I am Charles Schwartz Show - Predictable Revenue, Endless Income

Episode Date: January 15, 2025

Collin Stewart joins this episode to share his journey from humble beginnings as a “geeky sales guy” to becoming a sought-after expert in achieving product-market fit. With a career spanning multiple startups and countless lessons learned, Collin’s insights are a must-hear for anyone building a business from the ground up. Through candid stories and hard-won wisdom, Collin reveals the mistakes many entrepreneurs make when trying to scale too soon, as well as the key strategies for finding product-market fit. He explains why understanding your customers’ pain points is non-negotiable and how early-stage founders can use customer development to turn insights into revenue. Collin doesn’t just talk theory—he provides a clear, actionable framework to help entrepreneurs identify real market opportunities, validate their products, and scale sustainably. His emphasis on listening to the market and aligning growth with timing offers a refreshing perspective for founders navigating the challenges of early-stage business. Whether you’re an entrepreneur searching for direction or a founder ready to scale smartly, this episode is packed with value. Collin’s practical advice, combined with his no-nonsense delivery, will leave you inspired to rethink your approach to product-market fit. Key Takeaways: * Why product-market fit isn’t binary and how to measure it effectively. * The dangers of premature scaling and how to avoid them. * A step-by-step guide to using customer development as a foundation for growth. * Real-life lessons on creating products the market can’t live without. Head over to podcast.iamcharlesschwartz.com to download your exclusive companion guide, designed to guide you step-by-step in implementing the strategies revealed in this episode. KEY POINTS: 2:01 - Common Mistakes: Collin highlights frequent entrepreneurial pitfalls, including ignoring market signals, rushing to scale, and failing to truly understand customer needs. 9:32 - Premature Scaling Risks: The dangers of scaling too early are laid bare as Collin explains why investing in sales teams or development too soon can drain resources without delivering results. 12:11 - Understanding Product-Market Fit: Collin breaks down product-market fit as a spectrum, where success depends on identifying market needs and crafting a solution that directly addresses them. 14:19 - Market Need Importance: Collin emphasizes that strong market demand—not personal passion—is the foundation for sustainable business success. 19:00 - Customer Development Process: A step-by-step framework for engaging with customers, uncovering their pain points, and refining your product to meet market demands. 35:00 - Outbound Sales Timing: Collin discusses the importance of timing outbound efforts to align with market readiness and long-term sales goals. 37:26 - Long-Term Thinking: Founders are urged to adopt a mindset of patience, focusing on sustainable growth and avoiding the trap of short-term gratification.

Welcome to the I am Charles Schwartz show. In this episode, we dive into the critical concept of product market fit with Colin Stewart, an entrepreneur who has built and scaled multiple startups. From his early days as a geeky sales guy, bridging the gap between tech and business to running successful SaaS ventures, Colin has learned firsthand what it takes

to align a product with a market and the costly mistakes to avoid. Colin reveals practical no-nonsense strategies for finding and leveraging product market fit. He shares how to identify real market pain points, use customer interviews to uncover unmet needs, and turn those insights into paying customers. Along the way, he highlights why scaling too early can kill a business and offers a roadmap to navigate this crucial stage of growth.

This isn't a conversation for the faint of heart. Colin challenges conventional thinking, calling out the traps many founders fall into and delivering actionable advice to help you succeed. If you're ready to leave guesswork behind and master product market fit, this episode is for you. Grab a notebook and prepare to rethink your business strategy.

The show starts now. Welcome to the I Am Charles Schwartz Show, where we don't just discuss success, we show you how to create it. On every episode, we uncover the strategies and tactics that turn everyday entrepreneurs into unstoppable powerhouses in their businesses and their lives.

Whether your goal is to transform your life or hit that elusive seven, eight, or nine figure mark, we've got the blueprint to get you there. The show starts now. Everybody welcome back. We're gonna talk about something here on this podcast called product market fit amongst about 15 other things. But before we get into that, Colin, welcome to the show.

Thanks for having me on Charles. So for the audience that doesn't know you and they haven't figured out kind of who you are and what you do, let's catch everybody up. What is it that you do better than anyone else? That's a good question. What is it that you do better than anyone else? That's a good question. Um, I probably say that point where you are trying to find a product opportunity and then getting it to your first couple of customers, I've done that a number of times.

I've helped a number of companies do that. Um, I spent 12 years building, running an agency, helping, well, six years doing an agency, six years doing it for myself. We basically used the agency to bootstrap a couple of SaaS companies into existence and made some huge mistakes and learned a lot along the way. But I'd say finding those first, finding that first market opportunity and then figuring out how to transfer, transition that into your first customers. You mentioned that there's a bunch of mistakes along the way, which I think all of us do. So before we get into the strategies on how to do it right, let's, let's talk about some of the ways that people just do it wrong or some of the

mistakes you've made along the way. Well, initially, like I, I came from sales and when I walked into the accelerator incubator, coworking space where I started, it's called launch Academy. I think it was the only person that came from sales, like everybody else was product and engineering. And I was the obnoxious guy who was always on the phone talking to people.

And I remember engineers being like, why is this guy, can I swear? Yeah, absolutely. No. Okay. Who the fuck? What is this? Why is this guy always talking to somebody?

