Growing ConvertKit to $30,000 in Monthly Recurring Revenue
A year ago I made the decision to focus full-time on ConvertKit—which at the time was a failing product with only $1,337/month in revenue. In order to turn it around I…
- Focused full-time on just ConvertKit—ignoring my other businesses and products.
- Invested $50,000.
- Hired my dream team.
- And worked like crazy.
You can read that story here: Growing ConvertKit to $5,020 per month.
That article still gets shared every week on Twitter, which got me thinking: how many people still anchor ConvertKit’s growth at something around that number?
So, here’s the update. What we’ve done since I published that in March.
By the way — if you’re reading about ConvertKit for the first time, it’s an email marketing platform for professional bloggers. Recently described as “the power of Infusionsoft with the simplicity of MailChimp.”
I gave away the best part in the title, but here’s the graph that tells the story even better.
How I turned a failing SaaS app into a rapidly growing startup
The last year of success can be summed up in a single word: focus.
If you want more of an explanation I’d add another word for more detail: extreme focus.
This summer I was talking with my friend Josh Kaufman and the topic of my book and course sales came up. I mentioned that revenue from those had mostly dried up. I went from making about $15,000/month (not including launches) down to about $3,000 per month.
After I said that the conversation with Josh went something like this:
Josh: “What caused that?”
Nathan: “I don’t know.”
Josh: “Did traffic dry up? Are your sales pages not converting any more?”
Nathan: “I don’t know.”
Josh: “Open Google Analytics and find out in a few minutes.”
Alright, that’s paraphrased (and makes me sound rather rude), but the point is that I have been so focused on ConvertKit that I won’t even take a few seconds to find out why other products aren’t selling well anymore.
It’s not the five minutes that I’m worried about wasting. It’s the space in my head. If it took five minutes to identify the problem, my next step would be to go about fixing it. Chances are the fix would take far more time. Even if I decided not to fix it or hired someone else to fix it then the process would still take up mental energy.
Building a software startup is hard enough. I don’t need to make it more difficult by providing distractions.
So even today I don’t know why my product sales have dried up (though I have a few guesses) and I don’t care.
Because my focus is 100% on building and growing ConvertKit.
Not every dollar is equal
I know for a fact that some people reading this right now are either thinking:
“But you’re leaving so much money on the table!??!”
“Let me help you out. I’ll run everything for you for a percentage of sales and then we’ll both make plenty of money.”
But here’s why I say no every time: not every dollar is equal.
If I make $50,000 with book sales that’s good, but the next month I have to start over. But making even $2,500 with ConvertKit that money will come in the next month, and the month after, etc.
I can build a massive business off of the recurring revenue. It’s predictable. And more importantly if we ever were to decide to sell, we can. There’s no easy way to sell a training business tied to a personal brand.
But not only would ConvertKit be easy to sell (settle down, we’re not selling), but the valuations on software companies are at least 5x higher on the same amount of revenue.
Taking all that into account I’d take $1 in ConvertKit revenue over $20 in one-time book/course revenue any day.
Even though I strongly believe this I almost got talked out of it a couple times. At least until I visited a friend to discuss online business. During the conversation this exact topic came up. What to do with products that have made significant income, but now aren’t doing much?
He simply replied:
“Giving up short-term revenue to focus on building long-term revenue and success is a CEO move. Good work.”
That was all I needed.
I had a lot of plans for growth, but what worked came down to just two things: direct sales and referrals.
I talked about this a lot in the previous post, so I’ll keep it simple now. My process for direct sales was just to make lists of blogs using MailChimp, AWeber, and Infusionsoft, and then reach out by email. Because of my connections in the blogging world only about 1/3rd of these were cold outreach.
The email is simple:
- I introduce myself,
- ask if anything frustrates them with (MailChimp / Aweber / Infusionsoft),
- and say I’d love to show them ConvertKit if they have time.
Usually the frustration question gets good responses—the exact same reasons that I built ConvertKit in the first place. Things like “paying for duplicate subscribers”, “lack of automation”, “no tags”, etc.
From there I continue the conversation and try to setup a Skype demo. I give them my calendar link so that they can pick a 30 minute time slot that works for them.
