140: From $300k in Product Sales to $9m in Software Sales with Nathan Barry


by Alexa on Mar 06, 2018 in Podcast

How to tier your pricing structure, why you should save your side business income, and how to incentivize word of mouth with Nathan Barry.

Welcome to episode 140 of the Food Blogger Pro podcast! This week on the podcast, Bjork talks with Nathan Barry from ConvertKit about how he started his career and pivoted to focus on selling software.

Last week on the podcast, we shared the Q&A from our recent Recipe Video Bootcamp. To go back and listen to that episode, click here.

From $300k in Product Sales to $9m in Software Sales

Nathan started out as a designer and app developer, and he launched his first product to an email list of 800 people. Thus started his successful product sales career, writing three books, two courses, and building an email list.

But then in October 2014, Nathan decided to pivot. He decided to focus on his email software, ConvertKit, which was making only $1,000/month in revenue at the time. Now ConvertKit has over 18,000 users, including Pat Flynn, Leo Babuta, and Chris Gillebeau.

How to tier your pricing structure, why you should save your side business income, and how to incentivize word of mouth with Nathan Barry.

In this episode, Nathan shares:

  • What he did before starting ConvertKit
  • His suggestions about what you should do with your side business income
  • Why he suggests to tier your pricing for a product
  • How to price a product
  • Why he wanted to make an email marketing platform
  • How he decided to focus on software
  • How to incentivize word of mouth

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Bjork Ostrom: In this episode, I talk about a simple goal that every blogger needs to have, and we connect with Nathan Barry from ConvertKit, and chat about email marketing. Hey everybody, this is Bjork Ostrom and you are listening to the Food Blogger Pro podcast. We have been doing this for a couple years now and it is one of the great joys of my job is producing this podcast each and every week and sending it out to you across the world. We have people that listen all around the world and I think that’s so incredible.

The WP Tasty Sponsorship, or the Tasty Tip is something that we’re doing every single week. And WP Tasty is not an English poet as my friend gives me a hard time about. He actually calls it MT Biscuit. But it is not MT Biscuit, it is WP Tasty. And WP Tasty is a site for WordPress bloggers. We launched WP Tasty about a year ago now and we have been going strong. We are now in the 1000s of users and it’s been slowly but surely picking up speed and we’re really, really excited about it. And it is the official sponsor for this podcast with a Tasty Tip. And what is a Tasty Tip? Well, a Tasty Tip is a really short concise but actionable piece of advice that you’re able to implement on your blog.

Sometimes it has to do with the plugins that we publish at WP Tasty. So it might be about publishing a recipe post and how you can optimize that for SEO, because that’s what our plugin Tasty Recipes is for. Or it might have to do with Pinterest or optimizing your images ALT text, which is what Tasty Pins is all about. And those are the two plugins and products we have at WP Tasty right now. But sometimes, it doesn’t have to do with either of those things and that’s the case for today’s Tasty Tip. Today’s Tasty Tip is about goals for bloggers. And these aren’t the kind of goals where you set a goal and you want to achieve a certain amount of page views in a month. This is a goal that you would set in Google Analytics. And lots of bloggers have Google Analytics set up and if you don’t, that’s definitely something you should setup.

But not as many bloggers have a goal set up. And I would really encourage you to set up a simple goal if you haven’t yet done that before. In the previous episode, we talked about the Tasty Tip of optimizing your conversion pages. So, if you have a page where somebody signs up to be on your email list, which is perfect for today and they hit this confirmation page. Maybe it’s not going to be the ideal page. It’s probably not going to be branded or look the way that you want it to. So it’s important to think about intentionally crafting those pages on your blog. Along with that, you should set up a goal in Google Analytics for those important pages. So what are some pages that you could set up goals for. Well, the one that I just mentioned is a good example, any email confirmation page.

You could also set up a goal page if you have any type of conversion for a product. So if you are selling something on your blog, make sure that you are tracking the conversions of those pages by setting up a goal in Google Analytics. And to do so is really easy. We’re not going to walk through the exact steps of how to go about doing that. But you can find the Goals area in Google Analytics by going to the Conversions area and then you can click on Goals. And that will show you the entire Goals section for Google Analytics. And all that you need to do when you’re setting up a goal in Google Analytics is there’s multiple different ways you can do it. But one of my favorite ways is to pick a goal URL.

So what is the URL on your blog or your website that you want people to go to and when they get there, you consider that a successful conversion or a successful visit. And for a lot of people, if you have an email list, which we’re going to be talking about today, that goal page can be the page that people see after they sign up for your email list. So that would be the Tasty Tip for today. If you haven’t set up a goal before, jump in, set up a goal for your blog or your website, so you can track along and see within Google Analytics, how many people are signing up and hitting that page each and every day. And I think once you do that, you’ll start to be really encouraged to try and get that number to increase because we improve what we track. And if you are tracking important things and you’ll be able to improve them a little bit better.

That is the Tasty Tip for today brought to you by WP Tasty who sponsors this podcast and is also one of our sister sites for Food Blogger Pro. Email and conversions is actually a really good topic for the Tasty Tip today because we’re talking with Nathan Barry from ConvertKit. And Nathan is going to be sharing his story of building ConvertKit up from a tiny startup that was kind of struggling along and they were really trying to make ends meet and the expenses every month were as much as the income. And he’s going to talk about how he strategically made some decisions and started to become a profitable company. And it’s a really inspiring story for any of you that are interested in building a business, which is a lot of people that listen to this podcast.

He’s also going to talk about some tips and advice for bloggers when it comes to email marketing in general and some things that you could be doing as a blogger and a content creator to help encourage people to sign up for your email list. So it’s going to be a great story and there’s also going to be some great actionable advice from Nathan. So let’s go ahead and jump in. Nathan, welcome to the podcast.

