One million zlotys of annual revenue is 83,333 PLN per month. If you have a subscription-based business where your average client pays you 1000 PLN a month, you need 84 customers to have a million zloty business. If they pay 100 PLN – you need 834 of them. If the subscription fee is 10,000 PLN – it’s nine. And that’s just if we assume that there will be no churn, so the case in which no customer decides to leave you all year long. I assure you, it is much easier to get and maintain nine or 84 customers than 834, even if the nine are to pay you 100 times more. It is simply a matter of finding people with a seriously acute problem, in a correspondingly strong need for a solution. As Peter Diamantis rightly pointed out:
“Problems are gold mines.” With a business that has a million zlotys in revenue, however, these are not drastic issues. Consider another example. Some of us are ambitious enough to target revenues larger by an order of magnitude – 10 million PLN.Peter Diamantis
How many clients in different price points do we need to get 10 million zlotys?
10 million zlotys annually is 833,333 PLN per month. So how many customers in different price points do you need to achieve this result?
100 PLN = 8334 clients
1,000 PLN = 834 clients
10,000 PLN = 84 clients
100,000 PLN = 9 clients
The vast majority of us won’t be able to attract several thousand customers throughout the company’s life cycle, let alone the top few thousand. Top companies operating in the subsription model in Poland: Brand24 and Livechat, had 2,196 and 23,107 customers respectively at the end of 2017. Assuming that your lead to deal conversion will be 10%* how many trials do you have to generate?
100 PLN = 8334 clients = 83,340 trials
1,000 PLN = 834 clients = 8,340 trials
10,000 PLN = 84 clients = 840 trials
100,000 PLN = 9 clients = 90 trials
Even if some of you have thought that it’s easy to handle 8,000 customers, then 80,000 trials are probably more of a problem, right?
And how much traffic would you need for this if you want to achieve it all with inbound marketing, with the relatively automated SaaS customer acquisition process at a low price point? We will consider a traffic-trial conversion of 5%.
100 PLN = 8,334 clients = 83,340 trials = 166,6800 visitors
1,000 PLN = 834 clients = 8,340 trials = 166,800 visitors
10,000 PLN = 84 clients = 840 trials = 16,800 visitors
100,000 PLN = 9 clients = 90 trials = 1,800 visitors
Naturally, the probability that the customer buys a product for 100,000 PLN per month following a free trial is ridiculous. We should be rather certain that we will have to drive over to this client, and it’s quite possible that once won’t be enough. This mathematics shows that software houses doing MVP for startups are not big, because they cannot be. It also shows why Polish agencies have huge problems with scaling up revenues (after deducting from them supported budgets) in amounts reaching tens of millions of zlotys, and the fact that it is better to do SaaS’es where you can go up the market than those that always win customers for several hundred zlotys.
If your goal is to make a business that has a million zlotys in revenue, the math above doesn’t matter to you. However, if you aspire to achieve revenues of ten or more million zlotys, then you better think about what I am saying here – especially those small businesses and small deals have higher churn rates than large businesses with their big deals. Partly because there is more to invest in customer success, and partly because customer organizations will find a way and resources to try to draw success from the pile of cash they just spent.