Transparency Report #17 – August 2017

Phew, I’m getting slower with publishing these transparency reports.  The start of September has been busy for me since I’ve been moving out of an apartment and had limited access to the internet. However I’m back with the seventeenth report on what’s been going on with Epic Plugins, Epic Themes and Zero BS CRM.

This report goes into managing the growth of an online business as well as when to pay yourself..

If you’ve missed the older reports, you can view them all here as mentioned in previous updates, these reports are primarily for myself, to look back on and see the progress of my own businesses. If these reports also help you to gain inspiration in your own endeavours then great, I’d love to hear from you in the comments.

Growing an online business

Growing an online business is hard, I wrote about this in my eBook here, these transparency reports (and the back story) go into detail month by month around how I’m tip-toeing my way around and try to navigate my way to a continued successful business.

In previous reports I’ve flipped back and forth between including freelance, excluding freelance and the general reasons why I want to exclude it.

In this report, I’ll continue to focus on the revenues from non-freelance (i.e. plugin and theme sales) but I also wanted to cover a tool (google sheet) that I’m using to manage my cashflows and also highlight a little bit the cashflow management and forecasting side of things. If you don’t do similar I would recommend that you start…  it’s a bit of a “financial whirlwind” this month..

Here’s the chart that I use to track progress (and make sure I can still pay salaries each month). When the red line dips below the yellow line it means I can’t pay salaries.. (and have to use the cash reserves).

Now, this chart DOES include freelance revenue to complete the picture, it’s all revenue in and shows the cashflow (revenue less expenses) and also the salary levels (yellow line). Explaining it a little more

• The blue line is revenue into the business, this is after any transaction processing fees (charged by Stripe)
• The red line is revenue minus expenses, these expenses do not include salaries. They are things like ConvertKit, Domain Names and Hosting. They also cover any freelance work (content writer, support help, development help)
  • In May, the big difference between blue and red was due to payment of ZBS CRM revenue share to Woody
  • In August, the big difference was the purchase of new office equipment.
• The yellow (salaries line) is what we are drawing from the business each month in salary. If the red line is below the salary line then it means we are operating in a negative cashflow environment (i.e. we will run out of money if we carry on!)

Here’s another way of looking at the same chart (but this time including salaries in expenses)

For a predictable business, it’s best to make sure that you don’t have any big chunks of cashflow going out, as mentioned the one in May was the distribution of the first share of ZBS CRM revenue to Woody (co Founder). What does this mean though:-

• For the first year of Zero BS CRM – we both worked without taking any salary from the revenues
• We did our first distribution in May 2017.
• Since then, the revenues of ZBS CRM have started to increase (we’ve both been focussing on this a lot) so better cash management is needed

If left unmanaged then it can become a strain on the business and you might find that you have to scurry around for the cash

Managing distributions

OK, so here’s where I’ll quickly switch to the usual chart which shows the revenues from plugins, themes and ZBS CRM, then move onto how to manage the revenue distribution side of things when a product is growing. A good (great) month for Zero BS CRM.

Showing the split above is really encouraging for Zero BS CRM it shows that the product has a market and that our recent efforts (we’ve spent a LOT of time building new features) is starting to pay off.  Here’s the breakdown for August

The strong performance was lead by Zero BS CRM, as a refresher the figures for July are below too

• CodeCanyon – $63.68 (vs $76.00)
• Epic Plugins – $694.29 (vs $712.37)
• Zero BS – $4,158 (vs $2,251.00)
• Epic Themes – $1,385.10 (vs $1,084.47)

August, when compared to July shows that, CodeCanyon fell slightly, Epic Plugins sales have been broadly similar, ZBS is picking up steam and Epic Themes also had a +30% month compared to July.

Zero BS CRM gathering speed

This is great, when we started the CRM plugin as a side project, we aimed to take it to market with the expectation that people would share our vision. It’s good to see that people are using the CRM, and also that people are seeing the value in using ZBS CRM and supporting us with grabbing an extension or bundle.

As the product (hopefully) continues to sell to customers, the cashflow side of things needs to be managed and how we “spend” the product revenues. We (Woody and I) have both said that our intention isn’t to get mega rich from this, we want to serve Entrepreneur’s and build a product which is very useful for small and medium sized businesses.

