Nathan Barry - Convertkit - Spotlight Podcast-MP3 for Audio ...

Sun, 4/26 5:37PM • 58:04

SUMMARY KEYWORDS

convertkit, people, creators, free, started, marketing, product, bloggers, building, landing page, paid, run, big, subscribers, launch, email list, year, email, set, money

SPEAKERS

Nathan Barry, Ben Tossell

Ben Tossell  00:00

Nathan Barry  00:24

Yeah, well, thanks for having me on. I guess high level ConvertKit, the email marketing company for creators so we're, we've been at it for seven years now. We compete with like MailChimp and Active Campaign and Infusionsoft and all those were totally transparent about everything in the business. So high level stats, we get 50 people on the team distributed all over the world. Let's see what else 20 million ar 20,000 customers we recently launched a free plans Talk about that. We now have 20,000 free users a couple months into, I guess for two and a half months into launching a free button. So it's kind of this magic moment where for users and now equal paid users, which came pretty quickly, so excited about that. And then a little bit about me, I love to play soccer. I'm trying to think what else I live on a farm in Boise, Idaho, so not like a major city. But we happen to have four and a half acres, like right in the middle of town. So if you have to be quarantine somewhere, which is what we're doing right now.

01:40

I've got a pretty good setup

01:41

for it.

Ben Tossell  01:42

Yes. Sounds like a good displaces any tweak on teams. But we want to be in our one bedroom studio in New York right now.

01:49

No, that is very grateful to not be there. Yeah.

Ben Tossell  01:55

Just a side note, we have one of your ex employees on the Artie to Helen Keller files she she helps with our newsletter which is conveniently also running on ConvertKit. So there's a nice little link a few days there so let's dive in. There's a few things I want to talk about I think from reading loads of your blog posts and videos and things like that there was like the one that stuck out to me was the sales the sales when the cold email sales which Yep, I like posts like that because there was very actionable do this then do this then do that which I think a lot of writing on the internet misses there's lots of like fluff around how I got to this place with whatever but isn't really telling you be like how you set up that system yourself. actually roll from superhuman did the product market fit article which went crazy and that was really good. Like, yeah, by step stuff. And but in that blog post, you mentioned, like basically your first customers were bloggers? are you creating ConvertKit for bloggers or at least marketing it that way? When was it a shift to just make it more broadly creators? And how is that? And did that like influence the fact that you've now rolled out this free plan?

03:27

Yeah. So it's all part of like a longer strategy. Initially, it started with just an email marketing product, but right, I didn't want to focus on a specific niche, because that would eliminate certain, you know, that would exclude people. And when you have 20 customers or 40 customers, you're like, I don't want to exclude anybody, whoever can sign up. We'll take it. Thank you. And so that's where it started. It just wasn't getting traction. And so a friend of mine, his name's Tim girl, and he's Like really well known in the author, space. He's written a few really great books himself, but then also, like his claim to fame is that he's had five clients with books on the New York Times bestseller list at the same time. Yeah. And so he's very good at bookmarking and all that. And he was like, you know, anything, you gotta focus on a specific, specific niche, like, narrow it down. And I kind of knew the types of customers that were the most successful with us. And it was these author types, authors and bloggers. And so we started experimenting with messaging and positioning around that. First, we tried to authors that was attracting a bit of the wrong segment, not the professionals that we're talking about. But a lot of the, like, total beginners. And so we tweak that a little bit and settled on professional bloggers. And that's where we start to bring in people like Pat Flynn, or you know, some of these big sites where they had 10s of thousands of email subscribers or hundreds of thousands of email subscribers. And the product was really simple then. So we would kind of make up for a lack of features by like with consulting, and helping people set up custom solutions and stuff like that. So that's where it started. And then we spent a couple years, maybe three years with the tag on being email marketing for professional bloggers. And that worked really well. We grew the audience. But we always wanted to expand beyond that. Because we run into someone who's like, well, I'm a podcaster. I'm a blogger, and like, the needs are the same and they would be sensitive blog on their site, they identified more as a podcaster. And so that was the meeting. And then we also wanted to get into all these people who really inspired us so like, artists, musicians, filmmakers, you know, chefs, like the number of or the the breadth of people creating amazing stuff that need an email list and need a way to stay in touch with our fans was pretty significant. And so You know, we made this switch to creators uprising when that was maybe two years ago. And it's been a great move. So now we have, like, you know, not only famous authors like Tim Ferriss and Gretchen Rubin, and people like that, but we also have musicians like Tim McGraw don't even you know, we have actors or activists or heavy politicians like Arnold Schwarzenegger. Yeah, he's a customer now. So like they're all creators, so it's as much bigger umbrella.

Ben Tossell  06:33

Yeah, I think I find it funny in that especially like, because I'm my land is like the no code space. Yep. Like, there's so many use cases for some of these nuclear tools. And I for me, if I see something I'm like, okay, it says for bloggers, but I know that I could use this exactly the way I would want to use it. It doesn't matter if I was blood going up. What do you think it is about specific messaging Have products and like you having to have. This is the use case for you like glaring someone in the face being like, Oh, yeah, that is the one thing I wanted. What do you think it is that like there's that need, people need to see the exact thing that they're looking at before they can sort of trust it or try out their product instead of just curious to know.

