EP06: Patio11 on building products that make money (part 2)
Want to build a software product that actually earns income? In this (Part 2) episode Patrick McKenzie (Patio11) shares specific tactics for researching a market and finding a problem to solve.
Want to build a software product that actually earns income?
In this (Part 2) episode Patrick McKenzie (Patio11) shares specific tactics for researching a market and finding a problem to solve. Listen now.
- Don’t think up a cool product idea, go and spend months developing it, and then try to find customers. It won’t work.
- Instead, go out and talk to people and see if you can find 5 people who will buy it.
- Trick for interviewing people in potential markets: tell them you’ll pay them their normal rate, but instead of getting their service, you get to ask them questions about their industry (Patio11 interviewed massage therapists and stylists this way)
- Be relentlessly curious: ask people about their business problems.
- “Businesses have a lot more money. The people who are responsible for making a purchasing decision in the business aren’t spending their own money; the office manager at a business is very not reluctant to spend 200 dollars a month of that business’ money.”
- Avoid the education and hobbyist markets: Patrick loves Dungeons and Dragons, but doesn’t think you can make much income by building software products for D&D players.
- “There’s different types of pain: you want to be solving a problem where people know they have the problem and are actively looking for solutions, rather than something that the pain is bearable, or is just considered so endemic to the condition that they are not actively trying to get better at that.”
- Have the humility to talk to people and find out what they really want.
(courtesy of Patio11: thanks so much!)
Justin: Huh. That is so fascinating. Basically, in 2010, you were able to stop working at the day job and just live on product income.
Justin: Was there a portion of that that was consulting, as well, or was that all, you quit because you were making enough on the product?
Patrick: I quit because I was making enough on the product. But there's an asterisk there with regards to consulting stuff. Bingo Card Creator is highly seasonal, because it tracks the school year. Sales go down every summer. I was quitting in April.
I thought, OK, I know I'm fine until the school year ends. Then, summer's going to be interesting. Either I'm going to be burning savings or having to subsist on credit cards until the school year starts up again.
Patrick: But when I went home Christmas 2009, I met a buddy of mine who I had become acquaintances with over Hacker News. My buddy's name is Thomas. He's a security consultant who works in Chicago.
He knows that I'm pretty good on this online marketing stuff that I've been blogging about for the last couple of years. Oh, if it wasn't obvious, I'd kept up a blog from the day I started working on Bingo Card Creator in 2006, through 2010 and continuing through now.
Justin: That's at kalzumeus.com.
Patrick: Right. Kalzumeus.com. It moved around a bit, but it's there now.
Patrick: Anyhow, so there's this guy in Hacker News who was very smart. We're mutual admiration society of each other's comments, and he was in Chicago where my family's from. I said, "Hey, I'm coming home for Christmas, do you want to get coffee?" My only plan for getting coffee was, why don't we talk about Hacker News threads and laugh? I'm a geek. I'm very, very geeky.
Thomas says, "That sounds like an excellent plan." We go to a coffee shop. He says, "Hey, this coffee shop happens to be under my office. Do you want to come up to my office?"
We go to his office. Says, "Hey, why don't we drink our coffee in that conference room over there with my VP?" Thomas, who founded the security consultancy with a few other guys and his VP come into the conference room and they lock the door at me. We just start talking about online marketing, and in particular, how I would do online marketing if I was in charge of it for a security consultancy.
This is absolute brain crack for me. I talk non-stop for about three hours. At the end of it, Thomas has a check list of things that he's going to try. He says, "I've got to tell you, as a consultant myself, if you hadn't phrased this as, 'Let's get coffee together...' If you had phrased this as, 'Why don't I do a consulting gig for you on improving your online marketing,' I would be writing you a check right now."
I had just quit a job that paid me less than $3000 a month. I thought that $100 an hour would be incredibly generous for intermediate engineer's time. My mental peg for my work was $100 an hour. I said, "Well, Thomas, $300 around Christmas, honestly that's not enough to worry about doing a whole invoicing dance or anything." Yada, yada, yada. I was basically coming up with reasons why I could not do the consulting that I had just done.
