5 questions to ask when your product stops growing | Jason Cohen (2x unicorn founder)

0:00 A lot of product teams, a lot of founders built something. It starts to show some success and then all of a sudden it just stops growing. There's a series of questions that I asked to diagnose why is growth slowing. The first question is, are customers leaving? Think about the gauntlet they went through to get to the product. How did they even find out about me? That was hard already and improbable. They didn't just bounce off the homepage, which is again improbable. and they got to the pricing page. That didn't scare him off. They actually had the budget and bought the stupid thing. And after all of that, which clearly means they wanted it to work. They're like, No, buy What? Like just on an emotional level, you gotta go. Wait a minute, that's terrible. Step two is pricing, positioning. Your prices are way too low because you just guessed and you haven't changed them. What often happens is you raise prices and signups don't change. Just think about a company with a thousand employees and 400 million in revenue or whatever. If they see a product that's$2 a month or even$100 a month, thought is like that can't be good enough. We position this conversation as how to deal with stalled growth, but it's actually just as useful for how do I grow more. Do you know right now which channels are saturated and which aren't? You can't just rely on marketing forever. Just adding one little feature and then hoping we can flog outwards is not going to work. What comes next? The last question is, do you need to grow? We all have heard the phrase, if you're not growing, you're dying. Is that true or is that the kind of thing that investors use to make founders try to grow even when they shouldn't?

1:19 Today my guest is Jason Cohen. Jason is a four time founder, including two unicorns, one being WP Engine. He's not just an incredible builder and entrepreneur. He's also an incredible writer. and share of product wisdom. He's been sharing his advice online for over twenty years now. I've been a huge fan of Jason's from afar for so long, and it was such a treat to have him on the podcast.

1:41 There are a million things we could have talked about, and definitely gonna have them back. In this conversation, we spent the entire time talking about his very actionable And a very helpful framework for what to do when your product's growth stalls. I found his way of looking at the problem incredibly practical and real and actionable. And if you're looking for ideas for how to rekindle your product's growth,

2:02 Or just accelerate the growth of your product. You're gonna walk away from this conversation with your mind buzzing. Also, I'll add that after twenty years of blogging online. Jason is about to publish his very first real book. It's called Hidden Multipliers. You can now pre-order it online at Hidden Multipliers.

2:19 Dom I am gonna grab a bunch. I bet after listening to this conversation, you will too. If you enjoy this podcast, don't forget to subscribe and follow it in your favorite podcasting app or YouTube. And If you become an insider subscriber of my newsletter.

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5:11 Run your next study. At strella.io slash Lenny. That's S T R E L L A Io slash Lenny. Jason, thank you so much for being here and welcome to the podcast. Thank you. It's an honor to be here. It's an honor to have you here. I have wanted to get you on this podcast for so long.

5:32 You are both an incredible builder and a founder. And you're such a great communicator. You have been writing at uh a smartbear.com, which I want to get the backstory on for so long. How long have you been writing uh there, by the way? Almost twenty years I started when bugging was cool. And I'm still I'm waiting for blogging to come back and be cool again, but it's not yet. I think it is cool. Newsletters are cool now. Yeah. Newsletters are cool. Okay. I don't know if you saw Twitter now as encouraging long form writing. There's like this articles feature. So I think it's cool. I think you've survived off.

6:05 Okay. Uh, I was also uh talking to Gemini trying to figure out how many posts you've written. I was like, Count the number of blog posts on a smartbearer.com. How many do you have a sense of how many things you've written on there? Yeah, it's not that many. Uh it's uh something like maybe a hundred and well, I would say between hundred and fifty and two hundred that I'm proud of. And probably about three hundred, three fifty.

6:23 And that's it over, you know, about eighteen years. And that's because I only write uh in depth Some were long, n not all are long, but none are short, I guess. And um I I've always had a rule, even though you're supposed to write really regularly and not just for algorithms, but they used to say again back in the aughts where I started, Oh yeah, it needs to be like really regular so people know when to expect your thing and they They plug it into their day and all this. So it's always been true that you should be The the the you should be regular and I never was because my attitude was was always

6:54 I will only put out stuff if uh if it's the best that I can do. It's up to the reader to decide if it's good. Or useful. Um And if I so if I don't have that I'm just not gonna publish. That's the way it is. And so there's years where I've published once or twice only the whole year.

7:09 Maybe I was busy or didn't have the energy. Other years were yeah, I posted, you know, forty times or something. But even then it's only that'cause I can't It can't do something of that magnitude. And also found unicorns, which I did during that same time and run them, you know, like can't do that all at the same time. Um and produce a lot. So

7:26 It's fewer and hopefully better, but that's in the eye of the reader, of course. I like what you say I've o I've done three hundred, not too many. Well, not for eighteen years. Right. Like over that time, you expect. But I think this actually this is where I was gonna go, but I think this is a really important lesson I've also learned. I always used to tell people the The key to being successful writing.

7:43 stuff online and just content in general is Quality and consistency. But I've just more and more realized quality is actually the only thing that matters. And the consistency doesn't matter.

7:53 So the only difference is like the more rarely right. The more awesome it has to be. It is a lot of pressure. I feel that. And then I tell myself you That will just prevent you from writing anything.

8:05 And that's not good. So Yeah, y you tend to want every thing you make to be the best thing you've ever made. And on the one hand, I want to hold on to that because it it's motivation to be good and not to let the bar slip.

8:18 On the other hand, you you can go into paralysis, which is obviously bad. So Yeah, I I still struggle with that, but I think that's that is the tension. Okay, so With three hundred ish post, two hundred you're proud of there are so many directions we can go.

8:33 There's a few that I've picked that I want to spend most of our time on. The first is you have a really pragmatic way of approaching uh Growth stalling. And the reason I wanna spend time here is because a lot of product teams, a lot of founders built something.

8:47 It starts to show some success. There's it's going, it's growing, and then all of a sudden it just stops growing. And I think that's one of the most painful things to go through. And there's never I've never come across a A way to think about how do I solve this because I think a lot of people are just like, okay, I guess that is not working. Let's move on to something else. You have a very specific way of approaching this problem.

9:06 And I'm not. I wanna read actually a uh quote from Will Smith. And this is something that has stuck with me ever since I read it. Because it's so true. So in his biography. He has this line.

9:17 People ask him, What's it like to be famous? And his answer is Becoming famous is amazing. Being famous is a mixed bag. Losing fame is miserable. That's funny.

9:30 So first of all, I think a lot of people are experiencing this right now. You have a lot of companies that have reasonable products. And they've they've their growth has slowed. Why? could be the economy because it's not as good as a lot of indicators say. We all know that, for example, jobs are not as good as the indicators say. It could be'cause AI or the threat of AI or the expectation of the A of AI, blah, blah, blah. Who knows?

9:50 It also can just be size. As you get bigger, growth slows because you know what, you're not gonna grow Two X a year forever. So it flows. Um there's like just mechanical things. So there's many reasons why things slow. And sometimes it's all of a sudden, although then maybe there's some event like an algorithm changes or

10:07 You know, something happens. But actually I think what's really common is it just slowly gets slower. In other words, it decelerates. But just it it it it kinda s it I don't I wouldn't say sneaks up on you'cause n most people are looking at growth all the time, so it's not sneaky, but it is it is sort of um uh a gr a little bit more gradual, or just like you just feel more like you're running through mud. Like ah God, we're just still doing so much work and it's not having as much of an impact. And so

10:35 Um i that's what I see. And when I say that's what I see, so I've built four companies. The last one is a unicorn, the one before that is also a unicorn. The boot the the the the previous one was bootstrap, this one was V C funded, and I've invested in about sixty startups. Some of them failed completely, some of them were very successful, some in the middle'cause of course right. Um And uh so when I say that's what I've seen, this is that's the b the context of what I mean by what I've seen.

10:59 So there's a there's uh I wouldn't say a checklist, but there's a there's a series of of questions that I asked to to diagnose why is growth slowing. in this order because it's one of these things where the first one that's a problem I if you don't fix that, it doesn't matter if you fix one of the ones below. Um, just like if I don't know, maybe if you had a marketing funnel and there's a step where everything falls apart. And you're like, Well I'll I'll I'll just uh

11:22 Tune the bottom of it a little. It's like that's not gonna work. It's not gonna help enough. Like you gotta you gotta go where the biggest issue is. So this is in that sort of order. So the first question is uh is are customers leaving? I. e. logo churn. Right, churn with M. You can do churn with M or R too, but uh just for simplicity, let's say uh let's say with customers. And it's the worst problem for a couple of reasons. One is there's nothing you can do about it once it happens.

11:46 Like they're gone. There's no saving them, increasing their revenue. Like there's there's nothing In the future you can do. Also, it's often correlated with things like negative reviews. or other things on social media, which is another kind of preventing growth. Those kind of the two

12:01 two uh a two punch thing of like they're not here and they may be like actively h hurting your growth. That sucks. The math is undeniable, which I wanna talk about because this is something where I there's a metric I like that is unusual. And um Yeah. But before we get to the metric, there's also this kind of visceral thing.

12:19 Which is The customers saying this product, I don't want it. And when I think about the gauntlet they got They went through to get to the product. They how do they even find out about me? That was hard already and improbable that they see an ad or hear it. And then they clicked, which is improbable, and then they st

12:37 They didn't just bounce off the homepage, which is again improbable. They actually were like, Oh, yeah, this sounds pretty good. And then they got to the pricing page and that didn't scare them off. They actually had the budget and bought the stupid thing. Then they went through onboarding and invested their time, et cetera, et cetera. That is a crazy gauntlet that almost no one gets through. And after all of that, which clearly means they wanted it to work. They're like no By what? Like just on a just on an emotional level, you gotta go. Wait a minute, that's terrible. I'm I'm fundamentally not fulfilling whatever promise I made or they thought I made, which is whether that's a product issue or communication issue. Okay, like there's lots of but

13:13 One way or another, like th something is really fundamentally Broken. Just in terms of like I'm a product person, so what I want to do is make a product that other people want to buy and use. And if they don't Like no matter what the metrics say, I'm you know, I'm a I'm we're failing our mission, our customers, whatever. So there's just even that non-mathematical reason to go, Oh my God, right? So

13:36 Uh so to me that's already enough reason, but the the the math is very interesting and What I find is when I talk to people, especially on Twitter or something where people are just, you know, yapping around Whatever they're doing. Yeah, you say th I say things like You know, anything above three percent from love cancellation is is is terrible.

13:53 And people are like, Oh no, it's okay, five is fine, seven six, everyone's yapping about what they And it's very abstract. Like who who is four better much worse than five? Like I don't know. And I heard someone else and blah blah blah. It's very um I don't know, like like generic and rough. So there's a different metric that I like to use. Which is

14:13 Uh w which which um which keys off of this idea that I think again people uh don't appreciate. Which is Cancellations grow faster than marketing. And so cancellations overpower The growth of the company and slow it to a halt.

14:29 I e growth slows. Right. to where you literally cannot grow anymore. There's a maximum ceiling of how big you could ever be. Thanks to cancellations. And when you know what that number is, it's much more real and visceral and scary.

14:44 And so just to kind of justify what I just said. Just imagine any company And imagine you just triple the number of customers that are there and paying. And the same kind, the same age, you know, just the same kind of stuff just tripled, right? Overnight. So

14:59 The next month would marketing deliver more new customers than the month before? No, because Marketing doesn't it none of your marketing efforts care. How many customers you have. AdWords delivers the same number of leads and you know, SEO delivers the same like the it does not care how big you are, these these these efforts. So you're you're you're still gonna be growing at the same rate as you were the previous month.

