Reference checks: Is this the best question to ask?

How do you find out what a referee really thinks about your candidate when they often don’t want to say anything negative about the person? Someone called me about a job candidate who had worked at Seeking Alpha. He asked me this:

If you could send this person on any course, what would it be?

Notes:
(1) I was comfortable answering this question candidly because it has a positive undertone, as if the questioner was asking “How can I maximize the probability that this person will be successful?” In this respect, this question is similar to Tom Tunguz’ question.
(2) This question is also specific enough that it cannot be avoided or fudged. Scott Cook has a similar approach, though with a different question.
(3) The specific nature of the question contrasts with Jeff Markowitz’s advice to ask referees open ended questions.

How to talk so people can listen

Edited excerpt from The Power of Two by Susan Heitler, PhD:

Speak in short segments. In effective dialogue, each speaker generally offers brief comments rather than trying to say too much at once. Listening is a lot like eating. To take in what you hear, small bites work better than large chunks. A listener can only pick up one or two points at a time, and can respond to only one. Long monologues also drain the energy from a conversation. To keep the bits small enough, either the speaker needs to pause regularly, expecting to take turns talking and listening, or the listener needs to interrupt.

To keep your speech segments short, aim to make just one point each time you speak.

Notes:
(1) This is an area I personally find challenging. I have a tendency to speak in long segments. Perhaps, as an introvert, I bottle up things I want to say until I feel I have an invitation to speak, and then want to say all of them. Or perhaps I speak in long segments because I build logical constructs, from analysis of the problem or opportunity to recommended action, and want to share the entire construct. Either way, Susan is right that speaking in short segments is better.
(2) Susan’s advice is powerful because it’s so simple and actionable: aim to make just one point each time you speak.
(3) On “the listener needs to interrupt”, see Surprisingly, good listeners interrupt.

Surprisingly, good listeners interrupt

Edited excerpt from The Power of Two by Susan Heitler, PhD:

In contrast to what you were probably taught as a child, interruptions can be considerate. Interrupting can actually help a dialogue stay on track. Happily married couples in fact interrupt each other more frequently than distressed couples (Margolin and Wampold, 1981). When and how you interrupt is what matters.

Interruptions are helpful when you:
– Reiterate what the other person is saying,
– Check that you are correctly hearing the other person, or
– Ask a question in order to clarify something you didn’t fully understand.

These interruptions assure both you and the other person that attentive listening and braided dialogue are occurring.

Notes:
(1) While Susan’s advice is for couples, it is equally applicable to all conversations, including work conversations.
(2) A risk with “reiterate what the other person is saying”: it’s tempting to add information or descriptions of your own experiences to support what the other person is saying. However, that goes beyond reiterating what they are saying, and can therefore be perceived as an unhelpful interruption.
(3) Note that the positive interruptions Susan describes are consistent with The best advice for how to be a better listener.

How smart is this candidate?

From a CEO who asked to remain anonymous:

We all want to hire smart people. At the same time, asking an interviewer to rate candidates on how smart they are is too vague. Instead, we’ve found it helpful to ask interviewers to rate candidates on these characteristics:

How precise? How clearly did the candidate articulate their thoughts, ideas? Are they rigorous in distinguishing between different aspects of a problem, or categories that can help define an issue more precisely?

How curious? Did the candidate ask good questions, with good follow up questions? When they think about an issue, are they excited by asking the right questions?

How entrepreneurial? Is the candidate excited to try or test new things? Do they think big? Are they ambitious? Are they self-motivated?

How engaging? How excited was I by the conversation with them? How much did I learn which was new and interesting? What’s my enthusiasm level for spending another hour with them?

Notes:
(1) I’ve found that a good way to assess “how precise” and “how engaging” is to send the candidate a follow up question by email after the interview. You can learn a lot from their replies as the conversation continues in writing. Cf. What to look for when hiring someone to work remotely.
(2) Cf. “For every job the No. 1 thing we look for is general cognitive ability, and it’s not I.Q. It’s learning ability.” in The 3 things Google looks for when hiring.
(3) See also 5 testable qualities that determine a candidate’s potential.

Getting the free right in freemium

From Reflections on freemium by Joel Gascoigne:

If you don’t get your free limits right in freemium, it just doesn’t work. However, most think about this purely in terms of being too generous, and harming the free to paid conversion rate. I think the opposite is also a big risk: limiting the free plan too much, that you don’t provide enough value to drive genuine consistent free plan usage.

Any company that has success with freemium will always be at risk of the temptation to restrict the free plan more, or even drop freemium completely. The short-term A/B test will always favor dropping freemium, as if you test free plan vs free trial, the free trial variant will always likely win within any timeframe you could do an A/B test. The short-term revenue bump is hard to resist. The longer-term consequences are often not thought about enough.

Notes:
(1) For Seeking Alpha, freemium works for our core product. However, when we A/B test tighter restrictions on free usage, they always result in a higher short term conversion rate to paying subscribers. Yet we know that restricting free usage doesn’t maximize long-term subscriber growth. So our key challenge is to find a methodology to determine the right demarcation line between free and premium to maximize long term subscription growth. Ideas, anyone?
(2) Cf. Freemium works if 4 conditions are met.
(3) Cf. The 3 conditions of a great freemium business.

Why you should not call your employees “missionaries” or “mercenaries”, or your company “a family”

From Alfred Lin’s section of Sequoia’s presentation to its portfolio companies about adapting to a harder business environment:

To prepare your team for the new reality: Start with why. Reaffirm your mission and values. Showcase your leadership. Align your team. Ask for commitment.

Reaffirm​ your Mission/Values: This is really important​ ​to the missionaries you’ve hired. The​ ​mercenaries are the first to decamp. When we couldn’t go public​ ​at LinkExchange, the mercenaries were the first to leave and that​ ​happened at Airbnb and DoorDash.​ ​After 9/11, when sales went to zero at Zappos, the mercenaries​ ​fled to larger companies such as Nordstroms or Amazon.​ ​This happens again and again. Make sure you keep the​ ​missionaries.

Notes:
(1) It’s the CEO’s responsibility to ensure that the company has an inspiring mission, and to convey this mission to your team. You should also build a team of smart people who are inspired by the company’s mission, will work hard, and who don’t skip from job to job.
(2) At the same time, labeling employees as “mercenaries” is simplistic and demeaning. Your employees are rational individuals who should be expected to evaluate their job and their confidence in the company’s future. It does not make them “mercenaries”.
(3) And “missionaries”? You are not building a cult. Employees should not be devoted to your mission as a supreme value. Similarly, while working at your company should be satisfying, inspiring, and supportive, it is not your employees’ “family”. There’s a difference between friends, work colleagues and family.
(4) Each employee’s emotional well-being is impacted by their belief that their company does good, by their job satisfaction, and by the people they work with. Their financial well-being is impacted by their salary, benefits and options, which are determined by the financial success of the company. Many of these factors are in your control and are therefore your responsibility. By labeling employees as “missionaries” or “mercenaries”, you downplay your own agency and avoid this responsibility.

What is a good customer acquisition payback period?

Edited excerpt from What is a good payback period by Lenny Rachitsky:

For B2C businesses, a payback period of less than 1 month is GREAT, 6 months is GOOD, and 12 months is OK. And the exceptional cases can pay back their acquisition costs on the first transaction.

For B2B businesses selling to SMBs, less than 6 months is GREAT, 12 months is GOOD, and 18 months is OK. And similarly, the exceptional cases get their customers to prepay their contract and recoup all acquisition costs up-front.

For B2B businesses selling to enterprises, less than 12 months is GREAT, 18 months is GOOD, and 24 months is OK. The exceptional cases can pay back their acquisition costs within 6 months.

Notes:
(1) Startups should focus on payback periods over LTV/CAC ratios, Lenny argues, because accurately calculating LTV for an early-stage company is highly suspect.
(2) Longer payback periods are OK, he adds, if (i) you can confidently predict your LTV, (ii) you’re a mature business and can think longer term, and (iii) you are optimizing for growth.
(3) “Lower payback periods are not objectively optimal, because they may mean you’re leaving growth on the table.” – Dan Hockenmaier
(4) Cf. Lifetime value can mislead you into excessive spending on marketing.

The best advice for how to be a better listener

From a Twitter thread:

Michael Villahermosa: What is a piece of advice a leader (civilian or military) has given you that has stuck with you?

Tom Barrett: Listen to understand, not to respond.