Nathan Barry: Hey, thanks for having me on.

Bjork Ostrom: Yeah, it will be fun to chat here because I really view this interview as a two-part interview. First, I’d love to talk about your story as an entrepreneur and I’ve been able to observe you as you’ve created publicly and talked about your journey as an entrepreneur. And I followed along with that. And then after that, we’re going to talk a little bit about some specifics with email because ConvertKit is obviously all around email. So a two-part podcast interview. We won’t officially break it up. But let’s jump into the first part and hear a little bit about your story. So take us back to pre ConvertKit. Before you started ConvertKit, what were you doing?

Nathan Barry: Yeah, I was designing software and then writing blog posts about how to design software. So my background is first in web design, then in I guess what’s known as user experience design and software design. And so I was working for a software company, leading their design team and then I really got into designing iPhone and iPad applications. We had the fun experience of building an iPad app before the iPad was released.

Bjork Ostrom: Oh cool.

Nathan Barry: So we got to design an app even before we had the device. And it was really cool experience to like go to the Apple Store and buy it.

Bjork Ostrom: Yeah.

Nathan Barry: And then like load our software on it and be like, “This works right?”

Bjork Ostrom: For sure.

Nathan Barry: We’ve never tested it, but it was out on the App Store. So it was really fun.

Bjork Ostrom: So you’re working as a software designer at a, was it an agency?

Nathan Barry: No, it was a software startup.

Bjork Ostrom: Okay, got it.

Nathan Barry: We were probably half software then half video production. Because it was a video delivery startup where, it was more into corporate training and used by a lot of hospitals and people like.

Bjork Ostrom: Got it. And so what happened, I would assume is that the iPad is coming out. And so it says, as a company, you have this conversation like, “Hey we should probably have an iPad app here in the App Store.” So you create that. While creating that, you realize “Hey this is something that I really enjoy.” The process of developing for the iPad and for the iPhone. So, did you take that and then kind of as your side hustle start to designs apps for fun? Did you do it, consulting for other people that had maybe their own little side business that they were starting as an app? What did the next step look like?

Nathan Barry: Yeah it was kind of all of the above. So, I started with the very first app that we did. I just designed it, like in Photoshop, and didn’t write any code for it. And then the next app, like I was just like, “I’m going to do some implementation of it.” And then, after that, it was like, “Well, we don’t need to build any more apps for work.” We had made two big ones. And I was like, “But, this is fun.” I’m like, “I’m not, you know, you may be done with apps and not needing it anymore, but I’m not done.” And so then I started along with a couple coworkers. We all kind of had our own little side projects, apps and just started building stuff. And that was really fun. And so each time, I’d get deeper and deeper into the code side of things.

And one of my coworkers, who’s a good friend, his name’s Chris. He was a developer and so he had his apps. He’d make fun little math apps for kids and other educational apps. And then I would help him design those out and then I was making some apps like a Habit Tracking app, a Language app, and some other things. And I would design them and code them, and then I’d get stuck somewhere and he’d be like, “Oh yeah, let me help with that.” So computer science 101, he’d like teach me through some of these areas. It was really, really fun time.

Bjork Ostrom: Cool. So that then led you to a point where you said, “Okay, I’m interested in apps. I’m starting to design them. Even starting to develop them a little bit.” But then, as you’re doing that, you start to teach other people about the things that you’re learning. And as I understand your story, that was kind of your first step into selling product at scale. And can you talk about the first product that you put together? How you knew that it would be a product that you should put together and then what the process was like selling that? Pressing that button to publish that and then to offer that to the world.

Nathan Barry: Yeah, so I wanted to be a blogger. I looked at people, like Chris Guillebeau and Tim Ferris. And so these other people putting out great content out on the web and I wanted to be like them. I wanted to have my own audience. And so, as I was building apps, I was always looking to that world. And somewhere in there, I learned the, “Hey you could write a book and you can actually make money from that.” And so that got me in the idea of, “Okay I’m going to write a book called the App Design Handbook.” It’s going to be teaching people, you know developers or people who might get into design, how to design iPhone applications. I learned a lot, probably from Chris Guillebeau in particular. He’s been a big influence on me.

And you know, just kind of wrote out that book and my hope was to make $10,000 over the lifetime of sales from the book. Because my idea was, “I’m going to build this audience and I want this product out there.” But I didn’t know like how successful it could be. And my idea was that I was going to use this as kind of like a calling card for, “Hey hire me to consult on your app design.”

Bjork Ostrom: Yeah.

Nathan Barry: Be a reputation booster.

Bjork Ostrom: What did you learn from Chris that was helpful?

Nathan Barry: So a couple of things. He had these two manifestos that he put out early on. And they’re still available and I highly recommend reading them. One is called, “The Complete Guide to World Domination” and you know, it’s just this short PDF but it’s super inspiring. And then the other one is called, “279 Days to Overnight Success”. And I love this one because everything, and it’s super interesting to look back on now. I just pulled it up a few days ago actually, after having not read it. It was written back in 2009 or something, 2010. What’s interesting is the numbers that he’s talking about in there. He’s talking about getting to $60,000 a year in revenue from his blog. And numbers that like, you and I have spent tons of time around the blogging world for people like, “You know everyone’s saying I’m a six figure blogger. Oh you’re only a six figure blogger? I’m a seven figure blogger.”And part of me is like, “Shut up guys.”

But the other part that’s interesting is like the way he sets the bar for achieving success with your blog made it seem really achievable.

Bjork Ostrom: Yeah.

Nathan Barry: And it wasn’t some crazy outlay. It was like, "No, no, no. These things get pulled together so that I can be a full time blogger. And here’s how it took me 279 days to get to the point where I could make a full time living from my blog. And it’s just great when we’re telling. And so it felt very approachable. So, that was one thing. Do you want to add to that?

