Marketing Secrets with Russell Brunson - Shut It Down or Double Down: Nathan Barry’s Road to $45M with Kit (ConvertKit)

Episode Date: October 21, 2024

Nathan Barry, the creator behind ConvertKit (now rebranded as Kit) came to visit my Inner Circle and gave a very special presentation. Nathan’s journey from a designer to building a software empire fascinated me. He originally tried to solve his frustrations with MailChimp and, in doing so, founded a business that today generates $45 million annually. In this episode, Nathan and I unpack the lessons he’s learned from building and scaling ConvertKit to rebranding it into something bigger. He offers transparent insights into the challenges of entrepreneurship, including the crucial moments when you have to either shut down or double down. Throughout the conversation, Nathan opens up about the turning points that shaped his business. From battling churn to leveraging direct sales in the early days, he shares how a relentless focus on product quality and customer experience laid the foundation for his success. He also discusses his decision to turn down a $200 million acquisition offer and the ripple effects it had on his executive team—proving that even the right decision can bring new challenges. Key Highlights: Shutting Down or Doubling Down: The pivotal question every entrepreneur faces when their business stalls. Fighting Churn: Strategies Nathan used to reduce churn, including shifting customers to annual plans. The Power of Direct Sales: Why doing things that don’t scale—like concierge migrations—helped build momentum early on. Rebranding and SEO Challenges: How transitioning to kit.com presented unique hurdles and opportunities. The Importance of Execution: Why Nathan built a habit of writing 1,000 words a day for 600 days—and how it fueled his entrepreneurial success. This episode is literally packed with valuable insights for anyone navigating the ups and downs of scaling a business. Tune in to learn practical strategies for growing your audience, retaining customers, and staying focused on what matters most. Don't forget to check out this awesome deal from Mint Mobile! https://mintmobile.com/funnels And if you want to enjoy the Marketing Secrets Show ad-free, check out https://marketingsecrets.com/adfree Get 70% off on Welch Equities' retail price at wealthyconsultant.com/secrets Learn more about your ad choices. Visit megaphone.fm/adchoices

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and you can get anything you need delivered with Uber Eats. Well, almost, almost anything. So no, you can't get an ice rink on Uber Eats. But iced tea, ice cream, or just plain old ice? Yes, we deliver those. Goal tenders, no. But chicken tenders, yes.

Because those are groceries, and we deliver those too. Along with your favorite restaurant food, alcohol, and other everyday essentials. Hey, what's going on, everybody? This is Russell Brunson. Welcome back to the Marketing Secrets Podcast. I've got a really cool episode today. As a lot of you guys know, I have a mastermind program called My Inner Circle. It's funny, everyone now has knocked off that name for the most part. Back in the day, Dan Kennedy had one called Insider Circle. I was like, I don't want to copy him. I need to make my own. So I changed mine to Inner Circle. And now

it seems like everybody's gone to Inner Circle. But I was the original OG, I think. Maybe not. I might have gotten something else. But I'm pretty sure I took Insider Circle from Dan and turned mine into Inner Circle. So I still take credit for it. Regardless, Inner Circle, we launched over a decade ago and I ran it. There were seven, eight years where I was the core facilitator and trainer. And you saw the success stories that came from that program over the years, like all the who's who of the marketing world nowadays, basically all came through the Inner Circle one time or the other, which is really cool. I mean, I took a two or three year hiatus, um, because I was tired and I wanted a little break. And then a couple of years ago, I re re brought inner circle back. And it's interesting is, um, for the first two years we brought it back. I ran it differently

than I did before. I had other people help facilitating and we just did the meetings different. It was really good. Uh, but for some reason this time I wanted to go back to the roots and go back to me facilitating the meetings. And so for the last three weeks I've been facilitating inner circle meetings in the office and click funnels HQ. And it's been so much fun. So cool. Some of the coolest experiences. Everyone's like, I, you know, inner circle was great before, but this has been insane.

I had no idea. This is what it used to be like. And I was like, oh yeah. So it's been fun to get to know everybody really close and hang, hang out, have dinner with everybody. And you know, it's been pretty special. So anyway, I digress. The reason why I took the inner circle is because last week I had one of my friends come in as a guest speaker. He owns a company called Kit. Used to be called Convert Kit. Same as Nathan Berry. Great marketer, great business owner.

Some people would look at us as maybe competitors, but regardless, I still want him to come speak to our people because I respect him and how he's built his business so much. Essentially, he comes from a different background, different world than me. We look at business differently. Um, and so it's just fascinating to see how he's grown his company from a couple thousand dollars a month to the empire just today versus how I did it. And I don't think either of us are right or wrong. I think they're both things we can learn from each other. I learned so much from him in this interview. Um, not interviews this talk he gave was insane. It was so good.

So I wanted to share with you guys just so that you can hear the story behind Kit and Nathan Berry, his story, and just get some ideas about how he's grown his business that were really fascinating. So I was taking more notes than anyone. I was geeking out. A lot of cool stuff I'm implementing from this, but I thought you guys would enjoy it. So with that said, here's a really cool presentation from Nathan Berry, the founder of kit.com. In the last decade, I went from being a startup entrepreneur to selling over a billion dollars in my own products and services online. This show is going to show you how to start, grow and scale a business online.

My name is Russell Brunson and welcome to the marketing secrets podcast. All right, to kick off today, I'm excited. We have a special guest coming in and I've not told anybody who you are yet. I told him he's a special guest and got him all fired up. This is someone who I, so I don't know if he even knows this, man, probably 15, 16, 17 years ago, I saw his work online and I tried to hire him as like a designer developer. Like he was insanely good. I don't know if I told you, I tried to message him because he was on Dribbble, I think, and he was in Boise and he was insanely good. I't know if i told you i tried to message him because he was on dribble i think and he was in boise and it was insanely good i can't message him he didn't respond back to me and then i started following him and then i saw he launched like an info product and he made like a whole bunch of money i was like dang it now he's like unhireable because

he's making too much money and then uh over the years i was watching him do stuff and then eventually launched this little software company called convert kit who has ever heard of convert kit so he launched his company and it was kind of doing well doing well and then all of a sudden like overnight it felt like it just blew up and exploded and became this huge business, a huge brand. And then recently, he'll probably tell more of the story, but recently changed the name from ConvertKit to Kit.com with a K, right? And anyway, it's been really fun watching him from afar.

