It's a big decision to make your first hire, because what you're really deciding is whether you want to keep a lifestyle business or attempt to cross the chasm and maybe even get rich.

There's already a lot of great advice about hiring at little startups. Before I give you mine, here are some of my favorite articles, in no particular order:

• Smart, and gets things done by Joel Spolsky — The classic guide to what to do during the interview and how to know whether to "hire" or "not hire."
• Why startups should ALWAYS compromise when hiring by Dharmesh Shah — There are many attributes you'd like to see in a hire, but compromise is necessary; here's how to do it.
• Five quick pointers on startup hiring and Disagreeing with Entrepreneur Magazine by Dharmesh Shah — Assorted tips, all important.
• Hazards of hiring by Eric Sink — Great tips, including some specific to hiring developers (for more on the latter, here's another).
• Date before getting married Part 1 and Part 2 by Dharmesh Shah — A strong argument in favor of working with a person rather than relying on interviews.

I'm not going rehash those or attempt a "complete guide to hiring."

But I do have some fresh advice you might not have seen before:

I sold my company, Smart Bear, in December of 2007. I haven't talked about it at all on this blog, and it's time I spill my guts about the whole affair.

You'd think selling a company would be a glamorous, exuberant experience, but I was surprised at the reactions I got. These are actual quotes:

• "How could you sell your baby? I'm shocked."
• "I thought you said things were going well. Hmm."
• "You're such a sell-out! You used to be one of the few cool people I knew."

Interestingly, 100% of the negative reactions were from people who had never started their own company. But that doesn't make them wrong, and it doesn't make their words sting less, especially when they're your friends.

Now that almost two years have passed, I can relate exactly why "selling my baby" was right for me. Hopefully this thought process is interesting to you and possibly useful in the happy event that you're faced with the same choice, but the truth is I just need to get this off my chest.

I need to explain to those who still consider me a sell-out.

You've probably heard about Noam Wasserman's "Rich or King" choice: Company founders are either in it for the money ("Rich") or in it to build a lifestyle and personal identity ("King"). FogCreek and 37signals are built to be "King;" all venture-funded companies are built to be "Rich."

Noam says that successful founders make the "Rich or King" decision up front, and that though it doesn't matter which path you take, you must be consistent in your actions. You can't mix "be king" tactics with "get rich" end goals.

Except I did mix "Rich" and "King," and it worked.

See, it's good to be "King," but what do you do when you're at Trudy's "North Star" Tex-Mex Restaurant tucking into a chile relleno (with salsa verde, black beans, and the ground beef filling), and the guy across the table looks you in the eye and offers you enough money that you never have to work again?

I was always in it for the money, especially in the form of acquisition. Everyone who came to work at Smart Bear was indoctrinated with this attitude in no uncertain terms; on more than one occasion I had put it:

"We're simple country whores — we'll do anything for money."

Profit was the rule behind every choice we made. Although the end goal was always acquisition, my attitude was (and still is) that the best way to get yourself acquired is to be profitable. Profits prove the business is operating well. Profits validate the market. Profits make minimum valuation easy. Profits mean the buyer converts balance-sheet money into bottom-line profit-and-loss money — a trade every large company wants to make.

Most of all, profits mean you don't need to sell, which gives you the ability to walk away from a deal. You have little negotiating power in any deal unless you can happily walk away.

On the other hand, I knew I would only be happy building a genuine, great company, where the product solves a real pain, where customers are given white-glove service, where "tech support" is the only sales force, where we leave the world a little better than we found it, and where every employee is smart and gets things done and is trusted with any decision.

And I wanted the ego-inflating trappings of running a company. It's cool at parties to say "I run my own company." I wrote a book that got so popular (in my little corner of the world) that people would bring it up to me to sign. (We gave the books away for free so the joke was that by signing I doubled its value.) When I walked onto a tradeshow floor it was like Norm on Cheers — I knew everyone and they knew me. I got to present at cool venues like Joel and Neil's Business of Software Conference.

And I write this blog, shamelessly exploiting the fact that Smart Bear (and two other companies) were successful to convince you that I'm worth reading.

In short, although the goal was "Rich," I achieved it by behaving like the goal was "King." I don't know why people find this contradictory; after all, acting like "King" means building a long-term, sustainable business, and that's exactly the kind of business that gets acquired.

Still, because "King" was enjoyable and Smart Bear was profitable, I still need to explain why becoming a "sell-out" was the right choice.

The first thing to understand is the non-linear relationship between "cash in personal savings" and "financial freedom":

There's a line you cross where your savings alone will fund a reasonably lavish lifestyle. At the risk of sounding like George Bush, this is a Freedom Line — freedom from restrictions about what you can do with your life, family, and career.

My observations:

1. A movement from left of the line to right of the line changes your life fundamentally, giving you the freedom to do whatever makes you happy, forever.
2. If you're crossing from left to right, it doesn't matter how far to the right you go. (Sure, $100m is a different lifestyle than $10m, but it's not as critical to lifestyle or happiness as just crossing the line.)

#1 is what was offered to me at Trudy's Tex-Mex. #2 means it almost didn't matter what the offer was, so long as it was big enough.

Some people gave me a hard time about #2. The typical argument was:

Your company is growing 100% year over year. It's profitable and throwing off cash. Why not wait another year and let revenues double again, which will make the company six times more valuable (assuming 3x revenue valuation, a reasonable ballpark for a growing software company).

Here's the best analogy I've come up with to describe why this is flawed logic. It's called the Box Game:

Imagine I have two opaque boxes. Box A contains $10. Box B has a 50% chance of containing $20, and a 50% chance of containing nothing at all. You pick either box and take whatever's inside. Which box do you pick?

Of course statistically there's no difference, so this isn't a question of math or economics or intelligence; it's a measure of your attitude towards risk.

Most people pick box B. After all, the difference between $10 and $20 is trivial and it's more fun and exciting to pick B.

But what if the numbers were different?

Now box A holds $5,000,000. Box B either holds $10,000,000 or nothing, 50/50 chance. Which do you pick?

