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

D. Maxwell

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Thanks for being very transparent and thorough, I appreciate that.

There's one more thing I'd like to ask: what do you think about building a small audience first by publishing some good content in a particular market, gaining trust & credibility, learning needs and then creating a software product (and possibly other products & services that fill the needs)? I know it will take more time than emailing and calling companies, but personally I'd prefer to do it this way.

So basically what are your thoughts on building an audience first (example: the way Pat Flynn launches his online businesses) vs product first approach (example: Eben Pagan, as far as I know he didn't have any audience when he was starting his dating empire, he started with a simple ebook and then went from there).

If all of my businesses burned to the ground and I had to start from nothing, this is what I would do.

Here's how I'd do it if I were going after one of my favorite niches I think would be awesome to be serving, Chiropractors.

Seriously, look at this business: Chiropractic Marketing | Chiropractic Website Templates | Chiropractic Websites | About Us

A 100 employee company just helping chiropractors with marketing. Which business would you rather own, be a chiropractor, or help chiros with their marketing? Ding.

Sell tools instead of digging for gold. Money is always in building the tools, not providing the service.

Anyway, this kind of business (with 100 employees) validates that the market is awesome to me. I'd want to enter it when I see a 100 person company serving chiros with basic PPC direct response websites.

What I'd do:

I'd combine mixergy with idea extraction and a mastermind group.

Step 1 - I'd google search the top 50 cities in the country like "new york city chiropractors"
Step 2 - I'd create a blog and publish and find the top ranked chiro's and interview them weekly on their marketing and business practices

(Top ranked chiro's in google have to have their shit together)

Step 3 - I'd market these interviews for free to other chiro's, totally free

(I'd have someone in the phillipines personally find chiros websites and find an email and send them links to the interviews - one chiro at a time)

Step 4 - I'd collect leads on the website for a PDF like "top tools chiros use to run their business cheatsheet"
Step 5 - At the end of each interview I'd have the Chiro share their favorite and least favorite software, taking notes
Step 6 - I'd use the tools from the interviews to create a recommend resource of tools for Chiro's to use in their office, taking note of what's a pain and what's missing
Step 7 - I'd focus a segment of the interview on pains the chiro is experiencing
Step 8 - I'd find the top most common pains and least helpful tools and organize a mastermind group of 10 chiro's who all want that top pain solved
Step 9 - I'd organize bi-weekly calls with this group of 10, asking them to tell me exactly what they want and then show them user interface shots of the product each week as an update
Step 10 - I'd get pre-sales from these 10 for minimum $2k each and use the $20,000 to hire a dev to build the product
Step 11 - I'd launch the product to them
Step 12 - I'd get testimonials
Step 13 - I'd use the testimonials to promote to my chiro list and blow it up to all the other chiros who now trust me because I've been showing them epic content on how to run their practice
 
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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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D. Maxwell

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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.
 

D. Maxwell

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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.
 

samovens

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Hey all,


I can see some comments in here about me having a falling out with Dane and I want to clear that up.

Firstly, SnapInspect and my consulting business would not be here today if I had not joined the foundation.

I learned a ton in the foundation and that is ultimately where I got the new mindset and strategies to start the businesses I own today.

Dane Maxwell and I have not had a falling out. Dane is an investor in SnapInspect and I still have a ton to do with the foundation - mentoring, creating content and attending the bad a$$ parties that happen at the end of it.

The Foundation model does work. You can pre-sell enough customers to fund the development of your product entirely.

What I am saying with my recent marketing is that I used cash flow from consulting to "Accelerate" SnapInspect as a business.

SaaS companies start slow and then explode when you get a few critical things right: product market fit, pricing, positioning, optimal sales process and key marketing channels.

I used consulting to accelerate my business; activities like marketing, hiring in-house developers and hiring a sales team on salary.

These things are not necessary and SnapInspect did not need them to become a success, it was simply a way to accelerate the growth.

On another note; I do NOT recommend consulting as a end-game business. I've read the book and consulting is not "fastlane". Software as a service IS "fastlane".

Just like MJ and many other entrepreneurs... sometimes you have to do some non-fastlane stuff in order to get your fastlane business off the ground.

I hope this clears things up and I'm open to asking any questions you might have.

Dane Maxwell is an amazing dude and the stuff he teaches in the foundation is seriously powerful and life changing, I endorse everything he does 100%.


-Sam Ovens
 

D. Maxwell

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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?

What an awesome question.

Yes. We offer two guarantees. If you are unhappy with the program, or you don't get a business with 10 paying customers on your software at the end of 6 months, you can get a full refund.

This year 2013 336 members sign up and X number refund. We don't like keeping money if people don't feel their life has changed or they didn't get the end result they wanted.

The first year I ran this program 2012, we had 88 members sign up, and only 5 produce a software company at the end of it. That's 5 / 88 = 5.6% success rate based on our guarantee. We had another 10 or so go on to start different online businesses like ecommerce, or mastermind groups, or consulting, or freelance SEO. That's 15 / 88 = 17% I'd say total happiness rate?

I can't remember all 5, but three from the first group were:

1. Sam Ovens from SnapInspect - currently $700k+ a year
2. Dan Corkhill with FollowUpBoss - currently $70k+ a year
3. Anonymous guy with CRM for hedge funds - currently $3.6M a year

The first year we started with 88, and around 30 were left at the end. Half them are now doing some entrepreneurial activity, the other half are still on their search.

I take responsibility for the low success rate of the first program, and the students who weren't successful also take responsibility as well for not really giving it their all. Where I take responsibility: The first year I didn't understand how emotional clearing worked or limiting beliefs. I didn't realize many people who want to be entrepreneurs are not lacking tactical advice, but emotional and limiting beliefs are in the way.

