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Two founders talk about how to build software businesses that are meant to last. Each episode includes a deep dive into a different topic related to starting, growing, and sustaining a healthy business.
00:00.56
Rick
How's that soilent tyler.
00:03.62
tylerking
Ah, it's ah disgusting. Sorry we just started recording and I was telling him how gross my soylent is and then it cut out So we're he's starting in the middle yet soylent is ah it's like a douchy tech Broy a tech pro.
00:13.21
Rick
Um, what is soilet.
00:18.38
tylerking
Protein shake or meal replacement shake. There's nothing special about it's just like any other like shake you might drink instead of having a meal but we're recording this during kind of lunchtime for me. So I'm trying out this new protein soilent chocolate shake and it's. Terrible so I'm going to make all these like cringy wincing faces while we're talking here. Um, yeah, so if anyone follows me on Twitter you probably saw this already. But ah we kind of pulled the trigger on a pretty big decision. It less annoying. It is absolutely called Twitter i.
00:36.46
Rick
Wonderful! Wonderful! What's going on in your world.
00:48.76
Rick
It's it's not called Twitter anymore. It's x.
00:53.32
tylerking
I refused to I don't even know what you're talking about Rick ah, if no one calls it x it is not x I'm digging my heels in here. Um, yeah, so ah, we've talked about this for like on and off for a long time but just to catch anyone up on context here. Ah, less knowing serm start out being $10 per user per month. No tears or anything. Um, that was in 2009 we set that price in 2020. We raised the price from 10 to $15 but anyone who signed up before that price increase got ah kind of that legacy pricing of 10 and so for the last three plus years. Some people have been paying us $10 a month some have been paying us 15 ah and we recently made the decision to kind of announce to everybody that as of next July which will be the 4 year anniversary of the original price increase. Everyone's going to 15.
01:44.88
Rick
And can you talk through your rationale behind this and how you reconciled it in your head.
01:53.97
tylerking
Yes, yeah I I have a lot to talk about and like it's all intertwined says is probably going to be a sort of like unorganized disconnected conversation I'm guessing but um. Maybe I'll start with like why didn't why didn't we raise it originally because like a lot of people I know well where did you stand? Did you think I should have raised it or or like announced like ok, we'll give you six months but then it's going up for everybody or did you were you behind the like keep it at 10 for everybody.
02:20.46
Rick
um um I I I didn't have a strong opinion. Um, but I understood why you kept it at 10 at the time because you had this strong stance for for people who aren't aware like there was ah a pretty strong stance by you that you would never raise prices.
02:29.63
tylerking
Um, ah.
02:36.28
Rick
On existing customers. Um, yeah.
02:38.68
tylerking
Yeah I Want to be Clear. We never said Net like ah we we've had 4 angry customers be like you Promised. You would never raise prices like we absolutely did not but we didn't what we we thought we might never raise prices and we probably made it. We probably went a little overboard on messaging that that was our goal. Yeah, so sorry, go ahead.
02:56.87
Rick
Yes, and so so whether that was what you said or not that's kind of what what I think people heard um and and so like that that makes it really I think that makes it really hard to do this? Um, and so I kind of like the 2 like very specific questions I have is like what was the trigger point for this and how did you like.
03:01.90
tylerking
Um, yeah.
03:14.80
Rick
Justify it in your to yourself. Um, and then how are you repositioning your pricing moving forward So that um you you can do this again if you have to without necessarily the the um the backlash that you aren't really getting but like for people is is not that many.
03:21.72
tylerking
Um, ah.
03:27.36
tylerking
Um, yeah, yeah, So the the logic of not raising it honestly was less about we Promised. We wouldn't or anything like that because again I in my mind we didn't it. If we ever made a strong even something close to a promise it was when we raise the prices and we said we're not going to raise your prices but um, we actually we use the word indefinitely I'm now realizing different people think that means different things if you look it up in any an online dictionary and definitely means Indeterminate. We don't know. A lot of people interpret that to mean unlimited permanent Never infinite that is not what it means I would I wasn't intentionally trying to use a word that people would misinterpret but I get that. That's what happened anyway. But the the thought was just like if you're growing fast enough. You can keep a like.
04:06.85
Rick
Infinitely. Yeah, yeah.
04:20.94
tylerking
The number of new customers post price increase will dwarf the number of old customers prepriccing increase pretty quickly and so like getting that extra five bucks a month out of them. Is it worth the Goodwill if if them loving you and feeling like you're taking care of them will lead to more $15 customers joining in the future. I think there's an argument to be made that it's actually a selfish capitalist move to honor the old pricing indefinitely as a way to but buy Goodwill with people. Basically so that was kind of the logic at the time. I think I don't know maybe go back and listen someone can go back and listen to what I said on the podcast. Maybe I'm like completely change. Maybe I'm remembering this wrong. But I think that that was a big part of it and there is some guilt of like it feels bad to raise prices on people. But.
