7 Powers: The Foundations of Business Strategy by Hamilton Helmer (Amazon)
[00:00:00] Nate: so we were talking the other day in Slack, a bit about some new markets and different business ideas. Do you want to talk a little bit about that?
[00:00:42] Josh: Yeah, sure. I think it came up because we were setting up some analytics for ourself with our podcast just after we’d been out here. I believe. By this time, this one will be episode nine, I believe
[00:00:57] Nate: something like that.
[00:00:58] Josh: so. At the time of this recording, we have seven out there. But now we’re kind of checking stats, seeing follow seeing, there’s just getting some feedback and we had Nate set up what was the software
[00:01:10] Nate: charitable, I think it was. Charitable.com.
[00:01:13] Josh: right. And a need had a little bit of complaints about the, the analytic software. And I kind of joked about. Okay. Are you gonna, you’re gonna make one. And how did you respond?
[00:01:25] Nate: Well, I was like, no, I, I, I shouldn’t do that. I’m I’m not allowed to do that. It’s a bad idea. But then we kind of started talking about like, what’s the, what’s the viability of that market. Like if I was to go and build it and I was kinda like I don’t think that there’s really a room in that market.
[00:01:39] Josh: or yeah, you didn’t think it was a particularly big market per se, right? And yeah, we just kind of went down this little slope of a quick conversation and yeah, essentially, I think we were, you know, if you start tearing apart podcasting a bit the first place you went to was what hosting right?
[00:02:00] Nate: Yeah, I was looking at hosting and I was like, well, like hosting is like really commoditized. Like that doesn’t seem like a great place to hang out.
[00:02:07] Josh: right. Yeah. There has been some rises in podcasting. Although the caveat I would put up on podcasting is it definitely has had a big hit, a bigger stride the past year because of it had a massive pandemic effect. But,
[00:02:22] Nate: Yeah. Yeah. Yeah. And it has the, yeah, it has that the upward swing, which is always nice to have.
[00:02:30] Josh: right. So it was an interesting exercise because we’re going through, well, it’s not just that there’s also the recording side. There’s like all these other little niches that are involved for the podcast or, you know, or that company hosting. And then you have Spotify buying things. I mean, when you look at it, it’s not a big, big market, but it’s a growing market and that’s it.
[00:02:54] Nate: Yeah. And I think one of the things you brought up too, is that there’s, there’s a lot of fairly large companies in that space. So it’s not like they’re, you know, that they aren’t, they are making it work. So clearly there is a, a market of people that are willing to pay for things over there.
[00:03:09] Josh: right. I think it’s, I feel like it’s definitely still emerging. It’s probably been one of those ones that people have talking about. It’s been an emerging space for many years. It’s kind of like IOT, IOT has always been emerging and yet. I don’t. I think, I don’t know if it’s ever become truly the year of IOT and maybe what one killer app kind of did is like, you know, do you consider Alexa IOT?
[00:03:33] Nate: Yeah. Yeah. Well, that’s. Yeah, that’s a tough one. But I think that that whole conversation kind of brings up the topic that we wanted to talk about today, which is when you see these different markets, like how, how would we go about finding a niche in there that would be a good place to build a business around.
[00:03:53] And so I just wanted to kind of get your thoughts on that today.
[00:03:57] Josh: Yeah, I mean it’s T for a blank statement of niches, I would just say there’s always a niche for something and it might be too small, right? Like some of the areas or markets might seem small at first glance, but they could be big enough.
[00:04:11] Or even if they’re not that big, there could be a very clear. Subdivided niche. And the niche might be 30% of that market or 50% of that market. So you could be a market leader in a small market, or you can be a small slice of a much larger market, but those are all different ways to be the niche and how big a pie and how big a pie is enough for someone starting out like you.
[00:04:36] Nate: right. Yeah, exactly. And so I kind of wanted to like take our conversation and kind of wind it back and start from kind of the beginning and how we kind of went through that discovery process and that discussion. And so I guess we kind of started with, we had this new market that we wanted to talk about.
[00:04:54] So, are there ways that you discover new markets or ways that you find that you’re able to find new markets that you might not have previously known about?
