Category Archives: Entrepreneurship

10 Rules of SaaS that will make your startup journey easier

7 December 2023

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I’ve been working on SaaS products for nearly 15 years, which feels kind of crazy to write. While I’ve worked on a lot of very cool products and helped many other PMs over the years, it doesn’t seem like it’s been that long.

What lessons have I learned?

The other day, a friend asked me what rules I’ve learned that I would apply from day 1 the next time I start a company. It got me thinking, and once I jotted my thoughts down, I realized it was worth sharing as a post here.

There is no need for a lengthy preamble, so let’s get right to them.

10 Lessons for Scaling Your SaaS Startup Faster

Consider this a checklist of simple tactics and approaches that I’ve seen first hand work repeatedly. Maybe your situation is different, but they’re all worth at least experimenting with, and very likely moving up your priority list to do sooner.

Many of these I learned the long and hard way, and wish I had done sooner, which is a big part of why I decided to write and share this post. It’s the kinds of things I coach my clients to think about regularly, so this is also a reference for them in the future, too.

I hope you learn a thing or two, and make a few extra dollars faster because of them.

1) Start charging as soon as you can. Earlier than you think you can.

One of the greatest mistakes I see founders make is to wait to charge money for their startup. It crushes me to see friends and mentees waste months, or in some cases even years, of their lives building their product for free, avoiding the hard question of, “Will anyone pay for this?”

The fact is people will use a lot of things when they’re free that they’d never pay for. And equally important, you don’t learn many key things when you put off the discussion about them paying:

  • What is their buying process?
  • What kind of budget do they have for this sort of problem?
  • Is this problem important enough that they’ll pay for it?
  • Can your user even make buying decisions?
  • Will they pay enough for this product to make your business viable?

In one particularly sad case, a friend of mine went years without charging for his product. In the process of chasing the mythical startup where he’d charge based on progress next month, he not only ultimately had to shut down the startup, but he destroyed his personal credit, his wife divorced him, and he lost custody of his daughter. I wish I was exaggerating any of that.

Don’t be a cautionary tale. Cross the penny gap as soon as you can.

I’m still amazed that I got customers to start paying for my startup, Lighthouse, when we were a barely functional CRUD app. You could post some notes, and we sent a morning reminder email, and that was it. Yet, people not only paid, but my second customer ever actually prepaid annually. Quite the vote of confidence.

The Bottom Line: Start charging customers before you think you can. Often, you can even get them to pay *before* you build anything. But you won’t know unless you ask.

2) Offer annual subscriptions from day 1.

Now that you know you should start charging as soon as you can, and earlier than you think, the next move is to have an annual plan.

You may be surprised to realize that many people prefer annual agreements; it’s standard for procurement departments, and if you need reimbursement or approval to spend money, you only want to go through the hassles once a year.

And that’s before you get into basic persuasion.

The single most profitable, highest impact experiment we ever did in the history of Lighthouse was an email we sent to customers.

After 3 months of them paying monthly, we sent an email that essentially said, “Looks like you’ve been enjoying using Lighthouse. Why don’t you save yourself some money and buy an annual plan?” Our annual plan gave them 2 free months, and that’s all they needed to think it was a no-brainer to pay annually.

Some founders I’ve met are afraid to offer annual plans up front, and to some extent, I thought people wouldn’t want to. But the fact is, if you offer it, some will say yes, and if they say no, you’ll learn helpful things anyways.

The Bottom Line: Offering an annual plan can help you grow your revenue much faster. Especially if you’re bootstrapping, this can provide critical rocket fuel to fund and grow your business, all while lowering your churn rate (they can’t cancel for 12 months, after all).

Apple makes a little bit of money from services. Can you? (SOURCE)

3) Charge for services you provide. People will pay.

You’ll notice the first two tips are all about helping you make money faster. This third one is also about money, too.

The fact is, you need revenue to grow your business. It’s the oxygen to keep your business going. (Obviously.)

Investor capital only goes so far, and getting that next round of funding is usually related to how much revenue you were able to generate with the last round of funding.

And if you’re bootstrapped, more revenue lets you quit your job sooner, or fund more growth faster.

Either way, more revenue sooner is a net good thing.

Yet, some people frown upon services revenue. They think charging one time costs for things like setup, training, manual work, custom integrations, etc is a bad thing because it’s not recurring revenue.

However, if you look at lot of successful publicly traded SaaS companies, services revenue is a real part of their total revenue each year. No, you don’t want it to be 90% of your revenue, nor do you want to become a custom development shop for anyone, but you can easily make 10-20% of the value of your contracts include one time services revenue. This is on top of whatever your annual subscription rate is.

This is awesome for you for a few reasons:

  1. It’s free money on top of what you expected to make: You probably have to do the things you’ll charge them services revenue for anyways. Now, you’re making money for doing it. If it’s a $10,000 or greater deal, they probably expect it, so why not ask for it?
  2. It’s a second negotiating point & an easy place to discount: Procurement is usually rewarded for saving money on the total contract, not necessarily an individual point. That means when they negotiate, you can discount the one-time, services revenue, while preserving the price of your recurring subscription. You can also use tactics like telling them you’ll waive it if they close today.
  3. Renewal time is easier: While in year 2 you may have less services to charge for (or none at all depending on what you provided in year 1), you’re hopefully growing your subscription fees. With the services price down in your contract, you can often then grow your MRR in year 2 without substantially increasing the total cost to your customer. This is win-win as their books look better, and you show growth on your side.

The Bottom Line: Services revenue is your friend. It’s free money for any deal you’re negotiating of reasonable size, and you can ask for it as soon as you start charging customers.

4) Use software to make yourself more efficient.

One of the great breakthroughs of the last decade is how software has been eating the world; there’s now software to help you do just about everything. This saves you time, money, and allows you to do more with a smaller team than was ever possible before.

It’s amazing to me how much my team and I have been able to do never being more than a team of 7, thanks to the fact that virtually every department has software to help support it.

A few of my favorites include:

  • Intercom: Covers all of our help docs, customer support tickets, in app messaging, product tours, and chat on our marketing site.
  • Gusto: Simple payroll so I never have to think about paying employees or contractors, nor worry about tax time.
  • Upwork: For easily finding high quality, inexpensive workers in other countries. Takes care of paying them, monitoring their work, and helping you run an efficient hiring process each time.
  • Digital Ocean: So easy to use that as a non-technical CEO, I can go in and make upgrades and check or fix things in a bind.
  • Strikingly: Simple landing page tool, which has allowed us to build landing pages that look great even with no designers or engineering involved.
  • Stripe: The easiest payment processing setup I’ve seen, that makes it easy to manage your subscriptions, handle refunds, and use across multiple offerings you have.

And I could list out dozens more, all of which combine to save us time and money.

Over the years, I’ve embraced this idea more and more, which has led to a few simple rules for adding software to our stack:

  1. Anything that costs less than $50/month is a no brainer: Any team member can ask for the company to pay for a tool at that price or less. If it helps them do their job, it always pays for itself. All I ask is what it is, and an invite so I can enter the credit card.
  2. With a strong case, most other tools still are purchased: Above $50, we have a quick discussion about it. The team member requesting it has to help us calculate the benefit, and as long as it generates more value than we pay for it, we’ll purchase it.

I’ve rarely regretted buying any software to help my team and I, and even when it doesn’t work out, it’s usually tool specific, not use case specific. That means we cancel one tool to switch to another, similar one that’s better/faster/cheaper.

And all of this was learned before AI came along. Now, I’m rethinking this further, as now I realize tools like ChatGPT and Claude.ai can automate and speed up things I never thought software could.

The Bottom Line: Software helps you and your team go faster. Don’t slow yourself down by making it hard to add helpful tools to your stack, or being penny wise and pound foolish.

5) Marketing has to be a part of your plan from the start.

At the peak of the bottoms up SaaS era (which I consider roughly 2010-2020), it was often thought that building a great product that can expand virally in a company was the most important thing you could do. Some even thought of freemium as a form of marketing en lieu of other strategies.

While some of those rules still apply, it’s become clear that marketing must be a part of your plan from the start. Building software has gotten easier and faster, and AI is rapidly bringing commoditization to many markets, so you cannot ignore distribution.

Build it and they will come was never a particularly great strategy, but now it’s fatal. I think at this stage, teams should think in the frame of “Technical Cofounder” and “Distribution Cofounder”, because frankly, distribution is the most important thing a founder can work on if not building the product.

