We also discussed what I spent $4988.84 on and what my income was.
In August, I:
- Introduced a paywall
- Got our first cohort of paying customers – the toughest part of a startups life in my opinion!
- Started thinking about how to get 1 user to invite 5 more users (growth hacking)
From Free to Paid
I decided against trying to convince an engineering lead to join me as co-founder on this project (would mean giving up large equity chunk and fixed expenses).
As an example, before I sold my last SaaS company Heyo, we raised our $2m Series A round of funding at an $8.5M pre-money valuation ($10.5M post).
10% was worth $1,000,000 on paper.
Call me greedy, but I have confidence in my abilities to build a business and keep most of the equity to myself.
Instead of technical co-founders, I use TopTal and UpWork to quickly find developer talent to execute code updates, new features, and A/B tests. Using these outlets also saves me recruiting time.
In the July Income Report I talked about my commitment to value based pricing. I don’t want any users paying unless they get value. I defined value as 50 or more credits used since the user signed up.
Credits add up every time a free user clicks the Send Later chrome extension to:
- Schedule an email to be sent later (write at 11pm, send at 6am)
- Set a reminder to followup in X days if email gets no reply
- Sent out an auto-followup sequence on a cold email they were sending to a new prospect/influencer
Once the user tried to send their “51st credit”, this pop-up would appear: (thanks to Neville Medhora for “Power User” header suggestion)
You might wonder why I left a button that says “Let me use one more time for free”.
I left it because I didn’t want users to stop using us because they hit the paywall.
I needed to have the chance to connect with them 1 on 1 to figure out why they aren’t willing to pay for the 50 credit “value metric” I set.
This feedback will drive future pricing tests tied to different usage metrics.
If the user clicked “Pay now”, this pop-up would appear:
I’m a big fan of copying (or at least testing!) what works in terms of pricing.
Taking lessons that The Economist learned in their pricing experiment, I created two plans with the same price – but where one was vastly more valuable. This should yield increased conversions from free to paid customers based on The Economist test illustrated below.
Dan Ariely, author of Predictably Irrational, dives into this subject in his 4m+ viewed Ted Talk where he questions if we are in charge or our own decisions or not.
When $125 Print Subscription was removed from below pricing page, sales dropped. A less-valuable decoy package (which no one should buy) increases perceived value and drives a buy decision of the plan you want people to buy.
Next month, I’ll report on how many payment pop-ups were shown, how many paid, and how many keep clicking “use for free”.
August Income Report
Note that this Freshbooks report only covers revenue and expenses from my SaaS business, Send Later. These numbers do not include my INC #1 rated podcast, speaking, media, investments, or other income/expense categories I’m involved with.
In July, I shared my goal of getting 10 new paying customers from the “no-touch” $5/mo, usage-based pricing popup.
Ultimately we signed up 63 new customers from about 200 who saw the pricing pop-up – 32% conversion rate. I want this rate to be 90% otherwise I will increase my “when to show paywall” metric from 50 credits used to 100 credits used.
I set limits like this to preemptively fight churn.
If your paywall value metric (50 credits) is too little, people might pay then churn because they aren’t sticky.
If your paywall value metric is too high, you’re leaving considerable money on the table.
I only want 5% of my userbase to see the pricing pop-up and for 90%+ of the activated users who see my pricing pop-up decide to pay and convert.
This forces my hand into using a singular lever to drive growth: my definition of what an “activated user” means, which triggers the paywall. (Right now its 50 credits used)
If I have 10,000 users, 500 see pricing popup and 450 convert to paying. That means I have to put all my focus into driving # that see pricing pop-up (ideally forcing me to either make more valuable product or edit my value metrics tied to paywall).
In the chart above, you see total new MRR of $1540 which does not equal 63 new customers paying $5 each ($315).