15:21 But cancellations in absolute terms like the number of customers who leave will triple. 'Cause you have five percent cancellation and Triple okay, so still five percent of a triple number is triple, right? Like So this is the point is the cancellations automatically grow as you grow, even if you're doing everything right. But marketing doesn't.

15:41 Marketing grows only as fast as you can improve marketing. We all know that's quite hard, actually. It's linear. It's hard to find new channels that aren't trivial. Like it's hard. Of course, we're gonna do it, but like it it's hard, whereas cancellations grow automatically as you grow. Right. So cancellations always overtake marketing for this reason. Like the metaphor here is a leaky bucket where Are you adding enough water to keep up with the leak, essentially? Right. Except the leaks automatically increase and that's what people don't appreciate. Mm-hmm. Because it's a percentage of your entire customer base. Yes. See, we say when in marketing we say things like, um I'm adding a hundred leads a month, but in cancellations we say five percent. Why do you say percent? 'Cause it's based on your size. And it's exponential. That's what five percent is an exponential.

16:22 And and so there's this maximum size you could ever be. It's when churn equals growth. Right. Like that's that's the So how would you compute that? It's actually quite simple because Let's say you have this five percent per month just as take a number. So it's simply The amount of new customers you add.

16:38 Divided by that cancellation rate. That is the amount that that is the limit. So let's suppose you add a hundred customers a month. And you have five percent cancellation? So hundred divided by five percent is two thousand.

16:51 So a company like that will never have more than two thousand customers. And by the way, as you approach that number, growth is very slow because you bring in a bunch of customers and almost the same number leave. So growth is slowing. Ah, look, we've diagnosed why ghost slows automatically at all SaaS companies. So that's as why this is the first thing, because it's so it's such a hard cap limit and it means that people don't want your product. Like these are two reasons why it's the most important thing. Just to clarify, this is logo churn, this is like number of customers, not revenue turn. Yeah. Well.

17:20 It is both local churn and revenue churn that you do the same math. You could say dollars in divided by dollars cancellation rate or number of custom I've been saying number of customers just to keep it simple, because I think when when you look at it and say, Wow, we will never have more than two thousand customers. It's just such a like a like a Vceral.

17:40 Oh my God, we gotta do something about that. Now, of course, one thing you could do is have more marketing, but we you know that already. If growth is slowing, you're already thinking, How do I get more out of marketing? You knew that. The point is that cancellation is this hard limit pulling you down with all these other really bad either implications or side effects, which is why it's so important. Cool. And when you say marketing, just to clarify, this includes basically all growth work, PLG stuff, marketing, sales. Yes. Yeah. Right.

18:05 Right. Yeah, PLG is nice, but that doesn't the you still need marketing to bring the people in in the first place. PLG just means there's not a salesperson unless you're expanding or some other segment. Cool. Yeah. It's like the whole bucket of just bringing new customers in. Yeah. Yeah. So Okay, so Assuming you agree, like, yeah, I don't like customers leaving, that sucks. Um so obviously you wanna find out why they're canceling and do something about it.

18:27 And the the the kind of root issue here is they don't want to tell you. Like they're already out the door. They've already like stopped investing in you, like mentally. So the last thing they want to do is spend time with you. Or like really think about it and diagnose it with you. And uh I have a funny story about this for myself, so Um at SmartBear, people would cancel we put up this uh form.

18:46 And and uh a drop down list, you know, too expensive, uh project ended, you know, this little stuff like we do, so we could gather data. And um One of them did have more uh more selection than the than the rest. And I realized it was the first one on the list and I thought, huh. I wonder if people are just picking the first one. So then ever then we randomized the list so everyone saw a different order of the list, and now all the items were picked equally. Like oh it's complete noise. And uh I know other companies have done similar things also with a similar results. So this is this is a global phenomenon.

19:19 So okay, so what do you do? Like the point is it's hard, right? So The first thing is what you wanna ask open ended questions. I I know it's e you want to just get a list, but this is the problem. At least with open ended questions, I mean most people won't answer, but at least you might be able to get some kind of thing that they generated. And when you do this, the The wrong way is to ask why did you cancel? Because again, this allows them to say something really simple like

19:43 Budget. Which may or may not be true, we'll get to that in a second. What you wanna do is say what made you cancel. In other words, what about the product or situation or whatever caused the cancellation, just phrasing it that way, you get much better results. And I stole this from a company called Groove, who has this great case study online about this very thing. They had an email that that they sent out, which is a very a great email. And um

20:10 And they started by asking why did you cancel? They got ten percent usable responses. They changed it. Same email to why what made you cancel and it's 20% re usable responses. So this is this is m that there's like I guess maybe some anek data that this is a good idea. But the point is you really want them thinking about the product and not just coming up with an excuse. The next thing is when you when you can the few times you do talk to them, so you want to like go into Yeah, delve as mu as far as you can into there because Most people won't talk. The temptation is to hear

20:37 what they generate at first and say that's the answer. So like a really common one is it's too expensive. I think anyone who's looked at cancellation data at any company will agree that too expensive is often the number one or at least like top three reason in one form or another. And that is never, ever, ever the reason. How do I know? Because they already looked at your homepage, read all the stuff, saw what you promised, looked at the pricing page, and decided to buy it.

21:03 That means it, whatever's in their mind of what it is, is not too expensive. It was they already decided with their actions. It was not too expensive. Something else happened like But you didn't fulfill the promise that at least they thought you made.

21:19 Or something else didn't work. Or you know, now it is possible they lost budget, but that doesn't mean you're too expensive. That means they lost budget. That's a very different reason. Right. So It's sort of like um

21:33 Th this happens in uh In healthcare, for example. So when someone dies, the doctor has to write the what's called the proximate cause, which is what why did they actually die? But then you try to also write down the real reason. So let's say someone comes in and they the the proximate cause of death is they stop breathing.

21:50 Well, you could stop there and that's like listening to it's expensive and going, That's it. Well why did they stop breathing? Um because they they had they they uh ran their car to a telephone pole and were injured so much that eventually they stopped breathing. Why did they run their car into a telephone pole?'Cause they passed out at the wheel. Why'd they pass it at the wheel? Because they had undiagnosed diabetes.

22:13 Now we're getting somewhere. It still isn't just one root cause, another as a sidebar. I hate the idea of a root cause. Complex systems do not have one root cause. They often have many interlocking things that could be done to detect earlier or to change it or to reduce or and not one root cause. So the root cause analysis to me is By the way, an incorrect thing. I'm explaining why right now with the healthcare, right? Because Well what about the second diagnose? Well Maybe part of the problem is we have a healthcare system that isn't preventative, and part of it is that but they didn't go to the doctor anyway. And you know, okay, so you there's all kinds of things that could be useful and interesting to prevent this or make it better. That's the point. That's what analysis should be is this array of things, not the root cause.

22:52 Anyway, something along the lines of undiagnosed diabetes is much more of a cause than stopped breathing. So when we say uh it's too expensive And uh that's the reason. You're making this fallacy. You gotta go into

23:05 Well They wanted this stuff, but it didn't work with linear, which is what they use. It only works with Jira. And so there's a lack of integration. Now, maybe we should write that integration, maybe we shouldn't. course it depends on how much we hear about it and you know, of course it's gonna depend on other things, but that's the reason, not it is expensive, right? And so So this idea of like getting into not even the root cause, but let's say root error causes. The root causes more root

23:32 Um, I think some people probably say five Y's and just paper over what I just said with that, and maybe so, but I just, you know, let's not be so simplistic about it. that'cause again five Y sometimes implies that there's some root cause at the bottom of the whys. L let's be a little bit more let's be a little more smart about that. So anyway, these things too expensive. This is not it. Maybe project ended really is project ended. Okay. But even there, I see

23:54 Just today, today on a on a on an entrepreneur forum on on I am on, someone said, um Yeah, you know, uh We're starting to see more people have project ended. As the reason and so there's nothing we can do about that. See, that's incorrect.

24:11 That's only true if you only look at the proximate thing, which is project ended. You're correct that you can't make that project not end exactly. Yeah. Okay, but wait a minute. If your software was more successful And the project was more successful, would it have a have ended? Or is that actually an indicator that your product wasn't that useful or didn't do its job? It's possible, like in this case, who knows, right? But that's possible.

24:34 But it really is your fault. Um another example is But you picked what target segments you were going after. Did you pick like a market segment that was easier to sell to? But their projects end like small business and consumers.

24:48 where very often the small business does go out of business where the project ends, et cetera. Because when things are small they're they're you know have high variance and Lots of things can knock them off the the path and so on. And so

25:01 Is it your fault for picking the wrong ideal t customer profile or target segment? And so yes, that one case of that one project, that's not your fault, quote unquote. But by saying that you're you're you're just like ignoring the fact that there is maybe something to do about it. Now all this is maybe. None of this proves you should like change your market, right? But but the fact but when you say it's uh there's nothing we could do about it, you are c you are closing the door. On these things that might be the right thing, and very often As I think probably a lot of people here On this on this listening to this no.

25:31 The market segment you pick has a lot to do with your retention rate. 'Cause everyone acts differently, right? And so anyway. Um So I I know it's it' it's a it's a lot on this topic, but I I just feel Constantly people make this particular mistake of not Not getting you know, not you know just like abdicating responsibility or just listening to the first thing they

25:50 they hear and saying that's the reason and and that's not right. So that's that's the big thing about listening. Another thing is you gotta ask When people are In trouble but not yet cancelled. you might be able to save them. You certainly can learn more because you can talk to them like they're they're not shut off yet from you.

26:09 So this might be They never uploaded their data, so they're not being successful. They are Calling tech support too much, they're in trouble. You know, calling text word enough. They they they're not engaged. Um, they didn't log in for a while. Like there's all kinds of things where where Now, of course, this is all gonna de the details are gonna depend on the product, obviously, but there are signals.

26:29 that are correlated with cancellation. Now if you have a lot of data, you can literally correlate signals with cancellation and try to extract that um you know you know precisely, but even without data, you can guess. And guessing and having a theory Acting accordingly. And as you get more data adjusting your theory, this is a this is a wise way to proceed even without data.

26:48 So if you can catch them when they seem like they're off the happy path, they're in trouble, like that's That's a better time to do it. And then the last thing I would say about about um about this detection is If you don't know what to do or all else being equal

27:03 Then focus on onboarding. Um All almost all companies have a whole lot more Uh cancellation in the first Day, thirty days, ninety days depends, right? But the first

27:14 period than the whole rest of the customer's life. And also small changes in the onboarding can have large effects on cancellation, whereas Later on that's not necessarily true. It could be, but it's not necessarily true. So Uh a really dramatic version of this is if you've ever done YouTube videos, which I know I mean, I know you have, but if if a listener has ever done YouTube video and you see the retention, quote unquote, of the of the viewer on a YouTube video, it has this thing where it it falls like just so much you can't believe in the first thirty seconds. And then if if it's a decent video, it'll flatten out as people

27:45 You know, decide to watch the video. So in that in that crazy looking curve. For the people that have watch it for fifteen minutes. Maybe there's something you could do to keep a few of them staying to the

27:56 And but that's not gonna change very much how many people get to the end. Whereas Like for me, I've only done a few, but I what what I see is about fifty percent fall off in the first thirty seconds. Well if I can get there from fifty percent to fifty five percent stay. That's an additional.

