Kalzumeus Software Year in Review 2014
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There was some thread here where patio11 kind of snickered when someone called his business a "huge success"; probably because he knows a bunch of people that earn one or more magnitudes more money. But the above quote probably sums up "fantastic success" for me, and I think, a whole lot of the world.
"Appointment Reminder’s key stat of interest is monthly recurring revenue on our publicly available plans, since this is the most predictable revenue in any of our businesses and thus lets me make consequential decisions like “Move the family to Tokyo, where rents are 5X what they were in Ogaki” (that happened, more later” or “Bring on help” (that also happened, more later)."
Tyranny of the majority is in effect at HN.
To respond to your original comment, you're right if you have external shareholders. If you don't, it's pretty much up to you. Your employees aren't owed a maximum possible amount of growth either. It's a free market - they can stay or leave.
Lesson to learn: it's okay to let some things decay so that attention and focus can be paid to the right things.
Then again, BCC seems to have reached much higher heights than I would have thought its potential was, so maybe it's more of a "Mission Accomplished" there.
So during the years I worked sequentially (or sometimes at the same time) on a gift certificate template gallery, a travel insurance comparator, a body-mass-index calculator website, a file sharing solution for businesses targeted at the french market.
The reasoning behind all these projects was to make "passive income". And by running multiple websites I would make a nice income from them all combined.
After developing and marketing the last of these projects (file sharing one, post-mortem here: http://www.sparklewise.com/post-mortem-5-mistakes-i-made-wit... ) I realized that the most important thing is not to have a "good idea" but to work on a problem you want to solve and with people you can relate to or at least that you enjoy working with. That's why I now focus on serving SaaS businesses, because that's actually something I care about and will likely care about for years to come.
Thanks for all the transparency Patrick and for setting an example for the rest of the HN crowd. And good luck with the fatherhood :-)
My approach is more high-touch - I don't rely on people searching for "Terminerinnerung" ("Appointment reminder") and then coming to my website. I think most doctors don't do that. I go out and talk to them.
I also by default offer to develop integrations into the customer's existing appointment reminder system - because the majority (~66%) of my potential customers here already have some computer system. This means reverse engineering the customer's existing system to be able to continuously export its data. I did this successfully for one of my customers (it was a Java/MySQL application). The other customer I developed a web calendar for.
I have now completed the development for my first two customers (I hadn't completed development when I sold the service to them. I just pretended I had, to make the sale). At the beginning of next year I'll start to acquire more (enterprise) customers.
I'm happy to talk about this via email if anybody's interested. My address is [my first name]@[my last name].io (Michael Herrmann).
It's in it's early stages. I'm waiting to e-mail Patrick when I can say "Thanks to you I now have >500€ MRR" :-)
I sent you an e-mail to talk about it some more and share experiences! Always great to learn of similar endeavours.
A few other people also got in touch. Cool! :-)
Congratulations patio11!
Your open sharing of actual revenue numbers is invaluable. The tech press only loves to talk about all those billion dollar companies. But your blog posts put that into perspective, giving us a glimpse of how much money a small business can realistically make without shooting for the startup lottery.
Apropos of nothing, it seems that if you're interested in piquing the interest of someone busy, discovering the venn diagram for which they're one of a small population in the intersection might be the way to go. Or, it might just be really creepy.
> I’m taking my own advice to charge more, and re-aligning those numbers with actual customer behavior rather than the numbers I guessed four years ago.
How do people normally handle this?
1) Take it or leave it price hike
2) Give a X month grace period before new price
3) Grandfathered in and price only changes if they need to upgrade
4) ??
And I agree that it's more profitable to serve the bigger customers, but it's a shame nonetheless that I see things that I would love to try to use myself, and would pay for, just not worth $99 a month to me.
Later when they need to make many hires to support customers it is much better value to chase those bigger customers.
That is assuming there is significant support cost.
It took a little bit to map the software eng. assumptions to a mech eng. role such as my own (especially given the market is terrible for me right now where I am) but it paid off in dividends for me. So thank you so much!
From my perspective your business model seems to be:
1. Pick a niche and figure out keywords for that niche.
2. Perform the Magic SEO Incantation to rank high in Google.
3. Sell well to the visitors that gets you.
For AR, the entirety of the magic incantation is a) getting a small handful of links to it and b) exact match domain name for [appointment reminder]. I'm literally embarrassed that this is the only thing I've done. I mean, I knew it would work, and it did work, but I have always felt like I should be doing substantially more and more complicated marketing.
Patrick is a wonderful example of a person who takes the middle road and actually put quite a lot of effort into making sure he stays there rather than letting himself be sucked in by the grow like crazy game or the never launch anything game.