The good news is, all that effort investing in marketing early on can help you in a variety of ways:

  1. Sourcing customer interviews: I used this blog to source the 40 managers I interviewed before we started building Lighthouse. If you can write a blog post, create an ad + landing page, or otherwise get attention for a problem, you can funnel that towards interviews and customers.
  2. Easier trial and sales: Even if you have a great network, and you’re building in an industry you know, you’ll run out of friendly people to try your product pretty quickly. If you’re spinning up marketing efforts from the start, you can grow a lot faster.
  3. See faster what you’re up against: Much like you don’t know if you have something until you charge money for it, you don’t know what marketing will work until you try it. Finding out your costs of acquiring a lead are much higher or lower than you expected can help you understand the viability of your business much faster.
  4. Lay a foundation sooner: Especially if you want to try SEO or social media as a key tactic, it can take some time for it to start to pay off. That means the sooner you start, the better.

While I started thinking about marketing from the start of my last startup, I will be even more aggressive next time. Instead of blogging on my personal blog for the first few months, I would have started the company blog from the day we bought our domain. Every bit helps and gets you to escape velocity in your marketing faster.

The Bottom Line: Don’t wait to figure out marketing. You need to be thinking about it from the start to be sure you really have a good business that you are well positioned to grow.

6) Choose your industry wisely, and learn all about it.

Spotting a problem or an opportunity to make things better is a great way to come up with startup ideas, but it’s not all it takes to be sure you’re onto something special.

It’s really important to think through the business you’ll be building and the industry you’d be working in. They all have their flaws, challenges, frustrations, and benefits. Make sure they’re things you’re well suited to tackle, and would enjoy tackling.

A few examples of pitfalls that I’ve seen stop founders in their tracks:

  • Two introverted engineers start a company that turns out to sell best at trade shows. It was not a good fit and exhausted them quickly.
  • A product minded founder built an easy to use product, but couldn’t find a way to reach his target market consistently, because they rarely were by a computer.
  • Two founders who loved helping their end user found they couldn’t stand dealing with the buyer for larger deals, who had different goals and incentives.
  • Founders looking to pivot their business thought they had a great idea for a different department, only to discover that department had no budget for what they could do.

The point isn’t that you need to find the perfect market; that doesn’t exist, because they all have their flaws and challenges. However, you can save yourself a lot of frustration and heartache if you do your homework up front to understand your market more clearly.

When evaluating an industry or market, be sure to find out:

  • Who is your end user?
  • Who is your buyer? How do they like to be marketed to and what is their purchasing process like?
  • What features are absolute deal-breakers for them, or the most important ones for their current solution?
  • What do the largest companies in your industry do best? What did they get really right?

I know it’s easy to think that your one insight will carry you to winning the market, but that’s typically only part of a bigger picture. Taking the time to get to know your industry can help you place much smarter bets early on, and make sure it’s a mission you want to be on for the next 5-10 years.

The Bottom Line: Do your homework thoroughly to really understand your industry. Read public company quarterly filings, interview people all through the value chain, and look at companies that have succeeded and failed in the market to truly learn.

7) Raise your Hierarchy of Value and avoid “nice to have”

Other than not charging money soon enough, the number one mistake I see founders make is starting a business that’s actually a “nice to have.” In fact, those two mistakes tend to go hand-in-hand.

There are a lot of things people will use for free that they will *never* pay for. Unfortunately, this is particularly true in the world of SaaS. But is it really SaaS if people don’t subscribe?

As I’ve seen many startups come and go, rise or fall, exit or shut down, it’s led to a theory on how to evaluate the value of a startup:

The point is, you have to think about the value you’re providing from the start of your company.

The clearer, and more important, the value you provide, the stronger your business is. If it’s only nice to have, or it’s a very vague time or money savings, then you’re likely to have a hard time (hence the grim reapers in the image).

However, all is no lost. Often you can raise your value over time, jumping or expanding from problem to another. In particular, I’ve seen this in HR tech, where a small tool grows into a full suite for performance management (most companies feel they need annual reviews), and then ultimately adding payroll (a legally obligated action) to rise all the way to the top of the hierarchy.

There’s a lot to this, which is why I wrote a whole post on the hierarchy of startup value and what to do about it here.

8) Remember the buyer vs end user dilemma

Of all the lessons I’ve learned in SaaS, this was one of the hardest for me to learn. It essentially comes down to these fundamental truths:

  1. Just because you solve a problem for an end user, doesn’t mean a buyer cares.
  2. If you don’t give the buyer what they need, it often won’t matter how much the end user likes what you do.
  3. The bigger the buyer, the further distance they typically are from end users. They may not even speak with them at all.

Until you understand both the buyer and the end user, you don’t know what your business’s potential really is. Especially as the bottoms up SaaS era winds down, you can’t shortchange what buyers are thinking. When budgets are tight, markets consolidate, and IT re-asserts they role in decision making, you can’t count on front line users of your product to get the deal done for you.

Beware startup siren songs…

Who is your buyer? How far are they from the end user?

These are the two most important questions you need to ask when starting to evaluate a SaaS business.

That’s because the farther removed they are from your end user, the more likely you’re at risk of a Siren Song; in cases where there is a large gap between buyer and end user, the end user likely has a terrible experience and is not consulted at all in the buying process.

That’s a dangerous temptation for founders, who see the end user experience and then think that’s a great startup opportunity.

A great example of this is the performance management space. That’s because:

  • HR is the buyer
  • Managers and Employees are the end users
  • HR doesn’t consult with managers and employees when choosing their performance management software
  • Most performance management software is painful for employees to use, especially at large companies (just ask anyone who has ever used WorkDay or Ultimate Software…)

When I started Lighthouse, I was so singularly focused on the end user (managers, in our case) that I didn’t even think about the buyer. That lead to some painful and challenging lessons as I found our product was ill equipped for what the buyers (HR) really wanted.

And it’s not just about the features you have, or are missing. It’s also the structure of your organization, the buying process, and your positioning.

What resonates with your end user, and how you acquire them, can be totally different than what your buyer wants. If you’re not careful, you can have your entire company structured in a way that is counterproductive to your long term growth goals.

That’s why this is one of the most important lessons to keep in mind from the start.

The Bottom Line: Learn who your buyer is, why they buy, what their process is, and the features that matter to them as early as possible. You may be surprised to then realize that the incentives the buyer creates are why the end user experience looks like it’s so appealing to start a company to solve (but will ultimately limit your potential unless you satisfy the buyer, too).

9) Customer service is every startup’s greatest advantage.

Have you ever used enterprise software and sent in a support ticket? Often, it will take days to get a response, and at best you get a work around, but never an actual fix of the problem.

For many people, they deal with these kinds of problems and response on a daily basis.

That means that when they try a startup’s tool, and they see the startup actually listens, and actually fixes the problem, or later adds the feature they requested, they’re overjoyed. Because of this, they often become incredibly passionate and loyal to the startup, even if it’s missing some features or has a few wars.

Roll out the red carpet and fix mistakes fast.

It never gets old seeing customers respond positively to startups showing them care and attention. Customer service is a huge asset for startups, whether founders directly talking to customers, a highly responsive customer success team, or engineers that take pride in fixing bugs.

One of the best things you can do in your early days is to lean into this advantage. The bar may be low to be better than your average enterprise tool, but you have an opportunity here to really wow your customers.

To do this, all you have to do is:

  1. Involve your team so they see and fix bugs: Make sure your engineers especially are aware of customer feedback. Let them see the customer’s own words. “A player” engineers take pride in their work and love telling customers they saved the day and fixed or built the thing that was important to the customer.
  2. Make it easy for people to contact you: One of the dumbest things I see startups screw up is making it hard to contact them. Make it easy! Whether you use Intercom, or another tool, the easier you make it for them to contact you, the more valuable feedback and positive interactions you can have with them.
  3. Follow up and show you care: A lot of times, people just want to feel heard. It’s amazing how often even just asking a few questions to understand their request will make them feel special. Of course, if you then build the thing they asked for and follow up even a few months later, they’ll *love* you.

Best of all, doing this helps keep churn low and can cover for many limitations in your product. People love rooting for an underdog story, especially when, like a training montage, they see you continually getting better.

The Bottom Line: Customer Service is a huge opportunity for every startup to stand out. Lean into it and you can really build some amazing affinity for your product.

10) Set up analytics as soon as you launch. It only gets harder later.

When I ran product at KISSmetrics, I saw this problem all too often. Companies wanted to measure their product usage and run experiments, but they kept putting off starting. Then, by the time they realized they *must* set it up, it became a really big project.

At that point, they now had to think about either devoting a whole sprint to tracking everything in their product, losing a sprint of feature building or tech debt work. That’s a tough tradeoff to make when trying to hit key growth milestones, which often led to even more procrastination.

That’s why the best thing you can do is start tracking from the very first feature you launch.

