Building profitable apps on Shopify

This series aims to help founders, like you, get profitable. Get all the case studies here:

Awww yeaaah! Looks like you're already on my mailing list! Have you subscribed to my YouTube channel?

Björn Forsberg’s story

In 2009, Nick launched the 18th Kickstarter ever for a book on interaction design called Cadence & Slang. It successfully raised $12,206 with 258 backers. He was blown away by the support he received.

At the time, he was working at a design agency, and the Kickstarter experience gave him confidence. He’d self-published this book, and had earned an independent income.

In 2012, he decided to start freelancing. That year, his business made $47,000 in revenue. It was a difficult time; by November he only had $21 in the bank. His business was saved by stroke of luck: in December, he was hired to redesign  Chicago Magazine.

The following year, he started looking for a sustainable source of income. “What can I offer on a monthly retainer basis?” he asked himself. After evaluating a few options, he settled on monthly A/B testing. He called it Draft Revise, and initially prices it at $650 / month. When he launched the sales page, Patrick McKenzie found it and wrote about it in his newsletter.

“My server crashed, and I sold out of spots. I’ve been sold out ever since.”

From 2013 until 2016, revenue grew from $81,000 per year to $238,000 (pretty good for a one-person shop!).

Here’s what Nick learned about building a profitable business

  • Success hinges on the relationships you build. Each of Nick’s pivotal moments involved a relationship he’d built previously. He was one of the early Kickstarter projects because he’d met the founder in college. Right after he quit his job, he met Amy Hoy, who introduced him to the bootstrapping community.  See the Harvard Research Study.
  • It’s OK to go in over your head. “Here’s a secret,” Nick says, “I’d run two A/B tests in my whole life when I launched Draft Revise. I got better at it, but I was in way over my head.”
  • Pay attention to expensive problems that businesses want to solve. You don’t want to have to educate your customer about the problem; they should already be in motion. Focus on solving an expensive struggle that clients are compelled to solve.
  • Infuse your values in your business. Nick’s business been profitable (on purpose) from day 1. Draft’s business charter prevents him from taking outside investment or being acquired. Likewise, he only works with independent companies that have not taken outside investment themselves.
  • Have a “buy out” number. “If someone wants to hire me full-time for a year, upfront, no strings attached I have a “buy out” number,” Nick says, “it takes into account the opportunity cost of a year of lost business & attention. Currently $3.5M. I say it with a straight face and people laugh, incorrectly.”

Nick’s monthly expenses

Nick tracks all of his monthly expenses in a Soulver file. It looks like this:

Nickd's monthly expensesa

Draft’s annual revenue and profits

Nick’s financial picture is interesting, because a large part of Draft’s profits become his salary.

Draft Revise annual revenue and profit

In 2012, profit margins were 3.19% ($1,500 after expenses). As revenue grew, Nick also paid himself more.

This gave him some flexibility. In 2016 he deliberately took on more client work so that he could buy a house. He made $238,000 in revenue that year, and posted a loss only because he decided to withdraw $100,000 for his downpayment.

His plan for 2017 is to work less. He’s expecting to have $180,000 in revenue, $93,924 in expenses, and earn a profit of $86,076. That should give him a healthy profit margin of 47.82%.

2012 2013 2014 2015 2016 2017
Revenue $47,000 $81,000 $128,000 $160,000 $238,000 $180,000
Expenses $45,500 $71,000 $100,000 $140,000 $270,000 $93,924
Profit $1,500 $10,000 $28,000 $20,000 -$32,000 $86,076
Profit % 3.19% 12.35% 21.88% 12.50% -13.45% 47.82%

Actions steps for you

  • Being healthy is the best investment you can make in your business. “Sleep, improve your diet, exercise, drink a lot less alcohol, meditate and journal,” Nick says. (Watch the clip)
  • Track all of your expenses. Nick is a one-person shop, and he tracks all of his expenses, from the cost of his passport to his mortgage. This gives him a clear picture of his break-even point.
  • Raise your prices. Nick initially launched Draft Revise as a productized service that cost $1,950 / quarter. After the initial spots sold out, he realized he was very underpriced.
  • Keep 6 months living expenses in the bank. Nick’s goal has always been to have 6 months worth of cash in his bank account. It’s dipped down a few times, like when he bought a house, but he always tries to build it back up to at least 6 months.

The full transcript is coming soon! In the meantime, watch the interview with Nick here:

Get more case studies like this!

Don’t ask people what they want. Ask where they’re spending their money.

I love this quote by Jason Fried:

You can’t ask people who haven’t paid how much they’re willing to pay. The only answers that matter are dollars spent. People answer when they pay for something. That’s the only answer that really matters.So put a price on it and put it up for sale. If people buy that’s a yes. Change the price. If people buy, that’s a yes. If people stop buying, that’s a no.

You can use this approach to find new business opportunities. Ask yourself:

“Where are people already spending their money?”

For example, Eric White noticed this:

If they were already spending money on Mailchimp, they’ve got a problem they’re willing to pay to fix. Seems like a good sign?

