February 10th, 2015 By: Ash
John Lee Dumas: Hey, this is John Lee Dumas from Entrepreneur On Fire. You’re listening to my friend Ash Roy.
Ash Roy: Welcome to the Productive Insights podcast for entrepreneurs and professionals where we discuss how to leverage your business online, and how to maximize your profitability. In this podcast, I interview Neil Patel, the founder of KISSmetrics. Neil and I chat about a range of topics, including branding, investing in stocks, productivity at work, and a whole lot more. I hope you enjoy listening to this as much as I enjoyed recording it. The sound quality isn’t great in some parts because we had a pretty poor internet connection, and I apologize for that, but that doesn’t take away from the spectacular content. Enjoy.
Hi, Neil. Thank you very much for agreeing to this interview. It’s a pleasure to have you on Productive Insights’ podcast. You’re the founder of Crazy Egg, KISSmetrics and Quicksprout, which is your blog. You also consult to major organizations such as Buffer, MailChimp, CampaignMonitor and LiveChat, just to name a few. You’ve been endorsed by Michael Arrington, the founder of TechCrunch. All these achievements make for a spectacular resume for a very young entrepreneur like yourself. As a manager in the corporate world of over 15 years, I can say that you’ve achieved a lot in a very short space of time. Let me start by asking, what does your typical day look like? How do you manage to be so productive?
Neil Patel: My typical workday, I spend most of my time actually in my email inbox. When it’s not in my email inbox, it’s on phone calls. When it’s not on phone calls, it’s in meetings. The majority of my day goes to communication.
Ash: I know from our previous interactions, you mentioned that you have a specific way of handling emails. That is, you read it once and respond straight away, so you avoid double-handling.
Neil: That’s correct. It makes you much more efficient. I have filters set up as well. I have an assistant who does all the scheduling, so I don’t have to deal with that. I have canned responses for the generic type of emails I get, like I get a lot of emails from people saying give me money, or teach me how to make money. I have quite a few generic canned responses for emails like that as well.
Ash: The next question is, you have some very high profile clients that are vying for your limited time. How do you decide which client to work with? I’m sure money is a factor, but are there any other criteria that you use to decide on which particular projects to take on?
Neil: Other than budget, because that is important, if it’s not worth it financially to me, we never do it. I don’t really do much consulting at all. There’s two things, one can I help the customer, and can I really help them and provide results? Not like, oh maybe I can, but am I really confident that I can help them. I don’t want to end up working with someone and not providing results, because that’s just going to ruin my brand name. Two it’s a disservice. You don’t want to be unethical.
The second variable is, is the customer fun? Do I think I’m going to enjoy working with them? Are they going to implement my suggestions, or are they going to take them for granted? Will they be happy with the results? Will I enjoy working with their team members? Those are the two main factors for me, the third being financial. They would also have to have a big enough budget.
Ash: That’s interesting, so the financial isn’t necessarily the first thing you do. The first thing you do is you look at the value that you can deliver to the customer. Depending on that, you take up a job.
Neil: There’s a lot of companies who have the financial means to pay someone, whether it’s me or another company out there. Money is, it’s great, but that shouldn’t determine whether you work with someone or not. The most important thing, I feel, in business is being ethical. If you can really help someone out, and you can enjoy it, and they have a great product or service and it helps other people, by all means work with them. If you can’t help them out, what’s the point of taking on a client, burning a bridge, and ruining your reputation? I learned that from actually Warren Buffett. If you watch a lot of the stories on him, Warren treats his brand as if it’s gold. It’s more important to him than money. He won’t do anything to jeopardize his brand name.
Ash: Totally. I’m a big fan of Warren Buffett, and I’ve read a few of his books and followed him quite closely. He actually says, don’t lose a shred of reputation. It takes years to build trust, but it takes a second to lose it.
Neil: That’s correct.
Ash: I couldn’t agree more. Berkshire Hathaway is one of my stock holdings actually. I have an interesting story on how I almost doubled my investment. It was just before the stock split. The only thing stopping the stock from getting into the S&P Index was the trading volumes. The trading volumes were going to go up because institutional investors were going to buy into the stock. I realized there was no downside, so I bought into the stock, and it went up by 20% in the next two weeks. For a blue chip stock, that’s quite a lot.
Neil: That is a lot. You should have done options.
Ash: I should have done options, yeah. Anyway, I bought it at about the equivalent of $67 a stock, and it’s now $122 today, so I’m pretty happy with myself.
Neil: You should have done options. You would have made a killing.
Ash: Yeah, well, options are, yeah. They’re quite risky though.
Neil: They’re risky.