05:04.12
Rick
Are you are you changing how you talk about pricing from a less annoying branding perspective going forward. Also.
05:10.70
tylerking
Um, yeah, um, so we I don't know in the past we kind of let me start with this an interesting thing about having a team of people is that.
05:25.88
tylerking
I can say here's what I think our stance on pricing is and then that filters down in different. You know a sierum. it's it's possible a serum coach did promise a customer that we would never raise prices because when we did this I learned some serum coaches thought we had made that promise. Um, now I I like I went back on slack and like saw what my communication was and I like. That's not what I thought but anyway and then some of our marketing messages different people write blog posts and this and that some of it was stronger and some of it was softer. 1 thing we're doing is we're just tightening up price. Creases are inevitable. There will be pricereas in increases because our goal is to be around for the next century. There's no way in the year 21 23 the price is going to be $15 per user per month. Um, it'll be in bitcoin obviously ah no, never um, but so the the new pricing is like we we will only charge what the new messaging is like we will only charge what we need. We will hold out as long as we can. We've only done one price increase ever and even in that case we honored the old 1 for 4 years it's it's it's not about we will never raise prices. It's about the pricing will be fair. Basically yeah, exactly. Um.
06:30.48
Rick
We our pricing will not be annoying. Yep Cool I Think that's good. Um, and and what was that why? why did you decide to do it now.
06:38.48
tylerking
Yeah, so I said earlier that the original logic was we don't need to raise prices because the new customers will dwarf the old ones. Well anyone who's been listening also knows that during that time our growth slowed quite a bit so actually even though we're 3 years and ah a couple months postp price increase. 60% of our current users are still in the old price. Um, and our growth like I've been talking for a year and a half now about just we're not like in desperate financial situations. But we're getting there like things are trending in the wrong direction I shouldn't say that we're still growing. We're not growing fast enough three years ago we didn't need to increase prices on. $10 people now we do um and I ah you could take away any number of lessons from this and I've I've been thinking like reflecting a lot and like should we have just raised it back then and I mean knowing what we know now. Yeah, probably but I actually really like that this tested us to say yeah there is such thing as enough we have enough money we won't raise prices on customers and if we don't have enough money. We'll do what we have to do to have a you know sustainable business and that's what changed.
07:41.66
Rick
Yeah, it makes sense to me. Um, and and how long has it been since you announced it to your customers Tuesday and only for sort of negative massively negative reactions.
07:47.83
tylerking
Ah, we're recording this on a Thursday we announced it Tuesday so two days. Yeah and it was honestly it's been kind of overwhelming. How nice people are, um. So we sent it out. We didn't send it to every customer because it's just the 60 it's the admins of the 60% who are on the old pricing about 8000 people got this email. Um I blocked off all of Tuesday because it came from me personal email from me and I replied all the replies to it. Ah. I think we got about eighty replies four were negative. There are a few maybe 3 or 4 that were like I understand but I'm not going to pay like you got to do what you got to do. But I'm going to go elsewhere. They weren't mad but they're canceling or at least they said we'll see if they actually do and then the rest of them were like over the top supportive. Um.
08:36.70
Rick
Um.
08:37.61
tylerking
Like we had a handful of people right in just like you know everyone every business is screwing over their customers. You guys are different the way you did This is with integrity I. Love how you did this I'll pay you 4 times that if you want just charge me what you need you know like it was the whole team. We were just we felt so. Nice.. It's just one of those really nice moments where customers really stepped up.
08:57.59
Rick
That's cool now I I like that um now so when's the next price increase.
09:04.38
tylerking
yeah probably next week ah yeah I mean I have no idea I think at at $15 we should be good for quite a while. But um.
09:12.37
Rick
So so the 2 levers that I want to talk about I know you probably don't want to talk about this right now. But I do are like how do we? How do we get a $25 thirty dollars tier. Um and and start pushing people that way and then how do we miget more leads.
09:17.23
tylerking
Um, she is.
09:26.84
tylerking
Yeah I mean I definitely want to but I want to talk about more leads for sure. Um, and I've I've got a whole thing about that because just to tease what we'll talk about later this price increase has caused me to think differently about how we look at our metrics and I realized some things I had been missing before. Ah. But yeah tears. So when we when we went from 10 to 15 for new customers. There is a very noticeable dropoff in our like new leads coming in. Um I know if you go on Twitter and follow all the thought leaders they're like price doesn't raise your prices forever. It doesn't matter at all. And I think for a lot of businesses that's probably true. We have made a niche for ourselves appealing to people who are price sensitive and the reality is we have fewer features than every other c I'm out there like it's more than just price. It's not just price but price is one of our big pillars. Um, and when we raise the price to $15 lead volume drops like but by a third or ah, a half or not not a half by probably a third um it was significant. So I'm not like I'm not looking at this like yeah let's keep driving up prices. Yeah.