28:13 It and and at the end of of the line I only have twenty percent still there, which is pretty good for a long longer video. But if I get it from fifty to fifty five, I might get it go from twenty to twenty five percent staying. In other words, if I shift it ten percent at the front, which maybe I could do, like I can't be dramatic, but maybe a little Then in the output, I might be able to increase it by twenty, thirty percent. So that's a huge change. And so in the SAS equivalent is as we all know, if they leave early

28:38 Not only is it bad, but it's super unprofitable because you spend all this money to acquire them and then they never stayed around long enough to pay it back, much less to be profitable. So if you can do a little bit in the onboarding. or shift the onboarding percentages a little bit. It pays off enormously in revenue and profit. Over time. By by uh by making them successful. And uh

28:57 So again, if you don't know what to do, onboarding is is a good bet. And even if you do know what to do, I'll I'll still bet that onboarding is a good bet for where to go. Oh man. I'm so happy we're spending so much time on this very specific first step of Logo Churn. Because the way you described it is so visceral. You've spent s it took so much, it's like impossible how far this customer got.

29:19 already. Like they are using your product and understand it. Mostly and then they still decide to leave. So Brutal the way And you're gonna believe them when they say it's because of of the cost?

29:32 No. Right? Like it just doesn't even make sense when you put it that way, right? So let me uh let me kind of uh summarize the advice you shared here,'cause this is so good. So step one is Look at logo churn.

29:44 The way to understand and Essentially to understand how big of a problem this is and why you need to spend time here is Uh look at this basically do the math. Uh, what's how many new customers you're getting divided by the cancellation rate? And that essentially tells you what's like if that doesn't change, what's the maximum number of customers you will ever have. Exactly. That's gonna be a sad number.

30:03 And then the question is, okay, cool, how do I reduce the cancellation rate? Obviously, as you said, everyone wants new customers, more new customers. Yeah, and you'll I know you're gonna do that anyway, but you got this cap. Exactly. Okay. So the way so a few things you've shared here. One is Instead of asking people on uh option uh multiple choice why did you decide to cancel, you make it freeform. And you make the question, how would you say it? Was it Uh what made you

30:25 What made you cancel. What made you cancel. Yeah. Great. Yeah. And then you could use AI to help summarize these things, I imagine, instead of Yeah, um I think what I find with AI is this with this sort of thing with surveys um is this. AI is good at picking out themes. Yeah. It is bad at picking out details of that

30:43 or actionable. Mm. When I say AI, of course I mean L's, which is probably what we mean when we when we're looking at natural language, right? Um

30:52 And if you think about it, it sort of makes sense because the L M is an averaging machine. Right. It's predicting the most likely that's an averaging kind of a thing. And so when what you're looking for is a kind of average, it's usually pretty good. So summarization Topics, themes. But when you're asking for like what is interesting and not average, it's actually pretty bad at it.

31:15 One uh one way that I've found that's sort of useful is Yes, I'll ask it about themes, but then I'll say, Now pick out every specific detail That goes under one of these themes. could it along with like which customer said it and the link to you know blah blah blah. Um so you have to, you know, play with this to tune it right. But like that kind of thing so that a human being can then still see the detail, which is what triggers in your mind, wait a minute, but that means we should do that, right? Because the topics won't do that. The topic will be

31:42 I already know what the topics will be. It'll be stuff like I couldn't figure out how to do this, this integration, right? Like the the the the topics are actually not going to be that surprising, probably. It's the details that are gonna be The triggers for actionab uh actionable stuff or patterns or something like that. So Yeah, y AI is not useless. But

32:03 It's not as useful as it sounds. It's probably still a good idea to just read all this stuff. although AI might be able to clean up, you know, maybe people's grammar is bad, it's a weird language. Okay, sh yes. Like that's annoying. You could clean that up, but I wouldn't rely on AI to do the thinking for that reason. That's such such good advice. I actually have a really cool guest post coming out soon that gives a bunch of really specific techniques to avoid AI.

32:27 uh hallucinating or just giving you really bad uh results from this very specific synthesis work? Because it turns out AI is very Uh not great. And actually being honest about some of the stuff. So we'll link to it if it comes out before this. And like I think in real life, most people don't have that much.

32:45 The volume of these cancellations unless it's like a super consumer app is not that high. So You don't even need A for this. Just like read it. And then this is like it's like way to your next piece of advice, which is uh essentially the five whys, but not the five wise. Where you kind of force yourself to dig into what's the real reason that

33:01 force them to cancel. It's probably not pricing. It's probably not the project ended. There's something deeper. Yeah. And then uh advice number three is try to catch people early. Try to catch them before they turn.

33:13 If you don't have a lot of customers, it's a lot easier if you have a lot. It's obviously harder. Uh there's always been this like holy grail idea of a product that just like watches metrics and tells you this person's cancel. I would see that. It is not hard. You don't need a lot of customers in to to go talk to the ones who are in trouble.

33:32 Mm. You do need a lot of data or customers. to mathematically know what behaviors are correlated with cancel and therefore to spend your time wisely. Then you need a lot more data. But to your point. Even if you have the data, it's not entirely clear

33:47 you know, it's it's very common advice. You should Try to get more good customers and fewer bad customers, of course you should. And so therefore it they say You should see what the good customers have in common. That's not the end of the sentence.

34:04 Because a lot of the things the good customers have in common, they also have in common with the bad customers. Because It's just what your customers do. Just what anybody does. So it's what the good customers have in common that are different from what the bad customers have in common. Okay, so with that in mind, this kind of like it has to be both, or else you're you're sort of not getting you're just getting correlations that are that are not helpful.

34:27 Um The cancellations are or uh Talking to people who are in trouble is is another application of that. So what is c correlated with people who actually end up canceling, not just what you know. And so Um

34:39 I think that mindset is Is correct if if you add the other side of that to it. A really important nuance. Yeah. Okay. And then the final step just to close this out is onboarding work on onboarding activation. Yeah. Something that's m one of the most recurring themes on this podcast is just the power

34:54 across every dimension of Improving onboarding, improving activation. Yeah. Sweet. Okay. So this is just step one, which is already full of gold. If your growth has slowed. So step one is focus on are your logo churn, the number of customers leaving, people leaving, actually canceling your your product. So I I kinda look at it like a question. So like the first question is are l are people leaving it too much?

35:16 Because if your if your monthly cancellation is two percent for S B, that's good. So you could try to work on it, but since it's already good. It's still probably a good idea to work. It's probably probably a good ROI for you to work on it, but it's possible that you're got diminishing returns and that this isn't really the reason. Where it's not really reasonable for it to go. I mean, how low can it go for S and V? Like there's some floor and you might be near it. So the first question is like is is is logo churn too high.

35:41 And try to set a threshold that Yeah. lower than what people uh normally want to do. So the next the next question I have is is the pricing correct? Which

35:50 Of course, pricing is a perennially interesting topic, I know. There's this funny thing of uh especially with newer companies that the pricing is always too low. It's not always, but like that's the common thing. Patri Campbell, who ha has Forty two hundred data points about startups. Let that sink in a little.

36:08 um has this great quote which goes like this, Your prices are way too low. Because you just guessed and you haven't changed them. It's like yeah, if you really like look look deep within you realize like, yeah, or we just picked whatever our competitors are doing and And and that's it, or we added or subtracted something because reasons. Right. That's probably not good. And people are scared to rape prices for obvious reasons.

36:31 But the but the If we set aside the emotional reasons Whether they're correct or not. the the sort of economic reason people normally give is they have in their mind this e this microeconomic supply and demand curve thing. And the demand curve says that if you raise the price, demand goes down. That's why demand curve's always going that way. Right. And so

36:51 They understand. I think everyone understands. Right, but maybe you raise prices by ten percent. But sign up. go down only five percent. So overall it's better.

37:00 But the opposite could happen too, if I'm on the other side of the demand curve and okay. So that's what that's how most people think of it. However, this is not how it works. So that's how it works in microec. Microeconomics one on one textbooks. That's not how it works in the real world. Awesome.

37:16 So what usually hap what often happens is you raise prices and sign ups don't change. When I say sign up, I mean the like sign up per month, you know the rate at sign. Or signups go up. This happens all the time. Even even for like solopreneurs on Twitter.

37:30 who have you know strange projects or everything happens all the time. They raise prices, they're like, I was scared, but then pr then science went up. I want to talk to a guy. This is this is really funny. I'm I'm not I'm gonna not say the name to protect the the Protect the name. Right. But but um But uh

37:46 So he had a product that was that he was selling essentially to enterprise and government, so larger companies. And it was To me way too cheap. So he said something like Yeah, I charge three hundred dollars. Like three hundred dollars a month? That's not enough. He goes, No, per year. Like, okay, wait.

38:01 I said, Okay, just do me a f like how many signs do you get a week? And he's like, One or two, because this is enterprise and it was a startup. I said okay. Um Just for fun. Just change it from per month.

38:14 Per yearly per month. So in other words, we're twelve Xing the price, right? So he did. And he's still got one or two per week. Like nothing changed.

38:24 I'm like, okay, what what are you gonna do next? And he goes, Oh my gosh, well now I have so much more money and profits, I'm gonna like hire an engine, I'm gonna do this marketing. And I'm like, time out. What you're gonna do is raise prices again. Like you just told me you you twelve X the price and nothing

38:41 observable changed. That means you're not near the price yet, right? You're gonna you don't have to tw 10x it again necessarily, maybe two X, maybe fifty percent, but like you're not done. I mean you can do those other things too, but you're not done with the price. Like it didn't even occur to him still. Okay. So Why does this happen? Um The reason is that pricing selects the market.

39:04 So If you only think of the market as people with uh very limited budgets, barely can do anything, not getting much value out of it, then it is true. That if you raise prices, you'll get fewer of them. 'Cause they were never getting that much value out of it anyway. They don't have that much money, so if you raise prices, they're gone. But

39:21 Think about just even a mid sized company, forget about enterprise. Just think about a company with a thousand employees and four hundred million in w revenue or whatever. And um If they see a product that's You know, two dollars a month or even A hundred dollars a month.

39:34 The thought is like that can't be good enough. They're not mature enough. It's not gonna do enough. The support's not gonna be good enough. They probably don't have good governance policies or other things that we need, you know, et cetera. Whether that's true or not, like this is what it looks like, is it's low quality, cheap.

39:49 Whatever, aimed at S and B. So They just won't buy. They're not in the market for the thing. So it's not true that they have this demand curve where oh since it's cheap, they all want it. That's what that's what Mike Reg.

40:01 Economics curve says it's so cheap. That they should all want it. No, they don't. None of them want it'cause it looks bad. So as it gets into a price range that makes sense for the kinds of things that they need. Then their demand actually goes up.

40:14 Then it can stay up while it's in a good range. And then of course at some point you are priced out of that. that particular kind of company's like, look, I'm not gonna spend ten million dollars a year on it. Are you kidding? So yes, it does slope down and go away. So it's not a normal curve, but it is like it slopes up and then it's something and slopes down. Who knows exactly what it looks what what shape it is? Probably know. But It's more like a mesa. And not a Line that goes fr uh up to down.

40:39 Like we like in the textbook. For that market. It's only the very lowest You might even say worst in terms of metrics, end of the market that has the microeconomic slope that you're worried about. So what happens is you raise prices and you enter a different market. And that's why the sign ups go up or okay.

40:57 Uh you leave behind Perhaps a worse market. Anyway. And of course everyone will tell you, you know, the more they pay the higher retention is and then the you know, the like all the all the kinds of stuff goes better when you when you um when you charge more.

