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Dane Maxwell AMA-- SaaS, Membership Sites, The Foundation

MJ DeMarco

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Ladies and gentleman I'd like to welcome Dane Maxwell to our little corner of the world for our latest AMA.

Dane will be joining us Monday September 9th for a little AMA.

Here is a brief bio for Dane

danemaxwell.jpg

At age 22 Dane Maxwell was scammed for $12,000 by buying a business online - it was a sham. Broke, humiliated, and totally lost, he moved back into his parents basement. And it was this turning point that led Dane to say F*ck this, and figure out how to make money on his own without the help of anyone.

Propelled by desperation... and starting with just $123 to his name, he built his first six figure web based business without any idea, any money, and any expert knowledge. The idea was given to him, the money was given to him, and he hired out the expert knowledge. Incredible.

Since then, he's built 4, 6 figure web based products and has taught 1,000's of others how to repeat his process. He believes anyone can start a business if they understand this framework.

What makes Dane different is not that he's built kick a$$ companies and never has to work again... what makes him different is that he focuses on the internal game of Entrepreneurship. Mindset and deep limiting beliefs.

Dane is also one of the masterminds behind TheFoundation, a entrepreneurial bootcamp that has created dozens of successful entrepreneurs leveraging the SAAS model.

For more information on that program visit:

Do you know the most important word in business? | The Foundation

For more information on some more great entrepreneurial resources visit

Starting from Nothing - The Foundation Podcast | The Foundation

As always, please be respectful to our guest.

Topics to consider:
  • Entrepreneurship
  • Finding Needs (Exploration)
  • Failure lessons
  • Niche opportunities
  • Successes (And failures) of students

Also, if anyone is interested in running a bootcamp, or an educational system, Dane would be good person to ask as well.

Enjoy,
MJ
 
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MJ DeMarco

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OK, since everyone appears to be shy, I'll start...

1) How do you avoid having your students compete in the same space? Or do you?

2) The business you bought for $12K and got "scammed" -- how exactly was it a scam? Please provide details so as someone here might not repeat the same mistake, or so we will know how to spot the red flags.

3) Was the business found at Flippa?
 

ZaneN22

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Awesome! Thanks for jumping on here and sharing your knowledge. It sounds like you've had an incredible journey so far!

Here are the questions

4) I see you mention a lot about preselling companies. I understand getting them on the phone, but how do you convince them to pay you and wait for "x" months until you have a product ready for them?

5) How do you guarantee they will actually purchase once they said they would? Do you put contracts in place or is it just word of mouth?
 
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mrsilva

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This will be interesting. Sub'd

ps.: welcome!
 
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What's your take on competition?

If I'm starting a new software company in a space with a ton of established players already, how do I come out on top especially if I have less capital, features, and experience.
 

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Dane, loved your interviews on Smart Passive Income, Eventual Millionaire, Mixergy. Very informative, inspiring, actionable.

I followed a methodology similar to what you teach, and had something horrible happen:
A few years ago I had a site on the first page of youtube for a 1m/month exact match keyword. I conceived of software, had a small group of people invest almost 10K into the development of the SaaS site, hired a developer based on a personal recommendation. We got as far as an ugly working prototype hosted on his server.

He never thought of me as a real 'player' and didn't respect me as a client. I would often take a backseat to his clients that paid him much more than I did. In the end, his side project got funded by venture capitalists and he disappeared. No contact. Nothing.

I was dumb, and didn't set up contracts with ANYBODY. Not him, not my investors. I ended up taking my savings and paying back what I could to the early investors, and worked a minimum wage job to pay back the rest. In the end I was living in my parents laundry room, had no money to keep my site, email list, or anything I built running. Just left with my skills and experience.