10:36.25
Rick
Interesting. Yeah, it'd be cool. Yeah, well we can talk more another time but like about this um I think we've this is are there any lessons around pricing too low or ah, you know.
10:51.46
tylerking
Um.
10:52.83
Rick
If you could go like you you mentioned like if you could go back in time you probably would have rolled this $15 out knowing what you know now like yeah yeah, so I guess like is there any any lesson that you would impart to to on pricing here.
10:59.27
tylerking
Knowing what I know now but knowing what I knew then I don't think I would.
11:08.61
tylerking
Um, okay so I'm going to ramble for a bit number 1 we set the $10 price in 2009 if you put that into an inflation calculator. It's like $14 and something cents right now. So right around 15 um there's 2 types of price increases. We want to keep the same slice of the pie. We've always been taking and inflation exists and the other type is like we want to take a bigger piece of the pie or I guess maybe a third type is like our product. What you always hear in these pricing. Announcements. Our product got so much more valuable. So the price went up. We were very careful. Not that was not the reason at at no point in the announcement have we been like our product got better and so it's worth more and so that's why you're paying more because the message that sends to people is if we keep working on it like you like you don't want us to keep improving it if that's the case you want us to stop because that's how you keep the price the same. Um. So we were this is a very conservative price increase and then it's like we're literally just readjusting to what we were charging when we launched before we like the product was pathetic back then you know, um, and then I guess the second yeah.
12:12.91
Rick
Yeah, yeah, so so so I think the takeway just to summarize like like there's like it's very easy to justify inflation based adjustments versus um, ah, sort of greed greed. Ah you know.
12:29.36
tylerking
Yeah, and and and I think how you commute if if your communication is you're paying more because the product's better. It sends a very different message I think I don't have the contra positive but that's my guess. But then I think that leads into like the bigger thing I feel really good about this whole thing we we left So I I did the math how much money.
12:29.54
Rick
Taking more of the of the margin.
12:37.50
Rick
Call.
12:49.25
tylerking
Do you think people have saved in total but by us, not raising the price originally just like ballpark. What do you think 3000000 we've given up $3000000 in revenue from this.
12:56.23
Rick
500 grand what? Why? how did I do that math so wrong. So 5 oh yes, that was what I did it annual. Wow.
13:07.17
tylerking
I think you're you're in, you're close per year, but it's been 3 over 3 years um and if you if you go it out to next year because because the price we're giving them a nine month heads up about this. It will be three point Eight Ish million if my forecast is correct. That happens to be exactly what our annual revenue is so we've given up one full year of revenue by doing this now a part of me is like fuck like that was dumb right? Ah, but another part of me is like that's why we got 74 or whatever, incredibly positive responses and 4 negative ones. And you like a lot of people listening might say well who cares like you can deal with one day of people being mad at you for three point eight million dollars I think but I feel really good about it like this is if if anyone listening wants to run a business where people actually like you I think this is how you do it kind of.
14:00.80
Rick
I like it. It's helpful.
14:04.20
tylerking
yeah um yeah I don't know I the pattern that's happened time and time again is all the people who do things by the book say I should do something and I push back on it and then two years later I do it. And so you could interpret that to be like I'm always wrong, but every time waiting that two years makes me feel more prepared to do it wiser when I make the change that might be in some ways worse for customers or putting restrictions on employees or whatever the amount of Goodwill and the amount of thought we can put into it I don't know I feel like lagging behind. Conventional wisdom and best practices his his worked. Okay I'm a laggard. That's right? Um, yeah I have a million other things I could talk about here although I don't know like getting bored with the topic. Um.
14:40.29
Rick
So you're saying you're a laggard cool. Thank you for sharing.
14:51.65
Rick
You know I love that I love pricing topics So like any other like big things before we move off of this.
14:58.90
tylerking
Yeah, like I just wrote some notes on various topics. So One was like my biggest concern actually was not how ah employee how customers would deal with it was how employees would because the reality is like $5 doesn't mean anything to customers for almost all of them. But um, you know. There's this the term is the in shitdification of everything in the world. Everything just like gets worse and worse and worse and worse and I thought employees might worry about this I gave a ah hour long hour and a half long actually probably too long a presentation about company finances and all that to employees and then.
15:33.76
tylerking
Kind of ended with so here's the decision we have to make we can do nothing and we better get growth on track. We can do what I talked about in the um in a previous podcast I said what if we add this feature but say if you want the feature you got to be paying $15 that's kind of like in the middle or just require everyone to pay $15 and that's that um. And then I met 1 on one with every single employee and all but 2 people said raise prices and I was really surprised by that. Um, but thrilled.