41:11 So this question is pricing correct. This is kind of what what's in my mind when I ask that question. It's like'cause probably the answer is no, because pricing's very hard. It's just as much art as it is science. Um, you've had some really good people on here on pricing. In fact, so good that I've bought some of the books that those people have talked about because I love I love the interview so much. Right. So so like um So I I believe in all that. No problem no problem. I believe in it. Um nevertheless, they also say it's art and science, and it's it's it's very difficult to uh and and also once you auger it in,

41:41 The world changes like five, ten years later, the market is different, the world's different, and uh so it's still it's still unclear. Also, price is not just the number. on the web page. It's easy to think that, right? But How it's structured is just as important. How the product's positioned is just as important. So for example

42:01 The the this example I've written about before Um online. Is uh Uh th this example It it it actually was something that um that I

42:10 that happened in my life, but I I changed the story to make it like simple and and and visible and clear without having to get into lots of detail. So the the the sort of story version Is uh how This company was able to charge eight times as much For the same product just by talking about it differently.

42:29 So just by positioning it differently. Eight times as much. Again, this happened to me, but it's too complicated. It's not not interest those details aren't interesting. So say there's this company called Double Down. And the idea is that it have the cost of your AdWords because it makes it so efficient. So that's what it says on the webpage.

42:46 Cut your Adwards costs in half. Which is a very good pitch, isn't it? Simple. Obviously valuable. When you think so, let's suppose uh I have a I'm a customer and I spend forty thousand dollars a month on AdWords. What am I willing to pay for double down?

43:03 Well, if you do cut my ad words in half, then all right, I saved I save twenty K. But I'm not willing to give twenty K to Double Down because then I'm not saving any money. Or to actually save money, I need to give Double Down less money. How much less? I don't know. Let's just call it a quarter. So I pay Double Down five K. to save twenty, so I'm sav I'm really saving fifteen. Double down's making five K a month. That's pretty good. Everyone's pretty happy.

43:26 At this five grand A month price point. So there's nothing wrong with this. No one's doing anything wrong, like that's a perfectly valid company. However Think about these two situations that the CMO might be or the chief product officer might be in. And talking to the CEO at the end of the year.

43:44 Well. Scenario one goes. We started using this tool double down and it halved our cost. So we got we able to spend that money on some other stuff. We were able to sone. And the CO go would say, Great. That's good.

43:56 Let's we're gonna renew and I'm happy to hear it. Again, nothing wrong here. But Let's take a different tact altogether. What does the CO want to hear more? Growth or saves money? Both are good, but I know which one is healthier for the company, increases market share.

44:13 is better competitively and also makes the company more valuable. It's the growth. So What we'd really like the CMO to tell the the CEO is I increase the growth rate of the company. Not so much I save money.

44:27 That was be way better. So here's how we could do that with double down. Yes, double down has the cost, but what that means is Right now. Right now, the company is paying two hundred bucks.

44:39 lead. Let's call them leads, right? Whatever whatever this is outputting, right? Well If I have the cost of a lead. I could get twice the leads for the same money.

44:49 I'm already willing to spend two hundred dollars a lead. And I'm already spending Forty K a month for it. So If Double Down has the cost, it means I can get more leads.

45:00 So what I the way I could pitch double down is Double the leads per month with Period. Now if I'm willing to spend forty K For this number of leads.

45:12 How much am I willing to spend? To double the leads. Forty K. I just said I'm willing to spend forty K for this number of leads. So doubling it, I'm willing to spend forty K to double it. So if I give double down forty K, not five.

45:27 For the same product, which is the leaves are cheaper. But the now the pitch is I doubled the leads for forty K instead of ha instead of having the cost for five K. So double down gets eight X the money. 'Cause it gets forty K for this product, not eight not not five K for this product. Amazing story.

45:44 And everyone's happy'cause the CEO goes, What did you do? And they said, Like, Oh my God, I doubled leads. What? Yeah, I mean at the same at the same pr at the same ROI as we had before, saying, Cac I doubled leads. CO goes, How can we do more of that? Like I mean, just everything is so much better. Same product. I know it's a little bit of an exaggeration, et cetera, because I'm trying to make a point, right?

46:04 But the but the the big point is Uh the the largest point is pricing is not just the number on the page. It's positioning It's how their budgets work.

46:16 It's how it's structured, like it's per site, or it's per usage, or it's per seat, or it's per all of this stuff is part of what pricing is. And often even if it's the same price or the same product Depending on how that's structured, it either seems um fair and and and good or it seems like unfair and too expensive or whatever? Um

46:34 And so in particular with the positioning, the big lesson for product managers is sell more of what the company values like growth. But doesn't have to be growth. It could be Something else uh their uh it's retention for their customers could com their competitive how competitive they are in the market. Like there's various things they could Value.

46:54 Growth is an obvious one. Sell them that they're gonna get more of what they value. As opposed to saving, cutting R O Y Saves time, saves money, more efficient.

47:07 And again, there there's nothing wrong with saving money and saves time. It's just that it caps this price and this value that is pr they perceive that you do, whereas if you deliver more of the value that they already value, It's I don't want to say uncapped completely, but like The cap is

47:23 Maybe an order of magnitude higher. than saving. So it again it's it's it's valuable to save. You're not doing anything wrong. Like that's not how to talk about what it is and therefore s help set the price. So Yeah. So it's a it's a long way of saying so when I again when I think is your pricing correct, I'm thinking in a m maybe a more general way than just like the number. I'm thinking about the structure, the positioning, and all that. And my guess is when growth is slowing

47:49 Um no it could that there's a lot of improvement that could be that could be had there. Oh man. This is such the story is so powerful. Who does not want Copy on their website and double their growth and triple their price. Um

48:01 And the The biggest takeaway here is When you say is pricing correct, isn't like What is the number twenty or twenty five or a hundred? It's It's almost is the market we are going after.

48:12 correct? Is the way we are selling to them correct? Is this price communicating the right sort of story? And then also is the positioning of What problem we solve for you? Correct. So there's a lot here.

48:24 And luckily I've done a bunch of episodes along this stuff. Yes, which we'll point people to. Yeah to go much deeper,'cause this is a very This was a deep skill. And there's a lot to do here. Uh one thing I'll mention specifically, so Jen Abel, a recent podcast guest, it was her second visit to the podcast. She has a lot of really good advice on this of just

48:43 how to price and how to reposition the way you're selling it. Specifically, she had this really interesting insight that enterprises Their sweet spot for contracts is like seventy five to hundred fifty K. That's like how they p normally buy SaaS software. And it sounds absurd, but that's kinda what you want to You want your product to be in that bucket versus like a thousand a month, two thousand a month. And everything just gets easier if you're like, Okay, this is one of those. Okay, cool.

49:05 It gets easier. Um The thing uh I don't want to go off too much of a tangent, but the the The the the thing you have to remember is that pricing is not This knob that you can turn.

49:17 Separate from the rest of your strategy. So When you say like even when I just said raise prices or whatever, um But You can't just raise prices. Like

49:29 These new customers have different demands. Now maybe you need sock too. Now your other governance stuff matters. Now integrating to certain systems you didn't know about matters. Maybe now they need professional services. Like You can't just

49:42 Raise prices and change marketing like that's it. And maybe that's wise to do, but maybe it's not. maybe you realize that sure, of course that other market has certain advantages, but they also have disadvantages. And we don't want those either because we'll no longer be competitive, because the way that we're distinguished competitive special Interesting, valuable.

50:02 is only valuable in the market we're in. It the uh the the next market does not value it like like that. And so uh oh. Um actually that would be really bad for us. Or it could even be cultural. We're a company like Buffer's a great example. Buffer could go up market and try to sell, you know, social media tools or whatever.

50:18 But they realized We are a company. For the little people. I don't want to sell to a big company. We're never gonna make a product for them. We don't want to.

50:28 This is who we are. This is what we wanna do. This is what's fulfilling to us. So we're not gonna go there. So it can be cultural, it can be certain goals, it can be it can be other aspects of of the business model of the strategy, but you it's not this kind of like, Oh, I'll just I'll just change this. It's a decision about the whole strategy. And it that too we could talk about for hours. Um But um I'll just let's just caution that uh

50:50 Oh, we'll just go enterprise, like is is of course not how it goes. We got this. Yeah. I love Jen. Her pricing and s and sales stuff is good. She's great on Twitter too. She's I love her I love Jen. And that is such an important nuance, you know. Don't build the thing you're miserable building and just like, Okay, I listen to a podcast, we're gonna raise our prices ten X and Life will be grand. There's also downsides. Yes. Yeah. Okay.

51:12 Uh amazing advice. Okay. There's so much here. Again, this could be its own conversation pricing positioning. Yeah, yeah. We'll link folks to a bunch of cool advice that um We've covered on the podcast too. If you're a founder, the hardest part of starting a company isn't having the idea. It's scaling the business without getting buried in back office work. That's where Brex comes in.

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51:53 With Brexit's AI agents, you can move faster while staying in full control. One in three startups in the United States already runs on Brent. You can too at brex. Oh. Let's keep going through this uh check. So one was look at logo churn.

52:11 Yeah. Is your pricing correct? Pricing right. And why do we why do we think it is? We probably don't have good reasons yet. Okay. So the third one is are existing customers growing. I think everyone probably knows this, but just to say it

52:25 Um okay. If if cancellations overtake marketing and and and um magnitude. one way to combat I mean one thing is okay, make the cancellations lower, but they can't be zero. So another what else do we have to combat cancellations that would be Proportional to our size. So then it keeps up. Unlike marketing, right?

52:45 Or you know, should be basic direct marketing. So one would be all right. Two percent left, but of the remaining ninety eight percent. Some of those upgraded. Or otherwise paid us more, maybe it's usage based, whatever it is, they're paying us more.

52:57 And so that that covers the gap. And that's And and yes, if I tripled the company overnight, that would triple. And so that's the answer. So it is an answer. And maybe that's obvious, but you know, it's useful to type back to the the sort of model mental model we've got going. Um and of course the the metric here is N R R net.

53:14 Revenue retention. And The way that's computed is you say What is the revenue of customers right now.

53:23 Like so existing customers, existing whatever, just the whole total. And then one year from now What if that remains? So not new customers coming in, not talking about them because we're asking about the cohort that exists. What remains. So with cancels it goes down, with downgrades it goes down, but with upgrades it goes up.

53:41 So when I say remains, it could end higher than we started if upgrades exceed Cancellations and downgrades. And now we are talking about MRR and not N. Because N doesn't have this. And doesn't have an upgrade and just only goes down. Which again is why

53:56 I think the N is actually the most important one. Because think about it, like a lot of times people think so. If you've heard of NRR, you might think, Well, that's my golden metric, I'm done. But the issue is If N or R is positive, but N goes down too fast. It doesn't matter'cause not enough people are left.

54:15 And so there's not enough people left over to upgrade. And so actually you're wrong. And so NRR does not does not include that and therefore it actually undercounts what's going on. It in in a bad way. Like in a way that's n that that Hurt you.

54:28 There's yet another way to see w why what I'm saying is right. You know, there's this this thing in investments where Let's say I started out at a hundred dollars. And the stock goes down five percent. So now it's at ninety or no, it goes down twenty percent. Now it's at eighty. Then it goes up twenty percent.

54:43 Is it back to a hundred? No, because twenty percent within eighty Is ninety six. So if it goes down twenty percent and up twenty percent, it does not come back to zero. It's worse.

