Kalzumeus Software Year In Review 2013

I’m Patrick McKenzie (and often go by patio11 online). I started the world’s least ambitious software business in 2006, and it took over my professional life.

Every year I publish my stats and my thoughts on what worked well and not. Other folks tell me it has helped them, and the act of putting words to virtual paper helps me think through things — since I’m a one-man shop this post is the closest thing to strategic planning that ever happens.  Here are the writeups for 2006, 2007, 2008, 2009, 2010, 2011, and 2012.  (Hint for Googlebot: if someone is looking for the Bingo Card Creator Year in Review 2013, this is the right post, but BCC is a small portion of the business these days so I’m re-titling it.)

Capsule summary: 2013 was mixed from a business perspective. Sales fell at several of my lines of business, for various causes, not all bad.  Appointment Reminder, on the other hand, doubled sales, both on a per-year and on a monthly revenue run rate basis. I’d call it a pretty good year by any objective standard and a minor disappointment with regards to my personal goals.

Sales for Kalzumeus Software were approximately $112,000 and profits were approximately $60,000 *.

* Explaining That Asterix: As of 2013, I actually went ahead and formally incorporated my businesses. Appointment Reminder, LLC runs that product, and Kalzumeus Software, LLC runs everything else. Like in previous years, I’m not disclosing the Appointment Reminder numbers.  In 2010 and 2011 Kalzumeus Software dominated my personal income, so the health of that business was a bellweather for my overall financial situation.  This is no longer true.

Things Which I Suck At: Bookkeeping/Accounting: I used to do all my own bookkeeping and accounting, both for Japan and the United States. I’m still in charge of it for Japan but, thankfully, I have competent professional advisers for the US. Unfortunately, I did not get them hard numbers consistently enough for them to get me hard numbers by the end of the year, so it is likely that the below numbers will not match the “official” numbers I put on my tax returns. Treat these numbers as ballpark rather than audited  financial figures.

The Year In Brief

Bingo Card Creator was in maintenance mode for the entire year. I successfully transitioned myself almost entirely from working on it. Traffic and accordingly sales declined by about a quarter.

Appointment Reminder was theoretically my main focus in 2013. This was, again, more theory than practice. The bad news is that competition from consulting in the early half of the year and health problems in the later half of the year made it impossible for me to give AR the sustained focus that I wanted to give it. The good news is that despite my only sporadic ability to move forward on the business, sales doubled.

I quit consulting in approximately May of this year, to focus on my product businesses. It produced no new revenue, aside from collecting outstanding invoices, though did consume a bit of time/focus prior to winding down.  The full story is below.

I experimented more in 2013 with delivery of productized consulting in a variety of form factors, including writing a book on conversion optimization (technically written back in 2012 but released in the last weeks of it), continuing to sell the course on lifecycle emails which I released last year, developing a new course on software conversion optimization, and running a few online workshops through partnerships with other software entrepreneurs. It’s funny: when you phrase it like that the year sounds really really productive and yet sometimes it doesn’t feel that way. Hmm. Anyhow, feedback from customers has been overwhelmingly positive and the line of business has mostly achieved the free-me-from-the-consulting-treadmill goal I had for it.

I continued angel investing in a very limited fashion in 2013. I now have a grand total of two investments, in Stormpulse and Binpress. One to two a year seems to be a good fit for the amount of bandwidth I have available for software companies which I don’t own, considering folks typically want my advice a lot more than they want my wee little checkbook.

Bingo Card Creator

Bingo Card Creator is a freemium SaaS application (with a deprecated-but-still-used downloadable client) which makes bingo cards, mostly for elementary schoolteachers.

BCC was in maintenance mode for the entire year. “Maintenance mode” means that I do the minimum work required to keep the business up and running, rather than attempting to create new systems to e.g. improve marketing outcomes or substantially improving the product.

My only substantial work on it was spinning up two processes to allow me to work even less, to whit, transitioning front-line customer support from myself to a virtual assistant (the illustrious Sugar from Pepper VA Services, without whom I’d have long-since lost my sanity) and hiring Nick Disabato to run A/B tests every month so I wouldn’t be tempted to do it myself.

Bingo Card Creator’s traffic has fallen substantially this year, including large declines in organic search and AdWords traffic. This is the direct cause of BCC’s substantial decline in sales.

BCC Stats:

Sales: 1,734 (down 23% from last year’s 2,254)

Refunds: 57 (down from last year’s 89 — most were caused by a carder ring which ran ~30 fraudulent charges through us before we convinced Paypal to lock them out)

Sales Net of Refunds: $50,156.16 (down 23% from $64,791.81)

Expenses (estimate, pending bookkeeping): ~$27,000 (down slightly from $29,145.20)

Profits (estimate, pending bookkeeping): ~$23,000 (down substantially from $35,676)

Wage per Hour: I think I spent approximately 10 hours on process improvements for BCC over the year and approximately 10 hours on customer support, so the hourly wage is on the order of $1,000.  (One significant digit since I don’t keep anything like accurate time cards.)

