Happy Bootstrapper
Happy Bootstrapper - Product Business - Fund it. Grow it. Love it. | Product Business – Fund it. Grow it. Love it.

29
Jan 15

Why I’m ditching the 60-day money-back guarantee for free trials

Guarantee VS Free Trial

It’s over 6 months since I started offering 60-day money-back guarantee for FirstOfficer. Unfortunately it’s not working for me and today I’m offering 30-day free trials.

Why I chose to start with a money-back guarantee

I’ve been tempted to try out money-back guarantee since Jason Cohen’s 2013 MicroConf talk Designing the Ideal Bootstrapped Business.

Money-back guarantee felt like a perfect cure for my pre-launch fears:

  • I wouldn’t have to worry about filling my API usage limit by serving people who aren’t yet paying
  • I wouldn’t have to spend a lot of effort to support people who are just ‘kicking the tires’
  • My app would have smaller load and I’d have more time to improve the performance

My app is a good candidate for this model – it starts providing value from day 1 with very little setup.

I also knew that most people don’t actually ask for their money back unless they are really unhappy – so I’d be getting more money even if people wouldn’t convert.

As an extra boost, one of my competitors seems to be happy with that model, so I knew I wasn’t doing a business suicide by starting the same way.

What worked?

In a way, the guarantee did just what I wanted and I’m happy I started with it.

The biggest benefit for me was to gently restrict growth and filter out people who weren’t serious about buying.

Stripe API is feature-rich. For several months, I was worried that new customers would be using some API feature that FirstOfficer wouldn’t be able to handle.

I have a double-entry system similar than in accounting and cross-checkers so I know when the numbers aren’t right – but in worst cases I had to keep the customers waiting for weeks while I was debugging the problems and implementing support.

Some weak moments I felt that I’d never cover the API fully and I was happy to know I did that work for serious prospects.

But there’s no reason to hold back anymore. And still, one size does not fit all when it comes to financial analytics.

I find comfort in numbers – I have enough customers to say no to people whose dashboards would require extensive customization to work properly. The basic customization work is automated.

What didn’t work?

What usually goes wrong with money-back guarantee is that people lose money with it.

However, my bigger problem was that I was losing time – my most valuable resource. Why? Because I ended up giving free trials anyway and then had to manage the whole onboarding manually.

Most of my ‘free trials’ were caused by people signing up too early for financial analytics. If you have few customers or too short history, some of the metrics can’t be calculated reliably. I don’t want to show metrics that can’t be trusted.

So I had two options – let people evaluate the app with some parts not available – or to give them enough time so that they can actually see all the numbers. I decided to give them the time.

In addition to that, some people – especially from larger companies – just asked for a free trial anyway.

It creeped up on me. One day I woke up and my calendar was filled up with notifications to write onboarding emails. I was spending time for something that should be fully automated.

When I sat down to think how to solve this – I decided that I don’t want to support two different onboarding flows.

Why I think there’s also more money in free trials

When I look at my metrics, there are several things that stand out – lousy landing page conversion rate (1.5%) and unexpectedly low refund and churn rates.

I can interpret the numbers in 2 ways:

1. Customers love my product! Sweet. I’m doing the right thing!

2. I’m filtering away a large number of potential customers. It can’t be that everyone just loves my product – I’m not converting people optimally.

When something looks too good to be true, it usually is.

If it were only the conversion rates, one could argue if the conversion rate could be brought up with a demo or better landing page. And they might be right – but it’s time  to try and ditch the guarantee. I never intended to keep it forever.

Guarantee is a choice of whether to have money up front or to have more people in the onboarding funnel. Today, I’ll rather have more people.

It’s thrilling to see what the change will do to my numbers.

What types of SaaSes might benefit from the guarantees?

Even though I’m not continuing with money-back guarantee, there are businesses that have tried both guarantee and trials and found out that the guarantee makes them more money.

I suspect that the main ingredient for succeeding is the customer commitment and the trouble from switching – like what you see with WPEngine, Jason Cohen’s product.

They do WordPress hosting and moving your WP content over to a new host is a major headache. People don’t do that just for the fun to compare different options and when they pick a host, they don’t change on a whim. I’m a happy WPEngine customer myself.

With SaaS analytics, especially with one-click setup, there’s little commitment.