If the call goes well then I talk them through the migration process (which we usually do for them).
Early on I was talking to anyone who would listen, but now I just track conversations (still using Trello) and relationships with potential customers who have over 10,000 subscribers.
“But it doesn’t scale!”
Years ago I remember reading how Basecamp grew without sales people. They made it sound so compelling. Basically they wrote stuff on their popular blog and then some of those readers signed up. Not long later they had a multi-million dollar business.
Ever since then the bootstrapped software community has been shy of sales. They want scalable solutions for growth that don’t require them to do anything difficult (like actually pick up the phone).
Here’s how direct sales can be scalable:
- Each new customer makes getting the next customer easier. Early on everyone would say, “that sounds great, but who uses ConvertKit?” When the answer was a short list, there were more objections. Now I can point to some of the biggest names in blogging which gives instant credibility.
- The referrals from each new customer mean that each sale doesn’t bring in one customer it brings in three or five—potentially more. Bloggers are interesting—they tend to copy what eachother are doing. If you get one then you’ll get a lot more.
- By actually talking to customers you can find out the objections they have, where your marketing copy is falling flat, and what your market actually needs.
- You can then turn that knowledge into marketing emails, webinars, and other content that sells more effectively.
- Finally, you can hire a team to do the prospecting, outreach, demos, and webinars that you were doing early on. These days that’s a common part of any SaaS companies playbook.
Referrals and Affiliates
I mentioned referrals and affiliates above so let’s dive into that as it’s becoming a larger part of our daily customers.
Step one for getting referrals is to build a product people love. That didn’t happen overnight with ConvertKit. Instead our product, messaging, and market slowly morphed into something that is getting referred like crazy.
But our affiliate program definitely helped a lot. Starting out I saw all these people recommending AWeber over MailChimp when their reviews came down to both being about equal. Why? Simple: Aweber pays a 30% recurring commission, MailChimp gives credits for their app. One is compelling, the other isn’t at all.
So AWeber can offer a mediocre product and win out because of a generous affiliate program. What would happen if a great product offered a generous affiliate program?
That made it an easy discussion to also pay a 30% recurring commission. We quickly got most of our customers signed up for the affiliate program and the referrals started flowing in. People were recommending us anyway, but the payments are what pushed them over to writing fantastic reviews about ConvertKit.
So, if you run an affiliate program, don’t be cheap. Offering credits or a pitiful commission (like 5-15%) is just insulting to your customers and won’t motivate anyone. Build a great product and then pay those who refer to you generously.
I’m coming up on three years of working on ConvertKit. Which is crazy. But the last year in particular is when everything happened.
- January — Started The Web App Challenge and started validating ConvertKit
- February — Hired a developer, ran preorders, started building.
- March — Named the product and first customers started using the alpha version.
- July — Closed out the first 6 months at about $2,000 in MRR.
- August to December — Growth stalled, just kept improving the product.
- January — Launch ConvertKit Academy to better train customers and use a launch model to bring in new accounts.
- April — Some success with that, but not on the level needed. Hiten Shah tells me to either focus on ConvertKit full-time or shut down the product and move on to something else. I ignore his advice.
- May — Product revenue from books and courses is so good it’s hard to bring myself to spend much time on ConvertKit.
- June — I realize that ConvertKit Academy brought in only beginner customers who are likely to churn. So I stop promoting it and growth stalls again.
- September — Revenue drops down to $1,337 per month. Hire Dan Gamito to run support and operations on my blog and training business. He also starts handling support for ConvertKit.
- October — I take Hiten’s advice seriously. But instead of shutting down I decide to focus on it full-time and stop working on books and courses (and this blog). I choose “Email marketing for Authors” as a niche and start direct sales.
- November — MRR hits $2,100 and I push ahead with sales efforts.
- December — MRR reaches $3,237 which I find encouraging. I invest $50,000 and hire David Wheeler as our new lead developer.
At the end of 2014 our team is Dan Gamito on customer success, David Wheeler and Marc Boquet on development, and me running design and sales.
- January — Direct sales start to pay off as we land larger accounts. MRR reaches $3,885. I start to realize that authors are not a good market.
- February — More direct sales, more growth.
