the entrepreneur

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About Tim Hackbarth

Tim calls himself a good ol’ Midwestern boy living in Austin, TX and playing on the Internet all day.

He is the founder of AgentPronto. His company is RealHQ.

Full Transcript

Chris: Welcome to Chrishaueter.com. I’m happy to have with me today Tim Hackbarth, the founder of Real HQ and Agent Pronto, and welcome.

Tim: Thanks.

Chris: So, Tim, thanks for coming on the show today. Tim and I met about a year
ago through a mutual friend of ours, Dane Maxwell. Tim is now CEO for Dane
Maxwell and also he runs his own company, Real HQ. So Tim, let me just
share a little about you. You studied marketing at Iowa State University,
and you told me that while you were in college you started a service
business, servicing computers, and that that experience of servicing
computers while in college was more formative to you than your actual
college experience. Why was that?

Tim: College, at least from a curriculum standpoint, I didn’t learn much that I
used later in life. I mean, a lot of people say that, of course. But
whenever I point out that college wasn’t that useful for me, a lot of
people will throw in the social aspects or learning to be an adult or
everything else but the school itself, which is fine. I think there’s
defenses for that but I just think it’s sad that the curriculum isn’t more
useful when that is the perceived benefit or the immediate benefit that
someone should get from it. Running Solid Systems, that was the name of
the company at the time, running that business with two partners for a year
while in school, I’d say I learned much more from that than I did from my
traditional school.

Chris: What did you learn from it?

Tim: The company is still running. One of the original three partners is still
running it and I think is successful and really enjoys it. I haven’t got in
touch with him lately. But from my standpoint it was a failure in that it
wasn’t something that I wanted to do. I had two partners in that, and I
don’t often work with other people. Part of the reason that I’m an
entrepreneur is just because I have really strong opinions about the way
that things should be run, and it’s a little easier to be the one making
the decisions when you are that way. So I learned that about myself and the
struggles with working with other people, too. I just learned a lot about
things that I would do differently if I was the only one calling the shots,
versus three people, too.

So it was just really formative. There were a lot of positives too, of course. I’m a big systems person, setting up systems to make just the day-to-day life easier for working in a company. I first got to express that through that computer service company. I work with someone on Agent Pronto and Real HQ who I originally hired through that business probably four or five years ago now, too. That’s still something I benefit from every day that I got through that experience.

Chris: Okay. Great. So, after you got out of this computer service business you told
me in the pre interview that you thought of some business ideas for a
while. In January 2008 you started e-Marketing. So, why don’t you tell me
what that is?

Tim: Sure. Like you said, I decided to leave the computer repair business in
late 2007 and by this time I had graduated. I think I had been out of
school for about four or five months. I could see it wasn’t going to scale
as fast as my ambitions wanted it to, and there wasn’t a business that I
loved working in the day to day. And so, being young and naive I thought,
“Well, that’s okay because we’ll just be really successful and grow really
fast and then I’ll be in management instead of repairing computers on a day
to day basis.” I was more interested in the business aspects than in
repairing computers. But after having done it for a year and really
devoting myself to it for about five months, I realized that we could get
there but it would take a lot, lot longer than I had planned.

And so that’s why I left. One of the big issues with that as well was that I was in Iowa, which is where I went to school, and that was a business that required me to be there in Iowa to run it, and I knew I didn’t want to be in Iowa
forever. And so that was another challenge and when I could see that it
wouldn’t grow fast enough for me to be able to move to corporate
headquarters somewhere and manage people then I left. E-marketing-I had a
whiteboard in my room, which is kind of a cliche, I think. I just started
writing down ideas about what I wanted to do next.

I focused more on not what I was good at necessarily, but just what I thought I would like based on my past experience and a few criteria that I set out. I can’t remember now, because it wasn’t really a formal process, it was more like
brainstorming, but I know that one of the things that I wanted was to be
able to do it from anywhere. I knew I didn’t want to have to sell people a
lot. I knew I didn’t want to have to do sales.

And e-Marketing was pay-per-click marketing, consulting, basically. That’s the
idea I came up with, which isn’t really an idea, of course. People do that.
I liked it because, like I said, I wanted to do it from anywhere, and I
could with that business. I felt like I really didn’t have to sell because
the results would sell themselves. It was numbers based marketing, and
either you invested five dollars and earned more than five dollars and you
were happy with your return, in which case you’d continue to do pay-per-click
marketing, or you wouldn’t, and you wouldn’t.

So there wasn’t much sales involved. It was just convincing people to give
it a shot, or that I could manage it better than their existing account,
and I could work for free for a month or two while they decided if it was
something that was profitable for them. I decided to do that in early
January ’08 and my first client I think was April. The three months in
between I was playing with logos and making a website and just doing silly
stuff that I really didn’t need to be doing, but it was probably a nice
period to gather my confidence and learn a little bit, I guess.

Chris: So, Tim, you said that you were able to offer a one to two month, I guess,
guarantee period, or a window in which they didn’t pay you so they could
determine if they got a positive ROI on their campaign. How were you able
to do that and still provide for yourself during that time?

Tim: As far as for providing for myself, I just had a credit card. I went a long
time without pay. The computer service business also didn’t pay, and before
that I volunteered at a music venue in college. I booked bands. I went a
really long time without pay. I had financial aid through school, too,
which was really helpful. I actually lived off of financial aid and credit
cards basically for two years probably, something like that. That carried
me through to that time, too. But really, two months isn’t that long of a
time in the grand scheme of things. The customers-ideally they would have
had to pay nothing. That would have been great.

But they did have to pay the pay-per-click costs to Google or whomever to get started, and that was a bigger investment than my rates would have been anyway. It wasn’t like they didn’t have any sense of commitment. It just wasn’t necessarily to me, financially. It was more of a token way to say, “Here’s how confident I am – I’m willing to invest my own time in it”. I never really got to scale with the consulting enough to say that that was a huge success or wasn’t.
The consulting paid my bills for several years, but it was never an
operation where I had lots of employees and had focused marketing efforts
or anything like that.