New apps popping up every day, it’s easy to switch and try different ones. When it’s easy to switch, the situation is different. People may sign up to 3-4 different tools and try them all side-by-side. In a situation like that, free trial is a nice thing to have and I’m glad that I’m now able to offer that.

Share and Enjoy!

    15
    Jan 15

    Learn: Why do I need 3 different Churn Rates?

    Today’s Learning Center article explains the differences and usage of different Churn Rates.

    If you run a serious SaaS business you need 3 Churn Rates: Net MRR Churn, MRR Churn and Subscription Churn.

    I know… you’d rather not read any theory on metrics. But knowing the difference between the churn rates is important, so I’m going to give you an incentive:

    You’ll also learn how to answer these questions:

    • “If I’d lose my main acquisition channel, how long would my business survive?”
    • “Can I trust my customer life-time values?”

    So hop in and enjoy Why do I need 3 different Churn Rates? – It’s a 5-minute read.

    Share and Enjoy!

      18
      Dec 14

      “I’m in the US – what if I just ignore the EU VAT changes?”

      The European online businesses are in pain. The upcoming Value Added Tax (VAT) changes are a nightmare and many European bloggers are crying out – but American bloggers are silent.

      Why?

      Because as soon as you open your mouth and admit that you know about the changes, you can no longer apply the default strategy to cope with this – by staying under the radar and ignoring the whole thing.

      But there are questions you’d probably like answers to, like:

      “What’ll happen if I ignore the changes?”

      “How will this be enforced?”

      “What’s the penalty for breaking the rules?”

      “Are there any loopholes?”

      It’s been a long time since I did accounting and taxes myself, so I interviewed a tax specialist and asked these questions for you.

      DISCLAIMER: I cannot encourage you to illegal acts. The purpose of this post is to deliver information.

      My official advice is to comply with the rules and do your duty as a tax-payer.

      I’m describing the situation as it is now, so if you are reading this after Jan 1st 2015, some of the information may be outdated.

      What’s changing and why?

      Until now European businesses selling to digital goods and services to European consumers have charged VAT based on where their business is located. Now the VAT must be charged based on where the consumer of the service/goods is located.

      Table for VAT changes 2015

      The change was made because EU wants to get more money from transactions for American companies – or to force them to move more operations to EU to get VAT reductions.

      The VAT percentage is different country-by-country, ranging from 3% to 25%. Here’s a full listing of VAT rates in different EU countries.

      The lowest rates are in Luxembourg, so that’s where Google, Amazon, Apple and other large American companies have their European headquarters. It’s been a perfectly legal strategy to pay less taxes – but after the change it will stop working. It no longer matters where your business is, the taxes will get paid based on where the consumer is.

      What happens to small online businesses is just collateral damage.

      What’ll happen if I ignore the changes?

      If you take a look at the table above, you’ll notice that this change affects only EU businesses. The same rule has been active in Non-EU countries already since 2003.

      So in theory you can’t start ignoring this – you’ve already done so for over 10 years.

      How is the law enforced?

      Currently each individual EU country enforces the law themselves, via tax audits.

      VAT is an ‘end-user-tax’ so EU companies get to reduce any VAT they have paid, which is why their book-keeping has all the information tax authorities need.

      Consumers don’t keep books on their VAT purchases. Consumers do get tax reductions from certain goods, so they’ll save the receipts and send them to tax authorities. Most of those are physical goods like work clothing, but there are also some goods that could be digital, e.g. work literature.

      However, there are small businesses which aren’t registered for VAT yet. They may keep books already, yet they are categorized as a consumer by this law. As a rule, if an EU company cannot provide you a VAT code, they are a consumer. Yet they’ll keep books, save all receipts and are a target to tax audits.

      There’s also a separate enforcement system. You must register as a VAT payer in each of the countries where you have consumer sales. Another option is to register to VAT on eServices (VOES) system in one EU country. VOES is a similar system than MOSS (UK), but for non-EU businesses. Each country has their own system, but it’s enough to register just in one country.

      When you are registered, the authorities can then follow up that you send the reports and payments on a regular interval.

      But if you aren’t registered, there’s very little enforcement.

      To really enforce the law in the US, EU would need help from the US tax authorities. At the moment US tax authorities show little interest in enforcing this – moving wealth from US to EU isn’t in their best interest.