BCC Web Stats:

Visits: 770k (down from 1.08 M)

Unique Visitors: 630k (down from 875k)

Page views: 2.4 million (down from 3.4 million)

Traffic sources of note: Google (50%), AdWords (14%), direct (12%), Binghoo (11%)

Trial signups for online version: 61,000 (down from 87,000)

Approximate online trial to purchase conversion rate: 2.6% (up from 2.4%)

BCC: What Went Right


Outsourcing front-line support has been a long time coming to Bingo Card Creator. I used to genuinely love responding to customer emails every day. Some time in 2011 or 2012 I started to dread it, because after 5 years of saying e.g. “Thanks for the email Miriam. I’m sorry, Bingo Card Creator does not support using clip art. Have a nice day.” I was going absolutely spare. My business friends told me that every time we got to talking I’d recount more exasperating CS anecdotes (“You won’t believe what someone told me today!”), which should have suggested I was burning out. My replies were getting less helpful, my responsiveness dropped from 99.X% of customers getting a reply within a day to avoiding checking email for days at a time, and, here’s a confession from the dark recesses of my soul, I occasionally felt contempt for my customers.

So I decided last year that I was finally going to bite the bullet and outsource front-line customer support. It isn’t rocket science, but I never actually made getting it done a priority until early this year.

Steps to outsource support:

  1. Stop using Gmail as my primary customer support platform, because “share Gmail with someone other than me” is a non-starter for me. I instead redirected our primary CS inboxes to Snappy, a helpdesk SaaS product. (I also tried ZenDesk but my VA felt it was hard to use. Snappy is a breeze, for both of us.)
  2. Write up a statement of principles and standard procedures for CS. My statement of principles is so that Sugar, or any VA I later bring into the company, understands “who we are” despite not being in the trenches with me since 2006. The standard procedures tells her how to operate the systems (our backend, Snappy, etc) that she has to use to do her job, how to write in the company voice, how to answer our most common questions, how to get help from me when she can’t answer a question, and how to help evolve the standard procedures document. I flagrantly stole this idea from the guys at the Tropical MBA podcast.
  3. I made some minor tweaks to my backend admin area to make them more user-friendly for someone who isn’t me. You might need to actually make a CS dashboard if you don’t have one already.
  4. Shadow Sugar as she does the job for a few weeks, by simply reviewing the tickets she worked in Snappy. I offered feedback on some responses and updated the standard document in response to others. (e.g. “You didn’t think you could answer this question and referred it to me for resolution. We will tend to get this question a lot, so we’re going to add it to the standard procedures document. Also, in the future, notice how my resolution here is in keeping with our company’s principles? You could have guessed I was going to do that, right? Great. If you feel in the future that you absolutely know the right answer, you don’t need to have me tell it to you. Go ahead and take action on it. I trust you. Don’t be afraid of not doing exactly what I would do, either — if we’re on the same page about principles, then a tactical mistake here or there doesn’t matter.”)

All that sounds pretty high-level, right? OK, concretely, here is our standard procedures document. The only thing I’ve taken out are credentials for our backend. Feel free to pattern your own on it if you’d like. Also feel free to improve it — this was a one-day project for me, not a heartbreaking work of staggering genius.  (n.b. That’s a frozen copy, not the live Google Doc, because while I’m a pretty transparent guy I don’t want to have to constantly censor credentials or what have you in the future.  If you’re viewing this post years after the publication date, it is likely out of date.)

As you can see, neither the Bingo Card Creator CS operation nor outsourcing it was particularly complicated.  It does, however, save me substantial time and focus, since I no longer have to worry about the product more than once or twice a week, when Sugar runs into something which she can’t handle.

Outsourcing A/B testing has also been a qualified win, mostly in that rather than spending my own time doing conversion optimization for BCC (a huge win historically — e.g. 60% more sales last year as a direct result of it), that happens without having me in the loop, and I’m freed up to work on more important projects. When Nick Disabato announced he was doing A/B testing expertise as a product I simultaneously a) facepalmed for not having done it years ago and b) signed up to be his first customer.

So what did Nick do for me? Great question. I have no clue and that’s exactly the way I like it. However, since that is a bit unsatisfactory for those of you reading this, I actually logged into Visual Website Optimizer to check up on his recent tests.  A representative example: in December, he ran some tests testing the layout of my Christmas landing page.  I’d normally think that’s likely a loser from a conversion optimization perspective, but the stats apparently disagree with me: conversion to the free trial increased from 15% to 19.5%.  That’s not a hugely useful result in and of itself, given that that page doesn’t get the volume to justify huge amounts of effort, but repeatable processes which collect wins like that are worthwhile for me.