In doing so, you can make it second nature to add a few events and properties to track every time you launch something. It’s very easy for engineers to add them while they’re already in that part of your code base, and you can make it routine to do so if it’s part of how you write out your product specs (as I describe here).

Bonus points: Build the habit of reviewing key metrics every week.

It’s amazing the difference a single email can make. While it’s great to be able to log into MixPanel, Amplitude, or another analytics tool to quickly look up a key number or funnel, it’s even better to have numbers you and your team can’t miss on a weekly basis.

That’s why one of the most useful things we did at Lighthouse was start having my virtual assistant go to a few sources to report 4-5 key metrics each week in an email to us. Here’s a snippet of part of it monitoring some of our key marketing metrics:

Thanks to this email, every Monday morning we knew if last week was better or worse than expected, how it compared to the previous year, and if there was an anomaly to investigate.

I’ve lost count of how many times we caught an issue we would have otherwise missed for weeks, as well as the many times we found something to celebrate.

The Bottom Line: Make measurement and looking at your data a central part of your startup from day 1. It will pay dividends for the rest of your startup’s life, and save you playing painful catchup later.

These are 10 lessons I’ve learned over the years that I keep in mind every time I work with a new client, and will remember when I start another company in the future.

What are the hardest or most important lessons you’ve learned? Share your advice in the comments.

Practical Product Ep 7: How to Supercharge Growth with Free Tools & Side Products with Michael Novotny

11 November 2022

Have you ever thought about building a free tool for your company? Do you want to build more buzz, get a ton more inbound SEO links, or drive signups and leads for your core business?

Or maybe you are a free tool skeptic, worried it will distract your team, take to much time, or not pay off?

I’ve always been curious about free tools, but haven’t been directly involved in many myself. So when I met Michael Novotny, who has become an expert in creating free tools, I knew I had to have him on the Practical Product podcast.

Michael is a product manager turned founder, who has helped build and launch dozens of free tools / side products now and studied hundreds of others with his company, Product and Build Co.

In this episode we go deep on this topic covering everything including keys to success, pitfalls to avoid, tons of examples, and how to convince yourself or your boss to take a shot at making some free tools or side products.

How to Use Free Tools & Side Products to Grow Your Business

Today we talked about how building free tools (aka – side projects) for your company can help drive major growth for your company.

Building these tools helps you a few ways:

  1. People who use your free tool may directly sign up for your paid product when they see you made the free tool.
  2. People using your free tool may give you their email address, which you can market to later.
  3. Others will link to your free tool, boosting your SEO through improved backlinks.

Michael shares a lot wisdom and experience doing these, and the most important tips are:

  • Build a portfolio: You need to launch many tools (ideally 4-5 or more) so that some will hit, and others won’t. If you only launch one, the odds work against you on the moon and stars aligning for you. 
  • Build in public/test with your community: To increase your success rate, validate and test the ideas you have for tools to see if they resonate and what are the most important things it needs to do to provide value. 
  • Use low and no-code tools: You can build and launch a lot faster using these tools, and since it doesn’t touch your core product, it doesn’t need the perfect architecture. 

There’s a lot more to this episode, so I encourage you to give it a listen on your favorite platform or in the player below:

Highlights of the episode include discussing:

  • (2:04) – How Michael discovered the power of free tools to drive sign-ups for another product
  • (11:46) – What are a couple of your favorite examples of these tools?
  • (16:31) – Cases where free tools didn’t work out.
  • (21:55) – Are there businesses that shouldn’t be creating free tools?
  • (29:05) – What is Michael’s Side-Product Framework?
  • (34:56) – How should PM’s think about budgeting for Side-Products?
  • (42:08) – How do you come up with good ideas?
  • (47:55) – How can you start to validate some ideas for tools to see if you’re on the right track?
  • (54:09) – What should people do to make these free tools successful?
  • (58:05) – What are the best ways to tie a free tool to your product?
  • (1:03:32) – How much ongoing maintenance should you expect?
  • (1:09:18) – What are your favorite tools that help you piece this process together?
  • (1:13:58) – Keys to convincing your boss or peers to try free tools.

Key Show Notes & Further Reading:

Case studies and examples of Free tools:

No Code and low code tools to help you build your free tools:

– Connect with and learn more about Michael Novotny:

Want to be the first to hear about new episodes of the Practical Product podcast, and blog posts I write about Product Management? Sign up here:

The Two Most Important Words for Product Managers to Use

8 August 2019

What does your sales team think of you? Does customer success enjoy their conversations with you? Or do you feel animosity and tension with them?

And what about with customers?

How about the squeaky wheel who sends in feature requests regularly, or the enterprise customer with contractual promises?

Product management is about relationships.

One of the biggest mistakes I see otherwise good product managers make is not managing internal and external stakeholders well.

Rather than building collaborative relationships, where everyone feels like they’re on the same team heading in the same direction, they sow seeds of tension.

As a product manager, any communication issues fall on you. It’s your job to build bridges, even on challenging terrain.

You can do that through a variety of tactics:

  • Product advisory boards, and regular check ins with key customers.
  • Peer 1 on 1s with key sales, customer success, account management, and other department leaders.
  • Regular updates, training, and collaboration on collateral creation for new and updated features.
  • Following the timeless of advice of Dale Carnegie’s How to Win Friends and Influence People.

Throughout those conversations, both internally and externally, there are two words to always remember: “Not yet.”

Let’s dive into the nuance of how 4 letters can make such a big difference…

“Not Yet”: The Two Most Important Words for Product Managers to Use

Remember when you were a little kid and you wanted something and you asked your mom or dad? How did you feel when they said “no”?

Chances are you were pretty unhappy.

We’re not so different when we grow up.

Just say no…to saying, “No.”

As a product manager, when you tell customers and colleagues, “no”, it creates problems for you now and in the future.

No is denying what they want.

No makes them feel unheard.

No is a wall between you and them.

And most importantly, no is the end of a conversation.

Where do you go after you say, “no, we’re not doing that”? You can possibly explain why, but the other person is likely already thinking about how they can either convince you to change your mind or tuning you out in frustration.

The Power of “Not Yet”

Four letters. That’s all that separates “No” and “Not yet”, but in reality it makes all the difference.

Not yet is, “we might do that down the line…”

Not yet is, “I hear you, but…”

Not yet is hope.

And most importantly, not yet is the start of a conversation.

“Not yet” builds empathy

If you’ve ever learned about the power of using “and” instead of “but” in conversation, you know that a simple change in word choice actually leads to a larger transformation.

By changing the word you use, you change the entire nature of your discussion the rest of the way.

When you say, “not yet,” it lends itself to explaining why. This is powerful because it helps them understand the choices you’ve made.

When it’s an internal stakeholder, explaining why can help them see the other priorities. I’ve lost count of the number of times that once I’ve explained what we’re doing right now already they suddenly are willing to wait on their request; you may even be working on something important to them.

Meanwhile, with customers, it’s an opportunity to build excitement and engagement. Maybe you can’t give them what they asked for right away, but you can tell them about some other things in the pipeline.

Often, a couple of the things you’re doing are also important to the customer. You can then offer them the opportunity to provide feedback on the feature as it’s developing, or early access. Either way, it ends up feeling like they’re coming away with something, even if it’s not what they originally asked.

Show your work.

A key part of all of this is that you’re showing your work to others. You don’t need to explain the whole roadmap, but even a small snippet can help people see there’s a solid foundation to the decisions you’ve made.  It also demonstrates the hard work and rigor of the product team:

  • Data driven: Good PMs know their numbers, so you can explain to them how the feature they asked for may have a much smaller impact than the current features you’re working on.
  • Customer focused: Whether you have an enterprise contract with deadlines due in 30 days, or are finally delivering on the #1 most requested feature, showing that what you’re doing is backed by real customer insights shows you’re a PM that listens to customers.
  • Strategic: Great PMs see the big picture, and help others see it, too. Concisely explaining strategy comes with practice, so use these “not yet” conversations to practice clearly explaining how the new API opens up thousands of leads a month, or how the onboarding improvements will drive more revenue to hit key company goals.

When you show some of your cards to your colleagues and customers, you help them understand your decision making process. While they may not always agree, they’ll often respect the decisions you’ve made a lot more than when all they heard was, “No.”

In my experience, when you show you have data, strategy, and customer insights backing up your decisions and bets, your colleagues and customers will trust you. Just like they expect you to trust them to do their jobs well, they’ll see plenty of evidence to believe in you as well.

Save your relationships!

This may seem like a small thing, but I can tell you from experience,  it matters a lot. No may feel like the expedient way to handle requests, but it comes with a long term cost.

Over time, saying “no” leads to resentment and may sour relationships. People you want to partner with to make launches successful and for everyone to hit their numbers suddenly avoid you, except when they want to demand and override your No’s. They may even try to go around you and talk straight to a designer or engineer to get what they want.

