Hello and welcome to Ditching Hourly. I'm Jonathan Stark. Today I am rejoined by guest Jason Cohen. Jason, welcome back to the show.
So today folks, we're going to talk about Jason's new book, Hidden Multipliers. Both the content and perhaps even a little bit about the process because we've been talking to a few authors lately. But first, Jason, for folks who didn't hear your previous appearance or don't follow you on LinkedIn or whatever, could you tell them a little bit about who you are and what you do?
Yeah, sure. I'm known as a Smart Bear online because my previous company two companies ago was called Smart Bear and when I started my blog in 2007 because I'm old and that blogging was still cool, it was called Smart Bear. Anyway, I've built two unicorns over the past 25 years. That's Smart Bear and WP Engine. I've bootstrapped. I've raised hundreds of millions of dollars. I've invested in 60 startups. I've been writing about all this for 20 years. I just wrote a book, like you said, called Hidden Multipliers, which of course we can talk a little bit about, but I mean I'd like this to be just action-packed and I'm not trying to hold anything back or make people buy the book in order to learn something. So I hope people want to buy the book just because they want to hear more, not because of tricks. Actually, I also have a set of AI skills that I made to go along with the book that includes a lot of the stuff that's in the book and also other articles I've written and those are all free and open and you don't even have to put in an email address. And so that's at skills.asmartbear.com.
Hopefully this can be helpful. So, yeah, I'm looking forward to this because to me, bootstrapping, being solo, it's the dream. It's also feast and famine. It's hard to say no to a consulting gig, but it's also amazing if you can get to that point where you're making 10 or 20k a month more or less stably and really live the life. So, I just love that. I love that zone. I talk about it all the time, you know? It's mostly what I talk about online, too. I just love it. Yeah. I am a longtime subscriber to your list. You're one of the few people that is worth going to LinkedIn for these days. Just so much great stuff. And as I was saying before the show, for anybody that has a subscription style business where churn is something they need to think about. I mean, the stuff you've shared about that I have bookmarked and just refer back to it every time because it's very unintuitive to me for whatever reason. But it's just absolutely great stuff. So, folks, you're in for a treat. Let's start with the skills, the AI skills. We talked about AI last time you were on was a little over a year ago. Where are you at? First of all, how does that work? How does the skills thing work?
Yeah. So, I'm actually not a big AI maximalist, whatever. And so I don't think, for example, AI should tell you what to do or solve problems in your business. So what I found is that I could if I instructed the AI well enough, it could facilitate me finding answers better for myself because it could hold me sort of accountable to not give wishy-washy answers. It could walk me through some sort of workflow. Maybe it could do a little bit of light research like well you said there's no competitors but here's 10, you know, that sort of thing. And so of course the best facilitator is a human being of course. But when you're a solo founder, who exactly is going to do that facilitation for you for whether it's a strategic decision or a product decision or analyzing something or just someone being a devil's advocate perhaps in some form. And so if the answer is nobody, then perhaps skills crafted specifically to be facilitators, not answer givers, could that be better than nothing, even if it's not as good as a human? So that was my goal for every one of those skills actually is to hold you sort of accountable as it were and not give you answers. So some of those things are how should I price things? How should I position my product? How do I interview customers like in a structured way to learn stuff? How do I decide who my ideal customer is exactly? These are the kinds of things that are skills there. And again I wrote about it in the book but you don't have to buy the book to go enjoy that. And I'm also happy to talk about any of that stuff right now.
Anyway, well, let's dive into that. How to decide exactly who your customer is because that is something that is super difficult for people listening. And to me, it's one of the biggest kind of Achilles heels for anyone's business growth is not really knowing what to build or who to sell it to or it's just it seems people always want to fish in the ocean instead of picking a barrel of fish to service, right?
