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Porsche 911 Targa that I definitely don't own

Should You Take a Salary When Starting a Consulting Company?

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In the startup world, the general advice is for founders to pay themselves $50k-$100k/year until they get outside funding. Your net worth ends up higher – but only if you hustle and grow the value of your company, since your net work mostly consists of your ownership stake.

When you build a consulting company, there’s an unbelievable amount of unpaid labor to be done: hiring staff, training them, managing them, improving the deliverable product, marketing, sales, contract negotiations, expenses, accounting, taxes, web site maintenance, you name it. It’s all too easy to say, “We should really pay ourselves for doing this unglamorous work.”

But when we started Brent Ozar Unlimited, we didn’t take any salaries at all. We figured that since Jeremiah, Kendra, and I were all consultants, we could make money directly. Each partner got a percentage of the consulting work that they personally did, but the rest of the money stayed in the business.

Porsche 911 Targa that I definitely don't own

Porsche 911 Targa that I definitely don’t own

We figured that if we were going to hire people, we needed to build a little money fort inside the business. In the event that an employee didn’t have revenue associated for a few months, we still wanted to be able to pay their salary. (That goal ended up coming in handy, and I’m really thankful – if it wasn’t for that, we’d have probably had to close the company’s doors.)

When we finally had enough unpaid labor involved (due to growing head counts, taxes in different states, and selling goods online to EU citizens), rather than paying ourselves for it, we hired an admin to offload 40 hours a week of it – but the unpaid work for the partners continued (and continues!) to grow. It’s just a byproduct of running a growing company.

Taxes make this tricky.

Here comes the really challenging part: in a pass-through LLC, the founders get taxed on profits even if the profits stay in the business. To keep things overly simple, let’s say in a one-founder bootstrapped consulting company:

  • Brings in $150K of consulting revenue
  • The founder only takes out $100K of that, leaving $50K in the business
  • At the end of the year, the business had $20K of expenses, and $30K left in checking
  • The founder gets taxed on $130K of revenue, even though take-home was only $100K

The more successful you are, and the more you want to sock away in the business’s savings, the more you get penalized on your personal taxes. Businesses are encouraged to cut things as close as possible, keeping as little cash as possible in savings.

SaaS startups don’t have this problem because they don’t make any significant income for years. Their cash comes from investors, so it’s not revenue.

So should consultant founders take a salary?

The Porsche 911 Targa I do actually own

There’s probably a little survivorship bias here, but in our case, I’m really glad we chose not to take salaries. (And I still don’t take one.) Cash in the business’s checking account doesn’t let me buy that Porsche 911 Targa that I want today, but it fuels the company’s fire to hopefully let me get one years from now.

In your case, talk to a good attorney and a good accountant. When you’re starting a business, ask around in your circles for local folks who specialize in this kind of thing. Attorneys & accountants will usually have a 30-minute call with you for free, and a good one will ask you questions about your goals, your future tactical plans, and what success looks like to you. The questions they ask will enlighten you and help you decide.

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The Freelance Calculator

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If you’re thinking about going freelance, here’s a handy Freelance Calculator by Chelsea Shaw (@chelshaw).

See the Pen Freelance Calculator by Chelsea (@chelshaw) on CodePen.

(Big props to Chelsea – I originally just sketched out the UI, and she knocked out all the code! You readers are amazing.)

  • Hours per week = the number of hours you’re going to work, but work includes both billable hours as well as non-billable (paperwork, email, travel, blogging, presenting.)
  • % billable = the percent of your work that you can actually charge for.
  • Hourly rate = what the clients actually pay.

Being an independent means you can change any of these things, whenever you want. (And you will, through the course of your career.) In a perfect world, you’d track these 3 numbers over time to know if things are getting better or worse, and track the success of your experiments in passive income (training courses, plugins, SaaS apps, etc.)

The equation:
Hours worked * (% billable) * hourly rate = your revenue.

But don’t think that the last number is the only important one.

Sometimes you want to work less.

Spending time with your family and friends is awesome, and wouldn’t it be nice to retire, too? You need money to do those things – so your rates need to be going up, not down, to maintain your standard of living.

To work less, you have two options.

1. Short term: do less unbilled work.

You don’t get paid (directly) to:

  • Do marketing to bring in new leads
  • Convert those leads to buyers (do sales)
  • Do support to keep those buyers happy
  • Sharpen your skills via learning, experimenting, building
  • Build passive income tools like training classes or apps

But you get paid indirectly (later) for those investments. If your calculator produces less than 10-20 hours of unpaid work per week, you’re probably underestimating the above work requirements.

You can coast on your existing network & skills for a while, but do that for a year or two, and you’ll suddenly find yourself in trouble. This is how freelancers end up taking a gig they don’t really want, just out of desperation, or end up joining a consultancy.

Don’t want to do unpaid work? You can pay someone else to do it. Sometimes they do it better than you could possibly do it yourself (like my accountant or my attorney or my coworkers.) Sometimes they don’t – like when I’ve tried using Google or Facebook advertising to bring in leads. Compared to what I get from the blog & presentations, the lead quality hasn’t been as good, and it’s been expensive as hell. But if you hate marketing or content generation, you can buy your way out of it. It’s just a matter of setting the right settings on the calculator – your revenue may need to go up in order to justify paying someone else to do stuff.

