If you're selling anything online, pay attention to these two variables:

1. Unit economics: how profitable is one "unit" of your product or service? (one digital download, 1 month of MRR)

2. Sales volume: how many units can you sell every month?
📊 Unit economics

Think about a musician. 👩‍🎤🎸

## She used to make:

🎵 On iTunes:
Retail price: $0.99 / track
Artist profit: $0.69 / track

## But now she makes:

🟢 On Spotify:
Artist profit: $0.007 / stream

Her profit per unit has gone WAY down.
📉 Sales volume

🎵 On iTunes, an artist needed to sell 3,623 tracks to earn $2,500 in a month.

🟢 On Spotify, she needs to get 357,143 streams to earn $2,500 in a month.

Because of poor unit economics, the volume required to hit baseline has gone WAY up.
👥 The market you serve

Let's say an artist has "1,000 true fans." To hit her revenue numbers:

🎵 On iTunes, each fan would need to buy 3-4 new tracks per month. (Difficult, but not impossible)

🟢 On Spotify, each fan would need to stream her music 357 times per month.
This is exactly what happened to @pomplamoose: they had good unit economics on iTunes, but bad margins + volume on Spotify.

As @jackconte recounted to @guyraz on @HowIBuiltThis:

“In the recent past it might have been possible to make a middle-class living on your music. In the current streaming economy, the only way to survive is to be huge.”

theringer.com/tech/2019/1/16… It's way harder to make a living on Spotify than iTunes
So what does this mean for SaaS founders, or creators selling digital products and subscriptions?

📈 Volume
💰 Profit.

Those are your two levers.

How badly do people want it? That's volume.
What's your price and costs? That's profit.
Low-volume example:

💰📆 If you want to make $10k / month...

📊 And your margins are 80%,
👥 but you can only attract 5 sales,
💲 your price is going to need to be $2,500
High-volume example:

💰📆 If you want to make $10k / month...

📊 And your margins are 80%,
💲 and your price is $25,
👥 you'll need 400 sales/month

☝️ most SaaS is high-volume (~400 customers to earn $10k / month)
Generally, you're either in a low-volume business (with a high price), or a high-volume business (with low prices).

And (again, generally):

👩‍💻 Most consulting/services businesses are low-volume/high-price
💾 Most SaaS/digital products businesses are high-volume/low-price
Just wrote this up for my upcoming Saturday newsletter.

Anyone here want to give me some feedback? (Ways to improve, make it better/more clear)

Another funny example:

Tony Hawk owns his own skateboard company (Birdhouse).

My guess, based on market share, is he's sold 1-2 million decks in the past 10 years.

But over the past decade, his video games have sold over 31 million copies.

He's rich from 🎮 not 🛹.

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More from @mijustin

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Odd to see folks advocating that Twitter should be a “government controlled utility.”

So, you want to fight censorship by giving a central government control over the big social media platforms?

(Personally, as a citizen, I’m more afraid of being censored by the government)
A central totalitarian government controlling communication channels is the literal definition of “Orwellian.” Image
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Business success is a function of:

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👍 how much of that demand you can capture and satisfy

💸 how much it costs you to capture that demand and create customer satisfaction

🔁 how repeatable the whole process is
📈 To figure out how much demand is there for what you’re selling, ask:

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You want self-motivated customers: folks who are hungry for a solution.

"F*ck this, I'm fixing [this problem] today."
"Inertia" explains why the podcasting industry saw a huge bump during the initial lockdown.

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The lockdown disrupted them. It gave them the momentum they needed.
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Nothing gives indie founders a better quality of life than recurring revenue. 🥰
The only thing that compares is a one-time sale product (course, book, downloadable software) that does massive revenue when it launches, and then consistent sales in the years that follow.

(Without needing a lot of re-launching, complex sales funnels, or CPC ads)
The risk with one-time sales is you can have a reasonable launch ($10k - $30k) but then have it peter out.

Then, it's like squeezing juice from a squeezed lemon. 🍋

But, if you get a really good launch ($100k - $500k) you have the margin to figure out how to make it sustainable
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