Almost every business is spending money on email marketing. It’s one of the non-negotiables. You’d think that the space would be too crowded, but Nathan Barry’s ConvertKit has recently become wildly profitable.

How Nick Disabato built a profitable productized service

This series aims to help founders, like you, get profitable. Get all the case studies here:

Awww yeaaah! Looks like you're already on my mailing list! Have you subscribed to my YouTube channel?

Nick Disabato’s story

In 2009, Nick launched the 18th Kickstarter ever for a book on interaction design called Cadence & Slang. It successfully raised $12,206 with 258 backers. He was blown away by the support he received.

At the time, he was working at a design agency, and the Kickstarter experience gave him confidence. He’d self-published this book, and had earned an independent income.

In 2012, he decided to start freelancing. That year, his business made $47,000 in revenue. It was a difficult time; by November he only had $21 in the bank. His business was saved by stroke of luck: in December, he was hired to redesign  Chicago Magazine.

The following year, he started looking for a sustainable source of income. “What can I offer on a monthly retainer basis?” he asked himself. After evaluating a few options, he settled on monthly A/B testing. He called it Draft Revise, and initially prices it at $650 / month. When he launched the sales page, Patrick McKenzie found it and wrote about it in his newsletter.

“My server crashed, and I sold out of spots. I’ve been sold out ever since.”

From 2013 until 2016, revenue grew from $81,000 per year to $238,000 (pretty good for a one-person shop!).

Here’s what Nick learned about building a profitable business

  • Success hinges on the relationships you build. Each of Nick’s pivotal moments involved a relationship he’d built previously. He was one of the early Kickstarter projects because he’d met the founder in college. Right after he quit his job, he met Amy Hoy, who introduced him to the bootstrapping community.  See the Harvard Research Study.
  • It’s OK to go in over your head. “Here’s a secret,” Nick says, “I’d run two A/B tests in my whole life when I launched Draft Revise. I got better at it, but I was in way over my head.”
  • Pay attention to expensive problems that businesses want to solve. You don’t want to have to educate your customer about the problem; they should already be in motion. Focus on solving an expensive struggle that clients are compelled to solve.
  • Infuse your values in your business. Nick’s business been profitable (on purpose) from day 1. Draft’s business charter prevents him from taking outside investment or being acquired. Likewise, he only works with independent companies that have not taken outside investment themselves.
  • Have a “buy out” number. “If someone wants to hire me full-time for a year, upfront, no strings attached I have a “buy out” number,” Nick says, “it takes into account the opportunity cost of a year of lost business & attention. Currently $3.5M. I say it with a straight face and people laugh, incorrectly.”

Nick’s monthly expenses

Nick tracks all of his monthly expenses in a Soulver file. It looks like this:

Nickd's monthly expensesa

Draft’s annual revenue and profits

Nick’s financial picture is interesting, because a large part of Draft’s profits become his salary.

Draft Revise annual revenue and profit

In 2012, profit margins were 3.19% ($1,500 after expenses). As revenue grew, Nick also paid himself more.

This gave him some flexibility. In 2016 he deliberately took on more client work so that he could buy a house. He made $238,000 in revenue that year, and posted a loss only because he decided to withdraw $100,000 for his downpayment.

His plan for 2017 is to work less. He’s expecting to have $180,000 in revenue, $93,924 in expenses, and earn a profit of $86,076. That should give him a healthy profit margin of 47.82%.

2012 2013 2014 2015 2016 2017
Revenue $47,000 $81,000 $128,000 $160,000 $238,000 $180,000
Expenses $45,500 $71,000 $100,000 $140,000 $270,000 $93,924
Profit $1,500 $10,000 $28,000 $20,000 -$32,000 $86,076
Profit % 3.19% 12.35% 21.88% 12.50% -13.45% 47.82%

Actions steps for you

  • Being healthy is the best investment you can make in your business. “Sleep, improve your diet, exercise, drink a lot less alcohol, meditate and journal,” Nick says. (Watch the clip)
  • Track all of your expenses. Nick is a one-person shop, and he tracks all of his expenses, from the cost of his passport to his mortgage. This gives him a clear picture of his break-even point.
  • Raise your prices. Nick initially launched Draft Revise as a productized service that cost $1,950 / quarter. After the initial spots sold out, he realized he was very underpriced.
  • Keep 6 months living expenses in the bank. Nick’s goal has always been to have 6 months worth of cash in his bank account. It’s dipped down a few times, like when he bought a house, but he always tries to build it back up to at least 6 months.

The full transcript is coming soon! In the meantime, watch the interview with Nick here:

Get more case studies like this!

Brennan Dunn on increasing profits for digital products

Everyone wants to talk about revenue. But what about profits? How much cash are these businesses actually earning?

What’s the difference between a founder who is mega-profitable, and an owner who’s just making a living? How can a SaaS, software, or digital product company go beyond breakeven?​

These are the questions we’ll be examining in this series. Get all the case studies here:

Awww yeaaah! Looks like you're already on my mailing list! Have you subscribed to my YouTube channel?

