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In this special part II episode, we talk with SparkToro cofounder Rand Fishkin about his chill work philosophy, alternative ways to fund a business, the power of intention for founders, and more!
About Rand Fishkin:
Rand Fishkin is cofounder and CEO of audience research software startup, SparkToro. He’s dedicated his professional life to helping people do better marketing through his writing, videos, speaking, and his book, Lost and Founder.
When Rand’s not working, he’s usually cooking a fancy meal for the love of his life, author Geraldine DeRuiter. If you bribe him with great pasta or remarkable cocktails, he’ll happily pull back the curtain on big tech’s dark secrets.
SparkToro® is a software company founded by Casey Henry & Rand Fishkin. We believe high quality market research and audience intelligence should be available to everyone, not just tech giants and those with huge budgets.
The Way of Alternative Funding & Chill Work with Rand Fishkin
Brian Sierakowski: Welcome to Founder Chats by Baremetrics where we chat with founders and hear how they started and grew their businesses. This week, we talked with Rand Fishkin, Founder and CEO of SparkToro.
This episode was a little bit different since Rand was on the podcast two years ago. So we’re picking the story where we left off and specifically focusing on what’s changed since the last episode. Enjoy!
Brian Sierakowski: Rand, welcome back to Founder Chats. How are you?
Rand Fishkin: I’m all right. How are you, Brian?
Brian Sierakowski: I’m fantastic. For our chat today.. Usually when we’re talking to people, we walk through their entrepreneurial journey and we talk about where it started and they sort of walk through each step of becoming an entrepreneur and all the trials and tribulations.
But you’ve been on the podcast before. And my first thought was that you were on the podcast like a long time ago, but then I looked it up and you were on the podcast as recently as 2019. And then I thought about the last two years and I’m like, wait, I actually, that’s kind of like a long time ago.
So for this one I don’t want to tell people that if they want to hear that story, they should go back and listen to the first episode, but they should go back and listen to the first episode. What I thought would be cool today, if you’re up for it, is to go back and say, Hey, well, what’s changed since then?
The world’s changed a lot, obviously. Maybe I can run by some of the things that you talked about in the first episode and some of the other things that we’ve seen you talk about, and maybe you can give me the 2021 revised version. How does that sound?
Rand Fishkin: Sounds great.
Brian Sierakowski: Cool. So the first thing I was thinking about was, you started in the consulting space and one of the things that you said, I don’t think I’m putting words in your mouth, but please correct me if I’m wrong, but the consulting relationships kind of tend to have this, you know, there’s you said, a little bit of a fakeness about them.
I think it’s becoming increasingly popular to basically turn support teams and success teams outward to doing kind of outbound. It’s not really sales and it’s not quite consulting, but I think a lot of SaaS products are doing more work and kind of hunting their customers down in a bigger way.
Do you still feel the same way about that kind of fake consulting relationship? And do you have any concern that that’s something that spills over into the world of customer service?
Rand Fishkin: Let’s see. So I’m guessing the word I used, cause this is how I always think of it in my own mind, was transaction.
So it’s not that the relationship isn’t fake, it’s a real relationship. It can be great and positive. I know lots of consultants who have wonderful relationships with their clients and vice versa. We are a client of many consultancies we’ve used, you know, elevate and conversion rate experts and a number of individual consultants for all sorts of things.
I love using consultants and agencies for everything I possibly can. I don’t understand why other companies don’t, AND obviously the relationships that I have with them are great. What I don’t like is when I am the consultant, the transactional nature of the relationship that I feel emotionally with my clients and potential clients, right?
Like I’m always kind of trying to please them because I have to, because it’s part of my business. And for some reason, especially in my twenties, when I started out as a consultant, I was very poor at navigating those relationships.
Would I be okay at it now? Maybe. As to your question about customer success teams, I agree with you that many, many large SaaS companies, even mid-sized SAS companies, software businesses probably have a very large services arm and they sort of try and hide it in their numbers because some investors are still wary of services revenue, but they shouldn’t be. That’s just a dumb bias on the part of investors.
I think smart software companies recognize that customer lifetime value and margins and stickiness of those relationships can be great. Obviously, Salesforce has a consulting-like relationship with many of their clients, the big ones and the small ones. HubSpot has the same thing. You know, if you look at the, whatever top 50 SaaS companies by public market share or public market size, They almost have a consulting-like relationship and a consulting-like team in customer success or onboarding or customer service, those kinds of things.
And that’s fine.
Brian Sierakowski: So the transactional nature isn’t really like an universal truth. You were saying more like this is something you don’t particularly like, or at least you didn’t at that point in time.
Rand Fishkin: Exactly. I still don’t like it. I still would much prefer to have as much of a disconnected from financial, transactional relationship as possible with the people that I know. That’s just, that’s just how I am. I’m weird.
Brian Sierakowski: Does it feel different for you? So for example, if you have a customer that’s subscribing to your software. Does that feel okay for you?
Rand Fishkin: It does because they can quit anytime. And I won’t even know. If someone comes up to me at an event… people would come up and be like, “Oh, we’re a client of Moz!” That’s great, wonderful. That’s terrific. And if they cancel their membership, that’s fine too, right? It’s not the same thing as, “Oh, hey, we’re a client of yours personally.”
Brian Sierakowski: Interesting. I see. There’s like a little bit of an indirection there. It’s a misdirection.
Rand Fishkin: It’s sort of like, “Oh, hey, you work at Hertz. I once rented a car from Hertz.” “Oh cool.” As opposed to, you know, like, you’re a contractor for me. You consult with me. We get on the phone for a monthly call. You present me with how you’re doing for us. That’s a very different kind of relationship.
