Steps To $5,000 In Monthly Recurring Revenue

http://blog.statuspage.io/5-steps-to-5000-in-monthly-recurring-revenue

by dannyolinsky • 13 years ago

357 106 13 years ago

blog.statuspage.io

pallandt• 13 years ago

Good read, congrats on your success btw!

JeremyMorgan• 13 years ago

Somewhat broad, but good information. Congrats on your success.

pkamb• 13 years ago

Suffers from the classic "clicking big `statuspage.io` logo takes you to `blog.statuspage.io`" problem.

gregd• 13 years ago

I did this exact thing.

Wanted to see what statuspage.io was all about. Clicked logo and wouldn't you know it..they only blog.

stephanos2k• 13 years ago

I totally agree.

I always roll my eyes when that happens. And then there is a 50/50 chance I search for the actual link - if I'm REALLY interested I edit the URL manually.

drpancake• 13 years ago

I'm not an expert, but it's also better to use something like /blog rather than a subdomain, for SEO reasons.

http://moz.com/learn/seo/domain

weisser• 13 years ago

Dharmesh had mentioned it really wasn't that big of a difference either way. Personally I have no idea outside of a short exchange with him about it.

wasd• 13 years ago

I didn't know that. Thanks for that heads up.

petercooper• 13 years ago

It is, but bear in mind many companies have different architectures or even hosts behind their blogs vs their main site (or even product). For example, a Rails or Django app for the main site, PHP/Tumblr/Wordpress.com for the blog.

There are some proxying shenanigans you can do with mod_rewrite but I'd certainly not want a PHP-based blog anywhere near my main site/app if I could get away with it due to the security risks.

xauronx• 13 years ago

Yep! I always wondered if that bugged anyone else. I imagine the purpose of people spending the effort to blog and advertise it was to drive traffic to their company. Then I have to jump through hoops to get to the actual company's page.

dannyolinsky8• 13 years ago

Making the change.

yogo• 13 years ago

This is the most annoying thing about most blogs, and like others on HN I don't bother to visit the main page since I'm usually in reading mode (hand on mouse, away from keyboard). To their credit there is also an About StatusPage button (not sure if that was added after the fact).

vowelless• 13 years ago

Seems to have been fixed.

adamcanady• 13 years ago

In a bout of realtime support, it looks like they've fixed this now!

dylangs1030• 13 years ago

I'm glad this worked, so congrats on that. However, I don't agree that this is good, actionable advice.

1. Find a problem.

2. Get to hacking.

3. Soft launch.

4. Synthesize feedback, build more.

5. Expand the funnel (user acquisition).

6. Aha/Win/Rich/Yay

...That's the formula for any startup/technology service. It's literally those steps, a little individual secret sauce, and you win or you die (figuratively speaking). I know it worked for you, but things like

"In our minds, there is no better way to build a product that people want than to be the customer you plan to sell to."

...aren't very helpful. It's a broad characterization of how to put yourself in that mindset.

But in any case, good explanation of what you did for your own project :)

honzzz• 13 years ago

Exactly. The problem I see with these 'guides' is repeatability. You cannot just follow the steps and get there... the substantial part is missing. Find A Problem Worth Solving... well everybody knows that, right? Is anyone here intentionally trying to solve problem that is not worth solving?

I have to admit that I am actually little annoyed when I see title like '5 Steps to $5,000 in Monthly Recurring Revenue' because to me it seems a bit misleading. These are not really steps to $5,000/month... if they told me _how_ to find problem worth 5k than maybe that could be useful.

But this is like, ehm... do you want to be successful with the ladies? Here is one simple step... be awesome!

tracker1• 13 years ago

    Is anyone here intentionally trying to solve problem that is not worth solving?

You might just be surprised by that... I find this happens a lot in business, where they will do custom ground up development something that could be an extension to their existing ERP solution, or other off the shelf solutions already do better.

dannyolinsky8• 13 years ago

I agree that just reading the headlines of the sections themselves is meaningless. What we tried to do with the post is identify tactical things we did to increase our MRR. Things like personally reaching out to every user, hand-holding them through the sign up process, figuring out where they abandoned the product, identifying the core feature set to build from our first batch of signups, figuring out how to deliver value within 5 minutes of signup.