54:56 When you have a loss, a percentage loss, you have to have a greater percentage gain just to get back to where you were. In this case, a loss of twenty percent requires a gain of twenty five percent to get back to where you were. This is why NRR isn't quite right. Because NR is saying that a loss of twenty percent from cancellations. is offset by twenty percent from upgrades.

55:17 As we just saw, no it's not. That only gets us to ninety six percent, actually. So this is why like again, I believe in NR I'm saying you gotta look track it, like it's good. Just in the back of your mind. Realize It's not quite that good.

55:32 And looking at N helps me keep keeps you honest about what's really going on with these customer cohorts. Right. So that's why they're both useful, in fact. But that's this is why they're both useful. So NRR uh of course is important. A nice way to see this is it If all this is if everything I'm saying is true and there's these limits and stuff because of cancellation

55:50 Then There should be no way to get a big company like a public SaaS company. Unless NRR is greater than a hundred. Like otherwise cancellation should just win. And that is in fact the case. There's over a hundred Sass.

56:02 Public companies. And something like two of them have NR less than a hundred percent. Like that's how it goes. And those companies have horrible financials and their values valuations are b are bad. Like it's not good. It's not a good thing, right? And in fact the median

56:19 For eight. Uh IPO SaaS company, like at IPO, the median NRR is a hundred and nineteen percent. So that's so yes, that's what it takes. You can't do this. You're you're limited unless now your your goal may or may not be to get that big, but the point being It's mandatory for growth. Now If the literal customers are just leaving like

56:40 You know, that you gotta you gotta plug that hole first, like you said. But okay, if the if they're okay, that's why this is in order. If that's generally okay, now we turn to NRR to say, okay, but The ones who stay, they're hopefully happy, they need to grow. Okay. So that's the kind of the full story of NRR. I think people don't. Quite. people who've heard of NR don't necessarily think about all those things and and realize that. So

57:02 A good question is okay, what do I Do with N R R But I think the answers are pretty clear. Like You add features. You have different tiers.

57:12 You change the pricing in some way, uh w with usage or seats or something that kind of goes up automatically as they get more value out of it. So I I don't think that's terribly interesting to like double click into it's it's sort of obvious. I would say, oh look, it's tied into pricing because their behavior, but the main thing is you want it to so to where The customer themselves would agree. When they pay more.

57:33 That they are getting it more value. Hopefully they even think they're getting far more value than the price going up, right? The I I'm I'm I'm I'm gonna say this as if it's precise, which it's not, but they they need to feel like if the price doubles, yeah, but I'm getting five times the value. So that's fine. Like that should be the feeling, whether they can measure it or not. A a good way to do that is to say, well, then you should be measuring whether they're getting value out of it. Often we measure like usage metrics and other kinds of metrics within our product.

57:59 Because we can. But actually what's really important is to measure How does the customer value this? And we need to measure that. So that we sh make that go up.'Cause if we make that go up, they're be willing to pay in whatever structure.

58:15 And if that isn't going up, they won't be willing to pay. So even if we start making them, they'll leave. And we all know we've all probably done it ourselves. We've all had products we love, but then as we scale the price goes up. faster than we feel the value is, and then we start looking for other products. We've all experienced that. So that's what I'm saying. To do that, you want some sort of measure of the value the customer is getting. If you're really lucky, that can be a number.

58:39 That would be wonderful. Then go do that and maybe that's your North Star. But Um, admittedly, it's not always possible. So then the question is the usual questions and metrics, are there proxy metrics that we understand are not the full picture, but they're helpful, they're part of it, you know? Um And and I'm a big believer in saying not all important things are numbers.

58:58 Even things like how differentiated are we in the market? Not a number, but it's very important. So this might be one of those things that's Important but a n not a number. So okay, can we get some proxy metrics, even of behavior and other things. That's Something um something better than some metric that's you know just operational. And even if it's qualitative.

59:17 Okay, can we do that? Can we talk to customers and ask them qualitative questions to try to say like you know I would just say like do your best here because only when You generate more value for the customer, you can then decide how to split that with the customer. In terms of things like price. Yeah, right. Um but that's that's my um that's in fact how I think of it, that very phrase.

59:39 How do we ch create more value for the customer and then split that with them? And when you do that. Your keeping the customer forefront in mind, you are taking some like splitting means you get some. Like let's not forget, it's not a charity. And on the other hand, First we should think how we generate value for customers and then think

59:56 And then we can take a little we've now earned the ability to take a little piece of that. So to me, this is the right way to think about NRR, not just we'll add a feature and make them pay. True, but let's actually take it from this different but let's get there from this different perspective. Amazing. There's a uh in the recent Modavan episode where we go into pricing you actually have some really good tactical advice for measuring the value that you're Giving to a company to quantify that.

1:00:20 Uh, which I feeds into this idea of How do I create more value for you and then how do we split it? Yeah. The other element of this that's Top of mine is just the sland and expand strategy. There's a lot of companies that are just like, Okay, cool, we'll get in with some price, we'll expand, that'll be amazing. Which is essentially expanding as NRR going above a hundred percent. Yes. Something Jen actually shared on her in her chat that was really important.

1:00:41 Is that You can't expand that. Much Yeah, yeah. At least for a while, because if you get in for like ten K

1:00:47 Uh if you go up to okay, now it's a hundred K. Someone's gonna be like, What is this why is this can go up ten X? Are we s getting ten X value from this? You can just raise prices later, you're kind of stuck at that reference point. So you have to be really careful there. Yeah, I think that's right. Um And maybe you don't deserve it. Like in other words

1:01:04 Especially when there's investors or other sort of forces saying like, Hey, we need to X, Y, and Z. The forces that are not the customer saying that. Um Yeah, we yeah, you can you can be

1:01:16 You can be coerced into making pricing or other kinds of policies. But In fact are not good for the customer. So so when when uh

1:01:25 Uh Is when when anyone claims anything it really is is Is is that really true or is that really actually good for the customer?

1:01:35 'Cause look, we are gonna do things that are selfishly good for us. We have to. We can't just do things that are bad for us. But But is this in fact good for the customer? 'Cause often often even in an internal proposal, we say it as if it is. Oh this pricing will be good.

1:01:49 It'll raise prices on everyone, but it's better because of this reason that we were sort of justifying, right? It's like well, is it w the customers say this is better? If the answer's no, it's like, okay, it's not, it's better for us, but sorry, we have an equation where it has to be better for us and better for the customer. Sorry, it's an and you know. And of course not all companies do that and we ex and we experience that all of us. um as as consumers on the other end of that. We don't like it.

1:02:15 And and that's not a good long term strategy, even though it might might work in the short term, as many Bad long term strategies are. I love just how uh this third step just reveals how powerful the sequence is that we're going through. Step one is this logo retention. Essentially, do we have product market fit?

1:02:31 Step two is Pricing, positioning, essentially are we going after the right market and charging them the right amount, roughly. And then here it's just can we Can we grow? Is there something here that

1:02:43 Can it continue to expand because you're gonna get eaten alive if you're especially and this is just to be clear, this is B to B SaaS. Primarily that we're talking about here. It's harder to grow. N R if you're a consumer product that has I don't know just like a Tier two. What what I would say is the the rules are true everywhere because they're based in the mechanics of

1:03:00 Finance and the business. Mm-hmm. You were right that a cons that in the consumer segment or small business segment for that matter. Um they tend not to grow. So that doesn't mean the NR question is invalid. It means Dang, we can't think of anything.

1:03:15 Mm. That's okay. Then you go on to the next question because you can't think of anything. But you know But it would be more strategic if we could. Mm-hmm.

1:03:25 Yeah. And are we trying hard enough? As a consumer, I do not want to spend more with A T and T, but they're also not giving me any more value. Mm. But there are other products as a consumer, like Amazon.

1:03:35 Where they do. So You're right. But it would be as a product manager. It would be ten times more valuable for you to think of something like that.

1:03:45 You know, then to move on to other things and et cetera. Or there's other ways like other products. Like we didn't talk about it, and it's okay because of course each one of these is you could go on forever, right? But another way is a second product. A second product sold to the same segments that you're in. So that your existing customers can buy it. Well, I don't know why that wouldn't work in consumer. It certainly works in consumer and apparel.

1:04:09 I think about A G one, which has all these new like I'm doing their sleep uh supplement and there it goes they're just okay, here's a new thing you can buy. Yeah. So like like so is it harder? Yeah, of course, of course. Like all of these are like easier or harder in different segments and ways. Like, of course, of course. I'm not trying to say otherwise. I but I would say the mechanics of how the finances work is the same. You're just saying I don't have this lever to pull. And then I would say, Okay, well then you need different levers.

1:04:34 Um One that we didn't talk about. Um is One way to offset the cancellations is is existing customers grow. But another way

1:04:44 Is if existing customers bring in New customers. So they didn't grow, but they brought their friend. Now this is absolutely something that happens in consumer, but it's also an answer to this. thing where cancellations grow exponentially and you know because existing customers bring in new does triple if you have more existing customers. Uh-huh.

1:05:03 So this is stuff like um you know, refer a friend and all this kind of stuff. Again, like some of this is obvious we don't need to enumerate that. But uh so so those things are good. And so in consumer you might say, Oh It's easier to try to get someone to invite a friend with a coupon and blah, blah, blah, blah, than it is to try to get them to grow. But in B2B, that may not be true. Right, I don't get a mid-sized company to refer like that doesn't make sense. So I uh so once again, this question of how do we have the existing base help us grow.

1:05:29 is still correct and consumer, but its manifestation could be very different. Of course I agree with that. But um I mean, how could how could we not say I mean, of course, things like word of mouth and invited friend, of course that's enormous with consumer and this is This is one of the reasons why. I'm uh I just love the picturing the people listening to this specially product.

1:05:47 Fok's founders. I I imagine many of them are just sitting here taking all these notes of how to help grow their product. Because As this is we position this conversation as how to uh deal with stalled growth, but it's actually just as useful for how do I grow more.

1:06:01 Oh, for sure. Right, right, right. Which is clear it's more growth, it's just maybe a little more evocative. It's because if growth is good. Yeah, sure you want to grow more, but it's not the problem. Like if growth is really good, the problem is generally operationally scaling to meet the growth. Uh and so you're focused on that. It's when growth slows, we're like, Whoa, wait, wait, wait, wait, wait, wait. Right. We we have to focus on growth now. Must, as opposed to of course it's always nice. So yeah.

1:06:28 Yeah. And I was thinking as you we were talking about consumer NRR. If you look at Duolingo, they've done a great job here. They have so many ways you can pay them more for all these little Advances, get all these gems, change the color of your app to like something fancy. Yeah. Yeah.

1:06:41 Yeah. Okay. So there's more. Let's keep going. So we've done three. There's more you can do. So okay, logo churn, um Uh Uh pricing.

1:06:51 Pricing And R And then Maybe it's stalled, so this is really a stalled question. Maybe your acquisition channels, your marketing channels.

1:07:00 Or saturated. We're done. I me what we tend to do is flog the people doing AdWords, get more Flog the SEO people, get more searches, right? It's possible that this is it.

1:07:13 Maybe this is it in some sort of physical law. There literally isn't anything else. Or maybe this is it, just this is how good we can be. Like we're just not that this is it, right? But there really are uh limits. You know, they it's there's different words for it. Inventory is the sort of the old word like with magazine ads. Uh inventory was the word, but there's just this as amount. Like there is only so many searches in your area. And you can only appear once in the search results for a given keyword. So

1:07:39 There is this limit of like what you can get. Even if you're number one physician for everything, you know, other things that are that are not even practical, uh, there's still a limit. And there's some kind of practical limit that's below there that we we don't really know, but You know, maybe we're there, or maybe we're close. And worse. Channels tend to decline over time. So I think people talk about S curves.