      However, there have been some rumors on EU tax authorities starting to use spiders and web bots to find law-breakers, but whether these exist is unclear. There’s some information about this in Taxamo blog, but their material seems to be a bit biased to increase sales.

      What’s the penalty for breaking the rules?

      Frankly, the rules are so complex and change all the time that EU businesses break the rules accidentally every now and then.

      When you break the rules accidentally or just because you didn’t know, what normally happens is that the tax authorities calculate how much tax you have due and charge it afterwards. In some countries like Finland you’ll also have to pay overdue payment.

      If you break the rules intentionally, that’s a tax crime and a court gig.

      However, each country in EU has their own law. Even though Finland does not have penalties, some other countries may have them.

      Are there any loopholes?

      Overall, the law is pretty clear this time. If there would be holes, they’d probably get plugged pretty fast. There’s only one gray area.

      All kinds of digital goods and services are included. All kinds of physical and customized/human services and goods are excluded.

      So in principle I could offer FirstOfficer.io for free, and then charge customers 1-2 times per year for support or metrics analyses – which are both manual work. I’ve also heard some speculations on automatically customizing ebooks, but the gist is in manual/human work, so I think that wouldn’t work.

      It’s crazy, huh? What are you going to do?

      If you ask me – YES it is crazy. There are 28 member states and over 75 different VAT rates – which I should all know and create different invoices for. And in principle you should too – since 2003.

      Many small EU businesses are going to stop selling to European consumers, including me.

      Starting from today, FirstOfficer.io SaaS analytics will continue to be available for all American customers, but European customers don’t get in without a VAT code. Most of my customers are from US so this doesn’t change things much for me, but it makes me sad.

      Many small EU businesses with their own shops are going to have to move their business under the wings of Amazon, just because they can’t deal with the bureaucracy. There’s no revenue threshold in the VAT law, so we will lose all those lovely sewing patterns from handicraft shops and ebooks sold directly from people’s blogs. We might still be able to buy – but we’ll lose the personal shopping experience.

      I can’t ask you to share this post – but please share this other VAT post for EU folks which links to the petition for the small online businesses. Because sharing is caring.

      Share and Enjoy!

        18
        Dec 14

        EU VAT changes for online businesses – Act before Jan 1st!

        If you run an online business in EU, there are important VAT changes coming into effect at Jan 1st 2015. I met with a tax specialist to get an up-to-date view to what’s going on.

        I wrote another blog post on how this change affects US-based folks, which also explains why this nightmare is happening, so I’ll concentrate on practical issues for EU-based businesses in this post.

         TL;DR;

        If the changes affect you, register to your country’s local MOSS-system NOW, before the year ends – it’ll save you a huge trouble later.

        If the changes don’t affect you – please stand up and plead for the ones who are affected. Share this post, sign the petitions linked to the end of this post, take part in TwitterStorms, speak about this. We need a revenue threshold to this law to save the micro-businesses.

        What’s going on?

        What happens is that consumer sales will carry a VAT based on the consumer’s location instead of the seller’s location. The change affects only digital goods and services, not products or services which are just delivered digitally.

        Below is a table that shows the change in red:

        Table for VAT changes 2015

        Not only do you need to know the VAT rates for your goods in all the 28 EU member states – you’ll also need to create invoices and receipts to match. If you are using Stripe, I believe ecosystem apps like Quaderno are already working hard to make your life easier on this.

        But even then, you’ll also need to handle the sales separately in your accounting and tax reports.

        Until Jan 1st 2015, you can register to your country’s ‘Mini One Stop Shop’ (MOSS) system. You can report all your EU consumer sales through that system.

        But if you miss the deadline, you’ll need to separately register for VAT in all the countries where you have consumer sales, because the MOSS system adds new users only once per quarter (at least here in Finland). And that means you’ll have to file VAT reports and make VAT payments to each of those countries separately. Yes, this sounds crazy, but this is what the tax specialist told me.

        In addition to all reports, you must collect two proofs of the customer location. Country information from credit card, address or IP address would all do.

        How do I know if this affects me?

        If the goods/services you are selling aren’t digital, but are just sold online, this does not affect you.

        For example, if you design web pages and each design is custom-made, the changes shouldn’t affect you. But if you sell web page templates instead, you are affected.

        If you provide pre-recorded learning material via internet, the change applies to you. But if you provide live webinars, you can ignore the change.

