Startup Q&A #11: Managing an Email List, Funding a Business, Scratching your Own Itch

Hey everybody, Matthew Paulson here. Today we are going to talk about managing your email list, whether or not you should get an investor knowing whether or not you're ready to start a business and whether or not your business should scratch your own itch. Let's do this. This is officially episode 11 of Startup Q and A, the online video show that helps startup founders, small business owners and entrepreneurs grow their businesses faster and achieve their dreams of financial freedom. So whether you're just getting started or if you have a hundred employees, Startup Q and A is the online video show that will give you actionable ideas and advice that you can implement in your own business. So this week's tip is to go read the book beyond the E. Myth by Michael Gerber. If you don't know who Michael Gerber is, he wrote the classic business book called the Entrepreneurial Myth. And that really was the first book that kind of separated the idea of working in your business versus working on your business. So in that book he gives the example of a pie shop owner. And that pie shop owner can spend all their time making pies and never really getting ahead in their business, or they can be the person that makes the recipe for the pies, hire somebody to make pies, then that person is freed up to work on the pie business, find new locations, do marketing, think about big picture things. So E Myth is kind of that first step in saying, okay, how do I go from thinking about being an employee in my business to being an owner that's working on the business? Now, beyond the E Myth is kind of the 201 version of this book and I'm about halfway through it, so I can't give a complete synopsis, but the whole kind of idea is how do you build a business from day one that you can sell? The idea in this book is you should be able to build a business that works without your day to day presence in the business. So if you go on vacation for a few weeks, it should just continue to hum along. And that time when it comes time for an exit strategy, whether you sell, you go public, whatever, you don't have to try to do a bunch of work then to get your business ready for sale. And this is a good book. Even if you don't ever plan on selling your business because good businesses shouldn't be reliant on any one person. You should be able to take a break or a vacation from your business and continue to have it, let it run. And if you follow the processes in this book to develop systems and people and processes, you're going to have a much better business than if you Everything is reliant on you and the work that you do. So go ahead and check out beyond the emyth that just came out a few weeks ago. It's on Amazon. I strongly encourage you to check it out. It's definitely worth reading this year. So that is the tip of the week. Let's dive into the questions. So every week we take four or five questions that come through Facebook or through our website and we answer them on our show. So if you'd like to have a question answered on Startup Q and A, go to the domain startupqa Co that will take you to a page on my website. Then under the Startup Q and A Show menu item there is a link to ask a question. Also, I just periodically ask on Facebook, hey, does anybody have any questions for the show? If you see one of those on my personal account or my business page, go ahead and just respond there and say, here's my question and I will try to answer it on a future episode of this show. One thing to note, I record these maybe four or five weeks ahead of time. So if you answer ask a question, it might not get answered for a while. But I do try to answer all of the questions that aren't duplicates. So I will get to your question eventually. So the first question today comes from Micah Kennedy, and Micah asks how should you segment your main email list and when should you segment it out? Excuse me? How often should you email your main mailing list and when should you segment it out? Also, when someone joins your mailing list and receives your automated emails and your current emails, is that too many emails for them? If so, how do you fix this issue of over emailing your list? So how often you email your list really kind of depends on what industry you're in. I'm in the financial news space, and that industry changes every hour of every day as market conditions change. So we send out a lot of emails in our space. It's not uncommon to send a daily email or a couple emails a day, or even instant update alerts throughout the day. So we send a lot of email. We have maybe 435,000 people on the list, and we end up sending a total of 20 million messages to those 400,000 people throughout the month. So that's a lot of different emails that we send. But at GoGoPhoto contest, it's not the type of business where you need to or want to be emailing our customers a whole lot. And they don't want to be hearing from us that often. So we actually only send out one email a month to that list. So it really depends on your industry. If you're kind of a standard interest based business, I'm doing a photography blog. This is a hobby, whatever. I think two or three times a week is just a really good place to start. And then depending on how engaged and interested your audience is, you can either ramp that up if it's the type of thing that they want to hear about all the time, or you can slow it down. If people complain and say, you're emailing me too much segmentation. That's a pretty decent idea. If you have a list that's a decent size, there are a few thousand people on your list, you know, then it's probably, you know, a decent time to start saying you're segmenting people by their interest. So you can send out a survey, say, you know, I'm interested in, or have them say, I'm interested in this, this or this. Then based on those segments, you can send them different types of email. So say you have an entrepreneurship blog. Pat Flynn of Smart Passive Income does a good job with this. He segments his list into people based on how successful they are. So he segments his