Brian Sierakowski: Interesting. Yeah. And maybe why I went down the success road is I feel like we’re almost walking ourselves into that sort of relationship where we are proactively reaching out to customers. We are looking at their account. We’re trying to, at least on the Baremetrics side, we are trying to help them figure out like, What could you be doing better?
We’ve just seen a lot more Baremetrics dashboards than everybody else. So I wonder if we’re walking ourselves into that sort of situation where it’s like, oh, Hey, well, you know, we see them cancel. And we’re like, “oh man, we sent them. It’s almost kind of funny.
It’s like we sent them so many great tips and tricks and they received them well.
Rand Fishkin: Yeah. It feels much more personal.
Brian Sierakowski: Right. And maybe that’s just a piece of psychology that we’re going to need to get better at managing
Rand Fishkin: Yeah, it’s everyone’s choice. The beautiful thing about being a founder and creating a business of your own is that you get to decide which types of problems you want to take on and which types of problems you don’t want to take on.
And one of the problems that I don’t want to take on is changing my psychology to be more robustly immunized against the transactional nature of consulting relationships. Like I just, I don’t care to work on that problem. I’d rather just work around it. And I think this is a beautiful thing that a lot of founders should think about is: here’s a problem that I don’t want to work on. How do I work around it? How do I just avoid that problem altogether by designing a business that doesn’t need to get good at that
Brian Sierakowski: Yeah. That’s really interesting. And it’s almost to a point that you mentioned before, around how there are all these market forces. For example, you mentioned VCs are sort of like anti-services revenue.So companies hide that and work around it, but that you sort of have walked down a pretty long road to get to the point where you care, what the VCs think and you know, you’ve walked yourself into that situation. So yeah, that’s, that’s really interesting.
Rand Fishkin: Yeah I obviously think, and you probably know from our previous conversation, and I think that’s almost universally a mistake taking on venture capital, nevermind, caring what your VCs think once you have.
I think both of those are mistakes.
Brian Sierakowski: Interesting. I want to talk more about that too. There’s something else on my list here that I made a note of when I was listening to the last episode and it feels to me, please, correct me if I’m wrong, but it feels like to me, like you have like a system for your psychology.
Like, it feels like you have something figured out there even to like what you’re saying of… you don’t have this overt concern around like, “all the cool companies are doing this, so I need to change myself.” You’re like, well, this is me. And this is who I am.
It’s like a very, almost a very Zen and mindful thing. Do you feel the same way about yourself? Do you feel like you have a system of psychology that’s working for you?
Rand Fishkin: It’s certainly getting better. I don’t think I have it all worked out by any means, but I think one of the things that comes with age and some emotional maturity and some bad experiences is that you become wiser about who you are and what you love to do and what you hate to do and what brings you energy in your day and what zaps that energy from you and makes you feel like crap.
And those are things that I am lucky enough to be very mindful of, right? One of the things that I for example know about myself is that I have no interest in being a moonshot, low-probability chance of getting to, you know, whatever, a hundred million ARR with a SaaS business. I don’t give a F about that.
Like, I just don’t couldn’t care less. Actually, Brian, that’s probably, that’s probably not even the right way to say it. I think what I recognize from my history and from being inside the venture environment with my previous company, and then kind of waking up to what’s going on is venture as an asset class that is intentionally designed to take advantage of the tax breaks that are given to capital gains over income.
The venture capital industry, for anybody who doesn’t know… like eight out of 10 venture firms, don’t beat the public stock market and will return two out of 10. And the only way they’re able to do that is through capital gains tax rate, of course. So you are essentially getting an asset class that funds a few hundred thousand companies a year with the goal of having a few dozen of those hundred thousand do extraordinarily well.
The rest have a somewhere between mediocre and truly dismal journey. What that gets is essentially a world like the world that we live in, where, in the broader economy, there are a few winners and a huge mass of losers.
Lots of income inequality, lots of wealth, inequity, lots of jealousy and strife and anger and frustration and sadness, the wreckage of tons of people’s sort of careers and financial lives because they could have been making more money at a bigger company, but they were sort of seduced to a startup where hopefully their options were going to make them rich.
And of course, 99% of the time that doesn’t happen, sometimes that happens even when it does happen, if they didn’t execute them right. Or didn’t negotiate right. Whatever. So that’s an ugly world. I just don’t, I don’t want to be part of it. I don’t understand–that’s not true. I understand the allure. I understand how they sell it.
And yeah, I think that, you know, the beautiful part about getting older is that you can recognize systems that you don’t want to be part of and then sort of walk away.
Brian Sierakowski: It sounds so simple and logical when you put it that way.
Rand Fishkin: It is not, it is not simple. There’s nothing about it that is simple. Is Baremetrics venture-backed? Oh,
Brian Sierakowski: We are owned by a private equity firm.
Rand Fishkin: Oh, okay. Yeah. So yeah, my old company Moz, was just bought by a private equity firm maybe three months ago, four months ago. Private equity has its own challenges, but at least there’s the expectation, right? That they will pay you market rates and that your odds of lasting are much, much higher than a venture backed business.
Brian Sierakowski: There is a lot of similarity to the venture world, but you’re right. There are some differences. I had the same conversation with one of the partners at the private equity firm and was sort of like, well, they were like, “We want to be in the 95th percentile of private equity.
And it’s like, okay, well, what do we need to do to do that? And they said, just don’t lose any money. And you know, of course I’m laughing and, you know, hitting them with my elbow, like, yeah, sure. And they’re like, “No, seriously.” I think private equity and VC are lumped into sort of the same category. That’s an eye opener to a lot of people where to be amongst the best in the world, if you return anything, if you give people their money back, you’re like instantly God-tier S-tier financing
Rand Fishkin: I mean, a venture is certainly not like that, right? Because so many of the companies go bust. Moz, for example, I think I’m not allowed to disclose what the sale price was or whatever, but I can give you a ballpark that our early investors in the first round probably made somewhere between five and seven times their money on the Moz deal.