        How much human touch there must be in the process is still unclear.

        If you aren’t the official seller, the change does not affect you either. So if you are an affiliate, or sell your goods via Amazon, you aren’t affected.

        If you are selling only to businesses, the change does not affect you. You don’t need to register to MOSS either. The only thing you need to do is to collect the VAT codes from all of your customers and continue to use the reverse charge 0% VAT.

        What is Reverse Charge?

        Reverse charge moves the VAT-paying responsibility from you to your customer in another EU country. The responsibility can only be moved from business to business.

        You’ll write an invoice/receipt without VAT (or 0% VAT) and include a text “Reverse charge, VAT directive art. 44” and you are done. In practice the text is often missing, as people re-use the same invoice format they use for non-EU sales.

        Why do I need to collect the VAT code?

        If your customer cannot provide a valid VAT code, they’ll be considered a consumer – no matter what kind of business they have.

        In theory, you are responsible of validating the VAT codes you get. There’s a handy service where you can do that. If you get deceived and book VAT sales as non-VAT sales, your local tax authorities will calculate how much tax you have due and charge it afterwards. You’ll also have to pay overdue payment.

        In practice, I wouldn’t worry about the validation part too much. Giving an invalid VAT code when you don’t have one is a tax crime, resulting an extra fees that can be thousands of euros, having to pay the tax that you’ve avoided – and you’ll end up in the court too. So smart people don’t give invalid codes just to be able to buy stuff.

        How will small businesses handle this? 

        Now we are getting to the core of the problem.

        Here’s what I’ll do. Starting from today, FirstOfficer.io SaaS analytics will continue to be available for all American customers, but European customers don’t get in without a VAT code. Most of my customers are from US so this doesn’t change things much for me, but it makes me sad.

        This is the only logical thing to do for a mainly B2B product like mine.

        If you can’t do that, Rachel has written several good articles on VAT and how they are going to handle it for their SaaS which is a bit more B2C. ArcticStartup has a good article about VAT as well.

        But lots of small online shops are just going to drop the digital products, if that’s not their main business. Some businesses are going to change back to physical products from the digital ones, and many of them will move to Amazon or some other marketplace that makes them legally non-sellers.

        What I can do to help?

        Please stand up and petition for the small ones!

        Your grandmother selling sewing patterns will become a law-breaker when the year changes. We’ll see a lots of content just disappearing from online shops or becoming unavailable to us.

        I enjoy visiting the colorful and quirky small online shops by hobbyists who want to earn money doing what they love. Many of these shops can’t handle the extra workload and costs of the VAT change. I may still be able to buy the same things – but shopping experience in Amazon isn’t the same than visiting the small shops.

        This isn’t right. Killing small online consumer shops in EU or making them criminal overnight just cannot be in EU’s best interest. We need a revenue threshold to this law to save the small businesses.

        So stand up, speak about this, share this post, take part in TwitterStorms and sign the petitions below to save our unique small business shopping experiences:

        https://www.change.org/p/pierre-moscovici-a-unilateral-suspension-of-the-introduction-of-the-new-eu-vat-laws-for-micro-businesses-and-sole-traders

        https://www.change.org/p/vince-cable-mp-uphold-the-vat-exemption-threshold-for-businesses-supplying-digital-products

        Share and Enjoy!

          04
          Dec 14

          7 ways to use Stripe API that can break your metrics

          There are some things you shouldn’t do with the Stripe API, if you want your analytics to work out-of-the-box.

          Many of those aren’t some forbidden hidden hacks, but valid ways to use Stripe that are enforced in their documentation. They just happen to cause problems when you want to calculate SaaS metrics using Stripe API.

          So today I’m presenting 7 ways to use Stripe API that can break your metrics.

          Share and Enjoy!

            26
            Nov 14

            “Can we grow to $6.000 MRR in 3 months?”

            Sometimes it’s either money in or game over. And you have the question: “We need to reach this MRR goal – but can we do it?”

            Today I’ll teach you a method that helps you to answer that question for your SaaS business.

            You’ll learn a simple yet effective way to evaluate your business rescue plans – with a projections spreadsheet.

            This post takes about 5 minutes to read, but I have to warn you. I did this spreadsheet for my friend, a fellow SaaS owner who asked me a question like the one in the title. When I taught him this method over Skype, he went: ”Send me the sheet – I’m going to play with it the whole day!”