I figure Nick is likely to eventually achieve results which more than pay for his efforts in perpetuity, and it also gives us the opportunity to work together on BCC (which is low-risk for me), get a good working relationship and base of shared knowledge, and then start systematically applying that to higher-leverage opportunities like e.g. Appointment Reminder.

BCC: What Went Wrong?

Traffic fell off a cliff: The only major problem in Bingo Card Creator has been the substantial decline in traffic as compared to 2012.

I have not dug deeply into why this has happen, because it’s strictly irrational for me to do so at this point.

Why? Let me share an item from my todo list for later today: “Call $HAPPY_CUSTOMER and apprise them that their credit card failed for the last month’s charge of Appointment Reminder right before Christmas, so that we can charge them $2,400 this year like we did last year.” I anticipate that phone call to take 5 minutes or less. $2,400 is approximately equal to an entire month’s profits of BCC. Any questions?

I rather suspect that it is just down to the ebb and flow of Google algorithms rather than any specific named algorithmic change (Panda/Penguin/etc) or penalization.

Appointment Reminder

Appointment Reminder is a SaaS application which makes reminder phone calls, text messages, and emails to the clients of professional services businesses (accountants, lawyers, doctors, HVAC installers, etc).

As in previous years, I am going to take the liberty of not disclosing exact numbers for Appointment Reminder. This is largely for two reasons: one, I go back and forth on taking investment for it someday, and having numbers publicly available complicates getting investment. Two, a significant fraction of Appointment Reminder’s revenues are through Big Freaking Enterprise Sales, and contract sizes are such that, when I win one, detailed granularity on my sales numbers would let an interested party figure out who just bought AR and how much they paid. I’m generally not contractually at liberty to disclose that, and (frankly) publishing it would be quite against my interests in getting the next contract.

What I can say:

  1. Appointment Reminder’s revenue for 2013 is approximately double it’s revenue from 2012. Monthly recurring revenue, which is my main metric of interest, is also about double on a YOY basis.
  2. The enterprise pipeline looks better than I could reasonably expect it to be, given my slackadasical efforts with sales in the last 6 months.
  3. We’re absolutely smashing my projections for COGS, which were approximately 20% at the design stage. (COGS is “cost of goods sold”, which in the AR context is dominated by the underlying telephony services we purchase from Twilio on behalf of our clients.)

Appointment Reminder: What Went Right

We had rock-solid technical performance in 2013, after having some severe issues in 2011 and hiccups in 2012. I’m sufficiently confident in AR’s systemic reliability and our monitoring setup to represent it as ready-for-mission-critical-use for customers while not causing me as much stress as being on 24/7/365 pager duty would ordinarily entail.

I don’t believe, off the top of my head, that we had any extended customer-visible downtime in 2013.  (Edit: Spoke too soon — I had misremembered the date of a partial outage.  In connection with the Ruby on Rails January of Fun (TM), I applied a series of security patches at 3 AM in the morning Japan time, and in the process managed to cause a partial outage to the service for several hours before realizing my mistake and fixing it.  This luckily did not severely impact any customers.)

At the same time, AR is not yet where I’d like it to be. We’re mostly covered on system-level issues, but we still have application-level errors on a handful of phone calls every month. The denominator is large, but my target for errors is zero, not “so few that customers are unlikely to notice.”

In conjunction with doing my course on lifecycle emails last year, I “hired” myself to do a proper job of email marketing for Appointment Reminder, which previously had “the absolute minimum required to ship the product.” One would think that “Psst, doing this would make you a lot of money” would be more successful inducement than “Advising people to do something that I don’t do in my core product feels wrong” but, in fact, that second factor was the one which lit a fire under my hindquarters. Our conversion rate is up and our churn rate is down, which (eventually) translates into a large portion of the 2X increase in revenue.

I’m quite happy with several security improvements I made in 2013 for the benefit of customers (and myself), including a) improving our HIPAA story, b) getting an E&O policy to cover the business, c) formally incorporating the LLC, and d) migrating from Rails 2.3 to a commercially supported version of Rails.

I didn’t commercially exploit a lot of these to the degree that I could have — for example, only a single digit number of customers even know that Appointment Reminder is insured — but they’re peace of mind for me and, knock on wood, I’ll retool processes in 2014 to take more systemic advantage of them.

Also, I couldn’t do it at all without Twilio.  In the spirit of full disclosure, I’ve hit a growing pain or two with them over the years, but at the end of the day they’re probably my favorite vendor ever.  (I’m told that some people operate under the assumption that I’ve taken their shilling due to how much shilling I do for them, so for the avoidance of doubt, the only consideration of value that I’ve gotten from them is three track jackets, which if you compare to my monthly Twilio bill must make them the most expensive track jackets in Japan.)

