If I Wanted to 10x My Revenue in 2027, I’d Do This | 154

[00:00:00] Nathan: Growing from $500,000 per year to $5 million a year takes five specific things, and I broke it down today up on the board using Matt Trinetti’s membership as an example.

[00:00:10] Matt: You’ve built a really impressive business.

[00:00:12] Nathan: Matt is the co-founder of London Writers Salon, where 1,000 writers gather every weekday to write together.

[00:00:18] Matt: When I look at your business, there’s a ton of potential.

[00:00:21] Nathan: The first thing you need is a clear mission and vision.

[00:00:24] Matt: They skip past what matters most- Yeah … which is mission. This is

[00:00:26] Nathan: really important. Second is knowing your funnel and your conversion rate at every step.

[00:00:30] Matt: We have to care about the funnel. You start to notice these trends, you’re like, “Oh, wait, all traffic is not created equal.”

[00:00:35] Nathan: Third is retention. Because if members keep leaving, no amount of marketing is going to fix that.

[00:00:40] Matt: What is your monthly churn rate on your membership? It’s roughly 3 to 5%. 3 to 5% monthly churn is really quite good.

[00:00:45] Nathan: I even pull up some of Kit’s own numbers. ‘

[00:00:47] Matt: Cause that churn rate for us is 18%. Wow.

[00:00:50] Nathan: And some of these fixes are surprisingly simple.

[00:00:51] Matt: I worry about the ones that don’t fill out the survey. The silent reason people are canceling. Two things that I would recommend. One, I would like to pause for 90 days. That’s smart. Second thing everyone can implement on retention is pricing. That’s smart. Um, my wheels are turning.

[00:01:06] Nathan: Fourth is your products.

[00:01:07] Matt: Silver and gold don’t tell me anything. I know. Who should choose the gold plan? This is, uh, a bugaboo for me. How can we get more clear value and more commitment? And what I would be doing is I would say, “Hey-” That’s really good.

[00:01:17] Nathan: Then there’s the fifth thing.

[00:01:19] Matt: The final part is- Yeah, I’m kind of, like, excited to figure this out, though.

[00:01:22] The crazy thing is- I love that …

[00:01:24] Nathan: stick around for that one before you spend another dollar on getting new members.

[00:01:27] Matt: Oh, wow. That was impressive. That was great. This is, really is a masterclass.

[00:01:37] Nathan: All right, so Matt, I wanna dive in with the numbers. How many members do you have in your community right now?

[00:01:41] Matt: We currently have 2,000 paying members, and that’s across three different tiers.

[00:01:45] Nathan: 2,000 members. How much revenue, uh, did you do last year?

[00:01:48] Matt: So we were just over 500,000 last year, and this year we’re on pace for about 750,000.

[00:01:54] Nathan: What’s the team look like?

[00:01:55] Matt: We’re about three to five full-time to part-time, and then we have another 20, 30 contractors, coaches, supporters across different areas of the business.

[00:02:05] Nathan: Okay.

[00:02:06] Matt: Yeah. That

[00:02:06] Nathan: sounds good. Give me a sense of the, the product breakdown and, and prices. I, I understand you’ve got three main tiers?

[00:02:12] Matt: Yeah. So we, our core revenue, our core product is a membership. Yeah. And we have three tiers within that membership. And some of this is a hangover of our Patreon days. That’s where we started the membership. Okay. But the first tier, it’s called the Writers Hour Member Tier, and that is the focused writing sessions we do.

[00:02:28] Mm-hmm. There’s 20 plus silent writing sessions every day, so you get access to that.

[00:02:31] Nathan: Okay.

[00:02:32] Matt: So Writers Hour Tier, that’s about $16 a month. The next tier, uh, which we call Silver Membership, again, this is a hangover from our Patreon days, uh, that’s about $49 a month. That includes everything, all the writing sessions, plus we do weekly workshops, interviews.

[00:02:46] Okay. We have a recording library, all sorts of great stuff, great community. The third tier is Gold, and this includes all of that, plus weekly group coaching.

[00:02:54] Nathan: Okay, and what does this cost?

[00:02:55] Matt: That’s 149 a month.

[00:02:58] Nathan: Is that the full product offering, or you have something else in there?

[00:03:00] Matt: So this is the core product offering, and then we also, just that last year, we introduced a, a new product called the Manuscript Accelerator- Okay

[00:03:09] or The Residency. Um, and so that’s a cohort-based product. Members get discounts to it. Uh, but that’s for anyone who’s in the middle of a manuscript, a book, and they want to get to the end. Okay. And it’s a 10-week program. Uh, it’s about, uh, just over $3,000, uh, for those 10, 10 weeks. It’s weekly coaching, small cohort of people, all meant to make progress toward their, their book goal.

[00:03:30] Nathan: All of this revenue is recurring, and The Residency would be-

[00:03:34] Matt: That’s

[00:03:34] Nathan: right … one time.

[00:03:35] Matt: Yeah.

[00:03:35] Nathan: And then if we look at the, uh, revenue numbers from last year-

[00:03:38] Matt: Mm-hmm …

[00:03:38] Nathan: what would the breakdown be between… Like, what percentage came from the membership versus from The Residency?

[00:03:44] Matt: Yeah. So this was brand new last year.

[00:03:46] Okay. We did our first intake in October, so that- Mm-hmm … that was totally brand new. So this- Membership is, let’s say, roughly 80%.

[00:03:54] Nathan: Okay.

[00:03:55] Matt: And then this is slowly creeping into close to 15%- Yeah … will be of, well, the math won’t add up, but we have a, a few other streams. And then

[00:04:03] Nathan: you have miscellaneous-

[00:04:04] Matt: Yeah

[00:04:04] Nathan: things that add up to- Yeah … others. And then do you think residency is growing as a percentage of revenue?

[00:04:09] Matt: It is. We did the first intake last year, we just had one intake- Uh-huh … and now we’re planning to do three i- intakes over the year. Okay. Um, so there probably is a little bit of a ceiling to that.

[00:04:18] Mm-hmm. But I think we can include more cohorts, more coaches if we need to. Yep.

[00:04:23] Nathan: I like it.

[00:04:24] Matt: Yeah. No. Okay. It’s, it’s been transformative actually-

[00:04:26] Nathan: That’s a good

[00:04:27] Matt: business … the business. Yeah.

[00:04:28] Nathan: So where do you wanna take it? Obviously you’ve mentioned that you wanna take it to the- Yeah … five, five million in revenue, but let’s kind of map out the goal over here.

[00:04:35] Matt: Yeah. So the goal is, you know, roughly over 500,000 last year, growing to five million. Yep. So that’s a, a 10X increase. There’s two, that’s the monetary goal. Uh-huh. And really, I mean, the thing about money, I’m sure this is a conversation you guys have all the time about money, but it’s a, it’s a proxy for the value we’re providing- Yes

[00:04:53] for people. So this alone isn’t… It’s exciting. It’s not that motivating without- The other part which is serving more writers. Yeah. And so if we … The other, the flip side of this is we currently have 2,000 members. We’d love to- for that to be closer to 20,000-

[00:05:09] Nathan: Okay. I

[00:05:10] like

[00:05:10] Matt: it … that are, yeah, part of our community of practice, writing together, committing to a writing practice.

[00:05:15] So these two goals in tandem, I think. Yeah. And we talked about this a little bit earlier, like this, this without this is shallow, and this without this, it’s kind of not correct. It’s unsustainable.

[00:05:26] Nathan: Yeah. Yeah. I love that. A lot of people get caught up in, you know, like, “Oh, I should only focus on, you know, the success of the customer.”

[00:05:33] Matt: Mm-hmm.

[00:05:34] Nathan: Or, or they go the other way. Actually, honestly, more people get caught up the other way- Yeah … where they’re only caring about their own success. But exactly as you said, they go hand-in-hand.

[00:05:41] Matt: Right.

[00:05:42] Nathan: So,

[00:05:42] Matt: yeah. And if I’m honest, sometimes because we are so mission-driven- Uh-huh … we’re, we’re more focused on serving more writers.

[00:05:49] Yeah. So if I’m a little honest, I’m putting … I’m … It’s a little uncomfortable for me to- To say, right? … set a goal like that. Yeah. For many reasons, just because I don’t want this to be the primary focus, but also that’s not really the motivator. It’s serving more people. Yeah. But this is just a proxy, a metric- The

[00:06:06] Nathan: revenue goal

[00:06:07] Matt: is-

[00:06:07] for that we’re doing.

[00:06:07] Nathan: Yeah. So. That makes sense.

[00:06:09] Matt: Which I don’t know if that resonates with other, you know, creator businesses that-

[00:06:13] Nathan: I, I think it absolutely does- Yeah … because people are, uh, caught in this tension. Yeah. And, and especially because it feels like today saying you’re focused on revenue or profit is

[00:06:22] You know, it’s like, “Oh, that’s bad.” Mm-hmm. You know, people say like, “Oh, this, this, uh, company is trying to maximize profits, and they’re evil,” or, or whatever else.

[00:06:30] Matt: Right.

[00:06:30] Nathan: There’s a quote that I love that I thought of Seth Godin. I can’t attribute it to Seth Godin, so now I said it. And that’s just that profit is permission to do it again tomorrow.

[00:06:40] Matt: Mm-hmm.

[00:06:40] Nathan: And if you wanna run a sustainable business, you have to be profitable, right? Uh, I think there’s a lot of writing communities that don’t exist anymore because they weren’t able to run. That’s true. Maybe they were a nonprofit, or maybe they didn’t get the business aspect styled in, and, you know, they, they weren’t able to sustain themselves.

[00:06:57] Matt: 100%.

[00:06:58] Nathan: And so if you’re able to say like, “Hey, we can build a thriving business that has a huge impact on members,” then, like, guess what? You’ll be doing this in 10 years. Yeah. And you’ll go from impacting 2,000 to 20,000 people.

[00:07:08] Matt: Yeah. And that’s why … And I, I see that. I’ve, we’ve watched these organizations crumble.

[00:07:13] Mm-hmm. And writing’s too important, and the writing practice is, is too important to, to not exist, so.

[00:07:18] Nathan: I love that.

[00:07:19] Matt: Yeah.

[00:07:19] Nathan: So as we talk about going from 500K to 5 million- Mm-hmm … we’re just trying to add a zero. No big deal. Yeah. Let’s go up by an order of magnitude. Uh, I’ve got five steps that I wanna take you through.

[00:07:29] Matt: Yeah.

[00:07:30] Nathan: And you actually touched on the first one that I think is most important. And so many people skip past it. They wanna get into funnel. They wanna get into all these other things. Mm-hmm. They skip past what matters most, which you touched on-

[00:07:39] Matt: Yeah …

[00:07:39] Nathan: which is mission.

[00:07:40] Matt: This is really important.

[00:07:41] Nathan: And we- And we’ll put vision on here, too, as well.

[00:07:43] Yeah. You need to put numbers to it to be able to rally everyone together. What is the mission for your organization?

[00:07:48] Matt: It’s kind of lofty.

[00:07:49] Nathan: Yeah?

[00:07:50] Matt: But we want to help every individual develop and sustain a writing practice.

[00:07:55] Nathan: Mm-hmm.

[00:07:56] Matt: And why a writing practice is that writing is one of the most easily accessible tools into things like reflection through journaling, contemplation, self-awareness, communication- Right

[00:08:08] imagination, influence. And it’s, again, one of the most accessible tools, and we’re at this really interesting nexus point with humanity, I feel, that it might be the last thing we haven’t yet offloaded to technology. Right. In the same way we’ve offloaded our navigational abilities to Google Maps- We don’t

[00:08:25] and our mobile abilities to cars and other things.

