Steps To $5,000 In Monthly Recurring Revenue
blog.statuspage.io
blog.statuspage.io
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.
> The best part about their $5,000 is that most of it will be profit.
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.
It all depends on volume and cost to deliver. Some of the biggest providers have the highest costs to deliver service.
Does that help?
Edit: for example, a hosted PBX provider, pricing at $35 all inclusive per seat, should have gross margins north of 150% and net margins above 40%, assuming at least 10,000 seats. There are, of course, huge variations because of management style, frugality and a myriad of other factors, but there's money to be made.
The easiest money in telecom, with the highest margins, are the Analytics, billing and operations tools (of which there are many but finding quality ones is a YMMV proposition).
I'm currently on Twilio's first tier volume discount (I assume there's further volume discounts that aren't on the website), paying .8 cents/min IIRC.
I looked into buying voice minutes and DIDs and running my own freeswitch boxes. Any provider that had listed prices charged upwards of .4 cents/min or had unlimited minutes per DID with a $4 or something fee per channel. A lot of them also limited the number of channels on a DID.
Another reason I have low margins though is because my free plan and free trials also cost me real money. There is no way I can get around that.
While we're at it: Another reason I looked into self-hosting was because I'd like to host conference calls with up to 5000 participants (think earnings calls, public forums, classes etc), most of which are mute. THAT is a high margin business, with companies charging up to 20 cents/minute/caller for those kinds of calls. I read this may be possible with freeswitch on beefy hardware. What do you think? Do you know any way I could get around hosting my own freeswitch servers, load balancer, redundant backups etc?
Have you considered rolling back or sharply limiting your free trials? With the exception of people you've made commitments to, if they aren't accomplishing a business goal for you, you don't owe the world them. There is nothing intrinsic about SaaS that says there has to be a free plan. (Additional options: aggressively using the free plan as a viral spread mechanism. Your free competitors do this, as I learned the other day when on a sales call organized by somebody who would have happily dropped $50 to remove the external branding for that single phone call if they were aware of your option existing.)
We also run on Twilio, and have a 30 day free trial with CC required upfront. While we still have marginal expenses to service free trials in a way that many SaaSes do not, the costs are not terrible and easy to justify as a cost of customer acquisition. (We shoot for, and mostly get, 80%+ margins on the paid plans.)
If you're ever in the mood to chitchat about this, drop me an email. I'd be happy to share about how e.g. moving a bit upmarket and doing a bit of enterprise sales has worked for us.
Thanks for chiming in!! :) I always find a lot of value in your advice.
I started out asking for a CC before the trial, but on a small adwords test campaign that converted exactly zero out of a few hundred people. Then again, that may have been because the entire site was a single signup/cc form and had very little information otherwise.
Putting my marketing hat on, I'd strongly suggest Patio11's blog on inbound marketing. He's really good and the points he make are dead on (the big marketers are basically doing the same thing except paying Marketo and Hubspot for automation).
I think it would be difficult to do 5000 participants in a conf call on stock freeswitch boxes, but we've done over 20k using Kazoo (Which leverages FreeSWITCH as the media server). Our secret sauce is an abstraction layer and custom freeswitch modules for distributed scaling. When you get over a few hundred participants in a conference call you're always doing some sort of bridging between boxen and when you chain lots and lots of boxes together keeping state across the cluster becomes a challenge. We've done a lot of work handling distributed state in conferences; it was a pain.
If you want us to host something like that for you, drop me a line in my inbox. Contact info in my profile (we're also open-source if you wanna get your hands dirty).
Please note: Kazoo (our stack) is built for carrier deployments, and requires a minimum of 8 servers for full redundancy. You can get by with as few as two but full redundancy requires 8 (and is thus our recommended minimum configuration). But it does have all of the stuff you've mentioned and you don't need beefy hardware to do it either.
I'd also like to note two things:
1) if you want to charge more, tell a better story
2) if you want to charge more, take features out of your product
Those two axioms are usually true and apply pretty generally to SaaS businesses.
At 2600hz we started with free plans and then realized the headache, now we mostly do paid support (there's a lot of free-ness because we're open-source anyways).
Generally though, I'd recommend against free trials. They just waste a lot of your time with tire kickers.
Erlang was basically built for telecom so it made sense for us to build kazoo on top.
Keep your eyes open over the next 60 days, we've got some fireworks coming out.
Do you know how easy/hard it is to start a "international calling card" service?
I see lots of random ones popping up every day and they mostly look unprofessional so they remind me of email/web-hosting resellers.
I was wondering if reselling "international calling card" is a thing? or do you actually need your own infrastructure?
I was hoping that I can resell these services and make some passive income that way (I can directly market to low-competition markets in my home country).
The typical way this is is done is to get a carrier route to a specific country and then arbitrage between that rate and the expected rate from say AT&T. There's usually a lot of margin when you compare it to AT&T costs, but you'll find the business is ultra competitive. We call voice the race to zero.
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.