Yeah. I have a lot of thoughts on this. One big thing, one big branch in the decision process or in the framework process is do you already have a business with customers? And the question is how do I focus and grow the business from where it is or am I starting from scratch? Because I think those are pretty different how you approach it. So for example, if I already have a business, then I ask things like, well, who's your best customers? Like just think of your best three to five customers. And you could try to define that and have numbers and that's fine if you want to. In fact, I did this process at WP Engine called a profit well where we ranked all the customers by their individual profitability. This is when we had 7,000 customers. And just for perspective, now we have 200,000 customers. But anyway, at 7,000 we ranked them and it was really clear like, oh, there's these groups that are more profitable. Why is that? Of course, is a good question. Ones that are very unprofitable also, why is that? And then what should we do about that? And so you can be sort of objective and systematic about it. But I find if you just say wait just think of like your if I say who's your best couple of customers somebody already comes to mind. Good enough. What about them makes them a great customer? Do they love you and they never call? They don't need features or the features they ask for are features you want to do anyway so it's a perfect fit. Do they tell other people about you? Have they brought in other customers? Do they just pay a lot but they don't want a lot and that's why they're profitable and you know maybe in the top even just three and five customers there's probably not going to be something that's 100% true of them across all of them but like is there some kind of trend or pattern about them which are different from the people on the other end of the spectrum and this is key because if you just ask what is similar about my best customers you'll find things that are also similar to your not good customers because they're just what your customers are like and what you know what market is like. So it has to be what's similar among them and dissimilar to people who are on the other end of the spectrum. And again, this isn't an exact science. You see what I mean? If you can find some of these things, then those are some facets in a gemstone you can imagine cutting to say, 'Ah, this is my ideal customer.' So that's the kind of thing I would do with an existing company. But suppose you don't have three good customers, right? And so that's fine. What if I don't have that? What do I do? And there I think of course you need to find a market that's healthy and growing and this and that and I have a lot of thoughts about what makes a good market also but I actually think it's better to start with yourself and start with what are my strengths and weaknesses. What are my capabilities and assets? What do I have already? What do I love and what gives me energy even if I have to learn it but I love doing that so I can do it all day and even during the hard times I can push through it and so on. What are those things? And what I want is a company, especially if I'm a solo founder, but even at WP Engine, it was like this for me. What kind of strategy or product or market could I build and serve where the strengths I already have are what's needed to win? And the weaknesses I have are irrelevant or at least not deal breakers. Sometimes weaknesses can be by the right things you see as weaknesses and maybe they are in certain contexts. Your perfect customer or your perfect market actually sees them as strengths. That's when you start seeing like, 'Wow, that's the strategy I should adopt.' I'll give you an example because that's so generic and doesn't sound right. Let's say I buy so I love things like pouches and slings and backpacks and stuff like that. It's just like a personal thing I like. So I like to buy pouches and sometimes I buy stuff from people on Etsy and I'll get a pouch from someone on Etsy and oh look this seam is kind of weird and there's a thread coming off here and etc. Right? It's not perfect because it was handmade. Now, you could say that's a weakness. Here's a product that has some quality issues, one might say in the sewing department. So it's a weakness, but is it? I bought a handmade product from somebody? Of course, it has a thread coming out. I would expect that. It just shows it demonstrates that I bought a handmade product. So, I like that. It's not a weakness. It's an indication of the thing I wanted, which is that it's handmade. Also, it's kind of too expensive, right? You say, 'Well, here's this little pouch with a simple zipper and it cost you $30 and shipping and handling.' So, is that a weakness that it's more expensive than you'd expect for what you get? No, because again, I'm supporting some crafts person, some artist. That's what I wanted to do. So, that high price is not a weakness. In fact, it's part of what I wanted all along, which is to support somebody else. So there's a very specific thing that happens every single day, right, on Etsy where things that in other contexts would be weaknesses are in fact either strengths or at least they're not weaknesses or they're indications of kind of what I wanted. So this is what I mean when I say like okay a product that leans into your strengths like maybe someone who likes to sew, right? Likes haberdashery then that would lean into that and the weaknesses aren't considered that if you're selling to the right person. So if I'm starting from nothing then I want to start from myself and ask well what am I who am I what are these strengths and weaknesses and stuff or at least I should say the contexts in which these natural things of mine are strengths and the context in which they are weaknesses so I can decide about a product market strategy etc where to win in that way actually leans into who I am. I'll be more naturally a winner. Even if there's competitors who compete the same way as I do, I'll actually naturally be better than them because it fits me. So, I'll either be better than them or it'll cost them 10 times as much or take 10 times longer because it's not natural for them or something. I'll have advantages. In other words, even though I'm by myself. So, it's a natural way to get an advantage. Now, of course, the problem here is you say, 'Oh, yeah. So, I built the thing I like. But I didn't bother finding out if anyone else wanted to buy it.' That's the okay. So obviously it can't only be what I like. Obviously and this is where strategy in general becomes difficult because strategy which is and by that I just mean the major decisions that you make that sort of guide what it is you're doing and not doing and why. Strategy has to take all this into account. It has to take in account what can you do? It has to take account what's the competitors doing. What do customers actually want to buy? What's happening in the industry or the economy at large? It has to take all that into consideration. Of course because it involves all that stuff, right? Well, it's hard to how do you take all these inputs and sort of mash them up and have something like that's it's going to naturally be messy and difficult. So, it is difficult to do that. Like it's fundamentally difficult to build a strategy. Nevertheless, I think starting with yourself and then asking and then what markets actually exist that might fit with that is a nice way to proceed if you don't have anything yet.
