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How to Recruit the Best Talent for Your Online Business

Voiceover: Rainmaker FM.

You’re listening to The Digital Entrepreneur, the show for folks who want to discover smarter ways to create and sell profitable digital goods and services.

This podcast is a production of Digital Commerce Institute, the place to be for digital entrepreneurs. For more information, go to Rainmaker.FM/DigitalCommerce.

Sean Jackson: Welcome to The Digital Entrepreneur everyone. I’m your host, Sean Jackson, and I’m joined as always by the illuminating Jessica Frick. Jessica, how are you today?

Jessica Frick: I’m illuminated, Sean. How the Jackson are you?

Sean Jackson: I am well, as always. We left the last episode with the question of the week, which I think is perfect when thinking of you.

How weird is too weird when it comes to standing out, when it comes to your unique selling proposition, and when it comes to really crafting that special mojo that is you and your organization?

Jess, what do you say? How weird is too weird?

How Unique You Have to Be to Stand Out

Jessica Frick: I think you can be as weird as you want to be. But I think there’s certain levels of weird that are appropriate for certain situations. I mean, you don’t want to let your full freak flag fly in a client pitch.

Sean Jackson: Right.

Jessica Frick: You know, just maybe a little freak. Wear something a little weird, or maybe make a joke that somebody would have to catch.

But when it comes to recruiting, you can be super weird. I think that that would actually help you find an employee or a staffer that might not otherwise come. Just because they resonate with you, and they’re like, “Oh, my God. They get me.”

Sean Jackson: I think you’re right. I think you can be unique.

And being unique means being yourself on your best day, but truly being yourself. Not trying to be something that you are not.

I mean, if you looked at me — me dying my hair pink does not go with my persona, okay? It just doesn’t.

Jessica Frick: No.

Sean Jackson: I would stand out, to be certain. But there would definitely be a disconnect, and I wouldn’t be able to carry it off. And so I do think you’re right.

I think you do have to be unique and different and really something that is memorable and remarkable. I think you don’t want to be boring. You do want to stand out, but you don’t have to be something that you are not.

And I think it goes to the core set of values that you believe in yourself and the people that you want to attract. The people that you want around you — be it the audience that you’re trying to build online, be it the customers that you’re trying to sell to, or being, as you pointed out, the employees or the contractors inside your organization, right?

Jessica Frick: Absolutely. If you just disappear into the background, you’re going to just be part of the background noise. And if you’re selling an ebook or if you’re creating a new membership organization, the more people feel at home with you, the more they’re able to trust you.

Sean Jackson: Yeah, and they look forward to seeing you.

I mean, let’s face it: There’s a lot of boring people out there. The more that you can infuse your work with the unique characteristics of what you do and what makes you special — and really clearly articulate it. That’s what I really think it comes down to, is that you have to really know what it is about you and what you stand for and clearly articulate it so that it becomes a compelling part of your messaging.

Because it is okay to discriminate against people who are not sharing in the values that you share when you’re trying to build an organization. If you have certain values and you are clear about articulating them, there will be others that will be derisive of those values, that will be dismissive of it, and may not find any value in it. And you know what, Jess? That’s okay.

Jessica Frick: It is. I think though a lot of people don’t necessarily need permission to get weird. But I think that there’s a lot of us who were perhaps freaky kids, getting called out weirdo in the playground. And it was a bad thing then.

But now it’s an asset. And it takes some guts to make those first steps and be more you than who you think they want you to be. Little by little, you can get as weird as you want to be.

Sean Jackson: There you go.

I think this really comes to a head when we start talking about building up an organization. That by identifying, articulating, and really understanding what makes it unique about the organization you’re creating, which really centers on the solopreneur to start with and then expands and grows from those they bring around. It’s very important from the onset to understand those unique qualities to attract the right people, and that’s a little bit about what today’s show is.

We do have a very special guest on who is going to talk to us about how to create up that right type of organization. Be it a standard office or be a remote workforce, how to articulate that culture, how to attract the new type of talent that is out there, that is very discerning in the type of jobs they are looking for. And really understanding that, by being better at understanding yourself, it may not only save you money in the long run but actually help facilitate your growth.

Jessica Frick: Yes.

Sean Jackson: I know.

When we get back from this break, we will be talking to Kathryn Minshew, the author of The New Rules of Work, about how you can build an organization that attracts the best people. Stay tuned.

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Welcome back from the break, everyone. Jessica, it is time for our interview this week. Whom do we have?

Jessica Frick: This week we have a very special guest, Kathryn Minshew. She is the CEO and founder of the TheMuse.com, which is a career platform used by 50-plus million millennials to find a job, learn professional skills, or advance in their career, and by hundreds of companies looking to hire or grow their employer brand.

Kathryn is also a Wall Street Journal and Harvard Business Review contributor. She’s spoken at MIT and Harvard, appeared on Today and CNN, and she’s been named to SmartCEO’s Future 50 and Inc.’s 35 Under 35.

Most importantly, of recent news Kathryn is co-author of the forthcoming book The New Rules of Work: The Modern Playbook to Navigating Your Career. We’re very excited to have her today. Kathryn, thank you so much for joining us.

Kathryn Minshew: Absolutely. Thank you for having me. I’m really excited to be here.

Sean Jackson: Kathryn, I want to get into this because I figure I’m going to take a giant leap here, okay? I think you’re probably an expert in career management as well as helping companies figure out how to attract the right people. Would you say that’s a true statement?

Kathryn Minshew: I think it’s fair enough, but it is definitely an unintentional expertise. I like to joke that I started this business because I needed the advice, and I’ve ended up gaining so much more than I ever expected.

Sean Jackson: See? It helps when you’ve been there, right?

Kathryn Minshew: Exactly.

Sean Jackson: Let’s get into this a little bit.

The Muse, by the way, is a beautiful site. Congratulations to you on your success and obviously the valuable information you have there.

Given who our audience is, I want to talk a little bit about where you are seeing the trend now for people in the workplace. Because obviously our audience are the people that do the hiring. But I think, before you can hire anyone, you need to know what is that pool of talent out there. What are they expecting, and what are they looking for?

So talk to us a little bit about the modern worker today and the person that’s looking to manage their career.

Why Younger Workers Are More Discriminating in the Jobs They Pursue

Kathryn Minshew: Absolutely. One of the big things that has differentiated The Muse and I think our community is that the people that we cater to are often thinking about work in a fundamentally different way from perhaps 10, 20 years ago. And there’s a number of differences, but just a couple at the high level.

One is that candidates are becoming more like consumers. So it’s no longer enough for a company to post up a job description and say, “Walk right this way, come through my interview process, and maybe at the end I’ll tell you if you get an offer.”

Instead, candidates are taking more power and they’re saying, “Well, why this job? Why this company? What is it that will happen to me if I join you? What will I learn? Who will I work with? What will my day-to-day be like?”

They’re becoming much more informed and discerning consumers, and companies are reacting to that by changing their entire recruiting process. The investment in employer brand, the candidate experience that someone has as they’re going through your application interview process. All of that.

Secondly, the types of things that people are looking for, as I mentioned, it’s less about the sort of flashy perks or simply just, “Oh, you have a job? I want a job.” That is definitely going the way of the dinosaur.

We’re seeing a lot of people focus on the people, purpose, and path. So “Who will I be working with?” The purpose being the overall goal, mission of the company. “What is the point? What is the ultimate reason we’re all here together?”

And then path is opportunities for growth and development. This has never been more important, because career paths are less linear. And so as individuals realize they need to develop skills that will take them where they want to go in their career, they’re looking to employers to say, “What experiences that will help me develop those skills can you provide, and how will you help me grow?”

Sean Jackson: So it really comes down to the fact that people who are looking for a job now are not just looking for a job. They’re looking for something a lot more.

They’re becoming, I would say, much more discerning about the opportunities that they would like to pursue. Would you say that’s an accurate statement?

Kathryn Minshew: Exactly. It’s completely true, and it’s changing the entire way that employers are thinking about attracting those people.

Sean Jackson: Got you. Let’s talk about that a little bit.

Because, obviously, if you have a supply of people out there that are much more discerning, that are much more discriminating — looking for the 3 Ps, as you mentioned out there. How as either a solopreneur looking to scale up or an established business, where maybe I’m doing a lot of my work with people who are not necessarily in an office, how should I be thinking about company culture and trying to appeal to this more discriminating audience out there?

Why Corporate Culture Is More Than Just a Slogan and Is Essential in Finding the Right People

Kathryn Minshew: I think the first mistake that a lot of people make is thinking that there’s some sort of generic best culture or attractive culture that exists that they should emulate. Instead, the most successful people figure out what it is that they already have to offer.

So, what’s authentic to the opportunity, to their business. Whether it’s a one-person solo shop looking for a number two or someone else to help out or a much larger and more established business.

There’s a lot of ways to do this, but one thing that I find really helpful is, if you are in a position where you already have existing employees, you can actually get some of your best recruiting content by asking them, “What made you take this job? What drew you to this opportunity?” You can gather and sort of capture some really interesting content about what already brings people to your open roles from the people who’ve done it.

Frankly, if you’re a solo entrepreneur or you’re looking for your first, second, third person and you’re very small, that’s an opportunity in and of itself. There are people out there who are specifically drawn to and excited by that sort of thing, and so I would put that front and center when you’re recruiting.

I’d say first you have to figure out what is it that sets you apart. What are those unique identifiers that might make someone say, “Yeah, that’s what I want to do.” Then secondly you’ve got to make sure you get those in front of the right people. Whether that’s making sure they’re on your career site, if you’re at the stage where you have a career site, making sure that your existing employees or your network is sort of informed and empowered to be able to spread the word.

And then the simple job description. I think the days when you can just post Looking for a sales person or a software engineer and get a bunch of great people in the door, those days are numbered. And the best job descriptions have a section, not just what do I want from this candidate or what are the qualifications, but also what we can offer you. Why would you want this role?

It’s incredible, this sort of uptick you can see in applications and then conversion from people who look at your job description to actually apply when you write the right things and you really think about the person reading it as you’re creating that.

Sean Jackson: Of course, there’s a value when you do this as a company or a solopreneur, because it forces you to really think about the people that would fit well with you.

I think that’s the other side of it, that too often businesses that are growing especially are like, “We just need bodies in the door. If they can spell their name properly and, you know, I can check off on the resume the things that I think are important, bring them in.”

I think that does a disservice as the company and organization grows, because you’re not sitting there putting in the right mix of people into the organization.

Kathryn Minshew: Exactly. Everyone who’s worked on a team knows the impact of having somebody who’s just the wrong person for that team.

Now, it doesn’t mean they’re not a great person. They may be wonderful. Frankly, they can be very difficult. It’s more about the fit and do their preferred ways of working, their priorities, their core values as a professional align with what the company or the team needs. I think that’s so important for people to keep in mind when they’re hiring.

It’s interesting, because one of the most popular exercises in the book, in The New Rules of Work, is from the candidate’s perspective. It’s helping people look at their career values, essentially, and we have a long list in the book.

Someone who’s seeking creativity, flexibility, autonomy — they’re going to be looking for very different opportunities. And, frankly, a very different employee motivated in very different ways, from someone who might be seeking stability, compensation, the ability to move up in a very predictable fashion, prestige.

There are a lot of different work values. And so for an individual candidate, there’s a lot of utility in understanding what really motivates you at the end of the day. For a company, I think it can be so helpful to make sure that when you’re bringing somebody in, that their values are aligned with what you can provide.

Because, frankly, if you bring someone in under I don’t want to say false pretenses, but I think everyone’s familiar with that situation where a company sort of oversells itself and what it’s offering. That’s not going to end up well for anybody. Best case, you’ll have someone who leaves after a short period of time. Worst case, you could have someone who’s a long-term part of your team but ultimately is a bit toxic.

Sean Jackson: That’s important that you go into this. And it’s kind of funny, because to me it sounds like marketing your company to the people that are going to help you build your company. And do those things that we as online marketers would normally do both to attract an audience but also to attract an audience of potential employees.

That to me makes a ton of sense, because every organization is different. And the better way that you articulate that, the more clearly you articulate that, the better the results will be both in building the customer base as well as building the employee base. It’s generally the same type of rules.

I want to go in though, because one of the things when you were talking about all this, what kept on coming into my mind was the fact that the better that you can clearly articulate the core values, unique proposition, the type of person that would fit with your organization — there is a monetary side to that.

Correct if I’m wrong, but sometimes I would take less pay to be with the right organization. Where pay, sometimes where I get it in the extreme, is only to compensate for the fact that I don’t really want to work there, but they’re going to pay me so much to be there.

So talk a little bit about the role of paying and the whole salary side when it comes to these very discerning potential employees.

Kathryn Minshew: Absolutely. You’re spot on. The business impact is real. And I can give you a million examples, but just two that come to mind.

The first is, as you said, in how much you have to pay people to join the team. There’s a great statistic, and I don’t have it on hand right now, but it’s something like the average person would accept 19% lower salary to join a company that they were really excited about or where they felt like it was a good fit, compared to a company that did not have an employer brand or a positive association that resonated with them.

Right then and there, that’s been shown now by data. I would say it’s very true, in my personal experience. And we have over 600 companies on The Muse. We hear it from them as well.

When you find someone who is excited … For them, first of all, it’s more about joining a tribe or a community and being part of what you do and less about, “Well, this other opportunity is paying me $15,000 more, so thanks so much. Sorry.”

On the attraction front, it certainly has a business impact in terms of whether you can attract great people at sort of a normal market rate or, frankly, if you’re a growing company, sometimes even below market, versus whether you really have to overpay to convince people to come. That’s sort of number one.

Second is retention. I cannot tell you how many times I have seen this, where somebody, a great employee, will get that offer from a big business. I’ve heard recently about a situation that happened a couple of weeks ago. It’s a star employee. They had a friend in their network reach out and ultimately made that person an offer for I think it was something like $100,000 more in base salary.

It was a massive difference. Of course, this person thought about it and agonized, because that is a major lifestyle change. The original company could go up by a tiny amount, but not even close to that jump. And ultimately the person decided to stay, and part of that was that they believed in the culture, the experience, the place that they were.

I think that for leaders, it’s funny to me, and I don’t want to be … I’ll try and keep this really nice, but leaders have always been saying, “Oh, our people. The people are the most important thing.” But when you look at people’s actions, in fact, they often don’t act in a way that indicates that their people are the most important thing. And yet how does anything get done in your organization? It’s your employees, your team.

The more that you can both invest in those people, treat them well, but also, again, as we were talking about, making sure that you have something unique to offer and that you’re really being thoughtful about the employee experience. I believe that’s going to be more and more critical to both attracting but also keeping great people. Because information asymmetry is going away, and those great people are going to find somewhere that does value them if they’re not valued at your business.

Sean Jackson: Let’s talk a little bit. Being the finance guy, I love the financial side of the employee equation and especially nonfinancial incentives.

So I am here, I’m trying to grow my business. I am looking and following the advice that you give about really articulating what makes us unique, what really drives us to attract people who are inspired and want to join that tribe, if you will. But part of it is going to be pay. The other part are going to be the incentives that I put in to both retain and to encourage. Both, there’s financial and nonfinancial.