Brennan Dunn’s story

Brennan was running a multi-million dollar agency when he decided to build his first software product. He launched Planscope, a project management tool, in 2012. It was a hard grind:

I was pretty disappointed with the income. It took over a year and a lot of effort for it to make any measurable impact on my finances. The problem was that I could make in a few hours of consulting what Planscope brought in each month.

Then something happened. Planscope customers started asking him questions about how to charge higher freelancing rates. After responding hundreds of times, he decided to just write a book on it. The result was Double Your Freelancing Rate. Pre-sales for the book totalled $2,213.

Is Brennan Dunn's business profitable

Revenue for DYF took off. Getting a sale for Planscope was a lot of work. Conversely, selling a copy of the book (and then later, a course) was a lot easier, and had way fewer costs.

In 2016, he sold Planscope and decided to “double down” on Double Your Freelancing.

Here’s what Brennan learned about building profitable products

  • Talk to potential customers in-person or on the phone. Your understanding of what customers want is what will drive future profits. (Listen here)
  • It’s tough to get people to change their behavior. “It’s one thing to build software, and it’s another thing to get people to modify the way they work.” (Listen here)
  • Respond to evidence from real people. When Brennan started seeing trends in the questions people were asking him, he responded. It wasn’t about asking people what they wanted, but observing the behavior. (Listen here)
  • It’s always hard in the beginning“I pushed super hard for those pre-sales,” Brennan remembers, “MailChimp even disabled me for excessive spam. Lesson learned!” In the beginning, he had to grind to get $2,213 in pre-sales. Nowadays, making that kind of revenue seems easy for him. Just remember: it’s hard for everyone at the start.
  • Track the lifetime value of your customer. Brennan knows exactly how much a lead is worth to him, and he can segment by “what they do” (designer, developer, owner). (Listen here)
  • Evaluate your profitability per product and customer type. When Brennan launched a premium $9,000 course, he discovered that revenue was higher, but profit margins were meager (below 5%). He also knows that certain customer types are much more profitable than others. (Listen here)
  • Automation increases your profitability. In the beginning, you need to work hard. But eventually, you need to automate your process. (Listen here)

Double Your Freelancing: Revenue and profits

Brennan’s business expenses are relatively stable: about $115,000 per year. Revenue in 2015 was $566,000, and increased to $855,000 in 2016. He expects to do about $1.1 million in sales in 2017.

Brennan Dunn's product profits 2015, 2016, 2017. Get more profitable

As a one-man shop, Brennan’s profit margins are excellent:

  • 2015: 80%
  • 2016: 86%
  • 2017: 89%

(Note: these are before he pays himself disbursements, but he’s still well above the 15% profit benchmark)

Here’s what you should do next

  • If you’re starting out, create something small. “I wish I’d started with a workshop (or webinar) instead of building a SaaS app,” Brennan says.
  • Give yourself time. Brennan began by launching an ebook in 2012 (to a list of about 1,000). It sold for $29 and initially brought in $2,213. Fast forward five years, and he’s expecting to do $1 million in profit (with a list of 42,000). But that didn’t happen overnight. (Clip 1, Clip 2)
  • Listen to real human beings. “I almost gave up,” Brennan confides, “until I started noticing the support emails I was getting from Planscope customers.” He was getting questions like: “Any ideas about what I should charge?” This lead to the creation of Double Your Freelancing, which was a vastly more profitable product.
  • Double down on what works. Brennan found himself with two businesses: a SaaS and an info-product. Growth (and profits) for the SaaS were slow, so he doubled down on DYF.
  • Be realistic about your expenses. Maximize your revenue. Brennan’s company expenses are around $115,000 a year. That hasn’t changed that much. What has changed is his revenue. By keeping his costs flat, and focusing on maximizing revenue, his profit margins have increased every year.

The full transcript is coming soon! In the meantime, watch the interview with Brennan here:

Get more case studies like this!

Justin Jackson’s talk at Laracon 2017

It was awesome to meet all of you at Laracon 2017 in New York City. A special thanks to Adam Wathan for introducing me to the Laravel community, and to Taylor Otwell for inviting me to speak.

Download the slides from my Laravel talk (PDF)

Download PDF

Watch the teaser video:

Get my book: Marketing for Developers

If you liked learning about how Code + Product + Marketing makes software developers unstoppable, you’ll like my book. You can download a free sample below:

MicroConf 2017 – “The Freedom Ladder” talk by Justin Jackson

I had an awesome time meeting you all. Thanks for coming to my talk on The Freedom Ladder: Achieving Financial Independence Through Products.

If you have any questions in the future, feel free to reach out at justin@megamaker.co or on Twitter: @mijustin

You can download my slides here:

Download my slides (PDF)

Watch the video:

GET MY BOOK: MARKETING FOR DEVELOPERS

If you liked learning about how Code + Product + Marketing makes software developers unstoppable, you’ll like my book. You can download a free sample below: