Foundr Magazine Podcast with Nathan Chan

These days, Sabri Suby reigns supreme as the founder of King Kong, Australia’s fastest-growing digital marketing agency. But he’s come a long way since his first job, selling ink cartridges over the phone, which he describes as a “cold, hard slap to the face.”

“I sucked incredibly badly at doing that in the beginning,” he says.

Soon enough, thanks to mastering the art of sales and persuasion, he became the top producer in that role, went on to travel the world, and eventually, forged his path as an entrepreneur. For all of his companies, he realized he was asking the same fundamental question: “How do we get more customers?”

His obsession with answering that question has helped him perfect his selling skills and scale King Kong from zero to $10 million in annual revenue in just four years.

In his latest book, Sell Like Crazy, Suby reveals the selling system he’s created and honed over the years, including things like the Magic Lantern Technique and the Halo Strategy. He says he’s deployed this system in more than 167 different niches and markets—and it’s worked every time. With Sell Like Crazy, he shares the steps you need to take, regardless of what stage you’re in, to level up your business.

Key Takeaways

  • Where to begin if you want to succeed in selling online
  • Psychology vs. technology and why the traffic channel doesn’t matter
  • The biggest mistake online businesses are making regarding sales
  • Why you shouldn’t start a business by looking only at your interests
  • How to identify a gap in the market that you can fill
  • Using automation and a funnel to convert sales
  • Why skepticism online is at an all-time high—and how to overcome it
  • How to know when to ask for the sale
  • How to get over the fear of selling
  • Why you’re doing the world a disservice by not trying to sell
  • Why paid advertising is key to growth
Direct download: FP235_Sabri_Suby.mp3
Category:general -- posted at: 9:34am AEDT

Heavy Lifting

From humble beginnings to fitness empire, Sweat CEO Tobi Pearce tells us what it takes to run a multimillion-dollar business and grow a powerful brand with a significant other.

At just 26, Tobi Pearce has accomplished a lot. He’s the CEO of Sweat, a fitness app that’s been downloaded 30 million times. He’s engaged to his business partner and Instagram fitness star Kayla Itsines. And together, they’re worth an estimated $63 million, according to Australian Financial Review.

But just a decade ago, Pearce was homeless and struggling to get by on $45 a week, something he revealed in an Instagram post in July 2017. “I am not posting this for sympathy and this is not a sob story,” he wrote. “I just thought it was time some of you got to know ‘me.’”

To get to know Pearce is to discover many unexpected facets. While he’s popular for his fitness empire, prior to all of that, he was a “nerd” who grew up in a small town in Australia and loved playing classical music. From what we’ve seen on social media, he can just as easily shred it on piano as he can in the gym. On his Facebook page, he posted a video of himself playing a complicated Chopin number, writing, “I used to be embarrassed to tell people I played piano as a kid because it wasn’t ‘cool’ or classical music made me a ‘nerd.’”

Today, Pearce has plenty to be proud of. In addition to his upcoming wedding to Itsines, TechCrunch reports that the couple’s fitness company is on track to bring in $77 million in revenue this year.

From Classical Music to Fitness Classes

Pearce began his foray into fitness when he started working as a personal trainer to pay his way through college. He and Itsines met at a gym and began dating around 2012. Eventually, the pair became business partners, too, with Pearce taking over the marketing side, helping to promote Itsines’ popular Bikini Body Guides ebooks and grow her Instagram account (today she has more than 10 million followers).

Not one to be easily satisfied, Pearce then set his sights on expanding the business “to kind of shake up the industry.” That’s when the Sweat platform was born.

“My whole career and this particular field has always been about trying to push boundaries and kind of see how far we can move the dial and how big we can build things,” he says.

Originally dubbed “Sweat With Kayla,” the Sweat app provides workout videos, meal plans, and progress-tracking tools to its subscribers, for $19.99 a month or $119.94 a year. It targets millennial women with programs from bikini body to post-pregnancy workouts and boasts well over a million monthly active users.

The Appeal of an App-Based Business

Moving from ebooks to a mobile app, what made Pearce choose a new platform for Sweat? As he tells Foundr, there were three main reasons:

First, he wanted a better user experience. Originally, Itsines’ workouts were being shared through ebooks—not a very interactive platform. Pearce wanted a way to have more control over the user experience, including being able to gather user data to improve the product.

Second, he wanted to meet the needs of millennials. Most of Sweat’s customers are in that age group, so Pearce knew that meant the content needed to be mobile-friendly.

