Episode 87
· 54:57
Hey folks, Justin Jackson here back with another mega profitable case study. These are a series of interviews I'm doing on profitable founders, many of them solo founders, and they're doing everything from running SaaS businesses to today's guest, Nick DeSabado, who's running a productized service called Draft Revise. And Nick had tons of great advice for building a profitable business, and they're all not what you would think. They were all unexpected, and I can't wait for you to get into this interview. I also wanna make sure you don't miss any of the future interviews.
Speaker 1:So go to megamaker.co/profit. Megamaker.co/profit. Put your email address in there, and you will get all of the future case studies as well. I'm doing write ups on these. And eventually, this will be a course on how to bring your business from just breakeven to earning cash that stays in the business, and that you can invest in growth or invest in yourself if you want.
Speaker 1:So head over there, megamaker.co/profit. If you're already on my newsletter, you're already on the list. Alright. Let's get into the interview with Nick.
Speaker 2:And Can definitely do that.
Speaker 1:It seems one one more personal thing before we get started. But it seems like you you've been very what's the word I'm looking for now? Very purposeful about building community in Chicago. Now did that happen as a byproduct of you growing up there? Like, these are lifelong friendships you've had?
Speaker 1:Or is this, like, something in your adult life, you moved back from North Carolina and you you were just very, like, purposeful in saying I'm going to help foster community or be a part of community. Like how did that grow?
Speaker 2:You would think a lot of people have asked me that question and you are the first.
Speaker 1:Oh, interesting.
Speaker 2:And that's a fantastic question. I think it came about over the past like five or six years. And it probably dovetailed with the, I think the beginning of it was actually you could draw a through line between my focus on local community in Chicago and this is gonna sound so crazy, but the Kickstarter project that I ran in 2009 for my first book. Because I had to have so many people come out of the woodwork to back it. Two thirds of the backers of my first book were from Chicago.
Speaker 2:Inside the city Chicago. Not just like, that doesn't even count my parents or suburbs or people I knew that like went to college nearby here. Like, it was like the top 10 zip codes all began with 606. Yeah. For shipping.
Speaker 2:Wow. And so it was very much this local focus. And then I realized people, well people cared about the work which is great but then there's kind of this what now? And I realized, oh wow like I can actually like ping a lot of people and they'll do stuff. And they'll have fun and I'll have fun and it will like make something.
Speaker 2:Yeah. And so that know, that also happened right at the time when I was I moved to the direct center of a neighborhood that then became the cool neighborhood.
Speaker 1:Gotcha.
Speaker 2:And so I had the best located apartment with the biggest backyard and I could throw very good parties. Yeah. And that happened like a couple of months after Cadence and Slank came out. And I lived there for five and a half years and then moved into this house which is now in the center of the next cool neighborhood. Nice.
Speaker 2:And I'm not leaving. So So There's a there's
Speaker 1:a few things there, isn't there? There's like, you kind of got woken up by the support.
Speaker 2:Yeah.
Speaker 1:Like, folks were you saw that there's people around. And then, it's interesting because so much of community, like, genuine local community, has to do with proximity, it seems, and the fact that you had a you were in a neighborhood that people wanted to go to. And it it makes it a lot easier to like these pictures you paint of people texting you because they're on your your doorstep and they wanna drink some beers or something.
Speaker 2:That happened because I was in the middle of that neighborhood. Right? Yeah. So
Speaker 1:much of it is proximity and obviously you being open to it, but the yeah. That's it's it's interesting because maybe like, definitely, if you were now I'm gonna just pull something out of my head. But if you were in Melrose Park, maybe that wouldn't have happened,
Speaker 2:or let's go further out. That would have never happened. That would have, you know, Wheaton? Would happen if I were in, Wheaton is also the fundamentalist Christian suburb. So there would have to be a lot life changes.
Speaker 2:A lot. But like, even if I were in Albany Park, which is up Kedzie, like, but it's on the other side of 1994 and it's off of a different train line. Like it's it's two miles. Yeah. It is such a small distance.
Speaker 2:And would not I would not have had access to the same community. I would I mean I would've had really good access to Falafel and that would've been about it. Yeah. Like And that's so weird to think about. I think it was a large part of it was writing cadence and moving into that apartment at the same time.
Speaker 2:Yeah. And then realizing okay well also as I'm getting older there's a focus less on being a party house and more on actually thinking how do we help out our community. And so not only did I move into that apartment in a really good block, but that block was full of bike activists.
Speaker 1:Yeah. Yeah. You know, I actually found that genuine community, real people really connecting in a local way, is one of the few utopian dreams that ends up being as good as you dream it. I remember dreaming about that and feeling like, Man, I bet you that would be amazing if there was even a sliver of purposeful people that you can count on that, you know, actually do care about you, that you're you're involved in each other's lives in a meaningful way. That must be amazing.
Speaker 1:And then when you actually even when you get it, even if it's just a piece of it, it's actually as good as you dreamed it. Whereas other things like money and cars and even business, I found have not been as satisfying as that. Like, it actually is as good
Speaker 2:Yeah.
