358 – From Zero To 1000 Per Month Subscription Business With Dane Maxwell

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In this episode:

01:24 – Is entrepreneurship possible for anyone?
04:02 – How Dane did it
06:34 – Businesses delivering great value
07:57 – Good software vs. bad software
09:04 – 4 levels of recurring revenue mindset
10:15 – Looking into fast growing industries
15:08 – This is where the real wealth is
17:00 – Be on the next generation of software
18:25 – If you want to go from zero to 1K a month
19:34 – It’s a mindset thing
21:08 – A funny little side story
23:06 – What’s preventing people from getting there?
25:21 – Next step: Idea extraction
27:06 – Getting to the root of the pain
29:42 – The email inbox strategy
33:17 – How you respond is very important
35:43 – Activator behavior consequence
36:48 – Quick recap
38:04 – A live idea extraction session with James and Dane
44:56 – The value of a research and development team
48:35 – Building a product with what’s going right
51:45 – Developing smart systems with diverse sources
53:55 – Wrapping up the episode

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Transcription:

James: James Schramko here. Welcome back to SuperFastBusiness.com. Today’s topic is really quite a soulful one because it’s something we all go through in our online journey no matter where you’re at. And I’m talking about even if you just got started today, if you’re at ground zero for your online business, and we all start there. This episode is for you. And if you’re a seasoned professional and you’re really kicking butt, you might pick up a few tips as well; especially one of the core insights in this topic.

Now, I’ve brought back a guest who we’ve had before, I’d love to welcome to the show Dane Maxwell from TheFoundation.com.

Dane: What’s up James?

James: Well I’m chatting to you, we’re catching up. You have been doing some really good work with people who are starting out, and that’s one area that I haven’t been focused so much on. I like to help people who are already kicking butt because I find that so much easier, and there’s a space in the market for people to do all of these things. But you’ve got this idea that entrepreneurship is possible for anyone. I’d love it if you could expand on that a little for us.

Entrepreneurship is possible
Dane: Yeah. So the idea that entrepreneurship is possible is it can be a troubling concept for me at times because I want people to realize just how absolutely possible it can be once you see the world in a certain way, adapt a certain set of beliefs, and become the kind of person internally that’s able to view the world in this way, then entrepreneurship not only becomes possible. What I love about it is that, it becomes, for me, in my opinion, less risky than being an employee. I actually feel safer as an entrepreneur than I do as an employee.

Like if I was an employee I would feel a little depressed in my own expression because I’m kind of confined into the restraints of whatever box I’d be put in. Some people can be really fully expressed as an employee. For me personally, that would be depressing for me. And not even like a depression in terms of happiness depression, that would be probably follow after my self-expression is “de-pressed,” if you know what I mean.

James: I do. I’m on the same page. I’ve played that role. I agree with you on both points so far. Number 1, it’s absolutely a mindset game, and number 2, employee is a very risky position because basically, you’ve got less fested in everything because at any point, it could stop and you’re getting paid by one person and we call that single source dependency. It’s a dangerous position to be in, to have one of anything is dangerous.

And I was that person. I was the general manager on a very high salary, with 4 kids to feed, mortgage to pay off, an investment property to pay off, and a share portfolio that was geared to pay off; wondering, what would I do if my boss said, “See you later.” And it was also on the cards, since the U.S. economic collapse was starting to happen in the property market and the subprime lending turned belly up, and that’s about the time I started my own business and got serious about it. This was about 2005, 2006. I was that person wondering how I could have my own business.

So I am a big advocate for being an entrepreneur. I think you can create your own life the way you want. Lifestyle design is a topic that comes to mind on that topic, and you’re enabling people to pursue this, and I guess our listener might be wondering how are we going to do this?

How to do it?
Dane: Yeah. Well, you said one source of income. Well, there’s a number of ways, and that’s just the thing, there are a number of ways and it’s not like that there’s no way, there’s actually a number of ways.

So for my software business James, I have paperlesspipeline.com. And that’s what I saw for a business and I think it’s around $80,000 or so a month. When I started TheFoundation.com, which teaches people how to build software, that business was rather on 40 grand. I started financing 2 or 3 years ago. I spent 3 hours a year on paperless pipeline, maybe more like 3 to 10, and these are just like meetings, just talking with the CEO that runs it. And we have a 25% profit margin that gets distributed to me every month from that business. The money just kind of goes into a bank account at this point because I have more than enough for myself.

And while I’ve been running The Foundation, teaching people how to build software, the business has doubled. So in essence, my passive income from Paperless Pipeline and I have a couple of other software products too that are starting to grow as well, not as nicely as Paperless Pipeline, that’s all growing as well without me even touching it. Let’s just say there are 400 people paying a monthly fee of 200 bucks a month, which is 80 grand a month. I have 400 streams of income. Whereas an employee just got the one.

James: Exactly. You want to get paid by a lot of different customers. We have thousands of customers for SuperFastBusiness across different divisions. I know we’re going to touch on one of the subtleties there on how your business has grown. I’ve got a few subscription businesses in my business portfolio here.

One of them, probably the standout for growth and success would be the SuperFastBusiness community itself, which is an online marketing coaching forum where I actually attend. It’s definitely not passive, it’s an active business model for me. However, it is leveraging my skills set and my predisposition to communicate and help people. But also and importantly, it’s a recurring revenue business, which means that people are signing up once and then they’re continuing to pay as long as the value is delivered, which in this case it is. And it sounds like Paperless Pipeline is delivering as well.

