Our latest podcast is a combination clinic and therapy session for anyone who has ever tried to build software products for small businesses. At the recent Tech Adoption Summit in San Francisco, my colleague Neal Polachek interviewed Ted Paff, a former VC turned entrepreneur who founded Customer Lobby in 2007 and sold it in 2017. Today when Ted isn’t sharing war stories at conferences, he’s more likely to be found on a beach with his surfboard.

The original idea for Customer Lobby was to “digitize an ephemeral asset, which is customer goodwill.” In other words, helping SMBs generate customer reviews. Today, Customer Lobby, now an EverCommmerce company, uses AI to take an SMB’s customer data and analyze it for signals to do more effective marketing.

The 30-plus minute interview with Ted is a must listen for anyone who has built, is building, or hopes to build products for the small business market. Ted offers an extremely candid take on how many of his decisions look in hindsight. And he also gives us a glimpse into the emotional toll that running a start-up exacts from entrepreneurs and the intensity of living that reality where what you are building just has to work. Living “failure is not an option” day in and day out takes its toll.

“It’s hard. I don’t even know where to start. It was a long road. I kept looking for a panacea. A silver bullet. And there was none,” Ted said, summarizing his journey building Customer Lobby.

The interview offers much more than catharsis. Neal and Ted got into a serious conversation about the hard lessons Ted learned building an SMB software business. Here are some highlights.

On the Freemium Model 

Earlier in the conference, ThriveHive CMO Adam Blake made a detailed case for building a business with freemium products. Neal and Ted picked up on that thread in their conversation.

“There is a truism that you need to view a freemium product with the same degree of passion as a paid product. You just have to view it that way. Otherwise, it just doesn’t really work.”

On Product Pricing 

“Almost everyone in this marketplace is radically underpricing their products. This market is a lot less price sensitive than people think it is. As an example, when we sold our company, the new acquirer raised prices by 40 percent and it dropped right to the bottom line.”

On Customer Support

“When I initially launched, I was so cheap with our support. Later I realized I needed to build in enough margin to enable a really wonderful experience for the customers. And that is all a function of price.”

On a Future without Salespeople 

“No one wants to talk to a sales person until they do. And when they do, they want to talk to them right now. They are not kidding. There is a high value attached to that. So there is a question of where nurture drops off and sales kicks in. I get that. But that magic ARPU or MRR is more a function of what type of sales one actually want to roll out.”

On Product-Market Fit

“Product market fit wasn’t an a-ha moment for us. It was a series of micro-learning lessons. Like, ‘Oh, this audience is interested in buying something that solves this pain point.’ When we started our initial product was around helping businesses generate customer reviews. At the time, that was anathema to everyone’s thinking. Plumbers would say ‘Isn’t that for movies and restaurants? Why would a plumber want customer reviews?’ For a long time, it was just rolling a boulder uphill. it just kept getting a little easier. There was no step function for us.”

There is much more to the discussion. You can listen to the full podcast here:

Thanks again to the sponsors of Above the Cloud and the Tech Adoption Index.