16:04.94
Rick
The the larger issue here is like when you have employees and you you need to make like operational changes. Ah that ah potentially conflict with their interpretation of the strategy and and sort of cultural philosophy. Um, then it can cause a lot of friction right? like and and so um, yeah, that makes a lot. Yeah that's that's interesting like and that that does not just pricing that's anything like with the more employees you have the more likely. Ah, well, there's 2 situations either.
16:24.14
tylerking
Yeah I was very worried about that. Thankfully it wasn't a big deal. But yeah.
16:35.70
tylerking
Um, kind of.
16:40.40
Rick
You have to make a strategic or cultural change because it's best for the customer the business. The employees, the collective everyone. Um and that's a hard change to make or you make an operational change that people think is in violation of the philosophy. But in that reality it's not and and then you've got to manage like.
16:55.23
tylerking
Are.
16:59.31
Rick
Oh crap like they have a misinterpretation of my philosophy and that's a larger problem in this case, it sounds like you made a operational change that was within your version and your head of the philosophy and the strategy and there are few if any sort of ah customer or employee.
17:01.72
tylerking
Um, yeah.
17:18.81
Rick
Sort of Miss Misalignment with that like.
17:22.17
tylerking
Yeah, even though so back to what we were saying earlier I Do think a lot of people thought we had promised to never do this and if I went back to 2010? Maybe I've said that before I don't think I have but ah even with people thinking that that was the commitment they still looked at it and said like. Yeah, this just this makes too much sense.
17:38.50
Rick
Yeah, like even if you if even if you had to even if you did change your philosophy here like it was just it was it was appropriate. Yeah, that's great Cool I Think that's a really important thing to to that that applies at every stage of a business. It's but in probably even more so in an early stage of a business.
17:45.70
tylerking
Um, yeah, um.
17:56.86
Rick
Because change is happening more and so like your mission like ah in a if you're if you're into mission vision values and all that kind of stuff and whether you so call them that or not like you do start with some version of that with their first employee and the reality is the likeliness that you're going to have to change that at a startup.
18:08.54
tylerking
Um.
18:14.62
Rick
More than once is really really high or in the early days and managing managing people through that and bringing them along um is important and hard and takes effort and if you do the right thing generally people come along. But if you're trying to like go too fast or cut some corners or you're trying to like.
18:16.20
tylerking
Um, that's a great point.
18:29.66
tylerking
Um, this. Ah.
18:33.70
Rick
Be 2 people at once be 2 companies at once it it people see right through that.
18:37.97
tylerking
Yeah, when you I think a lot of people have this like what is the Ceo do all day type of thing and this is one of those kind of invisible things where at at the end it was ah an hour meeting and I mean I spent like three full weeks basically just figuring out how to talk about it and. If I could go back if I were to restart a new business right now I do a lot of things similarly to what I've done with lastings here and but 1 of the big things I would change is exactly what you just said acknowledging everything is going to change I feel like in the early days like how did I attract the the first handful of employees being like. Here's our goals here's the trajectory of the company if you join now you'll be the head of your team yada yada yada and what I should I think I could have recruited the same people in a more I I wasn't intentionally dishonest I was just naive. It would have been much more honest to say you're going to be in charge of this for now I have no idea what's going to happen. There may not be a sales team 10 years from now.
19:30.23
Rick
Yeah, yeah, like the the all I can promise you is This will be a fun ride and there's a lot of upside. Um, but I can't predict the future.
19:31.00
tylerking
Right.
19:37.30
tylerking
Yeah, and so same thing with pricing What I should have said instead of being like our goal is to maintain this pricing indefinitely what we should have said is like you know we really take a lot of pride in charging as little as we can and I think we can get away with $10 for a really long time and we're we're here and we're just going to work towards towards that goal like I. Just leaving the door open for I don't know what's going to happen in the future. But I can tell you what my intentions are right now.
20:01.45
Rick
I think you and I have both got like that if if I compare Rick and Tyler in late 30 s to you know Rick and Tyler early 20 s like I think we're both much more like open to like not knowing um, ah and being okay like.
20:10.16
tylerking
Um.
20:17.48
Rick
With with like Lee being very intentional about like even our agreement with working together at leg up health was all around like this. Not what what we agree to not actually being what we end up agreeing like what it ended up happening and making sure that we're both covered in this in the situation.
20:29.36
tylerking
Um, yeah I mean we renegotiated the deal like two weeks in right and neither of us was like oh no, this is if we were both like oh yeah, yeah, that makes sense that the first one didn't well it didn't work.
20:35.10
Rick
Um, you know.
20:45.80
Rick
So um, cool that that I love it when we talk about things that are super micro and then they expand into these like larger things. Um I saw that you um had something in here about forecasting.
