Episode 756 | Why Great Product Management Is Critical for Your Startup
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Welcome back to Startups for the Rest of Us. I'm your host, Rob Walling. And today I have the pleasure of talking with a good friend of mine, Brendan Fortune, about how to be a great product manager. And you might be thinking to yourself, well, I'm a founder.

I don't want to be a cog in a wheel at some large organization. Product manager, that sounds like a title of someone managing things. That doesn't matter. You know what? Being a product manager is about making decisions of what to build, how to build it, how to market those, how to frame them, how to explain them to the rest of

of your team and how to explain it to the world at large in a way that gets people interested. Product management is a skill that any SaaS founder needs to be aware of. And I think all of us can improve on that.

Brendan Fortune was the first person, aside from the two founders of Drip, to make any product decisions about what went into Drip, what was built and how it was built. Brendan has been a product manager at several companies. You'll hear us kind of talk about it in his intro, but we have a great conversation, not only defensively,

defining product management. And you can hear me at the beginning kind of prod him like, what is product management? And how should someone think about that if they're a founder? But then we get into a framework that Brendan introduced me to that involves building a flywheel and helping that decide how to make your users more successful and how to make your product more successful.

If you listen to this episode and you decide you have product questions, things about how do I decide what to build, how would I think about being a product manager, how can I hire a product manager, how can I become a product manager, anything around product, product management, any of this stuff. If you want to send those in to questions at startupsfortherestofus.com or you want to click the ask a question and put product question in the subject line, I will invite Brendan back on if we have enough questions to do a full show.

Before we dive into our conversation, applications for my SaaS Accelerator TinySeed are currently open. We will be having a live Q&A if you're interested in applying or just have questions for us on February 13th at 10 a.m. Eastern Time.

Hey, how's it going?

Great, man. It's good to have you on the show. Yeah, I'm excited to be here. I've listened for so long. We've worked together. We played D&D for so long together. And now finally, I'm on the show to Crush Your Zone. Have you just been waiting? Were you checking your mail every week? Like, where's the invite to come on Startup for the Restless? I was about to rage quit this friendship and move right on. I know. I get that a lot. Yeah.

Yeah, I get from a lot of people. So as folks probably heard in your intro, you and I worked together at Drip after the acquisition, after we sold the lead pages and kind of became the company. You were the first person...

Aside from Derek or I, to ever make product-level decisions about drip. That's the honor. That's tombstone level. Yeah, I'll drop that right on my tombstone. I mean, it is kind of cool when you phrase it that way. Yeah, I'll take it. And your role today is your title? I'm Director of Product over at Customer.io.

All right. And most people listening to this podcast will know customer.io. I wanted to start us off, though, with a brief kind of discussion definition of product, like that role, that department. Because...

Back in the day when I was bootstrapping early, let's say 2005 to 10, I'm a developer, I'm trying to build stuff people want and just trying to make enough money to pay my house payment. Product, that role, that department, I don't know if it didn't exist or I just didn't know what the hell it was. It probably existed at Procter & Gamble for toothpaste. There's some product owner or product leader or QuickBooks maybe into it. They would have a QuickBooks product leader, I'm sure, back in the day. Microsoft, there were program managers.

Maybe they were product managers. Yeah, yeah, of course they were. Like in the 90s for Excel and Word and all that. There were even as far back as like in HP, like I think in the 90s. But of course product doesn't mean the same thing. And so my question then, I remember starting to hear this term as I was building more SaaS companies and it just became, much like customer success kind of sprang out from...

nothing to being a role now in a department. I feel like product did that with SaaS and I don't know the history of it that well. But what I want to do is for, you know, the 25% of the audience, it's like, of course, we know what product is. We know we're a project manager, product owner, like all that. But there's a good chunk of this audience, I think, that's kind of like, whether they're a solo developer, whether they've only worked at small companies, where just the founders are

they are by default the product managers and they don't call themselves that. It's like, oh yeah, the CEO and the CTO of our five-person company, they make all the product decisions. What does that mean? What does product do and what are product decisions? Talk us through this as someone who's been in it for what, 15, 20 years. Yeah, I think

the segue from a founder is probably the simplest way to understand it because what's one of the things a founder does? Well, a founder has to understand their market, they've got to understand their product area, they've got to understand their customers, they've got to be thinking about pricing and packaging and how they're going to make money at the end of the day. And that's very much what product managers do once a company or product is

has scaled to the size where one person just can't do it all. There's just too much going on. And not even that they can't do it all, but they're just not going to do it as well. There's a limit to the capacity of details that we can ingest as companies grow and products grow. So at Customer.io, for example, we've got eight product managers now. Actually, we're about to be up to 10. We're adding two more later this month.