Appointment Reminder: What Went Wrong

I did not execute well on my plan to do enterprise sales for Appointment Reminder. I did not end up attending any conferences for target customer segments. I was insufficiently diligent in following up with many leads, which resulted in AR getting written out of a lot of sales processes where, if executed properly, we would have had a decent shot of winning. A lot of this was due to distracted focus, for reasons I’ll discuss in a moment.

I did not deliver an awesome experience with regards to customer support for Appointment Reminder customers consistently in 2013.  When I got very busy or stressed, one of my coping mechanisms was avoiding opening email, out of an irrational fear of finding more work or stress in my inbox.  This does not play well with email being the primary support channel for a business!  It only cost me a handful of accounts which I know of, but commitments are commitments, so I should be better at this going forward.  At present Gmail is reconfigured to force me to deal with AR email first, and I’m working on managing stress levels to avoid having a burnout-related relapse in inbox avoidance.

I was not successful in hiring for Appointment Reminder this year. There are a few places where AR could probably justify a full-time employee. Product development is one: I think AR probably got, hmm, call it 4 weeks of full-time development effort within the product, where I could easily have done the entire year full-time if I didn’t have other things to do.

I’d also really like to have someone for combination customer support and concierge onboarding — e.g. walking every single trial customer through getting their office up and running on AR from their current workflow for appointment management. My very limited experiments with doing this for customers make it pretty clear that it is stupendously valuable.

So why didn’t I hire? A combination of fear of the unknown — I’ve never had an actual employee, and worried about that fundamentally changing the character of the business — and just having way, way too much on my plate to get any portion of the business to the point where I could comfortably hand it off to an employee who didn’t have founder-level amounts of discipline/drive/skill.

For example, take a look at the Bingo Card Creator description for what it takes to outsource just routine T1 customer support. I was successful in that because I understand the task in my bones, could do it blindfolded, and have produced substantial systems and processes which mean you don’t have to be me to succeed at doing it for me.

I am successful at customer onboarding for Appointment Reminder at the moment, but it’s still at the flying-on-seat-of-my-pants level of improvisation and willingness to e.g. crack open the Rails console while on a phone call and update things in real time rather than just having a sympathetic ear, good product knowledge, and a bunch of knobs to twist.

Maybe in 2014. Maybe not. We’ll see.

Consulting

Since quitting my day job in April 2010 I consulted with a variety of software companies, mostly selling B2B SaaS, on ways to improve their sales. In broad strokes, my shtick was applying engineering to improving their marketing/sales outcomes. For specific examples of engagements, see last year’s post.

I got really good at it. After having made clients millions of dollars, I had a sufficiently good understanding of where the points of leverage were in software businesses and how to credibly explain them to potential clients that I was routinely selling new engagements at e.g. $30,000 per week.

I quit consulting this year. Why? It’s complicated.

Partly, I felt like I had achieved what I set out to achieve in consulting. My internal Nagging Doubt Monster was quite loud in 2010 that I might know enough to run a toy business like BCC but that the skills probably would not generalize to “real” software businesses. It turns out that my Nagging Doubt Monster is an idiot and that my skills generalize impressively well up the sophistication chain. By the end of my consulting career I was working with very smart folks like Fog Creek, Matasano, WPEngine, Wildbit, and 37signals, and to the best of my knowledge my clients generally had very successful outcomes.

So what was next? Well, continuing to do ten-ish weeks of consulting a year for clients like that was certainly an option. If I wanted to grow the business, I could have titrated off of my own products, hired employees for the consultancy and trained them in my bag of tricks then set them loose at client engagements, or moved up to the next level of clients.

NDAs prevent me from naming names, but suffice it to say I grasped for a brass ring at a Very Large Software Company. If that engagement had been knock-out-of-the-park successful, my consultancy would likely have been captured by their business, in the manner that e.g. Lucky Strikes sort of subsumed the Mad Men advertising agency.

That didn’t happen. What did happen? NDAs happened.

I was a solo consultant with a part-time consultancy, so my pipeline was not all that deep at the time I was trying to put this deal together. Since we were contemplating a success outcome where my consultancy’s available bandwidth went to zero, I began turning away prospective engagements in anticipation of the deal happening.

So fast forward to May, where a) I’ve been absolutely wracked by stress for several months, b) I have no consulting pipeline, and c) I come to the realization that the brass ring deal will probably not happen.

I talked to a lot of my friends and mentors, and they kept asking “Why do you do consulting?” Previously when asked this I had great answers, like “I love the opportunity to work with smart people on new challenges!” and “I have a wedding to pay for!” It had been a while since I won a new challenge merit badge, and my wedding was paid for. But like many people, I felt sort of pot-committed to justifying my present state of affairs, so I felt substantial inertia to continue the consulting business.