Notes:
(1) Cf. Farnham Street’s listen with intent to agree. This is better, because who says you should agree? The essence of listening is to take yourself out of the picture and focus on the other person.
(2) In To make meetings more effective, learn to listen, Emma Chilvers notes that “rather than listening in meetings, people spend the majority of their time either working out what they are going to say or defending what they are saying”. Listening to understand is the antidote to that.
(3) Note the similarity with How to listen when you disagree.
(4) Compare also to How to listen without judging — a guide for managers.

How to be a great team member (and person)

Daniel Jackson is a professor of computer science at MIT, a talented photographer, and author of Portraits of Resilience. (Full disclosure: He’s also my brother.) Edited excerpt from one of his Resilience Postcards:

The year is coming to a close, and I’m looking back and pondering its lessons. Our good friend Bernie died a few weeks ago, so I’m thinking particularly of what I learned from him, and how the way he lived his life can be an inspiration to us all.

Be optimistic. There’s so much to worry about, from climate catastrophe to the decline of democracy. Bernie was always smiling and enjoying himself, despite decades of ill health. His grandson aptly noted in his eulogy that had Bernie been able to speak at his own funeral, he would have said “Isn’t this the best funeral ever?” Realism need not imply pessimism, and if we can look for the good around us, we will be able to create more of it.

Be loyal to your friends. Bernie was a staunch advocate, especially for his friends. When my book on resilience came out, Bernie became my unofficial publicist, giving copies to anyone he thought might benefit from it. Only my official publicists (aka my parents) gave away more copies. When, just a few weeks before he passed away, he came across a book I’d made of a historic garden in our town, he bought a copy to give to the Mayor and asked me to sign it. It’s the only copy of that book that I ever sold.

Know your neighbors. Sitting with Bernie on his expansive porch meant being introduced to every delivery person, neighbor or landscaper who happened to walk by. We’re isolated enough without keeping our distance from the people we pass every day.

Have the world in mind. Despite his love of his family, his friends and his neighborhood, Bernie never forgot about those who were less fortunate. When I interviewed him as part of my porch portrait series at the start of the pandemic, and asked him what he was thinking about, he said: “I pray that America fulfills her promise to all.”

Notes:
(1) What are the equivalent values for being a great employee? Perhaps: Be optimistic about your company. Be loyal to your co-workers. Know the people you work with. Make sure your company has the world in mind, and contribute to that.
(2) Re. “Be optimistic”, see Why you have to actively fight cynicism, How to avoid being influenced by others’ negativity, and You can train yourself to think positively.
(3) Re. “Have the world in mind”, see Private companies are the biggest driver of progress, so what’s your vision?

Three tips for managing people

Yanay Sela — a superb CMO — sent me the following (edited):

I learned a bunch of things in my career, but lately I’ve been noticing more clearly three things that really tweaked my professional approach and keep coming back:

1. One lever, one person
2. Throw the ball back as quickly as possible
3. Demand preciseness

Notes:
(1) One lever, one person: For each of your KPIs, ensure that you have one owner of that KPI, and that that person is tasked only with that KPI. If you have more than one owner for a KPI, nobody will feel responsible. If one person owns more than one KPI, you will not have the focus you need on each one.
(2) Throw the ball back as quickly as possible: This is management advice I heard from Adam Miller, ex-CEO of Cornerstone on Demand. Managers face the constant temptation to do things themselves instead of delegating and empowering others. So when something comes up, don’t hold the ball. Pass it to someone else as quickly as possible.
(3) Demand preciseness: Asking people to be smart is too general. Instead, demand preciseness. In particular, look for preciseness in written communication. It helps other people to move faster with fewer misunderstandings.
(4) On “Demand preciseness”, see Why you should push your team to write (and hire people who can write). See also the other items in the Managing People section of Best practices for startups — a list by topic.

How to find language/market fit, and why it matters

Edited excerpts from Finding Language/Market Fit: How to Make Customers Feel Like You’ve Read Their Minds by Matt Lerner:

Language/market fit is when you find the exact right words to explain your product or service to prospective customers. When you talk about your product, they think, “That is EXACTLY what I’m looking for” — they feel like you’ve read their minds. Without language/market fit your conversion rates hover between 0.5% and 3%; with it, companies normally get conversion rates of 8% to 40%.

Starting with language/market fit brings three big advantages. First, it increases your speed, because you can iterate language 5X in a single day, far faster than product build-measure-learn cycles. Second, it generates traction, because a pre-launch lead-capture site (that markets the product to validate demand) with 25% conversion is a strong signal to potential investors, plus it queues up a product waitlist of potential beta testers. Third, a clear, validated, plain-English articulation of your value prop really helps the entire team understand what they’re building and why.

You can achieve language/market fit by following a four step process:
1. Jobs To Be Done interview recent signups – what was in their heads before they found a solution?
2. Draft headlines & subheads using their language re. struggle & desired outcome.
3. Test the language qualitatively for comprehension, 5 second tests.
4. Test the language quantitatively in ad impressions eg. 4 identical designs with 4 different headlines. This is faster than landing page tests.

Notes:
(1) Cf. Does your company description resonate with potential customers?
(2) Cf. How to name your product and create its tag line
(3) Cf. The importance of product positioning, and how to get it right

Benchmarks for churn / retention rates

Edited excerpt from What is good retention by Lenny Rachitsky:

We reached out to twenty of the most experienced growth practitioners we knew and asked them two simple questions: What do you consider GOOD and GREAT user retention (at 6 months)? What do you consider GOOD and GREAT net revenue retention (at 12 months)?

The results:

User Retention at 6 months:
Consumer Social: ~25% is GOOD, ~45% is GREAT
Consumer Transactional: ~30% is GOOD, ~50% is GREAT
Consumer SaaS: ~40% is GOOD, ~70% is GREAT
SMB / Mid-Market SaaS: ~60% is GOOD, ~80% is GREAT
Enterprise SaaS: ~70% is GOOD, ~90% is GREAT

Net Revenue Retention at 12 months:
Consumer SaaS: ~55% is GOOD, ~80% is GREAT
Bottom-Up SaaS: ~100% is GOOD, ~120% is GREAT
Land and Expand VSB SaaS: ~80% is GOOD, ~100% is GREAT
Land and Expand SMB / Mid-Market SaaS: ~90% is GOOD, ~110% is GREAT
Enterprise SaaS: ~110% is GOOD, ~130% is GREAT

Notes:
(i) An important ingredient for benchmarking your company is frequency of habit. See: The relationship between frequency of habit and customer retention.
(ii) For practical advice to raise retention, see How to reduce churn by identifying your “red flag metrics”.
(iii) See also: To reduce churn by more than 2 percentage points, you have to raise product value and usage.

Private companies are the biggest driver of progress, so what’s your vision?

Edited excerpt from The Real Public Service by Dr. Thomas Sowell:

Do you want to be of some use and service to your fellow human beings? Then let your fellow human beings tell you what they want— not with words, but by putting their money where their mouth is. You want to see more people have better housing? Build it! Become a builder or developer. Would you like to see more things become more affordable to more people? Then figure out more efficient ways of producing things or more efficient ways of getting those things from the producers to the consumers at a lower cost.

That’s what a man named Sam Walton did when he created Wal-Mart, a boon to people with modest incomes and a bane to the elite intelligentsia. In the process, Sam Walton became rich. Was that the “greed” that you have heard your classmates and professors denounce so smugly? If so, it has been such “greed” that has repeatedly brought prices down and thereby brought the American standard of living up.

Those who have helped the poor the most have not been those who have gone around loudly expressing “compassion” for the poor, but those who found ways to make industry more productive and distribution more efficient, so that the poor of today can afford things that the affluent of yesterday could only dream about. If you really want to be of service to others, then let them decide what is a service by whether they choose to spend their hard-earned money for it.

Notes:
(i) Mark Perry, who quoted Thomas Sowell’s article in his blog, adds: “I nominate Walmart for the 2021 Nobel Peace Prize for its extraordinary public service. It has done more to lift more people out of poverty — with its “Everyday Low Prices” and by providing millions of jobs worldwide at its retail outlets and supporting millions of jobs indirectly for the thousands of Walmart suppliers — than past Peace Prize recipients including Mother Theresa, Al Gore, Jimmy Carter, Barack Obama, the United Nations, and the World Food Program combined.”
(ii) People need three things in a job: (1) I get to do the types of tasks I love doing every day, (2) I get to do them in a company which is succeeding, and (3) My work makes the world a better place. So if you want to recruit great people, you need to have something to say about how you make the world a better place.
(iii) See also How to articulate your vision in a compelling way.