There's never going to be a do x,y,z and you'll make $5k since every business is different, but instead tips like ours from what we've seen work for us.

Agreed on the title, a better one could have been, 'Our 5 Steps to $5k in MRR' to clarify.

redguava4• 13 years ago

If there were defined steps that would always lead to success then we'd know about it and everyone would follow them.

There are so many variables that this will never be the case.

You can only read these types of guides and hope to pick out something that might inspire you or help you realise something that you're doing that you could do better.

jitnut• 13 years ago

you nailed it honzzz! somebody should just a content focused on the first step: how to find a meaningful problem to solve.

nish1500• 13 years ago

Why should a business model always revolve around solving a problem?

If you can solve the problem, then I can copy your solution, and solve it too.

But if your job is to take up an existing solution, and significantly improve upon it, I will find it very hard to catch up.

mijustin• 13 years ago

From the initial connections and users we picked up from the post, we were able to convert 20 users into $50/month paying customers.

On first take, I was surprised you were able to pick up 20 paying users just from an HN post.

But then I went back and read the first part:

First, being in the community, we had a bunch of friends that were great customer candidates.

It would be interesting to know the breakdown for those first 20 customers: how many came from personal connections?

scootklein• 13 years ago

anecdotally, probably half and half. even personal connections can be slow and are super busy :). the other 10 were cold signups that surprised us, but enjoyed what we were doing.

nawitus2• 13 years ago

I hope those pseudo-personal emails don't get more frequent. I don't need more "spam", and it makes me feel a little rude not answering direct questions in an email.

dannyolinsky8• 13 years ago

Hey nawitus, thanks for the feedback. From what we've seen so far, the majority of signups have reacted positively to the personal emails. Usually, there's some type of question that we can help out with off the bat.

nawitus2• 13 years ago

I haven't signed up with you, as my comment was more general in nature.

jhuckestein7• 13 years ago

The best part about their $5,000 is that most of it will be profit.

I'm pretty happy with my own SaaS application, but because I provide a telephone service I have pretty low margins. This is by far the most annoying thing about my business (it affects me more than taxes), especially considering that it would have been just as much work to make a SaaS with negligible marginal costs.

The lesson is, if you have the choice and don't want hypergrowth + venture funding, provide a service that costs you next to nothing to provide. Another disadvantage of providing a service that has high marginal costs is that your bigger competitors will usually be able to outprice you. If all you need is a few servers, you can differentiate based on product alone and charge accordingly.

ChuckMcM• 13 years ago

   > The best part about their $5,000 is that most of it will be profit.

How do you reason to that statement?

thesis• 13 years ago

There are lots of telephony services out there with great margins.

josh260013• 13 years ago

Telecom geek here: why do you have low margins?

Where are you buying your DIDs and Routes? What switch are you using?

I'd love to help, I literally eat sleep and breathe this stuff. There's no way your margins should be skinny unless you're playing LCR games, in which case you make it up on volume.

Source: I work at 2600hz, the bootstrapped open source telecom cloud company. We've bootstrapped to 30+ employees on a pure telecom business so I have some experience here.

sologoub• 13 years ago

What margin range would you consider healthy?

jhuckestein7• 13 years ago

Nice, I'm a big fan of 2600hz!

I'm currently on Twilio's first tier volume discount (I assume there's further volume discounts that aren't on the website), paying .8 cents/min IIRC.

I looked into buying voice minutes and DIDs and running my own freeswitch boxes. Any provider that had listed prices charged upwards of .4 cents/min or had unlimited minutes per DID with a $4 or something fee per channel. A lot of them also limited the number of channels on a DID.

Another reason I have low margins though is because my free plan and free trials also cost me real money. There is no way I can get around that.

