September 17, 2020

Net revenue of -$313. Yikes! 😥

Ethan Teng @ethanteng

It’s been a couple of months since I first launched WheresMyStuff, so I thought I’d share how it’s going so far.

First, some some vanity metrics 😆

  • Number of users: 36
  • Total packages tracked: 74

Now, let’s dig into this more deeply and examine the true health of the product. But first, some definitions:

  • Churned user = user who has had no repeat use after 1 month of their first use.
  • Retained user = user who has used WheresMyStuff 3 or more times. To be clear, I mean 3 or more separate occasions (dates), not just 3 or more packages as some people send multiple packages to be tracked at a time. And I chose 3 because, from the data I have so far, the users who’ve used WheresMyStuff the most have used it at least 3 separate times. So, it seems rather indicative of people reaching the “habit moment.”
  • Users at risk for churn = those users who’ve used it once or twice but have yet to reach the “habit moment” of 3 uses.
  • Inactive users = those users who have signed up but not yet tracked any packages.

Given the definitions above, the key metrics break down as follows:

  • Churn rate: 33%
  • Retention rate: 19%
  • “At risk for churn” rate: 31%
  • Inactive rate: 17%

So, while there are good number of users overall, only 19% (so far) have reached the habit moment and are using the product consistently. And while 19% isn’t terrible, I definitely want to work towards increasing that number to at least 25% retention or better.

It’s also interesting to note that of all the users, 67% are new contacts, i.e. I do not know them personally. So, it seems like WheresMyStuff is in fact reaching an audience beyond my personal network, which is pretty cool.

Now, let’s look at the CAC and revenue numbers so far:

  • CAC: $11
  • Revenue to-date: $55

Again, let’s break that down:

  • So far, I’ve spent $411 on Marketing costs, e.g. website design, paid marketing, user research, etc.
  • I’ve spent $151 on Operational costs, e.g. website hosting, APIs I use to provide the service, etc.

Given all this, here is how I am measuring and evaluating the sustainability of this product as a business:

  • My churn cost is $137 so far. That is how much I’ve spent in total on Marketing (acquiring) customers who’ve eventually churned.
  • Each retained user costs $22 in operational costs alone to provide this service to them.

If you sum the amount I spent on Marketing (acquiring) each of the retained users, plus the operational costs, plus the average churn cost, each retained user costs a whopping $53. I chose to include the average churn cost (i.e. the total cost spent on acquiring churned users, divided by the number of retained users) because I want to be hyper vigilant about my churn. So, by including the churn cost in my cost calculations for retained users, I’m forced to think about it and not just be satisfied with retention / blind to churn.

So, even though I’ve made some revenue from those who’ve chosen to support me (thank you!), the my net revenue to-date is -$313.

This is obviously NOT sustainable over the long term. But, I’ve only just started to do some paid marketing as well as ask people to subscribe to the service, so I’m going to give it more time. But, I think if my net revenue exceeds -$1000, that will be my line in the sand to step back and evaluate whether or not to shutdown WheresMyStuff.

  1. 3

    Hey Ethan, I'm about to give you some negative feedback – I'm sorry for this, but I mean well and hope that is helpful to you.

    First, I don't see how this could possibly work as a consumer business – for most people, the problem you're solving isn't a big deal and it's going to be incredibly difficult to get consumers to pay for this. Maybe there's a willingness to pay by businesses – you should talk to business to see if there is a need for a solution like this.

    Second, spending money on paid marketing at an early stage is very inefficient and almost always a mistake. You should look for users by reaching out to people, participating in communities/forums, on social media, etc. You have to get out there and talk to people – that feedback is where the real value is.

    Last, I may be misinterpreting this but your operational cost of $22 per user seems extremely high. That means as a customer I would have to pay you more than $22 to be notified for package delivery for you to make a profit? I don't know what the driver of costs are, but I would have to think that tracking packages costs almost nothing unless delivery companies are charging you a lot for using their API.

    Sorry for being so negative. You look like you have talent and ability, and you've built something that works which in itself is a great accomplishment. But I'm very concerned you're working on a project that isn't going to work as a business.

    1. 1

      @stevenkkim thanks so much for the constructive and detailed feedback! I really do appreciate it, and I don't consider it negative at all. It's always great to get a contrary perspective to help bring me out the weeds, so to speak. But yes, I agree re: it being to early for paid marketing. I had been doing what you suggested, i.e. reaching out to communities, social, etc and it was showing some traction. I just wanted to see what would happen if I tried running some ads since I had personally never had the experience of setting up and running ad campaign before. So, it was more of a learning exercise :)

      But overall, I do think I will see if there are more "legs" for this idea among small business owners / B2B play. Others here have suggested similar ideas, including maybe also dropshippers. I plan to reach out to those segments and validate the idea. Thanks so much for your feedback and help!

      1. 1

        You’re welcome, and I’m rooting for you. Good luck!

  2. 2

    Looks like this is mainly a B2C product. Have you considered shifting focus to B2B? Maybe providing an API to dropshippers so they get notified when a customer gets their package, and that can trigger an email where the businesses ask for a review, or try to upsell something similar. In this way, you directly connect the value of your product to "make more money with me".

    1. 1

      @zerotousers absolutely, thanks for the feedback! It's definitely an idea I'm starting to consider. I had planned to start reaching out to small business owners to validate the idea, but great suggestion re: dropshippers. Thanks!

  3. 1

    I like the website. I think this will work as an API service offered to businesses that do not want to integrate with many delivery company APIs. It's a B2B solution, not a B2C.

    A white label option should be really appealing to businesses that want to automate tracking and offer better customer service.

    If you can add event hooks and automated emails to the API, that will be a huge time saver for businesses that have to deal with enquiries about delivery date and time.

    You should find at least one business willing to pay for this before doing more development.

    1. 1

      @technopreneur thanks for the feedback! I've definitely heard others echo your suggestions. I plan to start to reach out to small business owners to validate the idea.

  4. 1

    Is there a way to drop your CAC? Is there a small niche target audience you can reach out to directly? What businesses would most benefit from your service?

    1. 1

      @mikeneedle the CAC should drop soon, I think. The current cost is due to some early research I did to learn more about my target customers (which I wrote about here), and some paid channels I was experimenting with. I've only recently started investing in paid acquisition using Adroll. Initially, I was spending more money so I could learn quickly, but now I've scaled back my ad spend to less than $5 a day since I have a better idea of who to target and with what message.

      1. 1

        @ethanteng I’m curious what platform is less than $5 a day for advertising? I haven’t looked too much recently but I remember that being the minimum everywhere?

        1. 1

          @mikeneedle I have been using Adroll. You can set a certain daily spend per campaign. It doesn't seem like they require a minimum.