Thomas said, "I don't think this was worth $300. I think this was worth $15,000 to me." I said, "What?" Thomas went to his VP and he said, "Do you think we got $15,000 out of this?" The VP said, "$15,000 is a little steep." I said, "See, the VP, he is sane." The VP then stumbles over my words and says, "But we could pay $5000 for it out of petty cash, no problem." That was the first time I ever had the inkling that, wow, for-profit businesses really have money to spend on business problems.
Sure enough, they did actually deploy the advice to much more than either of those two numbers, in fact within several weeks. That ended up working out pretty well. Prior to that, people had emailed me a couple of times and said, "Hey, I read you blog. You seem like a smart guy. Do you consult?"
I always said, "No. I've got a day job." Yada, yada, yada, but when folks emailed me after I quit, instead of saying, "I don't think I'm good enough to do consulting," I started to say, "Yeah. That sounds found. Why don't we talk about it?"
With the idea that I could do that during the summer months and then not have to dip into savings or anything. I started doing consulting concurrently with the product development. Actually, I say that, but I had a good six months of down time caused by just total burnout. Because, for the last six months at the day job, I was working 100 hour weeks, seven days a week and it just killed me. There's another product story in here.
Justin: I'd love to hear the next one. Let's go.
Patrick: Sure. Basically, at no point in my life was I ever thinking, "Man, I should live off..." Oh, maybe not true.
[silence 36:45 to 36:53]
Patrick: Let me think. I was about to say, at no point in my life did I ever think that I would just live off Bingo Card Creator. That's not true. During the midst of my burnout, that was an attractive option to me.
Patrick: Just coast on Bingo Card Creator, spend five hours a week on maintenance, and then just spend the rest of my time living. Because I was very much overworked. The thing that changed my mind on that score was a conversation with Joel Spolsky, who I got my coffee entrepreneurship bud from his forums, and spent a lot of time reading his essays. He's one of my software heroes.
Patrick: I had the opportunity to meet him at a conference once. I don't know if the entire conversation is for public consumption, but the gist of it was that people who are capable of doing things have an obligation to do them...to bring their gifts to the world basically. He grounded it in a Talmudic understanding of the relationship between people, society, and capabilities and obligations, which...I'm not Jewish, I'm actually strict Catholic, but it spoke to me.
Justin: Interesting. Yeah.
Patrick: Wow. It would be a waste if that was all I did. Then I got more serious about shipping the second product that I'd been thinking of. Let's talk about the second products. That's a misnomer. There were three second products.
While I was still at the day job, I had made inklings of direction of launching two different things prior to that, but I had killed both of them before launch, because I did everything the LEAN startup folks tell you not to do.
Patrick: I started from, "I think this sounds like a great problem. I'm going to go code away in my bat cave for a little while, and then I'm going to try and find customers for it." Luckily, I didn't have them done, but they were half-built in the bat cave before I figured out, wait, there's no way I can make the numbers work for this, or of getting customers into it, and I have no clue what the customer even looks like.
Patrick: But anyhow. After quitting the day job, I was exposed to a technology called Twilio. Twilio is an API that lets you make phone calls and send text messages from a web application. This is not the right way to go about identifying a business. I thought, wow, that's an awesome capability, and there's so much done by businesses that requires a telephone. There must be some way I can make a business on top of this new tech that I love playing with.
Justin: Yeah. That happens a lot. I think people will see there's some tools or there's some technology, and you'll be thinking, man, how can I build a business around that? I think that's a really...
Patrick: It's seductive, and it's the wrong way to think of it.
Justin: Yeah, exactly.
Patrick: The problem was, that's the way I actually did it. Do what I say, not what I do. I had a notebook full of ideas for what I could do for Twilio. Then one day, in the midst of my being burnt out and getting up at noon and feeling like doing not too much, I went down to the cafe where I usually had lunch.
Went to the massage therapist next door and said, "I spend too much time on the computer. My shoulders are aching. Can you give me a massage?" She said, "Yeah, we have a two-hour wait right now, but we can see you after two hours." I said, "Oh, that's fine. I've got an iPad with me. I'll just sit in this chair and wait here for two hours."
