My Startup Journey

The Referral Rock Story Part 1 (From Beta to Real Business)

Growing from an idea to business takes time, a lot of time!  Especially when you are stubborn, don’t want to take funding, are more risk-averse than people think, and initially think you can do everything yourself.  If you ever get that lucky, there is a lot you go through learning about yourself and other people (team and customers) to have the idea take flight to a fully sustainable business.

Back in 2013, the idea of providing small businesses with the tools to run their own referral program was born. Not too long after in December 2013, was registered.

Beta (2014)

So many lessons learned from my past in building a startup led to Referral Rock.  Like most businesses, the first few months of Referral Rock were focused on building the initial contacts and defining an ideal target market.  All during this beta period, I was software consulting on the side to support myself and my family.


I want to say I formally went through a customer development process, but that’s not entirely true.  The truth is I didn’t like what I heard from the initial group, and I had a vision for what I wanted the product to be, so I built an MVP anyway.  As many projects die on the vine (at least five that never launched), I was at least smart enough to not put too much into the MVP.   The first version I cobbled together was from some old HTML templates and some reusable code laying around; then I was off. 

Survey Monkey was my first admin UI, where I used it as a form to complete a user’s program (i.e. logo, tagline, business name, referral offer).  I then exported it to a CSV, then converted to a resource file to match a subdomain in the system.  If they wanted changes, I manually made them upon request.  It was quick and dirty but saved me a lot of time to get something out to people without too much coding investment.

Lack of a launch

Sites like Product Hunt weren’t as big of a thing in 2014, and this was a time where listing sites still had a little weight.  Sites like Betalist, personal contacts, and even the list of users from UberNote were used to get the word out.  I didn’t care much about a big launch at this point as I was excited about the project, but wasn’t confident it could be a business yet.

Within the first half of 2014, Referral Rock had a list of over 200 contacts. Referral Rock’s beta program had begun, and we had some live fire and opened the site up for registration. During this time Referral Rock was a part-time gig and working hours consisted of working nights and weekends.  Thinking back, I’d estimate I was working about 20 hours a month on the project.

With over 500 businesses signed up, the first year and a half proved to me that there were customers in this market and that there was a need for the software.  

Paying Customers (June 2015)

I was chatting with a long time startup friend of mine (Alex Black) with great excitement about everything I had done with Referral Rock, and he burst my bubble by mentioning this wasn’t a business unless I charged people.  Initially, I was upset, but then I took that candid advice and turned it into a challenge to create a paid version overnight. 

In June of 2015, the first paid version was launched.  As luck would have it, the first paying customer signed up within two days!  Beta users still had access, but sign-ups were now only for the paid version ($59 per month).  By the end of the first month, I had four paying customers, and I was on cloud nine!  

Thinking back it makes me wonder how fragile I was at that point.  If the paid version was up and there were no takers for a month or so, I’m not sure if my impatience would have gotten the best of me or not.

Over the next few months, I slowly shut down the beta program.  I made it clear up front that we would eventually charge, but I highly valued my early users.  As I closed out the program, I emailed the most active beta users and sent them a coupon with a massive discount for life.  I firmly believe in grandfathering all pricing as a sign of the gratitude and appreciation for anyone that has taken an early bet on us; it’s something we’ve continued to this day.

I was on my way to the dream of building a little internet business that I could provide recurring income for my family and me.  Within a few months, Referral Rock was making about $2k a month, and I reached a tipping point for myself.  All I wanted to do was work on Referral Rock and doing any other consulting work was starting to feel like a drag or even torture as I rushed through projects.  I decided to make the jump to full-time.

Inside sales was discovered

Can I build a product and sell it to 1000s of people and never have to actually talk to them?  That’s the indie hacker dream, right?  Well… when all your income is coming in small bite-sized chunks, and your marketing efforts are starting to normalize you begin to follow the path presented.  If I weren’t forced to need the money, maybe I would have continued down the road of a more self-service oriented product.

