Dropping from 15k to 5k MRR (lessons learned)

I know this is a growth group and what I'm posting is a "decline", but I feel there are lessons to be learned too when your revenue dropped so significantly.

In this post, I'm sharing the 5 things I learned and how I'm using them to build a better business.

I run an email service provider.

In January we were sending around 5 million emails/day for our customers, netting us around 15k MRR.

A month later, these numbers dropped to 1 million emails/day and 5k MRR.

To cut a long story short, we had to cut off bad customers who abused the platform.

As an ESP, we already have measures in place to spot for “bad user behavior”. Both human and automatic system alerts and suspensions if users have poor stats (spams, bounces, unsubscribe rates, open rates, etc).

Somehow this group of bad users managed to stay within these thresholds. They didn’t show any sign of abusing the platform.

After further manually reviewing their mailing activities, we discovered that they violated our terms of service, and hence we suspended their accounts.

Lessons learned:

1/ Make sure to focus on serving your intended audience only

Don’t just take anyone’s money. If you’re not comfortable doing business with someone (because of their business model or ethics or whatever reason), don’t let them become your customers.

If you only serve your intended audience, you’ll have an easier time making them happy since they share the same traits and needs. You don’t need to build many different use cases for different types of users and include them into your product, which can get complicated and hard to maintain.

2/ If you don’t get rid of bad customers, they’ll recommend you to their community (of equally bad customers)

Birds of a feather flock together.

Imagine bad customers recommending other bad customers to join your business. Eventually things get really toxic.

Bad customers → join your business → recommends other bad customers → your business is ruined (eventually)

That’s what happened to my business. Don’t let it happen to you.

3/ If you run a “sensitive” business, be sure to do regular checks to make sure your customers comply with your rules

By “sensitive”, I mean you’re constantly under the surveillance of a neutral organization(s) whereby if you don’t comply with their rules, they have the power to ruin your business.

For us, as an ESP, we’re always under the scrutiny of anti-spam organizations like Spamhaus, which mailbox providers like gmail, yahoo, hotmail, etc. use to determine whether or not to deliver your emails to your recipients.

An example of a business that’s not “sensitive” is a landing page app. Nobody is scrutinizing the kind of landing pages being created by their users and then “banning” them saying these pages be published.

4/ Be more proactive in preventing problems rather than waiting for them to happen and then fixing

This problem arises because I didn’t do enough digging and research to make sure only legit users get to use the platform.

I have learned this painful lesson. Moving forward I’ll spend more time and effort in the vetting process.

5/ Be very decisive and ruthless when it comes to protecting the longevity of your business

In my case, once we understood this group of bad eggs were causing trouble for us, we suspended their accounts, even though that meant we’ll lose ⅔ of our MRR.

But it MUST be done before things get worse. I cut off my limbs today so that the business can become much better tomorrow.

  1. 5

    I can understand why you did it.

    It's not worth it to keep these customers if they can torpedo your entire business through their bad behavior and abuse of your platform.

    For Zlappo, I'm also very mindful of what my users post or do with my platform, as I wouldn't want to be terminated by Twitter, Stripe, my VPS provider, or any other platform on which my business is built.

    Some business are just not yours to earn, and I believe you made the right call 100% here.

    I'm more surprised that bad actors can account for $10k of your MRR.

    There's really a lot of money in abetting wrongdoing.

    1. 1

      Yeah it's just like what I said above. Birds of a feather flock together. If someone bad joins, and they find value in what you offer, they'll refer you to other bad people in their community.

      This same group of people would probably be accepted in other mainstream email marketing platforms. The reason they used us is because we provide good results (high email opens) + our cost is very affordable. But lessons learned and we're now strict on compliance.

  2. 2

    That's extremely painful but you'll be better off for it in the long run 👍

    1. 1

      Thanks for the encouraging words 🙏

  3. 2

    Thanks for sharing Welly, especially the reality of the situation. This kind of info is especially useful in what can seem like a sea of people always doing well - it's not all plain sailing. Good work for being proactive, best of luck with the long term for your business!

    1. 2

      Thanks Matt. And best to yours too!

  4. 1

    Spill the beans! What were they doing?

    1. 3

      Aggressively emailing every day multiple times promoting all the time. Basically providing no value to their subscribers -- it's always offers after offers.

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