Like, doesn't he actually do any work? And that was kind of the perception. What the fuck? What is this? Why is this guy always talking to somebody like, doesn't he actually do any work? And, uh, that was kind of the perception. And I, I came to it because I come from sales and I was trying to figure out how to do customer development, but I'd spent 10 years, 12 years in sales as the geeky sales guy. And so when you're the geeky sales guy and you're the youngest on the team, you naturally get pulled into every CRM project. And I got into sales because I was in marketing

and I found a way to write a copy and paste a macro from Stack Overflow and basically automate my job. And then I was sitting there and I couldn't, I was playing solitaire and I almost got fired because I was playing solitaire because it was the only thing on my computer that would run and I couldn't do anything else. And so after almost getting fired,

the sales guy across the hall was like, hey, I got some cold calling. Here's a list, come join me. And so he sat me down fired, the sales guy across the hall was like, Hey, I got some cold calling. Here's a list. Come join me. And so he sat me down and kind of gave me the spiel and I started cold calling. And so that's kind of, that was my entry point into sales. And as you were going through that, and you kind of entered into sales from playing solitaire. Um,

and I love that you started as the geeky sales guy, cause I started as the geeky IT guy that ended up being able to, to bridge the gap between the business owners and tech because tech couldn't talk human and human couldn't talk tech. And I was like, all right, I gotta find a way to get these guys to talk to each other. So I, it's a similar path, but in this situation,

you talked about a bunch of the failures that people do when they're trying to get it and do that initial launch. What are some of the failures that are the classic mistakes people do? Well, I think because I had spent so long in sales and I'd been involved in so many CRM projects, I'm not, not I think, I know, I considered myself an expert.

I'm an expert in CRM. I've set up a bunch. I've been using Salesforce since 2005, like early, early, early Salesforce. So I had a very large opinion of myself. And so when it came, when I read, you know, all the books on customer development and get out of the building and interviewing people, I think I took the term customer validation a little bit too literally. I had sketched out my idea and I went and did. I put the effort in and I interviewed 50 people and went

look at my idea, isn't it great? Not quite in those words but that was the effect. And I've seen this in a lot of other entrepreneurs where I wasn't open-minded enough to hear people actually saying, we don't want another CRM. Like your idea is interesting, you have a valid insight, but we don't want that insight packaged as a CRM. We want it as part of Salesforce or working along Salesforce.

And I couldn't, I could, it was like a belief that I had, you know, like some people have these beliefs that they just are not willing to change. And this was one of them was like, no, no, no, I'm going to, I believe that I'm smarter than everybody. I'm this Steve jobs of CRM and I am going to, you know, break this thing wide open. I'm going to take on Salesforce. And obviously it didn't work. Um, I eventually, I had a mentor sit me down and I'm Canadian.

And he said about the meanest thing you could say as another Canadian, which is, I can't wait till you're working on something where you have a chance of being successful. That's pretty rough from another Canadian. Cause you guys are some of the nicest people on the planet. So that's pretty rough coming from another Canadian. And so is Roger. He's another entrepreneur. He was founder of the coworking space and had another couple projects on the go. And he is somebody who I'd gone to, who I respected

and he respected me. And he's like, it was just, he was frustrated because I wasn't like getting it. And I think that was the moment I kind of cracked me open and said, ah, I got to stop and like reconsider a whole bunch of things. And the first that was the moment I kind of cracked me up and said, ah, I got to stop and like reconsider a whole bunch of things. And the first piece was opening my mind to actually listening to customers. I was kind of doing customer development right, but I compared to how I run it now, it was totally wrong. And I was coming into it with ill intent, not ill intentions, but just totally closed minded about the process.

I was coming into it knowing, feeling like I knew everything I already needed to do, needed to know, and I was just there to check the box of like, hey, I've talked to 50 people. So those are some of the mistakes that you made. Your firm and what you guys do and how you guys are connected, who are the people that you serve? And before they get to you, what are some of the mistakes that they normally come in with as well? So we typically serve entrepreneurs, founders that are trying to build their first go to

market channel. They've got initial product market fit and they're trying to figure out how do we get out of founder led selling and then kind of scale up the team and you know, maybe they've got in the earliest cases, they've got a couple of customers and the later cases they've been selling and they've got up to a million in ARR. And typically what they come to us for is outsourcing. They say, Hey, I want to, I've got this thing. I want to get this sales thing off my plate. I want to get this Legion thing off my plate.

So I want you to outsource for me. And I think why we get so many people sending us referrals is they know I'll people, I think it's a bad idea if I think it's a bad idea. And when we work with more established companies, there's a really narrow niche of where it's outsourcing is a really great fit. You know, it's specifically, if you don't want to build a huge team, there's no political capital to hire new folks. Hiring is really costly from a, not just from a monetary perspective, but bureaucracy and budgets and all that. Everybody's got capex, opex, and all the different budget things. For companies that are not looking for extreme growth

or aren't gonna be, are gonna be roughly the same size next year, plus a little bit, outsourcing is a great fit. For an entrepreneur, for a founder who's building their first team, outsourcing is a terrible fit. For an entrepreneur, for a founder who's building their first team, outsourcing is a terrible fit, most of the time. Because, one, nobody can build anything better

than the founder. Like, I don't care if you and I sit down, you know, if I sit down in your company and try and build a team and you try and build a team, even if I built that team 100 times before, you know your company, you know your customer, you know your market 10 times better than I will. I'll eventually get there and I'll have the advantage of knowing the tactics and things. But if we had this side by side, like you're going to do a better job. Now you alongside me working together, we'd probably do

an even better job than either of us on our own. And I think that's where that's kind of the conversation we tend to have with entrepreneurs is trying to talk them out of premature scale. You know, having two customers and, you know, 10K a month of recurring revenue and then trying to invest, you know, $100,000 because you're not, it takes a long time to realize and achieve the value from that. And so I, one of the things I ended up talking most frequently with founders is, pardon me, quantifying product market fit, and then trying to find a way to time your go-to-market investments so that it kind of, it aligns with your fundraising strategy of, you know, if you got 18, if you got, you know, I've had this conversation a bunch in the last 60 days, it's January 9th, as we're recording this.