Bjork Ostrom: Yeah, well I was going to say, I think it’s a really important takeaway. I think maybe we’re spending some time on you know as people that listen to this podcast would be interested in either doing what they’re doing better from a business perspective with their blog or getting started from the business perspective. And one of the things you said was that pulling it all together. And can you talk a little bit about what you meant by pulling it all together and how you did that. And then, how that impacted your mindset?

Nathan Barry: Yeah I think what was interesting for me is that he had a bunch of different revenue sources. And I can’t remember now. I would need to read the whole thing again. You know, but it was like the writing that he did for this publication and then it was his own products that he sold here. It was definitely a few different sources and as much as the title of the ebook kind of points to the 279 days to overnight success in that it didn’t happen immediately and he had to pull from a bunch of different places.

Bjork Ostrom: Right.

Nathan Barry: It wasn’t like he was like, “Yeah, I came up with a course and it sold $50,000 the first week.” It was all easy from there. Why don’t you do the same thing? I don’t understand."

Bjork Ostrom: Right.

Nathan Barry: You know, it was very much like he worked at this, he built it up over time. There was some affiliate revenue in there, there was some advertising, there was…I don’t know if he had some sponsored posts. I don’t think he did. But then, the bulk of it was his eBooks and courses and it just felt scrappy and relatable.

Bjork Ostrom: Yeah.

Nathan Barry: In a way that nothing else had.

Bjork Ostrom: Yeah, so this is an older episode for people that are just picking this up. In episode 97, one of the things that I talk about is this idea of the Egg Carton method. And it sounds really similar to what you’re describing where you view your blog not as, or your business, whatever it would be, your online business not as, “Hey how can I, from this one source, ads or affiliate income. How can I get to the place where I replace my full time income?” But instead viewing it as an egg carton and saying, “Okay if I need $50,000 as a salary, how do I break that up down, or break that down to a point where from 12 different sources, I can pull in enough.” And when you do that, you start to realize like, "Oh okay, I don’t have to make $3,000 a month from advertising. I can start with $300 or $400 a month. And from affiliate marketing, it could be the same thing. And it becomes more approachable and in some ways, more encouraging because the numbers don’t seem as daunting.

And it sounds like maybe that kind of overlaps a little bit. We’ll link to both of those things in the show notes, the 279 Days to Overnight Success and the podcast I’m talking about. But it sounds like maybe there’s some overlap there with the idea that, "Hey you don’t have to be super incredible and get to you know, 9000 visitors overnight. But you can put these little pieces together along the way.

Nathan Barry: Right. Yeah I 100% agree with that. And I think, what I particularly like about that is that just the way it builds on itself. The other thing I would say is if you’re in that position right? Your goal, I don’t know maybe your 2018 goal, is to quit that job. Let’s say, it’s making you $50,000 a year and you need to replace that income. One thing that I would really encourage you to do, if that’s where we’re going to be at by the end of 2018, that’s what we’re working super hard. It’s not going to happen immediately. It’s not going to be like you made zero dollars and then now you’re making whatever that is, 47. I can’t do the math in my head. But some number of thousands of dollars a month.

Bjork Ostrom: 4000, make it easy.

Nathan Barry: Yeah, it’s not going to happen instantly. And so, at that point, let’s say it’s February and you’re making $1200 a month. Go put that money in savings. Like, take that income that’s coming in. This is what I did with those iPhone apps in their early days was as they were in the App Store, they were making some money. First they were making $500 a month and then by the time I quit my job, they were making $3000 a month or so, which was not enough for me to live on. But I had been saving it all the way along. And so then, when it came to time to quit, I had $25,000 saved up entirely for the purpose of funding me quitting my job.

Bjork Ostrom: Yup. Yeah and…

Nathan Barry: Allowed me to quit a little sooner.

Bjork Ostrom: Yeah and I think the other thing that helps you do is that it doesn’t let you have lifestyle inflation where suddenly that $3000 a month gets folded into the coffee budget.

Nathan Barry: Yes.

Bjork Ostrom: And it’s like you upgrade from the coffees to caramel macchiatos and suddenly it’s like your spending increases to the income and if you put that away, it allows you to maintain that number that then you can then transfer over to.

Nathan Barry: Right.

Bjork Ostrom: So you’re starting to have some success with this and it’s starting to get some traction. You’re inspired by Chris Guillebeau and you launch this, your first product. And your first product is around the thing that you’ve been passionate about which is iOS development, it wasn’t called iOS at the time, but iPad and iPhone design. What happened when you did that? And was it what you expected?

Nathan Barry: It exceeded expectations in pretty much every way. So I launched it to a little email list of 800 people and my goal was at 10,000 over the course of the lifetime of the project. Maybe five years or three years or something. And it made $12,000 in the first day. And I went, “Whoa, okay.” I heard crazy stories of other people doing you know, epic launches. But that was them, and they were internet famous. And this was me. You know on my prelaunch list of 800 people. And so I was definitely blown away by that. And I actually didn’t take on a single…The point of the book was to help me get that reputation so that I could charge more on my consulting and get more people. I didn’t take on a single consulting project after that. I just said, “Nope, I’m a full time blogger now.”

Bjork Ostrom: Yup.

Nathan Barry: That’s, you know, that’s amazing.

Bjork Ostrom: Yeah and it’s a huge proof of concept that what you were doing was needed. But also, what you’re doing was valuable. Right so, the solution you came up with solved the problem that you thought it would. I know for some people, they go through that process, they launch and it falls flat. So what do you think was the difference between what you did versus a launch that just falls flat?

Nathan Barry: Yeah, that’s a good question because a lot of people you know are going to have that frustrating experience of like, “I couldn’t build the prelaunch list or you know I did, but no one went to purchase.”

Bjork Ostrom: Yeah.