The straw that broke the camel’s back was a conversation with Ruben Gamez, a buddy of mine, at Microconf. We were chatting about what I’d say in my presentation about my consulting business, and everything I had planned to say had the ring of falsehood to it.

So I put an “I Quit” slide into my presentation, and that was that.  Quitting a consultancy with no active engagements turns out to be really easy: all you have to do is stop saying Yes.  (Conversely, starting a consultancy is fairly easy if you’re known to be good at something with high utility to potential clients, since all you have to do is stop saying No.)

Consulting: What Went Right

Quitting. My level of work-related stress declined drastically. I felt substantially less worried about the constant treadmill of refilling the pipeline. I get substantial amounts of personal satisfaction from being able to say that my family only eats every month because I’m really good at shipping products.

Consulting: What Went Wrong

The particulars of that NDAed engagement belong here, but obviously I can’t tell you them.

Quitting was poorly timed. Although transitioning away from consulting was a decision months/years in the making, the exact timing of it was very impulsive. It was, in hindsight, more risky than I normally tolerate, and exposed my family and I to substantial avoidable stress.

Last year I had ~$150k of consulting billings, which represented almost half the revenue of the company. This year I had close to zero, aside from converting some accounts receivable into actual cash ($15k or so, which I didn’t include in this year’s total because I already put them in last year’s as accounts receivable). Going cold-turkey to zero would have been an interesting ride no matter what the timing. I picked uniquely poor timing during the year to decide to do it.

Remember how I suck at accounting? I have historically run my businesses on a cash basis. This makes a lot of sense in software: if money in minus money out is a positive number for a month, and that positive number is enough to live on, yay. I never prepared for my own use anything like e.g. a balance sheet for the business. Why bother? I knew how much cash was in the bank account.

There are a bunch of things which would be on a balance sheet which were not reflected in my bank account. I was peripherally aware of them, in the way I was peripherally aware of hundreds of things about the four lines of business I run, but when I got busy/stressed/etc they were not at top of mind. One thing, in the Liabilities section, is Accrued Tax Liability. For example, if you have your best year ever in 2012, when 2013 rolls around, the mechanics of progressive taxation mean you’ll have to cut a few fairly large checks — in my case, to both the US and Japan.

When were those checks due? Right around when I quit consulting. At the start of the slow season for Bingo Card Creator. Coincidentally, when I made a few large capital investments in Appointment Reminder. Also with the product pipeline for productized consulting totally dry. And with large one-off expenses in my personal life.

This ended up being a perfect storm of a cashflow crunch for me.  I went from having a nice cushion in my checking account and thinking “I’m going to close the largest deal in the history of my business any week now” to owing high five figures at credit card interest rates while staring down an empty sales and product development pipeline.

My business-related stress level (probably 7 out of 10 during the worst of the consulting rigamarole) spiked. By August it was 8 to 9 for weeks on end.  This directly contributed to me becoming severely ill, which is a subject for another post.  Getting ill doesn’t help your stress level or help you execute on the business to ease the financial considerations that are causing the stress which is exacerbating your illness, by the way.

In hindsight, here’s what I should have done given the epiphany “I’m ready to quit consulting.”

  1. Call up my top five clients.
  2. Tell them that I’m quitting consulting but want to make sure that they have any loose end projects tidied up before I become totally unavailable.
  3. Booked three projects at $1X0,000, which would have given me an easy glide path out of that line of business.

At the time, I felt doing this would keep me attached to the treadmill. That’s silly. I’m disciplined enough to execute on a commitment like that, and it would have been so much easier than playing a game of chicken with my bank / credit card statements.

(To avoid worrying anybody: The cash flow crunch eventually worked itself out, since it was caused by transient timing issues rather than structural problems.)

Productized Consulting

One of the things I experimented with last year was moving from a pure services model consultancy, where I worked for clients on defined engagements for (generally) a weekly rate, to introducing some products where the core customer base and customer goal was the same (the client is a software company and they want to use engineering to drive marketing outcomes) but it didn’t require weeks of my time to deliver the services component.

This was quite successful last year, and I wanted to continue experimenting with the model this year. Under that general rubric:

  1. Rather than just throwing blog posts out into the ether, these days I focus most of my writing effort on my email list. (If you’re not on it, you can sign up here.) It’s the minimum form of engagement with my business where somebody could affirmatively opt to not be a stranger.  Topics range from enterprise sales for developers to SaaS pricing to A/B  testing to whatever strikes my fancy when I’m writing.  I shoot for every Friday but it more typically comes out once to twice monthly
  2. Above the dreaded penny gap, I have a book which I wrote on software conversion optimization.
  3. Last year, I released Hacking Lifecycle Emails, a 5 hour video course on doing drip email campaigns and lifecycle email optimization, which was one of my most common consulting gigs.
  4. I also did, if I recall correctly, three online training events, one on email marketing with Joanna from CopyHackers and Colin from Customer.io, and two with Brennan Dunn on creating recurring revenue for consultancies. (If only I had been thinking more on that subject at the start of the year!)
  5. This year, I started work on Software Conversion Optimization, a video course with interactive elements, including a higher tier which is basically a mini-consulting engagement.  It hasn’t shipped yet, as of January 6th 2014.