And it's interesting because I feel like he lives in a similar but different world than me. Like I'm more of the, I don't even know, whatever world the funnel hacker, our people are. He's more like on a lot of the content people, like hanging out with Tim Ferriss, those kind of guys. And it's like we're similar worlds but different worlds at the same time. And we look at business very differently, I think, a lot of times. And I'm always impressed by what he does, what he says. I've quoted him in a lot of my books. And a lot of times I speak and stuff.

And so I'm excited to have him here. He happens to be a local Boiseite as well because Boise is the greatest town in the world if any of you guys go to boise.com slash russell brunson you get your real estate there when you buy your houses here which would be amazing so uh anyway that said uh we're excited for next hour so he's gonna come up tell some stories talk about some stuff and then open up q a you guys ask some questions about uh whatever you want so with that said let's put our hands together for nathan berry uh russell i did not know that you tried to hire me, but I've had that experience multiple times

where you're like, oh, this person's great. Oh, they're kind of discovering the content creator, the audience world. Oh man, they're even better to hire because now they understand what I'd hire them to do. And then, oh shit, they're making money now. Oh no, they're making way too much money. And then you realize like, okay,

this isn't going to be an option. So I thought I'd do a couple of things today. First to give a bunch of context, just on my story, building ConvertKit. I can talk about some of the rebrand to Kit, which just went live, I think 10 days ago. And yeah, I kind of play in this world between content creator, you know, building my own audience and earning a living that way. And then also I get to see, you know, behind the scenes, very similar to what Russell gets to see of like, hey, what actually works at scale from across so many businesses? I think some quick stats for ConvertKit, we do about $45 million a year in revenue, 58,000 paying customers, like 500,000 free users. And our focus is really on content creators. It ranges from people like James Clear, Tim Ferriss, Gretchen Rubin, a lot of authors like that,

podcasters like Andrew Huberman. And then you go all the way through, we did a big push into music. So we've got like Tim McGraw, Mandy Moore, Leon Bridges, a bunch of people in that space. And then we've been having some fun lately in the like full celebrity space. Weirdly, celebrities are really getting into content creation and newsletters, which is fun. So over the next month, we're launching newsletters for Matthew McConaughey, Morgan Freeman, Ellen DeGeneres. And then weirdly, the one that I'm most excited for is Lil Jon is launching a newsletter about meditation, which is going to be fantastic. So if you're ever wondering whether or not what you're doing, building an audience, you know, and email and funnels and all of this

is cool to the general public, like even all of the celebrities are like, I want that. So I think Morgan Freeman will be on Jimmy Kimmel end of next week to talk about his newsletter that he's starting. So it's a lot of fun to see it come together. My story, I grew up in Boise. I can attest that Boise is in fact the best place to live. I have been told by many people here to stop saying that because there was a point where we were trying to convince people of that fact. And then now everyone seems convinced of it. And we have to tell people that like, it's actually not, you shouldn't be here. Uh, though I had, I don't know,

Russell, if you get this, I had like 10 people text me the wall street journal article from this week, like the wall street journal is like, Boise is the greatest place ever. Uh, and so I agree, but, uh, grew up here, went to Boise state super briefly. Uh, I lasted there all of two years before dropping out. I was always in a hurry to grow up and to learn how to make money. Uh, and so, uh, in that process, I graduated high school when I was 15, I dropped out of college at 17, when I got my first $10,000 web design project. And I was like, all right, I think I'm, I'm here to learn how to make money. I think a web design is going to work for me. And, and, uh, you know, no point in continuing this, you know, business and marketing degree. And then I really did web design for the

last number of years. I worked for a company, uh, uh, down in Eagle where I led the design team. And then, uh, we had some fun projects. We had to work on an app for the iPad, like the day the iPad was released. And so that was fun to like, there was no Apple store here. So we flew to Portland at like five in the morning, bought, you know, 30 iPads,

like tested our software to see if it works. And then like distributed those iPads to clients and flew home. And so that got me into the world of designing for iOS. Um, fell in love with that, did a bunch of projects over there the next couple of years, and then ended up leaving that job, writing a book about how to design iPhone applications. And my idea was that if I wrote the book on designing iOS apps, then I would be, I would

get so many more clients, right? That would make people say like, oh, do you want to hire a random designer? The guy who wrote the book on it. And, uh, so that was the goal. I wanted to make $10,000 in sales from the first, um, uh, like, or like in the lifetime of the book, I thought, you know, this isn't a charity project or purely an authority project. I do want to make money from it. And so I launched it to an email list of 798 people on MailChimp and ended up making $12,000 in the first 24 hours.

And then never took on another design client and decided, all right, this like audience selling digital products thing is what I'm going to do for a long time. One thing that's been key for me is consistent execution. So I had started a bunch of projects of like, I tried to write a book multiple times and not succeeded. And there's a creator that I follow, uh, named Chris Guillebeau. And he talked about, yeah, you're Chris Guillebeau fans. Uh, I learned so much from that man. He was one of the first people in the blogger content creator space who was talking about the money that he was making, um, in probably 2008, 2009, you know, he was just like, I made 50 grand a year as a blogger and I can

travel full time. Oh, look now it's a hundred grand a year. And so, um, it was fun to come across this stuff, but he had this line that he said, he was like, it's really easy to write a book every year. And all of a sudden I'm like, okay, first of all, I disagree with that statement, but the sentence keeps going. And he goes, it's really easy to write a traditional published book every year, 100 blog posts, 50 guest posts, a self-published book, and a few other projects. It's easy to do that in a year. And I'm like, bullshit. I've had the hardest time, like, even making progress on a single book.