But the problem was they initially funded us in 2007. And so over what, 14 years, the rate of return just isn’t good enough. They probably barely broke even or lost money as compared to if they just put it in the S and P 500.
Brian Sierakowski: It’s actually so interesting to consider too.
Me, a doofus, is like, “but it could have been better” Here’s where you’re literally sitting here and being like, no, like I’m, I’m literally giving you the facts of what’s happened.
Rand Fishkin: Basically, what I’m saying is, you know, MAs a company that returned.
Rand Fishkin: Somewhere around five to seven X, the money that was put into it to its early investors is not even what a venture capitalist would consider a base hit. Right? It’s a, “That sucked. Let’s not do that again”. What’s realistically going to happen is, if you’re a venture firm, you should do that many, many, many times again. And try to find the one that either is going to do five to seven X in four years or three years, or the one that’s going to do 50 X in 14 years.
Brian Sierakowski: It’s strange to consider too, because I feel sort of a similar pressure from the operator side. The way that I think about what we’re doing internally, it’s like, well, we could do 10 projects in quarter four and we could have 10 goals and maybe we get one of them.
And that would be really awesome. Or, we could set five goals and then we could kind of narrow our scope or we could just focus on one thing. We could really really knock that one thing out of the park.
It’s interesting to consider from a VC perspective, since you theoretically have less control. Well, yeah, then it makes sense to throw 10 things out there, whatever the case is, you know, and just play the numbers. Maybe. I don’t know. I don’t know if it’s actually a good idea or not, but people are doing it and it seems like they’re making money.
Rand Fishkin: I think this is the challenge, right? The stories that get told and the ones that get amplified and covered in the press and featured on Tech Meme and talked about in the wall street journal and all that are the one in 1000, 1 in 100 companies that do extraordinarily well with the asset classes, right?
There is no coverage. I’ve almost never seen it unless there’s a huge scandal. I’ve almost never seen coverage of, oh, “Here’s an analysis of this venture fund and the 80 companies they invested in over the last three years that have all gone bust. And we’re going to tell the sad stories of the 6,000 employees who worked at those 80 companies and how much money they lost, how that impacted their families and friends.”
No, no, but will we talk about how Travis Kalanick bought, I don’t know, whatever, some pop star’s old mansion. Heck yeah. That’s super going to be in the press, right? The ability of an individual in the current technology and, you know, founder media ecosystem, to be able to rationally recognize the odds that they’re up against is next to impossible.
I just don’t think it is reasonable to ask a founder to consider the odds because every founder of course thinks that they’re the outlier, right? Like to go into this world and to go and try and raise venture money, you have to think that you are literally one in 1,001 in a million, and that’s what you have to be.
What you don’t recognize is not only do you have to be one in a million in the general population, you then have to be one in a thousand among the one in the millions that have been selected for taking venture and being able to raise and hopefully grow a company. There’s just no recognition of that.
The failure rate, you know… many people joke about the worst business you could be in is the restaurant business, right? Whatever the five-year 10 year survival rate of restaurants is, the ten-year survival rate of restaurants in the United States is like three times better than a venture backed business.
If you start up a sandwich shop on the corner, you are far more likely 10 years from now to still be in operation and successfully serving your customers and employing your team than if you start a venture back company.
Brian Sierakowski: That’s pretty wild.
Rand Fishkin: It’s very weird.
Brian Sierakowski: Yeah. It goes to show that it’s sandwiches are a pretty durable product.
Like pretty good. We’ve been working on them for a while. I think the market agrees that sandwiches are pretty durable.
Rand Fishkin: I mean, I need one every now and again.
Brian Sierakowski: You mentioned that you’ve kind of come to a thought process through your experience and through thinking about it and with some time and some wisdom, I was going to ask what do you say to entrepreneurs that are just getting started or thinking about it, or, you know, maybe your answer to me is going to be, well, you can’t really like, you can’t teach the stuff. Like either somebody is going to, you know, think this way or they’re not going to think this way.
Rand Fishkin: I hope that’s not true.
I hope that there’s a mindset of openness to alternatives. And I think there is starting to be some cognition around the inequities and the challenge and the problems, systemic problems of the venture industry and more broadly, the tech startup industry. I feel like we’re seeing that.
I feel like my job, my obligation is, is not to say, don’t start a company. It’s to say, founding a company is amazing. You get to build this thing. It’s creative and artistic, and it also can be life-changing for you and for your team if you do well. My prerogative is just to tell the story of alternative ways to fund and build your business.
And the crazy thing that’s crazy to me is you do not have to raise venture capital or go after these high risk, low reward asset classes. You can, I don’t want to say very easily, but just as easily as you can raise venture capital, which is quite difficult, you can just as easily look at alternative funding methods.
Those include, you know, private investors with a unique structure, like what we did at SparkToro. And obviously we open-sourced our docs so that other people could do it. There’s a bunch of alternative funds that are out there now that are kind of funding the zebras over unicorns model, right? This idea of companies that are designed to grow at whatever pace they reasonably can rather than, you know, rocket ship or die trying.
There are crowdfunding alternatives, there’s revenue loan alternatives. It’s never been cheaper to self-fund a company. Those alternatives just present a path of lots of smaller businesses with growth rates that are survivable and scalable with long-term survival odds that look more like a normal, small business and without outcomes that can be still financially transformative, but financially transformative for a larger number of people and spread across those, right?
So when you think about, you know, Hey, here’s this market sector, some venture business is going to win, whatever 80% of the market. And two founders are going to get super rich and everybody else not so much, or Hey, 50 businesses, a hundred businesses, 10,000 businesses are going to start in this sector.