Why you have to actively fight cynicism

Excerpt from 10 Learnings from 10 Years of Brain Pickings by Maria Popova:

Don’t just resist cynicism — fight it actively. Fight it in yourself, for this ungainly beast lays dormant in each of us, and counter it in those you love and engage with, by modeling its opposite.

Cynicism often masquerades as nobler faculties and dispositions, but is categorically inferior. Unlike that great Rilkean life-expanding doubt, it is a contracting force. Unlike critical thinking, that pillar of reason and necessary counterpart to hope, it is inherently uncreative, unconstructive, and spiritually corrosive. Life, like the universe itself, tolerates no stasis — in the absence of growth, decay usurps the order. Like all forms of destruction, cynicism is infinitely easier and lazier than construction.

There is nothing more difficult yet more gratifying in our society than living with sincerity and acting from a place of largehearted, constructive, rational faith in the human spirit, continually bending toward growth and betterment. This remains the most potent antidote to cynicism. Today, especially, it is an act of courage and resistance.

Notes:
(i) This is particularly relevant to startups and growth companies, because they are built on a foundation of optimism — optimism that the future will offer opportunities, optimism that the company can succeed, optimism that the company can deliver value that doesn’t yet exist. Cynicism eats away the foundation of a startup or growth company.
(ii) For more on building company culture, see To build a great culture for your startup, be explicit, and Dick Costolo on company culture.

To manage successfully, use this simple rule

If you are a manager, you can be far more successful if you ask yourself:

For each project or initiative I’m responsible for, is it in the “figure it out” phase or the “scale” phase? Then, act accordingly:

• Projects in the “figure it out” phase most likely require your direct involvement and detailed attention. A common cause of failure is for managers to delegate responsibility for projects in this phase to people who don’t have the knowledge, creativity and attention to detail to “figure it out”. So ask yourself whether you should delegate this, and if so whether the person you have chosen is capable of figuring it out. Make sure you stay deeply involved.
• For projects in the “scale” phase, focus on setting clear goals and metrics, hiring, and delegating as much as possible. Your job is to replace yourself by hiring people better than you into leadership positions. Don’t let yourself get involved in the tactics of execution.

Notes:
(i) Ali Rowghani divided every startup into one of three phases: Phase 1: Find product-market fit by doing things that don’t scale, Phase 2: Scale by hiring, creating purpose and alignment, and nurturing culture, and Phase 3: Expand horizontally into adjacent products or markets.
(ii) But in any company, irrespective of what stage you are at, there are different projects or initiatives in different phases. If Ali’s advice is correct, then it should apply also to individual initiatives and projects, and can help managers to be radically more effective.
(iii) See The three phases of the life of a startup and thus a founder / CEO’s job.

Three questions to ask yourself before getting on a call with someone

… and five questions to ask yourself after the call. Forwarded to me confidentially:

Before your next call with someone, ask yourself:
1. How am I feeling?
2. How do I imagine they are feeling?
3. How comfortable am I talking about myself?

After the call, ask yourself:
1. How am I feeling now?
2. How do I imagine they are feeling?
3. What did I learn?
4. What did they learn about me?
5. Did I get what I was hoping for?

Notes:
(i) I love the idea of checking your own emotional state before each call with these questions. Perhaps you’ll decide to postpone a call because of your answers, avoiding damaging a relationship or losing an opportunity.
(ii) Re. “What did I learn?”: For a radical approach, see The antidote to bad meetings.
(iii) If before going into a call, we know that afterwards we will ask ourselves “How do I imagine they are feeling after this call?”, how will that impact our behavior on the call? Perhaps we’ll remind ourselves to ask positive questions, or to ask the right question to motivate people.

The three phases of the life of a startup and thus a founder / CEO’s job

Excerpt from What’s the Second Job of a Startup CEO? by Ali Rowghani:

Phase 1: A CEO’s first job is to build a great product and find a small group of people who love it and use it enthusiastically. A Phase 1 startup CEO is the Doer-in-Chief. You must be deeply involved in both building the product (observing/interacting with users, writing code, designing product specs) and acquiring users/customers. Delegation should not be a word in your vocabulary. If you succeed, it’s because your deep involvement and unique vision give the company a perspective and drive that few others have. The other imperative for a Phase 1 CEO is to conserve money in order to extend the time to iterate and improve the product.

Phase 2: As a Phase 2 CEO, you need to transition from “Doer-in-Chief” to “Company-Builder-in-Chief.” It may seem impossible at first, but you can eventually delegate day-to-day responsibility for everything you did in Phase 1, even Product. Your job is to replace yourself by hiring people better than you into leadership positions. Stated simply, your job as a Phase 2 startup CEO is to delegate everything you did in Phase 1 in order to create time to focus on three critical operational tasks that only the CEO can do: (i) Hiring a leadership team and making sure they work well together, (ii) creating purpose and alignment, and (iii) nurturing company culture. In practice, Phase 2 usually begins when a startup has around 20-25 employees and ends when it reaches 400-500 employees. 

Phase 3: In phase 3, you should take profits from the core business and invest them in new, transformative products. As an example, Facebook built its senior management team in Phase 2 while running the business at roughly breakeven. In Phase 3, it began to generate huge profits in its core business thanks to more lucrative in-stream ads, so it could allocate significant resources towards Messenger as a separate product and buy Instagram, WhatsApp, and Oculus.

Notes:
(i) Here’s another way of describing this. Phase 1: Find product-market fit by doing things that don’t scale. Phase 2: Scale. Phase 3: Expand horizontally into adjacent products or markets. 
(ii) Scaling prematurely, ie. moving to phase 2 before you’re ready to, is fatal. See Why startups shouldn’t scale prematurely; Don’t scale before you have product-market fit; If you have low retention, don’t scale and keep your costs low and Why more funding won’t help you find product-market fit.
(iii) One of the biggest challenges for a founder is being honest with yourself that you have not nailed product-market fit, including a profitable business model, and thus whether you are ready to transition to phase 2. It’s hard to admit that things aren’t working well enough for you to scale, particularly because VCs sometimes push startups to scale prematurely.

To generate change, explicitly identify and empower change agents

Edited direct message sent to me by a Seeking Alpha contributor:

Just wanted to send a message congratulating you on your hard choice to transition the economics of Seeking Alpha from advertising to subscriptions, as well as correlating contributor pay to them. Not easily done or explained. Might be helpful to hear what Microsoft’s experience was with respect to reorganizations, which they used to re-invigorate their company every 18 months over a span of 30 yrs.

They determined that the employee base is typically split in thirds:

• 1/3 resisted change, feeling threatened by it
• 1/3 embraced change, felling it provided opportunity
• 1/3 were on the fence.

The Microsoft strategy each time was to identify these groups early on:

• 1/3 who embraced change were identified and promoted making them internal change agents.
• Many of those that were pre-identified as resistant were let go. Those that continued to resist were either let go, demoted or transferred to a less impactful areas.
• Those that were on the fence were then influenced by the change agents becoming valuable contributors

The logic of this strategy was explained to me by their Corporate Counselor who was a contractor hired by them to facilitate the process.

Notes:
(i) This advice certainly fits a company when it’s going through strategic change. But perhaps it always fits.
(ii) On promoting people, see Promote Fast.
(iii) On titles for promoting people, see Two approaches to titles and promotions.

To learn more from other people, defer judgment and ask for actionable proposals

From 10 Questions for 2020, by Chris DeMuth, hedge fund manager and author of the fast-growing SPAC investing advisory service Sifting the World:

How can I use iterative conversations to harness the value of others’ conclusions instead of ruining the value of diversity by tainting their views with my own?

A lot of my thinking on this question has been guided by Annie Duke, who is a great teacher on the subject of high-quality decision making.

I am working on deferring judgement and listening to people worth listening to without simultaneously deciding what to do about it and formulating a response. Instead I’ve been fixating on the sound of their voices and the sensory experience, trying to become a keener observer. The reactions and judgements can come later. The more I listen for sound instead of response, the longer increment I can assimilate. My recall has soared.

I also have been nudging colleagues for actionable proposals instead of meandering chats. That way, I can choose to defer to them and stay on my own track if their idea is valid but I prefer my preexisting focus. Actionable proposals let me say “yes” and then come back when I want to tweak.