But he said, I'm just seeing Napoleon Hill in the chat. Yes, thank you for dropping the Chris Govo link. It's good to have Napoleon Hill helping us out. But he said, it's really easy if you write 1,000 words a day. And on one hand, I was like, okay, 1,000 words a day is a lot. On the other hand, it's two pages, two and a half pages maybe. And Tim Ferriss has talked about this as well, of like that consistent execution over time. And so what I ended up doing was I actually didn't sit down and start writing a thousand words a day immediately.

The first thing I did is I built and designed an iPhone app to help me track the streak of writing a thousand words a day. And then I started it. Uh, but I like wrote, I got it for 12 days in a row and then I broke that chain, but then I built it up to 20 days in a row and broke it. And then by the time I published the book, I had 80 days in a row of writing a thousand words a day. And every day that I didn't the, my phone would pop up and say, Hey, are you going to, are you going to write? And so the day after I published the book, uh, my phone popped up and said, are you going to write a thousand words a day? And I was like, no, I published the book. Like it did better than I expected. Like that was a success. That streak is over. But then I was thinking like, well, I don't want to break the chain. And so I thought, okay, let me write a blog post about how the launch went and the lessons that I learned. And so I wrote that and published it. And then the shocking thing is that

the next day, the iPhone app popped up and said, are you going to write a thousand words today? Like it had done for the previous, you know, 80 days. And I didn't have, I was like, well, I don't know what to write about. And so I sat down and wrote another book. And I just started the process. And 90 days later, I published a book called Designing Web Applications, which made $25,000 in the first 24 hours. The email list had grown to a few thousand people by that point. And then I just kept it rolling.

And so that creative habit of writing a thousand words a day built my entire audience. I wrote, so I kept that street going for 600 days in a row. I finally got shingles and that, uh, like I got sick enough from that, that I broke the chain. But over that 600 days, um, I wrote and published three books. I started the software company, uh, ConvertKit, um, probably made seven or $800,000 in total revenue. Um, and it like kicked off my entire creator journey. And so that like consistent execution has been always really core to everything that I do. I guess getting into ConvertKit started in January 2013.

And the idea was I just got frustrated with MailChimp. It felt like it wasn't made for people like me, for content creators. And so I embarked on a project to get to $5,000 a month in recurring revenue in six months. Uh, I wanted to self fund the whole thing. Cause I'd seen people like make a bunch of money over here and then say, Oh, I'm going to build a software company and then waste just a huge amount of money because they used their money that they had from somewhere else to build for too long without talking to customers. And so, uh, with that, I decided like, okay, this has to be customer funded from the beginning. And, you know, I got to launch with pre-sales because I just learned from some other failed

projects that if you go to build something and you ask people, will you buy this? They will absolutely lie to you and say yes. And because they're speaking in a hypothetical, like if this existed and it was a perfect fit for my business and I hadn't solved the problem a different way already, you know, and like probably five other things. And yes, absolutely. A hundred percent. I would buy that, but we don't think in those terms. And so we just end up saying like, oh, he said he'd buy it. Like, great. Let's take that. But I, what I learned is that the only way to get honest feedback from people is to ask for their money and to see like, will you actually buy this thing? And so I built up that product with through pre-orders

and then use that money to, to build the product. You know, it was only, I think I did like 15, 20 grand in pre-orders. So it wasn't a crazy amount. Um, but that gave me money to fund it. I ended up building to 2000 a month in revenue in the time period that my goal was to get to 5,000. Uh, so on one hand it was a failure on the other hand, um, you know, it like 2000 a month in revenue in six months, I was really happy with that. But it stalled out from there. And it actually wasn't until I decided to double down on building the product a couple of years later that we really got traction. So it like probably six months and we hit 2000 a month in revenue.

And then it stayed there for the next year to 18 months and to end like bounced around everyone talks about like how recurring revenue is the best thing ever and it is but no one talks about churns and uh churn can be absolutely brutal i'm curious for everybody just a quick show of hands who has recurring revenue in their business. Yeah, so two-thirds of the room probably. And who has been at one point very, very frustrated trying to reduce churns. Yeah, it's just so hard. And there's all kinds of times where you think, wait a second, maybe I should just be charging one time

and collect my entire lifetime value up front and maybe that would be better, especially in memberships where you find that the churn, the churn, you know, like good churn in software might be three to 5%. Good churn in memberships might be 10%, uh, per month. Um, and like the math gets really, really difficult. So we fought against churn, trying to build a good product at all, just being too small and difficult for a long time. Um, and then my friend Heaton Shaw pulled me aside at a conference and, uh, he just said like, look, I love what you're doing. Um, you're going to be successful at whatever, like you set your mind to, but you've worked on ConvertKit for a year and a half and it's not

working. I think you should shut it down. And I remember just kind of being shocked by that. Like that's not a nice thing that you say to someone of like, hey, this thing you worked on, like, shut it down. But thinking about it more, it's like one of the kindest things that you can say to someone. And sort of the difference between like nice and kind or polite, right? If I'm being polite, I say like, oh, your project is so great. Like, keep going. Like, you know, all of this. You'll get there eventually. But the kind thing might be like looking at it from a first principles perspective and saying

like, Hey, you've got these skills. You've got something here. You've worked on it for a long time, but it's not working. Like something has to change. And I think as business owners, if we can be kind to each other in that way of giving that real hard feedback, it can really serve each other as a community really well. And so like, especially in like a mastermind format, it can really serve each other as a community really well. And so like, especially in like a mastermind format, it's so easy to fall into a trap of like, um, how's the business going? Great. Okay. And just like building each other up without the kindness of real hard feedback. And cause he didn't ended up going on with his feedback. And what he said was, you know, you should shut it down or take it really seriously and give it the time, money and attention it deserves and build it into something really meaningful.

