1 Jul

What can you do in six months? Concluding The Web App Challenge

How long is six months? It’s not the number of days that matter, but instead what you can do with them. At the beginning of this year I wanted to know if I could turn six months into a brand new business. A business with actual demand, customers, and most importantly, revenue.

On December 31st, 2012 I announced The Web App Challenge: my journey to build a software company from nothing—not even an idea—to $5,000/month in recurring revenue within six months. You can read the announcement post here.

I bet you’re wondering the results.

What I built

After trying to find a painful problem to solve, I decided to solve one of my own: email marketing. That journey led me to create ConvertKit, my dream email marketing application. No more hacking together a system using other off the shelf providers—I made ConvertKit to follow the best practices I use, built in by default.

The product is far from perfect (more on that later) and the creation process has had its issues, but I love the app and can’t wait to grow and improve it over the years.

The results

Every project should have one key metric by which you measure success. For me that’s monthly recurring revenue. My goal was $5,000 a month—which to me is the start of a real business. At that revenue you can support one person working full time on the project or 2-3 people working part time. It’s not a lot of money, but once you get to that point, you can really start to focus and grow.

So where am I at?

Sadly, not $5,000 per month as hoped. Assuming all current customers continue their subscriptions, ConvertKit is on track to do $2,480 per month.

I made it to 50% of my goal. Now it’s important to note that I haven’t collected money from all those people. Some of the customers are currently using the month(s) free they got from purchasing Authority, meaning they may not actually be charged for another month or two. But since I collect credit cards up front, the default is that all these people will be charged when their credit runs out.

Disappointment

When I first realized I wasn’t going to make my goal, I was pretty disappointed. I aim high, but it’s still frustrating to not meet the goal. Then a few friends reminded me of how far ConvertKit has come in such a short time. Even at only half the goal I have created a valuable tool—completely from scratch—in just six months. Not only that, I have customers that love it and are happy to pay for it.

When you ask SaaS owners how long it took them to reach certain metrics, they always count from their launch date. I’ve been counting everything since the day I decided to start working on this project—even before I had an idea of what to build!

So in technical terms The Web App Challenge was a failure—I didn’t meet the goal. But to me, it’s a massive success. $2,480 in monthly recurring revenue is a fantastic start to what will be a great business.

So, what happened?

A few weeks ago I wrote a post about my upcoming plans to add the needed customers. It was a bit of a long shot, but I was determined to try.  My ideas included guest appearances on podcasts, guest blog posts on sites, webinars, email campaigns, and a lot more.

Some of it happened. I published one guest post on Smashing Magazine about product launches, hosted a webinar with over 50 people attending, and sent a couple emails. Not at all the blitz of content I had planned, but life just got in the way.

I spent most of June traveling to Seattle and then in Germany, Austria, and the UK. Normally I’m quite good at getting work done while I travel, but this trip had a few more snags: I got sick. Unfortunately most of the trip was spent sick in bed, the little energy I had I used to actually explore some really awesome cities and visit friends. All those guest post? They never got written.

A few great podcast interviews are lined up (one recorded last night), but they won’t go live for another few weeks. That’s just the nature of working with someone else’s editorial calendar.

The result is that subscriptions increased over the last few weeks, but not at the rate that I hoped.

Rough times

While I was traveling I worked with Ben and Sam to refactor some major parts of the application. There weren’t a lot of new features to push, but some pretty major under the hood changes. This refactoring will make future features much easier as well as it radically improved the speed. The only problem is it broke things. A lot of things.

When Sam and I started building ConvertKit I wanted to get a minimum viable product (MVP) out as soon as possible, so I decided we should write the application—just the first version—without any automated tests. Of course if you don’t start with tests, it’s hard to add them in later. Habits get formed and no one wants to go back and write tests for old code—especially when there are new features that could be written.

The lack of automated tests meant that despite manual testing a lot of features broke when we pushed the new update.

Production went down for several hours multiple times and at one point you couldn’t even subscribe to a landing page. All told there were 9 critical bugs. All customer facing. It was a rough week.

Miraculously no one canceled because of those issues. The emails I received from customers were very helpful bug reports and very patient feedback. One customer did say “Only reason I’m not canceling immediately is that I want you to succeed with this project.”

