Hidden Multipliers: The New Book for Every WordPress Business Owner

Thank you.

Well, I mean, we're still the most expensive, at least at the time that you're talking about, we were still the most expensive managed WordPress host. So, we still were the more expensive option. Yeah. So, it's a good example of, of course, not all business advice applies to everybody at all times, obviously. And the way I always put this is you can imagine a two by two, which always also makes me laugh because I make fun of two by twos that consultants use. And but you can imagine it where the columns are took business advice, did the opposite of the same advice. Those are the two columns and then the rows are company succeeded and company failed. And I can always find lots of examples in every box. So that means advice has to be tuned to this context. It has to, the question is what else is going on at the company and so forth and maybe it doesn't even matter. Maybe half of the advice literally doesn't matter. You could have done either one and it would have been fine and it wasn't one of the important things. So that's true of all advice, including all of mine. But pricing probably is along the more important lines. And it's easy to see why because if you multiplied your price by 100, that probably would fail. And so that tells you price must be somewhat important. I think the critical thing is to ask, well the way I look at it is that there's kind of three main pricing strategies when it comes to the price and how much value you would deliver. And so I have an article about this called more or less and then I just play on these words which makes it very confusing to listen to probably. And this is also a version of this is in the book but also I have space to connect it to more ideas in the book but you can just read the article online too and not buy the book. And the idea is the three things are what I call more for more, which is I'm getting the very best and it costs me a lot. So I'm getting more and I'm paying more, more for more. The opposite of that is less for less which is the lowest end of the market. This is the cheapest thing I can buy. It's very cheap though. Of course, I don't expect it to be high quality. It might melt. If this is something like a hoodie, then it'll probably get destroyed by the end of the season just by normal use and washing, right? But it was $5 for a whole hoodie. Isn't that amazing? And so that's less for less. That makes sense. And then the third one is more for less, which is the idea is that it's high ROI. It's not super premium. But there's trade-offs. Like it'll have some great features or some quality but then other things less so. But look at the price. It's pretty reasonable. And in terms of the number of human beings on Earth, most things that are bought are on the less for less of course because most people don't have any money. And so it's better to have something than nothing. And so less for less works. This is also true in WordPress. Most WordPress stuff is super cheap, arguably too cheap. Certainly cheaper than it is in most other aspects of software and even CMS's in the world. Most WordPress stuff is less for less.