I also see it as, the program works. These guys used the program to become a success. So my mission now after the first program is to increase the success rate.

Enter 2013 class. LOTS we learned.

336 members started - 210 left at the end - Dozens of success stories. I guestimate an average 10% success rate (see more concrete numbers below though) - This double what we did the first year. A significant improvement. We are getting better.

Students from this year include peeps like

Carl - who made ClinicMetrics and quit his job at Tesla motors
Geordie - who made Guest Retain and quit his job as a wireless tech
Esther - who made ShootZilla - Photography business software that will save you hours every week & bring you more clientsShootZilla and I don't know if she quit her job or not yet, but she's on her way.
Renata - who didn't make software, but is now selling $10,000 custom website jobs and she's not doing any of the work - using her mindset she learned and mentornship from an awesome Foundation member Amit.

To your question, is it true that only a small percentage? Yes. 5% first year, 10% this second go around, and this third year, we are shooting for an insane 20% success rate. The success rate is not all on us though: It is up to how hard the student is willing to work. For our students who show up and play with vulnerability, their ROI is potentially infinite.

They invest on average $5k in the Foundation program, and another $1k in random expenses, the rest of the money to build the software they raise through pre-selling the product.

For the 20% success rate this year around, we are doing the program a LOT differently (I can explain in another post if you'd like), we are defining success as they have one paying customer in a business at the end of the 6 months. We are doing this because we have people who didn't reach 10 customers, they had 1, or none, but they were close, and felt like not successful. But they are!

For example, one student just landed her first customer, and it's Zapposs.com, but it's 4 months after the Foundation ended.

Our program is not an instant quick hit short term play for people, it's a 5 year play. It's like growing a tree. It takes a while. But in the end you have a ton of shade. In the first 6 months if you are fulling showing up and working hard, you will be in a positive ROI, and 5 years from now you should be completely hands off in a business fully supporting your lifestyle. Maybe even 3 years.

For metrics on this last years program, we did "success metrics" that shows a percentage breakdown for this last years program. You wouldn't believe how difficult it is to get complete numbers with all members. My feeling is many members are ashamed or torn after dropping out and don't want to talk with us.

I hired a guy to do the success metrics, he's a follow up beast, and out of 336 students he's only been able to get 173 on the phone. And he's contacted them multiple times.

For this year, out of 171 students we were able to get on the phone. We have 41 with software.

41 / 171 = 23% made software with at least one paying customer. The other bunch we can't reach because they either dropped out of the program or won't reply to our calls / emails - or are too busy.
 

D. Maxwell

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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.

What a beautiful question!

1) My SaaS business Generated roughly $700k in revenue last year with a 25% profit margin, I kept roughly $175,000 - that was for maybe 10 hours of work the whole year. It's all on autopilot. What's nice is that my expenses to live are less than $2k a month. I now work because it's a choice :)

And my calling has shifted. I enjoy helping others find freedom (like MJ). Plus The Foundation can scale to the entire planet. My software is limited to real estate. We want this framework to be in the school systems of Malaysia, and in the college programs of India.

Enter Foundation numbers.

We did roughly $800k in revenue after refunds, and I took home $200k of that or so after paying the team and affiliates and such. Of that $200k, I was working 50 to 60 hours a week.

Not exactly worth it from a financial sense if you're just looking at the numbers. But I had a BLAST!

During that 6 month time, my software company churned out $100k or so for me, with maybe 3ish hours invested talking to the CEO - and it had an offer for $2.1 million - which I declined as it was only a 3x multiple. I wanted 6x+ multiple. (We talk about how to sell SaaS in the foundation).

In the end I believe The Foundation has more total revenue potential than my software company, and I hope I make more with The Foundation than my SaaS business because the impact of the Foundation blows my SaaS business out of the water - but it's at a huge commitment personally. (

Building SaaS is a LOT more fun than doing the education (for me), but I feel called to this arena to help others. It's hard. I get burned out dealing with the skeptics and naysayers, people who expect something for nothing, people with unrealistic expectations, but in the end those guys make my conviction stronger.

If I may, a little rant from my heart:

If at the end of my life, when I'm lying on my death bed... if I didn't do everything in my power to empower the world to be free, I will feel I lived a limited life. If I didn't do everything in my power to show the world that Freedom comes from kindness, and kindness is freedom, I will be very disappointed. My life has drastically shifted from providing for myself, to empowering others.

The Foundation for me is a vehicle to propel kindness into the world. And I mean kindness to yourself. You are awesome if you are reading this. You matter. The inner voice that talks nasty to you is a lie. Be kind to yourself, and you'll be free.

The Foundation takes you on a journey of building a SaaS, and on that journey you face all of your inner demons and self limiting beliefs, by addressing those, and being kind - you become free.

2) The Foundation right now is really tied to my face. I don't like this. My vision for the foundation is to turn it into the Alcoholics Anonymous for Entrepreneurs starting with nothing. We want to specialize in helping entrepreneurs start anywhere in the world, regardless of circumstance. How F*cking badass is that? Do you know who the creator of AA is? No. I don't want you to know who the creator of the Foundation is 10 years from now. But I want it to be everywhere :)

For Replacing me: We are bringing back our students to teach and replace me each year. And I think the Foundation will be better without me in it over time. I think there are better teachers than me. In a few years, I will be gone from the business (probably running a SaaS for a while - or who knows).

For your PS - Running an education company can seem attractive. It's a LOT of work. You charge high price points, you change peoples lives. But like any business, it comes with it's downsides.