And since you represent the product team, it can even lead to inter-departmental drama and rivalries. Rather than engineering and sales being partners, they become enemies, with each side criticizing the other. I’ve seen and heard it too many times, and it’s really the fault of product managers on those teams for it becoming like that.

You can avoid being that kind of cautionary tale by taking the time to regularly communicate with other teams, stakeholders, and key customers. When you meet and talk with them, remember to use “not yet” so those relationships flourish and they understand your decisions.

Never underestimate the power of using the right words.

Why You Want to be the *Second* 1st PM

28 April 2019

Wait, what??? What is a “second” first?

If you’ve been a first product manager (PM) at a company before you know what this means. For the rest, let’s take a look.

What is a first PM?

The first product manager (PM) is exactly what it sounds like: it’s the first product manager hired at a company.

Typically, that means you’re taking over for one of the founders who is now too busy to handle the responsibilities.

In other cases, the company has not really had anyone serve as product manager, and finally hits a point where they recognize the team needs stronger product direction and focus than a variety of people can figure out ad hoc.

In both cases, that usually happens somewhere between employee #8 and 20. So the team is small enough to be nimble, but big enough to make some serious progress.

So what’s a *second* first PM?

Joining a company as first PM is a big risk. The company usually has some traction, but not a lot. They’ve likely raised some money (or have substantial revenue), but not tens of millions in the bank.

However, that’s not the greatest risk.

The greatest risk is that the founders that hired you don’t know what they really need.

Unfortunately, the first first PM often ends up being a sacrificial lamb so that the company can figure out what they really need in product leadership.

Today, we take a look at why it happens, and what product people considering being a first PM should think about before taking such a role.

The Unique Challenges of the 1st PM

The first PM is a special job. You’re coming in to bring order to chaos, and disciplined habits to a company with some (or a lot of) traction.

With that comes a lot of challenges starting on Day 1:

1) Metrics: You may or may not have *any* metrics, which makes decision making looking back hard. If there are some analytics implemented, you’ll likely be the first person to seriously look at them regularly and use them to make product decisions.

2) Resources: The team may or may not be fully staffed. Chances are you’ll be working with a mix of junior hustlers who were early and are “figuring it out as they go” and the first executives brought in to bring order and scale. In particular, you may not have a full time designer to work with.

3) Process: Unfortunately, what worked in the “Figure it out” mode of early days, doesn’t work so well with a dozen engineers and a growing roadmap. You have to work hard to get buy in so that a little process can help everyone’s work go more smoothly. Sometimes, founders can be the most resistant to this.

4) Founder Passion: Giving up their baby to let you run product can be really hard. A founder’s vision & gut for what is “right” has gotten them incredibly far, and now you need to work with them to chart the right course forward. There’s a fine line between executing their vision, and being stuck forced to build things they want that you know aren’t the most important thing.

5) Founder experience: If they’ve never worked with a PM before, they may not know what that really means. Given how vague product responsibilities and outputs often are, it’s not uncommon to hear “I like how this project/new feature is going, but I have no idea how you’re contributing to that.” 

Now, these challenges make the job uniquely difficult, but also can generally can be overcome as long as you don’t face too many of the above issues together.

Unfortunately, it’s their combination with the 2 biggest factors below that leads to a first PM’s departure, and a second 1st PM being hired.

Why the *first* 1st PM often ultimately fails

Most 1st PMs are experienced product leaders. Whether they’ve been a product manager for years, or started their own companies, they’re generally very T-shaped employees that know how to deal with a variety of challenges.

Despite this, being the first 1st PM still does not work out in a lot of cases. I’ve seen this firsthand and commiserated with fellow PMs who have been through it.

So what are they unable to overcome? Why do they ultimately fail?

1) The founders don’t know what they really want and need

The earlier a startup is, the more haphazard the hiring process is. At 10-20 employees, they often don’t have a recruiter (or often any HR) on staff, so they’re making it up as they go as they hire people. This means many hires are directly from their network or referrals from there, without a lot of vetting.

With all the problems that have built up leading them to realize it’s finally time to hire a product manager, they start asking around for product people they know.

Eventually, someone gets introduced to them that understands this early stage startup world. In the interview they’ll be able to point out some obvious problems the product or product team has with plausible solutions.

This makes the founder think, “Yes. I need this person to solve these problems!”

Unfortunately, when they hire this person, they later realize that while those problems did need fixed, they weren’t *the most important thing* they needed in a PM.

Instead, these founders slowly discover that the skills of the PM they hired don’t align as well as they hoped:

  • Market: Are they well-suited for the nature of your market? Do they relate well to your target customer?
  • Stage: Are they comfortable with where your business is in finding product/market fit? Pre-P/M fit requires a level of experimentation and exploration some PMs can be very uncomfortable with, and is very different work than post P/M fit.
  • Non-Technical: Is it a very technical product? Then your UX issues may seem glaring now, but won’t matter when you’re trying to make core feature innovations quickly.
  • Too-Technical: Is technology not the most important differentiator in your market? Then, a technical PM may relate well to a technical founder, but not bring the customer empathy or design skills that are more important in your market.
  • Rapport: The PM and the founder they report to have to build a very close relationship. If they think too differently, or clash in personality, it won’t work.
  • Culture: How the company operates often follows the habits of the founders. If they’re disorganized it can be very hard for a process-driven PM to bring in process and get buy in from colleagues if the founder isn’t supportive of those changes.

Hiring a first PM is like the story of Goldilocks; you have to try a few to find the one that’s “just right.”

Unfortunately, first PMs often end up being like Goldilocks’s first bowl of porridge; not quite right.

Given product management comes in many different flavors, it’s easy for founders to choose the wrong one for any of the above reasons, or similar ones.

Note: this post does a great job of grouping and explaining different types of PMs.

2) The company isn’t fully established

The other side of the coin is that this is still an early stage company. Even if at the time you hired them, the PM is the exact right fit technically, market-wise, and culturally, it still may not work.

Why? Because if your company makes a major change, so does the PM you need:

  • B2B vs. B2C: If you take the leap from consumer to being a B2B product, there’s a good chance that your first PM won’t be the right fit on the other side.
  • Moving Up or Down Market: Someone great at building for the enterprise with many stakeholders and permissions leveling may not be good at building for SMBs who are used to free trials, and a self-serve approach.
  • Solution format: If you were a consulting and services heavy business it’s great if they’re from that world as well, right until you want to build a product that stands on its own without any of that.
  • Industry passion: Just because the PM was excited by your original mission and industry does not mean they’ll still be in love with your business if you suddenly have a whole new customer base to work with that’s very different.

On top of all this, as other roles are hired, what the PM needs to do could change, too. For example, if you hire an amazing designer who loves usability research, then a PM strong in that is less important than another unfilled gap.

One person’s trash is another person’s treasure.

Due to all these factors we’ve explored, the first PM ends up being a very expensive learning experience for both the PM and the company.

The company learns all the things they really need in a PM, and the things they really don’t. They can now confidently write a much more specific job description, and will be more precise in how they source, filter, and evaluate candidates.

Meanwhile, the first PM is likely feeling pretty burned out and frustrated. They fought many unwinnable battles, and in the end saw that they were never in a position to succeed. They may have even raised concerns during the interview about issues that ended up being foreshadowing of exactly what would go wrong.

This first PM has a short, challenging stint at a company on their resume, and leaves either saying “What if?” or “Glad I’m outta there.”

The second first PM then reaps all the benefits.

The glory of being the *second* 1st PM

Being the second 1st PM has all the benefits of being the first PM, but few of the drawbacks.

There are many reasons it’s fun and tempting to be that first PM:

  1. Prestige: It’s really cool to be the first product person in the door. You call many of the shots, you get to bring in process *your way*, and put your stamp on a product with some momentum.
  2. Equity: A good first PM can get a sizeable stock grant (0.2 – 1.0%) depending on pedigree and need, so the upside can be high.
  3. Challenge: If you like rolling up your sleeves and making something from (almost) nothing, this is an amazing role, with other awesome, hungry, hard working people to go with it.
  4. Growth: If the company succeeds and grows (which you play a key role in), you get to build a product organization, growing into a management track.

And unlike the *first* 1st PM, you are being hired with a much clearer picture of what they need; they’ll have learned from their mistakes the first time around.

This is why being the second 1st PM is one of the rare times it’s *not* a red flag that you’re applying for a role that is being back-filled.