No, no, no. It's not WordPress specific except that the examples with WP Engine is of course in that area because that's what WP Engine is. But none of the other examples are from WordPress. WordPress is though, it's the most popular CMS by far which means definitionally it's used by people that don't have money. Now it's also used by enterprise. It's also really used by everybody but most people aren't enterprise. There's only a few of them relative to the number of people that have websites. So, since WordPress is the most popular CMS on earth by a long mile, almost definitionally, it has to be used mostly by people who don't have any money. And so things need to be free or cheap. And so in the WordPress space, that's what you see. Things are lifetime deals, things are super cheap, things aren't recurring in general. And then even the successes where let's say people are able to sustain in the business for 10 years or more or you might define success as making more money. Either way, however you want to define success of course is perfectly fine. In fact it's good to select which kind because then you can match your other actions to that. It's still really hard in any of those cases to succeed with less for less. Less for less, while a lot of the WordPress market in terms of the buyers want that, it's really hard. Even if you're a solo bootstrap founder, that's really hard because you're just not getting any money. Like it takes a lot of effort to get one client, one customer, and keep them, but they're not giving you very much money. So that's very hard. Typically, the less for less strategy, which can be very smart, by the way, that generally works with companies that reach enormous scale often but not always raising money in order to get to that scale because it's only when costs can be distributed among a large number of customers and other kinds of bulk things happen that that business model makes any sense. So you see things like Vanguard Funds or IKEA furniture or Southwest Airlines. These are all things where it is less for less and it works really well, very successful. Even stuff like Cloudflare, but these are all things where either it took a lot of funding because you have to fund your way to scale or other reasons why that was possible and so none of those are mechanics that are common with small bootstrap companies. So I think it's possible but a bad strategy for a small solo company which is what most of the WordPress companies are as well. So you have this problem where less for less is kind of what most of the WordPress market wants. And when I say most, I mean by the number of buyers. And yet that's a bad business model for small companies because there's no money to work with. And you're not at scale where those kinds of scale effects can come in. So people select it and have a difficult time even giving up a day job or giving up consulting work. In WordPress, this is largely the problem. So I think that in WordPress more for less is better. Even more for more could be okay because although N is smaller as a small bootstrap company, you don't need N to be big. That's not one of the things you need. And so the higher the price, the fewer customers you need to make it a business that's whatever again whatever your goal is. That could simply be that you don't have a day job but you're making the same money as you did at a day job. That could be a very reasonable goal. You still want to be able to get there with let's say 50 customers paying a reasonable amount of money, maybe a hundred customers paying a reasonable amount of money. That's a plausible path. Whereas thousands and thousands of customers giving you small amounts of money, it's unclear how to make that work. And usually it doesn't work. Fortunately WordPress is so large that there are niches everywhere. Everywhere there's a niche everywhere you want to look in WordPress. Isn't that great? And so you can do that. And so that's what WP Engine did from the beginning is we were the more for more. We're the most expensive thing and also the best. Most expensive but the fastest host, most expensive but with the most scale, most expensive but the most secure, most expensive but really good tech support and all those things are things that do cost money to do. So it's logical that that would cost money. Now of course that meant most people didn't want to be customers. I know that's part of the more for more strategy is oh if it's the best it costs more because it's the best but on the other hand you'll have fewer customers in N, that's right. And so that's what we were doing. Now having said all of that, to your point, the advice we got from Erica Douglas who herself had a successful hosting company and sold it and she was on to her next thing and she was helping us out with pricing and I as you say I tell that story in the book but I'm telling it now too and she said you lower your prices a little bit because yes, you're more for more, but man, it's way more and you would do better. Not lowering prices of higher tiers. Keep those, but the lowest price doesn't allow someone to be introduced to the company and you might want to do something about that. Now, even so, we didn't just take her advice simply because she had it. But what we did do is say, hm, well, she's smart, she's been successful, we should look into this. You know, that's what you do with a good new theory. You don't just assume one piece of feedback is correct, but you can say, hm, that's an interesting theory. Let's go try to gather information that would confirm or deny or otherwise tell us about it. So, we did. We went and talked to customers. And so, there was this story we kept hearing which told us that she was right, but also helped us to understand, well, what, why, and for whom, and what's the right price? Because those are good follow-on questions that you'd need to know. And so what we kept hearing from agencies, especially individual freelancers, is they'd say, 'Listen, currently my clients are on GoDaddy or Blue Host or one of these kind of places and they're paying something like two bucks a month for hosting.' Now, I meaning the freelancer, I can convince my clients to pay more for hosting. They understand that, or at least they understand when I tell them that their site will get ranked higher in Google if it's faster and people will stay on the site and more likely to do whatever is on there, you know, convert or something if the site's faster, they'll believe me and they're willing to spend more than $2 a month. But trying to get them all the way up to $50 a month, which was our minimum plan at the time, they're like, 'That's too far. That's like 10x, 20x what they're paying. I can't get them that far up in one leap. I need something more like 5x, you know, to 7x something in there. I can get them to do something like $20, $30 a month. I can't get them to 50 in one leap.' So, it was this kind of story that we kept hearing that told us what is the point of this lower plan price and why? And so, we did do that when we made the lowest plan $29. So, still on the high end of that kind of advice. And there were other things we did that wasn't the only thing, but certainly that was one of the things that helped a lot.