And I often describe product as my very, you know, I always, it's like I have a lot of good feel and I have a lot of very shorthand things that are not necessarily official. But I will say like product decides what gets built next, like what features, often in what order, often how they're built, meaning like what do they look like? How do they operate? How do they interact with other areas of the business? How are they going to impact pricing?

Which tiers do they go in? And then there's even beyond that, there's product marketing, which I had never heard that term before you came on with Drip. And then you and Tedesco and the other, you know, the execs were telling me these things. And I was like, oh, is this how they do it at big companies? It's like, yeah, that is. And so that was the merging of like me being in the small companies, you know, the small SaaS and kind of hitting that. But so that's my loosey-goosey run-on sentence definition of it. How do you think about it?

I think that's right and the reason I pause is because there's a lot of debate in nerdy product circles about whether it is the product manager who makes certain decisions versus guides certain decisions. That weaseliness is part of why I don't want to, I'm not sure the details are actually useful. But at the end of the day, the product manager is accountable for

the features that ship and whether they are actually adding value both to customers and to the company. And so that does involve, what are we going to do first? What are we not going to do? Which are 95% maybe more of the decisions that have to get made. So I think I'd agree with that. Product marketing,

I don't know if you want to go deep on that, that's just really splitting hairs, but product marketing is kind of a fascinating dual head of product management. And the most concise way I've heard it described is product management is listening to the market and reacting and building, and product marketers are speaking to the market. So both of them need to understand that.

Customers, at a detailed level, they need to understand, have an opinion on strategy and personas. But one builds stuff and the other one tells stories.

And this is the thing, this is why it's hard is because, again, you know, there's a chunk of people listening to this podcast that either do work at big SaaS companies or have seven or eight figure SaaS companies. So I don't want to act like everybody here is doing 10K MRI. That's not true. But a lot of folks, if you're a founder or two co-founders of an early stage company, like I think of Derek and I with Drip when we were doing 20K a month, right? Yeah.

product management and all the decision making he and I made together. That was actually a huge chunk of our job. What do we build next? How do we build it? Let's collaborate. We've got to architect, we've got to get the naming right, blah, blah, blah. And then as we were getting close to, say, launching that feature, the automations or workflows or whatever, we'd get together and I was like,

All right, we're going, and this is where product marketing happened, but I didn't know that was what it was called, but it was like, we got to communicate this to everybody, to all the prospects in our pipeline. I want to communicate it to the world. I'm going to tweet the shit out of this. We're going to email everybody. I want to try to get on podcasts and talk about workflows. Now, we didn't have a, later on, you have a sales team, a customer success team, a customer support team.

And you have to keep all of them appraised. There's some internal product marketing happening, right? Now that didn't, to me it was, we had one email support guy and I was like, Andy, here's a feature, try it out. Here's a loom. Tell me if you have questions. That was literally, you know, our internal communication and the sales, the customer success. We would circle up in a room. We'd walk it through. Derek would walk us through for 10 minutes. Any questions? No. Start integrating that in your thing, right? It's easy when there's seven of you, but you imagine, you know, again,

as a listener, if you're a hundred person or a 500 person or a thousand person org, someone has to be like, hey, this is what's happening and how do we communicate this to everybody? And that's, again, how I think of product marketing. Is that right? That's just my image of what it is. Yeah, I think product marketing, like product management, it depends a little bit company by company. But when I was at...

GoDaddy before, which is a much larger company, product marketing was responsible both for the internal training and communications and the external. And again, the more people you've got, the more time and energy needs to go into helping others help you

they're going to support the feature that you've shipped. So if they don't know what it does or how it works or some of the details, they're not going to do a good job and that's going to translate to the customer experience. Of course, if you are building features that are intuitive for enough customers, then there won't tend to be as many support requests. But yeah, the way you described it I think is exactly right.