list into people that haven't started a business, people that have started a business but aren't making more than $500 a month, and then people that are making more than $500 a month or are full time in their online business. Then he sends out different mailings to these different groups based on where they're at in their life cycle of entrepreneurship. So that can be a good idea. It's more work to do this than just have a simple email blast that goes out to everybody. But your emails will be more effective. You'll get better open rates, better engagement, and that's a great thing to do if you want to put a lot of work into it. The other way you should segment your list is based on what they have purchased and not purchased. So if somebody signs up for MarketBeat Daily Premium, I don't want to send them emails to say, hey, sign up for MarketBeat Daily Premium. Again, that's just a good way to waste people's time and upset them, especially if you're having a sale. So if somebody signs up at full price and it's a Black Friday sale and it was like five bucks off a month, you don't really want to say, send an offer out for somebody for a lower price than what they're already paying. Because then they'll just ask you for the discount and you'll lose that money. So be careful to segment people by what they have purchased and what they haven't purchased. And don't send emails to sell something to people for something they've already bought. That is something you want to avoid doing. You also asked about mixing email blasts and autoresponder messages. There's really kind of two ways to do this to make sure that you're not like emailing people twice on the same day for an autoresponder or a dedicated email send. What I do in my business is that if somebody is going to get an autoresponder message on a given day, so say this is the third day that I've been on a mailing list, I'm going to get this autoresponder message, but I'm also sending out an email blast. People that are getting autoresponder messages that day, they just don't get that email blast because I'd rather have them get the autoresponder message than whatever the email blast is. The other way to do it is wait till somebody is done with your whole autoresponder series before they start getting email blasts. I tried this in my business. It really slowed down sales for me, so I stopped doing that. But some people definitely do that as well. So I hope that answers your question. Micah, some thoughts on those issues. Feel free to reach out to me if you need further clarification. The next question comes from Ross Wickman, and he asks, what, if any, are the criteria for creating a product and service that others haven't found an expressed need for yet that is scratching your own itch or something where you might be slightly ahead of the curve? So really, Ross wants to know, how should you approach a business idea that doesn't currently exist and nobody really knows that they need it yet? I think I probably have maybe a little bit of a controversial opinion on this, and some people will probably disagree with this, but I don't think you should try to tackle something that there isn't an expressed market need for. If there's not an established market, I just don't think you should try to go after it. Sure, people like Steve Jobs have been able to will a market into existence based on his ideas of what he thinks the market needs. But I'm not Steve Jobs. Ross, you're probably not Steve Jobs. Somebody is Steve Jobs, but it's probably not you, me, or anyone listening to this podcast. For every one Steve jobs, there's probably 100 people that have found an existing market, built something for that market and succeeded. I just think it's a lot easier to succeed in a market where that market already exists. So when you're trying to will something into existence from scratch, you first have to convince people that they need your product or service and then you have to convince them that your solution is the best solution to that need they just discovered that they had. And that's just a much more uphill battle to kind of educate your audience. When there is an existing need that people know they have, you just have to convince them that your solution is better than the next Solution. So with MarketBeat, people already knew that they needed information to research stocks. That has been a well expressed needs for several decades. And there are plenty of other services that do this. People buy multiple of them. So I just need to convince people that MarketBeat is as good or better than these other services. And that's just a much lower bar than trying to invent a new market from scratch. The marketing strategies, the growth channels, they're just much more of a known quantity. It's much less of an. I have no idea whether or not this will work. Ross, I know that you have tried a couple different business ideas that were kind of blue sky, big picture concepts that maybe haven't worked out as well as you would have liked. So I would encourage you to find an existing market that already exists and find a solution for that. And then after you've had success with maybe a first or a second business, then you can go pursue maybe a blue sky idea that nobody's thought of before, when you have the financial resources to kind of wait that out and tackle something bigger. So the next question comes from Matthew Robert Timms, and he asks, should you bootstrap your business? Should you get a loan for your business or should you go find investors? What is best for what situations? Now we have covered this topic a little bit before on the show, but I think it's very important to keep on discussing and thinking about on a regular basis because capital is just an incredibly important aspect of your business and you really can't many cases build a business without some money. So I think it's good to think about, you know, what are the different sources of capital and when should you think about each of those things. So there's three different types of, I guess, fundraising that Matthew brought up. One is bootstrapping. This is funding it yourself, taking money out of