Finally, he wanted to be able to scale. To be able to make a real impact on the health and fitness industry, internationally, Pearce knew Sweat needed to switch business models.

“The big move was, yeah sure, from ebooks and a website to an app,” he explains. “But it was also a huge migration from a single-purchase service into a subscription business. And subscription business economics are completely and fundamentally different to that of a traditional ecommerce business.”

Combating Churn With an Engaged Community

As with any subscription business, churn is always a concern. One way to combat the tendency for members to cancel their subscriptions is to cultivate an engaged community. For Pearce, this is a no-brainer: He’s seen how it works from his personal training days.

When he was a personal trainer, he often picked up on the social habits of the people he was training. At 8:30 a.m., for example, a few women attended a 30-minute class with Pearce, while another group of women had coffee together downstairs awaiting their 9 a.m. slot. Once 9 rolled around, the groups would exchange spots, and by 9:30, when everyone was finished with training, they’d all go to the beach together.

“Fitness actually brings people together,” Pearce says.

But how can you recreate the social aspect of in-person fitness classes in a mobile app? The Sweat team knows people feel their best right after they’ve exercised, so within the app, users are prompted to invite their friends once they’ve finished a workout. They can even share their trophies and achievements, as part of what Sweat calls “social currency.”

Beyond the friend-invite feature, Sweat has a community forum where members can share stories, find advice, and get motivated.

“Not seeing much progress :( starting to panic,” wrote one bride-to-be on the Motivation & Encouragement forum.

“There is such a difference between the two photos,” replied another member. “You’re definitely making progress so keep up the good work!”

“There's all these different stories,” Pearce says of the forums. “But there's hundreds of thousands of women that can connect and relate with one another, and that really brings them together.”

On Chasing Growth Without Sacrificing Quality

While Pearce is aiming for growth, he’s not willing to do it at the cost of top quality and a strong brand. Sweat’s trainers, for instance, are carefully curated.

“We're not really looking to have like a hundred or a thousand different trainers and programs,” Pearce says. “We're kind of looking to have best in house and best in class.”

A prime example of this is Kelsey Wells, who joined the Sweat team over a year ago and leads the weight training and post-pregnancy programs. Beyond her finesse in the gym, she’s excelling on Instagram with 1.4 million followers. Her brand growth and depth have impressed Pearce, who says, “We'd much rather work with 10 people like her in their own specific categories than a thousand people that are just generalists.”

With a team of talented trainers who are also Instagram rockstars, does Sweat have aspirations of acquiring influencers abroad to boost international growth? “There's definitely a potential for that,” Pearce says.

How a Fitness Power Couple Finds Work-Life Balance

Google “Tobi Pearce” and you’ll find plenty of headlines referring to him as “fiancé of Kayla Itsines.” From the start, he’s been comfortable doing the behind-the-scenes work while Itsines steps into the spotlight for the Sweat brand. As soon-to-be spouses and current business partners, how do they strike a healthy balance between work and personal life?

“It has its testing moments, that's for sure,” says Pearce, adding that he’s obsessed with the business aspects while Itsines loves handling content creation and community interaction.

“She’s able to switch off,” he says of his fiancée.

Pearce, on the other hand, not so much. “I've always been probably a little bit too interested in ,” he says. “If I'm not talking about it, I'll be reading about it. If I'm not reading about it, I'll be listening to something about it or learning one way or another.”

Pumping Up Your Personal Brand

In recent years, a movement to build your “personal brand” apart from your company or product brand has taken hold of the entrepreneurial world. Big names like Gary Vaynerchuk and Neil Patel come to mind; both social media powerhouses use their personal brands to funnel clients into their consulting agencies.

Sweat has a similar story. It began as Itsines’ personal brand, which Pearce helped grow into the formidable Instagram presence it is today. Recently, Forbes named Itsines as the top social media influencer in fitness. Many of her faithful fans have followed her to the Sweat app, too, where she leads high-intensity workouts based on her Bikini Body Guides.

So what’s the secret to building a powerful personal brand? “Content and messaging are really king,” Pearce says. That means content that is high quality and messaging that creates interest.

“There's so much crap on social media,” he adds.

In the fitness sphere, he says it’s more than just looking good and posing for the camera. You need to create content in an intimate and authentic way. Just take a look at @kayla_itsines on Instagram. Instead of polished, picture-perfect content, it’s a mixture of motivational quotes, funny memes, before-and-after praise for her clients, and of course, workout videos—all with conversational captions where Itsines’ personality shines through.