Dane: Yeah, mass amount of value. If you head to paperlesspipeline.com, you’ll see I think 41,000 people use that software product and it makes the world tremendously better place because it reduces car emissions, paper; it’s something to be proud of, you know? Like some of the people I know online, they make good money. Sometimes they’re hesitant to say what their business is because it’s not very defensible; someone could rip it off pretty easily because it’s not a lot of value that is protected. And in software, it’s a very defensible business. So I could talk about it all over the world. It’s great.

James: One reason I can think of that it’s reasonably defensible is the software business can be quite tricky for the inexperienced. I know plenty of people who have tried software and I put myself in that bucket as well where it can be a little bit unexpected. You do hear stories of how easy it might be and I’m sure it’s easier for your students than it is for someone who’s not being trained. But it can also turn into a money hole that you just keep plugging because the market changes, or you haven’t chosen the right industry, or you didn’t really understand the need you’re solving, and it can turn into an expensive nightmare. So we’re going to see if we can clarify some of they key differentiators between good software and bad software.

Key differences between good and bad software
One of the things on the good side would be we’d be looking for recurring revenue model. We’d be making sure that we have a good mindset, and part of that mindset is accepting that being an employee can be extremely risky rather than the traditional mindset of it being a safe thing to do.

I have felt like I had this burning bonfire I had to jump off quickly before I got burned to smithereens as an employee. Not just from the financial aspect but you’re right about the soul-destroying aspect. Growing someone else’s business with creative shackles can be difficult, especially if you are working for a multinational, you’re probably doing some things that make you feel good.

What are some of the things that we might do next, Dane?

The recurring revenue mindset
Dane: Zooming out for a second. This concept doesn’t just apply to software. These principles apply to most any recurring revenue business. The things that I like to start off with is the recurring revenue mindset is really broken down into 4 things that I’ve read and put together over the years.

One is I got an automated sale, so people can sign up and pay for it without talking to you ideally. It’s recurring revenue so you’re paying monthly for that service. It doesn’t have to be software, it could be a number of things. The third is that you have no accounts receivable, so you’re getting paid in advance, and the fourth is that you’re selling tools instead of providing a service, the old axiom, it feels like a million times now but it’s probably more like a few hundred. The guys that made the most money in the gold rush were those with the pickaxes and the shovels and Levi Strauss, the guy selling jeans.

When I first learned that it was a big shock to me because I would have thought that I should be mining for gold. I would have never thought I should have been the guy making the shovels. So the way that applies today is the way I think about things as I apply those 4 levels, they’re like embedded into my nervous system. I feel like those things are in my DNA. It’s a little extreme but I almost can’t think of an idea or work in a business that doesn’t have recurring revenue.

Look into fast growing industries
So you have these 4 things, the next thing that I really like to have people look at is fast growing industries; really fast growing industries. Facebook was a fast growing product for a time being, and then iPhone app development has been a fast growing industry online. Any other fast growing industries you can think of, James?

James: Well I’m in a few. The most stratospheric business model that I’ve ever started was in the SEO industry, and we went from me, one person, with 2 customers, to 7 figures a year. We just cracked 7 figures a year in sales within an extremely short time frame. That was very fast. And I’m very, very pleased that I have an online coaching community because I think the Internet’s here to stay. That one’s going very well.

Dane: And is the SEO recurring?

James: The SEO is recurring. It’s like 99% recurring. My business is split down the middle. I’ve got services; I actually have recurring services and I’ve figured out how to make that work very well. A lot of people don’t know how to make it work but in very simple terms, I’m hiring labor and I’m reselling it as packaged services with the automated signup, monthly recurring, there’s no accounts receivable. I’m just selling solutions rather than tools per se. But I did build some tools into my coaching community. Actually, when it started I had website building tools, etc., and using software features was a nice way to differentiate from any other education community. But I do predict that education community is going to be a big thing. We’re seeing some of the players in the market doing it. You do it. Interestingly, TheFoundation.com is an education type product. Is it recurring?

Dane: Yeah. It’s recurring for 6 months but after that, we don’t have any recurring after that. And I’ve actually smiled at that. And we’re a little off-topic so I want to make sure we get back but just briefly on this, if we were charging 400 bucks, 500 bucks, 600 bucks a month, we end up charging about 5 grand or 1,000 bucks a month for 6 months. That’s current pricing but we’re changing it as we add and remove services because we’re constantly innovating that to get a higher satisfaction, higher success rate and whatnot. But the 5 grand is what we would probably collect if we charge a monthly fee over like 3 years. So we’re kind of getting the recurring all upfront if you will.

James: Good. You’re working out the value of a customer and front-handloading it.

Dane: Yup.

James: There’s a few people in our space who do that. They sell a one-time or lifetime memberships. I’m still not a fan of that model and maybe I’ll change one day but I’m much more a fan of recurring. In my case, what I found really interesting is I’ve had some customers for 6 or 7 years in my subscriptions. In fact, the longest and most profitable ones I had were $5,500 per month for 7 years straight. I had 2 of those, and that’s looking after small businesses with their online marketing needs, where you update their websites, do some SEO, etc., and you can have that extremely passive by having a small team doing the work and just getting the customer in the beginning. That’s my best success so far on the recurring model in terms of revenue generated and the amount of passiveness that can be dialed into it.

Let’s get back on the topic then. So we’ve covered the criteria that you look for with your software business, automated signups, monthly recurring, no accounts receivable, and you’re selling tools like a gold rush jeans supplier and the pants supplier. Lovely so far. We’ve got a good mindset and we’re a fan of the recurring revenue. So we’re going to have to look for an industry that is fast-growing, and that’s where we left our little track. We’re back on track. What are some other fast industries we might be looking at to start our business?

