Episode 39:Thoughts on Products
Are products a way to replace services, or do they help augment your services?
Summary
Nick and Kai make the case that books and info products are authority tools for consultants, not income replacements, and that SaaS is a trap most consultants walk into too early. The right sequence is consulting first (clients pay you for market validation), small products second, and SaaS only after deep, earned understanding of the expensive problem your market actually has.
Highlights
- Nick’s book Cadence and Slang took years to reach minimum wage on an hourly basis. It tripled his salary and opened professional opportunities that the royalties alone never paid for.
- Kai’s two books earned roughly $12,000–$13,000 combined in direct sales but produced over $40,000 in billable consulting work from readers who hired him to implement or teach what the book covered.
- Nick warns against converting a white-label consulting deliverable into a SaaS. One paying client is not market validation: their product may have failed, and no end customers have been proven.
- Kai, citing Patrick McKenzie, puts SaaS success odds at ‘rolling a 100-sided die and having 101 come up.’
- Nick references a Business of Software talk by Gail from Constant Contact titled ‘The Long, Slow SaaS Ramp of Death’: no hockey stick exists for most SaaS products, just a grinding ramp over years before breaking even.
- Kai’s recommended path: ship a minimal book or info product, pair it immediately with coaching or consulting, and treat the product as a lead source. The consulting engagements are where you learn what the expensive problem actually is.
- Both argue that fragmented products across unrelated audiences kill referrals. If nobody can explain what you do in one sentence, positioning is broken and the business suffers for it.
Read the transcript
I wrote a book in 2010 called Cadence and Slang, and it was about interaction design. It is the single Biggest and most important thing that I’ve done for my career so far. It was tremendously valuable. It allowed me to triple my salary. It allowed me professional opportunities in my field that I just flatly didn’t have access to before this. It allowed me no small measure of respect that has been ongoing to this day. And If you calculated the hourly rate that it took me to make this book, we broke I think we talked about this on Make Money Online in the past. We broke minimum wage about eight months ago. I am now above the minimum wage in Illinois. Congratulations. Thank you. I’m glad you’ve reached this high watermark. No longer indentured. If you told me, Nick D, I’m going to make and sell a book and make a living off of it, I would. Caution you against self-identifying as a writer. There are certain people who do a great job doing this. There are many people who are professional writers. There are many people who get the majority of their income from writing. Our friend Josh Kaufman is the author of The Personal MBA, which has been New York Times bestseller. I can think of many other successful authors, Malcolm Gladwell, For Better and For Worse. I can think of Alan Weiss. He’s written probably a couple dozen books at this point. A lot of people that are successful authors live middle-class lives or middle to upper class lives. They live comfortable lives, but they’re not. They’re not killing it, you know. They’re writing and they feel self-actualized. They’re also in the severe minority of all people who publish, right? So my strongest recommendation, write a book. Do not expect that the book will make you money. It is very, very easy to be disincentivized from making a book when you realize it will not make you any money. But it makes you prestige. And it makes you a considerable amount of authority and allows you to get in front of people who pay you better and give you better projects.
Agreed. Agreed. In my case, I’ve written two books: Podcast Outreach and Outreach Blueprint, or The Outreach Blueprint. I’m the author, and I’m not sure what the title is. And in both cases, writing them has served as a source of leads, has served as a flag in the sand for this is something I know a lot about. Has served as a way for me to start moving people into my funnel. I mean, I’ll share revenue numbers. Podcast outreach has made me just around $9,000. Outreach Blueprint has made me around $3,000 to $4,000 somewhere in that window. And I’m really happy with that. For first time self-publishing, making a thing, it’s great. Yeah, that’s not bad. But even on top of it, like both of those books have produced upwards of $40,000 in billable client work for me because somebody has bought the book, read the book, and said, This is hard. I want you to do it for me. Or bought the book, read the book, and said, Okay, you’re an expert. I want to hire you to teach me how to do this. And I have aspirations of Slowly shifting the balance of revenue in my business to favor products more, but that’s a multi-year journey. Last year, 5%, it was actually exactly 5% of Kaiko revenue came from information product sales. I’d love that to be 10%, 15%, 20% moving forward, but it won’t happen overnight. But in the meantime, the book is a great way to level up, to demonstrate I know what I’m talking about and to move people into consulting or coaching engagements.