While Pearce is hesitant to give a one-size-fits-all strategy for growing your Instagram—”Every industry is different,” he warns—there is one Instagram tip he recommends for fitness brands: lay off the endorsements.

“It's all well and good to sell a product or do endorsements, sure,” Pearce says. “But if that becomes everything that you do, it really becomes a bane of your existence and it's actually quite saturating for your personal brand. It's impossible for you to maintain credibility and authenticity as a brand if every second post that you do is talking about a new deal that you've done.”

Instead, says Pearce, focus on what you’re good at. Let’s bring Gary Vee back into the discussion. Take a look at his social media accounts. How many times does he mention his agency?

“I don't think I've ever actually seen him do that,” Pearce says. “The point that I'm making there is that if you do have a product, it's very often what you're trying to do is sell yourself and sell the opportunity, sell the dream. You're not really actually trying to sell the product itself because telling people to buy stuff is irritating.”

The Sweat brand steers clear of hard sells. That’s no small feat in an industry that’s always pushing guarantees of six-pack abs, a celebrity body, or a nice rear-end. “We would never, ever do that,” Pearce says of his company, “because reality is that it instills the wrong cycle of mindset in consumers. It predicates the wrong perceived mindset before consuming a product and that only actually sets up consumers for failure.”

How to Sell Without Selling

If people hate being sold to, how do you get them to buy? Sweat focuses on the benefits, not the features. For instance, instead of promising you amazing abs, Sweat’s messaging would tell you how you’re going to feel more confident and develop better relationships by getting healthy with its app.

“The best car salespeople are the ones who actually don't try to sell you anything, but they make you feel like you really want to buy the product,” Pearce explains. “They're telling you why this car's going to be perfect for your family. … They're not telling you that it's got 19-inch rims and blah, blah, blah.”

For Sweat’s Instagram account, Pearce focuses on posting educational, credible content that adds value: healthy eating tips, user-generated content, and motivational quotes, with a few posts highlighting the Sweat app sprinkled in.

“It pitches us as industry experts—which we rightfully are—but then it makes people turn to us when they do want to spend their money on a product that's actually going to help to solve these problems in their life, rather than going for the one that just says six-pack abs, because no one actually believes that crap.”

And Pearce doesn’t get fixated on the one-off purchases; he’s looking to create long-term users and repeat buyers, which is something the Sweat platform is built to nurture. “They develop friendships with other members of our product and that builds our community.”

Working Out What’s Next

For the next year or two, Sweat will be focusing on reducing churn and improving the product, namely, getting more quality content and keeping users engaged.

Long-term, though, Pearce hints at something more. He says there are three big pillars in the fitness industry: facilities (think studios and gyms), trainers and therapists, and content. “We obviously kind of only play in the content spectrum of that at the moment,” he says. “I think in the longer term, we'll probably, hopefully, get a chance to play in some of the other areas as well.”


Key Takeaways

  • How he met Instagram fitness influencer Kayla Itsines, who’s now his business partner and fiancée
  • How he scaled the brand beyond Kayla’s Instagram account
  • The advantages of developing a mobile app versus a strictly web-based platform
  • The growth strategy that catapulted Sweat to about 30 million users in two and a half years
  • What it’s like to run a business with your significant other and how to make it work
  • Tips on growing a personal brand and becoming an influencer on Instagram
  • How to promote your business on Instagram without being salesy
  • His strategy for fostering a strong Sweat community and reducing churn
  • What’s next for Sweat

 

Direct download: FP234_Tobi_Pearce.mp3
Category:general -- posted at: 8:53pm AEDT

Steve was a guest of StartCon, Australia’s largest startup and growth conference. It was held over two days at Randwick Racecourse in Sydney on Nov. 30 and Dec. 1.

One For The Books

The story of Booktopia, ‘Australia’s favorite bookstore,’ and how they’re conquering the competition—even Amazon.

Once upon a time, a programmer who got his start with IBM was given an enchanted opportunity to create a magical bookstore that would one day battle powerful giants. The magical power? With just a click of a button, Australians could have brand new books delivered within days to their doorsteps.

And just like in most fairy tales, our hero and his friends stumbled upon the opportunity entirely by accident. “We literally fell into it,” says Steve Traurig.

Traurig and his two brothers-in-law, Tony and Simon Nash, were running an online marketing consulting business when Angus & Robertson, the 130-year-old Australian bookseller, approached them and asked if they would be interested in getting into the book business. The pitch was a white label book retail website, meaning that everything from the website creation to the distribution would be handled by Angus & Robertson. All Traurig and company had to do was add their personal flair.