You pick box A. Of course! Because it moves you from the left of the line to the right. And because a "chance of moving even further" isn't worth giving up the certainy of that life-altering event.

This is my argument in favor of #2 and against "wait and see." This is why I sold.

In my case, the correctness of my choice was made painfully clear by the economic crash in 2008. Had I held out for "another year and far more money" — box B — I would have found an empty box.

I know this for a fact — another company (can't say who, sorry!) was offered a deal at the same time I was. This founder wanted to roll the dice (box B) and delayed the buyer. Two quarters passed and revenue failed to grow; the buyer nixed the deal. Months later with the recession in sight, the founder approached the buyer again, this time willing to accept a low offer. The buyer refused; that ship had sailed.

There are those for whom this calculus doesn't apply because they want to be "King" no matter what. I'll bet Jason Fried wouldn't sell 37signals for $100,000,000; neither would Joel Spolsky sell FogCreek. Are Joel and Jason being irrational? Of course not. But neither was I.

As of December 2007, I have the freedom to work on any project I want for the rest of my life while simultaneously providing for my family, never again worrying about bills, debt, having a place to sleep, or sending our daughter to any college she wants.

I can stay home with my wife and new baby girl for as long as I want, having all the precious time and experiences and memories that they say money can't buy.

But, in the sense of securing that freedom, it can.

And by crossing the line, I did.

Are you disappointed? Am I a sell-out? Comments welcome.

I'm giddy about this new project!

Dharmesh Shah of OnStartups started a new website for entrepreneurs, and he graciously invited me to co-moderate the site.

OnStartups Answers is a new site where you can ask any question about startups: Starting, ideas, raising money, going alone, co-founders, marketing, hiring, shoestring budgets, accounting, sales people, cold-calling, technical talent, what to do when you're burned out.... anything.

It's awesome, and it's not just a "forum" or a "community" or some other generic crap like that.  Here's why:

Other entrepreneurs answer the questions, and a vote-based "reputation system" ensures that good answers "bubble up" and highlights people who consistently produce good questions and answers.

Among those people already contributing awesome questions and answers are well-known successful entrepreneurs and investors including:

• Joel Spolsky of FogCreek and Joel on Software
• Dharmesh Shah of OnStartups & HubSpot
• Rand Fishkin of SEOmoz
• Nivi of VentureHacks
• Neil Davidson of RedGate Software and Business of Software
• Adam Smith of Xobni
• Peldi Guilizonni of Balsamiq (yes that guy)
• Alex Papadimoulis of DailyWTF and Inedo Media
• .... and me!

I'm honored and thrilled that Dharmesh asked me to co-host Answers, but what's really fun is that we all get to meet new people, hear new ideas, and get questions answered quickly.

After all, the Internet is huge, but somehow it manages to be an echo chamber.  In theory we have direct access to everyone with an email address, but in practice the ocean is too big to find new people we like and trust.

So it's exciting to think that, in our little way, we're building a place where you can get quality, varied answers to questions about startups, and get to know some new people who you would have otherwise never have met.

Besides, how cool is it to get your question answered directly by Joel Spolsky?

I hope to see you on the site!  Leave a comment and let me know what you think.

Here's that link again:  http://answers.onstartups.com

P.S. Those of you familiar with StackOverflow will notice that this is a StackExchange site, built on the same platform.  It's been interesting being on the administrative side of building the site and bootstrapping the community; let me know in the comments if you want me to write about the experience.

This is a guest post from my wife Darla, herself an entrepreneur and chef with a healthy dinner delivery service and a food/recipe blog. Darla and I made different trade-offs with our businesses and I wanted her to share her perspective.

I did. I started Fork In The Road, a wee little healthy dinner delivery business. I actively chose to stay small and was profitable and happy for years. So what about sacrifice? Here's my story.

I have the typical ambitions of an entrepreneur but I also wanted to plan for my future as a mother. Some women can divide their time and energy between kids and a career, but trying to do both would make me incredibly unhappy. From the start, I decided that when I got pregnant I would walk waddle away from the business for as long as needed to give 100% to my family. I also wanted to have time for travel, for visiting my family far away, and for a social life.

Knowing I would stay small, I kept overhead to a minimum. I avoided rent payments by cooking in client's homes. When I got big enough, I rented kitchen space from a caterer instead of building out my own kitchen. I did as much as I could by myself without hiring help until finally I gave in and hired one employee. The goal was to make a profit while always maintaining flexibility. If I was going to stop working to be a mother, I didn't want to be responsible for a full staff, a lease, and a huge amount of overhead.

Fork In The Road was exceedingly successful, especially in the notoriously difficult food industry: Nice profits, solid customer base, over 1500 local email addresses on my weekly mailing list, a growing reputation, and regular features in local magazines (like being on the cover of Austin Monthly, pictured at right). There were too many orders to fill and 12 hour workdays were becoming 16 hours. It was hugely tempting to cross the chasm and see how far the business could go.

If I were going to take the leap, this was the time to move to my own kitchen, likely to cost $30k to build out, $50k per year just for rent and utilities, and be bound to a 3-year lease. Time to buy delivery vans and hire and train cooks and drivers. Time to consider delivering to nearby cities, from which I was receiving constant inquiries.

I started to give in to my ambition. I negotiated a lease for a perfect, cheery kitchen space, and started pricing equipment. I was ready to sign on the dotted line.

And then my sister called."What weekend are we going camping?"

My stomach sank. I felt nauseous. I couldn't go. We had been going on an annual camping trip for years. In the past I would just close down for that weekend and eat the loss.  But now there would be this new expensive lease and new employees and revenues were going to have to grow 5x to become profitable again; I couldn't just leave and go camping. I found myself trying to think of ways to explain this to my sister without sounding like I was putting work before family.  But there was no good excuse; I was putting work before family.

This trip was a dear tradition. If I was torn now, how was I going to feel with a baby?

I walked away from that lease the next day. We scheduled the camping trip.