[00:08:28] Nathan: We don’t, we don’t, uh, memorize phone numbers anymore. Yeah. That’s not a thing. Yeah.

[00:08:32] Matt: And it’s a practice for deep thinking. And you know as a writer, like what that can do both personally, but also for a business, but it’s not just about that. So yeah, we’re j- we’re at this interesting nexus point of humanity, and we want…

[00:08:43] We’ve been fortunate to create a space of belonging and creating the conditions to make building a writing practice really easy and fun. Mm-hmm. Because we give writers, who are essentially, it’s kind of a lonely pursuit, whether you’re just journaling or trying to write a book, we give them colleagues in a way- Mm-hmm

[00:08:59] and a space within community to stay committed to the practice. So anyway, that’s… I can get on that hi- high horse all day, but I think we’re at this really interesting point. And maybe I can say one more thing- Yeah … is that I think the hypothesis is that- Creative health, I think will start to become a category in the same way physical health has.

[00:09:17] Mm-hmm. So this shift that physical health went in the ’70s, where workouts and exercises wasn’t just for athletes anymore, there were people running, gyms popping up. Today, we look, every corner has yoga studios, CrossFits. I think a similar renaissance will happen with creative acts. Mm-hmm. And time spent in creative acts, not because necessarily you’re trying to grow an audience, that might be part of it, but really for a sense of connection to yourself, a sense of connecting to your brain and your- your deep thinking muscle.

[00:09:47] So anyway, we wanna be part of that conversation. So back to the mission and vision. Yeah. We think writing is a really great accessible tool to stay connected to that, and we wanna help more people achieve that.

[00:09:57] Nathan: Yeah, I love that, especially because now I’m seeing so many people who used AI to accelerate their output or that sort of thing- Yeah

[00:10:04] which is great. I’m- I’m thrilled that they did that and are accomplishing so much more. It’s when it feels like, oh, you used AI, you outsourced your thinking. Right. And you get these documents or these things, and you’re like, I don’t, I don’t think you not only believe every single word in here, I don’t think you understand every single word- Right

[00:10:19] in this. And so, yeah, like any muscle, if you don’t exercise it- Yes … you will lose it.

[00:10:25] Matt: Yes. Yeah, and I feel it, and- and I don’t know if you feel it too. Like, as someone who writes, I’m feeling that muscle atrophy a little bit- Mm … when I shift more into, okay, I’m just gonna stick it in here first to see what it, what comes out.

[00:10:36] Right. But I’m not doing that deep thinking, which I still do in my notebook-

[00:10:40] Nathan: Yes …

[00:10:40] Matt: to start, you know? So- Yeah … anyway, that’s the … Did I explain that well? Yeah, no, that- that’s perfect. Yeah.

[00:10:45] Nathan: So then the, where the vision comes out is the, you know, the question of, like, how would you know if you achieved your mission?

[00:10:51] Matt: It’s a good question. I mean, numbers help.

[00:10:54] Nathan: Mm-hmm.

[00:10:54] Matt: So to know, we do these writers’ hours, they’re live over Zoom. We have up to 1,000 writers every day writing in these four sessions across the day. If that number was growing- Yeah … so we can visibly, visually see people, um, writing, that- Mm … that will be one indicator that- that the message, me- message and- and mission is growing.

[00:11:14] Yeah, I think just, like, bodies,

[00:11:16] Nathan: like, to see. So we might articulate part of the vision, you know, of 20,000-

[00:11:20] Matt: Mm …

[00:11:20] Nathan: um, active members. Is that how?

[00:11:23] Matt: Yeah, I mean, that would feel really exciting. Yeah.

[00:11:26] Nathan: Okay. Let me give you an example from Kit. Mm. So first, I love starting with the mission and- and full credit, uh, I was listening to Travis Kalanick on David Senna’s podcast.

[00:11:36] Mm. And David asked him this question, and- and Travis goes, “Hold on a second.” You know, about, like, what Adam’s, Travis’ new company- Mm … so this is the founder of Uber, what his new company is doing, and he says, “Well, hold on a second. Let’s start with the mission. It’s easier that way.”

[00:11:49] Matt: Mm-hmm.

[00:11:50] Nathan: And I feel like in so many conversations- If we, you know, we’re in the weeds.

[00:11:55] La- later we’ll get into funnels. Yeah. We’ll get into all of these other metrics and things that matter there. But if we keep zooming out and say, “Hey, let’s start with the mission.”

[00:12:02] Matt: Mm.

[00:12:02] Nathan: It’ll make everything else easier.

[00:12:03] Matt: Mm.

[00:12:04] Nathan: I think that’s so important. So using Kit as an example.

[00:12:06] Matt: Yeah.

[00:12:07] Nathan: Our mission for years has been we exist to help creators earn a living.

[00:12:11] Matt: Mm.

[00:12:12] Nathan: We’ve since evolved that to say, “Hey, now we’re … You know, our mission is to help creators build valuable businesses.” So not just valuable for themselves and their families, but, like, creating value through all of the community members and readers and viewers- Mm-hmm … that they impact. But that’s, like, high, lofty.

[00:12:28] How do you know if you achieved that? There’s no way to know.

[00:12:30] Matt: Yeah.

[00:12:31] Nathan: And so the vision part of it is where you actually articulate, okay, let’s put some numbers to this.

[00:12:37] Matt: Mm.

[00:12:37] Nathan: And so there’s three main numbers that articulate our vision. The first is $1 billion-

[00:12:44] Matt: Mm …

[00:12:44] Nathan: paid by Kit to creators.

[00:12:46] Matt: Mm.

[00:12:47] Nathan: And so we track that, because, like, okay, well, we can directly see how much money- Mm

[00:12:51] we’ve paid out through product sales, sponsorships, paid recommendations, all of those features. And so we can keep the team aligned, like, how are we doing against this goal? The second one is, uh, an amount of revenue for us, right? And so we have 100 million in annual recurring revenue as the goal.

[00:13:08] Matt: Mm.

[00:13:09] Nathan: And today, we sit right at about 55 million.

[00:13:11] The reason that that’s so important to articulate is we have to bring the team along. They have to understand where we’re going, what they’re a part of. And as a founder, a lot of your job is to articulate a mission and vision that’s so big-

[00:13:26] Matt: Yeah …

[00:13:26] Nathan: that your team can see their own mission and vision for their life-

[00:13:30] Matt: Mm

[00:13:30] Nathan: fitting inside of that.

[00:13:31] Matt: Mm.

[00:13:32] Nathan: So if you say, “Hey.” I want to grow from 500,000 to a million in revenue, and we want to double our membership. There might be people that you want to recruit to their team, and they’re like, “I would love to that, but that means I’ll never earn more than-

[00:13:47] Matt: Mm …

[00:13:47] Nathan: X amount.” Like, your mission is not big enough to fit my-

[00:13:50] Matt: Hm

[00:13:50] Nathan: mission inside of it.

[00:13:51] Matt: Yeah.

[00:13:52] Nathan: And so that’s why it’s so important, one of the reasons why it’s so important to articulate something really, really big.

[00:13:57] Matt: Mm. I’ll tell you just real quick, this increasingly has become a motivator for me. The team, actually. Mm. The team. Yeah. I don’t know if you’ve felt this, but seeing that we can help provide a place for people to kind of look after their lives and their families, it…

[00:14:11] That, for me personally, as a founder, um, s- that’s starting to, uh, emerge as a motivator. Yeah. So that, that resonates a lot.

[00:14:18] Nathan: Mm-hmm.

[00:14:18] Matt: And actually in many ways, hearing you talk about that, I’m like, “Man, this actually feels pretty small.” You know?

[00:14:23] Nathan: The great thing is you can- Yeah … always change these.

[00:14:25] Matt: Yeah.

[00:14:25] Nathan: Right?

[00:14:25] And, and so you might want to make it even bigger. You might say 100,000. You might, you know, whatever it is. Right. ‘Cause it can be lofty. And, like, we’ve shifted ours over time.

[00:14:34] Matt: Mm.

[00:14:35] Nathan: So originally, our goal was a billion dollars, uh, earned by creators on the Kit platform.

[00:14:40] Matt: Mm.

[00:14:41] Nathan: And we actually hit that maybe four years ago.

[00:14:43] Matt: Wow.

[00:14:44] Nathan: Because we could track all the revenue that you were earning through, you know, everything that you were doing. Yeah. And, and email was powering that. And so once we hit it, we said, “Okay.” You know, we- we had a discussion, like should we raise that to 10 billion? And then we said, “No, no, no. Actually, we want it a billion dollars paid by Kit directly.”

[00:15:00] Matt: Mm.

[00:15:01] Nathan: You know, like it has come from our bank account to yours. Wow. Mm. And that’s a way harder goal, you know. Currently, we’re on track to do that in, like, 17 years. Right? And so now we’re like, okay, how do we accelerate that to- Mm … uh, get to the point that we’re paying out, you know, not 50 million or 80 million total, but $50 to $80 million a year, and then faster and faster from there.

[00:15:21] Matt: Right.

[00:15:21] Nathan: And ultimately, we want to get to the point where we’re paying out, you know, a billion dollars a year to creators.

[00:15:26] Matt: Mm.

[00:15:26] Nathan: And that’s how the goal will shift.

[00:15:27] Matt: Yeah. It’s interesting, ’cause now I’m thinking, okay, what is that for us? Mm. Because this still is a… For you, this might be the number of people using Kit.

[00:15:35] Yeah. But actually, how are these people’s lives different and better-

[00:15:40] Nathan: Mm-hmm …

[00:15:40] Matt: because they’ve joined us? Mm. And I don’t know if that’s time spent in Creative Act, time spent writing. I’m not sure what that is, but it’s giving… I’m- I’m w- wondering if actually what’s that… Because we’re not, like you- Like Kit, we’re not helping people earn a living necessarily.

[00:15:58] That might be one of their paths, but that’s not our direct goal. Mm-hmm. So it’s more so kind of the intrinsic, am I sitting down to do the work?

[00:16:06] Nathan: Yeah.

[00:16:06] Matt: So, or just to sit and journal.

[00:16:08] Nathan: One thing that it made me think of, you know, I wrote down impact, and the, a thing that I always align the team around, and even our community, is thinking about not just, like, okay, great, as a, as a creator on the platform, here’s the impact that Kit has had on you.

[00:16:23] Mm-hmm. Helped you hit a revenue goal, hit a subscriber goal. But also, like, writing, content creation, all of these things have an impact on people.

[00:16:33] Matt: Mm-hmm.

[00:16:33] Nathan: Right? And so for us, we talk about the, I think it’s like 700 million active subscribers- Mm-hmm … that are on the Kit platform. You know, if you think about your favorite writers and podcasters who are sending out their newsletter that’s, like, impacting people’s lives and- Yeah

[00:16:45] the content and all that. And so we keep recentering on that. And so I have these graphics I’ll draw of, like, you know, we’re a team of 115, and we impact, you know, it’s, it’s, I think we’re at 108,000 active users on Kit- Mm-hmm … ev- who, who are active every month. And then those 108,000 impact- Mm-hmm … 750 million people-

[00:17:05] Matt: Mm-hmm

[00:17:06] Nathan: that they reach.

[00:17:07] Matt: Interesting.

[00:17:07] Nathan: And that’s the kind of thing that’s really important.

[00:17:09] Matt: Yeah.

[00:17:09] Nathan: The other thing is, we don’t need to spend too much more time on this. Mm-hmm. But, um, I also really like counterbalancing goals. So I mentioned two of Kit’s goals, which are the one billion paid to creators, the 100 million in annual recurring revenue for, um, for our company.

[00:17:23] And the third one that’s really important is 250,000 active creators on Kit.

[00:17:29] Matt: Mm.