2. Long term, you need to raise your rates.

Raising your rates is the key to having more flexibility to pick between paid work, family time, relaxation, or investing in your future. When you raise your rates:

  • The less billable hours you have to put in for the same revenue, and
  • The more time you can spend on marketing or building passive income products like training courses, which
  • Increases the demand for your services, which
  • Means you can raise your billable rates again

For more info on that, check out Brennan Dunn’s Double Your Freelancing. (That’s not an affiliate link – I just really believe in those concepts, and I think the more people who know about that, the better.)

Optimize your calculator settings over time.

Over time, you should be optimizing this calculator to find the right work/life mix for you, and optimizing your services & rates to minimize the amount of work required. These kinds of conscious planning decisions are the difference between a okay freelance/consulting career and a great one – hopefully short, too, so you can retire and enjoy time with your friends and family while you’re still able.

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So How Did the Pricing Test Work Out?

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Last month, I wrote about the pricing tests we ran in advance of our subscription training class launch. I explained why the winner was this one:

Price Test #3: The Highball

Going into the launch, I had a lot of questions. Here’s how they turned out.

Which option was the most popular?

  • DBAs – 29% of buyers (126) opted for this
  • Performance – 29% (125)
  • Enterprise – 41% (177)

Wow! The dead-even split between DBAs and Performance totally shocked me.

I’m not sure yet how much of the split is due to lower pricing – maybe people are buying the $39 plan because they see it as more affordable. It’s priced that way because there are less training videos for that plan, but the plan’s popularity hints that maybe I should get my butt in gear and record more training videos to justify pushing it to a $49/mo price tag along with perf.

How did buyers pay, card or Paypal?

We’ve always offered both, but previously (when 80%+ of our sales were the Everything Bundle), Paypal sales represented a very small percentage of our sales, and it was almost exclusively the $29 videos. Now that we offer monthly subscriptions, did that change?

  • Paypal – 18% of payments
  • Credit cards via Stripe – 82%

The majority of the Paypal checkouts were for monthly subscription plans – so yes, it would seem that we’re opening up to a new market of folks who not only prefer subscriptions, but also prefer paying with Paypal.

I’m not too surprised by that because the goal of the subscriptions was to enable people to get in at a lower transaction price if they were paying for the subscriptions themselves.

How many monthly subscribers bailed immediately?

On offering a subscription product, the big worry is that folks are going to subscribe for just one month, bum rush the videos, watch every one of them, and then cancel. The purchase instructions say you can cancel at any time, and you can continue to watch the videos for the rest of your month – and you won’t be charged a renewal. (I wanted to make this as easy as possible for everyone involved.)

Subscription vendors look at this in a couple of ways:

  • Churn – how quickly the subscribers bail
  • Lifetime value – how much the subscriber will pay you before they churn out

To decrease churn, a subscription product needs to add value over time. One way to do this is to trickle out videos during your subscription so that you can’t see all of the good content right away. I’m not a fan of that one just yet (although I do want to give people a better learning plan to navigate through the content.) Another way is to add new content for everyone on a regular basis – that’s the approach we’re using instead, with new video material from Erik going live today, for example.

I expected the initial sales to have a lot of cancelations right away because we didn’t have a track record of adding new videos over the last few months – I had my hands full prepping for the subscription launch. I was happy to see that only 10% of customers canceled, and surprisingly, most of those were actually annual customers. That makes sense in retrospect – we’re seeing a lot of corporate buyers where the boss is buying the training for someone else, and they don’t wanna get hit with an automatic renewal.

What holes had I missed?

I figured I’d end up with a few loose ends or desperately missing features, but there’s only one really big one right now: making it easier for corporate folks to buy seats for other people. Right now that buying process isn’t intuitive at all (causing Erika to tell me, “Your web site sucks.”)

I’ll outsource that tuning (plus some conversions testing and free trials stuff) to a WooCommerce guru. I’d love to keep working on this, but it’s time to switch focus. This week, I embarked on a client project to build self-healing, auto-scaling Availability Groups at scale (hundreds of thousands of databases) in Azure VMs. The last step will be building a Chaos Monkey that randomly kills VMs – our proof of concept will use a D6. Awesomely, the client is going to let us blog & talk about the end result.

Not enough hours in the day.

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WordPress Plugins I Use to Sell Training Classes

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First, a few disclaimers.

If I started today with a mission to build a $1mm/year e-commerce business, I probably wouldn’t start with WordPress – I’d probably go with a purpose-built e-commerce tool like Shopify. There are even folks out there who will tell you not to start a blog on it either, and that there are better static content generation tools that don’t require web hosting.

However, we’ve been powering BrentOzar.com with WordPress for just shy of a decade, and it’s grown into one heck of a consulting and training business. We’re running over $1mm/year through it, so I should probably talk about the setup I’m using these days.

None of these links are affiliate links – I’m just sharing what I know. Everything in here, I’m using in production today.

WooCommerce adds e-commerce to WordPress.

WooCommerce is a free plugin that enables the core of e-commerce processing: products, customers, orders. Automattic (the company behind WordPress) bought WooCommerce a while back, so you can feel pretty confident that it’s got a future. If you’re going to run a store on WordPress, WooCommerce is a no-brainer.