My questions to you:

  • What should I look for in a programmer/developer to prevent this sort of thing from happening again?
  • For somebody starting from scratch, with no knowledge of contracts, no money for lawyers, how do I go about getting contracts in place?
  • When working towards a minimum viable product, how do you go about getting everything DESIGNED and looking pretty. A programmer doesn't always know great design and user interface. Assuming I didn't have the capabilities to design myself.. how do you bring in a UI/Design person into the mix? At what stage do you bring them in?
  • I once made a few calls to golf course offices to discover their NEEDS. Once I extracted them and figure out a possible solution, how do I figure out if it's even possible? How do I know where to look for a developer/coder if I don't know what languages/technologies that would make my idea work?
  • In the case that a SaaS app required two separate skillsets to implement, would I look for two developers to work together? One developer that knows both skillsets? Search for a simpler solution?
  • For a month or so, it felt like you were doing a media blitz. You were EVERYWHERE. What's the best way to go about booking guest spots on popular shows/blogs?
  • What's the best way to capture/capitalize on leads from such guest appearances?

Thanks for taking the time to do this!
I'm a video-guy, so if you can think of anything I can do for you in return, feel free to reach out.
-Dennis
 

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I've got lots of questions ;-) I love The Foundation's website and your sales video is awesome.

First, the tough one: Why package and market your system as opposed to scaling one of your existing SaaS offerings to 7 figures a month or building a portfolio of 6 figure SaaS apps?

How do you approach growing MRR while minimizing churn and building a loyal customer base? E.g., do you find that you put just as much or more into retention as you do into acquisition? Do you find that retention is easier because of the specificity of the idea extraction process? Have any of your students built a partner channel?

Are most of the apps that you and your students produce aimed at the small business market? Have you or any of your students broken into the mid-market or enterprise space? Have any of your students grown into or past mid 7 figures annual revenue? What about in terms of subscriber count, whats the largest you or your students have achieved? 1k, 10k, 100k, a million?

How do you handle outages? Do you credit customers for downtime or throw them perks or anything to offset the pain of an outage? What works best in your experience?

How do you set up your students to deal with operations, do you outsource it or are most of the apps of small enough scale that they are just running on a basic hosting account? Do you teach your students how to setup an operations team and tiered customer support processes?

What is your opinion on data portability, APIs and integration? Are you an advocate of the walled garden approach or open access? Do you put up barriers like fees for a data extract, etc. to slow folks from fleeing to competitors?

Have you run into compliance issues with differing laws in different countries or are your apps focused on the US market? Do you explicitly block users from countries with potentially "difficult" laws like Germany, Belgium, Ireland, etc.? Do you have any students using cloud platforms and how do they deal with this issue?

Do you teach your students anything about scaling, and scaling the technical stack as the business scales? Or is the focus of your course just on the "entry" and launch? Any plans to do a follow on course for your graduates to deal with the next stage of growth of their apps?

On business scaling, do you advocate doing as much as possible "virtually" over the internet, or have you used an in house solution sales team to sell subscriptions? Have you found that businesses are more accepting now of cloud based solutions or are you facing a challenging sales process?

Whats the highest ROI marketing channel you/your students have used for your apps? LinkedIn driving to webinars? Direct mail postcards?
 
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FreeMan

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Dane,

I really enjoyed your interview with Pat Flynn as it opened my eyes to a new way to identify SaaS opportunities.

I started doing a number of idea extraction calls (following up from a cold email) but it was getting a bit tricky to schedule the calls around my full-time job. I previously have done prospecting calls before/after work and during lunchtime, but the idea extraction calls can be quite long (30 minutes) and the recipients usually offered a time during their business hours downtime as opposed to after-hours.

I know I could take some time off to batch the calls, but what are some other ways your students have managed their idea extraction calls around a full-time job?

And have you or any of your students had success with idea extraction without making calls (e.g. emails or another asynchronous method)?

Thanks.
 
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D

DeletedUser2

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Dane!

Great to see you here!!! Thanks for showing
We appreciate people here, like you, who go out of their way to share info.


Thanks again

Z
 
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Yeah, weird timing to have a student one day, and the teacher the next day.
 

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Hello Dane, welcome to the forum and thanks for doing this. My questions:

- When offering any sort of coaching, is there any advice you have regarding disclaimers? Have you ever had any troubles with customers despite clearly stated TOS and how to deal with it?

I'm working on a self-help program (dating), should the note that it expresses personal opinions and is for entertainment purposes only be enough? Refund is a non-issue, I'm curious about people who would want much more than just a refund, or would claim my responsibility for their actions.