And that's sort of that brought me to a turning point because I realized he was right. I was putting in, you know, not the full level of effort that I should. What's up, everybody? This is Russell Brunson. I've got something really cool for you today from my friend, Taylor Wells. And Taylor spoke at our last funnel hacking live because I wanted him to share a really cool concept about what he calls the revolving pricing method. And today he decided to sponsor the podcast to give you guys more access to this super cool strategy that you are going to love is something we've been implementing into our

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And I promise you guys, as a customer of this, you are going to love it. So if you're serious about growing your business with real stability, this is the model you need to add into your funnels. So go over to wealthyconsultant.com slash secrets, grab your 70% off deal, and let's start turning your clients into long-term revenue. Again, that's wealthyconsultant.com slash secrets. Do not miss out. Hey, this is Russell Brunson. And

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So anyway, I love this assessment. Go check it out at workinggenius.com and enter the promo code SECRETS for 20% discount. Take this test for yourself and for your team, and I promise you it'll change the working dynamics amongst everybody and help your company to grow. And so I ended up asking myself two questions that I think you can use

anytime you're trying to decide whether to shut down a project or double down on it. Because really, if you think about it, if something, if you try to do something and it doesn't work, that's good because at least, you know, or if you try to do something and it really works, that's good because you know, but like so many things in life, there's like death and frustration in the middle where something kind of works because then there's, there's not clarity. And so if you have a project that kind of works, there's two questions I think you should ask. The first is, do you still want this as much today as the day that you started? And if the answer is no, that's totally fine, right? There's all kinds of things where like, oh, I want to write that book. I want to

build this company, you know, whatever it is, complete this, you know, run a marathon, you know, as you get into the middle of the training or wherever the process, you're like, I actually don't want this anymore. And I think it's fine to admit that to yourself and say, all right, I can in good conscience, shut it down because I realized I want something different. Then for me, when I got to that point, I was realizing, wait, I do really want this. I want to make this move from selling info products into software, right? That's where I got my start as a software designer. Like I want to make this move from selling info products into software, right? That's where I got my start as a software designer. Like I want to build this company. So I was like, great. Okay. Move to question number two. And that is, have you given this every possible chance to

succeed? Because again, if you, if you really want this and you've given it everything you've got and it still hasn't worked, you can feel good about shutting it down, right? Like all we can give is our best. And sometimes that's not going to work, right? The timing might not be right. You could be way too early with this idea. There's all kinds of things that people have tried and it didn't work. And then five years later, when tech is different or the market is different or social opinion is different, the same idea works by a different founder. But then the other thing is if you have this disconnect, if you say like, oh, I really, really want this thing, but I have not given it every possible chance to succeed. And if you shut it down in that moment, I felt like I would be in the worst position there. I'd be that guy like five years from now at a party who's like, oh man, what happened with ConvertKit? And you're like, you know, if I would have just done this, this,

and this, I could have totally made that work. But because it's something outside of my control or whatever else, you know, it didn't work out. And whether that would show up as, uh, you know, sort of ignorant bragging of like, Oh, you know, this would have worked in a different way or regret. I realized that I wasn't okay with that. I had not given ConvertKit every chance to succeed. I'd worked on it on the side. I'd limited the amount of money that went into it. You know, I'd kept my other business going. And so I realized I had this disconnect. I said I really wanted something and my actions didn't match it. And so what I decided to do was to double down on it. And so I changed a handful of things, either three or four. Let me list them out and see how many it

is. First was I decided to go all in and I stopped working on my digital products business entirely. A quick side note, I thought that, you know, without a launch, I was selling about $10,000 to $15,000 a month. And I was like, okay, if I stop paying attention to it, it'll, like, coast down to just $10,000 a month. It actually coasted down to, like, $2,000 a month. And I learned that, you know, passive income isn't quite so passive. So the first thing was double down on it. Second thing is I took $50,000, which was a huge part of our savings and, and, uh, put it immediately into the company. And I got rid of this arbitrary constraint of like, no, it has to be entirely customer funded. Um,

the third thing is I, I narrowed down the target market. I think we've all heard the advice of focus on a niche. And I had given that advice many times when it came to writing a book. We're talking about, oh, get as narrow as possible. Don't write a programming book. Write a book on how to do payments in Ruby on Rails. Get very, very specific on the problem that you're solving. But I wasn't taking that advice myself. And so I was making an email

product for anyone who sells things on the internet or needs email related services. And so I ended up focusing very narrowly on email marketing for authors. That ended up being not a good niche for several reasons. And I tweaked it ever so slightly to email marketing for professional bloggers, which worked really well. And then the fourth thing is I focus very much on direct sales. I think as, uh, content creators and business owners who build things on the internet, um, we, we can get very caught up in focusing only on scalable things, right? Like, okay, how can I scale this ad budget? How am I going to sell thousands of these?

And we miss out on the direct sales and things it takes to get it off the ground. Paul Graham from Y Combinator says, do things that don't scale is very important to get things off the ground. He talks about how when the Collison brothers were building Stripe, if they were talking to someone, another company in Y Combinator, the startup incubator, who were talking about, yeah, we need to get payments figured out. We haven't done that yet. They would get their laptops out and be like, oh, we can help you with that right now. And they would actually pull out their laptops and help that person code Stripe payment processing into their app MVP, like on the spot, which 100% not scalable at all, but absolutely necessary to, to build things up. So I focused on direct sales. And then we did a lot of what we called concierge migrations, which is a very, very fancy way to say that I like pulled up someone's WordPress site, you know, and all that on one screen.