And in the last 60 days, people have been coming in planning for 2025. So many people have come to me and said, I think I had five people in one week said, I want an I want a sales development team. Like, okay, cool. Let's talk about it. Like, what are you trying to achieve? I need to raise in next summer. And I was like, okay, and what do you want to achieve with that? Like, well, I want to have an SDR team and I want to have pipeline coming from it and X and Y and Z. I'm like, okay, well, let's look at the actual math. And like, if we started today, say January 9, in six months, you're not going to have any close one deals, right? You're going to have spent a bunch of money. You're not going to have got

a lot of value. Now, some people will. But when I'm talking to somebody about timing and when I'm trying to help them plan, I'd like to assume the absolute worst. And then if something better happens, great. And so in four of the five cases, the entrepreneurs needed to hit a raise and they had a cash crunch coming

if they didn't hit a couple of sales in the next six months. And investing an additional, upping their burn 20, $30,000 a month to hire a bunch of salespeople that weren't going to produce value for 12 to 18 months. And not that they're not producing value at all, but they're not going to produce value at the right time, right? It just wasn't aligned with the timing of what the founders are looking for. And so that's a lot of the conversations I have is trying to help them figure out, okay, well, if we

can't do that and I don't want to get stuck here forever, what is it I do? And so how do I go from, I've got my first few to how do I build that into 10, 20, 30, without investing in a huge sales development team? I love that you come in and you have a real honest conversation with people because so many times they come to me and like, hey, I want to scale and I'm like, oh, that's adorable.

What do your systems look like? They're like, well, I don't know what that means. I'm like, all right, if I took you and I duct taped you to a chair and I put you on a boat in the middle of Greece for the next six months, what does your company look like? Can it still survive? Can it still work if it doesn't interact with you in any way, shape or form? And most people are like, no. I'm like, then you're not ready to scale yet, princess. You gotta put some systems involved. So before you do sales, you've brought this up a couple of times and what probably one of the most excited to talk about with you is product market fit.

It's something that people just don't talk about. They'll talk about, you know, when you're doing your raising rounds and you're bringing in funding and you're doing all of these different things, but very few times do people, unless you've already lost your first meal or two, are you sitting down and talking about product market fit for the audience who has no clue what this is. Walk me through on if I'm an elementary school kid, what's product market fit? Product market fit.

The way I see it is kind of the strength of I'd say the size of the opportunity that you found, right? the strength of, I'd say the size of the opportunity that you found. If you and I were going to start a printer company, a copier company, there's probably not a huge market for it. I mean, there is a massive market for it, but it's saturated. There's Xerox and Canon and probably some other ones, but there isn't a giant market need. But if we started something that was, if you found something where there is a huge amount of unmet needs, where there's all these customers that are really frustrated with the way that the current solution works, and it's costing them money, it's costing them time, it's causing them pain, right? To me, that is the beginning of product market fit. That is the market side, right? It's the huge amount of unmet needs

The products out of product market fit is how well your product meets those needs and I think together they kind of create this Multiplier effect on your revenue efforts. So say you and I were gonna go and start that copier business We're gonna do some cold outbound do some cold calling some knocking on doors. It's gonna be Let's call it one out of 10 effective. It'll work, but it won't be as effective as if we were doing something else. Now let's say we start this other business and say, I don't know, we found a big market opportunity, there's lots of pain, that pain is costing them money. We're going to do the same, we're going to put the same amount of effort into cold calling, cold emailing and knocking on doors.

Chances are we're going to get 8 out of 10 or 10 out of 10 out of the result. And that's not because you and I are magically better. It's because there's a greater market need. So to me, product market fit is not something that's binary. It's something that kind of exists on a bit of a spectrum from weak, which is like selling copiers into a world where copiers and everything exists already to selling something new and helping people with new pains and challenges that are unsolved. And when you do that, people tend to not just be more receptive, but they tend to tell their friends. And the transition from like when I was selling voltage CRM, I got a decent salesperson. I'm a better salesperson now than I was back 12 years ago, 13 years ago.

But even back then I was decent. I had one customer with Voltage. That was my first company, the CRM company. When we pivoted to CAR, we were just doing the Wizard of Oz style beta, where I'm like, nothing's going to work. Everything's going to be manual. It's me behind a curtain running spreadsheets and mail merges. I interviewed 50 people

for Voltage and I ended up with one customer. I interviewed five people with Carb. I interviewed more people than just five but the first five people I interviewed with Carb turned into seven paying customers. I was confident I could only handle five and two of them bullied me into taking one of their friends because they needed, they're like, no, no, no, no, James needs this so bad. Uh, I talked to Mac and he was just telling me about this. You've got to help him. And like to me, that's the definition of market poll is I was telling people I couldn't do

more and they're like, nah, nah, no, no, you're gonna do it anyway. And what I love about that is you didn't put your idea and your dream and your passion before the market. You went to the market first day, where's the market meet? And I'm gonna have this conversation with the market. I think that's one of the mistakes at all. Most, if not all entrepreneurs make is that like,

hey, I've got these amazing cookies from my grandma and they're the best recipe ever. And I love this. And I've got these amazing cookies from my grandma and they're the best recipe ever. And I love this. And I've such a great idea about selling these cookies and your entire audience is a bunch of diabetics. They're not buying your cookies.