They will combine for maybe 80% of the market overall. And, that wealth will be spread out and the growth rates will be smaller. And the concentration of financial returns will be smaller, but that’s okay. That’s I think that’s actually a beautiful thing. So it’s a philosophical thing, right?
Do you want to participate in an ecosystem where you have a very small chance of being the big winner or do you want to participate in an ecosystem where you have a much greater chance of being smaller, but still successful in ongoing operations.
Brian Sierakowski: Yeah. That’s really interesting. I’m just trying to put myself back into where I was mentally when I was starting my first business.
And I think I was still probably, it’s just still too dumb to understand that like, you know, a greater chance at, you know, a slightly worse outcome financially is better overall.
Rand Fishkin: Yeah. I mean, I think unfortunately the last, you know, 20, 30 years of American economics and just American culture in particular, this might be true in Canada and Europe to a lesser extent. But it has very much, I think, been ingrained in all of us, this idea that there’s a few winners and tons of losers.
This is how you get. The income and wealth inequality of the US overall and this sort of idea of like elites against everyone else and all that sort of stuff. And, and obviously, you know, we are now at a wealth inequality level that I think technically rivals or, or even beats the 1920s, which is historically very dangerous.
That’s usually when lots of terrible things happen, but Hey, man, I mean, I, I have a lot of empathy for folks who feel like they have to be the one winner among a thousand losers, right? Hey, I have to, become a millionaire or die trying. Cause I just can’t, I can’t survive in this economy on anything else and I get it, it’s painful and, and shitty the way our culture reinforces that idea. It’s sort of lottery winner culture.
Brian Sierakowski: Maybe I’m sort of going down the wrong path here because I’m sort of saying like, well, the solution to this problem is the new entrance to people who are younger or starting their first business. The kind of onus is on them to realize that they have a choice other than going the VC route.
But, you know, they’re also the least educated and least experienced. So maybe the actual vector for change here is like, before we used to celebrate the serial entrepreneur of somebody who would raise money and then be on the VC treadmill, like forever across multiple companies.
Like maybe that’s the path to like, better visibility of like, in your case. Like, you’re like I tried it and I, you know, that wasn’t the flavor for me. So I’m going to do something else. And you know, I’m going to just present as a role model for anybody else to say like, Hey, and you can even, you can even skip step one if you want.
Rand Fishkin: Yeah, I think my hope is sort of just to set an example of how that can be done and then to hopefully amplify that journey with the same zeal that venture-backed founders and the media that covers venture backed companies does. That’s a tall order, but my hope is that SparkToro does well over the next few years and continues to do well.
Maybe at some point there’s a followup to my book Lost and Founder, the one we talked about in 2019, and maybe that helps get it on a few people’s radars. It’s a slog, man. You don’t have a vested interest from tens of thousands of, you know, very, very wealthy elite folks to amplify those kinds of stories.
Whereas every venture capitalist and every firm and all the LPs that put money into venture, they all have a lot of interest in seeing that media ecosystem continue to amplify and support that one narrative that this is the way.
Brian Sierakowski: Yeah, it’s interesting. And I think that we, in addition to all the other social media things that happen to our brains as well, I think like the success against all odds and you know, or this fantastic success story is something that’s very, very attractive.
Like you were saying, this founder bought this beach house or this, you know, sports car or whatever, like for whatever reason, to your point that’s news. I guess I get it too. Cause in my head I’m thinking like, well, what’s the other headline bootstrap company…
Rand Fishkin: …keeps doing well year after year?
Brian Sierakowski: Exactly. Reliably, independently provide service to customers who appreciate them. It just doesn’t have the same zing to it.
Rand Fishkin: Shockingly, happy employees aren’t harassed and burned out. Not really a story, but should be a story. Deserves to be a story.
Brian Sierakowski: Yeah. Bootstrap company decides to operate at 50% for two weeks to protect employees from burnout.
Rand Fishkin: What a beautiful thing. We at spark Toro, we have this idea. There’s only three of us, but we have this idea of like chill work. I am in a deep work productivity zone, you know, today and I have two or three hours where I’m cranking through stuff and getting stuff done, and that’s great and it feels wonderful.
And then I feel kind of tired at the end of it. And technically there’s four or five more tasks on my plate, but I am going to go inside and play some video games and go for a walk and make dinner because I’m just not feeling it. And that is awesome. That is not something to be maligned and laughed at and scoffed at which hustle culture will absolutely do. That is, in my opinion, that’s two things.
One, it is respectful of the human being, which is a wonderful thing. And two, when I do that work and I’m in a mentally better, less tired place, the quality of the work and the outcome of that work will be better. And the company will actually do better because of. And so I think that’s a really hard mental model to work yourself around because we have been sort of, again, media trained and culturally imbued with this idea that hustling and working hard and working through pain and tiredness and cranking out that extra few hours of effort, even though we put in a full day that that is what is to be lauded and aimed for, but it’s not, that’s a totally false narrative that we’ve been fed, right?
This idea that after whatever, you know, seven or eight hours of work, the next three hours are somehow going to be equally productive. That’s just a whole bunch of baloney.
Brian Sierakowski: I’ve heard some people make the argument of like, well, if you’re starting a business and you’re taking all this risk and you know, it’s really hard and challenging.
Why are you doing all of that to just work the same hours that you would work at an investment bank, like what is the point? What is the benefit to this additional struggle and these additional risks that you’re taking, if not to set your own hours? Isn’t that what we were pitched? Start a business and you can set your own hours and be your own boss.
