SPI 775: What You Need to Know Before Creating Software For Your Audience

SPI 775: What You Need to Know Before Creating Software For Your Audience

Dave Chesson: The multiple for selling a software is incredible. If you’re selling a website, you’re looking at maybe three to four times EBITDA, which is like the profit, if you will. But when you start looking at, like I say, a one-off software, you’re looking at six to eight. And if you’re in a SaaS, which is software as a service, you’re well over ten times annual reoccurring revenue. You might even be into twenty times.

And so it’s a very valuable asset, especially if you have profitability or you’re showing any type of growth. There are a lot of private equity groups, that would love to have a cash generating SaaS that’s growing.

Pat Flynn: A couple Fridays ago in session 772, I’d mentioned that I was starting a new software and that I was going to take you along for the ride. Well, we’re still in the early days of this journey together, but I wanted to bring on a couple people who’ve been very influential in how this is being built. In fact, I’ve done software before and I failed completely.

Tried it again a little later, did much better with a single developer. And this time I’m working with a professional software development company called Surge Global. And that was founded by Bhanuka, who we’re speaking with today, as well as his partner, Dave Chesson. Now Dave was known as the Kindlepreneur. He still is.

He helps people publish Kindle books, and he’s since developed several pieces of software for authors. And now he’s also created a lot other kinds of software, partnered with people in other markets to create software alongside Surge Global here. And we’re going to talk about all the ins and outs of creating software.

When does it make sense? What might you need to know up front? How much might you need to spend? What are some of the hidden costs and how can you make the developer to entrepreneur relationship a little better? What’s communication like, and how do you stack things in your favor to make this work? I want to know these things because I want this development journey to work as well. So anyway, let’s dive into it. This is session 775 of the SPI podcast with Dave Chesson and Bhanuka from Surge Global. Here they are.

Announcer: You’re listening to the Smart Passive Income Podcast, a proud member of the Entrepreneur Podcast Network, a show that’s all about working hard now, so you can sit back and reap the benefits later. And now your host, he still gets camera shy before he hits record, Pat Flynn.

Pat Flynn: Welcome to the SPI podcast, Dave and Bhanuka. Welcome. Thank you so much for being here today.

Dave Chesson: It’s great to be here. Thanks for having us.

Bhanuka Harischandra: Yeah. excited.

Pat Flynn: We’re gonna have a lot of fun things to chat about, especially in the world of software development.

I think there’s a lot of opportunity for entrepreneurs to figure out a way to solve a problem or to automate something. And it’s something that I’m doing at this very moment. I shared a little bit about it on a previous podcast and we’ll bring people up to speed in just a minute. But I do want to catch people up, in fact, with you, Dave, first, we’ll start with you because you’ve been on the show before. You’re known as the Kindlepreneur and you were early on in the days of helping people write eBooks and publish them and you’ve helped make a lot of people very, very successful in the world of self publishing. Are you still focused on that?

And maybe just quickly, how have things changed since the last time you were on the show in that realm?

Dave Chesson: Well, I still work in Kindlepreneur and I’m always developing it. The thing though was, was that after building the website and having a market and people sign up for my email list, it became evident where I actually knew what the industry needed there were a couple of problems that i really wanted to solve. So it was at that time that i started looking at all the different sets of software services that were out there and there was nothing that was that i thought at the time was really solving the real problem and so my first project was building Publisher Rocket.

And that was my first real big foray into software and since then it’s something that i’ve gotten heavily involved in because it’s done so much for me and my business. And it’s allowed me to be a creator and it’s just neat to be an author and then say to yourself, Oh man, wouldn’t it be nice if, and then turning around and building that thing.

And so that’s really been where I’ve been kind of in the headspace.

Pat Flynn: That’s amazing. And so what was it like for an entrepreneur, a creator, somebody who wrote books and published blog posts and did videos, what’s the big mental shift that needs to happen before even experimenting or exploring the world of building software?

Dave Chesson: Yeah, I’m not going to lie. It was very scary to do at first. The first time I did a set of software is I wanted to build a simple tool, just something to put on my website. Back in the day, it was the Kindle calculator. And it was just a simple thing where somebody could Go in and take the Amazon bestseller rank of the book on Amazon, put it into this calculator and it would tell you basically how many books that day that that person had sold.

This was really cool. You think it’d be very simple. Well, I went to Upwork. And I just kind of put the job up there and I got wild, wild ranges of prices. You know, somebody saying a couple hundred dollars and even a couple of people saying tens of thousands of dollars. And I was just like, I didn’t know what was right.

I didn’t know what was the right thing to do. I’m not a programmer. I’ve never written code. I still don’t to this day. So how does someone like me kind of figure that out? Well, I was very fortunate enough to be connected with a good company. And was able to talk with them and we were able to build a very simple tool.

And what was really neat about that was that just by doing that one simple tool, it made my website stick out. It became like the one go to place where if anybody wrote an article about how to self publish a book, there was almost always a section where they’re like, Oh, just go to this calculator and figure out, you know, if your book idea is going to make money.

And it really put my website on the map. And that was like, Yeah. Nine years ago, ten years ago, so then taking that next step and realizing there’s a much bigger software that could be built and that I know that my market would love this if I could just create it. It would do great. So then it was the next challenge, right?

Which is how do you build a large software? And so this is where getting connected with Bhanuka and his company Surge was that first real big step for me. And since then I’ve focused more on just kind of learning about the business of software is the way I put it. Hey, if I want to be a really good client, what kind of things do I need to understand?

I can’t just kind of come up to, you know, a software team and just say, well, I’d like to make Uber, but better, can you do that? Instead, it’s really fleshing out the idea, understanding what I really want it to do, how I want my customers to feel, what they should experience, and packaging that together.

That’s really what I focused on. And that’s what’s allowed me to then go to a company like surge and say, okay, guys, let’s build this together. And that’s kind of the shift that’s happened for me.