[00:17:30] Nathan: And the reason that we have that is any software company that you’re trying to grow, the, the best way to grow revenue is to move upmarket, start offering enterprise plans, and do all these things, and really to leave behind the beginner.

[00:17:44] Because they’re not that profitable, they churn, all this stuff, and we didn’t wanna do that. Like, that starts to go at odds with our mission.

[00:17:50] Matt: Yes.

[00:17:51] Nathan: And so we added that, that, okay, 250,000 active creators on the platform c- as part of our vision, because you can only achieve that if you continue to serve the beginner- Mm

[00:18:03] the long tail, the entry-level person.

[00:18:04] Matt: Mm. Hey, just a quick note before we keep going. If you usually just catch episodes whenever they pop up in your feed, take a second, hit subscribe or follow. We’ve got some great conversations coming up, and that’s the easiest way to make sure you don’t miss them.

[00:18:18] Thanks so much for your support.

[00:18:19] Nathan: And I think you have a similar aspect. Something that I loved- Yeah … like digging into your site, in this $16 a month- Mm … program, I mean, it’s a low price point, and then I noticed that you also have a, like a scholarship version of it.

[00:18:32] Matt: Yeah.

[00:18:32] Nathan: Where you’re, like letting people in, just say, hey, if…

[00:18:35] W- how do you structure that?

[00:18:36] Matt: Yeah. And this… And maybe I rewind a little bit because- Yeah … the way… I think the origin story’s kind of interesting, is that we started this, Writer’s Hour- Mm-hmm … in the pandemic. Mm. Like many people, they were doing things online. We were one of them, and we thought, let’s invite…

[00:18:51] We’re gonna do two weeks, 8:00 AM, Monday to Friday, join us and write together in silence. And we called it Writer’s Hour, and we… It was free. There was no monetary. The first day, someone said, “I got more value, more writing done in 50 minutes than I have in the last five months. Do you have a Patreon or something?”

[00:19:07] Nathan: Yeah.

[00:19:08] Matt: And so that was the first time anyone had been offering to give us money, give me money- Yeah … for anything. I’ve done a lot of entrepreneurial things. So the next day, we did have a Patreon. And so I’ll, I’ll get to why this matters. At ab- about a year and a half, we shifted from a- It’s free. If you get value out of it, here’s how you can donate.

[00:19:26] Nathan: Mm-hmm.

[00:19:27] Matt: To, here’s the price, but if you can’t afford it, here’s a no questions asked, we’ll give it to you for free. Mm. And what that did is that a lot of people actually wanted to pay, because it was a proxy for their own commitment to their- Yeah … writing practice. And we were actually leaving a lot of money on the table for the business, but also a lot of intrinsic value for them- Mm

[00:19:46] by giving them the opportunity to say, “This matters to me, and I’m going to pay for it for my own self.” So all that to say, that’s why we kept that very generous policy in place, because we never want community and writing to be something that people can’t access because they can’t afford it. We have so many people who are either in rural locations- Mm

[00:20:07] disabled, elderly, in a tough financial spot, that they get to connect with a wider community of people that they, even in the best of times, wouldn’t have been able to. So anyway, that’s –

[00:20:18] Nathan: Yeah …

[00:20:19] Matt: why that’s important. But we do have a price. And

[00:20:20] Nathan: now, if anyone questions it, you can, you point to the, the mission-

[00:20:23] Matt: Yes.

[00:20:23] Nathan: Yeah … right, of what you’re trying to accomplish, and you articulated that really well. All right. So as we think about scaling a membership from 500,000 to five million-

[00:20:30] Matt: Mm-hmm …

[00:20:31] Nathan: there’s a lot of things that people skip past, and mission is the thing that I think everyone skips past. And so I love that we spent as much time on that as we did.

[00:20:39] Now, uh, give me the… I realize I didn’t write it down. Give me the, the short version that we keep referring back to- Yeah … of the mission.

[00:20:45] Matt: So it’s to help every individual develop and sustain a writing practice.

[00:20:51] Nathan: And I think this is just important to have- um, up here so we can keep referring back to it.

[00:20:57] Matt: Yeah.

[00:20:57] Mm-hmm. ‘

[00:20:58] Nathan: Cause it really, if you were writing it out, you would, you know, start with the mission and then articulate the vision- Yeah … usually with a few metrics beneath it. So you know, this goes right up there. About a year ago, I had Julia Taylor, the founder of GeekPack, on the podcast. Mm-hmm. And she said that one of her KPIs that she tracks as a founder is how many times a week does she articulate publicly-

[00:21:19] Matt: Mm

[00:21:20] Nathan: their mission.

[00:21:20] Matt: Mm.

[00:21:21] Nathan: On podcasts, in front of the team, in front of customers, all of that, to just keep recentering everyone. Because if you’re trying to say, “Okay, I’m try- I’m building a, a membership or a community that’s way bigger than me.”

[00:21:32] Matt: Mm-hmm.

[00:21:33] Nathan: Just always keep coming back to the mission.

[00:21:34] Matt: Mm-hmm.

[00:21:35] Nathan: Okay.

[00:21:35] Matt: I love that.

[00:21:36] Yeah.

[00:21:36] Nathan: Hard pivot here. Yeah. ‘Cause now we’re going into numbers.

[00:21:39] Matt: Yeah.

[00:21:40] Nathan: The thing that matters after that, that we need to obsess over, is the funnel. And you might be like, “Well, hold on. No, no, no, we’re just mission-driven.” Mm. “We’re, you know, we just care about the touchy-feely side of it.” It’s like, okay, cool. Do you wanna be in business next week or next year?

[00:21:51] Matt: Yeah.

[00:21:52] Nathan: Like, we have to care about the funnel. The other thing that I feel like all membership operators get wrong is they usually make the jump from selling info products, digital products in some way, into membership.

[00:22:05] Matt: Mm-hmm.

[00:22:06] Nathan: And the- and they treat it the same way. But the thing is, you’ve switched. You’re running a SaaS company.

[00:22:11] Matt: Mm.

[00:22:11] Nathan: Right? You’re at 500,000 revenue. I mean, you’re on track for 750,000 in revenue. Mm-hmm. Like, there’s a lot of metrics that matter in here that you need to start caring about.

[00:22:19] Matt: Mm. Yes.

[00:22:20] Nathan: Um, the good news is there are thousands of SaaS companies out there, and there are tens of thousands of articles written on how to handle all the metrics- Mm

[00:22:28] what you should care about and all that. So we’ll do a little crash course on it right now. Um, but you have a lot of studying that you can do because you have to start thinking about this business so much differently than most people think about membership.

[00:22:41] Matt: Yeah. It’s … I, I’m, I’m feeling like we have to mature in this way.

[00:22:44] Mm-hmm. That feels uncomfortable. I’m sure every founder kind of goes through these levels of maturity of, like-

[00:22:48] Nathan: Yep …

[00:22:49] Matt: how you need to operate. And yeah, I agree, this is probably where we’re the weakest right now. We pretty much go on good vibes, word-of-mouth. We do have, like, podcasts, social media, but- Yep

[00:23:00] free events, but we don’t really have an engine. Mm-hmm. And we’re not cl- certainly not monitoring it about this right here.

[00:23:07] Nathan: All right. So on the funnel, if we’re just to map it out- Yeah, yeah … in the simplest terms. Right? So we’re gonna have, uh, visitors to your pr- you know, to your site, and you would wanna map out where are those coming from, what’s word of mouth, what’s referrals, uh, what’s paid ads, all of that.

[00:23:25] So you’d have, you know, a few different sources coming in. You have a, a trial right now that you offer, right?

[00:23:29] Matt: Yeah. This tier has a trial. There’s a free seven-day trial. Okay. Yeah.

[00:23:33] Nathan: And so then we’re going visitors into trials, and then you have some number of those that convert- Mm-hmm … into members. Mm-hmm.

[00:23:41] And so that’s … It’s a very simple funnel. Mm-hmm. But what you need to do is you need to put, uh, numbers to all of this.

[00:23:48] Matt: Mm-hmm.

[00:23:49] Nathan: And on each one, you’re going to track, uh, two things. We wanna track the total count, uh, on a weekly or monthly basis. If it’s a metric that you- care about deeply and you’re trying to move, track it on a, on a weekly basis.

[00:24:02] Matt: Mm.

[00:24:02] Nathan: If it’s a metric that you’re like, “Oh, I’m just kind of aware of that,” then monthly is fine. But this is very important, and so I would track it-

[00:24:08] Matt: Mm …

[00:24:08] Nathan: on a monthly basis. So the two things that we’re gonna track is the, uh, the stats for each one, so the total numbers, like total number of visitors, uh-

[00:24:16] Matt: And

[00:24:16] Nathan: that’s across

[00:24:17] Matt: each-

[00:24:18] Nathan: Yep

[00:24:18] Matt: category.

[00:24:18] Nathan: Uh, and all of that. And then you’re gonna track the conversion rates at any individual point. And a lot of people do these as a point in time, but you don’t actually want that. You wanna track it how the trend changes over time. Mm. So this is a really impor- These metrics are all really important to your business, and so we’re gonna track them on a weekly basis.

[00:24:38] Matt: Mm.

[00:24:38] Nathan: If it’s not that important and you’re monitoring it- Mm … you can do that monthly. But, like, these matter, so track them weekly.

[00:24:43] Matt: Weekly.

[00:24:44] Nathan: And so then what we’re gonna see in our table is, you know, for the week of August whatever, uh, we had this many visitors. Mm. Uh, we had this many trials and this many members, and the conversion rate between them- Mm

[00:24:57] at each stage was this.

[00:24:59] Matt: Mm.

[00:24:59] Nathan: And then you’re gonna graph those over time. So we’re graphing both the total numbers over time and then the, the trend in- Mm … conversion rate over time. And you’ll start to notice trends now. Mm. But what you’ll find is that you can then optimize, like pick a single metric and say, “You know what?

[00:25:14] For the next two weeks, I’m gonna really focus on improving this.”

[00:25:18] Matt: Mm.

[00:25:18] Nathan: So do you happen to know your visitor to trial?

[00:25:21] Matt: So, yeah.

[00:25:22] Nathan: Or trial to, uh, paid conversion rates?

[00:25:25] Matt: Embarrassingly, no, to visitors. Okay. Um, we do roughly know this. It’s roughly 27%.

[00:25:32] Nathan: Okay.

[00:25:32] Matt: Now, the caveat to that is that this is the only tier that has a, a trial.

[00:25:37] Nathan: Uh-huh.

[00:25:37] Matt: And also… And maybe we’ll get into the complexity of membership versus product later, but-

[00:25:42] Nathan: Yeah …

[00:25:43] Matt: sometimes I worry the value proposition of each of these are different. Right. So-

[00:25:47] Nathan: As people move between plans and

[00:25:48] Matt: yeah. Yeah. So some people jump right in here. We don’t really have a trial for that.

[00:25:51] Nathan: Mm.

[00:25:52] Matt: Sometimes we do occasional free events that gives them a taste of the community. We don’t really have a trial for this one either.

[00:25:57] Nathan: For the gold tier.

[00:25:58] Matt: Yeah. So it’s kind of we’re forcing everyone to funnel through this first tier, which broadly is the thing that people tend to come to us the most for.

[00:26:08] Nathan: Mm-hmm.

[00:26:08] Matt: And then we position these as escalating need states and value. If you’re looking for more craft support, if you’re looking for more community- Right … if you’re looking for more accountability and coaching, then people are in the ecosystem here, and then they will self-select-

[00:26:22] Nathan: Yep …

[00:26:22] Matt: to join those. But like I said, it’s- These have no trials other than listen to a podcast, attend an event.