Sorry, it's not going to happen. So identifying a pain in the market and then seeing how you come to it is more important than the opposite. I, you know, one of my, one of my people that I work with, he talks about all the time. I was like, what, what's your next business? He's like, I don't know. Let's see what Google trends is doing today.. I was like, what's your next business? He's like, I don't know.

Let's see what Google Trends is doing today. And I'm like, are you serious? He's like, yeah, I'm going to see what everyone's searching. And I was like, no, no, no, no, because that made more sense to me because in the market's pulling it. So when you run into that situation, and if you've got an entrepreneur who you and I do have more frank conversations with entrepreneurs than most people will, where they have something that clearly isn't a product market bid, and they want to hire you and they want to scale. How do you handle that,

for lack of a better term, come to Jesus moment where you're like, listen, nobody wants your grandma's cookies other than you. What do this is what I recommend, or do you just say, hey, I'm not I'm not not your guy. I'm not gonna help you out. I mean, the only time I'll say, hey, I'm not your guy, I can't help you out, is if people are so close-minded about the conversation that they're not willing to open up and have a genuine conversation. Because people are hiring us for consulting and coaching work and it's just,

I don't wanna waste people's money. So if we're just gonna argue about, you have product market fit, you don't have product market fit the whole time, it's not, I'm not interested in taking your money just for the headache. If somebody is open to it, like we just took on one client where I've been telling him for two months,

then I'm like, hey, your product market fit is not strong. He wanted to hire me to outsource. And I was like, dude, I could take six months of your money, but it's not gonna produce anything for you. I'm like, you're welcome to do that. But as the founder of this company, I'm telling you it's a bad idea. I was like, so what do you want to do?

And I was like, I was very open and very candid about what I thought would be achieved and the timing. And then when it came down to it, we dug into what are your numbers? How many referrals are you getting out of your customers? How many, when was the last you getting out of your customers? Right? How many, when was the last time you talked to your customers? How many, how many customers that started using it are still using it, are upgrading,

are adding licenses. And I've got a bunch of questions where I can ask and kind of triangulate and help them see that like, Hey, this is, this is maybe not exactly the one and only thing that they need to do. Cause chances are the company started with a strong insight. I'm not one of those that can just look at a Google trend page and be like, okay, I'm going to start a company in here. I have to care about the customer, about the industry, but the change that I want to make.

Otherwise I'm just not a very, at it. And so I find that I empathize with folks that get so caught up in their idea that they're like, no, this is the only way. But when you're going, like what I was doing at Voltage, and I was like, hey, this is my insight, which was CRM wasn't a sales productivity tool. And so what I wanted to do about that was build another CRM. What I do with the founders I work with is help them back up to like, what is that core insight? Your application of that insight may not be 100% perfect, but the insight is probably very good.

So let's talk about the insight. Let's talk about all the different things you could do with that insight. And when I can get people to back up and kind of open up, right? Then they start to realize that I trust them, that I understand that there's a real insight there. Because telling them, hey, you don't have product market fit is a conversation killer. Because they're like, there's all these like,

there's these beliefs wrapped up in like my, I'm only an entrepreneur because I've got this product market fit. And I have all these like my ego and my self-worth and all these things are built on top of like whether or not I have product market fit or not. And so the introducing product market fit as a spectrum and the idea of like hey let's strengthen it. You've got something it's got to be better and then we use the process of customer development to go and find how do we make this better and then eventually turn those conversations into customers. Because

that's one of the biggest mistakes. The second biggest mistake that folks make is not selling to the people they do their customer development interviews with. How would you go through that process of selling to the people that do that? I mean, when you talk about, hey, they don't do that, that's a huge mistake. How do you get your clients to pivot and actually start doing that? Slowly. The way it's worked for me in the past, because I came to the,

I learned customer development as a salesperson. And when I was learning it, I couldn't help but notice that this is basically like the first half of a really good sales call, right? A great sales call, you're just talking about pain. You're talking about the shape and size of the organization, their goals, their dreams, ambitions, etc. talking about what hurts. The difference between customer development and sales, I mean, the difference is basically

with sales, you've got something that can solve the problem. With customer development, you don't quite have that yet. And so I'm just trying to bring slowly the sales process back into that. And the way I do it is gradually. And coach people on is to do it gradually. Because if you come after that first call and you say, hey, cool, I've got this thing I'm building.