And then, or like, I guess mostly I'd pull up MailChimp on one screen and then ConvertKit over here. And I'd copy and paste between them while like watching a Netflix TV show on the other, just to like do all this $5 an hour work, but to get someone up and running. And then it, it just compounded from there. It was saw the momentum build. We had more and more customers. Every sale got a little bit easier to make, uh, and on from there. So over the next two years, we grew from 2000 a month to a hundred thousand a month in revenue. And the year after that, uh, so that was in 2015, was $2,000 to $100,000. 2016 was $100,000 to $500,000. And then it's just steadily grown from there. And we moved from there into affiliates, webinars and workshops, things that are much more common. But it's really important to build that base with a very scalable, hands-on touch.

I think taking that all the way through to today, the company is 90 people. We're distributed all over the world, probably 60 in the US, 10 in Canada, and the remainder in Europe and around. And we're just very, very clear on who we're serving of the types of creators we're serving that market that we're building and um we've continued to stay entirely self-funded um and it's a lot of fun now at this point we're doing projects that feel really uh

exciting so part of this rebrand to kit one thing we're doing with it is building a full app store on top of platform, similar to what Shopify and WordPress have. So people are building AI apps and podcast hosting and all the other things directly on top of Kit. And so we're able to see how can we leverage the entire community and ecosystem to build that. And then another project is we launched something called Kit Studios, which is high-end, uh, podcast recording studios that are free for our customers to use. Uh, our first one is in downtown Boise. It opened two months ago. Uh, Brooklyn should open in another two months. Uh, and then we'll expand from there. So we're saying like, how can we help the creators in our ecosystem make the absolute highest quality content? Um, and then, yeah, just keep expanding

from there. So the business has become a lot more methodical and, and, uh, I guess deliberate over time, even as it's, it's reached scale. So that's my story. I'd love to open it up and to any topic that you guys want to cover. It could be anything from what's worked for us, hiring, company culture. We do some odd things around profit sharing with our team, team retreats, what we see working in the industry of people who have grown newsletters to hundreds of thousands or millions of subscribers, all of that.

So yeah, we've got a catch box right there. Thank you for sharing. A couple of questions for you. At the beginning, what did the team look like, right, getting to the, I think you said, is it 48 million? Yeah, 45 million now. 45 million. So what did it look like at the beginning? Who were those first hires?

And what does the team look like as you were scaling to the 48 million? Yeah, so I always try to be very deliberate with hiring and add people slowly. There are companies that won't talk about revenue and instead they use headcount for like the public metric. And so if I were to ask you like, Oh, how's business going? You're like, Oh, it's great. We're at 20 employees. And when we sit like, that's a proxy for how well the business is doing. I'm like, all right, well, I'm assuming you're making at least $10,000 a month or $15,000 a month per employee, all of that. What happens is you end up optimizing for the wrong metric.

There's a company here, T-Sheets, that grew really, really well and then had this massive exit into it. And I have a ton of respect for what they did, And I even did a lot of design work for them in the early days. But I always thought it was weird that headcount was the metric that they optimized for. You talk about like, oh, we're going to crush that business this year. We're going to double headcount this year. And that was such a weird metric. And so something that I always did is I talked about revenue publicly. So if you ask me how business is going, I would tell you like, oh, you know,

we've added 5 million in revenue this year. I'm talking about a metric that actually serves the business. Headcount is not a metric that serves the business. And in fact, I think today with what you can do scalably with software automation and AI, like you should be thinking the opposite. You're like, all right, how do I keep, you know, this headcount pretty lean? So to answer your direct question, it was just four of us really early on, three of us actually. So myself, I did all the front-end code, the marketing and the sales. And David, who was our designer, mostly developer, but he was a designer as well, who like really leveled up the product. And then, uh, Dan, who led all of our customer support, uh, and all of that, uh, that was through to probably 10,000 a month in revenue.

And then we started hiring more people. Um, our first team retreat, uh, we were 20 people, probably six or seven engineers, a handful of customer support, a couple of marketing, uh, on from there today, the business is 30, 30 engineers, five designers. Um, our marketing team is seven or eight people across content, social, SEO. SEO is a really big part of our business, which it's an interesting time to have SEO be a big part of your business.

Both from a couple, both because of algorithm changes that Google makes, the impact that AI is having and going to have on SEO. And then also if you change the name and domain name of your company, it's an interesting time. So moving from ConvertKit to Kit.com, we'll see how it plays out. If anyone wants to throw some Kit.com backlinks in, I wouldn't do that at all because we're just praying to the Google gods that, you know, we only have like a 10 or 15% dip. And then across the board, things that I've always invested in, one thing is storytelling. So we hired a full-time storyteller,

probably about 40, when we were about 40 people, and then a full-time filmmaker shortly after that. And those are two roles that I just absolutely love. And a quick example about storytelling in the time of AI, which I think is really interesting, when you can do original research on your customers and you can bring in AI writing, it's really powerful. So something that I can do now is we have, we took all the stories we've ever written on our customers, pulled them into a single Google doc. It's 200,000 words and uploaded that. I tried a bunch of things, but, um, notebook LM has been the best one for doing this. So now when I'm writing something for a book or an essay, uh, or a video script, you know, there's a point that I

want to make about consistent execution or whatever else, or whatever other trait for creators, but it's always having the right story. And if you read something like a Ryan Holiday or someone like that, that what I'm always impressed with in writing is when someone introduces a character, uses them to make the point and then like moves on sometimes in as little as one sentence. And I just think that's so hard to do, you know, but the perfectly illustrated stories are so important. And so now I will ask, you know, my notebook LM bot, like, here's the section I'm trying to write for from this 200,000 words of original stories and research from our customers that we've done, who's a creator that matches this. And it'll give a handful of suggestions. And so it's really sped up my writing.

And so that's something I just love storytelling. And I think that if you have customers that you created transformations for, it's really, really worth investing in someone, either contract or full-time, who is finding all those stories. Yeah, let's go right there. All right, I've got a few questions, but I'll ask one first. So what is your why? So I grew up in a family where money was very scarce. Is anyone here from Boise?

