📉 How to recession proof your business, build metrics based teams, and more

Winners include: Lenny's Podcast, The Tim Ferriss Show, and Noah Kagan Presents

GM, this is Podup #19. Discover the best 3 business podcasts of the week (save 3 hours 25 mins listening in the process).

What you need to know

• 📉 Ultimate guide to recession proofing

• 🔢 Metric based teams > feature based

• 🚪 One-way vs two-way door decisions

+ 2 BONUS frameworks 

• ⛔️ Stop hiring managers from hiring

• 🗓 Why you should score your meetings

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Purge your costs

🥉 Third place (4 min read vs 25 mins listening)

Most podcasts give you high level ideas. Noah Kagan goes a step further. He gives tangible advice that you can apply today. You can read the exact wording he used when negotiating with landlords and SaaS providers.

This episode was originally published 2 years ago at the height of Covid. It was republished last week because it’s still applicable today. Arguably, even more so. Take note.

What they say

Cut costs earlier than you think

People are starting to double check their wallets. We had to unfortunately do that at AppSumo. But, what that means is it’s also an amazing time to help other companies cut costs.

Lock up all of your finances and all of your costs right now. What I’m noticing is a lot of people saying ‘When things get bad, I’m going to do it.’ That’s already too late.

I have a friend who’s company is 50% up in revenue versus projections, so it’s going super well. He’s still planning for a very significant cut in his business and he’s planning for it now.

Noah Kagan

Send a rent reduction letter

The first thing we did was send a rent reduction letter [to our landlord].

I made this specific request ‘I would like to request a $10,000 reduction of my monthly rent for a period of 6 months. I believe this is a fair rate that would retain occupation here.’

I made it very clear what I was asking. If you make it vague in these requests, you’re going to get a vague response.

The second thing that is super important is how is it benefiting them. That is the most important part. What I said is ‘You avoid the expense and hassle of listing the vacancy, going through applications, and avoiding loss of rental income.’

Noah Kagan

Negotiate your SaaS costs

Most people should have at least 12-24 months of capital in their bank. The VCs in San Francisco are saying 24 minimum to survive this. Winter is coming people.

Do a total credit card bill review. Look at what you can cut, reduce or find alternatives for.

We’ve gone out and negotiated with all of our software vendors. If anything was over $100 we’d ask for a discount.

Here’s the exact wording we used ‘Hey, can you please cancel our subscription. Please confirm when it happens. If you can offer X price per month, then we can keep it. Otherwise, we can’t afford it. We can evaluate in 12 months to go back to the original price. I hope you understand.’

I mentioned this to a few of our SaaS providers and they were able to accommodate this. They want to stay in business too. We’ve cut almost $196,000 immediately.

Noah Kagan

What I say

Why it matters: The old adage ‘That won’t happen to me’ can kill your business. Please don’t think your business is above cutting costs. These tips can be implemented in the next hour. They may not work every time, but I’m a big believer of the saying ‘If you don’t ask, you don’t get.’

Between the lines: The same goes for if you’re procuring new software or agency support. SaaS companies have absurdly high margins, so you’ll be surprised at how low they can go to win your business.

Just last week, I secured over 40% off the headline price on a CRM. That’s with no economies of scale to leverage - we only purchased 4 seats. Be bold, give an ultimatum of I need X price or I can’t move forward. Worst case, they’ll meet you in the middle with a strong counter offer.

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Myopically focus on a few metrics

🥈 Second place (6 min read vs 2 hours listening)

You can add Luis von Ahn to your ‘How the f*** have I not heard of this guy’ list. He sold two companies to Google in his twenties, he co-invented CAPTCHAs, and he’s Co-Founder and CEO of Duolingo, the largest language learning app in the world. Luis revealed some of the unique ways he built Duolingo into a company worth almost $4B.

What they say

Metric based teams

We discovered this idea of metric based teams, which to this day we use and I think has been a really, really good thing. This is not common.

The standard at companies is to have teams that own big features. These are feature based teams.

At Duolingo, we have a leaderboard feature for example. The normal thing to do is to have a leaderboard team.

Instead, we have a bunch of teams that own a single metric. For example, a metric that we have is time spent learning. What they own is the number of minutes per day that the average user uses Duolingo for.

It turns out that changes to the leaderboard can increase or decrease time spent learning. That team messes with the leaderboard a lot but they don’t own it.

The only thing they do is improve this one metric. Every quarter it has to increase. They run hundreds of AB tests to increase this metric.

Our first metric based team was a retention team. All you have to do is make sure users come back everyday.

At some point we had around 40 teams. That started to become craziness. We decided to pool the teams together that were similar to each other into this thing called areas.

For example, we had a monetization area. Inside the monetization area, we have a team that owns ad revenue per day, we have a team that owns subscription revenue per day. That’s how we’re split out now.

Luis von Ahn

Focus on daily metrics

There’s two reasons for daily metrics. One, because we’re big believers that you should be using Duolingo everyday, we really want you to build a habit and the best habits are daily.

The other reason is we run a lot of AB tests. Looking at a daily timeframe allows us to move faster.

Imagine if our timeframe was a month. If we said how many people do X in a month, we’d have to wait a whole month to figure out what that number is.

If you look at daily metrics it’s much faster. If we make a change, you can see tomorrow.

We talked about starting to do hourly. We haven’t quite done that. One of the difficulties with hourly is there’s a pretty big difference in terms of times.

For example, around 9pm is the most popular time to learn a language, whereas 4am there’s not that many users.