Speaker 1:As you think it might be.
Speaker 2:And it's good no matter what position you are in the Like if you're the connector, that's great. If you're just a participant, that's great. If you're the one that's like one level away from the connector, that's kind of helping the connector, that's also great. Like there's never a situation where there's anybody's getting like taken advantage of or everybody like yearns to be the connector or like yearns to have the party house. They're grateful to have their own space and then come to the house or whatever.
Speaker 2:And I think that's a part of why it can be like almost utopic like you're saying. Yeah. Right? Like it can be, how do I put this? Like this very egalitarian situation where everyone is respected and appreciated and God hold that close.
Speaker 2:Why else do you live in a giant city? There's so much stressful garbage about living in a giant city, right? So have that, you know? Yeah.
Speaker 1:That's awesome. Awesome. Well, that's great. Now let's talk about business, which matters, but doesn't matter as much. And, eventually I wanna know how much money you're making.
Speaker 1:That's the whole point of this interview. But before that, I'm going to need to know and the listeners, whoever is going to see this, is going to need to know what is your business. So maybe give us a little background on Draft and what it is and what you do.
Speaker 2:Sure, so I call Draft a interaction design consultancy. And that has meant a lot of things over the years. The thing that I do right now that I'm probably most known for is what I call research driven AB testing for e commerce businesses. So it's research driven because I put a lot of UX research into finding the right ideas that are more likely to win. It's AB testing, that's duh.
Speaker 2:And then e commerce businesses also duh. So in practice that means I spend a lot of time writing and talking to customers and analyzing heat maps like you know that's what I'm gonna be doing after this call and a lot of different awesome things, usually for online stores. Sometimes it ends up manifesting in the form of books or courses, that sort of stuff. So I consider myself kind of half educator, half consultant.
Speaker 1:Gotcha.
Speaker 2:Yeah.
Speaker 1:And your delivery model for your consulting services, I think, is quite unique. Can you maybe talk a bit about that? I'm guessing that at some point you've done regular consulting where you're like, This is my hourly rate, and then you charge people. How do you do it now and maybe talk about how you got here.
Speaker 2:Sure. So let's talk about how I got here first. Because I used to do the kind of like I make wireframes and you pay me. And it went from an hourly rate to a per project rate. I would just give deadlines and there he would go.
Speaker 2:And everybody was happy but it was materially the same deliverable for the same type of company, whatever. Eventually mid July twenty thirteen, I kind of stepped back and was wondering like, what is the Venn diagram overlap of UX y things that I can do because I have an interaction design background. I handle the layout and behavior of software and things I can sell on monthly retainer. Well, it's not wireframes, which is the like, hello world of interaction design. Because what do you do?
Speaker 2:Get the homepage and are like, stay tuned next month for the product page. Like, that makes no sense. It's a holistic package. And it's not IA. And it's kind of not research because people aren't really willing to pay for that unfortunately.
Speaker 2:But it is, it could be analytics and AB testing. Because AB testing is an ongoing optimization and you're essentially measuring the economic impact of a design decision. That is fundamentally what AB testing is. And I'm a designer so I can screw with that. That's great.
Speaker 2:Let's do it. Put up a marketing page. Don't think anything of it. And then a fella named Patrick McKenzie who is well known on the Internet for everything at this point. He runs Stripe Japan at this point.
Speaker 2:He wrote, I think a 7,000 word blog post about how it was one of the greatest marketing pages he had ever seen, which like, no, that's far too much, but very flattering. My server crashed and I sold out within a week. And I've been doing that and it's been sold out in some form or another ever since. It's actually come to the point where I almost never, the last time I publicly announced a spot was available was two and a half years ago because I just post to my secret insider list or nudge colleagues that I have a slot available and then just word comes in and somebody gloms onto it. So I only have, model is basically I have a fixed number of slots that has been slowly decreasing over the years of clients that I can have at any given point and on a formerly monthly, now quarterly basis, you pay me money, I run a certain number of AB tests for you.
Speaker 2:While those AB tests are running I am researching what to test next. That involves looking at your analytics, determining any revenue leakers, taking a look at your heat maps, running surveys for your customers, getting people literally on the phone and asking them non leading questions about how they found out about this product and what objections they had and what problems they had on the checkout, fixing usability errors, all of those sorts of things, all the stuff that you really wish you should be doing on your business and don't touch with a 10 foot pole because you have better stuff to do. I do it. It's great. Then I make you money.
Speaker 1:That's such a great, like that's a really great, sales pitch. Like all those things you listed that a lot of businesses wish they were doing, but aren't doing. How Right. Because part of running a profitable company is understanding or at least discovering what people want. And I've recently made the distinction, and some people disagree with me on the semantics of this, but I've recently made the distinction that between what people want and what you think people need.