It might superficially appear that there’s a ladder of sophistication/engagement there, from targeting the least engaged customers with free email to offering the most engaged customers a $2,500 mini-consulting gig. That appearance is mostly an accident, as all of these products were planned in isolation from each other. I also don’t do anything particularly sophisticated with cross promotion of them.  That’s probably something I should fix this year, come to think of it, since they have synergistic effects and most of the people who could buy one could buy all of them without perceiving any difference in cost.

Productized Consulting Stats

I’ll report the sales by product and the expenses consolidated, since the products share the same systems/resources for delivery, which dominate cash expenses.  I don’t keep web stats for the productized consulting business — pure oversight on my part.  D’oh.

Book Sales: 1,239 units, for royalties of approximately $5,000. Many of the units were actually sold in 2012 but I didn’t even hear about that until 2013 because, in the publishing world, 6 weeks is an acceptable amount of time for a SQL transaction to require. (This is no slight against my publisher, Hyperink — it’s the legacy players in the industry who currently dictate the pace.)

Hacking Lifecycle Emails Sales: 41 sales for $18,927

Software Conversion Optimization Sales: 46 pre-sales for $15,922

Workshop Revenue (my cut only):  $22,000 (rounded and aggregated to avoid revealing financial information of third parties)

Total gross revenue: ~$62,000

Expenses (estimate, pending bookkeeping): ~$10,000

Productized Consulting: What Went Right

My emails to my mailing list have been some of my best writing in years, which is enormously motivational for me as I had previously felt like my blogging in roughly the 2010 to 2012 range was not as consistent or as informative as it had been in previous years.  The great thing about email as opposed to blogging is it is a truly bidirectional format, so people will often write me to say “I tried this advice and it actually worked!  We just closed a $500k sale using one of these tactics.”, where I never really had consistent, high quality interaction with people through my blog comments.  This has lead me to actually write more consistently for the mailing list than I’ve managed for the blog in years, which is in general a win for my personal happiness, for the business, and (I hope) for you guys as well.

Customers have taken the ideas from these things and ran with them.  This makes me enormously happy, as they’ve meaningfully changed businesses they’ve been implemented in.  It was always fun when I was a consultant to hear that a client closed e.g. $100k of new business as a result of part of an engagement, but at many of my clients, that wasn’t a transformative outcome.  Some of the results I’ve heard from productized consulting customers have been transformative — 20% increases in MRR for SaaS products, $0 to thousands in recurring revenue for one-man consulting shops, etc.  I do a little happy dance every time I get one of those emails.

I hooked up an autoresponder sequence to my email list, which just sends people who are newly arriving at it the four or essays that I personally like the best.  One of them has a brief plug for my lifecycle email course in it.  Adding that made a clearly visible bump to the residual sales of the course without requiring any huge amount of effort to do dedicated sales.

Stripe.  I occasionally kick myself for custom-rolling my own delivery application rather than just using Gumroad like any sane individual, but the Stripe integration has performed flawlessly.

As compared to Appointment Reminder, where I often have to force myself to do what needs to be done, working on these projects has been invigorating for me.  I often reflect on a bit of advice Peldi gave me prior to launching Appointment Reminder: “Is optimizing the schedule of dentists’ offices your passion?  No?  Then why are you committing to working on that for the next several years?!”  These projects let me write/teach, both of which I find enjoyable regardless of the topic, and they let me focus disproportionately on the MarkDev (somebody make a convenient word for this, please) rather than the rest of the business, which doesn’t excite me quite as much.

Productized Consulting: What Went Wrong

I originally intended to launch the Software Conversion Optimization product in August, but delivery dates slipped due to severe illness.  I alluded to it above and will probably talk about it at length in a separate post.  Anyhow, that delayed the project by several months.  It will (knock on wood) ship this January, as I promised when I opened pre-sales in late December.

My friends, including Amy Hoy, advised me to apologize and call off the launch earlier than I did.  I should have taken that advice — instead, I attempted to soldier on through despite being sick, which accomplished absolutely nothing for my customers and was damaging to my stress levels and health.  More broadly, I should have stuck to one of my rules, which is Never Pre-Commit To A Ship Date.  (That rule is even in the standard operating procedures document, for crying out loud!  Maybe I need to bold it a few more times until it will sink in.)

This is the only work day in January where shipping Software Conversion Optimization is not my main/sole task.  I’ll be happy to have it ready, because I’m excited to hear what people do with it, and because I’m keenly aware that I currently have the Unearned Revenue liability on the balance sheet until I do.