Nathan Barry: I think there’s a couple of things. You know, the size of that prelaunch list matters. If that launch is to 50 people, then you got to do some work to get it at least up into the two, three, four hundred people. If we’re going to have a successful launch. The next thing is, if you have those people, one trap that is easy to fall into is to think, “Okay I have 5000 people on this list. So the conversion rate will be X and a bunch of them will buy.” But often they didn’t intend to be on that list for that product. They just signed up for your blog or they signed up for something unrelated from two years ago, and they’re still on your list now that they’ve pivoted your blog four times. And then so you’re like, “Why aren’t they buying?” Well it’s because they don’t actually even care about this thing that you’re doing now.

Bjork Ostrom: Sure so…

Nathan Barry: It’s not a list for that product. It’s a list for whatever you’ve had as your interest that’s changed over the years.

Bjork Ostrom: Yeah.

Nathan Barry: I think that’s a big risk.

Bjork Ostrom: In your case, it’s a super targeted list. It was all people that were interested in iPad and iPhone design.

Nathan Barry: Yeah, exactly. So it’s about as targeted as you could get.

Bjork Ostrom: Got it. And so you’re, were there some more things, takeaways that you’re going to say that in terms of success versus not success.

Nathan Barry: Yeah. I think in the mistakes that I’d, the next thing you could do is you could really mess up the pricing. One thing I learned from Chris Guillebeau was doing tiered packages. And I’ve written a bunch of articles on this if you just search “Nathan Barry tiered pricing”. I’ve written like probably 30,000 words all across the internet about this one thing. But basically the idea is instead of charging the same price, say $29 for your book or your course, you should have some tiered prices. So $29 is the entry point, and then maybe $99 is the higher end package. And what you’ll find is that only a smaller subset, maybe 20–30% will go for that higher package but they’ll represent over half the revenue.

And so just doing that, every time I’ve done it, every time I’ve helped other bloggers implement tiered pricing, they’ve always at least doubled their revenue by doing that.

Bjork Ostrom: Yeah and idea of being that, just because you have a certain product price point, doesn’t mean that, that’s serving the needs of everybody that’s there. There might be people that’s would have a bigger budget, that would be willing to pay more in order to have additional value or product or services, whatever it would be.

Nathan Barry: Yup, for sure. And everyone has a different price tolerance.

Bjork Ostrom: Sure.

Nathan Barry: So, you might be willing to spend $50 and think nothing much of it. I might be like, “Ooh, $20 is the max I can do.”

Bjork Ostrom: Yup.

Nathan Barry: So if you had two price points at $20 or $50, like you and I will both be happy consumers and the author will have made $30 more off of that sale.

Bjork Ostrom: Yup. And how do you know how to price your product? It’s a huge tough question but in your case, how did you go about picking that number?

Nathan Barry: Yeah, you know, I don’t think I had much of a formula to it. I originally went with I think $29, $79, I did three packages, $29, $79, and $129. Or something like that, or $180 I can’t remember. And they were just examples of what other people had done. I heard this tiered package idea. So I put together a top tier package that I didn’t think people would buy. Turns out a third of everyone bought that and it accounted for well over half the revenue. I was like, “Oh, okay.” You know so, I think the thing to do is to just pick, figure out what the ratio is. You’re like, “Okay I would like 50% of people to buy the smallest package, 25% to buy the medium one, and 25% to buy the most expensive.” And then throughout launches and other changes, keep tweaking those prices so you end up close to that ratio.

Bjork Ostrom: Got it, yeah. Tweak, adjust, change, monitor.

Nathan Barry: Yeah and I would say, set the prices at something. If you’re super worried, you could set them lower than maybe what people are recommending. Do a launch at that and then for your next launch, “You know, okay we’re going to raise them by 50% or 30%, or something like that.” And see where the price tolerance is, especially when you have tiered pricing. Then you get to cover this range. And that ends up being really good. So you’re less likely to run into the problem of, “Oh, I priced a course at $500 and nobody bought it and it really should have been at $200 or $300.”

Bjork Ostrom: So you are starting to make this transition. You’re experimenting with apps and those are having some success. Now you do an information product around designing apps, that has success. You double down on that and get even more traction. And it got to the point where, you know you’re reporting publicly on this and talking about it on your blog, and you get to the point where in 2015, you make almost $300,000 from products on your blog. And around the same time, you’re also starting to experiment with starting this software company called ConvertKit. So can you talk to me about that pivotal point in your life and why not just continue with the success that you had with the products you’re selling on your blog.

Nathan Barry: Yeah so, I wanted to get back into software. I felt like I was teaching people how to make software and I was kind of getting a little bit disconnected from actually designing and creating software myself. So I wanted to get back to that. And the other thing is that I’d gotten really good at a launch driven model for my business. Where I would do a product launch, it would make $20,000 to $40,000 in one go. And then maybe, even in a day. And then would taper off from there. So my launch, I might have a $60,000 month, but then my average would be. Not the average, maybe the low months where I wasn’t doing a launch would be $10K or something like that. And so I really wanted the stability and I was originally drawn to the reoccurring revenue that a software as a service platform has. So hey I wanted, instead of buying a $29 ebook, you’re paying $29 a month for as long as you use that product.

So I wanted that. I liked the stability of it. My idea was, “Ooh, then I can have the launches.” You know be these big peaks and valleys and then with the recurring revenue, smoothing that out, it’ll be perfect. The other thing, I was getting a little bit bored. I’d figured out a system for, you know drawn from a lot of other people and my own ideas for self publishing, for fill in audience. They’ve written a book on it called “Authority”. And I was like, “Hmm, I can make this gradually increasing $300,000 a year.” You know, maybe get it up to 350 and then 400, or something like that, without ever really challenging myself.

Bjork Ostrom: Right.

Nathan Barry: I could just execute the same playbook a little bit better every year and that’s where were at.