Luis von Ahn

What I say

Why it matters: By default, functional teams quickly become siloed. By defining shared accountability and setting common goals for metric based teams, you’ll improve cross-functional collaboration and alignment.

Between the lines: At Medicspot, we’ve recently transitioned to metric based teams. We have four cross-functional teams that each own one of our core metrics - number of partners, NPS, cost to serve a patient, and number of patients.

So far it’s going great. Each team has a lead who sets the direction and rhythm. They’re fully accountable for improving their metric every quarter. They empower their teams to live and breathe their metric, to think creatively, and to learn quickly with experiments.

BONUS framework

How to maintain quality hiring

Hiring managers are extremely biased towards hiring.

Ultimately, at Duolingo, the decisions are not by the hiring manager.

The hiring manager can have a lot of input, but there is somebody else (a lot of the time that’s me) who says ‘I understand you’re in deep pain right now and need another person but this person does not pass our bar.’

I make the same mistake when I’m hiring for an executive. I have a bias toward hiring because I don’t want to spend time looking.

It took a long time to find a CFO. After nine months of searching I started faltering. I almost gave up. I thought ‘I’ll just take whoever. It doesn’t matter.’ In the end I spent about a year looking for a CFO and thank god we waited.

It’s not that I’m that good at holding our bar but I’m very good at holding our bar when it’s not me.

That’s a big piece of advice - have somebody else hold the bar.

Luis von Ahn

Luis raises a good point. It’s easy for a hiring manager to compromise quality if a ‘good enough’ candidate comes along to solve their immediate pain. At Medicspot, we have another member of the leadership team perform final interviews. Although they don’t make the final decision, those leaders raise concerns and challenge the hiring manager to maintain our high bar.

9 times out of 10, I always advocate for quality of hiring over speed. There are exceptions to the rule. You may need to hire a warehouse worker or customer service agent in times of rapid growth. Even then, a minimum bar needs to be met. It’s prudent to hire temps rather than FTEs when you need to fill urgent roles.

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How to empower your teams

🥇 First place (5 min read vs 1 hour listening)

I hate these kind of episodes. They’re so good, I’m left frustrated at the end. Why? Because I could write a whole damn newsletter on this. From setting your North Star metric to dogfooding your product or service, this is one of those rare episodes I encourage every reader to listen to.

What they say

Empower teams with two-door decisions

I love the concept of one-way door versus two-way door decision making.

If your team is making a really critical, long term decision that’s going to be limiting to a lot of the future things that you could want or need to do, that is a one-way door decision.

You should spend time really thinking about it, discussing it, getting feedback and buy in from your larger community, from your leadership team, etc.

If it’s a two-way door decision, it’s not going to make a huge impact. You can change it later if you need to.

Let your team cruise on those things. It gives people autonomy. It helps you move fast.

Just make sure when it comes to decisions that are harder to change longer term, then spend time really thinking about, discussing and debating it.

Nickey Skarstad

Second order decision making

I’m good at [knowing if it’s a one or two door decision] 80% of the time these days. It’s a muscle that you build.

You start to understand if I make this decision today, it’s going to impact this next level of decisions, and the next level after that. That will cascade through a larger system.

It helps you understand ‘This is a lynchpin in our ecosystem that we’ve got to be really careful about if we’re going to change it.’

Forcing yourself and your team to think in that way is a really good exercise because it will save you time and a lot of money.

That ladders up again to having a very clear vision and strategy. You’re starting to think on the long horizon, so the decisions you’re making today are in service of that long horizon.

Nickey Skarstad

What I say

Why it matters: There’s only upside from giving people the power to make two-door decisions. Worst case, they make a mistake and learn from it. Best case, they do the right thing for your business and strengthen their analytical muscle. In both cases, they feel empowered and start to treat your business like it’s their own.

Between the lines: You can also empower people by involving them in one-door decisions. What I do is write out a one-pager with context about the issue, what the options are, and add a steel man argument. I’ll then have a call to get their opinion on the issue. Three things can happen:

• They come to the same proposal and you write it up. They feel like they helped make the decision and you validated your school of thought.

• They share an insight you hadn’t considered and change your mind on the best way to proceed (aim to have strong views loosely held).

• They think the opposite of you. They feel valued that their opinion is heard and respect the final decision as there was a strong case for both sides.

BONUS framework

Are you in the right job? When Nickey joined Shopify, something didn’t feel right. She later concluded she’s not excited by platform companies. Here’s her framework for finding out if a job is right for you.

I went through my calendar and changed the colors of all of the meetings on my calendar to red, yellow, and green after the meeting.

If it was yellow, my energy was baseline. If it was red, I was either bored, stressed, or not having a good time. If it was green, it gave me energy, I felt excited and I wanted to keep working on that.

When I looked back at the last few weeks it was almost all red and yellow. From an energy standpoint, I was like ‘I don’t think I love this.’

Think about the work you’re doing in that lens. Get really good at figuring out what you love and how you can optimize your next role for the things that you love.

Think through what your work will look like, who your end consumer is, what will the actual work you’ll be doing every day be. If you can get really clear on that and what gives you energy, it makes it much easier to figure out where you should go next.

Nickey Skarstad

This also works as a way for you to identify what parts of your day deplete your energy reserves. Delegate as much of the yellow and red stuff as you can, so you can focus on where you add value and what brings you the most amount of joy.

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Note, these quotes were pulled at different points of the episode. Some sentences were left out to make the narrative clearer and more concise. Podup is not associated or affiliated with any podcast (unless otherwise stated). All roundups are independently written and do not imply any sponsorship or endorsement by the podcast.