I bet a lot of customers thought that, but didn’t actually say it.

It just goes to show that the more personal your connection with each customer (by being transparent about everything), the more patient they will be with your mistakes.

To all the ConvertKit customers who put up with the issues and are still with us: thank you very much!

Budget and finances

I started with a budget of $5,000 from my own initial investment. That was one of the constraints on the project. Beyond that everything needed to be funded with revenue from customers. Here are the financial details from the last 6 months:

Expenses:

  • Rackspace: $997.00
  • Development:
    • Sam: $6,344.40
    • Ben: $3,471.00
  • Domain & Certificates: $37.30
  • Amazon EC2: $29.42

Total expenses: $10,879

Revenue:

  • Preorders: $4,541
  • Stripe payments: $1,093

Total revenue: $5,634

Profit: -$5,244.29

Initial Investment: $5,000

Cash on hand: -$244.49

Oops. I spent slightly more money than originally planned. Basically a little extra development time in the last week (bug fixes) pushed me over. Overall I’m very happy with the returns on my initial $5,000 investment. I’d count that as money well spent!

I should also comment on the rather large hosting bill. Using Rackspace we had too many servers setup. The setup included two web servers, a load balancer, and a server for the email queue. Basically we designed for what we would want down the road, but had it running now. Ben kept telling me that could be trimmed down, but I hadn’t done it yet. Then today I was quite surprised that the Rackspace bill was almost $300/month! Way more than needed.

Documenting the process

One of my goals for The Web App Challenge was to document the process in public. I did my best to keep track of each step of the process. You can read all 16 posts here:

If there are any other specifics you’d like me to write about, I’d be happy to do it!

What’s next?

Quite simply, keep working. Nothing actually changes from yesterday to today. The goal is still to keep making ConvertKit better and keep acquiring more customers. I plan to continue growing aggressively for the rest of the year. I’d love to be at $10,000 in monthly recurring revenue by the end of the year.

Actually my next big decision is what to do with the finances. All of the current $2,480 per month (actual cashflow is less since many customers have a few months free from buying Authority) is going right back into development—so I’m not personally making anything from ConvertKit. But it leaves me with a question: now that my $5,000 initial investment limitation has ended, should I invest more of my own money?

I don’t know where I read it, but someone was saying the only time insider trading is legal is if you invest in your own private company. I have more knowledge than anyone else about how likely ConvertKit is to succeed and I am confident it will be successful. I have the money from book sales and it needs to get invested somewhere: either in traditional investments (stocks, etc) or ConvertKit. Would an extra $15k or $20k (invested personally) help it grow that much more quickly?

There are things I’d love to hire out, like a logo design, and have a larger budget for development. I just can’t decide if I should grow exclusively based on revenue or not. This would probably take the form of investing $5,000/month of my personal money for four or five months in order to get ConvertKit to where I the features and user experience to be.

What are your thoughts? Build only with existing revenue or add more cash?

Wrapping up

Thank you for following me on this journey. I hope it has been helpful and inspiring to create your own products. It’s a lot of work, but completely worth it in the end. I’ll continue writing about ConvertKit here on this blog—in fact, if you want to learn how I use email for marketing take a look at my latest post.

And of course, you can sign up for ConvertKit here. Once you do, send me an email (nathan@convertkit.com) and I’ll help you get setup.

Thanks

I also want to say thank you to everyone who helped me through this process. If you used ConvertKit and gave me feedback, thank you so much! In particular I want to thank Brennan, Patrick, Amy, Sam, Ben, Garrett, and Hiten for all the help, feedback, and support. You guys are wonderful!

A favor

Last of all, I want to ask for a favor. Over the weekend I celebrated my birthday. Instead of friends giving me presents, I’m asking for donations to Charity:water. They do fantastic work all over the world and I’d love to help them raise more money.

Take a look at my donation page here.

If you enjoy and have learned from this blog and my writing, please make a small contribution. I’ll match every donation up to $2,300.