I took active steps to limit the growth of the business. Advertising and press releases stopped. Order capacity was capped—we began to sell out each week rather than grow revenue. Menus became more limited, the delivery area severely restricted. Some customers were (understandably) pissed off.

I started to take plenty of breaks, completely closing the business at times to travel with Jason. I took very long Thanksgiving and Christmas vacations, with plenty of time to visit my family in another state. Fork In The Road was the definition of a lifestyle business—small and based on values other than just making the most money. I had attained my goal of having time for fun and family and kept making a very nice profit, even though there was no growth.

Sounds great, right? I made good money doing what I love and now I get to focus on my family. We now have a one-month-old baby girl and I can be a stay-at-home mom without feeling like I have to keep working to feed the business' growth or keep employees' jobs intact.

It is great. But what I haven't told you is that I still had to sacrifice a lot.

During those early years, desperate to get established, I worked myself ragged. Time for fun? Ha! My legs were swollen from being on my feet for 10 hours a day, there wasn't nearly enough sleep happening, and the "healthy" chef was eating pizza after long shifts more often than I'd like to admit. The home phone which also served as my office phone rang around the clock. I drank too much in a misguided effort to take the adrenaline edge off a night of frantic cooking when I needed to go to sleep as soon as I got home. For many months I was going to work at 2:30 a.m., cooking until 9 a.m., sleeping an hour, and then driving 150-200 miles making deliveries until 6 p.m. When not cooking, I was doing the accounting, maintaining the website, drumming up business, getting press, talking to customers, creating menus, and building delivery schedules. Later, I finally hired a prep cook. But early on, there simply wasn't enough money to hire any help.

It is hard to grow a business to a profitable level. Orders don't come in by luck or magic.

I had no social life. Even when I had time, I had no energy. It's not like anyone would have found me interesting anyway; I was so consumed with the business that I didn't have anything else to talk about. If you wanted to discuss how to more efficiently make 200 servings of food in a few frenzied hours, alone, on an awful stove, I was in. Otherwise, I was completely zoning out.

Just as I supported Jason being so single-minded in those days, he had to do the same for me. If we hadn't been so supportive of each other, we would have been in trouble.

Once the business had grown enough to be profitable I finally reaped the benefits of staying small. Orders and work hours became reliable and stable because I wasn't always chasing down new customers. Exercise was back in the routine, decent nights of sleep, vacations, a sensible diet, and the ability to be social and interested in other people's lives. Now I am devoting myself to being a mother, having already established myself enough that I can go back to work at any time. It was one of the best decisions I ever made.

But in order to achieve the work/life balance I eventually attained, I had to sacrifice just as much as any business owner, large or small. Even a lifestyle business requires obsessive devotion to get going. You might have to sacrifice your healthy habits, your social life, or your reliable day job paycheck.

Something always has to give.

What are you thoughts on this?  Is your story different?  Leave a comment and join the conversation.

Last week I beat you up about why the number one way to increase revenue is by getting feedback from lost sales. Feedback from the field, not adding new features, not polishing the website, not even talking to existing customers.

That's right, talking to existing customers isn't good enough! They bought in spite of your faults; you need to talk to the other 99.9% of your potential customers who aren't so forgiving and understanding.

But how?

So here are eleven ways to collect empirical data about why people are checking out your product but not buying it, most of which can be implemented in less than a day.

1. Add a short, optional form before your download/eBook/whitepaper so you can follow up.

"But forms are a barrier to downloads," I hear you cry.

I know this argument, but if you don't have feedback you can't fix your product, and if a hundred people download in silence and don't buy, it doesn't matter that they downloaded.

Besides, if you do it right, adding the form doesn't necessarily mean fewer downloads. I didn't used to believe that sentence I just wrote until we did it at Smart Bear. Sure enough, no impact in the number of downloads. None.

So how do you "do it right?" I wrote a nice, long article with specific tips, learned by experimenting in the field, that you can put to use in less than a day. Read it here on the Avangate blog.

Getting email addresses means you can follow up about the trial. Half of them will have forgotten to start the trial. Half will have gotten stuck and silently stopped. Half don't realize you're a friendly, happy, small company that wants to spend time making them successful.

For those who end up not buying, if you ask them "why" you'll be surprised how many will tell you. How can you afford not to know this information?

2. Have an opt-in newsletter.

You don't have a newsletter and you don't have time to write one. You don't even know what to put in one.

I know, and I don't care! Prompt them anyway, because someday you'll want one, and then you'll have a bunch of email addresses.

There's no reason not to build an honest, opt-in, no-spam list of people who are interested in your product. My experience is that most people on such lists aren't paying customers! So this means you get all sorts of excuses to gently ping interested people who haven't given you money. Such as:

• Praise the features in a new software release.
• Give a tip about a feature they might not know about.
• Tell a customer success story.
• Highlight a nice article someone wrote about you or which argues that a service like yours is valuable.
• Announce a partnership with another vendor they might use.
• Give them a time-limited coupon.
• Tell them you'll be in their city and ask if they'd like you swing by and do a demo.

If you don't accumulate these emails, it's a tremendous waste, for nothing. Add the checkbox.

Update: Somani from Worklog Assistant asks: "How do you manage your subscriber list?  I'm stretched thin enough; I don't want to write a custom app."

Answer:  Use an on-line newsletter system like Constant Contact, MailChimp, or Emma.  They provide forms you can drop into your website; they accept and confirm the email addresses for you.  Then when you're ready to send a newsletter, they have special deals with the major email providers (e.g. Yahoo, GMail, Hotmail) so your newsletter won't be accidentally marked as spam.

3. Offer free stuff for feedback from lost sales.

Hunt down the contact info for people who trialed but didn't buy and give them something for free if they'll talk to you for 15 minutes about why they didn't buy.

(Guess this means you'll have to get their email address, huh?)

At Smart Bear we gave $2010 to Wikipedia, $5 at a time.  It was amazingly successful.

What can you give away?