Speaker 1:So, one side is very, kind of, like a doctor. Like sometimes we think we're the doctor and we just look at the patient and we go, Oh, I can see what you need. What you need is more vitamins. But the patient's
Speaker 2:So you've got this problem. Yeah. Out comes the iPhone, and here's this magical miracle product, you know? Like Yeah.
Speaker 1:And so how did you discuss was it, like, some people just do stumble into it. How did you figure out what people actually wanted? You discounted a lot of other things. Like you said, I can't do this on an ongoing like, homepage design on an ongoing basis. Nobody actually will pay for research.
Speaker 1:Was it trial and error? How did you figure out what people actually wanted?
Speaker 2:This is, I don't know if I'm going to offer a very comprehensive answer on this, but I will try. Okay. A lot of listening to the community, surrounding myself with people who were strongly opinionated. Paying attention to like actual problems that people were feeling and trying to see what I can square up with my own talents. The fact that I run a design consultancy and I am a designer with expensive problems that businesses are broadly feeling and know it.
Speaker 2:Right? So I don't have to do the legwork constantly educating them about it. Yeah. Because I think that the result with AB testing, like I came in on AB testing right when it became the hotness, right? Mhmm.
Speaker 2:So there was this cool and sexy thing that I was glomming myself onto and going really big in on. So there was a very big right place right time thing with draft revise. I think it's sold out in that way because I came up with this idea and then everybody started doing it. Because if you look for monthly productized consulting AB testing services, there are hundreds now. People email me a couple times a week being like, I made this marketing page.
Speaker 2:Are you okay with this? I'm like, well, yes, but it's a word for word recopy of Draft Revised's marketing page. Could you maybe please write it in your own words and not plagiarize me? And they're like, okay, we changed three things. And I'm like, fine, just please.
Speaker 2:And that happens to be routinely because people saw a thing that they viewed was, it was compelling to clients and solved an expensive problem for them. Yeah. I mean it might have been compelling to clients because it solved an expensive problem for them. Yeah. But that's kind of, it was finding, okay, here's this tool set, here are all these problems that people are feeling, they wanna do AB testing, and I'm a designer, so I can figure this out.
Speaker 2:Yeah.
Speaker 1:How long before was a lot of kind. And and sorry, I I I don't mean to interrupt, how like, how long did it take? Because you said 02/2013, this is when you were thinking. Were you doing did you have an agency before that? Like were you doing freelancing before that?
Speaker 1:How many years of Yes. How many years in the wilderness did you have?
Speaker 2:Draft was, it started in February 2012.
Speaker 1:Okay.
Speaker 2:So and I had and I basically started with full time jobs at agencies and stuff like that in 02/2006.
Speaker 1:Okay.
Speaker 2:So I've been in the industry for a long time and I went independent a good year and a half before I even launched any sort of productized consulting engagement, anything around AB testing. Yeah. This is the secret. I ran two AB tests in my entire life when I launched Draft Advice. I was like, I'll get, I'll learn this.
Speaker 2:It's cool. And I did but like I just, I did not understand the full ramifications of what it is I was doing and got way in over my head very, very quick. I would have done a lot more forethought before launching that marketing page if I hadn't thought like well it's, this is hilarious to people who are actually paying for draft revise right now. It's $19.50 dollars for the first three months. It's $6.50 a month.
Speaker 2:That's a really big involvement. It's gonna take people a long time to really pull the trigger on that.
Speaker 1:Nope. You saw right away that you're maybe underpriced.
Speaker 2:I very underpriced. And people got grandfathered in. I never hiked the rate of people. And a couple people stayed on for two, two and a half years and they were great clients. Like I'm very very grateful for that.
Speaker 2:But yeah, no. I kept them on.
Speaker 1:I think the other thing that a lot of folks miss is because I'm trying to you know, part of me is like part of this interview is talking to folks who have a product or service and they are making revenue and they are close to profitability hopefully, or profitable, and they want to get more profitable. But there's this other group of people who are still waiting for that thing, or and they're frustrated, and, or they've started something and it it just is not profitable. They've been working on it for a long time. It's just not profitable. And I think the part of the frustration is sometimes going like, how did Nick come up with that idea?
Speaker 1:Like, how how come he's so lucky? But when you go back far enough and you go, well, he started with agencies in 2006 and started seeing how real companies spend their money and started seeing like he knew what it was like to be in a client meeting and try to explain to the client that educate the client first. Like, No, this is actually a better design. Like this conforms to better design principles. And you were able to see sometimes putting a lot of work into educating a client doesn't actually give you the payoff that you want, right?
Speaker 1:Must have been noticing things as you were going along.
Speaker 2:Yeah, and I think there's, I mean, there's a possibly apocryphal story of somebody approaches Picasso on a Central Park bench, and they're like, You're Picasso? And he's like, Yes. And he's like, Will you draw my portrait? And he's like, sure. Pulls off a page in his sketchbook, draws a thing, hands it to him.
Speaker 2:And he's like, that'll be $10,000. He's like, what? You just did that in five minutes. He's like, no. I did it in the forty years of experience that I had.