Woo is free because they make a ton of money on plugins/extensions that add functionality you’re going to want.

Plugins to help you get paid

Stripe – so you can take credit card payments via the credit card processing company Stripe. We used to use Authorize.net, and it was alright, but just not nearly as intuitive. Stripe is easy to get started with: just get an account and start taking money. Wildly different from the big providers like Authorize.

EU VAT/IVA Compliance – if you sell digital goods online, you have to charge tax to EU members even if you don’t live in the EU. Then, you have to file taxes back in the EU and send the money back over. Plus, some customers are VAT exempt, and they’ll want to put in their tax exemption data at purchase time. This process is a giant pain in the rear for US sellers, and this plugin makes it way easier.

PDF Invoices & Packing Slips – before we installed this, tons of corporate buyers wanted us to send them a PDF receipt. Yes, you get a receipt during checkout, but they next-next-nexted their way past that and deleted the email, and then they’d remember about the receipt later. With this, they can generate their own receipt in their my-account page.

Plugins for live instructor-led classes

We sell two things: live instructor-led classes, and self-paced online videos.

For live instructor-led classes, we use variable products: a single product with several variations, each one being a different class date/location (like August 22-25 Online vs Oct 24-27 in Chicago.) This way I can keep the same page URL for all class dates, getting me a little better SEO over time and easier linking. Plus, whenever I add a new SQLSaturday pre-con that I’ve already given once before, I can just add a date variation for that city/date, and my setup is done.

When people buy an online class, the Zapier Integration plugin sends a webhook to Zapier, which is like integration glue for all kinds of different web services. I have a zap set up to register the student in the appropriate GoToWebinar series.

Leading up to a class, we use the Product Variation Reports plugin to generate a list of everybody who registered for a specific class (variation). We send ’em email reminders, ask them about meal restriction specifics, print out check-in lists for the door staff, etc.

Plugins for self-paced online video classes

Until recently, we sold fixed-price, fixed-length video access: you bought a specific class for 18 months for, say, $299. As we built up a bigger library of videos and started offering bundles, we learned that most people wanted to just buy everything, and they wanted to be able to extend their access on a month-by-month basis.

So we switched over to a combination of monthly or annual subscriptions, and here’s the plugins we use to do it:

  • Memberships – lets you set up levels of memberships, and then on any page, you can restrict access to content to people based on their membership level. For group sales, add the Teams plugin so corporate buyers can manage groups of members, doing their own enrollments.
  • Subscriptions – so you can charge for memberships by the month or year. For corporate sales, add the Gifting plugin so corporate purchasers can buy subscriptions for their staff.
  • Easy Pricing Tables – really simple way to build pricing tables like the one I linked to. Without that, you end up with single-product pages, which aren’t quite as boss.

Plugins for better marketing and conversion

One Page Checkout – in our training model, people don’t buy multiple things anymore. They’re just either buying a single subscription plan, or a training class. With this plugin, they can check out entirely on the page without having to go through a cart. The easier you can make check-out for users, the more likely they’ll complete the purchase.

Gravity Forms and the Woo Gravity Forms Product Add-Ons – in our live instructor-led classes, there’s a small form on the product to enter the student’s name, email address, food restrictions, and t-shirt size. We’ve learned over time that for a lot of live classes, someone in a purchasing department buys a seat for someone else. They want the receipt to go to the purchaser via email, but they want the class’s seat in the other person’s name. Gravity Forms integrates with Woo to make that happen.

MonsterInsights – Google Analytics integration so you can see sales inside your web analytics and figure out where buyers are coming from. This has become really helpful now that all of the course pages are public: I discovered that a few specific class pages are getting a lot of web hits, and when non-members see the message that “you have to be subscribed to watch this class,” they’re buying a membership. Well, hello there – that raises new keyword opportunities.

Whew. That’s a lot of plugins and configuration.

The site as of April 2017

It’s been a ton of work over the years. We’ve always managed it ourselves (although we outsourced parts of it to a learning management system for a while.)

Today, I’m happy with the infrastructure, but there’s still things I want to do to continue taking it to the next level:

  • Bring in a design team to improve the child theme’s looks (but still keep the underlying stock theme code to be flexible)
  • Hire a conversion expert to simplify the browsing-to-purchasing process
  • Empower companies to buy group subscriptions online (right now, we’re handling that process manually)
  • Design an onboarding process so that new members are gradually coached through the content
  • Help users track which content they’ve watched

It’s genuinely fun for me to work on this stuff, but as I look at the revenue numbers, it’s time for me to step back and let someone more qualified manage this infrastructure. The skills and work that got us to $1mm/year of online revenue won’t be the same stuff that gets us to $2mm.

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How the Company-Startup Thing Worked Out For Me, Year 5

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Every year, I stop to look back at what happened a couple of years ago. This post covers April 2015-April 2016.

My cofounders and I were all ready to try something new.

Jeremiah, Kendra, and I had the same vision for where the business was going next (on-premises software), what the next steps were, and the speed at which we’d make the journey. We didn’t want to kill consulting and training, mind you, just wanted to build up a third profitable leg for the business.