Customers who expect something for nothing.
Skeptics who feel like I'm doing this for some unethical or greedy reason.
A never ending slew of challenges that come up 10 fold over what I have to deal with in my hands off, effortless software business.
And because of this, being always pushed to the ultimate edge of who I am to handle this energy.

And I wouldn't change it for anything in the world.

The business opportunity space sucks. It's terrible. It's full of shady people. We want to transform that by having transparency in our flaws and our strengths. We're not perfect, but you can be damned sure we do the absolute best we can.
 
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D. Maxwell

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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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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?

Question: 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?

Answer: My deeper reason why for living is to help others find freedom. For me I believe freedom is kindness, and kindness is freedom. Especially personally. Kindness to yourself is the ultimate freedom. It feels so, so, freeing. When I'm quiet and ask my heart what it wants, it tells me to help others find this freedom.

Financially, and personally.

Running the Foundation is 10x more difficult than running my SaaS business. I don't ever have to work again, but I choose to.

The truth is, once you reach a certain level of financial success, your focus shifts from protecting yourself to helping others.

What my heart wants is a lot of work, but I'm down for the answer, down for the journey. I work 40 to 60 hours a week on The Foundation. I work 0 hours a week on the SaaS business and take home $20k profit a month with zero zero work. My current salary at The Foundation is $10k a month plus a bonus of profit. We have a team of 10 to 15 we manage and pay. It's a different beast. Lots of work. But lots of meaning.

Question: 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?

If you're product is like a sugar cookie to a diabetic, you need to acquire customers all the time. If your product is like insulin to a diabetic, you can acquire a customer and keep them for life. If your software is useful, people will keep using it. If it's not, they will quit. No tricks or work arounds for that. It's really straightforward and awesome in that way. Money doesn't lie. And money follows usage. Make your app so important they always use it. Like insulin to a diabetic.

PaperlessPipeline grows at a net gain of 10 customers a month, at an average ticket of $125 a month, so it grows around $1250 per month, always. PaperlessPipeline is like insulin to a diabetic. My RecruitingNinja.com platform is like a sugar cookie, people cancel that one more.


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?

Small business market yes, but I'm excited to see someone break this mold. We have a few. This model would work in any market.

Largest student doesn't want to be named, but he is doing $300k a month by providing a CRM to private hedge funds. He's bigger than any of my businesses.

He is definitely an anomaly - smart smart guy. Sam Ovens is quickly approaching 1M per year.

But I think the more exciting metric is not how big are our students, but how many of them are successful. We've had 36 or so graduate this year with a paying customer in a product - 10% success rate. And a dozen with working companies by the time the Foundation ended.

One student is building a GPS tracking up for door to door salesmen for roofers. So cool.

Many are still building their success.

Some are slower, but one of our slower students had Zappos.com just pre-sell on as a paying customer for her software, and now she is building it. Yeah - zappos.com bought a product before it exists. So exciting.

Question: 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?

Answer: We just communicate the outage, and don't offer anything.

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?

Answer: We don't teach the full blown scaling aspects of the business. Most are able to host on one server with one developer doing code and support. Beyond that is where our program ends right now. We have yet to build the scaling side of the product, which is an entirely different beast! You know… how to do all that stuff you just asked about :)

Question: 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?

Completely open, completely transparent. No scarcity mindset.

Question: 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?

Answer: No we have not. I'm not sure how to answer this question. Seems out of my area of expertise.

Question: 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?

Answer: This would be an awesome course to add on. Not right now no we don't. Just entry and launch up to 100 users.

Question: 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?

Answer: Do as much as possible virtually over the internet. Sales team after you have 100 users dialed in and the app working with good support ticketing system in place.

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

Answer: By far, webinars. Cold emails to webinars, PPC to webinars, landing page to webinars. Webinars drive on average 50% of my software revenues.
 
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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

Hey Rogue! This sounds like you've uncovered a seriously awesome limiting belief about your identity. Let's get started dismantling it brother!

If I was to guess, it would be something like...

"In order to have or feel valuable in the world, I have to come up with an idea and do the work myself."

In other words, if other people do the work, it somehow takes away from your value as a person? Like you're almost feeling stolen from?

Yeah! DUDE!

Thinking back I totally had this... like I'd feel totally stolen from if it wasn't my unique idea, or if someone else designed the website instead of me.

When my parents would see a business and ask, who designed that website? If it wasn't me - but I outsourced it. I'd be like pissed, like "screw that I'm still awesome if I didn't design it." Oh wow... haha, this is funny. Crap did I ever have this.

It shifted slowly for me as I started hiring others.

I'd awkwardly feel the pain of not having value... but understand I couldn't do it myself so I have no other choice but to feel this pain as I continued to outsource!

I was a really self righteous, totally proud person. Ouch, hurts to remember this phase of my life.

At age 24, I'd hear other entrepreneurs be humble and give credit to their team, and I'd think "F*ck that, I'm the genius behind this, I made this happen, no one else gets the credit - even the developers are listening to me, this is my thing."

Do you know how destructive that is for me to type now? It's so gross. It like... poisons my body to even try and believe that now.

Rogue you are doing disservice to yourself and the world holding on to something that doesn't serve you. I hope it's ok that I'm saying this publicly? I'm really proud of you stepping up with such a deep issue and being so open. Thank YOU.

Rogue, think about what it would be like if this is what your life looked like.

Instead of working on your own ideas and doing your own work, you had this instead...

Instead... you'd own a 100 person company that runs without you, and it's really up to amazing things in the world. Your whole mission is not to DO anything in the company but love your employees and help them become the most amazing people. Your value shifts from doing things and coming up with ideas, to developing people to be awesome... and these people can do that work for you. Then when greatness happens, you humbly give them all of the credit, and all of the credit goes to God.