He is happy, he is not trying to be happy. That alone is something most people will never experience and measured in that he is a billionaire.
I just realized that I am a part of this :(
Congrats on the kid! Balancing a newborn and any amount of business is no joke (source: I have two startups, a software company and an 18 month old).
I wanted to ask about this:
> To build out that software and get the team spun up, I had to actually sit down and document our business processes
I'd love to here a bit more about how you went about that. You've got a great approach to documenting your thoughts and I'm sure I could learn a thing or two. I'm scaling our app http://www.staffsquared.com in 2015 and working hard to share knowledge across our growing team.
Keep up the great work!
https://training.kalzumeus.com/newsletters/archive/sales_aut...
[H]aving numbers publicly available would complicate
[taking investment money in the future].
Patrick basically has all his cards on the table, and can't give much more than that
"AR is virtually guaranteed to be a mortal lock on the query [appointment reminder] due to the combination of the exact match domain bonus and the fact that most links to it naturally cite the name of the company."
Wasn't that largely made irrelevant a while back? I'd be willing to bet the majority of your relevancy comes from the backlinks and content on their pages vs. your exact match domain. Hopefully you're not building a link profile focusing on that link text as there have been reports of people getting dinged for that.
In his case, his brand is also highly relevant to the term 'appointment reminder', which pretty much locks up the #1 spot for that term.
And yet despite your finely tuned ability to detect amateurish abandonware he managed to bring in ~$75,000 revenue in on public plans, and if I had to take a guess anywhere between 1x - 1.5x in non-public plans.
As a general rule, we shouldn't use the obvious to tear someone down.
What would make his case different from theirs other than his backlink profile?
If you could go back in time how would you change the pricing model here?
Would you remove the professional plan altogether? How could your pricing model differentiate between the small personal services with < 100 appointments/month and the law firms with < 100 appointments/month?
Congratulations on fatherhood!
> We do our level best to answer all emails within 24 hours. All questions are answered by our lead engineer. (Your business is too important to trust to a call center.)
This sounds like it won't scale well. How do you plan to cope with support when your number of customers grows?
- Make it a selling point for the higher tiers of accounts. "If you choose the Serious Business plan, all your questions will be answered by our lead engineer. (Your Serious Business is too important to trust to a call center.)"
If you want to keep the selling point of competent and personal support for all customers:
All questions are answered directly by our highly-trained customer support reps, Anna and Thomas [Picture of Anna and Thomas smiling winningly and looking nothing like That Anonymous Incompetent Dick I Get Every Time I Call The Phone Company.] In the rare cases where they can't solve your problem, they'll immediately refer you to our lead engineer."
"The slip date shipped repeatedly."
Have you thought of launching an affiliate program for the BCC ?
You can connect on forums like WarriorForum and find good affiliates. They will love that you have a proven product. Then give them 50-75%.
Some will advertise on their existing sites, to their lists and may even pay for advertising. You take no risk and may get a lot for sales.
Another option is Clickbank where affiliates may find you. There are alternatives like JVZoo, DigiResults etc.
You could hire someone part time to do the customer support and bugfixes.
In short you could keep BCC going nicely with very little effort on your part.
And then after a few months, you have a low maintenance business that you can sell, rather than something that will slowly die.
I know it may not seem worth your time, as you have bigger fish to fry.
However all of this could be done in a couple of days, and maybe an hour a month to maintain. You may be able to sell it for $100k or more once it is in good shape again.
The info products sold on sites like WF and such are what I'd lump into the "guru" category, and are oftentimes just lots of fluff or something the writer paid someone off Odesk to write for them. Overall, they don't come off as terribly professional and can quite readily be identified as living within the "Get rich quick" bucket.
Affiliates can be helpful, but I'd be really careful about picking ones that won't damage the brand image and credibility he's built for himself.
You could ask the potential affiliate to fill in a form with some information about their site, how they will promote before you accept them in.
You can also build relationships on the forum, so you know who can be trusted with your brand. There are plenty of OK marketers, who may have a popular website on there. But you are right there are plenty of get-rich-quick types you have to filter through.
I think the affiliate idea has merit even if you don't use the Warriorforum. You could for example run your own affiliate program using a script, and then contact sites you like directly.
These internal referral programs are how Dropbox and many other companies have kicked off great acquisition campaigns.
It's funny to hear you call the WaFo products "guru" here on HN (I would agree they are), because HN itself is subject to the same kind of guru-bullshit. There are multiple people on HN who make money selling info products purely to the HN crowd. I would classify them as "guru" as well. I enjoy watching it play out, because as HN builds as a community, it seems a lot of trends are evolving in the same way the IM community did. Someone makes money, makes a blogpost, gains a following, writes an ebook, makes more money. I would call that "guru", but people on HN pay for it. I will say, however, that the content the "gurus" on HN produce is far better than 99% of the shit coming out of WaFo.