Let’s talk a little bit about that as I’m crafting up my package. Because I’ve got a great story, I’ve clearly articulated it. I’ve got a pay that may or may not be above market. But that’s not the only thing in the equation.

What is it that as an organization I need to start thinking about as far as incentives, as part of this discussion with potential hires, as well as current people I’ve got in my shop already?

Tips and Tactics You Can Use Right Now to Improve Your Online Recruiting Efforts

Kathryn Minshew: Exactly. I think this is a great point, because when people think about attracting — as you said, there’s a lot of incentives and a lot of benefits and things that employees are looking for. Some of them are financial, but a lot of them are not.

I will say, I’m going to go through a couple of different examples. Not every example is right for every company. And this goes back to figuring out your specific, unique value proposition essentially, for lack of better words, as an employer. So don’t feel like you’ve got to do all of these.

For example, some organizations have been incredibly successful in investing in things like flexible working hours, the ability to work from home, bringing children into the office. We actually have a baby-at-work policy at The Muse for infants that are under six months old that’s been very successful. And that’s been tremendous in terms of both people with small children feeling welcome and feeling excited about the company, but also, I think, we’ve seen retention benefits across the board.

We also see that there are companies that will take a strong focus on investing and learning and growth. I was talking about this earlier, but that there are ways to do this that both have a financial and a nonfinancial impact. Financially, obviously, companies that can provide formal training, that can send their employees to conferences or other external learning opportunities. That’s obviously a huge draw for a lot of people that are thinking about building skills and experiences in their career.

Nonfinancially, I think there are also some really interesting opportunities. Whether it’s giving people the chance to rotate into a different department, pick up a new skill, work with someone that’s in a different field or different part of the business to, again, see more about what they do. These sorts of things can be really big draws for people, and I think that it pays to be creative.

I’ll give another quick example. When The Muse was very small, we didn’t have a lot of budget for anything. In fact, the business now is over 130 full-time employees. But the first two years, we were three, and then five, and then seven, and grew very slowly.

But a couple of things we did that people have since told me really made the difference: One was I really got to know what motivated each person and did my best to provide that. Now, you can’t do that as easily at a hundred people, but you can at three, at five, at seven. And it’s incredible.

I’ll give you a silly example, but one of our early team members, our kind of lead marketer, was just a huge basketball fan. I happened, two months after I learned that, to get an invite to an event where I think Allen Iverson was speaking and I couldn’t go. And so I reached out and I said, “Can I send somebody from my team?” And I sent Elliott, and it was this huge, exciting thing for him. And I think he appreciated that I remembered.

We also would, because we were very small, we would approach conferences and say, “We can’t afford to pay your ticket price, but can we do X, Y, Z or promote you on our social channels in advance and send somebody for free?” A lot of conferences would say yes, and so we were able to get professional development opportunities for the team without investing a huge amount of money.

I can talk more. I think it’s really useful for people to think about all of the additional incentives. But whether it’s professional development and growth, is it flexibility and work life integration, is it upgraded software and tools and the type of things they’ll be using in their day-to-day?

People are motivated in very diverse ways and, frankly, that’s a great thing for the world. But as an employer, and especially as someone who’s leading a small team, you have a unique opportunity to really understand people on an individual level and then help give them the thing that’s going to most specifically motivate and excite them. And I think that it’s very, very powerful.

Sean Jackson: I want to end our conversation, because if you’ve ever read The Fountainhead by Ayn Rand, it was interesting how the protagonist in the story went from running their own shop, to going back to work, to again coming through the trials and tribulations in the story.

And I think a lot of online entrepreneurs at some point will see failure, and it’s sad but it’s true. Talk to us a little bit about, “Look, I’ve been running my own online shop for a while, okay? And it’s not going as well, or I may need to augment my income by getting a permanent job.”

Talk to us a little bit about coming back from that solopreneur world and re-entering the marketplace. Of course, in Silicon Valley, you see this all the time. I would do my startup, and when it doesn’t work, somebody go gets a job.

Talk to us a little bit about re-entering the workforce from that solopreneur or very, very small business environment.

Kathryn Minshew: Firstly, I think from a mindset perspective, the most successful people are ones that realized they have developed some incredibly valuable skills as a solopreneur. And that going back into a more traditional workforce doesn’t necessarily mean that they are sort of giving up on that path.

In fact, it’s an opportunity to see how another business does things. Polish the types of skills that you would get at a larger organization versus a small one, and ultimately go back if you want into being a solo entrepreneur in the future, armed with more. I think looking at it that way can be really helpful.

Secondly, I think that there’s no rule book that says you have to go get a job doing what you were doing before you were a solo entrepreneur. And sometimes people think that, because they’re like, “Well, this is what I’m qualified to do.”

But one of the things about The New Rules of Work — and this is a premise that TheMuse.com is built on and that the book is honestly built on as well — is that your career is determined by the skills you have and whether you can adequately convey those to new people. It’s not necessarily a line of experience or a degree or a credential.

I think this is incredible news for solo entrepreneurs, because you tend to have picked up a tremendous number of skills in what you do day in and day out. And so this is where I think writing out a cover letter … I mean, actually before that even, a statement: What is it that you do well? What could you bring to an organization? It’s obviously very tempting to focus on the functional things.

For example, let’s say you’re pro digital marketer, but you’ve also probably had experienced wrangling complex projects, or dealing with certain financials, or understanding a business from three different sides. Because you’ve been doing it. And so thinking a bit more broadly.

Another exercise we recommended in the book is talking to a few folks who know you well about, What would you say my strengths are. What do you feel like I’m excellent at? What could I bring to a new organization? Because people will see things in you that you take for granted in yourself, and those can sometimes be the most powerful.

Then I would frankly lay those out on a list. Firstly, it’s just great to regain your confidence. It can be the basis for updating your resume or your cover letters, and it can be a good cheat sheet before you go into an interview, making sure that you kind of harken back to examples of the skills that you possess. Because that is ultimately what’s going to make that transition more smooth.

Sean Jackson: Kathryn Minshew, thank you so much for being on the show. The name of the book is The New Rules of Work: The Modern Playbook for Navigating Your Career. We truly appreciate you joining us and sharing your insight.

Kathryn Minshew: Thank you so much. I really enjoyed it.

Sean Jackson: Hey, everyone. This is Sean Jackson, the host of The Digital Entrepreneur. And I want to ask you a simple question: What is your business framework for selling digital goods online?

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Welcome back from the break. Now it’s time for our recommendations, Jess. And I’ve got one that is directly applicable to our guest today, but it’s not her book.

Jessica Frick: What is it, John?

Sean Jackson: It so happens that on her site, in addition to the book that they’re promoting at TheMuse.com, they also have this ebook called Employer Branding 101. And it’s an ebook, it’s a download. Go ahead and take a moment to go to TheMuse.com/employers, with an S, and download the book.

Because here’s why: I think much of our audience are online marketers. They understand the art of communicating, inspiring people to act. And, of course, whether it’s an audience that you’re looking to turn into customers or potential employees that you’re looking to hire, this type of understanding of branding is something I think our audience would get right off the bat. And to know that they already have the skill, this book I think would help reinforce it.

So go to TheMuse.com/employers and download her Employer Branding 101 book. That’s my recommendation.

Jessica Frick: That’s a great recommendation. Mine is completely the other way, though.

Sean Jackson: Uh-oh.

Jessica Frick: I’ve been thinking a lot about research lately, as far as keywords and ads in the online space. And I want to recommend SpyFu. You can learn about them. It’s SpyFu.com.

What SpyFu excels at is competitive research. So you can actually type in competitors websites and find out exactly what they’re doing online to give you a better idea on what you should be doing, might consider doing, or what you might want to stay away from.

Sean Jackson: Okay. So SpyFu.com. Definitely well known and absolutely somewhat devious, if you will. But not really, because it’s all information that is out there.

SpyFu.com is Jess’ recommendation. Alrighty, I like that.

Jessica Frick: You know, Sean, you said devious. And that makes me think more about the question that I wanted to ask next week, if you will indulge me.

Sean Jackson: I will.

Finally, Sean and Jessica s Question for the Week: Should You Be Overly Obsessive About Competitive Research?

Jessica Frick: My question is, should you be doing competitive research? Should you be paying attention to what your competitors are doing at all, or is that going to distract you?

Sean Jackson: Ooh, good question. What say you?

Jessica Frick: I think you have to. I think if you don’t know what your competitors are doing, even if you think you don’t have a competitor, I think you should at least know what other people who are in similar spaces are doing so that you can better create that unique selling proposition and really kill it.

Sean Jackson: Well, I will take the counter side of that argument and say that if you focus too much on what your competitors are doing, you may not be focusing enough on what you should be doing.

Jessica Frick: I can see how that would be there. This is a genuine question. I think it could go either way.

Sean Jackson: I think it could, and we will find out how it evolves and our conclusion on the next episode of The Digital Entrepreneur. Take care, everyone.

Jessica Frick: Thanks for listening.

The Transcript

How to Hire the Right Contractor or Employee for Your Online Business

Voiceover: Rainmaker FM. You’re listening to The Digital Entrepreneur, the show for folks who want to discover smarter ways to create and sell profitable digital goods and services. This podcast is a production of Digital Commerce Institute, the place to be for digital entrepreneurs. For more information go to Rainmaker.FM/DigitalCommerce, that’s Rainmaker.FM/DigitalCommerce.

Sean Jackson: Welcome to The Digital Entrepreneur, everyone. I am Sean Jackson, and I am joined, as always, by the delightful Jessica Frick. Jessica, how the Frick are you today?

Jessica Frick: Delightful, Sean. How the Jackson are you?

Sean Jackson: Good. I’m going to have to start looking through my thesaurus and find more synonyms that I can start using to reference you.

Jessica Frick: I was going to say, I’ve been called worse.

Sean Jackson: I know, and mostly by me.

Jessica Frick: Not in the podcast, Sean. Not in the podcast.

Sean Jackson: No. We left everyone hanging last week with our question of the week, which is about when should you bring in outside help, or when should you bring in a contractor or an employee into your organization. Jess, you took the position of bringing them in early in the process, right?

Jessica Frick: Absolutely, otherwise you’re going to go crazy, and we want to avoid that.

Sean Jackson: Give the argument for bringing someone in from the outside early.

Jessica Frick: First off, I’ll say I understand where you’re coming from. You want to wait until you absolutely need them because you don’t want to spend money on things — that’s presuming that’s where you’re going to go with that. I think that it’s worth the money — when you know you’re going to need them eventually anyway — to have somebody come in and own the job. I used to work with a client who would say that if he was the smartest guy on his team he was doing it wrong.

Sean Jackson: Right.

Jessica Frick: He would hire these brilliant people, present company obviously included. We would come in and bring our expertise for things he would never even think of. He was able to grow his business and sell it off. I’m not sure he’s working now. I think he’s just hanging out with those piles of money. I’m not sure. I’ve got to check in with that guy.

I know that I have seen it happen before where businesses will be built and they go through so many strains and pains that your company starts losing morale, you start losing business, and you can’t attend to the business you already have. Thus, you need to get that help before you think you need it, because chances are you’re not going to know you need it until it’s too late.

Sean Jackson: Yeah, I think there’s a case to be made for that. Let me give you the argument against. I think you can’t bring anyone in until you know your business to an extent that you can direct them in the place that you want them to go. Let me explain that. I think there is an evolution to every online business or to every business in general. We all start with the one or two things that we’re doing, and then over time we have more things and more things. We start to say, “The pressure is building. I really need some help.”

But too often, if we bring them in too early, we haven’t thought through what is that help that we need. Defining what we need done and understanding the best way to get it done based on the unique culture that you have in the business. I think sometimes we jump the gun a little bit and say, “I just need to bring somebody in right now. If they’re really smart they’ll figure this whole thing out, because I don’t have any time to talk to them.” I think that’s the mistake you have when you bring them in early. But, of course, to your point, you would say bring them early benefits you how?

Jessica Frick: Because they can expand upon your capabilities and save you from losing your mind.

Sean Jackson: Yeah, that’s a foregone conclusion in some cases.

Jessica Frick: Yeah, you have to be a certain kind of crazy to do this.

Sean Jackson: Yes, I think you had to be crazy to start your own online business, are you kidding me?

Jessica Frick: I think you cannot buy amazing customer service. You just give it. And you give it early and you give it often, because once you screw that up, you can’t get that back.

Sean Jackson: Yeah, what you’re referring to is the fact that if you don’t bring in somebody early enough then you may find that you are losing people quickly because you can’t service them in the way that they were used to when you were smaller and it was just you and maybe just a few customers, a few clients, etc. Right?

Jessica Frick: Exactly.

Sean Jackson: Putting people in early allows you time to train them before things get crazy. It allows you time to sit there and really understand the task at hand and how to service that best. Before the crazy comes on you when you’ve got 20,000 things that are occupying your time and attention. That would be the argument for early. The argument for late is very simple: if you don’t know what you need people to do, then you’re going to be bashing your head against the wall because you haven’t really figured out, “What are those tasks? What are those projects?” Sometimes taking the time to understand them so you can make a strategic move, that helps with time, which means later in the process.

You know what, Jess? It really comes down to what does our audience think. What do they think? Should you bring somebody in early? Should you bring them in later? That’s what it really comes down to, what do you think about that? We have the best mechanism for you to give us that feedback by visiting our page and leaving a comment. Letting us know when you — based on your personal experience — have found it right to bring in those outside people. When we get back from the break, we have …

Jessica Frick: The lovely and talented Jess Ostroff from Don’t Panic Management.

Sean Jackson: Jess is amazing — both our Jessica as well as Jess. But Jess is amazing because she’s built a whole business both with employees and contractors and helping other business owners reach out and have the resources that they need to build their business.

So for today’s interview, we decided that … We had too many Seans on before, right, Jess? We’ve had so many Seans on the show recently that I wanted to confuse our audience even more and bring a Jess on to contrast with our lovely Jessica. Jessica, will you introduce our guest today?

Jessica Frick: I will. She’s one of my favorite people in the whole wide world. She makes me so happy whenever I see her. It’s so fitting that she is CEO and Director of Calm of her company, Don’t Panic Management, which works with small business owners, entrepreneurs, and executives to help them organize and execute their day-to-day operations, giving them the ability to focus on the things that matter most. She is a wonderful human being, a “get ‘er done” girl, and her favorite kind of cheese is aged goat gouda. I introduce you to the lovely Jess Ostroff.

Jess Ostroff: Quite the intro. Thank you, my fellow Jess. It’s so great to be here. Thank you, Sean.

Sean Jackson: Of course.

Jess Ostroff: I’m glad to meet you.

The Pros and Cons of Bringing in Help Early or Later

Sean Jackson: You know, to keep it simple, I’m going to call Jessica Frick “Jessica,” and I’m going to call you Jess. That way our audience won’t get completely confused. So Jess, let’s go through this. Because this is a very important topic, and you are in a very unique position to give the pros and cons. Let’s go through this general setup.

I have been working my online business primarily by myself for some time now. Maybe I’ve used a contractor here and there in pieces and parts, but infrequently. Given the success of my online business, things are starting to grow, I’m making some real money, and my time is really busy. When do you think, based on your experience, should a business owner start to consider putting someone more on a continual contract basis as a part of the organization or bring them in as an employee? What is the triggering event, do you think, to start to consider personnel as a big part of your online business?