I started out doing all product support through chat but then frustration sets in and you have those moments where you realize you’re going to either spend the next 20 minutes on chat trying to explain something, or you could pick up the phone/screen share and talk to them to have the problem solved in 5 min.  Path of least resistance?  I picked up the phone.

Within a week I found that talking to people in person resulted in more sales. In fact, the conversion rate practically tripled. I put up a demo request form and needed found that I needed to leave 1/2 my time open to scheduling demos. Who would have thought that actually talking to people and explaining the product and service in person is the key?! Brilliant, right? 

It wasn’t until much later that I realized this was inside sales and founder selling at it’s finest.  It was the birth of our consultative sales practices and laid the groundwork for what would genuinely get Referral Rock off the ground.

Getting bigger than just me

After inside sales were implemented and made an integral part of the sales process, it was evident that we needed to grow the team. At this point I felt confident that customers can be acquired, we could provide value, and there was enough revenue coming in to support a business.  More hands were needed as I would no longer be able to go at it alone. 

The jump to building a team was scary as it wasn’t just me in the boat anymore.  Yes, I had a family but was always confident I could provide, but bringing other people with me and having them depend on me was a different sort of risk.  In the early days I brought on some part-time people and other people willing to take a chance on nights and weekends as we grew in revenue so did my confidence in bringing people on full-time.

In this time frame, there were moments where I kept wondering and having doubts.  How big is this market?  Last month we had 20 new customers, and this month there are only 10… Is this the new normal?  This is around the time I discovered SaaStr specifically through this post about 10 unaffiliated customers and I no longer felt alone in what I was doing.

I now find it interesting to compare how my startup beliefs changed on what was truly important for the business. Referral Rock did more in revenue in 1.5 years with a single founder then UberNote did in 4 years with a team of 4, some funding, and an accelerator.   Not quite an apples to apples comparison, but a very different change in focus on revenue and sustainability vs. user acquisition and market share.

By the end of 2015, Referral Rock hired its first team member and got some outside technical assistance from an old high school friend as the business grew to 50 customers.  So that put us at 2 FTEs across 3 people at $3k MRR.

Muscle Development (January 2016)

Though the business had grown quite a bit, 2016 proved to be the real year of change for me.  I wasn’t just coding anymore.   As an engineer by trade, I was developing more skills in sales, marketing, and managing customers.  This wasn’t totally foreign to me as I previously had a software consulting business, but that was dealing with 2-3 customers in a given month vs. having conversations and managing over 100 in a month.  I had to grow all kinds of different muscles and fast.

Listening to customers

Listening to customers isn’t just about what features to build and listening to their feedback.  It’s also about getting a feel for them and understanding their needs even if they are not saying it.

During this period I was splitting my time between inside sales and developing the product.  I had some early team members helping out writing KB articles and marketing blog posts to support me.

In February 2016, Referral Rock raised the prices for the first time. I remember the day this all happened.  I was on a call with a prospect hearing about how their sales process worked and how they were already using referrals.  They spoke of the pain of issuing rewards and how much time it took to manage the referrals and rewards. 

Reward fulfillment was a feature that we were considering, but we weren’t sure our $59 a month customer would really care.  After they mentioned referral rewards in the amount of hundreds of dollars, I realized how much a new customer was worth to them and how trusting a $59 a month startup seemed iffy at best.

By the time we had our next call, I had added gift cards fulfillment to a new higher priced plan $250 a month with a 6-month commitment to our pricing page.  I wasn’t quite sure how the next call would go as I was sure the price jump would scare the customer away.  To my surprise, she mentioned she saw the new plan on the website and was happy to sign up.  At that point, we were making $3.5k per month and just took in $1.5k in one swoop.  This was a massive change vs. the microtransactions I was previously receiving.   Maybe I can afford to pay a salesperson instead of me?

Scale-out sales (Attempt #1)

June quickly approached. Referral Rock hit a significant milestone as the anniversary of the ‘pay’ version arrived. During this time the business grew to a total of 110 customers. It was then when I realized that so much time was taken up by sales demos and the product was developing much slower. 