In fact, it’s better than hearing it’s a brand new role, because you get some extra things that were created thanks to the efforts of the now departed first first PM:

  • Buy in: After what the other PM started, there is more support by the whole team and especially founders to make changes. They likely hired you specifically for skills and changes they now know they need.
  • Momentum: Chances are the first PM laid a foundation that gives the second 1st PM things to work with; they’ll have some analytics tracking set up, some semblance of project management, etc so you have the basic tools you need to do your job from Day 1.
  • Potential: The company is now a bit further along, a bit more traction, a few more key hires. So while you get the title, equity, responsibility, and opportunity, there’s a bit more certainty in the business so you can be confident in the opportunity.

I was a second 1st PM.

I’ve had a few friends go through being the first 1st PM and run into the challenges outlined, and once I heard their stories, I realized how much I benefited in being the *second* 1st PM at KISSmetrics:

  • Foundation: The first 1st PM had gotten us started on a number of key things I could pick up with: processes, customer lists, habits, etc.
  • Buy in: The team was experiencing a bunch of challenges as the 1st PM had left a few months earlier. They knew exactly what they needed this time, and were supportive of what I wanted to do from Day 1.
  • Opportunity: An amazing VP Sales had just come on, the business had hundreds of paying customers, Series A was raised, and it was clear what they needed and that I could run with it. I couldn’t ask for more.

At the time, I didn’t appreciate the battles that had already been won, and the buy in that I inherited.  Now, I do.

To all the first 1st PMs, who often don’t vest any equity, and found a huge difference between promises during recruiting versus reality, we salute you. It’s not a job for the faint of heart, but there’s another PM who greatly benefited from your hard work.

What if I’m interviewing to be a first PM?

If you’re interviewing at a company that is hiring their first product manager, be sure to ask if they’ve already had a 1st PM before.

Their answer will be very revealing, and helps dictate what you do next…

If you’re the second 1st PM…

Dig into what the founders learned from the first PM. Find out why they think the other PM didn’t work out.

Look for signs that what they need is what you can do, and that they’re accountable to their side of what went wrong (or you may be set up to fail, too). The more thoughtful and introspective they are, and the more what they describe are things that you’re great at, the better your chance of success.

You also likely would benefit from networking your way to that first 1st PM. They likely know the skeletons in the closet and can give you an alternate perspective on the company. Then, you can work to discern the truth that is somewhere between what they and the founders tell you.

Not all previous PMs will want to talk, so if they decline speaking with you, respect their privacy. Instead, look for other ways to learn about the company like Glassdoor, asking others you may know there, etc.

Meanwhile, if you’re the first 1st PM…

Go in with eyes wide open. Proceed with caution!

Unfortunately, no matter your optimism, or pre-existing relationship, there is a high chance you won’t work out.  Make sure it’s the right time in your career for the risk, you’re confident in the founder you’ll report to, and you can work from day 1 to iterate to what they need.

Once you’re there (or if you’re already the first 1st PM) a few things that can help:

1) Understand why you’re there

One of the biggest challenges of the 1st PM is turning a vaguely defined role and need into a clear cut set of goals you can achieve. Spending time with the founders to clarify everything can help you start on the right foot.

How to do it: Take another look at the job description and what you learned while interviewing. Talk with the founders to confirm what they need most, then deliver on those things as best you can.

2) Over-communicate

Building trust and confidence with the founder you report to is essential. You need to calibrate with them so they understand what you do and why, while also understanding their vision and expectations.

How to do it: Use 1 on 1s, weekly emails, get their feedback pre-launch, and give them access to the tools you use so they can see what’s happening.

3) Create a clear plan

Make a 30-60-90 day plan of what you are going to do, why you chose those things, and mutually agreed upon success metrics. This helps them understand how you think, and make sure you’re heading in a direction they agree with.

How to do it: A Google doc with bullet points is often all you need, and allows them to comment and ask questions easily. Then keep updating and reviewing it as you pass those monthly milestones. Quarterly product plans thereafter can work well, too.

There are definitely times where the 1st PM has worked out the first time, so it is possible. However, whatever vetting you typically do for a role, triple it before taking such a role, or even consider consulting as a way to try before you buy if you’re unsure.

Is a 1st PM role right for you?

Being a first PM can be a great way to learn quickly, level up your career, and work with amazing people. It can also turn into a short stint on your resume, cause burnout, and create deep feelings of frustration over what could have been.

If you’re thinking about becoming a first PM, realize it’s very different than just about any other product role you can have. Take your time, talk to others who have been 1st PMs, and make sure it’s what you really want.

There’s much more to the story…

There’s been a lot of interest in the life and challenges of 1st PMs, so to further understand this topic, we have 2 interviews on the Practical Product podcast to help you;

1) Hostos Monegro with the perspective of a 4-time 1st PM (Full show notes here)

2) Pulkit Agrawal with the perspective of a very candid CEO who had a 1st PM not work out (Full show notes here)

What’s Your Story?

Have you been a first PM? Please share your story in the comments, so others can learn from your experience.

>>> Are you looking for help hiring your 1st (or 2nd) PM? Would you like help getting your product processes in order? 

>>> Or are you a 1st PM who wants help navigating these unique career challenges?

Contact me and I can help you: jason at be customer driven dot com or schedule a call here.

Peer 1-1s: The Missing Habit Separating Good and Great Product Managers

24 September 2015

5 Comments

There are many skills that go into being a great product manager, and one of the most underrated is communication, as these Silicon Valley product leaders emphasize:

“As a product manager, it is imperative that you understand the company’s overall goals and objectives and exactly how your team fits in to the broader vision.“ – Josh Elman

“We lead by example. We succeed by making others successful. We listen first and make certain that others feel that they’ve been heard. We pursue diverse opinions. We rally our teams behind a vision that yields passion and commitment. We value and foster strong team relationships.” – Satya Patel

“Good product managers communicate crisply to engineering in writing as well as verbally. Good product managers don’t give direction informally. Good product managers gather information informally.” – Ben Horowitz

You can be the best former engineer or designer, but if you can’t communicate, not only with your product team, but the broader company, you’ll struggle.

Great Product Managers communicate beyond their teams.

While it’s important to develop great written communication skills, informal, verbal communication skills are just as valuable.

When you are working with other departments to either gather customer insights or share with them a new feature launch, you’re exercising crucial communication skills.

Now, you could just blast off an email, internal survey, or update a wiki page and consider your work done. However, you’re missing out on crucial relationship building and major learning opportunities. Every moment of contact with another team in your company is a leadership and learning opportunity for product managers.

The Secret, Winning Habit of Great PMs

When you’re a product manager you have to influence people, because you have limited power on your own. You need to get buy in to accomplish anything.

And to be a product manager people enjoy working with instead of loathe, you want to be a trusted, respected colleague, not a politician or Machiavellian monster.

And the best way to build that trust and respect? Peer 1 on 1s.

What’s a Peer 1 on 1?

Peer 1 on 1s are a secret weapon for many great companies. They help fellow managers commiserate and support one another, and teams that interact regularly work together better. Usually, these meetings happen every 4-12 weeks, depending on what the two people involved feel is the best frequency.

As a product manager, having semi-regular check-ins with key members of teams you work or interact with can be priceless. It gives you a chance to give and receive feedback, hear new perspectives, gather customer data from new sources, answer product questions, and build rapport with them.

It can also ensure that people understand how you approach product decisions. You may be crushing it as a PM, but that doesn’t mean everyone else sees it that way. Product people have some of the greatest visibility across an organization, which can make it easy to forget that not everyone knows everything you do.

Who should product managers have peer 1 on 1s with?

The culture of your company and the nature of your product can make this vary, so use your best judgment when you apply this to your job.  For me, I was leading product at a 20-30 person SaaS startup, and so I will share what I found worked there based on the advice I received.

1) Your Product Team

Your engineers have an entire engineering org that decides their compensation, job title, and work. All you can do is influence what is worked on next and collaborate with them on making the best (not just good enough) solution. The same goes for designers.

When your team is small, meeting once every month or two with everyone can help ensure you stay on the same page and fix problems. Identifying a bottleneck, something frustrating, or a blind spot can save your team hours, days, or even weeks of lost time from infighting, inefficiency, or poor decisions.

You may also find opportunities to help them understand how you make decisions. This can reduce resistance to changes you propose and open up constructive feedback to communicating with them and their colleagues.

Everyone?!? At first, yes.

When you’re small (7 or fewer designers + engineers), meeting with each person can ensure your processes are working well and ensure everyone feels heard.

As you grow, focusing on the team leads who you work with most can help you scale. They can be a voice for their team. Assuming the design and engineering team leads have one on ones with their teams, they can raise with you any concerns they hear from their teams. (Note: it can help to remind the lead in advance to ask their team before you meet.)

Peer one on ones are a great way to take the temperature of your product team. If when you meet with them, they clam up, refuse the meeting, or seem combative, that’s a major signal you have work to do to improve your teamwork.

