How much does it cost to run a SaaS in 2018? We take a look at our bootstrap expenses.
Every business accrues monthly expenses. The danger? Business owners can get in the habit of spending money, believing that "you gotta spend money to make money."
Patio11's reply to Justin's tweet: "It is far, far, far easier to create something that will increase the revenue of your business by $200 a month than it is to squeeze $200 out of the expenses."
It's easy to get carried away with the "you gotta spend money to make money" meme.
Show Notes
How much does it cost to run a SaaS in 2018? We take a look at our bootstrap expenses.
Every business accrues monthly expenses. The danger? Business owners can get in the habit of spending money, believing that "you gotta spend money to make money."
Patio11's reply to Justin's tweet: "It is far, far, far easier to create something that will increase the revenue of your business by $200 a month than it is to squeeze $200 out of the expenses."
Interested in building your own SaaS company? Follow the journey of Transistor.fm as they bootstrap a podcast hosting startup.
Jon:
Hey, everyone. Welcome to build your SaaS. This is the behind the scenes story of building a web app in 2018. I'm John Buddha, a a software engineer.
Justin:
And I'm Justin Jackson. I'm a product and marketing guy. Follow along as we build transistor.fm. Actually, I wanna say I'm now a a junior Rails developer.
Jon:
I think so. Yeah. Put that on your resume.
Justin:
I'm gonna put that on my resume. So how are you doing today, John?
Jon:
Good. I'm good. I'm a little little tired.
Justin:
It feels like I took you out of a, I wanna say programming slumber, but you weren't in a slumber. You were in a programming trance.
Jon:
Yeah. I was I was jacked in.
Justin:
And what are you working on right now? What what what were you
Jon:
still I, well, I always do this. I have multiple branches of code open at once, and I'm just kind of moving around to each one when I get stuck. Or Oh, I see. I was actually working on this HubSpot integration because it's actually fairly simple Oh, cool. To to add HubSpot, excuse me, as a newsletter option mailing list option for transistor customers.
Justin:
Oh, cool. So so that'll be in our integrations section, which is actually that's a one of the things that we need to do is I've had so many people ask me this lately. I've been I was at a Halloween party last night, and I was, I've just been running into folks that are like, so what's the deal with Transistor? Like, give me the pitch. And I say, well, we are podcast hosting and analytics.
Justin:
We're a podcasting platform for businesses and brands that want to start a podcast. And, you know, as we figure out what really differentiates us, we get some of that feedback from our customers. For example, we've had quite a few people switch from a host that shall not be named, one of the old time timer players. And they, to be honest, they've done great things for podcasting, but their user experience is just not great, and their embedded player is not great. And so a lot of folks are moving to us just to get a better user experience.
Justin:
Folks really like that embeddable player that you built. It looks good in a lot of situations. And so some folks just switch because of that. They wanna look more professional. They want, you know, they want a nicer user experience when they're using the tool every week.
Jon:
Could yeah. Could be, you know, the, idea that maybe it's being updated more often and it's newer. Mhmm. Maybe the other one got lazy, and they're just sort of, like, making money.
Justin:
Yeah. Making money, or they just got too stuck in the old you know, they're they're too far gone. They can't their their code base isn't versatile enough or flexible enough to or they just need to do a rewrite, which is always really scary. So, Yeah. So that HubSpot integration, a lot of businesses use that.
Justin:
It's it's pricey, that HubSpot.
Jon:
Is it? Yeah. I know. I'm not always too familiar with it. They do a lot.
Jon:
It seems like it does a lot of stuff just other than contact lists.
Justin:
Yeah. Yeah. They're one of those enterprise y CRM tools. Yep. They are let me see here.
Justin:
So it's professional is $800 a month. They've wow. They have a big jump here. So free is $0 a month. I don't know what you get with that.
Justin:
And then starter is $50 a month, but then it goes from start $50 a month to $800 a month.
Jon:
That's a big jump.
Justin:
And then enterprise is $24100 a month.
Jon:
And people are confused about our pricing. Yeah. Yeah. People Man.
Justin:
Yeah. Yeah. There's, wow, that's crazy. Anyway so, cool. Well, that's that sounds good.
Jon:
Yeah. I mean, I, you know, I think we're still, like you said, we're still sort of figuring out what the differentiation is. I mean, we have a lot of potential customers asking us why they would switch or what's what's the difference or what makes us better.
Justin:
Yeah. And and maybe just for us to be honest right now, we are we are struggling with our our pricing tiers, or more actually, not the pricing, I think, is right. I feel like it's, what we offer in each tier because
Jon:
Right. Yeah.
Justin:
The the to be honest, like, I feel like the the downloads per month really fits that $19 plan. Everyone's getting started. It's really hard to get a podcast up to, you know, even 5,000 downloads a month. But what is stopping people from signing up is everybody wants to have a big show. And so in their minds, they're like, well, this this could get expensive or maybe that it's too limiting in our mid and upper tier.
Jon:
Right.
Justin:
And so we haven't done this yet, but I think we're going to start to do some feature gating. Meaning, some of our more enterprise y features are going to get added to the higher tiered plans.
Jon:
Yeah. I mean, as we certainly, as we build more into it, yeah, right now, there's not a huge amount of differentiation, so it makes it a little tough
Justin:
Yeah.
Jon:
To sort of, you know, tell people or ask people to upgrade.
Justin:
Yeah. Exactly. So we're still we're still playing around with that. We've had some great feedback from folks about, you know, maybe we need to go, downloads per episode per month. For that that real the you get more and more like, what is that?