We needed to scale out sales! July came, and the first salesperson was hired. At this point, all I knew was what I was doing in sales but never considered myself an actual salesperson.  I thought a salesperson was supposed to be “salesy” and what I was doing was a hack.  So the first person I hired fit that mold and as you probably can guess… I failed miserably for these key reasons:

  1. We had ZERO onboarding and training for sales – I didn’t realize how much of a learning curve a new product and new customer profile mattered.  I thought hiring a salesperson was just going to spin up and do what they do as a “real salesperson” in a matter of weeks.  I think I even gave the new salesperson all the demos within about 2 weeks.
  2. We didn’t have the right type of salesperson – There are different types of salespeople?  My first hire had experience selling to SMBs which was great but didn’t have much marketing experience which led to some challenges on picking up on the product and understanding the customer.

This was a hard lesson to learn as it killed 2 months of revenue and I was pulled back into sales and lost valuable time and energy that could have gone to other areas of the business.

Scale-out sales (Attempt #2)

In October of 2016, it was time to take another at-bat.  This time the training process, though still not 100% settled was is a much better spot. In hindsight, we were actually very lucky in more than one way with finding our next salesperson. 

First, he actually found us. Mica was in limbo with his own startup. He didn’t want to give up on it, but couldn’t work on it full time either. So, he stumbled upon a Referral Rock listing and decided to reach out. He said right away that he could help with everything we needed and threw down the gauntlet by saying he could do anything I could do except code.  I told him he didn’t know what he was getting into, but go ahead and put your money where your mouth is.

Second, Mica turned out to be much more than our first salesperson outside of me.  He was just what we needed to get to the next level as he eventually took up the helm running both sales and what would become customers success.

By December, we were able to begin focusing on other areas of the business. Since sales had a new head honcho, it allowed the rest of the team members to dig into their core duties.

Pushing on customer pricing

With the help of Mica holding down the day to day sales and customer success, we were able to land our first large enterprise sale.  It was for a lot of custom work on our end that honestly wasn’t even on the roadmap.  So I priced it high because I viewed it as a distraction but for the right amount it could be worth it.  This was a mental pricing exercise I learned from my consulting days that we still use today.  Price it, so you’re happy if you win, but not upset if you lose.  In this case, I priced it high enough that it was worth the distraction and when the customer accepted I was happy with it.  In retrospect, it was a big distraction but added enough cash to the balance sheet for me to feel more comfortable pushing forward with some new hires.

Another significant change to the pricing model was that we added a new “Customer Success Package”. We started charging for most as a way to justify all the time we took to help customers use the product correctly and launch their programs.  First, it was optional, then quickly moved it to a required setup fee for m/m commitments.  Conversions to paid did not drop and churn was reduced. Win! Win!  As a bonus, we also waived the fee for a longer commitment and got many converts to 6+ month contracts (yay cashflow).

The year ended with a total of 170 customers, 3.5 FTE, and $15k MRR.  By this time I stopped asking myself if this was sustainable and if this was a real business.  The answer was a resounding yes!  It only took 1.5 years of sales and 1000 demos and trial users for me to believe.

Key lessons so far:

Let the customers and business unfold as you go

By listening to the customers and their needs, it’s led Referral Rock to be a totally different business from what I intended.  The business has a life of its own and won’t necessarily end up where you designed, and that can be a good thing!  We have gone from being a $50 per month self-service product meant to require little to no interaction, to be intimately involved in building relationships with our customers and their success and building a team.

Everything takes longer than you think  

“In a month we can train a sales team with no materials, a founder shooting from the hip, and still keep up with existing sales”… Dying words!  Don’t take for granted how long it takes to get people up to speed on everything that you’ve learned over 2 years.  

Everything slows down as you have customers.  You have a drag of legacy customers, legacy features, that have to be managed as you grow.  Your existing customers are what keep you alive, and they are the ones who invested in your early.  Don’t piss them off!