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Ask HN: sideproject, generating revenue & profit what's next?
46 points by wasigh on March 18, 2011 | hide | past | favorite | 34 comments
Let me first give an introduction. I'am a 30 year old dutch software developer working at one of the largest internet companies in The Netherlands. My wife is a Highschool teacher, teaching Dutch language to 13- 15 year olds. Almost 3 years ago we build a website for here students to use. After a few months it took off and visitors are climbing. From our stats we see that a lot of schools are using it. We got good media coverage and top-5 rankings in google for important keywords. The succes came as a surprise to us and we decided to create a business out of it.

We provide 250 free exercises and since a year we also provide subscriptions: personal subscription (5 euro / year) and classroom subscription (35 euro / year). With a subscription customers have access to their performance report and a few "member-only" exercises. With a classroom subscription a teacher can see the results of their students, look into the exercices they made and what mistakes they made. And some other extra functionality.

All this functionality is primarly used & tested by my wife and her class. For us it is a sideproject; it is generating revenue & profit, a couple of hundreds a month. Enough for me to cover my hosting expensives, and working less hours at my day job.

My wife is very clear: she is a teacher and wants to teach. She doesn't want to persue the business fulltime. Also she is pregnant with our first child. So technically: I'm the one running the business and my wife is my biggest (& most influentual) customer.

I'm not sure what to do next: we have a few hundreds a month and I would really want to grow. So I can work even less at my day job and more on our project.

But we have a hard time figuring out how to scale:

* Selling to schools is hard, even more without dedicated sales. With keeping the price low we think it's easier for schools to buy. * The succes of the website started with the free exercises and quality content. We got a lot of free press with that. We don't want to risk our name with making it all premium content * We don't want to run advertising as it would distract students, and make schools don't want to use it anymore. * I work at the website besides my main job, doing all the coding and administration stuff * My wife doesn't want to sell (the website is tied to her lastname) * We are anxious to get outside funding, we want control over the project ourselves * We are afraid to charge more (risk of losing customers) * We only want to go into different subject when we can find good teachers who can create quality exercices.

Sofar the options are to creat more verticals (we need subject experts there) or create a better site.

So what to do? I would really like more time to develop more functionality. We get a lot of e-mails asking for different kind of exercises. Which I simply don't have the time for to develop. I feel we are an unique team: teacher and softwaredeveloper working together. I think we have a great oppertunity to create a big product. Good software is a huge gain for edecution.

But I don't know how to execute on this oppertunity, any tips?

Hey wasigh, I'm in a similar situation, developer w/ teacher wife and education business. Two most important things I've learned:

1) You can sell to schools, but not by "selling" to schools. Instead sell to the teachers and they'll sell to the school for you. There are lots of ways for teachers to get schools to pay for stuff they want (grants, discretionary funds...). If you create a great product one teacher will tell another and before you know it a group of them want it and they'll pitch their principal.

I sold to 15 or so schools last year (big, small, public, private) and every one of them started with the school contacting me. I realize 15 is not a lot, but total time I spent on those sales was maybe 10 minutes and $0 each. I replied to emails, setup accounts and generated invoices.

2) As a developer you're going to want to solve the scale problem by coding. You need to fight this.

Take the money you make and buy adwords - they work (http://pseudocoder.com/blog/my-adwords-spending-for-2010)

Talk to your customers constantly - make incremental improvements based on their feedback. Only when there is overwhelming demand add a new feature or in your case expand to a new area.

Do more SEO. You're top 5? Not good enough. The difference between #1 and #5 is huge. Figure out what keywords make you the most money (might not be what you think they are) and attack those.

A final note (this one is tough and I'll try to be tactful). In the end your wife (however awesome she was in getting the site started) is just a user. If she's not interested in the business side then you need to take ownership. That means you may make changes without consulting her and that are unpopular with her that are better for the rest of the community.

Email me if you want to discuss anything offline.

Thanks for the reply:

Currently most of our sales to schools go to teachers (that's why we keep the prices low, a teacher might even be tempted to pay by themself. We sold to over 40 classes.

I'll follow up on the invitation and e-mail you shortly!