[00:05:02] Josh: For me, it’s probably just a lot of listening, so it’s a lot of podcasts, a lot of books, a lot of reading, just interesting in these different spaces and I’m always. Taken back and surprised when I hear about a space or a company, you know, coming from the ashes or all of a sudden showing up on a hacker news or indie hackers or there’s so-and-so that is now a, you know, $200,000 a year business, which I think could, is probably a, an aspiring goal for you to essentially replace your consulting and only have to worry about a side business.
[00:05:40] Nate: Yeah, exactly. So you’re kind of just keeping your ear to the ground, I guess. And when something peaks her interest, you kind of look into it.
[00:05:49] Josh: well, I mean, I’m not actively looking, so I can’t say that that’s like a, I don’t have that down to a science, but I do get ideas based off of these. Or maybe it’s it’s I am correlating. Oh. Okay. That was a niche in market X. And, Oh, I wonder if that similar niche or type of niche, like for creators or making the pages more beautiful or a drag and drop interface or whatever that, that little niece or insight might be that.
[00:06:22] Could adhere to a better, a different audience within a bigger market. I, my brain goes, Oh, well, what about this market? What about that market? What about that? So that’s, I sort of stopped there because I don’t want to honestly be too distracted, but that’s sort of how I start to look at this in color.
[00:06:38] Kind of what types of niches there can be.
[00:06:41] Nate: so you’re kind of looking at the overall market and you’re just like, Hmm, this is kind of neat. Let’s play a little bit of like, what if in my head and like, well, what if we added, you know, this, this special feature to this market, would people really stick to that or not? That’s kind of, is that kind of what you’re saying?
[00:06:57] Josh: yeah, like a, a good example probably is that one that I’ve learned recently. So and maybe we can run through a few examples. So. One of the ones I just mentioned earlier was like making, just making things more beautiful or presenting. And I even say the word beautiful. It’s not a common word I use, but it’s oftentimes in this language to even make it even more obvious that that is their intent.
[00:07:23] So here’s a little quick quiz on that one. Like some real, one of the oldest largest. I wouldn’t say it largest, but one of the oldest industries in SAS is probably forms. Right. We talked about survey monkey. We talked about Wu Fu, but someone relatively new in this space in terms of maybe the past, I’d say five to eight years, I’d say is Typeform.
[00:07:48] Nate: Yep.
[00:07:49] Josh: So how big do you think Typeform is?
[00:07:51] Nate: In terms of revenue 3 million a year.
[00:07:54] Josh: Okay. 48 million.
[00:07:56] Nate: Hokey Nelly
[00:07:57] Josh: Yeah, so, and their whole angle or niche on this is like user first beautiful forms, right? Their user experience for the person taking like actually completing the survey or completing the form is unique. Right. It’s totally different than any other, just very basic web form, which is pretty much everyone else out there.
[00:08:19] Nate: Yeah. And if you had come to me and said, let’s build some form software, I would, I would have laughed you out,
[00:08:24] Josh: right now, that’s a niche that you go as like, okay, can I apply that to something else? Can you apply that to photo editing? Probably not. Like, does that, does that twist actually do it there? There’s not really a two-sided interface, so it’s not, it’s not something that probably could, could run that same playbook, but.
[00:08:45] Nate: Yeah. Yeah. And the, I think on the form side that you probably are driving engagement by making it more user focused. Right. And engagement is what you want out of a forum. So
[00:08:55] Josh: or do they just disrupted a thing that was previously very stagnant and boring. And all of a sudden it made it fun and also it made it viral and different because people were willing to talk about it because it was like, Hey. This form was actually neat. Like it had, you know, you could hit enter, you go on to the next thing.
[00:09:11] Like you hit the back button and it’s every, you know, what was unique about them? You look filling out any one of those forms is every input is like one per page. So it’s a very different experience. You’re not going to probably have all the auto-fill and all that stuff on your browser.
[00:09:29] Nate: Yeah. And you can press enter on every field. That’s the feature I love
[00:09:32] Josh: right. So, so yeah, it’s, it’s different and unique and pretty much people know, and they made it synonymous with that’s where tight for me.
[00:09:41] Nate: Did you have any other examples that you wanted to run through?
[00:09:44] Josh: yeah, there was another good one on that same angle, which is email marketing. So I know, you know, email marketing, right? So who’s who are some big players, you know, in email marketing.
[00:09:54] Nate: well, it’d be like MailChimp or like second grade or there’s a few that are really obvious that I’m forgetting now. Cause we’re on the spot. But.