Now we're going to play a little game. You and I are each going to answer a question, but you're going to answer first so that I can answer with mine second and I can say, that's why you're wrong. No, I'm not going to do that. Just so people know, you and I have known each other now for 10, eight years and we play D&D every two weeks. So there is a lot of rapport. So I'm going to be jokey and stuff. Don't let it make you uncomfortable if you're listening to this and being like, why is Rob being such a jerk to this guy? Yeah.

Question is, though, before we get in, because I want to get it, we're going to get into pricing and flywheel and how I often say on this podcast, like pricing is the number one lever in SaaS. And if you f*** it up, you can have a

an amazing business that should be a million dollar business that is actually a $200,000 business. I've seen companies do that and you can do the math. It could be a 10 million versus a 2 million. It's pretty easy. So we are going to dig in to how product and product management and all the decisions around that integrate with pricing and flywheel. But before we do that...

I want to ask you, when do you feel like a SaaS company should have its first product manager that isn't the founder? There's a rule of thumb that I use to answer this question. I've gotten it from a few founders. Customer.io works with many founders, as Drift did too. And it is, when can you afford to pay an employee

120, 130,000 a year. I'm assuming USD and it kind of depends on where in the world you're hiring. When can you afford? That's not the only question, but it's a pretty good indicator. If you're not at that point, then you don't need someone else trying to get close to details. You need to be closer to the details yourself. Because as we've been talking about, a lot of what founders do is what

product folks do, product managers are going to come in and do for you. So that's the usual rule of thumb. And then you can kind of take that deeper depending on, well, okay, but what if I got these projections or what if I have this specific problem that I want to offload to someone else like project management or something like, is that okay? So you can go more detailed, but product managers, the way that I have experienced it across my career, you don't need them until you're doing pretty well.

My rule of thumb across kind of tiny seed companies, they'll ask me or even just I'll get a question on this show, right? And it's a rule of thumb, can't be broken, is that you don't need a product person before a million ARR. And usually I see it between one and two million, somewhere in there. And it depends a lot on the product. Look, there are some very simple products out there that are kind of like a feature or a collection of a handful of features. And like, do you need a product manager? No. And then there's customer.io and Drip. Yeah.

And HubSpot and Salesforce and these very complicated, it's like, yeah, you probably need one earlier than not. Similarly, my rule of thumb for when do you need kind of a head of marketing or someone to run marketing that's not the founder, usually it's between one and two million. That's also my thing. And part of that is what you're saying, which is, well, then you should have the budget to do that, to hire someone good, because they are going to be $120,000, $150,000 or more. And...

Usually you just are at a point where you can bring someone in from the outside because the product's mature enough. It's not that mature, but it's way more mature than when you were at 240K a year doing 20K a month like products. So you need some founder level decisions at that point. You know, it's really, really hard. There's still so much fuzziness around the decisions. And to piggyback on that,

One of the things that I see non-technical founders struggle with is you get someone who's a subject matter expert in the construction industry, or in brick and mortar, or in just whatever, we could name any industry, legal. They don't have a developer founder, so then they go hire either an agency or a developer. And they hire the developer and they say, I have an idea for a thing that's going to help legal people do this. And it's like, great, what should I build? And it's like, well, build the thing that helps legal citizens do that. And it's like, okay, let's take a step back. Where will every checkbox...

Where will every setting, what will the top nav look like? I'm preaching to the choir here to you and to everyone listening to this podcast of like, you can't just hire a developer and expect them to build an incredible product, not unless they're Derek Reimer. I know like three in my life, you know what I mean, who are developers plus really good product people. I'm exaggerating, there are more than that, but you get the idea is that's where as developers

developer co-founders, I think we often get that intuitively of like, oh, we've learned to build software, therefore it's just a thing, you make decisions. And that's why I never called it product in my head, it was just what to build.

But when you're non-technical, you don't have that. You're missing an entire skill set, right? Yeah, and that's how my career and product started. I was not an engineer, I was technical. I was more of like a sysadmin. But it started because there was a really large, gnarly project that required a lot of alignment building and coordinating. It was a people problem first, I guess, is my point. And when you get into product, there are lots of different paths. But if you're coming in non-technical, it's substantially different. So let's...