            Because even though it’s a serious topic, playing and speculating with numbers is fun!

            Let’s peek into your business future

            We are going to visualize different options on how your business could grow in the future. That way you’ll get a realistic image of what is actually needed – in practice – to reach your goal.

            It looks like this. There’s a line for your goal and the columns show how much MRR you could get in the future months.MRR Projection
            You’ll need to know 5 numbers to use this spreadsheet:

            • Your MRR goal
            • Your current MRR
            • Number of new customers per month
            • Average revenue per paying customer (ARPU) – or average plan price
            • Net Churn Rate – but this is optional. I’ll teach you how to play even if you wouldn’t have this number

            mrr_projection_beginning_input
            Here’s the download link for the MRR projection spreadsheet (iWork Numbers). I also uploaded a Google Spreadheet Template if you want to use it from Google Docs.

            Step 1 – What’s the current reality?

            We’ll start by filling in your current numbers. Your goal and your current MRR are fixed – but everything else is up for a debate.

            Don’t just pick in the numbers from last month. If you have data, take a look at the last 3 months. Try to make it more pessimistic than optimistic – if you were an artist, this would be the painting we’d be working on:
            Realistic painting by Akseli Gallen-Kallela
            So if in the last 3 months you had 20, 15 and 25 new customers, you’d fill in 20 – unless you’d really have a reason to assume that you could get 25 customers also in next month.

            Now you have a rough view of how your SaaS would grow if you don’t change anything. Our example business isn’t going to reach their goal unless something changes.

            mrr_projection_beginning_input

            MRR Projection at step 1

            How do you fill the Net Churn Rate if you don’t know the exact value?

            Net Churn Rates is a metric that shows how fast your recurring revenue depletes. It can also be shown as calendar time – which makes it much more concrete.

            15% churn means that the money will be around for 7 months. To get money for 7 months, your average customer needs to stay that time. The formula is 1/churn, but here’s a small table to help you out.

            50% = 2 months
            30% = 3 months
            20% = 5 months
            14% = 7 months
            10% = 10 months
            8% = 1 year
            5% = 1 year, 8 months
            4% = 2 years, 1 month

            Just think what’s realistic for you and how your existing customers have behaved this far. How long can you actually keep a customer?

            Even though we use customer life-time metaphor for the projection, Customer Life-Time Value should NOT be calculated from Net Churn Rate. Use the Subscription Churn Rate for calculating CLTV.

            Step 2 – See how changes would affect your business

            The next step is to come up with scenarios that would improve the situation. If you were an artist, this would be the painting we’d be working on:

            Jolly painting by Renoir

            Just go through all the opportunities that you could take and imagine how they would change your numbers.

            What if we could get 40 new customer per month instead?

            mrr_projection_more_customers_input

            Our example business would do much better – but they wouldn’t reach the goal in three months like they wanted.

            MRR Projection with more customers

            Try to think outside the box – but with a story. What are you going to do to budge the numbers?

            Try to make it concrete. 40 new customers per month is about 10 new customers per week. This is what 10 new customers look like (from http://www.uifaces.com):

            This is what 10 new customers look like
            Who are these people? How do you reach them? How do you win them over?

            You don’t have to stick to changing only one number at a time either.

            What if our example business pivoted and started to market to business customers? They could get $79 per each customer – and less churn too.

            mrr_projection_end_input

            Now this is enough to reach the goal!

            mrr_projection_goal_reached

            Just play with the sheet for a while, and you’ll start to have a pretty good grasp of the changes needed to reach your goal.

            Step 3 – Think of the ROI

            Before you make your actual decision, stop for a while and think of the costs.

            What do you need to do to realize your plans? How long will it really take? What’s the return of the investment? Are the wins big enough to spend the money and time? Are there easier ways to get the same money with less work?

            I had to mention this because normally this type of projections include the costs. But I wanted to keep it fun today.

            So if you didn’t download the spreadsheet yet, here’s the link again and here’s the Google spreadsheet template. Enjoy!

            Share and Enjoy!

              15
              Oct 14

              How to check that your analytics app shows the MRR right?

              Metrics - WTF?

              Cool new Stripe analytics for SaaS apps are popping up almost every day. And you want to try them out, of course!

              So you’ve just subscribed to a new analytics app, but it shows different numbers than the previous app. How do you know which app reports your data right?