• Cool stuff that promotes something good for the world (e.g. something from Etsy)
• Give money to charity so you can write it off and the other person feels good (e.g. $25 donation to Kiva or Wikimedia Foundation or Free Software Foundation)
• $25 coupon to Amazon (it's easy and "Amazon" means "anything you want")
• Swag with funny/cool content promoting your company (T-shirt, mug, mousepad)
• Cool stuff having nothing to do with your company but which is desirable to your audience (e.g. calendar of XKCD cartoons or Despair posters)

It's worth $25 at least; probably $50. You don't have to offer it forever, just until you start hearing the same things over and over again. Or budget $1000 and run the offer until the budget is gone.

4. Hunt down the contact info for one customer and get them on the phone.

I know, it's an "existing customer," and I just told you they can't tell you why other people aren't buy. But I want you to ask about their buying experience.

Well, of course you should also talk about what's bothering them and what they'd like to see next, and in fact that's the excuse you can use for the call. But carve out at least 15 minutes to interview them about the trial and buying process.

Ask them things like:

• How did they hear about you?
  (Tells you which marketing sources are worth spending more time/money with)
  
• What information on your website convinced them to download?
  (Tells you which messages are important; if they're buried, make it more obvious; incorporate into ads)
  
• What was the main reason they bought the software?
  (Tells you their primary pain point, the one you should address on your home page and ads)
  
• What part of the trial process was confusing or difficult?
  (Tells you where other people are probably dropping out of the sales process)
  

5. In your product uninstaller, ask why they didn't buy.

This sounds dubious I know. Why would anyone bother? They're already uninstalling, why would they give you the time of day?

But the fact is, this works. People like to give opinions. Don't take my word for it — check out this comment on last week's post where Mo Flanagan from WindowTabs volunteered that this technique was "eye-opening" for his company.

The FireFox browser not only asks when you uninstall, it even asks if you merely cancel an install!

Sure, most of the time you'll get nothing and sometimes you'll get useless crap like "You suck," but sometimes you'll get gold.

As with the Help Menu link, don't bother making a custom form to get the feedback, just pop up an email client or web browser with a form asking why they didn't buy.

While you're at it, why not add a field that says: "If you'd like to be notified when we address the problems you've raised, put your email address here."

6. Solicit testimonials from existing customers.

Besides being great marketing fodder, testimonials are where you discover the real reasons your customers love you. The real pain you solve, the true impact of your software on their daily life, whether you really do have "legendary" service, etc..

For the things they highlight, consider: Are those things obvious from the get-go to new visitors to your website? Are these things obvious while someone is trialing your product?

For the things you thought were great about your product or company that they don't talk about, maybe you should reconsider whether those things are actually important. Listen to your customers' point of view, not yours. Listen to their stories, not your vision.

Here's an example. This is an actual customer quote for Smart Bear's (my) software development tool:

"When we introduced Code Collaborator, it was like someone broke the ice in our group. With some common ground to start conversations and help us get to know each other, we came out of our cubes and actually talked to each other. As a result, now we collaborate more often to design and test features as well as review them."
—Anand Kalyanavarathan, Program Manager, Siemens

Notice how there's no mention of features or why we're better than the competition or whether we're SaaS or not. It's a story about how this tool changed the social dynamic in the company from isolation to collaboration.

You can see this sentiment reflected in the bi-line on Code Collaborator's product page: "When code review is easy and fun, it actually gets done."

7. Add links (for web apps) and Help Menu items (for desktop apps) soliciting feedback.  Or ask on "quit."

It should say something inviting and human like "Complain" or "Yell at us." Just "Feedback" is too corporate and unfeeling. Prove that you want them to click that link!

You don't have to create complex forms or mess with proxy servers, just open a "Contact Us" form on your website or launch their email client.

We did this at Smart Bear and a sizable percentage of all feedback email comes from that link in the product. You can probably add this to your software in an hour. Why not do it?

Keith from Redcort software suggests also prompting users when they exit the product.  Would that bother a user?  During a trial, this is no different from any other "annoyance" buy-me-now box, but has much great opportunity for reward.

8. Give away free copies of your software in exchange for product reviews.

Reviews not only give you feedback about your software, they also double as publicity.

Don't worry about getting bad publicity. If your product is DOA they won't bother writing a review, because writing "I couldn't get it installed" doesn't make for an interesting article. If they like some parts and dislike others, that's OK. In fact, there's data that shows people are more likely to try a product that has mixed reviews that one with rave reviews, provided the reviewer gives details!

The smaller the blogger the more likely they are to help you. Remember, even a blogger with 17 RSS subscribers can provide valuable feedback.

9. Give away copies of your software in exchange for a 30-minute feedback session.

After the trial period elapses, almost no one buys, right? So you send some emails to beg them etc., but almost no one responds, right?

So you have these people who were interested enough to download but absolutely are not going to buy. I propose you give them the software for free.

You're not losing money on the sale because they weren't going to buy anyway. You exchange the free license only if they get on the phone with you and really talk about why they couldn't shake the money loose from the boss.

The only way you "lose money" here is that you have to provide tech support without revenue. But the feedback about lost sales is more than worth it.

Besides, those people will tell their friends (free publicity), and you can set limits like "only one free seat per company" so that they can't pull this trick on you twice.

Also you don't have to offer this forever. By the time they tell their friends and suggest that if they wait they could get a free seat, you'll have ended this program because you'll have gotten 10 meetings and you'll know how to get those friends to actually purchase.

10. Find a local startup/entrepreneur/user group in town and pitch your product.

Most cities have an informal support group for startups. Ask whether you can pitch your product to the group for practice and feedback.

It doesn't matter if you're pitching in front of entrepreneurs, investors, or a local user group. In fact, the latter is great if they're also your potential customers — you get to do a sales pitch in a friendly environment.

Even if you don't get great feedback, having to do a presentation forces you to rethink what's important and interesting about your software and how to communicate that to others. Frequently this exercise reshuffles some ideas that end up on your home page and advertisements.

11. Use UserVoice or GetSatisfacion

These web-based services solicit feedback and then allow people to vote on each other's ideas. The cost is free or cheap depending on service options. Both of these services are ubiquitous on the web so people generally know how to use them.