Jess Ostroff: In my own experience — it is an interesting position to be in, because not only do I provide these services for other people now, but I also went through this myself as an entrepreneur. Where I got to the point where I had so many clients and so many hours of work that it was actually impeding my quality of life. For me, part of the reason why I started my own business was because I wanted to have the freedom. I wanted to have a flexible lifestyle. The second where I felt like all this money was going into the bank but I didn’t have any time to spend it, that was the time where I decided to bring on more help. I think for a lot of entrepreneurs there’s that friction point where the cost of getting help and of getting some of your time and your sanity back is worth it.

Everyone has a different setup, a different level of profit margin, so I think that cost element is the differentiating factor between whether you should hire a contractor or an employee. Overall, the time when you get overwhelmed and you get to the point where you’re not enjoying what you’re doing and you’re not able to spend any time living your life, I think is when you should start thinking about hiring someone in the first place.

Then, for most people, it’s a slow build. I think that’s why people start with a contractor or freelancer relationship. Because — especially in online businesses and service-based businesses — you can’t always guarantee that you’re going to have X amount of sales or X amount of clients to pay the bills. Starting someone small — maybe five or 10 hours a week — and having the opportunity to grow … When I start working with people, I always ask them what they are doing in the rest of their lives. A lot of them are mothers or fathers, or they’re actors or they’re chefs — they do have other hobbies. But if I wanted to bring them from, say, 10 hours to 15 hours a week, I have the flexibility of doing that.

That’s why that’s a really good option for people. On the other hand, if you’ve all the sudden gone from 10 clients to 50 clients and you really need day-to-day, full-time support, and you know that maybe it’s even administrative things like scheduling your meetings or booking your flights that you’re not getting to … We had a client recently that I’m thinking about who ended up in Vegas a week early for an event because he booked his own travel. That was the pain point for him where he was like, “I’m so busy with my clients that I can’t even book my own flights.”

It’s the pain of screwing up and doing things wrong that was the impetus for him. But there is something really nice about being able to share the burden. That’s what I use my employees for, is having someone there all the time, someone that I can call on. You have to get to a certain level to be able to justify that kind of cost.

The Best Way To Start the Process

Sean Jackson: Let’s talk about that, because I think in the natural evolution of anyone’s business there is going to be that point where you’re looking forward and saying, “I’m going to need some help.” Now, I would hope that you need help because you have so much business coming in and you have so much money that you’re really like, “I’ve got to do something now.” I think for most people it’s a gradual shift between, “I’m going to bring somebody in to start with — maybe on a contract basis, but a very regular contract basis, not ad hoc,” and then moving them to an employee. I’m going to talk about that.

I want to talk about the difference between the regular contractor — which is a service that you provide, obviously, so you have a lot of understanding of that — versus that decision when you’re going to say, “I’m going to put them in as employee.” Because there are trade-offs to both.

Let’s start with what’s in your wheelhouse. Talk about the — I want to call it “continuous contractor.” Not a permanent person, but a continuous contractor. What is the basic thing someone should be looking at when they are considering that type of service, be it a programmer, a writer, a personal assistant? It really doesn’t matter. This is someone on a regular basis. Let’s talk about the decision process on that. Specifically, what should they be looking for? How should they set that up?

Jess Ostroff: I think that when you’re going to work with someone like that on a continual contractor basis, you have to think about what type of tasks you’re going to delegate. If they are the kinds of tasks where they could be done at any hour of the day from anywhere in the world, as long as there’s a deadline and people understand what the instructions are, they’ll get them done. That’s the perfect kind of job for a freelancer or continual contractor relationship.

That’s because usually these kinds of contractors are what we call the digital nomads, or people who actually value their independence and their freedom more than they value — or at least equally as much as they value their career. They might be working from Bali one day and then they might be working from Tennessee another day. For them it’s more about a deadline. As long as they get their work done by this time, it doesn’t matter if they’re holding a nine to five schedule or not.

Sean Jackson: Let’s talk about that, because that’s important, what you just said. The deadline and task-oriented approach. Do you bring in, for instance, some sort of to-do list managing that? I think you’re right. I think you hit on something, which is bringing in that continuous contractor, it’s very much task-oriented. A clearly defined “what I need and when I need it.” Am I using some sort of tool to do that? Is it fairly ad hoc via email? What is the best way to manage that process? I think if you do that you’re going to see success, but the problem is, if you’re so busy, you may forget when they’re supposed to have things to you.

Jess Ostroff: Totally. That’s a huge problem for a lot of people. I frankly don’t think that you can be a successful entrepreneur without having some level of organization. That’s tough love for a lot of people because they think, “I’m the ideas person. I just think of things and then they happen.” No, that’s not how it works. If you are the ideas person, I think doing soul-searching …

That’s something that I work on with a lot of my clients. I have these conversations all the time where people are like, “I know I need help, I just don’t know what I need help with.” I say, “You need to figure that out first. I’m not here to tell you what you need help with. I can consult you on that. I can take you through these processes that help you figure out what to delegate.” But it’s really a soul-searching process, because you’re trying to figure out who you are and what your value is as the business owner, what you’re best at.

Really, once you figure that out, you should be delegating everything else. If you are the ideas person and you’re not detail-oriented and you’re not good at project management or anything like that, then you probably need to get someone to do that first before you even consider hiring anybody else. Like you said, someone does have to manage the tasks. It might be through a tool, it might be through email, it might be through a calendar — that part doesn’t really matter. Everybody has their own preference on that. What matters is that someone’s there managing it and making sure it gets done.

Now, sometimes a contractor can do that. Sometimes these people are super-organized and, like I said, deadline and task-focused, so they are able to manage themselves. I would say the best freelancers and contractors are those self-starters who will say, “If I have a deadline on Friday and it’s Wednesday and I haven’t gotten what I need from my client to get the thing done, I’m going to be poking you for it.”

Whereas there are other people out there who are going to wait and let the deadline pass and say, “You didn’t get me what I needed.” I don’t think that’s the kind of person you want — whether you’re organized and busy and detail-oriented or not. You want to be able to hire … I would say the main benefit of hiring a freelancer or a contractor is that they are self-starter. They are most likely a business owner themselves, so they know how to get work done. They know how to hold themselves accountable and ask for what they need when they need it.

Why Contractors Working a Regular Schedule May Be the Best Way To Start

Sean Jackson: Let’s go through the contractor scenario a little bit more. I do want to jump into the employee side, but on the contractor side, let’s talk about money. How should you look with that continuous contractor in paying them? Is it going to be project-oriented? Should it be just a steady fee? Talk to me a little bit about how you’ve seen clients as well as your own people think about the money side of it. Again, that comes into my factor too. Yeah, I want to bring somebody in — heck I may even hire a project manager as a contractor to manage my other contractors — but what is the fee schedule? Is it continuous, meaning, “I’m going to pay you the same every week,” or is it really, “Hey, you do this, then you get that”?

Jess Ostroff: I think it depends on what you’re working on, but for both sides I think it’s definitely easier to have a fixed monthly fee for a set number of outcomes. It’s not just, “Okay, put in these hours,” necessarily. It’s actually, “Complete these projects and do these tasks.” And actually that’s really important from a legal perspective. You’ve got to be careful with being able to prove that they are on their own time and they have these set of deliverables, because if you ever got audited by the Department of Labor — which I have — you have to be able to prove that they have contracts in place for that.

If you can say, “You’re getting this much done. You’re getting paid for this many,” even if it is hours and you agree on a set hourly rate or you set up a set project rate, I definitely think it’s easier for everyone to pay that way. But if you’re in a situation where your client load really does grow and shrink on a monthly or quarterly basis, you might not want to commit to that. I think that’s okay if the contractor is okay with it.

You just have to figure out what works best for you as the owner. And you have to make sure that your margins are going to cover the freelancer. That’s the thing about contractors, a lot of times they are more expensive because you’re not paying for their health insurance, you’re not paying for their supplies, and you’re not paying to have them in the office. So you have to consider that you might be paying a little more per hour for a freelancer, but overall there’s less risk.

Sean Jackson: Let’s go through the biggest things that you see. What are the two biggest mistakes? I want to talk about employees next. Two biggest mistakes you see — first from the client perspective and second from the contractor perspective. What are the two biggest mistakes that are repeatedly seen in your industry that people are making?

Jess Ostroff: From the client perspective, the biggest mistake is forgetting that a contractor is not an employee and thinking that you have them on the payroll and you can call them and email them and text them at all hours of the day. That’s not how it works. I think that’s a problem. Sometimes it’s a problem on the contractor side, where they haven’t given the client the proper expectation. “I only work for you for ten hours a week, so that means it’s about two hours a day. That’s what this might look like in my relationship with you.” We’ve seen so many clients disrespect that boundary and not remember that a lot of times, like I said, these contractors are their own boss and they are business owners themselves, and they need to be treated that way.

From the contractor side, I think that — not on my team, of course, but other contractors that I’ve seen are unrealistic with how much they can get done and how they can manage themselves and their schedule. Living a freelancer life is not for everybody. Same thing with being an entrepreneur, it’s not for everybody. You’re not really accountable to anybody but yourself. If you don’t do your work and you miss a client deadline, that client’s probably going to fire you. But you may not be motivated by that. I think the biggest contractor mistake I’ve seen — and I’ve heard horror stories from current clients — is that they are good at what they do, but they’re not good at managing themselves and they’re not good at managing their time.

When to Make the Leap and Hire a Full-Time Employee

Sean Jackson: All right, Jessica, let’s go into the employee side. I’ll let you take that over. When I said Jessica, I mean Jessica Frick. See, we’re confusing our audience. Jessica, I want you to talk about the employee side with Jess.

Jessica Frick: My first question is where do you find them?

Jess Ostroff: For me, I have started — anyone that’s become an employee at Don’t Panic started as a contractor. A lot of times they start with me because they maybe needed a little extra money or they’re unhappy at their job. We talk about the “side hustle.” I started that way. A lot of us start by being in a job that we’re not particularly satisfied in. You’re looking for something else, so we freelance a little bit on the side.

That’s how I found my people. They come, they work, and they prove themselves. Then I say, “You know … ” There’s that tipping point where I feel like I want to bring them in full-time and maybe don’t quite have the revenue to cover them yet. I don’t tell them that. But I know that by hiring them it’s an investment. And I know that when I hire them I will be able to make that money, because I’ll have that much more support on my side so I can focus more on the business development and the processes — all the things I’m supposed to do as a CEO.

That’s how I’ve historically found people. I’ve been doing this since 2011. At this point, there are a lot more places that you can look to find these kinds of people. There are more virtual assistants out there, there are more freelancers and web developers out there. I think it’s really about the cultural fit, because if these people can do whatever they want for whatever clients they want, why would they want to become an employee of yours? You have to think about it from that side too.

I found that a lot of people just don’t want to be their own boss, they don’t want to be responsible for finding clients and paying taxes and all the annoying things that you have to do as a business owner. It has not been that difficult for me to find people that want to freelance for me and then want to come on as a full-time employee because of that. They want someone to manage them. They want someone to give them work.

I think finding someone who is younger — not necessarily younger, but at that more entry-level place who’s interested in either leaving their job or growing significantly in the number of hours they’re giving you — and be a mentor to them. Be a good role model for what they want to do in their career, and you’ll be able to develop the relationship to the point where you trust each other enough to actually work together. I think the best employee/employer relationships are the ones that are built on trust and stability.

Jessica Frick: That brings up my next question. You find the right people, and whether they’re full-time or whether you’ve hired a virtual assistant, aside from the money, how do you keep them happy?

The Best Methods for Integrating Staff Into Your Business

Jess Ostroff: It’s really hard in a virtual environment. It’s something that you have to pay attention to more than if you were in an office. Because if I have my corner office on Madison Avenue and someone can pop over and see that I’m just staring out the window and not doing any work, they might not be super happy to continue working for me. But I could be doing that here in my home and they would never know.

Jessica Frick: I’m doing it right now.

Jess Ostroff: Totally. We’re all doing it, I think. But we’ve had to work really hard at that. For me, I’m a little bit more of an extroverted introvert. That was part of why I wanted to leave my job and work at home, because I didn’t really want to talk to people. But I realize that it is important. We do a couple of different things.

One of the first people I hired as a full-time person was an HR-type role. She’s our cheerleader. She keeps the team happy. She sends out Monday motivation. She does things to keep spirits high. She thinks of things like, “Oh, so and so’s mother-in-law went in to the hospital, let’s send them flowers.” She’s the one that thinks of little things like that, because I realized I wasn’t very good at that.

Like I said before, figure out the things you’re not good at and hire for that. We also have a private Facebook group. Some people do Slack channels, HipChat — there’s all kinds of ways to stay connected. We have a virtual office tool called Sococo, where it looks like a floor plan and we all have our own little cubicles, so people can see when we’re working and when we’re not, technically. Someone can pop over my office and say, “Hey, I have a question about this client,” or, “Hey, my pay check’s wrong.” Whatever it is. They know that I’m there and available.

And I’ll change my status. Like right now — we actually have a room in our Sococo office called “the sound booth,” and that’s where we go if we’re recording a podcast. I have my own podcast now, so when I’m recording episodes it’s like, “I’m still here. I’m still working. But don’t bother me because I’m in the sound booth.”

Sean Jackson: That’s great.

Jess Ostroff: Yeah, it’s awesome. It’s just another way for everyone to feel like there’s a little thread connecting us. We employ a lot of women, and women tend to be a little more touchy-feely about that stuff. They just want to know they’re not alone. It can be really lonely as a freelancer or as an entrepreneur working from home. It’s just a little way for us to stay in touch in the times when we feel that way — or even if we don’t.

We also do — once a month we do these little lunch and learn things where a different person from our team will share for an hour something that they’ve been working on. We try to highlight our team’s personal achievements. Like I said, a lot of them are parents, a lot of them are doing other things and have other hobbies in their lives.

I feel like, as an entrepreneur, I’m supporting those by hiring them. I’m supporting those other dreams that they have. But I want to support them in other ways too. Make them feel like … It’s actually good for you to go out and play at things in your garden or cook things in your kitchen, because I think that that holistic human hobby thing makes you a better employee and a better worker. I love that.

Sean Jackson: Let’s go through this. I think you brought up some amazing points, but I also want to go to the bad side. Being the only guy on the call, I’m going to think of some bad things because you’re so piffy at positives.

Jess Ostroff: Thanks, Sean.

When and Why Should You Let Your Staff Go

Sean Jackson: Let’s talk about when you have to make that gut-wrenching call to cut off the contractor. To fire the employee. Inevitably you’ve worked very hard to build processes, and you’ve worked very hard to make sure that everyone knows what they are supposed to do — building some camaraderie, as well as helping the client feel like they are getting value from the service. But at the same time, there are just some times where people don’t fit.

Most of the time it’s a cultural thing. It’s not the skills of the person, it’s sometimes the cultural aspect. The client can’t get along with them, or you’ve been working with them and they just don’t fit inside the environment. Talk about the contractor side. When do you recognize that you need to cut off that continuous contractor? And then, conversely, about the employee side? When do you need to cut that relationship? Let’s end on that side, which I know is not very positive, but does come up.

Jess Ostroff: I’m going to make it positive, Sean, if it’s the last thing I do.