Your lowest plan also feels too inexpensive to me, especially since those customers are probably responsible for a disproportionate number of support requests.
Those plans are far too lean.
Also, I don't understand what a "local line" is when I go directly to your pricing page. I also don't understand what a "toll free line" is. Specifically I don't know why I need 5 lines.
I don't run a pure SaaS (http://gridspy.com) but $9 / mo? These people are not employees. They have profits. We had to fight the same tendancy to offer unrealistically low prices.
Your typical "professional" will bill $80-$200 / hr while on the conference call. They'd swallow $40 +
You probably don't need a free plan, though you might want to consider a prepaid one. Bill on minutes or something. I'd consider eliminating it entirely.
Team should be about $200 and business you should be thinking $1000 / month plus.
I also think that segmenting based on max people per conference makes a lot of sense. It would also be simpler to bill based on "number of conferences" rather than "number of minutes" and trigger a new "conference" when a call extends beyond 1 hour.
Higher prices should support more marketing work. You'd be surprised - higher prices will make your clients think that your product is more valuable and thus more likely to try it out.
You've also got a viral element. Your users are telling others about you (to invite them to the conference). Ask them to put each person's phone number and email addresses into the system so you can send reminders to each participant before the meeting.
In those reminders, I suggest you offer a "coupon" for 1-5 free conference calls to that guest. You might only want to do so if the guest has an email from a different domain. Monitor for abuse. This will help you get natural viral marketing underway.
Another alternative is to build a followup email after the conference ends that has details on who joined the meeting, how long they talked, a downloadable recording (?) and their contact details.
I hope this helps. It looks like you have a nice product.
1) Most BIG conference calling companies are registered as competitive local exchange carriers.
2) As CLECs, these companies get to charge for inbound traffic.
3) Charge customers per minute in addition for insane profit.
Companies like FreeConferenceCall.com are basically ignoring the subscriber revenue in exchange for only the inbound tariff (that's their industry disruption).
Example: I setup a conference call bridge on FreeConferenceCall.com and I call in. One other person joins me. I call in on my cellphone and so does the other person. Neither one of us pays for long distance so we don't care, but on the backend, FreeConferenceCall.com is billing our cell providers $.30 per minute.
That's the reason GoogleVoice blocks those numbers, because Google is already eating $.004/min for US numbers, they can't afford to eat calls that cost $.30/min; that's nuts.
This is the same business model that powers MagicJack as well. Just a quick FYI. Paying people for inbound minutes is only for folks that don't have enough volume to get a CLEC-level agreement (you can get CLECs to sell you inbound for $0 or even to pay you for the traffic if you have enough volume). The beauty of Twilio's business model is that they get all of the aggregation benefits of your traffic.
Does that help?
Edit: Also the comment I'm replying to has a ton of great advice!
It has to do with treaties and international tariffs versus state to state. When you hit a certain scale, say Verizon scale, you get to have your traffic carried for free by the other major telcos. It's all a volume game.
In short, people without volume maximize the rules of the system in order to increase their margins. One such method was to pretend calls were coming in from Canada when they were actually state to state.
Another odd fact: Calls Intra-state (from one county to another) are just about universally more expensive than calls Inter-state. The reason is, when you call out of the state, more often than not, someone is paying for receiving that call, but when you call intra-state all of the cost is born by the local operator.
Cute, right?
BTW, FreeConferenceCalls know their model is doomed and are expanding as fast as they can into countries with phone systems modeled after the US one, where the loophole still persists. It's pretty clear, though, that their business isn't sustainable. My guess is that somebody will soon gobble up FreeConferenceCall for their customer database.
The real question is: Who's gonna get more spam, The old Acme Packet customers who are now getting spammed by Oracle or the soon-to-be-potentially-sold FreeConferenceCall.com clients?
These companies break down into a few broad categories:
1) it's new technology (this is the holy shit category)
2) it's cheaper (IMHO boring)
3) it's higher quality (think uberconference)
4) It's a different experience (Grouptalent using conference bridges for interview screening)
Most of these services are of category 2 or 3 and aren't that interesting. The 1's and sometimes the 4's have the potential to be really cool.
I don't know where speek fits but I think it's a 2 or 3.
Edit: not to say 2 or 3 businesses can't be hugely profitable but they're less interesting to hackers. There are still Multi-billion markets for businesses in category 2 or 3. I happen to love the guys at Uberconference and think they have a great product as a sidenote.
I don't have any data to suggest that larger companies have bigger conference calls, but it may still help the value perception of more expensive plans to limit by number of callers. In fact, most of our $9/month customers aren't Professionals that charge $80-$200 per hour, but people that would otherwise use FreeConferenceCall et al and are already stingy about spending that much. A lot of "randos" signing up from Google or ads are very small companies, non profits, organization committees for various things etc. I like those customers and don't want to lose them, but I agree that I should find a way to separate them from the lawyers that sometimes get the $9/month plan as well.