Justin:
So we're gonna track average because average downloads per episode is actually an interesting metric because the the challenge, as some folks have illustrated, is that as shows become older and their back catalog is still downloaded, you're it's it's like exponential growth. If you've got a show with a 100 or 200 episodes, you can almost guarantee you're going to get thousands of downloads just from your back catalog. Even if they're just being downloaded, you know, each episode is only being downloaded 20 or 30 times a month, that back catalog starts to really add up. Yeah. And so the the idea is we we would give folks some sort of metric for well, if your episodes are getting this many downloads, this is what you pay, and then it's a little bit more, you know, maybe fair, because then you're not being penalized for having lots and lots of episodes.
Justin:
Does that make sense? Yeah. So I think that's something that we're gonna continue to look at. Inside of inside of Slack, that's the one thing that I bring up almost every week. Like, I really wanna fix this.
Justin:
It it's not quite right, but figuring out what is right is is the tricky part.
Jon:
Yeah. Exactly. Yeah. We'll continue to continue to hash that out. I think we have a lot of feedback, I think, to go through and sort of Mhmm.
Jon:
Weigh out the pros and cons of each of those.
Justin:
Yeah. And it might be I mean, maybe it'll just be a slight shift or I don't know. Anyway, let's take a break, and let's say thank you to our patron patreon patreon supporters. We've got a brand new one. Brad, my buddy from Canada, just joined the Patreon ranks.
Justin:
I've known Brad for quite a while. Yeah. He's good. Really good dude. Good musician.
Justin:
Good guitar player. Just Cool. Just one of those good old souls. I think he's the same age as me, but
Jon:
He's an he's an old soul.
Justin:
He's an old soul. Like, when I'm feeling gritty or haggard or, like, just I just need to hang out with another old man on the on the porch, He's the kind of person I would wanna hang out with. Just feels like we'd be drinking Yeah. Drinking sweet tea and playing
Jon:
On your rocking chairs.
Justin:
Yeah. Maybe playing a little banjo or something and
Jon:
Sounds good.
Justin:
Yeah. So thank you to Brad for for becoming a Patreon. Who else do we have, John?
Jon:
We got Darby Frey, buddy of mine in Chicago. Thanks, Darby.
Justin:
Then we got Kevin Markham and Adam Duvander. And should I try it, Dave Guinta?
Jon:
Junta.
Justin:
Junta. What else? Junta.
Jon:
Like GIF versus Jif.
Justin:
Yeah. See, I I'm always trying I think the the pronunciation that I'm making I'm mistaking is in the I u, but it's actually like the I u n t a, but it's actually Right. I'm just I'm getting the wrong consonant.
Jon:
Yeah. Yeah. Dave actually sent me a message, on Slack after our last episode, which was a fun one. Our our trip down memory lane.
Justin:
Oh, yeah. We got tons of feedback from that episode.
Jon:
Yeah.
Justin:
Lots of folks liked it, and it made me think that if we do another show for fun, that would be a great show to do, like we mentioned last time. Just a deep dive into some bit of computer nostalgia.
Jon:
I would. Yeah.
Justin:
And, you know, this show is not gonna last forever. I one thing I wanna we would need to talk about at some point is I I think there's this idea that when you start a podcast, it has to be forever. Right. And one of the things we wanted to build into Transistor is this flexibility to start new shows. Yeah.
Justin:
Because sometimes you need to do, you know, I don't know, couple seasons of a show, and then you stop.
Jon:
Yeah. Maybe we maybe we hit 50 episodes, and then we do one episode every 6 months as an update.
Justin:
Yeah. Yeah. Exactly. There there's there's, I mean, I think as long as you have something to say and as long as people wanna hear it, you should keep going. But maybe people aren't testing.
Justin:
Podcasters don't test the waters enough, which you know, just asking 2 questions. 1, do I still have something to say? Do I still enjoy the show, or am I just phoning it in every week?
Jon:
Right.
Justin:
And and 2, are people still listening? You know, are people still eager to to engage with you, in this in the bounds that you've created, the box that you've created for the show. And, like, here's an example, and this is don't get me in trouble for this. But, I think Merlin Mann and Dan Benjamin have great chemistry together, but their show is still called Back to Work. So meaning it's a show ostensibly about productivity.
Justin:
And I've kind of always thought that, you know, maybe just, like, book in that show. Great run. And even if you start a new show in the same feed, which I know a lot of people wouldn't wanna do, but start a new show in the same feed or, you know, create a whole new feed. But just it's okay to bookend a show and still even have the same hosts, but say Yeah. You know, this was about productivity, but now we're gonna talk about BBS's every week.
Jon:
Guitars or, yeah, something. Right.
Justin:
Yeah. So for this week, we thought we would talk a little bit about startup expenses. Is that kind of the the thing?
Jon:
I think so. The, yeah, startup expenses, how to reign those in, when to spend money, what we've noticed over the past, you know
Justin:
What are we at now?
Jon:
10 months.
Justin:
10 months. Yeah. Well
Jon:
yeah. Since well, I guess, since the beginning of the year. Yeah.
Justin:
And maybe to start, do you wanna give folks kind of an idea on, because some of these numbers are hazy for me. How much did it cost us to incorporate through Stripe Atlas and all that?
Jon:
Stripe Atlas was $500. K. There was a little bit of extra with that due to some renewal fees for the business license. I think that was a couple $100. We had some extra lawyer fees, I think
Justin:
Mhmm.
Jon:
After once we sort of, got our paperwork together.
Justin:
Yeah. That wasn't too much. I'm guessing, I'm just looking for it here. Yeah.
Jon:
It was only a few hundred, I think, because we got a sort of a deal through Stripe Atlas, I think.
Justin:
Yeah. $366. Yeah. There was those expenses. Anything else that was kind of substantial at the time, do you think?
Jon:
Well, there was I mean, we had our our, we hired our designer, Dylan. Oh, yeah. So we gave him, I wanna say, 25100 for everything for branding and
Justin:
Yeah. That was a big expense.