Just Russell? Well, we're from Brickley, Idaho, so. Few people. Okay, so if you drive, there's a race called the Race to Rugby Creek, and it goes up over Aldape Summit, the mountains over here. Unfortunately, that whole area just burned like last week. But if you go up there, you'll like run by the little tiny house, like a tiny house before tiny houses were cool,

where I was born and all that. So money was just very, very scarce. And I watched that be like a big point of conflict in my family growing up. I watched my parents fight over it, ultimately divorce over it. And I think there's two questions that are really important to ask yourself in your life to understand like what drives you. The first one is what's the time in your life that you watched something happen and you said, that will never be me. And for me, that was watching like my parents fight over money. And I'm like, that will never be me. I don't know how, I don't know if this making money thing is luck or skill or whatever else it is, but I'm going to figure this shit out. And then the second thing is, what's the time in your life where you watch something happen and you said, that could be me.

And if you know those two things, like what really speaks to you from observing other people, you can really find your why and what resonates. And so I decided that I was going to get very good at making money. And somewhere along that journey, probably early, or maybe right after I dropped out of college, somewhere in there, I read an article from Jason Fried from Basecamp where he talked about how making money is a skill. You wouldn't expect to sit down at the piano or the drums or something else and, like, play something amazing if you had no skills. But many times we expect to start a business and like that would work out. Right. And we don't understand why people's like second, third or fourth business do way better than their, you know, than their first business. And really it's that just like playing the piano is the combination of a thousand little skills, right? We need to know

the finger position, the timing, music theory, all of these things. Well, in business, we need to know, right, how to show up consistently, how to do what we say we're going to do, how to sell in person, how to sell without talking to someone, right? That's a new skill to learn, to sell through a landing page instead of face-to-face, right? Automation, pricing, like there's a thousand things. And so when I understood those two those two ideas that, uh, really anyone could get good at making money because it was a set of skills. And I applied that and got to the point where I was making hundreds of thousands of dollars a year, way more than I ever expected to. And I'm doing it with an audience where I realized like, wait, this is the biggest cheat code

in every way. Like imagine any big goal you're setting out on and you're like, do you want to do it alone? Or do you want to do it with like a thousand or 10,000 people cheering you on? And that's what your email list is, right? That's what your audience is. It's this big group of people who are just rooting for you to succeed. Then I just felt like everyone should know this. And so my why is, and the reason the company exists, is to help creators earn a living. To get to the point to teach people, this is a set of skills. We're going to automate as much as we can with software, but we're going to teach you these skills. So you can get to the point that money is not a point of stress at all.

And there's just an insane amount of freedom that I think all of you have experienced. And we could keep it quiet. We could tell it to just our friends, or we could just shout it from the rooftops of like, look, all of this stress around money doesn't have to be that way. If you're willing to put in the work to learn the skills to earn a living, build wealth, and have the amount of freedom that comes from it. It's hockey season, and you can get anything you need delivered with Uber Eats.

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So while you may be spiraling over double texting your crush, whether your skincare routine is working because you look the same or is doing nothing because you look the same and whatever the heck red light therapy is, it's definitely not that. Don't overthink how you hydrate. Life's full of choices. Smart water is a simple one so good so my next question is how do you manage your time and keep yourself accountable to that time yeah poorly awesome best answer ever honesty right authenticity uh Yeah, I juggle way too many things right now. I actually had, I really, really struggled to say no. And I think that there are these traits that serve you really well at one season in life and then sort of backfire at another season.

And so I'm someone who wants to do everything. And so I say yes, like this project and that project and all of that. And then I will not say no if it means I'm letting you down in some way. And so managing time, there's a lot of like hiring people, setting priorities, all that. I don't think I'm good at it. There's probably other people to take that advice from. One thing I will say is in my inability to say no, I get myself into a lot of trouble. And then I will just work my way out of it. But I won't actually fix the core problem, which is like developing the skill of

saying no, right? Because early in your career, opportunities don't come to you. You have to fight for every single opportunity. But then later on, all the opportunities come. And so you have to develop an entirely different set of skills. And so it actually wasn't until breaking my ankle that I realized I like how overcommitted I was and that I actually couldn't work my way out of it. And so, um, the other like psychological thing is I realized it was easy for me to cancel things. Like I had two different masterminds that I canceled and various other things when I could blame it on something out of my control. I was like, I would love to do that, but I actually just broke my ankle and I, I can't. And so that was

just interesting realizing like with me letting people down, like I couldn't, I, you know, I was playing volleyball. It was the guy's fault who came under the net, you know, he shouldn't have done that. And then I could have done that mastermind for you. Um, couldn't, I, you know, I was playing volleyball. It was the guy's fault who came under the net, you know, he shouldn't have done that. And then I could have done that mastermind for you. Um, so the, probably the biggest thing that I'm still working on is, um, the ability to say no and say, cause this is what I'm truly focused on right now. Um, someone said this to me recently, I'm still in the, like struggling to say no. And then if I say no, I'm like, no, because of these, these things. And someone said to me last week, did you know that no is a complete sentence?

And so that's what I'm working on the most. So good. I'll let somebody else, I've got another question, but I'll let somebody else go. Here we go. I can still relate to that with the no. That's me too. Thank you for that. So I'm curious, you were mentioning churn earlier. So what is your most effective strategy that you shouldn't try them or pursue them, but quality of the product is everything. I will say all of my effort related to reducing churn is in software as a service specifically. So some of that will translate to other businesses, some won't. The more we could match expectations with what we actually delivered, the better. So that meant on sales conversations, we would start talking about how difficult some of these things are. And we just try to be really realistic.