[00:26:30] Yeah,

[00:26:30] Nathan: and generally if you focus on, uh, problems higher up the funnel first-

[00:26:35] Matt: Mm …

[00:26:35] Nathan: then, uh, you can solve the downstream ones later. Mm. So I wrote down upsells. So after someone be- you know, converts from a, a trial to a paying member, then later on you, you’ll upsell them to other plans.

[00:26:48] Matt: Mm-hmm.

[00:26:49] Nathan: And we can deal with that later.

[00:26:50] Matt: Yeah.

[00:26:51] Nathan: But just instrumenting this funnel, graphing it over time- Mm-hmm … you’ll start to notice a lot of things that happen. Mm-hmm. You’ll start to see, okay, are, are visitors spiking all over the place, or is our trial-

[00:27:00] Matt: Mm …

[00:27:01] Nathan: are our trial conversions going up and down a bunch?

[00:27:04] Matt: Mm. ‘

[00:27:05] Nathan: Cause a lot of people assume that conversion rates are a function of the funnel itself- Mm

[00:27:10] and, like, what’s on screen and all that, and that matters, but the intent of the traffic matters at least as much.

[00:27:16] Matt: Mm. Yeah, I’ve seen that.

[00:27:18] Nathan: And, and so you might, even before you do cohort analysis and all this fancy stuff, you might see, wow, we had way more visitors That’s amazing. Oh, wait, but our trial conversion went down like crazy.

[00:27:31] Matt: Right.

[00:27:32] Nathan: Oh, like, thing that we deal- we deal with bot traffic a lot. Mm. You know? Or it might be like, uh, we had that article that went viral. Oh, and that conver- the people who signed up for trials converted to members at 6% instead of 27%.

[00:27:43] Matt: Got it.

[00:27:44] Nathan: You start to notice these trends, and you’re like, “Oh, wait, all traffic is not created equal.”

[00:27:47] Matt: Mm.

[00:27:47] Nathan: Which we intuitively know.

[00:27:49] Matt: Right.

[00:27:49] Nathan: But it’s once we represent it in numbers.

[00:27:52] Matt: Yeah. And we- I’ve seen that before. We do this 24-hour writing sprint event- Uh-huh … every year. It’s the 24 hours of silent writing when we’ll have 3, 4, 5,000 people signed up to that. Mm-hmm. But it’s interesting that actually the

[00:28:04] I thought that would be our audience, but very few people actually convert into-

[00:28:08] Nathan: Yeah …

[00:28:09] Matt: a membership. So I, I see that in practice. But that

[00:28:11] Nathan: might be great for awareness.

[00:28:13] Matt: Yeah.

[00:28:13] Nathan: And then later on you’re retargeting those people or- Right … you could be doing other things.

[00:28:17] Matt: Yeah. True.

[00:28:18] Nathan: So in this, really the, the action item here on the funnel- Yeah

[00:28:21] is just instrument and monitor every step of the funnel.

[00:28:25] Matt: Yeah.

[00:28:26] Nathan: And then, you know, I’m gonna put a question mark down here as well. Basically, you’re g- you’re gonna have a stat for every one of these per week, and then a, a- Mm-hmm … a percentage for the, the number that move between that.

[00:28:37] Matt: Yeah.

[00:28:37] Nathan: And then you can ask questions of, like

[00:28:39] Okay, we’ll give you another example. Mm. So at Kit, we get 15 people a day who move from the 1,000-subscriber plan, which is our base plan, and graduate to the 3,000-subscriber plan.

[00:28:51] Matt: Mm.

[00:28:51] Nathan: And so on one hand, that’s a drop in the bucket compared to the huge amount of revenue. But if you look at the total, you know, the new revenue coming in- Mm

[00:28:58] it could be pretty meaningful. And so we have a team that sat down and said, “Okay, what would have to be true-

[00:29:04] Matt: Mm …

[00:29:04] Nathan: for instead of 15 people a day graduating, it to be 18?” It’s only three more people a day, but over 30 days in a month and 365 days in a year. Right. And the, the more they graduate, the more likely they are to retain.

[00:29:16] And so we have a team that’s just like, “All right. We’re gonna get three more people a day.”

[00:29:19] Matt: Mm.

[00:29:20] Nathan: And now they’re looking through everything. They’re digging into the details, and they have this very tangible metric to move.

[00:29:25] Matt: Mm.

[00:29:26] Nathan: And so you might be saying, “Okay, like, 27% trial conversion is pretty good.” But you’re like, “Okay, what would have to be true for this to be at 30%?”

[00:29:31] Matt: Mm-hmm.

[00:29:32] Nathan: And you go through the flow yourself. Yeah. You really dive in, and I bet you would find the improvements-

[00:29:36] Matt: Yeah … um,

[00:29:36] Nathan: to get

[00:29:36] Matt: to that. I already have some ideas here. I think- Mm … we kind of throw people into Writers Hour, which is, uh, those daily sessions, but we don’t really have a great, like, onboarding- Yeah

[00:29:45] or a great here’s how to set up your writing practice. We don’t really do that. We kind of just throw them in. So I imagine something there to make that- stickier for them- Yeah … when they do join. So I, uh, there’s already ideas to improve that.

[00:29:57] Nathan: I like that.

[00:29:58] Matt: Mm.

[00:29:58] Nathan: Um, there’s lots more on funnel that we could get into.

[00:30:00] Yeah. But I think this is enough for now. Once you go through all that, you’ll find there’ll be more to get into. The, the one flag that I will save for later- Mm … this would be the, like, uh, you finish all of this, like, the thing to work on later would be cohort analysis.

[00:30:14] Matt: Mm. I’m just gonna say cohorts.

[00:30:16] Nathan: Because basically what you’ll see is not all traffic is created equal, and it behaves very differently down the funnel. Yeah. Um, you don’t need to worry about that yet, but it will become very important.

[00:30:27] Matt: Yeah. Can I ask one question- Yeah … about this part in particular? The

[00:30:30] Nathan: upsells?

[00:30:31] Matt: I think we’re very good at…

[00:30:32] Our, our positioning is invitation versus upsell. Obviously, we never, like, use that word with our- Yeah … community. It’s very, “If this is what you’re looking for, we have this over here.” Some of our feedback has been feeling like, “Oh, am I constantly being upsold?”

[00:30:49] Nathan: Mm.

[00:30:49] Matt: Mm-hmm. And I’m just curious how you guys have done this, how other creators have done this to really…

[00:30:54] Again, this is just, it’s, it’s, we don’t want that to be the vibe. Yeah. That you’re constantly, “You’re here, but we always want you to be up there.” I’m curious if you- How

[00:31:02] Nathan: do you handle

[00:31:02] Matt: that? Yeah, if you have thoughts on- So the- That

[00:31:05] Nathan: question … the thing is, I’m realizing in our business, I would describe this as expansion.

[00:31:09] Matt: Yeah. Okay.

[00:31:09] Nathan: Maybe I just didn’t wanna write a word as long as expansion on the board.

[00:31:13] Matt: Yeah. No, I, I, I like that though, ’cause that, it, it’s, it’s a framing.

[00:31:16] Nathan: Yeah. And so, you know, they’re expanding their relationship with you, their ex- Yeah … their business ex- is expanding, um, all of that. At Kit, we have two forms of expansion.

[00:31:27] One is when your list size grows, you automatically move up, right? Mm-hmm. So someone paying us 10,000, uh, or who has 10,000 subscribers pays us more than someone who has 8,000. So we call that organic expansion.

[00:31:39] Matt: Hmm.

[00:31:39] Nathan: Um, and that just happens very naturally. And so we’re, we’re coming alongside you, and we’re like, “Hey, how can we help you grow your list faster, reach more people?”

[00:31:47] All of that. Hmm. And our incentives are very aligned. And then we have the upsell expansion, which is getting you to move from our creator plan, which is our standard paid plan, to our pro plan that has more features and, and all of that. So I’m not sure. A lot of memberships-

[00:32:03] Matt: Mm …

[00:32:03] Nathan: typically only have one kind of expansion.

[00:32:05] Matt: Mm.

[00:32:06] Nathan: Um, but it’s always worth thinking about is, are there two levers here, or is there a type of expansion that naturally aligns with the success of the customer?

[00:32:13] Matt: Mm-hmm. Yeah.

[00:32:14] Nathan: Does anything come to mind here?

[00:32:16] Matt: Yeah, I think we are often … So we do have emails and announcements every day, and often we’re pointing to all these other things that are happening.

[00:32:25] Mm. So it’s very much like, here’s what’s happening over here versus … It’s like an, it’s like a soft upsell where we’re not- Yeah … like … We do have some, and we’ll talk about this residency maybe in a bit, where that’s more of like a campaign, but it’s really just like signposting. These things exist. Yep. If that resonates, you’ll click through, and you’ll realize, oh, I need to be-

[00:32:45] Nathan: That’s the right fit for me.

[00:32:45] Matt: Yeah. Yeah. So I think just more of that. That feels like it aligns. Yeah, and I think,

[00:32:49] Nathan: um, in your, your wording, it’s an invitation- Yeah … it’s not a sale. Yeah. Maybe just say, say that. That can be really good.

[00:32:55] Matt: Yeah. I think that’s it.

[00:32:56] Nathan: Okay, so let’s keep moving.

[00:32:57] Matt: Yeah.

[00:32:58] Nathan: So as we go past funnel, right? This is everyone coming in.

[00:33:01] Mm-hmm. The next thing that really matters is retention. And so this is looking at, you know, what is your monthly churn rate-

[00:33:08] Matt: Hmm …

[00:33:08] Nathan: uh, on your membership? Do you happen to know the,

[00:33:11] Matt: the numbers? Yeah. I j- I, I didn’t, but I do. It’s roughly 3 to 5%.

[00:33:15] Nathan: 3 to 5%?

[00:33:16] Matt: Yeah. Kind

[00:33:16] Nathan: of like- Monthly churn.

[00:33:17] Matt: Yeah. Yep. Monthly churn.

[00:33:18] Nathan: As a membership- Uh, 3 to 5% monthly churn is really quite good.

[00:33:22] Matt: Oh, is it? Okay.

[00:33:23] Nathan: To give you an idea, Kit’s monthly churn, we differentiate between user churn and revenue churn.

[00:33:28] Matt: Mm.

[00:33:29] Nathan: Um, and what that does, typically people who pay you more are gonna stick around longer. You know, if I can afford paying $149 a month, I probably, uh, am fairly stable in what I’m doing. I probably have a higher income.

[00:33:44] Um, I’m probably r- am really committed to my writing practice rather than just like, ”

[00:33:47] Matt: Eh.” Mm-hmm. Yeah. Like, it’s probably important to me. And people here ge- generally, they’re either on deadline for a book. Mm-hmm. They need more support, so there’s their goal. It’s aligned with their- It’s important to them.

[00:33:56] It’s not- … their goal and ambition. Yeah.

[00:33:58] Nathan: It’s not a hobby. I always separate those out. So Kit- Mm … for example, has about a 3.5% monthly user churn.

[00:34:05] Matt: Mm.

[00:34:05] Nathan: And like a 3.1% monthly revenue churn.

[00:34:07] Matt: Separate.

[00:34:08] Nathan: So there, there’s two different things, right? User churn and revenue churn, and then you can assign these to each individual tier.

[00:34:15] Matt: Mm.

[00:34:15] Nathan: Because what you’re gonna see is like, oh, interesting, the silver and the gold tier both have additional services offered. Mm. You know, and these additional benefits. But for some reason, one is churning-

[00:34:25] Matt: Mm …

[00:34:26] Nathan: way higher than the other.

[00:34:27] Matt: Mm.

[00:34:27] Nathan: You might expect that the gold tier is churning, um, at a lower rate.

[00:34:31] Matt: Yeah.