Relatedly, it's amazing how quickly people on HN will dismiss the SEO and affiliate marketing industry. It's a massive market. The "marketplace" forums on WF, WaFo, and BHW process five figures of transactions per day. That's mostly SEO services, some spammy, some not. Outside of that, there are multiple affiliates on those forums doing six figure daily revenues. The AM industry as a whole is ~6billion annually.
Despite all the money in SEO/AM, commenters on HN are quick to degrade the industry as spammy/blackhat/assholes/whatever, and yet most of those people are making more on their own than anyone here. It's quite funny, honestly.
That makes quite the difference though. It's like comparing Jon's consulting thread to McKinsey or Boston Consulting.
>Relatedly, it's amazing how quickly people on HN will dismiss the SEO and affiliate marketing industry.
The opposite is also quite amazing too. WF is full of people who think they are running "real business", while making the most childish (and arrogant) statements and opinions.
Also, out of those $6bn, majority is incremental sales for legit operations (mostly ecommerce, some financial services) through CJ, SaS, Zanox. Pills and bizops through Maxbounty/Neverblue are quite small in total numbers, not to mention pretty dissatisfying to run.
My point is, it's not that much money. The holy grail "10k/day CEO" is just 3.6M/year. I'm sorry but this looks more like event budget than total revenue. What makes it particularly unappealing is the complete lack of predictability. I recognize your username from WF, so I'm sure you know what I'm talking about.
The distinguishing factor is that a large % of the businesses here attempt to really add tangible value, vs. just selling a dream that they hope some newbie suckers buy into.
Again, quality over quantity. For example, Mike Hartl sells an info product. It also happens to be the definitive bible on Ruby on Rails and has helped numerous people start learning the language, including getting jobs as developers. Contrast that with some random person's "WaFo Special" and I think the difference is pretty stark.
I'd further add that I'm not dismissing SEO at all. I think it is quite important under the "Content" umbrella, but trying to game it is not sustainable and a waste of resources in the big picture. These days it is about creating linkable, high-density/value content, and then getting relevant backlinks for it. That has never really changed in the SEO space. A lot of the random attempts at gaming the signals you send search engines has.
The distinguishing difference between the crowds seems to stem from the differing skillsets. WaFo has more non-programmers than HN, and consequently differs in market dynamics from HN.
"Gurus" on HN, considered in a context parallel to that of WaFo, enjoy the privilege of writing actionable content because most readers can program, and therefore can take a different route to profit from non-programmers. Thus books from HN authors can simultaneously promote profit and add value, unlike those from WaFo authors, which create a bullshit-cycle by selling things to each other. Then again, maybe that's just good business...
We share the same viewpoint. Well said.
"cars.com" is still the #1 result for searching "cars". And "business.com" is still on page 1 for searching "business". The death of the EMD has been greatly exaggerated, IMHO.
It wasn’t the world’s most inspired naming choice, but the $8.95 I paid for the domain name is probably the best ROI of anything I’ve ever bought. (AR is virtually guaranteed to be a mortal lock on the query [appointment reminder] due to the combination of the exact match domain bonus and the fact that most links to it naturally cite the name of the company. The fact that it is a .org is irrelevant, except in that the .org was $8.95 and the company which owned the .com wanted $30,000 for it.)
Can you counter churn rate by acquiring new customers?
The bottom line is you can only optimize so much via a/b testing and whatnot from marginal ideas at best.
Also, he made $4,000 an hour on BCC, so it seems like he's left with a lot! And even so, business come and go all the time. Doing nothing on BCC as it fades from $60k a year to $0 over the course of a decade while doing minimal work on it for the last half of that decade doesn't sound like a bad idea to me at all. Sounds like 'free' money.
(He could do more, but he doesn't have to, which is a great place to be).
Happiness is different things for different people. Don't be condescending if you do not understand another person's way of life.
Further, patio11 is one of the few programmers to have written extensively on how to become a good salesman. To say that he doesn't understand why it's not winning in the market is extremely condescending to someone who specifically writes a public post to address this.
He's making a lot more than $60,000 currently. Also he is running his own business/monetary life and that is something very few great entrepreneurs can still say these days. Hard to put a price on that, especially since he acknowledges he values the freedom of not being tied to investors in this very post.
Also he owns Appointment Reminder and he didn't count the appreciation of that asset. Lets assume the total profit for AR went from 100k to 135k. Now lets make the assumption that it is valued at a 5x multiple, this means that he increased his net worth by 175k. Thus his total "profits" for the year would be under estimated by 175k.