How does that picture sound? Maybe I'm off. But to me, it sounds sweet.

Instead of waking up in the morning wondering how you can feel valuable, you wake up wondering how you can make people feel like they matter, and they are loved.

Now F*cking A. For ME. That's a mission worth waking up for. But it couldn't happen until I transcended this belief.

The idea that my value comes from my unique ideas or the work I do is so self destructive. It's almost as if I'm worthless unless I do X. Where X is get the hot chick, build the business, get the house, car, money, etc...

OMG have I been doing that.

Consider the other perspective.

"My value comes from God, and was given to me at birth, nothing I do can take away or add to that value."

What's even worse Rogue, is that because of this belief, it could be driving you to do things you don't even want to do! What if your heart wants to play the piano all day, what if you just want to write a book, what if you want to hang out with and show orphaned kids they are lovable, but to feel valuable you have to come up with ideas and work.

That's a life not fully aligned... not fully alive :-(

Once you realize you are totally and completely valuable. Then you can work on things you love.

And I have news for you. You ROCK Rogue. You are F*cking awesome.
 

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Great stuff! Thanks for sharing, it's really an eye opener.

What are the shortcomings of mindset that "green" recruits harbor when they enter your program?

How do you specifically go about discovering and breaking down the limiting beliefs of your members? Or even yourself? What types of limiting beliefs did you have before launching your businesses; limiting beliefs that you now unequivocally know to be untrue?

Thank you again for taking out the time to answer our questions.

Question: What are the shortcomings of mindset that "green" recruits harbor when they enter your program?

Answer: The more common beliefs I find that are deep identity beliefs. A fear of failure means something bad and a fear that I'm not made out to be an entrepreneur.

Failure is awesome, not bad.
And you are born to be whoever you want to be :)

We have failure fridays at The Foundation this year where people celebrate failures with each other.

To discover a limiting belief: Limiting beliefs are designed to come up while you take action. While you are taking action, pay attention to your body, is it getting tight, clenched? If your body is in a state of compression instead of expansion, you're thinking a limiting thought.

Our top student Carl Mattiola reversed 32 limiting beliefs on his path to creating ClinicMetrics.com

To break down and reverse a limiting belief we follow The Work of Byron Katie :: Homepage - framework. It works very well.

It can be hard to do on your own, which is why I recommend having someone do it with you, they can just read outloud the questions for you from The Work.

Limiting beliefs are challenging, but doable. They are usually deep blocks. And blocks are things you can't see for a reason, they are blocks afterall. It takes a second set of compassionate loving eyes to dismantle them.

Once you apply consciousness to a block, things start to shift. Just putting words around the limiting belief and knowing it's there can sometimes be enough! Othertimes, do The Work from Byron Katie.

Limiting beliefs I had? All of them.

I'm unqualified. No one will listen to me. I'm just a kid, who wants to work with me? I don't know anything about software. I don't have money. I don't have an idea. I don't have credibility.

I just held on to all of those beliefs while I took action. Instead of believing I don't have an idea, I asked others for ideas. Instead of not having money, I asked "how can I get money?"

I remember feeling totally unqualified, but people still listened to me so I went with it. I remember thinking, how in the world does this person think I'm qualified? But I just ignored the question and kept taking action in spite of the limiting thought.

Now it's reversed through direct experience. I find it awesome to take action and let experience reverse a thought. Othertimes I have to do the Work.

Limiting beliefs suck, they cause you to doubt yourself and produce awful feelings in your body.

If it feels light, it's right, it's empowering.

If it feels heavy, it's a limiting belief your thinking.

Imagine starting a business feeling light. That's the power.
 

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Hey Dane,

My question is very basic, but what is your "outline" that you follow for getting in touch with the right person and getting to their pain. I'm kinda scared to get on the phone with people and what key lines would tip my extraction phone calls more towards success?

Liberty, I would practice your idea extraction on friends and relatives who have businesses first, get a few under your belt there, then once you find some success, branch out to the cold industries.

I don't prefer cold contacts for idea extraction. I like to find industry experts and get them on the phone and tell them I'm a tech entrepreneur looking to automate painful tasks in businesses.

Look up associations like if you picked chiropractors I'd look up chiropractor association. I found a website and looked up their board.

ACA - ACA Board of Governors

I would email and call all of these guys multiple times and tell them something like this...

"Hey doc I'm Dane, a tech entrepreneur looking to serve the Chiropractic industry, I know you guys have lots of options but many are terrible. So I'm doing a research investigation and learning about the top pains chiro's face, and looking to compile this research into a report and possibly create a product to solve some of the pains. Would you like to participate in this and also see the research I find?"

Then I'd hop straight into the idea extraction questions.

Lots of times with these guys who are heads of associations, they are so dialed in you can straight up ask them questions like

"What would you definitely buy as a chiro, if I was smart enough to offer it to you?"
"What software have you been looking for for years, but have not been able to find a solution that fits your needs?"

Then I'd go into the PAIN extraction questions...

Take me through the first hour of your day, what are you usually doing?
The second hour?
The third?
How about after lunch, what do you usually do then?

What are some of the pains you experience when handling patients?
What are some of the pains you experience with your staff?

NOW important, in idea extraction, it's not about the first question, but how you respond to the first answer.

They will tend to answer with general answers, and it's up to you to dig deeper.

You want to steer towards LEVEL 4 issues and answers.