Speaker 2:Yeah. That led me to be Picasso and led you to recognize me on a park bench. And you never saw any of that, but it culminated in this Yeah. In this sketch. And whether or not that story is true, I think there is something to it.
Speaker 2:Right? There's so much subtle there's so many subtle things in one's career. Not my career, not your career, anybody's career that factor into the relationships you've developed, the skills you've gotten, and how much interest you have in solving this particular problem. I think there's that and for me with draft revise in particular, I think naivete actually helped call my fears significantly. I would've been petrified if I had known what was going on when I had launched that thing.
Speaker 2:If I had known that Patrick McKenzie was gonna be paying attention. I had no idea. I had no idea. And that probably helped me tremendously.
Speaker 1:Yeah. Yeah. And and there's obviously, I I know I have a few people listening that are gonna be like, you're it all it just all seems like luck. It's just like, you know, like Nick just got lucky. And there is obviously an element to that, but there must have been all of these other things.
Speaker 1:Like Patrick somehow was clued into you as a person before this. I'm not sure how that happened or what you'd done before. I'm not sure if Did Cadence and Slang come out before this?
Speaker 2:In 02/2009.
Speaker 1:Okay, so 02/2009, that's one step that maybe we haven't talked about yet. You did a Kickstarter for a book, right?
Speaker 2:Right. And so this is a very good example of this. So I was the like eighteenth or nineteenth project ever on Kickstarter. Oh wow. And I wouldn't, I would not have found out about Kickstarter and I still had a full time job at this point.
Speaker 2:I wrote a book about interaction design. It sold I think 3,800 copies at this point. Some crazy high number. It's great. Wow.
Speaker 2:It's been you know it got me a keynote spot at South by the year after and it did really really well for my career. Would not have published Cadence and Slang if I had not found out about Kickstarter. And I would not have found out about Kickstarter's existence if I hadn't met Charles Adler when he worked for my college radio station in 02/2003. So if I hadn't gotten into techno in like 1998. I'm so deadly serious about this.
Speaker 2:The butterfly over there flapped its wings, put me in front of this guy whom I only knew because he also liked techno. And we talked about Detroit techno for two years and then I graduated. I ended up in his address book when he sprayed the announcement, Hey, I have a new website, kickstarter.com to literally everyone on his address book that he has ever encountered. And I'm like, this seems cool and I have a terrible manuscript together. Let's see what I can do with it.
Speaker 2:Wow. And I launched it and it turned out that I made, I don't even remember like five figures at least. But something like that. It did well. Yeah.
Speaker 2:And there was so much butterfly wing flapping that had to go into that. And then that formed the groundwork for me starting to speak more frequently and get a reputation for myself such that I could develop enough relationships that I could feel comfortable quitting my job. Then I quit my job, didn't know what I was doing there. Met Amy Hoy who was a fan of my book in 2010. And she said, you should quit your job.
Speaker 2:And I'm like, I already did. She's like, great. Here's bacon biz conf and I met all the bootstrapper people. Yeah. And I think that's probably how we know each other, right?
Speaker 2:Yep. And so I don't know, get into computers and then wait 20. The whole point is that I got lucky, but I also made my luck.
Speaker 1:Yeah. And part of the making the of the luck, if there's one thing that keeps coming up in all of these stories, it's all relationships. So if you had stayed in your house and never gone to a rave or never gotten into techno or never talked to anybody, you would have not had those opportunities. But being open to relationships, getting out of your house and meeting some people, investing in community and, and relationships is one way to create your own luck. And every story has these things, and it's almost like always the pivotal moments all hinge on some sort of relationship.
Speaker 1:If you don't have those, it's going to be really hard it's going to be a lot harder. Like the even if you have an incredible amount of skill and, you know, an incredible idea, you really do need to have people in your life that can help you make those jumps, right?
Speaker 2:Have you ever heard of, this is gonna sound like a jump, I'm gonna bring it back in a moment. Have you ever heard of the Harvard Grant study at all? No. Okay, this is amazing and you should look it up. It is basically this one sociologist researcher at Harvard said, okay, the entire class of 1939, I think something like this, we're gonna keep tabs on you for the rest of your life.
Speaker 1:Have heard of this. Keep going, this is great.
Speaker 2:Every year you've gotta check-in, talk about your health, talk about how you're doing. There are like multiple presidents in here like Kennedy was in there I think. Wow. There are multiple like congressmen because it's Harvard, right? Yeah.
Speaker 2:And so all these people but like because it was essentially, I mean quote unquote random sampling, it's still Harvard but you know, it's a very broad sampling of effectively randomly selected people who didn't know they were gonna be in the study only that they were going to Harvard. You end up with a very broad range of outcomes. You have people who died alone, who were surrounded by their loved ones. You have people who lapsed into alcoholism and never recovered. You have people who became president, right?