Dig in to pricing and flywheel. When I asked you what you wanted to talk about on the show, because there's a bunch of stuff we could go down, you mentioned how much pricing ties into product. And I was kind of like, yeah.

Yeah, I guess it does. It's not something I would think of every day, but the moment you said it, I was like, well, of course it does. And I want to hear your thoughts on this whole concept because everybody struggles with pricing and everybody wants their pricing to be optimal, net negative churn, all the things I talk about, the cheat codes I talk about on the show. So why don't you kick us off? Yeah, I'm really passionate about this topic or this framework that I'm going to run through because...

It's something that helps not only with pricing, but also with decisions about how you prioritize and even how you organize as the company grows. It's this really amazing tool that you can do early on and it grows with you. It just keeps on giving.

The foundation of it is this concept of a flywheel. And that concept, I was using that word for maybe two or three years before I actually stopped and looked up exactly what it meant. So if there's anyone else in the audience like that, you imagine a crank on a wall that you're cranking with your hand.

and you crank it faster and faster and faster and at some point you let it go. And it's a self-sustaining crank at that point. You don't have to put any more pressure on it, it's just going to keep on rotating. So that concept is what the flywheel tries to embody. And the reason it ties into pricing is because if you can find a pattern of customer behavior that works like that flywheel, where customers will do it over and over and over again, and you can find a way to price that,

based on that behavior, that's how you can get some of the expansion revenue and the cheat code you were talking about with the net negative churn. That's how you achieve that. Not all companies can pull it off, but particularly in SaaS, there's a very good chance that you can. I think a lot can. Anytime you see usage-based pricing, that's someone who's trying to take advantage either of a flywheel or maybe it's just a cost-plus model where...

You're like, well, I pay for these text messages to go out to Twilio, so I'm going to charge you for that. Now, I don't know, we could go into some examples, Flywheel, sometimes that really helps. Why don't we start with Drip, because that's a fun one we can both relate to. And it's very similar to Customer.io. Yeah, I know you have a diagram for this one, and what we'll do is we'll probably have it in the

ex-Twitter snippet that we put out, but we will definitely take a still screenshot of it and put it in the show notes if folks want to add to startupsfortherestofus.com and look for, I believe this will be episode 752, possible it'll be 51, but they can peep in if they want to see the diagram we have, but describe to us what you got. We'll first share it and then describe to you what's going on.

It starts at the top with integrating customer data. Anyone who's used a marketing automation product will be familiar with this. Maybe you're putting in an email address or the person's name or their plan if you're a SaaS business, B2B SaaS. You put some sort of data in.

And then with that data, you craft messages that are personalized. So that could be personalized off a trigger. A really simple example is an onboarding campaign. So someone signs up, that triggers a message to that person telling them thanks for signing up and here are some features you should try, etc. That's at its most simplest. That's stage two. Stage one, integrate customer data. Stage two, send messages that's personalized with this data. And then the last stage, stage three, is personalize.

You want to influence the recipient of that message. So you send the message out to them and there is a behavior that you're hoping the recipient will take. So an onboarding campaign, maybe it's that they log back in two days later. Maybe a feature catches their eye and they're like, oh, okay, that's worth me reengaging with. Maybe it's like a case study or a customer quote that they resonate with that's going to push them back into your product and make it more likely that they're going to convert.

So that's step three. And at that point, you've completed the Drip flywheel because you're like, oh wow, I can put data in this system and set up this message automation once and it's going to continuously impact the behavior of new customers as they sign up, which is great for my business. That's amazing. So maybe I'll put more data into Drip or I'll use more of the data that I've already put in to send more and different kinds of messages that are going to influence more and different types of behavior.

And for Drip and many marketing automation products, we price on profiles or people or contacts. Subscribers, whatever. Subscribers, yeah. See, this is how you know I've been a customer for five years.