[00:34:31] Nathan: Because they’re more invested. Mm-hmm. Well, you might find it’s churning at a higher rate because it’s more expensive.

[00:34:36] Matt: Mm-hmm.

[00:34:37] Nathan: Oh, it’s three times the price.

[00:34:38] Matt: Mm.

[00:34:38] Nathan: And so seeing the difference between month, um, between user and revenue churn, uh, or member and revenue churn-

[00:34:44] Matt: Mm …

[00:34:45] Nathan: is really, really important.

[00:34:46] Mm. And then you track it over time. And then what you wanna do is, this is where cohorts really matter. Let’s take two different types of visitors. So one of them might come in from your … a big challenge or the writers hour. Mm-hmm. You know. Yeah. They’re one of the, the 4,000 that all came in at once who

[00:35:03] They converted at a low rate, but they did make it all the way through to a member.

[00:35:06] Matt: Mm.

[00:35:06] Nathan: And you’re like, “Oh, that’s interesting. Okay.” Uh, and then the other was referred by a friend.

[00:35:10] Matt: Mm-hmm. Mm.

[00:35:11] Nathan: What I would most like, what I would expect to see- Mm … is the person referred by a friend-

[00:35:16] Matt: Mm …

[00:35:17] Nathan: has a way lower churn rate than the person who came in through a challenge or a paid ad.

[00:35:24] Matt: Yeah.

[00:35:24] Nathan: And all of that.

[00:35:25] Matt: I like that. So it’s not only channel. I know you can’t read that, but-

[00:35:28] Nathan: Yep …

[00:35:29] Matt: separating by tier, but also by way in.

[00:35:31] Nathan: Yeah.

[00:35:31] Matt: Yeah. That’s interesting.

[00:35:32] Nathan: And I want you to know that this is hard to do.

[00:35:34] Matt: Mm-hmm.

[00:35:35] Nathan: Like, these initial metrics are pretty easy.

[00:35:36] Matt: Yeah. ‘

[00:35:36] Nathan: Cause you’re tracking total stats and all of that.

[00:35:38] Then i- as you get into cohorts and attribution, it gets hard.

[00:35:42] Matt: Mm.

[00:35:43] Nathan: So like, you know, there’s a lot of software companies that it takes them a while to do this- Mm. Got it … or that sort of … or it requires some more sophisticated software. Mm. Um, but it’s totally worth it if you wanna scale. Mm. Do you wanna pause for a second- Yeah

[00:35:54] and check in? We’ve covered like three of the five main points. Yeah. All of that. How are you feeling? What questions do you have?

[00:36:01] Matt: I feel good. I feel … This is important. I, I’m realizing as we go down, it’s like my … I have less answers to.

[00:36:10] Nathan: Mm-hmm.

[00:36:10] Matt: And no, I think, I think it’s re- I think you’re right where it’s at.

[00:36:14] And I think- I imagine this is the nexus point for organizations like this-

[00:36:18] Nathan: Mm-hmm …

[00:36:19] Matt: where if they, they don’t decide to go into this level of granularity are, are the ones that kind of plateau. So it … Yeah, it feels both exciting, a little daunting, um, but I think, I think this all feels, feels right.

[00:36:33] Nathan: The other thing that I was noticing, you know, is 3, 3 to 5%- Yeah

[00:36:38] monthly revenue churn, or sorry, mon- monthly, uh, member churn, is those are really good numbers. Mm. Like I mentioned, I’ve seen a lot of memberships sit at 15%.

[00:36:47] Matt: Mm.

[00:36:48] Nathan: But there’s a lot that you can do here. And if you think about the points of leverage in a business, retention is one of the absolute biggest-

[00:36:59] Matt: Mm

[00:36:59] Nathan: in a monthly recurring revenue

[00:37:01] Matt: business. Yeah.

[00:37:02] Nathan: Because if you just imagine, you’re like, “Okay, we’re gonna get so good at attracting more and more people at the top of the funnel. We’re gonna dump … Invest all this in paid ads.” But if you have a leaky bucket and they’re just dumping out-

[00:37:14] Matt: Totally agree …

[00:37:15] Nathan: it, it’s just

[00:37:16] It’s a two steps forward, one step back- Yeah … continually.

[00:37:19] Matt: Mm.

[00:37:20] Nathan: And so I would track the retention numbers for a period of time. Mm. You can probably go back and calculate them. And some of these might be … You know, if you’re using Stripe for payments or things like that- Mm-hmm. Yeah … it might calculate it automatically.

[00:37:30] Yeah. But go back and track that. And then I would just set a goal.

[00:37:33] Matt: Mm.

[00:37:33] Nathan: Let’s say that it were … If we … Let’s say it’s hovering right around 4%.

[00:37:37] Matt: Mm.

[00:37:38] Nathan: I would say, “Okay, our goal on this is to get it to 3.5.” Right? Or 3.7. You know, and you’re just saying, “Okay, what can we do?” Mm. And then brainstorm four to five ideas.

[00:37:48] Matt: Mm.

[00:37:49] Nathan: Put them in sequence. You can’t do them all at once. You know, just like, look, uh, every week or every month we’re gonna implement these little things.

[00:37:57] Matt: Mm. Mm.

[00:37:58] Nathan: Um, and one of them might be a survey when someone, when someone cancels.

[00:38:03] Matt: Yeah.

[00:38:04] Nathan: Which we

[00:38:04] Matt: have. Which we have. We do have that now. Okay. Yeah, yeah.

[00:38:06] Nathan: Do you act on information from that?

[00:38:09] Matt: We reply to everyone. We ask them to reply as well. Uh-huh. And we reply to everyone, um, back. Yeah, it’s… I mean, honestly, a lot of it is financial and lifestyle changes. Mm-hmm. Which is nice, and actually a lot of people saying, “I’m canceling because I’m going on holiday for three months, but I- Yeah … I’ll be back.”

[00:38:25] That’s the ones we hear. I worry about the ones that don’t fill out the survey and that don’t answer. Mm-hmm. That’s the, the secret, the silent reason people are- Yes … canceling. So that’s the one I worry about.

[00:38:37] Nathan: Two things that I would recommend. Um, one, uh, you just described not a cancellation, but a pause.

[00:38:43] Matt: Yeah.

[00:38:44] Nathan: But in your flow, it has to be a cancellation.

[00:38:46] Matt: Yes.

[00:38:47] Nathan: So if you can change your flow where it says, “I would like to pause for 90 days.”

[00:38:52] Matt: Mm.

[00:38:52] Nathan: Or, “I wanna pause my subscription.” It’s like, “Great, how long? 30 days, 60, 90?”

[00:38:56] Matt: Mm.

[00:38:57] Nathan: And then let them do that, and then it automatically comes back- Mm … when they said they were done with their- Mm

[00:39:01] summer holiday-

[00:39:02] Matt: Yeah …

[00:39:03] Nathan: whatever else. I bet you would save a decent number.

[00:39:05] Matt: Mm.

[00:39:06] Nathan: Versus the person who’s like, “Oh, I’m canceling,” which to me is just a pause, and I’m totally gonna remember to renew. Mm-hmm. And it’s like, “No, no you’re not.” Mm. Yeah. You know? Like, we don’t, we don’t remember to do that. And on one hand, someone might argue like, “Oh, that’s a sneaky cancellation flaw,” or they said they wanted to cancel, and it’s like, no, no, they said they wanna be a writer.

[00:39:24] Matt: Yeah.

[00:39:24] Nathan: They said they wanna have a daily writing practice.

[00:39:26] Matt: Yeah.

[00:39:27] Nathan: And that accountability and the email saying, “Hey, the pause in your membership is coming to an end. Like, we’re so excited for you to restart-

[00:39:33] Matt: Mm-hmm …

[00:39:34] Nathan: the daily writing. Here’s our video. Here’s our tip on how to restart-

[00:39:39] Matt: Yeah …

[00:39:39] Nathan: your writing habit as you’re invited back to the community.”

[00:39:41] Matt: Yeah. I love that. Yeah, and actually people do request pause. Mm-hmm. Unfortunately, the platform we use, we’re on Circle. Uh-huh. Are you familiar with Circle? Yeah. We have limitation by the platform because we’re not custom-built. Okay. But we have a lot of people saying, “Hey, do you have a pause option?” Yeah.

[00:39:55] And we’re like, “Sadly, no. Just email us again.” So I totally understand that’s not-

[00:39:59] Nathan: But, uh- … the thing is … there might be… It’d be worth reaching out to the Circle team. Yeah, yeah. There might be something with Zapier or-

[00:40:05] Matt: Yes …

[00:40:05] Nathan: inside of Stripe or whatever-

[00:40:06] Matt: That’s, that’s smart …

[00:40:07] Nathan: where y- they trigger the pause option, and-

[00:40:10] Matt: Mm

[00:40:10] Nathan: it goes from there.

[00:40:11] Matt: Yeah. No, I think this is such a… This is actually, this is key.

[00:40:15] Nathan: We’re gonna add a pause.

[00:40:18] Matt: Yeah. I love the, the video idea too of like, I think we just need to do more of that kind of stuff. We’re fortunate we do a lot live, so we’re able to- Yeah … be that friendly face live in the room, but actually a video.

[00:40:30] Mm-hmm. I, I love this, these kind of ideas.

[00:40:32] Nathan: And then going back to, uh, Julia from GeekPack.

[00:40:35] Matt: Yeah.

[00:40:36] Nathan: That is an opportunity to reiterate your mission.

[00:40:38] Matt: Right.

[00:40:38] Nathan: You can say like, “Hey, you’re-” Yes … you know, “Your pause is coming to an end. We’re so excited to have you back. As you probably know, our mission-

[00:40:46] Matt: Mm …

[00:40:47] Nathan: is, you know- Yeah

[00:40:48] to help everyone develop a daily writing practice.”

[00:40:51] Matt: Yeah.

[00:40:52] Nathan: You know, and you choose what you enter, you know, but then they’re like, “Oh, man, I’m excited to come back,” instead of like, “Oh, shoot, I actually didn’t mean to cancel that.”

[00:40:58] Matt: Mm.

[00:40:58] Nathan: You know. Mm. ‘Cause they’re coming to you and saying, “Hey, I want this thing,” and you’re like, “Great.

[00:41:02] I’m here- Yes … to help you achieve

[00:41:03] Matt: that.” Yes. Mm.

[00:41:04] Nathan: Okay. The second thing that I think everyone can implement on retention is calls. Mm. And I would say I would pick some number of your users who cancel- Mm … uh, to get on calls with every week. Mm-hmm. It could be three, it could be five.

[00:41:17] Matt: Mm.

[00:41:17] Nathan: And just get on a call, do an interview, learn more, record it.

[00:41:20] Matt: Mm-hmm.

[00:41:21] Nathan: Save the transcript. AI is really good at going back through the calls and saying, “Hey, here’s the trends that are happening.” Mm. And so if you do those interviews and calls, then, um, you’ll learn so much more. Mm. And often just that quick little email like, “Hey, I just noticed you canceled. Um, if you’re up for it, I’d love to get on a 15-minute call and learn more.”

[00:41:41] Matt: Mm.

[00:41:41] Nathan: You know? Nice. “Here’s a- Love it … here’s a link to book,” you know? Mm. And a bunch of people will.

[00:41:45] Matt: Mm. I love

[00:41:46] Nathan: it. So Alyssa, who’s our director of customer experience at Kit, she gets on, like, 10 of these calls every week, just, like- Mm … always trying to learn ’cause she’s looking for all the friction points that make people cancel their membership.

[00:41:57] Mm.

[00:41:57] Matt: That’s smart. Um, my wheels are turning, so that’s really good.