Dane: Well I’m actually not sure. I’m so involved in the things I’m working on. We’ve got SEO, it’s been one, iPhone app developments has been one, and like Facebook was one. In those 3 industries, what you have, is you have a bunch of people that are rabid about using those industries to make money. Oh, and also podcasting.

James: I think podcasting is far and away in a more hyper growth mode than SEO for example, because of the proliferation of mobile phones and small devices. So anything to do with mobile is going to be hot.

How to involve yourself in fast growing industries
Dane: Yeah. So even podcasting, so those are 4. So what happens, and this is really fascinating, this is what happens; these things happen like people go, “Oh, I’m going to start a podcast.” “Oh, I want to make iPhone apps.” “Oh, I want to make a Facebook app.” “Oh, man I see, I want to provide that service.” What you want to do is you want to go to those people and you want to talk to them, and you want to find out basically what tools they need to run those businesses, and then you want to be the supplier. You want to sell the tools to those guys. And that’s where you’re going to make the big bucks. It’s in supplying tools to people in fast growing industries.

James: That is the bombshell. Supply tools to the fastest growing industries.

Dane: Yup.

James: That’s bold, double underlined. Thank you Dane. I’m smiling. It’s so genius. It’s looking one step past the obvious to see where the real wealth is.

Dane: Yeah. And I don’t know that I actually do that good a job of this because I’ve got software and real estate transaction management, and that’s not really like a booming industry. It’s really more stable. If I had everything burn down to the ground and I was starting over, I would definitely do this.

What I am doing though is I am applying this in a way where if you look at Marc Andreessen, and the guy is like an investor in Facebook, and adviser at Facebook, he sold Netscape, I think it was Netscape, he’s a billionaire, and he’s really smart and I usually listen to what he says. I challenge a little bit of it but not much. Actually, I don’t think I’ve ever challenged a single of his statements to be honest. But he has a quote that says, “Software is going to eat the world.” It’s really true. If you look at AirBNB, they like challenging the hotel industry, and they’re basically a software platform that connects a bunch of people.

James: Uber.

Be on the next generation of software
Dane: Uber, that’s software. So literally, if you want to be in on this next generation of software, we are the supplier of information and system to support on how to get into that. So we are selling the tool in that regard. We’re actually going one step beyond the supplier tools and teaching people how to build the tools to bring it to the suppliers. We’ve positioned ourselves pretty nicely in that way. So that’s what’s going on James, and that’s what’s exciting. And if you look, if you look at what’s happening, some of the smartest marketers that I respect and look up to online, what are they doing? They’re getting into software. Pat Flynn just built a product. Clay Collins started LeadPages. Laura Roeder just built a social media software app. And they’re cranking.

If you are a marketer, a business owner, and you’re already pretty successful, if you start doing a software, oh my goodness! It’s phenomenal. Now, you want to make sure you’ve got a good technical guy because the 2 things that will clear your software are great marketing, if marketing sucks, and also the development team. The development will eat you alive. That does not mean just getting code written. That means like the whole mindset of writing code, how do you build it with a smaller set of features, and how do you build it so it’s bug-free, and how do you release it so it’s on time, and all the things that we talk about in The Foundation. We’re still learning because development can be hairy if you don’t know what you’re doing. So that’s what’s up.

If you want to go from zero to 1K a month, what I see if your first time starting out entrepreneur, if you’re moving from employee to entrepreneur, I wish we could do it faster, and I’m doing everything, I’m racking my brain every way to see if we can make it faster. It’s about zero to 1K a month in a year. If you’re a first time starting entrepreneur and you’re going to go after SAS. What happens is the next year from your one of your two, is to about 10K a month. And then what happens is at your two is something can click. And you can go from your 2 to your 3. You can sometimes go from 10K to 100K a month. And I also firmly believe that you can go from nothing to 100K a month in 4 years, and have complete financial freedom. And so, if we’re talking about the zero to 1K a month phase, the reason that I think it takes a year, and I’ve watched 1200 students go to The Foundation, is the first answer that comes to mind is that the 1200 students that I’ve seen go through, they are so amazingly brilliant, James. But they’re getting in their way.

James: But that’s the mindset thing, isn’t it?

Dane: It is. What I’ve learned is it’s actually deep stored subconscious emotional blockages that are getting in their way.

James: And it doesn’t really change for a lot of people whether they’re at zero or even if they’re kicking butt. This might be interesting to you but of the people I work with who start in my SilverCircle program, when they’re doing a minimum of $10,000 a month, which means they’re starting with a 6 figure business as a minimum, I’ve never met a student I can’t make immediate changes to in the way that they’re thinking about what they’re doing to get windfalls.

Usually, we’ll double or triple their business. I just spoke to one guy yesterday for example, and he made $25,000 profit in January this year. Last year, he lost 10 grand because he had a seasonal business and the mindset shift was to turn his business into an all year long delivering profit machine instead of an upsy-downsy type business. And one of the ways we did that was to stabilize all the peaks and troughs out of the business. This mindset thing applies to every person no matter what stage they’re at, and it should have the high level focus. But we’ve really put some big points out there.

Number 1 is the mindset. You’ve got to have the right mindset. Number 2 is you want to chase a fast growing industry and not just being in that industry but supplying tools to them. I’ll tell you a funny little side story here Dane.