15 minutes later, she comes back and says, "I know I told you two hours later, but it would be really, really good if you could take your massage right now." I said, "Oh. Sure, that's no problem for me. I have nothing planned today, because I'm gainfully unemployed. But can I ask, what changed?"
She said, "Well, my appointment that was scheduled to come in right now didn't come in." I'm like, "Oh, that's interesting." One of the things that had been in my book of ideas was reminding software.
I said, "Why didn't you call him to see if he was coming in to the appointment?" She said something that stuck with me. "I'm a massage therapist. If my hands are on the telephone, they're not on someone's back. If they're not on someone's back, I'm not getting paid," I said, "Ooh. Ooh, that's interesting."
Patrick: The next time I went back to America to see family...Again in Chicago...I went to an ATM, took out $400, and started wandering around downtown Chicago just looking for anything that looked like a high-end salon or a massage therapy practice or that sort of thing. I would walk into them, talk to the lady behind the counter, and say, "Excuse me, are you the proprietor?" If she said yes, I said, "Do you accept walk-ins?"
If she said yes, I said, "All right. I'd like the 30-minute thing. But I have a proposition for you. Rather than having a massage or a haircut for the next 30 minutes, I just want to talk to you about the industry, because I'm interested in it. I'll pay you your normal rate."
Justin: I love this idea. Did it work?
Patrick: It worked out so well. I think only one person actually took money for it. All the rest were happy just to talk to somebody who would listen. I said, "What do you do for scheduling? How many appointments do you see in a day?" People were telling me... The vast majority of them did scheduling on pencil and paper, or catch as catch can. They had a lot of appointments, relative to walk-ins.
They had severe no-show problems. Some of them would do appointment reminder phone calls themselves. Some of them meant to, but too many things going on in the business, never got around to doing them.
Some of them have an office manager that was supposed to do that, but because the people who are office managers at salons tend to not be the most diligent people in the world, it was haphazard. There was a huge amount of problem for it. I'm like, "Appointment Reminder. Totally going forward."
I released an MVP of it, which was just one page that showed, basically, that if you gave me your telephone number, I could...Actually, I think I'm getting my timeline wrong. I did the MVP first. Made a page that, if you gave me a telephone number, I would give you a phone call immediately. Had this voice actress, who was a college student that I hired on Fiverr, for $10, recorded basically a sales pitch for Appointment Reminder.
That said, "If you can come to your fake appointment, which is five minutes from now, please press one." Then, as soon as you pressed one, it would flash on your computer screen that you just confirmed their appointment. If they had cancelled the appointment, we could SMS you right now, so that you could reschedule someone and save that one. I showed that on my iPad to people, and asked them, during the conversation in Chicago.
I said, "Would you buy this?" Five people said yes. They were totally in at that price point. I was pitching at like $30 a month. "OK. There exists a market for this."
Justin: Five people out of how many?
Patrick: Good question. I talked to about a dozen people that day. I don't know if I actually got to the sales pitch on everybody. But I think it's less a question of five people out of how many...It's more a question of, can you even find five people in the world who will buy it?
If you can find five people, there's probably more than five people. The world is a big place. If you can't find five people, on the other hand, when you're talking to them and you've got that little crazy founder glow in your eye that people want to say "yes," just to get you out of this door.
If you can't sell someone with that, you're not going to be able to sell them with a web page. Might as well not build that. That's my take on the LEAN startup methodology for very bootstrapped startups.
Justin: Yeah. I like that, because there is...You have this theory of different ways to do customer development and LEAN. But then there's the actual practice. I'm always interested. In actual practice, what do people find? You're saying, if you can find five people that say they'll buy, the world is a big place and there's probably more people that will buy?
Patrick: Yeah. Exactly. Interestingly, I think the customer development led me a little stray, in one respect...My conception, from the time I started the project...Because I was talking to people in massage therapy practices and salons and that sort of thing, was that, an appointment is something that you, the client, go to. There is another whole market of service providers, where the service provider comes to you for the appointment.