Some random thoughts:

- Don't sell to students, sell to parents (apart from the schools of course). They are more motivated to than children to pursue good grades and they have money.

- Charge more. If you lose users, so what? You've only lost the ones that you can't make money from in the first place. (although I see that you've raised the price already).

- Your wife doesn't sound committed. No selling the thing (migrate to a new domain now to get rid of the name association, what's the problem?), no charging more out of fear, fear of losing control. If it's a hobby for her, and you want it to be more, you have a problem. Solve this first.

- Find subject experts on a profit-sharing basis if you don't want to invest any money (although seriously at your age and your household makeup, 5000 euros should not be a major problem and it would get you sufficient content for 5 different subjects).

- If you will work 4 days after your baby is born, you'll have even less time than you have now to work on this! This one day will be full-time babysitting unless you take her to day care, which I presume you'll only do for 3 days a week!

- The way your website is structured, it doesn't seem to be easy to expand into different subjects.

- The 'original' website (with the free content) looks like a 1997 Geocities page. It also doesn't make many attempts at upselling, apart from some small links to the premium version.

- Have you tried calling schools, or the associations your wife is a member of? If she uses it, ask her colleagues why they don't. Then fix those issues.

Wait, looking further either you've obfuscated most of the info in the post, or I've been looking at the website of your competitor that offers exactly the same functionality. If it's that last one, you could look up his turnover at the KvK to estimate his market share. He seems to have had quite a bit of press coverage too, so if he can't turn it into something big, either he isn't trying very much (quite likely) or it's really a hard market (also likely :) )

I guess you looked into my competition: cambiumned.nl or extraned.nl? The main purpose for us to start our site was because the geocities like of those sites.

I guess you nailed it here: - Your wife doesn't sound committed. No selling the thing (migrate to a new domain now to get rid of the name association, what's the problem?), no charging more out of fear, fear of losing control. If it's a hobby for her, and you want it to be more, you have a problem. Solve this first.

We must decide if it is hobby or business :)

Yes that's the one - I guess another remark is that your SEO needs work :)

For 2.50 you can get his yearly accounts from http://www.kvk.nl/handelsregister/zoekenframeset.asp?zk=0... - that should give you some insight into the amount of customers he has and how viable the market is.

Ranking higher is hard, those sites have been around for ages.

We rank quite well on: "Nederlands oefenen" & "Werkwoordspelling" for example.

I don't know if he is obligated to send his yearly accounts to the KVK?

Getting more info on the marketsize is a good tip :)

Depends on how he's incorporated, as an 'eenmanszaak' he's not.

Perhaps a quick chat with patio11 would help here? I can't imagine a more appropriate HNer for the kinds of questions you have. He has been thinking about the education market for quite a while. He has long advocated finding freelancers who you can pay to build up content. What about hiring some freelance subject experts to build questions for you? That removes at least one burden to expansion and lets you trade money for time. Along those same lines, you might focus your energy on automating as much of your maintenance as possible so that you can focus on developing novel stuff. Maybe even hire a freelance web developer to do some of the more boilerplate stuff so you can focus on the truly unique stuff.

) Read every single business-related post at patio11's blog [1]. That is great advice for any startup (due to the quality of the content), but for a startup selling to educators? Unmissable. In case you are unaware, patio11 is extremely popular on HN (for varied and valid reasons), and he runs a website which sells bingo cards to teachers.

) Agreed re: adverts - as a user, I would be annoyed that I am paying for your site and still seeing ads.

) Try outsourcing the creation of new material - the more subjects you cover, the better. There are many freelance where you can find teachers in various subjects, and your wife can act as "quality control".

) Use Adwords to bring more people to your site

) If you are specifically targeting Dutch schools, maybe creating a Hyves app will help? (Unless that is your employer :D ) [1] http://www.kalzumeus.com/

) Perhaps try to attend some startup groups in the Netherlands? I live in Amsterdam, I should try and find one too... maar mijn Nederlands is niet geod.

If you want to develop you're Dutch skills I have the site for you :) Our site is used a lot by non-native Dutch. I have some connections to startups in Amsterdam. Maybe I can introduce you to some.

Sure thing - my email is in my profile.