LeadPages is one that I spotted very early, back when there was LeadPlayer. I had a good relationship with Clay then because he contacted me when I purchased his product. And from there, he came to spoke at my event. I’ve interviewed him on my podcast many, many times. I’ve actually been charting the journey that he’s been through. I speak to him privately and I share behind the scenes information between us. One thing that I’ve noticed is that an easy way for someone like me to be a part of that is just to affiliate with them. So I’m going one layer back from the layer back if that makes sense. We take the hot lead generation market. We find the software supplier, and then I affiliate on a recurring affiliate commission and that’s been one of my long term profit winners, is having affiliated recurring income to people who are hot in the market and picking the winners that way.

Dane: That’s beautiful. And that all depends on what your goals are. So if your goals are passive income streams, then that’s phenomenal. If you want to build an asset that’s also got saleable value and whatnot, that’s just another goal that you have to set. And so I love how clear you are on what you want and that you’re able to create that.

James: It’s not just that. I’m also clear on where my specialties are and I think Clay Collins is definitely a standout operator in the marketplace. I rarely bump into anyone with as much vision and mindset clarity as him, and he’s so focused. And that’s how he built such an epic machine. I had seen that before with James Dyson in OptimizePress, and I’m seeing it in other people now like Kyle Graham with his 10-Minute Funnels. You can see these people pop up who get it, who know what’s hot, and they move straight into that marketplace, and they’ve driven. You could describe all these people as driven and focused. You only need to spend 10 minutes and you can see it.

Dane: Yeah. And if you look at what prevents most people from getting, to that if you were to generalize most people as, I see it as one that lack of confidence because of the lack of skills, because of a lack of strength and identity of how they see themselves. I remember when I was starting out, my first software business, I was desperate and hoping to get 10K a month. And now, a million dollars a month is more like the number for me. And what changed? My mindset, my identity, how I see myself.

James: I think we actually equalize or normalize to our environment. So I’ve had maybe 4 or 5 years straight of hundred thousand plus months. I had struggled to accept less than that because I’d think there’s something wrong and it would be natural that a million dollars a month would be considered a higher number when you’re used to the 6 figures, 7 figures seems like the next level. Then a question of: Is it worth paying the price to get to that? Do I have the mindset or vision required for that? Is it what I actually want? When I get it, will I be happy with it? What would I have to do to get that? And is it worth it?

It always comes back to this mental game and one tool that I use to continually counterbalance myself is I question everything. Constantly question. Like every 12 weeks, I’m reviewing every part of the business and I’m drawing up plans as if we we’re starting today, would we rehire the team we have? Would we continue to pursue the models that we’ve chosen? And that often reveals things that we need to change and adjust to, to stay relevant and to have that market context that we need to be successful.

So let’s bring us on track here. We have a fast growing industry, we want a recurring revenue, we’ve got some good mindset, we’ve decided we’re going to go for some tools, we understand that there’s a few people out there that we could go and talk to, and find out, I guess you’re looking for problems or challenges they’re facing that you might be able to solve. Something like that?

Idea extraction
Dane: Yes. So let’s take an example. The next thing you want to do is you want to do idea extraction. And James, we can test a couple of questions on you to see if we can uncover any ideas. Before we do that we just want to come up with a little brief story. So if you were contacting iPhone developers and you are conducting what we call idea extraction, which you can get a free guide on our site, and also you can actually listen to a full MP3 recording of me doing idea extraction on someone and discovering idea that he wanted me, begging me to pay 500 bucks a month for. Literally a 45-minute call. By the end of the call, I was like, “Just please, build this. Take my money.” 500 bucks a month and I had nothing to start from.

And so, that’s where you go into these industries and you conduct idea extraction. So let’s say you do idea extraction on iPhone developers. I came across this product that some brilliant guy has built that helped iPhone developers with their marketing, and helps them basically, does keyword research in their industries so they know how to write their iPhone app descriptions so they show up in the results. And they charge like $200 or $300 a month. It’s a fairly simple straightforward tool that a developer has no interest in making, and also, developers aren’t really that crazy about marketing. If you can provide tools and help them with marketing, they just want to develop their product. That’s a mindset thing.

What is the right mindset?
You know James, you keep saying, you have to have the right mindset, and each time you say that, I’m picturing someone being like, what is the right mindset? It encompasses a lot of things. One specific example is could you ever sell a software product to developers? Absolutely. I remember when I was like, “There’s no way I could sell a software product to a developer.” So here you would be conducting an idea extraction call with a developer. You’d ask him questions like, how do you go about building your product? What parts of the process do you enjoy? What parts of the process do you not like?

So if you want to breakdown idea extraction into the before, during or after phase, you say, “What do you do before you start the product? Why are you building the product? What sort of things do you do after the product? If you do before, during and after, and if you get into the after phase, they say, “OK. Then I’d put it in the app store and I do this and that.” And you say, OK. Well great. Then what happens after that? How do you conduct marketing and for sales? “Well then I’ll write the description.” And you say, well how do you write the description? They say, “Well I do this.” And then you would ask, how do you know if you’re writing the right description? He’s like, “I don’t know.” And you’d say, what’s important to you? He will say, “Well probably be getting in the first page of the rankings and the iTunes app store.” I say, how do you know how to do that? And he’s like, “I’m not really sure.” And then you’re starting to get to the root of the pain in a fast growing industry.

James: Nice. That all makes sense to me.

Dane: It’s really straightforward. It can be a lot trickier. What I’ve noticed and what I’m getting really d*mn good at helping starting entrepreneurs, it’s a pain in the b**tt.

James: Well it sounds like you’re using a Socratic approach, which is something that I use as a wonderful tool.