[00:10:02] Josh: Yeah, MailChimp, HubSpot, Marquetto big, you know, big other ones all over the place. And you know, the, one of the bootstrapper favorites, drip and another one convert kit. So do you know how much revenue convert kit makes.
[00:10:17] Nate: I do not, but if I had to guess, I’d say the last one, I aimed a little low, so maybe I’ll say like 7 million.
[00:10:24] Josh: okay. There around 27 million
[00:10:26] Nate: Wow.
[00:10:27] Josh: and I believe MailChimp is well over 500 properly up to 700, but they’re probably getting close to a billion a year at all these numbers right here. So
[00:10:38] Nate: Yeah, yeah. Wow. That’s that’s incredible.
[00:10:42] Josh: Convert kids. Nice is, but there’s this for creators. So they built it very specifically their, their workflows and they’re adapting. And I think with the creative market growing now, you know, they kind of hit a, hit a nice trajectory of that, but what’s more interesting in the email marketing space, which I’ve only learned about this company.
[00:11:01] Maybe. I don’t know, probably in the past few months is a company called flow desk.
[00:11:07] Nate: I haven’t heard of them.
[00:11:08] Josh: And I heard them on a Saster podcast, but apparently they have self-reported that they are at 5 million a year and all within the past, maybe year or two.
[00:11:19] Nate: Wow. That’s incredible.
[00:11:21] Josh: Yeah, who would have thought in that email marketing stuff, which again, you’re like, okay, that nice, that, that ship has sailed when convert kit and drip did their thing.
[00:11:29] And now all their features are being adapted by, by the big guys, like you know, MailChimp and HubSpot and whatnot,
[00:11:36] Nate: Yeah. Yep.
[00:11:38] Josh: but, but flow desks, unique thing get, do you know what it is?
[00:11:43] Nate: well it’s flow, but I don’t know.
[00:11:46] Josh: It is to make the emails more beautiful. So.
[00:11:49] Nate: Really?
[00:11:50] Josh: Running back to the whole like Typeform playbook. There’s one of those playbooks in another market that also seemed very old and stagnant flow desk. And apparently they’re at 5 million in ARR within like, you know, a year or two.
[00:12:06] Nate: that’s incredible. Like when I hear that, like they made it more beautiful. Like I, I wonder how much of it is the fact that they made it better versus like, did, were they just really good at marketing and sales and they managed to capture enough market share before. Like their competitors kind of noticed or anything like that.
[00:12:26] Josh: Well, I think this goes back to a little bit of you and I both read the book What is it that the seven powers? Right. So one of those ones that makes me think about that oftentimes is seven powers by Hamilton Helmer, I believe is the
[00:12:40] Nate: Yeah. Well, we’ll link that in the show notes for sure. That’s a good
[00:12:43] Josh: So yeah, it’s, it’s, it’s really interesting because it’s talks about like these lasting powers that kind of give a company a, a very strong hold of an advantage.
[00:12:53] Common ones, people know, network effects, things like that. But the one that. Resonated the most with me, this is oftentimes they talk about a power that you might have as a business. And your advantage is that an incumbent or other people? I bet I’m going to probably going to totally botch this, but they can’t because of their position because of what they’re building.
[00:13:18] It makes it hard for them to compete with you. Like they’d be chopping off their own legs. So to speak,
[00:13:24] to like,
[00:13:25] Nate: They’ll dilute their position by trying to please everybody.
[00:13:29] Josh: Not necessarily even dilute them, but just like they would, they might hurt their own customers. Like they might have to cannibalize themselves. Or for example, I know this from building referral rock is like at a certain point, you have, you know, everyone’s familiar with tech debt, but you also get, you have existing customers, especially in SAS. You can’t move fast anymore. Once you have a substantial amount of customers, because now you don’t want to. Screw up the, all the paying customers you have. So you start moving slower, you have slower architecture changes. You can’t do as many big things anymore because you don’t want to, you can’t just change your messaging on it.
[00:14:07] Nate: right. You don’t want to rock the boat too much,
[00:14:10] Josh: Exactly. So when you mentioned you know, the question about flow desk was like, okay, well, what did they. What did they do? And I think one of their key things is I think they have like unlimited emails or something like that, but that, I don’t think that’s what got them, but they also do a couple interesting things.