- One of my big and established competitors is very open to cross-promotion. Should I reach out to them when my product gets big as well, or as soon as it gets decent traction so that it's clear it's a winner? And should I reach them at all if my product is directly competitive to theirs?
 

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Thank you for doing this.

Whats the most reliable way to find niche markets to start idea extraction ?
 
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Disciplined

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Dane,

In Andy's interview with Peter Shallard, Peter talks about a 2 year cycle that entrepreneurs go through before they're able to really "get it" and move on with building a successful company. How is The Foundation able to compress that timetable for people who have never started their own company before and have other demands on them, such as a job and family?
 

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How did you started, did you always wanted to be a entrepreneur, or was something that just naturally happened?
 

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Since what you are selling is a replicate-able process, the material for you is scaleable. If someone doesn't succeed following your material can they get their investment back? In essence, do you back up your claims with any sort if guarantee? Is it true that only a small % if people that buy your program ever recoup their investment? How much money does a student invest with you on average, and do you have any metrics that can validate what the average ROI is? How many people have taken your courses?
 
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Can you profile 10 successful students and companies they have started using your material?
 
M

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1. What's more profitable for you - SaaS or the Foundation (software company vs educational company)?

2. As far as I don't see any problems with selling a software company, I see some issues regarding the exit of an educational company. Do you think that a business like the Foundation, which is highly attached to your persona, might attract buyers?

PS. It'd be great if you could share some thoughts on running a software vs educational company in general.
 

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Hey Dane,
You seem pretty big on outsourcing,
From my initial take of what you did, it was that you overcame the fears of "having to do it off your own back for it to be valuable" that I and other people have definately struggled with. So I'd ask you, what do you feel was the key that helped you really be comfortable working with others? I think the question is even more pertinent considering that your first experience with buying a website left you without much cash or patience for shoddy purchases.

Did you implement a screening process because of that first failure, and work out how to organise others creations into YOUR vision.

How did you balance "taking control" of out sourced material, and make it so coherent and valuable?
Leadership? Fearlessness? Oh cr*p moments?

I guess, I'm asking, how did you manage to become so comfortable, without the backing of it being "all your work".
I think that is a really unique skill, and I'd find it cool if you could share something that could help anyone that still struggles with "needing their own work" to be comfortable.
How is creating your vision through what you have available NOW, better than "relying on your your own creative works" to be comfortable.

And do you have an example?

Thanks Dane for taking the time to answer some questions
 
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Looks like Dane bailed
 

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He's prolly busy.
 

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There was no time specified for his contribution other than a starting date of today, and whatever time was convenient for him.

Eagerly awaiting his replies...
 

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OK, since everyone appears to be shy, I'll start...

1) How do you avoid having your students compete in the same space? Or do you?

2) The business you bought for $12K and got "scammed" -- how exactly was it a scam? Please provide details so as someone here might not repeat the same mistake, or so we will know how to spot the red flags.

3) Was the business found at Flippa?

1) It just doesn't seem to happen. Our belief is that there is always an unmet pain or need in any market, you just have to dig deep enough to find the pain. Which means, there are plenty of awesome ideas. In times where people stumble upon the same pain through idea extraction, we have students partner up, or either bow out of an idea. This happened one time in the last Foundation out of 336 students. As the Foundation grows I want to encourage people to target a market and build separate components of an all in one system, and have them all API together. Think Chiropractors, one builds marketing system, one the billing, one the appointments, one the paperless component. Which each person focusing on one, they could build the best single product, and integrate into the others. This is down the line. But I'd love to see Foundation inspired software take over industries.

2) I bought sourceofsuper.info from buysellwebsite.com - it was advertising $200 a day in adsense income, $6k a month profit for a sale price of $12,000. The guy wanted a fast sale to build his deck. Name was Phillip Shinnen. I was an idiot. I got really good at research. Now before I buy a business I do a whois.sc on them, a reverse DNS record, and see if they have any copies or duplicates of the business. Turns out this guy had 15 other domains just like the one I bought. Years later he's pulling the same shit on a different name and alias. I reported him, went to attorneys, sent papers. Nothing happened. So I dropped the negative energy and started my first SaaS AgentCareCenter :: Welcome which holds study at $4k a month.