Dane: Well, it’s Socratic James, but what happens is the people I teach to do this stuff, they get on their own way a number of ways and I’ve been trying to create this full proof of a way to do it as possible. We’re getting closer and closer to it by the day, but what I’ve noticed is with students, it’s not about, and this is really important, if you’re wanting to get started from employee to entrepreneur, or if you’re on entrepreneurship, you really resonate with this, I think, I’ll guide you, it’s not about the first action that we take. It’s about how we respond to the first result based on the first action we take, and what action we take from there.

For example, I’ve got a student of mine, no names mentioned, but he’s like, “Hey Dane, I’m doing all these idea extraction phone calls, idea extraction sessions, and I’m not being successful. It’s not working.” Oh man, my process doesn’t work. This is really disappointing, like dang! Sucks. So I said, “Well hey, why don’t you send me a recording of one of your idea extraction phone calls?” He’s like, “OK.” Because we have them on recorder.

So I started listening to his idea extraction phone call, and when I listened to the call, I was blown away because he went in and he asked the first question, “So tell me, what are the biggest pains that you deal with on a day to day basis?” And I don’t advise you actually going and asking that question right away. But as we’ve iterated things, that’s why he’d thought it. That’s why he did it that way because that’s how we taught them but we’re getting better at we did.

That’s not what I would advise now but that’s how he asked, “What are the biggest pains in your day to day business?” And the guy, he’s like a lighting engineer. And he said, “Well, I’m stuck in email all day. So I don’t really get a chance to see many other pains.” And then the student goes, “OK. So well tell me about some of the tasks of your day to day basis.” And I was like, oh. No, no, no. Please. Please stop. He just gave you gold. Ask him about his email. What are you doing in your email? How long do you spend in your email? What kind of emails are you replying to? What’s taking up your most time? What emails do you wish would go away? Blah blah blah.

Email inbox strategy guide
And then that became the essence of what I call the email inbox strategy guide, where you can actually go into someone’s email inbox and it takes some time, it takes some massaging, it takes some perusing, but inside in someone’s email inbox, you can find a plethora of problems and pains to solve, to create software products, from there you can charge a recurring revenue from inside the email inbox.

For example, if you would think about the electronic signature software boom, like DocuSign, EchoSign, RightSignature, those guys just meant money. Imagine how you could have got that idea, calling up a realtor, talking to a friend of yours who’s a realtor. I don’t imagine you would just cold call a realtor and ask them to see your email. You would need to set some more context up. You could do it but you need to set more context up, you’d get a little bit of rejection along the way but it would end up working if you were desperate about it. I wouldn’t recommend it. I’m not saying that you couldn’t do it.

And so, if you’re talking to a realtor as a friend of yours, and you’re going through their email inbox together, and then you come across this email that’s got a pending contractor, a listing contractor, an offer for a purchase, and you’re like, so what email is in your inbox take the most time and steps? And they’re like, “I hate these emails.” Why? “Because I’ve got to print off this thing, I’ve got to sign it, I’ve got to scan it, I’ve got to go back to my computer, attach it, and send it back.” And then you say, if you could wave a magic wand, what would you do to solve this problem? He’ll say, “I would love to just be able to sign it right from my email.” And boom! That’s there. Electronic signature software could have been born. That could have been you discovering that idea. That could be me discovering that idea if I knew this back in 1999 when DocuSign got started.

And I’m not saying that you couldn’t get into electronics and into software. Now, there’s plenty of room in that space. You could start e-signature software tomorrow if you want. It’s not that the idea is over and gone with, but the point is that you can go into email. The point is that you go into fast growing industries. The point is that you talk to developers and you ask them questions, and you find out that they need this keyword research tool. That’s how you get to the initial idea.

James: It makes a lot of sense. I just did a podcast with Dan Dobos, who’s a friend of mine, who’s got a long and very successful sales background. Both of us talked about our sales techniques, and one of the techniques I was using was centered around Spin Selling, which really is finding out where people are at, and what problems they’re having. It sounds like an amazingly similar process, probing for problems.

In your case though, you’ve got the context of being able to develop the solution. Whereas when I was using it, I was solving people’s motoring problems with the Mercedes-Benz. I already knew what the solution was, I just had to steer people in the right direction. I love how you can go to the inbox, absolutely.

I actually made a product called Inbox Relief, which is in my members’ community and it is purely about the mindset around the way people do with their emails. You can tell so much about someone from their emails whether they’re an opportunist, a pragmatist, whether they’re very systematized or completely out of control. I imagine just about every software problem would be able to be pointed to using that inbox message you talked about.

Dane: I would like to think so. And I want to reiterate that if you’re making the move from employee to entrepreneurship, or if you’re an entrepreneur, you do hopefully resonate to this. It’s not about the first action you take. It’s about how you respond to the first result based on the first action you take.

Another guy, he says, “Hey Dane, I’m not getting any idea extraction phone calls. I’m sending all these emails and they’re replying but I’m not getting any phone calls.” I was like, well show me what you’re saying. And then he showed me what he was saying. I was like, oh dude. No wonder they’re not talking with you. Why are you saying that?

James: Words are so important, aren’t they?

Your response is important
Dane: They are important. But what’s more important is how you respond to the first result because you can take the first action. If you take the first action and you get no results, what do you? If you take the first action and you get rejected, what do you do? If you take the first action and you have success, what do you do? That’s when stuff gets messy. The devil’s in the details and those details show up during implementation and that’s when people need support, and that’s why The Foundation is such a wonderful place for entrepreneurs to support them while they’re in those messy details. And I am coming at you with this advice and this insight coming from 3 or 4 years of sometimes painstaking patience, working with people and I figure all their crap that would start a company.