While we're at it: Another reason I looked into self-hosting was because I'd like to host conference calls with up to 5000 participants (think earnings calls, public forums, classes etc), most of which are mute. THAT is a high margin business, with companies charging up to 20 cents/minute/caller for those kinds of calls. I read this may be possible with freeswitch on beefy hardware. What do you think? Do you know any way I could get around hosting my own freeswitch servers, load balancer, redundant backups etc?

pc86• 13 years ago

I was just thinking about 2600hz the other day! I've recently started learning Erlang and you're one of the few startups I can think of that uses it (I'm sure there are some others, though).

borplk• 13 years ago

Hey since you mentioned you ear sleep and breathe this stuff I thought I'd ask a question.

Do you know how easy/hard it is to start a "international calling card" service?

I see lots of random ones popping up every day and they mostly look unprofessional so they remind me of email/web-hosting resellers.

I was wondering if reselling "international calling card" is a thing? or do you actually need your own infrastructure?

I was hoping that I can resell these services and make some passive income that way (I can directly market to low-competition markets in my home country).

vladd• 13 years ago

The best part about their $5,000 is that most of it will be profit.

There are significant fixed costs associated with the development they did so far. I doubt $5,000/month would break them even considering just the salaries and office expenses such as rent.

beat2• 13 years ago

$5000/mo won't pay salary for one mid-grade programmer in flyover country. The important thing isn't the current value, it's the rate of growth (and the increase in the rate of growth).

jhuckestein7• 13 years ago

To clarify: My point is about the marginal cost of providing a customer with service. It's not useful to talk about a certain amount of recurring revenue if you have terrible margins. I could start a business that gives you two dollars for every dollar you pay me and reach $5,000 in monthly revenue in no time at all!

rexreed6• 13 years ago

Exactly. You could also make $1M tomorrow by selling gas for $1 a gallon. You'd have more customers than you'd know what to do with. But you'd lose $2M in the process. Many entrepreneurs confuse revenue with income. Positive revenue does not mean positive income. There was a good article on this regarding Ecomom's demise as a company because, in their case, getting more revenue meant necessarily incurring more losses. They didn't realize it until it was too late. They were better off not selling anything at all rather than selling something that increased their losses. In many ways, it wasn't a business. It was basically a charity where they subsidized the cost of a product for their customers without any upside for them.

agwa• 13 years ago

I'm a bit of a telecom geek (though josh2600 undoubtedly knows more than me, as he works in the industry), so I decided to check out your startup. I agree you should have nice, fat margins. Remember, you should be setting pricing based on how much your customers are willing to pay, not how much it costs you. For that reason, I think you should segment your plans based on max number of participants, even though this probably costs you nothing. I would think that this would be the best way to segment out customers willing to pay more: if I'm a small business or a freelancer, I'm not going to have many people on my conference calls, but if I'm a larger business with deeper pocketbooks, I'm going to have large conference calls and thus be driven to the more expensive plans. Even if your software isn't ready to enforce the limit, consider adding it to the pricing grid anyways to see if you get more signups on the bigger plans.

Your lowest plan also feels too inexpensive to me, especially since those customers are probably responsible for a disproportionate number of support requests.

gridspy• 13 years ago

The grandparent runs (https://www.hipdial.com/) about which the parent and I are talking.

Those plans are far too lean.

Also, I don't understand what a "local line" is when I go directly to your pricing page. I also don't understand what a "toll free line" is. Specifically I don't know why I need 5 lines.

I don't run a pure SaaS (http://gridspy.com) but $9 / mo? These people are not employees. They have profits. We had to fight the same tendancy to offer unrealistically low prices.

Your typical "professional" will bill $80-$200 / hr while on the conference call. They'd swallow $40 +

You probably don't need a free plan, though you might want to consider a prepaid one. Bill on minutes or something. I'd consider eliminating it entirely.

Team should be about $200 and business you should be thinking $1000 / month plus.

I also think that segmenting based on max people per conference makes a lot of sense. It would also be simpler to bill based on "number of conferences" rather than "number of minutes" and trigger a new "conference" when a call extends beyond 1 hour.