For things like exterminators, the trades, HVAC installers, yada, yada. It turns out that they have a much more pressing need to avoid no-shows than massage therapy practice has. Because if a massage therapy practice gets someone...They flake out. Yeah, they lose revenue, but it's only about $60 of revenue and maybe they can slot in a walk-in. But if you have an HVAC company that has three guys who go out in a van to someone's house and they get locked out...
A, the company is out $200 for that truck roll. Meaning, putting the people in the van and sending them out. But B, they probably just lost out on a $2000 furnace repair job that might get done by one of the their competitors now, because people don't typically leave broken furnaces for a day.
Justin: How did you figure that out? How did you discover that need in that market?
Patrick: An exterminator or something related to that found me for just Googling for "appointment reminder." They signed up for the service. The business names was like Bob's Termite B Gone, or whatever. I thought, "Interesting, that's an exterminator would use this." It's a service that...Communication is the point of the service. It's sending SMS messages between you and your customers...Yada, yada. Obviously, "I know this guy's contact information. He gave an email address to sign up."
I said, "Hey, Bob," of Bob's Termite B Gone, "want to talk about appointments for a little while? I think I have some ideas for you." I gave him some ideas on better messaging he could use about cancellations. In return, I said, "Why does a Termite B Gone place need a appointment reminding software?" He laid out the, "Well, three guys in a van burn $200 every time they go out to a site whether I get paid or not." Like, "Oh, that's interesting." That helped me change the marketing message a little bit.
Justin: Is that a primary market you're going after now?
Patrick: That sort of thing, where the customer doesn't go the appointment, the appointment comes to the customer is probably...If you ball them up together, it's a bunch of industries. But that's probably my second largest customer group, after probably medical. Medical wasn't even scoped for version 1.0 of Appointment Reminder. Because there's this Health Information Privacy and Portability Act, I think. It's an American law about health information security standards that...
There was some technical and legal groundwork that I had to lay before I could say that I could support health care providers. But it turns out that...I won't bore your listeners with the whole story about this, because it's much more interesting for my business than for their businesses. But it turns out that there's various hacks around that. I'm in a...Well, the less said about that the better.
Patrick: Suffice to say, there are hospitals on Appointment Reminder right now. As a matter of fact, I think eight of the ten largest US hospitals are on Appointment Reminder. Sadly, not for all of their appointment needs, but...
Justin: Yeah. When did you launch Appointment Reminder?
Patrick: The MVP I created in maybe May of 2010, the month after quitting the day job. I launched it in December of 2010. It's been going on for just a little over two years now.
Justin: OK, in terms of your whole world of revenue, what portion of that does it represent?
Patrick: OK. We didn't mention it in the interview, so just back-tracking a little bit. I've been very transparent with many parts of my business for the last couple of years. Bingo Card Creator, for example, has a page that you can go to that will literally say what my sales are for every month for the last six years. But I'm perpetually "Will I? Won't I?" on taking investment for Appointment Reminder.
That makes it difficult for me to disclose numbers. Not in that investors will hate me if I don't disclose numbers, because it's the opposite. Most companies don't. But, basically, if I disclose numbers then they can see the numbers without having to talk to me.
If I don't disclose numbers then to get an insight into the business they have to talk to me. If they come out of the woodwork and talk to me, I basically get implicit permission to pitch them, should I ever decide to take investment for it.
I'm going to avoid saying how big Appointment Reminder is, in relation to my other businesses. Can I just mention...If you're wondering, extrapolate a little bit from the fact that it's used in eight of the top ten US hospitals.
Justin: Yeah. The market seems big. One thing I'm thinking, as I'm talking to, is the markets you've gone into...Teachers, massage therapists...There's a lot of folks that try to launch products for those groups. Not a lot of people think about launching products for exterminators.
Do you think that it's still worthwhile launching a product, for example, for teachers? Or for massage therapists? Or do you think that product people need to be going after these other markets that they might not have thought about?