07:21

Well, it's a part of it's the messaging and part of it's a feature set. But if you look at email marketing, it's probably one of the most competitive spaces on the internet, like you and I could sit here and read probably name 2025 email companies with over 10 to 20 million a year in revenue, you know, in many of them into the hundreds of millions and, and beyond. So like, it's a very competitive space, and everyone you know, who wants to compete with MailChimp as the biggest one they have to like slice off their little angle because everyone's asked them well, why should I use you instead of MailChimp and so part of it is marketing and positioning right which customers do choose to feature Who do you say you're for. And that really matters. But what matters more is how it influences the feature set. So for example, like Active Campaign has gone heavier on this, like CRM sales focus, right? And so they're going to be featuring more traditional small businesses, and they're gonna have more features that align that way. Like, tracking deals or adding notes to a conversation. Whereas if you go the other way, which we've gone, like take Tim Ferriss, for example, he's got millions of people on his email list. At no point does he want to click to click into a subscriber and really want to hear the notes about them? Here's the details of like, you know, their spouse's name or anything else like that, or like, oh, we're about to close a $10,000 deal with him. Like he just that's not the goal at all. And so he wants that level of automation, but in a way that scales for his his business, and so the future That we build scale that way, right? We, you know, we focus instead on like the deliverability. And the ease of use. And so instead of like Tim, for example, doesn't run a big marketing team. He is one, like director of marketing. And that's it, and they use some freelancers. And that's it. So, you know, they're effectively running this giant media company, like as far as reaching and, you know, views and impressions. They're up there with some of the biggest brands. Yeah. But they're run by a single person. And so or, you know, Tim, and presto is director of marketing. So that's like, a lot of the there's the messaging, but then the feature set behind the scenes is what really angles that direction and makes it useful for that demographic.

Ben Tossell  09:48

Yeah, so yeah, I think, yeah, it may just be that people need black and white in front of them. This is why it's useful for me and yet helps them maybe think the product understands their use case. With

10:00

the other features.

Ben Tossell  10:03

So with creators, I mean, like, I worked at product time, and we call people makers and no hidden charge to the maker report. And he called and he has, I think, on purpose in the tagline there was like, creative and it changes to makers, then it changes to bloggers, and stuff. So do you think suppose creators encompasses all of those people doing creators are like, and I think I would say they're in notoriously bad market to try and sell to or like, try and get people to pay stuff? Because if they're in the weeds with all these tools, trying out things and trying to make things work, often on a small budget, is that why there's now a free tier of ConvertKit? Is that why does that lead some of that product decision that way?

11:00

Yeah, so creators is such a broad lens, right that as we've made the switch from professional bloggers, so you have a lot of the most experienced people, and then you broaden that into creators, then yeah, they're the some of the absolute beginners, but like, we have a lot of customers that don't fit that demographic like Tim McGraw, solidly a creator does not fit that demographic. Right. He's like, great, you know, we would see if we're gonna hit number one on the Billboard charts with this latest single release. And he, you know, his marketing team, his record label. He's kind of interesting because he has his own he's partnered with a label, but he has basically his own marketing department. And, you know, so what they've done, right when they have a new single coming out, they're right there in ConvertKit. launching it and like he had a book come out this last fall, and so having the email list and everything he did the same Think so he's a creator on that massive level. But then what we're really trying to do is not serve like a really broad market. So like all of small business. Yeah. And try to go I think even to access the the width, right? What industry are we in and the feature set needed to do that. And then there's the expertise and the skill level, right of as a beginner up to the biggest names in entertainment. And we're not trying to do everything on both of those. Instead, we're trying to go very narrow on creators and then go from beginner to expert, you know, from, I'm just getting started and I need to launch my next creative project. And I need to build a landing page and get started with that all the way up to you know, I have millions of subscribers and and, you know, and one of the most famous in the industry. So, now the other part of your question was what drove the switch to free That's part of something that like, I've been wanting to do for a long time. I actually have like internal pitch documents going back three years. Yeah, like, here's why we should make the switch to free, here's how it should go. All that. And the couple things had to be true one we had to build, I refer to it as like earning the right to launch a free plan. Because having a stable product at that scale is really hard. Right now we're sending a billion emails a month, like we have to have the perfect uptime, we have to have the support in place, all this stuff. And there was always kind of a weak link in the product. Right? Like, support would be good, but infrastructure wouldn't be quite as good or in deliverability, where it wasn't where we want it or we didn't have like spam and compliance lockdown, you know, and so the last three years have been about getting all of those in place because you can't give us all these pancakes. And there's some issues but you know, you're working on them, say like, the support isn't very good. And then you launch a free plan, and support gets worse. Yeah. And everyone's like, wait, I'm paying you. And now you're like you're supporting all these free users and like, the experience is degrading. So the biggest thing was having to get like all across the board the experience where we wanted it. And then the second thing is that we started to see who was coming in anyway, right? We were focused on this like mid or higher end tier, what we found is we were getting thousands of people who were total beginners. So we put a signup flow, like a little survey into that. Just like a couple questions A or B, like so when you sign up it says, Are you just getting started? Are you migrating from another tool like are you brand new to email or migrate? You say migrating asked where you migrating from and personalizes the experience based on say MailChimp or whatever, but if you say you're just signing up Are you brand new? The Nast, you have a website yet or not? And if you say yes, WordPress, you say no, then you know, so taking the experience, but so we were getting seven to 8000 trials every month. And which for context, now we're getting eight or 900 free accounts a day. So like the volume has changed pretty significantly. But of those seven or 8000 trials a month

