Ask HN: Surprised by your revenue? Easier than you thought?

[route3]

I'm slowly hacking away at a niche B2B SaaS product after work and on weekends.

I'm looking forward to the prospect of some extra monthly cash. I get a kick out of thinking, "At $30/mo, I only need 200 users to bring in a cool $6000 a month!" (gross, of course)

...but wait. Will I get even 200 subscribers? Maybe I'll struggle to reach 10. What if I'm underestimating my market here - what if I get 2,000?

I bounce ideas around in my head: "Of course I'll get 200 subscribers. 1.3 million people live in New Hampshire alone, and we're just one small state in the USA!" Even though my product is for a niche market, my local Yellow Pages confirms there are a dozen likely candidates for my application. I sometimes think I could secure 200 subscribers from just New York City alone, never mind the rest of the country, world.

I'm genuinely interested in the product I'm working on and the experience developing and marketing it is invaluable. I'm excited to see how my projections line up with actual revenue, good or bad.

What revenue goals did you have when launching and did you hit them? Were your pre-launch market analysis/projections correct or way off?

(Patrick, writing about BingoCardCreator on his blog, said that his initial goal was $200/mo. His very next sentence? "The business has been successful beyond my wildest expectations and has made it possible to quit my day job at the end of this month." Makes me smile every time I read it!)

[bigsassy]

A little off topic, but you should know there's a better way than the Yellow Pages to find customers. The ReferenceUSA database will give you all the companies in a given area that fall under the entered NAICS code. Here's a small sample of the information you'll get:

* Business Name

* Address

* Contact Information

* Number of Employees

* Number of PCs

* Location Sales Volume (in dollars)

* Credit Rating Score

* Names of Management and their Titles

* $ spent on accounting

* $ spent on contract labor

* $ spent on advertising

And this information is all free to you thanks to your local public library. It's pretty awesome if you ask me. Here's how to get access to it:

1) Get the NAICS code for the industry you're selling to. This code is used by the government to classify businesses. http://www.census.gov/eos/www/naics/

2) Go to your local library to access the ReferenceUSA online database. You may even be able to do that through the library's website (I can through mine).

3) Click on U.S. Businesses under Available Databases

4) Customer Search

5) Enter the NAICS code in one of the boxes at the bottom of Business Type -> Keyword/SIC/NAICS.

[famfam]

I'd upvote you twice if I could for pointing out this amazing resource. I'm amazed I never knew about it.

[mahmud]

This morning I shopped our idea to 20 potential users. Cold-called them. They have been extremely nice and supportive, but it's been 4-5 hours since I sent them links and I am sitting on the edge of my chair staring at a blank tail -f /var/log/access :-|

-- Edit:

They have come! it's been 50 minutes since I wrote the above and already got two beta users. My other startup went for 43 days before I got a 2nd client, and the first was my former employer.

I had to warm them up with a phone call but so far 8 of them have followed the links and 2 signed up. Twelve more to go.

This is my first B2C, I think it's gonna be a different experience.

[pbhjpbhj]

B2C = business-to-consumer.

Contrast to B2B (business-to-business). Slightly confusing as he mentions his former employer as his first customer, I presume he means his boss in a personal capacity.

[nmftt]

This might be harder for a B2C company as people won't be in front of computers as frequent, but try to get them logged in on a demo account when you talk to them on the phone.

[prpon]

Guy Kawasaki had an article where he mentions doing a bottom up approach to financial projections. "How many biz dev meetings can I attend, how many people can I reach out every single day and add in the conversion rates for each one of them". It's probably better than saying my company will get 1% of a 10 billion dollars market.

[drewcrawford]

I spent literally 35 minutes writing my first iPhone app and it's brought in over $4k in sales over the last two years. That works out to ~7k/hour.

Alternatively, I've spent weeks or months on projects for zero revenue.

The moral of the story is: there is only weak correlation (at best) between effort spent and revenue received. Entrepreneurs do not get paid by the hour.

[qq66]

What was that app?

[rokhayakebe]

Almost never fails. The apps you spend more time developing are the ones with the least success rate.

[callmeed]

We had no goals–which is great because anything you get is gravy. Let me explain: 6 years ago I built something for a friend. "Hey, this is great. You should try and sell it," he said. "Meh, ok, whatever ... " I replied. Sent some emails. Got some good response. Fast-forward and we've got thousands of customers, 6 employees, and 7 figures in revenue.

Was the revenue easier than we thought? Well, yes ... because we never thought anything. I know that doesn't really help, but what I'm getting at is maybe it's a bad idea to waste energy "setting goals" to any degree beyond covering costs or being ramen profitable.

Just focus on finding a need, saving/making people money, doing customer development, and iterating/adapting. Most everything else is beyond your control.

And don't forget, when you're setting goals, there are a lot of numbers less than 1% (that came from an HN post/comment IIRC)

[joeld42]

People tend to overestimate short-term revenue, and underestimate long-term revenue.

It will probably take you much longer than you think to get 200 users, but if you stick with it and your idea is good, you'll end up with more than you ever expected.

[izak30]

Do not be fooled by the field of dreams. It was a movie. You have to do much more than build it before they come.

[exline]

It has taken longer to get to where I am that I thought. I have a number of spreadsheets I've made of the time showing cash flow based on number of customers. The growth has been much slower than I wanted. Part of that is the software aspect is much easier to me than the marketing. I would say that software is absolutely critical, but it is only the first 10% of the business. The rest is sales/marketing etc. That is what is going to get you the 200 customers you want. Its not the software by itself.