3) BuySellWebsite.com
 

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I bought sourceofsuper.info from buysellwebsite.com - it was advertising $200 a day in adsense income, $6k a month profit for a sale price of $12,000. The guy wanted a fast sale to build his deck. Name was Phillip Shinnen.


Website maker pleads guilty to wire fraud

Looks like the person you mentioned Dane....he is now heading to sentencing :thumbsup:
 
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Awesome! Thanks for jumping on here and sharing your knowledge. It sounds like you've had an incredible journey so far!

Here are the questions

4) I see you mention a lot about preselling companies. I understand getting them on the phone, but how do you convince them to pay you and wait for "x" months until you have a product ready for them?

5) How do you guarantee they will actually purchase once they said they would? Do you put contracts in place or is it just word of mouth?

4) There isn't a lot of convincing. In fact, that word convincing has me wonder what your perspective on sales is. I see selling as alignment with removing pain, and getting money for that. With our process on idea extraction, we are asking people what their painful problems are. So once we've uncovered a pain, it's a straightforward sale. Let me give you an idea of a level 4 pain I experience in my business as an example.

I use OfficeAutoPilot.com to power my marketing and sales. I also use quickbooks for accounting.

PAIN: I have to enter data from OfficeAutoPilot into Quickbooks, it sucks balls. (Zapier.com doesn't have an integration, so I'm outta luck.) So... If you pre-sold me on software to do that, I'd gladly pay in advance. See I have massive pain, so I'm willing to part with money in advance.

No pain, no parting with money.

The pitch looks like this if you were to sell me. "Dane, I see you have pain in entering data from quickbooks into OfficeAutoPilot. But you can't find a solution to help you with this. Would you like me to build this solution for you and take this pain away? (YES!)

In that case, how would you like to be one of the first 10 people on the planet with this solution, and get a 10% discount off for life as a champion/founding member?

It will be ready in 12 weeks or so, and I'd like a down payment to secure your spot. How does that sound? (YES!)"

So the traditional formula is 10 champion users, charge a year upfront, and give 10% off for life on monthly rates after that.

And if you did idea extraction on me, the way we teach it in The Foundation, you would discover this kind of deep level 4 pain I have (4 levels deep, not just my first general response, but digging deeper to 4 levels in, you'll hear ideas like this).

This kind of idea is a perfect example btw. You build on top of an API on OfficeAutoPilot for an integration into quickbooks. It's a golden passive income software business idea. And these ideas are plentiful to build when you have the right mindset, which we teach in the Foundation.

5) We trust people to their word. But you could have them sign a contract - I suppose. We just take money as soon as they say yes. Some people send checks to them, wire money, paypal, etc. Get the person to say yes, then get the payment ASAP.
 

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What's your take on competition?

If I'm starting a new software company in a space with a ton of established players already, how do I come out on top especially if I have less capital, features, and experience.

Excellent question. Take my primary breadwinner PaperlessPipeline.com - last year when I started the Foundation it was $40k a month in revenue.

Now... one year later it's over $60k a month in revenue. It grows without my involvement. SaaS is insanely awesome.

That $60k in monthly revenue is from ~400 paying users. (Note: I like to charge at least $100 a month for a product. Anything less is not as exciting to me).

Here's the thing: PaperlessPipeline has 16 competitors.

Competition is great because I recently had an offer for $2.1 million to sell PaperlessPipeline to a competitor. I declined.

Lesson: Competition means money.

Now, I started PaperlessPipeline with me, one developer, and one real estate broker who gave me the idea. I invested $8,000 into building the first version with money from my other SaaS businesses.

The first version was built in 8 weeks. I took everything the real estate broker said and built it to the T.

How did I get the idea?

I asked the broker: What software have you been looking for for years, but have not been able to find a solution?

His answer: Transaction management software.

My response: Yeah, but isn't that insanely competitive?

His response: YEAH, but I know exactly how to build it, and all of my friends will sign up after you build what we want, none of the solutions do what we want.

My response: OK, I'll build it.

And 3 years later. It's cranking. With fewer features and less capital than my competition who has raised money. All because I listened intently to the customer on what they wanted.

If you want to win against competition, you have one mission: understand and define the pain better than any of your competitors.