1:07:59 Right. Oh. I uh I didn't figure out this market. Then I figured it out. You know, we we we we unlocked it. Now we're getting you know, hundred leads per month through Facebook or whatever.

1:08:09 But then it kind of taps out. And then we go into this optimization mode. Can we eke out another blah blah blah blah, which is right. Oh, that's right. And you call that an S curve because it's shaped like that. But that's not what happens. What happens is it starts with an S curve and then it starts sagging.

1:08:24 Its butt start sagging down. So I wrote an article about this called the Elephant Curve, which is what I named it. Right. Because it's like this trunk and then but then it's this butt. And what what and and there's different reasons why this happens, but if you talk to any marketer, they'll they'll all tell you, Oh my God, let me tell you this story, right? All stories about it because yeah, this is what happens. Um there's different reasons that um first of all the the audience gets saturated. You know?

1:08:49 'Cause there's all these little marketing ismsms and I don't know if they're true or not. I don't I don't think any of it has any data that actually proves it, but whatever. Uh like You know. If worms if if words uh start with the same letter That's better. I don't think I don't think anyone's ever proved that's true, but workers seem to think so. Okay. Well, one of the things is someone has to see it seven times before they act. Okay. All right, well maybe they saw it seven times already, so they don't want it. Or they saw it twenty times. Right. So so

1:09:16 So you you it initially you got you hit people who hadn't seen it yet, right? But now you have. And you know Especially with magazine ads as I used to do. before there w was no such thing. Um that's exactly what would happen. You'd have this nice surge and then like, well we've seen this we've seen it before. So you you still get a little trickle, you still get some because, you know, it was just that moment they needed to see it again. Okay. But like there's this Sort of um but a lot of people have already seen it and they don't want it. Where the channel is declining.

1:09:43 And they'll never tell you. When I did magazine ads, every year they would tell you what their circulation is. And every year it would go up and then the magazine would go out of business. Conferences are the same way. Attendance is great. Attendance is great. Oh wait, we're out of business because we couldn't get enough people to come. What what it was great. And but you know, more quietly, AdWords, Facebook ads. Even SEO searches.

1:10:06 It's this does happen all over the place. affiliates it can happen. And now with AI, I mean I don't even know. Right. It's disrupting everything. I you know Well we've all heard stories going all different directions. I think the answer is I don't know. Shrug is the answer. And what will it be like in two years? Another shrug. But the point being they're not all they're not all gonna be growing a lot. Like that's not that's not one of the futures that AI will bring us. So it has the sack. That's just a very long way of maybe trying to prove this point, but the

1:10:36 It's yet another reason why You can't just rely on marketing forever'cause they not only you try to stack things, but there's not like infinite number of marketing channels you could advertise in that your customers are actually going to. And they sag. Oh no, like it's even harder to keep up.

1:10:51 So it's kind of like the secret, like in reinforcing my very first point here with with this. But here Are they all saturated? Because we could flog marketing all we want. It's not gonna work. So maybe growth is slowing because this is all our Channels are saturated, possibly even sagging, but even if not, okay, not growing. And so We can't just flog the marketing department.

1:11:12 It's going to take something else. Right. Um No, the obvious thing is get more channels, but again, maybe there aren't any So Again, there there's many possible things to do, but this is like this critical thing to notice because I guess I would put it this way, do you know right now Which channels are saturated and which aren't.

1:11:30 If the answer is no, I'm like, Well, okay, maybe that's'cause the answer is all. Yeah, that needs to change what you how you think. Just adding one little feature and then hoping we can flog outwards is not going to work. Even if the feature's great, not going to work. So there's there's different things that could work, but that's not one of them. And yet that's probably what we're doing. Let's add another feature and marketing can flog it. Is is often the answer. But if you're in the state, that isn't the answer. So this is this is why like

1:11:57 You could say it's obvious to say this and that, but if but Are you are you acting like this is true? You know, often we don't. Um okay, so so there are many things to do. Again, we don't have to enumerate all of them or something. Um just simply the right question to ask, but for example Uh some people are like um We've done direct, maybe we should try things like SEO and social and these other indirect, or vice versa. We're really good at SEO, but we've never taken out ads. Often if you've done ads and they're optimized, you know what content might be good to write stuff, Recio.

1:12:27 And maybe even vice versa, maybe. So it's a good idea. And sometimes it works, but Here I have no data. I only have my my feeling here. And actually you probably have a lot more visibility into this. But my experience is

1:12:39 A product that's sold really well direct actually doesn't do well on things like social SEO. And vice versa. If you're getting a lot of traffic through SEO. Adding ads often like costs a lot and doesn't really move the needle. You can tell me like is that 'Cause I don't have data to support that.

1:12:54 That theory. Yeah, my take is Like you can always get some percentage of win from all these different channels. Usually one channels. where most of your growth will come from. And so over time, everyone just adds every channel. Everyone's doing ads, everyone's doing SEO in some form.

1:13:08 But it's usually like sales or word of mouth or ads. It drives everything. Everything else kinda s like little layer on top. Yeah. You know, should you do that? Yeah, probably, especially if you're at some scale and you can just afford to because it's such a clear thing to do. But probably you'll have to get more creative about what it means to add a channel. Yeah.

1:13:27 Something like a new product or a new market where it's it's it's actually new. It's expanding in a new way rather than trying to incrementally expand what you're already doing. So an example of Getting creative on a channel. is what constant contact did when they had this very problem of Growth is slow. We don't know how.

1:13:45 We sell email marketing newsletters to small business before all these modern tools existed. And one of the things they did that restarted growth. They physically went to a bunch of cities and held workshops showing here's how to do email marketing for your small business. So the restaurantur and the dentist and everyone would come to these sessions. And they teach them how, of course, teaching them how to constant contact so they became customers, right?

1:14:09 that you would think there's no way this is cost effective. Physically being in these cities and dragging people in for a, you know, twenty dollar a month product, like no way. It was very effective and actually solved in that moment their their uh restarted growth. They were very clever about first of all, it's a clever idea, but then they were clever about how to do it. They took like power users who were also agencies. So like these could become customers of their okay. So it's all like you could be clever about like how is it that we do something Uh something different, something new. So that's possible. Of course it's always hard to say think of something clever. That's that's a weird finger wagging thing to do, but okay, it's true. But uh

1:14:44 Yeah, it it it could be a different type of channel. For example, um hub spot famously Uh just uh tested selling through agencies instead of direct, they ended up being fifty percent of the revenue after four or five years. So it's one of the main reasons why they're able to continue growing. Um

1:15:00 Same thing happens with uh my company WP Engine. Tons of our uh websites are sold through. I throw through uh uh the agencies that create WordPress sites. So um there could be something that's not direct anymore. That's you know another channel of human beings or something like that. Could be could could in fact

1:15:18 dramatically change your growth rate. Uh there's lots of examples like those. So But but it could be like it's time for the next product. Like and I said that earlier because it's always possible. Of course we all know that's very hard. It's it's risky.

1:15:31 I have sort of a framework that I use to think about that kind of expansion, which I'm happy to happy to provide. I've also written it up, but I'm happy to just say it right here. But But usually you wanna stay in in the target in the target market you're already good at. and grow from there, but sometimes the whole point of the expansion is to change the or change target micro or add something Well, you're leveraging something else about the company that you have as an asset.

1:15:55 going somewhere else. So this is what this framework helps decide. But um uh plant one foot into some strength or asset that you have. Move the other foot.

1:16:05 Which is the risky part, but the idea is that yeah, but we have this big upside. So we're we're taking that bet. And like that becomes a smart bet. Um So With things. For any of these things, but especially if acquisition channels are full and it's like we literally can't ask the marketing department, like that's just not one of the choices. It almost forces us to start taking these more drastic bets.

1:16:27 To say, Well, we gotta do something, and that's not one of them. I just wanna keep saying how Awesome, this advice is and how many people are gonna benefit from Like, you know, none of this is like oh I've never th ever thought of any of this. It's just like the very methodical a sequence of questions you should be asking yourself to help

1:16:44 You not just undo stalled growth, but also just come up with a bunch of great growth ideas. And this specific section, it like it makes sense. Somebody's discovered alpha in a growth channel. Say Uh Snapchat I just launched. TikTok just you know, there's like oh cool, what's the new thing? Let's get there quick. And then You drive a bunch of growth, it's awesome. Eventually everyone's gonna start doing that.

1:17:04 And so you should assume everything that is working for you now will slow down. Uh I've never uh I've missed your post on the the elephant. Uh S curve. What do you call it? The Lfin curve? Yeah. Elephant Caribe. It's so yeah, that's so real. Just it's not just the S curve that will forever continue to dry when it will actually dip and decline over time because other people discover it and start using it.

1:17:26 Yeah. I love that. So the idea here is And the classic advice is Like not a whether it's an S curve or an Lfin curve.

1:17:35 Think about are you starting to approach the The the apex of that and start to explore other channels before you Slow down or start to dip. Yeah it's easy to hear stuff like

1:17:45 Well if marketing is Is full, do something else. And you go, I know. But then you look at people's behavior and it's like, well, you're not acting like you know. So maybe what needs to be said in enough detail that you actually do something about it. And this is it's important to note, this is a very hard problem. Most companies do not really solve this. They something worked for them. Sure. And then it it stops working and then like all right, well, we found something and then it just kind of It went away.

1:18:11 There's a couple of posts we're gonna link to in the show notes that will help you come up with ideas that are all around. New growth channels that are emerging. One is by Emily Cramer around ecosystems as a new growth channel. And there's a lot of really cool advice there. Around this kind of emerging combination of influencers and content and partners

1:18:31 Where it's your ecosystem that helps grow. Basically there's a quote from the head of growth at Wiz where it's like why start with Zero and you can start with ten thousand. Essentially going through someone with an audience already.

1:18:43 And then there's gonna be a post out by the time this comes out around Chat GPT's app store, which is gonna let you submit apps. And that's a really interesting, potentially huge growth channel for companies. So Cool stuff happening there. So just to summarize logo retention.

1:18:58 pricing, NRR. marketing channel saturation. What comes next? Yeah. The last question is Do you need to grow?

1:19:08 So okay, growth is stalled, and if we assume every question before has been answered s in a satisfactory way. You could ask. H Is that a problem? What do we mean by grow?

1:19:22 What do we need to do exactly? Now of course you should know these kind of things with goals all the time, but And again, like obviously the answer could be once again, oh new products. Th these other things were like this company, when we say Do you need to grow if we define you as this product in this market in this company, the answer might be No

1:19:41 What we need to do is have a different product or in a different market or A different thing. Or uh you could you could change the word uh revenue. If you say, do you need to grow revenue? You could change the word revenue and say, You know what? What we could do is

1:19:55 Maximise profit instead of revenue now. We've been maximizing revenue. But maybe you maximize profit instead. And so this is a company like thirty seven signals. Or really lots of bootstrap companies who have hit some sort of limit.

1:20:08 And realized that's okay. Like the founders are getting paid millions of dollars a year. And dividends and like it's okay. But I don't have to get in fact if I got bigger It might be an organization that I don't like. or serving a market segment that I don't want to serve, or whatever. Um And so maybe

1:20:24 Maybe growing forever isn't the goal, actually. Or growing revenue isn't. Um You could ask philosophically Why grow anything? Why isn't it just okay to have stasis? And we all have heard the phrase, if you're not growing, you're dying.