The last thing we want to do is be forced to stop working on the product, and it fail its purpose. We want to be able to continue to develop the product, make it more useful and really give back to the community (this doesn’t mean giving the extensions away for free though.. sorry folks).

So we need a strategy for how to sustain the growth, and this is where forecasting comes in. It’s also important that we start taking more regular distributions from the revenues of the plugin (we can’t work on it forever without taking a salary from it)

If you have a similar product, I suggest you look at the same type of analysis. It will help you understand at which point you should consider taking regular incomes and how much you should ‘save in the bank’ for future expenses (such as marketing etc).

As you can see from the chart above, we spent a long time with ZBS out in the market and it made low revenue figures. The chart above doesn’t show the time spent “pre initial launch” where the product was initially developed.

We started on the “Core” of ZBS CRM probably about a year earlier (2015), which was built out of a personal need, we then expanded it and decided that we should launch it to the WordPress community.

We did this in June 2016, we had 5 extensions at the time, and sales were dripping in as people grabbed one of our earlier bundles. In March 2017, we put a big stint of work into the plugin, marketed the plugin and extensions a lot more and developed our wider bundle offering (freelancer, entrepreneur’s and reseller bundles).

Forecasting and spend

Obviously with any side project you want to be able to eventually make it so that you can spend time doing what you love. ZBS CRM is a WordPress Plugin, as such it sits in my area of doing something I love. It’s a product where we want to to be able to support both founders (Mike and Woody) and also for us to grow the team.

What we want is for this to be the Entrepreneur’s CRM of choice and something which we can live comfortably off. For that, careful forecasting is needed.

Looking at the progression this way is really interesting. We’ve not been taking anything from the ZBS CRM revenues (apart from a small distribution in May 2017 (after almost 18 months of taking $0)). That distribution was c$2,500 between us ($70 a month roughly).

Explaining the chart

The above chart, is something I recommend anyone to put into practice is their business. How is it constructed?

• The black bars are the capital that has been built up in the CRM business (after distributions)
• This capital is after our expenses have come out (hosting, marketing, domain, etc)
• It’s cumulative, so the current position is that it’s built up close to $10k in capital (remembering we’ve not been drawing any income)

So going forwards, and shown in red, the capital position needs to be managed. We can therefore (using the spreadsheet model above)

• Change assumptions – in the above forecasting chart I have input variables for
  • % of subscriptions which renew
  • How much salary we draw each month
  • The average monthly expected revenue
  • Average expenses

Through adjusting those input variables, I can test what we should focus on. What happens if sales drop, and what should we focus our capital spending on, such as:-

• A marketing manager hire,
• Additional support staff
• Additional developers
• Sponsorships etc.

Being in this position is great, and if you have a similar product, I recommend you look at similar forecasts like this (the forecasting chart is one of a few different tools we have put in place). We also use our Zero BS CRM Sales Dashboard to check in on progress as well as some internal metrics we keep private.

CRM Dashboards

The final piece of our monitoring puzzle is our CRM Dashboard, where we keep track of leads through to customers (for ZBS) we’ve *just* hit our 100th happy customer. I have a similar dashboard for Epic Plugins, and Epic Themes (the CRM dashboard is included free with Zero BS CRM). It’s centric to everything we do and really helps with managing the customer acquisition process.

Epic Plugins Traffic

One thing I like to check in on and will continue to do so in these reports is the traffic reports from similar web. They give an overview of whether content marketing is working and the popularity / footfall of the sites. Higher traffic levels *should* lead to higher revenues (as long as conversion rates don’t fall)

A healthy picture for Epic Plugins. We’ve been publishing more regular content so through this I expect the traffic should increase (certainly once we have the marketing loop sorted for each piece of new content)

Epic Themes Traffic

A fair bit lower (still) here, similar web tracks visits to the home page domain and not including demo websites.

Zero BS CRM

Our CRM product is picking up pace on the traffic reports now too, certainly when it comes to organic search.

That’s all for the report this month. I wanted to focus on the management of the cashflow. I hope you’ve found this useful.