Chris: So in late 2009 you took your first initial investment in your company,
Real HQ. Why don’t you tell me about the process of getting that started
and how that went.

Tim: Sure. It’s confusing, but Real HQ is the parent company for Agent Pronto,
and Agent Pronto is the original name, too, so I’ll use them
interchangeably, but for all intents and purposes they’re one and the same.
I had a little e-book business at the time I was running e-Marketing, too.
There was this auction website basically called [Swoopo]. I had a business
selling an e-book for that auction site. I had a partner in that had a
business. We had a pretty good working relationship and came to trust
one another. We had never met in real life, and I really didn’t know much
about his background. He didn’t know much about mine. He had sent me a link
to a website that he had run at one point, and it was in real estate. He
didn’t really know I had a real estate background. He knew I did
pay-per-click.

And when I say “real estate background”, I just mean I had
clients in real estate, so I had started to understand it more. He sent me
a link to this site he had done, and he said it was a failed site. He and
his partner sat down and it really didn’t go anywhere, and he was wondering
if I was interested in working on it or maybe working with him on it. I
said that I was. I sent the link to a few friends and asked what they
thought. Dane was the one that responded. It was a really short email, and
it was just like, “Yeah, I think it’s a good idea. You should do it this
way.” He wrote out one more sentence that was a twist on the model,
and everything made so much more sense to me.

Chris: Tim, what was the website like before? What was their model?

Tim: Their original pitch was like LendingTree for real estate agents. And the
premise was that a home buyer or seller would submit a form and that agents
would bid to receive that person as a client. So they were basically
bidding down their services. That model didn’t work for a lot of reasons.
One is just that people want instant gratification. It’s surprising how
often, even now, we have clients who will get in touch with us, get in
touch with the real estate agent and end up listing their property on the
very same day that we spoke with them. It’s an instant gratification
society, and this process can take five or seven days and involve lots of
parties needing to get involved to bid it down. And agents weren’t really
interested. They were competing on price as opposed to competing on
quality. So agents weren’t interested in the model for that reason as well.
Some were not good agents, typically. It was those that were willing to
compete on price or were willing to do anything to get business.

So it never really was an option basically. I sent emails out, and Dane, who
we’ll talk about in a while, would write back and say, “That’s a good idea.
You should do that, but do it with this twist.” I’ll explain what that is
in a sec. So we tried to buy that business that he had sent to me and
pitched, and he was on board for it, but he had partners that were trying to
make life difficult for everyone involved and didn’t want to sell it at
that price. We even came close to a deal but in the end it seemed really
messy and it seemed like there could be, even after the deal closed, that
there could be legal issues down the road with those partners. It just
didn’t seem like the right way to start a business through this messy
transaction.

Ultimately all we would have been buying was a brand name
probably because we knew we wanted to rebuild the infrastructure and we
were going to do something slightly different. Ultimately we didn’t
end up buying that business and we just started from scratch. And you
mentioned it was late 2009, but by the time we got everything going and
incorporated it was mid March of 2010, and so it was about a four or five
month process of gestation, I’m not sure what that word is, with thinking
about the idea and talking to people about where it was going to go, and
then really getting started with it. And we did raise a little bit of money
and it was basically friends and family money. A client of mine that I’d
worked with for quite a while, did the majority of the investment, and
Dane, who’ve we mentioned and will mention, chipped in with a minority
investment.

Chris: Okay. And so, you started Agent Pronto you say in March 2010. You took
several, well I assume thousands of dollars in funding from these private
investors. How has your growth been since then? Have you been taking a
scatter shot approach, or more deliberately

Tim: We raised 60K in that initial round, and I don’t mind saying it just
because it’s shockingly low compared to most Internet web standards.

Chris: It is, definitely.

At that price, most people pay more for their lawyers than they would
receive in money. But we’re a really simple organization. Structurally
we’re a LLC and we’re designed to generate a profit. We incorporated in mid-
March and we launched in early May. We really didn’t hire anyone. I was the
only employee, and I had a front end guy who was really great who had been
working with me. His name is Peter. He had been working with me for about a
year and a half or so. I would say maybe a year full time at that point. We
would partner up on my consulting projects if we had someone who needed web
design. We got to work really well together. We still work really well
together. He works on every project I work on, basically.

To Peter this was just another client, one that was more fun, because we had ultimate control, him and I. Peter and I were the only two that were involved in it from the beginning. And we ended up launching in early May, and I even traveled to Chicago where Peter lives to sort of celebrate. It happened at the time with trip. I don’t remember what day, but we launched, and
launched really means put a website live and turn it on, pay-per-click ads
which is how we drove traffic to the site. Before we’d even set up
notifications of new referrals coming in through the website, we had a
referral. It was something like the first 30 or 45 minutes. I got really
excited. I was like, “This is going to be huge!” I thought we were off to
the races. Then we went the rest of that day not having gotten another
referral, and I was like, “Maybe it was a fluke, or just one”, and we ended
up going something like a week, I think, before we got our next referral.

Chris: Were you paying for leads the whole time? Were you paying for ads?

Tim: We were, yeah, but on some unlimited spend. In the first month we probably spent something like $1500 on ads or something like that. We spend much more than
that now, of course. There were just a lot of things that we hadn’t figured
out yet about the funnel and about everything else that the business entails. It was natural but it was just funny that we got one in the first hour
and I got really giddy and didn’t realize it was going to be a lot harder
from there.

Chris: Tim, what did you do to celebrate when you got that first referral?