Having a good relationship with the product teams you work with is table stakes as a Product Manager. Yet, many PMs mess this up. Good peer one on ones are a good option to improve the relationships no matter your situation with your team.

2) Customer Facing Departments

As a PM, one of your most important jobs is to understand your customer better than anyone. There are only so many hours in the day, so even if you’re awesome and talk to multiple customers every day, you should still look for ways to get additional perspectives. And the best place to get those are others at your company.

Ask yourself: who else regularly interacts with customers?

  1. Customer Success / Support
  2. Sales
  3. Account management

In many orgs those three departments are off in a different area of the company reporting to a different C Level leader than you. They may literally be on a different floor or in an entirely different office. Because of this, it’s easy for sales and product to develop different cultures and even some animosity.

Break down the silos with communication.

Product managers are the perfect people to break down those barriers. You’re probably already working with them more than you realize.

Product people often get pulled into sales calls on the biggest deals, and help launch new features that success teams must document and support. They’re also driving the roadmap that ambitious sales people may use to excite prospects.

When I was running product at KISSmetrics I met with all those groups. And in each case I had two goals:

  1. Find out any lessons I should take back to the product team about customers.
  2. Answer their questions and concerns they have about product today and in the future.

So I set up regular peer 1 on 1s with people from sales, customers success, and account management.

Here’s some of the kinds of questions I’d ask to make the most of the meetings:

Customer Success / Support:

  • What are you sick of answering over and over for customers?
  • What bugs do you find you have to help users work around most often?
  • How can I make your life easier when we launch new features or make changes in the product?

These questions help improve our process around launching new features, updating FAQs, and identifying existing problems in the product we should fix. Few things make success team members stuck on the hamster wheel of never ending tickets feel better than having things that drive them crazy in the product fixed.

Sales:

  • What are common product-related issues that are causing us to lose deals?
  • What features get leads most excited about our product?
  • Are there any areas of the product that are unclear to you that I can help you understand better or fall flat in your demos?

These questions often required me to do a little 5 why’s to dig deeper to really understand and get them out of their sales mindset. Yet, with a little effort, I often found gold when I did. It also helped me better understand how my conversations with customers compared to those by sales. There’s a lot of great customer problem knowledge trapped in your head as a PM. Transferring it to sales team members can drive revenue for your company.

Account Management:

  • What features do you find you have to explain to customers the most? What’s most confusing?
  • Where in onboarding do users tend to get stuck most? How do you help them?
  • What could product do to make your job easier/better?

The people that help customers get activated will know many of the pain points that are affecting your onboarding funnel. Much like Customer Success team members, removing friction they deal with every day can really make their day, and help your customers.

Peer 1 on 1s are a privilege, not a right.

I worked hard to ask lots of questions and be helpful in these meetings. After the first meeting, I expected they would be prepared as well. I only continued meeting with people that truly brought good data, ideas, and/or concrete feedback. Otherwise the 30-60 minutes we would meet could be better spent elsewhere.

This was a challenge, especially in sales. Not all sales people really get to know their customers, but the best ones did. The best could coherently explain why we lost a deal versus just trying to ask me for every feature a competitor had.

The same was sometimes true in success; I didn’t want to know what happened that they remembered today. I wanted numbers so I knew how big a problem it was.

This then helped me make the business case when trying to decide between building something new we could sell and fixing what we had. When you can prove someone that costs $35 per hour is wasting 10 hours a week on something and it affects customers X, Y, and Z, it’s much easier to justify a change.

Build a Customer Driven Culture

When I set out to have these meetings, I was just trying to get more data and feedback to do my job as a PM better. A great byproduct of the meetings ended up being that everyone in the company became more customer driven.

As I met with people more regularly, and they saw me take action on their feedback, it created a positive feedback loop. The more I listened and demonstrated I heard them, the more they wanted to provide more valuable insights and contribute. That led to more discussions about approaches they could use in their job to get me better data and good questions to ask customers.

Patterns converge

What was particularly fascinating to me was that quite often, I would hear similar things from the majority of people I would talk to; often an issue in product would impact everyone in different ways, whether it made a sale harder, increased support tickets, or changed how account managers taught our product.

By empowering all of them to share with me what they were experiencing and teaching them how to best do so, they helped me better triangulate customer needs and calculate fully their impact. With everything else on everyone’s plates, this would never have happened without regularly scheduled meetings to talk about it.

—

There’s always more work to be done than time for a product manager. Taking the time to have peer 1 on 1s with key members of teams you work with can be an invaluable part of your processes as a product leader.

—

Want to work with a product person that lives this customer driven approach every day?

If you’re an engineer in San Francisco interested in joining a fast growing, early stage startup, I’d love to talk to you about how my startup, Lighthouse, can be a great opportunity for you. Send me an email at jason at getlighthouse dot com and tell me a bit about yourself.

To New Beginnings: TCN Acquires Greenhorn Connect

4 August 2014

1 Comment

Dear Boston,

5 short years ago, Ashkan Afkhami and I were sitting on Northeastern’s campus talking about Boston’s startup community and what could be done to help better organize everything it had to offer.

Not long after that, I found myself at the unConference at Sun Microsystem in Burlington listening to Scott Kirsner and Tim Rowe’s “TurboCharging the Entrepreneurial Culture in Massachusetts” session where they talked about how there needed to be a central place for all the resources and events in Boston’s tech scene. On that day, I nervously raised my hand declaring I wanted to take on that challenge.

That was the day Greenhorn Connect was born.

These last 5 years have been amazing. We’ve seen so much growth in the ecosystem and played a small part in making it better. We’ve helped many find jobs, connected thousands with the resources they need, and been a voice for the community.  I’m proud to have been part of making that a reality and honored to have had a great team and community partners help Greenhorn Connect thrive over the years.

From the beginning, I had the goal of Greenhorn Connect helping organize the Boston tech community and making it easier for newcomers 10 years after its start. Now, after 5 successful years of Greenhorn’s life, I realize that fresh ideas and new, local leadership can take Greenhorn Connect to places in the next 5 years I never could.

That’s why I’m excited to announce that TCN, The Capital Network, is acquiring Greenhorn Connect. Of all the organizations I spoke to about Greenhorn Connect, TCN had the best combination of resources and a shared vision for serving the Boston startup community. I am excited they’re taking the reigns to lead us into the second half of that goal.

Greenhorn Connect has always been resource constrained with our small, passionate team, and TCN will be able to alleviate some of that by mixing our team with theirs. Our teams have complementary skills and established relationships, which will enhance and grow both missions.

TCN is committed to continuing our current programming and building on what we’ve created. Expect to see our Student Dinners starting this fall and the Greenhorn Summit is very far along in planning for our annual fall event.

I want to thank Paul, Ariel, and Eric for being awesome throughout this process and I’m excited to see what they can do with TCN as the next chapter in Greenhorn’s history is written.

—

As for me, Tim Rowe told me once, “it takes as much effort to start something small as it does something big.” I’m excited to put that to the test as I set out on the next steps in my startup career.  I’m currently applying all that I learned in building, managing, and ultimately selling Greenhorn Connect to my next venture already in progress: Lighthouse, an app to help you be a better manager.

Thanks to everyone that has helped Greenhorn Connect along the way. This day would never have come without you.

Thanks,

Jason

 

PS: I’d like to call out in particular a handful of people that have been instrumental in Greenhorn Connect’s history.

To key supporters, Thank YOU

  • Scott Kirsner for giving us so much press and support over the years.
  • Tim Rowe for helpful advice and helping spark Greenhorn Connect with the MassTLC session with Scott.
  • Gus Weber for being the first sponsor of Greenhorn Connect. We wouldn’t be here today without the ongoing support we’ve received from Microsoft and it’s people like Walter Somol, Abby Fichtner, Sara Spalding, Betsy Aoki, and Cathy Wissink.
  • Greg Hoffmeister and Jon Frisch of T3 Advisors for being amazing supporters since our early days.
  • Microsoft has been an amazing host and sponsor to so many events including almost every event we’ve ever put on. The tech ecosystem is much stronger due to them.
  • David Ekelund for being Greenhorn’s startup lawyer who understood our needs and was always helpful.
  • Our many partners & sponsors along the way including: NEVCA, thoughtbot, Acquia, Grasshopper, the City of Boston and their 1in3 program, Cort & Jake for helping in the early days as they hustled on DartBoston, Wayfair, Carbonite, Sonos, Yesware, and so many others.