Patrick: Appointment Reminder is a broad horizontal product, which happens to target, in the marketing, individual verticals, like massage therapy and whatnot. But it was never a product built by massage therapists, for massage therapists. With specific regards to elementary and high school educators, for your listeners who might be thinking of getting into building a product business. I'm going to recommend that you don't go after teachers.
Especially if you do, well, pretty much for any reason. I love teachers, I love education. I worked six years in this field. The amount of pain you go through for, like, increment of success you get is off the charts compared to working in B2B, business to business.
Businesses have a lot more money. The people who are responsible for making a purchasing decision in the business aren't spending their own money to buy your thing, where teachers typically are spending their own money to buy your thing. Teachers are very reluctant to spend 30 dollars of their own money where the office manager at a business is very not reluctant to spend 200 dollars a month of that business' money.
The top line plan for Appointment Reminder that's actually exposed on the website is $200, so that's $2,400 a year in revenue. That's about 100 bingo card sales, like a month of sales in some months, that I can get from one person who just comes to the website and signs up five minutes later, and never calls me. That doesn't even crater the approach to the bridge to the high-touch enterprise sales, where I'm talking to a hospital individually about, "Well, quote us a price if we have 10,000 patients a month."
I would recommend avoid the education market. I would tend to avoid hobbyist markets for the same reason, especially hobbyist markets with lots of overlaps with geeks, because they typically are way, way over-served. For example, again, I'm a geek. I own it. I play dungeons and dragons.
You also play dungeons and dragons, and you're thinking, "Man, there's something that can be done with a computer that hasn't been done yet for dungeons and dragons," A, I think you're probably wrong, but B, that is not a great use of your time from a financial returns perspective. Make something for boring businesses, or other underserved markets that are valuable.
One I talk about a lot is making products for women, because if you've been around a developer conference ever, you've noticed the switch in the community. People largely make things to scratch their own itches, and there being less women around who have capability of making software products, less that their itches get scratched. Some of them are, for example, in jobs that are largely female dominated, like, say, nursing and whatnot, or office managing.
There's compelling business problems that can be solved by not too difficult software, which can be worth substantial amounts of money.
Justin: Yeah. Yeah. You've talked about how you your initial taking the MVP for appointment reminder around in Chicago. What would you, so if you're just, because a lot of product people, like, people that are interested in building products. Sometimes we are people that are sitting in an office all day, or we have a life, or we might, the things we interact with, our kids go to school, so we think about teachers, we go to the massage therapists, and we go to get our hair cut, all these things.
We're often thinking about those kinds of problems, or we're thinking about our own problems. Do you have any hacks for ways you've gotten to know some problems from people in boring businesses, as you've said?
Patrick: I think being relentlessly curious and talking to people about their business problems helps on that. I have no...I consume services from, say, massage therapy practices, but I also consume pizza, that doesn't exactly make me a pizza chef or a massage therapist, but I love talking to folks for any reason.
I keep an ear open, talk to folks. People love talking about their problems. A sympathetic ear is one of the most motivational things that you can offer somebody...to just say, "Hey. You're a nurse. What's sucks about being a nurse?"
About 15 minutes talking to someone while you're waiting for your kid to get out of the doctor's appointment, or "Say, you run reception at a dental clinic? What software do you use? Do you like it?"
The answer's going to be no. "Why don't you like it? I'm just curious about your industry. Who in the company makes decisions about purchasing things?" Yadda, yadda, yadda. But just talk, talk, talk, talk, talk. You've got friends. They're probably in diverse walks of life. Talk to them about things.
My father's a real estate developer. I've been hearing his real estate development stories for the last 30 years of my life. Talk to him about, "Hey Dad. What do you do manually still in your business?" They do a heck of a lot of the data gathering that they do to source deals is, it revolves around paper maps and Googling things randomly.
There must be some way to automate that process. It would probably be worth...my father works in commercial real estate. The basically smallest deal that his company could go after is in the millions of dollars. Think of how much increasing the effectiveness of him at sourcing deals by 10 percent would be worth for that company.