              After reading this article you’ll know the most common causes for differences in the numbers. You’ll also learn what questions you can ask your analytics app provider to check out if the numbers are calculated the way you need and want.

              The root problem – SaaS metrics aren’t controlled by GAAP

              There are certain rules that all accountants follow, called GAAP. GAAP stands for Generally Accepted Accounting Principles. But SaaS metrics aren’t defined in the GAAP.

              As a result there are several variations on how the SaaS metrics are calculated. The results may vary a bit or a lot depending on what variation is used.

              Different results may both be right – they are just optimized for different purposes.

              Different uses of MRR

              MRR can be used to:

              1. Assess month-to-month performance
              2. Calculate recurring profit
              3. Estimate future performance (Committed MRR)

              What separates recurring revenue from regular revenue is that recurring revenue is normalized – You’ll only book the part that you provided the service for.

              If you assess monthly performance, you’ll want the MRR to answer the question: “How much of my revenue was received from the services that I provided this month, and is recurring?”. If you wouldn’t get new customers and no-one would cancel, downgrade or upgrade, you’d receive this same MRR next month.

              If you want to do profit calculations, the question is: “How much of my revenue was received from the services that I provided this month?” No matter if it will be there next month!

              If you estimate future performance, the question is: “How much revenue will I receive for the services that I’ll provide next month?” So if a customer cancelled today, you’d reduce the MRR – even though he already paid this month and that revenue stays in your pocket.

              FirstOfficer.io calculates the MRR to assess monthly performance.

              If you just normalize and sum up the Stripe invoices/charges, you’ll end up with option 2 – MRR for calculating recurring profit. That is usually pretty near to option 1, especially if prorations aren’t used and you don’t have a lot of refunds.

              Ok, what are the actual differences?

              Based on what purpose the MRR is calculated for, there are differences in:

              • What gets included in MRR? Everything or just subscription revenue?
              • When are the losses booked? When customer stops paying or on cancellation?
              • What gets normalized? Just revenue or also refunds?
              • How upgrades and downgrades are booked? Are prorations normalized?

              If your analytics app books the losses on cancellation date, you’ll want to know if the losses are reduced from MRR or not. Just ask if they calculate MRR or Committed MRR.

              Also ask if the churn rates are based on previous month’s total MRR or on the subscriptions that actually can be lost. If they use the previous month’s total MRR for anything else than Net Churn, you’ll know that the churn rates will not be accurate.

              How do I know how my analytics app calculates these things?

              Your analytics app should provide this information for you. If it doesn’t, just go ahead and ask for it! You are entitled to have it – otherwise you can’t really know what the numbers stand for.

              FirstOfficer.io calculation principles can be found in the Learning Center. You can also click most of the numbers in the MRR view to drill down and see which customers are included and with what amount. And I’ll be happy to answer any questions about the metrics or their usage.

              I’ve chosen to calculate the MRR in a way that month-to-month performance can be assessed. I think it’s a nice compromise that is close enough to recurring profit, and is still easy to convert to Committed MRR if needed.

              Which way do you like to calculate your MRR?

              Share and Enjoy!

                16
                Sep 14

                Announcing SaaS Metrics & Analytics Learning Center

                I’m proud to present the SaaS Metrics & Analytics Learning Center.

                By now you’ve probably noticed that you don’t get insights on a silver platter – you’ll have to learn how to use the metrics first.

                It’s like with Google Analytics. You can use it to simply track traffic – or you can put in some time and learn how to set goals and funnels and conversion rates. After that, it’s like a whole different tool.

                So hop into the learning center and learn how to use data to answer business questions like:
                Am I losing high-value customers?

                Or if you are in a hurry, use the cheat sheets to quickly get the gist of a metric.

                It’s mainly for FirstOfficer.io customers, so most of the examples & charts are from the app. I’ll be adding more content as I go, so you might want to bookmark the page.

                Share and Enjoy!

                  28
                  Aug 14

                  How running a SaaS startup differs from what I expected

                  The wrong place to worry if my SaaS is doing ok
                  It’s 3 months since I launched FirstOfficer SaaS Analytics and it has 28 customers at the moment. It’s not only new to the market – it’s new to me too and I’m still learning how to live with it.

                  I had this preconception of what running a SaaS would be like and how it would affect my life. But lots of things went differently than I expected.