I recommend allowing anonymous responses, otherwise many people will be discouraged by having to create a new account or forgetting the account information they created.

Don't worry about people crapping up your forums. You won't have much feedback at first so moderation is easy, and in my experience at Smart Bear we've had hundreds of entries and comments and thousands of votes, and we haven't once needed to delete something.

Please, just do something

If you're not actively getting data about lost sales every day, you're in the dark. These techniques are easy to implement so there's no excuse not to try some.

If you still think you "already know what they're going to say," try it anyway. If you're right, hooray for you.

But if you're wrong, these techniques could be the difference between molding a product people will actually pay money for and going out of business with an idea you thought was perfect.

What other techniques do you have? Leave a comment!

Gregg and Dale were wondering why I switched blogging platforms from Squarespace to Wordpress.

If you were not wondering, you should stop reading now. :-)

Here's what I'm doing with Wordpress that was  impossible with Squarespace, even after repeated appeals to their tech support.

1. Comment spam management.  I get between 5 and 20 spam comments per day, and it's been increasing.  Squarespace has no support for automatically flagging obvious spam (like contains the word "Cialis"), using blacklist sites, or CAPTCHA.  Wordpress not only has all these options, but features like "Moderation required, unless a comment by this user has already been approved."
2. Awesome comment system.  The better the comment system the better the conversations.  I've said before that I measure the "success" of this blog by the quality of the comments. When the comments round out a post, when people argue with me and each other, when the points in the comments are stronger than the post, that is success, because we're all learning and growing, including me.In Squarespace I had no control over the lame commenting system.  I wanted threaded conversations at the least, but ideally I want Gravatars, a "recent comments" sidebar widget (to further reward those who join the conversation), and promoting my commenter's own blog posts automatically (more reward).Yes, I could have switched to DISQUS or Echo, but then I would have lost all my existing comments.  (Had this been the only problem with Squarespace, I would have probably just used one of those systems and said "oh well" to the existing comments.)
3. Full backup.  Squarespace lets you back up posts and comments but not the files you've uploaded (i.e. images).  Now that I'm hosting Wordpress myself, I'm now backing up the entire system to Amazon S3 daily or on-demand.
4. Speed.  My current Wordpress installation serves pages three times faster than my Squarespace site.  That's not trivial.
5. Site design.  Wordpress has "infinite" control over your theme.  As you can see, I didn't change a whole lot yet, but for example see the new home page layout with two columns, the summaries, and the thumbnail images.  I like the freedom to do more in future.
6. Automating social media buttons.  Similar to "layout," but now talking about code and not just layout and graphics, I've written custom code that automates things like those "Retweet" buttons on the post, and emits them in a different way in the RSS feed.  Before I had to make those buttons manually, and even then it didn't appear in the RSS feed!
7. RSS control.  Besides those buttons, there's things like special formatting or a footer for the RSS feed that I couldn't do in Squarespace.  For example, on the site the <blockquote> tag has an orange line down the left side, but in the RSS feed it didn't, which means I couldn't convey the same meaning.  For example, sometimes I just indent text without the orange bar — in the feed you can't tell the difference!  Now I've added code that does this in the feed too.
8. SEO control.  I can now control everything about a post — title, URL, meta-description, etc..  With Squarespace you can't.  Besides losing out on some SEO, other widgets and toolbars (social media support systems) pick up on those things too.  In Squarespace, the title was so screwed up it even had broken SGML characters and inexplicable &nbsp; characters that screwed up those systems.
9. Sandbox.  When I want to try a new layout or a new plug-in or whatever, I might break the site.  With Wordpress, I have a script that completely duplicates the current blog (files and database) into a sandbox.  Then I can screw it up, and only after I'm satisfied with the changes do I apply it to the real blog.
10. One site to rule them all.  Currently I don't have anything on this site except the blog and the about me page.  But in future that will likely change (whether or not it's actually advertised in the menubar).  With Wordpress, this is not only easy, but the other pages can be "anything" if I need them to be — even just arbitrary PHP, even without e.g. the sidebar.  Since this is my de facto personal website, that's important to me.
11. Community support.  There's 7.5 million Wordpress blogs, so there's lots of information on the web if you get stuck.

The downsides to self-hosted Wordpress have been:

1. Have to manage a server.  (For me I have to manage a server anyway for other reasons, so this isn't so bad).
2. MySQL out of memory errors.  A known problem in Wordpress; I've run into this a few times.  Long story, but hopefully is solved now.
3. Future scalability.  Right now scalability isn't a concern — I've tested it with tools and it's fine, plus I can increase the power of my virtual host just by spending more money — but if it ever were, that would take work.  The work is pretty obvious, e.g. using a CDN for static content, using nginx for caching and front-ending multiple Apache servers, etc., but it's still real work.

But geeks like me enjoy screwing with servers, so we tend to turn a blind eye to the downsides...   :-)

Why not Typepad or MoveableType or something else?  Because I knew Wordpress would work, so I didn't bother looking.

P.S. Proper post up tomorrow.

If you're subscribed to the RSS feed, there's a good chance you just got a load of duplicate posts.

The reason is that I just switched blogging platforms from Squarespace to Wordpress.

All comments and trackbacks have been preserved, but the switchover resulted in new GUIDs for posts, which means Feedburner thought all the posts were new.

Sorry about that!  I know it screws up your reading patterns.  Shouldn't happen again.

New post tomorrow.

I'm involved with several little companies right now. They all have the same problem, and they're all avoiding the clearest, fastest path to fixing it.

Their problem is: We don't have nearly enough sales. Some actual quotes (sound familiar?):

"We have 300 downloads and no sales."
"People tell me I have a great idea, but none of them are buying my software."
"My sales/download conversion ratio is 1%. It should be 8%."
"Folks are signing up for an account but they don't come back."

This problem is solved only one way: You need feedback from lost sales.
Empirical data, not your own ideas about why people might not be buying.