Justin: Yeah. Is that the math you do? Because on one hand, you can go find a business problem, but is that the math you do when you're trying to figure out, how much could they potentially pay or how much would this be worth to them?
Patrick: Right. There's two things you can offer to any business to induce them to get into a business relationship with you, whether that's buying a product or consuming your consulting services or employing you. The first is to increase their revenue, and the second is to decrease costs. Of the two of them, increasing revenue is generally more motivational from a businessman's perspective.
I would generally tend to look for high-visibility problems that are close to the money, as opposed to "You can do inventory tracking software, which is going to save you five dollars on your next toilet paper purchase." This is probably not enough to get them to change the way that they do business.
Every business already has ossified ways that they do business right now. Your mission, if you choose to accept it, is to convince them to go from their current process into using your software that they've never heard of before. You have to have a really compelling advantage over what they're doing right now.
Shaving off a buck here or a buck there is not a really compelling advantage, but plus 10 percent improvement on the effectiveness of employees that cost four or five figures a month...We make your software developers who cost $20,000 a month fully loaded, we make then 10 percent more effective. That's $2000 per developer, and you might have 30 of them, you're willing to pay a lot of money for that, and that's why a lot of software that targets software developers is all done in per seat basis by the way.
Patrick: Similarly, if you were thinking who in the organization to make software for. Minimum wage employees on the ground floor? Probably not as good as the folks who, A they have the authority to buy things, and B they're a bit higher in the organization, higher salaries and what not in imputed cost to their time. That's not a law of nature, it's just a rule of thumb.
Justin: I think that's a really important point. Sometimes you just identify a problem and the problem is painful...you just really want o solve this thing that's painful, but if you're going to make a business out of it, there has to be someone who's going to be willing to pay you for that. Then you have to subtract some other things.
You have to subtract your time, but also how much time and effort is it going to take to support this thing. We don't always do that math, sometimes the problem is so painful that we don't thing about how much are people willing to pay for this, and how much time would it take to support it.
Patrick: One thing that people don't appreciate enough is that there's different types of pain. One for example is pain that people know they have versus pain that people experience, but don't know that they have. There's a pain that has people searching for solutions actively, and the kind that people figure is just a cost of doing business.
You want to be solving a problem that people know they have the problem and are actively looking for solutions, rather than something that the pain is bearable, or is just considered so endemic to the condition that they are not actively trying to get better at that.
For example, among people who could buy Appointment Reminder, they have the word no show. It's a hair on fire problem for them. When I mention would you be interested if I could get rid of all your no shows or a substantial percentage of your no shows, their eyes just light up, and they actively search on Google for it.
By comparison, let's us an example from education, grade book software, it sucks. Most teachers do not wake up in the morning and say, "My grade-book software sucks." Many things about teaching suck. Grade-books are one of them. Every teacher puts up with it. I know a few people who've made grade-book software and that doesn't typically work out great for them.
Justin: This is another thing that I think is challenging. When you finally identify a pain...and you go, "This is a real pain," like it's definitely a pain, but when you start talking to people, like you've said, it's not a hair on fire issue. Even if they have the problem, why is it so hard to convince people when it's not something that they're actively searching for an answer for?
Patrick: Mind if I turn that question around a little bit? I think as developers, and as product people...We have the ability to create things, which is magical. We get a little high on our own supply sometimes, such that, "I am capable of creating this software, ergo it's going to have these awesome features, and ergo that's going to be awesome and change people's lives forever, such that they will not remember their life prior to using it."
We can stand to learn a little bit of humility and meet users where they actually are. To a certain point of view, I think that..."Why is it hard to convince people that they're in pain from these antiquated solutions that they're using that are clearly sub optimal...maybe they're not?"
Maybe we should have the humility to talk to them and to actually figure out what they genuinely want, what they think that they need and meet them there. Users, they'll make things as not most users core options. They often won't understand what's capable or what's possible like we do. Maybe they can articulate their pain but they wouldn't necessarily come to a great solution without guidance from us.