Ash: Yeah, that’s a problem. This actually leads into the next question. You’ve built an excellent brand in KISSmetrics. Other entrepreneurs like Warren Buffett or Steve Jobs have had a lot of difficulty separating their personal brand from the company brand. They’re been tied in with their organization. When Steve Jobs passed away, Apple stocks took a bit of a beating. Do you have difficulty separating your personal brand from KISSmetrics and Quicksprout?
Neil: I do. A lot of times people associate the companies with my brand, and people associate my brand with the companies. By the companies doing well or having a good brand it helps mine, and by me doing well it helps the companies. I think they go together. These companies are built by awesome people. I’m not saying I’m awesome, but it’s awesome people, team members, engineers, designers, managers, whatever you want to call, even support people. They’re all important. I think if you take away the people, what is a company? Apple without the people wouldn’t be Apple. I forgot their lead designer’s name, but they do an awesome job with design. Without him, the products wouldn’t be the same.
There’s probably a lot of other great people on that team, but without those people Apple products wouldn’t look as good. If they don’t look as good, people wouldn’t buy them. I think personal brands go with company brands in many cases, and vice versa as well, especially in markets that we’re in. It’s not like an old school brand like General Electric. No one really cares who builds the plane, it either works or it doesn’t. We’re in an informational age where we’re educating and teaching, and it’s an individual usually teaching. Sure, they may be behind a company, but still it’s an individual speaking and people want to get to know that individual, and understand why they’re saying specific things.
Ash: Absolutely. In fact I think one of the biggest challenges in today’s day and age is actually being able to convince the market that you have embedded enough of what you have built in terms of personal reputation into the organization. I believe the market is slowly starting to come to realize that. With Apple, the stock prices are slowly creeping back up. I believe this is going to be one of Buffett’s biggest challenges. When he moves on, how does he convince the market that he has embedded his expertise into the organization, and stop the stock from going down if he decides to resign or move on from Berkshire?
Neil: I think it will end up being a transition. They say Warren already has a successor in mind. They don’t want to release the name. I think what will happen is Warren will stay onboard a bit, the successor will take over, and then they will slowly transition. I bet you right now that guy, whoever it is, he already is doing a great job and probably has [inaudible 00:08:24] his soul in it. Just look at Apple. Tim Cook’s doing an amazing job, even without Steve Jobs. Steve is great, but Tim is still doing an awesome job.
The stock may not be as high as it was, but people are looking at the growth rate. Apple’s still growing at a rapid pace, but they’re so big with their numbers, their P/E ratio is so low. Everyone’s like, well it’s low because we don’t see how they can grow faster and faster, but they’re continually growing. I actually think the stock is under valued. Their P/E ratio is way lower than most of the tech stocks in the market, and their growth rate is still rapid.
Ash: True. What’s one of the toughest decisions you’ve had to make in the last year, in this year so far, 2014?
Neil: Some of the tougher decisions having to be around focus. I could have taken a lot more opportunities, investments, things that I was passionate about, but I decided not to because of my core business. It’s really hard for me, because I had ADD, and I just really want to do everything that I think is fun and exciting, but it’s just not possible.
Ash: Yes, I don’t think you’re alone. I think in today’s day [inaudible 00:09:29], there are so many distractions, we all are mesmerized by shiny objects. One hack that I’ve found is very useful actually is not having my to-do lists on the computer, but rather having them on paper. That way I’m less likely to be distracted by things that are on the screen.
Neil: Cool, I like it.
Ash: What advice would you give to young entrepreneurs that are starting out today online? What do you think is the most important thing they should focus on?
Neil: Finding something they love, and solving a problem. Those are the two things. Entrepreneurs these days are trying to create an online business just to make money, which usually doesn’t work. Money is the side effect of doing something great or solving a problem. If you’re not passionate about the problem you’re solving, you’re not going to end up doing it in the long haul. You’ve got to love what you’re doing, and you’ve got to solve a problem that enough people face. It doesn’t have to be a unique problem. You can solve the same problem that someone else is solving and do it better, or make it simpler, or make it cheaper, whatever it may be, but you’ve got to solve a problem.
Ash: Right, and you have to deliver value.
Neil: That’s correct, and more than other people in the marketplace.
Ash: Right. Yes, you have to do competitor research. I watched an interview yesterday which Leo Babauta did with your Co-founder, Hiten Shah. Something really interesting that Hiten was talking about was how his dad almost raised him to be an entrepreneur, asked him to look for opportunities in situations from the age of 15. I know that you and Hiten have known each other for a long time now, and you’ve been working together for a long time. I’m interested to know, did you have a similar mindset? Were you raised in a similar environment?