Sean Jackson: Good.

Jess Ostroff: Just kidding. This is something that you think you know and then you don’t know. You don’t really get taught how to deal with this. One of the things that we’ve done at this point is we’ve implemented a three-strikes rule. I don’t really like to call it that, because it seems very cut and dry — it’s not.

When we figured out what the things were … Like you said, sometimes it’s just they’re not getting their work done, or they’re not getting it done on time, or they’re not getting it done well. Sometimes it’s the fit thing — and we work really hard in the hiring process to try to avoid that. I would say not only on the hiring process of the assistant side, but also on figuring out who we want our clients to be. We’re really picky about who we’re even going to bring on as a client, because we don’t want to go through that. We don’t want to have to say, “Hey, you’re not a good fit. Bye.”

We want to keep them forever. We’ve had some of our clients for five, six, seven, eight years, and that’s part of why we’ve been successful. I think that, as the business owner, you have your own metrics of what success looks like — or you should. If you don’t, you need to determine that before you hire somebody, because then you can say, “I really like this person but they’re not hitting these metrics. They’re not responding to my emails in a timely manner. They’re not giving me the right attitude when I give them feedback.” Whatever those metrics are, it should be really easy for you to see whether or not somebody is hitting them that you’ve hired.

For me, I think I’m really good at compartmentalizing work and personal. The lines get blurry when you’re in these relationships, because when you have a personal assistant they’re seeing your life, and it can get super personal. You have to be able to delineate between, “Okay, do I like this person and is that why I’m keeping them?” Or, “Are they just not doing a good job, or are they not a good fit for me?”

I would never let someone go without giving them feedback. I would always try to work with them and get them to the place I want them to be. This is another thing, I would say, is the second biggest mistake that clients make with hiring someone. They think their assistant or their contractor can jump into their brain and just know what they want.

That would be awesome. If I could invent that technology and be able to do that I would, but you can’t. There’s an investment on the client side. There’s an investment of time and giving someone that training. Giving someone the expectations that you need for them to be successful. And if you’re not willing to do that, then all of a sudden, “Oh, they didn’t do it the way I want it. I’m firing them.” That’s unreasonable. You need to tell them exactly what you want, when you want it, how you want it. Then, over time they can start to learn, and hopefully preempt your instructions because they start to know you so well.

That doesn’t happen overnight. You need to be able to invest that time. One, I would always give feedback. Two, I would try to separate the personal and professional. Even if you like them, if it’s not a good fit, let them go. It’s better to let them go sooner than later. That’s something that I’ve learned the hard way in the past and now I just don’t. I say, “Hey, you’re not a good fit. I’m happy to help you if you want to get another position or if you want to try something else, but we’re done here.”

The good thing for me — I’d say the good thing for a lot of business owners today — is that the freelancer pool is enormous. The amount of people who want to work in this capacity is enormous. So even if you let one person go, there’s going to be another person there and there’s probably going to be a better person out there for you.

Sean Jackson: Sure. Jess, I think you bring up a very good point. When you do bring someone in — whether they are a constant contractor, full-time employee, or even a part-time employee — when you’re bringing them in, you take a responsibility on to educate them, to train them, and to communicate with them. I think that’s probably something that we feel when we’re working on our own. “Well, they should just get it, just like I get it because I’ve been doing it all the time,” forgetting that you know it because you do it all the time.

I think when you fundamentally look to outside resources, you have to be committed to investing the time, knowing that the payoff on that is that they will get really good. If they don’t, you have to cut them loose. But it’s okay, because they’re probably going to find something that is a better fit in the long term. Would you say that’s a pretty accurate statement?

Jess Ostroff: Definitely. I would say — if you want to lessen the burden a little bit — if this is the first time you’re hiring someone and training them, as you’re going through those trainings with them, record them. Do them on a screen flow or do them on some kind of video or something, where the next time — if it doesn’t work out — you’ve invested the time, but you don’t have to invest the same time again. You have it all recorded and then you can give it to the next person.

Sean Jackson: Jess, this has been phenomenal. Jessica and I can’t thank you enough for being here today, because you really are someone who has to live with all of these issues. I loved the insight that you provided today, so thank you again for being on our show.

Jess Ostroff: Thank you so much for having me. I love you guys. I love the show. And I look forward to more.

Jessica Frick: Thank you, Jess.

Sean Jackson: We will be right back after this short break.

Hey, everyone, this is Sean Jackson, the host of The Digital Entrepreneur. I want to ask you a simple question. What is your business framework for selling digital goods online? Now, if the question perplexes you, don’t worry, you’re not alone. Most people don’t realize that the most successful digital entrepreneurs have a framework or general process for creating and selling their digital goods in the online space. One of the best free resources is Digital Commerce Academy. Digital Commerce Academy combines online learning with case studies and webinars created by people who make a living selling digital goods online. The best part is that this material is free when you register.

Are you interested in joining? I’ll make it easy for you. If you’re listening to the show on your phone and are in the continental United States, I want you to send a text message to 313131 with the keyword “digits.” When you send that text message, we will send you a link to the registration form right to your phone. Are you outside the United States? Don’t worry. Just send us an email to Digits@Rainmaker.FM. Either way, we’ll send you a link to the registration form so that you can sign up for free for Digital Commerce Academy. As a special bonus, we will also subscribe you to our newsletter when you text or email us so that you can stay informed with the latest insights from the show.

Don’t worry, we respect your privacy. We will not share your email or phone number, and you can easily unsubscribe at any time. If you want to start building or improving your framework for selling digital goods online, then please send a text to 313131 with the keyword “digits,” or send us an email at Digits@Rainmaker.FM. You won’t be disappointed.

Welcome back from the break, Jess, it is our time for recommendations. What do you have?

Jessica Frick: Since we have Jess on the show today, I want to recommend another great book on a similar topic by Chris Ducker, one of our —

Sean Jackson: Who?

Jessica Frick: Chris Ducker, everybody knows Chris.

Sean Jackson: I know.

Jessica Frick: If you don’t know him, you’re about to know him. Check out VirtualFreedomBook.com. Chris outlines in detail exactly what you need to do when working with virtual staff to get more time and, in turn, be more productive.

Sean Jackson: That’s a good book for the topic we covered this week. I am going to key off something that Jess mentioned in the show, which is Sococo, because that little tool — with having your own little virtual rooms for a virtual organization — makes a huge amount of sense to me, especially when she said she had a podcasting room. So I think everyone should at least check it out.

If you’re running a virtual organization with multiple people, whether they are contractors on a constant basis or employees, let’s take a look at that Sococo tool — which has the worst name, but is an awesome tool. Let’s put that as my recommendation for the week. We’ll, of course, include both of these in the show notes on the page for the episode. Which leads us to the end of the show and our question for the week. Jess, are you ready?

Jessica Frick: I am, Sean.

Sean Jackson: Okay, here is the question. We all know about the unique selling proposition and its importance in any business. However, there’s one question related to how unique should you really be. In other words, how much should you really try to stand out, versus just a little bit of standing out? What do you say? Should you be really weird and so original that you are unrelatable? Should you be unique enough that you’re remarkable and memorable, but not so much that people are like, “Who’s the crazy person?”

Jessica Frick: Asking me is like walking around the asylum looking for a crazy diagnosis. Yeah, I say go as weird as you need.

Sean Jackson: Go as weird as you need. Okay.

Jessica Frick: Get weird.

Sean Jackson: I will take the more restrained aspect, given my nature and personality, that you want to be remarkable but not completely out there, however —

Jessica Frick: Sean, that’s totally you. You’ll wear this fancy suit and then you’ve got your expensive skull ring just hiding.

Sean Jackson: You know what? Folks, what do you think? Should you really be out there and be so unique that it is different, or should you be a little bit more restrained and more memorable? What do you think? We’re going to cover this topic in our next episode of The Digital Entrepreneur. Everyone, have a great week.

Jessica Frick: Thanks for listening.

The Transcript

What Online Entrepreneurs Need to Know about Affiliate Marketing

Voiceover: Rainmaker FM.

You’re listening to The Digital Entrepreneur, the show for folks who want to discover smarter ways to create and sell profitable digital goods and services. This podcast is a production of Digital Commerce Institute, the place to be for digital entrepreneurs. For more information go to Rainmaker.FM/DigitalCommerce, that’s Rainmaker.FM/DigitalCommerce.

Sean Jackson: Welcome to The Digital Entrepreneur everyone. I am your host, Sean Jackson, and I’m joined as always by the diligent Jessica Frick. Jessica, how the frick are you today?

Jessica Frick: I am diligent, Sean. How the Jackson are you?

Sean Jackson: I am well. I am well as always.

Jessica Frick: You sound so much better, Sean. You haven’t been feeling well. You sound great.

Sean Jackson: You know, again, as I’ve always said, it’s for the audience. I feel like absolute pounded poo poo but I am going to make my way through it.

Jessica Frick: It’s that show biz flare. You got it.

Which is More Important: the Quantity of Leads or the Quality of the Process

Sean Jackson: There you go. So we left everyone hanging last week with the question of, “What matters more? The quantity of leads or the process of converting leads?” I’m going to go ahead and take the quantity argument because I want you to go in depth on the process side. Okay? Here is my argument for quantity of leads matters more than the process for converting them. Okay?

Jessica Frick: Okay.

Sean Jackson: If you don’t have leads, who cares what your process is? So you need to get them.

Jessica Frick: Well, that’s a good point.

Sean Jackson: You want a ton of them because being a small business, there will naturally be what I call spillage, right? There will just be people that are coming in who are, you’re just not going to be able to get to. Something is going to break in the system, and if you had a bigger team, if you had a bigger organization, then you can take care of spillage. But at the end of the day, being small, you can’t deal with it, so you might as well get as many as possible so that the few that don’t spill out, you can convert them. That would be one argument. What say you?

Jessica Frick: Well, the argument that I have would be the better argument, but you know, we are a customer-first company, and we always think about that customer perspective, and unless you have processes to treat them right, not only are they going to bail, but they’re going to tell their friends to not talk to you. They’re not taking their ball. They’re taking their ball and all of their friends with them.

Sean Jackson: Ah.

Jessica Frick: Acquisition is hard, but activation and retention, that requires process. And not only that, but if you don’t have process, your team is going to burn out fast. If you don’t have a team, what difference does it make if you have a million leads? You can’t do anything with them.

Sean Jackson: Yeah, very good point.

Jessica Frick: So process is more important, because the amount of leads that you have can be adjusted, but if you can’t activate and retain them, it doesn’t really matter.

Sean Jackson: Well, see. That is a good argument, and I will counter with this. I think that when you have a process, then you’re going to want to fill that pipeline up as much as possible, right? Now, it may not be a perfect process. It may be something that is good enough to get you to some sort of revenue for the business enterprise.

At that point, once you have a process, then of course, stacking as many leads into that pipeline then become paramount. If we find the middle ground, which I don’t always like to do, but if we found the middle ground, I would say that you have to have a process, but then once you have that process, then you want to stack up the quantity. What say you?

Jessica Frick: I think that sounds reasonable.

Sean Jackson: Okay.

Jessica Frick: I think it has to happen in that order. I think you need to have some leads, then work out your processes, then you get more leads and you tweak your processes, and you’re just always growing and changing with the demand.

Sean Jackson: Yeah, and I think that’s a part of it. I think really where the end output of this discussion is, is that it is a constant feedback loop, right? You have to have somebody who wants to buy what you’ve got to begin with and you’re going to have to put a process in. I would say start with the process first, right? I’m giving my honest opinion on this. I’d say have a process, get some leads into it, and then continually refine both the acquisition and quantity of leads and the process that goes with it so that spillage, which is natural, can be addressed through the continuous feedback loop and continuously addressing what is occurring in your little ecosystem.

I will say this. One of the things, it’s always hard to take a side of an argument is that if you are only closing 1% of the leads that you get in, then you could double the size of your business by just improving the process in closing 2%, right? But, if you’ve only got five people. You know what I’m saying?

I think the end output for our audience is very simple. It is a continuous feedback loop. It is a continuous process of putting a process in, filling the pipeline, refining the process, refining the pipeline, and that’s the back and forth. Because literally your business can grow not because you got a hundred million people coming in. It could grow because you’re just taking ten thousand and converting more of them in the process that you have. Would you say that’s a logical statement?

Jessica Frick: That sounds logical to me.

Sean Jackson: Good, and the nice thing about today’s show is that we actually have some experts as our guests who came up with this idea of “growth hacking.” In fact, they’re called the Growth Hackers. I’m going to let Jess really take the lead on this because she really is the process gal, and we’re going to interview the founders of Growth Hackers and the authors of the new book, Hacking Growth.

We are joined today by two, I would say, extraordinary individuals. Jess, wouldn’t you say that?

Jessica Frick: Absolutely.

Sean Jackson: We have with us Sean Ellis, who is the founder and CEO of Growth Hackers, which is convenient, given the fact that he coined the term “growth hacker” back in 2010. But prior to being with Growth Hackers, he was the founder and CEO of Qualaroo with customers such as Uber, Starbucks, Spotify, and Intuit. And he also laid the foundation as the first marketing executive to help grow five different companies including UpRoar, LogMeIn, Lookout, EventBrite, and DropBox to more than one billion in valuation.

Our second guest, who happens to be the coauthor of their book is Morgan Brown. Morgan is a startup marketing veteran with more than 15 years helping early stage companies find traction and growth. He took his first job at a startup in 1999, and then worked for a marketing agency, and then he moved to the startup world again to grow venture-backed startups such as TurnHere and ScoreBig. Morgan also writes regularly at MorganBrown.co. So with that introduction, gentlemen, welcome to the show, and Jess, I’m going to turn it over to you and let you run this interview.

Jessica Frick: I would love to, Sean. So Morgan, Sean, thank you so much for joining us.

Sean Ellis: Thank you Jessica.

Morgan Brown: Yeah, thanks for having us.

The Right Mindset You Must Have to Create a Growth Hacking Culture

Jessica Frick: As I’ve told you both, I’m very excited to read your new book when it comes out, and so since we’re talking about business growth on this week’s episode, I figured you guys would be perfect men to ask these questions. My first question: At a philosophical level, what is the mindset you need to be successful with growth hacking?

Sean Ellis: I’m happy to take that one. I think you have to have this recognition that everything you’re doing, there’s a better way to do it, and the only way to figure out the better way to do it is through testing. And that that testing should really be directed toward delivering more value to users, and when you do that, growth seems to be an outcome of that. That just continuous improvement mindset would probably be what I would latch onto the most. Anything you would add to that Morgan?

Morgan Brown: No, I completely agree. I think just the understanding that there’s always a better way to do things and that you can constantly improve is really at the heart of growth hacking, and I think the only other thing that I would add is that as people, we tend to underestimate how fast things are changing out in the world and how fast people’s behaviors are changing, the competition coming and going. You have to pair that constant improvement mindset with an urgency to move as quickly as possible and not be caught off guard with how fast things are actually moving, so I would add an urgency to that constant improvement.

Jessica Frick: That makes a lot of sense. I would imagine it’s very easy to get stuck. Now, you guys talk a lot about big businesses and rapid, successful growth. How can a solo entrepreneur use growth hacking, given the huge demands on their time already?