Level 1 answer - an all in one software solution (don't build this, it's too complicated to build, and sell)
Level 2 answer - something that does all patient management but not office management
Level 3 answer - something that does a few key things like appointments and billing
Level 4 answer - just software handling people who don't pay on time, or appointment reminders only

In real estate a great level 4 software is e-signature software. It solves one painful problem only.

The closer to level 4, the higher the chance you can build it in under 12 weeks.

There is a lot more on this. We have a 43 page report on how to fully do idea extraction.

This should give you a good start. Get out there and practice lots :)

Expect the first 10 calls to go shitty.

Record your calls, listen back, and reflect on what you can do better.

Tom Brady became the best quarterback in the game by reflecting on game tapes.

Reflection is a top skill from our top students. The students who don't reflect on how they did after a failure, usually fail often and start blaming things.
 
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Thank you for doing this.

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

Criteria Number 1: Lucrative industries are preferred
Criteria Number 2: Profit driven businesses
Criteria Number 3: Roughly 5,000 to 10,000 businesses (or more) in the market industry
Criteria Number 4: Reachable by phone, email, facebook, linked in, twitter, or message boards.
Criteria Number 5: Can get person with pain point on the phone
Criteria Number 6: The average successful business earns at least $100k per year in revenue, and ideally profit (guestimate this)
Criteria Number 7: The business currently pays for software of some kind

Examples: property management companies. physical therapy practice, chiropractors, pilates or yoga studios, graphic designers, realtors
 
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Some of us are too busy working the dream than sitting in front of a screen dreaming?

May I suggest you go and play on Facebook, Twitter or something! Maybe watch American Idol or Celebrity News?

Consider this the 2nd foot in your mouth. First you scan the thread (you don't' read it) and then claim there's nothing to see, then second, you insult one of the most successful Fastlaner's on the forum-- one who isn't working for a dream, he's already living it. And no, I doubt he spends much time on Twitter and Facebook, but I do know he spends a lot of time on a beach in Hawaii twiddling his thumbs and building sand castles with his daughter.
 
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Can you profile 10 successful students and companies they have started using your material?

1 Sam Ovens - SnapInspect Property Inspection App Software
2 Dan Corkhill Real Estate Lead Management Software. Convert leads into closings.
3 Anonymous hedge fund dude - domain not disclosed (which he wasn't so private... grrr)
4 Carl with ClinicMetrics
5 Geordie with Guest Retain
6 Esther with ShootZilla - Photography business software that will save you hours every week & bring you more clientsShootZilla
7 Lisa with NCIDQ Study Prep - Qpractice helps you pass the NCIDQ Exam (not software, she found pain outside of software and is doing well)
8 Daniel with TTB Tamer | Federal Reporting | Brewers Report of Operations | Brewpub Report of Operations | Excise Tax | Brewery Software
9 Ed with MaidBooks Maid Software | Residential Cleaning Software & Scheduling
10 Carter and Don (partnered inside the Foundation) - ChatterLime - Live Chat Concierge

There are many more, we plan to get a results type page up that just shows all the companies that have come out of TheFoundation.com - we are just slammed getting the next program out and will be making all of that stuff as we go. Lots to do for next years class.
 

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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.

Hey Stefan, learning to code would be fun, and exciting I think. I have a desire to learn to code, but that desire conflicts with wanting to own a business and not have to work. In the Foundation, we don't allow you to write code on your own projects, it's prohibited.

If you write a line of code before you get one pre-sale on your product, you are kicked out of the foundation.

No product can be created until you get a pre-sale. We don't allow you to sabotage yourself.

Anyway, for me, it just never made sense to do it.

Here's what I've noticed on the entrepreneur spectrum as a teacher over the last couple of years.

The greater the novice of an entrepreneur, the more the emphasis is on product.
The greater the expert of an entrepreneur, the more the emphasis is NOT on the product - but marketing.

Now if you are into making great products to do your marketing, that is marketing in and of itself. Today great products do their own marketing, but they are generally built by excellent marketers.

The more likely you are to want to develop the product yourself, the more likely you are a novice entrepreneur. NOW... this is NOT a blanket statement. Just something I've noticed.

I've noticed a trend for people starting out... to think that the value is the product. It's not. It's marketing and management of the organization that creates multiple and remarkable products.

The newbie entrepreneur would probably rather have a kick a$$ product.
The all star entrepreneur would probably rather have a list of 10,000 people on their email list with no product.

Take AppSumo.com, they didn't start by making their own products, at all, they just had bad a$$ entrepreneur mindsets so they did a better job marketing other peoples products.

The details I'm referencing are fully laid out in this video with the 4 types of entrepreneurs and marketers: The Secret Language Of Millionaires | The Foundation
 

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I was a skeptic when I heard you were going to do this AMA. However, I must admit your answers have been very thorough and very forthright. You seem honest. You haven't shied away from hard questions and have answered some questions I didn't think you would answer. Thank you for doing this AMA. I think you probably changed a lot of perceptions, including mine.
 
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Can you go a little deeper on your freedom = kindness philosophy?

I'm still experimenting with this philosophy. I'm really rough on it, so I'm going to feel out loud a bit here.

Expect this to NOT be articulate.

I feel kindness is a part of freedom, and the another part of freedom is being true to your feelings. And expressing them.

If you're in a job because that's the advice the world gave you, instead of you honoring your feelings to be on your own...
If you're in an intimate relationship that doesn't feel right, but you're in it because you're afraid of being alone...
If you're in a business you own that you don't feel alive in, but you've settled and rationalize it as good enough...

That doesn't really feel like freedom to me, either.

I feel most free when I can honor my complete feelings, and be kind to myself.

When I don't honor my feelings, and then I beat myself up about it, it's almost like the most complete and total sabotage for myself.