Yes, exactly. It gives you some constraints so you can kind of start to narrow things down. And what just to give folks an example from the service space, professional services space, one that I always used as a or I presented it in a way that it was a strength was that I was a soloist. And if companies were like asking me questions like, 'Oh, well, what happens if you get hit by a bus?' Or, 'We're really looking for someone who has a deeper bench. Could you bring on some contractors?' Or, you know, 'Are you thinking about hiring?' I'd just be like, 'No, that's not a good fit for me. I don't want to have employees because I don't want to manage anyone.' So I would be looking for companies who or potential clients who did want to work directly with the consultant who was essentially the whole business. So they weren't getting handed off to junior employees who are learning on the company's dime or someone who could be extraordinarily responsive and they didn't have you know people who were annoyed by going through the telephone game with an account manager and then to the project manager and then to me you know so for clients who were sick of these sort of communication layers and just wanted to talk directly to the person they really wanted to hire anyway I would just present it as a strength it's like Hey, if you want McKinsey, go hire McKinsey. But if you want someone who will give you a quick like a great answer in 15 minutes, you just pick up the phone and boom, there's your answer. Then I'm your guy. So, I just wanted to come up with an example for folks who are doing services and not products. But, you know, the Etsy example is perfect.
Yeah. And I always like the analogy of the boutique. When you go to a boutique, it's not open 24/7 because it's only when the artisan is there. And then it's amazing and special and unique and all this stuff, but it's not scaled. It's not 24/7. It's not, you know, they only make certain things, you know, and so a boutique, I think, is small and individual, but in the best possible way. So that doesn't mean you have to call yourself a boutique literally, but to me it's a nice maybe mindset of like well if it were like that what would be the advantages and disadvantages like you said like who would say well I don't want that like right well I'm not for everyone of course.
Yeah. Right. Right. So what let's say let's say someone listening is well aware of their strengths weaknesses you know and I really like your point about what context. So, let's but let's just call them strengths and weaknesses. What's unique about them, maybe is another way to put it. What I usually talk about like things that you're amazingly good at. You might not even like them, but you're just a natural at certain things. Other things that you just love doing and hopefully there's some overlap between the things you're amazing at and the things you love doing. And then there's, you know, the sort of third circle in the Venn diagram is like the market like someone who cares about the overlap or someone who can have value created for them using the overlap of your superpowers and your passions. So where would someone start solo software tech consultant? Where would someone even like if I talked to people, they didn't even really know what I mean when I say a market. So where would they start looking? You said earlier like what makes a good market. So how would they even recognize one if they knew what they were looking for?
So there's a book Crossing the Chasm which was a bestseller. I think most people who talk about the chasm have read a blog post about it and think they know what's in the book and often get it wrong. Book is pretty good. It's like 30 or 40 years old and I read it just a few years reread it just a few years ago and it was amazingly still relevant. So I recommend that as an interesting way to see to answer questions like what is a market because in there Geoffrey Moore defines a market as a group of people who buy a certain solution for a certain problem and I think what the way he says it is they speak to each other but meaning if one of them said it worked for them the next one would actually take that as evidence that it would work for them too. And this is a critical difference that helps sort of put the barriers up of what it is. So in other words, if a freelancer says this was great for doing my bookkeeping, Google will not then think good, we should use that for our bookkeeping, too. Because they need different things, right? And vice versa. And so they're not in the same market even though they both need bookkeeping. So the fact that it's bookkeeping, that's describing what it does or maybe the problem it solves, something like that. The utility of it. That's not the only part of the market. But people tend to say things like big company, small company, and that's not true in my experience. In the case of bookkeeping, it is, but not just because of the number of employees, but because Google actually needs something different. So, for example, at WP Engine, we are the largest managed WordPress hosting provider, which means we host websites built in WordPress, and we have 200,000 customers, blah blah blah blah. Now we have lots of customers who are individual people whether it's for a business or personal we also have small business medium-sized business and enterprises like Google but they don't use it for the same thing. Google doesn't use us for google.com obviously but mid-size companies do use us for their homepage. So the product is this managed WordPress. It's making your website your WordPress website fast, scalable, secure and have great service and there are people who need that. Google needs it for different things than a mid-size company needs it for. So if you were just to say Google's big, midsize is mid and therefore Google isn't in the market and the other person is, you'd be wrong. The market is people who need their WordPress site to be