The business who has the pain defined and articulated clearly, usually has the best solution.

Defining the pay is usually done in written form or (even better) in a visual flow chart detailing how bad the current situation sucks.

With PaperlessPipeline, we found that the competition didn't really understand how paper flowed in a real estate office.

So... we flow-charted out how the paper actually flows, and made the system lay over top of that. The competition tries to change how a real estate agent works. We just plug into their flow.

So a few good rules are: the approach needs to define and articulate the pain better than anyone else (even better than the customer).

And then change customer behavior as little as possible.

Price against competition: Whenever you run up against pricing shopping, this issue... this sucks.

I'm not totally sure of a hard and fast rule for how to address this all of the time. In this case with PaperlessPipeline, we charge a flat monthly fee instead of per transaction. We found the brokers like to know their expenses in advance, rather than have them variable.

So in price... this was another edge we had.

Lesson: The business that wins is the business that understands their customers inside and out.

Most businesses are competition focused. We are customer focused.

Many companies time would be better spent interviewing customers, instead of googling and researching their competitors.
 

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My questions to you:

  • What should I look for in a programmer/developer to prevent this sort of thing from happening again?
  • For somebody starting from scratch, with no knowledge of contracts, no money for lawyers, how do I go about getting contracts in place?
  • When working towards a minimum viable product, how do you go about getting everything DESIGNED and looking pretty. A programmer doesn't always know great design and user interface. Assuming I didn't have the capabilities to design myself.. how do you bring in a UI/Design person into the mix? At what stage do you bring them in?
  • I once made a few calls to golf course offices to discover their NEEDS. Once I extracted them and figure out a possible solution, how do I figure out if it's even possible? How do I know where to look for a developer/coder if I don't know what languages/technologies that would make my idea work?
  • In the case that a SaaS app required two separate skillsets to implement, would I look for two developers to work together? One developer that knows both skillsets? Search for a simpler solution?
  • For a month or so, it felt like you were doing a media blitz. You were EVERYWHERE. What's the best way to go about booking guest spots on popular shows/blogs?
  • What's the best way to capture/capitalize on leads from such guest appearances?

Dude, that sounds awful, I wish I could have been mentoring you inside The Foundation, we could have avoided that whole mess.

Question: What to look for in a developer to prevent getting screwed? And question about contracts?

Answer: We have a whole programming test, and also require a full time commitment on our projects - not part time. It feels to me like you took a personal recommendation over your intuition. My guess is your intuition had a few red flags? Or maybe not.

I trust my intuition gut check with a few other metrics based things.

One thing I require of developers is that they have awesome personal hobbies like being a photographer or having a family. You can smell integrity in the things they do outside of development. Another thing I do is ask for a recommendation from past work, ask if they got things done on time and on budget - bug free. Those 3 are the biggie.

Then like I said, we do a programming test to make sure they know what they are doing. In this case it looks like you had just one option for a developer.

We like for you to be in the position where your picking between 3 developers and you're in a more abundant place so your not picking one based on scarcity. Good developers can be hard to find, expect to invest 3 to 5 hours into finding your ideal one. I like to place jobs on oDesk and also in message boards/google groups where I find reputable open source developers helping others out. Those are the ones I message and invite. Lots of integrity. That was exactly how I hired my developer for PaperlessPipeline.

I know very little about technology or how to code. I'm a complete novice. So I have to rely on high integrity people. I've never had a contract signed for anything. I work on my word, and so do my developers.

Question: When working towards a minimum viable product, how do you go about getting everything DESIGNED and looking pretty. A programmer doesn't always know great design and user interface. Assuming I didn't have the capabilities to design myself.. how do you bring in a UI/Design person into the mix? At what stage do you bring them in?

Answer: Design the UI first, never develop until you've got the UI done, it saves you hours of development to have the UI crystal clear. Use Keynotopia.com yourself or Themeforest.net or twitter bootstrap. You don't want pretty, but you want clear and straight forward. My UI's start out as pencil and paper, then I take a picture and give to a designer to make look nice.

Question: I once made a few calls to golf course offices to discover their NEEDS. Once I extracted them and figure out a possible solution, how do I figure out if it's even possible? How do I know where to look for a developer/coder if I don't know what languages/technologies that would make my idea work?