Bjork Ostrom: Yeah.

Nathan Barry: And it wasn’t challenging. So I was like, “Software company sounds hard.” Like a lot of new challenges, so let’s go do that.

Bjork Ostrom: Yeah and I would guess that you are right. It is a hard thing, isn’t it?

Nathan Barry: It’s very hard.

Bjork Ostrom: Turns out.

Nathan Barry: Way harder than I thought.

Bjork Ostrom: Turns out you were right. So ConvertKit, you decide to create an email software product for bloggers. Before we jump into the story of ConvertKit and cover that, can you talk about at a high level what ConvertKit is and then what it does.

Nathan Barry: Yeah so, ConvertKit is a email marketing platform. You think of it as a competitor to Mail Chimp or Aweber or Infusionsoft. And it is designed from the ground up, specifically for bloggers. So, I designed it based around the needs that I had. And then said, “Okay we’re not building a generic tool. We’re building exactly what bloggers need.” And so it’s designed for people who, whether they’re just starting out or they have a million subscribers to their blog. It has the deliverability, the automation they need, you know all of that. All the integrations. While still staying really simple and easy to set up.

Bjork Ostrom: Got it.

Nathan Barry: So it’s used by everyone from Pat Flynn and Chris Guillebeau to Gretchen Rubin and Tim Ferris.

Bjork Ostrom: Cool. Yup and the idea being that it is really focused on the people that are maybe solopreneurs or bloggers that have a small team, but it’s not necessarily this massive tool that’s super hard to use like an InfusionSoft would be, where you almost have to be full time email marketer just to use the tool.

Nathan Barry: Correct.

Bjork Ostrom: Yup. And with ConvertKit, you’re at this point where you started it, you launched it. It was kind of going alongside the products that you’re creating, but you’re doing both at the same time. There came a point where that wasn’t sustainable or did ConvertKit take off. At what point did you say, “I’m going to start to focus less on the product side of things, the information products side of things and do more on the software product side of things.” And was that a hard decision to make?

Nathan Barry: Yeah it was a hard decision because I think most people are expecting that you know, once I’ll gradually shut down the current business once the new business is doing amazingly well. And what I realized is that I’m really bad at doing multiple things at once. And so, if you give me one thing to do, I’ll do it well. You give me two things, I’ll do both of them poorly. And so that’s what I was doing. I was basically starting to run an info product business worse and worse because of the focus on software. But I also wasn’t able to do the software side on the level that I needed to. And that was definitely frustrating. So a friend of mine called me out on that. And he was like, “Look, either shut down ConvertKit and just keep building your audience, keep building this info product business. Or, shut down the other business and go all in on ConvertKit. But whatever you’re doing, it’s not working. So pick one and move on from the other.”

Bjork Ostrom: Yup. Yeah, and it’s interesting to see that decision, being the right decision when you’re doing your year end review on your blog. We’ll link to that. Where you show the graph of the books and course revenue. And it’s in 2012, it’s $75,000 and then it goes to $160,000, $170,000, $300,000. And then, in 2014 it pretty quickly drops off and goes the other way, back down. But then underneath that, you look and see the ConvertKit’s growth and it’s like not on the graph, not on the graph, not on the graph and then it’s like 2015. It’s on the graph. 2016, it’s like multiple millions. And then 2017, it’s $10 Million dollars, almost $10 Million dollars.

Nathan Barry: Right.

Bjork Ostrom: So that is a massive change in a short amount of time, in terms of the success of a product. And for those that are interested, you’re part of Baremetrics Open Startups, which reveals the revenue from different SASS apps, so Software as a Service. Kind of those monthly apps. And when you look at that, you can see the recurring revenue, which is really interesting to see. But one of the interesting things for me was to see right around August or September of 2015, it looks like there is, not necessarily a hockey stick movement but it kind of feels like that where’s this jump, this pivot point. And when you look back at that, can you pinpoint what happened at that point that helped lead to the success and kind of launching of ConvertKit into pretty consistent growth?

Nathan Barry: Yeah so, everyone always talks about how you need “Word of Mouth” to grow. It’s like, “How did you grow the company? Oh, word of mouth.” And then, as a founder, that’s super frustrating here because you’re like, “Oh, word of mouth right. Why didn’t I just try that.”

Bjork Ostrom: Why didn’t I think of that?

Nathan Barry: Why didn’t I just pull that word of mouth lever. Here I was trying to do sales and like build a business, and all I had to do was use the magical word of mouth.

Bjork Ostrom: Word of mouth.

Nathan Barry: So it’s super frustrating to hear. But when everyone talks about that, there’s a certain amount of momentum that has to happen. Right, you want super happy customers saying good things about you and that momentum builds and allows you to get a little bit of reputation and land bigger and bigger people. So we spent the nine months before that or eight months before that, I was all in doing direct sales, calling people up, cold emails, just trying to talk to any blogger who would work with us. And then we would do all the manual switches for them. If we get them to switch off of Aweber, then we would do all the work for them to set them up, and all that.

And so we did that to grow the company from about $1500 a month in revenue to just about $10,000 a month in whatever that was, seven or eight months. And right about that time is when we started to feel that things were getting easier, that I’d have a conversation with someone and they’d be like, “Oh yeah, my friend uses ConvertKit.” Or someone would respond to an email and say, “I’ve heard good things about you.” And that’s when it’s like, “Okay, this is that word of mouth thing that they’re talking about.” So we were able to land a couple clients right around then who were really influential in different spaces. The first one, actually they both signed up on the same day, which was super funny. One was Katie Spears of WellnessMama.com, just a massive, amazingly successful blog. And the other was Pat Flynn from SmartPassiveIncome.com. Both of them signed up on the same day. Both through the course of a lot of conversations and in person meetings and all that. And so, that gave us a nice…I think that was a $4000 dollar bump in revenue, or $3000 in a single day.