Jon:
Yeah.
Justin:
And that one might be an interesting one to come back to because I I think one of the things I wanna do today is is contrast, you know, the way we've done things with the way other folks often do them. And often, bootstrappers don't spend that much on design. And Right.
Jon:
And
Justin:
it might be interesting to well, yeah. Why? You are quite frugal when it comes to business expenses.
Jon:
Yeah. I try to I try to keep them low. I mean, recurring costs. I don't know. Design was one of the things that I really felt was, you know, hugely important to, like, set the brand early on and make it look as professional as possible.
Jon:
Mhmm. And, like, I you know, I have some design experience, but not on the level of of branding and, like, really, I don't know, explaining an idea to another designer and having them just sorta, like, go with it. Because I I had I had ideas in my mind of what the, you know, the mark and the branding could be, but it ended up being completely different than what I would have thought. But it that was what I explained to Dylan was, like, here are my ideas of this thing. Yeah.
Jon:
Kind of riffing on the the transistor idea of, like, this, you know, like, analog transistor, but it digitally and stuff. And so he just, like, went with it and came up with something completely different, and it was great. Yeah. Like, I didn't, you know, I didn't have to worry about that. We just met every couple weeks and did some revisions and then settled on it.
Justin:
Yeah. Again, I think one of the the the traditionally, when bootstrappers start a business, you're starting something that you don't know if it's gonna work or not. And so the inclination is, I'll just jump on one of those logo sites, or I'll try to, you know, make something myself. And I can understand that tension of of, maybe I'll just save some money. And then once I know I'm on to something, I can invest in branding.
Jon:
Right.
Justin:
But there is something to say. I mean, it's a little bit of a risk. Right? Because you could have invested that money, and then it could have just been, like, a bust. Like Right.
Justin:
Like, there you wouldn't have you never get a return on that investment.
Jon:
Exactly. But, yeah, I I don't know. I felt I felt like it was an appropriate thing to spend money on the time I was sort of you know, like, I didn't even I didn't technically need to start I didn't need to incorporate transistor from the get go. Really could have started as something else, but I just felt like, man, I kinda wanna, you know, get rolling with this thing and really just start it legitimately, put a little bit of money into it Mhmm. My own money and just, like, run with it, not have to worry about the business stuff, not have to worry about the design stuff and really just be able to focus on building the thing Yeah.
Jon:
Building the app itself
Justin:
Yeah. Which
Jon:
I think worked out pretty well.
Justin:
Yeah. Yeah. And I I had a similar experience with like, MegaMaker was the first thing I ever really invested in design up front. For me, it was like, I think I really like this brand name. And regardless of what happens to it, I'm willing to invest the money because I think it's going to be something that I'll kind of treasure regardless.
Justin:
You know? Like, even if this doesn't work out, I'll just having this branding is is fun for me and worth investing the money.
Jon:
Right.
Justin:
And the the advantage is when you have a great style guide and a great, you know, logo and, you know, your color's all figured out from the beginning, it's one way to set yourself apart from the sea of fly by night. You know? We built this in a in a weekend, put it up on product hunt, you know, kinda
Jon:
I I agree. It's like, you know, hiring the designer. If it was me, I would have probably just opened up Photoshop or Illustrator, typed gotten a few font ideas, typed in the word transistor, and, like, made up some weird logo. And then 6 months to a year down the line, probably be like, well, we should probably spend some money on this on rebranding this thing. Yeah.
Jon:
But now everyone's already used to it, so I felt like it was worth it.
Justin:
Yeah. Totally. I just think it's interesting for us to because so many people don't spend money on that. Yeah. Comparatively, this is all such small potatoes too.
Justin:
Like It
Jon:
really is.
Justin:
We're talking about under, you know, under $5. The one thing that we did have to spend some money on is that you had before we had started our partnership, you had already registered the company. And so our corporate filing fees are, like, just to file your I I'm assuming this is what it was is because I'm going through this right now for my personal business. Just to file your corporate taxes, even if you have no, like, major expenses and stuff, just to get an accountant to do that Yeah. Can be 2,000, $25100, you know, somewhere around that that range.
Justin:
And so we had to pay for that because we had already had a fiscal year. Right? Right. What the the products didn't really get going until, yeah, around January.
Jon:
Yeah. That probably could you know, we probably could have waited at it, you know, whatever. Hindsight being 2020. Could have waited to use Stripe Atlas until the 1st of the year, but Mhmm. You know?
Jon:
Yeah. When I start, I didn't I didn't know we were gonna be partnering up.
Justin:
So Yeah. Exactly.
Jon:
It's all good. Yeah.
Justin:
So those are our startup expenses. What I wanted to explore a little bit is just the monthly expenses that go into running a startup. And I'm gonna go back to an old tweet I was just telling you about. Last year at this time, I was looking at my own business and just feeling like I I'd started hearing about this Profit First book, which kind of talks about ways of running your business to maximize profit. And I just been to this, retreat in Colorado with a bunch of smart people.
Justin:
James Clear is the one that organized it. James Clear, Sean Blanc, and Sean McCabe had organized this event. And one of the things we talked about was profit and how expenses lower profit, which sounds, you know, common sense.
Jon:
Yeah.
Justin:
But we one thing, there's this guy there named Tan Pham. He is Tan HTFam on Twitter. And he he has this this business he's been running forever. And he said, you know, let's say for let's say your profit margins are 5%. So for every $100,000, you make $5,000 profit.
Justin:
That's after you've paid salaries, everything. And he said, well, this event we're going to, this retreat, is costing us at least $1,000. So that reduces your profit to $4,000. So to maintain your 5% profit margin, like, most of the usually, the way I would think about that is, oh, you know, I'm going to this retreat. Okay.