your own pocket, your savings account, your credit card, whatever, and using that to get your business off the ground. So I think you should bootstrap. When there is a business that requires a lot of sweat equity, a lot of work on your part, but doesn't require a lot of money. MarketBeat was a good example of this. It didn't take a lot of money to get MarketBeat off the ground. Yes, I mean, I need a logo and a little bit of web design work, but it was probably less than $10,000, and I just funded that out of my own pocket. But it was just a lot of work on my part to get it off the ground. It didn't require a lot of money. So in that situation, I think it's best to bootstrap it because you get to keep all your equity and you just don't need the money. And all things being equal, I'd rather have the equity than give it to an investor. You should take out a business loan. That's kind of the second option. You know, getting a loan from a bank or some kind of loan program if you have just a very quantifiable idea of where the money's going to go and whether or not I'm extremely sure that that money's going to come back. So a classic example of this is buying inventory. It's like, I know I have the sales channel, I know I'm going to sell this many things, but I need money to buy the inventory, to put it into that sales channel. It's a very, I know I'm going to sell this. I know I'm going to get that money back. So it's a pretty low risk thing to borrow money for the inventory that I know I'm going to sell eventually. So if there's anything where it's, I put a dollar in, I get $2 out. A very known thing, a business loan is fine. Sometimes, if you're just getting started, you're going to have a hard time getting a business loan because banks can't quantify risk in an unknown setting where there's not revenue or an established business. So if you have a company that's already making money and you need money to do something where you know you're going to get that money back and then some in the near future, a business loan is a good option. But for I'm just getting started, I need some money to get off the ground. A business loan is typically not a good idea because you don't know how you're going to pay that back eventually. So you should look for angel investors or venture capitalists if you have A big idea that's going to require a lot of time, money, and people to do. So if you're hoping to build the next Snapchat or Instagram or whatever, where it's a big idea, you want to pursue it. You don't know the A, B, C, D, E and F path to get to where you want to go. You just need a lot of resources to try to figure that out. That's kind of when you want to pursue that angel investor venture capital route so that you can have a long enough Runway to really figure out if this idea is going to work or not. And then you're not on the hook for a loan if the business idea doesn't work out. So any kind of business where it's going to take a long time, a lot of money, there's kind of that nebulous path to profitability that's kind of when you want to pursue, know angel investors. I'm an angel investor myself. I think it's a great idea for the right type of business. But I think a lot of times there are businesses that try to go the investor route when really they should go the loan route or the bootstrap route. So if you're thinking about raising capital, I'd really encourage you to think about, okay, how much capital do I actually need? What is the best source of that capital? Is it my savings account? My credit card? Probably not your credit card. Is it a loan from a bank? Is it finding an investor? If it is an investor, what's the right type of investor for me? So don't just automatically assume that one of these is the right solution for your business. Okay. The next question comes from John Small. And John asks, I have people asking me about taking the plunge and starting their own business. The biggest question they ask is, how do I know if I'm ready to start a business? So there are two criteria that come to mind when I think of the question, am I ready to start a business? First is, is the business idea something that I can't not do? Do I think about the idea every day and night? Do I dream about it? Can I not get it out of my mind? If there is a business idea where I say, yes, I have to do this, I would regret it years down the line if I don't do this. That's kind of the point when you're excited enough about an idea to kind of really pursue it and make a business out of it. So it has to be something you're very passionate about, something that you just would feel terrible. You would see it as a giant missed opportunity in your life if you didn't do it. That's the first criteria. Second, are you willing to work like crazy on the business? I just don't know anybody that has a million dollar year business that works five to ten hours a week on their idea. Everyone that I know that is extremely successful, they work 40, 50, 60 hours a week on their business idea exclusively. So if you want to start a business, it's just not going to happen in five to ten hours a week. If it's a side business, you really have to be committed to working 25 to 30 hours a week on your business idea in addition to your day job. So this means you're probably going to be working on it every night, all day, Saturday, Sunday afternoon and evening. It is just going to suck up a lot of time in your life and you just need to be prepared for that and be willing to do that. You, if that's the route you want to go, you can't successfully start a business by working on it on say a Saturday morning and a Tuesday night. It's not going to happen. You need to put in a lot of time into your business. So if you're not prepared to put that time in right now, maybe you should wait to start your idea until you are in a space where you can really devote some time to it. The other thing that I see that stops people from starting a business is that they think they need specific skills to start a business or they think they need to go back to school. Like you might think that you need to have some good accounting knowledge or marketing