[00:42:01] Nathan: Okay. Yeah. Uh, the next one that I wanna dive into-

[00:42:03] Matt: Yeah …

[00:42:04] Nathan: is products. So this is another big-

[00:42:06] Matt: Yeah …

[00:42:06] Nathan: leverage point. So you have, uh, a good mix of products here.

[00:42:10] Matt: Yeah.

[00:42:11] Nathan: Right? So we have the membership with three different tiers. Yep. And then we’ve got the residency.

[00:42:16] Matt: Yep.

[00:42:17] Nathan: Do you feel like there’s anything missing in your product stack, or is there anything that you wanna change?

[00:42:22] Matt: There’s two thoughts here. One is the residency came. So again, this is our highest ticket thing we’ve ever done. It’s white glove service. How do we help people get to the end of a manuscript?

[00:42:32] This came from knowing that Gold was great, but it actually wasn’t serving people- Mm … truly in the way that we could. And we felt it was easier, instead of trying to reimagine this tier of membership, creating a whole new product with a whole new value proposition- Mm … given all the insights we’ve learned about this tier.

[00:42:51] So we made the choice to have a separate product. Now, there’s other things that have come in our surveys that people are looking for something that is the community and experience of silver, but more what I’m calling craft tracks. So a more intimate group that maybe isn’t residency- Mm-hmm … but is aligned with someone who’s writing fiction, actually bringing those people together-

[00:43:15] Nathan: Mm-hmm

[00:43:15] Matt: with weekly or maybe monthly office hours around that particular cohort. So I’m kind of going a roundabout way to say I’m faced with this, this question, and this is a bigger question of, do I introduce new tiers of membership-

[00:43:30] Nathan: Yeah …

[00:43:30] Matt: revise current tiers, or continue to launch new products? And that’s kind of what I’m sitting with.

[00:43:37] And right now I’m thinking this craft track is almost like something between silver- Between yes, yeah … and gold, or maybe it’s beyond gold. I’m not sure. And maybe another tangent, I’m even wondering if, like, Writer’s Hour becomes its own product with its own tiers-

[00:43:51] Nathan: Mm …

[00:43:51] Matt: for people just looking for focused writing.

[00:43:53] And then membership, silver and gold almost become membership, and then there’s tiers within membership. So I don’t know if I’ve explained kind of my thought, but I’m-

[00:44:04] Nathan: Yeah …

[00:44:04] Matt: at once, there’s the question of new ideas, do I launch new products? And actually, our current membership, do I separate that into two products?

[00:44:11] Nathan: Yeah. ‘

[00:44:12] Matt: Cause I worry that the complexity and the unclear value proposition of each of these and the bigger membership might be a hindrance to our ability to, to scale and grow.

[00:44:22] Nathan: Yeah. So- These are all really good questions.

[00:44:24] Matt: Yeah.

[00:44:25] Nathan: And part of the reason why we saved products for number four, and we tackled funnels- Yeah

[00:44:29] as number two, ’cause o- once you instrument your funnel- Then you can start to see how changing and packaging and positioning and price-

[00:44:38] Matt: Mm …

[00:44:38] Nathan: affects conversion rates and the amount of money being brought in. There’s another element to the funnel that you can add in where you can talk about revenue at each stage of this.

[00:44:45] Matt: Mm.

[00:44:46] Nathan: Right? Because if we, you know, we’re tracking the total number of people and the conversion rate between each step, but that gives a … I- if you add in price and plan, that gives us the math to say, “Okay, this funnel was driving $2,000 in new MRR every week, and now it’s driving $4,000 in new MRR every week.”

[00:45:08] That could be because people are choosing a higher plan, because they’re- Mm … uh, converting at each of these thresholds at a higher rate, or because more people are coming through. So I say all of that because I believe that all of your product decisions should go through the lens of the funnel- Mm … and conversion rates.

[00:45:26] Because my gut instinct is that the more complexity you add, the … You’re gonna see your conversion rates decrease.

[00:45:33] Matt: Mm.

[00:45:34] Nathan: And you’re gonna see- Yes … referring a friend decrease, and you’re gonna see some of these other things as people are just like, “I don’t know what’s right for me.”

[00:45:42] Matt: Yes.

[00:45:42] Nathan: There’s a, an author named, uh, by the name of Dan Ariely-

[00:45:46] Matt: Mm

[00:45:46] Nathan: who has written a ton on pricing and psychology- Yes … and all of that.

[00:45:49] Matt: Yeah.

[00:45:50] Nathan: His stuff is fantastic. I would r- I would read that. But my gut instinct is I would not add- Okay … any more tiers or membership. Okay. I would think about how can I simplify?

[00:45:59] Matt: Yes.

[00:45:59] Nathan: And how can I make this decision as easy as possible?

[00:46:03] Yeah. One of my favorite pricing examples that I’ve ever seen was, uh, there was a software platform that had, I believe, three tiers, and it was like, uh, $15 a month, you know, 50, and then I think the most, the highest one was like 250 or something like that. Mm. And everyone was getting what they needed from the cheapest plan.

[00:46:23] And so that’s where- We’re feeling- … everybody went …

[00:46:25] Matt: we’re feeling some of that too, yeah.

[00:46:26] Nathan: Now, they’re targeting businesses.

[00:46:28] Matt: Mm.

[00:46:28] Nathan: So the only change they made, so they were getting like, say, 80% going to the $15 a month plan. They changed the name of that plan from, uh, starter or whatever it was- Mm … something positive, to hobbyist.

[00:46:39] Matt: Mm.

[00:46:40] Nathan: And a bunch of people went, “I’m not a hobbyist. I, I I work on a 12-person marketing team at a legitimate, you know, at a full business.” And so they just bought the business plan instead.

[00:46:48] Matt: Interesting, huh.

[00:46:49] Nathan: And so there’s a lot of things that you can play with- Yes … in that, where … And there might be packaging things, uh, wording, all of that- Yeah

[00:46:57] that says, “If you are this type of person-

[00:47:00] Matt: Yeah …

[00:47:01] Nathan: go here.” ‘Cause silver and gold don’t tell me anything.

[00:47:03] Matt: I know. It’s really … This is a, I’ve been … A bugaboo for me is, are these two titles.

[00:47:08] Nathan: So who-

[00:47:09] Matt: Yeah …

[00:47:10] Nathan: who should choose the gold plan?

[00:47:12] Matt: So kind of the way we describe it and think about it, Writer’s Hour, this is for focus.

[00:47:17] Mm-hmm. If you’re just looking for focused writing, that’s where you would go. That’s the Writer’s Hour held in community. Plus, we do monthly challenges. Yeah. So if it’s around focus, join that. If you’re looking for more craft support and community- Mm-hmm … you join Silver, ’cause that includes weekly interviews, a bunch of meetups happening at the mem- member-led meetups.

[00:47:35] This is for if you’re looking for coaching and accountability.

[00:47:38] Nathan: Mm-hmm.

[00:47:38] Matt: That’s the goal. So generally, it’s that escalating need state of seriousness- Mm-hmm … with a particular project or what you’re looking for. So- And

[00:47:45] Nathan: so there’s some aspect of that, of the, like, hobbyist to-

[00:47:50] Matt: Yeah …

[00:47:51] Nathan: like, sincere,

[00:47:52] Matt: right?

[00:47:53] Nathan: Yeah. And so you could even name them things like Focus-

[00:47:56] Matt: Yeah

[00:47:56] Nathan: Community, Coaching.

[00:47:58] Matt: Yeah.

[00:47:59] Nathan: Right? Or-

[00:48:00] Matt: Commitment or con- con- something. Mm. I’m not trying to do, like, a bunch of Cs, but that could be- Yeah … interesting, too. But yeah, Focus, Community. And actually, this other one I’m potentially wanting to introduce is something around craft. But then, uh,

[00:48:14] Nathan: coaching. And I’d be careful with the word craft- Yeah

[00:48:16] because it doesn’t actually mean anything. And I say that w- as per- someone who runs a conference- Yeah … called Craft and Commerce. So I, I love the word. I use it-

[00:48:22] Matt: Right …

[00:48:23] Nathan: and all of that. But it doesn’t help me decide, am I the right person-

[00:48:26] Matt: Right …

[00:48:27] Nathan: uh, to jump into one of these others. Mm-hmm. I bring all this up just because, uh, the products and the product mix is really, really important.

[00:48:35] Matt: Mm.

[00:48:35] Nathan: It’s a big leverage point, um, that you’re gonna wanna play with and you’re gonna wa- wanna look at. And then you’re gonna wanna look at how every change in that changed your funnel metrics.

[00:48:46] Matt: Mm-hmm.

[00:48:47] Nathan: And ultimately changed the retention.

[00:48:48] Matt: Right.

[00:48:49] Nathan: Right? Because does someone identify with, “I’m on the right plan for me”?

[00:48:53] Uh, Seth Godin has this line where he says, like, “People like us do things like this.”

[00:48:57] Matt: Yes,

[00:48:58] Nathan: yes. Right? It’s an identity thing.

[00:48:59] Matt: Mm.

[00:48:59] Nathan: And so I show up and it’s like, “Hey, um, where do people like me go?”

[00:49:03] Matt: Yes. They’re

[00:49:03] Nathan: like, “Oh. Well, tell me about yourself,” and like, “Here’s a few things.” “People like you go to the gold plan.”

[00:49:08] Yes. And you’re like, “Great. Thank you. Thanks for letting me know.” You know, ’cause you know that I’m new here feeling where you’re like, “Shoot, where do I need to go?”

[00:49:15] Matt: Yeah. Like,

[00:49:16] Nathan: just, just tell me.

[00:49:17] Matt: That’s it. Yeah.

[00:49:18] Nathan: Uh, and, and it might be the stage that they’re at, how serious they are.

[00:49:22] Matt: Mm.

[00:49:22] Nathan: Any of those things.

[00:49:23] Matt: Mm-hmm.

[00:49:24] Nathan: Yeah. Or, like, I, I like accountability as a word. Right. ‘Cause you might even, as you describe the details within this- Mm-hmm … right, accountability might be- Yes … the word. That really is,

[00:49:33] Matt: yeah.

[00:49:34] Nathan: If, if you are on deadline-

[00:49:35] Matt: Mm-hmm …

[00:49:36] Nathan: you have to be in the residency. If you’re serious you know. I guess you’d go through all the traits-

[00:49:42] Matt: Yeah

[00:49:42] Nathan: of the writer.

[00:49:43] Matt: Yeah.

[00:49:43] Nathan: What stages could you be at, all of that.

[00:49:45] Matt: Yeah.

[00:49:46] Nathan: And then, then you identify and, like, map those to each plan.

[00:49:49] Matt: Right.

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[00:50:15] Matt: I’m also curious your perspective, because this, so this was an additional product.

[00:50:19] Mm-hmm. So we kinda kept this product what it was- Yeah … and then we added this additional product.

[00:50:24] Nathan: With the residency.

[00:50:25] Matt: Yeah. And I guess I’m curious your decision point of when does something become a separate product.

[00:50:33] Nathan: Yeah. ‘

[00:50:34] Matt: Cause this, we always want members to feel, uh, that they’re valued, so everyone gets a discount on this.

[00:50:40] So it’s almost like this is the ticket to the, the venue. Mm-hmm. And then we have this thing. So I am questioning, there are some other products I can imagine us launching that once they’re in here, it’s… Okay. Yeah. What, what’s your real need state?

[00:50:54] Nathan: I think

[00:50:55] Matt: the- And I’m curious how you approach that … the

[00:50:56] Nathan: way to think about it is, first, is there a core job to be done that’s not, like, that’s really, really important, a lot of people share, and is not being served- Yeah

[00:51:05] in our current stack. And I think that’s what the residency does.

[00:51:07] Matt: Yes.

