$100,000 Revenues in last 12 months – wow!

Ok, this might sound like bragging, but I have a very happy news to share with you all. My little company has crossed an important milestone.

We have made $109,941 in revenues in the last 12 months. (October 2009 to September 2010).

The numbers:

October 2009 was such a key month in my start-up. I have launched my first big product that month. It was one of the best things I have done. There was no looking back since then. I made 2 more products (and on the verge of releasing 3rd one next week).

The next wave of encouragement came in February 2010, when I launched my first online training program. It became an instant hit. I have rolled it out 2 more times in June and September this year. Both times, the sales were beyond my wildest expectations.

Please note that I have included revenues generated from advertising & affiliate sales. It is shown in blue (as against orange for actual product sales).

Here is same chart, but stacked. This gives you a better idea of total monthly revenues.

While it is clear that online training programs (Excel School) and Project Management Templates are my main revenue earners, I have few other products (ebook, wedding planner template) that generate $200-$500 every month. I have some plans to improve my e-book and make the sales much more prominent. Hopefully it should be ready by Christmas this year.

Finally, number of customers per month.

About 5% of customers repeat. They come back and purchase something else too. Most of these are Excel School students.

What next?

When I set-up my venture, I never thought I would hit $100k milestone this quick. While, I am very happy for this I also have ambitious plans and awesome ideas for future. Right now, my mind is occupied with these thoughts:

  • How do I ensure same kickass support and service to my customers when the base is growing. (1700 is a large number, and they are growing every month. Even if 1% of them email me a week, I will be loaded with work very soon).
  • How to automate or outsource more activities so that I can spend time with my customers and community?
  • Finding time & creative juices to work on products that my existing customers are asking for (mainly 2 new training programs, one more e-book and upgrades to existing stuff).
  • Moving from proprietorship (one man firm) to a private limited (more like LLC).

I have already hired one assistant on contract basis to help me with few activities. I will be moving more work to him as time passes. I have been thinking and outlining ideas for next products / upgrades.

I also have started the process of migrating all my sites to one vendor who will host, maintain and upgrade them as needed. This will free-up some of my time.

Growth vs. Sustainability

While the above ideas are fine, I also have thoughts about whether to grow my company or make it more sustainable.

On growth front:

I think the market where I operate (Microsoft Excel users) will change drastically in the next 10 years. Technologies like touch-screen computing, web-based spreadsheets, online analytics & visualization will mature by then to become mainstream. What I am doing for living will be obsolete by then. So I must grow my company to the maximum possible level before that (may be by 2015). This will create enough liquidity so we (my family) can live comfortably for long.

On Sustainability front:

I love spending time with my customers and community and learning new things. I like teaching and enjoy writing. I also want my business to have meaningful social presence. There is tremendous scope for doing all this while making decent money ($100k-$200k per year). While technologies may change, I can adopt and continue to be passionate about data, analytics, visualization in future and share what I learn with my audience. This is more sustainable.

What I am going to do?

I am certainly not going to manicly grow my company. I am hoping to sustain current revenue levels and slowly grow them with new products in future. I will keep my core values sacrosanct and stand by them. I will continue to be cheap and awesome. Despite all the excess, we (my wife and I) have mastered the art of living frugal. We have few un-fulfilled goals (mainly to get a house), but we will reach there slowly, not in a rush.

What is in it for you?

I am glad you asked. No matter whether my company makes $10k or $1mil next year, I will share the my journey with you thru this blog. I will tell you what stupid mistakes I am making and what awesome things I am doing. So stay tuned.

PS: Do you know you can get free email updates? Just click here.

PPS: this post is inspired by similar article written by Peldi on Balsamiq blog almost 2 years ago.

How I keep my startup expenses low [Part 1 of 4]

As a startup owner, my first and foremost goal is to keep expenses ridiculously low. At the same time I have conflicting goals like,

  • Give insanely awesome customer service
  • Design fantastic products

But I found a decent balance between these goals and today I want to share some of the tactics I use to keep my business expenses low.

This post is unusually large, so I am going to write it in 4 parts.