Answer: Post on Odesk.com to see if your idea is feasible. "Hey I have an idea to take X and do Y, is this possible, if so, how would I go about it, and can you give me a quote?"

Literally that simple or a project to post.

Question: In the case that a SaaS app required two separate skillsets to implement, would I look for two developers to work together? One developer that knows both skillsets? Search for a simpler solution?

Answer:

Ideally, you want a developer who can do it all.

Here are my 15 deal breakers for hiring developers, you can copy and paste this.

1. You don’t have full time focus on this one project. I don’t want your attention spread, I want you to work solely on my project. The subconscious mind works best when it is focused on one task. We want this to be your sole focus for that reason.

2. To challenge me, tell me I’m an idiot if I’m being one. In other words, don’t blindly listen to me. I’m not your boss, we are partners.
But we do have one boss: The customer. That means we do what’s best for them. When questions about building a feature arise, we consult the customer. We don’t guess.

3. You must have a track record for completing projects. Working them through to completion. Too many developers just go 80%. You must be a 100%’er or we can’t work together.

4. You must be a problem solver. Don’t come to me with problems, come to me with a problem and then the potential solutions for the problem. Then we can brainstorm and pick one of the solutions. I don’t expect you to know solutions to problems, I expect you to consult forums and use google to find solutions to problems on your own. I want a driver, not someone I have to babysit.

5. To understand Rapid Application Development. Release early, release often, get feedback, and make progress.

6. Can hack together HTML and CSS if needed. A UI will be provided, but if we need to add something on the fly or make a tweak, any skills here would be a bonus.

7. Proficient with the command line interface. Must understand basic system administration. Capable of launching and administering basic LAMP server. We might not use LAMP, but just knowing you have these skills is enough.

8. To be familiar with the 37signals Getting Real framework at Getting Real: The bestselling book by 37signals

9. To do the initial customer support on the software built. If you are not open to supporting the system you help build, then we must part ways now.

10. To be interested in the success of this project after version 1.0. Version 1.0 will just be the beginning and I’ll need your help after we release the first version.

11. To release features on time. (You set time frames, not me, so this shouldn’t be a challenge).

12. When releasing a feature, bug test it yourself before showing me. Don’t show me a feature you have not tested once. I will go through all features to double check them, but I am not your initial bug tester.

13. As the project picks up speed and feature requests roll in, we will use www.uservoice.com for future feature development. Again, the customer is our boss. I am not your boss.

14. Accurate time quotes on development time frames. You do not have to be 100% accurate. But do not tell me a time frame you think will make me happy. Tell me a time frame that you can complete the bug tested work in.

15. Most Important. This is NON NEGOTIABLE. In the 10+ software projects I’ve worked on, here is the most life changing thing I’ve started doing. It will make both you and I very happy working together: You will spend 5 minutes at the end of each workday sending me a daily update. Your daily update will answer 4 questions. 1) How many hours you worked 2) What you accomplished (not what you did, but what you accomplished) 3) What problems you encountered, and 4) What questions you have for me. I will review this immediately every night and answer your questions.


Question: How do you do the media blitz, and then get leads from it?

Answer: This is really my partners skill set, Andy Drish for the promotions.

We get one good interview on a blog, then we leverage that and show other interviewers, and ask if they'd like to do an interview as well. We goto conferences and network and have beers and just be generally awesome people.

For leads, we offer a really sweet bonus at the end of the interview, like this...

"I've got a copywriting checklist I put together I use to sell all of my products. It's 10 steps. I'd like to offer it for free as a gift to anyone who's listening to this interview. Just visit FreeGiftForYou.TheFoundation.com (not really a working link) to get it right now."

Instead of just the standard call to action, we use that. But in total honesty, we've been so overworked and stretched we haven't been doing that this time around. Just been driving people to TheFoundation.com that has a sweet call to action for the homepage.
 

stefan

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Thank you very much for coming here to take the time do this AMA.

Why did you choose not to learn to code/do your own developing, and purely outsource those aspects of work? I realize that your decision has obviously worked for you, I'm just curious as to your reasoning behind that.
 

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