October 2017 Income Report

income_report

I write these income reports not because they are good for me (they’re not – competitors love this stuff) but because I hope the hard data they present help other entrepreneurs make smarter decisions inside their own companies.

This income report is only for a small software startup I acquired about 15 months ago called TheTopInbox. I’m actively buying b2b software startups with less than $1m in ARR – tweet at me if you’re selling :)

You can see this tool has a very healthy userbase on the Chrome Store and allows you to:

  • Schedule emails to be sent later in Gmail
  • See which emails you send get opened in Gmail – Open Tracking
  • Set reminders in your inbox (Ex: Ignore this email until next Monday)
  • Set up auto-followup (If no response on day 2, send this new email) sequences to people you email

Monthly Recurring Revenue (MRR)

In October, we had 79 new signups of which 27 were annual $50/yr plans and 52 were new $5/mo plans for total new MRR of about $350.

Total MRR is now at $3375 ($1300+$2075).

415 people paying $5/mo for $2075 in revenue plus 311 people paying $50/year for another $1300 in MRR. 

While I have you here, go install the extension for free and see if you can figure out how I get my paywall to convert at 97% (meaning of all the people who hit the paywall, 97% convert to a paid customer).

The data below only analyzes my Stripe customers paying on a monthly basis (not annual).

Churn

In October 30 people stopped paying $5/mo compared to 17 in September.

While this snapshot is valuable, I wanted to know how old those 30 accounts were that cancelled in October to calculate Lifetime Value. This is where you need cohort analysis.

Screen Shot 2017-11-05 at 9.16.03 AM

Cohort Analysis

I run this cohort report manually in excel based off my Stripe subscription export to help me decide where to focus resources over next 60-180 days.

Screen Shot 2017-11-05 at 9.49.34 AM

The way to read this chart is as follows:

In March 2017, 37 new customers signed up of which 21 are still active today (11/1/2017). That means 41% of the total cohort has churned.

On average, monthly churn for the March 2017 signup cohort is 5% meaning the customers that signed up that month will stay with me for an average of 22 months (1/churn which is 1/.05) paying $5/mo making those customers worth $111 each to me over their life.

That cohort “return” is $4107. If you are running ads to get new signups in a given month, say $1000 in FB ads, calculating this cohort value will help you determine if you have a positive ROI or not. To date, I’ve spent no money on advertising to grow the tool to over 30,000 weekly active users.

Impact of Decreasing Churn from 7% to 3%

To get a sense of how critical minimizing churn is, lets change Monthly Churn for my September 2017 signups from 3% to 7%:

Screen Shot 2017-11-05 at 9.59.01 AM

3% churn means that cohort is worth $11,163 to me which means I can afford to pay more to acquire it.

7% churn means that cohort is worth just $4357.14 to me which means I have to acquire customers way cheaper in a very competitive FB ads, Google ads market.

This is why $100m ARR companies tend to be able to squeak out marginal gains. They know their cohort worth, they decrease churn, and they have plans to drive expansion revenue so that cohort value is always increasing.

Takeaways:

  1. The product does 4 things in gmail (send later, reminders, auto followup and open tracking). If each of those features was “1 usage point”, the send later button/feature makes up over 90% of our paying customers usage. I need to do a better job introducing the other 3 features to my audience so they get more value.
  2. Once I do #1 above, I’ll likely double or triple pricing to $15/mo minimum. A key strategy these 10 SaaS companies used to grow to over $100m in ARR was increasing annual contract value (ACV).
  3. Churn should decrease if I do #1 above correctly. New users will get hooked on send later, introduced to open tracking, then used advanced features like auto-followups and reminders.

If you guys found this valuable, I’ll do another income report soon. Let me know. I’ll be in the comments to answer any questions you have

  • Thanks for putting these out Nathan, super valuable for understanding the software business and how to track MRR and more importantly how to think about scaling.