If there is one thing I don’t think I excel at as a business man, it is making money. That’s probably not a good thing to admit publicly, but it’s reality. In fact, I’d argue that I’ve gotten worse at making money in the past several years as the third-party software market has bottomed out. Making money was hard enough selling $25-$40 products. Try doing it when your most expensive app is $4.99.
The first step towards recovery is admitting you have a problem, and this is one that I am working on this year as I am steering Glassboard towards its next phase of life. I have to. This was December and January’s membership revenue and operating expenses:
I won’t share the exact dollar amounts, but yikes, right? If there’s any solace in those numbers, I was able to make a decent amount of progress between December and January in cutting costs and raising revenues.
Making money is harder than it seems. Most people assume you put a product out and people instantly find and support it. The reality is that for most products, they first struggle to find an audience, and secondly struggle to find an audience that’s willing to pay.
I have an inherent advantage by having a decent online following, which gives me nice starting ground of users to sell my wares to, but that’s by no means a guarantee of success. The goal of making money is to convert people outside of that base into paying customers. That is a problem I’m hoping to solve sooner rather than later.
So, how do I get good at making money? There’s a few different ways I can approach it.
Use Someone Else’s Money
This is what I’d argue is the ‘standard’ way of doing things when you are running a multi-platform service such as Glassboard. You spend a decent amount of time building a pitch deck and shopping it around to a variety of venture capitalists who will hopefully provide you with enough money to give you the resources you need to grow.
This is the least appealing to me for a variety of reasons.
For one, raising money is a full-time job and any time I spend running around begging people to write me checks is time I’m not spending on the product. Second, I don’t see it as a good fit for the type of business I want to run. Venture capital is for people who want to grow something to Instagram or Tumblr levels. Getting funding for something that VC typically (and insultingly) refers to as a “lifestyle business” is far harder. Glassboard, by design, isn’t designed for those insane levels of scale.
And finally, I’m personally averse to the whole racket of venture capital. Entrepreneurs are the new labor, especially when old guys with money are funding the sweat of someone who gets to put “founder” on their business card. I’d rather not participate in that.
VC is a nonstarter.
The easiest way to make money is to spend less of it so that your monthly profit-loss is heading in the right direction. By cutting costs, it’s easier to approach the break-even or profitable point.
This is the way I have been approaching Glassboard so far into my tenure. The existing service had quite a bit of fat on the edges that could be cut without impacting the service in a negative way. Some of the things I did were:
- Negotiate a new plan with Sendgrid to account for how much email Glassboard sends on a daily basis (well into six figures). This 30 minute meeting shaved over $1000 a month off my monthly expenses.
- Disable email on any board that has over 200 members on it. There are not many of these high traffic boards, but they accounted for a heavy portion of our email traffic. I’ve had maybe 2 complaints about this since I changed it six weeks ago.
- Optimize Glassboard’s Azure Cloud Services to dynamically scale the amount of instances it needs based on how much traffic is coming in. This shaved about 40% off the CPU costs on my monthly Azure bill.
There’s still plenty I can do to cut costs, but that only solves a small portion of the equation. None of the remaining items on that list are on the low-hanging fruit/quick win list.
The far more interesting opportunities are actually increasing the monthly revenue.
For apps increasing revenue can be done by raising your app’s cost, adding advertisements, or inserting some sort of in-app purchases. Every app is different, so it’s hard to offer a single prescription for success to everyone. I can only speak to my use case.
For Glassboard, this is the hard nut to track because I’ve got tens of thousands of users who have been using a service for free that I have to figure out how to bring revenue in from.
One of the first things I did was lower the cost of a Glassboard Premium subscription from $50 a year to $25. There was no science behind this decision other than me personally not being willing to pay $50 a year for the service. $25 sounded much more reasonable for the existing offerings.
I also added the yearly premium subscription to the iOS app as an in-app subscription, so that it’s easier for people to support the service.
Neither of these changes set the world on fire. I sold more Premium subscriptions in two months than Glassboard sold in its previous two years of existence, but it was also at half the price.
The more interesting metric I discovered was how many people weren’t even aware Glassboard had a paid offering. Since people primarily access it through the iOS and Android apps, they had never been prompted to pay for the service. I had more than a few complaints from people about adding the premium subscription as an option in-app. These are the folks I assume will never be customers.
There’s still plenty of existing users to try and convert to paid, but $25 a year is a hard sell in 2014 when $1 apps are seen as the new Premium. The next phase is experimenting with different business models and ideas as I try to get better at making money.
I’ve got a few ideas. Now to just build them out and measure the results.