July SaaS Income Report, 2016


July was a busy month. Here’s what went down including my income and expense report created with Freshbooks.

As Entreprenuer.com recently pointed out, I failed to acquire Success Magazine for the very fair price of $5m and instead acquired a tool that is in a very interesting space but is not the clear market leader.

Why I Acquired Send Later

In the last Facebook Campaign SaaS company I started and sold I had major issues getting monthly churn below 5%. A bucket that leaks 5% of its water goes dry without serious rainfall. SaaS companies with monthly churn greater than 5% aren’t very valuable.

Send Later is a chrome extension lets you schedule emails to be sent later, set reminders for emails if you don’t get a reply, and track if your emails are opened.

The tool plays in the email and productivity space, one that users engage with way more than Facebook Fan Pages. I’m betting the industry overall is more sticky making for a better recipe for SaaS success.

I looked at over 50+ deals to do this one and ultimately pulled the trigger because:

  1. I only had to work with the developer that built it to figure out the deal. He had no board or investors to convince.
  2. It’s a free tool with a healthy user base. When companies begin to earn revenue, they want to be valued on revenue multiples which makes a rational acquisition hard. “Pay me 10x annualized revenue!” was not a demand I would accept or wanted to deal with.
  3. It was not #1 in its space in terms of revenue or user base. I love this. It means I can buy an asset in a market that is proven. I’m isolating my “startup” battle to: Can I get consumers to chose us over competitors.

Lesson here is pick your battle. I’m one of the best in the world at using eyeballs and media to sell SaaS. I’m not so good at getting product market fit, so I bought what I’m bad at.

The tool competes directly with Boomerang, RightInbox, and Followup.cc and as a point solution with more enterprise focused tools like Hubspots’ Sidekick (now Hubspot Sales), Yesware, Toutapp, and others.

These companies, many with talented founders, have proven the market. This hedges my “product market” fit risk.

If you are a developer reading this, wanting to sell your email or productivity business, text me 7034312709 :). I’d love to chat.

July Income and Expense 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.


Tool was free in July. Paywall introduced in August. This report will have revenue starting in August. 
Starting MRR: $0
New MRR: $0
Not-Activated MRR: $0
Lost Revenue: $0
New LMRR: $0
Lost LMRR: $0
Total LMRR: $0

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 the section below this, 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.

HostGator: $10.98
TopTal/Dev Resources: $4317.50
Active Campaign: $325
Digital Ocean: $10
Adobe Creative Suite: $39.98
Freshbooks: $19.95
GoToWebinar: $265.43
Total Expenses: $4988.84

Next month, expect to see revenue start to rise as I look to bring in the first 10 paying customers. I don’t mind losing money for many months. I’m keeping 100% equity control, and total freedom in what to do with cashflows from this business once it turns the corner.

On a side note, I put most of these expenses on my Chase Sapphire Preferred Card which got me 50,000 free bonus miles (about $1000 in plane trip savings). Always be looking for ways to turn your expenses into assets.

SaaS: Using “Motivated Money Moment” To Create $1B Company

There are many SaaS companies who’ve excelled at using  discounts, pricing page shenanigans, and other tricks to close new customers.

While this is great for getting folks in the door, nothing matters unless you get new customers using your tool. This is why these 80 SaaS companies have churn (users who stop paying).

In my last SaaS business, we were always creating cohorts – groups of customers based on some data point like time, size, or location – to analyze churn. Debates around these topics always resulted:

  • Are webinar sales less effective than no touch sales?
  • Nathan, people are buying Heyo because they like your energy on the webinar! They don’t even know what it does and thats why they churn.
  • Are the signups we got from the TechCrunch article more or less valuable than the signups we got from The Top Entrepreneurs podcast?

Ultimately, this created research overload and made taking any action almost impossible. At Send Later we will focus less on cohorts and more on what action we need every cohort to take to predict with 90%+ certainty that the user will become a paying customer.

I call this the “Motivated Money Moment”. To find this moment, I needed to get qualitative feedback from users via open communication and quantitative feedback by actually counting how many times certain features were used.


To get this kind of feedback, I sent out this email which was optimized for getting users to respond with features they really wanted or loved:

Screen Shot 2016-09-05 at 5.54.29 PM

The email got a 37% open rate with the subject line “Reminders you love are back!”

Screen Shot 2016-09-05 at 5.55.50 PM

Over 30 people wrote back detailed replies like this one:

Screen Shot 2016-09-05 at 5.53.02 PM

My reply script was:

“These sound like great ideas! If I build them, would you pay $5/mo?”

I’d test different price points and if anyone ever replied “Yes”, I’d quickly set up a checkout button using Stripe and Clickfunnels and say:

“Great, you can pay here!”