At the company retreat in Oregon, mid-2015

At the company retreat in Oregon, mid-2015

But in year five, both Jeremiah and I had the same thought individually: “The company should continue on as it is, but just without me.”

For me, it was the software work that was just over the horizon. I’ve worked for small and big software companies before, and I know the infrastructure is way, way bigger than it looks from the outside. I didn’t want anything to do with building a support team, managing groups of developers, QA processes, etc. I didn’t have any skills to bring to those tasks. I knew it’d be a Herculean amount of work over the next few years, just as the first 4 years were huge to get the consulting and training off the ground. I knew the company would succeed with Jeremiah and Kendra at the helm, and that I wouldn’t add anything to that success. (I wouldn’t hold it back, I just wouldn’t be able to contribute to those tasks.)

I took some time off by myself to think – I’m a big fan of doing structured solo retreats every year – and I sketched out a few ideas. I figured I’d walk away, then start a remote DBA services company or an e-discovery consulting company, because neither of those would compete with Brent Ozar Unlimited. (Neither of options had a particularly easy route forward, but I didn’t want to do anything competitive – I wanted Jeremiah and Kendra to succeed, period.) I talked it over with Erika, and we agreed that it was the right time.

I told them, “I’m walking away, but I fully believe in where you guys (Jeremiah & Kendra) are going to go with the company, and I’m totally okay with you using my name.” I was even willing to change my name to something else entirely just to make it easier to keep the existing company going. (I’d be Brent Valencia, if you’re wondering – I’d take my wife’s last name.)

But that company name made things awkward.

Jeremiah and Kendra didn’t want to keep the company without me involved because they would want to rebrand the company as something else. I don’t blame them – all throughout the company’s history, tons of readers/customers kept saying stuff like, “Great post, Brent” even when the blog post was written by somebody else. We had clients refer to our consultants as “Brent” no matter who was on the call. Jeremiah, Kendra, and I were always equal partners, and I know the constant “Brent” references had to be frustrating. If I was gone, they wanted the name to be gone too.

Rebranding – changing a company’s name – sounds easy, but it’s HORRIBLE work. We went through the rebranding process when Tim left – the change from Brent Ozar PLF, LLC to Brent Ozar Unlimited was a pain in the ass. I totally understand why they didn’t want the company if it came with that kind of baggage.

Company lineup, summer 2015

Company lineup, summer 2015

This is probably my biggest regret in founding the company – I wish when we started it, we’d have added another domain and started migrating our company stuff over to it. Something independent, like Data Bass Hatchery or whatever. It would have given us more flexibility around ownership. (When you start a blog, I still believe it should be under your own name, though.)

So in fall 2015, the company bought out Jeremiah and Kendra.

We brainstormed a bunch of options and came up with this:

  • Jeremiah and Kendra would each get a cash payout, plus money over the next several years
  • They would leave their intellectual property for training inside the company (which meant we could sell their classes, thereby helping pay them out)
  • They could do anything they wanted, even take clients with ’em, but not hire the company’s employees for several months (because if the company lost J&K and all the employees, it’d be too hard to bring in revenue and pay down the loan)
  • If the company defaulted on payments, Jeremiah and Kendra would get their ownership back

We came up with numbers that worked for everybody, worked through a bunch of legal paperwork, and then told the team.

I always say “the company bought out Jeremiah and Kendra” because I wanna make it really clear that I didn’t whip out my wallet and start slappin’ down hundos. I wouldn’t have been able to finance that big of a move. Instead, the company bought back their shares, which indirectly makes my shares worth more, but the company was the one taking on the debt and the risk. This move wouldn’t have been possible if it wasn’t for the incredible work that Jeremiah and Kendra put into the company, building up its earning potential over the years.

Since then, it’s been really cool to see Jeremiah go back to college and watch Kendra build up SQLworkbooks.com. I think the biggest lesson we learned over the years of working together was that each of us – and each of you, dear reader – can define what personal success looks like, and build a path to get there. I love watching them do their thing.

When the company ownership shifted, I had to pause to think about what success would look like to me, too. We were just hitting the $2mm/year revenue mark with a successful consulting and training business. I decided that over the next 2-3 years, if I owned the company, success meant growing the company to 10-15 consultants. (I didn’t choose to hire trainers.)

The first six months were really hard on me.

There’s probably never a great time to do stuff like this, but my first ~6 months of ownership (winter 2015-spring 2016) were rough. I knew it would all be fine if I could just get to May 2016, but until then, I was a little unhealthily stressed out because:

I had to do all partner duties. Jeremiah and Kendra hadn’t exactly been sitting idle playing Solitaire – they were managing the staff, building tools, and designing the new software. I found myself working seven days a week trying to tread water. Thank God we had really smart, self-starter people who could manage themselves, because I didn’t do jack for management.

I had to rehearse and teach week-long classes by myself. We’d already signed hotel contracts for our 2016 training classes, and we’d just announced our week-long class lineups. However, I didn’t have co-presenters anymore, and I was up by myself starting January. While Jeremiah & Kendra left their training material in the company in order to increase its value, I wasn’t necessarily familiar with all of their modules. Teaching a week-long class solo is exhausting, let alone two of them, as I wrote last week.