But Booktopia, the company that arose from that project, would end up becoming something much bigger. Nearly 15 years after Traurig’s brother-in-law said he “wouldn’t mind giving that book thing a bit of a go,” Booktopia has served over 4.2 million Australians and is on track to bring in $115 million this year, making it the market leader in online book sales. Oh, and they now own Angus & Robertson.

The journey from their very first book sale to squaring off against Amazon for online book supremacy in Australia was a chess game of strategic move after strategic move. Thanks to some shrewd decisions, including focusing on customer interaction and building their own ecommerce and fulfillment systems, Booktopia’s well on its way to happily ever after.

A White Label Bookshop, Transformed

In 2004, with only $10 a day to put toward advertising their new business, Traurig and the Nash brothers dove headfirst into the book world.

“When we first started, we owned nothing,” Traurig says.

When Booktopia first launched, Angus & Robertson created their website, managed their distribution and owned the brand. Traurig and his brothers-in-law were responsible only for marketing, so they created a few Google AdWords campaigns (one of which is still running today) and waited for their first books to sell. By the end of the first year, they were doing $100,000 in business a month.

This worked beautifully for the trio and for Booktopia for three years, but in 2007, they had to confront the reality that what they were building, with revenue ever increasing, could all go away in an instant. They also realized that the fulfillment company was neither able to keep up with the growth they were experiencing, nor were they able to meet the expectations Traurig held.

“We decided we had to go out on our own, because we were actually building a company of value,” he says, “and we realized that if you want to have something of value, you have to do it yourself.”

Things were going well, and they realized that in the current setup, they didn’t really own anything of substance, should they ever want to sell.

So they broke away from the fulfillment company and set out to turn Booktopia into something of their own. They set up their first warehouse, hired a warehouse manager, bought some shelves off eBay, and got to work building their own core systems.

“Dealing with those sorts of numbers in databases, in the website, in the front end, in the backend, etc., the scale is beyond almost any other retail environment, and we had to make it all work,” he says. “We built the systems ourselves and that takes particular commitment and skill.”

With all of the changes taking place, it would have been reasonable to see a marked customer drop off. Before the transfer, they did about 130 orders a day, but that number only dropped to about 110 a day, even after everything from their systems to their website changed.

Through it all, the Booktopia customers remained loyal. In fact, the focus Booktopia places on the customer experience would come to define their brand.

“It’s about the customer obsession,” Traurig says. “About putting yourself in the place of the customer.”

When Traurig and his brothers took on the fulfillment side of the business, they began with only a single book on their physical shelves, but knew that building up their stock was the only way to give their customers the best experience.

Instead of the long wait from the moment an order was placed until a supplier could deliver the order and then ship it off, all they had to do once they built up stock was grab an item from the shelf the moment the order came in and send it along.

“That was essentially a business-changing experience, because the feedback we got from the customer was instantaneous,” he says.

Customers responded with glee that their books arrived so quickly, inspiring them to remain loyal and recommend the bookseller to friends. Because of this organic growth, Booktopia has never needed to take on investors.

Even without investors, they have consistently outmatched the competition and met their sales goals. In fact, they made the BRW Fast 100, Financial Review’s list of the fastest growing Australian brands, seven times between 2009 and 2016, the only company to do so.

Traurig says that they have also built strong relationships with their banks, something he describes as a critical part of doing business. This gives them additional wiggle room if necessary, staving off a need for traditional investors.

“A lot of startups, a lot of founders, think they immediately need to go out and grab someone else’s money and give away bits of the company,” he says. “There’s definitely merit in doing that for certain types of models. We chose to actually build a solid business organically and build it off the back of our customers and customer service.”

And this approach has carried them through what could have been a business-ending battle.

Squaring Off Against a Giant

When Amazon announced that it would be launching in full in Australia at the end of 2017, Traurig wasn’t nervous. The institutions they worked with, however, had concerns.

The gargantuan online retailer had generated $136 billion in revenue the year before, with all signs pointing to continued growth. So how was “Australia’s local bookstore” going to keep up?

Well, according to Traurig, they had been keeping an eye on the behemoth from the very beginning and hadn’t let its success deter them.

“From our point of view, when we started Booktopia, Amazon was shipping $100 million worth of books into Australia already, and we didn’t worry about that,” he says. “We were fearless.”

They focused instead on their own business, and the most important asset: the customers.