Even for Patrick, he did't get there over night and he is very good at his marketing. But the good news is that you can get there. I'd focus on the first customer. Getting that first customer is one of the best feelings ever. And the good news about SaaS, is that they stay with you. I still have my first customer paying me every month.

My thoughts were similar to yours going into it. I only need 500 customers and I'm set. I'm a long, long way off. The problem is not that there are not enough customers, the issue is reaching them. I have a ton of competition in my market, some good, some bad. I'm somewhere in the middle product wise and somewhere near the bottom half marketing wise. At my current rate of customer acquisition, it will still be a few years until I get there. But I keep plugging away.

Good luck!

[exline]

Just found this link on HN:

http://blog.chrometa.com/you-launched-your-app-now-what

Related and a good read.

[Asa-Nisse]

Most everything I ever did has been totally random. Things that I thought was safe bets went out the window. Stuff I did when hacking on beer and booze over a weekend has netted me $100/yr.

Key is to not spend to much time thinking about it, just do it. The more you play the higher your chances of winning are.

[Asa-Nisse]

Giggle @ self. $100k/yr :)

[JangoSteve]

I've built 2 B2b products now, and I can say that it depends entirely on what type of business is your target market. Case in point:

-RateMyStudentRental sells to colleges and universities. Schools are essentially large corporations, and the sales cycle is excruciatingly long (a year or more). To top it off, my absolute maximum market in the US is around 5500 possible clients if I garnered 100% of the market (probably actually less because some schools are commuter campuses which puts them outside my market). I've been doing it since 2007, and I'd tell you that you may get 3 customers in 3 years if you're incredibly lucky.

-LeadNuke on the other hand is a B2B product that can be useful to almost any type of company, startups to multi-national corporations, franchises, and freelancers. I haven't even really told anyone about it yet (except the occasional HN post), and it already has around 30 companies signed up and using it. In this case, I'd tell you, pshh that's easy.

My point: it depends. The only way to know is to try it. Any speculation before trying it is just that.

[cullenking]

I was surprised to receive $5k in donations this year, while working towards our premium featureset. It has created high hopes for some real recurring revenue in the next 1-2 months when those premium features are released. But yes, the donate button along with a simple paypal payment setup was very easy and the amount of donors continues to surprise me.

Then again, if you count up the hours spent with no revenue, the $$$ per hour is very small.

We were recently surprised to be approached randomly by a second company (first company approached out of the blue as well) asking if we would license our stuff. I guess this is a decent example of an unexpected revenue stream, requiring a slight pivot in revenue model.

[kadavy]

Making revenue projections is useful when you have something concrete to work with, but otherwise it gets in the way of actually making money.

The most important part is collecting your first few bucks. Something clicks the first time you get someone to take out their wallet. Like Jason Fried has been known to say "learning to make money is like learning to play the piano: the more you practice, the better you get at it."

Your product needs to be less perfect than you think. The hard part is getting your product under the noses of the right customers - and enough of them to actually make your first sale. After that, you can learn through trial and error - and start making reliable projections.

[jon_dahl]

If you've sold at full price to 5 customers at arms-length (people who aren't positively predisposed to you already), then sure, I wouldn't be surprised if you land 200 customers at $30/month. Dial up the marketing and repeat the process as prospects come in.

But until then, you have no idea what is going to happen.

(Plagiarized from Steve Blank...)

[visava]

One of my friend created a Desktop software for small business.He was giving free trial license and download for 30 days. Adwords gave him 50 daily propsects.It took him 6 months to get his first customer and 2 years to reach 200 total sales. But in the process he learnt a lot about that specific industry ,added lot of features to his product and also added an online offering. Now he is selling 60 a month.

[edw519]

I continue to be amazed by 2 things:

1. How difficult it is to get a raw prospect to understand how my offering will benefit him.

2. How easy it is to get his money once he does.

[SoftwareMaven]

I think that is the case for most good software. Many engineer-led companies think the engineering is the hard part, so get totally surprised by #1, to the point that their business fails.

Of course, there is a name for #1. It is a name mocked and derided by engineers world-side: Marketing

Learn it, love it, earn from it.

[kljensen]

I love fantasizing about future revenues and FU money. But, I've worked like a dog for every dime thus far.

Regarding revenue projections based on New Hampshire state population, see http://sivers.org/1pct

[csomar]

This is not an easy issue and this is why advertising exist. (and companies like Google with billions $$ of profit means that advertising is really a huge issue).

Unless your product is making people money, you need a strong argument so that people subscribe to your product. To show you the effect, offer two products: One free and the other cost as little as $9. Post the product (can be any crap) on a forum and watch the downloads/buy.

People are curious about products, but they are very unlikely to pay. They are serious about money. BUT for a _good reason_, they'll pay. Find that good reason, find the targeted audience, build the reason and they'll come and pay.

[cme]

Hey Paul,

I'm in NH too and run a very small niche app. I've got about 100 people using mine after 3 months. this is with very little marketing.

I was surprised at how difficult it was to get people to understand the benefits of my app, especially when it was for a very specific need. But once people understand they are more then willing to give it a try.

We are currently working on version 2.0 based on customer feedback and hope to finish/begin marketing the new version by the end of summer.

Let me know if you would ever want to meet up, its hard to find fellow web entrepreneurs in NH!

[tocomment]

How will you reach these customers? Will they find you, or you find them?

[switch]

Why don't you focus on providing value before you start worrying about how much money you'll make.

From your questions it seems you want someone to tell you it's going to be easy - a piece of cake. It's not.

Why not flip the equation and focus on how you can add enough value to 100,000 people a month. That though you're charging them $30 a month they've benefitting to the tune or $3,000 or even $30,000 a month. Plus do this without focusing on your own need for a side stream of income.