[00:14:25] Like they do have a referral friend, a viral loop type of thing, but their whole piece of it is if you go into any one of these email tools, like how long does it take you to actually get the email out?
[00:14:38] Nate: Oh, I know it’s brutal. And like, imagine trying to get a, non-developer trying to mess around with the email builder. Like it gets even worse.
[00:14:47] Josh: right. So I believe that’s who they’re targeting. They’re targeting kind of like even the lighter creator, like when convert kits. It’s targeting like kind of the info creator type of thing, like classes and courses. I believe flow desk doesn’t do much of those automations. It’s almost like more of like competing with the old school MailChimp.
[00:15:06] And it’s just, all of these templates are just pop, pop in, you know, like, and that’s their approach. So it’s like, Hey, little, little, a hair salon. You just want to send email list to your things and you just want it to look great. Like. It’s for the, I wouldn’t say for dummies, but it’s for the less, less tech savvy.
[00:15:25] Nate: Yeah, but when, like, as we kind of talk about this, this position more, it sounds like they have a lot more going for them in terms of like their positioning instead of their like, like, I mean, positioning in the terms of who they serve instead of positioning as we’re more beautiful, because when you talk about that in the sense of a power.
[00:15:46] To me, it seems that like having more beautiful forms, like are more beautiful emails. Like everybody wants that. Like how could you rock the boat by providing better forums to your customers?
[00:15:58] Josh: Well, I don’t think it was necessarily, that was their power. I just meant that all the other incumbents couldn’t easily go like you think survey monkey or woof, where all these on a dime could start doing forms that look like tight form without like totally changing their infrastructure, changing other pieces that at that point they have.
[00:16:19] All these people on a certain boat and a certain style. And you can’t just flip that bit overnight. Even if you see a rising tide or you don’t know before, it’s too late, by the time they’re big enough to take a chunk out of you. You know, it’s, it’s, it’s too late. You’re already like a year behind or so,
[00:16:37] Nate: Yup. Yup.
[00:16:38] Josh: and they may not even care.
[00:16:39] Right. They just care about growing their existing thing. Once you have an established business, you’re like, I’m just going to keep beating the drum. I’m going to keep doubling down on our core. Versus trying to worry about Typeform. That’s creating a sub market where my big market is still pretty good.
[00:16:54] So I’m really not that concerned.
[00:16:56] Nate: Yeah, that’s interesting that both of these examples that you’ve brought up so far are are big, big markets. Like these, these people are going into well-established places and trying to bring something new there. As a bootstrapper that seems counterintuitive to me, like. I would try to stay away from those places most
[00:17:16] Josh: okay. All right. Well, let’s go to some small markets. How about that? All right. So what about. Then we’ll go. So how about social media management? What do you think of social media management?
[00:17:27] Nate: what do I think of it? I,
[00:17:28] Josh: Yeah, like, is that a market size?
[00:17:31] Nate: how as a market size I think there there’d be quite a bit of market there because you got all these people in marketing departments, managing social media for their business.
[00:17:39] Josh: So is that one that scares you off as well?
[00:17:42] Nate: It scares me off in the sense that it seems like a large market where there should be big players, but I also have heard of a number of smaller companies making edges in there. So I was not as scary, I guess.
[00:17:53] Josh: okay. Okay. And there’s a lot of pieces to social media. I would say there’s the posting automation buffer, you know,
[00:18:00] buffer I’m. Sure. And do you know Buffer’s revenue?
[00:18:03] Nate: No, but I’m guessing it’s huge. 500 million.
[00:18:06] Josh: Not that big they’re 20 billion.
[00:18:08] Nate: Oh, that’s
[00:18:09] Josh: so, okay, here you go. So maybe this market isn’t as big as you thought. Now. Another interesting one S someone that is, I think, well known in the indie kind of bootstrap world is there’s a software called one-up. Have you heard of that one?
[00:18:23] Nate: No, I haven’t. What does that do?
[00:18:24] Josh: So again, it’s, it’s.
[00:18:26] Basically social media posting, but they’re big. I think advantage is they do a much better job at the Google, my business side of that. So posting to Google my business, which I think is just a totally different animal than social media. Right. So it’s like to those pages. So when someone Googles your business, you see there’s the business profile there.