Due to its global nature and size, Amazon has an impersonal quality to it that Traurig says Booktopia always vowed to counter. For example, Booktopia’s website has the office’s physical address, email, and phone number on every single page, not only allowing but encouraging customers to reach out and share praise, complaints, and questions instantaneously. They wanted to be accessible and feel like a part of the community.

To keep up with the emails and phone calls, they quickly hired their first customer service staff, a cheerful individual who still answers the questions of Booktopia customers today.

Traurig says they take customer feedback extremely seriously and use it to inform their continued development. With a 20-person development team on the case, he says that Booktopia is always in pursuit of the best possible user experience, a quest that can only be completed through regular, honest feedback.

Traurig says that this approach to customer service has been the key to keeping up with the competition.

“All throughout our history, Amazon has been this massive company…but we were just focused on getting product to our customers.”

And if winning 2016’s National Book Retailer of the Year and 2017’s National Bookstore of the Year at the Australian Book Industry Awards is any indication, Booktopia’s approach is working.

The Next Page

Today, Booktopia has over 6 million products available on their website with over 150,000 of those titles in stock in a 140,000 square-foot distribution center. They also acquired Angus & Robertson, along with its online store Bookworld, in 2015.

“It’s a 130-year-old company that had a very, very good chance of disappearing completely,” Traurig says. “So for us, it was also an honor.” The company currently runs as its own business unit with independent marketing, branding and customer base.

The founders also have high hopes for the company’s automated systems and distribution center. To demonstrate their capabilities, Booktopia acquired an online camera and optics company. In doing so, Traurig and his partners are hoping to show that their systems can handle more than a single type of product.

So what’s next for Australia’s favorite bookstore?

Although they ventured down the path of going public in 2016, they pulled the IPO just before launch, choosing to remain a private company. With Amazon looming, and after watching several other online companies attempt to go public and fail spectacularly, they decided to keep things as they were.

While Traurig has a “never say never” mindset toward another try at going public, there are no plans to move in that direction for now.

“Our customers have been our investors,” Traurig says. “What we’ve always chosen to do is delight the customer.”

And in true fairytale fashion, delight them they will.

Steve Traurig’s Tips on Building a Sellable Company

While founders are still scaling the challenging mountains that come with launching a business, it might seem silly to think 500 steps ahead to the day they will be shaking hands on the sale of the company. But Steve Traurig believes building a company that will someday attract a buyer starts on day one, so he offered three tips to creating a company that will sell.

  1. Make Sure Your Bookkeeping is Impeccable

“One of the things we’ve always done is make sure that our financials, our financial reporting and our accounting are top notch,” he says. As you might expect, well-kept books have always been a priority at Booktopia. From the very beginning, they sought financial advice when necessary and kept all of their books in perfect order. And because neither he nor his other co-founders had strength in bookkeeping, they always made it a number one priority to hire someone skilled.

“It may just all look like a whole bunch of receipts and a pain the neck…but aim to set up solid financial management right at the beginning.”

  1. Create as Many Original Things as You Can

In the beginning, Booktopia was a white label website, but when it started to flourish, Traurig and his partners realized they needed to make some changes. “If we wanted to sell it,” he says, “we had nothing to sell,” Traurig says. So they decided to build all of their own core systems to create something that would be attractive to eventual buyers. Traurig encourages founders to use as many original systems as possible and innovate wherever feasible. In doing so, the value of the company you may someday look to sell increases significantly.

  1. Demonstrate What You’ve Built

Now that you’ve created something original, it’s time to show what it can do! Perfect its intended capabilities and then push its limits. This is what Traurig says they are currently doing at Booktopia with their distribution systems. Because they created the automation used in the center, they decided to demonstrate to potential buyers that it could handle more than one product at a time, leading them to purchase a camera company. The only thing better than an innovative creation is one that can be used in more than one way. Traurig says that demonstrating this is a great way to build a sellable company.

Key Takeaways

  • How this self-professed tech guy “fell into” starting an online bookstore that rivals Amazon
  • How Booktopia has remained fully self-funded for 15 years
  • Why they pulled an IPO just before it went live
  • How he felt about Amazon coming to Australia
  • For bootstrapped businesses, how to know when it’s time to build your own internal tools and handle shipping and fulfillment yourself
  • The reasons behind the acquisitions Booktopia has made, particularly Angus & Robertson
  • How Booktopia approaches Conversion Rate Optimization (CRO)
Direct download: FP233_Steve_Traurig.mp3
Category:general -- posted at: 11:43pm AEDT

Eighteen years ago, David Heinemeier Hansson was a college student sitting in his little apartment in Copenhagen when he stumbled across a blog post by 37signals (which would later become Basecamp), a Chicago-based design company he had long admired.

