đ 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
đ Ultimate guide to recession proofing
đą Metric based teams > feature based
đȘ One-way vs two-way door decisions
+ 2 BONUS frameworksÂ
âïž Stop hiring managers from hiring
đ Why you should score your meetings
Purge your costs
đ„ 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 itâs 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 itâs also an amazing time to help other companies cut costs.
Lock up all of your finances and all of your costs right now. What Iâm noticing is a lot of people saying âWhen things get bad, Iâm going to do it.â Thatâs already too late.
I have a friend whoâs company is 50% up in revenue versus projections, so itâs going super well. Heâs still planning for a very significant cut in his business and heâs 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 âI 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.â
I made it very clear what I was asking. If you make it vague in these requests, youâre 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 âYou avoid the expense and hassle of listing the vacancy, going through applications, and avoiding loss of rental income.âNoah 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.
Weâve gone out and negotiated with all of our software vendors. If anything was over $100 weâd ask for a discount.
Hereâs the exact wording we used âHey, 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 canât afford it. We can evaluate in 12 months to go back to the original price. I hope you understand.â
I mentioned this to a few of our SaaS providers and they were able to accommodate this. They want to stay in business too. Weâve cut almost $196,000 immediately.Noah Kagan
What I say
Why it matters:Â The old adage âThat wonât happen to meâ can kill your business. Please donât think your business is above cutting costs. These tips can be implemented in the next hour. They may not work every time, but Iâm a big believer of the saying âIf you donât ask, you donât get.â
Between the lines:Â The same goes for if youâre procuring new software or agency support. SaaS companies have absurdly high margins, so youâll 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. Thatâs with no economies of scale to leverage - we only purchased 4 seats. Be bold, give an ultimatum of I need X price or I canât move forward. Worst case, theyâll meet you in the middle with a strong counter offer.
Myopically focus on a few metrics
đ„ Second place (6 min read vs 2 hours listening)
You can add Luis von Ahn to your âHow the f*** have I not heard of this guyâ list. He sold two companies to Google in his twenties, he co-invented CAPTCHAs, and heâs 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 donât 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. Thatâs how weâre split out now.Luis von Ahn
Focus on daily metrics
Thereâs two reasons for daily metrics. One, because weâre 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, weâd have to wait a whole month to figure out what that number is.
If you look at daily metrics itâs much faster. If we make a change, you can see tomorrow.
We talked about starting to do hourly. We havenât quite done that. One of the difficulties with hourly is thereâs a pretty big difference in terms of times.
For example, around 9pm is the most popular time to learn a language, whereas 4am thereâs not that many users.Luis von Ahn
What I say
Why it matters:Â By default, functional teams quickly become siloed. By defining shared accountability and setting common goals for metric based teams, youâll improve cross-functional collaboration and alignment.
Between the lines:Â At Medicspot, weâve 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 itâs going great. Each team has a lead who sets the direction and rhythm. Theyâre 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 thatâs me) who says âI understand youâre in deep pain right now and need another person but this person does not pass our bar.â
I make the same mistake when Iâm hiring for an executive. I have a bias toward hiring because I donât 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 âIâll just take whoever. It doesnât matter.â In the end I spent about a year looking for a CFO and thank god we waited.
Itâs not that Iâm that good at holding our bar but Iâm very good at holding our bar when itâs not me.
Thatâs a big piece of advice - have somebody else hold the bar.Luis von Ahn
Luis raises a good point. Itâs easy for a hiring manager to compromise quality if a âgood enoughâ candidate comes along to solve their immediate pain. At Medicspot, we have another member of the leadership team perform final interviews. Although they donât 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. Itâs prudent to hire temps rather than FTEs when you need to fill urgent roles.
How to empower your teams
đ„ First place (5 min read vs 1 hour listening)
I hate these kind of episodes. Theyâre so good, Iâm 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 thatâs 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 itâs a two-way door decision, itâs 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
Iâm good at [knowing if itâs a one or two door decision] 80% of the time these days. Itâs a muscle that you build.
You start to understand if I make this decision today, itâs 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 âThis is a lynchpin in our ecosystem that weâve got to be really careful about if weâre going to change it.â
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. Youâre starting to think on the long horizon, so the decisions youâre making today are in service of that long horizon.Nickey Skarstad
What I say
Why it matters:Â Thereâs 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 itâs their own.
Between the lines:Â 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. Iâll 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 hadnât 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 didnât feel right. She later concluded sheâs not excited by platform companies. Hereâs 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 âI donât think I love this.â
Think about the work youâre 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 youâll 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.
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.