15:30

5000 of them were beginners without a website. It's you look at that, and you're like, wait, in this creative journey, right? You need to create a website of some sort of presence, landing page, something like that. Then you need to automate your email. And then you need to sell products and convert it live so solidly in that the email, grow your list, automate. And we have these people coming to us who are like, yeah, I'm ready to get going. I don't have a website. Let's go. Like you gotta have a website. You know, And more than half of our trial volume was in that category. So we made two moves based on that one, we built out our landing pages product. Yeah. And so now when someone comes in says, I don't have a website, we say, great, you actually don't need a full website, we just need a home for your creative project. You know, like, let's build out that landing page as quickly as possible, then you can start to grow that list, and then you can see where that goes. And then the second thing is write someone that knew, then being able to get started for free, even, you know, not having to tell them go spend $10 a month with Squarespace or $30 a month with lead pages and like that, say like, nope, get started totally for free. And then when it comes time for them to make their email decision of like, Okay, great. What email provider should I use? They're already using one. And so that's the idea. And so we kind of have two big campaigns going right now. One is like a big brand marketing campaign, called the future belongs to creators. And then the second One is like our landing pages like product focus campaign, which is just the easiest way to start your next creative project. And that really pushes landing pages and like, hey, just get started, and then grow into that. So that's, that's why free, that's where we're going. And I think it's honestly the best way to compete with MailChimp and the big players. Yeah,

Ben Tossell  17:21

I think it makes total sense hearing you talk about how like, if someone's completely new, and they want to start a newsletter, like new size is hard. building an audience is hard for anyone. But you want these people to succeed, because, I mean, it's just good for the world. But it also is then they become a vertical customer at some point, right? So it's interesting to see that you identified like one or the other, because I just thought it was like an add on thing be like, Oh, yeah, we'll just we'll get them in on a website as well as an email thing and this is this both of things he uses here, but actually They're sort of behind the scenes of the product decision is more towards how do we help them succeed in building an email list or building an audience? And then actually the landing page is a critical part of that. It's not just like a gimmicky part of let's just get you all on one platform it's more of this will help you actually build that audience which is I guess the main focus here is really to do that and then provide the

18:27

interview if you think about everything around the creator journey, right? What steps Does someone have to take in order to earn a living online? And we were solidly on that middle step we've got that middle step locked down yeah, and then everyone on that first step we're like, yeah, go you know, WordPress, Squarespace. Go any of these 10 directions. And, and so now we can just say, okay, actually don't get caught up in how do I enter like wordpress.org vs. wordpress.com. Like, the amount of times our support team answered that question in the past. was crazy. But now it's just like no start with landing page. It'll take you an hour, 30 minutes to set up, and then start building that email list. And then once you get to 1020 3050 people on that email list, then you're like, Okay, wow, I'm getting traction. And so we're trying to get that initial results early, because we make all of our money, when, as your email list grows. Yeah. And so like incentives are 1,000% aligned. And that's just where we're really excited, like, get you on the platform, grow with it, and then from there, like we think about it.

19:38

Using music as an example again,

19:42

I have this goal to get Taylor so I'm a big Taylor Swift Fan. So I have this goal to get Taylor Swift on ConvertKit. But if you think about it, like she uses MailChimp right now, and I don't know this to be true, but I like to think that back in the day she or her marketing team Whatever it never made a choice to use MailChimp. They just started there, right? It was free, it was the the best way to get started. And they've been on it for the last 1015 years or whatever. I don't actually know how long it's been but so you think about that. And, like you think about the amount of effort that goes into it now to try to get someone like Taylor Swift to switch. That's really hard. But then if you go, there's another musician who just recently broke out and had a lot of success. That's Maggie Rogers, and she's kind of in a similar space. And, you know, she's going to be like, even watching videos of her coming out of like, New York University's music department and all that. Like she very recently made that decision, but now she's famous and it's going to be it would be hard to get her to switch. And so instead what you want to do is you want to be in that position. Where the next Taylor Swift the next Maggie Rogers just starts on your tool. So it grew with me because that's when you're like, Okay, I'm not going to get the current famous people I'm going to get the next generation of them and then I'll just get 100%

Ben Tossell  21:15

Yeah, it'd be nice to do like Tick Tock landing pages rounded

21:21

Yeah, it'd be interesting you know we're we're pushing heavily into like the Instagram space and that kind of thing as well because that's still growing like crazy and all that.