fast, scalable, secure, have good service, and they're willing to pay for more than usual for that to have that be the best for people that have that mentality. And then there's all these different reasons why someone might have that mentality. And that is the market. Another thing I would just note about the market definition is you have competitors which means other people who solve that same problem like managed WordPress hosting in largely the same way. Those are competitors but then you have what's called alternatives and often those are the more interesting ones. Sometimes it's even the bigger part of the market is the alternatives. Alternatives means the problem is still solved or addressed but not in the way that you and your competitor solve it. For example, you could say, 'Well, WordPress, what we do, we make sure you have a good website.' Okay, but Shopify makes sure you have a good e-commerce website. Is Shopify a direct competitor with us? Well, no. Shopify is not on WordPress. We are. So, they're not a managed WordPress provider, but they are an alternative for someone that wants e-commerce because they could use WordPress and they could use Shopify. And PS, in the real world, there's about half and half. How many sites use Shopify? How many is WordPress? So, that's a very very real example of an alternative to solving that problem. So, are they in the same market? Well, if you define the market as WordPress providers, no. And if you define the market as people who have e-commerce websites, then yes. So, that's a little tricky, right? Like, but at least we're putting names and words around the stuff when we say market. So having said all that of course it's people who want to buy your stuff and like we're sort of drawing a circle around what do we mean by that precisely when I think of like what is a good or bad market what I'm thinking is everything in business is hard and almost all of it is like working against you and high risk you know can you make the product or can you deliver the service can you find people to buy it if you ran an ad would they click it if they went to the homepage would they go to the pricing page is the pricing Okay, what about the competitors? But AI's coming to change it, but some countries are doing better than others. I mean, oh my god, right? Like there's so that's not even all the things coming for you. Like most of your answers to these things aren't good. Also, you don't have enough money. Also, you have no brand to rely on. Also, you know, it's just so bad everywhere. So, to me, it's like, all right, this is pretty rough. No wonder most companies fail. Like, there's just too many ways to fail, right? Yeah. So that some of this stuff isn't so damn risky or some of it has at least a decent answer from day one because we got enough to contend with. So part of that could be what I said earlier like can we lean into your strengths and stuff because like if you also have to do something that you're not good at oh my god you've just thrown another risk on the pile really you know don't do that right okay so maybe we've de-risked you a little so when I think of a good market quote unquote I'm thinking what is it about the market that's like taking some of this risk off the table so for example what are people buying more and more of and we all know the answer right now is AI stuff but there's other answers too okay so being in there already. At least you know people are buying whereas there's other markets where that's not true. Budgets are shrinking, people aren't doing it. So you could go there. And hey, maybe you'll have less competition because it's a bad market that's shrinking and budgets are shrinking. So with less competition, that may not be the worst idea. So for example, you might be a consultant writing code in a language that's on the downturn because all the new kids won't write code in that language and you will and so you can get work. So there's a good reason to do that. So there's no absolutes here, but okay, you're working into a hard market and so that's a risk. So there better be other good news to offset that risk. But in general, a market where there's already budget, people are already paying and that's growing over time and everybody knows that that's good. Now yes, there will be a lot of competition. But as I like to say, it's easy. Like even if you're at the beach and there's an ice cream stand, if you open another ice cream stand, that's probably still a good business even though there's another ice cream stand. Whereas if you open an ice cream stand where you know people don't want ice cream then like that's not necessarily a good idea. So it is a crowded but healthy market is still probably better because you can find a niche or just find anything rather than a small shrinking market. But even having said all that there's always except you know you can always say well look but here's a tiny market. Let's say I'm in a country that only has 5 million people and you know and we're not doing well economically and all this. So you could say that's a bad market. It could be, but you might be like the best consultant for a certain type of thing in that whole country. That's actually possible. Well, that could be good. Now, if you're trying to scale a big company, then okay, I guess that's not good enough because you also need the market to be large in that case. But for solo folks, you don't need to do that. So, who cares? Like, the size of the market's actually not relevant. Notice I didn't say big other than that it's healthy and growing and all this kind of stuff. That's good. But hey, if it's limited, but you have these other advantages where you can run all over it. That sounds pretty good to me because again, I'm just thinking about all the risks, all the challenges. Can you knock some of these down a little? You won't have no risks, right? But can you knock some of them down? And the market's a good place to do that.