- March — After a lot of sales conversations ditch every mention of authors from the site and focus on “Email marketing for professional bloggers”. I start cashing out of some investments to have money for my personal expenses.
- April — Leo Babauta from Zen Habits switches to ConvertKit which is a major credibility boost in sales conversations.
- May — Growth is strong, but we aren’t growing fast enough so that our revenue ($8,500) matches our expenses ($13,000/month) before we run out of the $50,000 I invested. I look into funding options, but ultimately decide to temporarily lay off team members to avoid running out of money.
- June — Start trying webinars (with some success). Reach $10,000 in MRR. Release tags which rounds out our marketing automation offering.
- July — Land some big new clients (including Pat Flynn) and hit a massive 48% revenue increase. We bring everyone back to full-time.
- August — 25% growth brings MRR to $18,296.
- September — 32% growth brings us to $24,699. Two days later we break $25,000/month.
- October — Just halfway through October we break $30,000/month showing 40% growth. Not including another 100 customers and $13,000 from a single webinar (that we counted as one-time income).
That brings us to today.
Too many posts about building startups read like an instant win. They built a prototype, found customers, and then BOOM! They had a million dollar business. Even posts that share some of the struggle gloss over (or hide from their charts) the most difficult parts.
It would be easy to talk about ConvertKit from October 2014 onwards and pretend that we just took off. But that’s not true.
Worse, it doesn’t help other founders who are struggling right now. If that’s you, know that many companies succeed when the founders get close to the decision of shutting down and decide to push through anyway.
If you’re in that spot just ask, “Have I given my company every possible chance to succeed?” If the answer is no (as it was for me), then truly give it everything you have.
So how much is profit?
I get this question all the time. Even back when we were doing $5,000/month people would ask what our profit was. Turns out $-8,000/month wasn’t the answer they were expecting.
I think everyone underestimates how much it costs to run a real company. Payroll, servers, etc. It all adds up.
Out of our $30,000/month in revenue that we have today none of it is profit. We’re still growing and I spend almost every dollar as it comes in. But I like to think about it as giving each dollar a job. That may be hiring out integrations, trying out ad purchases, or saving up for our next full-time hire.
I pay myself a very small salary ($3,000/month) which combined with a little money from book and course sales covers my expenses.
Early on in my online career I always wanted to do it solo. I’d seen the downsides of working on larger teams and just loved how I could work on my own (or with the help of a few contractors). Then seeing the volatility of a launch-driven business I knew that I didn’t want the overhead of a large team.
That all changed when ConvertKit started to get monthly recurring revenue. Even though we spend basically all our revenue each month I’m not worried about payroll at all. Knowing that our customers will pay us each month means that so long as I don’t commit to more than that number meeting payroll is easy.
One of my favorite moments of the year is this last January when I was on a remote island in Thailand without regular internet or cell service. When I finally got online I read through the Slack backlog and discovered a critical bug had come up. Worried, I kept reading. A few lines later I saw that it was fixed, customers were informed, and life was back to normal.
A crisis handled completely without me. That’s the moment that I knew I had an amazing team and was free to work 0n the business rather than in it. That’s an amazing feeling.
Now I’m hooked on hiring people who are more talented than I am and just helping them create their best work. I’ve gone completely the opposite direction from wanting to run a solo business.
From here we keep growing and keep improving the product and building more integrations. There is a global movement for creators to be able to earn a living through having a supportive audience. That is just going to continue to grow and expand to markets outside of the early adopters.
ConvertKit is perfectly positioned to help these people with a better email tool and automation.
For us that means to keep expanding the team and re-investing money in growth and improving the product.
I’m still focused 100% on ConvertKit, which means this blog will be quiet for a while. Maybe once we hit $50k MRR my reward to myself will be a little writing here again. :)
I’d love for you to be a part of what we’re creating. You can do that in one of three ways:
- Share this post. Seriously, I’d appreciate it.
- Become a customer. If you’re a blogger (or know someone who is) create an account. We’d love to have you as part of the ConvertKit family.
- Join the team. Right now we’re hiring a Rails developer. Soon we’ll be hiring a designer. Send me an email if you’re interested.
Thanks for being a part of this journey!