  1. How I lower my Rental & Salary Expenses
  2. How I lower my Marketing & Sales Expenses
  3. How I lower my Website Expenses
  4. How I lower my Other Operational Expenses [Hardware, Software, Misc.]

Rental Expenses

I said it earlier too. I run my company from our bedroom. It is cheap, convenient and gives me tons of freedom to work and relax as I want. But it may not work for everyone. Especially if you are planning to hire some help.

My next best suggestion to move to a low cost location and set up your company there. Living in big cities can be a fancy thing. For eg. I was tempted to base my company in either Bangalore (India’s silicon valley) or Hyderabad (equally good city for tech. companies). But I decided to run it from Vizag. Running your company from a small town has various advantages:

  • Rents and other living expenses are cheap, which means, you can last longer in a small city with the same seed money.
  • Temptations are low: In a small city, you have few venues to splurge or indulge in time wasting activities. The more money and time you have, the better it is for your start-up.

Of course, starting in a small city may not work if your business involves either selling physical goods or need a big network to run, both of which can be found abundantly in big metros like Bangalore or San Fransico.

How much I spend on Rental:

We live in the outskirts of a small town in India. So the rents are not that expensive. We pay roughly Rs. 3000 ($75) per month as rent.

Resources on best city to start a business:

If you are in India, consider starting your company in Coimbattore, Vizag, Mangalore, Mysore, Trichy, Chandigarh, Indore, Bhopal, Pune, Kolkata, Bhubaneswar, Cochin, Jaipur. All these cities are low cost (compared to metros) and provide excellent opportunities for expansion, infrastructure and peaceful living.

If you are in USA, read this post by Penelope Trunk explaining how to choose a low cost city for living.

Salaries

I once read somewhere,

The best time to hire an employee is when you couldnt do that work yourself anymore

I couldn’t agree anymore with that. I have zero employees in my company (other than me). I occasionally hire free-lancers to take care of various odd jobs I have, but I have no employees. That means, I have no salary expenses recurring every month.

If you absolutely must hire someone, consider the following options to keep costs low,

Hire Freelancers:

Freelancers are a great way to get something done quickly. Try to hire someone from your local community as it feels good for both. One disadvantage of hiring freelancers is that you need to hand-hold them during initial few weeks to get best results. Typical rates for a freelancer could be between $50 to $250 per hour.

Outsource:

If you have a regular activity that is easy to do, but time consuming, then outsourcing your best option. You can find good help either in your own country or elsewhere around the globe for reasonable price. You can hire a good employee thru outsourcing for somewhere between $500 – $2000 per month.

Take help from Friends:

Use your personal contacts from earlier work places and college to get some help on say coding, web site set up or marketing. Since they already have experience in that area, you are bound to get quality output from them within reasonable time.

I have hired freelancers as well as took help from friends to keep my business going.

Tell me how you keep expenses low:

Please share your experiences on lowering expenses using comments. I would love to know what tricks and tactics you use.

What next?

In the next installment, learn how I keep my marketing & sales expenses low.

Related Posts: How much does it cost to run a website?

Image credit: Photo by HLIT

What is your Startup’s Goal ?

There is an interesting article on TechCrunch by Vivek Wadhwa on Is Entrepreneurship all about Exit?

I like this article as it raises an important question. Read an excerpt (emphasis mine):

What business schools teach, and the conventional wisdom in Silicon Valley, is that a tech startup must have a clearly defined exit strategy and focus all of its energy on reaching this final goal. In other words, entrepreneurship is all about the exit—wealth needs to be built by taking the company public or selling it to a larger player.

But must this be so? Technology entrepreneur and strategy consultant Sramana Mitra asks a great question: “What if the idea of exit was removed from the equation… what if the investor and entrepreneur agreed to a different model—the model of sharing dividends”?

While people, groups trying to build next Google or Microsoft may want to eventually sell or go public, start-ups like mine have no such glorious objectives.

When I started my company, I had these goals in mind:

  • Make twice as much of what I made in my day job. (make = profits, not revenues)
  • Enjoy the freedom and challenge of working on my own.
  • Fulfill my passion of helping others thru teaching and leading (glorious objective #1: help a million people)
  • Become an expert in online marketing, web programming & design, online training.