Yeah, yeah. So the initial question around this, we talked a lot about in a previous episode about why write a book, so I’m not going to tread that ground terribly much. But like The question was more how to balance products with other things. And I’m here to give you the grim news you never wanted to hear, which is that You cannot rely solely on product revenue. There are a lot of people who try to, and there are a couple of people who succeed. By and large, that is not those people. Additionally, if you are listening to this podcast, you are probably involved in consulting in some capacity. I mean, at least I would hope so, because the both of us are consultants. You use your info products as a way of refining your thinking and promoting your authority to an audience. And those are valuable and important, but they’re not at all the answer.
Yeah, if I was looking at somebody who was starting off on the journey on self-publishing a book and saying, I want this to replace my full-time income I would say write the book. Like definitely create some like write the minimal JFS, just fucking shipped version of the book. Cut the scope as much as you can. Ship that, but pair it with a service offering that makes sense. Say you have book, you have book plus group coaching, you have book plus one-on-one coaching. And a majority of your revenue will come from the coaching engagements, but As you promote the book, even if you’re just selling 10 to 20 copies a month, reaching out to the people who are buying it, having conversations with them, saying, Hey, you read the book, what challenges do you still have? Oh, you know, working one-on-one in a one-off call or for a month of coaching. I could help you solve those problems because it’s more intensive and customized for you. I think that provides more cash flow than book alone, since you could sell $1,000 or a $2,000 coaching engagement easier than you can $50,000, $20 copies of a book. And pairing the two and slowly adjusting that balance makes more sense. So I view products really as you invest the time in creating products, pair them with services. and then over time, slowly scale down your focus on services and increase your focus on products. So in the short term, the products really are a lead generation tool for services of any sort.
Yes, unless you have a wildly successful product, which is almost never the case, there is no step function between working on services and working on products. And there’s really no substitute for getting in front of a client and solving business needs, right? And no one wants to do that because that involves emotional labor. And you have only a certain amount of that that you can deal with. And I don’t know about you, dear listener, but mine is tapped every fucking day. Every day. And I am run ragged about it, but I love my job, and I know there’s no other route to it There is no other route to actually selling to payers and being effective and doing all this. I want to shift gears and talk about a handful of the things that cause people to be blinkered by products. Here’s one. I’m a developer. You hire me. and to make a product for you. And it’s colored with the brand. And that’s fine. It goes well. You have the product. And in the contract, you were smart enough to integrate a white label provision, which allows you to take effectively the same product, strip out all of their branding, strip out any identifying information, and the theory is reuse it for other clients, right? Now that would be an amazing productized consulting service. You can basically just stamp this thing out for other clients. That is never how it goes. People instead take that white label provision and make a SAS. Do not if you are listening to this, do not make a sass out of a product you just made You need true market validation. One client paying you for their own narrow problem is not market validation because they may not have done the same market validation. Their product that they bought might have failed. There is a middleman in that situation. There are no paying customers in that situation. There is a paying client. And that is a key relationship that you need to be thinking about. Additionally, starting your own SAS. There’s a lot to be said about starting a SAS, and we’re not really a SAS podcast. Kai, I’m SAS. I’m a sass hole. We scale from one to ten, ten being the most difficult and one being the least difficult. Where would you put launching and maintaining a SAS, Kai?
Oh, I want to steal a line from Patrick McKenzie on this. In one of his articles, he said, succeeding with launching a SAS is like Rolling a 100-sided die and having the number 101 come up on it. It’s impossible. It’s incredibly difficult. Takes so much time and effort and attention. You’re developing a product, you’re supporting a product, you’re marketing a product, you’re adding new features. Launching a SaaS seems like You’re dealing with support inquiries. You’re dealing with so many contingencies you don’t even know yet to say. I’m going to, you know, code up a Ruby project, launch it as a SaaS, and then I will be drowning in money. Well, you could build an amazing product that solves an amazing need that people have, but If nobody knows that product exists, or even worse, if nobody understands that they’re actually experiencing the problem that your product solves, you aren’t going to have any customers. Launching a SAS really, in my mind, or succeeding with a SAS, comes after so much time invested in. Understanding your target market, understanding the expensive problems, understanding what offers they buy, understanding their price sensitivity, understanding what marketing they respond to. All things that you could learn by starting off by selling a consulting service. and then graduating to selling a small product and then graduating to launching a SaaS that solves one tiny iota of that overall problem.
