Episode 857 | Finding Hidden Multipliers in Your Business (with Jason Cohen)

Jason Cohen tells Rob Walling that Hidden Multipliers is his first book after 18 years of blogging and roughly 25 years of building and mentoring companies. He had avoided writing a book because editing and sustained effort were difficult while running a company, but leaving WP Engine more than two years earlier gave him the time and energy. The book responds to founders who say growth has slowed or stopped even though they keep executing their existing to-do list. Cohen collected recurring patterns—pricing, cancellations, customer selection, and strategy—that remain useful despite changes such as mobile and AI.

Cohen says a business could theoretically be represented by a mathematical model containing revenue, profit, customer behavior, competitors, market dynamics, and operating costs. A multiplier would be a variable where a small change produces a disproportionately large effect on something important, such as revenue, profit, or the enjoyment of running the company. In practice, founders cannot build that complete model, so the leverage points remain hidden. Sometimes the issue is choosing among ten plausible tasks; sometimes the founder already knows the answer—such as excessive cancellations—but avoids confronting it because customer rejection feels like a personal indictment.

Cohen explains the “profit whale” method: calculate each customer’s gross profit after the costs required to serve that customer, including servers, storage, tokens, and technical support, then rank customers from most to least profitable. At WP Engine, fewer than 10% of customers were costing the company about $1 million per year and reducing gross margin from roughly 80% to 55%; the top 10% generated about 40% of revenue. He warns against automatically firing the unprofitable tail. One customer contacted support daily because WP Engine lacked a self-service configuration feature, revealing a product gap that benefited many customers.

The WP Engine customer with hundreds of sites was unprofitable because support had to make a configuration change manually every day. Most customers needed the same capability only once a year, so their requests were not loud enough to expose the problem. Cohen argues that such customers can be gifts: before firing them, determine whether the company created the costly behavior and can fix it with a feature or process. Some customers may still be poor fits, but others may be valuable logos, loyal early adopters, or sources of learning. Even reviewing the tail one customer at a time can uncover major profit improvements.

SmartBear sold code-review software, which Cohen started in 2002 when code review was mainly used by large companies such as QuickBooks, Lockheed Martin, and health-care firms subject to HIPAA. Its price eventually rose from about $35 per seat to approximately $1,300, without unit sales collapsing. Cohen says the normal demand curve is real, and an immature product may initially deserve a lower price, but founders often remain underpriced after the product improves. A low price can signal “hobbyist” software and repel serious buyers; a higher price can make the product credible to companies with larger budgets, lower churn, and more demanding requirements.

Cohen stresses that pricing advice is not universal and can point in opposite directions depending on strategy. WP Engine lowered its entry price from about $49 to $29 after repeatedly hearing from freelancers and agencies who wanted to bring multiple clients but could not justify a tenfold jump from hosting that cost $2 to $5 per month. The relevant customer was not a single $29 account but an agency that might bring 20 customers and another each month. Cohen says companies should focus messaging, features, advertising, and pricing on their ideal customer while accepting that adjacent customers will also sign up.

Cohen contrasts a pitch to “cut your ad spend in half” with one promising to “double your leads at the same cost per lead.” Saving money caps the vendor’s price at a fraction of the savings—perhaps 10% or 20%—but a customer already spending $40,000 for a given number of leads may be willing to spend $80,000 for twice as many. The second pitch therefore supports charging for the full additional value rather than a fraction of the savings; in his example, the difference was an eightfold pricing opportunity. He recommends examining homepages and sales conversations for benefits framed only as removing costs or inconvenience.

Cohen says founders often perform $20,000 worth of implementation work for free because they fear losing the sale. He recommends quoting the fee directly, then negotiating a discount, a longer contract, or permission to use the customer’s logo if necessary. Even showing a $20,000 implementation charge and a matching discount communicates the value delivered and creates reciprocity. Sales calls also let founders test prices immediately: one customer may react badly to $1,000 after paying $99, while another may simply say the budget is available. Cohen cites SpareFoot, which cold-called storage-unit operators and tested different subscription, lead, and success-based prices manually before building the model.

Cohen created free AI skills because frameworks such as finding an ideal customer are difficult to execute alone. His “Rude Q&A” skill acts like a constructive devil’s advocate or rude journalist: it challenges vague claims, makes false assumptions that the user must correct, and tests a pitch. The “find your Carol” process guides founders through strengths and weaknesses, customer keystones, inciting events that create buying urgency, deal breakers, and behavioral descriptions of the ideal customer. Cohen says AI should not invent the answer; it should facilitate the founder’s thinking and push for specific answers. The skills are available without an email address.

Cohen describes Smart Bear Live as a continuation of his earlier advice format, but with a different co-host for each founder. He chooses co-hosts whose experience fits the company or industry, while the founder’s actual problem is workshopped rather than treated as a prepared interview. Episodes can run about two hours because they preserve the messiness of founders debating metrics, positioning, and decisions. Cohen calls the founder the “star,” noting that participants expose their business and themselves in vulnerable detail. The format combines tough questions with empathy: listeners see defensiveness and uncertainty they recognize in themselves and hear how people in the arena reason through them.

In the final chapter, “To Thine Own Self Be True,” Cohen argues that strategy must align market demand, competition, industry conditions, company capabilities, and the founder’s attributes. A strength is contextual: competitiveness may help in sales or recruiting but hurt a meeting intended to find the best idea, or make chess unenjoyable. He recommends inventorying attributes rather than labeling them permanently as strengths or weaknesses, then choosing a strategy where they are useful. A weakness deserves attention when it forces coworkers to work around it or blocks a stated goal, not merely because it is imperfect. Founders need only one or two exceptional advantages; the iPhone’s form factor and real internet access, or Heroku’s push-to-deploy workflow, could outweigh many shortcomings.