Pat Flynn: That’s amazing. Bhanuka, we’ll get to you in just a second. I need to tell a quick story here. And I think a lot of people have heard this story where I’ve failed as a person who had wanted to build software before, because I didn’t have the information that we’re about to talk about all the ins and outs and the things that you need to prepare before even going in. I think it’s really easy for an entrepreneur with the entrepreneur mindset to go, Oh, here’s a problem. I want to solve it. Hey, developer, make this. And it just doesn’t work like that.

There’s a lot more that’s involved, and we’ll get into that for sure. But I’ve failed once big time in early 2010, 2011. Couple friends were creating WordPress plugins and. You know, they did really well and my audience was bigger and I was like, Oh, dollar signs. And it just was a very expensive lesson later.

I created the AskPat Podcast Player and that worked out really, really well. And then all of us on the call right now are working on another software that is really exciting. And the process that we’ve taken through is already night and day compared to what I’ve done before. Like, I already know this is gonna turn into something amazing.

And Bhanuka, you and your company have been incredible to work with already. And I know we’re in the beginning stages of it right now before we get into what a person listening might need or need to think about that would benefit the developer to create something amazing for them. I want to get into your story.

Tell me a little bit about Surge and how you became the founder and. Kind of what were you doing even before that?

Bhanuka Harischandra: Yeah, so I come from a traditional kind of Asian household. Mom’s a doctor, dad’s a doctor, brother’s a doctor. I was studying to be one. And you know, in our family, you either figured out how to become one or you ended up as a failure.

I, despite that background, I decided to go to my parents that I wanted to be a professional YouTuber. And that was not a conversation that was going to go down well. Oh man. The YouTuber was also in the video game space. So it’s like a double whammy, right? Yeah, when I was about 17, 18, I realized that you could actually make money playing video games.

We had a channel up. We had what is, you know, then called the Multi Channel Network or MCN. And we had convinced people to play Pokemon and Minecraft and League of Legends and created a whole bunch of content and we monetized it. For me being 18 years old, living in Sri Lanka, I was kind of living the dream.

I was getting paid to play video games. Now, unfortunately, when we were just picking up, we’d started getting a couple of million views a month across the network, YouTube decided to shut us down and say, Hey, look, monetization that was available for you was because it was on a beta program right now.

We’re only going to allow monetization for these specific countries. And unfortunately Sri Lanka was not one of them. Now we had a business and as an entrepreneur, this is really tricky because I had just decided to stop my exams and pursue this full time. And as soon as I started, I got this message saying, congratulations, you’ve been shut down.

I obviously didn’t want to tell my parents that they were right. And this whole thing collapsed. So instead of what I did was I lied to them for about six months and pretended everything was okay. Now, being the 18, 19 year old I was at the time, I wasn’t necessarily fiscally responsible either. So any money we had made, we had spent on kind of rebuying items in game and calling it an investment.

Fortunately for us, a couple of businesses had reached out and said, Hey, you know, you’re doing this thing on YouTube. Can you help us with our YouTube channels? Not in the video game space, but to create some content. This was about a decade ago. And to me, the idea that someone was going to pay us money to create content was wild. Now, obviously, common sense, but back in the day, because we were always getting compensated based on the views we got, not exactly the content we were creating.

It was a very new idea. That really was the beginning point for us to start Surge. It was a YouTube kind of content creation agency And we would, you know, listen to podcasts like SPI and kind of all these places to learn from people to understand what they were doing. And I don’t know if you noticed that, like the first way I learned how to build a website was one of your videos where you had long form content of, you know, putting a WordPress website together, how to monetize that.

Pat Flynn: And that’s crazy.

Bhanuka Harischandra: It’s a surprisingly small world. We went from helping businesses manage their YouTube channels to managing their social media. And then naturally what would happen is they would come up and say, Hey, we need websites done. We need help with SEO. We didn’t have any technical exposure in the subject.

So what we would do is turn around to them and say, we could absolutely do it. Go on YouTube, learn how to do it and then sell it back to them. And that’s really how we started. You know, we grew into a couple of people, the social media naturally turned into websites. Websites became more and more complicated and we were forced to learn engineering.

And that journey has kind of taken us 10 years today, where we have about 300, 400 people. And what we had self learned, we’re now deploying technology solutions to governments all over the world and like really high profile organizations, which is looking back at it. It’s somewhat mind blowing as well.

Pat Flynn: That’s incredible. I have many questions. The first one being, what do your parents think now?

Bhanuka Harischandra: So now they’re okay for two reasons. Number one, is that the reason they wanted me to do medicine is not because they wanted me to be a doctor, it’s because they can tell their cousins and aunts and friends and family that their kids are both doctors.

Pat Flynn: Understood, very relatable.

Bhanuka Harischandra: So, so now it’s somewhat okay. And the second thing is I recently got engaged and in a weird twist of fate, she also happens to be a doctor. So they’re like, Oh, he didn’t quite make it, but she did. And because of that, I think I’m okay.

Pat Flynn: That is absolutely insane. Well, first of all, congratulations on the engagement and I’m glad the parents are okay.

So you said 400 people working now in the company. That’s right. Yes. And what is it that Surge is known for really now? I know it’s software, but what kinds of companies are you working with here?

Bhanuka Harischandra: So we like to go by the capabilities we have. So we say we’re the best in class at design, marketing, and technology.

What we’ve noticed is in the modern day, if business is going to be successful, they need to be able to really truly leverage the internet and to be able to do that, there are really three things. One, you need to build good technology products, or your business has to extend into technology in any way, shape, or form.

That’s the first step. The second step is once you have a base that’s built, you need to be able to acquire users, whether it’s in the form of social media or running ads for your content or generating demand. And if you can do those two things, well, really design and how users interact with the product and services you build is the next piece of the puzzle.