1. Don't give up your day job until you're making 10x what you are making now. Right now, you are likely not heavily taxed on that income, if it becomes your main source of income, you will.

2. Can you turn your day job into a 3 or 4 day a week job?

3. To scale: yes, free quality content attracts users. You need to find out ways to create that in a sustainable way.

Good luck!

Tnx, i'm working 4,5 days now. When the baby is born I will be working 4 days. Getting from the current income to 10x at the current grow rate will take us 4 years at least.

Any advice how to make it sustainable?

If it is going to take 4 years to generate minimal income, then it's a hobby for now :) Look for ways to increase income. 1. charge more. Try it. Charge 4 euro/m, see what happens. 2. expand your market. more niches or more countries. Good luck!

Yes, that! If you can, take a sabbatical or a long holiday to focus on your business. It's difficult to give your best when your day job eats up your most creative hours of the day. He's right about taxation, but since it's your own business, there is no upper limit on how much you can make. Outsource the content business, recruit students and other teachers.

First, congratulations on making something people want. If people are requesting more exercises it probably means you have a user base that: a)cares about your product and b)wants to see it continue. Yes, going after schools is hard, but going after teachers may be easier. There was a HN post a couple of months ago about a student grading application someone here had created and in trying to sell it, he ran into similar difficulties with targeting schools. But what he was finding was that teachers valued his application enough to purchase it themselves, then they would tell other teachers at the school, and pretty soon the whole school signed on. I think you should focus on keeping your product at a price point that would allow teachers to purchase it themselves. Maybe even try to build in some social features that would encourage teachers to spread the word. Then, with the revenue, outsource content creation. Finally, once traction and revenue reach a point where it makes sense for you to leave your full-time job or hire an additional developer, add functionality that would appeal to entire schools or school districts. Also, congratulations on the little hacker on the way!

You've solved some of the hardest problems already - getting the initial traffic, a decent product, initial user base, and marketing. You need to work on profitability and market size.

I agree that you should keep the free exercises to keep traffic flowing to your site. Don't focus too heavily on these, though.

Without knowing much about your market or product:

- Estimate the size of your market. A back of the envelope exercise should help you estimate how many schools are in the Netherlands, how many classrooms at each school, how many students. That's your current market size. How can you expand that? Can you extend to universities, or to other countries in Europe? Increasing your market size gives you more potential customers.

- You need to extract more money out of each user. $5/user/year requires a huge amount of users to generate even basic profit. Can you offer a premium subscription, for $15 per month? $20 per month? Compare this to the cost of private tutoring for parents. Put high value material in the premium subscription. Offer a 7-day free trial of premium.

I think you've got a good opportunity, you need to monetize it.

To be blunt I think you can charge more for this product. €5 / month is more realistic. I would tie in a price hike with a bunch of new features and keep the free model going.

Years ago a friend of mine doubled the price of his software product and sales went up because it now seemed more professional.

Some ideas:

- which subjects make most sense to expand into (math, science, languages, ...) ?

- maybe there is an opportunity to have former teachers create exercises for you (as freelancers). They have a lot of experience creating exercises, after all.

- including subjects like math could make it easier to expand to other countries, though I don't know how different education systems are (maybe the UK, Germany, France would be interesting as they large markets but of course there are other factors like fragmentation of the educational system in Germany, for example)

- as someone else has already suggested make it attractive to invite your classmates to your website. Rather than offering cash maybe free months (after their current subscription period) or discounts if enough students from one class sign up would be an option.

- maybe offer more options to obtain classroom membership, e.g. sponsored by parents, more than n people from one class signing up, maybe even local businesses as school sponsors but that could have the negative side affects you mention about ads)

- maybe offer "gift" memberships and free months if a group of students sign up at the same time, things like that?

- would it be attractive to people offering private tutoring to have a "group" membership for their students (e.g. up to n students/year) which includes seeing results of their students) ?

- maybe including other subjects provides an opportunity to raise prices, i.e. charge separately for additional subjects but offer a "all subjects included" premium membership.

You have not included a link to your site (or I missed it ?), would love to take a look.

Good luck with your business (and your parenthood!) :°)

(I'm more of a developer who cough failed with businesses twice so my suggestions should be taken with a grain of salt)

Congratulations and it sounds extremely inspiring to hear someone is doing something about education. I would love to get into the education space but I can't seem to pinpoint an idea that's sustainable.