Ben Tossell  21:33

Yeah, I think people often worry about the first customers and stuff is interesting to see you look at the lens of the different ways you can find people and then only just moving to a free product now, do you think is a mistake? I suppose it's not obviously there's there's different contexts and different tools but you think it's a mistake for people starting out to just like have a frequent straight off the bat and then try and launch a $9 tier $19 tier and then get burnt out when they only got 50 people on the $9 Tier or something.

22:11

Yeah, and

22:14

it's interesting. So I very much come from the bootstrap software world, right? And people tend to be pretty negative about free products, like free plans, premium free products, all that, you know, saying like, Oh, you need to charge only feedback from paying customers matters, all that kind of thing. And I largely agree with that. I would say the biggest issue with going to free first is you don't know if you have a business model. Yeah, I do. I have something here that people will pay for. But as you go, paid first, which is if you take the route that we did, you know, we built a 20 million in error before we launched a few months. We know for sure we have a business model and the business model works. Like there is something very worthwhile For for a lot of people and so then the move to free just becomes like a customer acquisition play yeah and and the thinking there is like okay now can you move to free without cannibalizing too much revenue and and take it like yeah cannibalizing all the profit that you would then use in order to like market and grow so we've been in this deliberate dance I guess of making our free plan better and better well trying to balance that contraction so we don't actually have negative months because when we made that switch to free we put about $250,000 of MRR our risk by people who are under that, you know, first hundred subscribers now 500 subscribers limit, you know, and they're like, Okay, I'm going to downgrade, you know, and granted the product is a little different, right because the free version doesn't have the automations And it doesn't have the enough support. But you know, so there's a lot of people that could downgrade. And so we've been carefully monitoring that and how we roll it out and everything. because on one hand, you could rip the band aid off and be like, Alright, we're going free, we're going to take the Mr. Hit, you know, let's go. But then, like, there goes your marketing budget you'd like so we run about $200,000 a month in profit. And if we lose that, that's like, that's what we're spending on the marketing into, like a big brand campaign. And so we've had to be careful, but we've seen far less contraction than we expected. And so we actually kind of did that first round. We could have had $200,000. In contraction, we had about 15,000. And so then we did the second round, and so another 10,000 or so and contraction, so we're basically finding that while we keep adding hedging our bets and being a bit conservative. We, we don't need to we can be pretty aggressive.

Ben Tossell  25:06

Yeah. How long does the this plan and the landing pages? How long have they been running?

25:13

Yeah, so we launched it. landing pages have been kind of growing all last year. And we launched the free plan January 1, and it's March 26. Now, so we had that like free for up to 100 subscribers. And we also have this like incentive, like invite a friend version where for every friend you invite, you can get another hundred subscribers managed for free. Yeah. And then last Friday, so we can go we made the switch to make it free for up to 500 subscribers.

25:47

And our daily

25:50

subscriber volume, or daily new account volume went from 200 to 402. Now are like over the last seven days. It's been like eight 100 a day 900 a day, I think today will probably break 1000 pounds for

26:05

the day. That's a lot. How

Ben Tossell  26:10

are you sick? Yeah. I mean, are you seeing good results? So far the transition of free to the paid product or is it too early to tell? And it's more than longer play?

26:19

Yeah, it's probably too early to tell officially we're at like a 3.8. We're at a four I think 4.2% free to paid conversion rate, which I was really excited about anything over three and I'm a migraine, my basically my goal. And I didn't know any of these things, but I wanted at least put assumptions down on paper. And this is something that I'd recommend everybody do, who's listening is if you're about to make a big change, even if there's all these unknowns, write down your assumptions of what's going to happen and then set that aside. Because what, what you're going to find is that you there truly assumptions you don't know Have that like I've never run a free product before. I don't know the volume. I don't know any of that, but then I can pick it up and go okay. Oh, that was spot on or like, isn't it cute the way that I thought about that. So like an example, we bring into Coronavirus. We have an event that we host every year called craft and commerce 400 people come in. It's my favorite conference, but I'm a little bit biased. And we're thinking, Okay, we're probably gonna have to cancel this event in mid June. And so, you know, early January or early March, so a few weeks ago, we're like, okay, under what circumstances would we make the call to cancel this event? And so we write these things down. We're like, okay, we'd make the decision on March 27. So tomorrow, and if there were, you know, if it gets up to like 3500 Coronavirus cases or 3000 Coronavirus cases in the United States. I think it's 3500 to 5000 by March 27 You know, like that would feel like really a lot. And that means accelerating and would cancel the event. Do now you look at it, I don't know what there is today 65 70,000. And it's going up by 10s of thousands a day. And even so you get that snapshot, you realize, like, wow, two and a half, three weeks ago, or whatever I wrote that down. Like, it felt like that would have been a crazy number of cases, because I think there might have been 50 cases in the United States. Yeah. And so then, then when it comes time to make the decision, instead of rationalizing it based on current information, like oh, what's gonna happen, you know, okay, past me, thought that under these circumstances, I would make this decision. And so I can pick that up, look at it and go, okay, that you know, that is a very easy decision, right, we're canceling the event. And so in this example, with a free plan, right, I have no idea what a good free to pay conversion rate is. Right. You've got There's plenty of articles written, you know, Dropbox hanging out, I don't know what point 5% something like that. And then like Spotify is the, the golden example of this. I think they're out like a 25 to 28%. Free to paid conversion rate, like just insane. Nobody does it. Nobody does freemium better than Spotify. Yeah. So you're like where in there are getting grant a fall? And instead of going like, I don't know, we'll see. I think it's good to write down something. And we said, we want to be at 3%. And so now, we know when we first got those numbers back, basically, a little over a week ago that we thought we had enough of a cohort to see it was at 4.2%. And then now that we've added, like 7000 more free users in the last seven or eight days, and like those are so new, and this skewed the number so it's now down at 3.8%. But we have numbers to start working on that and see where it takes us.