Notes:
(i) Cf. Farnham Street’s advice to listen to others with the intent to agree with them.
(ii) Cf. Leo Babauta’s How to listen without judging.
(iii) Re. “I also have been nudging colleagues for actionable proposals instead of meandering chats”: cf. When you’re given advice, here’s how to listen with an open mind.

Questions to ask yourself

From Answering these questions could change your life:

Could the act of answering open-ended questions about yourself give you new, important insights? It turns out the answer is “yes”. After running a series of five scientific studies, we’ve discovered a specific set of practical, yet rarely-asked questions that 83% of people reported were valuable for them to answer and that 78% said they would recommend to others. A remarkably high 88% of people even reported that they enjoyed answering these questions. We think you’ll be surprised at just how valuable answering these open-ended questions about yourself can be:

1. What in life gets you really excited?
2. What could you do to bring more of what really excites you into your life?
3. Summarized in just a few sentences, what is your life’s story?
4. What would you like the next chapter of this story to be?
5. What would you say is the greatest accomplishment of your life so far? Brag for a minute.
6. What do you want to make sure you do, achieve, or experience before you’re gone?
7. In recent years, what’s the biggest lesson you’ve learned about yourself?
8. Who inspires you most, and why do you find them inspiring?
9. What was the biggest turning point in your life, and how did that experience change you?
10. What are you taking for granted that you want to remember to be grateful for?
11. Think for a moment about the biggest problem right now in your life. If that problem was happening to a close friend instead of to you, what would you say to comfort or advise that friend?
12. What meaningful or important thing should you tell a particular person that you haven’t said to them yet?
13. When are you going to tell this person this meaningful or important thing?
14. What’s one of the best days you’ve had in your entire life? Describe what happened that day.
15. What in your life that you have the power to change is most limiting your long-term happiness?
16. What could you start doing now to address what you said is most limiting your happiness?
17. If you had to have roughly the same work day, 5 days a week, for the next 10 years, what activities would you ideally want this work day to consist of?
18. What can you do to make your current job closer to this ideal, or to help you get a job that is closer to this ideal?
19. What is the most important thing that you know you really should do but which you have trouble getting yourself to do?
20. What could you do now to make it more likely that you actually do this important thing?
21. What do you think is holding you back from achieving more in your life than you’ve achieved so far?
22. What could you start doing now that would help address what you said is holding you back in life?
23. In your opinion, what is the purpose or meaning of life?
24. How is the very best version of yourself different from the way you sometimes behave?
25. What has kept you hopeful in life’s most challenging moments?
26. During what period of your life were you the happiest, and why were you so happy then?
27. Imagine that you received a message from a version of yourself five years in the future. What warnings would the message give you, and what advice would it offer about how best to achieve your goals?
28. If you knew for a fact that you were going to die exactly 10 years from now, how would you change your current behavior?
29. Suppose you knew that you were going to die instantly (but painlessly) in exactly 7 days. What would you spend your last week doing?
30. If you could plan one nearly perfect (but still actually realistic) day for yourself, what would you spend that day doing? Describe that day, from when you wake up until you go to sleep.
31. When is the soonest that you can treat yourself to this perfect day, or to another day that you’ll really enjoy and remember?
32. What valuable things have you learned, or what useful takeaways have you gotten, from answering these questions?

Notes:
(i) Cf. Asking questions to build relationships. In this case, the relationship is with yourself…
(ii) I wonder nonetheless whether these are also great questions to ask other people.
(ii) These are great examples of questions which are open-ended, but not unmanageably big. See How to ask great questions.

How to hire the right people for your leadership team

Excerpt from What’s the Second Job of a Startup CEO? by Ali Rowghani:

Recruiting senior executives takes an extraordinary amount of time.

If you are doing it for the first time, meet lots of people so that you can develop good judgment about the skills, experiences, and personality traits that you need. Patrick Collison, co-founder and CEO of Stripe, made it a point to meet with the “best-in-the-world” in each field so he could get a sense of what a great candidate looks like.

Because executive hiring takes so much time, you should stage these hires rather than trying to hire everyone at once.

Our recommendation is to hire a good executive search firm to help you run your first couple of searches. It will cost you an arm and a leg, but if it helps you hire the right person, it’s worth every penny.

You should expect that at least 25% of your leadership hires don’t work out.

Notes:
(i) How do you know what to look for? Ali Rowghani recommends you “meet lots of people so that you can develop good judgment”. Ben Horowitz says you should start by doing the job yourself.
(ii) See Ben Horowitz’s advice about How to hire senior executives for your startup.  

First steps for founders to find product-market fit

From Jack Altman, edited:

Job number 1 is get product market fit. A heuristic for everything you do can be “does this activity help me get product market fit?” You’ll know you have PMF is when strangers buy your product, when they’re passionate, when 20%+ of demos convert, etc. Qualitatively, it’ll feel like chasing a boulder down a hill, not pushing one up. Still hard, but decidedly different. If you aren’t sure you don’t have it yet.

Your first 10 hires set the stage for your company’s talent bar and culture. Spend a lot of time with them pre-hire. Get them to work with you for a day or even a week. You’re looking for diamonds in the rough. Known quantities are starting companies or joining sure things.

Don’t outsource your early sales. You don’t do early sales to get revenue, you do it to get product feedback and inch your way toward product market fit.

Don’t delegate product decisions. It’s okay to be very micro-managey as the founder in the early days, especially with the product. The product is literally all your startup has to offer to the world. Don’t feel bad about being a bit of maniac here. Outside of building the product, talking to customers, and hiring, delegate everything else you can.

Make friends with at least 10 customers or industry people. Not like email friends. Text with them, go for walks, get well past the surface level stuff. You can partially skip this step if you yourself are the customer.

Notes:
(i) In addition to creating a product which people want to use, product-market fit also requires a strong business model. For example, for years Seeking Alpha was reliant entirely on advertising, and that was incredibly challenging. Once we focused on subscriptions, the entire company was transformed, including our growth rate. See: Product-market fit requires a market, a business model and customer engagement.
(ii) Re. “You can partially skip this step if you yourself are the customer.” This was my experience. It’s so much easier to build a great product if you are your first customer. You know what you want.
(iii) I really like the questions on Y Combinator’s application form: Six simple questions to test product-market fit and competitive advantage.
(iv) Note the similarity of those questions to: Four simple questions to help you get product-market fit.

How to supercharge email newsletters

Edited excerpts from Engagement beats scale: Inside Morning Brew’s approach to subscriber growth by Jenny Rothenberg:

Onboarding: The primary goal of our welcome email is to ensure our emails get delivered to the right place — they can’t open our emails if they don’t see them in their inbox. Since this is so important, our welcome email is super straightforward, focused on this singular goal as opposed to overwhelming them with content or trying to get too cute.

Subject lines: Our data has shown that getting an early subscriber over the hump from 0 opens → that first open is crucial. If a user doesn’t open at all in their first few weeks, it’s unlikely they ever will. So we test our subject lines four ways every morning. Each of the four subject lines is sent to 3% segments of our audience at 5am. The winning subject line by measure of opens gets sent to the remaining 88% at 6am. We’ve seen open rate test results vary by as much as 10% depending on the subject line.

Email list cleanliness: Subscribers who aren’t engaging with our content aren’t doing anything for us except potentially harming our deliverability. Our newsletters ending up in spam is quite literally the subject of my nightmares, so to prevent this we have a strict churning process in place. A reader will enter our churn flow if they (i) signed up 18 days ago and have not opened or clicked at all, or (ii) have not opened or clicked in 90 days, regardless of their signup date. When either of these criteria is met, we send them an automated email asking if they’re still interested in receiving our emails. Here, we remind them what they are all about and give them access to recent content. If they don’t re-engage within a few days, we remove them from our list and send them a notification email that we have done so, with one last opportunity to opt back in.

Referral program: Our referral program has been core to our growth. Each user has their own unique link to share with others . Anytime someone signs up with a reader’s unique link, they get the credit. As readers hit the referral milestones (outlined below), they earn rewards. Here’s a complete overview of the program. Our data has consistently shown that subscribers who come in from the program are among our most engaged group of users. When a friend goes out of their way to recommend you check out a new product, you’re likely to give it an honest try.