This is because I tested a “touch” free to paid funnel via webinars to my audience. These webinars yielded 25 new customers paying $50/mo for the Send Later tool + additional resources I offered only to them:
The webinar allowed me to use the following tactics to convert onlookers into paid customers:
- Scarcity: Only did this for limited # of people (I cant have too many new people on my podcast – see right Bonus column above)
- Urgency: Had to buy before end of webinar to get plan and bonuses
- Social Proof: I unmuted buyers as I saw them buying and asked “Why’d you just purchase”? This drove more sales.
Here is the sales dashboard in stripe with sales coming in (notice time stamps on right – they poured in FAST):
The risk with using this approach is you have to get these users to actually use the tool if you want them to keep paying month after month. I expect high churn from this group until I figure out how to activate them.
Only 1 $50/mo user has passed the activation metric (50 credits used) I know they need to pass in order to stick (The 76 one below):
Most companies quit thinking about revenue after the initial payment. I’ve conditioned myself not to emotionally accept this revenue until I get every customer to install the extension and pass 50 credits used.
As you can see, I have work to do!
Starting MRR: $0
New MRR: $1540
Lost MRR: $0
Total MRR: $1540
Not-Activated MRR: $1205
New LMRR: $335
Lost LMRR: $0
Total LMRR: $335
LMRR is a term I use called “Latka Monthly Recurring Revenue”. It’s how I keep myself honest on what monthly recurring revenue (MRR) I actually deserve because the people paying the monthly subscription are actually using the software tool based off an activation metric I set.
In July’s Income Report, I talk about what an “activated user” means to us at Send Later. LMRR is MRR only from activated users. Any paying customer who has not hit my “activated usage” metric will not be included in LMRR. In this regard LMRR is a true measure of a SaaS businesses’ sticky revenue.
Next month, I’ll share more around how much total money I’ve put into Send Later relative to the cash flow its generating. You’ll see its better than my other investments in real estate, the stock market, and other small angel investments.
I like betting on Nathan Latka.
Turning 1 User Into 5 Systematically
“Sent with iPhone” is probably the most famous “product marketing” case study out there. How do you get one user to get her colleagues and friends using your product as fast as possible?
Billionaire VC Tim Draper came on my podcast and talked about how “Sent with Hotmail” was created almost a decade ago and helped make Hotmail a $100m+ company.
There are many opportunities for growth hacking inside the Send Later chrome extension tool:
- Get business users to add their team members (See most enterprise SaaS tools and their upsell, net negative revenue churn strategies)
- Give free credits if users invite friends (See Dropbox)
- Add “Sent with Send Later” at bottom of all emails sent (See Hotmail/Sent with iPhone)
In September, we’ll launch a test where we put “Sent with Send Later” in the footer of all emails sent using free accounts. We’ll track how many clicks those links get relative to how many emails were sent. We’ll also track new installs through this link to see if user signups in September-October are materially higher than August (2,097).
Remember, I’m still targeting that orange cell above: The % of users who see the paywall and convert. I’m not making any changes to this until I get another month or two of data. Larger sample size needed.
Expansion Revenue Leads to Net Negative Revenue Churn
We had our first $5/mo user add 29 more seats moving that users ARPU (average revenue per user) from $5 to $150 (30 seats x $5 each).
The company was using Boomerang but really wanted to use our auto-followup feature for scheduling automatic reply emails:
Send email 1 if no reply in 2 days
Send email 2 if no reply in 4 days
Send email 4 if no reply in 6 days
Here’s what it looks like in the interface (click the blue arrows next to send button inside gmail):
To experiment using this auto-followup function in Send Later for free click here today.
That wraps up my Income report for August:
- We talked about moving users from free to paid
- How I got my first 10 customers
- How we plan to start testing growth hacks to turn 1 user into 5 or more
In the September report I’ll share results of our pricing test, updated income/expense numbers, and more data on how I’m using product updates to drive stickyness among users.
I’ll be hanging out in the comments if you have questions!
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