Speaker 2:So the number one consistent thing that happened in the grant study which is still going on, it ends when all of the people from the class of 1939 die. Wow. And it has been passed among multiple researchers who have made it their life's focus and their career's focus at Harvard to check-in on these people and amass this file. Like people you know take care of it for thirty years and then retire. Mhmm.
Speaker 2:Or die. The number one consistent thing was relationships. It was making sure that you have a community of people that surround you. And this has almost nothing to do with business at this point. This is how to life correctly.
Speaker 2:If you want to do your life correctly, you need to make sure that you are doing everything you can to burn as few bridges as possible and nurture the relationships that are around you. Because if you're gonna, if you have a personality that's liable to isolate yourself or be a firebrand or shit stir or something, you're not, it's not sustainable. I mean, I'm a lone wolf. Hang out with my dog all day snuggle him and I have one employee and I'm basically the definition of like a loner in my career but I still so strongly believe that having these relationships is so important. Yeah.
Speaker 2:Start And now and then in ten years you're gonna have multiple books published and you'll be running a consultancy.
Speaker 1:It does really help. It does really help. Let's dig into some money here. Sure. We've we've kinda painted the picture of, and I like this because I think we've identified already some key things that played into this business you're running.
Speaker 1:And, again, the people that are listening to this, they didn't come here for relationship advice, but that's actually the I that's that's the ball that's what you need to be focusing on to get the results, but they wanna know about the results too. So can you can you paint a picture of maybe even like what it was like your first year freelancing in 2012 and how that's grown over time?
Speaker 2:2012, I made about $47,000 off of my and keep in mind that this started in February, so it's an eleven month period. Mhmm. But still, 47 is not that great. And draft, our bank account had $21 in it for a six day period in November. I ended up closing a deal with, to redesign Chicago Magazine which is a local lifestyle magazine similar to New York mag.
Speaker 2:And I did that in December and that basically saved the business. I was still flitting around feast or famine from project to project. 2013 I made 87,000 and that was almost entirely due to the success of Draft Revise. And then 2014 and '15, I made somewhere in the the range of $1.28 to $1.30, something like that. Which is like, you know, after after health insurance and stuff like a decent upper middle class salary.
Speaker 1:And these revenue are numbers too, right?
Speaker 2:These are revenue. That is pre tax, pre health insurance, pre four zero one ks which I was filling up and everything. My retirement accounts are still extremely far behind what they should be for a person of my age. However I own a house. Mhmm.
Speaker 2:And that was a deliberate and intentional choice that I made. In 2015 I made $1.60 and that was enough to think hey I can't afford a down payment on a house. Then in 2016 I made $2.38 to account for the fact that I made a really stupid decision and bought a house. And I worked my ass off and never again. And this year I am deliberately making less money.
Speaker 2:I'm on track. We're recording this at the September. I'm on track to make about 170, 180 depending on whether one of my clients renews. And I feel very comfortable about that. We have 150 in the bank right now.
Speaker 2:I have broken even on expenses for 2017. So everything after this is gravy income which I'm gonna use to pay down my home equity loan. Wow. So this is just the boring quotidian stuff that goes into the business. Like it's been going very well, enough that I can eat well and travel well and snuggle a dog.
Speaker 1:Yeah. Yeah, this is awesome. That was a really great picture. I love, even if we go back to 2012, and there there's I'll I'll just repeat those numbers again and make sure I've got them right. It's like around 47,000 in 02/2012, around 81,000 in 02/2013, one twenty eight in 2014, one sixty in 2015, two thirty eight in 2016.
Speaker 1:And if you if you look at that, the the one thing that, again has come up over and over again is in most cases, especially people who have quit their job, that first year is really hard. Like, so so hard.
Speaker 2:It's It is bad, and I did not like it. I do not want to have that happen to me again.
Speaker 1:And so much of this hinges on my first year independent. So I did consulting in 2014 and 2015, and then my first year just relying on products was 2016. And what a lot of people don't know about that year is that in June I had a similar moment to you of, If I don't get this magazine redesign job for me, it wasn't that but if I don't get this, this is done. I'm screwed. And then I had an AppSumo deal that ended up just doing really well and kind of saving the business.
Speaker 1:And so there's these hinging things that folks need to understand. It's going to be really, really, really hard. The encouraging thing for you was that in 02/2013, that's when you started Draft Revise, you did 81,000. You almost doubled your revenue. And Mhmm.
Speaker 1:I think if you had gone if it was like 02/2012, '47, 02/1930, '50, 02/2014, '55 Unsustainable.
Speaker 2:Wouldn't Yeah.
Speaker 1:The the the trend is is is a bit worrisome there. But if you can work at it for one or two years and then have, you know, some movement in the right direction, I think that's a sign of, okay. Keep going. But again, I'm trying to talk to the folks right now that are maybe have started and, you know, aren't super profitable right now. There there there is a tricky piece where you have to evaluate these things.
Speaker 1:And if your expenses are $30,000 a year and you're having the time of your life, then keep making 47,000 That's awesome. But if you are married with kids and you live in New York City, you know, it's probably time to reevaluate.