If they ultimately didn’t pay, I put less weight on the features they wanted. If they did pay it became a priority. I’ll have more updates on this in August.

Quantitative Feedback to Discover “Motivated Money Moment”

User feedback surveys, emails, and phone calls are great but hard data never lies. Sometimes conversations with customers get caught up in “nice to have’s” and “what if’s”. I needed to look at usage data to determine what people were using the most as a leading indicator into what they might be willing to pay for.

I paid my developer via TopTal to generate an excel file that told me:

Lifetime Reminders Set
Lifetime Scheduled Emails
Lifetime Auto-Followups
August Total Usage

This was a tally for every user when they clicked one of these buttons (this data was encrypted and I only can see that a button event happened, not what a users email was or other sensitive items):

Screen Shot 2016-09-05 at 6.32.29 PM

I asked myself a few questions to hone my thinking:

  1. If I only want 5% of my user base paying, what usage metric does that tie to? About 277 users out of 7569 had sent 50+ scheduled emails, reminders, and autofollowups over their life using the tool. This equated to about 3.8% of my userbase.
  2. Is there a certain feature I can build that people would pay for just to have access to? This is less usage focused and more “wow! novel concept” focused. Stay tuned for updates here in August.
  3. Should I base pricing around usage of individual features or create “credits” which tallied up no matter what feature was used (track emails, send later, reminders, autofollowup)?
  4. How do I make sure to leave room to increase pricing in the future, or add higher priced plans?
  5. How do I provide a valuable enough free experience to virtually guarantee the sale once my Motivated Money Moment was hit?

Related: To hear from SaaS CEO’s who have $100m+ in ARR, check out this podcast

What I was hunting for were 3 different value based pricing axis’ I could use to anchor my pricing model. Early data showed I could likely use:

  1. Number of send later emails sent per month (This is the key “Motivating Money Moment”)
  2. Number of team members per business (This is key to becoming $1b+ company)
  3. Number of email templates (This will be valuable down the road. Check back in August/September)

Ultimately, I decided to work with my developers on TopTal to add a paywall with target release date, August 15th, after a user hit their 50th “credit”.

Example for new User X:

  1. Signup: 7/21/2016
  2. Schedules 11 emails to be sent later
  3. Schedules 7 reminders
  4. Uses 3 autofollowups
  5. Schedules 29 emails to be sent later
  6. Total credits used is 50 (11+7+3+29). We decided not to include “track if email was opened” in credit usage because that feature is so standard and not valued as highly as other “credited” features.
  7. Show pricing pop-up

Other examples of companies that worked hard to define their “motivated money moment:

  1. Facebook knew it needed users to get 7 friends in 10 days if the user was going to become sticky and valuable.
  2. Freshbooks knows it has to get you to send 3 invoices per month in order to keep using their free trial.
  3. HostGator knows you need to buy a domain name and hosting in the same checkout sequence to be sticky.

A good book to study on driving usage patterns is Nir Eyal’s book “Hooked

In next months SaaS Income Report (August) look for a report on the following:

  • How many users saw the pricing pop-up?
  • How do we decrease likelihood that someone sees pricing pop-up and stops using? (We don’t want to lose users)
  • What rate did the pricing pop-up convert at?
  • Is our 50 Credit usage metric the right “Motivated Money Moment?”

Ultimately, this is a company I plan to grow to $40-50 million in annual recurring revenue (ARR) and take public by the time I’m 30. Keep following these income reports (this was the first) to follow the journey real time.

I’ll be hanging out in the comments if you want to chat or have questions.


16 thoughts on “July SaaS Income Report, 2016

  1. What valuation method did you use to come up with a fair buying price?

    Curious to see how you valued the tool and user base as we’re also looking to acquire a few small tools over the next year.

    1. I didn’t use a hard and fast rule. Came down to soft-power negotiating with developer. What sorts of tools are you looking to buy?

      1. So… chrome store shows 29k users, which is installs probably. I can assume about 25% is somewhat active so 5k users with probably CAC around $5-10. I would guess the range is $30-50k?

  2. Hey Nathan,
    First off thanks for being so open with your activity i can definitely see you got a future IPO in you. i’m an experience developer and designer age 26 would we you be able to lend an ear or allow me to reach you by direct email i have a couple saas products using machine learning to take the pain out of what i think is a problem maybe this could be of value to you.

    Let me know,

  3. Entertaining read. One quick note (honestly I’ve spent much time reading :) is it looks like you are assuming that your userbase is representative and properly matches your ideal customer. Bearing in mind you’ve acquired the service and original developer could’ve leverage variety of channels to acquire initial users/early adopters, don’t get easily distracted by numbers you get.

  4. You will need more than 40 million in revenues to become public…maybe in China you could be a billion dollar company though given how crazy valuations are there…something to consider 😉

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