And if you can do those three things really well, you know, you can really build and design any business. So we like to think of ourselves as somewhat of a guide that can help you navigate those three spaces. Because we have experts within that field that have kind of done that at all different shapes and sizes, about half the team works with the U S so we have a core US focus, but as a recently, we’ve been very heavy across the Middle East, different parts of Europe and Australia, and that’s kind of where our work kind of sits at the moment.

Pat Flynn: Amazing. You know, what’s surprising to me. And Dave, when we got on a call together and shout out to our buddy, Spencer Haas, who, who connected us on this, I didn’t know you were doing software in the way that you’re doing it. And I didn’t know you have this connection with Surge and, and Bhanuka and the company when you had mentioned like, yeah, we have a bunch of developers working for us and they’re amazing.

They’re over in Sri Lanka. It’s like Sri Lanka. I didn’t know there was this incredible ecosystem of engineers over there. And my mind has been blown with the quality that is coming from this country. Final question to you, Bhanuka before we go back to Dave, but what is incredible about the Sri Lankan workforce that like, talk it up, what, what have we been missing this whole time?

Bhanuka Harischandra: Look, I think Sri Lanka has had an incredibly tough rap over the years. We’ve come out of a 30 year civil war. We’ve kind of overcome terrorism. As a country that was basically built on tourism going through COVID, it’s been a really rough patch. We have a group of incredibly resilient people that are, you know, we have like a 96 percent literacy rate, one of the highest in the world.

And we have a group of people that are incredibly skilled and are willing to go the extra mile that the world doesn’t really know about. Part of the reason why I’m really excited to get up in the morning and do what I do is the work that we do and we help with really puts everyone at that, like, you know, giving them that opportunity to build something spectacular.

Majority of the people that work for the business are the primary breadwinners in the home. We have built such a strong culture and community around the work we do. And to be able to do what we do and take it to the world is something that we are truly grateful for.

Pat Flynn: That’s incredible. Dave, I know it’s been awesome to work with the teams over in Sri Lanka, but let’s get into a little bit of brass tacks and what needs to happen if a person listening has a software idea before even like reaching out to a developer, what are the things that now in your experience we need to consider before that? What should we know before getting into this? And just to set the stage, like how many softwares have you developed now and have launched?

Dave Chesson: So I’ve done seven and they’ve ranged from, you know, we talked about Publisher Rocket, which is a book marketing software.

And by the way, just the extensiveness of that software, MarketWatch listed it as one of the top 10 book marketing companies in the world. So what it does is pretty robust, but also to, we did Atticus.io, which is a book formatting and writing software. It has grown so dramatically, but the challenges inside of it, because it’s not just a book writing formatting, it’s writing collaboration and formatting altogether.

So I like to tell people if Scrivener, Google Docs and Vellum got together and had a baby, its name would be Atticus. So it’s just a very complicated thing, but we also built a software called FFL safe. which is a federal firearms licensing software for anybody who’s pro or con weapons. What it does is it allows the legal process to basically, like, as in, if somebody buys a weapon, there has to be documentation, there has to be proper according.

So for both sides of that coin, it’s a software that really supports both. But we’re talking about ATF legal documents. And so, you know, we built something that’s absolutely stellar and is growing. And then, and then of course, HRS systems, just a slew of things. And so for me, it’s been wonderful because I’ve seen kind of the power of having a strong programming team to kind of combine with what you want.

And so to answer your question, Pat, I think there’s a couple of things that are really important for people to understand. And one is if you are going to an individual programmer, let’s say you find one programmer, you’re like, okay, I’m going to work with this person. I think it’s very important that you have a lot more of your ducks in a row.

I think that there’s a lot of things that you need to do prior to working with them. I’ve had the benefit of working with Surge’s team. And a lot of times they’ve been the ones that kind of Popped a question back to me and be like, well, have you thought about this? Hey, just a heads up, here’s a problem we see because we’ve looked at kind of the project scope. But regardless of whether you’re working with one person or a team that has a lot of experience and can provide you with kind of business thoughts or maybe some really key questions that help you be like, Oh man, I didn’t think about that.

That Ooh, you know, good call. That’s good. We figured this out now. One thing I do like to do as an exercise. Is that I like to build sort of a super basic wireframe, and you can either do that with PowerPoint presentation where you just create boxes. There’s a software that I’ve enjoyed in the past called Balsamic, which is just kind of a drag and drop WYSIWYG thing, but we’re not making something beautiful.

What I do is I try to say, okay, if the person comes to the homepage, the first page on the software. What do I want them to click? You know, like what, what are the things I offer them? And then you go and say, okay, when they click here, what happens then? And as I walk through this process, all of a sudden I start thinking to myself too, Oh boy, maybe I shouldn’t do that.

Oh, that’s conflicting. That’s hard. And so it really helps me to kind of understand the project at scope. But that being said is, is that that’s something you can skip if you’re working with a dedicated team that has a lot of experience because they’ll be the ones that will then have somebody there to say, Okay, Dave, sit down.

Let’s do this together and let’s walk through this and make sure we have a very solid project scope.

Pat Flynn: Yeah, so I mean, if you know what problem you’re solving, There’s a few things here. Number one, I’ve seen people who have gotten really excited about software and they’ll actually go really hard with like the look of it, the design, and they’re like, this is it.

They’re like, here’s the homepage. It’s going to be amazing. But once they start developing, you know, they hadn’t thought about how a person’s actually going to use this thing or what button goes where, like what the actual functions are. They’re just like, here, here’s the website. It looks cool. And here’s the promise.

And now let’s go build a thing. And like you said, if you’re working with a team, who’s experienced and they can help you connect the dots with that. And if not, I know from experience that it’s going to be a lot of other people just kind of trying to figure it out on their own and kind of making up answers on the go.