I want you to give me $9.99 a month, what do you say? You're going to alienate people. They're going to feel like, oh, this is a bait and switch. You're not actually here to learn. You're here to try and sell me something. So I basically parcel it out into four steps, where you start with exploratory customer development. That's where you're coming in with zero opinions

about the market, and you're just trying to learn and explore and find a gap. Then once you've found a gap, and it seems to be shared by, you've got kind of a persona that you commonly, if you talk to, that it's going to be their top two or three panes then that's when I start to move to focus interviews and when I do move to focus interviews I go from super wide customer development or super wide and kind of audience to like a very narrow audience so if I was doing something for you know product managers you know I

might start with like the entire product and engineering organization and then as I narrowed it down like okay you know what I'm gonna focus on product managers, you know, I might start with like the entire product and engineering organization and then as I narrowed it down, they're like, okay, you know what, I'm gonna focus on product managers that are just doing a, that own a product that has a PLG sales motion, right? Like that's a very, very specific. So I go to focused and the goal of focused customer development interviews is to basically confirm that if I talk to 10 of these folks, 80% of them are going to share this pain. And then once I've hit that barrier, or once I've hit that milestone, the next step is basically a paper prototype to say, OK, this is,

because that's the market side of things. That's the finding a gap. Then the next piece of product market fit is finding if you can solve that gap. So the next step is a paper product, paper feedback. And so I say paper because I'm a horrible drawer. And I find you can spend hours in tools like balsamic and figma, et cetera. But if you just sketch it out on paper, you can give people a rough idea that

said like, if I built this, would this solve that problem specifically? Right. And then if enough people say yes, then I'll go to my co-founder CTO and say, hey, I think we should build something like this. And then I'll come back to those folks and say, hey, remember that paper prototype? Look, it's like janky code now. Is this going to solve the problems we talked about? Yeah. And they're like close enough and then cool.

I'm like, great. At this point, what I've been doing is everybody I've talked to, I started an exploratory. I've invited them to the next stage of focused, right? At the end of every call, I always book the next one. Right. And so I've gone from, Hey, is there a problem here to, yep, there's a problem here.

Hey, let's talk about specifically what are the, what are the different ways you experience this problem? How does that impact you? How does it impact your job? How does it impact your boss, your company's financials? Then, hey, if I built this thing, would it solve that problem? Yes, great. Hey, look, I built this thing.

Does it solve that problem? Yes, great, cool. At this point, I want to, let's have a, can we book a conversation to talk about what this would look like if we implemented it in your organization and that's the lead in into now you're in a sales call and so there's no selling in the first four interviews but it's all building towards this last interview you invite them into a formal sales process you don't have to use my exact language but that's the

process that I followed and every company I, every founder I've worked with gets their first 10 to 20 customers out of their customer development process. And it sounds very similar to the brand awareness process where the person goes from a completely brand unaware all the way to, you know, where's the coupon? I want to buy your stuff type of thing. So it's, it's a very similar process. When, when people come to you and they've already pushed through, through a lot of it's going to be brute force. If you're making your first, if you're just under

your seven figures, you've just made your first seven figures, I've always learned that people can do that through brute force. They can just do sheer determination, just put the hours in. If you put your shoulder in hard enough, you probably could get there. When those people have come to you and they are a good fit for what that you want to do, and they are a good fit for your agency and what you do, what are some of the questions when you go through that process and you learn about them and you say, okay, we got your pain, this is what your audience is doing. Got it. You're kind of where we can help you scale and really take off to that next growth. What are the questions and some of the things that you sit down with them and say, hey, this is great. You've got this awareness you've got you've you've met with your customers

enough. When someone does want to bring you on what are some of the things that you normally ask them? So okay, great. You're a match for us muzzle. Now what we do. Yeah, I mean, it's usually about what their future plans look like. And see if we actually fit into those plans. You know, if if somebody's at just made it to a million bucks and they are like profitable by a dollar or if they're two customers a month

and they're bootstrapped and they're just paying themselves like there's not a lot, there's a ton that we could do to help, but there's not a lot that would make sense. You know, if you're at 10K MRR, you don't want to invest five of that in consultants to help you get to 20 unless you got a big bank account. Right. And so the fundraising strategy, like the finance strategy of like, do you want to be this time next year? Do you want to be here plus 10% here times 10 here times five. And that kind of helps calibrate because the speed at which you grow or the speed at which

you need to grow is going to be vastly determined by your financing strategy and your revenue strategy should follow your finance strategy. And I think that's what got a lot of people tripped up in 21, 22, you know, pre 22 money venture. I wouldn't say it was free, but it was readily accessible. Yeah, everybody had a sales development team. And I think in 22, 21, 22, sales development took a, had a really bad rap because, oh, it's not profitable.

But with the reality of it, of the situation was there was all these companies that were using it to hit top line growth numbers, but not profitability numbers. So they were investing, like, if you look at the key bank does a survey Pacific crest, uh, started the survey in 2015 or 2016. When they started the average SAS company. Guess, so let me ask you in 2016, how much do you think a SAS company was paying to acquire $1 of annual recurring revenue?

Wouldn't even have the slightest idea. Wouldn't even have this. They're 92 cents. Okay. So you're paying, investing in sales and marketing only 92 cents to acquire a dollar. By the end of 2021, there, it was like a buck 70. I can send you the links. It was a buck 65, buck 70, something like that.

So, and this is just your sales and marketing costs. This isn't accounting for engineers and servers and all the other overhead costs that go into it. So when you think about that, if you're a SaaS company and you're selling contracts that are one year only, you're still in the hole. You have to hit 18 months just to break even on your sales and marketing costs, not not let alone to be profitable. And so if you're not

hitting three to five year customer lifetime, there's no chance in hell you have being profitable. And I know that's not the point of a software company, especially in the early days, it's rapid growth. But all of these companies were investing so heavily and this is just the average, right? Like that's the crazy thing is like there were companies spending a lot less and there was a company spending a lot more so you know you know as part of that data set there was companies spending five dollars to acquire a dollar of ARR and like those are the companies that yeah lost uh sales development teams right and rightfully so

when you look 100 you look at uh i think Zendesk or not, not Zendesk. Um, uh, Parker Conrad's new company. Um, not Zen Zenifits was his old company. His new company is Ripple. Okay. Rippling. Um, they, I, I watched their C CRO, um, at, uh, Saster last year and they're one of the fastest growing companies as software company

like large software companies. They have hundreds of SDRs and they're getting, I think they're forecasting like 60% of the revenue this year to come from sales development. So everybody who's saying sales development isn't working. Obviously it just wasn't profitable for them at that price or the way that they were doing it. And I think the biggest piece for that, for them, is the strength of their product market fit.