1:20:39 Right. This is a classic Complete. Thing. Is that true or is that the kind of thing that like investors use to like make founders grow or try to grow even when they shouldn't.

1:20:50 It might be, but I would submit That even at a bootstrap company That has other values and culture, um other than growth at at all costs. That that phrase is still fairly relevant because

1:21:03 If the company's stagnant for years Is that a great environment for everyone? As the founder Did you start this company or to do the same thing? Every day.

1:21:14 Is that is that why you did it? Do you really want to do is that fulfilling for you? What about everyone else? Nobody nobody wants to further their career. They just want to do the same thing every day and never further their career. Not really learn anything, not really innovate. Does it feel good to just not be not not be growing?

1:21:31 The answer could be yes. Uh, you know, if I'm a CPA and I have some clients and life is good, um, the answer could be yes. Like I you know, that's I'm not saying I'm not dictating the answer here, right? I'm just asking A lot of times. Whether it's our careers.

1:21:47 Whereas founders are companies. We've just been in the mode of Well, I've gotta grow, I've gotta get promoted, I've gotta do more, I've got my resume. We've got in that mode for so long, like maybe our whole life. Yeah.

1:21:59 I was gonna say lose sight of but maybe we never had sight of. Wait, does this make me happy? Is this what I really want? Am I fulfilled doing this? Or even if I do have these goals, have I gotten stuck in a rut? Where my goal is growth and you know, I don't know, more money, more everything and I'm gonna I'm stuck in it right here. Like what Sometimes we forget to take a step back and go, Wait a minute. What is this

1:22:20 Is this still right, or do I need to turn the Page and have a new chapter of life. Right now. Yeah, and so This question d do you need to grow or if you're not growing you're dying.

1:22:31 Well, for some people no, they like doing the same thing forever and and and that's great actually. That's a that's a that's nice. But for many people, especially the kind of people who want to get into product and build stuff and innovate. And people who start companies a lot of People like that are not the kind of people that wanna just, you know, kind of do rote things for twenty years.

1:22:50 And so The not growing part. What I like to say is Maybe the U in If you are not growing, you're dying, is you the person as opposed to you, the company. It's also you the company, right? But like what if we took it to mean you?

1:23:06 If you are not growing. Then in some sense, maybe for some people. You're dying. Maybe if you're listening to this, that's you. You gotta be you're a shark and you gotta go. And we all know people too who

1:23:18 claim they hate work, or maybe they do hate work. Let's not say claim, they do hate work, but then they retire and and and kind of go downhill because they don't have a purpose or this or that and the other thing. In the act in that case. It was true. If they're not growing they're dying, literally. So I again I don't mean to overstate this, and I certainly don't mean to

1:23:39 Claim that There's some answer that's right for everybody, of course. But surely this is the right kind of question. And surely for many people who are listening to this. The answer is yeah, I mean in some sense, some very rough sense.

1:23:51 That's probably right for me. And so if I'm in a stagnant situation And really every other option has been exhausted and it isn't gonna happen. This is simply a stagnant thing. Maybe there's something else needs to happen. I need to leave.

1:24:05 The company needs to change some drastic way. I sell the company. I changed jobs. I I don't know. Like of course it's gonna be super context specific and and and personal, right?

1:24:15 Like something dramatic may need to change because nothing incrementally is changing. So this la final question, do you need to grow? Or if you're not growing, you're dying, is that true? And are you there for dying what needs to happen? Yeah, so if you were looking for more metrics in another framework, sorry. That's ex is as ex U existential, but it is. Is existential.

1:24:37 So uh All right. Do you have to only ask this at the end of the chain? No. Of course you should feel fulfilled and you know, of course you want to be checking in with yourself at least annually. Of course. But um I sort of put it at the end of my list in the

1:24:52 Sense that I'm assuming The original question is about the company. But especially with smaller companies, but but also also with big public companies. There's plenty of big c public companies that aren't growing. Aren't there? So like this is this is uh this is true of all

1:25:09 Scales. Because there are natural sizes for things. Um So Yeah, it's a little philosophical.

1:25:16 But uh I think it's quite important. Such a beautiful way to wrap up this piece. Uh a lot of people listening to the podcast are bootstrap bounders and For them, this is actually very much an option. They can just be happy with the revenue they're generating. Like with my newsletter right now. I'd be very sad if it stopped growing.

1:25:33 But also just it's uh amazing the life it has created for me. And even if it did stop growing. And just stay flat and doesn't become an elephant curve. That'd be incredible. Yeah.

1:25:44 Like in practice, psychologically still hard for that to be the case and that's why it is component of the of the sequence is really important. Like why do you actually need it to grow? Is that just Your ego is that's just like um used to growth. It can also help you d help you avoid.

1:26:01 doing unnatural things that you actually regret to grow. So like if growth at all costs is just the the thing, like there's probably ways you could quote unquote grow the newsletter that you would just say, I just wouldn't be proud of that. And the newsletter's doing so well, they don't need to do that. And so again. Maybe that's a softer version'cause growth hasn't actually stopped, but okay, it's a softer version of

1:26:21 Um, I certainly don't agree with growth that you you might say, I certainly don't agree with gr growth at all costs. I wanna grow as much as possible within the things that I'm proud of. Like if we grew fast, but the content Was crappy. I'm just not willing to do that. It's like not the point, you know. And so it helps set up these boundaries of like, wait a minute, not if dot dot dot. And uh, you know, early on we may not have that um That flexibility, you could argue that you should have those values early on because that's who you are and that's what you're doing, and people respond. So I could argue you should have that all along.

1:26:51 But I could also argue that at the beginning you're just trying to do something where you don't die. You're starting to blog, you're probably copying other people's style. You probably don't have that much uh unique things to say. So there's a lot of regard. That's okay. You're just trying to get going. It's okay. Twenty years later, if you have no style and no voice of your own and nothing new to say, that's probably not good. But to get going, sure. So um Sometimes we have this thing. Where we get going.

1:27:13 with maybe looser I don't want to say values, I'm not saying it's unethical, but like looser sort of bar or a pride that we have in our own work. And we tighten it up as we're sort of able. Um, as we can afford to, you might even say. So good.

1:27:27 But that's a th then that becomes a nice filter here of like what? What is it? In a greater sense, I'm trying to do here, I'm willing to do here. Um So if you're not growing your dying fare, but like that has to come with these limits and and the the more successful you are, the more you can be serious about those limits.

1:27:43 I think an important element of this is also the product you're currently working on. Maybe it's okay for it just to not grow. There's a good opportunity to do something else, have this thing maybe running on the side. Maybe Sunset at some point. But it's a good opportunity to be like, Okay, wait, what else is out there?

1:27:57 We had a uh recent podcast conversation with Matt McKinn McGinnis. uh CPO at Ribling and There's some really good advice he shared on just when to quit. When to quit your startup. Just like you know, if it's like four or five years in and it's just not clicking, maybe it's time to

1:28:11 To move on. And even though people do succeed. Years in. Uh most likely it's not gonna be you. I have a book almost out now that's on pre order. About topics like what we've been talking.

1:28:21 The next book I wanna write is on this topic of How do I make these decisions of uncertainty? Like maybe it is time to quit. Maybe I should move to a different city. Maybe I should marry this person. Maybe I should launch this company. Maybe it's time to the maybe I should use this strategy where You wanna use you you want to use probability and expected value.

1:28:41 It's unlikely that dot dot dot, right? But the truth is we don't know what the probability is. We don't know what the probability curves look like. We actually can't use expected value. And anyway, even if you could have expected value. I am a human being. This is my life. And I either sell the company or I don't. Yeah. All this stuff about probability and like

1:28:59 That's not that doesn't apply to me. I need other ways of of sorting this out. So I guess I would just say Briefly, um Probability is not going to work for these decisions. So That doesn't say what is right, um, but it's not that.

1:29:17 And so uh the which is nice'cause you can put those tools down. I'll do some market research to see if I'll sh I still make company. Nope. That's not where the answers are. More uh more questions than answers on that one. Yeah. Um speaking of the book, um let's give you a chance to share what is what you're working on and when this is coming out and when where folks can find it. Sure. So the book is called Hidden Multipliers.

1:29:39 And you can pre order it at hiddenmultipliers.com. Or I guess if this is out long enough I'll be able to And it's it's a lot of stuff kinda like we were talking about today. Um, these questions of

1:29:54 Uh it's called multipliers because the idea is little things that you can do or little decisions you can make that have a huge impact. And like Moving the cancellation rate from five to four percent. Sounds small. How's a huge thing? Onboarding as opposed to later huge thing. So those are some examples, but the book is is, of course, full of different kinds of topics but all of this idea of the stuff that has such a big impact on things like revenue or profit.

1:30:18 Um And either just as you said earlier, either like Either maybe you have never thought of it that way, so you didn't really you weren't thinking about it right, or Yeah, you you've heard that. You say I know, but your actions don't reflect it. And so if we go deep enough with examples and specific things to do, then you can actually act on that on that supposed knowledge and and and realize those multipliers. And uh just uh remind people that you're all hidden multipliers dot com.

1:30:44 Yeah. And there's an S at the M, Hilt hidden multipliers. Right. There's more than one. Jason, I had other things I wanted to talk about, but I feel like this episode's actually gonna be stronger if we just focus on the thing that we've been talking about, which is on stalling growth. So if we do that, is there anything else you want to mention or leave listeners with?

1:31:09 Before we get to a couple of Corners and then the lightning round. I think if you if you tried to find a common thread. Throughout all this stuff about growth. It comes back to the customer getting value.

1:31:22 And I know we just we already talk about that. But I think if if there could be one thing. Where It would Help solve kind of all of it.

1:31:31 It would be that they really are getting value. Your product Actually promises the right thing. And then it actually delivers on that thing. And the customers can onboard so that they can do the thing, and the customers know they realize that they're getting the thing, and you're measuring the thing, so you know it's increasing. Um

1:31:48 That is probably if I was an L L M, I'd probably say that's the common thread. If if you know, there's many ways that manifests, of course, but but but But if that's your North Star is How are we actually creating value in the way the customer values it? And their language and their way and their way of understanding it.

1:32:06 I wouldn't say all the pieces naturally fit into place, but certainly isn't that sort of the the root thing that that is going to make all the stuff work, then there will be a good way to do pricing. And They will stay as long as possible. And you know, like these things will probably be right if if that. So this idea of creating value for the customer and split and then figuring out how to split with them is probably the route. Idea. Of course I hesitate because

1:32:28 platitudes like that are actually not actionable. Not very actionable. You're like, all right, well, I'll move on with my day. And that's why Twitter's not so useful. But Given that we've gone into so much detail. Perhaps that's a nice way of summarizing it. I think that's such an important point. I think what's also interesting is some of your advice is

1:32:44 The value may You may be picking the wrong customer, the wrong market, you may be positioning it wrong. So the value may be there. You're just Trying to convince the wrong people. I've got it.

1:32:54 Yeah, there's so many ways to get it wrong. Uh right. Because because all the like we said, all these things have to be right. You're you just said another one, which is and you have to say in a way that when this person hits the homepage, they know it. It's true, but d do they know that? So many things have to go right. What a what a tough job we've got over here. Just solving people's problems. Come on. Well growing.

1:33:17 So now we will be after this conversation. Yeah. Okay, so I'm gonna take us to uh a recurring corner, a recurring segment of the podcast that I call AI Corner. What's one way that you have discovered uh using AI in your work or your in your life?