You need to talk with the people who were interested enough to find your website, read your marketing copy, download your product, and then give up without even an email. That's the low-hanging fruit; those are the people who are in your grasp, who should be buying today, but aren't.

As Steve Johnson says, "All the answers are outside the building." (Watch his one-hour presentation on the subject at the Business of Software 2008 Video Archive.)

Or as Eric Ries says, "Not listening is the cardinal sin ... Any other mistake can be overcome: shipping bad product, removing key features, erroneously banning community members, even kicking out a whole segment of customers."

But I find that entrepreneurs — especially technical ones — fight me on this tooth and nail. And I'm not surprised because, as usual, I too used to hold the I-already-know-why, I-know-my-customers-better-than-they-do attitude.

So once and for all, I'd like to dispense with the usual arguments for why "more feedback" isn't the problem:

• Existing customers are telling us to do X, so we should do X.
  Customer requests are important and you must follow their lead, especially in the beginning. But what about the 98% of trial users who didn't buy? It is they who hold the keys to more sales! Existing customers bought in spite of barriers to sale, so they're no help in identifying the barriers. Listen to them to increase your product's value, but listening to them to increase sales is classic survivor bias.

• What we need is New Feature X, then people will buy.
  This is almost never true. The world is filled with successful v1.0 products that lacked obvious features; in fact I challenge you to find an exception. Ben Yoskovitz wrote a great post about this fallacy (with 27 concurring comments). Even Nintendo says "the most important feature is the one no one asks for."

• We need to clean up the software before we can get real feedback.
  At Smart Bear, the first incarnation of our code review product was so hard to decipher, I can't understand how we got customers. They used it in spite of the problems, not because of them. If you're solving a genuine pain, people will try the software, complain about it, ask for features, and generally be engaged; if that's not happening, you're not solving the right problem or not making that obvious, and that is critical to getting revenue.

  Have you ever worked on a software project for many years and lived through a face-lift? After you're used to the new look and creature-features, when you see the old version it's so bad you get embarrassed, right? It's the natural order of things. Polish isn't important if you don't have enough revenue.

• I'm a user myself, so I know what's missing.
  That's great, but all that means is that you have 100 ideas for new features, but "more features" is almost certainly not the problem. It means is you have a "vision" which is almost certainly not how your company is going to unfold.

  Often the real impediment to sales is as mundane as "New users are presented with a blank screen, so they don't know what to do next, so they abandon the trial," or "The installer doesn't work properly under Vista, so people give up." The fact that you're a user yourself is the worst position for you to be in because you can't be objective about the new user experience, and you can't put yourself in the shoes of a user possessing below-average intelligence. Which half of them possess.

  There, I said it. Most of your users are dumb; almost all are dumber than you are. You are not your typical user.

• Apple just knows what's cool. So do we.
  This is a common misconception, easy to believe because Apple does keep product development close to the vest. However, it's completely untrue. See the VentureHacks blog quoting Steve Jobs on the matter; then see their roadmap for collecting customer feedback and using it for repositioning, just like Apple does.

• We can't afford to delay the v#.# release.
  If you have no real evidence that revenue will suddenly improve with the next release, why do you think it's important to release it? Just because it has "more stuff?" The only reason to be excited is because it's different, and since the status quo isn't working, you've got to try something different. But is that "stuff" why people are downloading but then abandoning? Until you can answer that question with empirical data, there's no reason to believe the new stuff will be more compelling than the last stuff.

• Getting revenue is a marketing/sales function; I need to be heads-down in the code.
  In a startup, it's everyone's job to get revenue. Sure, the usual day-to-day activities should be divvied up between founders; not everyone needs to write letters to bloggers and be glued to Twitter live-search. But if you don't know why people aren't buying, that's the #1 bug and the #1 feature you need to be working on. There's lots of ways (see below) to change the product or website in under a day that will begin fixing the problem. Saying "it's marketing's job" really means "I'm not going to help get revenue." Unacceptable.

Hopefully by now you're convinced to get more feedback from lost sales, but how do you go about doing it?

Stay tuned! Next week I'll post eleven specific ways to get more feedback, almost all of which take less than a day to implement.

Is feedback really this vital or am I overstating? Leave a comment and join the conversation.

I hate most interviews, and I think everyone else does too. They're rarely actionable or insightful. You want to learn and get specific ideas from interesting, thoughtful people, not read a biography.

This interview is different.

I'm starting the Uncommon Interview: Five questions that solicit deep answers with actionable advice, examples, and insight. Answers in paragraphs, not one-liners. Depth, not breadth. (Leave a comment and tell me if you want more of these.)

Let's get started.

Peldi got 100 product reviews in the first six weeks after product launch and raked in $800,000 in the first 12 months of operation. That should get your attention!

The first Uncommon Interview is with Giacomo "Peldi" Guilizzoni, founder of Balsamiq Studios, makers of the popular Balsamiq Mockups, a tool for creating quick user interface mock-ups. I've referenced Balsamiq previouslyas an example of how startups can grow in recessions and as a model for how small, informal companies should act.

Let's hear what Peldi has to say about building startups.

On transparency

Q: You've been impressively — some would say frighteningly — transparent on your website and blog about being a tiny company. Obviously this works well for you, yet still most small companies persist in promoting the façade of being ten times larger than they are. Would you suggest that most people should follow in your footsteps or is this a cultural decision that isn't vital to success? How do you decide what is "OK to reveal" and how much is "too much?" (For example, you used to publish all revenue figures but recently you stopped that practice.)

First of all I'd like to thank you Jason for the great work you're doing with this blog, it's part of my "read every single word, twice" folder in Google Reader, so it's really an honor to be featured here.

Regarding transparency: in short, I am trying to build a company I would like to do business with as a consumer. Being transparent is how I'm trying to gain my customers' trust and respect.

Thousands of years of evolution have made humans great BS detectors, so why do people even try to be something they're not? If something smells fishy on a company's website, would you buy their products? As a vendor, do you really want to only have the customers you have fooled into buying from you? It sets off the vendor/customer relationship on a bad note right from the start.