Tim: We probably had a beer or something. I can’t remember. It was May in
Chicago and the weather’s beautiful there. I remember we were on the back
porch, but I can’t remember exactly. I’ve never really been one for
celebration of major milestones. I sort of pause and acknowledge it for a
second and then keep moving, but I probably should for the team sake. But yes,
so that was the launch. Dave joined in August of that year, I believe, and
Dave was a life saver for the company. We were running low on cash. At that
point we had the model. We were right about at figuring out the model. We
were still in Austin at that point in August.

Austin’s just one market. Austin, Texas is I where I’m from, or where I live right now, I should clarify. We were focusing just in Austin at that point and my mindset originally was, “I’m going to own Austin, and then we’ll branch out from there, right?” I was thinking about it like risk or something where I
wanted to own Australia, and then branch out from there. In my case it was
Austin. That strategy just didn’t make sense. We ended up spending way too
much to focus on this one small area, and breadth across several
cities rather than depth. It ended up making a lot more sense for the
model, and there was no less quality–there were no down sides really. We
could better focus on fewer customers who were better qualified to use our
services if we went wider, cast a wider net. Since everything was done
online there was no downside to that, no travel or physical
presence required.

Chris: So, is that a unique quality of your particular business model or do you
think it’s a principle that is applicable to a lot of different online
business models?

Tim: Most online business models don’t even have a geographic component. Here’s
a web service. You can use it. Barring language, of course, but most web
services are U.S. and Canada right out of the gate. Ours is sort of
comparable maybe to Yelp where anyone can access it and read about any
city, and you don’t need a physical presence there to start Yelp in X city,
but it is specific to each city in that sense, too. So that’s pretty
similar to our business, too, I guess. I think that’s somewhat unique to
our business, to answer the question. Yeah.

Chris: Okay.

Tim: That was a shift that happened. It was really, I think, Dane and Neil both,
the early investors, pushed me to make that change. I was reluctant at
first, and then just a switch went on, and it was sort of like, “Oh, duh,
yes. Let’s do that. What have I been waiting for?” It took them badgering
me to make it seem obvious. And right around that time Dave started. Dave
was the first person that worked on it with me and I consider him a co-
founder. I don’t know if Agent Pronto would have made it without him. We
were kind of running low on cash and I had to consult still to pay my
bills. I wasn’t paying myself from the company at that point, although I
did some over the summer.

With Dave’s help we grew to being profitable in March of last year, not that much revenue and even less expenses, of course. It was at that point that we decided to raise another Austin round. We did another 60K with three investors total that I really respect and wanted to invest. That round just cleaned up people from the first round. We got a little more capital to expand. I just cherry picked people that I thought would be really good advisors to the company too, and wasn’t still [am] excited about the [inaudible 22:16]. I still can’t think of anybody I’d rather have than the investors we do have on board.

Chris: So, why was that important to you? Why did you cherry pick advisors,
cherry pick your investments based on the advisors? How much of a role has
that had in the direction the business has taken?

Tim: I still am pretty self-sustaining. I don’t tend to go to people much for
advice. Certainly I have things I don’t know in my head and I seek out
specific people who I think are knowledgeable in those fields. I don’t rely
on them a lot for traditional advice. Two of my investors are well known in Austin and that’s opened up a lot of doors as far as pretty much anyone I want to
meet. I can either just ask them for an introduction or just namedrop them
an email and that usually opens up other doors that I want to see open.

I office with people that were also in investments with my investors. In
that sense I met people too. A lot of it was a network thing, just meeting
people that are like-minded and making it not so lonely to be an
entrepreneur. I think that was the biggest thing. I do meet with a couple
of them regularly, once a month or so, and they’ve been really helpful,
especially lately, the past few months as we’re figuring out how to scale
and go from slow growth to exponential growth. And we’ll get there. It’s
been a great experience overall. I would hope that anyone would cherry pick
investors.

I said that with a sense of pride because I do really like our
investors. I would hope anyone isn’t just willing to take money from anyone
that puts it in front of them, [inaudible 24:18] them about it, because it’s an ongoing relationship. Changes in partner and employee you’re taking money from
somebody who’s going to be involved in your business for a long time. Even
if they don’t have a lot of power they’re still going to be barking in your
email box or on the phone arguing with you about decisions. And a lot
of times they have a lot of power if you take a lot of money, so I would
choose wisely.

Chris: Okay. So, I’d like you to explain more about where this business is now.
What does Agent Pronto look like now? What is the business model you’ve
settled down on?

Tim: Sure. Basically we’re a matchmaker for real estate agents and home buyers
and sellers. So if you’re a home buyer or seller, most people now find a
real estate agent either through someone they’ve worked with before, which
is really common, or referral is the most common. So if I needed an agent
I’d just ask Bob or Sue at church or at the PTA meeting who they use as a
real estate agent. A lot of time someone just knows several people who are
real estate agents, their cousin or their brother-in-law, and that’s who
they end up working with. I think that the reason it’s a referral process
typically is that it requires a lot of trust and it’s a long relationship
between two people.

But when it comes to the largest financial decision that most people will ever make in their lives, I think that it’s silly to rely on anecdotal evidence of someone maybe being good at their job or at least passable at their job, I think it makes sense to seek a more objective approach as if you were hiring or finding investors. I think that people jump into it and then don’t realize that it could mean thousands of dollars or a pleasant versus unpleasant experience for six months of their lives, as they buy or sell a home.

And so, we connect with referrals. We connect with customers mostly on
Google pay-per-click right now. Our pitch is we’ll match you with three top
real estate agents in your area. We do that. They’ll fill out a form, and
someone from our team calls them personally and chats with them about what
their needs are as far as buying or selling a home. Then we personally
connect them with three real estate agents in their area.