Crap. I feel choked up right now just feeling about it.

When I was just starting out into entrepreneurship, I was 22, and my girlfriend at the time told me she wanted me to wear a suit and go work downtown... I told her to politely F*ck off, I know what I want. When my Dad would show me job ads just in case my entrepreneurship thing fell through, I smiled and told him I don't need those. I honored my feelings instead of being swayed by my loved ones.

It took 1 painful year to finally get any traction with anything, but I didn't give up and I didn't honor anyone else's feelings but my own.

It feels damn good to reflect on that now.

But I did it a little backwards. Instead of being kind to myself or them when they wouldn't honor my feelings, I'd get a little angry. Like "F*ck you" I'm going to do this and show you up punk.

Now my nature is just... "Wow... my heart is pulling me this way and I'm sad you don't support me, but I'm going to move forward anyway, because this is who I am."

That's like the ultimate freedom. Gentleness with myself, my feelings, and others feelings.

Now what's amazing is the loving nature of people I attract in my life. You wouldn't believe how amazing the team of 10 is that power The Foundation with me. All so loving, all so powerful, all superstars, all humble, and all just kick a$$. I don't think I would have attracted them without the freedom in kindness and freedom in honoring my own feelings.

Thanks for the question and if you want me to elaborate more, I can. I greatly appreciate the question. It gives me a chance to explore the nooks and crannies of my heart and mind.
 

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I want to hear a lot more about this.
So you've got a SaaS app built.
You have a target market, and you know how to reach them (FB, email lists, ads, whatever).
How is the webinar structured?

Is the entire webinar an overview on how to use your software?
Do you present a problem, give a few tips, and present your software as a solution?

I've spent over $20,000 on info products and experts learning how to do webinars. What you're asking are for the golden nuggets.

I'll do my best to give you actionable advice.

And to do that...

I'll use a friends business as an example.

Assume you are already building a list on your website for your software.

Let's use Proposal Software | Bidsketch

Examples of ways to do this: have people enter their email address to request pricing for your product, or have some email capture for some added benefit with your product.

Proposal Software | Bidsketch does a great job with their free proposal example.

Then on that list of people who don't convert to buyers, I'd market weekly webinars like...

"How To Win 200% More Of Your Proposals" ... or "3 Idiotic Ways Firms Lose On Their Proposals" or... "17 Ways To Design Proposals That Win - Almost Every Time"

I'd try all 3 and find the winner, then repeat that one.

Let's use the 17 ways example because I like that one best, it feels most alive to me.

I'd go in, and for 5 minutes announce names of people on the webinar, call them out, ask where they are from.
5 minutes in I would start right into the 17 ways.
Within the 17 ways I'd sneak in little snippets about how bidsketch helps with each of the 17 ways. Very soft selling.
At the end of the 17 ways I'd make a killer offer.
Sign up for bidsketch right now and I'll throw in the top 5 proposals that have the highest success rate out of 1000's we track here at bidsketch. You'll get these as a free bonus if you sign up. (Note: newbies offer discounts, experts offer bonuses).

Then as people sign up and pay I'd announce them to the entire webinar so people know people are buying.

IF I HAD NO LIST

I would run ads on facebook and linked in targeting graphic design firms and graphic designers, pump them to the same webinar, rinse and repeat. This is slick because you can run ads for say $1,000 and then stop them, run the webinar, and see if you break even. The goal of the webinar is to break even on the front end, and then break the bank on the backend with recurring payments.

This option is great because you don't even need a website to do it. You can just run people straight to a webinar page!

I launched paperlesspipeline with 16 paying users on a webinar before I ever built a marketing website.

In fact, here is the first version of what PaperlessPipeline looked like: https://sites.google.com/site/paperlesspipelinehome/

I only made that marketing website after I had 60 paying users.

Notice how ugly. Notice no logo. Notice almost nothing.

This is the idea called Minimalistic Selling. It's the art of doing the least amount possible to sell your product. It's awesome, freeing, and fun.

Now... today... for PaperlessPipeline, we pay anywhere from $70 to $140 for one paying customer, and we make that back in the first month, breaking even. We use PPC on adwords for Transaction Management software keywords, get people to register, and then a sales guy follows up for one on one webinars. On those webinars he closes with an awesome offer.
 
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D. Maxwell

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Dane- Thank you for doing this AMA! Great info so far.

I have a couple of questions on the process of finding beta testers, and testing/debugging your software, before offering it for sale.

1) When do you look for beta testers in the process, and how do you find beta testers? How many testers are you looking for?

2) How do you keep your beta testers providing feedback on the software? I assume some move on and get sidetracked very quickly?

3) When do you launch your software to the public? How much testing and debugging is acceptable before putting it out there? How do you handle bugs and software problems after your first sales of the software?

Thank you!

1) Beta testing is not a good word to use. It implies they are helping you. You are the one helping them son! You want to switch that frame to champion users / founding members. We don't build the software until we have pre-sales. These pre-sales are the beta testers. So I find beta testers / champion users before any code is ever written.

Remember, if you write a line of code before you get a pre-sell, you are kicked out of the foundation.

2) When your software launches, launch to ONE user at a time. NO MORE THAN THAT for your first 5 users. You want to do it with them on a webinar and get on the webinar, share that persons screen so you can see them, and ask them to register and do whatever first activity is in your app, while you sit silently, watch, and take notes. You want your developer on there so they can see how shitty your initial UI is. It always needs improving when you launch.

When we re-built the UI for PaperlessPipeline, I spent about 10 hours watching users work silently for a week, 2 hours a day, no talking. I'd just watch how they used the app. F*cking incredible insights. No wonder our product owns now.