But yeah. You should also have worked in a small bootstrap SaaS in order to understand what it is, right? And nobody does that. They all start off working as a developer or working at Google or something like that. I’m talking a team of maximum 50 people. And you’re dealing with you have to wear many hats in that situation, no matter what. And you’re probably, if they’re a good team, they rotate you on support, which means you have to support I would not envy anyone who does this, and I would not envy anyone who thinks that they can get out of consulting and just do a SAS, right? It is the equivalent of you having an ant infestation of your house, and you solve the problem by infesting your house with spiders in order to kill off the ants. Now you have spiders, and you just work your way up the food chain, and eventually there are three lions living with you. Who wants to run support on lions? It’s they’re large, they’re angry. I don’t want to run anything on lions. I want to run away from lions. And that’s what you have when you build a SAS. I would strongly, strongly advise, in the most unambiguous possible terms, against Taking your white-label product as a consultant and thinking that a SAS is a necessary or important endgame. You think it’s fun. Other people are depending on you, usually for their businesses or their personal lives. They’re depending on you to be a tool, and you will fuck them when you fold. I’m not going to be there to save you. I’m going to be on the beach. Yeah.
I’ve seen so many products that I use, products that become an integral part of my workflow for Solving my clients’ problems fold because we couldn’t make enough money. We ran into this issue. We’re pivoting and we’re cutting the feature that you use all the time. I think those are all signs of. I mean, like whenever you see somebody saying, well, we’ve built the product, but now we’re searching for product market fit, it’s like saying, I made this thing, now I’m going to go try to find people who need this thing. You really want to flip that equation around. You want to find people. You want to find what those people need. And then you want to build the thing. Because you start off by saying, I’m going to build a SAS that solves X, Y, Z. You’re going to struggle to find the people who actually have XYZs, that problem. It’s so much more valuable and so much more rewarding and so much more lucrative to say, I found people. I found this problem. Okay, there’s a hundred different ways I could solve this problem: consulting, information products, teaching, trainings, freebie offerings, articles. SAS is just one of them. And SAS is really what I say you graduate to once you really, really intuitively understand that problem somebody has. And what aspect of SAS can fix? I mean, it very well could be that you identify a problem, but solving that problem isn’t really within the scope of SAS, or it’s really complex and hard to do. You could take what I do as a consultant and say, well, we’re going to reduce it down to an outreach tool. Like there’s BuzzStream, there’s Ninja Outreach. There’s these tools that say We will automate outreach for you for $29 a month, and we’ll find the influencers and contact them. And the end product, like, sure, it does some things well, but it’s not going to solve the expensive problem the client is experiencing in the same way that you can as a consultant. So jumping straight to the SaaS game, there’s so much you don’t know about what your customers actually are experiencing and the problems they have that Your attempt isn’t really. It’s not even going to be a home run. It’s not even going to be a line drive. It’s going to be an awkward swing. And maybe, maybe you’ll be lucky and the ball hits you and you get to first base. But. That’s not how you win a game of baseball. Step in front of the ball. But no, I think SAS can be a trap for consultants. And consultants of any breed, developers are not. I mean, There’s so many stories out there of non-technical founder seeks technical co-founder. Well, if you actually, we’re not even talking about that.
I’m sorry to interrupt, but that’s yeah. technical co founder. Yes.
But yeah, there’s so many, so many issues and contingencies around it. But I think products are an important thing for any consultant or business owner to think about because they are like we said in the Why Create Products, Why Write a Book episode. They let you get better leverage on your knowledge. They let you put things out there that people could find and purchase. If you want to hire me as a consultant, it starts at $1,000. If you want to buy one of my books, which distills my knowledge down, It starts at $29. So it’s so much easier for somebody to show up and be like, huh, this Kai guy, he has curly hair. I’d love to work with him. I could spend $1,000. Or I can spend 29 and learn how he thinks and the methodologies he promotes and what it’s like to, you know, hear his voice through the written word. It’s so much easier for somebody to do that and then leapfrog to a consulting engagement and move up that food chain. I think services are a very important or products are a very important part of a business, but SaaS isn’t the right direction to take early on. You will unintentionally spend time focusing on the wrong things. When you should be understanding the problems your customers are experiencing, You’ll be coding your app. But if you don’t understand the problems, how could you code something that actually solves those problems? And I always come back to The best way to understand the problems is to go and solve those problems as a consultant. Maybe you’re doing manual work to do it. Okay. You’ll figure out ways to automate it over time, but you work on 5, 10, 20 consulting engagements for a specific target market in a specific problem. You’re going to come out of those engagements with so much more knowledge about what people actually need and how to solve the problem than you would if you just started from, I’m going to build a SaaS to solve this problem. It’s so important to start with consulting because then, really, people are paying you cash money. To do market validation for you.