I was on the road most of the time. I’d already booked my own 2016 travel calendar, and between taking over classes, plus my existing training/client commitments, and new clients that would only take in-person work, I was on the road for 14 out of 16 weeks. That sucked. I wish I could have canceled some of that, but the company needed the cash flow early on because…

We had to backfill consulting capacity, fast. We’d just hired Angie, but that wouldn’t be enough to replace both Jeremiah and Kendra. I hired Tara before the company changes were even done because I had to get consultants up to speed really quickly. Doug & Erik had to do double duty – consulting, plus getting their new coworkers trained.

We had to go underground

We had to go underground

We were temporarily unprofitable. While Angie & Tara got trained on how we do the SQL Critical Care® process, we were way heavy on payroll – but way light on revenue. The first quarter of 2016 scared me more than any quarter we’d had – the consulting side of the business lost over $100k in those 3 months alone. We were never in a position where we wouldn’t make employee payroll, but I did a lot of training & consulting that I never got paid for, even to this day.

There were also some big expenses I couldn’t avoid:

  • We needed a company retreat to get the new team together to build camaraderie
  • My first solo class, a January 2016 class in Newark, bombed with only 5 tickets sold (losing a bunch of money, but we don’t cancel classes – lesson learned, nobody wants to go to Newark in January)
  • Doug wasn’t billable because he started recording Jeremiah & Kendra’s advanced querying & indexing training material, because we needed to start bringing in more passive income
  • I had the opportunity to hire Richie – but as a developer, he wasn’t directly bringing in revenue

“Wait – why hire Richie if you didn’t want to build software?”

Visiting Cliff Lede in Napa

Visiting Cliff Lede in Napa

If Jeremiah, Kendra, and I were all building Brent Ozar Unlimited, the right way to go forward was to add software to the company’s offerings.

If I left, and Jeremiah and Kendra ran the company, I thought software still made sense for them. I am absolutely positive that they would have succeeded wildly.

But if Jeremiah and Kendra left, and I was the only remaining partner, then I would have failed. It’s not that I don’t have the experience or the drive – it’s just that being a solo founder, running a consulting and training company, and trying to build an app – that’s stretching one person too thin. In the first year, there just simply wouldn’t be enough time for me to devote to designing a new app and building the staff infrastructure necessary to bring it to life.

However, I did see an opportunity to build something different than the SQL Server industry had seen before: free online services. (The first result which has since gone live: PasteThePlan.com.) I wasn’t really in a rush to build them, but when Richie became available, I wanted to snap him up fast because the personality fit would be so good for the team, plus he had the right architecture and project management skills that could hit the ground running with minimal oversight from me. (I really do suck as a manager – I just point at a dot on the horizon and yell, “Run that way! Let me know what you find.”)

Plus, I could have Richie build a tool to rapidly improve the SQL Critical Care® process, making it easier for us to onboard new staff that could produce a better product faster, and for less money. I gave him a general spec and two months to build it, and he totally delivered. His CriticalCareCollector app dramatically changed the way we do consulting.

By the end of year five, I thought could breathe again.

Breathing easier

Breathing easier

I remember laughing in April when a commenter called me arrogant – at that point, I was about the farthest thing from arrogant. I had spent months really stressed out, paranoid that I would have to ask my team to make compromises, work more hours, take less time off, work crappy engagements, cut bonuses, or stop investing in our future. I was willing to do whatever it took to make sure that didn’t happen, including making a lot of personal financial compromises.

Thankfully, by the end of April 2016, it looked like we were firing on all cylinders. The consulting business was kicking ass: we had a trained, profitable team, using new consulting and sales tools do to their jobs better/faster/cheaper. The training business was on track as well: my 2016 classes were all written and working fine, we had a successful (profitable!) class in Newark, we had new video classes coming into the sales pipeline, and the rest of the year’s classes were in a profitable state.

Sadly, I was wrong about of half of that, but that’ll have to wait until next year’s retrospective.

If you wanna read the past updates:

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Epic Life Quest: Another million dollars.

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Teaching in Portland, 2016

In my Epic Life Quest, sometimes I post [Redacted] achievements. It’s stuff that I’m really proud of, but I’m not quite ready to talk about publicly yet. The last one was hitting the $1mm/year total revenue mark.

A while back in Level 7, I wrote:

[Redacted] – I set a revenue goal for our company’s online sales (training classes & videos), and we crossed it. I’m not sharing the goal publicly yet, but I’ll circle back in a couple/few years and blog about it in my Life Quest category. Completed September 2015.

It’s been a while now, so let’s un-redact that and discuss it. We hit:

  • $1mm/year in training revenue (including both live & recorded classes), and
  • $2mm/year in combined revenue (training and consulting)

For numbers geeks, I’m measuring on a rolling 12 months basis – for young, growing businesses, you don’t wanna wait for calendar years to measure stuff. (Also, at the risk of stating the obvious: these numbers are revenue, not profit.)

How we got there: steadily building training

When we started the company, Jeremiah, Kendra, and I had a limited amount of presentations built. Since our day job was teaching customers what was broken in their SQL Server, we found ourselves continuously writing new training. That customer training material was designed to be super-concise, and it used real examples from their environments. Writing public training material is much harder.

