Ask HN: Founders, how did you balance between increasing users and revenue?

https://news.ycombinator.com/item?id=18249161

by adamfaliq • 8 years ago

4 6 8 years ago

news.ycombinator.com

Startup has limited resources. Hence, I found myself in catch-22 situation.

For example, if we want to increase revenue, we need more users. To increase users, we need to spend more. However we do not have enough revenues to justify the spending. How did you make decision(s) in this situation?

bwb• 8 years ago

I would want to see a ton of data on revenue and so on for your situation but in terms of what I have done in past...

1. I've increased prices for new customers by 30% to 50%. That can help right away if you are charging too little.

2. I've increased the discount on yearly and higher contracts to give us cash to fund the business upfront. IE, if you know your math you can make it easy. - You can approach existing clients for a contract increase too.

3. Adding to the checkout flow an upgrade recommendation at the final step, ie, for x dollars more a day you get this and this. We had a 30% uptake to our highest plan doing this.

The other way to go, is you can start thinking outside the box on marketing, but without knowing more that is hard. IE, how do you hit your customer segment for 1/100th the price you are now.

RaceWon• 8 years ago

Perhaps there is a free way to get more users (or a cheaper way). Why don't you post how you are currently getting users and Ask HN if there is a more economical way.

yosho• 8 years ago

Your profit should always cover your customer acquisition cost. If it does, congratulations keep spending and grow the customer base and start scaling. If it doesn't, refine your business model and keep iterating until it does. It should never be a catch-22 really unless you're doing it wrong.

markfer• 8 years ago

Most successful SaaS companies operate on a payback period of less than 1 year. Aka spend $100 today, and you'll get $100 from the customer within 10-12 months. After that, it's all profit, which works out really well if your churn is low and users stick around for 48 months.

tejcirkulate2• 8 years ago

"To increase users, we need to spend more."

Its great that you left the sentence ended at "more" because generally the answer isnt in spending more money, its about discovering those channels that help you get your message and value prop to your target audience at very low cost. Ideally, the cost should really be "time" in that you should be able to spend more time on discoverig the channels than spending money(ads for eg) on such discovery.

My opinion veers towards revenue and hopefullly from existing customers rather than new users because its less expensive, you already have a relationship and a strong basis for this relationship is the value you are already adding for them.

tejcirkulate2• 8 years ago

One more thing I wanted to add is that it sure does look like a catch-22 but the counter-intuitive thing here is that you cannot solve for revenue by gaining more users.

Revenue is a lagging metric that is a result of many things that you do in the business. You could increase revenue by increasing MRR by improving retention,reducing churn. You could increase expansion MRR by increasing value add for customers that enables you to translate that into upgrades/upsells.

Mostly, increasing users via acq only works when you have strong retention and thats a product problem, not a marketing problem.

I would suggest the Lean Analytics book to understand this in more detail and also this 6 part series from Social Capital.

https://medium.com/swlh/diligence-at-social-capital-part-1-a...

Ask HN: Founders, how did you balance between increasing users and revenue?

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