Our revenue went up by 30% when those two blogs signed up, because they had such large lists. But then in that August, September, October, we launched our affiliate program. Really kicked off by those two sites, especially Pat Flynn in a big way. And so then that was where we started paying to incentive the word of mouth. And that really started to take off.

Bjork Ostrom: Interesting, yeah. And makes a lot of sense that people that would use the affiliate program would then recommend it, if it’s successful and they like it. But even more so, if there is an incentive behind it, where they can take advantage of some of that recurring income that comes along with it, which is really cool. So you’re at the point now where ConvertKit is an extremely successful, bootstrapped business. And bootstrap, for those who aren’t familiar, means that you haven’t taken any outside funding. Is that correct?

Nathan Barry: That’s correct.

Bjork Ostrom: Okay, which is a really incredible thing. And the last thing I wanted to talk about on the ConvertKit side of things was to hear you talk about the story of building ConvertKit and the revenue and the expenses going hand in hand. And how you made the decision and how you went about making sure that ConvertKit started to turn a profit. So I think sometimes when people see that number, they see $100,000 in recurring revenue or a million dollars in recurring revenue. They think, “Wow, it must be so nice to get a million dollars every month.” But a lot of that, especially with a software company like this, goes into the expense side of things. So can you tell that story about how you turned that around and started to turn a profit with ConvertKit?

Nathan Barry: Yeah absolutely. So if we go to, I guess it was July 2015. We ended the month at $15,000 a month in revenue. That was the first month that we actually made a profit as company. It was a tiny little profit, but it was a good time to make a profit because we were completely out of money, both personally and in the business. And so from there, I think we got down to maybe $5,000 in the bank account. And from there, we ran a profit of about $1,000 to $3,000 a month. I think one or two of those months might have been as much as $5,000 or $6,000 as we grew. Because what happened from July to the end of the year is we just grew crazy fast, like $15K to 20 to 30 to 50 to…At the end of the year, we were doing $98,000 a month in revenue. So over those six months, it was just insane.

Bjork Ostrom: Yeah.

Nathan Barry: And all the way along, we were working as hard as we could to keep up on everything. There’s this idea in the startup world, that you need to reinvest everything in growth and supporting that growth.

Bjork Ostrom: Right.

Nathan Barry: So we ran right at break even, the entire time. And, there were always more tickets to answer, there was always more stress on our servers and everything else, hiring more engineers, upgrading servers and everything. So every dollar that came in got spent on something. And this guy Matt who has been on our team for a long time. He joined the Customer Success team really early on. I think he has the 3rd longest tenure of anyone in the company after myself and one of our engineers.

Bjork Ostrom: Nice.

Nathan Barry: When he joined, we hired him part-time to help answer customer support tickets and help customers get setup. And, we hired him at 20 hours a week. And next week, we were like, “Hey, could you do 25 hours?”

Bjork Ostrom: Right.

Nathan Barry: And he’s like, “Sure.” And then, like a week or so after that, we were like, “Can you do 30?” Then two weeks later, “Could you do 40?”

Bjork Ostrom: Could you do 55?

Nathan Barry: Exactly. And he was like…We had a conversation maybe a year later. He was like, “That was the weirdest thing. Like why not just hire me part-time and then move me to full-time?” And I was like, “Because that was the exact amount of money that we had coming in.”

Bjork Ostrom: Oh wow, yeah.

Nathan Barry: Like that was our, as our revenue went up, it was like, “Whoa, we just added $500 in recurring revenue. Like Matt, can work X number of hours more.” And he was like, “Oh, makes a lot of sense.” So that’s how we were running the whole company where every dollar that came in, we gave it a job and we put it to work. And that continued until mid January when we were at that little over $100,000 a month in revenue, but our bank balance was all the way up at like $25,000 a month. Or not $25,000 a month, just $25,000.

Bjork Ostrom: 25,000, yeah.

Nathan Barry: Which is way better than the $5000 that we had six months ago. But as a function of how like the number of days worth of expenses in the bank, it was a pretty bad situation. Because as we continued like that, our cash balance would go up but the days worth of expenses would get shorter and shorter. So I’d be like, “Oh, you know we have three weeks worth of expenses and then oh shoot, now it’s only 14 days and ten days.” It was getting shorter and shorter because we were spending so much money. And that’s when we really thought about raising capital and taking on investment. So I did the whole Silicon Valley thing. I was down there for a conference, talked to a bunch of venture capitalists. Luckily, they didn’t understand our business model and thought it wouldn’t be a very big business. And so we got turned down by pretty much all of them. But I talked to another founder, his name was Mike McDerment. He’s the CEO of Fresh Books and just this amazing massive company that I think most of your listeners have probably heard of.

Bjork Ostrom: Yeah.

Nathan Barry: And he just said, "Look, you’re growing at a rate of $20,000 to $30,000 of new revenue every single month. If you stop spending, and lock it and say you’re like going to stay at this level for expenses, then you’ll get super profitable really quickly. And you’ll be able to deliver your cash balance without raising funding. And it was almost as like I needed him to give us permission to do that.

Bjork Ostrom: Sure.

Nathan Barry: Because everyone else was saying, "Oh you got to…

Bjork Ostrom: Put it all back in.

Nathan Barry: Yeah, and so when he said that, I was like, “Okay, we can do this.” And we set a goal to get three months of expenses in the bank and to go from eight days of expenses in the bank to three months worth, as quickly as possible. And we started that in February and our expenses barely grew, our revenue grew a ton. And by July 1st, we had more than three months of expenses in the bank. We had gone from operating at maybe a 3% profit margin to operating at a 50% profit margin. And it was pretty incredible. There were definitely things that we should have spent money on that we didn’t.

Bjork Ostrom: Sure.