Rand Fishkin: Part of it sure is being able to accomplish something that you want to see exist in the world. I want this software that helps people with market research and audience research, like I want that to exist. It didn’t exist before there was no solution like this. I want SparkToro to exist.
I’m going to work very hard, long hours to see that happen. And the weird reality that’s been hammered home to me is that’s a false choice. That long hours and difficult work is something that you can work around if you are intelligent and thoughtful about how you design and build your business and how you design and build your workday and how you structure the company that you’re building.
And it is okay, not only okay, it is more ideal if you structure and build a business that requires as little as possible hours. I’ll give you an example, right, Brian? Yesterday, maybe Sunday we passed a thousand paid subscribers to spark, which is awesome. Like, just lovely.
I’m super excited about that. You know, it’s not like it was with Moz where we celebrated and put up a blog post and had a little party, but it’s fun. It’s cool. Like, it’s great to pass a milestone like that. And also yesterday I was realizing like, oh man, I think we got one support request all day.
And it was just like a very easy email to answer.I had this recognition like, Oh my God, we have somehow built a business where conceivably, all three of us could do no work, have a thousand subscribers. And as long as one of us replied to one email, that’d be fine. Because the business in a lot of ways runs itself.
The code that Casey built like it does.. I don’t remember like a parent teacher meeting yesterday and he had to pick up his girls from school and he was like, I got to do laundry. Casey’s doing stuff is his partner, his wife works full time, so great. Fantastic.
You know, I went for my two walks and played my video games and I got a bunch of my work done and missed out on a little bit of it and that’s okay. Catch up today.
Brian Sierakowski: Yeah. That’s really powerful. So if we have somebody that’s in that mindset of like, okay, I don’t know if we want to start with a case that’s full on like hustle culture.
Probably the average person working within a startup is more on the end of, I have way too much on my plate. And the way for me to get through to the other side is to spend more time and kind of power through what are the steps that you would walk somebody through to say, okay, you’re wherever you are on the spectrum, and I want to bring you over into this, like this calmer, more thoughtful place. What process would you, would you talk them through to get there?
Rand Fishkin: Yeah, I think a huge part of it is the design of the business itself. It is product design and customer relationship design, and it’s design of your marketing and design of your financial structure and design of your incentives and of your team.
When I look back on my time at Moz, I would say there were many, many weeks where I was working 50, 60 plus hours. Very few where I ever did like 80 plus, but plenty of 50, 60 plus. I am going to guess that probably a full hundred hours each month were useless, meaning that technically I was working, right?
I was answering emails and writing things and creating things and, you know, sitting in on meetings and giving feedback to people, blah, blah, blah, blah, blah, and 50% of it or more was pointless. It did not add value to customers. It did not make the product better. It didn’t make the business more efficient.
I was hustling to hustle. I was working hard in order to work hard, not to have an outcome or an achievement. And when I look at a lot of people’s schedules and talk to them about what they’re doing, it’s meetings. It is customer engagement or customer research or projects that are essentially high time consumption, lots of scheduling, and then like in-person or over zoom or that kind of thing that don’t need to exist.
That could end around it in other ways. So, as an example, many, many companies have a lot of structure around, Hey, in order to validate that this next feature is the next feature that we should be building, we are going to jump through dozens of weeks of work, spread across multiple team members.
There’s going to be like these three people. They’re going to do a bunch of customer interviews, and then we’re going to run this survey and then we’re going to blah blah blah. Alternatively, we could just build it. Right. We could just have someone who’s like, yes, build that. No, don’t build this. And by making that call, you could literally save, you know, 30 plus weeks of work across multiple people.
That’s pretty cool. That’s a good thing to do. Right? And then you just make those decisions based on the best information that you’ve got and you have a willingness to be wrong sometimes. And perhaps you choose to build the things that you think are the best combination of low effort to build and high impact to build.
And maybe you lean a little bit more in the low effort. One that is a great way to make those decisions. Maybe you design a customer service program that is exclusively through email. So you don’t have chat on your website and there’s no phone number and maybe you’re very responsive over email, but no other channels.
So everything comes from. Hmm, look at that. That one channel makes things a lot is how you decide not to set up slack. Now you have nothing to check, right? There’s nothing that’s always on that could be feeding you constant conversation. Oh, look at that. That really, that really reduces communication to just the most important, thoughtful things that people have to structure into an email.
This is what we do at SparkToro. So there’s a lot of ways to design a business that are the highest outcome to lowest amount of work ratio.
Brian Sierakowski: It seems like there’s sort of a hierarchy here. So if somebody is somebody in the non reformed state of being super busy, tons of hours and you know, really hitting that burnout spot, it sounds like you could really start at the bottom and say, okay, First of all, what are the things that you’re doing that are actually like, just not useful?
Did you need to send that email? Does this have to be a meeting, whatever there’s those sorts of very tactical things, or maybe you step up a rung in the hierarchy and say, okay, well, what are these projects that you’re going down?
Like which of these just actually are not going to take you to the end that you need to go to? And then you can kind of step up from there and say like, Well, okay. Now that we, you know, we kind of have a fixed set of projects that we think that we have a reason to believe that they’re going to be successful are going to be good for the company.
Well, what’s the way that we can go about that? It’s almost like it’s interesting. Cause it’s kind of, I think you’ve sort of hit on this thing over and over again, but it’s just like, Hey, like, well, what’s like the easy way to do this. What’s the kind way to do this? Like, treat yourself like you’re somebody that you love type situation.
I think people generally have a pretty tough set of standards for themselves, but if you imagine saying your self-talk to somebody else that you loved, you would never do that. It’s almost the corporate corporate version of that.
Rand Fishkin: That’s exactly right.