Something that I do when I'm hiring people, especially managers or executives, is I try to talk them out of taking the job. And I talk about all the things that are going to be really, really difficult. And it's sort of like, has anyone read the book Extreme Ownership by Jocko Willink and Leif Babin?

Yeah, a handful of people. Let's say that something goes wrong between our two companies, right? One of us is a vendor, the other one, and all of this. We actually had this with an integration partner. They had registered a domain. This happened on Monday. And they didn't set up appropriate tracking on it. It was a domain they'd only set up to manage this integration. And so it was not part of their core infrastructure.

And they let it expire. And so a part of our service stopped working, you know, just a fringe of it. And they didn't catch it, uh, for like a day. And we're trying to figure out why it's broken all that. And we're like, wait a second, it's because this domain expired. Like who lets the domain expire? This is the most amateur hour thing ever. And our team was pissed. We were like four engineers spent 24 hours, like trying to figure this out. And I think that the first reaction was to go to them and be like, what the hell? Get your shit together.

And then Brendan, my director of engineering, who keeps Extreme Ownership sitting on his desk, was like, what of this is in our control? And so they had a bunch of conversations, but he ended up going to them and saying like, man, I'm sorry, guys. We should have had monitoring in place. We should have,

um, I know this is something that you guys set up just for this integration. Yes. It's in your infrastructure, not ours, but like he had like a list of five or six things that we as an engineering team could have done better. And they,

I think they went into the conversation expecting a fight of like, I'll have to be like, get your shit together. And instead of showing up like, here's what we should have done better. We're we'll make sure that doesn't happen again and the other company their tone was 100 different they were like oh i mean it's in our infrastructure we should have had the monitoring on it like it's like the conversation was night and day what i think what everyone is expecting because uh brennan modeled this extreme ownership. And so I think the same thing

is true in sales where when you come in and if you talk about here are the hardest parts of this job, here's why you shouldn't take it. You know, here's all of those problems. Then someone goes, Oh, like I can overcome that. I can overcome that. You're not hiding anything from me. It's not making me less one. It's not making me want to have the job less. It's actually making me want to have it more. And if it does make them want to have the job less, then you filtered that out early, and that's way better than knowing three to six months in.

So if we bring that all the way through to customer acquisitions, then you're being very realistic about, hey, here's the transformation that I can help create for you or for your business. But here's what it's going to take from you, right? There's no magic bullet. And so then when somebody gets two or three months in and they're like, I didn't just buy this program

and my business transformed overnight or like whatever it is, they might be frustrated for a second. They're like, oh, that's exactly what she told us would happen, that I had to do my part. And so I think that setting of expectations is really, really important in sales and then, you know, really limiting churn. The next thing is really focus on conversations with customers. Like if you have, I don't know, maybe 500 people in a membership, I would say, how often are you talking to them, doing interviews?

What's their experience? All of that. In our product organizations, that's our designers and product managers. They have a rule where they have to talk to, like, do an interview or detailed conversation with the customer every week, each. So that means, like, it's not a crazy high bar. We're talking like 45 minutes a week per person. Um, but when they implemented that habit, they just got so much closer to the actual problems. And now they're at the point where they just have deep relationships with customers, but they're, they're working on something. They're like, I wonder what Jay would think about this. And they'll just DM him, you

know, on Twitter or something. It'd be like, Hey Jay, I'm working on this design for this new thing. What do you think? Makes customers feel awesome. So I think the user interviews are really, really important to find out that experience. And then the last thing is for us, um, this is like common wisdom, uh, but moving to annual plans really made a difference. Uh, and so we went from the point that like we used to be 3% to 5% of subscriptions, like new subscriptions coming in were annual plans. We're now at like 52%. And churn dropped from 4.5% to like 3.3%, which in our business is a difference of like $10,000 a month in churn. So hundreds of thousands of dollars a year. And obviously, in a recurring revenue business,

everything compounds, so even the smallest things make a big difference. So yeah, those are the things that come to mind. Wow, that was brilliant. Thank you so much. Yeah, what was the question, Russell? Yeah, so we did... The move to annual was... First first we changed the pricing page.

For some reason, there's some things that I felt were sneaky for whatever reason. I used to think like, oh no, everyone wants to pay monthly. And it's like, it's sneaky when everything defaults to annual. And then I ran a business for a little longer and I was like, I'd actually rather have one credit card charge than 12, you know, it's one of these things. I don't know if anyone is in the position of like finalizing random tax things before October 15th. Just me. I'm the only one that procrastinates.

I've been down a few people. Yeah. There's only four more days, but who's counting? I'm definitely not going to get on a call with my accountants later today to get them the last things they need. But anyway, like it simplifies so many things. So we changed, you know, all of our pricing. This sounds dumb. We actually just like got over ourselves and implemented all the best practices that everyone in the software industry talks about.

So annual by default, we increased some of the discounts on our lower plans. So, for example, on our very cheapest plan, it's $15 a month if you're paying monthly, but it's only $9 a month if you pay annual. So it's actually, I don't know what that is, 35% or 40% discount compared to the usual 20. Because we found at that lower price point, the annual version of it is still, there wasn't that big of a difference. It's still relatively small. Um, but we wanted to make it substantially cheaper. Uh, we also run, uh, upgrade to annual offers periodically, like in our lifecycle marketing

based on milestones that people hit in the app. Hey, you're growing fast. Why don't you switch to annual and get two months for free? Things like that. So if someone's upgrading to the next tier and you're like, oh, wow, this business has momentum, then you're like, hey, if you make this switch now, you'll get two months for free. We've also at times gated features to annual only,

and that can work. And then we've also offered bonus content for annual only. Uh, and that can work. Uh, and then we've also offered bonus content, uh, for annual only. The other one that we do is sometimes, I don't know if we'll do it this year. Uh, when we've run black Friday promos, they're only on annual plans. Uh, and we might offer a bigger discount. So like three months for free, uh, for a black Friday promo, and then it renews at the regular, and we're clear about this, but it renews at the regular two months for free that the regular annual plans have. Things like that. What else? I'll come back here.