So, you mentioned a bunch of things that I want to loop back to, maybe tie together. So, one was you know, who is the group of people who buy what we do? And then you kind of like said, well, what exactly is it that we do? Like, you know, using WP Engine as an example, you could sort of see it at least two different ways that you described. And you also were talking about, you know, that you guys have the capability to sell to a Google and a mom and pop, someone who's just got a hobby website. How different are the problems that you're solving for Google versus mom and pop, if at all? And how different does the product need to be to accommodate those two? Like do you have tiers that accommodate different levels of or different categories of customer or are you only you know for example with Google it's like yes Google is a customer but it's basically small work groups and their intranets and that's what they're using it for. You know what I mean? So for someone who doesn't have whatever however many employees you have and it's just them or a small team they probably in my opinion it would be adding risk to the pile for them to try to serve lots of different markets with lots of or even lots like three five different types of buyers in a way that is different for each one of them. That makes me nervous. That would sound risky to me.
We don't ser That's the whole point is if we were to define the market as big company or something then we would miss out on what it really is. What it really is is a person that wants a WordPress site that's fast, scalable. You know these things I already said, right? And so there are different kinds of people for different reasons who want that same product. So the product is the same and the market's the same in the sense that they would look at each other and say that's you know if it's good for them then it's good for me. So it sometimes it is relevant to the size of the company. For example, if it's something like accounting or HR software. Yes, in that case the size of the company actually does matter but only because companies of different sizes need different things from that software. There's no such thing as I'm just going to do HR in the corner at Google. That's not how HR works. So in that case, yes, it's correlated to the size of the company, but again, only because we're going back to who is the human beings wanting it and why and how do they buy and what do they need from it? And in that case, it's correlated with company size. Okay, fine. In our case, it's not. In our case, the thing that's needed, there may be different reasons for that. It's because it's an e-commerce site, so it needs to be fast and stay up so that they can sell well because the faster the site is the more transactions you get, which by the way, lots of people there's lots of data that show that that is true. Or it's a media site and again like the faster they are, the higher they get ranked in Google and the more people click around and that means more ads and that means more revenue. So faster, better site for media equals more revenue. So does that matter whether you're a small or a large media company? No. They both have that characteristic. In fact, a lot of times the companies that use us for a web page actually get less traffic than our smaller companies in terms of like number of people because we'll have like some news site run by four people that gets a huge number of hits and then there's some large company and like nobody cares about their website so they don't get that many hits, right? So again, we're back to like it's not the size of the company. It's not even necessarily the number of hits. Although maybe that starts to become correlated. It's whether they care about the site being blah blah blah. That's why I keep coming back to that because that's how I define it. A person who cares about the following things so much so that they will pay more for it. That's what we do. And there's all these different ways in which that could happen. In our case, that's not very well correlated with things like number of employees or revenue. And maybe very lightly correlated because someone with no traffic and one person isn't going to give us 20 grand a month, right? So, okay. Yes, there's this very slight correlation. Fine. But you see what I mean? I'm giving examples of how that's not the major axis. That's not the major way that you figure it out. So, there's some tools where it could be some not. And the answer is what is actually the characteristics that this person cares about that you're serving? And what is that? That's who you are. And you're right, you should not have five of those. You should have one of those. And then there might be different reasons why a person is in that scenario or different use cases where this is the right tool for them.
Mhm. I get a little bit nervous when because I hear a version of this from people. There are probably people listening who think, 'Oh, I tried that and it doesn't work' because they think, oh, I'm going to I'm a Laravel expert and anybody that needs a Laravel expert, they can hire me. And to me, that is not differentiated enough. Of course, it's not differentiated at all. Well, it's Laravel and not raw PHP, I guess, or Rails or something, but differentiate means different from other people who do the same thing. And if there's two Laravel developers and they both say only I'm a Laravel developer, then they're undifferentiated. That list of qualities that are you could almost call them values. It's like the promise that WP Engine makes, you know, fast, scalable, secure. What would that look like, do you think? Or can you imagine not to put you on the spot, but can you imagine like what a Laravel developer or consultant? Okay.