If you have a moment, I would love to have a chat about the challenges you faced when you first began and so on. I know you're still facing challenges but I think the fact that you've proven to get the initial traffic is a big win. I think one of the biggest proponents you can do is to get your customers to sell for you - get the parents to spread it to their friends and other parents.

feel free to DM me at www.twitter.com/wasigh

Maybe you could hook up with high school libraries. These are turning more and more into media-centers where school kids use computers during periods they don't have classes. Then you could scale up to a school-wide license. Oh, I'm Dutch as well, so at least we're talking about the same educational system.

I also like the idea of comparing it to private tutoring, which parents are definitely willing to fork out some money for.

Gather feedback from your current consumers, including students.

If selling to school is hard, sell to students. Maybe offer a little cash for referring their whole class.

Well if you don't think you can do it yourself maybe look for funding to hire some help? Did you get a change to read this today? http://www.ycombinator.com/imaginek12.html

Yes I looked into it, however we are not in the position to relocate to the US. And also imagineK12 looks very US orientated. While our product is very focused on The Netherlands. (and Dutch schools abroad)

You should try some collaboration with KhanAcademy . It's a non-profit measure but you can take out your basic expenses from it.

Do you have contact information?

Sure: DM me at www.twitter.com/wasigh

Side comment, but perhaps an important one:

"it is generating revenue & profit, a couple of hundreds a month. Enough for me to cover my hosting expensives, and working less hours at my day job."

It is generating revenue, it is not generating profit. This may seem like a subtle point, but it really isn't. Take the amount of money you make in your 'day' job, add in all the benefits your day job has as well (paid vacation? health care? life insurance?)

You mentioned your wife doesn't want to work at this business, so treat it like a one-person shop. Next you've got a hosting service, do you host on a virtual host? or do you have your own equipment? One of the nice things about things like EC2 and their ilk is that it aggregates a lot of operational costs that you can then consider in bulk (no need to depreciate equipment for example). Presumably you have your own computer (or computers) that you do development on, those you should depreciate because you will replace them as needed.

Take all the money you make from this service, and put that on top. That is your 'top line' revenue. Now take all of these costs operational (hosting), local equipment, your salary, your benefits and that becomes your 'burn' rate or recurring expense. Subtract them from the top line. The ratio of that number (the difference between revenue and cost) and your total revenue is your gross margin. Obviously if its negative you don't have any gross margin.

But if it is negative (and I suspect it will be) work backwards and make revenue a variable 'x' and your gross margin say "20%" Solving for x says your revenue has to be 20% higher than the sum of your costs to maintain a gross margin of 20%.

Now look at your customers, if you have N customers and you charge them x/N Euros per year, will they still use your service? If the answer is "no" then work that one backwards as well, if your N customers are too few, for what n will the price per n be low enough to meet your revenue and margin goal of 20%?

Lets say you figure out that you need another 1000 customers to meet your goals, do a sanity check and ask "Is there really a thousand additional people who might use my service?" If so then you need to reach them, so try to figure out what it will cost to "talk" to them (this takes various forms, going to a trade show where likely customers would go, advertising in a magazine or on a web site where likely customers would be reading/visiting Etc.) How many do you have to talk to before one signs up? One for one? One out of ten? out of twenty?

Anyway, you get the point. Running it as a business is very different than running it as a hobby. I was trying to give you a sense of what you might think about in your question "What next?" to see if you wanted to make your hobby into a business. This can be a winning strategy, if the business is sound, because you already you know doing it is fun (since you started doing it with no expectation of return). Of course you may also find that trying to make a viable business out of it takes all the fun out, and that would be a bad thing.

How does this work?

What do you mean? How does what work?

lol, I meant Hacker News. Came here for the first time. Then. :-)

Greetings from CA, home of the next big quake!

We are a small startup software/educational company looking for a hot shot programmer. Our idea has HUGE market potential. We have developed an excellent math content curriculum, and a national/possibly international marketing program. Please email me at jaejflowers@gmail.com. It is possible an exchange might be fruitful!

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