Higher prices should support more marketing work. You'd be surprised - higher prices will make your clients think that your product is more valuable and thus more likely to try it out.

You've also got a viral element. Your users are telling others about you (to invite them to the conference). Ask them to put each person's phone number and email addresses into the system so you can send reminders to each participant before the meeting.

In those reminders, I suggest you offer a "coupon" for 1-5 free conference calls to that guest. You might only want to do so if the guest has an email from a different domain. Monitor for abuse. This will help you get natural viral marketing underway.

Another alternative is to build a followup email after the conference ends that has details on who joined the meeting, how long they talked, a downloadable recording (?) and their contact details.

I hope this helps. It looks like you have a nice product.

redguava4• 13 years ago

Don't underestimate the costs of running any SaaS application. You'll still have decent expenses for:

- Fees to receive payments

- Hosting

- Support services (github, zendesk, etc.)

- Your own salary

I'll bet that not much of that $5k is profit.

secondmod2• 13 years ago

Thanks for sharing. I wrote similar post here on HN sometime back, would like to share here to add value :

After 30 days of launch, I managed to get 7000+ active users, about 100 paying users and $6129 in revenues.

My learnings : 1. Build your first main feature really well

2. Dont launch with 100s of features, keep the product simple

3. Make sure to have some influencers on your board as users from day one and make them super happy

4. Use tweet button very smartly - this is make or break up for your side project

5. Dont hurry up into making money, let your users ask you for more feature and then roll out paid features.

Shared here : https://news.ycombinator.com/item?id=5600281

vincvinc• 13 years ago

4. Use tweet button very smartly - this is make or break up for your side project

Could you explain this a bit more?

secondmod2• 13 years ago

Whenever I build apps, along with giving best possible product, my focus is always on K-factor (http://en.wikipedia.org/wiki/K-factor_(marketing)).

Viral Factor, K = No. of invites X Conversion rate

As long as, K >1, your app is growing. And best way I figured out to do that was to make people tweet and make that tweet provoking enough to let her users click on that tweet. Example, I encourage people to boast about number of repins or followers they got because of Pinwoot and tweet reads something like : 1) I got 954 repins on #Pinterest using @Pinwoot. Add your pin here https://pinwoot.com

2) Try @Pinwoot.com to get free followers on #Pinterest https://pinwoot.com

Tweet Copy 1 performed 267% better than Tweet Copy 2 in getting new users.

brandnewlow• 13 years ago

The StatusPage folks are executing incredibly well on adressing a tangible pain point. It's been a lot of fun to watch.

7Figures2Commas2• 13 years ago

statuspage.io might have a great product (I'm not a customer), and I can see the value in some of the things they offer (like the ability to pull in data from third party monitoring services), but if operating a useful status page is a "tangible pain point" worth paying $79/month plus for, Silicon Valley is in trouble.

I appreciate that companies don't want to build everything, nor should they, but pushing every piece of non-core functionality onto a SaaS is just insane. The worrisome thing for many but not all of the SaaS startups primarily targeting other startups is that when the next downturn arrives, the number of companies eager to spend hundreds/thousands of dollars a month on a portfolio of SaaS services for just about every function will likely decrease substantially.

redguava4• 13 years ago

If I build it myself, it will cost me a lot more and be a lot worse product.

This is their area of expertise, their passion and their business. They'll make a better status page than I would.

t0• 13 years ago

Can this strategy be duplicated? It seems like your main traffic source has been press coverage, but that isn't something that you can plan to have or rely on. Would you have gotten this far otherwise?

dannyolinsky8• 13 years ago

I'd say most of the strategy can be duplicated with the right founders. The only significant mainstream press we've had was the TechCrunch article and while it for sure helped out to accelerate growth, I think we would still have hit $5k a couple months later without it.

csomar2• 13 years ago

For Passive income dreamers, I think it's important to mention

1. This is revenue, not profit.

2. 3 guys. So $1600/person.