Sean Ellis: Well, we talk about big businesses. Most of the businesses that I worked with were tiny businesses when I started working with them. DropBox for example was less than 10 employees and I know that’s still not a solo entrepreneur, but I think for a solo entrepreneur, you want to be able to think holistically about the customer experience and not just gravitate toward, “I need more customers,” but instead think, “How do I get someone from consideration of my product to actually coming in and experiencing it?”

Really thinking about that full journey from there and just an understanding that there’s a lot of levers that can be flipped. And especially for a solo entrepreneur who doesn’t have a lot of time and, potentially, resources, making sure that the focus is on the area where you’re going to have the biggest impact is really important. And sometimes the biggest impact is not going out and spending a lot more money or figuring out how to get a lot more customers potentially interested, but figuring out how to convert and retain the customers that are already coming to you, for example.

How Understanding Leverage can Rapidly Accelerate Growth

Jessica Frick: That makes a lot of sense. That brings me to my next question perfectly. You talk about leverage being an important part of growth hacking. What does that really mean to you?

Morgan Brown: Kind of to Sean’s point, is that there’s so many things that you can do to try to grow your business and what I always try to think about when I’m working on my own business or working with the companies that I work with is, If I make a difference in what I’m doing right now, will it make a difference to the outcome of the business?

I think that’s the essential idea of leverage, is finding the one or two things that you can do and change and improve on that will create outsized results. As a solo entrepreneur, as a business owner, there’s a million things you could focus on at any one time, but you only have so much time and so much money to really … you can’t do it all. In growth hacking, really one of the first steps is identifying where you have the most leverage, where if you’re able to improve that one or two things, it will create dramatically better results and kind of outsized gains as a result of that.

Sean Ellis: I could give a quick example from LogMeIn about just the power of leverage. Sometimes-

Jessica Frick: Oh, that’d be awesome.

Sean Ellis: Sometimes it’s a little abstract without a specific example there, so at LogMeIn, we tried to grow the business initially, and I approached that as most marketers do initially where I just went out and started buying ads and could actually work on landing pages a little bit, but what I found was we quickly hit a wall at about $10,000 a month and how much we could spend to acquire users and get a positive return on investment.

What I was looking at, though, was optimizing to get people to sign up for the product, but basically, the majority of the people who signed up never actually used the product. So if they didn’t use it, then they weren’t going to pay us anything. They weren’t going to tell their friends. They weren’t going to stick around.

It was really beyond my control to do most of the things. After they registered, all of the things that needed to be done were beyond my control, so I brought the data to our CEO. We were still small enough where it wasn’t that hard to get the company to turn on a dime and realize that this activation area was where our leverage opportunity was.

The signup-to-usage was a goal that we put as an overall team where we all focused our energy on improving that. It took a few months of experimentation there, but we were able to get about a thousand percent increase in the number of people who signed up and actually used the product. Once we had done that, we went back to the same channels that previously scaled to $10,000 a month, and now we could spend over $1,000,000 a month on those channels.

Jessica Frick: Whoa.

Sean Ellis: Yeah, the money was paid back every three months so we got a fast return on that investment, so it just shows that power of leverage, where a lot of people are thinking about growth hacking, It’s this really creative trickery,” but ultimately we were fixing something that was kind of confusing in the onboarding path of a new user and then with no new creativity, we were much more effective on our customer acquisition. That’s really this idea of leverage, is just finding what’s that “choke point” that’s really preventing your growth.

The Importance of Experimentation to Implementing Testing

Jessica Frick: So you’re talking about activation and acquisition as huge levers. One thing that I was reading in the pre-order materials for your book, you were talking about testing at a high tempo. Of course, when I read that I’m like, “Oh my gosh. How fast can you actually do that? Doesn’t testing take time?” How would you recommend someone with a very small business go about something like that?

Morgan Brown: You have to start wherever you are. So if you’re a very small business and you haven’t done any testing at all, the first step is to commit to experimenting and to try to experiment with the things that you’re doing. My mom is a solo entrepreneur. She runs her own little business and I was talking with her about the book and she was like, “How can I start testing?” I said, “Well you send that weekly newsletter out constantly. Have you ever experimented with that?”

She says, “No, I just send it.” I said, “Well great. Start experimenting with the subject lines to see which ones generate the most opens so more people are reading your newsletter.” I think really you have to take that approach of just make a commitment to start experimenting and then try to speed up and build in more experiments as you get more comfortable and more adept at running them.

Once you kind of get the hang of what it means to experiment in your business and experiment on the parts of your business that have the most impact, then you can increase the velocity. Sean and I talk a lot about there’s two ways to go fast. You can go fast like a Formula 1 race car going around a hairpin turn, or you can go fast like a truck whose brakes have gone out on a mountain road. You definitely don’t want to be the trucks whose brakes have gone out.

I think it’s really about trying to build your speed as you get more comfortable experimenting. Sure, some companies like Amazon are going to run thousands of experiments. That’s not really what we’re talking about. If you’re a solo entrepreneur, it’s about trying to experiment just on a regular basis and building up your ability to do more and more tests. Sean, I don’t know if you want to add anything to that, but that’s-

Sean Ellis: Yeah, just a couple of things. There’s tools out there like Unbounce for landing pages and Optimizely. As Morgan was talking about with email, there’s really easy tools for doing these tests where some of these tests take five or ten minutes to implement. They’re super fast with the right tools.

It’s not really something that a solo entrepreneur shouldn’t have the capacity to do and they could be so high impact on the business that banging your head against the wall when it’s because you have the wrong headline on your page and that headline is really easy to test in something like Unbounce. It’s worth doing those tests.

Jessica Frick: Absolutely. Another thing you guys were talking about in hacking your funnel is retention. A lot of these things that we’ve been discussing, talk about acquisition and whatnot, but subject lines on newsletters, that’s retention focused. And you can also just keep them coming back for more.

Sean Ellis: One of the things with retention is the right first experience is probably the most powerful way to drive retention.

Jessica Frick: That makes perfect sense to me.

Sean Ellis: Yeah, if they don’t use a product correctly the first time, they’re not coming back.

Jessica Frick: Now, do you think people should be giving more focus to existing or new when it comes to growth hacking?

Sean Ellis: I personally feel like the highest leverage that I see for most companies who are just getting started is around activation. It kind of sits right in the middle of the existing and new. It’s essentially that first user experience, and really I like to start with the most passionate customers, really understand how they’re using the product, the benefit that they’re getting, and then build messaging that reflects that on the surface level, and then start to make the actual experience of a new user coming in. Experiment to get them to the experience as quickly as possible, that will make them a passionate customer.

To Survey or Not to Survey?

Jessica Frick: Now, here’s a question for you. I have my own personal thoughts on this, but I would love to hear your ideas on hacking growth and surveys. How do you feel about directly asking people what they want?

Morgan Brown: Sean, I’ll let you take kind of the mechanics of it.

Sean Ellis: Sure.

Morgan Brown: Sean and I are both passionate about surveying users, going right out and talking to them. Growth hacking, for us, is really a data driven, scientific approach to figuring out what moves the needle in your business and what helps you grow your business. But that data isn’t just the numbers in your analytics. It’s also the qualitative data you get from your customers.

The data in your analytics can tell you what’s happening, but only customer feedback can give you that context to help you understand why the behaviors that you’re seeing are actually occurring. I think at every step of the customer life cycle, there’s a case for surveys and a case for customer input. Sean, I don’t know if you can talk about some different ways to use them but-

Sean Ellis: Yeah. I mean, the only thing I was going to say on the high level question of, “To survey or not to survey,” is that interestingly, I had a VC way back in the early days of LogMeIn who pushed me to talk to customers and do surveys. I told him at the time, “I don’t actually care what customers say. I care what customers do, and I’m going to test, and surveying is really not that important to me.” And he said, “Well I just invested a lot of money and you’re going to do surveying.” So I said, “Okay.”

I really just went through the motions of surveying for several months and then one day I realized that my tests were so much better because I had the insights from the surveys. I was no longer guessing with my tests. My tests were addressing real problems that were revealed in these surveys. I actually ended up, later on, building a survey business that we sold last year. I became such a convert to the importance of surveys that I focused all of my energy on it for a few years.

Morgan Brown: Yeah, and I think one of the things that business owners who are listening should kind of take away is it’s not a one time thing. You don’t just survey people and say, “Okay, I know what people are thinking,” but you have to build it into your overall business process. At the business that I run, we survey our customers once a quarter, just the whole customer base once a quarter to kind of understand how we’re doing. Then we also are running surveys as people sign up for the service or hit a landing page and then go away without signing up. We try to survey them. It’s kind of a continual process of getting feedback and not kind of a one-time event.

Jessica Frick: Interesting, and so as you add more surveys, would you consider that a dovetail with your experimental testing?

Sean Ellis: Yeah, it definitely can, but go ahead.

Morgan Brown: Yeah, I was going to say it’s an input to help you figure out what to experiment on. If you get a bunch of feedback that a particular part of the product or service that you offer isn’t particularly valuable or on the flip side that there’s one or two things that really stand out to people as the ultimate value of what you offer, you should use that input to kind of feed into your marketing and customer acquisition efforts, how you refine and develop new products and so on and so forth.

The Essential Steps You Can Take Right Now to Grow Your Online Business

Jessica Frick: That’s awesome. You know that may be the answer to my last question here. Aside from buying Hacking Growth, obviously, which they could do at GrowthHacker.com, aside from buying Hacking Growth what is the one tip you have for small businesses and solo entrepreneurs who might be listening to this to deploy the growth hacking model to their online business?

Sean Ellis: So my tip, and then we ll let Morgan give his tip, but my tip would be just quantify the number of tests that you’re running. If you run zero tests today, that’s your baseline. Then start to track the number of tests you’re running, and try to get it to the point where you’re running multiple tests per week and when you run multiple tests per week, then you’ll get smarter about which tests you run and where you focus those tests. But for most people it’s about moving from not testing at all or very few tests to actually running more tests and it’s through those tests that you learn about what’s going to work and what’s not going to work. There’s a lot of other pieces that go into place to running really great tests, but start by just committing to running more tests.

Jessica Frick: I love that.

Morgan Brown: Yeah, and my tip would just be to look at your business currently and look at how you acquire new customers and how those customers turn into revenue for your business and identify, like Sean said, the one main pain point, or choke point, where those customers are falling off, where that process of turning a new visitor into a customer is failing and really try to understand that pinch point or that choke point and lean into there to try to improve that.

I think too often, as business owners and marketers, we kind of take for granted what’s broken is kind of the way things are and we go try to find new opportunities, and I think that’s a bit of a mistake. I think the better thing is to look at what’s already happening and then try to find the main choke point or pinch point and fix that first.

Jessica Frick: Love that, and I love that you guys have used that word “activation” as a real important part of the process to really focus on, in the middle of new and existing. So thank you so, so much. I would encourage everyone to visit GrowthHacker.com to learn more from Sean and Morgan. Gentlemen, I know you’re very busy with all of your book launch stuff. I appreciate you taking the time to talk with us.

Sean Ellis: Thank you Jess. We really appreciate the opportunity to share what we’re working on with you and your audience.

Morgan Brown: Yeah, thanks so much for having us. We really appreciate it.

Jessica Frick: And we’ll be back right after the break.

Sean Jackson: Hey, everyone. This is Sean Jackson, the host of The Digital Entrepreneur, and I want to ask you a simple question. What is your business framework for selling digital goods online? Now, if the question perplexes you, don t worry you re not alone. Most people don t realize that the most successful digital entrepreneurs have a framework or general process for creating and selling their digital goods in the online space. One of the best free resources is Digital Commerce Academy. Digital Commerce Academy combines online learning with case studies and webinars created by people who make a living selling digital goods online. The best part is that this material is free when you register.

Are you interested in joining? Well, I ll make it easy for you. If you are listening to the show on your phone and are in the continental United States, I want you to send a text message to 313131 with the keyword DIGITS. When you send that text message, we will send you a link to the registration form right to your phone.

Are you outside the United States? Don t worry. Just send us an email to Digits@Rainmaker.FM. Either way, we ll send you a link to the registration form so that you can sign up for free for Digital Commerce Academy, and as a special bonus, we will also subscribe you to our newsletter when you text or email us, so that you can stay informed with the latest insights from the show.

And don t worry we respect your privacy, and we will not share your email or phone number, and you can easily unsubscribe at any time. If you want to start building or improving your framework for selling digital goods online, then please send a text to 313131 with the keyword DIGITS, or send us an email at Digits@Rainmaker.FM. You won t be disappointed.

Recommendations for the Week

Sean Jackson: Welcome back from the break everyone. So Jess, now it’s time for our recommendations for the week. What should be people reading or using this week?

Jessica Frick: Obviously, I have to go with the book Hacking Growth.” I know this show is going to launch just before it comes out and they have some pre-launch bonuses, but it’s going to be worth every penny after it comes out. I have preordered the book, so I can’t wait to read it, but I know that just the information that these two gentlemen have in their head is worth every penny spent. I cannot wait.

Sean Jackson: And that’s at GrowthHackers.com, is that where it is? Or GrowthHacker. GrowthHacker.

Jessica Frick: Yes, GrowthHacker. I know there’s two of them-

Sean Jackson: Right.

Jessica Frick: But that’s my recommendation. What’s yours Sean?

Sean Jackson: Mine’s going to be Clearbit.com, and I’m going to tell you why. If you are familiar with it, you’ll understand. If you’re not, let me explain what it is. Clearbit.com has an API which is a fancy way of saying they have a way for computers and systems to talk to each other, and what it does is it can take email addresses and append additional information like people’s Twitter, Facebook, LinkedIn profiles, the companies they work for, their titles, where they’re located all automatically.

The one feature that they have that I really do like, which I think everyone who is listening should put it on their site right away, is they do have the ability for you to take the Clearbit API. Clearbit.com, get the API key, and you can put it into Google Analytics. So all of the visitors to your site, it can start appending information to the visitor data. Isn’t that cool?

Jessica Frick: Creepy and also awesome.

Sean Jackson: I’m a huge fan of that system and trust me, we have tested so many of them out. If you haven’t had a chance, go to Clearbit.com, sign up, get their API key, put it into Google Analytics. It is totally worth it. They also have a Google Sheets feature, so you can take email addresses in Google Sheets and append additional data.

It’s probably one of the best tools out there that I’ve found for augmenting customer data with additional data points. So we’ve got Hacking Growth at GrowthHacker.com, and we’ve got Clearbit API at Clearbit.com as our recommendations for the week. So Jess, to end the show, what is the question for the week?

And of Course, our Question for the Week When Should you Bring in Outside Help to Grow Your Business?

Jessica Frick: You know, talking with the guys, we were discussing all of this growth and I wondered, Sean, when is it the right time to bring in help?

Sean Jackson: Hm. You mean outside help right? When should you outsource some things versus trying to do it all internally?

Jessica Frick: Yeah, or when do you need to augment your team with someone to keep you from going crazy?

Sean Jackson: Yeah, I think that’s true because there is definitely an idea of the fact that we as solo entrepreneurs want to do it all ourselves, right? Maybe we do need some outside help. When do we bring that in? When is the decision? What do you say, you? When do you think you should bring them in?

Jessica Frick: I think you bring them in early before you lose your mind.

Sean Jackson: Uh, no, see, I’m going to take the opposite. I’m going to say later. You got to figure out what you’re doing so you can instruct them with the data. But you know what, Jess?

Jessica Frick: What’s that?

Sean Jackson: This deserves a bigger conversation, and we’re going to do that next time on The Digital Entrepreneur. Everyone have a great week.

Jessica Frick: Thanks for listening.

The Transcript

How to Do Simple PPC Advertising for Your Online Business

Voiceover: Rainmaker FM.

You are listening to The Digital Entrepreneur, the show for folks who want to discover smarter ways to create and sell profitable digital goods and services. This podcast is a production of Digital Commerce Institute, the place to be for digital entrepreneurs. For more information, go to Rainmaker.FM/DigitalCommerce. That’s Rainmaker.FM/DigitalCommerce.

Sean Jackson: Welcome to The Digital Entrepreneur, everyone. I’m your host Sean Jackson. I’m joined, as always, by the analytical Jessica Frick. Jessica, how the Frick are you?

Jessica Frick: I am still deciding. How the Jackson are you, Sean?

Sean Jackson: Always well. I am excited to continue our debate from last week about PPC. In fact, the whole show is about PPC, so we might as well put it at the top — our question — which was: is PPC for everyone? You say?

Jessica Frick: I say that it’s not.

Sean Jackson: Okay, tell me why.

Jessica Frick: I think that digital entrepreneurs should have a varied marketing mix, but I don’t think pay-per-click is for everyone. I think it’s certainly a good idea for most people, but I don’t know that it’s going to be the right play for everyone. Now, I think there’s some validity in saying you don’t know until you try it, but that’s not what we asked.

Sean Jackson: Right.

Jessica Frick: What we asked is, “Is it for everyone?” and I don’t know that it’s going to pay off for everyone. I don’t know that everyone’s business is the right model for that kind of conversion.

Sean Jackson: Yeah, I think that’s an important point to make, is that you really have to look at how your business operates. When we say PPC, we of course mean pay-per-click online advertising, etc. I would say, Jess, in support of your argument, if you were selling something very inexpensive, you may not have the margin to actually afford to advertise that way, with PPC. You may not even have the margin to do an experimentation, especially if you’re strapped for cash. Would you say that’s an accurate statement?

Jessica Frick: Absolutely.

Sean Jackson: But those cases, I think, are far and few between. I’ll let you have that argument in very niche cases. I’m going to give the affirmative. What I’m going to tell you folks is this: I think you do yourself a disservice if you don’t at least test things out. Now, it could be that PPC is not right for you because of you. You may be the actual problem. So, while others may see success in it — you, your business, how things are run, how you operate — you may not actually be ready for it.

But, if you can do the basics of online marketing, which you probably do today. You have a website. You’re selling something online. You are out there communicating to social media. You’re looking at search engines and how to improve your placement in there. Then you’re going to have to, at some point, put PPC in the mix. Because you’ve done everything else. I think that for most online businesses, they do a disservice if they don’t test it out to start with and then — I’ll caveat it this way — give yourself permission to fail at it.

Jessica Frick: Now, Sean, when you fail at a normal thing it’s really not so bad, but when you fail at paid placement, you’re losing money. Why is that okay?

Sean Jackson: Because we spend all sorts of money to fail. How many times have you gone on a new business pitch, and you spent the time and money to do the pitch and you never got the business? We, as entrepreneurs and online people, constantly do things that fail. We take the time to write a post that we think is going to be a hit, and it fails. Failure is, I think, a very important part of success, because it means you’re trying new things. Yes, it can be painful when you’re spending money in the hope that it comes back to you in something. But we do that all the time. We just don’t have that actual moment where it’s, “Put in your credit card and keep your fingers crossed.”

Jessica Frick: True.

Sean Jackson: I would argue that PPC is for everyone. If you’re of the mindset of continuous improvement, knowing that you don’t know what you don’t know, and you can’t know something until you try it. How’s that as the good compromise between?

Jessica Frick: I think that’s a good one. You don’t know it until you try it.

Sean Jackson: That’s right. In this episode of The Digital Entrepreneur, we actually have a very special guest on who is truly a master of PPC for a variety of different industries. When we get back from the break, we are going to interview Sean Dolan of PushFire, who not only is a great, awesome human being, he’s also done work for our company. So we’re definitely talking to someone who we believe and trust, and has helped us. He also has some really unique insight into not only how to start doing advertising, but also some of the things you should be looking for once you get good at the basics. So make sure you stay tuned, and we’ll be right back.

The Digital Entrepreneur is brought to you by the all-new StudioPress Sites, a turnkey solution that provides the ease of an all-in-one website builder with the flexible power of WordPress. It’s perfect for bloggers, podcasters, and affiliate marketers, as well as those selling physical goods, digital downloads, and membership programs. If you’re ready to take your WordPress site to the next level, see for yourself why over 200,000 website owners trust StudioPress. Go to Rainmaker.FM/StudioPress right now. That’s Rainmaker.FM/StudioPress.

Sean Jackson: Welcome back from the break, everyone. Jessica, this may actually be the most confusing interview we’ve ever done, given the fact that we’re about to interview our very special guest who happens to share my name. Please introduce our guest, and make sure when we’re talking to him, we direct it to the right Sean, not to me.

Jessica Frick: Yeah, that’s a good point. Sean, I’m excited to introduce Sean. But Sean Dolan, who is president and COO of PushFire. Sean is a recognized name in the paid placement industry, and he is a keynote speaker and an all-around great guy. He’s actually done work for us here, so I can think of no one better to talk to about paid placement than Dolan.

Sean Jackson: Mr. Dolan, welcome to the show.

Sean Dolan: Thanks for having me, Mr. Jackson.

Sean Jackson: Exactly. Our poor audience is going to be like, “Which Sean are they talking about?”

Sean Dolan: You guys can call me Dolan.

Sean Jackson: I’ll just call you Dolan, exactly.

Sean Dolan: I’ll roll with whatever.

Is PPC Right for Every Type of Business?

Sean Jackson: Well, the good news is you actually spell your name correctly, so I’m happy about that. Sean, we have been debating — Jess and I — about the role of PPC. Is it for every business online, or is it for only certain types of businesses online? Please answer the question for us. Is PPC for everyone?

Sean Dolan: Yeah, when Jessica actually reached out and asked me that in setting up this interview — she asked me that question — I said that PPC is not for everyone, it’s just for winners.

Sean Jackson: Ooh.

Sean Dolan: While it’s funny, I often find people that are asking the question of whether they should do PPC. To me, it’s so self-serving and testable, that the time you spend thinking about it, you could have just tested it and figured out if it works for you. I’m a big fan of “shoot and then recalibrate,” so I always tell people, “At least rule it out. Rule it out and then tell me it doesn’t work.”

If you haven’t tried it, the billions of dollars being spent on it … There’s some bad advertisers out there and big corporations that waste a lot of money, but I don’t think they’re wasting billions of dollars and not getting returns. That’s the argument I usually make to people. We do PPC for our own company, for obvious reasons, and it’s money in, money out. At the end of the day, it works or it doesn’t.

Jessica Frick: That actually brings up one of my questions to you, because as you know, I actually took the negative. I don’t think PPC is for everyone. I know that it works, but I also know that there are a million other ways you can get business. Didn’t you get business off a bathroom wall?

Sean Dolan: Yeah, we did. We had a guy call us — and we ignored him, we didn’t understand the lead. If someone fills out a lead and they don’t know how to fill out lead forms, then we rule them out as potential clients. There was something weird about it and suspicious. Anyway, we actually finally … He was very aggressive and got a hold of us. He’s like, “You guys aren’t going to believe this, but I saw PushFire in a bathroom stall in Sugar Land.”

I still don’t quite know how that came about. I’m not complaining, but I’m also not pursuing that either. Yeah, they come from everywhere. One of my clients teaches real estate investing, and something that he always says … We generate the PPC leads for him, motivated seller leads for his real estate flips, and people always ask him, “What’s the magic marketing? What works? What’s the best?” His answer is, “Everything works. Everything. All of it works. Some better than others, but sitting around not doing it definitely doesn’t work.” That’s where I try to get people, is just try it. Just do it.

Jessica Frick: How do you generate leads for PushFire?

A Super Simple Way to Generate $100,000s of Dollars of Business with Just a Few Hours of Work

Sean Dolan: Over the last three or four years, we’ve been fortunate enough that Ray is good at SEO. We rank one or two for PPC management on Google, depending on the day. It’s us and WordStream, neck and neck. That generated a lot. The problem with that is we would get leads from various sources. We would get a lead for women’s underwear, and then we’d get a lead for trailer hitches. My team is mastering and understanding the landscape of two completely different industries, so the scalability there is weak. We did that for a long time, and we were very successful at it. We have clients from all different industries.

I was spoiled that we were getting all these leads coming in through SEO. I decided that I wanted to take control of that and actually go out and acquire a specific type of lead. I went for the investors. I have a lot of investors we work with that are very successful. I’ve been doing this for over eight years in the real estate space, doing advertising. I get that space. I went online and I Googled “real estate forums.” I recommend, if somebody is trying to generate leads — find that water cooler. Find out where everyone is. If you think there’s not a water cooler for your industry, Google “chewing ice forum,” because there’s a forum for people that like to chew ice.

Jessica Frick: Dude.

Sean Dolan: Yeah. It’s real, look it up.

Jessica Frick: They talk about chewing ice.

Sean Dolan: Yeah, just a group of people that just enjoy chewing ice. That’s their thing. There’s plumbers forums, there’s attorney forums. Whatever is your market, there is a place online those people go. If there’s a website, that means there’s AdSense. That website has to generate money. If there’s AdSense, that’s your in.

I found this online real estate forum. They had three ad sizes across their website. I created three ads while sitting in Starbucks. They were not fantastic ads. I wanted to do all of it myself because I’m putting together a case study on how anyone can do this. I threw the ads together and I put together a landing page. It was very in your face. I understand the real estate investors enough to know how they speak and how to get their attention. I threw it up. I spent about $2000.

Actually, in four days, I got 20 leads at about $50 a lead. Right out of the gate, I was generating leads. I closed 10 of those lands, and I will probably close another five. This is just two or three weeks ago that we ran this. I had to pause it because I couldn’t take all the calls. Even at the 10 leads that we closed, the minimum revenue for that is $120,000 a year, assuming those 10 stay with us, which they tend to do. A third of those tend to spend more than the minimum. As their business grows, they’re spending $3000 to $5000 a month. Conservatively, from a few hours at Starbucks, I generated $200,000 a year in revenue.

If you do the math on that, 10 minutes of Googling the forum niche and finding out where the water cooler is, four hours at Starbucks creating the landing page, 20 minutes setting up ads in AdWords, 20 hours doing calls and sending contracts — that’s about 24 hours and 30 minutes to generate $200,000, or $8,163 per hour in revenue generated. This is literally overnight. There’s certain variables, like I had to be able to sell them. But when it comes to generating the leads …

Why Even a Failed PPC Test Is Better than No Testing

Sean Dolan: People dismiss display because the intent’s not there. “I have to figure out the intent based on the website they’re on.” With search, it’s very easy. People that are looking for PPC links for real estate, they’ll Google that. Through display, I have to identify where those people are. But it’s so easy to do. To me, if you have $1000 that you wanted to test — even if PPC fails, you have purchased data.

If you spend that on radio or TV, the data you get back is very weak. If you spend it on PPC, the data you get back is very specific. You know exactly what doesn’t work, and you can move forward from that. Obviously I’m biased. I’m in the world. I’m in it every day. But when I’m working with companies and they have other marketing channels … Man, I constantly feel like we outperform all the other channels.

Sean Jackson: Isn’t that part of the scary part? If I’m just doing this, if I’m just starting out, I don’t know if it’s going to work. And even if I think it may work, isn’t it too hard to put together? You gave a very specific example, but again, isn’t it just … I think there’s a lot of fear from the potential complexity of it. “I’m not a designer, I’m not a copywriter, etc.”

Sean Dolan: Yeah, and I don’t want to downplay my Photoshop skills that much. If we’re talking about just an average person, I definitely understand Photoshop enough to create an ad. It’s not a spectacular ad, but it’s enough to do the job. You can get people on Fiverr for $50, $100 to create you that great ad or maybe a set of ads. In fact, if we do the math I just did and instead I outsourced all of that work that I did, the 24 hours — it would have worked out to, let’s say, $1000 for the landing page, conservatively. You can get them a lot cheaper than that. But $1000 for the landing page design and copywriting. $500, let’s say, for the ad creation.

If I hired a sales guy to do all those calls for me, pay him $500 per lead he closed … If we take all that out of the $200,000, I’m left with $193,000 for 30 minutes of work. Do you know what I mean? Which is $96,000 an hour. Yeah, people get caught up in trying to do everything. This is huge in the real estate investing space. I keep bringing it up because a lot of my clients are in that space. But all these other guys, they’ll be on these forums and they’ll be like, “Hey guys, I’m trying to learn SEO.” I’m just like “ugh.” “I’m trying to learn PPC. I’m trying to learn all these things.” Then I ask them, “How is your flooring? Do you do flooring really well? How’s your roofing? Are you a good roofer?”

Are you going to buy a house and re-habit yourself, and hammer and nails? No. You hire people that know how to do that. I think people, they get caught up in wanting to do everything themselves. But when you outsource it, the math just makes so much more sense. Your time is valuable. Me and Ray always go over this. It’s been a mantra. If we find ourselves doing something that costs less than we make per hour to have somebody else do, we need to have them do it. That’s really helped us directly change our business and improve the revenue that we generate. That would be my response. Unless you’re passionate about graphic design, or unless you’re passionate about landing page design, man, just hire somebody. Just pay the money, have someone who is a pro do it.

What will happen is, if you do it wrong, you’re getting a false positive. You’ll disprove PPC where it might have worked had you hired someone who is competent and can create a good ad. Nobody is that far away from doing what I did in putting together the landing page and ad themselves, but at the same time, just hire someone who is good and learn from them. Prove the concept, prove the math. If you generate revenue from it, then you can go into the details and maybe play around with ads. That’s my recommendation, is outsource.

Jessica Frick: Sean, you’re pretty strong about outsourcing. What would you say the minimum amount of money is for someone to need to properly test whether paid placement is going to work for them? And should they just go straight for Google text or display? Should they experiment with social right out the door, too? Or do you suggest they use a budget and tier in? What do you think is best?

How to Find the Right Budget for Testing in Your Niche

Sean Dolan: Okay, I had a conversation with somebody yesterday whose wife is starting an event planning company. Or it’s been running, and she wants to help market it. The advice I gave to him for his wife was Facebook lead ads for their very specific area. If you want to test out PPC with the very minimum cost and lowest barrier of entry, you create a Facebook business page and you do Facebook lead ads. For her, it was event planning. It’s this bride who is frazzled. It’s like, “Don’t let this be you on your wedding day,” and you target people who are engaged within five miles or 10 miles of her home. She doesn’t have an office.

That’s my first step. I tell people that it’s either that or go to Google search and advertise on the exact product that you sell. If you sell blue shoes, you go to Google and you advertise on the term, “I want to buy blue shoes today.” I don’t care how expensive that term is, that’s not really the point. Bring people in that have the highest intent to convert for your product. If you can’t convert those people, you have a business problem. You have a lower funnel problem. A lot of people confuse that and they think that PPC didn’t work, when really it was the sales didn’t work. The follow-up didn’t work. In real estate, how many realtors do not answer their phone when my wife is calling them to check out a property?