And so what I would say is I have been able to invalidate as well as validate ideas before I've built it by interviewing customers with the method that is in the book, but I also have an article on it. And I also have AI skills that help you run this process of customer interviews. And those are free. So those are at skills.asmartbear.com. You don't even have to put in your email address to get it. You can just go get it through GitHub and everything. So without going into too much detail because you could again go get it yourself and see the detail there with examples and everything, I have a specific way that I interview customers and again it's a set, you come up with these theories of what you think are true and then questions that would validate or invalidate it but don't lead the witness and through that you actually find out what the truth is and that is a common theme I think you're right in everything that I do and whether it's AB testing where I think you should have a theory and then test it rather than throwing random things on the wall or customer interviews before or after and after you have a product because I agree that's not the same thing. Or even about your whole company strategy. I mean when you decide I think people will want this product. I think who it is that will want the product. I think this is why they'll buy me over a competitor. I think the price should be this. These are all theories actually that the market will validate or invalidate or there might be other ways for you to test that other than doing it. But ultimately you test it by doing it of course. Even then though it's not an experiment when you launch the whole thing. You've made all these decisions and they're not being tested in isolation, right? Every variable is happening at the same time. Every knob is being turned at the same time. So you're not really testing one theory that way. Nevertheless, it's life. That's all you can do. But I do think of it that way. Because then when you try to analyze what's happening or what should I try differently or even what should I ask people about if you have that mentality of oh I guess I'm making all these assumptions if I wrote them down it might be easier for me to say which ones I'm more confident in than others which I have more evidence about than others. What might I want to ask to change that? In other words, it gives you a place to analyze, a basis if not a framework for deciding what can I do to try to improve the set of theories that I have as opposed to just saying I'm doing everything it's not really working now I don't really know why. So it's not like writing all that down will just solve it but at least it gives you a basis for wondering about it. Another thing that happens when you write down all these theories is you realize well I guess all this stuff had better be self-consistent. Like if I say this is the best software that there is and also it's $5 a month. That's inconsistent. It doesn't make any sense. The best software that there is doesn't cost only $5 a month. So that has to be the wrong strategy. Even though I don't know what the market is, I don't know what customers want. I don't know what the competition is like. I don't know how good your product is. Even though I don't know any of that stuff, I already know your strategy is wrong just because it's self inconsistent. You would at least want it to be self-consistent. And then you still need to run into like, but can you, is your product delivering on it? Did the customer have the pain? Do they agree that that's the right price? Can you get to them efficiently? I mean, there's still a million questions, but at least it's plausible because it's self-consistent. I remember one time I was in high school and I was in math team and we were doing proofs and so there was some proof and I worked on it a long time and I had a whole page which you know for a real mathematician one page is not a long proof but for me in high school it is. So anyway I had a whole page and I showed it to someone who was essentially the best person in the club for this and he looks at it for like two seconds and he's just like this is wrong. Like how can you tell in two seconds this whole thing is wrong? And he says, 'Well, this thing in the middle, you say if this then that and that conclusion you have isn't right, so this can't be right.' In other words, the proof is self inconsistent. So there's no way it's right. Even if you don't even have to look at the rest of the reasoning, it's already just wrong. And so I think with a lot of strategies, if you actually write down the strategy that you're actually doing, the assumptions you're making, the things you're stating, the implications that has, you know, the consequences of that. That's what I mean by the strategy, these decisions and assumptions. You can realize right off the bat, this already doesn't quite make sense. I think I might need to change my decisions just to be self-consistent. So the podcast that I run where a couple of founders sit in a virtual room with a founder and work on a puzzle for two hours. That's what the podcast is. Often this is what arises. It's like oh but these things just don't make any sense together. Maybe we should make a different choice. In the case of pricing and pricing too low, in WordPress, again, we often price too low, but then we claim that it's for somebody that was getting a whole lot more value out of it. That's a common reason why in WordPress, we're constantly saying raise your prices, because in WordPress, we're typically pricing too low.