[00:51:08] Nathan: And it makes sense as a separate product because it’s time-bound. Mm-hmm. It’s a high price, all of that. The other question that I ask is- How close to the ceiling are we on these products?

[00:51:20] Matt: Mm-hmm.

[00:51:21] Nathan: Right? W- you might say, like, “Look, you know, we’ve saturated our market, and so we’re really only gonna be able to bring in another few hundred members.

[00:51:30] Like, that’s never gonna gr- grow. We’ve optimized every other part of the business. It’s time to add additional services, and that’s why we’re starting a publishing company. That’s why we’re doing,” you know, whatever other things you might do. When I look at your business, I see it as there’s a ton of potential to optimize all of these different levers.

[00:51:48] And so I believe it would be a distraction to add more products-

[00:51:51] Matt: Mm-hmm …

[00:51:51] Nathan: at, at this point in time. Yeah. Because you’re probably at, like, 25% optimization in, like, 10 different places.

[00:51:59] Matt: Mm.

[00:52:00] Nathan: And you would just add a whole new surface area that now you have to optimize, which w- which would just slow you down.

[00:52:05] Matt: Right. Mm. Mm.

[00:52:07] Nathan: I would say 9 times out of 10, when you’re looking to improve something in a business, you’re better off improving what you have rather than starting something new.

[00:52:15] Matt: Mm.

[00:52:16] Nathan: Uh-

[00:52:17] Matt: Got it. Which is- Can I ask one more question about that? Do it. So this concept of, I know we don’t like the word craft- Yeah

[00:52:24] but bringing a group of people together around, like, fiction writing or indie publishing or something- We could, the easy option is just to add that here. So we’re basically ballooning out what’s in there.

[00:52:37] Nathan: Yep.

[00:52:37] Matt: But I do think it’s, we’ll be leaving value on the table by just including that, which I think will be a higher glove service, not quite like this, but around making the community feel a little more intimate.

[00:52:51] Nathan: Mm-hmm.

[00:52:52] Matt: But also giving them the support they need.

[00:52:55] Nathan: Mm.

[00:52:55] Matt: So kind of holding that as well, ’cause I don’t wanna undervalue this by throwing a bunch more stuff in. Actually- For, for sure … it feels more confusing.

[00:53:04] Nathan: Yeah, and we’ve found that we’ve added stuff to it- Yeah … and people were happy paying for, like, a premium plan.

[00:53:08] Yeah. And we added even more value to it at the same price, and they’re like, “Well, I don’t need those things.” Yes. “So can I just pay a la carte for the things that I needed?” And you’re like, “No.”

[00:53:17] Matt: Yeah, yeah.

[00:53:17] Nathan: You know? But the additional value is, can sometimes, uh, decrease the perceived value.

[00:53:22] Matt: Right.

[00:53:23] Nathan: So what I would do there- We

[00:53:23] Matt: see that a lot, actually.

[00:53:24] Yeah.

[00:53:25] Nathan: Yeah, and so often it’s stripping things away and, or even just ’cause something’s offered doesn’t mean you have to talk about it on the sales page.

[00:53:31] Matt: Mm,

[00:53:31] Nathan: right. Right? And so you can AB test, you can do these things- Mm … like, ooh, if I don’t talk about this, does it perform better?

[00:53:36] Matt: Right. ‘

[00:53:36] Nathan: Cause maybe-

[00:53:37] Matt: Mm

[00:53:37] Nathan: partway down the funnel, maybe someone signs up for Silver, and it always included this additional thing. Mm. But you didn’t talk about it, and then maybe in the trial y- you have an email like, “Hey, if you- Mm … convert this trial- Right … we’ll add in this other thing for free.” Right. Right. And they’re like, “Oh, that’s amazing.

[00:53:52] I would love that.”

[00:53:52] Matt: Right.

[00:53:53] Nathan: Even though before- Interesting … you were just giving it away.

[00:53:55] Matt: Yeah.

[00:53:55] Nathan: But I would say a traditional membership is probably gonna sit at about 10% monthly churn.

[00:54:00] Matt: Mm.

[00:54:01] Nathan: And it’s insanely hard to scale that, right? That is, like, I don’t know, swimming with ankle weights or something. Mm-hmm.

[00:54:06] So if you had said that your, uh, churn was that high, then the first thing that I would be going to is like, okay, how can we get more clear value and more commitment from each member? And what I would be doing is I would say, “Hey, we’re gonna alter it, ha- have a different version of the Silver package.”

[00:54:22] Matt: Mm.

[00:54:22] Nathan: “And instead of $49 a month, it’s $499 for the year.” And what it does is we’re going to put you into this accelerator.

[00:54:31] Matt: Mm.

[00:54:31] Nathan: And we’re going to put you into cohorts based on, you know, fiction- Mm … or indie publishing. And with that-

[00:54:38] Matt: Got

[00:54:38] Nathan: it.

[00:54:39] Matt: Mm. Uh,

[00:54:40] Nathan: and, and the crazy thing is, not only are we doing all this for you, but it includes a full year of our silver membership.

[00:54:45] Matt: Mm.

[00:54:46] Nathan: And all you did is you created this one-time event-

[00:54:49] Matt: Yes …

[00:54:50] Nathan: that they get a lot of value. And I say one time, it could be quarterly, it could be monthly. Mm. Right? But it, it gives you an open and close launch. It moves them from like, “Oh, I’ll try it out at $49 a month, then I’ll probably cancel after three months-

[00:55:02] Matt: Mm

[00:55:02] Nathan: uh, and I’ll move on,” into this like, “Oh, I’m committed.”

[00:55:06] Matt: Yes.

[00:55:06] Nathan: So we’ve done this with Kit, where, you know, instead of selling a-

[00:55:09] Matt: Mm …

[00:55:10] Nathan: $30 or $50 a month, um, subscription, we’ve done an accelerator, and it’s like all this, and it includes.

[00:55:16] Matt: Mm.

[00:55:17] Nathan: This thing. But really all we did was really focus on making you successful in this first period of time, and then we f- at, we threw in a year free of the software, but it was all the same price.

[00:55:27] Matt: Got it. That’s really smart, ’cause you were able to then position to the value state and the value proposition that I’m talking about here.

[00:55:35] Nathan: Yep.

[00:55:35] Matt: But in this, it’d be just framed in a one-time annual- You didn’t, you didn’t go

[00:55:39] Nathan: make a new product …

[00:55:40] Matt: point of… Yeah, that’s really-

[00:55:41] Nathan: And so you didn’t clutter.

[00:55:42] Matt: Yeah, ’cause we are thinking of launching this in 2027.

[00:55:45] Mm-hmm. So actually starting the year, there’s an extra level of commitment there. We have this… Yeah, I really like this.

[00:55:51] Nathan: One other thing that you’re gonna need to look at on retention is this number, the 3 to 5%, is for the entire, for all 2,000 members.

[00:56:01] Matt: Mm.

[00:56:01] Nathan: So it is averaging the person who signed up last week and is like, “I don’t know that you guys are any good”-

[00:56:08] Matt: Yeah

[00:56:08] Nathan: with the person who said, “Man, I have been a member for three years. This is the best thing that’s ever happened.”

[00:56:13] Matt: Mm.

[00:56:14] Nathan: So from a cohort perspective, you need to split it out, not just based on where they came from-

[00:56:18] Matt: Mm …

[00:56:19] Nathan: but based on time.

[00:56:20] Matt: Mm.

[00:56:20] Nathan: And so I would measure a 30-day churn.

[00:56:22] Matt: Mm.

[00:56:23] Nathan: And so we do this at Kit. We are obsessed over if you pay us, you know, you become a member, um, how likely are you to still be a member- Yeah

[00:56:34] 30 days later? ‘Cause that churn rate for us is 18%.

[00:56:37] Matt: Mm.

[00:56:38] Nathan: Right? So that’s really, really high. It, whereas the average is 3 1/2%. So once you’re diluted into the big pool, it’s only 3 1/2%. Right. But if you said, “Oh, if I get this new customer in, they’re going to retain for this long period of time,” it’s like, no, they’re not.

[00:56:52] Matt: Yeah.

[00:56:52] Nathan: You’re using the numbers from the long-tenured people- To convince yourself that this person’s gonna stay at that retention level

[00:56:58] Matt: And we’ve, we’ve seen that. We say if someone crosses, and I think for us it’s something between 30 and 90 days. Mm-hmm. Once they cross that threshold, they’re, they’re with us for years.

[00:57:06] Nathan: Yeah.

[00:57:07] Matt: So, yeah.

[00:57:08] Nathan: And then you can say like, okay, you know, in our case, right? Yeah. We have a team. They’re like, “All right, how do we get this 18% number down to 15%?”

[00:57:16] Matt: Yeah.

[00:57:16] Nathan: They’re thinking of every touch point. Okay, what actions do you take? Okay, if you send a broadcast, if you import these subscribers- Mm … you know, how can we obsess over that?

[00:57:24] Matt: Mm.

[00:57:24] Nathan: You know, just because someone paid doesn’t mean they’re hooked. Right. And so how do we make that, that transition?

[00:57:29] Matt: That, that resonates.

[00:57:31] Nathan: Okay. The reason that we’re going in this, you know, we wrote it top to bottom.

[00:57:36] Matt: Yeah.

[00:57:36] Nathan: You could also write these the opposite way. You could think of it as, like, the foundation for a building.

[00:57:41] Matt: Mm.

[00:57:42] Nathan: The most important thing is our mission and vision.

[00:57:44] Matt: Mm-hmm.

[00:57:44] Nathan: Why are we doing what we’re doing? Second, if we don’t have a funnel, we don’t have customers coming in, we don’t have awareness, we don’t have a business. And so, you know, that’s our next level.

[00:57:53] Matt: Mm.

[00:57:54] Nathan: If we’re not keeping our customers, we don’t have retention, then something’s wrong with our product, uh, you know, and every bit of effort that we put in is going to be, uh, diluted, you know, and going out to leak- leaky bucket.

[00:58:07] Then the next part is the products. You know, what are we actually selling? How do we maximize the revenue per customer? And then the final part is, is this ready to scale?

[00:58:17] Matt: Mm.

[00:58:17] Nathan: And so I wanna talk through a few metrics that are really, really important to scale- Any recurring revenue business, whether it’s a membership or a SAS company.

[00:58:28] So there is a metric, uh, that is LTV to CAC.

[00:58:34] Matt: Mm.

[00:58:34] Nathan: And so I’ll just write that out, uh, and then we’ll describe what it is. All right, so LTV is lifetime value, and CAC is customer acquisition cost. So if we’re to … Let’s just focus on lifetime value for a moment. You can convert any percentage churn into a, a number of months or years that someone stays.

[00:58:55] So what you would do is you would, uh, say one divided by 3.5% will get you, I don’t know the math, it’s, like, 22 months or 24 months, something like that. Mm-hmm. And so on average, someone is going to stay at 3.5% for, you know, say right around two years. And then if you multiply that by your average revenue per customer, you could determine a lifetime value for each one of these plans.

[00:59:19] Matt: Mm.

[00:59:20] Nathan: Now, you have to keep in mind, it’s gonna be skewed because your longtime customers that are never gonna churn ’cause they love you are gonna be driving up that number, and the immediate customers who are skeptical-

[00:59:31] Matt: Mm …

[00:59:31] Nathan: and aren’t hooked yet, they’re gonna be driving it down.

[00:59:33] Matt: Mm. Right.

[00:59:34] Nathan: So you gotta kinda balance that.

[00:59:36] But that gets you to a number of what’s a customer worth to me? Okay, so with some quick math with the, the help of our producers, uh, a 3.5% monthly revenue churn means someone’s gonna stay on average for 28 months, and then at $16, we are at $457 in- Mm … average in, in LTV. Mm. Right?