That would be my biggest advice. If you’re going to test PPC, you want to make sure that you rule out your business as maybe being a problem. A good trick to do that is to advertise on the most obvious term and test it out. If you’re able to convert those terms — again, at whatever price — then you know you at least have your sales funnel together. It would be different if we’re talking about someone who has an established sales funnel, but I think here we’re talking about someone who is maybe getting started. If that’s the case, that’s how I would test it.

Sean Jackson: That’s a really good point, talking about the initial people that are just getting into this, going after the intent. I think it’s the question of budget, to follow up with Jessica. Part of it is, maybe you shouldn’t be playing in Google to start with. Maybe something like Bing, or a second or third tier place where you can make mistakes and it not cost you a fortune. You go after intent on a cheaper scale to test it out. Would you say that’s the case? If so, what would do it, $500? Do I need $1000? Do I need $10,000?

Sean Dolan: Yeah, it’s tough. When people come to me, if they’re not spending $5000 a month, for my business to work, it doesn’t make a lot of sense. I obviously give lots of people advice on the phone even if we’re not a good fit. For me, putting a price on it’s hard. If you’re an attorney who is wondering about PPCing for “truck accident attorney,” that’s hundreds of dollars per click. If you’re looking for “local hair salon,” that’s going to be a ridiculously cheap click. It does depend on the industry that you’re in. You can guess based on the lifetime value of the customer what that bid might be in general. There’s also tools you can look at.

It’s really hard for me to answer that question without knowing what their business is, but I will give the answer of, seek somebody out. There’s a lot of actual Facebook groups and there’s a lot of LinkedIn groups that discuss PPC, Facebook. There’s so many people on there that are very giving of their knowledge, and you can crowdsource that. I would suggest somebody like that. Either talk to somebody who is a professional, or go to an organization — even a meetup. DFWSEM up in Dallas. We’ve got SearchHOU in Houston.

Go to a meetup and ask somebody. Say, “Hey, this is my industry. What sort of amount should I spend?” You don’t want to spend too little and have it fail because you didn’t let the math run. You have to have enough sample data to really know statistically how that’s going to play out. A lot of people stop short. If they would have spent 10 more dollars, they would have gotten the lead that justifies it.

Sean Jackson: Right.

Sean Dolan: I would recommend going and seeking that advice out from someone in person.

Sean Jackson: Let’s move the conversation up. We’ve talked a lot about the beginning things that you have to do. I think you’ve covered through the basics. Let’s talk about the pros. You are obviously a pro. There are trends that are affecting the industry. Where is it going? I want to specifically key in on a couple of things. I want to talk about mobile and I want to talk about video. That’s how I’d like to end our interview. I want to go to the more advanced topics now. We’ve covered the basics, let’s talk about mobile and let’s talk about video. What do you see people are not doing that are currently advertising? What should they be doing better? And what they should be on the lookout for.

Future Trends in PPC and How You Can Stay Ahead

Sean Dolan: It’s an interesting question, because when I hear, “What’s on the horizon?” I immediately think, “98% of the people aren’t even doing what’s available today.” Do you know what I mean?

Sean Jackson: Right.

Sean Dolan: So many people aren’t doing what’s available now. But I think for horizon, if somebody were more high level, I think Facebook and Instagram are definitely — there’s opportunities there. Be first to try out new tools. New social network, whatever it is. Reddit recently released advertising. For anyone using Reddit, they see them. Obviously the targeting is not great right now. I think because the advertisers are not utilizing it very well. I’ve peeked in. I’m looking for the right client to try on Reddit. That’s what I’d recommend, is trying to stay ahead of the game and get into these new opportunities before all the competitors.

By the time Walmart and Chevron have gotten buy-in from upper management to venture into Reddit, it’s a little late. The competition is going to be there and the cost-per-click is going to go up. As far as mobile, man, people talk about advertising with PPC. They’re like, “I don’t have a website.” Of course, I’m like, “You’re hundreds of dollars away from having a website. Not a great one, but something.” That aside, there’s “click to call” options in Google, where you can have an ad that only shows up on mobile devices. When the user clicks it, it says, “Would you like to call this person?” You don’t even need a website.

Sean Jackson: Right.

Sean Dolan: You don’t need a website for PPC. I think little things like that, that people aren’t aware of and they miss out on. I think there’s huge gaps. I drive around town and I look at businesses, and I want to save all of them. They’re all missing out on such basic opportunities that would cost them very little to make a huge impact. That’s where I would go as far as mobile. Then, with video — video is killing it, particularly on Facebook. Hands down, every piece of content we put up, video drives more engagement than anything else.

There’s some arguments based on the authenticity of all that and what they actually count as a view, but I know from personal experience video definitely grabs me. I think if you’re an event planner, a hairstylist, or you sell honey from the bees in your backyard, if you go on Facebook and you advertise in a 5-mile radius and you put a video of yourself … Take the video on your iPhone and you post it. You explain your story. I think anybody could do really well.

Sean Jackson: Yeah, that’s a good point. Once you get into it, I think over time — just to sum up our conversation together — it’s not hard to get started in this. It doesn’t have to cost a fortune. But you should have at least a general idea, and ask others for their opinions and advice. Get into it. See what’s working for you when somebody is ready to buy right now. See what’s not working, and it could be that your business is broken. Then, of course, always be willing to go out there. Find new places that are on the forefront. Continue and expand.

But don’t forget the block and tackling. At the end of the day, if you’re not blocking and tackling, then you’re just missing opportunities that are so easy to grab. Then, of course, as the future unfolds with more mobile, video, etc., be willing to take a chance on them. Be willing to take a look. But realize that as you explore in this journey, you’re constantly going to be refining. Don’t forget to do the basics well to start with. Would you say, in summary, that’s pretty much what you said for the past 20 minutes?

Sean Dolan: Nailed it. That’s a wrap.

Sean Jackson: There you go. Well, hey, Sean, not only do you spell your name correctly, and not only do you have great insight, but you are a true gentleman and scholar. Jessica and I really appreciate you being on the show.

Sean Dolan: Anytime. Thank you so much.

Sean Jackson: Thank you, brother.

Jessica Frick: Thanks, Sean.

Sean Dolan: Y’all have a good one, bye bye.

Sean Jackson: Hey, everyone. This is Sean Jackson, the host of The Digital Entrepreneur. I want to ask you a simple question. What is your business framework for selling digital goods online? Now, if the question perplexes you, don’t worry. You’re not alone. Most people don’t realize that the most successful digital entrepreneurs have a framework or a general process for creating and selling their digital goods in the online space. One of the best free resources is Digital Commerce Academy. Digital Commerce Academy combines online learning with case studies and webinars created by people who make a living selling digital goods online.

The best part is that this material is free when you register. Are you interested in joining? Well, I’ll make it easy for you. If you are listening to the show on your phone and are in the continental United States, I want you to send a text message to 313131 with the keyword “digits.” When you send that text message, we will send you a link to the registration form right to your phone. Are you outside the United States? Don’t worry. Just send us an email to Digits@Rainmaker.FM. Either way, we’ll send you a link to the registration form so that you can sign up for free for Digital Commerce Academy.

As a special bonus, we will also subscribe you to our newsletter when you text or email us so that you can stay informed with the latest insights from the show. Don’t worry, we respect your privacy. We will not share your email or phone number, and you can easily unsubscribe at any time. If you want to start building or improving your framework for selling digital goods online, then please send a text to 313131 with the keyword “digits,” or send us an email at Digits@Rainmaker.FM. You won’t be disappointed.

Welcome back, everyone. It’s that time for us to give our recommendations for the week. Jessica, what do you have to recommend for our audience?

Jessica Frick: I can’t believe I’ve never recommended them on this show before, but Raven Tools. I love the Raven Tools team. I love the product. I have been a devoted user for years. When it comes to marketing reports and getting all the data you need in one easy place, Raven is where it’s at. Now that they have their site auditor tool in full force, it is absolutely unmatched and worth every penny.

Sean Jackson: Yeah, what’s the matter with you? Why haven’t you recommended them before? We love that tool, and we love those people. Gosh.

Jessica Frick: I have no idea. You know, I wear the t-shirt all the time. I don’t wear other people’s t-shirts very often, but I wear Raven all the time because I love talking about them. I don’t know.

Sean Jackson: Yeah, I agree with you. Raven Tools, everyone. Definitely check out that tool for the week. For me, I’m going to say to continue in our PPC thought, I have a blog site to recommend, which is the WordStream blog. WordStream.com/blog. Absolutely go and read that if you want to go and get more information about PPC, wouldn’t you say, Jess? That’s a good resource. At least to start out with. It’s going to cover both the basics and they, of course, have a tool that will help you for keywords, etc.

Jessica Frick: They do. It’s funny that Sean just literally said that WordStream.com competes with PushFire.com for SEO traffic.

Sean Jackson: Right. Hey, we’re equal opportunity here. Heck. We’re giving you both sides of the equation. We don’t care, as long as you succeed. That’s all that matters to us. Go take a look at Raven Tools, by all means. Great guys over there, great tool. In addition to our friend Sean Dolan from PushFire, by all means take a look at WordStream.com. Research and see what they have to say on their blog site if you are truly interested in learning more about PPC. All right, Jess, it is time for our question of the week, what we want people to ponder. You ready?

Jessica Frick: I’m ready. I’m ready.

Sean Jackson: What is the most important thing when it comes to growing your business, the quantity and quality of leads, or the process?

Jessica Frick: Ooh. That’s a really good question. Obviously, being the ops chick, I have to say process.

Sean Jackson: Of course I’m going to take the other side, which is the quantity of leads. Give me more to sell.

Jessica Frick: We should talk about this.

Sean Jackson: We should talk about this, and we’re going to do that on the next episode of The Digital Entrepreneur. Have a great week, everyone, we’ll catch you next time.

Jessica Frick: Thanks for listening.

The Transcript

A Simple Framework for Pricing Digital Goods

Voiceover: Rainmaker FM.

You are listening to The Digital Entrepreneur, the show for folks who want to discover smarter ways to create and sell profitable digital goods and services. This podcast is a production of Digital Commerce Institute, the place to be for digital entrepreneurs. For more information, go to Rainmaker.FM/DigitalCommerce. That’s Rainmaker.FM/DigitalCommerce.

Sean Jackson: Welcome to The Digital Entrepreneur, everyone. I’m your host, Sean Jackson. I’m joined, as always, by the eclectic Jessica Frick. Jessica, how the Frick are you?

Jessica Frick: I am eclectic, Sean. How the Jackson are you?

Sean Jackson: Oh well, I’m still suffering from this cold that has been going around, but as I said before, our audience is too important and the show must go on.

Jessica Frick: You are a trouper.

Sean Jackson: I’m going to suffer through, but I will make it happen. Jess, where did we leave the last episode? What was the question of the week we wanted everyone to ponder?

Jessica Frick: See, here’s where I know that you’re pretending like you’re doing this just because you believe in the audience, but I know secretly you have been looking forward to this conversation. I have been having so much anxiety about it. Just the idea of it makes me anxious. Last week you’d asked me what I disliked the most about online business, and my answer was pricing.

Sean Jackson: Ah, yeah.

Jessica Frick: You know, I thought more about it, and just the concept of pricing is enough to put me into analysis paralysis. I won’t launch anything because I’m too afraid to put a price out there. Then you can’t really change it once it’s out there. “Did I go too high, too low?” Sean, what is your best piece of advice for someone like me who is not a numbers, math, or money person like you and can just say, “This is the price”?

The #1 Rule That You Must Follow When Setting Your Pricing

Sean Jackson: Yeah, your fear and anxiety around this is very common. I think especially when you’re starting out with anything new, you’re always worried, “Am I going to set the right price?” I think at the end of the day it helps to remember the fundamental rule, which is you control your pricing. That control gives you both responsibility, but it also gives you a lot of latitude. To address that fear, we have to realize that there’s no set book that says, “All things must be priced accordingly.” That you actually can pick a price. And picking that price — the goal is to defend the price, to make people not even question it.

When I was in sales many years ago there was a great quote that I used, which is that if they question the price you haven’t sold it enough. I love that quote, because it says that really pricing is a function of justifying it through the sales process. How you support it is what makes that price seem reasonable. Let’s do this, Jess. Let’s go to a break, and then when we come back, let’s get into the mechanics of this. I want everyone who’s listening to this episode to feel empowered that they are in control.

In the next part of our show, we’re going to talk about how they can actually do that, but I don’t want to leave this section without everyone sitting there going, “I have control. With that control, I can do what I need to to make my business successful by pricing the right way.” Is that a good way to end this particular section?

Jessica Frick: I am in control.

Sean Jackson: That’s right. When we come back from the break, we’re going to talk about how you can maintain that control. We’ll be right back, folks.

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Welcome back from the break, everyone. Jessica, we left the last segment with you wanting to know how to price your online product. Is that correct?

Jessica Frick: It is. There’s so many things that I feel like you need to put into that total price. What all goes into it, Sean?

Sean Jackson: Okay. Well let’s start with a very basic idea. Let’s use this as the example for the show. Let’s say you want to make $400,000 in revenue. Is that a good target? Would that be okay for you, $400,000 in revenue for the year.

Jessica Frick: I wouldn’t kick $400,000 out of bed.

Sean Jackson: Sure. You sit there and say, “Okay, I want to have $400,000. That’s my target for the year. That’s the amount of revenue, money, that I want to bring in for the year.” Let’s use that. “I want to do that by selling some sort of digital goods online, membership, ebook, etc.” All right, so we want to make $400,000. Let’s start looking at that number in a little more detail. Jessica, let’s say you want to sell some sort of membership site or some sort of training program or something like that.

Jessica Frick: Okay.

Sean Jackson: You want to make $400,000 in revenue. That’s our target. How many customers would you need to reach $400,000 in revenue? The response is, “Well, it depends on the price,” right?

Jessica Frick: Totally.

Sean Jackson: If you have one customer paying you $400,000 … But let’s go through the math a little bit more, because I want people to understand an important part of that $400,000 number. All of the money you are going to spend to make that is going to be taken out of that $400,000. And part of that $400,000 is the cost for you to deliver your product.

Jessica Frick: Okay.

Why Understanding Your Costs is Key to an Effective Pricing Strategy

Sean Jackson: Now this is different than the expense of running your business. An expense of running your business is like your Internet connection. That is an expense for the business, but it’s not a cost of you providing a product or service to a customer. Let’s look at what I mean by cost. In any online business that’s selling a digital good, your target should be around 20-25% of the money you collect should be the cost of providing that product or service to the customer. All right?

Jessica Frick: Okay.

Sean Jackson: Let’s use 25%. You want to make $400,000, right, Jess?

Jessica Frick: Yeah.

Sean Jackson: But 25% of that money is going to be the cost of delivering that product or service over to your customer. So what is 25% of $400,000?

Jessica Frick: $100,000.

Sean Jackson: That’s right, $100,000. By the way, every business has a cost to provide the product or service, every single one of them. 20-25% is a very good rule of thumb, simply because there’s a lot of money that you spend to give that customer the product or service. Even if you’re giving a training course, you still have to do customer support, right, Jess? That’s a cost, right?