…and the team, THANK YOU

  • Ashkan Afkhami for being crazy enough to cofound with me on starting this business.
  • Pardees Safizadeh for being the first person to join our team and give us a real voice on social media for Greenhorn.
  • Ian Stanzyk for helping with our job board which was a key revenue stream during our history.
  • Paul Hlatky for rising to the occasion and doing a great job taking the reigns when I moved.
  • Angela Lei and Will Cox for being awesome team members as Paul took the reigns.
  • Ariel Winton and Eric Pasinski for being great team members today and going forward as we transition with TCN.

And finally, thank you to the community.

You all are awesome. It’s always been a blast serving this community and I appreciate all your support. I hope you’ll do the same for Sam and the TCN team.

Why don’t we reward good managers?

18 July 2014

{Note: My startup, Lighthouse, just launched its blog. If you’ve been enjoying my posts on leadership and management, follow me over to http://GetLighthouse.com/Blog and subscribe on the right sidebar to get every post.

Below is an excerpt from the first post there, “Why don’t we reward good managers?“}

We all know management is important, and yet, it has not changed the largely dismal outlook of management: 70% of American workers are disengaged. Poor management is largely to blame.

People don’t leave companies, they leave bad managers.

As I’ve spoken to managers and employees, it’s amazing how often I hear about managers that ignore their people, stifle their team’s efforts, and are totally unaware of the unhappiness of their employees. Unfortunately, this candor on their frustration is with me, not their employer.

Some of these issues can come up in 1 on 1s, if you have them often enough and you ask (many are afraid to volunteer such issues, especially introverts). If you miss those opportunities and they’re now leaving, you can do exit interviews to learn what went wrong, but that’s too late to help them. You are also unlikely to get straight answers in an exit interview; if an employee desires to leave on good terms, they have incentive to sugar coat things and find the most diplomatic reason to say they’re leaving.

Bad managers affect everyone.

Good employees work hard to produce, but they resent their manager if they’re not appreciated and treated well. When it happens to mediocre and bad employees, they will just shut down and under produce, creating dead weight on teams. Your good team members will eventually decide they’ve had enough and look elsewhere. In a competitive market, this will happen sooner than later.

Continue reading on the Lighthouse blog…

Why you should think of your employees as Allies in the future of work

8 July 2014

The rules of work have changed. Gone are the days where you spend your whole career at one company that gives you a great pension and a retirement party.  And yet, we still act like that’s the case when we hire people, and in how we approach managing them.

We live in the world of “at will” employment. Layoffs and “it’s just not working out” discussions are always just around the corner.  Meanwhile, many employees job hop from company to company always searching for greener grass.

When talking to candidates, we interview them expecting to hear how committed they are to anything the company wants, even though both sides know a lifetime commitment is pure fantasy.

Why are we lying to ourselves?

Rather than be in denial, we should accept the new rules and take full advantage of them. That’s what Reid Hoffman, Ben Casnocha and Chris Yeh advocate for in their new book, The Alliance I just read.

The current system is bad for everyone. The-Alliance-Managing-Talent-in-the-Networked-Age

It creates major problems for both the company replacing team members regularly and the former employees who see their tenures cut short.

The worst parts about replacing team members are:

  • They leave when you don’t expect it.
  • You have no plan for what to do without them.
  • Work is left incomplete even if they give some notice.
  • Their knowledge and experience is lost from the company.

And for the employee, the worst parts are:

  • Unfinished work and incomplete milestones that now can’t be put on their resume.
  • Less development in their career as companies fear to invest in them.
  • Damaged relationships due to resentment over the first 2 items.
  • Distrust in every employer they have going forward.

Hoffman, Casnocha, and Yeh advocate for a new system that considers employment as an Alliance: a mutually beneficial relationship, without the empty promises of long term employment.

Why You Should Think of Your Employees as Allies in the Future of Work

In an alliance, both sides work together for mutual benefit. This means shifting your thinking on employees. It’s a lot more than, “do this work and I pay you.” Instead, the relationship is, “I help you grow, learn, and tackle these challenges, and the company benefits from that work.”

The authors call this a Tour of Duty. You select a length of time (a year or two up through 5+ years) and a set of goals for them to achieve with core responsibilities. The agreement is that you will help them have a Tour that is of interest and value to them, and they will do good work for your company.

By agreeing on the time frame and what the Tour entails, you eliminate many of the biggest problems for both sides:

  • Employees now have a clear set of goals and milestones and a plan to get there.
  • Employers have more certainty how long they can count on having an employee.
  • Employees have a clear point where they can cleanly transition out if they want.
  • Employers can plan ahead as a tour is about to complete, avoiding any surprises.
  • Both sides have more certainty and a clear commitment to one another.

Now the end of a Tour is not the end of someone’s employment. What Reid Hoffman found with Linkedin, was that people were often hungry for new Tours. It provided opportunities to quickly progress people onto tracks for major leadership roles (they call them Foundational Tours), or give them a new, interesting, challenging job different than what they just completed.

Either way, you can keep renewing the Tours as long as there’s a good fit between company needs and employee interests. And if there’s not a clear fit at the end of a tour, you can have a very smooth transition for both sides, allowing the employee to find work elsewhere without hurting the company or vice versa.

Your people want tours. You just don’t know it.

As I’ve been working on my app for managers, I’ve spoken to a lot of employees in addition to managers. What I keep hearing over and over again is how frustrated people get over a lack of progress in their work.

Employees want to grow and learn new things. They want to be challenged. They want to be recognized for their good work, and feel like they’re working towards something greater than just a list of tasks for the day. When they don’t feel that progress, they feel stifled and quickly lose motivation. Not long after, they’re looking for the door.

Tours address all of these issues. A Tour:

  • Creates a clear set of goals to achieve in a role.
  • Creates a set end point where new opportunities can be explored.
  • Ensures a discussion about an employee’s goals and how they fit into the company.
  • Necessitates regular check ins to be sure progress is made on a Tour and will be completed on schedule.

Planning Tours take effort and have big payoffs.

Planning Tours for your team members doesn’t happen by accident. It’s why they wrote the book and are building a site around the idea (www.theAllianceFramework.com).

You have to have healthy discussions with each team member and plan out a path for them. What can they achieve in a few years? How does that align with their long term goals? What are the measures of success for a Tour for them? Do those goals interest them? If those are questions that are foreign to you, you need to start discussing them.

The best time to have these discussions is during your 1 on 1s.

With so much work to do, so many short term priorities to address, who has time for this? But if you want to keep your best people motivated and engaged and level up your team as a whole, you need to make time for these discussions. That leaves 1 on 1s as your best chance to have the time (You are having 1 on 1s, right?).

You’re already hopefully having candid conversations in 1 on 1s, so it’s time to shift part of each 1 on 1 to work on aligning their long term goals with their current roles and responsibilities. It won’t happen all in one meeting, but you can slowly put together a plan over a series of meetings.

You’ll see the benefits quickly.

Once you start this process, pay attention. Watch closely. The more you align someone’s work with their goals the more motivated they will be. Show them how the work you’re asking them to do gets them closer to what they want and they’ll work harder to help you with what you need.

It’s no mistake. It’s the Alliance at work. As Hoffman, Casnocha, and Yeh, write,

“Every employee relationship should be bidirectional in nature; it should be clear how the employee benefits and how the employer benefits.”

That’s because it creates the best situation for productive, happy work. And the Tour takes that to its greatest outcome by sustaining that over a multi-year period.

Are you creating aligned work for your team? Are you engaging your team towards mutual benefit? If not, learn more in The Alliance and start doing Tours at your company.

Get LighthouseLooking for a system to track your team’s long term goals and break them down into the near term goals you need?

Want to have more effective 1 on 1s that build towards alignment like what’s described in the Alliance?

Then sign up for Lighthouse, the app for managers.

Why Replacing a Good Employee Will Cost you $65,510

2 July 2014

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“Oh no! I didn’t know you were leaving, too.”

When a friend left his job, his coworker made the surprise comment that he was about to leave the company as well. What seemed like a few minor problems on the team soon snowballed into a costly mass exodus.

Employee retention is one of the most overlooked aspects of managing your team…right until you start losing good employees. It costs much more than you might expect to replace them. I was curious myself just how much it could cost and the surprising results are below.

Note: All salaries are assumed to be $100,000, which is $40/hr assuming you work 50 hours a week for 50 weeks a year. Adjust the numbers accordingly if anyone costs more or less for you.

The Costs of Sourcing a Hire:

Unless you’re a really hot company, it’s unlikely that great people are beating down your door to fill open roles. And even if you are well known, the best people probably aren’t refreshing your jobs page for an opening. You have to go find them.

You can source candidates a ton of different ways, but they all cost money either in the form of payment to another company or in time invested by one of your employees.