Justin:
I'm gonna need to make an extra $1,000 to cover, you know Right. XOXO or whatever. He says, no. No. No.
Justin:
To maintain a 5% profit margin, you'll need to make another $20,000 within 3 months for the retreat to be a good return on your investment.
Jon:
Do you do
Justin:
you understand the math there? Does that make sense? Yeah. Yeah. Yeah.
Justin:
And I'd never thought about it that way before. And so I was kind of, like, on this train of feeling like, okay. I need to reduce my expenses, and I posted all of my software expenses. So monthly monthly, like, subscriptions. WP Engine, a $100 a month.
Justin:
Email newsletter, $90 a month. Recurly, $31 a month. Memberful, $25 a month. Media Temple, $17 a month. And you'll see there's some overlap here that I can talk about in a bit.
Justin:
Audible, $15 a month. Google Apps, $40 a month. Digital Ocean, $37 a month. Dropbox, 14. So every business starts accruing these monthly expenses.
Justin:
And I posted this thinking, okay, I wanna reduce these expenses. But then folks who replied, many of whom are great business people, said, you know, this is a waste of your time. If you're if you're trying to reduce your expenses, like, you know, maybe I can reduce my my WordPress hosting bill from a $100 down to $40. But is saving $60 a month worth my time?
Jon:
Right. Or yeah. Or yeah. How long is that gonna take? Are you better off using that time to get more revenue?
Justin:
Yes. It was in it's been interesting for me to kind of revisit this, especially since I've started working with you because you like I said, I'm I'm used to just like, I need a service, and I'm I just take out the card and pay for it.
Jon:
Right.
Justin:
And and I think I've and I'm sure there's people out there listening. If you if you identify with this, say, hell, yeah, into your podcast player. But small business owners can get in this habit of just spending money because it the idea is, like, you gotta spend money to make money, and there's also this kind of common wisdom that yeah. Why why are you sweating over $60 a month when you're billing at a 100 or $200 an hour? Like Right.
Justin:
You dummy. Like, just just go make more money. Just send more emails, make more sales, etcetera.
Jon:
I give in this mind this, like, engineer mindset where I'm like, I can obviously, there's a lot of services, 3rd party services, integrations that we can use that are features, that people would love, but then we're paying a large fee for this other service where whereas, like, maybe there's a way we can engineer our way to a cheaper solution or, like, build our own. Mhmm. And that's, you know, that's the fun part of of engineering. But, you know, you I guess you gotta, like, pick your battles and be like, well, do I wanna spend time building this or do I wanna pay, you know, 20, 50, $100 a month for this other service that will save me, I don't know, how many days of work.
Justin:
Yes. And there is some wisdom to that. I think that is the conventional wisdom that we've got around to, which is, you know, in the old days, it was you'd be in a software company, and, you know, the engineering the the sales and marketing team would say, well, we need x. And then the engineering team would say, well, we can build that. And then, you know, they would build you you you'd spend 1,000 of dollars of engineering time building this thing that you could have just bought off the shelf for, you know, $25 a month.
Jon:
Right. I mean, my day job, you know, sometimes we're like, well, we don't wanna engineer that. Let's or, like, let's, you know, let's pay some money for a thing that's already built and does a great job.
Justin:
Yes.
Jon:
It's not it's not our main focus. Like, I don't wanna build a tax calculating platform Mhmm. Because the that already exists Yes. Somewhere.
Justin:
But I think one thing that working with you made me realize is you can get on these ideological trains. So you hear these sound bites, which is, you know, like, double your prices, charge more. And on the flip side, don't worry about expenses. Like, it's always cheaper for you to buy something off the shelf than build it yourself. And you can get on those trains and then start to not question what you're doing.
Justin:
Meaning, you know, in my personal business in Mega Maker, I've just accrued all of these monthly expenses as and I I just rationalize it as, well, this is just the cost of business. Right? And I think one thing I've been kind of that came up for me this past year was, I think we've talked about this before. You know, I had some some depression and some mental health stuff in 2017. You know, this advice of don't sweat, you know, saving money on hosting, that makes a lot of sense when you're not, burning money.
Justin:
But when if you you know, when I couldn't go to work and I was you know, I I get into the office and I'd get one thing done a day, that real like, that burn rate really affected my life. You know, a $100 a month might not seem like much, But, you know, when you have 5 or 10 services like that that are all a $100 a month
Jon:
Yep. And Adds up.
Justin:
It adds up. And so, you know, $1200 a year, and then you've got 5 of those, that's $6,000. And, you know, at the end of the last year, I was kinda like, man, I could use $6,000 right now.
Jon:
I haven't really thought about my reasoning behind, you know, trying to cheap keep things.
Justin:
You were gonna say cheap out.
Jon:
Cheap cheap things. Keep keep things cheap or, you know, reduce cost. But I think the more I think about it, the more I feel like getting rid of a service you depend on that you've integrated with is actually harder than getting rid of crappy code you wrote and adding in this new service once you reach a point Mhmm. That it makes sense.
Justin:
Yeah.
Jon:
So if we started from the get go and depended on, like, these all these $100, $200 services, then we're stuck with those unless we wanna engineer our way out of it Yeah. Rather than once we reach some level of, you know, traffic or whatever that we need to actually purchase, you know, a more robust system, then Mhmm. That would make sense.
Justin:
Yeah. Totally. Well and, again, I think one of the advantages of working with a partner is I was in this habit of just spending money. And it wasn't until I had someone, in this case, you, check me and go, no. Like, let's not spend money on that.
Justin:
I didn't realize how much of a habit I was of just spending money. And, you know, I know we've gotten some flack for, for example, your choice to go with Zoho.
Jon:
Oh, yeah? Oh, yeah. Have we?