James: Oh. I did that too on a daily basis. We have this great video of Ed O’Keefe at one of my events talking about mindset. He’s an 8-figure marketer, very successful. He went and sold millions and millions in the dentistry services market. He was talking about how people use cop-out language like, maybe, someday, possibly. And I saw someone post in my own community and they were talking about their podcast that sounded so distant because of the words they were using, and I said, “I know you’re not serious about this podcast” because I went to his site and I couldn’t see it live. And I said, what’s stopping you having this podcast live right now? And we got down to it. Guess how long it took this guy to put a podcast up live on his website after an intervention?

It was like 48 hours, give or take, an RSS feed problem that he had to do with his website. He’s up and running, he’s got episodes in the tin now with Neil Patel, James Schramko, and a few others are already booked, and he’s rolling. But what he really needed was to overcome this languaging that he’s using on himself. So it comes back to this mind thing.

Activated behavior consequence
I’m on speed with you with regards to the how you act to things. I learned this formula of activated behavior consequence, which turned into my ThinkActGet domain name purchase, which turned into a podcast. But activate is something that triggers a behavior, then you get the behavior that comes along from that, and as a result of that there’s a consequence. And I like this metaphor of the vending machine. You go up to the Coke machine, you stick $2 in it; I don’t know how much it is over there, probably 50 cents; we put $2 in it, we push the button, and the Coke is supposed to pop out. Because we’re thirsty, so we put the money in, we push the button, and the consequence is the Coke pops out. I think what a lot of people do is if they push the button and the Coke doesn’t come out in sales, they just walk away from the machine, they’re done. They don’t even bother trying to give a little nudge or, or tip it, or call the technician, or inform the service attendant nearby. They just give up.

Dane: Yeah.

A recap
James: OK Dane. We’ve covered quite a lot. We should probably just reign this in here. We’re talking about going from employee to your first thousand dollars a month, which could take a year because we’re being realistic and non-hypey about it. We’re talking about how it’s going to require different thinking. You’re going to have to look for fast growing industries, create tools that serve them, come up with some idea extraction questions that really probe for the problems, and then there’s going to be a process of actually having the thing developed. And I imagine that’s what you cover at TheFoundation.com.

Dane: Yeah. And the thing about this is it’s emotionally more difficult than it is actually difficult. Once you’re able to sort through the emotions and process the emotion, which we are really really good I think at emotional awareness. We have emotional release techniques, mindset shifting techniques. And once you clear out the emotions that get in the way, the process is pretty straightforward. It’s really just do this, do that, it’s mechanical. But it takes some gentle, loving, care to the mind, and the heart, and the emotions that you’re going through. It’s not about like pushing through it, or conquering it, or being stronger than it by any means.

Test questions
And I also wanted to try and just like throw out 2 questions to you real quick, as like a test idea extraction question, and see what responses we get. We may not get anything back in the short period of time that we have, but I wondered if you wanted to give it a shot.

James: Yeah, I’m up for it.

Dane: So, can you tell me, are there any areas of your business that you use Microsoft Excel for?

James: None.

Dane: None. OK. The next question is, that’s pretty rare by the way. The next question is, is there any software that you’ve been looking for for a number of years but you weren’t able to find one that fits your needs?

James: If anything, I try and have less software tools. I know I’m not normal. [laughs] I think most of my customers seem to hunt their inbox looking for something new to buy, but I shun tools as much as possible. And I like to think I found the ones that solve the biggest problems we had. And the most recent one was Slack, because that was the thing that was missing in our business.

Dane: So maybe, if I had asked this a little while earlier, you may have mentioned something like Slack.

James: Exactly. If we went back in time, I’d say I’m getting too many emails from my stuff, and Skype every time you open it up, you’re getting birthday notifications, and someone you met 3 years ago at an event is trying to corral you for some free advice. So that really solved a huge problem. It has cut my emails down by 5 hours a week, and it’s made my team communications completely private, and stores everything beautifully, and displays content just the right way. Amazing tool.

Dane: And that comes from the email inbox strategy. So that’s kind of an example.

James: That would definitely have come from the inbox strategy. I’m a real aficionado of email marketing, and I run RescueTime in the background to keep an eye on it every week. And I make sure that I always set a hard limit. But it used to be 10 hours a week, and my inbox was the primary activity I was doing running the business through my team, and I’ve cut that down to about 3 or 4 hours, which is substantially better.

But I’m not actively looking for to add more in my business. These days, most of my efforts are to, how can I simplify, how can I reduce, how can I perfect. Because I think we started with the block of marble, with a big team, and a lot of business units, and we’ve been chiseling out that perfect statue. I don’t want to cut the nodes off, but I also don’t want to carry extra marble where it’s not required.

Dane: Absolutely. Well, thanks for trying those questions. I was really unsure of the outcome and I like the realisticness of the response. It’s great.

James: You know like the Excel thing, one thing that we did do is we set up Google apps and we’ve made Google docs our standard for the business. I literally went through a phase where my Mac didn’t even have the ability to open an Excel spreadsheet because I didn’t have Microsoft installed or whatever.

Dane: Are you using Google spreadsheets?

James: Yes.

Dane: Ah, well that’s the same question.

James: OK. So I thought it was brand specific. Let’s keep down that line then.

Dane: Yeah. So what are you using Google spreadsheets for in your business?

James: I’m keeping a track of domains that we list for sale and sell occasionally, and the ones we used to use for SEO, keeping tabs on things such as purchase price, pagerank, indexed pages, listing price.

Dane: Anything else?