I think unfortunately we are used to corporate environments that abuse team members and, and each other and ourselves, and we’re used to a feeling that we do not deserve success, that we don’t deserve good outcomes unless we are suffering and struggling. And that’s not true either. You know, it’s really weird to imagine a world in which working six hours or five hours in a day and doing good work is rewarded with high pay with good healthcare and solid benefits.
And then the rest of your day is enjoying your life. And that does not, that does not compute for most Americans. But you have the option, it’s your choice, especially founders, right? I like, I, you know, I, I don’t want to suggest that if you’re currently in maintenance work or in the hospitality field or those kinds of things, right,that you have the option to be like, Hey, you know what, I’m going to tell the hotel that I’m only working six hours today, and then I’m going home. No, you don’t have that option. But founders, you have this choice.
You get to make this decision and you can choose to recruit and hire people who are very high-efficient, low number of hours. You can choose to build a business that is structured this way.
But I wouldn’t, I wouldn’t start from the bottom. Right. I wouldn’t start with, oh, okay. I have a hundred people on my team and they’re all doing all these busy things and like, what can I take off this one person’s plate? I would start at the very top strategically, what are the initiatives that we actually need to get?
What does everything that could be removed from that? What is the minimum amount of communication that could happen around it? How do we reduce the number of communication channels and the number of messages that people are getting? How do we make sure that people have lots of deep work, focused time to get into the zone and then get what they need to get accomplished?
And they have very few distractions on top of that. How do we make sure there’s very little randomization, all that.
Brian Sierakowski: Yeah. It’s so interesting. Just reflecting myself, I’ve gotten the feedback many times of like in probably not so many words, but just like, Hey, just chill, you know, take some time less better.
Rand Fishkin: Do less, better.
Brian Sierakowski: Yeah. Or even just do less. I’ve gotten that direct feedback when, you know, setting goals for the quarter and those sorts of things. I constantly get the feedback of like, Hey, well, Maybe just try to do fewer things. And I’ve always been like, yeah, but you know, more stuff is better. So like, why would I like do that, man?
Rand Fishkin: I don’t know if you’ve read much about the world’s oldest companies, but you know, there’s a few hundred companies that have been around multiple hundreds of years and almost all of them are in a few locations in the world.
I think a lot are in Japan. There’s a few in Italy and a few in some other countries like that. And they are almost exclusively, I think they are maybe exclusively singularly focused.They just do one thing. Right? There’s an onsen in Japan that’s been around for 700 years. They do exactly what they did 700 years ago, which is run a very nice hotel with the beautiful, natural hot spring bath.
It hasn’t changed. You know, it’s obviously been updated and the rooms have wifi and, you know, modern toilets and all that kind of stuff. And they continue making those kinds of upgrades. But the unique thing that has not happened is they have not tried. They have not aimed for growth at all costs.
They have aimed for surviving for a very long time with a healthy profit margin. And that is something that in the United States worked very, very well and was the goal of almost every company until the 1970s, when a bunch of wealthy individuals lobbied the federal government to get capital gains taxed at a much lower rate.
Once the capital gains was 15% and ordinary income was 40% everybody went, wait, I don’t want to make money. I want to grow and then sell things. I think most entrepreneurs have very little concept of how much tax incentives they’re like, well, “I don’t get into business for tax incentives. I don’t give a crap about whether my taxes are this or that”, but you do not understand how that impacts macro economics.
And it really, really does. That’s why venture works the way it does. That’s why private equity works the way it does. That’s why wall street works the way it does. It is all capital gains over ordinary income. And if you are willing to kick that to the curb personally… So SparkToro, we are taxed ordinary income.
We’re an LLC. Our investors get dividends that are part of their regular income and they get taxed at that rate. They might say, oh man, I’m losing whatever 20%, 25% of my gains from SparkToro. And my response is yeah, but all the benefits outweigh that, right?
Brian Sierakowski: You’re like, sorry…,
Rand Fishkin: But we don’t have, we don’t have to grow at all costs.
Our focus doesn’t have to be exclusively growth. It can be surviving for a very long time. Look, I mean, SparkToro is trying to grow. We have a 5% monthly growth target. I just looked in, you know, in our accountant, oh, well, we hit it on the 21st, today actually 101% of the goal. So like, you can do this.
I’m not saying that growth is not something to aim for, but it can be balanced with other things. It’s just a totally different mentality of running a business and why to found a business, what you’re doing with it. And I think the part that frustrates me so much, Brian, is that it is foreign and unusual.
Brian Sierakowski: It’s a whole system, which I think is kind of to your point at the end there. Like you’ve gone through this whole philosophy. And I think that even in my subconscious and probably in other listeners, we’re thinking like, okay, well, that’s cool. You know, if you’re okay, not, you know, growing as fast, you don’t want to be a hyper scaling company or whatever, but no you’re growing at, you know, a great benchmark.
It’s not like a tweak to the current system. It’s kind of a whole new, a whole new philosophy and you can, you can do all this other stuff and you can also grow it, like whatever it’s going to wind up being for this month, 6% or 7% or whatever the number is.
Rand Fishkin: The goal that I have for the business is…I have this structure right, where we essentially prioritize things.
I think about this in relation to my previous company where the priority essentially went to investors, market, customers, team, in that order. The structure of the business was essentially designed to better what the investors needed and wanted most of all, and then what the market needed and wanted, and then what our existing customers needed and wanted, and then what the team needed and wanted.
And of course, when you make your team the last priority, you get the usual sort of tech startup culture and SparkToro is very different. It is existing customers, team, market, and investors. Like, Hey, if there’s an existing customer and they have a high priority problem, we’ll bend over backwards.
But we’ve also built a business where that happens very infrequently. I looked at my email this morning. I think there were like three customer service inquiries. I replied to one, Casey replied to one, it was like a refund. One was someone needed access to a different account.