We started with some online 1-day events, then gradually expanded to a 2-day in-person class. Over the course of a few years, we ended up with a huge library of online stuff plus three 4-day live classes: The Senior DBA Class, Advanced Querying & Indexing, and SQL Server Performance Troubleshooting.

Steadily building a tolerance for risk, too

Selling live training class seats means:

  • Paying a large deposit to a training class venue, typically in a hotel
  • Committing to a minimum spend for food, A/V, and hotel rooms
  • Buying your own travel to the event
  • And if enough students don’t show up, you eat some of the food/A/V/hotel costs

As an extreme example, I had a January class in Newark, NJ (SHUT UP I KNOW NOW) where only 5 students showed up. I lost something like $15k that week on hotel fees, and that’s not even including the money I could have earned doing consulting or something instead.

If you have one or two of those bombs every now and then, it’s no big deal – but as a small company starting up, those are big eye-opening events. We started with just a little risk, and then gradually added more and more risk, signing several contracts for class dates throughout the year, and forking out tens of thousands of dollars in hotel deposits at once.

We also faced risk in that there were only three of us, and we didn’t have complete topic overlap. All of us had written modules that no one else knew well enough to teach: I couldn’t teach Jeremiah’s dynamic SQL module or Kendra’s THREADPOOL module, for example. If one of us broke our arm right before class, we had to put our game face on and keep going.

But with risk comes reward, thus this blog post.

Training powered the company buyouts.

When the company bought out Jeremiah & Kendra, this trove of training material was key to making it work:

  • Jeremiah & Kendra chose to leave their intellectual property (training classes) in the company
  • This meant I could deliver those modules, generating cash flow to pay them off over time
  • But this also meant I had to learn to deliver the live in-person modules all by myself (the self-paced online recorded classes weren’t an issue, obviously)

Teaching a class is more than just reading stuff off a slide. (Well, that’s all you get in a lot of crappy vendor classes, material taught by people who’ve never actually done it in real life, but I won’t settle for that kind of garbage.) I had to dig deeply into the material and be prepared to answer tough attendee questions on it.

This also meant a spectacularly high level of risk. One instructor teaching a series of 4-day live classes, all by himself? No missed travel allowed. No sore throats acceptable. No off/downer/slow days. No second instructor to turn to for questions. Those initial 4-day classes were really challenging. (But also rewarding! I’ve been able to sustain and grow those training revenue numbers, and they powered the company through the really dark times – more about those in next week’s installment of my annual How the Company-Startup Thing Worked Out for Me series.)

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How I Ran Pricing Tests for Training Subscriptions

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Lemme be the first to say that I’m not an expert on this stuff. There are SaaS experts doing a way better job of this. However, here in our smaller database server community, it’s a different story – so I figured you might enjoy reading how this works behind the scenes, dear reader.

I recently decided to change the pricing model on our training videos. Before, you paid a fixed price (say $299) for 18 months access to a single video, or $699 for 18 months access to all of our training videos. The vast majority of buyers just bought everything, so I wanted to rework the pricing a little. (Seems like a good problem to have, but I think I’m missing out on people who would spend a smaller amount.)

We’re lucky enough to have an active mailing list with over 90k folks, so I was able to run a series of polls to small subsets (like 1k recipients per test) to see which pricing they would prefer. I’m going to share three of the tests I ran rather late in the process after I’d already learned a lot from prior experiments.

Pricing Test #1: The Lowball

Here’s an example of one of the tests I ran. I’m jokingly calling it the Lowball, but only in the context of this blog post. I ran much lower-price tests too, like $9/mo, to see if it would convert more buyers.

Price Test #1

We sent this to readers and asked, “which one would you get your credit card out for, A, B, C, or none of the above?” (Yes, column B pops out brightly – that’s an example of another variable that I changed during different rounds of tests, including column titles of jobs vs video names vs aspirational titles, different savings displays of percent vs dollar amount, etc.)

You’ll notice that this poll is a bit of a hybrid: two of the answers are monthly subscriptions, and one of them is an annual prepayment. By the time I ran this test, prior tests had already determined that we have two types of customers:

  1. People who expense the training and just want to swipe their card once to get everything, and
  2. A price-sensitive audience who pays for the training out of their own pocket, and doesn’t want to fork over a large up-front cost

Here’s how they answered – note that there’s much more data here than what the survey-taker saw – this is the analysis side of the work:

Price Test #1 Results

Out of the 3 tests covered in this blog post, this one got the highest percentage of buyers, 88%. Remember how I said I ran even lower-priced tests, like $9/mo? If 100% of the responders bought at $9/mo, 136 buyers * $9/mo * 12 months = $14,688 annual revenue, or a $40k loss from the above test. Going that cheap doesn’t make sense.

A Word About Responses and Response Rates: “Distorted”

This survey was sent to about 2,000 folks, and after 24 hours, 136 responses came in (6.8%). 136 sounds like an awfully small number to make a decision on, and it is, but if you’re going to run a lot of tests, you don’t want to keep re-testing the same audience members. I was polling about 50k of our 90k subscribers, and those 50k were chosen for specific reasons.

While 88% of responses said they’d buy, that doesn’t really mean much without a credit card involved. That’s why in some SaaS pricing tests, you’ll hear the company actually let people sign up with their answer. That’s also why companies continue to run A/B pricing tests after going live, and measure results with real revenue numbers. There’s even WordPress plugins to help with A/B testing.