But we should definitely listen to them and be actively engaged in them in the process of creating ideas in order to make their lives better. Because ultimately, it's their life that has to get better or the product is a failure.
Justin: Mm-hmm, and I think, maybe in response to that, some people would say, "Well does that mean we're just always going to go after this low hanging fruit?" In a business, there's the things that are like hair on fire issues that you need to deal with all the time. They're a real pain and they're making your boss stressed out.
But then there's these deeper underlying issues that maybe there's not a lot of Google searches for those or whatever. Those are important. We need to deal with those underlying important issues that are not just on the surface, but deeper.
How should we respond to that? When we're building software are we always going to be just building for hair on fire issues?
Patrick: Well, it would be awesome if we could build software which would solve every educational problem in the United States. But given that most of us are makers doing this on the side, we have limited resources. We have to have an appreciation for what is reasonably possible and that's going to largely council going after things that are low hanging fruit.
Even for folks who are on the funded start up track, so they can afford to work without revenue for a couple of years on a project and try to blow up, they typically go after problems that...like, they're problems. People genuinely feel them. But they're not the problem that gets written about in a sociology book, to put it mildly.
That's partially a pragmatic answer. But in addition to it being a pragmatic answer I think there's honestly a lot of good that can be done by just solving people's pressing problems that come up all the time. Simply because if we keep knocking down all the problems that come up all the time and exposing each layer of increasingly higher fruit after the first one, then their lives are getting better all the time.
Software doesn't do one one-hundredth of a percent of what it possibly could do for most people. You can tell because most people's only use for software is email and Facebook at the moment. Even with that, email revolutionized how almost every knowledge worker worked.
Obviously you're not going to create email but you probably will create the next version of email or the next version of Facebook. Each incremental improvement that genuinely helps people out, genuinely helps people out. The scale that you can achieve with incremental improvements when delivered over the Internet, if you understand the marketing side of things too, is just absolutely incredible.
I think I did the math once. I've probably taught over two million kids a reading lesson with Bingo Card Creator which, if I was a teacher working in a school teaching 30 kids at once, I don't think I could teach two million student lessons in an entire career. But I'm able to do that while sleeping thanks to Bingo Card Creator scaling so well...
Patrick: ...and it doesn't scale so well unlike the Facebook [indecipherable 68:33] version. It's just a website can work when I'm not in. If you can...Obviously Bingo Card Creator is one of the most trivial apps I could possibly think of. That's partially why I picked it. If I'd known then what I know now, I probably would have gone with something a bit larger in scope for my first business, not 10 orders of magnitude larger in scope.
Justin: I think we're going to wind down pretty quick here, but I'd like to ask maybe a couple of more questions. Then, if you have anything else you'd like to share before you go. I think one thing that we didn't touch on here that would be interesting to cover maybe in the future is knowledge products. There's software products and sometimes it'd be interesting exploring that. But maybe we could do that another time.
Patrick: Yeah. I think that is a deep topic which I've gotten interested in recently. We could definitely talk for an hour on that one too. Why don't we table that for maybe next time?
Justin: Sure. Let's close with this. I live in Canada, so for me this is not as big of an issue. But for people that live in other parts of the world, how important is the American market right now for building software products?
If you are in Asia or Europe or Africa or somewhere else, would you still build a product for the American market? Or would you look at your local market? Or would you look at maybe...Maybe there's markets I'm not even aware of. Like maybe Europe is doing really well right now. Internationally, what do you think is a good starting place for people building products?
Patrick: This is a question near and dear to my heart considering I'm in Japan. I'll tell you all my products target primarily American companies or American customers. One of the reasons for that is that while my Japanese is pretty good my ability to write marketing copy in Japanese is not that great. Largely I'm selling to the people who I know how to sell to.
Another reason is that there's significant differences in how the software adoption cycle works at Japanese companies versus American companies. I won't give you the entire list of how Japanese companies are such [indecipherable 71:04] pathological, and how they do decision making, but suffice it to say that they don't really sign up for software as a service with their credit card after reading a website which is critical to me.
