The best part about their $5,000 is that most of it will be profit.
I'm pretty happy with my own SaaS application, but because I provide a telephone service I have pretty low margins. This is by far the most annoying thing about my business (it affects me more than taxes), especially considering that it would have been just as much work to make a SaaS with negligible marginal costs.
The lesson is, if you have the choice and don't want hypergrowth + venture funding, provide a service that costs you next to nothing to provide. Another disadvantage of providing a service that has high marginal costs is that your bigger competitors will usually be able to outprice you. If all you need is a few servers, you can differentiate based on product alone and charge accordingly.
Where are you buying your DIDs and Routes? What switch are you using?
I'd love to help, I literally eat sleep and breathe this stuff. There's no way your margins should be skinny unless you're playing LCR games, in which case you make it up on volume.
Source: I work at 2600hz, the bootstrapped open source telecom cloud company. We've bootstrapped to 30+ employees on a pure telecom business so I have some experience here.
I'm a bit of a telecom geek (though josh2600 undoubtedly knows more than me, as he works in the industry), so I decided to check out your startup. I agree you should have nice, fat margins. Remember, you should be setting pricing based on how much your customers are willing to pay, not how much it costs you. For that reason, I think you should segment your plans based on max number of participants, even though this probably costs you nothing. I would think that this would be the best way to segment out customers willing to pay more: if I'm a small business or a freelancer, I'm not going to have many people on my conference calls, but if I'm a larger business with deeper pocketbooks, I'm going to have large conference calls and thus be driven to the more expensive plans. Even if your software isn't ready to enforce the limit, consider adding it to the pricing grid anyways to see if you get more signups on the bigger plans.
Your lowest plan also feels too inexpensive to me, especially since those customers are probably responsible for a disproportionate number of support requests.
> The best part about their $5,000 is that most of it will be profit.
There are significant fixed costs associated with the development they did so far. I doubt $5,000/month would break them even considering just the salaries and office expenses such as rent.
To clarify: My point is about the marginal cost of providing a customer with service. It's not useful to talk about a certain amount of recurring revenue if you have terrible margins. I could start a business that gives you two dollars for every dollar you pay me and reach $5,000 in monthly revenue in no time at all!
Going from zero to $5000/mo is definitely great as that means you've created some value somewhere. But $5k is not really sustainable as a business for three people. It's a great side-job for one person, or good total income for one person who lives in a low-rent / low-cost area.
But for a team of 3 people, you can do much better than $5k just selling your time in consulting.
It's not clear how you'll get from $5k/mo (nice side-job income) to $50k/mo (Good bootstrapping income for team of 3) to $500k/mo (ok, now you have a business that scales).
I'm not being critical here -- It's just that SaaS math has me scratching my head wondering if all that work for all those customers with such small amounts to show for it is worth it.
Would you rather service 200 people for a total of $5k a month with 3 bodies to support or one solid consulting customer @ $5k+/month with just yourself to support?
I'd imagine that you'd want more revenue so you can have a business and not just lifestyle income to support one person. Going from 0 to $5k is one thing -- the advice here is good for that. But getting from $5k to $50k, where you need to be to have sustainable business for 3 people, will require much more substantial effort that's not clear you can achieve with these methods. Indeed, it is not even clear what your margins are at the $5k/mo revenue point and whether that will even be sustainable given the amount you'll need to spend on Customer Acquisition, Customer Support, and slaying the Customer Churn demons to retain your necessary high monthly subscription rates. This is where most SaaS companies die -- trying to achieve this necessary transition.
I'm glad this worked, so congrats on that. However, I don't agree that this is good, actionable advice.
1. Find a problem.
2. Get to hacking.
3. Soft launch.
4. Synthesize feedback, build more.
5. Expand the funnel (user acquisition).
6. Aha/Win/Rich/Yay
...That's the formula for any startup/technology service. It's literally those steps, a little individual secret sauce, and you win or you die (figuratively speaking). I know it worked for you, but things like
>"In our minds, there is no better way to build a product that people want than to be the customer you plan to sell to."