1:33:35 That might be helpful for folks to hear. There's a lot of data on the internet and it's often in things like images. Which makes it hard to do your own analysis or plug it in or et cetera. Come up with your own models or apply it. But I found that AI is really good actually, especially Gemini.

1:33:50 I'd say that you just give it to it and give a chart to it and say, like, make this into a table that I can paste, like literally say that I can paste into Google Sheets. And it will do in a way that literally you can copy and and it will actually paste correctly into Google Sheets and then you can do stuff. So especially with the book and and and my articles. Uh I I I love to use real data and as whenever I can, of course. And um Um so I I do that all the time.

1:34:12 So um I think that kind of interpretation. Is uh it is very useful. And so all of a sudden you can get ten examples of something and test a theory where before it was kind of just too hard and you didn't That's an awesome tip. Cause people know you can generate all these infographics with um especially with with Gemini.

1:34:30 And nano banana and all these things, uh that's really cool to know. You can just feed it. Here's a here's a chart and make it make it text. Yeah. Okay, I'm gonna now take us to Contrarian corner. The question here is what's something that you believe that most other people don't? A B testing doesn't work very well. And it doesn't work on most things.

1:34:47 It won't work on strategy or vision or insights. Like nothing actually important. To the success of the company? You don't A B test. Whether Uber's a good idea.

1:34:58 Um, and then even when you do A B test the details, where I agree like sometimes that can work. What happens is people will try things like oh I'll just you know, to try this verb and that verb and this add and that ad. And then like, oh, the seventh or eighth one, I got a positive result. That must be good. And what happens is um You keep doing that. You pick the g best one and then you

1:35:19 You go on and you find another one to pick the best one. And then a a year later you look back and you should be like fifty or hundred percent better because you've stacked these things and you look back and like nothing's different. The conversion rates are the same as they've always been. See, what the hell happened? I thought I picked the the winner. And the and the answer is And a combination of the tools not being statistically accurate.

1:35:38 Which they're not. And the fact that you will get pro false positives even if the tool is statistically accurate. means that most of them are false positives. Even if the tool's ninety five percent accurate, when the thing you're looking for is rare, which it is, in the case of A B testing. Uh it

1:35:54 The false positives are happen more often than the actual thing happens. And so most of the results you get are false positives anyway. So as a result This isn't true of all A B testing, but for most what most people do when they just do the sort of the the mundane A B testing. You can't A B test the important things. And the details are mostly false positive, so it's an enormous waste of time.

1:36:15 Unless you're incredibly sophisticated. I know there's special groups that Actually are very sophisticated fine if you're not doing that. It's sort of like the poker table. If you don't know who the Patsy is, it's you. Right. If you don't have all of this information and and knowledge about A B testing, then you're the Patsy. Bam. All right.

1:36:33 Uh I will just say that I have found A B testing useful in my career. I think it's maybe at a certain scale when you're just kind of trying to optimize. And continue to grow, you know, where it's like millions of users, like a percentage gain is like millions of dollars. True. Most people are not working at that scale. Most people are right. Yeah. So just wanted to c uh for folks that find it valuable. That's true. Uh but I love even so on your on your own podcast when you were interviewing the guy from Shopify

1:37:00 Um and he was saying how uh maybe a third of the things that they found with their systems just disappear. To just magically disappear. And they're they have a team of a hundred people and they're really good at it. And like their effects disappear all the time. That's so they double check later whether the whether the immediate effect goes away because even then.

1:37:19 Right. I think that was the CTO of Shopify conversation. Yeah, okay. Yeah. Yeah. Sweet. Okay.'cause I listen to a lot of episodes but I was such a good one. I love that. Yeah. Where they leave they leave like a holdout group essentially and then they just look back, was the effect something that lasted, and most times it didn't. Yeah, you go. And that's with a lot of so That's what I mean. If you're doing that level of stuff, it's not a good thing. Good for you. But if you're not, I don't know, man. There we go.

1:37:43 Well, Jason, uh I am uh it's always a really good sign when I'm just like I can't wait to get this conversation out the door and And into people's minds because this there's so much value here. Uh, I'm just uh already anticipating all people are gonna reply and just like I got so many ideas for what to do with my product. Um, which is exactly the goal. And with that, we have reached our very exciting lightning round. I've got five questions for you. Are you ready?

1:38:06 Well, Yeah, I mean I don't like talking a long time anyway, so lightning's great. There we go. What Are two or three books that you find yourself recommending most to other people? For writing on Writing Well by William Zinzer. I know I'm not the only one, but that's kind of the point.

1:38:22 Um On my best day, I write like that. Um, and then for for uh for product, I actually like crossing the chasm. Which of course everyone's heard of. But what I find is no one's read it.

1:38:34 So that you know the little picture and you think you know what the chasm is. What I find is very quickly I I realize, Oh, you haven't read the book. You saw a blog post. And you and there's so much good stuff in there. How to define a market. and really what to do with this model. It's fantastic. So I highly recommend reading the book.

1:38:51 I've had a Jeffrey Moore on the podcast. We dove into a lot of this stuff. One of the things that always stuck with me is Um When early Companies are looking for someone like them to adopt the thing. That's something that really stuck with me. It's not like they're looking for an early adopter to be like, Oh, this is awesome.

1:39:06 Like they're looking for someone that feels like them to say this is great. And so the early adopters are just gonna spread to other early adopters and there's there's work to do. Yeah, he part of that's'cause he defines a market in among other things as And the people in the market respect the opinions of the other people in the market. Exactly. And that's when you realize, oh, so jumping to a different market, it's not impossible. It's just you like like case studies aren't gonna work.

1:39:29 Mm. Yeah. It's a new thing. Okay. And then on writing well, such a huge fan of the book. That's like the book that most helped me. Right, and if you summarize the book For me it's just cut. Cut more and more of your stuff. There's always the cut. I love this phrase where he's he's um

1:39:46 He's on a panel with with this guy who is like an amateur writer. And his his kind of summary is to that guy is I I uh He the the the guy told him, I never knew writing could be hard. And Zinzer says, I never knew writing could be easy.

1:40:01 I think both of those kind of summarized the the uh the turmoil of being a writer. Yeah, the classic. Maybe Hemingway, maybe not. quote, uh writing is easy. I just sit at the typewriter and bleed. And bleed, yeah.

1:40:15 So good. Okay, moving on. Favorite recent movie or T V show. E. R. From nineteen ninety four. I have a sixteen year old daughter. And we have

1:40:31 We're now in season I think thirteen, watching this whole thing. She says it holds up after twenty five years. And being you know, Jen Alpha, whatever I don't even know what it is. And so if If this is an era uh an era when, you know, shows were an hour long and seasons were forever.

1:40:47 And uh and she says it's great T V. It must be great T V. Mm. Wow. I've not had the whole podcast yet. Um also the pit. I don't know. If you enjoy Yar, you'll enjoy the Pit, which just won all these awards. Yep, it's good on Netflix. Um fun fact my cousin was in ER. Not as a recurring character, but she was like a young girl

1:41:06 Patient. And now she's a fancy actress in the world. Oh cool. That was her start. Yeah. Okay, next question. Favorite product you've recently discovered that you really love?

1:41:16 Yeah. Um this is probably not unique, but Whisperflow for dictation. It's really good. I like the keyboard shortcuts'cause it you know, you just use it all the time and all the Software. And anything Anchor makes, you know, they have like

1:41:29 Power stations and Docs and recharge. Uh Yeah. A and K Right.

1:41:35 Um and uh just all their stuff is super high quality and works really well. Everything seems to charge twice as fast when plugged into an anchor thing. So I don't know. Whatever it is, it's really good. I got a new Inchor charger, I also live Inchor. Uh, that has like a display on the side when you plug in stuff and it's got like multiple ports and it shows you like the percentage it's charging and the wattage per outlet. I love it. They're just like, How do we make this more fancy and fun and charge more? Yeah.

1:41:58 I love yeah. And then Whisperflow, quick shout out. They are uh You get a year free whisper flow by becoming a uh insider, I think even just an annual subscriber of my newsletter. Uh as part of the product paths.

1:42:11 And so uh check it out, Lenny Product Pass dot com. You can also check out L. I do not know that. I'm not a shill for that. No, I love that. I love when people recommend products in the product pass. You missed out. Okay, there's nineteen products in there right now. By the time this comes out, there will be even more. Okay. Two more questions? Do you have a favorite life motto that you find yourself coming back to in work or in life? Yes.

1:42:36 Be yourself. Everyone else is taken. And it's attributed to Oscar Wilde, but I've tried to look into that. As I tried to get all my annotations correct for the book. And there's no evidence that he said it.

1:42:49 But there's also no evidence who said it. So let's say it's Oscar Wilde because he said lots of things like that. I love that. And it's such a deep point. Like, you know, it's easy to hear. Yeah, yeah, yeah, yeah. But it's It's something I've learned to be More and more true every time. Especially as you see people online doing their thing and just like, Oh, I wanna be like that and then you realise no, you gotta be yourself.

1:43:06 No, and and the people who l love you or like what you do also want you to be yourself. Because that's what they love. And if you're changed, then they would love that. So Final question, you have this fancy award behind you on your desk. I'm Curious what's the story there.

1:43:20 That's the Ernston Young Entrepreneur of the Year Award for two thousand seventeen for Central Texas, which I co won with the CEO of WP Engine, Heather Bruner. Uh, which is awesome because I I often call Heather or uh a late joining co founder. Because that's what um at LinkedIn, that's what Reed Hoffman called Jeff Wiener,'cause you know, Jeff was like uh you know, four years in But

1:43:43 With So impactful. to everything, the success of the company, the culture, the da da that like basically is a co-founder. And that's exactly Wheather's like a WP engine. It's now been Eleven years?

1:43:55 So she she became the CEO, so this is a you know There's lots of um Data to back us up. And I and I I I used to say to people at the at WP Engine, like If I just told you that Heather was a co founder, you'd say, Yeah, no no kidding.

1:44:10 Like right. That's what that's why I think of it that way, because so do you, cause so do anyone, because that's that's the impact she's had. So we co won that award. Which is nice because you almost never have co winners. In fact, Okay. I can't remember another one. I mean, I know there are others, but there it's rare enough I can't think of another one. So it's really cool that we co won that. Uh entrepreneur award.

1:44:29 Jason, this was so awesome. I really appreciate making time, I really appreciate you sharing so much wisdom. with us. Uh two final questions. Where can folks find you online, point'em to your book, your website, and how can listeners be useful to you? Yeah, I mean to be useful, order the book. Hidden Multipliers dot com. Or of course you don't have to. You can uh I have all these articles online for free. So you can go to asmartsbear.com And I'm on Twitter and other stuff that's all linked off of that website.

1:44:56 And the articles Uh there They're free. I don't have ads. I don't sell courses. I don't I don't sell anything. So like that's that's very, very noncommercial. Um and so the then in fact the one thing I've ever done with writing that costs money is the book, because you know, it's a physical book. I've got to charge something so I can ship it and everything. So um Um but I think hidden multipliers

1:45:18 Is It's certainly my best work. So um so I'm very I'm very proud of that. But uh But you don't have to buy it, it's okay. This is our chance to this is our chance to repay you for all the content you've put out over time. And so I'm gonna order a number of them. Jason, thank you so much for being here.

1:45:34 Thank you. This is fun. So fun. Bye, everyone. Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. Also, please consider giving us a rating or leaving a review, as that really helps other listeners find the podcast.

1:45:53 You can find all past episodes or learn more about the show at Lenny's Podcast.com. See you in the next episode.

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