We have five names for the same thing. Exactly. And again, the more you put in, the more you pay. So there's some sort of starting fee, but the expansion revenue comes in. With companies like Drip and certainly customer, what this results in is enough companies are expanding their profile account, enough companies are running around this flywheel successfully to offset the companies that are not and end up churning. And the

That's why you can sometimes have early cohorts of customers, I know Customer.io does, that are still paying the same amount of MRR as they were 10 years ago, even though maybe 20%

of the companies have stayed with the product. So that's kind of the power of attaching your pricing to this flywheel. If you have that pattern of customer behavior that you can identify that makes your customers successful and that you can fairly charge on. And that last part about fairly charge on is where the rubber meets the road and that's where this kind of can fall apart for some businesses. But most that I've gone through, you'll be able to get something pretty good.

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So I want to pop in here. The reason that Drip charged per...

contact subscriber. I'm going to say subscriber because that's what we called it when I left and then they renamed it when they went to e-com, it's person now or something. But the reason we did is because I saw the ESP market and I was like MailChimp and HubSpot and whoever else, Infusionsoft and everybody charged per contact or subscriber.

that's probably the way to do it. And I was aware of net negative churn and all that, or of expansion revenue and net negative churn, but I wasn't fully aware of how powerful that would actually be. That's why we did it. There was no more thought to it, and it worked. Hey, I got a little lucky. I was smart a little bit and got a little lucky is really what happened. Could an argument be made based on what you're saying here, which is,

It's about customer data, not about, I mean, you know, you have this flywheel of like integrate customer data, send the message and then influence the behavior. So could I have, should I have charged based on customer data, not number of subscribers? You know, how do you know? Like, is it so clear from this discussion that it should have been per person rather than like, what if...

a person, a subscriber has 50 data points, you know, 50 attributes, right? Or 100 attributes or 1000. Can we describe, you know, charge on that? How do you think is that when fair? Is that where fairly comes in?

That's where Fairly comes in, but it adds another dimension and that question's kind of awesome because at least in marketing automation, folks have tried it different ways. So we actually have some results of the impact of that. So Segment is one example. They're a CDP, but they've added marketing automation to their suite. Segment.com is a customer data platform. I'm again not sure if the whole

audience is familiar with that, but it's about aggregating all of your data in one place that you might want to send out to one or more marketing tools like Google Analytics or Drip. And they charge by API call because that's what they do. They're like, okay, well how many API calls? Yeah, exactly.

They were an engineer-first company, so they were like, yeah, API calls, they get that. They went along for a while, and I actually got to talk with one of the pricing folks who was involved in what I'm about to describe, this pivot. It was okay, but they weren't growing that fast. They started doing some pricing work, and the insight they got out of it is a lot of the buyers of their product were marketers themselves.

at this point who were like, "Oh yeah, my engineers are a pain to work with. They'd never want to work on my stuff. I want to get stuff into Drip or wherever else, into Google Analytics, and they're always kind of bothered by it. So can you sell me this product that my engineers will like and they'll integrate with once and then I can take it and connect it to the various different tools that I want. I don't even have to bother engineering."

And that message resonated, but then when they were asked, "All right, great, yeah, totally. So how many API calls do you need?" The blank stare comes and they have no idea. It's not, and then they lose the deal. So the insight was charged by person, or they called it monthly tracked user, or MTU, because Google Analytics has that concept. It's not a very good market name. Yeah, it's not a good name, but it's the one that Google Analytics has, yeah.

And so they were like, well, that's something that's familiar to them. So that's where some of the art over the science comes in, where you want to figure out what is going to make sense to your buyer and then price based on that. Yeah, okay, that's super helpful. I can jump into theory a little bit more because oftentimes when I'm sharing this kind of concept, it's like, well, okay, this sounds like it's going to be interesting, but how am I going to apply this practically to my business?

There is a pretty straightforward method that I've seen work for several folks, which I can walk through. First thing you want to do is find your best customers. Maybe that's your highest paying or your highest growing customers. You can start with just one. From that one customer, you want to ask yourself, what are the actions that they do in my product every week?

For some products, it's like every month, like marketing automation, it doesn't always have as close of a login cycle. But what are the things that they're doing over and over and over again? That's the key. And once you've identified that,

Then you want to try and distill that into this cyclical pattern of behavior. Going back to the simpler drip example, they put data in, they send a message off that data. That data actually influences behavior and they can measure that. Whether it's by a conversion or some other thing that's measured in the product that says, yeah, someone clicked on this thing. Then that's the movement that puts them back into the data part of the flywheel. Pick one of your highest paying customers,

look at what they're doing on a recurring basis, and then figure out what the pattern of behavior is. Less than five steps, ideally just three, even if it means cutting some stuff out and cutting some corners.