...aren't very helpful. It's a broad characterization of how to put yourself in that mindset.
But in any case, good explanation of what you did for your own project :)
Exactly.
The problem I see with these 'guides' is repeatability. You cannot just follow the steps and get there... the substantial part is missing. Find A Problem Worth Solving... well everybody knows that, right? Is anyone here intentionally trying to solve problem that is not worth solving?
I have to admit that I am actually little annoyed when I see title like '5 Steps to $5,000 in Monthly Recurring Revenue' because to me it seems a bit misleading. These are not really steps to $5,000/month... if they told me _how_ to find problem worth 5k than maybe that could be useful.
But this is like, ehm... do you want to be successful with the ladies? Here is one simple step... be awesome!
I always roll my eyes when that happens. And then there is a 50/50 chance I search for the actual link - if I'm REALLY interested I edit the URL manually.
Yep! I always wondered if that bugged anyone else. I imagine the purpose of people spending the effort to blog and advertise it was to drive traffic to their company. Then I have to jump through hoops to get to the actual company's page.
This is the most annoying thing about most blogs, and like others on HN I don't bother to visit the main page since I'm usually in reading mode (hand on mouse, away from keyboard). To their credit there is also an About StatusPage button (not sure if that was added after the fact).
We've averaged about 18% week over week growth for the past few months so we're well on our way to being profitable before the new year..even with a decent amount of slowed growth. Here's to hoping it keeps up!
statuspage.io might have a great product (I'm not a customer), and I can see the value in some of the things they offer (like the ability to pull in data from third party monitoring services), but if operating a useful status page is a "tangible pain point" worth paying $79/month plus for, Silicon Valley is in trouble.
I appreciate that companies don't want to build everything, nor should they, but pushing every piece of non-core functionality onto a SaaS is just insane. The worrisome thing for many but not all of the SaaS startups primarily targeting other startups is that when the next downturn arrives, the number of companies eager to spend hundreds/thousands of dollars a month on a portfolio of SaaS services for just about every function will likely decrease substantially.
When did you guys actually started working on this and how did you transition from a day-to-day consultancy mode (no doubt bringing in a multitude of that $5000 revenue) into working on this full-time. Your blog posts don't seem to contain a creation date :)
Did you fund the initial development with your own savings or did you get angel investors on board early on ?
I can imagine that after taxes and deducting costs there is little or no profit left but it's a great psychological barrier to cross !
I wish you guys the best of luck ! Great idea and great to see people using it (and paying for it)
I hope those pseudo-personal emails don't get more frequent. I don't need more "spam", and it makes me feel a little rude not answering direct questions in an email.
Hey nawitus, thanks for the feedback. From what we've seen so far, the majority of signups have reacted positively to the personal emails. Usually, there's some type of question that we can help out with off the bat.
So you started charging for the service very early (almost day 1). that's not the traditional startup approach of build a biggish user base, work out the product beyond MVP and then monetize. I like hearing you got to rev early so props but is there a downside to future growth (even in the short term)?
I also think that this is another awesome example how it could work including the steps you should go. There are thousands of ideas out there but most of them never go productive because out of whatever reason so you guys, as all other startups with paying clients, have my biggest respect.
Can this strategy be duplicated? It seems like your main traffic source has been press coverage, but that isn't something that you can plan to have or rely on. Would you have gotten this far otherwise?
I'd say most of the strategy can be duplicated with the right founders. The only significant mainstream press we've had was the TechCrunch article and while it for sure helped out to accelerate growth, I think we would still have hit $5k a couple months later without it.
[+] [-] jhuckestein|12 years ago|reply
I'm pretty happy with my own SaaS application, but because I provide a telephone service I have pretty low margins. This is by far the most annoying thing about my business (it affects me more than taxes), especially considering that it would have been just as much work to make a SaaS with negligible marginal costs.
The lesson is, if you have the choice and don't want hypergrowth + venture funding, provide a service that costs you next to nothing to provide. Another disadvantage of providing a service that has high marginal costs is that your bigger competitors will usually be able to outprice you. If all you need is a few servers, you can differentiate based on product alone and charge accordingly.