I always try to put myself in a potential customer's shoes. The qualities I look for in a software vendor are honesty, attention to detail, focus on usability and outstanding customer service, so that's what I want to offer at Balsamiq.

Also, buying from a small company seems to be more and more acceptable in the enterprise (perhaps thanks to the recession?). Sharing my good sales figures was part of my efforts to reassure my potential customers that I was going to stay in business long enough to answer their support phone call when needed. Having a straightforward, no-BS company page is part of the same effort.

As for why I've stopped sharing as much, the blog post you mentioned has some details. Finding a line has been a struggle. I am always tempted to share everything, but I've been pulling back, especially on sharing sales figures, for two reasons: I don't want to come across as bragging, and most importantly I don't want anything bad to happen to our employees and our families. It seems so silly to worry about that in 2009, but we live in a country where kidnappings still happen... <insert big shudder here>.

I am still committed to sharing as much as possible, I always try to provide value in all of my output, and I've learned so much from other people's books and blogs (yours included!), sharing what I learn along the way is the least I can do to "give back." Knowledge is for sharing! :-)

I also really enjoy writing, it helps me organize my thoughts in a way that nothing else can. It's really helpful.

On press for startups with no cash

Q: Your advice about how a startup can launch and get press should be required reading for any startup. Twelve months later, now that Balsamiq has enjoyed skyrocketing sales and press coverage, how much of this advice would you still give? Have you developed new techniques, e.g. now that Twitter is more mainstream? Have you changed your own behavior (for example spending nothing on AdWords) now that you have extra money to spend on marketing and advertising?

I admit I had to go back and re-read that post, it feels like I wrote it a couple of lifetimes ago. :-)

Let me go down the list:

Regarding "following the advice of the masters", I think that's definitely still valid. I always look for people who have been through my current problems before me, first-hand experiences are the most powerful way to learn for me. I am constantly amazed at how much incredibly good information is out there, on any topic. For tech startups especially, there are hundreds of good blogs to follow. Here's my OPML for instance (more on OPML here).

Regarding "Sending direct emails to bloggers", I think that's definitely still valid, although I would keep my expectations low with the big bloggers. Instead, I would really try to narrow the focus of the list of bloggers to write to, making sure that my product is exactly what their readers want to hear about.

Regarding "injecting yourself in the conversation", I still think it's valid advice but I have seen people over-doing it, which totally backfires making you look desperate. You should only really add a comment to a post or reply to a Tweet if it's obvious (and not just to you) that your product is just what the people involved in the conversation need right now. In other words, don't spam, it shows and it's ugly. If in doubt, don't write anything. And when you do, be humble.

As for "using RSS to track keywords relevant to your business", that's certainly a valid way to find places to inject yourself in the conversation, but it's extremely time-consuming. Also, other people's endorsements are so much more powerful than your own, so as soon as you start seeing other people replying to a blog post or a tweet recommending your product, it's time to take a step back, enjoy and be thankful. :-)

Regarding my suggestion to use Twitter as a direct-marketing medium (the $$-tweets idea), my thinking has changed on it and I don't do it any more. Here's a full post about it.

Regarding giving stuff away, it's definitely something we love to do every day and are very committed to. I recently calculated that we gave about $680,000 worth of licenses away to do-gooders so far, which I'm proud of.

That means that for every dollar we take in, we donate about 70 cents back to the World. I'd like to see that ratio go to 1-to-1. It's good for marketing but it's even better for the soul.

Blogging: I think it's still essential. One thing you have to decide when you start a company is "which social niche am I going to become a thought-leader in?" — my blog posts about Balsamiq's growth have brought a huge amount of attention to my company and my product. My post about donating software got me interviewed by a popular magazine. Again, it's about gaining people's respect by offering honest and most of all useful tips and ideas. Just like what you're doing with this blog Jason! :-)

AdWords: I got tricked into signing up for it (Google offered me $50 to start), and now have one ad that has a $200 monthly limit on it. I have looked at the AdWords management and reporting UI perhaps two or three times since joining, I just don't have time for fiddling with keywords right now. I'm also lucky enough to not be starving for new customers at the moment, so I'm not tempted to up the dollar limit right now. I'm sure it's helping some, so I won't lower it either. In short, I have no good advice on this topic.

As for new marketing techniques, I have agreed to sponsor a very good blog on wireframing and this year I sponsored a trade show — both fairly small investments — which I did mostly as learning experiences, I haven't really tracked down the monetary ROI for them.

In general, I have learned that long-term value (i.e. a solid, useful and usable product, supported by good people who passionately care about their customers' success) trumps any short-term marketing program. Sure you have to do enough marketing to show you're a real player, but if your product and company are remarkable on its own getting noticed is a lot easier.

On hiring Employee #1

Q: Four months ago you made one of the biggest decisions of all: You hired your first employee. Were you always planning to hire and grow or did this choice evolve? Did you wait for a certain financial condition before hiring, and if so what was that specifically? You mentioned having "fear and trepidation" alongside your "excitement" — can you elaborate, and do those feelings persist?

I always planned to have employees. My last job at Adobe was Sr. Engineering Lead, meaning that I had a team of 4-5 programmers to manage. Together we built Adobe ConnectNow in record time, with very high quality and had a blast doing it. I remember feeling "man, I'm actually pretty good at this!" I felt very comfortable leading a small and very talented team, sort-of like it was what I was born to do.

So my long-term vision for Balsamiq has always been to run a company of 4-6 people, bringing in maybe $3M/year in revenue. I don't really know how I came up with that revenue number, so I don't know how realistic it is, we'll see.

Before hiring both Marco and Valerie I waited for two things to happen: 1) the sudden, clear-as-day realization that "things cannot continue this way or I'll run myself and the company into the ground", and 2) to have enough in the bank to fully cover their first year of salary.

I think the fear and trepidation were due to the fact that I had never had anyone else (other than my wife and son) depend on my daily decisions for their sustenance. It's definitely a big responsibility, one of those defining moments that separate boys from men (or at least it felt that way).