Justin:
There there's that got mentioned on stage at MicroConf. Nice. They didn't they didn't say us in particular, but I know it was about us. They said they said, I was listening to a podcast about 2 guys that were starting a business, and they went with Zoho instead of Google Apps. And from the stage, he said, Listen, that's not worth your time.
Justin:
Just go with Google Apps. On one hand, I can see I can say well, actually, what do you think about that? That I should get your reaction. I don't know. It's kind
Jon:
of hilarious. Like, I get it. I get it. Google Apps is great. I Mhmm.
Jon:
It it's way easier to set up and but, again, it's like it's not even much money. It would be like, I don't even know how much how much a month it would be for us. Like, 10, $15, $20 a month. But, like
Justin:
Yeah. Well, I mean, now it's increased. So it used to be $5 per month per user. Now it's $10 per month per user.
Jon:
Okay.
Justin:
But, again, if you go back to my my tweet that I'm gonna include in our show notes, this is episode, 32. So sas.transistor.fm/ 32. You can get these show notes. But if you look at my Google Apps expenses, and I got in when it's $5 per user, I'm at $40. Well well, why is that, Justin?
Justin:
Well, because I added other users for different things, and so now I'm paying times 4. Right? These things can, they can expand easily.
Jon:
Right.
Justin:
And so, you know, we start spending $20 per month on Google Apps. And anything we spend extra right now like, right now, we're kinda saving up. We're saving for this time when we you and I can go, you know, start taking money out.
Jon:
Right. Right. So, yeah, everything we spend money on now is less. We can either pay for our lives or put back into the business because the other I guess once we talk about monthly expenses for for transistor, one of the things that will happen for us is that we will run out of we got AWS credit through Stripe Atlas, which is essentially paying for our hosting of the app itself outside of, you know, like media bandwidth. Mhmm.
Jon:
But that's gonna run out and that's that will be a couple $100 a month. Yeah. So, like, we gotta, you know, keep that in mind. I mean, you know, at the point it runs out, we might the hope is we'll be in a better place and, you know, we'll have more paying customers It will cover it, and it shouldn't be a big deal. And, obviously, we have to pay for hosting.
Jon:
We're not gonna, like, necessarily cheap out on that. Mhmm.
Justin:
And and the the bigger thing I'm realizing is just once you get into a culture or a habit of spending money, when spending money is is encouraged, there is some danger to that where where you you just take the sound bite, which is, oh, come on. Our our biggest our biggest expense by far is salaries. Like, anything else we spend money on is just small and compare yeah. Which which is true. But the the the flip side is also true that once you start kind of encouraging expenses and you say, well, expenses aren't a big deal, we can always just cover it with revenue, you could eventually get yourself to the point where you're just spending a lot of money.
Justin:
You know, part of me is feeling like back in 2017, I should have been I should have just reduced my expenses because, you know, I would have been further ahead now than I am. And now I'm looking at this new business that you and I started, and I'm like, man, our burn rate is so low. We're not paying ourselves yet. But just outside of our salaries, like, this business really doesn't cost us that much. And there's something about that that I think is healthy.
Justin:
And maybe we're eventually going to need you know, maybe once we get to scale, it really doesn't make much sense to sweat over these small little expenses.
Jon:
Right. Probably not. But I think it, you know, it reduces a certain amount of stress now that we just don't necessarily have to worry about.
Justin:
Yeah. And, again, I think you need to be careful about who you're following advice from. So, you know, there there are people who've been bootstrapping for years or people who are in the funded startup ecosystem, and the idea of saving $10 a month or $20 a month on Google Apps is ridiculous to them. But this is your journey, business owner.
Jon:
And, also, we're only using it for email. Right? Like, it's just we're not using we wouldn't necessarily be using Google Apps for, like, all of the things in there. Mhmm. All I wanted was a it was email that's with our own domain.
Jon:
Yep. That doesn't cost a ton of money or anything right now. And I set up my email through, you know, a desktop app or on my phone. I don't even use the Zoho web app, and it I don't notice a difference. Yeah.
Jon:
It's email.
Justin:
Yeah. It's email. Exactly. And and maybe this kind of questioning is good anyway because, sure, we're we're sweating some small details now. Some things are worth spending money on.
Justin:
Right? For example, podcast hosting. Mhmm. That that's a good expense.
Jon:
Brett good branding.
Justin:
Good good branding is worth spending money on. We, and we'll get into this in a bit, but we and we said this before. We spend quite a bit of money on podcast editing. Yeah. And, eventually, we're gonna you know, more and more of our bill our expenses will be hosting, like, you know, Amazon the cost to Amazon Web Services and stuff.
Justin:
Yeah. But it's okay to look at your expenses and go, well, maybe I should optimize some of this every once in a while.
Jon:
Right. Yeah. I I mean, I don't I don't wanna get in like I said, it's keeping the expenses low reduces the stress of having to worry about that. And I wouldn't if it got to the point where all we were doing was sitting there trying to squeeze out every penny, then we wouldn't actually be building the thing. Yeah.
Jon:
So, you know, it's not like it's taking up all of our time.
Justin:
I think it's also just way easier to be thoughtful about this stuff now. For example, there's a there's a messaging, like, chat widget company I don't think I need to name names, but people know who I'm talking about that, has increased prices three times in the last year. And so folks are now you know, startups that were spending, you know, whatever, are now spending $500 a month for that suite of products. I think it's good to spend money for services. Right?
Justin:
Like, if if we need to spend money on our chat widget, I'm fine to do that. But I think there's also, you know, this idea of always, like, charge more and like, that businesses should always be charging more. And then, you know, on the expense side, we should always just be like, wow. It's always easier to buy than to build. There there there is patina to all of this.