[+] [-] josh2600|12 years ago|reply
Where are you buying your DIDs and Routes? What switch are you using?
I'd love to help, I literally eat sleep and breathe this stuff. There's no way your margins should be skinny unless you're playing LCR games, in which case you make it up on volume.
Source: I work at 2600hz, the bootstrapped open source telecom cloud company. We've bootstrapped to 30+ employees on a pure telecom business so I have some experience here.
[+] [-] agwa|12 years ago|reply
Your lowest plan also feels too inexpensive to me, especially since those customers are probably responsible for a disproportionate number of support requests.
[+] [-] vladd|12 years ago|reply
There are significant fixed costs associated with the development they did so far. I doubt $5,000/month would break them even considering just the salaries and office expenses such as rent.
[+] [-] redguava|12 years ago|reply
- Fees to receive payments
- Hosting
- Support services (github, zendesk, etc.)
- Your own salary
I'll bet that not much of that $5k is profit.
[+] [-] jhuckestein|12 years ago|reply
[+] [-] ChuckMcM|12 years ago|reply
[+] [-] thesis|12 years ago|reply
[+] [-] rexreed|12 years ago|reply
But for a team of 3 people, you can do much better than $5k just selling your time in consulting.
It's not clear how you'll get from $5k/mo (nice side-job income) to $50k/mo (Good bootstrapping income for team of 3) to $500k/mo (ok, now you have a business that scales).
I'm not being critical here -- It's just that SaaS math has me scratching my head wondering if all that work for all those customers with such small amounts to show for it is worth it.
Would you rather service 200 people for a total of $5k a month with 3 bodies to support or one solid consulting customer @ $5k+/month with just yourself to support?
I'd imagine that you'd want more revenue so you can have a business and not just lifestyle income to support one person. Going from 0 to $5k is one thing -- the advice here is good for that. But getting from $5k to $50k, where you need to be to have sustainable business for 3 people, will require much more substantial effort that's not clear you can achieve with these methods. Indeed, it is not even clear what your margins are at the $5k/mo revenue point and whether that will even be sustainable given the amount you'll need to spend on Customer Acquisition, Customer Support, and slaying the Customer Churn demons to retain your necessary high monthly subscription rates. This is where most SaaS companies die -- trying to achieve this necessary transition.
[+] [-] redguava|12 years ago|reply
Just because they've decided to share their story so far, doesn't mean they think they've hit the jackpot already and are finished.
[+] [-] dylangs1030|12 years ago|reply
1. Find a problem.
2. Get to hacking.
3. Soft launch.
4. Synthesize feedback, build more.
5. Expand the funnel (user acquisition).
6. Aha/Win/Rich/Yay
...That's the formula for any startup/technology service. It's literally those steps, a little individual secret sauce, and you win or you die (figuratively speaking). I know it worked for you, but things like
>"In our minds, there is no better way to build a product that people want than to be the customer you plan to sell to."
...aren't very helpful. It's a broad characterization of how to put yourself in that mindset.
But in any case, good explanation of what you did for your own project :)
[+] [-] honzzz|12 years ago|reply
I have to admit that I am actually little annoyed when I see title like '5 Steps to $5,000 in Monthly Recurring Revenue' because to me it seems a bit misleading. These are not really steps to $5,000/month... if they told me _how_ to find problem worth 5k than maybe that could be useful.
But this is like, ehm... do you want to be successful with the ladies? Here is one simple step... be awesome!
[+] [-] nish1500|12 years ago|reply
If you can solve the problem, then I can copy your solution, and solve it too.
But if your job is to take up an existing solution, and significantly improve upon it, I will find it very hard to catch up.
[+] [-] pkamb|12 years ago|reply
[+] [-] gregd|12 years ago|reply
Wanted to see what statuspage.io was all about. Clicked logo and wouldn't you know it..they only blog.