We chose three because that’s enough that people can get a sense of what they
prefer or don’t like in an agent and can find someone that’s good for them
without overwhelming them and having eight or ten people blow up their cell
phone and annoy them while they’re at work. It’s sort of a paradoxical
choice; we didn’t want to get too many options. Then the way you get paid from a
transaction is, we receive a percentage of the agent’s commission when
deals close, so we’re paid on success. And so we’re incentivized to want to
match with that agent. And everything that we do is completely in line with
what both the agents want and the buyers and sellers want, because
everyone’s happy when a deal closes.

Chris: Okay. So let me go back to that point, specifically, how you’re compensated.
You’re paid by an agent when they close a deal, right?

Tim: Correct.

Chris: How do you ensure that they pay you?

Tim: That’s the first question most people ask me that get the model and know
how real estate works. They always say, “How do you close the loop between
an agent in our deals?” To date, we’ve closed lots of deals. As far as we
know, of course, this is a strange bias, but as far as we know we’ve never
had trouble collecting payment. The reason is because the callers on our
team that work with buyers and sellers are the same ones that work with
those real estate agents. They have a select set of real estate agents that
they choose to work with. And if you’re a good agent in our system,
especially if you close deals or seen success, we have a continuous
relationship where we’re sending in new referrals and new deals over time
and following up on existing deals.

So there’s this established relationship there and continuing value we’re providing them. It’s not that we send them one referral and then disappear and then say, “Hey, where’s our money” four months later. A lot of times we’re sending them deals on an ongoing basis, and that’s just one of them. So it would be kind of silly for them. They’d be biting the hand that feeds them if they didn’t pay for that one referral, because there’s more where that one came from. It’s a winning relationship for everyone.

And receiving a percentage of their commission is an established concept in real estate. If you’re an agent in Austin and you have a client who’s moving to Boston, and you have a buddy in Boston who does real estate, and you refer that client on, they will also pay a percentage of their commission to the agent in Austin. So, it’s something that happens in real estate already and it’s the same way our business works. And in every way, the only difference is that we send
to three agents as opposed to one, because we think that’s best for both
the agents and the clients.

Chris: And with only three agents, that’s not so many that it becomes hard to keep
track of which deals are closing.

Tim: Yep. Yep. It’s quality over quantity, and always has been. So when we
started we were just in Austin. To get our first round of agents interested
in the service, I actually had a friend bake cookies and go and deliver
them, personally deliver them to real estate agents in the area. I still
think that’s a really good idea. [inaudible 30:42] It doesn’t scale really well.

It’s hard to do that in markets other than your own, and it’s kind of
expensive, but it was a really fun way to start. And from that point [inaudible 30:58] a personal relationship we have with agents, and a really good working
relationship. Sometimes now, we’ve even actually received cookies from them
as a thank you for a deal that we sent their way.

Chris: Nice. That’s really cool. Of the agents that you’ve sent cookies, how many
of those started working with you? What was your conversion rate? What’s
the cookie conversion rate?

Tim: Yeah, I guess. It wasn’t that great. Well, I mean compared to direct mail
it’s pretty good. I want to say we maybe did 20 some. Between 20 and 30 I
want to say, something like that. Let’s say 25, and I think we had six sign
up or seven sign up.

Chris: Okay. That’s like 25%

Tim: Yeah, 25%.

Chris: That’s pretty good.

Tim: But even now, actually, we can use less intense methods of communications.
We still get a lot of yeses, because it just makes sense to real estate
agents. Back when I was in PVC Consulting and someone came to me and said,
“Here’s a client. I’ve met with them already. I’ve chatted with them, and I
think they’d be a good fit for you, and they want to have you manage their
Pay-per-click on an ongoing basis, and you just pay me 25%. Are you interested
in taking that client?” I would have said yes to that all day long when I
was doing [PPC] consulting. That’s basically a similar relationship to how
it works in real estate. It’s like someone just does your marketing for
you, and you just do your job-

Chris: Right.

Tim: …especially for those who aren’t into self-promotion or don’t enjoy
sales. Now I’m into online marketing and stuff like that but I still
don’t like sales, but I never sell friends on anything, and I don’t like going to investors until I think the idea’s a slam dunk or that we’re profitable,
in the case of last year. Because I just don’t like asking unless it seems like a total win basically. And if it’s anything less I just don’t feel
good about it. It might be a personal hang-up. I’m not saying that’s good
advice. I’m just saying that that’s the way I operate.

Chris: So it seems like you’ve really crafted a business that has a business model
and is structured in such as way that it really fits your unique strengths
and interests? Would you say that’s true?

Tim: Yeah, yeah, I mean 100%. It’s an extension, and it’s partly no accident
and it’s partly just evolution of what I was doing too. And the no accident
part is when I started e-Marketing and decided I wanted to do pay-per-click
marketing. It was on a whiteboard writing out the pros and cons of what I
wanted to do and lessons I learned from the computer services. It also
taught me what I did and didn’t like about the things I was doing. But from
e-Marketing growing into Agent Pronto was a very organic process where by
the time we started Agent Pronto, I didn’t totally know what we were doing, but I
had done very similar things in the past and had gotten results for
clients, so it was just taking that service business, basically, and
turning it into a product. I didn’t need to have clients who were real
estate agents say yes. I could do the work and just give them the result.
Everything is structured both in a way that I think is profitable for the
company and in a way that I enjoy, selfishly. And anyone who works the same
way I do would love to work with me because I consciously choose an
environment and create an environment around my strengths and weaknesses.

Chris: So, this is something we’re going to get back to. I definitely want to talk
about the culture of your company and your rules, the clubhouse rules which
you have on your website. Before we get to that, and I do want to get back
there, I’ve got one question. This is something that Andrew Warner always
asks in his interviews, and he’s sort of my inspiration in doing all of
this. I’d like to know, how profitable is Agent Pronto right now, and
what’s your top line, your revenue as well?