And the one requirement when you're doing that is to make sure that each step naturally leads to the next. Like when you're telling a story about it, it makes sense to you. Take some thinking. A lot of times I see people kind of come in and just jump straight to a flywheel and they're like, yeah, this is, you know, they log into my page and then they search for a document and then they click to open the document or something. Like there's some fairly simple pattern of behavior.

And that's where the last part of this flywheel exercise comes in, which is once you've identified this recurring pattern of behavior that you think represents how your customers get value out of your product, then you have to ask yourself, could I charge based on that behavior? And if it sounds totally insane, like Google Docs, for example, like, oh, we're going to charge you for every search that you run.

Well, that seems kind of insane. Who's going to accept that sort of pricing? I don't get value every single time that I can quantify off of that. That's where you might need to pivot your flywheel a little bit and say, okay, well, that behavior is not price worthy, so what else could I potentially try? If you can get that nailed down,

that's where you can answer that question. Can I turn this into an expansion revenue engine? Which is really what the flywheel is meant to materialize for your business. And if you can do that, then all you've got to do for your product strategy is be like, why aren't people going between each step of this flywheel? Why aren't they? Oh, it's because this is too hard. Okay, what are we going to prioritize? Making that easier. Great. And then that's going to accelerate your flywheel, which is going to accelerate your expansion revenue. And that's going to grow your business.

That's the key. The two are linked. Yeah, yeah, yeah. If they're disparate, if they're two different things, if you're charging not for anything in the flywheel, then you now have to optimize the flywheel to get people onboarded and to improve retention. And then pricing is separate. And what you're saying is if you can tie the two together, your job is so much easier. Yeah, it's so much easier. And you just don't have to, you have to not...

mess it up. But a lot of times, like it's one of the problems with user-based pricing is you buy it, you're one person, you're always going to be one person. Like maybe a company is going to come in and your company is going to grow and you'll want to add more people to it. That's fine. But it's not tied to any pattern of behavior and you're going to grow slower. Yeah, that's interesting. When I talk to founders and I'm trying to help them with their pricing, sometimes it's

a first crack of like, well, we kind of got to go with our gut on this and let's make it up a little bit. Or if they know something's off, which is very common. Like with new tiny seed batches, there's usually like 60, 70% of the batch is like, something's off. We might either need to raise or like our value metric is off or like there's something or I have too many value metrics or someone with like...

five value metrics and I was like nope nope nope there's no way you need all these and he was like oh well like this one's for resellers and I was like then have a completely separate pricing page for resellers and move all that over there because you do not want all that cumbersome here and I think we get from five down to either one or maybe two

And the second one was more of a, with an asterisk of like within fair use. Like it was kind of really simplified. And I think, do we know what's right? No. Do I think it's better? I do. And now he gets to experiment with it and see over the next three, four, five months if it feels right. You know, and I think that's a...

That's a big deal. I used to say, this was back in the Hytale days, 2012, 2013. So was that almost 13, 12, 13 years ago? I remember doing a talk and saying, what I'm about to say is going to be so obvious, but it was not obvious. No one was saying this. It was not obvious 13 years ago. I was like, you should be making more money. You should be charging more money the more value your customer gets from your product. And it's like, okay, that's cool. And again, I say that today and it's like, well, obviously. It was like, I've never heard that sentence ever, right? And then...

it's like, okay, so what value do they get? What is the value, right? What is the value of an email service provider, right? Email marketing like Drip. Is it...

Because you and I consider in brainstorming, we'd be like, well, it's the dollar amount they make off of the emails they send. Maybe, can you track that? This is where it comes back to like, can I track that? And can I charge based on that? If I'm not doing the payment processing, probably not, probably can't charge on that. You know, and then it's like, so is it the revenue? What if someone has an email list and they're a blogger and they don't sell anything, really? They sell some courses maybe, but like a lot of it is ad revenue, for instance. Well, then that doesn't make sense either, right? So then it's like, well, is it number of emails sent?