[00:59:56] Matt: Mm.

[00:59:56] Nathan: And you can do that math for each one of your plans- Mm

[00:59:58] right? ‘Cause they’re each gonna have a different churn rate. Right. And they have a different price point.

[01:00:02] Matt: Right.

[01:00:02] Nathan: And then you can get to a blended lifetime value. So now we get into customer acquisition cost. How much money can you spend to acquire a customer?

[01:00:12] Matt: Mm.

[01:00:13] Nathan: Um, if we think about ratios between this, uh, I would say four to one is kind of the, the minimum ratio.

[01:00:23] So let’s say, so in this- Mm … in this scenario, I would be happy to spend $100 to acquire a customer to the Writer’s Hour.

[01:00:31] Matt: Mm. Mm.

[01:00:32] Nathan: Now, if you’ve spent tons of money all upfront, and you don’t make it back for, oh, you know, you make it back over the course of 28 months- Right … you could go broke-

[01:00:42] Matt: Right …

[01:00:42] Nathan: if you did this.

[01:00:43] Right. Like, right, you have to manage cashflow

[01:00:44] Matt: and-

[01:00:45] Nathan: Mm. Hmm … um, e-commerce brands really struggle with this- Mm … because they have, like, supply chain and, you know, the- Yeah … and all of this. But-

[01:00:53] Matt: Huh …

[01:00:54] Nathan: that CAC-to-LTV ratio, um, is really important. If you can stay above four, like at Kit, we try to target 4.5.

[01:01:03] Matt: Mm.

[01:01:03] Nathan: Um, which is actually what this is exactly.

[01:01:06] Anything under 3.5, we start to get really nervous.

[01:01:09] Matt: Mm. ‘

[01:01:10] Nathan: Cause we’re a bootstrap company, we wanna grow profit- Yeah … profitably. Anything before, we’re like, “Okay, cool.” Above 4.5, we’re like, “Okay, we should be spending more aggressively to grow.” So this is like the final number that matters in any recurring business, because every other number plays into this.

[01:01:27] Matt: Mm.

[01:01:28] Nathan: So if you think about, okay, if I can increase my conversion rate … Sorry, if I can increase my retention from, um, 3.5 to 3, as I increase, uh, decrease my churn, right?

[01:01:41] Matt: Mm.

[01:01:42] Nathan: Then that is gonna take me from the 28 months to whatever it is, 30-something months of retention, which means a customer is worth way more to me.

[01:01:50] Matt: Mm.

[01:01:50] Nathan: If I can dive into my product stack and I can say, “Ooh, what would have to be true for 5 or 10% more people to be on this plan, on the silver plan versus the writer’s hour plan?” Well, now my average revenue per user is way higher, which drives my LTV way higher. Mm. Right? And then if you’re like, okay, on the customer acquisition, acquisition cost- If I can get my Facebook ads dialed in a little better, or I can have a mechanism where every member refers another member, that drives down my CAC.

[01:02:23] Matt: Mm.

[01:02:23] Nathan: Which means I can probably … I can scale more and all of that. So there’s like, there’s so much that goes into this. Mm. But I wanna show how, like, we have to get all of the fundamentals first- Yeah … before we can obsess over- Mm … this final equation.

[01:02:38] Matt: Yeah. There’s a whole world here.

[01:02:39] Nathan: Yes.

[01:02:40] Matt: Yeah. No, it’s- I’m very

[01:02:42] Nathan: curious for your thoughts and reactions.

[01:02:44] Matt: Yeah. I think, um, so I’ll just say the kind of the in- an uninformed perspective of this is I’m just gonna throw some ads out and- Yeah … like see what happens, you know? It’s like, “Oh, cool. We had 100 people sign up.” But without this metric, without actually- Mm … looking at what that means, it’s just sunk money at, at-

[01:03:03] Nathan: Yeah

[01:03:04] Matt: at worst. Um, or at best, really. Um, yeah. So I’m, I’m … This is, this framing is really helpful that we’ve started here. Uh, yeah, I’m kind of, like, excited to figure this out though, you know? That’s … Simultaneously.

[01:03:18] Nathan: Yeah. And so you’ll, you’ll look at it for every plan, and you’ll be like, “Okay.” Yeah. “If someone is on this plan, then they’re worth, you know, this huge amount of money.”

[01:03:27] Right. And so maybe it’s … You know, we’ve done it … We’re realizing like, oh, we could justify sending this, uh, Swagger merch- Yeah … to every person on this plan.

[01:03:36] Matt: Right.

[01:03:37] Nathan: You know? Uh, ’cause that might help increase their retention. It might make them feel more of a community. Yes. You know, all of those things. And, and you’re like, “Ooh.

[01:03:44] Well, I only made $50 off this user, and so if I spend $50 to send them stuff,” like, that’s a problem. You’re like, “Oh, wait, but if they stay for 28 or 36 months-” Right “… then, you know, like on the silver plan.” And we calculated it for the Writer Hour plan. Right. But it, it would be, you know, could- Mm … potentially be way higher.

[01:04:01] Matt: Hm. Lots to think about. Yeah. I’ll, I’ll, uh, I’ll feel like I need to come back in a year and, like- Yeah … all right, let’s, like, dive into that more specifically. So how, how would I calculate customer acquisition cost? What, what is that and-

[01:04:13] Nathan: Yeah … where do I start? So there’s a lo- like, there’s a lot of nuance to it, but to dive in, quite simply, it’s, uh, everything you spend on marketing.

[01:04:20] So that’s gonna be your ads, uh, your team. Mm. And you might … Someone’s time might be split 50/50 between marketing and community support or something else. Right. But it’s what you c- spend to bring in a customer divided by how many new customers you had come in. So in this case, it’s really important to know, like, the, the metrics in your funnel, ’cause it’s, it’s how many new members came in each month.

[01:04:43] And then you’re going to be like, “Okay. So on average, uh, you know, I spent $10,000 on marketing. I got, um, 1,000 customers. And so then- Hm … my CAC was 100 bucks.”

[01:04:54] Matt: Hm. It’s really helpful because it makes things like social media- Mm-hmm … and podcast instead of, okay, we pay an editor for this, we pay someone to do this.

[01:05:04] It’s actually, it’s in the context of that’s all awareness, that’s all marketing.

[01:05:09] Nathan: Yes.

[01:05:09] Matt: So anyway, it’s, it’s… We’ve ne- I’ve never had a good reason to say this is worth spending or not worth spending before, but having a number here related to this then-

[01:05:18] Nathan: And that’s where

[01:05:19] Matt: when you- … gives a lot more context

[01:05:19] when

[01:05:19] Nathan: you have, there’s more that you have to factor into it-

[01:05:22] Matt: Yeah …

[01:05:22] Nathan: of like what’s your gross margin? What do you actually have to spend to service each customer? Mm-hmm. And there’s a lot more details, and you can get into all kinds of debate of what gets included in CAC and what doesn’t. Right. But at the high level, if you pick a way to measure it, and you start measuring it, and then you say, “Hey, what’s my target?”

[01:05:38] You know, my target is above four. And you’re like, “Cool. At that number, I feel good ramping it up.”

[01:05:43] Matt: Mm.

[01:05:43] Nathan: When it starts to dip below that, then I start digging and say, “Okay, how could I, how could I decrease this?”

[01:05:48] Matt: Mm.

[01:05:49] Nathan: The other thing is- Uh, things like team members tend to scale across a lot of customers. You’re paying the same person to run Facebook ads if they’re bringing in 500 customers a month versus 5,000 customers a month.

[01:06:04] Mm. And so their salary at the 500 is a very big part of your CAC, where it’s a relatively small part of your CAC at the-

[01:06:11] Matt: Mm …

[01:06:11] Nathan: at scale.

[01:06:12] Matt: Mm-hmm.

[01:06:12] Nathan: All right. So Matt, we’ve covered a lot in the last hour. You’ve been drinking from the fire hose- … of all of the metrics and everything else.

[01:06:18] Matt: Yeah.

[01:06:18] Nathan: I wanna, like, just take a step back and say, like, what questions you have, any reactions or takeaways?

[01:06:24] Matt: So there’s three core actions that are sitting at the top of my mind. Number one is, I love what you said about the KPI around mission and vision- Mm … and constantly repeating that in every event, every interaction I have, keeping that top of mind. So that, that’s the first one that I think will… That, that foundation for everything.

[01:06:44] The next is the conversation. There’s a lot to think about around our three tiers of membership, the naming of it, this potential annual kind of, uh, invitation offer that we talked about, that I really want to get clear about that. I think that’s an important step. And then finally, all of these things like funnel and retention, it, it makes me realize how important the granular, granular numbers are.

[01:07:09] Mm-hmm. So I need to get clear on what those numbers are, start to track them, identify them. Um, yeah. So those are kind of like the three big points for me, and I think everything else, I’m gonna have to marinate on a lot of this and talk to the team. But- Yeah … yeah, those are the kind of the three.

[01:07:24] Nathan: I love it.

[01:07:25] But I’m go- The good, the good news is this is recorded.

[01:07:27] Matt: Yeah.

[01:07:27] Nathan: Thank God. So you can

[01:07:28] Matt: watch,

[01:07:28] Nathan: watch it back at any time. Uh, I mean, you’ve built a really impressive business. Like to get to this- Thanks, man … size and scale is really hard. To get to this level of retention shows that you’re having a huge impact- Mm

[01:07:39] on the writers that you serve. And I’m just excited for you … to see you take this to so many more writers because I know the long-term impact that you’ll have on the writers and the writers will have on their readers.

[01:07:51] Matt: Mm-hmm.

[01:07:51] Nathan: And I would just keep recentering everyone on that because you’re doing really important work.

[01:07:56] Matt: Yeah. I, I appreciate it. I mean, really, this has been amazing. Just, like, spending time together talking about this, geeking out on this has been incredible. I really appreciate it. And yeah, just, just so much gratitude-

[01:08:07] Nathan: Oh, for sure …

[01:08:07] Matt: for, for you. Yeah.

[01:08:08] Nathan: I’m happy to. All right. So I’m a writer. You’re a writer. Yeah.

[01:08:12] We both deeply believe in the importance of building a daily writing practice- Mm … and not outsourcing our thinking, uh, to AI, but actually, like, implementing it ourselves and keeping that muscle sharp. If someone wants to… They’re hearing this, and they’re like, “I love scaling memberships, but-” I want to do this.

[01:08:28] Hmm. I wanna have a daily writing practice. Yeah. Where should they go to join your comput- community and, you know, be one of these 20,000 members?

[01:08:34] Matt: Yeah, so they can go to londonwriterssalon.com and find out all of the details around the membership. Um, and really encourage everyone to join us for Writers Hour.

[01:08:43] We get up to 1,000 writers every day writing together in silence, whether they’re journaling or writing poems or writing novels or nonfiction books. Um, it’s a really great community, and it’s just … You get to be, have colleagues that you- Yeah … wish you had in the writing practice. So we’d love … The more the merrier.

[01:08:59] Come, come write with us.

[01:09:00] Nathan: I love it.

[01:09:01] Matt: Yeah. Thanks so

[01:09:01] Nathan: much for coming on.

[01:09:02] Matt: Yeah. Appreciate it, Nathan. Thank you.

[01:09:03] Nathan: If you wanna break through the million dollar ceiling, check out episode 85 with Tim Grall. Tim broke out of a three-year plateau and scaled his education company from 700,000 to over $2 million a year by rebuilding his business model and team.

[01:09:17] I think you’re gonna get a lot out of that one. Like the video if you enjoyed it. Hit subscribe on YouTube or wherever you’re listening, and I’ll see you next week