20:56.76
tylerking
Yes, um, so this is in a sense bad a bad outcome of this but it's actually um, some of my financial. So I'm not very sophisticated with finances as we've covered before and I exposed some of that. In this process and realized that some of my forecasts were overly optimistic in the past. Um, it's only me run through what I'm the the history here so we used to just measure user growth. You know we have a hundred users. We have a thousand users and you could multiply that by 10 to get our mmrr revenue and user count was the exact same thing. So like. Whatever look at user count then we did this thing where some people are paying 10 some people are paying 15 so user count is no longer maps to revenue because over time you churn $10 users and replace them with 15 your arpu goes up and so you're making more per user. So I started instead tracking revenue growth instead of user growth which again. Prior to that change was the same thing so when I made this shift I was like I don't really need to change anything else about my reporting about my numbers I'm just going to look at revenue. Ah, there is ah an ugly truth that that allowed me to mask which is a lot of that revenue growth was coming from. Increasing Arpu which I've said a million times on the podcast I wasn't like confused about that. But I don't think I appreciated what that meant because eventually that runs out eventually. Yeah go ahead.
22:16.76
Rick
Yeah, so are you are you saying that your revenue growth versus your user growth. What there's ah, there's a massive difference between those two things.
22:24.26
tylerking
Ah, yes, sort of so like yeah a massive might be somewhat of overstating it. But about twice about half of our growth over the last couple years has come from increasing ourpu yeah.
22:28.29
Rick
Significant.
22:34.74
Rick
So your your growth rate on your users is 50% less than wow.
22:41.49
tylerking
And if I'm being honest like this was not a deliberate conscious thing at the time but I suspect that a part of what influenced my decision to start looking at revenue is that number was going up faster and yeah as a founder you're kind of ah emotional state and happiness is so connected to like seeing a graph go up. And if I was looking at users. It was. It was a more depressing graph than if I'm looking at revenue and so I again I didn't intentionally lie to myself. But I I bet in the back of my head I was like oh I'm going to look at the number that excites me to see you know.
23:02.25
Rick
Oh gosh, It's so true.
23:15.24
Rick
Tangent. Um, we talked about this in our partner meeting when do we have our partner meeting was it Monday or last Monday this Monday last money man. It's been a roller coaster of us ten days the
23:18.72
tylerking
Last Monday last week.
23:26.46
Rick
Ah, so so we one of the things that that one of the topics I brought into the meeting was ah adjusting how we run the business right now we run the business around sort of unit goals at Leg up. Um, and so like you know Jd like your our goals collectively we're trying to hit like. What is it 200 clients um on the ah you know consumer clients and then 20 employer customers and that translates into revenue at some assumption and but it doesn't take into account how much we're spending and so like there's this lack of sort of ah alignment um around like how we think about.
23:50.50
tylerking
Um, is.
24:02.10
Rick
Ah, capital investment money investment and and and how to prioritize like should we pay you know J D Moore or should we um, spend this money on this marketing initiative or you know whatever um hire a consultant exactly um and so um and and part of that's necessary in the early days because
24:13.71
tylerking
Hire Consultant that type of thing.
24:20.44
Rick
You don't have any profit. Um, but what? what? What I brought to I read a book called profit first I highly recommend it if you have um, a business that generates revenue because it's actually I think very valuable start thinking this way. Um, prior to getting to the point where you have lots of profit because it's a totally different way thinking, but the the general just is. You um you you basically throw away the like traditional financial forecast and you throw away just like unit ah management and you focus on profit as your core metric and and and specifically ah setting a constraint on operating the business around distributing. Distributing some amount of profit before you ah you know, spend any of your money. Um, and so um, what 1 thing that that leg up is going to change and this is predicated on us hitting a certain threshold of revenue. But we're going to um in February change from um, you know basically. You know, just this unit focus where I'm like by myself worrying about money to you know Ah ah j d ah and Tyler and I will will all take a profit distribution first as a percentage of revenue before we allocate money to um.
25:19.70
tylerking
Bring up.
25:35.75
Rick
Other expenses including J D Salary and ah, ah, that will I think have a huge impact on what we spend money on and how we think about hiring as well as like I actually think it will lead to growth. Um the right type of growth Anyway, ah.
25:51.16
tylerking
Yeah I like yeah, it's so easy for you're like we have some money. Let's let's hire somebody. Let's you know, let's spend it and if you say no, we have profit. Do we want to reduce our profit to make this investment and sometimes the answer is yes, but.
25:53.51
Rick
Kangit but its same concept.
26:08.58
tylerking
Yeah, it's It's not as easy of a decision when you think about it that way. Yeah I'm excited for that.
26:09.51
Rick
No yeah, and it might be just be like and I'm just to be clear like this is a percentage ah the the concept is percentage allocations. Um, and so ah, we'll we'll probably start with a very low percentage allocation of the revenue. Um, but the cool thing is like all 3 of us are now going. Oh that 1% 1% of 100 is 10 or whatever I don't know what it is but like is that right? they do that right? that 1% of 101 so that be a thousand so a hundred thousand in revenue would be a thousand dollars a year split three ways like whatever like that's something um, ah and it's ah you know it's like oo you know how do we make this number go up.