The third one was a question about how to do a search. I was like, okay, that’s pretty good for 1,020 customers or whatever.
Brian Sierakowski: Absolutely. Well, Rand, I had it in my mind that the last question I was going to ask you is… because of your positioning, your vast experience with SEO and everything you’re doing with SparkToro. I was going to sort of ask a more targeted question around like, Hey, somebody who’s getting started today.
What would your kind of marketing and research recommendations be? We’ve kind of broadened the conversation out, you know, beyond that a little bit. So if you haven’t already hit your primary thoughts here, if somebody is listening to this podcast and they want to start a company or they want to become a founder or be a founder again, what are your recommendations on getting started? What are the first couple of steps that you’d recommend that they take?
Rand Fishkin: Hmm. Yeah, that’s a great one. I think cautiously and thoughtfully, considering the aspects of how you want to run your business and then being able to do some experimentation in those fields to make sure that, A, it is effective B it’s relatively efficient. Like you can do that work and it is not incredibly draining of your energy and you hate every minute of it and it’s not consuming all your time.
And then see that it is effectively moving the needle for whatever structure you want to build, right? So if you say, Hey, I am getting into whatever consumer product goods and I’m going to make this product to serve this particular market and here’s who I think needs and wants it.
And I’m going to do some experimentation around that to figure that out. I like those philosophies, right? I like the MVP sort of approach in the early stages and the experimentation. My advice that differs from the traditional tech startup world is that, You don’t have to go fast. You don’t have to pour hours into making yourself feel productive.
You can get a small amount of work done every day in your spare time or while you’re working at your day job, or you can go get funding and you can still give yourself permission to not have to work yourself to the bone and you can be very efficient with dollars.
One of the ways that Casey and I were very efficient with dollars that is super weird in the venture backed world… We kept the team, just the two of us for the first, almost three years of the business. So basically that kept our costs incredibly low. We didn’t have all that much burn. It was just basically paying ourselves and our health insurance and we got some AWS credits, so we didn’t even really start spending on tech costs very much until I think at the start of this year.
It gave us a lot of time to experiment and build some stuff and then see how it was going to go. We kind of did everything ourselves on our time. So yes, would it have been faster if we had built up a team and you know, to six or seven people and then tried to race to get something out? Yeah, maybe we probably could have done it in, I don’t know, 12 months instead of taking us almost 20 months, I think to get our product launched.
Not quite, like 19 months. So could we have done that faster? Yeah. Could we have scaled up faster after we got the product out? Maybe a little bit. Was that the right path for us? I don’t think so. And you can do this too. You can even do it if you raise venture, like tell them,
Rand Fishkin: Don’t tell them, tell them you’re going to do the like, oh yeah, we’re going to hypergrowth. We’re going to rocket ship, blah, blah, blah, blah, blah. And then once the round is closed, be like sike! You don’t have to. They’re not gonna stop you from doing what you want to do. Especially after that early race, you get to control it. I don’t think CEOs realize how much power they have even in that type of a structure.
You can take it slow and easy and tell your investors, Hey, you know what we’re going to do. We’re going to make sure this money lasts. We’re going to get to profitability so we never have to raise again. I know you want us to try and grow at all costs and die trying, but that’s not what’s going to happen.
Your investors might feel a little misled, but when you have a long-term growing profitable business that maybe eventually hits their goals, they’ll forgive.
Brian Sierakowski: That’s actually a great point is that the result is that. If you’re in a bucket of non-home runs, then I was going to say, you get kind of discarded, that’s really poor of putting it.
Rand Fishkin: Right. You get ignored and that’s great. It’s kind of great, right? To have a business that’s, that’s going and it’s profitable. And you’re like, Hey, you know, you’d go to the board meetings and be like, Hey, we’re doing good. We are, we are not growing, you know, 10X quarter over quarter, but we’re doing well.
Brian Sierakowski: Yeah, that’s really great. In summary, you’re kind of have all the traditional startup advice of experimentation, get the domain expertise, but your additional trick, if you can call it a trick, on top of all those sorts of things is to take your time and take care of yourself.
It almost sounds like you never want to be in a position where you’re trading your vitality and your life for your company, or, you know, the product or however you want to phrase that.
Rand Fishkin: The way I think about it is twofold, right? If your eventual goal is to have the largest possible business, if you want to be kind of the monopoly in your space, nothing short of Google, Facebook, Amazon level success will make you happy. Then, the classic venture model is right for you. And my sense is that 99 out of a hundred entrepreneurs who raise venture don’t want that.
And so you have to kind of fake it. You have to sell that to your VCs. And then once you get into your business, you can now adopt however much of the chill work philosophy as you would like. And you can instead say, we are going to be MailChimp. Right? Which just sold for, I don’t know how many tens of billions of dollars or whatever it is, right?
They did great. And tons of businesses are like this, you know, at Lassian and Surveymonkey, I think it’s just changed their name and, you know, a bunch of other companies, right. Where it’s much more of a chill work philosophy and an approach. It’s slow growth over a long period of time that compounds because you’ve built up a product and a team in a market that works well as opposed to, Hey, how are we going to grow 200% year over year, because we have to raise our next round in order to survive?
What if you didn’t have to raise the next round to survive? I just urge folks to ask that question.
Brian Sierakowski: I think that you’re totally right of like, what is your goal? You’re totally right. If you want to create a Google size company, there’s really not a lot of great ways to get there without raising tons of cash.
But if your goal is, I just want to have enough money, not a ton of money, not an insane amount of money. But money to be very comfortable and live a great life.
Well, the available options that you have in front of you, like how you actually want to get there, just got a lot wider. And I think you’re right, that everybody is taking the Google approach when it’s like, well, I have a good life. There’s a lot of very cool and interesting ways to get to like having a good life.