The crazy thing is, like, I know a bunch of people that work at Rippling that start, that were either at Zenefits or, you know, early days. I interviewed a few hundred people, a few hundred sales leaders on my podcast. And so I've had a chance to meet some of these folks and I know they've got really smart folks in there. But what I've seen some of what they're doing and what they're doing is what was standard like five years ago, but they're getting, or sorry, what they're doing is like, yeah, what was standard five years ago and they're getting like 10 years ago response rates.

So like their response rates are five to 10 X better than most SaaS company benchmarks right now. What do you think is the cause for them? What's driving that? Strength of product market fit. They have like, they have products that fit really well into the market. They're really well established, established brand. Um, and they have something that people need.

They're disrupting a fairly large industry. So when someone comes in, and I think I'm probably repeating myself on this one tonight, but I think it's so unbelievably important when people come in and they don't have the right product market fit, when they're trying to push a boulder of a tree, when they're going into that, I've always had people sit down. It's okay. What do you really want? Do you have this company that you love and you're so excited about it and you're willing to work a

hundred plus hours a week as an entrepreneur to make, you know, nothing, but this is your passion. This is who you are. Or is your truth that you just want to have $50,000 a month on monthly recurring income where you're not involved in any way, shape or form. And you can go become a shore erosion technician, which means you watch the beach erode in front of you

when you're drinking Mai Tais. What is your truth? What do you really wanna do? And most entrepreneurs have never had that. Most entrepreneurs run into situations where like, well, my father was a doctor, therefore I'm gonna be a doctor. I am the fifth in the line who is this paper making factory.

I'm going to do this. Having to come to Jesus this. Having a, you know, come to Jesus conversation of what do you really want to do is something that, you know, I run into all the time when we're brought in, when people are brought into yours and they actually are, when you do have that match between passion, you know, and your past and purpose and profits, when you have those alignments, you know, you've mentioned your podcasts. One of the things that you come across, you're like, hey, this is the most valuable insights when you're running into those situations, when you're running into Project Market FitNight

hitting there, or when you're trying to hire the, you know, your, what you guys do out there. What are some of the things you're like, hey, this is, I wish people would know this before they started anything. Yeah, I mean, to, to kind of go back to what I was saying before, I wish they knew they could go back to their customers, the people that they interviewed in the customer development process and sell to them and take it step by step. Don't obviously jump into it. But I think, like imagine you invented the fire extinguisher

and let's allow me a silly analogy that like you interviewed a hundred people that were currently on fire. And let's imagine even sillier that they're still on fire three months later when you built the fire extinguisher. Isn't it kind of a jerk move not to go back to them and be like, hey, remember all the pain you told me and all the burns and all the fire and the flames? I built this thing. Do you want to put yourself out? Like even a fire extinguisher isn't that good. They're going to say yes.

Right. I mean, it's, it's, it's the opposite of that is, you know, don't sell ice that's the most just doesn't doesn't make sense as much on that level. So make sure that you have a market that is just banging at your door that they really, really want it. And I think it's listening to customers that we just don't do that well anymore. Because we're in our own equal chambers. And then just making sure that you're not over investing until you have really strong product market fit until you have really confirmed because the the the most frustrating customers I've had have been really good software

companies that had great products where the founder wanted to open up a new market, but they didn't tell us it was a new market. Right. I had a conversation with a customer last year, and I think we worked with them for like nine months. We booked like 60 some odd meetings for their team. They like showed up and entered pipeline. So their salesperson had 60, 63 at bats. It was pretty good. And none of them closed. And so they let us go.

And I was like, okay, well, let's talk about this. Like why? And I was really, cause like for me, it was less about the money and more about the like, I want to figure out what went wrong. Yeah. But we dropped the ball. Yeah.

And what the sales rep eventually blurted out at the end was, oh, well we actually target our, all of our business is in this industry. And we've been targeting this slightly adjacent industry that unless you know deep about, unless you're like fairly educated about finance and how it works, it is different enough for it to be its own industry and all of our case studies are irrelevant. And so I, he had a tough time closing them. And I was like, okay, one that, that kind of sucks. Cause like we could have been focused on the original industry in the

first place and like the benchmarks that you're going to expect going after an industry you're established in and have strong product market fit versus a new industry, and you have to figure out your market message fit, all of these things, and how to sell to these folks is going to be totally different. And then on top of that, just the timing of outbound, nine months, they had a two-month sales cycle. So you expect nothing for the first three months outbound.

