Who don’t know about the MOZ which is prominent SaaS based compnay helping all the digital marketers to improve their marketing results. Recently I came across a book of Rand Fishkin, Lost Aad Founder. I can say this book is entrpenuaial autobiography and yes most geniune one.
So, Here are 3 business lesson which I learn after reading this famous book “Lost and Founder”!
Rand Fishkin, is a founder of MOZ, a SaaS based company which virtually dominated whole SEO Market. In 2009, he was named among the 30 Best Young Tech Entrepreneurs Under 30 by BusinessWeek, After he left the Moz, he launched another company “Spark Toro” by This company Rand is trying to resolve biggest marketing problem of the current time. Influencer marketing.
Talking about this book, I can say ; this is the most honest and authentic book ever written. Rand Fishkin literally explains everything from, his start-up struggle to the difficulties of life. He doesn’t shy away from showcasing his shortcomings and that’s a rare thing to witness in the current corporate world.
It’s wonderful book, and I really believe that everyone should read this book. And if you are planning to start your company then this book is a must read.
So, here are the 3 important lessons I learned after reading this book.
1)Service Business Vs Product Business
Moz, as it started, MOZ was service business mostly focusing on consulting with providing SEO and Digital Marketing services.
But as Rand Fishkin mentions in this book that in 2006 they come up with the transition from service to product-based business.
It all happened accidentally. They just wanted to open up access to some of their proprietary tool’s which they build for SEO related task. Things like tracking ranking in the search engine and checking for crawl problems.
Well, at the end of year they realized big revenue difference in service and product business.
In the year-end, they were getting
$ 400,000 – from Consulting
& $ 450,000 – from Software Business
Surely; It was a wake-up call for them.
With this revenue figure in mind, they continued with 2 business models. Consulting and Software.
After running the business for years, here is what Rand Fishkin’s observations are
According Rand Fishkin
- There exist bias for product based companies in the industry. VC’s tend to prefer product business and avoid service business as scalability of service business is a tough task.
For ex. You set up a barbershop and hired a trained professional and it becomes hit in no time and now you want to replicate the same business model in other cities. Here, comes the issue of scalability; though your idea and business model is great but to set up barbershop with the same business model in different cities you will be needing; proper location; trained professionals and time to build the whole set up.
Hence it is a time-consuming task so when it comes to scalibility it is quite difficult for service business.
And let say, you have product business; yours is software as a service-based company then it’s just a matter of time when you launch your product. If your software is exciting and really solving the issue of your target customer then, in no time your product will spread as fire without boundaries of demography
For example, Whatsaap is used across the globe and when facebook acquires the company for a staggering 19 Billion Dollar it was run by a mere 56 people in the US.
So just 56 people were operating the whole business! That too from a single location.!
So, here we can see the difference in profit margin from Product and Service Business.
2) Profit Margin Difference
Product Business – 75- 80 %
Service Business – 25-40 %
Well, this is how they differ when it comes to an Acquisition scenario
3) Acquisition Scenario
Service Business – 1x – 2x ( X revenue )
Product Business – 3x – 8x ( x revenue )
But that doesn’t mean service business doesn’t deserve consideration. Service business poses it’s own advantages
- Less Capital Requirement
- You can control – Scale, expenses, the profitability of a business.
- Hiring cost is lower compared to the product business.
2nd most important learning from this book is; understanding the importance of focus.
In Rand Fishkin’s word
“CEO Sarah stood onstage in front of the company and announced that we’d lay off 59 of our 210 full-time employees”
What was the reason for them to face such a situation?
“ Lack of Focus “ Period!
Why focus is the most important attribute to be considered.?
Moz – as known around the globe is a software company for SEO. That was their core competency and strength.
But then they try to build a product for all verticals. Be it social media, press, publications and content marketing. And focus shifted, as they were trying to copy Microsoft and 37Signal business model.
So Moz come up with
- Moz content
- Moz -Con
- Moz – Con Local
- Keyword Explorer
- Moz API
It turns out selling eight different things to people visiting the website more challenging than selling 2 or 3.
And it’s much harder to structure team that supports eight unique product.
Every product and engineering team were expressing anger and frustration of being understaffed.
And then it happened. Things were not going according to plan. Demand where less. New subscribers were less than expected.
And it was a time to make hard decisions.
To overcome this situation they come up with 2 Solution.
1)Focus on important product
2) Cut the cost – to sustain in the business.
And when you want to cut the cost in high margin software business; people are often the only resource to cut
And that was it. !
That’s the reason; why focus is most important in your professional and personal life.
3)Great Products are rarely minimum viable.
Something > Nothing
#3 What is Minimum Viable Product
What is the Minimum Viable Product?
Let me explain this
In the startup world, The fundamental concept craft a version of your product that requires the least amount of time and effort to validate whether the problem your solving is an important and that real customer will pay for use.
In popular notion and popularized by “Lean Startup” movement. It is expected from the company or early startup to come up with Minimum Viable Product so that based on the user experience and user feedback company can improve a product in the near future.
Rand Fishkin also relied on the concept of MVP and realized how it can be dangerous for the company
He started working on Google SPAM Score – with MOZ’s big data & data science team.
So working with these teams. Before working on SPAM score they already knew what exactly customer wants.
- They wanted a web index that includes all the sites Google Crawled and indexed.
- They want definite SPAM score so that they can make a judgment of which to link and which not to.
Building a product considering these important customer aspects would help them built an exceptionally great product.
But they come up with Minimum Viable Product.
Thinking that Something is better than nothing, but in reality – it’s NOT
And their product launch was a failure and even embarrassing for them.
And even create a bad reputation among the SEO industry.
Lesson: Rather then Minimum Viable Product try to come up with exceptional viable product.