I’m going to build off of that and say there are kind of two columns when I’m vetting what to do next, right? There is Ease of fulfillment in one column and potential ROI in the other column, right? Consulting is somewhere in the middle on ease of fulfillment, partly because I’m used to doing it and partly because I’ve had a lot of experience on it. It might be higher for others. But it’s extremely lucrative, right? I charge over if you calculated an hourly rate from what I do, about $1,000 an hour minimum. for what I do right now. But it’s all fixed bid, and you have to pay me ahead of time. And I’m booked until January, right? Like and then for books, it’s very high value. Or very high work. It’s very difficult to put together. And it’s kind of middling economic upside, but then you get a lot of like intangibles about the fact that you’re a published author and all these other things. And the SAS is very high amount of work and very low reward for a very long time. There’s an article called The Long or a Talk that Gail from Constant Contact did. called The Long, Slow Sass Ramp of Death at Businesses Software, and talked about how there is no such thing as a hockey stick, basically, unless you’re one of a tiny handful of startups. You want to be a hockey stick, but you’re not. And you’re not going to be for a long time. And I’m terribly sorry to throw cold water on your awesome idea, but 10 people have had it before, and it’s hard. That’s it.
Yeah, Seth Godin, I think it’s Seth Godin, talks about it as like the trowel of failure or the valley of failure, where And it’s very, very similar to the sasser amp of death where it’s like things are going, things are going, things are slow, slow, slow, slow, slow. Oh, they picked up a tiny bit. Oh, slow, slow, slow. It’s It’s so much time to get to a point where you’re making a full-time income off of it. You’ve broken even on it. I mean, we talk about the years it’s taken for the time you invested in Cadence and Sline to get you to a minimum wage level. How much more time needs to be invested in getting a SaaS and marketing the SaaS and getting customers for the SaaS before you hit that same point?
It’s Yeah, and how much prestige do you get from the SaaS? Right. Have fun with that.
Yeah, yeah. People don’t, I think. I mean, a SaaS could be a great way to get clients if you’re a developer. Look, I built a thing, it does a thing. But I don’t think it gives you the same amount of authority that writing a book does if you’re a consultant. Hey, I wrote a book on outreach. I’m an expert on outreach. I want to help you with outreach. Hand me to SAS about outreach. Well, people aren’t necessarily going to say, I want to hire you as a consultant to do my outreach for me. They’re going to say, Can you build me a SAS? which might not fit your positioning or target market or how you want to grow your business.
Yeah. Yeah. What else should we be talking about in this situation?
How people I think how people get mistakenly trapped thinking that They need to create a SaaS, or how people could identify when the right time is to sort of downstep from consulting to a small educational product. And Start testing the waters there since you could absolutely do it too early, and it’s important to know when it makes sense to do it.
Yeah. Okay, so let’s start going into some actual tactics here then. When you’re creating new products, you need to figure out what the economic upside is for the customer. And we’ve talked about this a lot. but you have to understand what value upside I have for it, how you can anchor that pricing and what you can charge for it as a result. People like getting a return on their investment, and you are either increasing revenue or decreasing costs with your product, period. End of discussion. So go through that, Juju, figure it out, and determine whether or not it is safe to proceed. Next, figure out how much work it’s going to be for you. Is it too much work? Are you actually getting a decent hourly rate? Are you leveraging your expertise in an effective way? You might start out with a really low hourly rate, and it might be slightly higher. That’s great. You might find something that gives you $1,000 hourly rate. That’s great. You might find that something actually puts you into indentured servitude forever. That’s not so great. Throw it away. So go through that process. Take a long, hard look and don’t be afraid to throw away ideas, right? The third thing Think about how it fits in with your existing product offerings. We have a whole episode on Make Money Online about doing a good product ladder that fits well with your positioning. I would strongly recommend taking a look at the product and seeing is this going to be an enormous distraction on my life? If so, am I okay throwing away the rest of my business? Because you can do that. You are allowed to throw away the rest of your business. I would strongly caution against running two businesses. Because if you’re going to make something for sock puppet manufacturers and something for the defense industry, Maybe you’re having two different sets of expertise there, and it’s really hard for you to keep track of, and you’re going to start making some sock puppet recommendations to Northrop Grumman, and then we’re all going to die because of you. Elmo with an Uzi.