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18 Responses to “What can you do in six months? Concluding The Web App Challenge”

  1. I was pretty much at half of where you are now 6 months into Planscope – so job well DONE!

    A few thoughts:

    * I’ll be interested to see what percentage of 3 month coupon customers stick around. I know many of them bought Authority and are in the exploratory phase of self-publishing, but if I were you I’d do whatever I can to help them along their journey (which I know you’re doing at scale through your newsletter) so that in three months they have no other recourse than to continue as a paid customer.

    * Offer your best customers an annual upgrade. I’m not certain what your current segmentation looks like, but 10/11 x $150 can inject some cash into ConvertKit for development. (Grab the template I took from Patrick/WPEngine here: http://planscope.io/blog/using-lifecycle-emails-to-grow-your-business/) (You should be able to do this all with minimal code via “email me if you want to accept this offer” and editing their customer record in Stripe.)

    * Find out if a lack of code (e.g. features) are either keeping you from growing or losing you customers. I’m pretty positive the app as it is today (maybe with a few more kinks ironed out) is full featured enough to continue an aggressive growth trajectory. And since guest blog posts, podcasts, etc. just require you, you should be able to cut back on your development overhead and focus on growth.

    * I’m eyeing those big tier plans of yours. A lot of enterprise-y companies offer free whitepapers on their website. It might make sense to try your hand at enterprise sales and court a few of these organizations. (Talk to Patrick or Colin, both of whom have done this.)

    * Create a ConvertKit blog and use it as an acquisition channel. I’ve had a lot of luck with it (25% of new accounts come via search), and I know Ruben’s really focusing on the content marketing angle with Bidsketch. While you’re probably getting good overlap with your personal blog, you’d probably have a lot of luck writing articles exclusively for ConvertKit.

    Looking forward to seeing where ConvertKit is 6 months or a year from now :-)


    • Nathan Barry says:

      I need to run the numbers on just how many of those people are using the discount—it’s less than a quarter of all the accounts. Agreed that I need to do everything to help make them successful.

      Before offering a one-year upgrade I want to improve the product a little bit. It was so unstable in the last week that I don’t think now would be the right time to ask for long-term buy in. But agreed, that’s a good direction to go.

      I need to finish up sending one-time broadcasts, but after that it is just a matter of polishing the app (there is a lot of work to do there). That combined with marketing will keep me quite busy.

      Enterprise plans are good. I’m still trying to get a few customers to bite on those. I’ll put out a post on the ConvertKit blog (doesn’t exist yet) on exactly that process (whitepapers), then use it as a link when trying for direct sales.

      Thanks for all your help and encouragement!


  2. “Find out if a lack of code (e.g. features) are either keeping you from growing or losing you customers. I’m pretty positive the app as it is today (maybe with a few more kinks ironed out) is full featured enough to continue an aggressive growth trajectory. And since guest blog posts, podcasts, etc. just require you, you should be able to cut back on your development overhead and focus on growth”

    This is a great point. You seem to know your $ isn’t exactly where you want because of the lack of time spent on marketing and getting customers.

    Flip the thought process around a bit. If you could pay someone $5k/month to market this 75% as well as you can, would you do that or build more features? I imagine you’d love to get the marketing help. Now imagine not paying that money and getting 100% of your skill by you doing it. Lots of value, right? Your personal brand is a big key in your products, so I’d be doubling down on that and continuing to get customers.

    When you get to the point of tech holding you back, you’ll know it. It’ll feel like “ugh, I have all these signups who can’t get in cuz the servers are too slow”, or there will be complaints from many users about emails not getting delivered, or your engineers will tell you how hard even the simplest A/B test is to run. When you have customers dying to get in and those blocks are in your way, then I’d put some money back at the tech.


  3. Hi Nathan,

    Only just came across your app challenge now but it strikes me that there’s probably quite a community of people struggling through this process in isolation trying to get something up and running. I know I am working late nights on speedcurve.com. Are there any communities around starting up SaaS apps? Or even a bunch of people pooling resources and learnings and taking the six month app challenge together? Imagine sharing a launch date when a bunch of apps go live and getting combined reach and exposure.


  4. That’s really impressive Nathan; to have a profitable (month to month) online business within 6 months. Extra props for choosing to do it in a space where there are already 2 major players out there!

    The most inspiring thing is that you outsourced the development so in theory, you could’ve
    held a full time job while this CK was growing.