Our price tests will get more accurate after we go live, but I still needed basic numbers to go live with. Anyhoo, back to our testing.

Pricing Test #2: Everything Only

I don’t like the way the next test looks – it’s visually imbalanced – but whatever:

Price Test #2: Everything Only

In this one, there was no DBA-only or performance-only option: you just had different ways to subscribe to everything. (It’s the Pluralsight model.) Drumroll please:

Price Test #2 Results

Compared to the prior test, this one had less buyers (82%, down from 88%) but a higher average spend per buyer ($491, up from $461.)

That means that if 1,000 people hit the sales page, then:

  • Test 1 = 1,000 * 88% buyers * $461 annual spend = $405,680
  • Test 2 = 1,000 * 82% buyers * $491 annual spend = $402,620

It would seem at first glance that test 1 would be the winner, but they’re both pretty close. Another factor is that in test 1, 54% of the buyers were monthly subscribers, which means lower up-front cash flow, and a higher chance of monthly churn. In test 2, only 34% of the subscribers were monthly.

Price Test #3: The Highball

To show another variation example, let’s take test #1, and just raise the prices across the board. Instead of $29/$39/$499, let’s do $39/$49/$599, so it’s the highball of this set of 3 price tests:

Price Test #3: The Highball

Now remember, readers don’t have to get out a credit card, so they’re less price-sensitive during free email surveys. With that in mind:

Price Test #3 Results

Even though there’s no credit card required here, the number of “None” answers went up from 13% to 19% – there’s real price resistance as you up the costs. Less people buy here – but it’s not a dramatic drop, down from 88% and 82% in other tests to 81% here.

However, because the buyer average annual spend is up dramatically here to $572, it wins:

  • Test 1 = 1,000 * 88% buyers * $461 annual spend = $405,680
  • Test 2 = 1,000 * 82% buyers * $491 annual spend = $402,620
  • Test 3 = 1,000 * 81% buyers * $572 annual spend = $463,320

What It All Means

Ever since we introduced the Everything Bundle, it’s simply dominated our sales at 80%+ of revenue. In these polls, though, the equivalent option (1 year of everything) consistently gets 32-35% of the votes. That could mean one of a few things:

  • Instead of buying the Everything Bundle, people might switch to spending less on a monthly subscription (which could be bad for our business), or
  • The core 32-35% of top-end responses here represent the people who were always buying the Everything Bundle, and the new 50% responses jumping for the monthly bundles would indeed represent entirely new buyers we didn’t get before (which would be awesome for our business), or
  • People are just clicking “yeah I’d buy a monthly subscription” when they really won’t

To figure that out, we also polled our existing Everything Bundle owners, plus folks who only bought 1-2 of our individual training videos.

For launch, we ended up going with Price Test #3, but with discount coupons available to loyal email readers (especially those who helped us out with the surveys.)

I could go on for pages about the work involved, and I absolutely love this kind of thing, but hopefully this gives you an idea of what it’s like to run your own sales at scale.

To learn more about price tests, check out:

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How I Handle Intro Calls with Consulting Prospects

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In the SQLcommunity Slack #Consultants channel, Steph Locke (@StephLocke) asked if anyone was doing free consultations or office hours as a way of growing your opportunities. We had a good discussion in there, and I’d highly recommend that freelancers and consultants join that channel for help.

I’ve done a free 20-30 minute sales call for years, and here’s the process that works for me.

Let clients book the date/time.

I used to make folks email us first with a brief description of their pains. We’d read that, make sure our company was a good fit, and send back a reply with pricing and how to book a meeting with us.

When we let go of our salesperson, I made a conscious decision to make the sales process as frictionless as possible for everybody involved. That meant the pricing would be public on our web site, and people could filter themselves out faster. As long as they knew the pricing and could see sample deliverables, I figured they could just book sales meetings right then and there.

If that fits your style, there are online services integrate with your calendar to build a live web form where prospective clients can simply book themselves whenever you have open windows:

With YouCanBook.me, I set up “Available for Calls” windows on my calendar, set to free (instead of busy), and customers can book themselves during those windows. I can configure the meeting duration, plus have it automatically pad my meetings so that I don’t do two in a row.

Sketch out the call’s flow.

Here’s how mine works, and I have a slide for each of these:

  • I introduce us (the company) and give a 60-second elevator pitch about what we do.
  • I show a slide of questions asking about who the prospect is, what problems they’re having with SQL Server, and what success looks like to them
  • I take furious notes while they talk, asking followup questions.

After about 5-10 minutes of listening and saying “tell me more about that,” I have a pretty good idea about whether or not we can help. At that point, I switch gears and cover:

One of the intro deck slides

  • How we’ve helped similar customers in the past
  • What a consulting relationship would look like
  • What questions they would need answered before they would sign a contract
  • Whether they want to move forward now, or talk it over internally

Now, look at that last and start to guess the time it’ll take to do justice to each topic. When you’re just starting out, expect to spend 30-40 minutes to cover that list, especially if you’re taking notes as you go. I’ve done a lot of these calls – a quick back-of-the-napkin guess yields 1k-2k over the last 6 years – so at this point, I’ve got it down to 20 minutes in total. (I can also type full speed as I’m listening and talking, so I was born for this kind of thing.)