Paid acquisition: We were fortunate to have such a strong monetization strategy early on that even as a bootstrapped company, we were able to start spending on paid acquisition. When allocating our budget and optimizing our spend, it all comes back to the north star: Quality > Quantity. Opens > List Size. For our hundreds of active sources, we are monitoring not just the cost to acquire a new user (CAC) but the high-quality percentage of each. We define a high-quality subscriber as one that opens six or more of their first 12 newsletters. Two weeks is obviously short in the broader picture of a user’s lifetime with us, but our data has shown that a subscriber’s actions in this timeframe are generally indicative of their longer-term behavior. If the source is paid, we evaluate everything based on its high-quality acquisition cost (HQ CAC). So for example, if a source has an acquisition cost of $5 per subscriber and 50% of those subscribers are high-quality, the HQ CAC is $10. While it’s not baked into the HQ metric, we also take into account a reader’s likeliness to refer based on the source they came from and optimize for that. For example, one of our top ad sets in Facebook Ads has been a lookalike audience built off of existing readers who have referred before. If you’re looking for an engaged newsletter subscriber, don’t go too far away from the platform: email. People who like newsletters…like newsletters. We’ve sponsored ($) and cross-promoted (bartered) with newsletters focused on topics ranging from travel to wellness to personal finance to sports. We’ve had varying success with programmatic ad campaigns within email. Email-based is the only type of programmatic that’s worked for us in any capacity.

Notes:
(i) Morning Brew is a free newsletter, monetized with ads. But email newsletters can also be a strong customer acquisition tool for subscription products. See How paid content site De Correspondent acquires users.
(ii) The article doesn’t explain how Morning Brew’s team values a quality user, which determines how much it is willing to pay in customer acquisition cost (CAC). On valuing a customer for paid acquisition, see Lifetime value can mislead you into excessive spending on marketing, and also characteristic number 6 in The 10 characteristics of a great consumer subscription business.

The 10 characteristics of a great consumer subscription business

Edited excerpts from 10 Factors To Consider When Evaluating Consumer Subscriptions by Nikhil Basu Trivedi:

Great consumer subscription businesses have these 10 characteristics:

1. “Must Have” service. To be a must have, the product or service solves a real need for the customers, and delivers a solution with higher convenience, better cost, or higher quality than other options, and often with a combination of those elements.

2. Taps into existing recurring behavior. It’s much easier to build a subscription business that draws on an existing recurring consumer behavior, instead of trying to create a new recurring behavior.

3. High conversion rate from free tier or trial to paid subscriber. The higher the conversion rate, and the faster the duration of conversion, the more effective the free tier or trial.

4. Annual gross profit per subscriber is high. To calculate the annual subscription gross profit, take the annual revenue per subscriber and subtract the cost of goods sold (COGS).

5. Strong customer, revenue and usage retention. Retention should be measured for cohorts. Revenue retention should be higher than customer retention, because subscribers that stick around are able to spend more on the subscription over time. Usage retention is a leading indicator for customer retention.

6. Rapid payback on customer acquisition costs. The best subscription businesses have very quick payback on customer acquisition costs, perhaps even instant payback. A payback period of over a year is challenging.

7. Large total addressable market for the initial subscription offering. It should be able to support $50 million in annual subscription gross profit, creating the potential for a $1 billion valuation.

8. Attachment and bundling potential for Act II, III, and beyond. Most great subscription companies have an Act I that gets them to tens or hundreds of millions, or even billions, of dollars in revenue. But they follow that up with more products and services that lead to secondary and tertiary subscription offerings (Act IIs and Act IIIs) that expand the size of the business and the total addressable market.

9. Win-back potential. Can the company turn previously churned subscribers into paid subscribers again? For example, a free tier enables ex-customers to continue to see value out of the service, and to be engaged to convert back to being a paid subscriber over time.

10. Network effects. The best consumer subscription businesses leverage network effects to increase the value of the subscription offering, to boost many of the factors listed above, and to provide a moat against competition.

Notes:
1. On rapid payback on customer acquisition costs, see Why capital efficiency is critical for SaaS and subscription businesses.
2. On network effects, see Building a moat – barriers to entry for SaaS companies.

How to make zoom video meetings spectacularly successful

From Tomasz Tunguz’ The Secret to Productive Group Meetings over Video (with edits):

Say you want to brainstorm ideas for a new product you’re going to launch. Schedule a video meeting for the relevant people from sales, product, marketing, engineering, and customer support.

Create a Google document with ten pages, a page with each person’s name on top. Ask everyone in the meeting to find the page with their name on it and answer the question: “what are the top three features our new product needs?” in the first ten minutes.

Time’s up; hands-off keyboards. Coalesce the lists in front of everyone. By the time you’ve completed your work, the team has read the others’ contributions and is ready to discuss. The group steps through the bullet items in the remaining time.

I’ve participated in sessions like this for brainstorming, 360° reviews, project planning, pipeline evaluation, team standups, all kinds. Each session is remarkably more productive with video and Google Docs than in person.

Notes:
(1) I love this advice. But the final step (“the group steps through the bullet items in the remaining time”) seems vague.
(2) One possibility: After the brainstorming, get the participants to name their top candidate from the combined list and explain why. I’ve found that asking participants to vote or to provide a rating (“How much do you like this, one to ten?”) helps get meetings to an actionable conclusion. See: How to end meetings.
(3) On deriving value from a meetings as fast as possible, see The antidote to bad meetings.

The most important thing to remember as a founder / CEO

From Redpoint’s profile of VC Tomasz Tunguz:

Best learning as a founder?
Things are never as good or bad as they seem. Throughout the rollercoaster ride, your have to keep your head, even if all those around you are losing theirs.

Notes:
(1) Peter Fenton thinks the most important quality of a successful founder is “profound, deep, innate motivation”. Perhaps that is related to Tom Tunguz’ point. To succeed, your motivation must be independent of short term success or failure.
(2) Wondering about the relationship between Tom’s “Things are never as good or bad as they seem” and the ancient adage “This too shall pass”?

To reduce churn by more than 2 percentage points, you have to raise product value and usage

From Churn is the single metric that determines the success of your subscription service by David Packman:

“There is a laundry list of optimizations subscription services implement to improve retention, and collectively these have a positive effect—re-billing insufficient fund accounts on the 15th and 30th of the month, allowing members to pause their service, allowing members to reduce the frequency of delivered goods, winback campaigns to churned members, etc.

But a key observation about businesses which show high churn in their early stages is that the churn will not meaningfully reduce. That is, you can expect your optimization efforts to maybe move churn 1% — 2% (absolute points) or so, but they will never halve churn or reduce it dramatically beyond this. This is because churn is a statement from your customers about how habitually valuable your service is to them. In my experience, the only way to meaningfully reduce churn in high-churn businesses is to essentially redesign the service and the value proposition.

For clarity, I have looked at close to a hundred subscription services and have never seen churn improve from, say, 12% a month to 7% a month without fundamentally changing the service…but I have seen it move from 12% to 10% or thereabouts through optimization.”

Notes:
(1) Re. “Churn is a statement from your customers about how habitually valuable your service is to them” — see The relationship between frequency of habit and customer retention.
(2) The optimizations which David Packman argues have limited ability to reduce churn do not address insufficient product usage. For an alternative approach, see How to reduce churn by identifying your “red flag metrics”.
(3) We’ve raised retention for Seeking Alpha Premium by (i) identifying our most valuable product features, and (2) redesigning the product UX to increase the usage of those features. For example, our ranking of the top stocks in each industry is valuable because it enables investors to discover stocks which subsequently outperform the market, so we’ve redesigned our product to increase usage of those rankings.

What happens when you talk about too many goals

From How Jeremy Corbyn Lost The Election – And Started The Race To Replace Him:

One big problem was the sheer size of the manifesto and the number of policies on offer. Candidates complained that they didn’t have a single five-point pledge card like the one Tony Blair made famous. While the Tories had a simple message of ‘Get Brexit Done’, Labour lacked a similarly easy ‘doorstep offer’. “We had so much in the manifesto we almost had too much,” one senior source said. “It felt like none of it was cutting through. You needed to boil it down.”

Notes:
(1) This is a fundamental point about successful communication, and therefore applies to managers as well.
(2) See What’s your “simple scoreboard”?

The key to success? Do less.

Excerpt from How to Succeed in Business? Do Less by Morten T. Hansen:

Most top performers in business have one thing in common: They accept fewer tasks and then obsess over getting them right.

