A few months ago, Justin Jackson was tweeting about margin in business non-stop. He persistently spoke about how important margin is in business.
Well he’s right. Your underpriced SaaS is going to shoot you in the ass.
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Margin allows you to absorb unexpected blows. You need margin to build an emergency fund. Some people live without emergency funds, and if their boiler breaks, they have to either go without or go into debt to fix it. It's a challenging way to live.
For businesses, lack of a margin will mean that you don't have the space to breathe. Your growth will be hindered if you don't have anything to re-invest into the business. Or you might have have unexpected costs, run out of cash flow and go out of business.
Before anyone gets stroppy (🇬🇧), I'm talking about tech businesses. I know nothing about restaurants, retail shops etc. so I'm not going to spend a second pretending I understand their margin challenges.
But let's get to the benefits of margin.
A few months ago, we were able to introduce uptime monitoring to all of our customers at no extra charge. This was a huge value add, and people were so pleased when we launched it. This addition wouldn't have been possible without margin in our pricing.
We've been able to work with some of the world's best digital privacy lawyers & experts. A few months ago we came up with a groundbreaking revelation regarding privacy law, and we had the margin to pay for them to review it. We review privacy law so our customers don't have to!
When customers go crazy viral, we can afford to absorb the extra infrastructure costs that come with that, because we keep an emergency fund for server excess (e.g. deploying a larger MySQL instance to handle the extra workers being thrown at it).
We were able to go full time on Fathom much sooner because we were able to replace our income. Both myself and Paul did well in our respective businesses before Fathom, and we both have families, so we needed to replace a good chunk of income to go full time.
When Fathom was open-source, we had millions of downloads and only $20/month in open-source donations (thank you @austinginder!). Austin is a great guy and we actually spoke on the pros & cons when we were moving away from open-source. Very smart guy.
Because of margin, we are able to pay for fully managed services, which comes at a premium, to free up time for ourselves to spend time on designing & programming. That one is huge for us. If we were a cheap/budget provider with no margin, we would be doing the DevOps ourselves.
For Version 3, we're able to roll out DynamoDB (infinitely scalable database) and Elastic cloud, because we have margin. This will lead to a much quicker dashboard and API for our customers. It's so damn fast.
More margin = better service.
We have one of the leading affiliate programs, where people get $10 credit when they join and the person who referred them gets 25% commission for life.
If we were only charging $5 per month, we'd be left with $3.75 after the 25% cut.
At $14 per month, we're left with $10.50.
Another huge piece is that margin lets us donate 2% of our revenue to carbon removal & rainforest preservation, and it's substantial.
And it lets us make donations to food banks.
And do cool things like make cat hoodies for giveaways/brand building...
Without margin, we wouldn't have the same trajectory. We wouldn't be building the world's best privacy-focused analytics software. And we'd be at high-risk of failing financially. Without margin, our growth could be our downfall, because we wouldn’t be able to afford it.
This tweet thread came about because I've been concerned with how people price their software. Don't sell your software cheap. It's a huge disservice to your customers who need you to be sustainable. $5-6 per month is a dangerous game to play if you're bootstrapping.
Some people like playing the game of customer volume. They'd rather go low on price, accumulate millions of customers, and then work it out.
Look at Zuckerberg. He had extreme volume, zero revenue and now he sells his users' data.
Lack of margin can mean lack of choice.
For us, we've been intentional about building a sustainable, antifragile business that our customers can rely on. If you build your business to be profitable & sustainable from the start, you don't have to compromise on values.
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I'm convinced that most developers don't know what OLTP and OLAP mean.
A simple & high level explanation is that with OLAP, you are running analytical queries across a lot of data.
With OLTP, you're typically reading, inserting, updating or deleting a single or multiple rows.
Most of us come from a MySQL background and, as you know, it's very slow to perform aggregations/searches on large amounts of data. Historically, we'd bring in solutions like Elasticsearch, which we run *in addition* to our primary MySQL (OLTP) database. Those days are over.
Circa 2013. This was the primary reason why I never shipped my side projects. My attitude to building software was that I needed to predict every possible feature before launch. This approach was so dumb. Build a good quality MVP, ship it, and then improve it regularly.
This ridiculous strategy meant I was manufacturing overwhelm for myself. I'd always feel behind because I had this absurd feature list that I had to build before launching. As a result, the software never went live.
Problem 1: My prior development experience was at an agency, where a client would bring a "fixed specification" for you to build, and they had a budget. Whereas I perceived myself as having no real limitations, so I just kept adding to my specification.
The idea came about early this year after @mijustin gave us an idea about badges/certification, which developed into “what if we could scan websites for Google Analytics?!”. But we left the idea in Basecamp for many months.
Fast forward to Halloween, we’re thinking about fun ideas we could do to entertain people. We discussed “Phantom Analytics” in response to people getting confused with our product name, and had various ideas. And then we landed on the URL analyzer idea.
2013: Attempting my first software startup, surrounding myself with motivational quotes. Very naive about business.
2020: I left my job to work full time on a fast-growing startup that I co-founded.
In 2013, I was working on a fitness startup called Raw Gains. It was similar to MyFitnessPal but focused on specific dieting techniques (carb cycling, keto, etc.) and better workout routines.
It was targeted at individuals & personal trainers & I had no idea what I was doing ☹️
I left my agency job in 2013 and had around £2,000 saved. I was living at home and my monthly bills were less than £500. I was going to build Raw Gains in 5 months, launch, and have 1,000 customers.
None of that happened. I didn't even get one customer.
After spending 2 weeks dealing with servers, I'm so pleased we went with Laravel Vapor back in mid-2019.
1) Time spent on servers is time I could've spent coding 2) If something goes wrong on these servers, I have to fix it 3) The servers have a hard request/sec limit
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The premium cost of serverless is worth the mental benefits & saving in time costs. With our custom domain infrastructure, we have to use servers, and I am very aware that I am responsible for them.
With our main infrastructure, the best nerds in the world manage it, not me.
And why am I so obsessed DynamoDB?
DynamoDB: Infinite or Read/Write Capacity Units
MySQL: CPU, RAM, IOPS, Storage & configuration
I cannot run 3,000 clients per second to a basic Laravel app. I've tried both Caddy & NGINX, both fall over, which makes me think that it's something related to PHP FPM.