Well, maybe. And actually, that's what SendGrid does, right? But they're more of an API. There's something about, you know, I don't know why the whole industry landed on people, subscribers or whatever, but that does, the beauty of subscribers versus emails sent is I don't know how much emails sent goes up every month, every month, every month for different accounts. But I do know that the ones that are succeeding, the customers that are succeeding, they do add

subscribers every month. You know what I mean? Not every business can have the amazing, like it's best for, it's good for the customer and it's good for the business.

it's actually really hard. You can often find pricing that's like, ooh, this is optimal for the business and no customer is willing to pay. That comes back to the, I think you said fairness, is it, right? Yes. Or what's so great, I have founders who come to me, usually not tiny seed founders unless I'm telling them to change their pricing, but they'll say, well, the reason that I'm a project management solution, all the other project management solutions charge based on either seeds or projects or something like that. And the reason that people come to us is because we're unlimited all that stuff.

And that's why I have customers. So I can't stop doing that. And I'm like, you are building a terrible business. You are not increasing, you know, they're getting more value and they're not paying you. This is a, you're going to cap at 5K MRR or 10K MRR. Like you're never going to make it to seven or eight figures because it's too in favor of the customer. Your pricing is too generous, right? So threading that needle, as they say, is harder than it sounds.

Yeah, it is. And that's also when thinking about different businesses to start, this is an interesting exercise to play around with. Session recording is an interesting one, like Full Story or LogRocket. I think there are a couple startups starting there. One of the best things about that model is it's usage-based based on sessions.

And that makes a lot of sense to customers for the most part. They're willing to do it, so you're going to be able to get some of that expansion revenue. Another interesting one, and I share it only in case it sparks something, Intercom has their AI-powered chatbot. And they've got an interesting pricing model for that, which is they charge based on successfully resolved chats.

as marked by the user. Did we solve your problem? Yes. Which is interesting because that system feels like it could be kind of gamed, but it is something that can be measured and it's something that the company itself isn't selecting, although perhaps it could influence

That's on the spectrum of not fair at all to super fair. That's on the super fair front. I actually am curious to see how their expansion is working. It's a fun story. I saw a screenshot of a customer support tool. I think it might have been Help Scout. Yeah.

which we used back in the day at Drip, and they were moving their pricing from seat-based, which they've been forever, to number of tickets responded to or something like that. And people were like, rage quit. And this was within the last few months. And I hope it's helped Scott, I hope I'm not throwing him under the bus, but it was one of those startup-y ones that has become much more prominent.

And I was like, oh, I wouldn't, no, that's too far. That is not fair anymore to me. Unless you, now if you start that way and everybody knows that going in, maybe, but like to change now from seats after having been in seat-based for 15 years to suddenly that, it's like, oh, that's a real, that's tough. It's a hard sell, especially if you are raising your prices by doing that. And that's the one way I could see it potentially working if you're like, hey, we've got this new, yeah, a new model and it's actually going to save you money.

Then you just hope that you're not again screwing your business because that is then a heavy risk. Mixpanel, for anyone who uses that, they may have experienced their kind of pricing back and forth, which is just unusual. I haven't seen that very much, but they started charging by events and

And then they were like, you know what, that's not fair. We're going to charge by MTUs, like segment, or by people, unique people. And then we'll put a very generous cap on the number of events you can log against a person. And they did that for two years. And then the founder updated, or the CEO was like, hey, just kidding, we're going to go back to event-based stuff. And the short version is because they had to manage

make more money than they were able to make off of to use. So it's a risky thing. But also, like you were saying at the beginning, if you can get the pricing and packaging right, I don't know, sometimes it's like 80 or 90% of the money challenge. And even as you're kind of constructing the business, just thinking about like, am I actually going to be able to charge for this thing? That's almost all that matters at the end of the day, if it's a business that you're creating. Yeah.

Brendan Fortune, thanks so much for joining me on the show. If folks want to keep up with you or get in touch with you, they can hit you up on LinkedIn. You are Brendan Fortune.

And you were telling me offline if people have thoughts, comments, if they think fly pricing and flywheel is BS, right? Or if they think it's great or have questions, they can reach out to you. Yeah, yep, absolutely. I love to discuss it and there's always room to improve some of the process of pulling this thing together. All right, thanks again for joining me, man. All right, thank you.