I still worry about making payroll of course, but we're lucky enough that our current cash-flow is constantly lengthening our runway to keep us in business for the years to come.

My current worry is to see if it is in fact possible to stay small in the long run... I wonder where "the balance point" is.

On selling stand-alone software versus plug-ins for existing software

Q: Your flagship product Balsamiq Mockups is available both as a stand-alone product and as a plug-in to popular systems like Confluence and FogBugz. Has it been cost-effective to have both the stand-alone and "hang on to coattails" styles of selling? What are the major differences selling stand-alone versus plug-in, in terms of pricing, marketing, and tech support? Is it vital or just a bonus to get support, buy-in, and press from the vendors of the tools you plug into? If you were starting over, would you begin with a plug-in rather than a stand-alone product?

I did start with a plugin product! My initial business plan was to build and sell "a wireframing plugin for Atlassian Confluence". I was trying to find the smallest, most narrowly focused problem I could solve, and a single plugin for a single Web Office application seemed to be a good place to start, big enough to support me and my family.

My vision has since expanded to building more than one plugin for more than one Web Office platform, and hasn't changed too much since.

The Desktop version, which is now 80% of where our revenue comes from, was not supposed to be on sale at first. I had build it because one of the problems of Web applications is online/offline usage, and since it was easy for me to port my code to the desktop via Adobe AIR, I did it. I planned to give out the desktop application to plugin customers (which we still do) and that's it — people had to practically beg me to sell them the Desktop version by itself. I'm glad I listened!

I still believe that "Web Office Plugins" is a good long-term strategy. Riding on the coattails of someone else's product makes a lot of things easier for a micro-ISV: the sales channel is clear, pricing is easier, the platform vendor needs you to be successful in order to show their customers that their platform is solid and mature, so they'll demo your product for you, help you with development and marketing... as a one-guy company, I felt that going about it that way was the safest thing to do.

I also really enjoy the coding part of building plugins: making different systems talk to each other has always been fun for me, so I guess it was a good fit.

I think it's still too early to know if building plugins is a big enough business in the future, but as of today (about 14 months from launch), revenue from plugins have totalled US $212,185, which is not bad for a 3-person company...I am confident sales will increase as more and more people are infected with "the Web Office bug" and start working in the cloud. It might take a couple more years, but I firmly believe it's one of those "no going-back technologies" (more here). And when the World is ready, we'll be ready for them.

In the meantime, it's nice to have the Desktop version to pay the bills.

On a board of advisors

Q: You have credited your board of advisers for contributing to your success. For other companies wanting to assemble a set of advisers, what advice can you give on recruiting them and incentivizing them to spend time with you? Was the board equally important before launch, as you started to grow, and now? Do you feel the board transformed the way you would have otherwise done business or are they less important than, for example, your blog and proactive, personal marketing strategy?

The number one piece of advice I can give is to "do the time".

Let me explain: most of my advisers are former colleagues whom I worked with in my 7-year career at Macromedia and Adobe. The others are friends we know from living in San Francisco, where everyone is in tech.

They are all people I looked up to in one way or another, people I did great work with in the past and that I know I would have missed once "going solo". So it's partially a way to stay in touch with old friends, but very smart and knowledgeable friends!

Recruiting them was easy, I just sent this email.

We don't have any formal agreement nor do we meet regularly. Mostly I email them whenever I have a question I know they'll be able to the answer, to or we meet on Skype once in a while (we try to shoot for once a month but somehow haven't been able to keep a regular schedule with anyone. Things get in the way.) We all got together for a big crab-dinner feast in San Francisco in May, something I hope to turn into a yearly tradition.

It's pretty informal, but every time I have some sort of contact with one of my advisers, I learn something. Or they say something that gives me an idea, or gets me unstuck. That's what talking to smart people will do. I always say that one could do a lot worse than trying to be excellent, because "excellence attracts excellence", and when you're in that circle, even once in a while, magic happens.

I don't think the board is any more or less important than the blog... I actually don't see the connection. It's ALL important... they're all pieces of the same big puzzle.

I realize that telling people to go work at a large tech company for 7 years before going solo is not what they want to hear, but it has so many other benefits that I really recommend it.

I also have sent this link to people before, which might be useful.

Thanks Peldi.  More questions?

Do you have more questions for Peldi? Do you have more to add to his answers? Leave a comment and join the conversation.

What if we ran kindergarten classes with the same rules as social media marketing?

• Children are encouraged to make at least one drawing or painting every day. Refrigerator art goes stale quickly and you want to stay top-of-mind with your parents.
• Rachel Davis, the most popular girl in class, writes an eBook explaining how other kids can get popular too. It's well received from pre-K through third grade, but although it contains clear examples and actionable advice, somehow the unpopular kids still never get invited to the cool kids' slumber parties.
• Little enterprising Genevieve Morrow puts Google ads on her fingerpaintings, but they don't generate enough cash even to cover her candy necklace habit. She finally starts making real money when she converts her afternoon lemonade stand to resell Thesis WordPress themes to second graders looking to enhance their personal brand.
• Children are admonished that having a lot of friends is not as important as having a few genuine friends who will play with you even after you throw up all over the good blocks in front of the whole entire class. The children agree in principle but little Patrick still cries when he gets only three stickers in his Valentine's Day booklet.
• Learning that making nice comments about people helps forge relationships, little Bobby Gray compliments every male member of the good kickball team. He is denied the coveted spot and earns the nickname "Bobby Bootlicker."
• Teachers explain that "What I did on summer vacation" doesn't grab attention. Better is something actionable ("Five ways to have fun on summer vacation") or provocative ("Why waterparks are more dangerous than you think") or something personally relatable ("What Dora the Explora won't tell you about summer vacation").
• After a stern lecture on the value of being honest and real, little Bobby Neuman courageously admits that during recess he pooed his pants and buried the evidence in the gravel under the blue slide. His bravery is not met with the loving acceptance the teacher had promised.

OK, class, what have we learned?

Leave a comment and join the fun!