3. Seems like they don't have jobs (means taking this full time, probably with consulting).

Still a pretty good job, and I'll be interested to see their growth.

stevenklein• 13 years ago

We've averaged about 18% week over week growth for the past few months so we're well on our way to being profitable before the new year..even with a decent amount of slowed growth. Here's to hoping it keeps up!

csomar2• 13 years ago

I'm not critizing your business model. I think you are doing good. However, I'm interested in passive income streams. This is not one, and the title (while not misleading) gives the impression that it's a blog post about a passive income stream.

So it's simply a note to Passive income dreamers.

stevewilhelm• 13 years ago

Just marked my calendar to check back and see how statuspage.io is doing in a year's time.

KMBredt• 13 years ago

You could just subscribe to their status-page located here: http://meta.statuspage.io/ ;-)

applecore• 13 years ago

I'm impressed that a soft launch[1] brought in twenty users on a $50/month plan ($1,000 MRR.) They really launched with a solid product.

[1] https://news.ycombinator.com/item?id=5401470

ddewaele• 13 years ago

Nice write-up.

When did you guys actually started working on this and how did you transition from a day-to-day consultancy mode (no doubt bringing in a multitude of that $5000 revenue) into working on this full-time. Your blog posts don't seem to contain a creation date :)

Did you fund the initial development with your own savings or did you get angel investors on board early on ?

I can imagine that after taxes and deducting costs there is little or no profit left but it's a great psychological barrier to cross !

I wish you guys the best of luck ! Great idea and great to see people using it (and paying for it)

dannyolinsky8• 13 years ago

Thanks for the comment. Work on the product started in October with a 3 week on product vs. 1 week consulting model (http://blog.statuspage.io/funding-your-startup-with-a-one-we...).

rexreed6• 13 years ago

Going from zero to $5000/mo is definitely great as that means you've created some value somewhere. But $5k is not really sustainable as a business for three people. It's a great side-job for one person, or good total income for one person who lives in a low-rent / low-cost area.

But for a team of 3 people, you can do much better than $5k just selling your time in consulting.

It's not clear how you'll get from $5k/mo (nice side-job income) to $50k/mo (Good bootstrapping income for team of 3) to $500k/mo (ok, now you have a business that scales).

I'm not being critical here -- It's just that SaaS math has me scratching my head wondering if all that work for all those customers with such small amounts to show for it is worth it.

Would you rather service 200 people for a total of $5k a month with 3 bodies to support or one solid consulting customer @ $5k+/month with just yourself to support?

I'd imagine that you'd want more revenue so you can have a business and not just lifestyle income to support one person. Going from 0 to $5k is one thing -- the advice here is good for that. But getting from $5k to $50k, where you need to be to have sustainable business for 3 people, will require much more substantial effort that's not clear you can achieve with these methods. Indeed, it is not even clear what your margins are at the $5k/mo revenue point and whether that will even be sustainable given the amount you'll need to spend on Customer Acquisition, Customer Support, and slaying the Customer Churn demons to retain your necessary high monthly subscription rates. This is where most SaaS companies die -- trying to achieve this necessary transition.

bryanh• 13 years ago

This comment, though polite, is quite dismissive of their accomplishment. I think you read the post and wrote your comment as if the $5/mo was the goal. Going from 0-$5k/mo is a huge step towards their very clear goal of building a larger business.

rexreed6• 13 years ago

I agree, and I don't mean to be dismissive. The point of my comment is that the post here is useful to get to $5k/mo, which is certainly laudable and better than many can do, but unfortunately it won't help much to get to the larger business goal. Indeed, many SaaS companies die precisely at this stage - they have decent single-digit thousands per month revenues that can't really support the business and have trouble making the transition to the larger, and necessary, double-or-more digit thousands per month revenue. Which in many cases is not even possible given the constraints of the market, churn rate, acquisition, and support costs.

jhuckestein7• 13 years ago

The point of recurring revenue is that you don't have to work to earn the $5k each month. Depending on how long they have been working on this, it's definitely a good investment of their time. If they wanted, they could now go and consult (at a higher rate) AND get a small pocket money each month.

rexreed6• 13 years ago

Unfortunately, for these sorts of SaaS businesses, the income is rarely passive in nature. Startup companies, which form part of the basis for the market for this app, have a naturally high churn rate. This means that you need to acquire customers continuously just to keep up with churn, and higher yet to achieve growth.