3) Launch to the public when you can have someone sign up, use it, and pay without you watching. Don't launch it publicly until then. Once you watch a webinar where the person enters their credit card you are F*cking golden. You handle bugs as they come up, one at a time, or lots at a time. How much testing until putting it out there? Until you feel it's usable.
 

D. Maxwell

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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 understand you reinvest 25% of revenue back into development, where does the remaining 50% of revenue go to?

Is 25% a typical profit margin for the SaaS businesses you have come across? As I thought it would be higher. Or is that because of the CEO you have running it?

Hey Freeman!

The nice thing about profit margins, is you as the business owner get to decide what you want to run at. And with SaaS, they can be insanely high. I always wonder how much 37signals profits off of basecamp. That SaaS is insane.

The core expenses in a SaaS business are servers and the developer.

When I was running the biz paperlesspipeline, We were at 60% profit margins.

I think you'll see 80% gross margins on a SaaS business.

My buddy has 95% gross margins. (I think, don't quote me on that, seems almost insane).

As we built the team to 7 people in PaperlessPipeline we sit at 25% profit margins now. I will not ever let the business drop below 25% profit margins. We could operate at 40%, but I like employing people and having a bigger team. (especially when I don't have to manage them).

Seriously, the magical feeling isn't in having high profit margins, it's in having a bad a$$ team you can email shit to and have it get done.

When the CEO took it over, we ran at 40%, but he then made a compelling argument to run at 25% = hiring/spending more resources to grow it more.
 

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Dane - Thank you for your honesty in all of your answers. I admire the passion that you have for your business and in helping others.

I'm curious as to how much, on average, building a typical SaaS can cost?

Skylizard, we like to build a SaaS business to it's first version in 12 weeks.

You have a few options here.

OPTION 1

If you are hiring a developer full time that's 40 hours x 12 weeks = 480 hours

If you are paying $50 an hour that's $24,000.

A bit much, right? I built PaperlessPipeline to first version in 3 weeks for $8k. When you get good at this, you can really get things out quickly and affordably. If you're a rookie, and you don't have guidance, a developer can sneakily take you to the cleaners.

OPTION 2

You have pre-sales and proven revenue before a product exists, this blows developers minds. Offer them a percentage of revenue, no more than 20% while working and up to to a year after they stop working on the product. I'd shoot for 10%, but the best developer? If I found them, I'd offer 20% while starting out. They'd have to work full time for X period of time to lock this percentage of revenue in.

OPTION 3

Offer no more than 10% equity and a reduced hourly rate, with profit distributions paid quarterly from the company.
 

D. Maxwell

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Dane, how do you deal with "haters"? Ignore? Engage?

Is there a methodology on how to do it and not feel pissed off and worn out afterwards?

Sometimes ignore, most of the time, if I can, engage.

"Haters" as you say are helpful for 2 reasons.

1. They strengthen your message.
2. They strengthen your heart.

Now... with that said... this AMA?

It was hard.

Here was my flow of feelings.

Hard question > Ouch feeling > Panic, like how can I answer this > Reading the question again > Feeling panic again > Thinking it over > Writing out my thoughts > feeling uncertain > editing my answer > feeling my heart relax > loving the person who asked the question > edit again from the loving space > hitting submit

I didn't follow this flow purposefully. It is just my natural state. That process was unconscious.

Writing a response from love is amazing. It disarms people. Just look at how many people have said they love this AMA. That it is a top AMA. What did I do to generate that feeling? Answer honestly, not defensively, and lovingly to people.

I sometimes feel depleted having to explain that my intentions are good all the time. Having to answer all of the hard questions here was rough initially. But I feel relieved knowing I can stand in my truth. I just thought... why can't people believe I'm good? Why do I have to go into all of this... this program works just trust me and do it.

But I couldn't. So I sucked it up, dug deep into my heart, and answered honestly.

The ideal for me is to keep an open heart to "haters". To feel the hurt they cause if they question me, and not protect myself from them.

To blow them off would be to shut down my heart to them. And to shut down my heart in one place makes it hard for me to keep it open elsewhere.

This may seem a bit unusual.

Sometimes I take it personal like it's an attack on me or my integrity. But when I'm grounded I see it is not. Only when I'm less conscious in the moment do I make this assumption.

There is one attitude you could take that says... "oh screw haters... you're going to have them... they're just jealous... or they're just hating on you to hate..." but that closes down my heart and shuts me off to them.

I desire to be in relationship to whatever I'm feeling. [THIS IS A KEY BELIEF I HOLD]

Why?

Because "haters" as we think of them... are not really haters from the loving perspective. That is their behavior but really... they could be scared, pessimistic, not optimistic, been burned in the past, really hurt by something else... and or they are projecting their fear/hurt all over others.

Yes. It's one thing to be a hater for something that is worth hating.

But in the space I operate "haters" are common.

For good reason. Lots of scammy scummy people.

And if dealing with them is the price I have to pay for being in this arena.... I'm game :)
 

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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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If you write a line of code before you get one pre-sale on your product, you are kicked out of the foundation.

Finally. This forces people to stop TALKING, and start ACTING... best advice to any aspiring online or offline entrepreneur for that matter.
 

D. Maxwell

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I was a skeptic when I heard you were going to do this AMA. However, I must admit your answers have been very thorough and very forthright. You seem honest. You haven't shied away from hard questions and have answered some questions I didn't think you would answer. Thank you for doing this AMA. I think you probably changed a lot of perceptions, including mine.

Yeah man, ask me anything is what it is right?

Keep the hardest questions coming. I want to be pushed.
 