Justin:
There's
Jon:
Yeah. Yeah. The example of the the chat widget you're you're talking about, I think, it's like they they realize that their their market are these other companies that are making a ton of money or have a lot of venture capital, which just makes sense from their perspective, but it really does price out people like us Mhmm. Which is unfortunate. I mean, I get it for them.
Jon:
Like, that's great, but they were once in the spot we are or their other customers were. Right? They were just starting out. They had to keep their prices low, and then Yeah. They become this well known name, and everyone wants to use them, but it's just, like, completely unapproachable.
Jon:
And maybe these companies have, you know, money to throw away Mhmm. Or whatever. But just because you have, you know, $20,000,000 in the bank doesn't mean that, you know, $500 service every month, if you have however many you have of those, is gonna
Justin:
it's just Yeah. All of this stuff can scale. Like, the yeah. Anyway so I'm sure we're gonna get lots of feedback on this. I I I'm I'm fine with that.
Justin:
I know
Jon:
I hope so.
Justin:
I know we're we are naive, people just starting out, but I I have been thinking about that that especially because the advice of you can always make another $200 to cover that thing that you just paid for, sure, you can, but sometimes that just means you're working harder just to pay for this thing.
Jon:
Right.
Justin:
And and maybe, you know, really, all you really need is web hosting, email newsletter, podcast hosting, you know, a chat widget thing. Like, the maybe you can limit what your business is spending on spending money on and just have a better life and not have to stress out all the time about, you know, okay. Well, now we gotta we're we're paying for HubSpot Enterprise now, which is whatever. Right? Like
Jon:
Yeah. You know, I mean, sure. If we had a bunch of money, I would love to have a $2,000 hosting bill with, like, the biggest, awesome, best servers, but that's not the case.
Justin:
Yeah. Well and then, eventually, when you get big, it makes even more sense for you to negotiate. Right? Like, the big the big guys. Yeah.
Justin:
Walmart, they negotiate their credit card processing fees like crazy. Do you think they're spending the same amount on credit card processing as
Jon:
Oh, yeah.
Justin:
Absolutely not. A main street business?
Jon:
No. Because a tenth of a percent for them makes a big deal.
Justin:
Exactly. And so that tenth of a percent, the equivalent for us is saving 10, $20 a month on on our email or whatever.
Jon:
Email. Yeah. Yeah. Anyway, Zoho's Zoho's great. Use them.
Justin:
So what are our monthly expenses right now?
Jon:
How,
Justin:
how can we break it out?
Jon:
Let's see. So we have our, well, we have some yearly expenses, things like domain name renewal, which is a $100 a year. Yep. Not terribly a lot. So that's, what, $8 a month or something?
Jon:
Yep. We have AWS is nothing right now, but will be probably, I would guess, by the time we run out of credit, 2 to $300 a month.
Justin:
K. Let's just put $300 a month just for
Jon:
We have some other hosting we use to host, our actual media, like audio files outside of Amazon, which right now is about 50 I'd say 40 to let's say 60.
Justin:
K.
Jon:
That'll that'll keep going up as we grow. Yeah. Until till the point where it makes sense to actually probably use a a large like I said, a larger, like, CDN service that we can actually negotiate prices with. Yeah. And then we have we pay Chris to edit the show, which is roughly 4 times a month, sometimes 3.
Justin:
Yeah. I'd say it fluctuates between, see, so probably 240 to $320 a month. Yeah. And that's an interesting one because I I think some folks will go, well, you you folks just talked about how, you know, you you gotta rein in your expenses and stuff. Honestly, like, the money we spend with Chris is worth every penny.
Jon:
Oh, absolutely. I mean, once we're done recording this, sometimes it's late on a weeknight. Neither of us wanna edit that. No. Nor do I know how.
Jon:
I mean, I'd love to honestly, I would love to learn how, and I can sit down with some people at the office, but, like, I'm not gonna necessarily do it.
Justin:
Yeah. I I think the one thing about podcast editing is it just especially for us because we have limited time. And so that's actually something that saves time. All we have to do is do our phone conversation, drop our files in Dropbox, and Chris just takes it from there.
Jon:
Yeah. And he does a great job. It's, like, kind of like hiring Dylan to do design where Chris will add in these other, like, flourishes and sound effects and things that you wouldn't we wouldn't have thought of.
Justin:
Yeah. Or we would just have to have more mind space to think about it.
Jon:
Yeah. And I just don't I don't don't have that right now.
Justin:
I I'm writing our show notes right now, which does take some time, but it honestly like, just to not to have the the finished product just magically show up in our transistor account every week is so nice.
Jon:
What what else do we I mean, yearly, we have, like, our business, whatever, incorporation fees, which are, I wanna say, $200 a year maybe.
Justin:
Yep. Yearly accounting for a corporation is about $2, I think. Yeah. And that's just man, it sucks because it doesn't matter if you're doing, you know, you know, this year will will probably be our financial year. You know, I don't know what what our total income will be, but doesn't mean matter if you're making $10,000 a year or $20,000,000 a year.
Justin:
I'm sure your your accounting fees go up a little bit, but I it's a lot more in the starting at the start.
Jon:
Right? I just I don't know enough accountants. Do I have a friend who's an accountant? I don't know if I do.
Justin:
That's the thing. We could trade we could trade some accounting for podcasting.
Jon:
But Sure.
Justin:
That's it's one of those things where you you kind of gotta bite the bullet on
Jon:
Yeah. Yeah. As far as a monthly, I I'm trying to think what else we pay for. Can you think of
Justin:
anything else? There's some bank bank service charges that we pay a little bit of money for, but not very much. We have we have Flywheel for our marketing site.
Jon:
Right. That was, what, a $100 for the year?
Justin:
Yep. We have some WordPress plugins. Like Yoast is Yeah. $89 a year. And, again, I I was just about to say, not a big deal.