    PS: Made a donation to Charity:water! Hadn’t heard of them before. Thanks for mentioning it!


  5. Nathan,

    I found you via the above mentioned via Smashing. I took a look at ConvertKit and was ready to pounce but $50 a month was/is a little steep.

    I wonder if your LTV would be higher if you had a more affordable plan as the churn would not be so high.

    Something to ponder.

    p.s. The above mentioned Smashing article was FANTASTIC!

    T


    • Nathan Barry says:

      Actually, churn is higher with lower priced plans. People who can’t afford $50/month+ are much more likely to cancel their plans.

      Glad you liked the article!


      • Have you tested that hypothesis out?

        I understand the rational but take buffer for example.

        It’s $10/month and it provides great value. I would never cancel.


        • Nathan Barry says:

          Yep, tons of SaaS owners have tested this. It’s always true. Customers that pay less are far more likely to churn.


  6. You are doing exactly what I want to achieve, Nathan!

    I plan to write an eBook that introduces wonderful hiking trails in Hong Kong and now I am writing a blog to attract traffic and build audience.

    Meanwhile, I am also partnering with a programmer to sell on-premise email marketing software online. But the software is a one-time cost. Our next step is to convert it to a SaaS model and charge a monthly fee. Hopefully, we won’t be worrying about looking for new customers every month.

    I can learn a lot from your sharing! You are not alone! Keep fighting!


  7. Helen says:

    Hey Nathan,

    I think ConvertKit just needs time to grow, not additional money. It’d be good to know where you’re at with revenue 6 months on from your first paying customer sign-up. You said yourself you spent extra on servers because you had the cash to do so, when you’re on a strict budget it forces you to look at every cost.

    Also, I think you may want to look at the type of people you need to reach. I think those with an existing mailing list on Aweber or MailChimp aren’t the right group to target. They’re already familiar with a complex system and there’s often friction getting people to change.

    I would suggest ConvertKit appeals way more to people who are building their mailing list for the first time. People often say they wish they had built their list sooner, yet getting started & diving into the existing tools can be really daunting.

    Perhaps you could look at attracting users with leads but no mailing list yet. So people who that have set up a successful landing page through Unbounce or LaunchRock. I think they’re a key demographic that are looking for a simple route to building a list and managing it properly.

    Also, I don’t know if you’ve had it before but the domain nbarry.com is for sale for a few dollars, it’s expiring in the next few hours over on GoDaddy auctions. Not many 6 letter domains left now :)

    Have a great weekend. Look forward to following the updates!


    • Nathan Barry says:

      That’s good feedback. I actually used to own nbarry.com. I prefer my full name.


  8. […] Nathan Barry is a well-connected, skillful entrepreneur who recently tried to build a recurring software business in 6 months. The goal was to get to $5,000 a month. He posted recently after the 6 months was up see this great post. […]


  9. […] to find product/market fit for a startup idea I have, similar to Nathan Barry’s six-month Web App Challenge and in spite of Dan Shipper’s astute “Why are you in such a rush?” post. […]


  10. Thanks for sharing your experience. I have been following your site for a while, and it’s great that you share your success and failures. Not really a failure though, you just didn’t reach your desired goal, but you will in time.


  11. Nathan – I really enjoy your writing and own a few of your books which I have found very helpful with actual actionable advice.

    Who is your target market with this app?

    I agree with an earlier commenter that this product seems appealing to people who are just starting out (and read your writing). However this group likely cannot afford or justify the price. The people who can afford the product would seem more likely to already have a solution or the technical expertise to do it themselves.

    I would be curious to see what happens if you lower the prices.


  12. […] is REALLY realistic. Nathan managed to get to a product generating $2,480/mth and there are numerous other stories of people reaching higher profit than this in six months by […]


  13. Bill says:

    Wow. Well Done Man.

    $2.5K in 6 months is excellent.

    With an initial investment of $10K – you’re earning a 25% return on that capital every month. That’s impressive.

    I am currently offering info products but my gut keeps pulling me toward recurring revenue. I love the feeling of waking up every morning with sales, but I like the idea of a bank account full of sales on the first of each month even more.

    I think I’ll look more into it.


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