Sourcing CostsWith just a few attempts at sourcing some good hires, between third party costs and labor in your company, sourcing costs can easily reach over $26,000. The scariest thing is, you haven’t even interviewed any of these candidates yet!

The Costs of Interviewing a Hire:

Now that you have a full funnel of candidates kickstarted, you start the dreaded interview process. You’ve got to filter through all the LinkedIn profiles, social accounts, resumes, and cover letters to find those gems who will then navigate your hiring process.

Here the costs are a bit more hidden. It’s all about lost time for various team members. What other great work could your team be doing instead of working on candidate hiring? Every minute spent hiring is a lost dollar invested in your business.

Assuming you have a clear funnel where you only have to look at 120 resumes, only have a third of them make a phone screen, a quarter of those make it to in person interviews, and you prep 3 offers, interviewing costs you over $5,000. For some specialized roles it could be significantly higher if you have many more interviews and phone screens.

The Cost of Onboarding a New Hire:

Congratulations! You found the candidate you’ve been looking for. Now you need to onboard them so they become a productive, integrated member of your team. Again, you have hidden costs. Now, you have losses both in how productive a new hire is versus a veteran on your team, and your team training them (an important investment, but also a significant time sink for your team).

When you hire an employee, there’s often some kind of bonus you need to give them. It might be a salary bump, moving costs, or something else to sweeten the offer. It’s part of the cost of doing business. When you combine that with your costs as they start on your team and get up to speed, onboarding can cost you over $10,000.

Of course, we’re assuming your hire works out, which unfortunately, it won’t always. You can go ahead and double these costs and many of the ones in earlier sections if you have to go back to the drawing board on another candidate.

The Cost of Lost Productivity:

While your team member has departed, the show must go on. The rest of your team has to cover for them, whether that means writing their code, calling their leads, or finishing their reports. As much as you’d like to think the rest of the team can just make up for them, if the hire really was good, that’s impossible. Lost ProductivityWhen someone leaves, team members are distracted. Those that were close to them in particular will be less focused and productive. They’ll probably grab beers with their friend before they leave, when they otherwise may have worked late.

Meanwhile, if you push your team to cover for them, the stress and extra hours can affect their physical and mental health, which will lead to vacation and sick days. If hiring drags on, you’ll probably hire a consultant or freelancer to cover which could easily exceed $100 an hour for their work.

All of this combines to lead to a Productivity loss cost of over $24,000.

So let’s add this up…

Total Costs

Ouch! Replacing even a single team member is expensive! Wouldn’t it be a lot cheaper to retain all your good people?

What can you do?

Next time a good employee asks for a raise, investment in equipment to help them on their job, or a morale boosting opportunity is presented, consider the cost of losing them before saying, “we have no budget for this.”

If your manager is blocking you from helping your team, remind them what you’re asking for is a lot less than the $65,000 cost to replace a lost member of your team (let alone the cost of multiple losses!).

While free lunches, ping pong tables, extra vacation days, and other perks are a nice bonus, they aren’t what keep people at a company. Even raises only satisfy people for a short period of time.

What really retains teams is managing people well.

This comes by having discussions with them about their personal growth & goals, company and self-improvement, and recognizing the things that are important to them personally.

I know that’s easier said then done. You have a million things on your plate as a leader and what little time you can spare has to be maximized. And it probably isn’t right now.

You have notes on people all over the place. One on ones are sporadically effective, because you may not always be prepared for the next one. Goals are a great idea in theory, but they’re buried in your HR app you can’t stand.  There must be a better way.

Get LighthouseThat’s why I started Lighthouse. It helps you stay on top of what matters quickly and efficiently for each of your people. It’s designed with managers like you in mind, because I’m a manager myself.

If you want to be the manager people love to work for & save the costs of replacing people, sign up at GetLighthouse.com.

What to Expect When You Start Having 1 on 1s

27 June 2014

2 Comments

Ben Horowitz advocates for 1 on 1s. So does Marc Benioff, the team at Bufferapp, and many, many others. Yet, in many ways they’re still shrouded in mystery.

Some people see them as a waste of time. Others are unsure how to make the most of them. Ask 10 managers and you very well could get 10 different answers.

If you’re convinced to get started with 1 on 1s, and never done them before, you’re in for a few surprises. Here’s a few tips for what your should expect:

1) They are different than any other meeting

As a manager and leader, you’re in a lot of meetings. Probably more than you should. And in most of them you’re being asked to give your opinion, make decisions, and answer questions that all focus on driving the business forward. One on ones are nothing like that.

As Ben Horowitz suggests after he took some heat for his firm stance on the importance of having 1 on 1s,

“The key to a good one-on-one meeting is the understanding that it is the employee’s meeting rather than the manager’s meeting. This is the free-form meeting for all the pressing issues, brilliant ideas and chronic frustrations that do not fit neatly into status reports, email and other less personal and intimate mechanisms.”

It bears repeating: One on ones are all about the team member, not you nor the company. You need to flip your mindset to thinking about what’s important to them and how you can help. This context switch can be difficult, but the payoff is huge. Set the standard that you recognize that these meetings are different from other meetings and you’ll be on your way.

2) You will learn important things you won’t hear any other way

You may think you know your team really well. You may think you know everything they’re thinking about for work and have addressed all their concerns they’ve aired publicly. If you’ve put in some effort to listen to your team in a group setting, that’s a great start, but there is always more they’ll bring up privately in 1 on 1s.

As URX CEO John Milinovich recently said in his interview with First Round Capital,

“There will always be things that people won’t bring up in a community forum that are still so important to address, especially before they become bigger issues.”

Build a trusting environment in your one on ones and follow through on what you hear and you’ll be amazed at what you’ll learn people are thinking about or have concerns with. The more you act on what they confide in you, the more they’ll share that will improve the company, your team, your management, and them as an employee. For the introverts on your team, who are less likely to bring up any issues publicly, this will be especially important.

3) They should bring things to talk about, and so should you.

It’s easy to put the obligation on your team member to drive the 1 on 1. It’s definitely important to let them talk about things that are important to them. However, especially early on, you need to bring some questions as well.  There’s a ton of different 1 on 1 questions you can rotate through and you can also use 1 on 1s as great coaching opportunities.

As Jason Lemkin (CEO EchoSign, VC @ Storm Ventures) writes,

“You may think you know if you have drinks together, or go see movies together, or whatever…But you don’t.  Even if people complain in that context, it will be general complaints.  You won’t learn what your top people need to find their growth path at your company.  Where they feel stalled out and frustrated.  You have to ask.“

By mixing up the questions you ask, you will ensure you’re not missing anything they may be afraid to bring up.  You’ll also avoid 1 on 1s getting into a rut where certain topics become safe and easy, at the expense of never discussing any elephants in the room. You get out what you put into your 1 on 1s, so prepare, listen carefully, and follow through.

4) They may be a little awkward at first

Your first one on one won’t be easy. It can be especially awkward if you recently got promoted and now you’re having a one on one with a former peer. Fight through the ‘fight or flight’ urge to not ask the questions a manager should ask in a one on one. Those early questions will break the ice and give you your first opportunities to build deeper trust and rapport with them. Over time, you’ll get in a rhythm and build trust. Then you’ll probably even look forward to them.

Stick with them. The benefits are huge as Michael Wolfe (PipeDrive, Vontu, Kana) wrote,

“Over time you can build up a very good relationship with most people simply through this time investment. Even though you may need to discuss tough issues, try to build up enough trust and openness between you that you can enjoy solving problems and working to make the company better.”

It’s a relief when a problem at work is solved. If you form a real partnership with your team member to address the issues they bring up, they’ll trust and respect you more even if you don’t always give them the answer they want to hear.

5) You will quickly learn why this is a manager’s best tool.

The conversations in one on ones are the keys to understanding your people and motivating them.  Everyone has different drivers and idiosyncrasies; the better you understand them, the more effective you’ll be able to work with them.

As Ben Horowitz notoriously recalls when he almost fired two people over a manager not having one on ones,

“Being a good company doesn’t matter when things go well, but it can be the difference between life and death when things go wrong…and things always go wrong.”

Unfortunately, if you don’t do one on ones, Ben continued,

“…there is no possible way for him to even be informed as to whether or not his organization is good or bad.”

You can fix so many problems and improve the morale of everyone on your team with these meetings. You’ll find out about issues before they blow up. You’ll be able to help people when they’re struggling, and give them good and bad feedback regularly.  You can talk about career goals and growth opportunities regularly. Bit by bit you’ll see improvements across your company and you’ll wonder why you didn’t do them sooner.

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black_alphaWant help getting started with one on ones? Want to build a better relationship with your team members?

Lighthouse keeps you organized and prepared for everything that matters to your team members including goals and 1 on 1s. Learn more at GetLighthouse.com