Justin:
Like, $89 a year, not a big deal. But those are the things that add up. You add
Jon:
And you've yeah. You forget about it. And then at the end of the year, you're like, oh, crap. Didn't save money for that.
Justin:
Exactly. Like, you're there's always I think the main point is that all of these things can add up. It can seem immaterial at the time. And I know we're gonna get email about how like, as soon as we hire our first person, it's gonna be like, well, there it goes. $15 a month or whatever.
Justin:
Right? Like, the the the scale of these things is important. But if you look at our revenue to expense ratio, for sure, like, so far this year, we've we've already, we've already got almost $10 in expenses, which you might say, well, that doesn't sound, like, you know, too much, but our total income is, like, $11 or something. Right. Yeah.
Justin:
So, comparatively, our expenses are high as a percentage of, you know, the business.
Jon:
And some of that, though, was paid by money that we each kind of contributed.
Justin:
That's right. So That's right. Exactly. Like yeah. That's a good point.
Justin:
There's so, yeah, there's nothing really hosting, software, advertising and promotion, we've paid a little bit.
Jon:
Mhmm. Yeah. I mean, we did, what, stickers and some t shirts or something. But
Justin:
Yeah. It's so easy to look at these things. And I think it's the scale that is hard for people to understand because if you are working for Cards Against Humanity or you're working for a 10 person startup, as soon as you add 10 people, you're probably paying at least 10 to $15 per person just for salary and, you know, computers and Oh, not
Jon:
to mention health insurance in
Justin:
the US.
Jon:
Health Huge expense here.
Justin:
So Man. The scale is what's different because our little piddly expenses might seem so piddly compared to to that. But when you look at it as a percentage of our total income, I think there's something there.
Jon:
Absolutely. I mean, yeah, I, you know, I think I I knew or had a good guess that that hosting and hosting and bandwidth would be our biggest expense, and I think that'll probably continue. Well, until, I mean, no, until we hire someone. But
Justin:
Mhmm. Yeah. And, yeah, that that'll be another conversation. Like, at one point, we're definitely not even close to hiring somebody right now.
Jon:
No.
Justin:
So, yeah, I I think it'd be interesting in in folks' thoughts if you wanna reach out on Twitter at transistorfm or reach out to us any other of the other ways.
Jon:
Know what what what types of, services are you saving money around, or what do you what do you think is important enough to spend money on that saves you time and effort?
Justin:
Yeah. And what and what rationale do you use? And maybe even just if you are a small business owner, like, if you are a solopreneur or you've got a little 2 person partnership or a little 5 person agency, maybe just asking yourself that question, have I gotten used to spending money? Do we have a culture of just, you know, ah, it's no big deal. Just, you know, put it on the credit card.
Jon:
Mhmm.
Justin:
There's almost, like, some ego in there as well. Like, oh, of course, we can afford that. It'd be interesting to have people's thoughts around that too. Like, have you actually looked at these expenses and thought about the repercussions of having that attitude.
Jon:
Yeah. What are the what do those add up to a year? And does that does it does it amount to enough to almost like hire another person versus you know maybe some of those expenses are legitimate and they're like things for the team that really encourages people to work hard or have a little fun, stick around longer. Yeah. Some of those things can certainly add up.
Jon:
I mean, I've seen that stuff at the day job for sure. And I and it's not even I'm not even, you know, obviously, in charge of the books or anything. But
Justin:
And you can the thing is you can model these things. Maybe I'll include this. I did this spreadsheet where I I just go through different ideas. Like, okay. What if I increased revenue by 10%?
Justin:
How does that compare to decreasing expenses by 10%? So using my 2017 numbers, if I increased revenue by 10%, my net profit would go up to 20 grand. If I decrease expenses by 10%, my net profit would just be 7, 8 grand. So, yeah, increasing revenue by 10% has a big effect for sure. But the the the problem with all these all this modeling is sure, but what happen if your revenue decreases by 50%?
Justin:
Or what if you were able to decrease? Like, the the relative nature of this depends on what number you start with. You know, if I decreased my expenses by 50%, and maybe so people are saying, well, it's always easier to make 10% more, but maybe it's not. Maybe it's actually easier for me to decrease my expenses by 50%. And in that case, I would have made, you know, $32,000 profit.
Justin:
I I guess I'm just revisiting this. And maybe I'm again, I there's some accountants listening to this, and maybe you folks wanna look at the numbers or whatever. But
Jon:
Yeah. Well, this will be this will be a good when we do our our recap in a year, one of our occasional our occasional episodes right now. Yeah. Yeah. Recap how things are going.
Jon:
We'll look back at this and see what our expenses are. We'll
Justin:
we'll just call the episode 3 hour budget session 2019, and it's just us going through our books.
Jon:
There's a lot of calculator sound effects. Yeah. Yeah. Support. Exactly.
Jon:
It's not doing. I just can't do. I have to set up.
Justin:
Okay. I'm I'm ready to leave this, but I just wanna reiterate again because I feel passionate about this. I'm talking to the the listener right now who's building something on their own. Your journey is your journey, and you can get feedback and ideas and wisdom from the gurus out there. But at the end of the day, you have to live with your decisions.
Justin:
And, yes, there is some wisdom that comes from experience. But remember, some of these gurus, when they started their company, that was 20 years ago. And I will bet you any money that back then, they were pinching pennies more than they are now. And so you really need to think about your startup journey or your building journey or whatever as your journey. And, you know, take the advice from other people, but put it in your own context.
Justin:
Because whether it comes to increasing revenue or decreasing expenses or getting funding or not getting funding, At the end of the day, you just have to figure out what is going to work for you, and that's part of the deal. Like, if you're if you're just always just photocopying what works for someone else 15 years ago, I think you're gonna be unhappy.
Jon:
Yeah. Absolutely.