Ben Tossell  29:59

Yeah. Would you maybe like, take into account current world environment on those numbers and think well, because of what we did, maybe that skewed some of our makes it closer to 3% that we would have had otherwise?

30:15

Yeah. And, you know, the really the, the answer would be to take a cohort based approach and to say we're not, instead of blending everything, we're going to say, we're only looking at accounts that have been with us for at least 90 days, or something like that, which we haven't even had a free plan for 90 days. But so maybe you'd say 45 days or something like that. Because really, you're trying to get people to grow over a certain amount of time. And you wouldn't expect like especially now that the limits at 500 subscribers, it would be really hard to hit that limit. And people definitely do it. But if you think of a total beginner Getting Started they're like, great. You know, we're like your three weeks in Why haven't you converted to paid now I did, because I'm really happy. I built my email list. hundred people in three weeks. Yeah. You know, so it's very much a long term play. And so probably the end of this year, you know, nine months from now we'll have some good, good numbers and all that of what freedom payback looks like. But it's very much a, I guess, a land grab strategy, instead of being this. Well, let me back up there. So I was reading this book called blitzscaling by Reed Hoffman, which I really enjoy. Particularly parts of I think the first third of it was was the best so if you're, if you like get bogged down in the second half, like that's fine, you can fit the bugs. But in it, he talks about like when they were at PayPal, and him and Peter to standing on the roof of the PayPal office, like kind of looking out and he goes, you know, if we had bags of money up here, we're grabbing. fistful of cash and throwing them off the roof of this building. We couldn't get rid of money faster than we're currently doing with our, like, user acquisition strategy, where they're paying, you know, I think it was $5. Basically, like for every, if I refer you to PayPal, then we each get five bucks, I think they might have bumped it up to 10 bucks at one point, and then tapered it often. And they're giving away money so fast during that they're like, we could throw money off the roof of this building. We couldn't, like get rid of it faster. And and they're doing that in the hopes of this business model working out. And, and like, obviously, it didn't, it was a massive success. And maybe there's some survivorship bias in there. But we looked at it. Like I read that part of the book and said, Okay, I know I have a business model that works. I have a lot of profit. You know, I've got $3 million a year in profit. What if as a successful bootstrap company with a business model that works. We did a land grab strategy. And we started to think in that way for a period of time and said, what how do we acquire as many users as possible? What happens if, you know, I'm not going to go raise a bunch of money and and the, you know, I have a high burn rate. But what if instead of running all this profit and returning it to the owners into the team, we spent a year or so and spent it aggressively on growth? And that's kind of the approach that we've taken, we're very new into it, but it's like, Hey, we got a free plan. Let's get it in front of as many people as possible. And then let's spend aggressively to promote it. So we, like historically have a very small ad budget. And this year, we put together a $2 million ad budget, and, you know, which in the grand scheme of things is tiny but yeah, you know, for us, it's a ton of money to spend. And then I guess the other thing on Free. That is really important for the times is a year ago, now almost exactly a year ago, I said to Barrett, my COO, okay, not only do I want to do a free plan, but it's really important that we get it in place before the next recession. Because I believe that while one businesses are built during recessions, like this is the time and two everyone's going to be, you know, out of work ready to start their next project, like the timing is really good and people will be downgrading, right? So do you want them to say like, oh, ConvertKit is too expensive. I'm going to cancel, move my list over to MailChimp because they have a free plan. And then when I'm ready, I'll move back to ConvertKit because I love the features. I love the brand, everything like that. Yeah, you don't want that. Now you want to say okay, let them downgrade to free. And then three months from now, six months, two years from now when they're ready to come back. They're just upgrading again to a paid plan and you've never lost them. And so we pushed for that we, you know, we got out in January, I expected that I was like, Yes. Okay. We've got it out. Well, I'm fine. The next recession, I expect it to be like 60 days.

35:17

Yeah. But that was one of the big goals is to like really position ourselves well, for this moment so that we had lots of cash in the bank, we had the free plan in place, we see that we can be really aggressive this time instead of cutting back and yeah, like being timid.

Ben Tossell  35:35

Well, I'm just on it there. And I mean, I've looked myself for basically trying to find a step by step how to set up a profit sharing thing. Is it right for my company, like how does it all work? What is it what's the real thing that you've said? I think there's a post recently that you did. Is it like 15% or something? And he did. He did a post about how much was paid out.