26:33.37
tylerking
Um, that's going to be 1
26:40.97
tylerking
Um, yeah.
26:49.15
Rick
Ah, we got we all areynized debate This never go up that changes behavior. So how do you think? what are you going to focus on instead. Do you see use users.
26:49.29
tylerking
Um, yeah, yeah.
26:53.93
tylerking
Yeah, so there's ah, a bad side and a good side to this the bad side again. It's not that anything new is bad. It's that ah an existing bad thing I now realize let me start with a good thing though. So I am feeling so much energy around thinking about users again. And to be clear I could have been thinking about users this whole time. But when everyone pays the same amount. It's even simpler to and as of next year everyone will be on $15 so like we used to have this tradition where we would on like the whiteboard wall in our office we would write the user count and we had this whole. Ritual around who gets to update it like how how much does the number have to change before you're allowed to update it and who gets to do it and it was kind of this fun little tradition we had and then we stopped because of the pandemic like we weren't in the office anymore. But also when we came back from that we were in this post price increase world. So we just never did it again. Post pandemic earlier this week I went out outside and wrote it on the wall again and I'm just like I kind of feel like a startup again like I'm really excited and it's it's just like it's more pure. It's like fuck money like the money's a byproduct. Let's go get customers. Um. It just feels a lot better to focus on that you know? Yeah, um.
28:01.22
Rick
Yeah I get it I simpler and it's tied to the the end use like value creation versus like a dollar amount.
28:11.83
tylerking
Exactly and even more important than so that's the kind of like emotional side of it the actual like money side of it. Ah yeah, I've been lying to myself and I can't lie to myself with users. The reality is our user count is not like literally plateaued but it's. Again, Half of our growth has been coming from something other than this. So our growth is half what I thought it was and as a result so this is the type of thing like you would have never made this mistake Rick but I did so I did like a decent amount of modeling about if we raise prices. What is that going to mean how much extra revenue are we going to and. The math was like you're going to get an extra something like six hundred Thousand a R as soon as you do this and I was like okay we're losing about one hundred thousand a year right now that'll net us 500 great like we're going to be printing money. We're going to be in a really comfortable position. And then this week I like put it into I have a bunch of different things like ways of looking at this I put it into a different model and it's like oh wait, but your growth is going to go from 20000 ar growth per month to 10 because you're not increasing arpu anymore. You're realizing all of that growth at once instead of trickling it out over the months then it's like oh that means that surplus is going to start dropping every year significantly if if we can't pick our growth up because we keep giving people raises our expenses keep increasing right now. Our growth is about breaking is growing at about the same rate as our expenses but half of that growth was fake and so now our growth is only going to be going up.
29:39.70
tylerking
And half the pace of our expenses and so like we when this makes the price increase even more necessary so doesn't I don't regret any decisions we've made but looking at I'm like I thought we were going to be in a amazingly comfortable spot and now it's like we're in a more comfortable spot but we still really have to get growth figured out.
29:56.20
Rick
Man Just like I you know I I have a problem I want to share with you that I'm facing J D's facing at like up health. It's a good problem but like it just just as just a reminder of just the journey of entrepreneurship is. Never ending problems and you have to like problems. Yes, yeah, you have to just like problem solving and if you don't like problem solv This is not for you like like yeah this is a big problem man.
30:16.58
tylerking
Um, yeah, even when you've made it.. There's still endless problems. Yeah, it is now the the optimistic side is this if anyone out there is listening thinking I don't know if I can start a business because like I don't know about Finance. I Got this far being capable of making this basic of a mistake right? So like it's obviously not the most important thing in the world that you're sophisticated with financial forecasting to do this. But yeah, it's ah it's a thing we need to tackle now. Um, so.
30:49.17
Rick
Yep, um, well I want to talk about that. But I don't know if we have time for for that today. Do you do you have any um, any other things related to the pricing learning.
30:52.60
tylerking
Yeah.
30:56.31
tylerking
I think that's I could talk all day about it. But that's good for me I mean we yeah we've only got ten fifteen more minutes here you have some stuff you want to talk about.
31:06.28
Rick
There's just one ah big thing that I wanted to share. Um and it's it's right like everything's just kind of chaotic right now in my life. So I've got you know I'm doing a house thing I've got a full-time job. That's pretty demanding but fun. And rewarding and then we've got leg of health and new baby and and all that kind of stuff. So um, but like 1 of the pushes we're making in this fourth quarter is we want to add more group health insurance customers which is a new area for us. Um, and so we we are enrolling our first sort of customer ah like it's our first. There's 2 ways to get a group health insurance customer in the us you can either become the agent on an existing health insurance plan for all of their employees and this is ah a plan that the employer offers the employees or you can basically go in and at the renewal time where the thing comes up for renewal and say.