And this was the problem with my first go. I was working with an individual who I didn’t communicate with properly and wasn’t asking questions and just kind of filling in the gaps. And they were not the gaps that I wanted filled. And it was just a terrible experience. But the idea of wireframing, I think, is really key because it really makes you think about how a person is going to be using this.

It helps you understand what the most important parts are here as well so that you don’t overdevelop it, which I know is a problem and we’ll probably get into this in a little bit. Feature creep is what they call. Bhanuka, from your end, receiving like wireframes and that kind of thing. Like, do you have any tips for a person who’s going to be doing that?

Are there better ways to submit that or to showcase what a flow might look like? Or what, what are the things that make it easier for you for the dev team?

Bhanuka Harischandra: So the biggest problem that we see is that when we interface with scenarios where we don’t go ahead and do a build or we decide not to take a project, it’s because the person that’s building the project doesn’t necessarily have a clear understanding of what they’re trying to do.

And it manifests itself in different ways. The first thing is, if you’re going to go to an individual developer and you say, Hey, I want this. thing built. Technology has really evolved over the years where things and different components have been specialized. Very rarely will you find one person with all the different skills that can design the front end, design the back end, manage the cloud security, the servers, and all of the different pieces of the puzzle and still make the product look good and function well.

As a founder or as an entrepreneur, the thing that you need to understand is what is the problem that you’re solving. And what are the typical customers going to go through in order to solve the problem? And in the industry, we do this thing called journey mapping, where you define what the user’s problem is and draw out the journey that they’re going to go through to be able to solve the problem.

And you’ll be able to identify the issues and problems along the way as that customer potentially uses your piece of technology to solve that problem. And wireframing is a part of that experience because once you understand, okay, I want to build a product that can, and Dave mentioned Uber, to get from point A to B, what happens when person clicks A and they realize there’s no vehicle nearby?

What should the technology itself do in those scenarios? And you start to ask the right questions about the product. And when we go into this, usually when we talk to companies that are not as mature in their process or haven’t built their first product or haven’t launched their technology, it’s really a nice discovery process where they understand that there’s a lot more to the piece of the puzzle.

And they understand that this may be slightly more complicated than they think, because if not, if you’re going at like a very high level, I want to be able to do this, and you’re not really putting the time and energy to think about it, it may seem like a rather simple task, which is why when you talk to different businesses and you will hear this all the time, you will get a quote for a hundred dollars and a hundred thousand dollars. And as a lay person, it’s very difficult to sit behind that two numbers and understand what is the difference between a hundred dollar project and a hundred thousand dollar project or a hundred million dollar project, because they don’t really understand the depth of it.

They don’t understand the scope of it. What we’ve seen works best is when our customers have spent a considerable amount of time trying to clearly articulate the problem that they’re trying to solve so that we can together discover what a journey mapping process is like.

Pat Flynn: Yes, very, very well said. And even in our experience working together on the new tool that I’m building, before we even got to wireframes, we talked about that journey.

We actually, I remember emails going back and forth between us where it was just bullet points. User does this, then this happens, then this happens. And they go here. Okay. And what was really helpful, I think, were two things. Number one, I’ve been trying to solve this problem myself, or I figured out a way to solve it by hacking 12 different websites to make this giveaway situation work and it works, and I’ve done it over and over and over again for over two and a half years that I was easily able to articulate the sort of current state of what I tried to do.

And you came back and your team came back with, okay, so if this is what we were trying to automate, here is a user journey that, or journey map that can happen. User does this, they click on this and then they create a profile that we get their address. And then I saw that and I was like, no, no, no. I don’t think we need to make a profile.

We want to make this as frictionless as possible. And already we’re solving problems before anything is developed, before anything is designed, we’re having an understanding based on what the person who’s ultimately going to be using this thing is doing versus just the end goal being, we want the giveaways to be automated.

So, totally, totally works. And the map or the journeys is really, really key. So I hope all of you listening are paying attention to that because you might be at a stage now where you’re already starting to think about hiring a developer. Well, think about the journey that they go on now and think about how much easier it will be when they have the software.

Unfortunately, sometimes if you don’t think about that, the journey. After the software could be even more confusing or harder. And that’s not what we want either.

Bhanuka Harischandra: Just a couple of things to add to that. You’re spot on. The part of the reason why the process was a lot easier with you, Pat, is because you understand the problems that the customer is facing because you are the customer in this context, you’ve used the same thing for two and a half years.

You know exactly what you want out of sheer practice. And then the other thing that you need to be able to do is when we’re building a product, you don’t want to add all the bells and whistles to design the most complicated piece of software. You want to build what is an MVP, the smallest functional unit to solve the problem.

In the case of Uber, it’s getting from point A to point B. Everything else is irrelevant. In the case of your project, there is a very, very bare bone set of things that need to be done to know that the product is valuable. Couple of good things that happened from that. The first thing is you’re able to reduce the time to build a prototype.

So, you know, whether the business is working or not, and as that process, you kind of fine tune that that’s where 80 percent of all the function actually remains. Everything else is an edge case. So you’re able to build the most seamless journey for the user, which ends up intentionally or unintentionally building the best business.

So you always want to make sure you’re optimizing to build the lightest, quickest, fastest thing first. And once you’re there, you know, once you have millions and billions of users, sure, you can figure out how to architect in a way where it can work at enterprise levels and all of that. But for 90 percent of the people that’s kind of launching their first software project, they need to not design, you know, and it’s very counterintuitive because when you go to a developer, your instinct tells you to get the most bang for your buck.

So you give a list of all the things that you want when in reality, you’re supposed to reduce it to the one thing that makes the most sense for your business. And that’s where I think majority of the people start to mess up.

Pat Flynn: Yeah. Amen to that.

Next, I want to talk about money, Dave, from your end as somebody who is going to be investing money into the development of a software, what business decisions or thoughts are you having related to the finances? Have you ever had an opportunity to create a software, but then it just didn’t make sense financially to do what’s going on in your head related to the numbers.