Yes, if you're doing a particularly good job you can just about, it's the totality, it's the totality that has to make sense. Can I think of products that are powerful and complex? Yes, that's easy. Photoshop. There, I did it. The Linux kernel. Whoa. Very powerful. Very complex. Okay. So, yes, that exists. Can I think of products that are not powerful and simple? Yes. Here I found one. A pen. Oh, okay. So, sure. But can I think of one that's powerful and simple? Yes. But other things also are true. So for example, my iPhone 17 Pro is very powerful and the camera is insane. I'm using it right now because the camera is the best camera that I have and I would probably have to spend thousands and thousands of dollars for a camera that's better than the one in the Pro. But what did I do? I literally set it over here on a mount, plugged it into my computer, which is technically not even required. It could use Wi-Fi. It just this is probably more stable to plug in a cable. If I literally plug in a cable and I now have like the best camera I've ever owned by a mile, that is powerful and very simple. So, yes, it can. But other things have to be true, like you said. Well, there's this amazing engineering and the software such and there's other negative consequences like I don't have that much control over what it does. Now, maybe I can install an app that gives me more control, but now it's more complex. Or maybe I do need a whole camera. Okay, now it's even more complex. So, I am giving up some trade-offs in exchange for it to be powerful and yet simple. Like, it's very expensive. Okay? It's not that flexible. Okay? Right? Like, so yes, those two good things, those are good, all else being equal, but also things that some people would consider bad. And so, it's that totality of all those choices and consequences, some people like and some people don't like, that makes sense. And so you can totally have simple and powerful on your website. You can even charge a lot. Like my iPhone is very expensive. So you can also charge a lot for that. But there's other consequences that people will have to be okay with. And the people who say, 'Well, I love those benefits and I don't care about those consequences.' Those are your ideal customers. That's what an ideal customer is. The one who sees your trade-offs and go, 'Oh, that's exactly the trade-offs I want. I don't even think of it as a trade-off because I didn't want it anyways. Perfect.' That's your ideal customer. And then your target audience is the ones where it's not a dealbreaker. It may not be the perfect customer, but okay, it's close. Like they mostly like your trade-offs. Okay, a few other ones they wish it were otherwise, but all right, that's your target market. And so that to me that's literally how I define things like your perfect customer, your target market is on the basis of all these strategic choices you've made. And then what does that mean? This is again why I think you write it all down. Again, in the book, I have more chapters about finding your ideal customer so that you can make this consistent strategy in the end. Right.

So I do link those. Of course you don't have to link the best customer to the most profit. You don't have to. Here's a very human appeal to why that's kind of true rather than the sort of red-blooded capitalistic reason why that sounds good. A customer who's succeeding doesn't have to talk to tech support all the time, but a customer who's failing does have to talk to customer support all the time. In that sense, a customer who's succeeding will be more profitable than the other one. A customer who is using the product as you intended it will just have normal usage. But a person who's abusing, and abuse is a really negative word. So I don't really mean it negatively. They might just be doing the best they can or they might be ignorant for how it's supposed to be used. That's okay, right? I mean that happens. But a person who's using it in a way that's not intended might be incurring a ton more costs because that's not how you expected people to use it. Therefore that's not how you priced it, etc. So, in other words, what really matters is is the customer being successful with you and therefore they're happy and therefore they're going to stay forever and even pay you more money over time because they're getting so much value because they're enjoying it so much for those reasons because they're getting value and they're enjoying it. Those are good reasons. That is a profitable customer actually. Okay, you can probably invent cases where it's not. Okay, you're right that again I admit it doesn't have to be a perfect correlation, but that's why it's often a correlation anyway. And of course, it is important that you make a profit off of customers. Of course, you don't need a usurious profit off of customers, right? But that is how you get the money in which you live. So, especially when I talk about the perfect or ideal customer, of course, you'd throw in that they're profitable, that they're ideal. Isn't that what that word gets to mean? It means the best in all possible ways. That's one of the ways. Now, a bad way to be profitable is if you're forcing them to do something they don't want to. You're way overcharging them for the value that they're getting. There's all kinds of ways that you could be profitable in a bad way. Of course, that's not what I am proposing. And in fact, elsewhere in the book, I have different ways that you might charge that you might cause people to pay you. And I specifically talk about ways that generate love, ways that generate utility. Both of those are good. And ways that come through coercion, which I argue is bad, and I argue why it's bad, too. So, I explicitly argue why some of these are better than other ways, even though they're all in fact ways that companies use in the world. And so when it's for the right reasons, which again I define in the book, I define what the right reasons are that they're profitable, then it's a good thing. And again, we're back to the ideal customer. And again, most customers that you have are not ideal. It's useful to say what ideal is because it defines the center of your bullseye. So, you know, here's what advertising I'm targeting. Here's what my homepage is saying and speaking to. Here's how I'm positioning my product. Here's how I'll know which features I should put in. I should put in the ones that my ideal customers want. So, it's useful as a focusing agent. But the fact is the majority of your customers just by N won't tick every box of the perfect customer. They'll tick most of them. And again, they're making trade-offs, too. So, that's okay. But it gives you a focus of what you're aiming for.