35:57

And then yeah,

36:00

The recent update was a Twitter thread after a loss to mitre. So yeah, how we do profit sharing. Usually when I say this, people are like, What? That's insane. So we we do 60% of the profit and the company gets set aside for the team, and 40% goes to owners. In this case, though, ownership I own about 90 93% of convert, so that 40% is largely going to me. And then of that 60% eight is set aside as bonuses for the leadership team. So they hit certain targets. You know, as we've recruited, you know, more and more talented executives and all that like putting solid targets in front of them. And then 52% is satisfied for the team in the form of profit sharing. And then that gets divided among the team. 75% is just Like, you get that as a team member, and then 25% is based on time with the company. So, and then we distribute money twice a year. So as an example, this last time, we had 4046 people on the team. And the average profit sharing check was like just over $10,000 for that six months, and then the highest ones, right, the people who had been there the longest, were like 15 $16,000. So yeah, I'd have to pull the exact numbers from the tweet. But I think at this point, we're up to 1.8 million that we've distributed to the team in the form of profit sharing. So of that 52% so it ends up being pretty meaningful. One other thing that we do, I've seen other profit sharing plans that that incorporate salary in there. And one thing that we did is, we basically decided that side There are certain roles that are worth more in the market. Right? If you take to extremes, customer success would be on one side and engineering would be on the other. Right, the market has decided that engineers should be paid a lot more. And so we have standardized salaries that are based on market data. And so, you know, say that one of our engineering roles is 130,001 of our customer success roles is 70,000. Now, in that we feel like that already takes care of the market differences. And so we don't factor salary in as a part of our profit sharing formula. Because like that was already factored in, in your salary. Yeah. And so one thing that makes really nice is that as everyone's sitting around the room at our team retreat, getting their profit sharing checks, you know exactly how, like, you don't have to hold it and be like, Oh, that's what I got it you know, and not share with other people because you know exactly how someone else's is calculated.

Ben Tossell  39:01

Yeah, like

39:04

one of our designers Dylan was sitting next to one of our teammates, Kaspersky estimates, and like they started almost on the same day, I think, oh, technically they started on the same day. But Dylan had done a contract project for us before, and we've given him credit for that. I mean, he'd like stargaze. And so he has a start date, that's like four days earlier than hers, you know, so they can look at each other. And he's got like, 50 bucks more. You know, her profit sharing check is like 14 grand, and his is like, $14,000, you know? And so you can just everybody knows how it's calculated. So you can talk about it. It's this big. we all win together. sort of feeling.

Ben Tossell  39:48

Yeah. How do you then you said this year, you're spending a lot of profit or spending a big chunk of stuff on certain things is that suddenly you just decide and the team says okay, well, we might not get as much of a chat, but this is like the long term or is it? How does that dynamic work?

40:07

Yeah. So on competition

40:13

we think of it in four quadrants, I guess. So if you think of, you know, one axis, it would be short term versus long term, and the other would be guaranteed versus performance based. Yeah. And so short term guaranteed is salary. Right. Let me think about this long. Yeah, long and then long term guaranteed, is like your 401k, your retirement match. You know, so we're like, we're getting you to put money into short term buckets and long term buckets automatically. And then as you get into performance based short term guaranteed is profit sharing and long term. No, sorry, short term performance based, is profit sharing and long term term performance based is equity. Yeah, so we're trying to make sure we have it covered from all these different areas so that people can make holistic decisions. And so when it comes to something like, okay, we've been running a couple million dollars in profit a year. Like that, obviously results in like the pool that we paid up last time was $600,000 for a six month period, so everybody did great. And we could have beat that I think we could have gotten up to maybe the pool next time being a million dollars or 800,000 or something like that, and the checks getting bigger. But we collectively as a team said, okay, we believe that if we invest heavily in growth launches free plan, which is going to take a hit to our revenue, and then spend a bunch of the profits for at least a year, then like not only will our profit sharing numbers be better two years, three years from now, but also our like equity will be significantly higher. We've no plans to ever sell the company. But we have an equity buyback program where we set aside money each month buy it, stock back from a team member who wants to sell it.

Ben Tossell  42:11

And then is it just the case that everyone just agrees on that strategy? Or is it? Is it the case of people saying no, I want my check in six months? I don't want to

42:21

Yeah. And that's ultimately on us as leadership. One, that decision is ours to make your mind to make. But then it's on me to you know, make a compelling case to the team that it's the right move. And people have had definitely had questions. But, you know, it's not like everyone's been like, Okay, that makes sense. Let's go. Yeah. And then, you know, we've just set the company up really well for for this time period of like, back in November, December. We were having lots of conversations of like, What does it look like to weather the inevitable economic downturn? Like we have this big discussion base camp? What would we need to do how we set ourselves up for success in this area?