Dave Chesson: Yeah, so one of the things that I like to do is software because software is not exactly cheap. I mean, it depends on exactly what you’re building and the complexity of it. Personally, I like actually having the market and understanding the market before I build the product. There’s a lot of people that kind of sit back and say, Oh man, I’ve got this million dollar idea.

It’s just a great idea. And I say, okay, great. Do you know how to reach? The customers and if the answer is no, it’s what I call a speculative project. Okay. You’re speculating that you can build something and it’s going to be so good that it will just connect with people. That does happen, but I personally don’t like to do that.

What helped with me was is that I had Kindlepreneur, the website, you know, I’d built a following learning from Smart Passive Income over the years. And because I had a following, I was always studying and learning. I was listening. I was responding to emails. I heard people’s problems. I knew that there was a real need for this product, not just myself.

And so for me, it was a small investment in order to build something that I knew would not only resonate for myself, but also for my fans. And so therefore it wasn’t very speculative. And I’ve kind of applied that same principle when building out the next software. The other thing that I’ve done too is in the past, I’ve partnered with people.

Who have said market, and I’ve come in and worked with them to build the software for their market, and that’s been a wonderful thing, because with the experience of building a couple of sets of successful software, it’s allowed me to kind of step in and say, Hey, I tell you what, I’ll walk you through this process.

You know, in the meantime, you’ve got this market. Let’s combine together and do something really cool. So those are those are some of my thoughts on how I like to approach software. But again, that doesn’t mean that just because you don’t have the market that you can’t do it. There’s a great couple of books, by the way, I’m going to take a second and I’m going to highly recommend that if anybody’s looking at getting into the process of building software, even thinking about it, I really love the book The Lean Product Playbook by Dan Olson. I think it gives a wonderful overview of all the different things you should do before, how you think through the process, working with companies. It talks about that UI, uX thing we mentioned, which is user interface and user experience.

I’ve read that book so many times, even after doing projects that I think I might have to get a new copy. It’s pretty worn out, but the thing about it is that, like Bhanuka had said, you want to identify what your minimum viable product is, your MVP. And once you know that, you can really cut down your cost because you can come out with something that you can bring to the market and test to verify that this will work.

And that MVP, again, reduces your cost, gets it out faster, and allows you to validate your idea. What you don’t want to do is spend 10 times that to get the entire product out, only to find out that maybe it didn’t work. So the MVP is important. Another term that’s really big in software is called product market fit.

And product market fit is where when you create your MVP, Okay, that that minimum viable product and you start to release it, you start to see, Hey, does this resonate with my customers? You know, with my market, do they love this? Is this really solving their problem? And so you use that opportunity to get feedback and kind of find out, okay, we need to now add these features or we need to do this before we fully launch.

And then once you have that, there’s another famous term that I enjoy called crossing the chasm. And crossing the chasm is where you were then trying to get the majority of the market to adopt the product itself. Okay, but if you start with the market, you don’t have to worry about product market fit, you don’t have to worry about crossing the chasm because you already know this is going to fit the market.

You already know that the market is going to adopt it.

Pat Flynn: Yeah, I mean, again, a plus one for building the audience first in some regard, having an email list, using that to survey, et cetera. What was the name of that book again, Dave?

Dave Chesson: It was The Lean Product Playbook by Dan Olson.

Pat Flynn: Nice. Thank you for that. And then in terms of partnerships, let’s say you have this amazing idea, but maybe you’re not necessarily known or have an audience in that space yet.

But partnering with somebody who is in that space would make sense. What does that look like in terms of partnership? Are you sharing equity or are they paying for some of it? What are those deals kind of look like?

Dave Chesson: Yeah, so generally in the past for myself, what I prefer doing, and it doesn’t mean that my processes is the exact process somebody else should do, is that let’s say this person has, a large market.

Now they have a website, they have YouTube, they’ve generated email list and through conversation, we’ve realized that this person knows that if only they could build this thing, if they could build the software that their market would love it. And let’s face it, if you own, if you really interact with your market, you’ll know what it is.

Okay. It could be that there’s a stop. Thing that you’re already selling and people are buying it through your affiliate, but you just know you can make it better. You can improve it. There are things that can be done. That’s a wonderful situation. But again, sometimes the, the, the fear of starting a software overcomes the person from taking that step, or maybe they went to Upwork, they grabbed a programmer and the programmer totally messed it up, you know, and so they’ve had a bad experience in the past.

What I generally will do is I’ll come up and acknowledging that they have that and that yes, this makes sense. I agree that that market is, then what we’ll do is we’ll build the software and we’ll do like an equity stake play where depending on whether the person wants us to cover the entire cost of its development, you know, there’s a certain percentage we’ll ask, but basically me, my team, we will then go.

And we’ll, we’ll work to ensure that the right product is built. And then once that’s built, we’ll have the market owner to then execute certain things to ensure that, you know, it’s a great opportunity, new revenue stream and profitability.

Pat Flynn: Awesome. Thank you for that. That helps a lot. And so this is where relationships come into play and why putting yourself out there and knowing people is really, really important.

And we talk about that a lot. The best way to grow your online business is to get offline and start meeting people. Bhanuka, I want to ask you about, and this might be an interesting question, but what are some of the hidden costs that a lot of people coming to you might not even know exist? I, not, I don’t want to say was caught off guard, but I had forgotten that if I’m developing a software that requires some sort of database or server that I’m going to have to likely pay for Amazon AWS.

And you know, that comes with a cost and it’s like, Oh yeah, I forgot about that. So maybe we can enlighten the audience and help them understand what hidden costs might be there that they can look forward to, or at least plan for.

Bhanuka Harischandra: So there are two specific hidden costs that I think are interesting. One’s obvious and the other one is not obvious.