James: I’d say our SEO team is using it to keep track of recurring subscription jobs. Like a project management tool. So they put in the customer details, the website target, the key terms, and the support ticket that corresponds with that job in Zendesk.

Dane: And you’re not actually using any of these softwares? Your team are using them?

James: Yeah. I’m dealing with about 5 people in my business once a week.

Dane: OK. Of these 3, since you’re not using them, do you have an idea of which could end up saving you more money or increase your efficiency? If you were to improve upon.

James: We’ve tried a lot of different tools before, and that’s the one we’ve ended up. It’s the one incidentally where we started but but more random. They used to do it in their private emails, and then I got Google apps, and we consolidated, and we tried different systems to manage jobs; everything from Trello, Teamwork, Basecamp, but this one seems to be the simplest for everyone to use, to share and collaborate. I thinks it’s solving the problem at the moment for us.

Dane: Great. So the spreadsheet that tracks all the SEO clients is the simplest to use. You’ve tried other solutions before, and it’s solving your problems at the moment.

James: Exactly.

Dane: So are there other any frustrations that are kind of like, dang it. Feelings about having to do that in the spreadsheet? Or is it actually really smooth?

James: I think they really like it. You can see who’s in there with that little different colors. It’s a pretty powerful tool.

Dane: So in this case, if I was in an IE call, I would just pivot from this quickly, and I would go to another question, switch the subject. So that’s kind of the essence of it. So you find out what they do, you ask how they use it. If you get them to how they use it, you get them to story mode, and then when you get them to story mode, you can kind of search for areas of pain. But I wasn’t really feeling any pain. You’ll know.

James: I’ve got this weird philosophy about tools. It’s like, a) we want the least amount of tools possible; b) if we have a tool, it’s got to be the best solution. So we research all the other ones available, and then third one is we have to know how to use it. So if we do have a tool, and we’re prepared to pay for it, and we absolutely need it, and it’s the best. We’ve got to learn how to use it properly. And the fourth sort of unofficial one is, as long as I don’t have to use it, it’s perfect.

I’m like, use whatever tool you want. I don’t want to build my website. I don’t want to be bogged down in code. I don’t want to run the tool. I would like to run the person who runs the person who’s running the tool. That’s the position I take. I guess in that call, what you would normally do might be find out who operates that spreadsheet and speak to the person in charge of that, because they’ll probably tell you frustrations that I’m not even aware of, blissfully unaware of.

Dane: Yeah. That’s a great piece of context to set that I forgot to mention at the beginning because you are setting up your life in such a way where you’re only doing these few core activities a day, you’re not as tapped in the different areas of your business to feel them as much, so it doesn’t it make for as rich of an idea extraction as someone who’s like really deeply involved in all the different areas. Absolutely.

James: Yeah I reckon people in my team who would be the right people would be the research and development team. We literally have an R&D team and their purpose is to do what you were just describing, to go and hunt down inefficiencies and see if we can get better solutions. That’s how we stayed ahead of the game on the SEO stuff because we’re always reacting much faster than our competitors.

Dane: That’s awesome. I love that you have that department. How did you go about setting that up?

James: I found the people in my team who were the most inquisitive, the most risk tolerant, and who love change and challenge. And said, “Hey, I’ve got a dream role for you. You can be like James Bond. I just want you to experiment with stuff. Take software for test drive. I want you to read and scan RSS feeds for news industry blogs. I want you to set up domains and see if we can get them ranking for things. I want you to see if you can penalize the site on purpose. All these sort of stuff. And while we’re doing that, we’ve got this safe little laboratory where we can test things. And when we get results, we can start wheeling that out across all of our customer sites, and they become the beneficiaries of our IP.

The other thing that we’ve really gone heavy on compared to most companies is our support. We have about 3 or 4 full time support operators, which is really a carry over from my time at Mercedes-Benz, because if I can have a very strong support team, it really keeps me out of the thing that stops most entrepreneurs from scaling, is this constant questions about billing, or login details, or software doesn’t work, or they can’t access this, or they need a receipt for that for their account or whatever. I like to have nice, fat, juicy layer of help between the customer and me when it comes to anything that I’m not going to be the world’s greatest input for.

Dane: This is pretty cool. You’ve got this research team, you picked people who were risk tolerant and liked change.

James: Yes.

Dane: And then you gave them specific instructions on how to search through different networks and gave them a mindset approach to a laboratory to test the ideas that you can then recommend to the rest of your customers.

James: Yeah. Not even have to prescribe the step-by-step SOP. One of the things is this type of person loves to create their own SOPs. I more talk about the result that I want. I talk about the changing landscape of the industry we’re in and how we need to be a finger on the pulse, and that that’s going to be their role and their mission, to keep us in front of everything so that we’re always neat and tidy because our customers are very risk adverse. When you do SEO, the last thing you want is a penalty notice from Google or your site to stop ranking. It’s going to cost you big, and they’re going to get angry, and they’re going to take it out on me, the business owner with my name across the top.

So I want to do everything in my power to protect our customers. So we’re not experimenting on customer sites like other companies. And we’re not testing things in real time in a dangerous way. We’re out there in an isolated laboratory doing crazy stuff to see what works. That’s how we figured out the trends, the blogs slapdowns were coming, we could see which tools were tainted, we also found out how infographics were becoming more popular, and image marketing was taking off with things like Pinterest and Facebook making images more shareable, and now Twitter now lets you put a picture of course. These sort of things all came from R&D.

Dane: So what I’m doing right now James, and what I typically do is like so you can go and do an idea extraction and you can find pain. But if you’re working with superstars like you, what you can also do as you can find out what people are doing really well, and possibly systematize that and turn that into its own little product and sell it to other people in the similar industry.