Thanks so much to Brendan for coming on the show. He shared a link to his Miro template and an image will be in the show notes, all the stuff we were kind of talking about during the episode. He was very generous.

with his time. In addition, a reminder that if you have any type of product questions, product management, deciding what to build, when to build, how to market it, how to communicate it to your team, just anything around product management, Brendan is an expert. And if we get enough questions, I will have him back on the show to answer those. You can send him to questions at startupsfortherestofus.com.

or head to startupsfortherestofus.com, click Ask a Question in the top nav, and of course, put Product Question in the subject, and I'll get him back on the show. Thank you for listening this week and every week. This is Rob Walling, signing off from episode 756.

Hello, dear listener. You found the hidden track on Startups for the Rest of Us, episode 750-something. In this track, I'm going to ask Brandon Fortune five trivia questions about 5th edition Dungeons & Dragons. For those, in case I didn't already say it in the episode...

Brendan has played in my D&D game with Derek Reimer, who listeners of the show know, as well as a couple other founders here in the Minneapolis area. And Brendan knows the rules pretty good. You know why I know the rules pretty good? Don't say it. Why do you know the rules pretty good? Well, there's games.

Gate 3. Baldur's Gate 3. So whenever Brendan references Baldur's Gate 3 at my table, I force him to drink something. And it's not always alcoholic because, you know, we need to be responsible kids. But BG3, it taught you the rules. It did. That's a good game. Yeah, it is actually. I've seen it. I've never played it. All right, so let's dive in. We're going to go from easiest to

To hardest. And obviously, if you've never played 5th edition D&D, you don't give a crap about it. Just skip to the next podcast. This is just fun, people. We're just, we're chilling. The first question. What ability score is used for ranged attack rolls? Dexterity all day. Yes. Final answer?

Final answer. Do you need to phone a friend? Not yet, although I have chat GPT up. I'm going to try not to use it. Don't you dare use it. It'll make me sound so smart. All right, fine. You got one out of one so far. Ding, ding. Yes. Second question, getting slightly harder. What saving throw is required to resist the fireball spell? Constitution? Incorrect.

It is dexterity. It was a trick because the first and the second answers were the same. Fireball. Wrecked. Fireball. One out of two. The best you can do now is 80%. B minus. Nice. Next question. Getting slightly harder. What is the maximum level a character can reach in a single class? I should know this, but we're so far away. I'm going to say 10%.

I'm watching your face. 10, 11, 12, 20. The answer is 20. Yes, see, that's what I said. Got it. 67% right now. You have a D+, which I'm sure was your GPA. I got to beat Derek, so what did he get? I don't remember, actually. We need to look back at that episode. Fourth question. How far can a character typically jump with a strength score of 15? Wow.

Long jump. 15 feet. That is correct. Oh, wow. Okay. I've never jumped in our game. A character can long jump 15 feet equal to their strength score if they have a 10-foot running start. Look at that. Okay. The fifth and final question. Oh, this is brutal. This is really detailed. How many spell slots does a fifth-level wizard have for third-level spells?

I think just one, two. Yeah. One. So here's the thing. I'm not going to hold you to this one because that's just not fair. It's two. But like why would you memorize? Who memorizes that? No. All right. So how about this is your fifth. Which condition prevents a creature from taking actions or reactions? Incapacitated. Incapacitated.

So here's the thing. Paralyzed? But that's incapacitated. I think you're right. Is incapacitated? Because the answer that ChatGPT has is stunned. But I think paralyzed, but I think wouldn't paralyzed do the same thing? This is, this is, I'm going to give that to you. Okay. I think there are, because I think there are multiple answers is my gut. Yeah, because a lot of things could cause stunning things.

Well, stunned is also a condition, but as everyone knows who plays at my table, I am the dungeon master, and I barely know the rules of Dungeons & Dragons. That's the way to play. That is the best. So you got an 80% solid B-minus way to show up. Thanks for playing. Thanks for having me, and I'm going to rub this in Derek's face. I don't even care what he got. I'm just going to say that I did better. Just be like, I beat you. I did better than you. Exactly.