Founder Frustrations – FF

As part of my new years resolution, I had given myself a deadline and a concrete goal to increase our revenues for http://horsepowercalculators.net from around $150 to $200 per month up to around $2000 per month. Although this 10x growth might seem highly unlikely to people working in day jobs or traditional mature┬ábusiness┬áthat have single digit growth year on year (my maximum pay raise at my old salary was 9% of my basic salary… a boring and demotivating single digit growth for a YEAR of nights and weekends).

So that was the goal to go from $200 per month in December of 2010 to $2000 per month in July of 2011.

We are now in Mid August 2011 so how did I do?

First let’s talk about the strategy …

Although 10x growth seems like a lot it can be broken down to a simple compounded set of metrics.

If I make $200 selling a product at an average price point of $30 to 8 people per month of my website’s 12,000 visitors then:

If I can double my average pricing (up front sale price) or my customer’s lifetime value (how long they stay subscribed to our service) that’s 2x growth right there.

If I can double my traffic and double the number of targeted visitors to my website then that’s another 2x right there.

If I can doubly my conversion rate, by working on my sale page and my sales offer and by making the free experience in my freemium product more interesting and more conducive to making a customer move to the next step and upgrade their account then there’s another 2x right there.

If I know that on average there is a 10:1 correlation between my free trial customers and my paid subscribers then for the same number of visitors, same price point, same everything else, if I can double my free user adoption then it’s not unreasonable to think that 10% of those new free trial users will result in sales.

More subtle ideas: If I can get my existing customers to enjoy the product more, and double the user engagement (how often they use the product and how satisfied they are with it) that can spawn two indirect effects: 1- they will stay subscribed longer as they will see the product as a more integral part of their life that they use more and more which doubles their lifetime value without having to raise prices…. 2- they are more likely to tell their friends about a product that they use 5 times a month vs one they use once a month so that can indirectly spawn more referral sales.

So now that was the plan

double the traffic times double the adoption times double the conversion times double the upfront pricing times double the engagement ….

Here is the frustration:

Traffic: (2x)

In July I had double the traffic that I did in January. Our rankings across all our targeted keywords went up. Our page rank went from 0 to 2 which means mathematically speaking, even though our site is just one year old now it has 100 times the value in googles eyes as a fresh site. Our traffic on average is up from 12,000 per month to 24,000 per month.

Adoption: (1.35x)

Compared to January 2011, our adoption (measured as the number of new free trial members) is up by 35% … I’ve tested different types of call to action, and different segmentation of free to paid features in the software throughout and the adoption has varied as much as -43% to as high as where it is now of +35% compared to our baseline

Conversion: (1.14)

Our conversion rate is unpredictable …. anywhere from -80% to +14% depending on the month, using the same traffic sources, and the same sales letter pretty much. Conversion is my #1 failure to be honest as I’ve never gotten it to where I want it … but in that 6 month period, in June we had conversion up by 14%

Engagement: (1.5x)

In late November of 2010 I launched version 4.0 of the power calculator.

This was a MAJOR updated because we now supported calculations for ANY power adder and ANY fuel.

The update also included 23 new features that came directly from customer feedback.

Since January 2011 I also followed up by releasing minor updates from 4.0 alpha all the way to 4.0 ultimate which is where we are today. Each update has had 2 or 3 minor edits, corrections, bug fixes, user interface upgrades, better flow, prettier pages, better illustrations …. etc

Lots of product refinements over a course of some 20 updates in 6 months or an average of one update every 9 days! When we read about startups iterating on their product… this exactly what they talk about… I did exactly that … I iterated fast and hard on problems, features, and design

Engagement peaked at 12% in July which means an average user used the product 4 times a month on average , which is up from 8% in January but nowhere near the 24%+ that you see with highly addictive products like farmville and other casual games… but we’re closer.

Also upon close inspection I’m happy to say that I do in fact have customers on monthly memberships at this point that have stuck with us for more than 11 payments, and that is on our 2nd tier payment plan of $15 per month…. so I know for sure that we are delivering value that is worth their payments…

Pricing and LTV (2.05x) and (1.30x)

We still have a high attrition rate of monthly users. I have doubled our lifetime access prices and re-segmented the software to push more people up towards the higher cost monthly plan or towards the lifetime unlimited plan. In march our average up front $ per sale was up by 105% compared to December/January. That is up front sales, not including additional monthly payments from those sales, and with an at the time average customer lifetime of 4 months.

Looking at our engagement doubling and more people staying on for longer on the payments plan… our lifetime value should be up from 4 months to about 5 months as a conservative average estimate though I don’t have exact averages on this yet as it’s difficult to track using our payment processor analytics (have to crunch the numbers and follow the cohorts by hand in spread sheet).

So why am I frustrated?

Theoretically we should now be making:

$200 X 2 (traffic) X 1.35 (adoption) X 1.14 (engagement) X 2.05 (up front pricing) x 1.30 (subscription duration) = $1640 per month

Which for me, living in Saudi Arabia is considered ‘ramen profitability’. Even though shy of $2000 per month (our original target) it does give me better quality of life options, a slower drain on my savings (which ultimately gives me more runway to continue to develop this business) and gives me the confidence to invest more heavily in marketing and outsourcing to continue to free up my time to focus solely on engagement and continue to raise the quality of the product.

The problem is … each of those numbers peaked in a different month… all my efforts, although bringing positive results in each aspect, never lined up to produce the overall peak compounding effect that I was hoping for.

Now I am definitely in a better position than where I started because back in December of 2010 I was not tracking any of these metrics this closely … so at least now I am in fact managing by metrics and measuring the effects of every change I make to the site, offer structure, and product by how it reflects on those metrics… but still I am not happy.

Currently I’m working on 4 things in tandem:

1- I am sorting out Search Engine Marketing. We have a very promising campaign running in google adwords with retargeting enabled… and I’m testing emotional hooks in my ad wording to find out exactly which emotions are motivating for our prospective customers.

2- I have a few more features to iron out in the software and am integrating Amazon Product Advertising API into the software so that we can increase our customer life time value by making a percentage cut on parts that they buy through our software recommendations (in addition to what we charge them for up front sales and monthly memberships).

3- I’m writing a new e-book called intake manifold secrets as a follow up to one of our most linked to and highest ranking articles on the site. It’s also pushed me to do research and assimilation on advanced intake manifold design theory which has already highlighted a few shortcomings in how our software calculations and recommends manifold dimension. So besides being part of our up-sell / lifetime package… it also helps raise the level of accuracy and quality in our software product.

4- Still working on raising our rankings for the search term ‘turbo calculator’ … there is a lot of search competition there, but I believe we are THE BEST turbo calculator on the market. However this is a tough uphill battle as we are fighting a handfull of free calculators (and you get what you pay for)… but hey people like free and if 1% of the people will buy and link to my product, having to battle 99% of the people using and linking to the inferior products is in fact a very tough and uphill ranking battle. The payoff though, from this single keyword ranking is DOUBLING our traffic so you can see why I am obsessed with this keyword.

Long term

Long term I am still bullish on this market. The automotive market is massive and filled with misinformation. Our ebooks and power calculator give professional quality design, knowledge and education all the way down at the consumer difficulty level. Our current customers love us and happily pay for our services. There is at least 20x the traffic out there and we can be about 4x as efficient at monetizing this market…. to me, this is a $5M company…. though I still have a lot of work to do to get there …

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