Jessica Frick: Yeah.

Sean Jackson: You still have to have a website for them to go to. That’s a cost. There’s a lot of costs. Even if I bought your training program and it’s all online, I still have a cost of supporting you. I have a cost of collecting your money via credit card.

Jessica Frick: Yeah.

Sean Jackson: When you look at it … Now let’s go back. Jess, you want to make $400,000. You know that $100,000 is going to be the cost of providing that product or service to your customer. The question is, Jess, how many customers can you support for $100,000? That is the key. If you know it’s going to take you $100,000 of costs to support them and you have $400,000 of revenue that you want to make, how many customers can you support for $100,000 a year? To make the math easy, I’m going to say it’s 1,000 people. Would you say that feels about right for your training course, let’s say, that you’re trying to put up?

Jessica Frick: On average, because you know, again, there’s a 90/10 rule.

Sean Jackson: Sure.

Jessica Frick: 10% of the people are going to take up 90% of your time.

Sean Jackson: Right, but if I come in and I want to buy your training course, I want to buy your ebook, I want to buy your membership system, or I want to buy whatever digital good you have — your software product, whatever — then you have to say, “For $100,000, how many people can I support?” Now in this example I’m going to say 1,000, because it makes the math real easy.

Jessica Frick: Okay.

Sean Jackson: Let’s go through. You want to make $400,000, right, Jess?

Jessica Frick: I do.

Sean Jackson: You know that if you spend $100,000, you can support 1,000 customers. What is the average price you have to charge to make that $400,000? You’ve got 1,000 customers and you want to make $400,000 in revenue. How much do you have to charge on average?

Jessica Frick: On average, about $400.

Sean Jackson: That’s right. See, this is where it becomes kind of fun.

Jessica Frick: But Sean, that assumes that all of the things that I sell are going to be $400. What if I want to scale it?

Solid Guidelines That Will Help Demystify Pricing

Sean Jackson: Ah, that’s right. This is where we come through the next part, because we know we need to make $400 per sale. If we have 1,000 customers at $400 a sale, it’s $400,000 a year. I got my $400 average. Now let’s put the price together. This is why we have to know a little math, folks. We know we need to make on average $400. Here is how you get that $400 average. You don’t do it by selling one product. You do it by providing three to four options for people to buy online.

There’s a whole science and study around this, but I’m going to make this easy because, again, we’re trying to figure out the price of what we want to sell. We know we have to make $400 because we’re going to sell it to 1,000 people. That $400 is going to be the average between the things that you sell online. Now let’s do this, Jess. We’re going to create up a product that we’re going to call the anchor product.

This is important psychologically, because the anchor product is the single most expensive thing you ever sell. It is the thing that when people look at it, they go, “Man, I wish I could buy that. I wish I had enough money to buy that particular offering.” It’s like when you go to buy a car. Sometimes they’ll show you the most expensive car just so that they can put your … Because they want to sell you …

Jessica Frick: Oh yeah, I watch that on the DIY shows all the time. They show you the house that has everything you want.

Sean Jackson: That’s right.

Jessica Frick: And then you find out it’s half a million more than your budget.

Sean Jackson: That’s right. Now let’s come through this, folks. You need to create what I call the anchor product. The anchor product is the single most expensive thing you would ever provide to anyone from the products and service of your business. This is the uber offering of everything. This is the consulting. This is the come and wash your house for you. It is everything and anything that you would want to sell, and you’re going to price that at a level that is extremely high.

Remember, we want to make an average of $400 in our example. So your anchor product is going to be way more than $400. Let’s call it $2,000, just to throw it out there. Here’s why the anchor product is so important: No one’s going to buy the thing.

Jessica Frick: It’d be nice if they did, right?

Sean Jackson: Yeah, a few people will, but the anchor product sets the expectation. For instance, if I had two houses that you can take a look at, and one is this uber million-dollar house that is gorgeous — it’s got all this finish-out, etc. — and then I show you a house that’s $200,000 that is kind of like the million-dollar house, you’re going to sit there and anchor in your mind the features of the million-dollar house and look at it in the $200,000 house, and say, “Oh, that fixture right there. That was in the million-dollar house. Well, this must be just like the million-dollar house.”

Jessica Frick: Yeah, and you start negotiating with yourself about the different things.

Sean Jackson: That’s right.

Jessica Frick: It makes that lower price one so affordable.

Sean Jackson: That’s right. You’re like, “Well, it has some of the same features of the big expensive one that I can’t afford, so it must be as good as that really super nice thing that I can’t afford that I really want.” That’s why anchor products are crucial. The beauty of an anchor product, folks, is you can make up the price. You know what your average is, and you’re going to sit there and jack that anchor product up way higher than your average. In this case, let’s go ahead and say it’s $1,500 to $2,000. It really doesn’t matter if anybody buys this product. By the way, folks, you should be super excited that they do. But no one’s going to do it. It sets expectation.

The next thing that we do is we set up our mid-tier product and our lowest-tier product. These are important in the digital goods space because, again, we want this average of $400. What should we price our mid-tier product and what should we price our lower-tier product? Very simple. We want to make $400 in our example. That’s the average. No one’s going to buy the anchor product. It’s solely there to set expectations. The average of the money that we make is going to be the difference between the lowest-tier and the mid-tier, so let me give you how that would work. If you know you need to make $400, then your mid-tier product should be about $600 and your lowest-tier should be about $200. Your average price is going to be the difference between them, which is $400. See how that goes, Jess?

Jessica Frick: I do.

Sean Jackson: Your anchor product is there to establish the value. Your mid-tier product, which you hope a lot of people will buy … It turns out people will tend to buy that mid-tier product. A lot more people will buy the low-tier product. Your average is going to be the difference between the two.

Folks, let’s stop for a second and run through your personal situation. You have a product or service that you want to sell. Number one, set a target price, the target revenue. How much is the revenue you want to collect? Number two, how much is it going to cost you to support that revenue? It’s generally about 25%. Then from that, figure out how many customers can you support with that cost, that gives you your average. Once you find your average, then you create up a really expensive product called the anchor product. Then you have your mid-tier and lower-tier, and your average revenue is the difference between those two. I know this is a lot, which is why we’re linking to a post on exactly how the math goes.

Jessica Frick: It actually sounds a lot less intimidating when you break it down that way.

Sean Jackson: It does, because it really gives you a formula that you can key off of. You can take any ebook that you’ve got, any learning management, any software, any service — anything that you’ve got — and break it into three buckets. “My really expensive anchor one, my mid-tier one, and my low-tier one, all of which are similar together. Knowing that the average amount of money I’m going to make is the difference between the mid-tier and the low-tier.”

That universally works out. You will always have costs, which will help you figure out what your average is. That’s why it is important to understand how much money you want to make in the year, how much it costs you in the year, and how many people you could support in the year. Then from that simple little math you can figure out all of the rest of what you should price the product at. Okay?

Jessica Frick: Hmm.

Sean Jackson: Don’t worry, folks. Look at the link to the post that we wrote about this. It will make it much clearer than the audio portion of this exercise. Now I want to go into Jessica’s question. I have figured out how much I’m going to charge now. How much I have to charge to meet my goals. Jess, you asked a question earlier. “What about discounts? Can I change my pricing? Can I move this up or down accordingly?”

Jessica Frick: Yeah.

Why You Should Always Start out at a High Price

Sean Jackson: Okay. The simple answer is yes, you can always change this. I would say that it is — to start with — better to price high than low. Now, why do you think I say that?

Jessica Frick: Because you can always discount, but you can’t really go up unless you add more to it.

Sean Jackson: Exactly. See, folks, when you’re coming up with this hypothetical for your personal situation, what I want you to realize is that it’s better to start out high and discount back than it is to start out low and try to increase up. You’re going to have to justify the price no matter what you do. At least if you start out high you can create up additional incentives that decrease the price to the person or add more value into it, versus starting out really cheap and saying, “What I was charging you $100 for is now $1,000.” To make that psychological leap from $100 to $1,000 requires a ton of effort, versus, “Hey, it was $1,000, but we have a special this week and we’re going to discount the price back.”

Again, I want you to feel that you’re in control. But realize that any time you are discounting or increasing your price, you’re going to have to give a lot of justification around it to make sure that your audience understands why you are doing what you are doing. If you’re starting out high, it’s a lot easier to come down low than it is to go back up and have to justify why you increased the price up. It’s definitely possible. Jess, I’ve given you $400,000. Congratulations.

Jessica Frick: Yay.

Sean Jackson: You have to spend $100,000 for it. You’re going to generate 1,000 customers. They’re going to pay you, on average, $400. You’re going to create up your anchor product, which is super expensive. You’re going to create up your mid-tier and your low-tier offering. The difference between them is going to be your average. That’s the basics of the pricing for whatever you are selling online. Okay?

Jessica Frick: I dig it.

Sean Jackson: That formula works from day one, and you can tweak it accordingly.

Jessica Frick: Now, I have one tricky question, and this one always catches me up too. When you’re working out your pricing, how do you know — based on what your business needs to stay afloat — whether you should offer monthly, quarterly, or annual pricing, or just the one-time, done-with-it thing?

Sean Jackson: Yeah, that’s a good question. When you come in and look at how you collect that $400 in our hypothetical, do you ask for it all at one time period or do you try to break it up? I’m going to let you folks in on a little secret. The world revolves around credit cards. What I mean by that is everyone is debt financing almost all the purchases they make in their life. It is amazing to me how much debt people are using to buy the goods and services they have. Credit cards are hugely important in that, because it helps people finance the purchase.

To your question, should you offer a payment plan of some sort — a monthly, quarterly type of subscription — or should you ask for all the money upfront? My feeling is that you should give people the option, but you absolutely want to help them finance the deal. What I mean by that is, if you can afford to do monthly, provide them a monthly. If you can afford to do quarterly, give them that.

It is so much nicer when you have someone’s credit card to charge that on regular intervals. It makes that easier for the person to buy it because they know they don’t have to give you $400 right now. They can give you, let’s say, $30 right now, and then they pay you every single month thereafter.

I always recommend, if you can finance a purchase, then absolutely finance it by offering payment plans — whether they be subscription, monthly, quarterly, etc. Or, if you’re going to charge them a big chunk of money upfront, let them pay it off over four months. You would find that in doing so, they would be more inclined to buy because the money perception going out is a lot less than if they have to give you that $400 right now.

Jessica Frick: I see a lot of people setting their prices higher when they charge monthly. Then they give you a discount if you pay it all at once.

Sean Jackson: Yeah, I think so. You should do that. That again goes to the point that … Remember when I talked about cost, there is a cost of the fact that if you want an average of $400 but you’re going to be giving discounts. Then your average goes down. Again, it goes to your cost. Can you afford to give people that discount? I think a lot of people can, because you can always increase your price up.

Jessica Frick: Yeah, that’s true. I feel like a huge weight has been lifted off of me. Thank you, Sean. I was dreading this call.

Sean Jackson: Well, I know a lot of people listening to this are rolling their eyes, going, “Gosh dang it, Sean. I’m a marketer, not an accountant. Why are you doing this to me?” But here’s the thing, folks — to really end this particular section, remember you’re in control of all of the pricing when it comes to your product or service. Start high to begin with. Do some very simple math. Set some targets. Figure out what it’s going to cost you. How many people can you support? Realize that the average is going to be a function of how your different offers are put together.

For God’s sake, please read the post that we have tied to this, which is The Smart and Simple Framework for Finding the Right Pricing Model for Your Site. By all means, please read this post. It makes it so much easier. I have seen, Jess, so many people underprice what they have. That are struggling to make a dime online because they think that they needed to be cheaper, not more expensive. That were not comfortable with the money side of this. Yet they’re doing it because they want to make money online. Get comfortable with the math, and then you’re going to find that the money is there. You just have to have the right pricing strategy, which we’ve given you a formula to do it. Does that help?

Jessica Frick: Makes sense to me.

Sean Jackson: Perfect. Folks, hopefully it’ll make sense to you. When we come back, we’re going to share some tips, tactics, tools, and ideas that you should be thinking about for the week ahead.

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Welcome back from the break, everyone. Jess, now it’s time in the show to talk about recommendations. What do you have this week for our audience on something they should take a look at?

Jessica Frick: Well, my very favorite resource for all things data and analytics-related is Annielytics.com. That’s Annie — her name is Annie — lytics.com. Annie Cushing has created a number of guides that make analytics sexy. I know. It sounds completely insane, but once you read it you’ll see what I mean. She teaches you how to do an actual site audit or develop a marketing strategy or an analytics audit with real life data. Also, her blog takes complicated concepts and puts them in such a familiar voice that when you read it, there is no anxiety whatsoever. By the end of it, you are actually working on your data without hired help.

Sean Jackson: This is very important, because at the end of the day, when it comes to the work that we do on the online space, we are awash in data. Certainly Google Analytics plays a big part of that data — both aggregation and research. Having someone like Annie Cushing can really help you understand all of this data and how to put it into context so that you can make informed decisions. Would you say that’s the end benefit of going to Annielytics?

Jessica Frick: Absolutely, and she has a number of resources available for free. She does have some paid resources, but when you look at the pricing, you’ll find that she did a really great job at making it completely affordable with a huge payoff.

Sean Jackson: Ah, very good. I like that recommendation. My recommendation for the week is a book called Contagious. I am absolutely blown away with this book. Jonah Berger created this book up, and he really went through the science of why things go viral online. I was fascinated. It’s not a long read. It’s a fairly short read. It’s called Contagious by Jonah Berger. He really goes through the science of analyzing, “Why do certain videos go viral? Why do certain products just take off?” In doing that, he found a formula that they all use to make something go viral online. The read is absolutely fascinating. I highly recommend it. Backed up by some real science, some real data.

It’s funny, because he’s also in that same universe. Have you ever read the book Made to Stick by the Heath brothers? He’s in that same universe. These are guys all know each other, and they all talk about the psychology and behavioral dynamics of online marketing. I highly recommend taking a read of this book, Contagious. It’s not very long, and I think Jonah did a phenomenal job with it. That’s the recommendation for the book.

Of course, folks, we will put into the show notes on the webpage links to Annielytics as well as to Contagious so you can take a look at them. Jess, what is the question of the week we want people to ponder while we put together the next show?

Jessica Frick: We are talking about analytics and it also got me thinking — paid traffic. Sean, is pay-per-click for everyone? Should everyone be doing it?

Sean Jackson: Absolutely. Everyone should be doing pay-per-click.

Jessica Frick: Not everyone, Sean. Not everyone.

Sean Jackson: I’m sure Google thinks so.

Jessica Frick: Well yeah, Google, Microsoft. They’re all like, “absolutely.” But there are cases where you shouldn’t. We should talk about that next week.

Sean Jackson: Really?

Jessica Frick: Yeah, we should talk about this.

Sean Jackson: Let’s do this. What do you think, folks? Should you be doing PPC or advertising on Google, on Microsoft — on all the major search engines and all the other ad networks out there? Or is it not right for you? I think that’s a good question to ponder for the week. We will answer that and much more in our next episode of The Digital Entrepreneur. Take care, everyone.

Jessica Frick: Thanks for listening.