I’ve experimented with form factors for productized consulting, and not all experiments panned out.  In particular, I’ve learned that for live, online training sessions, having long presentations with text-packed slide decks presented back-to-back is not maximally in the interest of the audience or the presenters.  Lesson learned.  (You would think as a former classroom teacher I would have been able to predict that one.)  I much prefer the more organic conversation style that I’ve been using recently, with smaller groups and more cross-talk.

Overhead

In previous years I just threw everything that wasn’t either BCC or AR under the consulting category, but I no longer have a consultancy, so I think I’ll break this out explicitly.  My business has substantial expenses which are not related directly to a particular product.  Examples might include my errors and omissions insurance, fees for registered (and renewing) the LLCs, accountant / bookkeeper fees, business travel, my blog’s hosting bill, and the like.

Of note for those of you wondering how to calculate how much revenue you need to make it as a solo entrepreneur: The single biggest cause of it is me being in Japan, since I have substantial travel expenses to e.g. attend conferences (almost invariably requiring a $1,500 plane ticket for me), and my tax/legal/etc situation is far more complicated than it would be if I lived in the US (where the majority of my business is concentrated).  But for this factor it would likely be below $10,000 at my business’ current level of sophistication.

Ballpark estimate, pending bookkeeping: $25,000.

Goals For 2014

Bingo Card Creator

  • I’m honestly happy to let Bingo Card Creator coast to whatever number the Google gods, in their infinite wisdom, decide to give me.  If that’s $25k profits on $50k revenue again, that’s a happy number, as long as it doesn’t require a huge time investment.
  • I would consider spending a few hours getting a new freelancer up and running on content creation, which has been stalled for the last few years.  It isn’t a huge priority for me, though.

Appointment Reminder

  • I’ve long had a particular number in mind for Appointment Reminder for where I feel like I would have “made it.”  It is at approximately 4X the present run rate.  I think this is an aggressive target for 2014 but could be achievable if I’m able to devote 6+ months of solid work to AR, finally, for the first time ever.
  • I’d like to successfully land a 6 figure a year Big Freaking Enterprise deal for AR.  The economics of the company work without it, but that would be a fun merit badge.
  • No progress on this from 2013, so let’s try it again: I’d like to get a systemized pipeline in place for AR enterprise deals rather than running them all myself by the seat of my pants, such that I could eventually hand execution of that to someone else.  I’m not sure I necessarily would want to do that, but the capability of doing it could only make my options better.
  • As an intermediate step to hiring, I need to find a Rails consultancy that I’d trust and enjoy working with, and get them to start doing in-application tactical projects for me.  The only problem with this is that the codebase is currently a disaster and fixing that (or at least documenting which parts of it are likely to explode if touched) will probably cost a month.

Productized Consulting

  • Ship Software Conversion Optimization, and sell (a total of) $80,000 of it (which is on the order of $60,000 more beyond existing pre-orders).
  • Explore the possibility of doing more products this year, if I have the time and desire to.  At this point last year I thought I’d ship four full courses a year, but seeing the amount of work it has taken me to do one to my standards, that’s crazy talk if I also want to work seriously on AR.
  • I still think $200k is a reasonable number to shoot for for this line of business, assuming I ship 2 courses in the year and residual income for pre-existing products continues to be as meaningful as it was in 2013 (one of the big positive surprises for the year, by the way).

Business / Personal Grab Bag Goals

  • I am mostly over the immediate flareup of the medical issue from earlier in the year.  Staying healthy is one of my key priorities for 2014.  Concretely, I want to get back to going to the gym three times a week for 45 to 90 minutes.  Also concretely, if my subjective stress level goes and stays above 5, I’m hitting the Big Red Button on whatever is doing that, rather than just trying to tough through it again.
  • It’s been over a year since  I’ve done any substantial OSS work.  Hopefully I can carve out a few weeks in 2014 to do that, or at least cause that to happen by exchanging money for the time of skilled developers.
  • Get the bookkeeper/accountant/etc what they need to do their jobs throughout the year, rather than just at the end, so that I don’t get bushwhacked again by issues which they would have seen coming.  Also, find a good accountant for the Japanese side of things.
  • Keep making a meaningful contribution to the businesses (and where possible, lives generally) of other software entrepreneurs, which is a major point of personal satisfaction for me.  It seems like a good thing to make the focus of my career for the moment.

Far more important than any of the above: I’m enormously blessed to have my wife Ruriko in my life.  No list of goals for myself is complete without “Be a better husband.”  (And, knock on wood, maybe I’ll be able to write “Be a better father” in next year’s installment.)

About Patrick

Patrick is the founder of Kalzumeus Software. Want to read more stuff by him? You should probably try this blog's Greatest Hits, which has a few dozen of his best articles categorized and ready to read. Or you could mosey on over to Hacker News and look for patio11 -- he spends an unhealthy amount of time there.