Justin:
Alright. So we'll close off that discussion. Any app updates this week?
Jon:
Not a lot. I honestly, every week, I keep saying, we're gonna get Spotify analytic integration, and we're gonna get free SSL out the door, and then I don't quite finish it. That's just sort of sort of where
Justin:
we're at. We're we're moving the ball forward.
Jon:
It's We're yeah. There's been there's progress. Like I said, I have, a couple different branches in in git opened up in various in various points of completion. Maybe that sort of signals an issue with how I work. But
Justin:
John, we can't be too self conscious here.
Jon:
Right. Right. Right. So not a whole lot. You know, continued couple of YouTube tweaks.
Jon:
Like I said, finishing up this HubSpot integration for anyone use who uses that. The the Rails coding that you had started and some of it finished, is out the door.
Justin:
Yeah. So if you go to your if you're a a customer and you go to overview, and then on the right sidebar, you can click RSS feed. That will now pop up to a a modal. And I've already noticed this has impacted our, customer support burden because at least we have a place. A lot of folks, and this is completely understandable, but I'd forgotten about this.
Justin:
They they don't understand this idea of a feed. Right. They don't they don't get that. And so, and we certainly need to get better at this, but the we have to explain to folks, oh, wait a second. Okay.
Justin:
So a podcast is built on top of this thing called RSS. RSS fee RSS is like a it every time you create a new episode, it's like a record of your episode. And we submit that to all of the directories, like Apple Podcasts and everything else.
Jon:
Right.
Justin:
And they read this this feed that's alive. Every time you publish something new, it gets updated. You you know, we have to explain these concepts to folks. And if they were just to look at the feed and just see a bunch of XML, it's not extremely self explanatory.
Jon:
Exactly. Yeah. I mean, it makes sense to me, obviously, because I am a developer. But, also, a lot of these people, like, with Chrome, it will open up the RSS feed and actually show you the XML. Yeah.
Jon:
But with Firefox and with Safari, it doesn't actually show you anything meaningful. It tries to open an external app. Yeah. And so people are, like, I just clicked on this link and it went nowhere Yeah. Or it's a bunch of gibberish, and, like, I don't understand what I'm supposed
Justin:
to do
Jon:
with this Exactly. Which, you know, makes complete sense.
Justin:
So Yeah. Exactly. So, yeah, that's that's fun to get that out the door. Yeah. And, yeah, we're we're continuing to work away.
Justin:
Thanks to all the customers that keep giving us great feedback. I think one thing we could say is we've just crossed another milestone. We are above $3,000 in MRR.
Jon:
Oh, nice.
Justin:
Both in, if we look at our Stripe billing metrics.
Jon:
Uh-huh.
Justin:
Well, actually, Stripe is we're just under 3,000, and our ProfitWell metrics, have us just above 3,000.
Jon:
So That's that's big. That's a good number.
Justin:
Yeah. It's pretty pretty fun to I don't know how that tracks with what we were, you know, in our original estimation of, like, oh, it's gonna take us 5 years to get to scale. But that feels like it's just like, wow. Like, that's Yeah. The we added almost $800 in new revenue this month.
Jon:
Yeah. That's that's really good. So what's the next what's the next one? 5:5 grand?
Justin:
5 grand is the next,
Jon:
The next big one? Well, I'm And then 10?
Justin:
I I kinda I
Jon:
don't know.
Justin:
I I'm gonna probably I'm gonna celebrate every 1,000, I think.
Jon:
Every 1,000. Yeah. It's good.
Justin:
And once we are we're able to look at those pro plans, you know, I just I really like the $19 plan. It just feels like for startups and smaller companies and smaller, you know, personal brands, that's just a great tier. But I know we could be adding value to companies that, you know, $99 a month is nothing for them. And Yep. And we could give back way more.
Justin:
What are you laughing at?
Jon:
We're saying it's nothing for them. We just had a discussion about how everything adds up.
Justin:
Yeah. Yeah. The irony. I know. I know.
Justin:
I know. But it it's just like anything. Right? Like
Jon:
Yeah.
Justin:
The I think value is proportional.
Jon:
Well, what they say is the value of something is whatever people are worth paying for it. Right?
Justin:
Willing to pay
Jon:
for it. Peep willing to pay
Justin:
for it. That that's true, but the I think and we're getting back into it now, but the scale of that is what matters. Right? Like, if Right. If you're a solopreneur, $19 a month, that that's you know, that you gotta think about it.
Justin:
Like
Jon:
Yeah. If you're not if you're not sure if you're getting value out of it or if you're making your investment back, I guess.
Justin:
Mhmm.
Jon:
And we've had that we've had that question on from several customers, potential customers. How do I make money on my investment? Yeah. Like, I never really thought about it like that. But
Justin:
Yeah. Like, what how is this? And, I mean, we have some folks that start a show on Transistor, and they put their Patreon link in, and then patrons pay for more than their transistor bill. And for them, that's a great way to just move forward.
Jon:
Yeah.
Justin:
You know, there's other folks that are going to we have to compete every month every year for someone looking at the list of things that they're spending on and going, okay. Is this worth, you know, our investment? And if you're a solopreneur making a $100,000 a year, you you almost have to compete a little bit harder than if you are, you know, a company of 10 people that's making, you know, well over $1,000,000 a year.
Jon:
Mhmm.
Justin:
Sure. Yeah. Then $99 a month doesn't seem like such a big deal. And then if you scale it from there, like, there's a lot of companies out there making 10 $10,000,000 a year or 20 or 30 or 40. There is something about scale in this whole conversation.
Justin:
So Definitely. I think that's it, folks.
Jon:
I think so. Thanks, everyone, for listening.
Justin:
Yeah. Thanks for listening, and we will see you next Tuesday.