In the post, co-founder Jason Fried posted a question on some aspect of programming. Hansson knew the answer, so he contacted Fried. Several emails later, Fried was asking Hansson to work with him.

“Jason decided it was easier just to hire me than to learn how to program,” Hansson says, “and that's how we started working together.”

That was the beginning of a now-legendary tech startup team, and an illustrious career for Hansson. In Hansson’s early days at Basecamp, he famously created Ruby on Rails, an open-source web development framework once used by Twitter, and still in use by GitHub, Shopify, and many more.

We were excited to talk shop with Hansson (often known as DHH) because, in an industry dominated by breakneck Silicon Valley culture, Basecamp stands out in many ways: It’s been profitable every year since its inception in 1999, it doesn’t chase growth, and it doesn’t even set numerical goals.

With their latest book, It Doesn’t Have to Be Crazy at Work, Hansson and Fried are hoping to challenge the prevailing narrative about chaotic work culture by sharing the unique way they run their company.

This is Part 2 of our Basecamp co-founder interviews. To hear Part 1, check out our podcast interview with Basecamp co-founder Jason Fried.

Key Takeaways

  • The blog post 18 years ago that brought Hansson together with co-founder Jason Fried, and what compelled Fried to hire him
  • How Hansson invented revolutionary web development framework Ruby on Rails
  • Why it’s never too late to learn how to program
  • The story behind how Jeff Bezos bought a minority, no-control stake in Basecamp in 2006—and how Hansson feels about it today
  • Basecamp’s philosophy on growth
  • His latest book, It Doesn’t Have to Be Crazy at Work, and why he hopes to challenge the prevailing narrative about entrepreneurship and growth
  • How Basecamp defines success, even though it doesn’t set goals
  • The disadvantages of large companies
  • How to maintain a strong company culture when your team is remote
Direct download: FP232_David_Heinemeier_Hansson.mp3
Category:general -- posted at: 10:17am AEDT

Ditching Growth and Setting Up Camp

How Jason Fried and David Heinemeier Hansson turned their backs on lofty goals and created a profitable tech company quite unlike any other.

Growth is exciting. Sales boosts, climbing revenue, and eager investors are all signs of a happy, healthy company. Right?

Basecamp founders Jason Fried and David Heinemeier Hansson beg to differ. While they rejoice in revenue and profit as much as the next set of tech company founders, they define success a little differently.

Instead of chasing arbitrary growth goals and deadlines, they simply aspire to do their very best work day in and day out.

Instead of always expanding their line of software products, they double down to perfect the one they already have.

Instead of scrambling to hire more people when revenue is climbing, they enact a hiring freeze so as to not lose sight of their mission.

Critics might call their approach too timid. Others call them brilliant. Fried and Hansson don’t care much either way. They’ve followed the startup road less traveled and have pitched sturdy camp at the end of it—all while remaining profitable and highly respected.

Today, Basecamp is one of the leading project management and team communications tools on the market, while boasting remarkable employee satisfaction. The duo also have a new book out explaining their unique take on startups and how they’ve found success.

Setting Up Camp

The origins of Basecamp date back to 1999, when Fried started 37Signals as a web design company. It’s since transitioned to a web development company, specializing in project management and team communication software, and became Basecamp in 2014.

The transition to web development happened in the early 2000s, when young Danish developer Hansson responded to Fried’s blog query about PHP. Hansson had been a fan of 37Signals for years and jumped at the chance to help out. After a handful of emails, Fried decided it was easier to hire Hansson as a programmer than learn to code himself.

The firm created Basecamp’s flagship software product in 2004 and drummed up 45 customers in its first year. The idea was simple, but met an important need in the modern workplace: It allowed for real-time, remote communication to help teams identify what needs to be done (and when) and work together smoothly and efficiently. In the following years, the pair saw their product achieve steady growth, which also caught the eye of venture capital and private equity firms.

Even so, working with investors never made sense to Fried and Hansson. They didn't want to sell any control of Basecamp or be forced to exit their business on someone else’s timeline. But they did need money to continue developing Basecamp and its products.

