
Steps To $5,000 In Monthly Recurring Revenue - dannyolinsky
http://blog.statuspage.io/5-steps-to-5000-in-monthly-recurring-revenue
======
jhuckestein
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.

~~~
josh2600
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.

~~~
jhuckestein
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?

~~~
patio11
_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._

Have you considered rolling back or sharply limiting your free trials? With
the exception of people you've made commitments to, if they aren't
accomplishing a business goal for you, you don't owe the world them. There is
nothing intrinsic about SaaS that says there has to be a free plan.
(Additional options: aggressively using the free plan as a viral spread
mechanism. Your free competitors do this, as I learned the other day when on a
sales call organized by somebody who would have happily dropped $50 to remove
the external branding _for that single phone call_ if they were aware of your
option existing.)

We also run on Twilio, and have a 30 day free trial with CC required upfront.
While we still have marginal expenses to service free trials in a way that
many SaaSes do not, the costs are not terrible and easy to justify as a cost
of customer acquisition. (We shoot for, and mostly get, 80%+ margins on the
paid plans.)

If you're ever in the mood to chitchat about this, drop me an email. I'd be
happy to share about how e.g. moving a bit upmarket and doing a bit of
enterprise sales has worked for us.

~~~
josh2600
Quick question: Do you have some kind of monitoring setup on HackerNews for
the keywords "Free Plan" or "Free Trial" or are you just that active? You
always get to these topics so quickly.

Thanks for chiming in!! :) I always find a lot of value in your advice.

------
rexreed
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
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.

~~~
rexreed
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.

------
dylangs1030
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
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!

~~~
dannyolinsky
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.

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

~~~
drpancake
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](http://moz.com/learn/seo/domain)

~~~
petercooper
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.

~~~
mercer
That's pretty trivial to do with nginx though, isn't it? I have a server that
can run php on certain subdomains AND folders, node.js on others and I suppose
ruby would be pretty easy too.

In fact, on one domain nginx sends part of the traffice /static/ directly to
that actual directory, and anything else gets picked up by node.js.

Or is what I'm doing really stupid? I'm not currently running anything
significant on my servers, and this is not my primary domain of interest, so
I've never checked how risky my setup is. Maybe you could tell me if that's
the case?

------
secondmod
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](https://news.ycombinator.com/item?id=5600281)

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

Could you explain this a bit more?

~~~
secondmod
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)](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](https://pinwoot.com)

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

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

~~~
DanielRibeiro
Don't forget viral cycle: [http://www.quora.com/Viral-Growth-and-
Analytics/What-is-the-...](http://www.quora.com/Viral-Growth-and-
Analytics/What-is-the-definitive-way-to-calculate-viral-coefficient-for-a-
social-game)

------
shimms
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.

~~~
dannyolinsky
Much appreciated shimms.

------
mijustin
> 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
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.

------
csomar
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
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!

~~~
csomar
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.

------
applecore
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](https://news.ycombinator.com/item?id=5401470)

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

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

~~~
7Figures2Commas
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.

~~~
redguava
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.

~~~
7Figures2Commas
> If I build it myself, it will cost me a lot more and be a lot worse product.

Your status page is _not_ your product (hopefully). If you run an online
service, the purpose of a status page is to inform your customers of downtime
and other issues that may affect their use of your service.

Like I said, I am not questioning whether statuspage.io has built a better
status page than what most companies would be motivated to build themselves.
What I am pointing out is that spending $xx or $xxx each month on a SaaS for
every little piece of functionality you don't want to build internally adds
up.

As for the costs of building internally, I would suggest that a half-decent
engineer could build a _satisfactory_ status page with email/SMS notification
functionality in 2-3 days. If you want to be generous and say it would take a
week, and your engineer is paid $110,000/year (~$2300/week), you're still
ahead of statuspage.io's $249/month plan, which costs $3,000/year and limits
you to just 2,500 subscribers.

If you operate, say, an API that is critical to your business and keeping
consumers of that API informed about status is important, there's no reason
not to invest engineering time in owning the status page functionality. On the
flip side, if your status page isn't all that important, paying $xx or
$xxx/month for a robust status page service instead of, say, rolling a status
page of your own using [insert popular open-source CMS of your choice] doesn't
make a lot of sense.

------
ddewaele
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)

~~~
dannyolinsky
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...](http://blog.statuspage.io/funding-your-startup-
with-a-one-week-on-three-weeks-off-setup)).

------
timharding
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-...](http://businessofsoftware.org/2013/02/gail-goodman-constant-
contact-how-to-negotiate-the-long-slow-saas-ramp-of-death/)

------
pallandt
Good read, congrats on your success btw!

------
nawitus
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.

~~~
dannyolinsky
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.

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

------
philhill
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)?

------
wusatiuk
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.

------
t0
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?

~~~
dannyolinsky
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.

------
Jamie452
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!

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

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

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