                  The first times are precious

                  The first times something happens are special. The first signup. First recurring revenue in your bank account. First customer leaving. First angry customer. First server crash.

                  They are special. It takes very short time to get used to things.

                  I’m writing this as much for myself as for you. Six months from now I will probably have forgotten how it felt at the beginning.

                  The 2 weeks of hell after the launch

                  People say that you should launch early. That when the first customers are in, you really start learning. It’s a great advice – but there’s a downside.

                  When you launch early, your app is not going to be ready for the real-world pressure. That means long nights of coding, technical problems and apologizing to customers.

                  About half of my early Stripe imports either failed or didn’t categorize MRR right. It took me several weeks to get to the point where all the dashboards worked alright.

                  Categorizing MRR isn’t easy, so I implemented a cross-checker that shows a message to customer when there are errors.

                  That feature saved my ass, because pre-launch I had no idea how many different ways there are to use Stripe API. As customers were able to see where the errors were, they were able to start using their dashboards even when everything didn’t work perfectly.

                  Another life-saving feature was NOT having automatic account activation & charging. That bought me time to fix the problems without customers being charged, getting mad at me and asking refunds.

                  The baseline stress is here to stay

                  In my dreams, my new business was location-independent and I had freedom to choose when I work and I was taking things easy.

                  In real life, running a business has this constant tension – it’s like there would be a certain baseline stress that it creates.

                  Yes, I can choose where I work, but I need to have network connection each and every day. Gone are the days where I would go off the grid for days at a time.

                  It’s not the amount of work that stresses me. At minimum I only have to check things 2 times per day and it takes just a couple of minutes. I’ll check the support emails and that everything is green in the master dashboard.

                  The possibility of things going wrong and the unexpectedness is nagging me. Whenever something happens, I’ll have to be ready.

                  Don’t get me wrong. I don’t have a performance-critical app – I chose deliberately not to build one. But when HeartBleed hits, you can’t really wait. And when you see that your customers are having problems, you don’t feel like waiting even if you could.

                  Fortunately there are articles like this where Thomas tells how they monitor Freckle. So I have set up the systems that notify me when things go wrong. Polling is mentally straining compared to being notified.

                  Loving the customer support

                  I thought I wouldn’t enjoy doing the customer support and was planning to outsource it as soon as possible. In reality, my customers are awesome and I enjoy emailing with them.

                  I get the best product improvement ideas and invaluable feedback from my customers. They also have really interesting use-cases for different metrics that I love to hear about.

                  It seems like FirstOfficer just doesn’t attract the kind of people I’ve heard some entrepreneurs complain about.

                  The only customer who has been really angry at me was the fellow whose refund request emails went to spam and I didn’t see them. I think that’s very valid reason to get a bit pissed off. I got lucky and he reached out to me via Twitter instead of disputing the charge. My ears were red from shame when I went through of all his emails in the spam folder.

                  Some people love the product – some don’t

                  One fine day, the first email I opened said something like this:
                  “This is useless, I’m canceling my account.”

                  And the next one said:
                  “I just wrote you to tell that our team loves FirstOfficer. It’s invaluable.”

                  Gee. But this is just the kind of feedback that I need. When a product is a perfect fit to someone, it’s automatically not suitable for someone else in a different situation.

                  Saying “sorry”, “I apologize” and “no”

                  During the last 3 months, I’ve probably said those things more often than ever before. Especially “no” is hard.

                  Customers don’t tell you if things go wrong

                  I was expecting the customers to tell me when things don’t work. For certain types of bugs they don’t, even when they are suffering.

                  Like when I messed up the authentication tokens while trying to scale up the servers – no-one could sign in to the app. Or when I forgot to do the timezone conversion in tooltips and the chart labels showed one month and the tooltips another.

                  It’s not like my customers wouldn’t talk to me or do bug reports – they do. But when a bug seems to affect everyone, people seem to assume that someone has reported it already.

                  If you don’t have proper monitoring, you are going to miss when your customers have bad experiences. I’m using NewRelic and BugSnag.

                  Crazy focus and selective laziness needed

                  Previously I wondered why so many entrepreneurs are throwing away money by not doing things that would clearly advance their business. Now I understand the pressure of possibilities.

                  There are so many things to improve, features I absolutely should have and marketing tactics I must try. There are just too many things to do.