Speaker 2:Probably a higher cost of living to have a comfortable quality of life in New York City, I would think. Yeah, yeah.
Speaker 1:Yeah. Sorry, did you want say anything on any of that? Because I've got, my next question is gonna be about how, the fact that you've got $150,000 in the bank is quite interesting to me, and I wanna know how you were able to to save that and and what the thinking behind that was. But anything about what we've just talked about that you wanna just add on?
Speaker 2:Oh, the 150 was what I've made in 2017 so far. That is not the amount of money I currently have in the bank. Oh, okay. Gotcha. I'm using it to pay down my loans.
Speaker 2:Gotcha. I have less than that in the bank. Gotcha. But enough for enough runway for enough months that I feel comfortable.
Speaker 1:How how much runway do you keep in the bank? What's what's kind of your goal there?
Speaker 2:Goal is six months. It's currently eight, something like that. Like worst case goal is six. I mean the longer the better. Right?
Speaker 2:Like I I would love nothing more than if all of my clients fired me, I just shrugged and found a way to make more money. That's kind of the position that I'm in right now. Like that would be like cool, sabbatical, three day weekend. Drink some beer on the beach.
Speaker 1:That's awesome.
Speaker 2:And not have a panic attack.
Speaker 1:Because I've been trying to keep three in the bank. And what I've noticed is that three is really not enough because, I just paid my corporate taxes and I pay them once a year. If Revenue Canada is listening to this, just don't listen right now. I don't know why they should be getting me to pay monthly installments, but they haven't yet. And so I pay it once a year.
Speaker 1:And when I pay it, that three month buffer goes down to, like, nothing. All of a sudden, I've got nothing in the bank. And that's terrifying. And that's And so how did you choose six? Was that was that trial and error, or you just felt like this is the right place?
Speaker 1:And when you say six months, that's six months living expenses in the bank?
Speaker 2:This is six months of everything. So what I do is I use an app called Solver. You can use any app you want, but basically I have it in there where I write down all of my expenses. And people are like, Oh, so like your mortgage for the month? No, all of my expenses.
Speaker 2:Oh, so also your payroll and utilities? No, all of my expenses. I have divided the cost of my passport by one hundred and twenty months and put it in there with a renew date specified. Wow. I have put in the cost of all of them.
Speaker 2:I have Nick Feltoned my expenses. And at the very bottom right of the silver file is a number. That number times six. Yeah. And okay, so to answer your original question, why six?
Speaker 2:That was the number that I reached after I built up that number and started feeling okay about my business. Yeah. It was entirely personal feelings and thinking like all of the stuff I have to account for in my life. The fact that I am making three fourths of the cash income of this household. Mhmm.
Speaker 2:So my partner who works the most amazing job in the world and is the secret badass in my relationship. If I lose my job we cannot rely on her income alone. Mhmm. Right? So fine.
Speaker 2:That's not a problem. I don't feel any resentment or you know, difficulty about that. But like keeping in mind, I am the one that has to comp all of these things because the mortgage comes out of draft. My salary comes out of draft. The health insurance comes out of her, is merciful and good.
Speaker 2:Awesome. For now, right? That could change, that has changed. But looking at all of the things and also the quality of life that we wanted to be having. How often am I taking a giant international trip?
Speaker 2:Well I'm going to Copenhagen in six weeks so do the math. Know like, etcetera etcetera etcetera. All of those things they go into this file And I realized like I have a tremendous amount of responsibility to this household, to my partner and my dog and my friends to not screw this up. How much do I feel comfortable if everybody fired me today that I would be like, I've got this. And I realized after a lot of personal conversations with my friends, a lot of journaling, a lot of talking with my therapist, it was six months.
Speaker 2:How That's just feeling.
Speaker 1:Yeah, and how long did it take because this is really a big part of what this conversation is about, because really profit is money that you get to keep in the business for whatever. It could be six months reserve, It could be twelve months reserve. It could be money for growth. It could be money to hire somebody. It could be money like, instead of investing in the stock market, your business is making 15% return, and you just think that's a better place to put your money.
Speaker 1:It could be any of those things. Right? How long did it take you to get to six months after you'd started draft revise in 2013?
Speaker 2:So that's an interesting question because I bought a house in the middle of all of this. I got to six months in about nine months after Draft Revise launched. But in the middle of that, took on too many clients and burned out which was bad. Mhmm. And had to raise my rates which was good.
Speaker 2:And then I got fewer clients which turned out to be good. Mhmm. So I fought really hard during that period. It took about nine months and then I started building up a cash cushion and made more money in profit than anyone has any right to, and I bought a house. Then I dwindled down to about three months of cushion and it took me about nine months after buying the house to rebuild that.
Speaker 2:You And have to keep in mind that that's in draft twenty sixteen levels when I'm charging way more money for draft revised and taking on way fewer people. So there was actually higher risk in that situation because if you lose one client you're losing a larger percentage of your monthly recurring revenue which is hugely problematic for cash flow reasons.
