it's folks with, you know, happy marriages, folks who are utterly devoted to their children and I wanted to emphasize, “Hey, that's truly doable. There's nothing about this line of work that says you have to sell yourself to get into it,” and it's, you know, it's important like at the end of the day, 40 years from now, I am not really going to care what the MRR of Appointment Reminder was as of, you know, 2-2-2015. I care about, you know, my daughter's baby pictures and whether I had been a good father and a good husband for my wife. So I mean, you know, try to optimize for that in the long run..
Omer: Awesome, great answers. Patrick, I want to thank you for joining me today and sharing your experiences, insights 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 Appointment Reminder or they want to read your blog, what's the best way for them to do that?
Patrick: Sure. If you want to see Appointment Reminder, it's appointmentreminder.org or just Google Appointment Reminder. By the way, buy a .org domain name for $8.95 instead of being $30000 for the .com name, like the broker wanted. You want to email me, my email address is: patrick [at] kalzumeus [dot] com. Also, my blog at: www.kalzumeus.com, there is, not blog quite so frequently any more, but there is an ask through email address at the top of the screen, I send about 1 email a month out to my email lists about making and selling software and has some of my best work and really happy with the way this has turned out. So I recommend it, if this was interesting to you, get on that email list. Also, new announcements coming down in a month or so, get on now…
Omer: Alright. Awesome Patrick. Thanks again for joining me today. I really appreciate you doing this, especially it is in the middle of your night, and I wish you continued success.
Patrick: Yeah, thanks very much Omer. I also wish you continued success. If there is ever anything I could do for any of you guys, I hope you always have only two of my little, modest slice of the successful business because people have been very generous with their time with me and so if there is ever anything I can do, I want to help you guys as well; drop me a line.
Omer: That's great! Thank you. Cheers.
Patrick: Thanks very much.
Omer: Alright, I hope you enjoyed that interview with Patrick McKenzie. You can get to the show notes for this episode by going to ConversionAid.com/44, where you'll find all the links and resources that we discussed today. If you'd like to get in touch with me, you can find me on Twitter: @omerkhan or email me at: omer [at] conversionaid [dot] com] and if you enjoyed this episode, then I would appreciate you taking just a couple of minutes to submit a review on iTunes. Just go to ConversionAid.com/iTunes. Thanks for listening. Until next time, take care.
Transcription sponsored by Karooya – Negative Keywords Tool
- “We are what we repeatedly do. Excellence, then, is not an act, but a habit.” — Aristotle
- “Predictable Revenue: Turn Your Business Into a Sales Machine with the $100 Million Best Practices of Salesforce.com” by Aaron Ross
Links, Resources & People Mentioned
- Kalzumeus Software
- Bingo Card Creator
- Appointment Reminder
- Visual Website Optimizer
- Wingify – @wingify
- Paras Chopra – @paraschopra
- Trello – @trello