The common practice we found among the highest-ranked performers in our study wasn’t at all what we expected. It wasn’t a better ability to organize or delegate. Instead, top performers mastered selectivity. Whenever they could, they carefully selected which priorities, tasks, meetings, customers, ideas or steps to undertake and which to let go. They then applied intense, targeted effort on those few priorities in order to excel. We found that just a few key work practices related to such selectivity accounted for two-thirds of the variation in performance among our subjects. Talent, effort and luck undoubtedly mattered as well, but not nearly as much.

The research makes clear that we should change our individual work habits if we wish to perform better, but the implications are much more far-reaching. We also need to change how we manage and reward work, how we measure economic productivity and perhaps most important, how our culture recognizes hard work. We should no longer take it as an automatic compliment to hear that we’re “hard working.” Hard work isn’t always the best work. The key is to work smarter.

Notes:
(1) This doesn’t mean that companies should adopt fewer goals. Companies may achieve more by having teams or individuals working on different goals. But individuals must focus.
(2) My golden management rule: in every interaction with people in your company, ensure you Focus, Empower, and Inspire. This excerpt provides one of the ways to help people become more focused — help them to accept fewer tasks.
(3) Cf. (i) The best work question to ask yourself every morning, (ii) If you want to get more done, stop doing these things, (iii) Saying “no” to good ideas.

How to manage legal, finance, IT, and HR to enable you to move fast

Edited excerpt from Lean Startup’s Eric Ries on How to Make ‘Gatekeepers’ a Source of Power and Speed:

Eric Ries calls functions like Legal, Finance, IT, and HR “gatekeepers”: Gatekeepers are the functional teams whose beneficiary is predominately the company itself, versus the end customer. They often impact the ability of the makers and sellers of the product — Product, Design, Engineering, Marketing and Sales — to reach customers.

The top tip for non-gatekeepers: Avoid the eleventh-hour ask. What they experience is someone calling them with no lead time, pitching a complex plan and asking for a thumbs up or down by end-of-day. From the gatekeeper’s point of view, that’s a lose-lose proposition. Either she has to say yes to something that has more liability than she’s comfortable with, or she has to say no and be the evil one. Instead, employ a cross-functional team from the start.

The top tip for gatekeepers: Revere how others build, be flexible in how you build. The best-performing gatekeepers have entrepreneurial virtues. They’ve got a tolerance — even comfort with — uncertainty and ambiguity and understand why entrepreneurship is challenging. This translates to empathy for what the product teams are going through. That flexibility brings a learning-first mentality. You want a gatekeeper who’s informed, but not always coming in with all the answers. She should be able to synthesize her expertise with what the company is doing.

The top tip for CEOs/founders: Foster an environment where gatekeepers can serve, not just respond. The statement you must be able to make is: The gatekeeping functions serve their customers rather than just respond to them. Keep gatekeeper functional heads accountable according to the cycle time of teams. Create metrics pertaining to how fast you want the team to turn things around.

Notes:
(1) Thank you Andrew Fine, an outstanding “gatekeeper”, for the tip.
(2) Cf. In your startup, the goals and culture must become a mantra.

Five key takeaways from Peter Drucker’s “How To Be An Effective Executive”

In his book How To Be An Effective Executive, Peter Drucker identifies five key habits of effective executives:

1. Manage time. Use a three-step process: (i) Track your time use, and eliminate time wasters. (ii) Delegate by identifying tasks which can be done equally well by someone else. (iii) Don’t waste the time of those who work for you or with you. Ask: “What do I do which wastes your time?”.

2. Focus on contribution. Ask yourself what you can contribute that will significantly affect the performance of your company. If you don’t ask this, you’ll aim too low or at the wrong things. Look to contribute in three areas: (i) Direct results. (ii) Building and re-affirming values. (iii) Building and developing people for tomorrow.

3. Build on strengths. To “staff for strength”: (i) Make sure all jobs are designed well. Identify any job that has defeated two or three people in succession and get rid of it. (ii) Make each job demanding and big, as a challenge brings out strengths. (iii) Start with what a person can do, rather than what a job requires. Ask what a person has done well, and therefore what they are likely to do well in future. That includes yourself. (iv) Tolerate weaknesses.

4. Concentrate time, effort and resources. Do first things first, and only one thing at a time. Embrace the opposite of multi-tasking. Allow a fair margin of time over what you think you’ll need, and don’t race. Say “no” due to courage, not analysis, by picking the future over the past, focusing on opportunities not problems, choosing your own direction rather than the norm, and aiming high.

5. Make effective decisions. Decisions are made well when based on the clash of conflicting views. Encourage opinions rather than seeking out facts, as those who give you opinions should provide the facts. Know what you need to know to test the validity of a hypothesis. Organize disagreement, for example by identifying why people disagree.

Notes:
(1) Here’s an excellent video review of the book which presents these points. And here’s another written summary.
(2) On time management, see: Do the most important stuff first thing in the morning.
(3) On “build on strengths”, see: The two factors which determine how successful and happy you will be at work.

Why revenue retention is the wrong operating metric to combat churn

Edited excerpt from Why Retention Is The Silent Killer by Brian Balfour:

When I ask someone from a SaaS business, or another subscription model business, about their retention, I almost always get an answer involving monthly or yearly revenue retention. This is a red flag for me. I’m far more interested in how retention is reflected in the breadth and depth of product usage.

Why, you ask? Revenue retention is the output of engaged users. The usage is the input, and looking only at revenue retention as a proxy for usage retention has two big problems:

1. Revenue can hide what is going on under the hood with product usage, and shield you from signals about your product’s health over the longer term. You may earn a month or a year’s worth of revenue from a paying subscriber, but if that person isn’t using the product, they will churn when that month or year is up.

2. If you are trying to improve retention but only tracking revenue retention, the game is over before you’ve even had the chance to play. Once a paying subscriber has churned, winning them back is almost impossible. If you want to improve retention you need to look at usage retention first.

Notes:
(1) Contrast Brian’s emphasis on product usage with David Skok’s approach in How to reduce churn.
(2) Cf. The relationship between frequency of habit and customer retention.
(3) Cf. How to reduce churn by identifying your “red flag metrics”.
(4) …and the other posts in the Churn & Retention section of Best practices for startups — a list by topic.

Mobile vs. desktop usage habits

Edited excerpt from How Meredith built Allrecipes into a digital-to-print, multichannel success by Cobus Heyl:

When designing each experience, we look to the unique strength of each medium.

Web provides a high degree of interactivity and utility: A keyboard and mouse allow the consumer to actively share their experiences through text. The large screen allows them to engage and to interact with the content through drag and drop functionality, and allows many items to be present on the page at the same time.

Mobile is all about mobility and constant connectivity: We take advantage of the likelihood that the home cook is most likely on-the-go or in-store when using their phone, so we are very much focused on helping them quickly find and share dinner solutions. The phone’s geolocation technology pinpoints the cook’s location so we can deliver hyper-local grocery offers that match their location and preferred retail outlet. We also take advantage of touch, voice and motion to allow them to enhance the brand experience. Mobile devices are also more likely to be a personal vs. shared device, so we can pay attention to their past behaviours to deliver a more personalized experience uniquely tailored to their interests and needs.

Print is an experience where cooks are most likely interested in having us curate the experience for them: The team pays close attention to the trends and behaviours we are seeing play out on the web to inform the editorial framework and focus of each issue. They are able to create features that marry our most popular recipes alongside hidden gems that might easily be missed through common search or browse behaviours.

Notes:
(1) Thank you Eli Hoffmann for the tip, and his summary: “tl;dr: success in mobile may not be about porting desktop functionality carte blanche, but rather about groking the needs of the mobile consumer”.
(2) Cf. “Mobile today does not mean ‘when you’re mobile’. It means ubiquity — universal access to the internet for anyone at any time” –Benedict Evans, in How to think about mobile.
(3) See also: The surprise about how people use their phones and The key success metric for mobile apps.

Improving retention helps growth in 4 ways

Excerpt from The One Growth Metric that Moves Acquisition, Monetization, and Virality by Brian Balfour:

Most people think retention is so crucial simply because it means you lose fewer users than you otherwise would. Though this is true, it misses the critical point. Retention is the core of your growth model and influences every other input to your model. This is important because if you improve retention, you’ll also improve the rest of your funnel:

1. Retention drives acquisition. For many products, especially those that grow through virality or user generated content (UGC), retention has a double effect. As you retain more users, those additional users take more of the key actions that accelerate acquisition, either through sharing, inviting, word-of-mouth, or creating content. As more of those new users retain, more are acquired – improving retention sets off a self-reinforcing cycle that drives acquisition.

