Cash machines - Jason Cohen
In this great video Jason Cohen talks about what properties great self funded business have. Jason calls them 'cash machines' and these are some of the properties he mentions in the video:
- recurring revenue
- try to get 150 customers (50 scratching and clawing, 25 guest posts/social, 75 basic marketing)
- $66/mo average ($49/$99/$249)
- annual pre-pay (cash right away is better than a bit more over a year)
- average revenue per user - most important metric to small SAAS business
- point-in-time / temporary pain (weddings, events, code profilers)
- needs virality
- marketplace (that's two businesses instead of one)
- naturally recurring (on-going actual costs, support, financial cycles, nature of the pain changes over time - eg seo, ab testing)
- not real-time (decision-support (metric, reports), project management, finance, content)
- something that can be "finished" (basecamp, hosting, email, pdf editor, image editor)
- after-markets - already estabilished market - ecosystems: salesforce, heroku, photoshop plugins
- big market (niches, validated space, easy to locate customers, options to change)
The squeeze: catch 22
If the company is successful and grows, your role changes. You might not like that it's not the small business anymore. You can accept the situation, sell the company, try to raise prices.
Summary of a cash machine
Predictable acquisition of recurring revenue with annual prepay in a good market creates a cash machine.
P.S. I'm ptrlaszlo on twitter, follow me for more stories.