In 2006, the pair was approached by Jeff Bezos himself. In exchange for a yearly dividend payout (but without making any other demands or staking any other claims to the company), Bezos purchased a piece of ownership and became a member of Basecamp, LLC. This arrangement worked well for Fried and Hansson as they didn’t have to sell control of their business to raise money, and the purchase was a lucrative investment for Bezos.

“[After Bezos’s investment], the appeal of selling the company subsided and allowed us to pursue our mission to build a wonderful company to work in for the long term,” Hansson said.

Fried and Hansson maintain a fiscal relationship with Bezos, but that’s about it in terms of what they’ve taken from the richest man in the world. As for perspectives on growth, productivity, and culture, Basecamp has blazed a trail of its own.

It Doesn’t Have to Be Crazy at Work

Or does it? Fried and Hansson’s latest book introduces a new perspective on the modern-day entrepreneurial hustle. They published this book to “[send] out an alternative beacon,” Hansson says.

The cover of It Doesn’t Have to Be Crazy at Work features a big red “X” crossing out words like "packed schedules,” "80-hour weeks," and "overflowing inboxes."

Sadly, a lot of today’s business literature and role models celebrate crazy schedules, packed days, and little sleep. “[This has] been a predominant narrative for quite a long time,” Hansson says.

Pushing back on the norm, It Doesn’t Have to Be Crazy at Work argues that this kind of lifestyle isn’t healthy, sustainable, or necessary. “You can do great work in a normal eight-hour day and 40-hour week,” Fried says.

Basecamp’s culture and success is a testament to this ideal. The 20-year-old business has been profitable every single year since it started, and the company’s 50-plus employees work a totally normal schedule. “At Basecamp, it isn't crazy at work,” Hansson says. “Crazy at work should be an exception; it shouldn't be the norm, and certainly not be an aspiration.”

The (Mis)Guiding Principles of Goals and Growth

As of 2018, Basecamp has more than 100,000 companies utilizing its software. But unlike most tech companies, that number goal doesn’t dictate their work.

“We have no interest in building [our] company to a certain amount of dollars or size,” Fried says.

In Silicon Valley, businesses often feel the need to dominate industries and destroy the competition. Basecamp isn’t driven by those criteria, and they’re definitely not driven by constant growth or lofty goals. “We've always felt that we don't need to chase anything but profit and quality...and quality of life, for both our employees and customers,” Fried says.

To Fried and Hansson, it’s much more about running a sound, sustainable, profitable business. Instead of prioritizing OKRs or various other acronyms, they simply focus on doing the very best work they can every day.

“The idea that a goal should be driving you harder. ... I don't understand why that'd be,” Hansson says. “People forget that goals are figments of their imagination.”

He explained that as a primary indicator of what success should look like, goals are not helpful. They’re arbitrary measures of success or failure…and falling short of one can make you feel bad when you shouldn’t.

Moreover, goals are often determined by looking at others. “They become this death of enjoyment by comparison,” Hansson says.

Basecamp does set a few loose, top-level goals, such as “build a good product,” “create a great place to work,” and “treat customers with dignity, honesty and kindness.”

But what about specific metrics, like sales, retention rate, or customer success? “We can look at [those] numbers, like retention rate, renewal rate, etc., to see how well [Basecamp is] working,” Fried says. “But we don't have goals around those numbers.”

To measure the success of their product, the team simply uses it themselves. They actually use it more than any other company. By employing their own product and improving it every day, they’re able to better understand their customer experience. And when it works better for them, it works better for their customers.

“We judge our success by how we feel about our work, and the customer reaction and reviews,” Fried says. They ask themselves, “Are we proud of what we did today? Are we proud of the way we did it? And ultimately, do customers like the product?”

How Basecamp Approaches Success

Such a nebulous approach to growth and goals is sure to make employees feel adrift, right? One might think so, but the opposite is actually true for Basecamp employees, they say.
“[We believe] work should be a pleasurable experience,” Hansson says. “Success to us means we set our own agenda, control our own destiny, and have a sense of independence,”

There are very few meetings at Basecamp, and that’s not just because they are a mostly remote workforce. The company does have an office in Chicago, but even those who live nearby only come in a few days a week.

“We’re a writing-heavy company,” Fried says. Instead of insisting on weekly stand-ups or organizing project check-ins, the pair encourages their employees to chronicle all updates, ideas, and thoughts. This gives employees a chance to ponder what they’ve read and formulate thoughtful responses—instead of presenting an immediate reply the way you’d expect in meetings and boardrooms.

This notion of slow, delayed communication inherently pushes back on live chat, an up-and-coming trend in today’s tech companies.