Did you have one since you have the catch box? Didn't you have a question? That answered it. Okay, perfect. So going back, and I asked for a very transparent moment from you. I don't even think that's not impossible for you because I think you're going to really answer this. But based on the journey you've been on to get to $45 million, and a lot of people say they want that level of success, but they really don't know what it looks like and what you have to go through. Can you share with us a moment where you almost gave up?

Right. And that moment that hit you of, you know, I quit. What did you do? Who did you talk to? And how did you recover the mindset shift that was needed for you to get to where you are today? Yeah, let's see. So early on, you know, I talked about the shut it down or double down moment. Let me think past that. This isn't an almost give up moment. In 2021, so 2021, we had an exit offer from spotify that i really strongly considered and that was like really think about this and decide uh do i want it and you know that was like sit at my favorite coffee shop really journal understand why i'm doing this and I ultimately turned it down. I thought that my team would be really energized

and motivated by that. We always said we're never going to sell. We're building this for the long term. We're all about mission. And so now we had this opportunity to have an exit and I thought that people would feel like an exit would mean we were giving up on the mission and they'd be really excited about continuing. And very broadly, the team felt that way. What I didn't realize is that a lot of the execs felt differently.

And so what followed there was actually people saying, like, I thought you said we'd never sell. But I knew that when an offer for $200 million came along, you'd sell. And so for some executives who joined us really early on, that would mean, you know, a two to $5 million payout. Right. And that was really, really important for them. And it's this exit to a name brand company. That's a big deal. For other execs who joined more recently, to be able to say, oh, I came over from this company and then I joined ConvertKit. I worked there for 18 months and we exited to Spotify.

That looks amazing on your resume. And so what happened is actually we had four executives leave over the next six months, over the next nine months. And that was probably the hardest time of doing something. I think we believe in life that if I execute in line with my values, my mission, and my vision, then things will fall into place. Like the universe will align to help make that happen. And I still believe in that. I just think that it's over a longer time horizon than we wish. And so what happened is, uh, I, I made this decision in line with what I really, really believed in and ended up creating

all of this, uh, other, other change. Now it's worked out really well in the long run where I've recruited other executives that are just absolutely phenomenal. But it resulted in a lot of pain and loneliness in the in-between. So I think it's, I guess my takeaway from that is still always make decisions in line with your core values and your mission, but just realize

that it might get a lot harder before it gets easier. I had put together, you know, we're not venture backed. And so we don't have a traditional board, but a few years earlier, I'd put together a board of advisors. And I would really encourage you to do that. And, you know, if your business is over a million dollars a year in revenue, you should have a board of advisors. I think it's worth writing a monthly board update of, like, how things are going. Now, they don't have the ability to, like, no, I don't think he's doing a good job. Let me replace him as CEO and we're installing, you know, professional management, right? But there's still accountability to like saying,

this is what we're going to do in the business. Here's what we actually did. Helps you calibrate. Like, are you always too low or too high in your estimates? You know, are you like delusionally optimistic in a way that holds the business back? Or are you actually in a really good spot? And so I think that like advisors like that

are really, really helpful. And I would, even in an info product business, basically any type of business, I would put together a board. Who else has one? I think we have time for one more. Russell and everybody else, you tell me what you want to do on time. Four? Yeah. So how do you compensate the board of advisors?

How does that look? Yeah. So I do equity. You can pay cash or equity. Um, I do equity. Uh, and you know, we have a setup where, uh, we do secondary rounds every two years. That's something that came out of like turning on the offer from Spotify, but then it was clear I had to create liquidity. Uh, and so I created this vehicle where team members could sell equity every two years. Um, and then, uh, like friends of the company, uh, could buy in, uh, and all of that. Um, equity is, you know, is going to work better in a business that has a vehicle for liquidity like that. Um, but profits, interests,

uh, or just straight cash, you know, I'm saying something like, uh, Hey, I'd love to be, um, you know, I'd love to pay you $10,000 a year to be on the board. Here's the expectations and all of that. Or you could even, if you have that relationship with someone you could, and maybe a few of you in this room would want to do that for each other. You could swap board seats for each other. Yeah. Just define the relationship, right? When we are having a board meeting and you are on the board of my company, these are the expectations I want you. And I would write this down. I want you to push me to hold me accountable. I want you to read the room and know if I'm in the point where I, I need that, or maybe I just lost three executives and I need the like,

or, you know, arm around me and being like, Hey, we've got this. I'm going to help you recruit or all of that. And then the knowing that the role at some point is flipped, right? Cause now I'm like a month later, we're having a board meeting and I'm on the board of your company, right? And we have those defined rules. But having that, I think it gives you a couple of things. People who are long-term committed to your success, who are around your business for a while, right? If you hang out with someone at a conference, you're like, hey man, you grew a podcast really well. I'm trying to grow one. What, what should I do? You got three minutes of context followed by 10 minutes of advice. Like it's worth something, but not that much.

But if it's like year after year, that's worth a lot. Um, I think the care is there, but yeah, I think it's really that context and long-term relationship. So three ways, cash equity, or a swap is how I would think about compensating board members. Perfect. Thank you. Yeah, for sure. I'm happy to hang around and chat for a little bit too, if you guys have questions and all of that, but I'm a huge fan of Russell and everything he's built. And I mean, you all have learned in a huge way what it means to build a business that employs people that, you know, changes your lives, lives of your family members. Um, I've just heard so many stories of people getting to this level of building a business

and they're able to do things for their parents, for their siblings, for like whoever else, whether it's like helping out financially or just being like that steady rock in other people, like in a relationship with other people. And so I just commend you in a huge way for what you've built, how you continue to show up to serve each other and everyone around you. And it's really special to be a part of this group. So thank you for having me.