You're gonna start getting some meetings in the next three months. So you're six months in and like, you've got some meetings, some, when I say meetings, I mean like opportunities that have entered pipeline, you'll get meetings earlier than this, but the quality improves pretty dramatically as you go along. But most people aren't ready to

buy. And so if you're gonna talk to you know ten people every month, like one out of ten are gonna be in a buying state because you're reaching them and you know you're reaching them cold. They're not coming to you saying, oh I've got this pain. And so most people discard those nine folks that they talked to and they're like, oh they don't have a project in the next 90 days, they're not worth my time. And that's what this company was doing. I're like, oh, they don't have a project in the next 90 days. They're not worth my time. And that's what this company was doing. And I was like, guys, you're, you just met, you know, 60 folks, you pulled six good opportunities

out there, but there's 55, 56 that are going to close in the next year. You just have to keep working them. And the sales, the sales guy didn't, didn't listen to me. And that's probably the second. The next most frustrating conversation is with I have with old customers that worked for us or worked with us two years ago, shut us down after a year because it wasn't profitable.

And then the following year closed a bunch of deals from outbound. And now they're frustrated that they didn't keep going. It seems like a scam artist thing to say, you know, hey, there's been no results so far. But trust me, it's going to come. And it's just, it's one of the reasons why I think outbound agencies and the industry as a whole gets a bad rap is it takes time because you're reaching people in all different

buying modes. I think the conversation is only 3% of the market is willing to buy from you at any point. So and that's those are high numbers, I think, when we talk about that. And one of the things that people talk about all the time is, it really comes down to, can they do they want your product? Can they afford your product? Will they actually buy your product? And the last one for me, which I didn't realize was, do you actually want to work with them if they do buy your product? And that was a that was a challenging thing for me, which I didn't realize was, do you actually want to work with them if they do buy your product? And that was a that was a challenging thing for me because the first thing I ever did was I was an IT guy and I was okay.

They clearly want it. They clearly can afford it. They're clearly going to buy it. I never asked myself, did I want to work with people at that level with what they were doing? I think that was the biggest first mistake I ever did. Once I did get into, hey, I can close this. There's I had a great product market fit. This is I'm gonna crush it. And then I was like, how many days how many times a day do I want to get called up with, you know, my printer doesn't print. And I asked them, do they have paper in the printer? And they're like, No, why doesn't it print?

I'm like, you have paper in the printer? And they're like, No, why doesn't it print? I'm like, I'm going to kill you. So repeated conversations like that, over and over. It's just, oh, I think it's also, you know, that that same naivety exists in people when they hire and they do up. So they're going, Hey, I, I put a seed in the ground. Why isn't it a pineapple? I'm like, well, yeah, just put it in the ground.

You, this is going to take some time. You got to figure out where they are. And, and they get into doing that. And I don't think people, people overestimate what they could do in a year. And they really underestimate what they could do in about five years. So I'm just having that patience. It's some of the stuff is going to take time.

It's very rare that you show up and say, Hey, I've got this widget. Here we go. Let's close. Here we go. At the market, we sold out within 37 seconds. It just, that's, it's this instantaneous culture that we have right now that just doesn't work for reality. And I wish people were having more of a reality conversation that you and I are having. What are some of the other long-term thinking? Oh, yeah. Yeah. What are some of the other realities that, you know, you sit down and you get to kind of open your, your client's eyes up to and say, Hey, here's what's actually going to happen. I know you don't want to hear it, but this is what's actually happening. And I, you know,

my job is to make sure that you can feed your kids. So let's have a real conversation. happening and you know my job is to make sure that you can feed your kids so let's have a real conversation yeah I mean I think when I sit down with founders the the almost the first place I go is is the pipeline especially if they've got customers and they've been trying to sell and they've been prospecting and I can usually chop up like a pipeline like the last time I did it I think the guy had 30 50 30, 30, 40, something like that, opportunities in his pipeline. And we did a pipeline review, took a couple hours

and we chopped it down to like three good ones. Don't. So they went from like, oh yeah, we got to close like, you know, to this month, like to this month and to next month and through the month after. And I was like, not with a pipeline like this. Yeah. And then everyone's like, okay, so I need outbound.

I'm like, but outbound is gonna be the helper six months from now, right? You have to turn the crank yourself. There's nobody, there's no getting out of this. There's no spend some money and buy. Like maybe there are other demand gen channels, ads can turn on pretty quickly, but it still takes time to build those things, right?

And I think what founders don't realize is there's this big giant handle called customer development, talking to customers and going back to people you've talked to before and kind of inviting them to the next stage that they just got to grab the handle and turn. But I find most founders I work with, they're pretty sloppy about their pipeline management. You know, you look at you look at somebody's pipeline, you're like, so what is that deal? Well, why is this one here? What does that stage mean? They're like, oh, okay cool. I'll go three down be like, okay

So does this person meet that oh, no, they're actually they're actually back. There's no there's no shared definitions There's no qualification framework There's no there's no ability to test and it's really interesting working with when I'm doing this with engineers because there's a thing called a unit test working with when I'm doing this with engineers because there's a thing called a unit test when you're writing code where basically if you're doing some people do test driven development where you write the unit test first and then you write the code that will complete that test and Having a good sales pipeline review and having good definitions are kind of the unit tests where you have this regular recurring thing that will say basically confirm that you are passing the tests on all of the things in your pipeline.

And that's something that not a lot of people do, especially founders that are solo or are taking on the revenue side of things solo. They don't have anybody who can call bullshit on that app really belongs here or doesn't belong there. And when you're forecasting revenue to hit in Q1 off of, you know, hope and miracles and magical unicorn dust, like, it's not going to go very well. I don't think enough people have the conversations that you and I are having. Or even this level

of conversation that you have with your clients, which is like, let's have a real talk. I really authentically want to try and help you out of this. And but some of this is going to be ugly. And it's a conversation some of this is going to be okay. And it's a conversation like sometimes I'm going to be a hammer. Sometimes I'm going to be a hug, but we need to have a conversation because I'm not going to blow smoke up your butt. Just take your money. Cause that's just not not who I am.