43:10

And so I think the team has a lot of trust that we've

43:15

thought through all these contingencies and why we're doing it. Yeah. And and then soon I say, Okay, now is the time to be aggressive. They're like, okay, the other thing is that honestly, the, we're trying to grow this company with such a small team, relative to revenue, like we're currently sitting at over 400,000 and IRR per team member, and we're trying to ramp that up to 567. And then eventually 100,000 an hour per team member, that if all of this works according to plan, which it largely is, then the profit sharing checks are going to go from, you know, this year, they would have been averaging $20,000 a year you know, at 20 to $30,000. A year, they'll get up into that territory of 6070 $80,000 a year. And even well beyond that, as we like push 40 millionaire or 50 million AR, and continue to do that with this multi

Ben Tossell  44:13

muscle. Yeah, I mean, definitely food for thought. But yeah, I'm just interested in how that's all put together. That's, that's awesome. We're trying to have it all switch. As I know, we're sort of coming up on on time. But we haven't talked about like, workflows automations no code stuff, which is obviously very much where I sit in, in all of this. And yeah, I just want to know what sort of tools you've seen played around with any workflows. You've got day to day that you use and rely on sticking these tools together. I mean, I know that no code is a term in itself. But I tend to think of it as like ConvertKit would sort of set in that realm is necessarily a no code tool or you've thought of it that way. But because tools that you don't have to write code that end up being part of like a no code solution to have, it's like business or podcast poker or whatever. Yeah, I wonder if there's anything there.

45:17

Yeah. So, I mean, we use a lot of ConvertKit itself and automations for that. So one example would be actually, a is two weeks ago, we launched something called the creator Fund, which is a $50,000 fund that we set aside to help creators who you know, had lost their you know, projects, gigs, any of that related to COVID-19 and so, that what is actually is a fairly difficult thing to facilitate. You know, you need people to apply for the fund, how do you approve denied them, what do you do, and we did it all inside ConvertKit with custom fields, you know, on application form. So they can fill out their details. And then there's an automation. Well, first it segments them based on what they said they need the money for. So rent, groceries, medical, childcare, etc. And then we have a custom field in there for what's the status of the application. And so as you run through it, you can set the custom field and say I forget what they what they use for basically, we need more information, and it drops them It has a it's listening for the custom field to change and then it drops them down that path and sends them an email saying Hey, could you provide more information about your need or something like that? Maybe because they're really bad or something. And then it's like there's a declined and then there's a paid and so it automates which emails, go from there. And then from there, it asked them, like, send another email for everyone who we paid out. Hey, would you Be open to like having your story being featured or something like that. So automates that, and then it jumps over and updates the Google Sheet. Because we have a bunch of partners as well, who have jumped in so that $50,000 fine turned into, I think, like 160,000. And so we need to get like she's off to this partners got to pay out. So you can grab all these people in ConvertKit and tag them. And then it goes and generates a Google Sheet. Just from Zapier to like to have that queued up. So we, we have like 20 engineers in the company. So we don't tend to default to no code solutions, except for when we come up with, like these ideas of like, we want to launch this project. And we want to do it tomorrow, like that was 24 hours from start to finish. And so we can't get an engineer involved in that. And so, like, oh, we'll use our own product that Xavier and Google Sheets. And like, there we go.

Ben Tossell  47:57

Yeah, it's easy enough and takes no time. So does the exact job. Do Yeah,

48:02

right. But we're by no means experts compared to like the maker pad community. But that's something that we're very excited about is like ConvertKit being totally free, like so many of these no code solutions need a landing page or need like that initial data collection to start. And then they kick off like all this crazy stuff from there that leverages air table and who knows what else, but it needs like, put in your name and email and answer these few questions as a starting point. So being able to do that with tons of great templates and all that for free is, you know, we're we're excited.

Ben Tossell  48:38

Yeah, I think like I mentioned earlier on about having the step by step of like, this is the sales stuff. This is how you do it. You're like, from that someone would go and just start emailing people. But maybe like this should be done. If you've got any recommendations for breakfast, like if the sales cold sales at the start, you should sort of leverage these Tools. And then we're looking for even things like you mentioned the referral program. And all these like, other marketing things or tricks, but marketing things you're using. I wonder if you've seen any good uses because I assume they're all engineering lead built in baked into the product. I wonder if there's like a case to be made of, we should be thinking thinking about how to step by step show these in different milcom solutions as people are in that early stage of getting started. If they're less than 100. People may want to have a referral friend type program and things like that.

49:40

Yeah, and that would be interesting. I mean, I'd love to see a no code solution for like a newsletter refer friend of like, maybe you guys have this already. But you know, say I've got 10,000 people on my email newsletter and, you know, we build something out where you're a subscriber and if you refer a friend or say you were For at least five friends and I'll send you like the converter, t shirt or some other bonus or like that kind of thing. If there's something there, that'd be interesting.