31:57.64
Rick
We'll be. We'll quote new options and if you go with one of our new options then we'll be your your your broker agent on that on that plan and that's what we did with this one. It was the first time that we did it and what we what we failed I think what? what we? what we are learning and we failed to over over prepare for is how much harder it is. To change the insurance company change the plan and become come in as the new broker and all the communication challenges and ah issues associated with that. Um, and be do that remotely because Jd's in Texas. Ah, versus coming in and becoming ah an aor and existing plan and just like up leveling the service so totally different animal. Um, and so Jade's working through that Today. He's actually flown out to Utah to deal with it. Um, it's like we're doing all the right things but man it is ah lots so two 2 big takeaways here. Um one is like. Depending on how you get a customer how you like go about implementing that customer is very different based on the situation like same service but like the situation that they're coming from changes. Everything.
33:01.21
tylerking
Yeah, Well I mean we have our own version of this where if someone's coming from Salesforce We spend the first three months being like no, we don't have that. No, we don't have that. No, we don't have that ah your data can't we can import your contacts and companies. But we can't import this other stuff if someone's coming from Excel. Or note like you know post it notes were like everything is better about this experience right? It's all is it's the same thing.
33:26.76
Rick
It's the exact same thing. So like when we take over ah an agent a record on a plan and come in and like start over you know, delivering on service and helping people. They're like this is all better. Um.
33:37.26
tylerking
Um, yeah.
33:40.14
Rick
And then but like with this one. It's like we're changing the insurance company. We're changing the process to enroll we're changing the pharmacy. We're changing the doctor networks. Um, and yes, this is better for them like it's better for everyone but communicating that is so hard. Um, because not only is this a ah there are kind of 2 factors with this customer one. It's um, it's last minute so we're behind the eight ball like everything's getting rolled out. It's a ten one. Everything's getting communicated with three days to make decisions. Um, so it's like it's frantic. The second is um, ah is is that we are new. Um, and so like this this is our first.
34:07.45
tylerking
Um, f.
34:18.45
Rick
We weren't the old broker making a change. We are a new broker coming in so we are new and the plan is new and ah man and and then on top of that like the decisions are made by a select few and then so the employees are sort of ah lagging behind that and choosing what information. Go out of your way to share so 1 1 example of this is we were ah in communicating this originally we were comparing so when you when you when you aren't a group health insurance plan you get a renewal um and then so basically if you don't change anything. There's 2 plans. There's the existing plan and the renewal plan.
34:38.98
tylerking
Um, yeah.
34:56.13
Rick
But the renewal plan isn't the same plan oftentimes. The coverage gets worse and the price goes up and but it's the same like plan Id It's just it's worse and it's more expensive. That's like the standard and and so employees don't understand that they think like they they go I had this old thing and.
35:03.21
tylerking
It's like you just roll over to the new thing but the new thing is actually different. Yeah.
35:16.60
Rick
You're taking this old thing away from me employer. But no, no actually it was getting taken away from you anyway and so 1 thing that that but like light bulb went off for us this morning when we're reviewing this was oh um, when we're talking to employees. We have to compare 3 plans. It's not. It's not just the.
35:21.10
tylerking
Um, ah have.
35:31.52
tylerking
Um, yeah.
35:33.57
Rick
The old plan in this plan or the renewal and this new plan. It's like all 3 of them so we have to almost go like hey let's assume first like let's assume we didn't change anything here's what would have changed here's how it would have gotten worse for you and so we we basically have built the template for communicating like anyway, the takeaway here is.
35:44.64
tylerking
Um, ah.
35:53.33
Rick
When you go through things for the first time in a business you have to be prepared to learn but you also have to be prepared to iterate um in real time and there's a tension between like we're learning and we're going to be better for the next customer. But you also have to solve the existing customers thing the thrill of that I just I love it. Um.
36:08.90
tylerking
Um, yeah, yeah, could.
36:12.69
Rick
Yeah, and and I actually get like a lot of but I can tell like JD's like oh this is hard. Ah, um, of course they're they're like they don't understand. They're upset about so it's it's just like the pricing thing. It's like i.
36:18.43
tylerking
Um, yeah because I I mean I assume people are upset about this. Yeah.
36:26.29
tylerking
Yeah, there's so many parallels between these 2 things.
36:29.99
Rick
Yes, and it's like oh my gosh like we just need to like help them understand like that effectively we are saving them 13% and they are getting better coverage than they had and definitely that they would have gotten if if we had renewed.
36:42.17
tylerking
Yeah, Ah I mean it? Yeah, we were talking earlier about commute like how I communicated or whether I did it right? or wrong, but thinking about like you have to put a lot of time into communicating it to employees with the pricing thing. Um, in this case, it's It's not your customer. It's the employees of your customer that are most likely to. Bulk at this. But yeah, it's just like any other communicate if you just go in there and you say hey we're making this change here's how it's going to like here's what you need to do no one has any context if you go in there and say here's the problem Health insurance keeps getting crappier. Your plan was about to get a lot Worse. We've got to fix for you I mean just that alone probably.