I end up selling to American companies. But partly that's because I am a foreigner living in Japan. If I was a Japanese person I would probably sell to Japanese companies instead. While it's true that America is the largest software market and is a few years ahead of the game with regards to getting on new innovations like say the software as a service model.
American companies spend a lot more on software as a service product [indecipherable 71:45] absolute basis on a per company basis than companies in other countries do. In say Japan, it's not really a...it's getting there but it isn't really a well understood thing yet. Anyhow, even with that being the case, targeting your local market has a lot to recommend it.
Just like you don't go into an overfished pond like D&D gamers, the U.S. is an overfished pond relative to...well, a heavily fished pond relative to any other country in the world. There's a lot of software that does...say, accounting and whatnot, that just won't work for an office in, say, Canada, because it's built around American accounting standards and the way American customers expect things to work, and not for how Canadian folks expect things to work.
Similarly, a lot of ideas that would be, "Oh my God, a invoicing app? We've got like a hundred of them," in Japan, there's only one invoicing app worth talking about. It's called MakeLeaps. A friend of mine runs it. It's a ridiculously mature market in the United States, and FreshBooks has sewn it up, and then there's other competitors, but in Japan, it's wide open, and the conversation is less, "Do you use FreshBooks, or do you use one of the competitors?"
But it's, "Are we ever going to use software for invoicing?" Even with a software that might not be as mature as FreshBooks is, software has a lot to recommend over pencil and paper, which is the primary competitor for MakeLeaps, so MakeLeaps is doing really, really well.
Justin: Interesting. If you're in one of those markets that's not the States, you might, say, consider maybe offering something that's not being offered yet. What about...
Patrick: I think there's absolutely no shame in taking something that works in the American market and bringing a version to your market, for example. OK, don't copy Bingo Card Creator, and I'm not saying that because I don't want the competition. I'm just saying because it's not a great, wonderful use of your time.
Hypothetically, if you're an Australian, the way that Bingo works is different in Australia than is in the United States, and most Australians can't use my Bingo Card Creator. You could hypothetically make Bingo Card Creator, because you know Bingo Card Creator, as a business works, from seeing it work for me, ergo, it should probably work in Australia.
Again, don't do it, but that's an example, where if you see a FreshBooks working in America, then FreshBooks probably should work in Japan, too, if someone would just go to the...Invoicing software should work in Japan, and if you see...What's that German company that their shtick is, they take American startups and clone them for Germany, and eventually get acquired?
A lot of people wag their fingers at them and say, "That's not innovative," but given that American companies don't typically launch to the entire world at the same, I think that does accelerate the adoption process of that technology by the German audience, and other than an irrational preference for innovative business models, I don't see how that's bad in any way.
Justin: That's right.
Patrick: Don't be afraid to use an idea that has been done before, even if it's been done in your market too. I'm certainly not the first Bingo Card Creator software that came out. Probably the only one that's actually good but there you go.
Justin: [laughs] Yeah. Well thanks so much for your time Patrick. I really [laughs] enjoyed the conversation. Glad we could make it happen.
Patrick: Yeah. I am too. Hopefully it was useful for some of your listeners.
Justin: Yeah. I like how we were really able to get a lot of your back story in the first part of our conversation. I felt like the second half has a lot of just really practical tips that people could walk away with. Both are important that we get the context and the story, we get to know the person but then we can also walk away with some practical things to apply. Is there anything else that you want to say quickly or leave us with, before we go?
Patrick: Sure. Well, I may as well give people some links to take a look at. My blog is at Kalzumeus.com/blog. We'll link that up in the comments to the interview.
Patrick: I have a email list that you can get on at training.kalzumeus.com. I send out an email every week or two about software and software marketing topics. This is my business but it's also my hobby. I really love talking about software and I can basically have unlimited propensity to do so. If you ever want to talk about it, drop me an email. My email address is email@example.com.
Justin: Perfect. Well I've certainly enjoyed talking to you. I'm going to have to have you back on the show again sometime in the future. Maybe we can talk about information products next time.
Patrick: Sure. I would love to do that. Thanks very much Justin. It was an honor to be invited.