These needs for high acquisition rate drives up high customer acquisition costs, which eats at the margins. $5k in revenues is good, but the profits are not mentioned. Going from $5k to $50k will not scale margins linearly. Indeed, the need to multiply customers by 10 will necessarily increase customer acquisition costs (low hanging fruit will no longer be available) and increase overall churn (the "natural" churn rate applies).

If you wanted to make money in consulting, it certainly would be easier to just offer consulting services, and both margins and sustainable revenues would be higher. Perhaps you can use your SaaS app as a consulting marketing tool, but I don't see this app being used that way.

dannyolinsky8• 13 years ago

As bryanh mentioned, $5k isn't the goal. It's the first milestone. Agree that getting from $5k to $50k will be a completely different undertaking so you'll see another post like this one once we get there

rexreed6• 13 years ago

Thanks for the response and kudos to you for making it to this point.

What I'd be curious to learn is your margins, customer acquisition cost, support cost, and churn rate. And how this changes as you go from $5k to more than $5k/mo. This is where most SaaS companies falter.

If you can, you should talk about how you plan to market to reach the larger required revenue rates. This will necessarily require higher customer acquisition costs as your lowest hanging fruit will be quickly exhausted.

redguava4• 13 years ago

Any SaaS company that is making $500k/mo was earning 5k/mo at some point.

Just because they've decided to share their story so far, doesn't mean they think they've hit the jackpot already and are finished.

peterjancelis• 13 years ago

True, but $5K recurring with predictable funnel and churn also means freedom, even if split by 3 people.

Depending on what you decide to do, it can mean any of the following:

- Paying the rent/mortgage and good food on the table. Nothing fancy but you'll survive even in the Bay Area as long as you live together.

- Ability to be picky with consulting clients or invest in longer sales cycles.

- Living in luxury on a beach in SE Asia while you figure out how to bootstrap the business.

All of the above are pretty fantastic imo. Not a finish line by any means but way more optionality than 98+% of the population.

timharding• 13 years ago

Fascinating. Thanks for the post. Not sure what your unfair advantage is here, perhaps being part of the community?

What barriers do you have to competition from a one or two person company w/ lower costs?

This is an excellent talk about what it takes to get out there and find the set of customers outside this bubble that will get you to $50k/mo.

http://businessofsoftware.org/2013/02/gail-goodman-constant-...

shimms• 13 years ago

Wow the negativity here is astonishing. $5000 recurring revenue is an amazing accomplishment, and something that most startups never see.

Kudos on this achievement, for taking the time to share it, and for the hard work behind it.

Wishing you guys the best of success in getting to the next milestone.

dannyolinsky8• 13 years ago

Much appreciated shimms.

originofspecie• 13 years ago

Call me a jaded but 60k a year in revenue isn't won't pay the mortgage or put food on the table or clothes on your back. And if you wanted all three... forget about it.

skeletonjelly• 13 years ago

As we continue to grow and hopefully reach $25,000, $50,000 and $100,000 in monthly recurring revenue

wusatiuk2• 13 years ago

I also think that this is another awesome example how it could work including the steps you should go. There are thousands of ideas out there but most of them never go productive because out of whatever reason so you guys, as all other startups with paying clients, have my biggest respect.

Jamie452• 13 years ago

So who fancies giving me a pain point which I can get on with?

That's my pain point.. trying to find a pain point to start developing!

philhill• 13 years ago

So you started charging for the service very early (almost day 1). that's not the traditional startup approach of build a biggish user base, work out the product beyond MVP and then monetize. I like hearing you got to rev early so props but is there a downside to future growth (even in the short term)?

Steps To $5,000 In Monthly Recurring Revenue

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