37:18.82
Rick
Yes, and we just we skipped we skip to hey we're on a new planet's better. We didn't say it's about to get was about to get worse that and that was a critical like myth.
37:19.62
tylerking
Yeah, does it people view it completely differently. Yeah, yeah, it's ah sometimes when I'm listening to podcasts or whatever people talk about like how important storytelling is and just that's. For every single communication Challenge. It's storytelling Stories. Don't start at the end you start at the beginning you establish the scene you create the conflict. What's the conflict and then you resolve the conflict right.
37:47.65
Rick
Yep yep, totally agree now and then the other thing that comes out of these customer learnings like these early things is just like product opportunities. So. There's a huge I it became so apparent to me what our freemium product should do on legup benefits. It's a survey tool for employees around benefits that is ah anonymized so the hardest thing so the hardest thing and that an employer has to do when they're making a health insurance decision is know what Stevie has from a medical condition perspective.
38:09.58
tylerking
Um.
38:22.14
Rick
And making sure and a doctor perspective and a prescription perspective and making sure that they take that into account when making the plan but they're not allowed to know that and so um, and and so like they like if if JD's dealing with you know the the office admin and the seat the the owner like.
38:30.60
tylerking
Um, yeah.
38:40.85
Rick
1 of the biggest things that we could do to get embedded into the company is say listen you can't know this but the first thing we need to do is we need to have you create a legup benefits account. Add your employees and invite them to a survey tool that will give us us all the information to. Make you feel confident. You are making good decisions with your ah on behalf of your employees and if we had that there are 2 things that would happen in this situation one we could give custom communication to every single employee on how it impacts them in particular um and 2 we could reassure the employer that we understand the employee's individual needs.
39:14.24
tylerking
Um, earth.
39:18.78
Rick
And that we have ah we each individual employee is better and if there isn't that exception to that we know which employee it is and we have our partnering in the communication and handling of that anyway that helps but with both like up benefits and with ah with a group health insurance.
39:26.84
tylerking
I Love that What I love about that that like a good freemium offering is one that provides value even if the person doesn't switch to leg up and yeah, that's when it's like fine stick stick with your current group plan if you want you're you're going to still have more information to help you make sure that you're not. You know, no one's fallen through the cracks. Yeah I like that a lot. Ah cool. Nice well.
39:48.18
Rick
Yep Yep! So um, anyway, that's all got there but that was a big that was my morning this' fun I love it and I miss it I miss it so much because like you get in these moments. It's like okay that we this sucks we've screwed up but we can fix it.
40:03.96
tylerking
Ah.
40:04.75
Rick
Ah, but there's just so much product and and customer learning and juice in this. It's like ah.
40:06.34
tylerking
Yeah I I'm the same way I'm a little different like what you're describing sounds miserable to me because I hate like there's like a kind of attention to detail. You have to have with health insurance that I don't like but my version of this Tuesday when that email went out I was expecting a ton of negative feedback because. Not that I thought most customers about the pricing would be fine with it. But the people who are fine with it aren't going to email us and tell us that that's what I thought I thought the only people who contact us will be angry people 8000 people got this email I'm probably going to get like a hundred really mad emails and I'll be honest I was. Pretty fucking stokes to go into Tuesday morning I was like all right? Let's argue with some customers here. But.
40:42.92
Rick
Um, yeah, you rape yourself up, You're like let's go you have to.
40:46.83
tylerking
Ah, but thankfully it was much easier than that but I would yeah I don't you mean that there's like life is kind of boring all that like like if life's too easy. You're just like and whatever and sometimes like oh let's go do a hard thing. Yeah.
40:56.65
Rick
Um, if now.
41:01.98
Rick
I know I know Anyway, that's that's all I got ah we are. We are so leg up. We are squarely entering in busy season and so I think we'll probably shift away from top of funnel and more just focus on survival and ah and I think ah well.
41:14.00
tylerking
Um, yeah makes sense.
41:19.43
Rick
At the end. The the thing I love about this business is if we just show up every day and just learn and do two 10 years from now we're going to have a multimillion dollar business that generates a lot of cash but like it's going to be very weird about how we get there. It's not like this. Um, it's a very and it's an ss startup. Yeah.
41:35.94
tylerking
It's not a saas startup. Yeah yeah, cool. Um, so I had a lot of updates this week you're probably going to have a lot next time we talk given ah given that it's busy season coming up all right? You want to call it here.
41:37.97
Rick
Exactly.
41:46.36
Rick
I Hope So yeah, if you like to review past topics and show notes visit startup to last dot com see you next time.
41:53.46
tylerking
Um, see ya.