Speaker 1:I
Speaker 2:got fired by my biggest client two weeks after I closed on the house.
Speaker 1:Oh man.
Speaker 2:Yeah. So that probably would have been fewer than nine months if it hadn't happened.
Speaker 1:Is that kind of stress, but I think what is and obviously, I'm glad you mentioned this too because there's fluctuations with all of this. Just like in regular life, and even more so in a business, like, if you're working for IBM and you're regularly getting a $10,000 a month paycheck, then that is going to feel a lot more,
Speaker 2:reliable. Now it might not be You get comfortable.
Speaker 1:You get comfortable. But there and it might be a false sense of comfort, but that false sense of comfort is actually pretty good for the brain because it because the stress is what kills you. Right? Yeah. So there I think the other thing people need to recognize is the other trend that's come up is that it doesn't matter if you have six months cash in the bank.
Speaker 1:It doesn't matter if you have a million dollars cash in the bank. Every single person I've talked to who has their own business, they think a little bit about what if this all goes away, and there's always some fear because they know it fluctuates. Right?
Speaker 2:I brought this up to my therapist last week. Last week, did my best, Draft did its first mid 5 figure week because of consulting revenue all hitting at roughly the same time. And the week after, I'm in my therapist's office and I'm like desperately worried about my business failing. And he's like, well okay, well let's like lay it out. What's the source of the problem here?
Speaker 2:And he's thinking like I lost a bunch of clients or whatever have you. And I'm like, well actually I'm you know in the middle of my next my fifth book long. It's you know everybody that I talked to about it is like jaw on the floor like please let me get access to the secret pre order page. And so it's probably gonna do well And I've gotten all these clients and he's like, know everything you just told me is like, you're doing really great with your business. And actually the past like six months I've been seeing you, you've been doing really great with your business.
Speaker 2:So what's the problem? And I'm just there like, I don't know. Now that you lay it out like that, I don't know. Yeah. Maybe it's that I'm, well, this is the problem, right?
Speaker 2:It's like why I'm yelling in the middle distance at my therapist about this. Because I don't know why I should. Maslow's hierarchy tells me that I'm like close to the tip of the pyramid. Yeah. I'm doing pretty good.
Speaker 2:Yeah. So what's the problem dumb brain Nick D? Yeah. And I think it's exactly what you're saying. It's this lizard brain impostor syndrome nonsense that you have to beat back no matter what level you're at.
Speaker 1:Yeah. Totally.
Speaker 2:It never goes away.
Speaker 1:It never goes away. And I I think folks do need to to be prepared for that. Like, the the, the the opposite is also a problem, which is this kind of gritty, I'm going to do whatever it takes. This doesn't faze me. If don't have the fear, I'm also a little bit concerned for you because, yes, there is a danger and a risk in business.
Speaker 1:That's the whole thing. That's how it works. And if you're not scared, then there's also a problem. If you're listening to this right now and you're not profitable and you're just kind of delusional, like, oh, it's gonna be fine, like, you probably need to see your a therapist. And actually, let's let's let's talk about that because I don't wanna actually make light of that because I've just started going to therapy No.
Speaker 2:No. No.
Speaker 1:Therapy as well. How often do you go by the way? Do go every week, every month? What's your cadence?
Speaker 2:Currently once a month. It has been as frequently as thrice a week. Okay. Yeah. But that's, I'm doing pretty okay right now, so yeah.
Speaker 2:Yeah.
Speaker 1:And so, and I pay about $100 an hour to see my therapist. Is it close for you? Is it about that kind of investment?
Speaker 2:I think pre insurance it's like 120, 130 because my insurance covers it, which But is I do a $20 copay for each session which like, that's great. But I think in practice, in The United States, should expect to pay somewhere between 90 and 150 an hour for a therapist depending on like how fancy they are and how many degrees they have.
Speaker 1:Interesting. Okay. See, and I I'm just I just pay for it outright. Have we we have free health insurance in Canada, but it doesn't cover, mental health, which is unfortunate. Yeah.
Speaker 1:But I just think, for me, it's been an incredible investment. And, not just for my business, but I'll I'll talk about the business part. If you're a founder, especially a solo founder, it's everything relies on your sanity. It all relies on your emotional and mental well-being. And this is something that Nathan Barry actually, it was kind of Nathan that got me into this because I was very kind of anti therapy for a long time.
Speaker 1:Not anti, but anti in the way that my dad is like, nah, I'll never do that.
Speaker 2:You know? Like not for me type thing.
Speaker 1:Yeah. Not not for me. And I think, my my advice to founders would be you should get a therapist right away, and it should be a real person that you actually meet in their office. And even if there's nothing going wrong, I think once a month is kind of a good base. You invest in, software for, you know, accounting and for project management and all that other stuff.
Speaker 1:Like, you pay $99 a month for Basecamp. If if your brain and or your soul or whatever, if they explode, that's worth a lot more than $99 a month. Right?