Neil: I was. My parents taught me to be an entrepreneur at a young age. I have other family members who are entrepreneurs. It kind of not only was part of the genes or part of my DNA, but it was the mindset that if you want to do well in life, you need to be an entrepreneur. My parents did a good job of putting me in an environment where I learned at a rapid pace when I was a little kid.
Ash: In your prior interviews, you’ve mentioned that you always listen to the data above everything else. Have you ever found yourself looking at the data and thinking, you know what, the data is telling me this, but this doesn’t feel right. Your gut is disagreeing with the data. Can you talk a bit about a situation like that, and whether you went with your gut or the data?
Neil: We’ve had that many times. We run a ton of A/B tests. We only do what the data says is best. A lot of times we’re like, yeah this looks really cool. I want to do it this way, but if the data says that we should be doing something else, then we usually go with the data. Me and my Co-founder Hitan are very logical, and we’re really numbers oriented. We’ve created analytical companies. We tend to usually always do what the data says is best, assuming it’s ethical and we’re not screwing anyone over.
Ash: Right. In fact I know that Hiten was talking in his interview yesterday, where he was saying he loves observing situations and people. He’s kind of doing A/B tests in his mind all the time. He talked about how he looks at a situation, and he tries to preempt what the person is going to do next. Then he waits to see if that’s actually what happens or doesn’t happen. Then he learns from that, which is fascinating.
Neil: Yeah. It’s so funny, I did something similar today. I was at the bank today, and I noticed a guy sitting down with a teller. He started flirting with her. They started talking about drinking, bars and all that kind of stuff. I was like, I bet you she’s going to convince him to open an account. If you looked at their body language, it didn’t seem that she was as interested, but he was very interested in her. He actually mentioned to her within the next few minutes, he’s like yeah, you’re really pretty.
Right away, she got him to open up two accounts. I was like, oh my God. This guy’s going to open them up just because he thinks she’s cute. It ended up happening, and I was like, this guy’s making a mistake. He doesn’t need another bank account. He’s just doing it because she’s cute. She doesn’t care for him, she just wants the commission.
Ash: I must try and be more observant in the future, because it’s amazing what you can learn from those situations. In fact, I am a big believer in mindfulness, and I practice mindfulness a lot. That tends to be more internally directed. Maybe I need to be practicing the same thing outwardly, and being mindful of what’s happening around me, not just what’s happening in my own mind.
Neil: Yep, totally.
Ash: In your prior interviews, you talk about Google Analytics. You say that Google provides quantitative data, whereas KISSmetrics provides qualitative data. Just to quote your website, you say, Google Analytics tells you what’s happening, and KISSmetrics tells you who’s doing it. Can you talk a little bit more about that?
Neil: There is quantitative data and qualitative. KISSmetrics provides quantitative just like Google Analytics. We just have another product called KISSinsights that provides the qualitative data. Qualitative would be non-number based. It’s like feedback. Like a user saying, like you, Ash, would be saying, hey I do not buy from you because I think the price is too high. That’s an example of quantitative versus qualitative. The difference between KISSmetrics and Google Analytics is, Google can tell you things like your time on-site, how many pages you [have 00:14:51], but they can’t tell you marketing attribution.
Someone comes from TechCrunch, Google, and the email campaign, and then they convert, where do you attribute the conversion to? They can’t also tell you, if someone converts to a freemium user and then a paid user, what actions caused them to upgrade to a paid user. Let’s say if you’re a Dropbox, because they have a free plan and a paid plan. If you’re a software company, Google can’t tell you what’s causing churn. We can help you determine churn. There’s a lot of metrics like that, that are important to businesses. Even an e-commerce company, the average order price or order values. We track a lot of these metrics, which help companies improve their revenue.
Ash: Fantastic. I know from being a user of Crazy Egg myself, it’s extremely useful when I go into the recordings and see where my readers have been clicking. That actually even helps me to know where to position my sign-up boxes. If people have a tendency to click more to the top and to the right, for example, I might put the goodies over there rather than having them further down the page.
That brings us to the end of the interview. I just want to say thank you so much for your time. I’d love to speak with you again someday.
Neil: Sounds good, and thank you for having me.
Ash: Thank you, Neil.
Ash: There you have it. Neil Patel, the Founder of KISSmetrics, Crazy Egg and Quicksprout. I hope you enjoyed the interview. Head over to productiveinsights.com, and check out a whole bunch of super useful articles that will help you to turbocharge your life and your business. This is Ash Roy, your host, signing off until next time.
John: Hey, this is John Lee Dumas from Entrepreneur On Fire. You’re listening to my friend Ash Roy.