Yeah, let’s get a Kuzi on this F-18. I mean, you’re absolutely right there, where if you find yourself. unintentionally running two separate businesses for different markets, you’re in a bad spot because your attention is going to be fragmented. You and I have talked a lot personally, and I think on this episode, or not this episode, on this podcast, about The necessity of focus as a consultant or as a business owner, or even just as a human. And if you find yourself in that position of, hey, I’m running two separate businesses for two separate audiences, solving two separate expensive problems. you’re not doubling the amount of work you’re doing, you’re more than doubling it because you have the cognitive cost of switching between these different businesses, of switching between These different audiences, of knowing where to focus your time and attention. It more than doubles the cost to run these businesses. Shooting yourself in the foot so hard. I’ve made the hard choice multiple times to shut down a business that was very, very profitable. My iPhone business, my first eBay business selling magic cards, because I realize, hey, I’m doing two or three things right now. I could only do one effectively, even though this is making me money, even though this is making me a nice profit. It’s a distraction, and I need to put it down and set it aside. Our friend Kurt Elster, I think, has done this wonderfully. He’s launched a couple information products, realized Hey, maintaining these and marketing these doesn’t align with my focus on an audience of Shopify owners or e-commerce store owners. Okay, they’re making me money, but Promoting them is a distraction to me and a distraction to potential buyers who show up because somebody shows up on his website and Shopify, Shopify, Shopify, stuff for freelancers? Question mark. And it becomes a distraction for people who are showing up to buy his services or buy his products. So, understanding how everything overlaps there and how it fits together into Your overall product ladder is super important. Nathan Berry wrote a wonderful, wonderful post on this a few years ago when he talked about sunsetting a couple of his apps and products to focus on the ones that had the most overlap because When you start thinking about products, I think it’s important to think about if somebody buys product A, what should product B be? What should product C be for them? And if one product is an e-book on how to make incredible sock puppets, the other one is an e-book on, I don’t know, how to blow up terrorists. How to blow up terrorists. Well, people who buy the Sock Puppet e-book aren’t going to buy the Blow Up Terrorist e-book. Unlikely. Unlikely. There’s some one one or two, Mike. You’re going to have to be able to get a little bit of a trip. You’re going to have a hell of a positioning there. But it’s important to think about how those things overlap. I mean, I’ve looked at my business and reoriented it a couple of times because of that exact question. How do my services fit together? I’ve killed off three of my productized consulting offerings because they don’t fit into the product ladder I’m defining. And by killing off those productized service offerings or productized consulting offerings, I’m then able to understand better where I should focus my time and attention when it comes to creating products. I don’t do SEO really anymore. I don’t do keyword analysis or link building. I do outreach. And by focusing on outreach within my business as a whole, I understand what my next book should be about: how to write better emails as a consultant, how to do outreach to set up joint venture webinars. You get a clarity for what products to create. when you decide where to focus and what to cut out of your business. But the hard part is realizing you need to cut something out. How many of these podcasts just come down to having better positioning? I mean, I think half of our podcasts are about positioning and half are about focus.
Which is a kind of positioning. And it looks like you’re being terribly one-dimensional, right? By throwing all this stuff away, but like, you know, you’re diversifying the products. And the consulting services that you’re doing within a given positioning. That’s kind of my take on it. And I think that’s the way to make it most legible and try to And try to address it as much as you possibly can. So, yeah, does that make sense?
Yeah, there’s one last thing I’d add there. I read an article a bit ago. We’ll link to it in the show notes: the Triumvirate of Positioning. Where I talk about how good positioning, I talk about it in the frame of a consultant, but you can apply it to products or anything really, creates a referable moment. If you’ve identified to your audience and your friends as, hey, I’m the guy who’s written the best-selling e-book on sock puppets, it’s going to be easy for them to tell people, oh, this is Kai. He wrote a very, very popular e-book on sock puppets. And you’re going to get people showing up to buy that thing. But if your positioning is fragmented, if your products are fragmented and touch on different audiences, people aren’t going to quite understand how to introduce you. I think this connects really well with the previous episode we did about how you signify to people what you do. And again, it’s positioning one-on-one, but if your products are fragmented and your services are fragmented, It’s going to signify to people that your business offerings are fragmented, which will work against you because you aren’t going to get referrals and people aren’t going to understand how exactly you operate as a consultant. Which will mean your business is hurting. So if, on top of that, you suddenly say, I’m going to launch a SaaS to help solve this problem, how does that solve the problem? It’s better to Trim it down, understand the expensive problem you’re actually solving with your business, and market to that effectively. Because if you aren’t doing that, do you really have a business?