Tim: Sure. I don’t really want to say numbers. I thought about the numbers
question, and it’s kind of frustrating to me that I don’t want to share
and if we were to have coffee and chat I’d be glad to share with you
personally and actually have the numbers. But in our culture, I
don’t know if this is United States specific or what, but in our culture
there’s still a taboo about money, whether someone’s making lots of it
or making little of it, everyone doesn’t want to talk about it. I’m really
open internally about things, and externally I’m open about pretty much
everything.

But talking about revenue and profit are things I’m just not
comfortable sharing right now. I can tell you we were profitable last
March, and we raised money and intentionally went into the red again to use
that investment to grow. For the past two or three months we’ve been at
roughly breakeven, and our next hurdle is, we don’t want to raise more
money at this point. That may change, I’m not an ideologue about it, but it
was designed from the beginning to be a profitable company and it’s structure as a LLC for that same reason I want to start making money for myself and my
investors and make it a profitable place to work for our employees.

Chris: So when you say that you’re at the breakeven point, does that mean for you
that you’re paying back the investors first, and that’s what you consider
breakeven?

Tim: No. That would be, we haven’t returned the investment, although that is
structured into the deal that we will pay back the investors before we
distribute to other shareholders. But no, I just mean the money coming in
each month roughly matches the money coming out each month.

Chris: Okay. So you took that second investment, you scaled your marketing.

Tim: Correct.

Chris: And that’s when you-

Tim: When we took that Dave was still roughly half time or three quarters time,
I think at that point, and myself. So maybe a total of twoish employee
and we’re now five full time employees, and another maybe three or four
part-time employees. So we’re a much larger operation now and our top line
has grown 3 X since last March. Yeah, we’re at a point now where we’re
getting over the hump of that profitability and we’ll move into the black
and just continue to scale. We’ve laid a lot of infrastructure and a lot of
hard work is done, and now it’s just time to grow it and fulfill the
promise of what the business should be.

Chris: So what do you see the business looking like in six months and 18 months?

Tim: Everything always goes a lot slower than I think it will in my head.
Ambitiously, I’m probably a year behind plan already from where my
ambitions are. I don’t think that’s doing a poor job. I just think it’s how
it works. That’s true in software estimates where someone will say it’ll
get done in a month and it almost always gets done in two, or three. So in
six months it will probably look a lot like it does today. Right now we
are five people, and two of those are on the front lines working with
referrals and working with agents. That will be the role we continue
to scale, so in six months we’ll probably have one for sure, maybe two
people doing that same thing.

We will have invested a lot more in SEO and helping people find us on Google search that way. I hope that we have a lot more of a presence from content, articles on our blog and information that people find valuable on our website and maybe a more established social media presence and all those fun fuzzy things that have gotten pushed aside as we’re holding on by the seat of our pants and trying to make sure we survived and had money in the bank.

Chris: Okay. I guess with all those things, you would hope that your revenue would
be increasing steadily.

Tim: Right.

Chris: Do you feel that the pay-per-click ads have been low hanging fruit, and SEO and content and social media, that those are all like the 20% of the 80-20 rule, not the 80% which is the PPC?

Tim: Yeah. I mean, that’s of course personal. I should point out the content
stuff and the social media stuff is more like a breakeven investment in the
short to mid term, but it will help with our recruiting and it will help
with our agent relationships. If we have more products and services in the
future that we think will be valuable to home buyers and sellers, or to
agents, it’ll be helpful to have that established relationship with them.
There’s just a lot of stuff that we’re doing internally, too.

When you break it down from a business level it seems so strategic, but there are a lot of things that we’re doing internally that I think are really cool that
I would just like to share with other entrepreneurs. Stuff like that. Some
stuff we’re going to talk about with clubhouse rules and philosophies and
just physical things that we’ve built too. We haven’t done any open source
contributions and we’re so grateful and indebted to the open source
community for a lot of the things that we’ve built and use. So that’s one
thing that I would love to do. We won’t get an ROI on that, not in the
short or mid term, but that’s okay. But PPC is low hanging fruit for us. It
doesn’t have to be that way for our business model. It’s just low hanging
fruit for me personally. I’ve done it for four or five years, and when
anyone tells me to do business, the first thing in my head is how can you
use search marketing to improve that business. Of course, you can’t for
every business, but that’s the first thing I think about, because that’s a
particular strength of mine.

Chris: Okay.

Tim: So if my strength was SEO then I’d probably consider that low hanging
fruit, and be all intimidated about pay-per-click.

Chris: Well put. Let’s talk about your clubhouse rules. I’ll read these here
from the website. We will be artists. We will asynchronously overshare. We
will work hard but we won’t work long. We will not create emergencies
because we know that most often they are created. We will make things
beautiful and profitable. We will even make beautiful more profitable. We
will speak to customers, partners, and co-workers like a friend, not a
corporate robot. We will make ourselves better so we can make the world
better, and we’ll have a fucking blast doing it. My censorship added. These
are unique. I definitely see the similarities with 37 signals,
keeping it real

Tim: And I mention in there big props to 37 signals for a lot of those things, and I’m not shy about our respect for what they have done. I’d gladly trade
businesses any day with Jason [Freed] and DHH. And so, big props to them.
I can’t remember now which ones in particular, but [inaudible 44:10], I think you know some of those too, and I tried to give props on that as well. So yeah, I’ve thought about this a lot since and that [inaudible]. We did a painting of it. And even since there’s not really anything I want to change about it. There’s very little that I’ve thought of that I would want to add. I think the wording sucks in a couple of those. If it was just text I’d probably go back and edit it, but the meaning still stands for me, and I think it’s as true today as when I wrote it, as far as how I want to run our company.

Chris: So let’s talk about a couple of these. “We will asynchronously overshare.”
What do you mean by that? What does that look like in your business?