[00:18:46] Can you guess where they are at.
[00:18:48] Nate: 15 million.
[00:18:50] Josh: Nope. A bit, a bit smaller there around 300,000. So, but for an indie hacker for a S it’s a, as far as I understand, it’s a two-person business and that’s not bad. Right. And it’s a little niche that is probably big enough that other people don’t necessarily care about. But is a, is a lice carved off little niche that.
[00:19:13] If you think of it from a development standpoint, you know, may not be the most challenging. Like I think, you know, being, doing an email thing, doing a forum thing there’s a lot of aspects to it, but maybe social media isn’t as challenging. I don’t know.
[00:19:28] Nate: Yeah, I, I, I guess in there’s other like different problems with that, but yeah. Teach, throw, and I guess that’s, that’s really neat. That there’d be that little niche there for them. Cause I’ve seen a lot of social media tools where they try to like aggregate everything and that’s kind of where the bigger players tend to go. And with all, with all the platforms, then it it’s really clear where, where you could find a little niche to settle in.
[00:19:51] Josh: Okay. So what about what about photo editing and social media photos? How about that? Do you know much of, of ones in those market? And if, if you do know some of these answers, we can skip over these sections too.
[00:20:02] Nate: Yeah. I, I remember like a couple of months ago, there was some news about someone doing a social media image, manipulator, and they were doing really well on it, but I forget the exact numbers.
[00:20:13] Josh: so we don’t have to quiz you, but I’ll let you know a little bit about this one. So. Kind of photo editing space and we’ll just even not even include Photoshop and that type of thing, but, you know, Canva is probably the big name and just like online photo editing or, or image editing or whatever. But from the social media side Snappa is one that I believe yep.
[00:20:34] Is, and there they are. I think they hit a million a year. Around this time last year or something like that. So I’m sure they are bigger now, but again, it’s also run by like less than 10 people. Not, not a bad business to have banner bear is another one and he’s notorious on Twitter and the indie hacker areas these days, I believe.
[00:20:54] But auto generates social media images via an API and his numbers are getting close to 200,000 a year.
[00:21:02] Nate: wow. And I think what’s really neat with those is that those people are really solving like one problem. Like. Here’s the one thing you come to us, we’ll take care of you. We’ll do a good job of that one thing for you. And I think it’s a neat niche that way, because they’ve really identified one very particular thing.
[00:21:20] Josh: right. So going a little full circle back to podcasting. So recording. Do you know much about the podcast? I mean, we’re recording space, we’re recording on zoom, but there are some players in that area. Do you know of how big some of those markets are?
[00:21:37] Nate: I don’t. I only know if the script has recording in it, but other than that,
[00:21:42] Josh: Okay. And mostly we use descript for the post post publishing or post editing, post production editing. Squad cast is do you know how big squad cast is.
[00:21:53] Nate: no, I have no idea.
[00:21:55] Josh: Do you want to, do you want to guess?
[00:21:56] Nate: 15 million.
[00:21:57] Josh: Okay. Now I think, I, I think I’ve changed your mindset a bit, but it’s the 3 million, which 3 million in ARR. Isn’t isn’t isn’t bad. It’s still, I’m not, no, I’m not. You’re not, I know you’re not insulting them. So
[00:22:09] Nate: I’m just trying not to undercut them because after your first couple, I’ve just been like, wow, those are huge. And I guess, I
[00:22:17] Josh: you’re overshooting it. All
[00:22:18] Nate: I guess that’s one of the hard things though with looking at these softwares, is that just looking at a company’s landing page or looking at what they do?
[00:22:27] I find it hard to determine how big that that market might be. And I guess maybe nobody knows until they really dive into it. But do you have any thoughts around that? Like estimating those kinds of things
[00:22:39] Josh: I do. I think, I think you’re right. And I think the first approach is like looking at the home page and to you, like looking at this homepage, like looking at flow desk and saying it’s beautiful emails or something like that just may not even Dawn on you, what their position is. And you’re just like, Oh, who’s this, I’ve never heard of them.
[00:22:58] I know all the email marketing players, it’s probably small, like. No offense, but if you are some of this other person that had the pain of MailChimp and I, how long it takes you and they’re like, Hey, you can do this beautiful one in like one click or like two clicks. Then it’s like, that says something to you.