2. Retention improves monetization. When it comes to monetization, two important things happen with improved retention – you can retain a larger proportion of a cohort, and in doing so, make more money from that cohort within a given period of time, and you can increase the length of time that a cohort retains, increasing LTV.

3. Retention builds an acquisition competitive edge. As you increase retention, monetization, and LTV, you can pay more to acquire a customer. In doing so, you can push competitors out of acquisition channels, open up new channels that were previously too expensive, and grow faster.

4. Retention accelerates payback period. Payback period is the time it takes to break even on the cost to acquire a customer. It also determines how fast you can start reinvesting in acquisition to fuel growth. Improving retention can help shorten your payback period to grow faster.

Notes:
(1) Cf. A radical approach to marketing
(2) Cf. Sustainable growth vs. growth hacking
(3) Cf. Why retention is the key to growth

Four ways to show you care about your team’s careers

Excerpt from The Front of the Jersey by Doug Weaver:

Call out the elephant in the room. “We both know that you won’t necessarily always work here…” can be the phrase that really opens up your dialogue with your employees and shows that you’re treating them as adults, not assets.

How does today’s action create long term value? Want your team members to get better at something? Frame the discussion around their long term value in the marketplace. Every rep has a stock price and that stock price is either going up or down.

Commit to them. Tell them that you want this to be the best place they’ll ever work, and that you’d like to be remembered as the boss who made them better at their craft. Then do what you say.

Put the relationships in long term context. Will there be a network of people out there who speak well of them in the future, or a network that’s felt slighted, overlooked or abused?

Notes:
(1) Thank you Brad Westbrook and Alon Zieve for the tip.
(2) Cf. Laszlo Bock’s eight steps to being a good manager
(3) Cf. Build self-confidence — but not your own

The most important job of a product leader

Excerpt from How to Run a Quarterly Product Strategy Meeting: A Board Meeting for Product by former VP/CPO at Netflix and Chegg, Gibon Biddle:

I think the most important job of a product leader is to outline a cohesive product strategy, along with metrics and tactics against these strategies. The way I define the product leader’s job is to delight customers, in margin-enhancing, hard-to-copy ways.

Your product strategy should define your key hypotheses about how you plan to deliver on these three dimensions. The metrics are how you measure your progress, and the tactics are simply projects or experiments against each of your key strategies.

Notes:
(i) Thank you Alon Zieve for the article recommendation.
(ii) Cf. First principles for startup founders (and product managers).
(iii) Cf. The heart of any growth strategy is core product value.

When freemium makes sense

Excerpt from Subscription Business Models Are Great for Some Businesses and Terrible for Others by Robbie Kellman Baxter:

I love freemium, the idea of combining a premium paid membership with a free membership that provides value forever. But freemium needs to work in service to a larger business strategy. Freemium works best in three scenarios:

– As a means of trial. Many people who have a free subscription to Dropbox get all of the online storage they need. But for others, as they make Dropbox part of their daily routine, they find they need more storage and greater functionality. As a result, they upgrade to the premium service.

– To create a networked effect. Each new member that joins LinkedIn for free creates additional value for the recruiters, salespeople and jobseekers paying for LinkedIn subscriptions. And if no one used the free version of LinkedIn, there’d be little reason for those people to pay at all.

– To serve as a marketing channel. Some people never pay for a SurveyMonkey subscription, because they only need small surveys sent to a few people, with limited analytics. But when those people send out their surveys, they are advertising for SurveyMonkey to everyone who receives the survey. If one of those survey recipients subscribes to the premium offering, the sender (who’s a free member) becomes a marketing channel for attracting and converting new members.

Notes:
(1) Thank you Daniel Shvartsman for the article recommendation.
(2) Note the similarities with Tom Tunguz’ The 3 strategies of freemium companies.
(3) Cf. The 3 conditions of a great freemium business.

Managers’ biggest HR mistake, and how to fix it

I was chatting with someone who ran HR for a Fortune 500 company and is now an HR consultant. “What are managers’ biggest mistakes in HR?”, I asked him. “And what’s your best advice for them?” His answer:

Most companies succeed because of a small number of outstanding employees — the stars. But managers frequently make the mistake of devoting the majority of their time to under-performers. Instead, they should be devoting their time to these stars who truly drive their company’s performance.

So the most impactful advice I give managers is: identify your stars; let them know they are stars; and spend time thinking about how to empower them — how to give them responsibility, how to ensure they’re on challenging and impactful projects, and how to coach them for promotion.

Notes:
(1) Cf. The best thing you can do for your team.
(2) Cf. Should you hire superstars?

Chris Fralic’s 7 rules for making memorable connections

Edited excerpt from How to Become Insanely Well-Connected by Chris Fralic:

1. Convey genuine appreciation — think about what they know that you don’t.
2. Listen with intent — demonstrate you’ve heard exactly what was said by the other person, and encourage them to continue.
3. Use humility markers — acknowledge your own fallibility and imperfection so you’re relatable; act in a way that implies your time is no more important than theirs.
4. Offer unvarnished honesty — in what will actually have utility for the other party.
5. Blue-sky brainstorm — with them, not for them.
6. End every meeting or conversation with the feeling and optimism you’d like to have at the start of your next conversation with the person.
7. Don’t fake it — know exactly why you care about that person or their company, based on diligent preparation.

Notes:
(1) According to Chris, the over-arching principle is: Imparting energy is more important than sharing new information.
(2) Perhaps this advice applies to all relationships, not just business connections.
(3) Note Chris’ advice about how to listen with intent — “demonstrate you’ve heard exactly what was said by the other person, and encourage them to continue”. Cf. How to be a better listener.

If you have any paying customers, don’t quit

Edited excerpt from The Right Sales Metrics For Your SaaS Startup, an interview with Jason Lemkin:

Q: You share a lot of advice about business growth on your blog, Saastr.com, taken from your own experiences. What was the most important lesson you took away from growing EchoSign or NanoGram?

A: The most important lesson, especially for earlier-stage entrepreneurs, is don’t quit. What I’ve learned from both my startups is if you have anything at all, build on it. Every SaaS company has a different story of how they got to initial traction, that $1 million to $1.5 million run rate. Some got there in 2 months, others took 4 years to get to a million in revenue. It may seem bleak if you’re doing just $10,000 or $5,000 a month, but it’s almost impossible to get anyone to buy anything. They don’t need any more business web services. So if you have something, even if it that doesn’t pay everyone’s salaries, don’t quit.

Notes:
(1) Cf. Why SaaS and subscription businesses often take longer than B2C.
(2) Cf. For SaaS startups — how to avoid increasing costs inefficiently and prematurely.

“Job To Be Done” for seed stage startups (#JTBD)

Yesterday I ran a workshop for seed stage startups about how to use the Job To Be Done framework to raise their chances of achieving product-market fit. The surprise: many seed stage startups are unclear about who their target customer is. A simple Job To Be Done exercise exposes the lack of clarity and helps resolve it.

Here’s the presentation and exercise:
“Job To Be Done” for seed stage startups

A better format for brainstorming

Maoz is a not for profit which helps leaders in the Israeli public sector make better decisions by inviting input from a network of smart volunteers. This is how they conduct their brainstorming sessions:

• The “owner” presents the problem / issue.
• Participants ask questions for 15 minutes.
• Participants discuss possible answers and approaches; the owner observes the discussion but doesn’t participate in it.

Notes:
(1) Brilliant. Dedicated question time forces participants to ask questions before expressing opinions. And excluding the owner from the subsequent discussion removes the risk that the owner will get defensive, anchor the conversation in their current approach to the issue, or not listen because they’re thinking what to say next.
(2) Cf. Group brainstorming doesn’t lead to creativity; this does. Perhaps Maoz’s brainstorming is different because it involves external players, not the members of a team responsible for achieving a goal.
(3) Cf. When you’re given advice, here’s how to listen with an open mind.