The reason you'd need multiple lines is if you're multiple people. The premise of HipDial is that each person has their own, dedicated conference line and phone number. E.g. sales teams with a few people will sign up for the Team plan.
The viral mechanics actually work out pretty well like you said. That's the reason we have the free plan, too. On the free plan we used to even send text messages to the participants after the call, asking them to use HipDial as well, but those converted so badly and gave us such a bad rep that we canceled them.
The obvious thing to do is have a announcement to each person who dials in which advertises your service, and pay to allow people to customize/avoid that.
Alternatively, you could limit the length of calls on the cheaper plan. Poorer customers will just redial, richer ones will pay more to avoid it.
- Fees to receive payments
- Hosting
- Support services (github, zendesk, etc.)
- Your own salary
I'll bet that not much of that $5k is profit.
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.
These needs for high acquisition rate drives up high customer acquisition costs, which eats at the margins. $5k in revenues is good, but the profits are not mentioned. Going from $5k to $50k will not scale margins linearly. Indeed, the need to multiply customers by 10 will necessarily increase customer acquisition costs (low hanging fruit will no longer be available) and increase overall churn (the "natural" churn rate applies).
If you wanted to make money in consulting, it certainly would be easier to just offer consulting services, and both margins and sustainable revenues would be higher. Perhaps you can use your SaaS app as a consulting marketing tool, but I don't see this app being used that way.
What I'd be curious to learn is your margins, customer acquisition cost, support cost, and churn rate. And how this changes as you go from $5k to more than $5k/mo. This is where most SaaS companies falter.
If you can, you should talk about how you plan to market to reach the larger required revenue rates. This will necessarily require higher customer acquisition costs as your lowest hanging fruit will be quickly exhausted.
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.
Depending on what you decide to do, it can mean any of the following:
- Paying the rent/mortgage and good food on the table. Nothing fancy but you'll survive even in the Bay Area as long as you live together.
- Ability to be picky with consulting clients or invest in longer sales cycles.
- Living in luxury on a beach in SE Asia while you figure out how to bootstrap the business.
All of the above are pretty fantastic imo. Not a finish line by any means but way more optionality than 98+% of the population.
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 :)
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!
Is anyone here intentionally trying to solve problem that is not worth solving?
There's never going to be a do x,y,z and you'll make $5k since every business is different, but instead tips like ours from what we've seen work for us.
Agreed on the title, a better one could have been, 'Our 5 Steps to $5k in MRR' to clarify.
There are so many variables that this will never be the case.
You can only read these types of guides and hope to pick out something that might inspire you or help you realise something that you're doing that you could do better.
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.
Wanted to see what statuspage.io was all about. Clicked logo and wouldn't you know it..they only blog.
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.
There are some proxying shenanigans you can do with mod_rewrite but I'd certainly not want a PHP-based blog anywhere near my main site/app if I could get away with it due to the security risks.
In fact, on one domain nginx sends part of the traffice /static/ directly to that actual directory, and anything else gets picked up by node.js.
Or is what I'm doing really stupid? I'm not currently running anything significant on my servers, and this is not my primary domain of interest, so I've never checked how risky my setup is. Maybe you could tell me if that's the case?
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
Could you explain this a bit more?
Viral Factor, K = No. of invites X Conversion rate
As long as, K >1, your app is growing. And best way I figured out to do that was to make people tweet and make that tweet provoking enough to let her users click on that tweet. Example, I encourage people to boast about number of repins or followers they got because of Pinwoot and tweet reads something like : 1) I got 954 repins on #Pinterest using @Pinwoot. Add your pin here https://pinwoot.com
2) Try @Pinwoot.com to get free followers on #Pinterest https://pinwoot.com
Tweet Copy 1 performed 267% better than Tweet Copy 2 in getting new users.
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.
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?
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.
So it's simply a note to Passive income dreamers.
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.
This is their area of expertise, their passion and their business. They'll make a better status page than I would.
Your status page is not your product (hopefully). If you run an online service, the purpose of a status page is to inform your customers of downtime and other issues that may affect their use of your service.
Like I said, I am not questioning whether statuspage.io has built a better status page than what most companies would be motivated to build themselves. What I am pointing out is that spending $xx or $xxx each month on a SaaS for every little piece of functionality you don't want to build internally adds up.
As for the costs of building internally, I would suggest that a half-decent engineer could build a satisfactory status page with email/SMS notification functionality in 2-3 days. If you want to be generous and say it would take a week, and your engineer is paid $110,000/year (~$2300/week), you're still ahead of statuspage.io's $249/month plan, which costs $3,000/year and limits you to just 2,500 subscribers.
If you operate, say, an API that is critical to your business and keeping consumers of that API informed about status is important, there's no reason not to invest engineering time in owning the status page functionality. On the flip side, if your status page isn't all that important, paying $xx or $xxx/month for a robust status page service instead of, say, rolling a status page of your own using [insert popular open-source CMS of your choice] doesn't make a lot of sense.
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)
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-...
That's my pain point.. trying to find a pain point to start developing!