D. Maxwell

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Hey Dane,

Here are some other questions if you have time:
- What was the biggest surprise benefit of biz to you?
- How do you feel you've become a better man through biz?
- Do you have any burning ambitions outside of your biz projects?
- Looking back on your choice to be better with business, how happy do you feel about most of the things you did to learn what you did? Is there anything you would have done differently looking back?

(fantastic stuff dane)

Also, are there any tips you would share for making sure your educational material is REALLY helping your target audience out, rather than being "fluff" that they look through and say "yeah, ok, dude, thats common sense... neeeext". :)

To your first issue... it sounds like you are aware enough to know you are sabotaging yourself. This is awesome. I don't know enough to help you through this problem with the specific issue you are facing. But I know it's something around a fear of either failure or success. Do either of those ring true?

Second, biggest surprise benefit of business for me? Having my mid life crisis at 26 instead of 50. I found out what was important to me real fast once I had money. Money only amplifies your problems. Take whatever problem you have now (self doubt, insecurity, paranoia, arrogance) and add millions of dollars, and they all amplify. So having lots of money helps you to sort through your baggage.

To add to that, I've become an incredibly loving guy. Sincere, humble, soft, and loving. I used to be hard, edgy, and have "F*ck you" energy. Like look at what I've done. Well that energy sucks. And because I got to achieve and see that accomplishments don't really matter to your true self esteem and love, I get to play a new game now.

For burning ambitions. YES. Oh shit yes. I want to show you Rogue, how brilliant you are. You are truly, incredibly, brilliant. This is called the "You Are Brilliant Project" right now. What I want to do, is have younger children take a personality test using the Enneagram, and then match them to the greatest thinkers and achievers of our time. So these kids have a north star for their potential.

Think Billy, takes the test, finds out he is a type 5, investigator. We'd match him to a report on Albert Einstein. Billy would get a report that says

"Hey Billy, do you know how brilliant you are? Do you know you have the same personality type as albert einsten? Do you know you could be as genius as he is? Here is a really awesome fun summary of Einsteins personality traits, skills, habits, and flaws. Read this report and learn how you could not only be like einstein, but even more powerful because you are learning from his mistakes."

Rogue it's insane to be in my mind these days... I'm thinking of the potential of others. I see kids walk down the street and think... "That kid could be the next Einsten, that kid could be the next Edison, that kid could be the next Bruce Lee!"

And so my lifelong project is this non-profit mission - I want every child on the planet to know how loved, and how Brilliant They Are. I will probably use my software background to create an integration between a fun test on the Enneagram, and linking in these great people to match to a personality system. (Sorry if this isn't making sense, The Foundation launch has me zapped on mental energy, but I wanted to get back on here to serve.)

Is there anything that I'd rather do differently? I'd start with and run a business up to $500,000 a year soley on webinars. I wouldn't waste time with anything else. I'd add the other shit in later.

If you want to be a master at persuasion, it helps to apply the 27ish word persuasion sentence. "People will do anything for those who encourage their dreams, calm their fears, confirm their suspicions, justify their failures, and help them throw rocks at their enemies."

My reports follow that framework.

So...

When I create content for the foundation, it's all based around the readers feelings FIRST. So I co-create content with the students. I ask them what they are feeling when they try to think about doing the task my next piece of content is going to help them do.

If I get, "frustrated... overwhelmed... not sure where to start..." I take that and create content like this:

"So in this report you're going to learn how to extract profitable ideas in a single phone call. Gone are the days of guessing for ideas. No more! If you feel overwhelmed or you aren't sure where to start, you are in the perfect place, because this will explain it all."

It really helps to meet people where they are at, before you take them where you want them to go. And you do that by connecting with feelings.

We can talk more about this if you're curious!
 

D. Maxwell

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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.

Idea extraction is best done over the phone. Sometimes, you can do one line emails back and forth with questions from time to time, but best to get people on the phone. I'd contact people from different time zones, west coast is great if you're not there, you can get some calls in there if you are mountain, central, or eastern.

I have yet to hear of an idea coming outside of being on the phone.

I appreciate hearing about your determination. Do your best to rock those calls in the half hour time slot and keep at it. And get after it in different time zones.
 

D. Maxwell

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What do you expect the lifetime of your SaaS applications will be? Less than 3 years, 3-5, more? Do you care as long as there is a positive ROI? With your process, I expect you have a high batting average on your projects, but what derailed projects that went south?

I have a SaaS app, several iPhone apps and a good sized website, would I be a candidate for your foundation?

10 years? Haha. I don't know. Forever? A solid SaaS application solving a serious pain, should last as long as you stay on top of it with new features - and this is easy, invest 25% of revenue back into dev, and let the dev take care of it.

I like to build businesses that are like insulin to a diabetic. Too many software products are like sugar cookies.

Insulin: PaperlessPipeline.com - $60k a month and growing with no effort
Sugar Cookie: RecruitingNinja.com $5k a month and dieing with no effort

Healthstatus it depends on how much money you are making with your businesses? My hunch is that you are NOT a good fit for the Foundation with what you've got under your belt - congrats - unless... the only reason I'd join is if you're the kind of mind that loves to learn new approaches to SaaS.

I buy all the expensive courses on the internet. Roughly 30% of my income goes back into education.

This weekend I fly out to a mastermind group my partner and I paid $40,000 to be apart of.

I highly advise buying info-products.

One of the best skills I've learned is suspending my disbelief.

With one of my friends who is skeptical about things in general, I find he isn't that thrilled with his life. It's not always the case. While skepticism can help you from getting screwed, it can also prevent you from getting awesome new perspectives.

I buy products all the time my friends question me for. But then again, I'm the one teaching all of my friends :)
 
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