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:

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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:

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