Rand Fishkin: I’m just going to share this one piece cause I think people don’t believe it until they really hear it. When I left Moz, Brian, the company was doing about $50 million a year in revenue. It was profitable. It was at a very slow growth rate. I think it was like 5% growth or something like that year over year.
So the growth had really plateaued. This was, you know, maybe four years after I stepped down as CEO and I was making $200,000 a year, which look, is a very nice salary. And I can tell you very honestly, that almost all of my friends who worked in consulting businesses, who had started a small agency or were a solo SEO consultant.
They were out earning me and had been for a good while. And it was pretty odd, you know, to have those conversations and be like, wait a minute, wait a minute. You founded Moz and it’s making like $50 million a year. You built this thing, you own 20% of the company. And you’re telling me that. My three person agency is making me more money than you every year? What? I’m like, yep, sure is!
Brian Sierakowski: Glad we’re talking about this!
Rand Fishkin: Yeah, right. Like I think there, there were probably, I don’t know, 25 of Moz’s 200 employees who were making more than I was right. Almost every friend I had who worked at Amazon, Microsoft, Google, Apple, they all out-earned me.
So, Hey, I’m just saying, you might think that getting to tens of millions of dollars of revenue with a company that tons of people know and a brand name and all that is going to be more financially successful… bad news, friends.
Brian Sierakowski: Yeah. It’s almost as if we’re just making all the assumptions and then just taking the most popular story that’s out there and trying to apply that to what we’re doing.
Rand Fishkin: That is for sure true. But Travis got that mansion. So… probably you’re probably going to buy a mansion too.
Brian Sierakowski: He did get that mansion. But think of the energy bill.
Rand Fishkin: Oh man. That guy is probably personally responsible for like an actual percent of climate change.
Brian Sierakowski: Right? Yeah. That’s fair.
Rand Fishkin: Deeply problematic.
Brian Sierakowski: Yeah. I think we need another hour to talk about that. All right. I want to let you go, Rand. This has been awesome. I really appreciate you taking the time to share what you’re doing and some of your thinking and how your path has evolved. I also appreciate you zooming out. I think it’s really interesting and useful to even consider things, you know like, where did VCs come from?
And just sharing personal stories of like, it’s working more calmly and being more focused and being more kind to yourself. It’s not a trade-off of like, you’ll be poor, but you can also do it like you can kind of have it.
I don’t know if this is too strong of an assertion, but you can kind of have it all. You just need to be really intentional and you need to be really, really thoughtful. I’m glad you’re sharing your story. Cause it’s, you know, there’s a lot of different archetypes that people could base what they’re doing off of.
I think that popping off to stopping working when you’re done working and playing video games, when you want to play video games and going for a walk, when you want to go for a walk, like that’s a, that’s a pretty powerful, you know, a pretty powerful trinity.
Rand Fishkin: I’m telling you, man, what do the Italians call it? La vita Bella, right? The sort of like Zen, like appreciation of your life and the world around you and the people… I’d take that.
Just one last thing, Brian, one last thing, it’s hard to share. So, you know, when Moz sold, Geraldine and I obviously made a good amount of money, right? We owned a lot of (my wife and I), we own a lot of the company… My best friend in the world, like she was the officiant in our wedding, was Moz CEO, Sarah Bert.
She was very close to us in our lives. And years ago, 2016 or something, our relationship really came to a breaking point. We lost a ton of trust. We had all these terrible things happen between us. And haven’t really communicated since, you know, even though technically she was my boss for a couple more years at Moz.
Geraldine and I sat down after this giant deposit came into our bank account and we were like, if we could take it all back, if we could go back in time and keep our friendship with Sarah andif none of these terrible things that happened just kind of an outcome had happened.
Would we trade this giant amount of money for that. And there is no fucking question in my mind, in a heartbeat, in a heartbeat, I would trade that money. I would give it back in exchange for that, that amazing person. I don’t know what happened to her, but yeah, absolutely. Even if it meant that Moz failed and, you know, brought no money to its investors and owners, I would do it.
I would totally do it because, look, money is a great thing, but it’s not the only thing.
Brian Sierakowski: That was the true cost. And when you added up your hours and the stress and it sounds like very deep, personal friendships..
Rand Fishkin: Just so much, so much loss, so much heartache and broken relationships and angry people and not worth it.
Rand Fishkin: It’s not worth it. It’s not worth it.
Brian Sierakowski: This is not the side of the story that’s told, going back to what we said at the very beginning. I can tell you from my position, you know, I haven’t been in the game quite as long, but I’ve heard other stories. Like you think about all these, you know, co-founders we hear about the co-founder breakup and the cofounder fights, because that’s tabloidy like we’re talking about.
But these were two people that were either best friends or partners. These two people had to have the faith and the trust, you know, in a relationship that is beyond basically any relationship besides being in a committed relationship for an extended period of time.
That’s actually what it is. And we sort of see the story of the breakups. So there are real painful collateral costs, collateral damage for a lot of these.
Rand Fishkin: Absolutely. Brian, absolute pleasure to talk with you as always and anything I can ever do for you, for Baremetrics, for your community. I love the people that you’re helping, my friend, and I hope we get to do this again in a couple of years, and we can talk about hopefully even more things that we both learned
Brian Sierakowski: Thank you so much for your time. I really appreciate it.
That was our conversation with Rand Fishkin, co-founder and CEO of SparkToro.
If you want to take your audience research to the next level, you know where to go SparkToro.com. If it’s business analytics and growth tools you’re looking for, check us out at Baremetrics. We hope you enjoyed the episode and invite you to check out our other founder chats. We’re able to share with a friend or leave a review, it goes a long way. Thanks for listening.