The obvious hidden cost is the fact that you are going to have to pay for third party service. The first thing is if you are building something like a website, you’re paying where you’re hosting, you’re paying for your SSL certificate, you know, things that you’re used to. Software is depending on the nature of the tool that you’re building.

That can be slightly more complicated. You can be potentially paying for third party libraries and tools and features that you may not want to build the whole thing and you want to integrate different systems and tools that are already built. For example, we’re using this podcasting platform. If. The people that are building it may not want to build the video encoding technology themselves.

They may just license it from a Zoom type thing. And then every minute that it’s being used, there is a pricing model where Zoom will charge X amount of dollars, right? We can plan what those costs are going to be at an architectural level when we’re designing the software to understand, hey, does this make sense?

Because some of these things become exponentially expensive as you have more and more usage. And if your business model, does it really tater to that? You might be in a situation where it’s tricky. For example, if you’re using heavy service space and you decide that you want the product to be free, you may end up eating tons and tons of costs as you scale.

So there’s some things you need to keep in mind. The other cost is something that you don’t really think about when you get started is the fact that. You’re not just building a tool in most cases, you’re building a business and there is a cost of time that you need to consider to build something because you have to over communicate and explain what is in your head, which is purely just in your head to a whole group of other people.

You can’t do that by having a single conversation and, you know, just like anything you need to communicate. And the other thing when you’re building a business is that it’s very rarely something you can wrap up and walk away with because technology changes. Your market changes who you’re competing with it’s going to change and what the expectation of the tool or product or service you’re building today may not even be remotely close to what is necessary in six months or a year. Does not mean the tool won’t work in a year but if the entire market catches up to you and you’re doing nothing and you’re waiting Then you’re setting yourself up to fail.

Very few businesses can get away doing that. And if you don’t build something that can, and that needs to consistently compete with the market, you need to keep that in mind when you’re building a piece of technology, because we have yet to encounter a service or a situation where we built something, we put it in a box, we forget about it and never talk about it again.

You either, you know, just like anything, you are either growing your business as a picture book well, or you’re stopping and then it starts to die from the day that you stop. And if you’re not cognizant about that, if you’re not thinking about that, I think it would be premature to get into the world of software to start a project just because you think, Oh, I can do this for a week.

And then it’s going to, everything’s going to be great. And I can forget about it. And it’ll just be like free money. Right. The one thing that we know about passive income is it’s very rarely pasive.

Pat Flynn: Correct. Very, very true. Thank you for that. Yeah. Is an honest answer. And I appreciate that. And it’s important to know that if you’re going to get into this, it is going to be a commitment, right?

It is something that you’re going to have to commit to, and it’s going to require upkeep. And so as technologies change, I found this to be the case in the world of WordPress. It was like, as soon as we came out with our podcast plugin, it was like new version of WordPress. And it was like, Oh gosh, we got to make sure this thing’s compatible now.

I mean, same thing happened with my iPhone app company in 2009. It was just like, not even worth it to keep up anymore because just not just because it was so competitive, but because there were all these changes and things happening so quickly. So definitely something to pay attention to. However, it can also be incredibly lucrative, obviously, especially when you get users in there and recurring revenue.

And I do want to ask a question to both of you about building a software to eventually sell. And we’ll get to that more toward the end. But Dave, I want to ask you about working with a developer as an entrepreneur, how often are you checking in? What’s comfortable? Is it a give them all the info, the wireframes, everything.

And you’re kind of like, okay, let it bake for six months. And then they come back. Or what, what is a. And your experience has been a really good cadence for checking in, seeing iterations. How do you do that without micromanaging the entire process?

Dave Chesson: Well, I mean, when I first started out, it was pretty easy to not micromanage because I didn’t know what to do.

But I was also very blessed to have a team at my disposal. And so I’m going to answer that question is if you have a group of professional programmers working with you. That would be very different answer if I was working with one individual I say found on like Upwork or Fiverr or something like that.

What was really good for me was that the team would always ask me the right questions before they would start. So like I’d fill out this form that helps them to understand some of the details and the questions themselves would ask me things that I had not thought about. And so I actually had to spend time and be like, Oh man, I need to go figure this out. That’s a good point. And so by filling that out, that was sent over and then the team would set up a meeting and they would ask even more questions. And the goal was, was that that team would then take all of the information when they really feel like they understand what it is, the project is.

What I love most about the team I work with is they will go and they will do their research and they will figure out, Hey, okay, this is what it’s going to look like. And they come back with a plan. And this plan tells me when they want to meet with me, when they think that they’re going to have something ready for me to check and it’s all laid out before me.

And so then at that point, I’m following their plan. I’m there to give input. Now, over the weeks, you know, or so there might be some random emails here when they maybe hit something like, Whoa, this is something none of us had thought about. Hey, quick question here. What are your thoughts? And so I might get an email here or there, but generally I have a tempo of maybe one to two times a week. We meet up just to check. And those are almost always pre scheduled unless there’s some kind of big thing jumping in. That has allowed me to really be able to kind of once you get that initial work set and the team understands things, then at that point, it’s executing a plan, which is really nice, but like Bhanuka said, you’re not just building your software, you’re building a business.

And so there’s a lot of other things as an entrepreneur that you should be preparing while. The team is building that software. It’s thinking about like, how do you want to price things? How do you want to launch it? Do you want to do a beta launch where you just get a couple of people in just to play with it and either possibly break it or find that random outlier case where the person put in code?

You know, is there a description and it breaks some, you just start to find these little weird things. Maybe you don’t want to do a beta, or maybe you want to do your MVP, but not really launch it paid until you have a next set of features. The point though is, is that as a business person, you have to start thinking about what it is you want to do to prepare for its launch.

Maybe you even have a landing page. There’s a lot of things going on there as well.