Speaker 2:That's true. And I'm gonna add on to this also. If you haven't read the personal MBA by Josh Kaufman, do it. It's amazing. It's one of the only good business books.
Speaker 2:I hate most business books. This one is good. And he spends a good fourth to third of it talking about personal health. Like the best thing you can do for your business is like exercise and diet. Like the whole thing that everybody's been telling you for your whole life that you've been screwing up.
Speaker 2:Exercise and diet. Yeah. Don't go out drinking every night. Like spend some time meditating. Like I cannot agree more with the dovetail between living a healthy lifestyle and performing well in business.
Speaker 1:Mhmm.
Speaker 2:And I know people are coming into this expecting like, here's how you run a mailing list that's liable to convert. You can get that advice a dime a dozen. It doesn't matter worth anything if you're not healthy. So that's like the biggest thing that I can recommend to people is like, not just therapists, but it's all of a piece, right?
Speaker 1:Yeah. And this stuff actually does matter. I think what's been interesting about these conversations is, and yours has definitely been maybe softer this interview so far, but I'm really glad we've covered this. I know we could have gone into the weeds of really technical, Here's some things you do. You do have that solver file, which is very, very kind of tactical.
Speaker 2:But
Speaker 1:this piece here actually does matter, and it's the piece that we are often inclined to ignore. And I'm speaking from experience. I'm the guy that's like, come on, I'm just a haggard grind it out kind of guy. It really matters. So if you're not profitable right now or you're struggling or you want to get more profitable, but you're at the office from six in the morning till six at night.
Speaker 1:How many hours do you work a day by the way?
Speaker 2:Five, six. I don't count this as work. I spend most of my day cooking and walking my dog. And then I sit on Slack. Like after this, I'm gonna open up Slack and make sure nobody's website's burned down.
Speaker 2:Yeah. But, if they didn't, I'm gonna go and walk my dog. It'd be great.
Speaker 1:This is something that Brennan Dunn said to me that he quite literally took me aside at a conference and said, You know, Justin, you are working way harder than any of us. And I just want you to know that I'm working three hours a day, and it's okay. Like, it's it's fine. And he he he's launching a new product right now, and so he was probably he was probably working sixty hours a week for a while. But his whole goal is to get back down to a healthy, breathable kind of life.
Speaker 1:And, I know again, like, I'm from Alberta, Canada. There is nobody that likes to work more than Albertans. Trust me. And there is something, good about having a good work ethic and all that stuff. But if you are the CEO of your own company and you blow up, everything blows up.
Speaker 1:And so you gotta take care of yourself.
Speaker 2:Yeah, I mean, I have an assistant, but it's not like there's a succession plan to hand draft off to her after I die. Yeah. Right? I'm pretty sure that the whole thing rests on, right? Like it's all on me.
Speaker 2:And it's funny getting that advice from in particular Brennan Dunn, who I think has a reputation for executing very well and working very hard. Yeah. Nobody's gonna accuse Brennan Dunn of being a slacker. Yeah. Right?
Speaker 2:And when you get that from other people it's like, it's almost shocking, right? To get like the self care spiel from other people who are busting their butts. Mhmm. And, but I'm gonna join in on the chorus man. Like that's, get eight hours of sleep a night.
Speaker 2:People are like not profitable. The best thing that you can do is everything in your power to stave the panic attack. Sleep, improve your diet, exercise, drink a lot less if at all, meditate and journal and start to work on your business. Those are the bits of advice that I have for you. And I know that they all sound so squishy and hippie and on actionable, but every time I do them, I end up making a lot of money, so you have to trust me about it.
Speaker 1:Yeah. I think that's a great place to leave this conversation. I really appreciate your time, Nick. This has been awesome. Awesome.
Speaker 1:Thank you for sharing your numbers. You for
Speaker 2:the I tactical
Speaker 1:actually think if we can get a screenshot of that Solver file, that would be amazing for the blog post. But most of all, thanks for sharing this really personal, down to earth advice. I think this is exactly, what people need to hear, and it's great encouragement for me too.
Speaker 2:Not a problem. Thank you so much for having me. This has been great.
Speaker 1:So that was my conversation with Nick DeSabado. Unbelievable. If you're not already on his email newsletter you have to get on it. It's draft. Nu, there's a subscription form right there on the site.
Speaker 1:I've been a subscriber for a long time and he just writes amazing stuff. It's the kind of newsletter that shows up in my inbox and I actually read it as opposed to a lot of newsletters. Go check that out, draft.nu. And his most recent book Draft Evidence is also amazing. I bought the hardcover version and it's again another book that I refer to again and again.
Speaker 1:Great stories, great essays. Some of them came at kind of a really difficult time in my life and were really encouraging. So if you haven't read his book yet, go check it out draft.nuevidence. And that's it. Be sure to go to megamaker.co/profit if you haven't already.
Speaker 1:Sign up for the rest of those case studies. See you later.
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