“The idea of chat as a primary means of communication inside of a company, I believe it to be a very toxic idea,” Fried says. He argues that outside of social communication and quick check-ins, keeping in touch with chat can cause a massive distraction for employees.

“I think that, right now, chat is why work is more hectic for more people,” Fried says.

Like they contend in It Doesn’t Have to Be Crazy at Work, Fried and Hansson don't expect, require, or support a culture that's “always on." They routinely monitor for “overwork,” and occasionally have to gently remind employees that late-night emails or mid-weekend product updates aren’t necessary. In fact, they’re frowned upon.

We don't reward late, hard overwork,” Fried says. “We’d rather reward someone who works normal hours and gets a lot done…someone who protects and manages their time. There’s no celebration of long hours here”

Basecamp hasn’t always been like this, though. Some of the values have been around since the beginning, but the company has spent the last 20 years constantly tweaking the way they work.

One major change Fried and Hansson have made is the way Basecamp gets projects done. The company used to work with absolutely no deadlines, then started implementing three-month work periods. Today, they work within six-week cycles.

The team doesn’t do anything they can’t complete in six weeks. When asked if that sort of deadline adds pressure, Hansson is quick to respond: “It could if you don't approach the idea of the budget as a tool. It’s there to shape your decisions and guide you. Budgets make it easier to say ‘no’ or ‘not right now.’”

Fried and Hansson are less interested and impressed by the results of work done with unlimited resources or timeframes. In the past, working with no deadlines left each project open-ended. It was harder for developers to say “no” or know when to stop working.

Each six-week time budget forces employees to make decisions and weigh tradeoffs. “That's what's enjoyable about product development,” Hansson says.

By implementing changes such as these, Fried and Hansson have noticed that Basecamp has become a calmer company. While the pair conducts employee audits twice a year, they mostly take the pulse of employee success and satisfaction by staying close to each team, which isn’t hard given the company only has 53 employees.

“We're constantly seeing [our employees’] work and talking to people,” Fried says. “We have a really good sense of how things are going. It’s pretty obvious when someone’s not doing well.”

How does their remote culture affect this? It doesn’t. The team has a few in-person outings each year—when they gather everyone in their Chicago office—but even those are spent “reconnecting and recharging social batteries,” as Hansson explains.

Basecamp’s culture is simply based on trust and harmony between words and actions.

When asked about the challenge of building a culture with a remote workforce, Hansson says, “[That is] based on a misconception of what culture actually is. Our definition is that culture is repeatable actions, what you actually do.”

Fried and Hansson do instill specific values and principles throughout the company, but Basecamp’s culture arises when they live up to those words. “Nothing transmits culture more than seeing actions, especially during hard times.”

He also believes that a remote workforce is better situated to building a strong culture because such culture is derived even more explicitly from the actions you actually take and the shared writings you commit, given there’s no office or in-person meetings to do the work for you.

The numbers behind Basecamp’s culture and employee satisfaction are off the charts. The industry average for employee turnover is about 18 months. Of the 53 employees currently at Basecamp, the average length of employment at Basecamp is 5.8 years. Eight employees have been there over 10 years, and almost half have been there over seven.

“Basecamp employees stick around a long time, even in traditionally high-churn positions,” Hansson says.
The company has recently enacted a hiring freeze, announced by Hansson in a post on their blog, Signal V. Noise, aptly titled, “Things are going so well we’re doing a hiring freeze.”

In the spirit of constraints, they’ve capped their headcount and are doubling down on good, effective work.

“We have no love for size,” Hansson says. “Big companies can’t solve small problems. The bigger they are, the more divorced and less able they are to relate [to customers]. More layers of management and indirection only harm empathy and kindness.”

Key Takeaways

  • How his latest book, It Doesn’t Have to Be Crazy at Work, is pushing back on Silicon Valley’s excessive work culture
  • Why chasing growth in your business can blind you
  • Why Basecamp doesn’t set OKRs, KPIs, or any goals of the sort
  • How to know if you have the right people on your team
  • How to ensure your remote team is doing their best work
  • The evolution of Basecamp’s culture and work processes over time
  • The difference between deadlines and “dreadlines”
  • When Slack can be toxic to your company
  • Why in-person communication isn’t as important as you think (and might even be detrimental)
  • How to eliminate meetings once and for all
  • The story behind selling a piece of ownership to Jeff Bezos
Direct download: FP231_Jason_Fried.mp3
Category:general -- posted at: 9:41pm AEDT

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