25 Responses to “Kalzumeus Software Year In Review 2013”

  1. Omar Sayyed January 6, 2014 at 10:01 am #

    Loved reading your 2013 review. I wonder if the decline in BCC traffic can be correlated to something more obvious?

    The one thing I’d recommend re accounting is never procrastinating. I find that if I am diligent in doing the work sooner than later it tends to be less of a chore.

  2. Dennis Gorelik January 6, 2014 at 3:12 pm #

    Lessons learned:
    1) Don’t suddenly drop successful line of business (to avoid sudden financial stress).
    2) Spend below your income. When running business, spend well below your income (to avoid sudden financial stress caused by fluctuations in your business).
    3) Try to live in the country you are doing most of your business in (in order to keep accounting/tax/legal overhead down).
    4) Don’t run too many businesses simultaneously (in order to minimize overwork and avoid work-related stress).
    Instead of hiring employee to run abandoned Bingo Card Creator it’s probably better to sell Bingo Card Creator.
    5) Don’t work alone. Try to find partners. Otherwise your focus is split too thin and almost nothing gets done.

  3. Eli January 6, 2014 at 7:17 pm #

    As you were describing the state of BCC, I kept thinking “sounds like it’s time for an exit strategy.” “Sell a profitable business” is an interesting merit badge, I would think.

    On the other hand, I’d miss reading about it, as I’m sure many others would as well.

  4. Tim January 6, 2014 at 8:10 pm #

    I don’t think SOP manuals are supposed to be funny, but this line made me laugh:

    “Our core company value is employee happiness. …Patrick McKenzie … is, currently, it’s sole full-time employee.”

  5. Brian January 6, 2014 at 10:25 pm #

    Patrick – thanks for sharing the ups and downs. It’s easy to read your emails and somethings think, “I’m never going to get all of this done”, so it’s nice to see that other people aren’t getting it all done either. Good luck in 2014!

  6. Fildo January 7, 2014 at 12:14 am #

    Hmm,

    that makes me wonder. 2013 was the first year I started selling my (desktop) software and I made a little more than you – without doing all the A/B testing and marketing dance. Makes me wonder if I should follow your path (originally I intended to do so) or if I should keep improving my product (adding more features).

    The thing is that my software is not trivial and does some pretty complex things. Maybe that’s the difference? The retail price is about the same.

    I’m pretty confused now.

    • mromanuk January 8, 2014 at 10:07 am #

      What is your product? How did you manage to reach your market?

  7. Prasanna January 7, 2014 at 5:42 am #

    Hi Patrick, thanks for the inspiration!

  8. Graeme January 7, 2014 at 5:57 am #

    Pepper VA’s contact form is severely broken. I can’t get it to accept my phone number, no matter which generally accepted phone number format I try. And the form erases all input when the phone number fails.

    Could you let them know about this? There’s no other way to contact them.

    • Patrick January 7, 2014 at 9:18 pm #

      I’ll ask them to get in touch with you and fix that.

  9. Lilia Tovbin January 7, 2014 at 11:23 am #

    Happy to hear the health issues are behind you now Patrick and things worked out. I strongly believe the traffic drop for BCC was caused by 1) lack of updates to the site (aka curation) as it appeared stale 2) expired old links. I had a very similar result for putting a site in “maintenance mode” once a few years back. I have a great content plan in place, so will reach out with some collaboration ideas over email. Would love to read posts on B2B sales for AR in the future. Happy 2014!

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  11. Richard January 12, 2014 at 2:37 pm #

    “..working on these projects has been invigorating for me…” and “never pre-commit date ship date”. Agreed!

    Well, What’s MarkDev?

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  13. Matt McCormick January 14, 2014 at 12:26 pm #

    This is your third installment of your year in review that I’ve read and I love it.

    I’m curious if you want AR to be a one man lifestyle business or if you’re hoping for world domination (or simply a sizable SaaS company). If it’s the latter, I’d suggest not waiting to hire your first employee until you’re so swamped that you have to have one.

    The reason is because good employees take time and effort to find and significant resources to train. It also takes some work and practice to figure out what you’re looking for in an employee as well as a company culture.

    Just this past year my company let go of almost half our staff (about 8 people) and replaced them with stronger people. That’s after 3 years of having employees. It took us that long to really figure out what we wanted in our staff and how to find that.

    I wouldn’t offer equity to a hire but profit sharing can achieve a lot of the same goals. Since you’re an upstart business with a lot of upside potential, it might be possible to offer a lower salary and benefits but offer a decent profit sharing plan.

    What ever you decide, I hope 2014 sees you triple AR sales, stabilize BCC, and maybe make a couple hundred thousand on a month or two of consulting.

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