Yeah. So this is a thing called the profit whale, a term from decades ago, but I've never seen it in a software context. But this is a very common phenomenon in all companies and industries. I very briefly in the book give the examples in insurance, in grocery stores, in consumer package goods, and then as well as in software. So it's just this common thing that happens in business. When something's that universal, it's not a law of course, nothing's a law, but it's probably a phenomenon that is likely to apply to you. And so if there's lessons to be learned that could be useful. Now once again, you don't have to buy the book to get this. I have a YouTube video on the profit whale and so you can just watch it. So isn't that great? So you can do that too. But the idea is that you compute the gross profit of each customer, which means how much money that customer gives you per month minus what they directly cost you in things like tech support, server usage, even things like banking fees because it's 3% per month with their credit card or whatever. Obviously that's not going to be the majority of it, but whatever. That's what gross profit means. So you line them up by that in dollars and then you add them up. It's a cumulative sum of that. And so what happens is since you have your most profitable customers first, the curve begins by shooting up as all these profitable customers are accumulated. So that's the head. Then the slope starts bending out as you get to customers that are less and less profitable. And again, this is not necessarily a problem. It's just a fact. That's useful for analysis. It doesn't mean you should rush out and do any given thing yet. Then at the end, you get to customers who cost more than they give you money. And so the cumulative sum starts falling because you're adding negative numbers here until you arrive at your actual gross profit definitionally, which is to sum it all up. But you see how that distributes out in your customers. And it's always this shape of like this big head and this weird back and then this falling tail. The exact proportions of course can change a little, but it's always that shape. And that tells you exactly what you said. Well, the obvious thing to do is, gee, we want to get more of those customers from the head, whatever they're like. And oh man, we got to get rid of these tail customers and stop signing them up because they're destroying our profitability. So that's the obvious conclusions. But what isn't obvious necessarily or what's useful is I give all these specific ways to do that, like what should I exactly do? So a lot of the book, the subsequent chapters in the book are about finding and defining and identifying who's in that head that I should focus on. But maybe one of the interesting insights that's not obvious is you can afford to spend like 10 or 20 times as much money to acquire one of those because they're like 10 or 20 times more profitable. Often they also stay longer too. So that's not as obvious that you can afford to do that. But you can't risk it without knowing exactly what they're like, right? Like you can't risk that kind of cost unless you understand what they're like. So therefore understanding that their life's important. The general idea there is not just to ask in what way are those customers similar, but also in what way are they similar and different from the tail customers? Because often there's a lot that the tail and the head also have in common because they're just what your customers are like. They're just what this industry is like. It's just what people who use this kind of product are like. And so it needs to be the difference between what's common in the head and what's common in the tail. And by common again, there's no 100% here. So these are patterns. So it's a little amorphous. And I agree. But this is the idea that you're trying to get to.

Okay. So besides go get more of the head. Okay. You know, identify what that's like and then get more of them. Okay. Easier said than done, but all right, fine. Good idea. In the tail, the temptation is to say, well, I should just fire all these customers because they're unprofitable. And of course you could. And that is one of the things you can do and sometimes should do, but it's the move of last resort. And in both that YouTube video and in the book, I give many other things you should do first or things you should consider, I should say, first before using the last resort, which is to fire the customers. For example, the first thing you should ask is, is this my fault? Like they're really unprofitable, but maybe it's my fault. So for example at WP Engine because the example in the book is literally the data from WP Engine of 7,000 customers from 2014 when I ran this exact thing and we did all this. This is not theoretical. This is my actual data and what we actually did. So and we were losing a million dollars a year at the time and we could say why because we had the chart and then we went and addressed it. Anyways this is not theoretical. This is a case study.

No, no, no, no, no, no, no. We had 7,000 customers. No, we had 7,000 customers and the bottom like 150 of them were losing us a million dollars a year.