Pat Flynn: Lovely. That’s perfect. Bhanuka, from your position. During those check ins, first of all, it has been great to know, okay, we’re going to check in during these times and the expectation of some, something to look at and see what would you recommend to somebody who is going through that process?

And perhaps they catch something that they’re like, well, this isn’t what I was hoping for, or this is not exactly what I was expecting. I think it’s obviously important to bring honesty and just like solve those things quickly. You know, sooner than later, but what would be your recommendation and the mindset that a person should have when going into those sort of show and tells, if you will, because I know some people are left often very disappointed or even upset, but also maybe afraid to say something because they don’t want to delay the project even more.

I mean, there’s a lot that goes into that. How do you best approach those check ins in those situations?

Bhanuka Harischandra: Over communicate, because the problem is the people on one side have no idea what’s in your head and it’s, you’re going in a direction that you’re not happy with, if you don’t vocalize it, there is literally no way for you to know.

I’ll give you an example, which was probably our most unsuccessful project today, which was a project in the video education space where our team’s been working with a client and there’s been a certain set of misunderstandings and the team refused to tell the client because they were afraid to hurt feelings.

The client refused to tell the team something and then both sides were just chugging along because technically the goals are being met, but you know, you weren’t really building something. At the end of the day, I was solving the problem for the customer. And what I tell anyone that we work with is you should have tension on both sides because at some point there’s going to be a little bit of tension and that’s going to be in the best interest of the product.

Just like you say when, you know, when you’re building something and there’s competition in a market, the customer always wins. When there’s tension between the programming team and the product owner, the product tends to be of a better quality. It’s do you say, Hey, this is what we’re building, smooth road, zero issues, hey, we’re done exactly in time and exactly the way you wanted and that you had in your head.

If you’re not kind of pushing and pulling on both sides, fortunately, in the case with that project, we ended up coming to a situation where we said, because the customer didn’t understand what was going on, we decided to not bill the customer. We can redo an entire cycle product, which cost us close to a year.

And then we initiate after that, but realistically looking back at it, we’re not perfect. We’ve made mistakes. But if we had an open and honest conversation and said, Hey, I did not like this because of this, I don’t know our team to say the same thing back to the customer, Hey, you will, you know, you’re not really effective at telling what you have in your mind.

Some of these things could have been a couple of conversations and resolved, but instead you spend the year trying to figure out what’s going on. So in all of these conversations, just like, you know, you’re building any relationship over communicating is a lot better than the opposite.

Dave Chesson: Sometimes I like to give the example of it’s like working with an interior decorator.

You have an interior decorator, they know what they’re doing. They come in, they tell you, okay, great, we’re going to do this, this and this. And you’re like, if you don’t stop and be like, whoa, whoa, whoa, whoa, I’m not going for modern Nash. I’m going for classical. And then maybe they run off with classical and, and again, they’ll build something.

Yeah. But if you’re not there to redirect them or to guide them or to tell them, I do not like that chair. I do not like that color. What’s going to end up happening is they’re going to continue to build something down the road that’s technically correct, but it’s not what you’re looking for. And so it’s really important to kind of communicate those.

And as a good interior designer will say, you can’t hurt my feelings. Tell me what you want, tell me what you like. And I think that’s the best way to handle software as well.

Pat Flynn: Exactly. And design is subjective. And so communication key, we talk about that when working with a VA in the beginning, you’re going to have to tell them what’s working and what’s not and work together.

And that’s exactly what you’re doing with your developer too. In fact, even in our project together in our first call, I was shown a few examples of, of some UI, UX. And I was like, well, that’s not quite what I was looking for. And so I came back with some drawings and just was like, Hey, here’s exactly what I was kind of hoping.

So we can simplify things. And it was like, cool. And everybody was happy and nobody was like, Oh, more work to do. It’s like, no, this is what needs to happen. And I’m very grateful for that. So I’m looking forward to the next call so we can see the next iteration and see where we’re at. And that’s really key.

So to finish up here, you know, I was actually really surprised when we were talking, it was like, one of the questions you asked me when we were starting the development process on this giveaway tool was, you know, what are your goals for this? And you had even said, is this going to be a small thing on the side?

Are you going to turn this into a full business and run it with a team? Are you looking to sell this? And I was like, yeah, I actually, it’s interesting that you ask that. And I was curious, how does a development process change or differ if indeed the goal is to sell this thing, because that ultimately is I’ve already shared this, the long term goal of this project is to sell it.

So what’s the difference? How do we approach or what is Dave, maybe I’ll start with you when developing a tool to sell, what does that mean in terms of the development process?

Dave Chesson: Exactly. Well, this also comes back to making sure that you have a good team of programmers with you. One thing that’s incredibly important for transferring over software to a buyer is that it’s got proper documentation.

We call it kind of like enterprise level, because what’s going to happen is, is that if you transfer the software over, if you sell the software, the company to somebody else and they are, and maybe they have their own programmers and they’re like, I only want my people working on it. If they can’t figure out what’s going on inside the program, sometimes without proper documentation, it’s like walking into a hoarder’s house, right?

The hoarder knows where everything is. But the individual has no idea the toothbrush ends up in the kitchen, you know, or whatever it is. The problem is, is that proper documentation is going to be incredible. Now, most of the time, though, if you’re looking to sell, say to a VC or to a private equity group or something like that, you know, what they’re going to want is they’re going to want to have access to the team that built it. And so that’s one of those things where luckily, like with the way that I have it with Surge is that those same programmers will still work on the program and they still maintain that knowledge. And so it’s not one of those things where the buyer might be worried that they won’t get the same technical team that you had to keep working on it.

So that’s an important aspect to keep in mind documentation and that you have a strong programming team that will work with the program when you sell it. Another thing that’s really important as well is that when designing the software, like Pat, you are a big personality, you are very recognizable. I think as you start this, it’s very important for your listeners to know that this is your product.