Nathan Barry: Like immediately after that, we were like, “Yes, hit the goal” with three people.

Bjork Ostrom: Yeah. Right, right.

Nathan Barry: You know, but still it was really good and it built a lot of discipline in the company. And it established a culture that we even have today of everyone being frugal and very, very deliberate width, how they spend the company’s money.

Bjork Ostrom: Sure, yeah that’s great. And I think it’s helpful for people to hear that because I think sometimes when you are in that sort of stage, whether it’s making $500 and spending $500 or $100,000 and spending $100,000. It’s interesting to hear people’s journey to profitability from a business standpoint. And knowing that part of it comes from that intentional decision to say, “I’m just not going to spend anymore. I’m going to press pause on spending to this point, not forever.” Right, you don’t want to get to the point where you’re never spending money on your business. But to intentionally build up those reserves, which I think is such a cool story.

So would love to pivot here a little bit for the end of our interview. And one of the things that I love about interviewing people like you Nathan is that with ConvertKit, you have thousands of touchpoints with other bloggers and you are able to see some common traits with bloggers that experience success as business owners and as bloggers. So, one of the questions I would love to hear you talk about is, some of the common themes that you see with bloggers that are having success online.

Nathan Barry: Oh, that’s a good question. Yes, so we’ve got 17,000 bloggers using ConvertKit. So we definitely get to see the full range as to what works and what doesn’t.

Bjork Ostrom: Sure.

Nathan Barry: Ooh, let’s see. I think that the bloggers who are growing a list really quickly are putting more time, let’s see. They’re putting more time than you would think into every blog post. So these would be the people, like the Tim Ferris’ who are writing epic blog posts. Or another example would be like Tim Irvin from WaitButWhy. He writes these blog posts that are just insane and they’re so good and so well researched. You’re just like, “Whoa, you did not just sit down and write this in an hour and hit publish. You were very intentional about this.”

Bjork Ostrom: Right.

Nathan Barry: And it deserves to be shared. So that’s the side of it where it’s like, “Hey, whatever you’re putting time into writing a blog post, a lot of these best bloggers are putting in two or three times as much as you are because they’re really crafting that great content.”

Bjork Ostrom: Yeah.Yup. And I, it’s one of the things we talk about on the food side of things with a recipe. By the time you go from recipe development to photography to editing photos to publishing the post, it’s so much time that goes into it. And so you’re saying, “These people are crafting these blog posts really intentionally.” But then you’d also mentioned intentional list building alongside that. So how do those two things partner?

Nathan Barry: Yeah, so because really, the great blog post is only half of it or maybe a third of it. There’s the list building side of having a really great opt-in incentive or reason for people to join the list. I know plenty of people who have tons of traffic and they’re really converting it quite poorly because there’s not a great ebook or a case study. Whatever it is, there’s not a great reason to download the free offer and join the list. The other side of it that I think people really mess up is, “Okay, I’ve had to put tons of time into this blog post. I’m going to do that and then I hit publish and whew, okay time to take a nap.”

Bjork Ostrom: Yeah.

Nathan Barry: And you just got to realize that your work is half over at that point. You have done exactly half of the work required. And it was way more work than you expected, and you’re only halfway done. Because, all these people put way more time. The other 50% into actually promoting the blog post after it’s out. And finding new communities, and reaching out to people, and doing projects together and appearing on podcasts and everything else. And so, there’s just a ton of work of who do you admire, who do you want to be friends with, who do you want to partner with. And working with them, going to conferences that they’re attending, networking, getting on calls, all this stuff. Well alone, the basics of promoting the blog posts, building backlinks and everything else.

Bjork Ostrom: Yup.

Nathan Barry: And so I think people just don’t put in enough time and enough high quality time.

Bjork Ostrom: Yeah. And I think that’s such good advice and such a good reminder because I think often times what people want is, myself included, like the quick tip or the trick that’s working really well on Facebook. But so often, it’s not a quick tip, it’s not a trick, it’s just the time and energy that goes into crafting content that people engage with and share and want to consume, which is a lot easier said than done.

Nathan Barry: Yup. The only other thing I would say is like what work are you putting in to level up your skills. One thing that made me want to move on to the software side was I thought I wasn’t learning things very quickly anymore. So I think if you’re really deliberate about, “Okay, I run a food blog. Okay when was the last time you took a course or really learned from someone on how to write really great recipes? Or, how much time do you spend practicing on taking great photos?”

Bjork Ostrom: Yeah.

Nathan Barry: These other things that are really going to feed into it. And then you’re like, “Great, I’m a food blogger. Oh shoot, that means I’ve got to go learn SEO and all these other things.”

Bjork Ostrom: Right.

Nathan Barry: And it’s like, I always tell bloggers like, “I hate to break it to you, but you’ve picked the industry where you have to learn basically everything, and continually learn. Then you should learn some HTML and CSS as well at the same.” It’s like there’s such a range of stuff to learn. And so I would just break it out. There’s okay these four things that I want to get better at this year. So you don’t get overwhelmed and you know that every week, you’re like “Okay, can I carve out an hour each week to get better at each of these things?”

Bjork Ostrom: Yup.

Nathan Barry: And then it’s more deliberate practice rather than you know a year later, “I wish I knew how to take better photos, but I just haven’t been able to find the time to do it.”

Bjork Ostrom: Right, yeah absolutely. And I think what people would find is if they do chock out that time to do that, it would be enjoyable. Especially if it’s something that you like doing. The hard part is just scheduling that and making sure to do it. This would maybe an encouragement to people that are interested in doing it. I’m going through the process of watching the Lynda.com course on Mac OS, just like the MAC software.

Nathan Barry: Okay.

Bjork Ostrom: And some of it is so, so basic. But I just spend 15 minutes a day going through these, it’s like eight hours of content. But what I find is like, "Oh man, there’s things that I pick up and that I learn and that I understand that when I’m sitting at the computer for eight hours a day, over time I’m able to do that and understand that better. Think even if it’s a short amount of time, it makes a really big difference if you’re able to continually learn.