But I do agree that in your industry, a lot of people kind of get that bad rap because they don't do that. They'll just take the money and then run with it, which is why your industry is saturated with just not a great rap. One of the things that you have coming up is kind of a preview. You've written a lot of this stuff down and you kind of collected all of your ideas and your thoughts. Can you tell me a little bit more about that?

Yeah, my our company started because of a book. So my co founder Aaron wrote predictable revenue based on his time at Salesforce. And that book has been, has brought us, you know, so many customers and kind of helped start, was the inspiration for me getting into doing Carb.io. And it's over 12, 15 years old by now. And so, you know, since we've, I don't know, for the last five years, I've been talking about writing a book. But I didn't want to write the last five years, I've been talking about writing a book, but I didn't want to write Predictable Revenue 2.

And so I started an email newsletter community where I talked to founders and just been sharing the ideas, a lot of the stuff we've been talking about today in our conversation today. And I've been sharing it out kind of weekly as a method for helping kind of battle test some of the content that's going in the next book. And as we sit today, I'm looking at my final draft. I'm handing in the third round

of substantive edits, which is book geek speak for like, I'm almost done writing and then people are going to start checking spelling and grammar. For the book that's going to come out in October, it's called The Terrifying Art of Finding Customers. And it's gonna be a founder's handbook for going from product market fit to getting those first customers and then basically leveling yourself up out of that sales role.

So when you wrote your book, you're talking about spelling and grammar. I have no idea what that is. What is spelling? I'm kidding. I wrote my book in nine days and there's still people writing it today. They're like, you do know there's misspellings. I'm like, yes, I know.

I was just, I just had to get it out. I was working on something. I love that you've taken this idea where even in your book, you take this approach of we're going to get tested. So we're going to battle test this and then we're going to test it again. And then we're going to get feedback. We're going to test it again. And we're in January right now. You're talking October.

We already know 2025 is going to be. Interesting and entertaining. Yeah. Um, you're still taking the time out to sit there and say, I'm going to battle test this so you practice what you preach in every way. Now you mentioned earlier that you've got a podcast and other ways for people to track you down and tell me more about that. Yep.

There's the predictable revenue podcast. Um, we're probably 370 episodes deep at this point. And we interview founders and sales leaders talking about revenue. The early stuff really focused on sales development, sales leadership tactics. And lately we've been more focusing on founders in their early revenue journeys and mistakes made and what they learned along the way. Gotcha. If someone wanted to get like an early preview of the book, do they just have

to wait till October, like the rest of us? I'll shoot you a link, but the Founders Edition newsletter is where you can go and if you give it your email, you can see all of my posts dating back from, I think I started almost a year ago, maybe December of the previous year. So you can go see all the back posts and you can kind of see the book evolve through there. So that's the best place to check it out. Awesome. And then how do people track you down? Because a lot of this stuff is stuff that are not frank conversations that most people are doing. Most people are going to blow smoke up your butt. And you're one of those few people that's one of the reasons I want to have you on is like, you're just going to be honest and you're going to say, listen, this is what's actually going on.

This is what's actually going to move the bottom line. And I'm going to have a real conversation with you. And that's very rare in our world, and across most worlds right now. Everything is just fluff and BS. With what you're doing, what you have going on, how do people track you down? What's the best way to get in touch with you?

Best way to get in touch is email, Colin with 2Ls at predictablerevenue.com. I post on LinkedIn, but I really don't enjoy LinkedIn as a platform. I'm not a huge social social media guy. So I do check my DMS and my inbox on there somewhat frequently, but I'd say email is the best way. When people reach out to you, what's, how do you want them to reach out? Like are there questions you want to have in advance or what is the best way for them to engage with you?

Yeah. I mean, if you got to, if you listen to this and you had a question or if you wanted to, if you disagreed with something I said, or if you were asking, you want more information on a resource, or you want to have a candid, honest conversation with me, man, just drop me an email. Love it. I really appreciate you coming on and teaching people from a place of, not just experience, but authenticity.

It's one of those things that's very rare. You've done it, you've proven you've done it, and you've had this honest conversation. I really appreciate you coming on. Right on. Thanks for having me on, Charles. It's been good talking to you've proven you've done it, and you've had this honest conversation. I really appreciate you coming on. Right on, thanks for having me on Charles. It's been good talking to you. Thank you for joining us for this insightful conversation

with Colin Stewart. We hope you're feeling inspired to rethink your approach to product market fit and unlock the true potential of your business. A huge thank you to Colin for sharing his candid, no nonsense strategies and lessons learned from years of building and scaling startups. His ability to turn failures into frameworks and ideas into action is

nothing short of transformational. To all the entrepreneurs, dreamers, and builders listening, your commitment to growth and innovation is what drives us to bring these conversations to life. Ready to apply Colin's strategies? We've created a powerful action guide summarizing his approach to product market fit, including his step-by-step process for customer development, market alignment, and scaling the right way. Download it now at podcast.imcharlesschwarz.com. And remember, as Colin said, product market fit isn't just about having a great product.

It's about creating something the market can't live without. Now go take charge and build something extraordinary. Your journey to business mastery starts today.