                  I think this contributes to the baseline stress too.

                  I can do just a fraction of the things that should be done and would be good for my business. The hard task is to pick the things that I really must do and then live with the fact that those other tasks will not get done.

                  I’ve had to ramp up my productivity tool usage and stop more often to prioritize. If there weren’t OmniFocus and Vitamin R2, I’d probably feel exhausted and busy.

                  But the hardest thing right now? Giving enough time to marketing and writing, when there are so many features I could build.

                  I’ve done online business before, so I didn’t expect all this. But it’s been a great experience and a wonderful opportunity for growth and learning.

                  I wonder if getting started with a SaaS is like this for everyone, or if every SaaS business is different?

                  Share and Enjoy!

                    14
                    Aug 14

                    Are rolling metrics deceiving you?

                    Zoom into the Rolling Metrics!

                    You felt that your last week’s email campaign was superb – until you looked at your metrics. How can the weekly MRR growth rate show 0% growth? What’s going on?

                    It may be that your gut is right and you were deceived by rolling metrics.

                    You are in a risk if you track SaaS business performance week-to-week and want to use that data to make business decisions.

                    I get a lot of questions about metrics. Whenever I get an email where someone is really confused about their metrics, it’s almost always because of rolling metrics. This article explains what rolling metrics are, what they are good for and what they cannot be used for. You’ll also see how they can mislead you.

                    What are rolling metrics?

                    All SaaS metrics can be calculated using different time periods. Normally the calculation period is 1 month.

                    But that’s not fine. Your business is online and you can track everything realtime – so you want to see your metrics now and not at the end of the month.

                    Rolling (or sliding window) metrics solve this problem by keeping the calculation period identical, but changing the days that are included.

                    Let’s imagine we are calculating 4-week rolling revenue. The number in Week 4 includes the revenue from weeks 1-4. In the Week 5, rolling revenue includes the revenue from weeks 2-5.

                    This is how rolling metrics work

                    I’m using weeks in my examples, but rolling month calculations normally use 30 days as their time period. That’s used every month, even for months that have 28 or 31 days.

                    What are rolling metrics good for?

                    30-day rolling metrics are used because:

                    1. You’ll get numbers faster – every day or minute if you want
                    2. Rolling metrics & rolling averages make it easier to notice trends

                    As a result, rolling metrics are superb at showing if your metrics are trending up or down on a monthly level.

                    But this comes with a huge cost of losing all insights from shorter periods.

                    What are rolling metrics bad for?

                    30-day rolling metrics deceive people because:

                    1. Accurate numbers from shorter periods disappear
                    2. You cannot compare rolling metrics using a shorter period than they were calculated with

                    As a result, you cannot use 30-day rolling metrics to find out if one week or day was better than the other. It’s all smooth!

                    Rolling metrics behave just like rolling averages. They smooth out any spikes and dips in the data.

                    That’s why we can always use 30-day period in rolling calculations. If Stripe charges several day’s worth of invoices on one day or if the system is down one day, the period is long enough to smooth that down.

                    This is how rolling metrics can deceive you

                    In the image below, the green bars show the real weekly revenue. The blue line shows the 4-week rolling revenue.

                    I’ve marked up some rolling growth rates for you. Just look at the week 6. That was a really bad week – but the rolling number does not show any change. And the week 8 definitely wasn’t any better than week 7.

                    How rolling metrics hide insights
                    This happens because when the calculation period moves, it doesn’t only take in a new week, it also drops away one week. So the performance in the week that was dropped out also affects the end result. In effect, all rolling metrics behave like averages.

                    This is fine, if you are trying to find out if you are doing better or worse in the long run.

                    This is not fine, if you need to know which week’s ad campaign was the most effective.

                    If you want to match your business performance to your actions on weekly level, ditch the rolling figures.

                    How do I know if I have a rolling metric or a regular metric?

                    That’s something your analytics app provider should clearly tell you.

                    I currently serve rolling metrics only in the weekly follow-up report. FirstOfficer.io is for strategic planning and trouble-shooting, so you must be able see the exact numbers – rolling metrics aren’t a good fit for that purpose.

                    There’s also an information sheet on how to read the weekly email report, which clearly tells which numbers are rolling. I also changed the naming of the metrics to better differentiate the rolling metrics.

                    Share and Enjoy!