Nathan Barry: Yeah, for sure.

Bjork Ostrom: So, last question that I would love to hear you talk about is for those that are just getting started. So let’s say, somebody signs up for ConvertKit or they’ve never done email marketing before. They have a food blog or maybe they have just a blog where they publish lifestyle content. They don’t have any experience with email marketing or setting up automations, or even the word automation is a little bit intimidating. What would your recommendation be for the people that are just getting started to set up a successful email marketing campaign or account.

Nathan Barry: Yeah so, the first thing to do is, I’d probably break it up into a few steps. It’s really easy to think, “Oh man, I got to do all this stuff, we’ve got to create this funnel, like so much stuff.” And it’s like, “Okay yes, you will do all that but let’s do it over the course of months or weeks, depending on how much energy you have.” And so it started with just get an opt in form on your website. There’s so many bloggers, like we reference Pat Flynn a few times. He often talks about how he really wishes he started building his email list a year earlier. And he didn’t because he was intimidated that he had to learn all this stuff. And it’s like, “Look, just put an opt in form on your website and at least you’ll be capturing some number of people who come in.”

Bjork Ostrom: Right.

Nathan Barry: Tim Ferris actually talks about that where he didn’t use email for the longest time.

Bjork Ostrom: Yeah, I remember him writing a blog post about that and saying like, “I’m finally going to start doing email.” It’s like, oh. It makes me feel a little bit better. Okay, Tim’s still working stuff out too.

Nathan Barry: Right, 100%. But he did the right thing and he had an opt in form sitting on his site the entire time.

Bjork Ostrom: Got it.

Nathan Barry: That he was like, “I don’t know what to do with email. Here’s this thing, someone told me to put it there and I did.”

Bjork Ostrom: So he had it but he wasn’t using it.

Nathan Barry: Right and then years later, he was like, “Oh, I have 300,000 people on this list.” You know, because he had all this traffic and it was crazy successful. But your version of that might be, “Okay, I ignored this for three or four months, or six months and I have 200 people.” And you’re not starting from zero because you did that work. I would say the next step after that is to create an opt in incentive of some kind. You know, a lead magnet. Everyone has a different term for it. But it’s basically, maybe it’s the free eBook of recipes, maybe it’s the cooking tips, whatever else. For me maybe, it’s the app design, the eBook on the ten must have app design techniques.

Bjork Ostrom: Sure.

Nathan Barry: Something like that. And incentivize people to download. Because, then it really gives you something to promote and it gives your friends something to promote on your behalf. As you’ve networked with other bloggers or the people in the industry, and you’d be like “Can you share this on Twitter? Would you mind linking to this in your email that’s going out? Or some of those other details that make it a lot easier to grow the list rather than like, ”I started this blog. Can you promote it?“ It’s like, ”You want me to just link to the home page of your blog? Like no, I’m not going to. This doesn’t work.“ But if it’s like, ”Hey I made this guide or a made this for a free email course or a really good opt in incentive.“ Then like, ”Yeah, I like your stuff. I’d love to promote it." That happens a lot more than actually.

And then the third step from there would be creating some kind of follow up sequence. And that’s not about going out and creating something crazy advanced or designing the perfect funnel. It’s really about taking like your three or four favorite pieces of content that you’ve ever put out. And putting those into an email sequence so that someone who signs up today is going to get that article sent to them that you love, that you wrote you know two years ago or something like that.

Bjork Ostrom: Cool.

Nathan Barry: And that’s the start.

Bjork Ostrom: Cool. So Nathan, we’re coming to the end of the podcast interview. But for people that are interested in jumping in, taking that first step, if they don’t have email set up or maybe converting over to ConvertKit. What would be best way to do that? And also, what would be the best way to follow along with online at your blog?

Nathan Barry: Yeah, so I write about a bunch of stuff just at NathanBarry.com. Barry’s is B-A-R-R-Y. So there’s a lot of ConvertKit story there. All our numbers are public. So you’ll probably see a lot of details that you wouldn’t expect to find published openly on the web about a software company.

Bjork Ostrom: Sure.

Nathan Barry: And then, I’d also recommend checking out from ConvertKit, we have a publication called Tradecraft. And it’s a monthly publication, it goes into a lot of detail on a different topic every month. So email deliverability, how to grow your list, how to do automation and all that, bunch of different stuff there. And then, when it comes time to actually sign up for ConvertKit, there’s a free 14 day trial on the website. And then if you have more subscribers. So if you have over 5000 subscribers, then we have a Concierge Migration Service where we’ll switch everything over for you, for free.

Bjork Ostrom: Cool. Great and they can find that at ConvertKit.com and then we’ll link to that in the show notes as well. So Nathan, thanks so much for coming on the podcast today, sharing the story and some advice as well.

Nathan Barry: Yeah, thanks for having me.

Alexa Peduzzi: Hello, hello, hello, Alexa here bringing you the reviewer of the week. And this one comes from Tonya from WhyNotMom.com. And it says, “As a non-food blogger, I’ve gotten more tips and helpful advice than I ever anticipated with this podcast. Not only is Bjork excellent at interviewing, but he has guests that provide very useful information for running any small to midsize business and blog. I love it when Lindsay is on and she has really shown what it takes to be successful. I would like to hear more tips on working from home and raising kids and juggling it all from guests who are making it work.” I really love that suggestion Tonya, thank you so much.

And if any of you have any suggestions for guests or topics that you’d like to hear on the podcast, we are all ears. Just shoot an email to .(JavaScript must be enabled to view this email address) and we’d love to hear it. Thanks so much for listening this week friends, from all of us here at FBPHQ, make it a great week.

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