Tim: Sure. So that’s one I would definitely reword. I don’t know why I chose to
say, “asynchronously overshare”, but I don’t know a more concise way to say
it. Basically it means that by default we should always choose the least
interruptive form of communication that still allows us to express what we
want to express. So I should not use a meeting when I can use a phone call.
I should not use a phone call when I can use a text message. I should not
use a text message if I can use live chat, and I should not use live chat
if I can use a Basecamp message or an email.

In fact, we don’t really have meetings, ever. It’s happened on rare occasions. We talk on the phone, maybe once a month or less, certainly never as a group. It’s never a teleconference. It’s just two people problem solving, and then they find the phone more efficient. We rarely check into campfire for a live
chat. People just travel too much and are in different time zones and work
different hours. They are free to do those things. Basecamp messages is
almost entirely how we run things. We are heavily reliant on Basecamp to
manage our projects. I have frustrations with Basecamp and they
get a lot of flak lately, although I’m really excited for the new version.
But I’ve tried every project management software under the sun, I think,
and I keep coming back to it because it just gets the basics right, and it
makes sense for us. All of our tasks are in to-do lists, and they’re
ordered by priority. 99% of our communication occurs in Basecamp.

Chris: Okay.

Tim: That interruption factor, and having to be asynchronous is just huge to me,
because I think-especially for programmers, but this is true of the way
that I work too is that interruptions to me are so much more than just the time it takes to be interrupted. It’s so much more than that five minute
phone call. It’s five to ten minutes after that, getting back adjusted to
it, taking notes from what we talked about. So often I’ll do a
phone call, and nothing will happen for a week or two because there’s no
record of it. No one wrote anything down. It didn’t go in a place
that it would be properly processed and useful to anybody. We definitely
still follow that one.

One thing I’ve learned recently is that something
will definitely have to make sure we hire for a fit with that, because it’s
not the way everyone works. We have a mutual friend that we talked about
last week who really prefers the phone. He’ll send me an email and ask if I
have time for a phone chat. That email will sit in my inbox for a week or
two, because I just don’t like the phone and I don’t like taking the time
to do a phone call. And if he wrote out an email to me, even if it was
pages long, I’d respond the same day. My email’s almost always at zero.
That’s the way we communicate. It doesn’t work for everyone, but it works
for pretty much everyone that we work with. You can still be as expressive,
and I think it saves time, and keeps everyone more organized than if we
were to do more phone calls and in-person meetings like most traditional
companies do.

Chris: So, we won’t have time to go through all these ones I wanted to, and we’ve
got some really interesting ones here. “We will work hard, but we won’t
work long.” So talk to me about that.

Tim: It seems like there’s a rift in Silicon Valley in general, and there are
people-it’s the 37 signals camp again that says we don’t need to work 40
hour weeks. At one point even they took Fridays off during the summer or
something like that.

Chris: How many hours do you work a week?

Tim: Probably 40. I don’t really know. I don’t track. It might be interesting to
track. The last time I tracked was probably 2008 when I installed
RescueTime on my computer. I haven’t done that in a long time. I’ve never
time tracked for my own work, but I would guess 40. Last week it was
probably 50 or 55, but the two weeks before that I was traveling in
Colorado and San Francisco, and so it was 10. So it fluctuates, but I’d say
I work a normal week. That rule is more for everyone that I work with than
it is for me. I don’t struggle to work more than I need to.

For me the struggle is not working. I really enjoy work, and no day would be complete if I didn’t get a little work in and feel good about the work that I did. It’s more so for everyone else on the team just so that they know that we
have that rule that says that you shouldn’t be expected to work 50 or 60
hours ever. There’s no good reason for it. We don’t believe in emergencies
either, so there’s no excuse. There’s no wartime excuse where it’s okay
now just because we’re doing this release, or because the server’s on fire,
or whatever. We’re blessed that we have a pretty straightforward business
from a technical perspective.

I’ve created systems, and everything’s pretty
methodical and understandable. We’re not facing huge scaling challenges or
millions of users who rely on our service. So in a way we’re lucky for
that. Yeah, I just don’t believe in it. Some of our employees are
contractors, and if they want to work more, they’re welcome to, too. But
it’s just never a rule, never mandated and never expected. I have Peter who
is our founder, and he likes to work 30 or 35 hours, and usually that’s
totally fine.

Chris: And most of your employees are on, not commission, but they’re paid hourly.
They’re contract workers, so you don’t pay them overtime. They’re not
salaried.

Tim: Correct. They’re not salaried. If they did work more than 40 hours, I would
pay them for it. Part of that is because of this belief I don’t think it’s
fair to pay someone a salary and expect them to work 80 hours, because then
the salary figure is a lie. Partly the employees know that, but if they
really did the math they’d be pretty sad about it I’d think. And sometimes,
in comparison, our contractors’ salaries or in comparison to freelance
rates, our contractors’ salaries seem paltry. But when you realize you’re
only expected to work 40 hours, you can bill every single hour that you
work, and you’re not expected to bear the burden of switching costs,
because there shouldn’t be switching costs because we’re communicating
efficiently, I think it’s a really great place to work and everyone is paid
well for it.

Chris: Is the expectation just that they’ll work enough hours that they get their
job done?

Tim: That’s the ideal. Right now most people still come in with roughly a 40
hour week expectation. But the ideal would be results only work environment
where if you contribute more in 10 hours than someone does in 40 you’d be
paid accordingly for that. I say that’s the ideal because I would love to
have that be the way that it works. It’s a pure meritocracy. It’s really
hard to get there because you have to track efficiently and you have to
equate how much effort someone puts in as close as you can to how much
money comes out the other end, from a business perspective, to be able to
do that. I try as hard as I can to pay on performance and to let people
work according to their contributions however much they want to. But it
just so happens that most people tend to work roughly 40 hours right now. And
it’s just because we don’t have the infrastructure in place to do it better
yet. But people are welcome to take time off and to do less time if they
want. Right now our Rails programmer [Gavin] is in South Africa and will be for
the next three months He didn’t need my permission to go to South Africa
for three months – he’s welcome to. There are challenges to working abroad.
I wouldn’t be excited to hire someone in South Africa right now just
because of the time zone differences, but for three months it’s totally
bearable, and we communicate asynchronously anyway.