[+] [-] drpancake|12 years ago|reply
http://moz.com/learn/seo/domain
[+] [-] stephanos2k|12 years ago|reply
I always roll my eyes when that happens. And then there is a 50/50 chance I search for the actual link - if I'm REALLY interested I edit the URL manually.
[+] [-] dannyolinsky|12 years ago|reply
[+] [-] xauronx|12 years ago|reply
[+] [-] yogo|12 years ago|reply
[+] [-] adamcanady|12 years ago|reply
[+] [-] vowelless|12 years ago|reply
[+] [-] secondmod|12 years ago|reply
After 30 days of launch, I managed to get 7000+ active users, about 100 paying users and $6129 in revenues.
My learnings : 1. Build your first main feature really well
2. Dont launch with 100s of features, keep the product simple
3. Make sure to have some influencers on your board as users from day one and make them super happy
4. Use tweet button very smartly - this is make or break up for your side project
5. Dont hurry up into making money, let your users ask you for more feature and then roll out paid features.
Shared here : https://news.ycombinator.com/item?id=5600281
[+] [-] vincvinc|12 years ago|reply
Could you explain this a bit more?
[+] [-] shimms|12 years ago|reply
Kudos on this achievement, for taking the time to share it, and for the hard work behind it.
Wishing you guys the best of success in getting to the next milestone.
[+] [-] dannyolinsky|12 years ago|reply
[+] [-] mijustin|12 years ago|reply
On first take, I was surprised you were able to pick up 20 paying users just from an HN post.
But then I went back and read the first part:
> First, being in the community, we had a bunch of friends that were great customer candidates.
It would be interesting to know the breakdown for those first 20 customers: how many came from personal connections?
[+] [-] csomar|12 years ago|reply
1. This is revenue, not profit.
2. 3 guys. So $1600/person.
3. Seems like they don't have jobs (means taking this full time, probably with consulting).
Still a pretty good job, and I'll be interested to see their growth.
[+] [-] stevenklein|12 years ago|reply
[+] [-] unknown|12 years ago|reply
[deleted]
[+] [-] applecore|12 years ago|reply
[1]: https://news.ycombinator.com/item?id=5401470
[+] [-] JeremyMorgan|12 years ago|reply
[+] [-] brandnewlow|12 years ago|reply
[+] [-] 7Figures2Commas|12 years ago|reply
I appreciate that companies don't want to build everything, nor should they, but pushing every piece of non-core functionality onto a SaaS is just insane. The worrisome thing for many but not all of the SaaS startups primarily targeting other startups is that when the next downturn arrives, the number of companies eager to spend hundreds/thousands of dollars a month on a portfolio of SaaS services for just about every function will likely decrease substantially.
[+] [-] ddewaele|12 years ago|reply
When did you guys actually started working on this and how did you transition from a day-to-day consultancy mode (no doubt bringing in a multitude of that $5000 revenue) into working on this full-time. Your blog posts don't seem to contain a creation date :)
Did you fund the initial development with your own savings or did you get angel investors on board early on ?
I can imagine that after taxes and deducting costs there is little or no profit left but it's a great psychological barrier to cross !
I wish you guys the best of luck ! Great idea and great to see people using it (and paying for it)
[+] [-] dannyolinsky|12 years ago|reply
[+] [-] timharding|12 years ago|reply
What barriers do you have to competition from a one or two person company w/ lower costs?
This is an excellent talk about what it takes to get out there and find the set of customers outside this bubble that will get you to $50k/mo.
http://businessofsoftware.org/2013/02/gail-goodman-constant-...
[+] [-] pallandt|12 years ago|reply
[+] [-] nawitus|12 years ago|reply
[+] [-] dannyolinsky|12 years ago|reply
[+] [-] philhill|12 years ago|reply
[+] [-] wusatiuk|12 years ago|reply
[+] [-] t0|12 years ago|reply
[+] [-] dannyolinsky|12 years ago|reply
[+] [-] Jamie452|12 years ago|reply
That's my pain point.. trying to find a pain point to start developing!
[+] [-] stevewilhelm|12 years ago|reply
[+] [-] KMBredt|12 years ago|reply