While I had no clear exit-strategy in mind, I joking tell my friends that if I can make Rs. 1 crore in revenues before I turn 31 (that will be in 2012 October) I would consider my startup as a success. That is around $250,000 for my western friends.

But that is not exit strategy. I don’t know if any company would ever consider buying me. I cant imagine the ridicule of going public. So my only exit option seems to be staying.

What about you?

What is your exit option? Do you agree with Vivek’s views in the quoted article? Please share your opinion using comments.

How much does it cost to run a website based business?

One of the advantages of a web based startups is that, they cost very little to setup. Today I want to give you a lowdown on how much it actually costs to run a mildly busy website. I will use Chandoo.org’s real traffic and running expenses to break it down for you.

Please note that the costs go up faster as your site grows in popularity.

Some basic stats about Chandoo.org traffic:

  • Page views per month: 350,000
  • RSS readers (daily): 9500
  • Email Subscribers (daily): 4900
  • News letter subscribers – 600+
  • Bandwidth per month: 25GB
  • Breakdown of bandwidth: 80% images, 10% CSS and JS and 10% text content
  • Breakdown of places viewers visit: Blog  – 85%, Forum – 5%, Formulas pages – 5% , Misc (including sales pages, home page etc.)  – 5%
  • No. of transactions (sales per month) – 65 (roughly 2 every day)
  • Affiliates (people who sell my products for me) – 5

I think this is a very good example of the kind of traffic a small startup generates.

Now lets breakdown the costs behind running a site like this:

There are 3 types of costs in running an online business.

  1. Recurring costs
  2. Fixed costs
  3. Invisible costs

Recurring costs for running a web based business:

  • Domain name – $10 per year
  • Hosting – $15 per month
  • Paypal Commissions – roughly $2 per transaction or $130 per month
  • Affiliate commissions – fluctuates, but  roughly $50 per month
  • News letter costs – $29 per month
  • Shopping Cart costs – $5 per month
  • Amazon S3 space and bandwidth costs (for hosting videos and other files securely) – $10 per month
  • Online backup of computer data – $5 per month

Fixed costs or one-time expenses:

  • Any software you need (for me, this was about $500 spent screen recording software, membership plugins etc.)
  • Web site design (no cost as I knew coding and I modified a free template to suit what I do)
  • Logos, Branding (again no cost as I try to do this on my own)
  • Set up fees (some hosting companies charge one time setup fees when you get a website. For my host there was no hosting fee)
  • Computer / Laptop – to run an online business, you need to have decent laptop or desktop and they usually cost $1000 or so.

Invisible costs:

  • The biggest invisible cost is your time (I work roughly 8 hours a day, 7 days a week). Even if you assume $10 per hour, this number will be 8*30*10  = $2,400. But this is all invisible and you do not feel this cost as a burden on your business.
  • Internet, telephone and electricity charges
  • House rent – most of the online businesses are run from home. You have to factor in certain portion of house rent / mortgage towards the cost of running this business.
  • Books, resources etc – To stay ahead in your business, you need to constantly read books or access resources to improve your knowledge. I purchase one book a month on excel / charting / dashboards / presentations / design concepts and read at least 70 different blogs on regular basis. Most of this is invisible cost.

Total costs:

There you go. If you add up the numbers, it would be $250 per month approx. As you can guess, major portion of it ($130 for paypal transaction charges and $50 for affiliates) is variable costs. That is if I have a bad month, I pay low on these and on good months, I pay more.

If you convert the amount to Indian rupees, it is INR 11,000 approx. It is not such a huge amount if your business can generate atleast a thousand dollars in revenues every month.

But the best part of this set up is that you can run your web based business for very little monthly costs ($10 for hosting, 5 for shopping cart and another 19 for email news letters) and scale up your operations as your revenue builds up.

What are the expenses like for you?

If you already own a business, share the expense details (in %s or in $s) with me thru comments. I would love to know how you keep your business lean and mean.

If you are planning to start a business, share your estimates and constraints thru comments. I can probably guide you by giving some suggestions on how you can reduce the expenses of running an online business.

Go!