Chris: So he continues to work, I mean, more or less 40 hours a week.

Tim: Yeah, like when he’s traveling, and working normally the rest of the time So, he’ll be in Johannesburg on Thursday, and we’ll be back in the saddle
by then. And in the meantime, he’s taking care of any little stuff we need
that comes up.

Chris: Great. Well, I think we’ve about had our hour. Do you have anything else
that you’d like to share with those who’ll be viewing this video, with our
audience?

Tim: Yeah. Good question. I’d really like to cue in that Agent Pronto in its
simplest form is basically a really simple website and it’s a simple
service for people to find real estate agents. Long term I think that we’ll
do some really interesting things, both with that simple explanation and
beyond it. But I think a lot of what makes it unique too is we’re
relatively boring in the grand scheme of start-up stuff. At a party, my
company is never the most fun to talk about. That will just always be a
fact. Photo sharing, social gizmo is always going to be more interesting
for people to talk about at a party. But I think the things that we’re
doing around the way that we work and the environment that we’re creating
for the people that we work with too is the most interesting thing about
our business in that we believe people can work from anywhere and roughly
whenever they want with the tools that they want, within reason. (As long
as it’s a Mac)

We’re doing our best to build, as we were saying, a results-oriented work
environment. And we will get there as much as possible. And the reason that
it’s that way is because that’s the environment I would want to work in. If
the tables were turned and I was in an interview and someone described this
work environment to me I’d be all over it and would excel in that
environment. Sometimes it’s dangerous thinking, and sometimes it’s the
simplest way to think. I’m building this company for me, just like a lot of
people say they’re building products for themselves.

I built this company for me, and if anyone has the same values as I do, values being trusted and working wherever they want and letting the results speak for
themselves, and being treated like an adult and having a seat at the table
and conversations and all those good things, being organized so there’s
less stress, then I think they’ve enjoyed working with us. Whenever I
get asked about what I do at a party it’s usually a two sentence blurb
about what it is that HQ does, and then I just bring out something
provocative about the way we work, like no meetings, or lately I’ve been
making a push for no deadlines, even. That’s usually much more interesting to talk about.

Chris: That is fascinating. If you want to talk about that right now I’d love to.
I’d love to hear more about the no deadlines thing, or we can call
it.

Tim: Sure.

Chris: How can you have no deadlines? How can you get anything done? It seems
counterintuitive.

Tim: Yeah. So, is there an example in your life of something you really love,
that you find really easy to do?

Chris: Write my journal.

Tim: Cool. Do you set up times for that, to write in your journal, or is it just-
Chris: No. It’s really motivated by my own passion for writing my journal.

Tim: Yeah. And there are things in life, like running, for instance, that I have
a quota in my head and I try to do it each week, because I don’t always
enjoy running. It’s not that fun. But for anything that is fun, I don’t
really need to set a deadline because I just do it because I really enjoy
it. There’s a great quote which is, “A collection of local [inaudible 59:20] does not make an efficient system overall.” Now this was in a recent book I read
is called “The Goal”. It’s a cheesy 80′s business book.

Chris: [inaudible] Goldman, whatever.

Tim: Yep. Eli [inaudible], or something like that. Obviously people know how to figure out what it is. The point is that deadlines are optimizing for this one task, right? If we need to do a website design we need to have a copy by
this date, and then we’ll have the website by this date, and what ends up
happening is, if you picture it like a factory floor, there’s tons of work
in process, inventory left on the floor all the time because people
finish something by a deadline, and then it sits while the next person
works on a deadline. You might that that deadlines are supposed to make
that better because they’re designed in a way that this deadline should
occur right before somebody needs it.

If you have a lot of dependencies, you need deadlines to structure it. But the big message in that book “The Goal” is that it should be a pull process and not a push process. And so, the bottleneck spaces determine what should be done and when. And a pull process just means, “I need this now. Okay. Pull it from here.” It’s just like just-in-time manufacturing, I’m throwing around a lot of random words. I did mention that this is one I’m just finishing now, so I’m
fleshed out my thoughts on this yet.

Chris: Sure. So that makes sense in the context of a factory. How does that work
in an information type service business? White collar?

Tim: Another thing that we should mention is that obviously people aren’t
machines. The way I’m talking about this is a much more humane way to work
and I’m just using the machine analogy as a way to relate it to something
that people can understand. But in a lot of ways I think this is a way of
treating people much less like machines than the traditional work
environment does. If people are only expected to work 40 hours, or however
much they want to work, and they aren’t expected to be stressed about
situations that arise or emergencies or whatever, then there’s no point in
a deadline. All you’re doing at that point is estimating, because there’s
so many hours you can work in a day, and there’s so many days you can work
in a week. For us we believe that those should be as much as you want, but
there’s no reason to work longer hours than anyone else, and you should be
paid if you do. What you get done is then what you get done.

So if you have a deadline, either you’re going to hit that deadline because you were going to hit it anyway, or you don’t hit that deadline, at which point you have to give a new deadline, at which point you’re estimating when the work will
be done, right? So rather than do that, we structure things based on
priority. You don’t need a deadline to decide that you should write in your
journal today if you give yourself six to eight hours to focus on the
things you want to do in a given day, and that’s one of your highest
priorities, right? Dads don’t need a deadline to play with their children
because that’s the number one priority in their life.

So we just use priorities rather than deadlines as a way to structure our
day. And a way that we do that functionally on a very basic level is
Basecamp tasks, and the highest task on the list is your number one
priority. People are welcome to negotiate that priority. Whoever’s task
that is can negotiate that if they believe it’s out of order, and any other
stakeholders in the task being done can negotiate that. So if I had a
dependency and I needed someone else to do something before I could do
something, then I would score that task higher on our priority list, and
then I know it’ll get done soon.