[00:23:14] But you looking for you don’t see that the same way. Right. When you saw that you probably wouldn’t have done, you know, you had two clicks. Okay, cool. Whatever.
[00:23:22] Nate: Yeah. Yeah, exactly. And like, I think of like, if you compare to physical, like bricks and mortar businesses, like if a company is really big, typically they have a big store or a big facility or something like that. Whereas with this, you have no idea. Right?
[00:23:36] Josh: right. Yeah. I think unless you start to dig a little deeper and I think that’s probably the key takeaway I would have for you is. It’s not all, like, some things might be much bigger than you think some things might be much smaller, but you probably do need to step in and do a little research baby or it’s like, and you don’t know, it could be nothing.
[00:23:58] It could be something. And like I said, the biggest way I see is I I’m learning these. Okay. Make it more beautiful. Okay. Make it easier. Everyone knows that. Make it easier, but there’s a lot of other ones make it cheaper. I mean, those are all different ways to position. Nice. And there’s probably many more
[00:24:14] Nate: Yeah, but I think it’s hard because I’m like, well, you could make any software more beautiful, like. You could try to make something more beautiful, but it has to be compelling enough that people would be willing to come to you as opposed to anybody else for that. Like, I’m just thinking of trying to get off the ground.
[00:24:33] You’re going to be hidden in like 30 pages of Google results. How do you stick out enough that you can get to the top?
[00:24:41] Josh: Well, that’s, it’s a good question. Right. And I think, I think at the beginning, it’s not about that. Right? So like picking, I think you’re mixing also like the distribution strategy in with the positioning, which I think are still going to be two different things. Because all of the things we’ve talked about Do you, do you know what they have in common other than being nieces?
[00:25:01] Like we’ve talked about?
[00:25:02] Nate: They’re all bootstrap, maybe.
[00:25:04] Josh: No, I think some of them have, might have a little bit of funding, but they were all started years ago. Like most of them, these are not like, Hey, this started two years ago when you started status list, but they also all have figured out a consistent distribution strategy. And. I know you’ve kind of, poo-pooed a bit like doubling down more on status lists and some things like that.
[00:25:28] But, and, and I think you’ve even said, Hey, yeah, I’ve seen what it took for those guys that, you know, are some competitors in the bootstrap space that are also doing something similar to status list and where they are in revenue now. So it starts somewhere. Right. And the biggest question I have for you is like, What would be a win for you as you look at these different markets.
[00:25:52] And as you try to find an idea, which I do feel like on this, on our journey with this podcast, we need to start pressing a little bit. And I think maybe our next few ones will have a bit more ideation sessions and validation sessions. But what, what is, you know, one of these could any of the ones I told you today, I’m sure it would be a win.
[00:26:12] Nate: Oh, totally. Yeah. And in terms of like, what would be a win today? I think just like a niece or a, a problem that seems compelling enough that people would go out of their way to find it or that they would be willing to choose my product over someone else’s because mine is positioned in that way. I think that’s, that’s really what I’m trying to get for it.
[00:26:38] And I’ve been, I guess probably a part of it is like listening to you talk about the numbers on these different businesses and seeing how far off my guesses are. I think that kind of speaks to that a bit where my feelers are not tuned. Super well on that.
[00:26:56] Josh: Yeah. And I think it’ll, it’ll probably be a great podcast episode. To follow up with, I think you mentioned asking me how I validate these things or how I look at these quickly. And I do have a little bit of a method that we can go through. Maybe on the, on the next episode.
[00:27:11] Nate: okay. Well, that sounds good. Did you have any you know, kind of final comments related to this that you wanted to share with everyone?
[00:27:19] Josh: No, mostly just to round up. I think you made the point yourself, which was the point is like, let’s refine your feelers. Let’s, let’s refine your let’s let’s tune you up a bit. So you can kind of look at these and analyze some of these things and actually have an idea and not, yeah. Skip over something that otherwise could have been something, but you didn’t dig deep enough or you just assumed it was too big and there isn’t any room or it’s too small and there’s not much worth there.
[00:27:48] So I think tuning that would be very helpful. And so you, as you take the time and go through your searches, that your chances of, of finding something interesting to start on or to dig your teeth into has a higher probability.
[00:28:04] Nate: Yeah, that sounds good.