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Jul 05, 2019 21:11:20

How do I make a million dollars? (3)

by @jasonleow | 827 words | 340πŸ”₯ | 378πŸ’Œ

Jason Leow

Current day streak: 340πŸ”₯
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@seunoyebode wrote something about how many customers he needs for his SaaS app idea in order to earn X amount, which I happened to also be brainstorming about recently. The question is: how do I make a million dollars in 12 months from a monthly subscription-based SaaS product? I wrote parts (1) - the why, and (2) - the what, previously, so this is a continuation.


Since I want a monthly subscription SaaS product that gives monthly recurring revenue, how much do I have to earn per month, and how many customers would that take, in order to get to $1mil? This nifty little tool, which @seunoyebode shared, helps break it down: 


I want to earn $1,000,000 in 12 months, hence I will need $83,333 per month, or $2,688.17 per day. So how many customers do I need?


Get 50 people to pay $1,666/month for 12 months.

Get 100 people to pay $833/month for 12 months.

Get 200 people to pay $416/month for 12 months.

Get 500 people to pay $166/month for 12 months.

Get 1000 people to pay $83/month for 12 months.

Get 5000 people to pay $16/month for 12 months.

Get 10,000 people to pay $8.33/month for 12 months.

Get 100,000 people to pay $0.83/month for 12 months.


I like how this breaks it down, since it helps me see what kind of market I want to play in. Mass appeal, or a niche few? Enterprise, or consumer? B2B, or B2C? 


The bottom half of the list (from 1000 people downwards) is definitely going towards mass appeal, to consumers, B2C. The last one - 80cents per month - is probably in the range of designing for extreme affordability, so it might be for a developing country market? (not necessarily so of course, but one of the possibilities). The top half of the list (50-500 people) is probably in the enterprise, B2B space, because probably only companies feel comfortable paying hundreds/thousands of dollars for a monthly subscribed SaaS product. Serving consumers vs enterprises has it's own set of pros and cons. Which do I prefer?


In the end, realistically speaking, it probably has to be a portfolio mix of it. @levelsio is a great example. Nomadlist is direct to consumer, but also runs some ads for enterprises. His job board, Remote OK, is free for consumers but paid for enterprises. His Make Book is for both. All in all it makes him a million a year. That's after 4 years of hard work of course. 


But as a starting point, I really love Kevin Kelly's 1000 True Fans article. He talks about how to be a successful creator and to make a living, you don't need millions of paying customers, just 1000 true fans:


To be a successful creator you don’t need millions. You don’t need millions of dollars or millions of customers, millions of clients or millions of fans. To make a living as a craftsperson, photographer, musician, designer, author, animator, app maker, entrepreneur, or inventor you need only thousands of true fans.
...
Here’s how the math works. You need to meet two criteria. First, you have to create enough each year that you can earn, on average, $100 profit from each true fan. That is easier to do in some arts and businesses than others, but it is a good creative challenge in every area because it is always easier and better to give your existing customers more, than it is to find new fans.

Second, you must have a direct relationship with your fans. That is, they must pay you directly. You get to keep all of their support, unlike the small percent of their fees you might get from a music label, publisher, studio, retailer, or other intermediate. If you keep the full $100 of each true fan, then you need only 1,000 of them to earn $100,000 per year. That’s a living for most folks.

A thousand customers is a whole lot more feasible to aim for than a million fans. Millions of paying fans is not a realistic goal to shoot for, especially when you are starting out. But a thousand fans is doable. You might even be able to remember a thousand names. If you added one new true fan per day, it’d only take a few years to gain a thousand.


Suddenly, the task doesn't feel so unreachable. One thousand fans is not something impossible. I also like how he talks about having direct relationship with them - which is something I enjoy doing as well. Even though he aims for 1000 fans paying $100 each once a year for a comfortable $100,000 income, while I'm aiming for 1000 people paying $1000 for $1mil income, the process is the same. In the back of my mind, I know $1mil is a stretch target...but hey, you know the phrase - aim for the stars and even if you fail, you'll land on the moon.  

 

The caveat is this probably shouldn't be the only perspective I have when it comes to thinking about what product I want to build. This is just the business perspective. More to come as I brainstorm about the other questions I listed here!

   

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  • 1

    @jasonleow - Bookmarked. A wealth of information here. Thank you

    Keni avatar Keni | Jul 05, 2019 10:34:32
    • 1

      @keni my pleasure

      Jason Leow avatar Jason Leow | Jul 06, 2019 20:25:15
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