Deadlines are ultimately either just things that would occur anyway because that’s a priority, or they’re things that won’t occur, in which case you’re renegotiating a deadline, and it just becomes an estimate. I don’t believe in estimates, either, and they’re so often wrong. You can really do it if you have a set number of resources, which is what your people are, is to just have priorities. And when you start to see someone maxed on their priorities, or their list gets really long and they all seem like important priorities, then it’s time to hire and bring someone else on. Anyone with a hundred person company or more is probably listening to this and thinking that’s pie in the sky because we’re five people – ten people involved in the company at any one time.

So it hasn’t broken down for us yet. I think that’s the right way to work. I
haven’t totally figured it out, and I don’t have the experience to
translate this message to people at a larger company. I’m not Eli [Goldrad] or whatever, and I don’t aspire to be. But I think we will figure it our for our own company if we get to that scale- 50 to 100 people or whatever.

Part of the reason why we have clubhouse rules and the sort of anti-rules
that we mentioned is because the way we’ve run things in the past is decide
what we want to do and then figure out a way to do it. I think that’s a
really good goal for a business, just in general. I think that’s the way
things should work. I’m not 100% convinced that deadlines are a bad thing,
but I don’t use them personally. Again, I’m just building the company I
want to work in, and every time I’ve made up deadlines in the past, they’ve
just seemed like BS. I’m just making up a deadline to let people know when
it’s going to be done.

Chris: Yeah.

Tim: Deadlines roughly translate to priorities then, right? So if I say this
I’ll give you next Thursday night next Tuesday it’s implicitly saying that
this is first, that’s second. But if I miss Thursday, all it’s doing is
creating stress on me that I need to get it done on Thursday. And then
maybe I’ll work a little longer to get it done on Thursday, but it would
have been done anyway on Thursday if it was my highest priority.

Chris: Yeah.

Tim: And if it wasn’t, we should renegotiate that priority and figure out what
should be first. If you need that to get motivated and to just do work in
general, then that’s not me and that’s not the people I want to hire,
people who struggle. I mentioned the hundred person organizations, and
that’s where you have people that can hide in the cracks and can literally
do nothing and get by. I don’t know how to address that yet, but that’s
certainly no one on our team. Everyone’s awesome and contributes daily and
weekly without needing prodding because it’s their job and they like what
they’re doing. And it’s really clear because we’re small enough we can see
what everyone’s tasks are. I know that’s a long explanation, but it works
for us and I hope that it’ll work for us at 100 or 200 people, and I’ll do
my best to make that so.

Chris: Yeah. I hate deadlines, honestly, Tim. I’m here in Austin, taking
a year off from Colombia, and one of the great things I’ve noticed living
here is being an entrepreneur, building my own business, and not being at
school. It’s that I don’t have deadlines, and it’s a huge relief. I’m one
who gets stressed by deadlines, so that sounds like something I could
definitely implement.

Tim: For sure. Now that you’re “on your own”, there’s a phase I went through,
and it was in early 2008 where no one was telling me what to do, and I
didn’t have a clear set of things to do. I read books on productivity and
how to get stuff done and whatever it was. So I went through a phase like
that. I don’t know if our employees have a phase like that or if they’re
[tests] are clear enough coming in that they don’t need to, or whatever, but it’s certainly an adjustment.

It’s just like sometimes when I say I work at home or work in a coffee shop, people always say, “Oh, I could never do that. I’ll just vacuum or do the dishes or whatever,” and I think that I find my job way more fascinating than I find the dishes fascinating. It’s not a struggle for me to sit down at a laptop and put on headphones and work because I enjoy what I’m doing. So if there’s trouble with that inherent motivation, maybe there just needs to be lessons like I did early on figuring out how to be productive on my own as an adult. But I think long term it’s best for everybody. And maybe it’s just because I didn’t have anything to do. It wasn’t that early in 2008. I didn’t have any clients and was just dinking around, changing my website and designing a logo and doing all the stupid stuff I didn’t need to be doing. So maybe it was just that I didn’t have
enough good stuff to do anyway.

Chris: Yeah.

Tim: [inaudible 1:08:28] read about how to do it more efficiently.

Chris: Yeah. I myself have gone through a number of businesses that have failed
for one reason or another, and there are many reasons. But I’m very excited
about this interview business. I found that having the passion for it,
truly caring about the people I’m interviewing and what they’re saying and
being fascinated to talk with them and share that with others, it really
drives me. I believe passion is huge, and just being productive.
Understandably, if you’re doing something you hate, it’s hard to be
productive about it.

Tim: That’s really tough advice to give to somebody, because it’s not like
something you can just go out and get. It’s like people say, “Marry well,”
and, duh, I’m trying. To be passionate about something, it’s true, but
it’s really hard advice for people, because if they have something they’re
not passionate about, and they don’t have something that they are
passionate about, it’s not really actionable advice.

Chris: Right.

Tim: But it doesn’t make it any less true, and it’s certainly something to
aspire to. You know, you wake up and you dread what you’re doing, which I
think is common among a lot of entrepreneurs, even. You know, build
a business that you don’t love-maybe you should do something else. It
doesn’t have to be immediately. It’s not advice to tell people to quit
their jobs. It’s just like, keep on that organic path and figure out where
you need to go, and maybe it’s quitting and maybe it’s changing how you run
your business or maybe it’s, as an employee, moving to a different
position. Yeah, I totally agree that things work so much easier when you
like what you’re doing.

Chris: Alright. Well, Tim, this has been a great interview. Thank you very much
for your time, and we’ll call it at that.

Tim: Thanks for doing-

If you enjoyed this interview, please let Tim know on Twitter: http://clicktotweet.me/e01c92jG