That being said, though, is you might not want to call it like Pat Flynn’s Software, because at that point, somebody else buying it doesn’t want to buy it with your name. Even though you’re not a part of it anymore. Same thing goes with, as you get ready to sell, you might want to remove the pictures of you or, or whatever it is so that the buyer doesn’t think that, well, the only reason why the software is successful is because Pat is the person on the software.

It’s kind of like a website too. Like you don’t want to have Dave Chesson’s Website because. You know, that’s going to be really hard to sell. So you need to kind of keep that in mind. One thing I will say though, about software is it’s the multiple for selling a software is incredible. It’s usually, and again, this is just kind of broad stroke, but if you’re selling a website, you’re looking at maybe three to four times EBITDA, which is like the profit, if you will.

But when you start looking at, like I say, a one off software, you’re looking at six to eight. And if you’re in a SaaS, which is software as a service, so it’s a monthly fee where people are paying monthly to use it, you’re well over ten times annual reoccurring revenue. You might even be into twenty times. And so it’s a very valuable asset, especially if you have profitability or you’re showing any type of growth.

There are a lot of PEGs, or private equity groups, that would love to have a cash generating SaaS that’s growing.

Pat Flynn: Yeah. And that’s part of it. The attraction here for me as well, on top of obviously just I would use this tool, even if only I was using it because I need it, right, which I think bodes well to its usefulness in the market in general. So thank you for that answer.

David is maybe same question to you in terms of like when developing this, any tips for anybody who is interested in eventually getting this to the point of sale?

Bhanuka Harischandra: Yeah, absolutely. So the question that I would have is, How do you get there? Do you have a business plan, which kind of explains the numbers in a way that it gets there?

Or are you trying to force growth for it to happen? Because the way that you build technology, the teams, the level of kind of complexity does change. For example, if you are trying to launch a product with a million people that are standing at the gate, ready to jump in the way you would address security and kind of compliancy, and all of that is completely different.

In the case that we’re working with, we’re trying to launch up a new path where you’re trying to be the first user and we are aware that the first couple of times the product is being used, it’s going to break and that’s okay. Eventually, the idea is to be able to get it to a point where it’s ready and kind of battle tested to be able to sell.

But the way you prioritize it is really a prioritization of resources strategy, right? You don’t want to spend too much money up front before you know whether the product is working or not. And you as a founder and operator need to understand where you’re spending your time, your energy, and your resources to be able to build the best product.

And of course, as you get to levels of scale and selling with millions of dollars in revenue and billions of active users you need to think about things like gdpr compliancy. Is the data safe? Especially if you’re working in health care You have to abide by and hita compliancy laws if you have minors in your application Are you disability friendly like these are things that you have to think about when you come to a commercial standpoint at enterprise software, which the average person that’s just getting into programming or trying to launch their first product is really not thinking about.

Pat Flynn: I mean, that’s really important. I mean, there’s a lot of research that needs to be done. And you know, the best way to figure this out is to obviously work with a team who knows what they’re doing.

Surge has been incredible to work with so far, and we’re definitely going to keep everybody up to date as we go. This will likely, who knows this, recording and the videos with it will one day be in a documentary. I don’t know. We’ll see, but working with the team and also having conversations. That’s why I wanted to bring both of you on today and to surround ourselves with people who have done these things before, or who are in the middle of it is the best way to learn.

And so I appreciate both of you for coming on today. But you could tell me a little bit more about where people can go to check out Surge. And in case they’re curious of working with you, where can they go?

Bhanuka Harischandra: I like to be as accessible as possible. So you can just go to Surge.global. Our website has all the information that you need.

There’s a big contact page to get in touch with surge. If you want to reach out to me directly for any advice or really anything about software marketing and technology, I’m always open. I’m active on LinkedIn as well as Instagram, and I’m sure you can search by name and find me.

Pat Flynn: I appreciate it, man.

Congrats on the engagement and all the success thus far. And I am looking forward to continuing to work with you. Bhanuka, thank you so much. Dave, same question. Where can people go to learn more about what you got going on on your end?

Dave Chesson: Yeah, sure. You can go to Aegis.investments and you can kind of, if you want to go there, you can see the portfolio, the things that we’re working on, you can reach out and contact us there, otherwise though, I’m still answering all the emails on Kindlepreneur.com. So if you go to the contact page there, just send me over any questions you have more than happy to answer them.

Pat Flynn: Amazing. Thank you both seriously for this valuable information today and for your time and we’ll chat soon. Thank you so much.

Bhanuka Harischandra: All right. Cheers. Thank you for having us.

Pat Flynn: All right. I hope you enjoy that episode.

Hopefully you can tell recently I’ve been going a little bit deeper into some very specific topics here on the channel. Last week, we talked about copywriting and we got the PASTOR model from Ray Edwards. Today, we’re going into software. Next week, we’re going to go into. Funnels and lead generation. So be sure to subscribe.

So you don’t miss out because we’ve got a lot of stuff coming your way. And again, I hope this was helpful for you. All the links will be available in the show notes. Thank you to Dave. Thank you to Bhanuka and thank you to the team over at surge global. By the time you listen to this, I should be a month or two ahead of where we were when we recorded this.

And again, more information about this journey coming out soon. This is definitely a commitment, but one that I’m excited about. Not just because it’s going to create a software that may be sold one day. We’ll see. But it’s one that I get to take you along the ride for it. Cause that’s what I love to do. I want to do more of that.

Thank you so much. Please subscribe. I’ll see you in the next episode.

Thank you so much for listening to the Smart Passive Income podcast at SmartPassiveIncome.com. I’m your host, Pat Flynn. Sound editing by Duncan Brown. Our senior producer is David Grabowski, and our executive producer is Matt Gartland. The Smart Passive Income Podcast is a production of SPI Media, and a proud member of the Entrepreneur Podcast Network. Catch you next week!