Ben Tossell  50:09

Yeah, we've got a few things like that. And we've seen people talk about referral programs, as one example from the very basic putting into an air table and group people to, okay, we run this huge referral program using parabola API's that other people pay sort of like they're paying for a product and it's actually run on a parabola and things like that. So right here, we see the whole spectrum. One more, like random idea, I just thought of when people were pinging on Twitter and stuff. I mean, maybe it goes on there so that there was you've got much thoughts on it, but I know that there's like DHH and Jason freed to talk about like the whole tribe. pixels and all that sort of stuff. Building Hey, I don't know what, like, I'm not sure what my thoughts are on, because I use superhuman. And I didn't even know that, like the whole track. I mean, I didn't know any of that. I don't like the product any less because of that. It's like, somebody want to use me in position and I see lots of like, things around DHH posts and stuff and, like almost roasting people saying, you know, whatever. And, and I know that's like sort of part of his, but his Twitter game. But I mean, I have it on WhatsApp or whatever that I like to know. And somebody read my saying, I know emails are different. And I suppose the way you use them, if I'm cold emailing someone and chasing up on them, maybe it's different to write to that. But I wonder what your thoughts on that whole system?

51:57

Yeah. So first, you know, I Don't use WhatsApp much, but in iMessage I have read receipts turned on, because I feel like that's just a way that I can. Like I'm bad at responding text messages so I can let my friends know I haven't actually read it yet, you know? Yeah. And so I'm, I'm more in that camp, but we're building out a solution at ConvertKit where you can turn it off, I turn off all open jacking on the account level. Okay, it's a big change to make. But like immediately after DHH kicked off a lot of that barrier, our CFO got on the phone actually got on the phone with him and talked through like, Okay, what are your thoughts on this, you know where to go. So will most likely be partners with them on the launch and having that open tracking turned, you know, the ability to turn it off for each each customer to be able to turn it off. There is a lot more nuance to that conversation that Jason and David seem pretty unwilling to Least publicly, like inserted into it. So for example, you know, they'll say things like, there's no reason, like, there's no benefit to the subscriber to open tracking. And that's just simply not true. Because if you get as you deep dive into the deliverability world, which is totally like, it's a black box, but once you spend, you know, seven years embedded in it, you're like, Okay, now I understand how this all works. And it's totally wild. You really need open tracking in order to clean your list. This is something people say, like, Oh, you shouldn't clean your list, because it doesn't matter. You will 100 like 100% should clean your list. Yeah, because there's something that all the major providers do. And maybe someone who's done a lot of email marketing has heard of the term, spam trap. And so you're like, Okay, how, you know, like, maybe at some point, your email providers reject says, hey, you're hitting spam traps, like it's time to clean your list. What does that even mean? How did I hit spam drops, like I'm not a spammer. I'm not scraping the web. Like, how did I end up with this on my list. And basically what happened is spam traps get created in two ways. One, they are email addresses purposefully left out on the public web in order to be scraped added to lists. And you know, this email address has never opted into something. And so if it shows up on a list, that provider did something shady, or someone did something shady to them and a list bomb and subscribes a bunch of shitty email addresses like I can do that to your list and cause you a lot of problems. And there's bots that roam the web and and do that. But then the other way, is that providers like Gmail, for example, will take that, like that old email address that you had in college that you haven't used in like five years. They will take that and use it as a spam trap and say, Okay, this gets emails until the spammer Because any legit sender should see that, like this email address has not opened anything in five years and should have stopped sending to them or even the year. And then if you were to log in again, just kidding, here's your email address back. We weren't using it for anything. Yeah. And back to you and you and it's, it's no longer a spam trap. So when you get that message, so you're sending to 100,000 people, and you're getting, you know, you're hitting spam traps, and you're getting put on a blacklist and you're like, I've never done anything shady, like, I've only ever had double opt in email subscribers on my list, how could I possibly hit spam traps, it's because you didn't clean your list. You have these accounts that haven't opened in two years that are, you know, triggering these that have been converted to spam traps and are now triggering that. And so the only way to solve that is every so often to clean off all the subscribers who haven't opened saying last year or something like that. Say, you know, they're not engaged. And in order to do that, you need tracking data. And you need it either based on link clicks or opens and ConvertKit uses, you know, blends those to tell you who's active and who's not. And so if you were to never, if you were to never check on your email list, and as a result of that you would never clean your list. You your deliverability over a long period of time would would drop significantly. And you would end up on a lot of blacklists.

Ben Tossell  56:35

Yeah. Yeah. huge problem.

56:38

Yeah. I guess the point is that there's a lot of nuance to the conversation. Yeah. And we're, we're totally in favor of allowing people to turn off open tracking. Yeah, because you do still have the option of, of emailing people or relying purely on click tracking and stuff like that. But we're Just trying to like get people to see the whole picture, know what they're doing? Because it's not just vanity metrics of like, oh 100 people open this, it actually serves a very specific purpose.

Ben Tossell  57:12

Yeah, makes sense. Well, we're coming to the end of the time now and it's been great chatting with you. And I really, really appreciate you coming on. For just let the folks listen what's going find you and ConvertKit

57:25

Yeah, so all my writings that Nathan berry calm. I'm on Twitter at Nathan Berry. And then if you want to try out ConvertKit and play with it, just go to landing page new, and it'll drop you right into building a new landing page.

Ben Tossell  57:40

You got one of those a Google?

57:43

You did.

Ben Tossell  57:45

Awesome. Thanks so much for coming on. Larry vitiated, thanks.

57:49

Thanks so much for listening. You can find us online at maker pad.co or on Twitter app make that we'd love to hear if you enjoyed this episode, and what we should Next

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