Set limits on what you can cover in that time.

If I’m going to cover that list, then I can’t look at code, databases, or do screen sharing. It’s just way too easy to get bogged down in technical details. Having a slide deck with a specific set of talking points and questions really helps.

Every now and then, though, a prospect will say, “Can I share my screen, and I’ll show you what I’m talking about.” Here’s how I respond:

“Our lawyers and insurance agents won’t let us go near a system without a contract first. We just need to make sure everybody’s protected.”

At least in the litigious United States, everybody seems to understand that immediately.

If I was a BI or analytics person, I would actually be more comfortable sharing my own screen to demo work that I’ve done in the past, though.

Finish the call with authority.

If you let people talk about their problems forever, at no charge, they often will.

  • 10 minutes before the call ends, I say, “Just so everybody’s aware, I have a hard stop at HH:MM to join my next call.”
  • 5 minutes out, I say, “We’re in the final five minutes, and I want to make sure we cover the most important thing. Is there anything else you want to ask about working with me?”
  • If they’re still talking at the end, and they haven’t said the magic words yet, then I say, “I really do have to bail for my next call, but this is a great conversation. Let’s handle it over email from here – go ahead and send me the list of questions you’ve got, and I’ll tackle them between my other client calls.” And close it down – even if you don’t have another call, you probably need to bail if they haven’t said the magic words.

The magic words are, “What’s the next step?”

I use an extremely soft sell, so I’m looking for the client to say those words to me. That means they’re ready to move forward with signing a contract. At that point, we talk about dates and contracts.

If the client doesn’t say those words, they’re not ready to sign yet. And that’s completely fine – some sales take weeks, months, or even years to close. You can speed it up if you want to take a harder sell approach by asking that question yourself, finding out what the client’s next steps are. You can also ask what their timeline looks like for making a decision and moving forward.

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THE Sales Question: “What Does Success Look Like to You?”

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Most of my sales work involves a productized service: the SQL Critical Care®, a package of consulting work with a defined set of steps and a finish line.

But sometimes on introductory calls, prospective customers just start venting.

They complain about performance, management, capacity planning, architecture, upgrades, downtime, cost, staffing, the last guy, and a litany of stuff.

As a consultant, though, I can’t write a Statement of Work for that. Or to be more specific, I can’t write it up in a way that an executive will actually sign the contract to let us start work.

So when I’m not sure where things are going, here’s what I say:

What does success look like to you? At the end of the gig, I want you to be able to say, “Thank goodness we called them because they were finally able to ____.” What’s in that blank?

What failure looks like

What failure looks like

The answer helps us all:

  • Understand what the first project’s finish line looks like (not necessarily the end of our entire working relationship, just the first finish line that we need to cross together)
  • Understand if I can help them cross that line (because sometimes it’s not a good fit for me)
  • Set things out of scope when they’re not related to the finish line (it doesn’t mean we’re never going to do that work – it’s just not part of this first race we’re running together)

If you don’t have a productized service yet – or even if you’re just applying for a full time job – success is so much easier when you understand what success means to the other person.

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How I Handle Weekend and Holiday Work

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Vegas, baby!

Vegas, baby!

When you’re independent, sooner or later, somebody’s gonna want you to work on the weekend or on a holiday.

Or, they may say something like, “Is there any way we could get into your calendar earlier, or get this done faster?”

Here’s how I handle that: any money I make on weekends or holidays goes directly to my wife as purely discretionary income.

This has an interesting effect on negotiations: it takes away all of my emotions from the negotiations process. Normally, when there’s money at stake, I’m interested in getting the deal signed, but since none of the money’s going into my pocket, I am totally chill about this whole thing. I can even be honest with my clients and say, “My wife and I have this agreement that she gets to keep the money I make on the weekends, so here’s the price that it takes to buy me out of family happenings.”

When I decided that, I went to my wife and said, “What’s a price number where you would be happy having me working on a weekend day? What’s the number of dollars that you’d want to have in your pocket where you’d be totally happy that I was working instead of hanging out with you?” She set a number, and now I’m able to just quote that anytime someone asks. I don’t have to ask her what we’re planning – at that price, she’s completely happy canceling anything we’ve got going on.

That was some expensive champagne

That was some expensive champagne

When deals are signed, everybody’s happy:

  • The client gets me faster (although at a significant cost)
  • Erika gets fun money to spend on stuff she’d never consider buying otherwise
  • I get the warm, fuzzy feeling of making everybody happy while doing what I love

To make it work and keep a good work-life balance, the price has to be high enough that Erika’s truly excited, and high enough that clients aren’t willing to fork it out every single weekend and holiday.

When I first got started, I thought I’d have to say yes to every client demand. “Work with us over the weekend and you’ll earn our business over time.” I learned that the kinds of clients who want me to work every weekend and holiday aren’t really the kinds of clients I want to work with long term.

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Hi. I’m Brent Ozar.

That's me, Brent.

I live in California with my wife Erika. I'm on an epic life quest to have fun and make a difference.

I co-founded Brent Ozar Unlimited to help make your SQL Servers faster and more reliable. I also maintain sp_Blitz® and the open source First Responder Kit repo.

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