2007 $6,200 / 100 hours / $60/hour
2008 $10,700 / ?? hours /
2009 $18,525 / 130 hours / $125~$150/hour
2010 $25,904 / 115 hours / $200~250/hour
2011 $25,000 / 35 hours / $700/hour
2012 $38,598 / 38 hours / $1,000/hour
2013 $23,000 / 23 hours / $1,000/hour
2014 $20,000 / 5 hours / $4,000/hour
Rough total is $170,000 from 550 hours of effort. Lets assume it ticks over for a few more years. You've basically earnt quarter of a million from equivalent of 3 or 4 months effort.
What's the value of being able to devote tomorrow to reading a Phyiscs (or whatever) book if you don't feel like going in to work? Or going out to a movie?
What's the value of being able to pick your kid up from daycare no-hassle when they run a fever?
What's the value of never ever having to dress some way you don't want to, to travel at times that annoy you, etc.?
When you're an employee, or a tightly-scheduled professional, or in a high-velocity startup, you give up all of these things. Sometimes it's worth it, but often it's not.
That isn't just worth much more than however much your average BigCorp Developer is making... that's priceless.
That said, the freedom to choose whatever city you like to live in, is priceless.
'cperciva likes how the business is.
Did she consider US cities?
Tokyo is very expensive and an unusual choice to move into for family with a child.
Any US city would put you in a better touch with your business and would be less expensive than Tokyo.
Life is about making choices.
5x price increase, small apartments (instead of houses), higher babysitter costs -- these are all downsides.
What is better in Tokyo than in, say, Austin, TX?
But fine, let's consider just Ruriko's family: they are mostly in Ogaki, not in Tokyo.
I understand that Tokyo has some advantages (any city in the world would have some advantages), but overall it seems to be a sub-optimal choice.
My goal here is to disassemble Patrick's choice, learn from it whatever I can, try to make a prediction about the effect of that move on his life, see what Patrick thinks about the move to Tokyo 1-3 years later and learn again.
So far I think the move would have slightly negative impact, mostly because increased cost of living. That would force Patrick to deviate from his goals more, do more enterprise consulting (as opposing to product development) and add more stress to his life.
Its high density and superb transportation mean you don't need a car -- go almost everywhere with your kids by walking, bicycle, or extremely frequent convenient train. Riding in the car sucks for kids (and adults, IMO).
There is access to all kinds of world-class health care, and all of it is free for your kids.
Tons of great educational institutions from the best universities down to preschool (and although the preschools can take some time to get into due to capacity, they are by and large terrific).
Great food of virtually every variety except Mexican. Most of Tokyo is extremely clean, safe and crime-free. Multiple always-open industry-redefining convenience stores, same-day Amazon prime deliveries, synchronous 1Gbps fiber optic Internet connections for $50 a month, a regular taxi system that is better than the Uber you always hear Americans raving about, one-hour cold beer delivery... in other words, the kind of fundamental lifestyle convenience level that is good when you are single, but becomes way more important once you have kids.
Source: I live in Tokyo with my wife, 2-year-old, and 2-month-old.
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[1] http://www.japantoday.com/category/national/view/japans-fert... Tokyo has the lowest fertility rate in Japan by far, hovering just above 1.0.
Tokyo is pretty awesome, but you do have to be able to afford it. I would assume it's a lot more expensive to live here than Austin, TX, but I know it is cheaper (and IMO way better for raising kids) than say, San Francisco.
Are you saying that for the same $120K/year a family would be better off in Tokyo than in Ogaki (or Austin)?
Lower cost of living means that you can afford other things, such as bigger house, better neighborhood, better doctors, babysitter, better car etc.
I see though how Tokyo could be better than San Francisco or NYC - thank you for your explanation.
To some people, a smaller house is a good tradeoff if it comes with abundance of extremely awesome restaurants, shopping, and riverside parks nearby. For others, having a big personal space is more important.
Some people get a lot of satisfaction from having a Porsche or (more likely, with kids) a well-appointed Audi Q7. I think the best car is not having a car at all (at least until the robo-cars arrive) -- but to me that means public transit + bicycle is literally so good that I can get where I am going faster than I could with a car. The only cities I have lived in where that is true are Tokyo and Amsterdam.
So yeah, depending on what you value most, you might be better off in Tokyo even on $120k. But if you want the car and big personal space, then probably not.
https://en.wikipedia.org/wiki/World's_most_liveable_cities#M...
Tokyo is #2.
Let me know when you visit Tokyo. I'd be happy to show you around. Any HN user is welcome to ask me for Tokyo advice.
I'm not against Tokyo in particular. Patrick moving to NYC, Washington DC, Singapore, London etc. would also surprise me.
I never lived in Tokyo and it was interesting to learn from veidr that Tokyo could be safe and comfortable for a family [that has significant income].