knowledge. Don't let these things stop you from starting a business. I knew maybe 20% of what I needed to know to start MarketBeat. When I started the company. There was a lot I didn't know and I just kind of learned on the fly. Like, oh, I need to figure out how to do recurring subscription payments. I went and learned how to do that. I didn't try to learn that ahead of time. So don't let kind of a skill level gap or knowledge gap prevent you from starting a business. Obviously you can't open a medical practice without a medical degree, but most of the types of businesses that are going to start, you probably don't go and get a bunch of education beforehand to start that business. Just go ahead and get started and learn on your way. Don't let a perceived lack of knowledge or skills stop you from starting that business. That is a good reason. That is not A good reason to not start a business. If you don't have the skills, you can go get those skills. That's totally fine to do. Next question comes from David. I can never pronounce David's last name. I think it's Sarah Yang, something like that. Sorry, David. He says, should you pursue a. A business that solves one of your problems, or should you pursue a business that solves someone else's problems? I've seen successful variations of both. Do you think one is better than the other? So I have started businesses both ways. There's pros and cons to each. So when you're solving your own problem, you kind of already have a good idea of what the market looks like and what maybe a good solution to that problem would be. But the challenge with that is, is sometimes when you think you already understand a market in detail, sometimes your focus tend to be a little bit myopic and you think that your solution is the answer. And then you don't end up going talking to anybody else in the market. And you could have a misperception about what your market's needs are. And because you think you already know the market, then you don't go talk to people, and then you end up building a solution that doesn't actually solve anybody's problems. So it's good that you know the market. You might know a solution, but it can be dangerous if you don't. If you think you know the market too well and don't end up talking to anybody when you're pursuing a market that's solving somebody else's problems, then you know, you have to go talk to a bunch of people and really hear them out and say, what are the problems in your market, your industry that I could solve? You can sometimes have a new, fresh solution that the market hasn't thought of before. You can take a more innovative approach when you're entering an industry from the outside. So there are pros and cons to each. I've done it both ways. MarketBeat was, you know, investing was not a market that I thoroughly understood when I got into it. Same for Goko Photo Contest. You know, I don't know anything. I didn't know anything about animal shelters when we started that business. My partners had a little bit more of an idea, but none of us had ever worked for or run an animal shelter. So it's really. You can do it both ways. I don't really think there is one way that is better than the other. I just think you have to ask yourself, objectively is this a good market? Whether or not I know a lot about it and if it's something I know about, am I excited about? If it's something that I don't know about, can I get excited about it? I think a big mistake that we can make is that we think somebody's going to be a great business, it'll make a lot of money, but we're not terribly excited about doing it. There's a guy named Patrick McKenzie. He's an entrepreneur, works at Stripe now, but he is well respected in our community of online entrepreneurs. Several years back, he started a business called Appointment Reminder. And when he was deciding whether or not to do that, his decision was based on, is this a good market? Am I going to make a lot of money? And he got some advice to not do that because he wasn't excited about it. And the person that gave him that advice said, you're going to be working on this five years from now and you're going to hate it because it's not a problem that you're passionate about. Then five years later came along and Patrick said at a conference I was at a couple years ago that the biggest piece of advice or the biggest piece of advice that I've ever ignored that was a mistake was that advice. He said that you really have to be some passionate about what you're going to do, or five years from now you're going to have a successful business and you're going to hate doing it because you just were never excited about the idea to begin with. So I do think regardless of whether or not you know the market or not, I think you do have to be excited about working on a problem for 30, 40, 50 hours a week. You can't say, this is a good market. I'm going to pursue it because down the line you're going to hate it and wish you were doing something else. So those are the questions today. If you would like to have your question answered on a future episode of Startup Q and A, just go to the domainstartupqa.co. there's a form there to submit questions. And if you would like to receive next week's episode of Startup Q and A delivered automatically to your computer or your smartphone, you can go to the domain startupqa.co and there are links to subscribe via Facebook, RSS, iTunes, YouTube and Stitcher. You can also connect with me on Facebook. My personal page is facebook.com MatthewPaulsen My business page with all the content I produce is facebook.com MatthewPaulsenpage you can also connect with me on Twitter. My user ID is MatthewDP. D as in dog, P as in pony. Feel free to connect with me there then. If you enjoyed the show, please take a moment, go to itunes, give this show a five star review and that will help us reach more people with the message of achieving financial freedom through the power of entrepreneurship. That would just help us grow this podcast faster, this show reach a bigger audience, and that will encourage me to keep on doing this thing. So that's it. Have a great week. I'll see you next Monday. Sam.