How to find out in an interview if someone is a giver or a taker

Edited excerpt from 1 Interview Question That Cuts Through the BS to Reveal Someone’s True Character by Betsy Mikel:

Organizational psychologist Adam Grant says that the more often people help each other, the better the organization does. To create a culture of helping, you need to hire the givers, not the takers. However, just because someone is agreeable doesn’t mean they’re a giver — there are plenty of agreeable takers and disagreeable givers in this world. To find out whether someone is a giver or taker, irrespective of how agreeable they are, ask:

Can you give me the names of four people whose careers you have fundamentally improved?

The takers will give you the names of four people who have more influence than they do. They care more about influence than they do about helping. The givers will give you the names of four people you’ve likely never heard of, who are equal to them or below them in power. That’s because givers aren’t in the business of helping to help themselves succeed.

Notes:
(1) Thank you Hana Abduljaami for the tip.
(2) This is very different from most other recommended interview questions, such as Sonya Meloff’s, Peter Thiel’s, Spencer Rascoff’s and Lou Adler’s.

Don’t let self-criticism become self-flagellation

From The School of Life, via The Difficult Art of Self-Compassion by Maria Popova:

To survive in this high-pressured, crazy world, most of us have to become highly adept at self-criticism. We learn how to tell ourselves off for our failures, and for not working hard or smart enough. But so good are we at this that we’re sometimes in danger of falling prey to an excessive version of self-criticism — what we might call self-flagellation: a rather dangerous state, which just ushers in depression and underperformance. We might simply lose the will to get out of bed.

For those moments, we need a corrective — we need to carve out time for an emotional state of which many of us are profoundly suspicious: self-compassion. We’re suspicious because this sounds horribly close to self-pity. But because depression and self-hatred are serious enemies of a good life, we need to appreciate the role of self-care in a good, ambitious, and fruitful life.

Notes:
(1) “Treating yourself with the understanding, mindfulness and kindness with which you would treat a friend – leads to far greater resilience, productivity and well-being.” From Stop beating yourself up.
(2) At the management level: (i) Build self-confidence — but not your own, and (ii) A simple litmus test for great managers.
(3) At the company level: Why celebrating wins is so hard, but so important.

VCs make two common errors, the data shows

Excerpt from the Startup Genome Report — A new framework for understanding why startups succeed:

1. Many investors invest 2-3x more capital than necessary in startups that haven’t reached problem solution fit yet. They also over-invest in solo founders and founding teams without technical cofounders despite indicators that show that these teams have a much lower probability of success.

2. Investors who provide hands-on help have little or no effect on the company’s operational performance. But the right mentors significantly influence a company’s performance and ability to raise money. (However, this does not mean that investors don’t have a significant effect on valuations and M&A.)

Notes:
(1) Re. “Many investors invest 2-3x more capital than necessary in startups that haven’t reached problem solution fit yet.” Cf. (i) The real difference between funding rounds and (ii) Why you should bootstrap your startup before raising money.
(2) Re. “Investors who provide hands-on help have little or no effect on the company’s operational performance.” Cf. VC pitfalls to watch for: trying to fix companies.

How money can mess up your startup

Edited excerpt from MailChimp and the Un-Silicon Valley Way to Make It as a Start-Up by Farhad Manjoo:

Start-ups fueled by venture capital often need to figure out how to run like ordinary businesses; they embark on unsustainable growth, they forget about earning money, they don’t learn how to weather tough times. The tech economy is littered with companies that raised too much money — and suffered for it.

“One of the problems with raising money is it teaches you bad habits from the start,” said Jason Fried, the co-founder of the software company Basecamp. “If you’re an entrepreneur and you have a bunch of money in the bank, you get good at spending money.”

But if companies are forced to generate revenue from the beginning, “what you get really good at is making money,” Mr. Fried said. “And that’s a much better habit for a business to work on early on, to survive on their own rather than be dependent on money people.”

Notes:
(1) Thank you Russell Rothstein, Founder CEO of IT Central Station, and Zach Abramowitz, Founder CEO of ReplyAll, for recommending the article.
(2) For startups that have already taken VC funding, see (i) Give your startup time and options — burn less (ii) Get to profitability — here’s how, and (iii) “We simply can’t cut costs without hurting our growth”.
(3) Cf. Why startups shouldn’t scale prematurely.

Can digital products leave space for silence?

Edited excerpt from I Used to Be a Human Being by Andrew Sullivan:

Has our enslavement to dopamine — to the instant hits of validation that come with a well-crafted tweet or Snapchat streak — made us happier? I suspect it has simply made us less unhappy, or rather less aware of our unhappiness, and that our phones are merely new and powerful antidepressants of a non-pharmaceutical variety.

Our need for quiet has never fully gone away, because our practical achievements, however spectacular, never quite fulfill us. They are always giving way to new wants and needs, always requiring updating or repairing, always falling short. The mania of our online lives reveals this: We keep swiping and swiping because we are never fully satisfied. The late British philosopher Michael Oakeshott starkly called this truth “the deadliness of doing.”

There is the option of a spiritual reconciliation to this futility, an attempt to transcend the unending cycle of impermanent human achievement. There is a recognition that beyond mere doing, there is also being; that at the end of life, there is also the great silence of death with which we must eventually make our peace. From the moment I entered a church in my childhood, I understood that this place was different because it was so quiet. The Mass itself was full of silences — those liturgical pauses that would never do in a theater, those minutes of quiet after communion when we were encouraged to get lost in prayer, those liturgical spaces that seemed to insist that we are in no hurry here. And this silence demarcated what we once understood as the sacred, marking a space beyond the secular world of noise and business and shopping.

A sustained spiritual life is simply unfeasible for most mortals without these refuges from noise and work to buffer us and remind us who we really are. But just as modern street lighting has slowly blotted the stars from the visible skies, so too have cars and planes and factories and flickering digital screens combined to rob us of a silence that was previously regarded as integral to the health of the human imagination.

This changes us. It slowly removes — without our even noticing it — the very spaces where we can gain a footing in our minds and souls that is not captive to constant pressures or desires or duties. And the smartphone has all but banished them.

Notes:
(1) The entire article is remarkable. Thank you, Andrew.
(2) Cf. How to stop your phone from distracting you and wasting your life.
(3) Cf. How tech products misframe our choices, and product managers should do better.

Does your company description resonate with potential customers?

Here are three company descriptions. In which is the value proposition for customers clearest, and why? How would you improve them?

CliClap helps you generate sales leads by sharing articles of interest to your target customers with an added call-to-action for your company or product. This gives you the benefits of content marketing without the costs of content production. CliClap’s solution doesn’t require any technical integration and allows you to get started in minutes.

Honeybook is on a mission to connect the different parts of the events industry by reimagining the way creative professionals work with their colleagues and clients.

OptimalQ helps companies increase sales. It does this by identifying, in real time, the best time to contact potential customers when they are physically and mentally available. Companies that use OptimalQ have realized an increase of over 70% in answer rate and over 18% in average duration of answered calls.

Notes:
(1) “The key here is to keep it really short and use plain English” — from Clarifying your strategy using a simple template.
(2) Cf. How to ensure your company is customer-centric, and the challenge for ad-supported services.
(3) Cf. How to name your product and create its tag line.

If you want to be a better listener, here’s a simple tip

Edited excerpt from Startup founders’ most common mistake in meetings — and how to avoid it:

Before you talk with someone, set a target for what % of the conversation you want them to be talking. Remind yourself of that target during the conversation.

Notes:
(1) Cf. How to have more valuable and rewarding conversations with people.
(2) Cf. How to listen when you disagree.
(3) Cf. How to be a better listener.

How your mood at the start of the day impacts your productivity

Edited excerpt from Eurekalert:

Researchers found that employees’ moods when they clocked in tended to affect how they felt the rest of the day. Early mood was linked to their perceptions of customers and to how they reacted to customers’ moods, and had a clear impact on performance, including both how much work employees did and how well they did it.

“We saw that employees could get into these negative spirals where they started the day in a bad mood and just got worse over the course of the day,” said Steffanie Wilk, associate professor of management and human resources at Ohio State University’s Fisher College of Business. “That’s why it is so important for companies to find ways to help their workers start off the day on the right foot.”

Notes:
(1) How can individuals ensure they start their day happy? Eric Barker suggests: (i) ensure you have something to look forward to from the night before, (ii) ensure the first thing you do gives you a feeling of control, (iii) eat breakfast, (iv) send a “thank you” email to someone, (v) kiss someone you love, (vi) plan how you’ll deal with changes, and (vii) do something you dread.
(2) Any ideas for how companies can “find ways to help their workers start off the day on the right foot”?