James: And that’s what my software friend does with my business. For example, I run a paid community. It’s on a Xenforo platform, and what he does is listen to me describe what I really want to do. I want to measure things like how long do people stay for, what’s my churn rate, what’s the most popular content in the community. And he goes and creates a dashboard and attracts all time subscriptions, current subscribed members, the signup rate per month, most active content, most popular posts, all these stuff displayed in a software thing, and that is a software solution that anyone running a Xenforo community needs to have, but they probably don’t even know it.

And what we’ve done is now, pretty much everyone in my SilverCircle membership who I’m teaching a subscription community model to, is replicating this software, this dashboard, it all gets installed. So we have this special advantage over the marketplace. And I imagine those things are very commercially viable for scaling.

Dane: Oh yeah, this is cool. I want to iterate that one of our successful students, who is now one of my roommates, actually I only have only one roommate which is him, he was contacting a physical therapist finding the pain, and he sent an email. This guy said, “Hey, do you have any problems in your business essentially?” And the guy replies back, he’s like, “No man, I don’t have any problems. I’m too successful or whatever. See you later. I don’t need you.” And then Carl, he replies and he says, “Oh wow. It’s amazing that you don’t have any problems. Maybe we could talk on the phone and see if there are things that you’re doing really well and maybe we could elevate the industry together.” He ended modelling a lot of what that guy did successfully and then just resold it to other PTs.

Sometimes, if you want recurring revenue, you don’t even need to create software. I could just take this idea that James mentioned about how to create these test laboratories, and this R&D stuff, and apply to different business industries, and sell it to people so they can stay out of the curve and cross the competition or whatever. It’s incredible.

Remember like I said, entrepreneur is not about the first action you take. It’s about how you respond to the first result. Most of our students, when they get an email back that says, “No thank you, I don’t have any problems.” What do they do? They ignore it. What did Carl do? He responded differently. He’s more entrepreneurial and his mindset, because we taught him, and he listened, and he’s also just really smart himself. So that’s what Carl did. And that’s what I’m kind of searching for fun right now with you James, is like, well what are some things that you’re doing really well that we could possibly package up and resell to other people.

James: Yeah. That would be easy. That would pretty much be the modules that are inside my mastermind.

Inspiration from other industries
James: That is my passion. My passion is benchmarking and finding the best. One of the exercises I used to do, when I was a general manager and I’d sit in my office, I’d have pretty much everyone doing their thing with their systems and procedures, and I’d almost replace my entire role through delegation and systems. And I’d think right, somewhere in the world, someone is doing a better job than I am at running a motor dealership or selling cars or better customer service, what would they be doing? And I’d spend time developing and thinking about that, and researching.

So at one of these times, I read Purple Cow, and I saw this thing about the ice cream parlor with the shop owner had put his contact details on the wall, said, “I own this shop. Call me if you want to talk about your service.” And I thought, “This is brilliant.” And I created a system that I had rolled out into the dealership to prove customer satisfaction. And we went from about last, which is when I just started in this dealership at the time because they weren’t going very well and Mercedes-Benz asked me to go there and fix it up. We went from last to first with this system. And I put my name all over that system, I copyrighted it at the bottom, and I used it in every dealership I worked at after that, the next 2. And always, without fail, top CSI or customer satisfaction index scores using the system that came from spending time thinking about how I can take an idea from another industry or another source and bring it in.

And I remember bringing in ideas from Rich Schefren, and Dan Kennedy, and Jay Abraham. I even created a risk reversal form once that would let people change their mind or not go ahead with their purchase at any time up until delivery, which was massively wild, that the dealership owners and their lawyers wouldn’t let it fly. But I was very innovative because I spent time thinking about what could be better than what’s already there. And someone out there is already doing it. It’s just a matter of locating them, or finding them, or reading about it I think, or asking the questions in this case. So my little mastermind is a research hub of best practice across the whole business, which is why when they come in at high level, we take them to a higher level really quickly. And it sounds like you’ve got that for the startup phase, which means we’re a good complement.

Dane: Absolutely.

James: Dane, thanks for coming along and sharing some incredible stuff. I know we mapped out our discussion a little bit before we’ve gone on the recorder and I think we’ve not only covered all of those things but we’ve gone down a few other areas as well that are certainly been interesting to me and I hope it’s been entertaining to our listener.

Dane: I hope that the last part of this has been really useful to people to see how messy and organic, it started with a couple of questions, and there’s nothing really there, and then you started talking about what you’re doing really well, and I asked you about that, and you kind of started picturing a system for putting together this R&D team that could be packaged and resold to people. I would be interested in that myself personally.

Once you get involved in a conversation with a customer, you’re just looking for how you can make the world a better place, whether it’s solving a pain for this person you’re talking to or taking something they’re doing really well and packaging it and publishing it and selling it to someone else. The world is endless when you can have the right mindset and explore with this kind of freedom.

James, thank you for having me on.

James: Thanks Dane. If you want to check out Dane’s company, it’s TheFoundation.com. And from time to time, they open up new spots. I think you mentioned you have 1200 students so far, and you’ll be looking for a few more.

Dane: Yes.

James: And if you’ve already got a business that’s up and running, and you’d love this recurring subscription model and you want some help from me, then certainly let me know and see how I can help you.

Dane Maxwell, it’s been a pleasure again. That’s his second time. If we get a good reaction to this or a few questions, I might ask you back for another session.

Dane: That would be wonderful. I’d love to.

James: All right. Take care.

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