Transparency Report – April 2018

It’s time to kick these back into regular production. As you may have seen, I took a bit of a break in writing these as I wrapped up the year in review post.

I think it’s a good a time as any to start them back up again. This post focusses purely on Financials.

Intro – A Quicker Production of Stats

When I wrote my transparency reports previously, I had to login to 2x different websites, overlay Zero BS CRM and then start analysing the breakdown of sales, etc.

So, as I constantly evolve to try and find the right metrics to quickly and easily produce for these report. I’m back with my new set of “automated” revenue charts from my Sunday Funday project.

Until I’ve built my own variants, I’ll also be using some of the useful charts from the Metorik service. Enough of the gas, and onto the stats.

Epic Plugins

Now I have the ability to split these out via my tool, below is a chart going all the way back to when I started the subscriptions model on both sites.

The chart above is for Epic Plugins and to explain it (as it’s probably the first time you’ve seen this chart in all it’s glory!)

• Dark Blue – this is New Revenue. Sign ups from new orders (could be same customers, though)
• Light Blue – this is Renewal Revenue. From people who have renewed their subscription to the plugin
• Light Red – these are “Failed Payments” – this is when the subscription could have happened, but it failed.
• Dark Red – refunds. Not too many of these – but I am quite harsh when it comes to refund requests.

From the general feel of the plugin business, it generally feels on a whole that the MMR is growing. While I didn’t have this to hand, the service I’m currently using does (until I calculate my own from my Sunday Funday project).

The way to read the above chart is the blues are after any deductions (i.e. refunds) and light red shows how many renewals *could* have come in on top of the light blue – but they failed (rather than being cancelled) or failed payments in general.

“Monthly” Recurring Revenue

However, through signing up to Metorik I’m able to see my MRR over time from my subscriptions, while this is stated as an “MRR” it’s not really, since the products renewal annually. It’s on average how much I’ll expect to generate over the next year ($812 * 12 being $9,744) if they all renew.

This is as I expected for Epic Plugins, a +2.1% growth over the month.  Net subscribers is positive too, which is good news (below is over the last 30 days)

So all in all, Epic Plugins is moving along and producing what it has for a while, key take aways:-

• Since the launch of WooCommerce My Account – average revenue increased from c$400 to c$600
• Renewals coming in has meant my MRR is now sitting at around $800pcm
• There’s not been too many failed payments (i.e. people who haven’t cancelled, but the payment failed)

*November 2016 in Epic Plugins still had some Theme sales in before I split the businesses out.

Epic Themes

Epic Themes is a different kettle of fish. Here’s the first chart (from my own system)*

*December 2016 had a spike for people who needed to “migrate” their order between sites (and these were refunded over at Epic Plugins)

This chart is more interesting. There’s been significantly more failed payments here (as well as more refunds in Jan and Feb). Here’s my analysis of the above

• New Sales for the themes have dropped since November. Possibly related to when I started travels (dark blue is lower)
  • You’ll notice I didn’t release any new versions of the most popular theme – Plugin Hunt – since November
• Renewals have helped “prop these up”.
• Failed Payments have been quite high. Whether these are 100% related to the order type is something I’ll build into the above charts.

Themes might be less sticky than plugins, certainly the type of themes I sell. They’re great for the start up enthusiast who has an idea for a niche variant of Product Hunt using Plugin Hunt, but then a year passes and their idea might not have “stuck” so they decided not to renew.

“Monthly” Recurring Revenue

Being able to see this chart confirmed how the past couple of months have “felt”. It’s felt like there’s been way more failed payments or cancellations vs the number of renews and new customers.

It’s a bit of a black box using a service like Metorik, and there’s some elements of additional analysis I’d like to see (such as the payment processor) I’ve been accepting only Stripe for a while, but now turning back on PayPal it will be interesting to see whether that’s a cause of some of the declines.

So in the last 30 days, there’s been a net change of -9 subscriptions.

How does “MRR” work for “Subscription Products”

This is something which is unique to the WordPress world and the business I operate in. WordPress Products are by their nature open source and once you pay once for a premium product – it’s yours to keep, regardless of whether your subscription is active or not.

Yet, a lot of WordPress developers are moving (or have moved a long time ago) to the subscription model for their products. From a business perspective though what’s the right way of thinking about subscriptions and your MRR, since it’s not the amount you’ll make next month (unless you sell your product through a monthly subscription).

I started selling subscriptions (vs one time) back in November 2016 and when looking at any “MRR” chart, it’ll show growth, growth, growth until you hit the one year mark (this is when you’ve done a full year of “annual” sales).

Until you pass this point, you really wont see any real churn (apart from those who you decide to refund / cancel in year one), this gives quite a unique picture for annual subscription products. Here’s how Epic Themes’ chart looks from day 1 (i.e. since starting to take in annual subscriptions – we’ve sold ‘one off’ licenses before then since 2015)

Growth, Growth, Growth.

Yep, 65.5% on average each month For Epic Themes. Crazy, if only it were true!

Renewals started coming into the business from November, so going forwards the “growth” I suspect will start to flatten (or even decline) as I’m seeing. The “MRR” is $1,423 but…

Looking at the revenue from the last couple of months, it’s been around $800 to $900 (this does break out new vs renew).

So, it’s not like a SaaS Model at all where you can say..

OK, we have $1,4k of MRR active, so we can expect around $1.4k next month (less x% for churn) plus new growth

It becomes more of a game of can you get more new customers this month, than you lose through customers not continuing to pay for use of your product. This way the business will grow, but again you’re mostly chasing new customers.

I can’t be planning on getting $1.4k revenue, but then actually only get $800 (due to the flawed nature of applying the “MRR” approach to annual renewals).

The Three Types of Subscription Product User

So with a product that’s on WordPress, but sold under a subscription model. I’ve got these grouped into the following types

• Active subscription users – these people continue to pay the annual renewal and are “active” in the MRR figure
• Cancelled (but active) users – these are people who cancel (or the subscription fails) but they still use the theme (or plugin)
  • They’re probably using an out of date version too.
• Cancelled (inactive) users – these are people who bought, used, but no longer use the theme (or plugin)

Is there a better way?

There must be a better way to manage an annual subscription business, is it move to monthly payments for the products – but lock down features if the subscription is cancelled?

Is it something else?

I’m opening the floor for discussion. If you run a subscription business (or are planning to move to annual renewals for your products)  – what do you think?