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How much Monthly Recurring Revenue?

Let’s set that straight right away.

Making revenue doesn’t necessarily mean making profit.

One could make billions of revenue and still operate with a loss because their expenses are too high. WeWork was a recent example with a reported revenue of $1.8 billion, but losses of $1.9 billion in 2018 (#1).

For a side project though, I should be making profits quite early. I don’t plan to invest much more into it than my available spare time, and I will avoid putting a strain on my bank account by all means. So hopefully, the first paying customer will mean profit and the cost to that point will be very low.

Why MRR

I want a side business to scale and that doesn’t work with anything having me involved directly. For that reason, I won’t do consulting as a side gig, for example. I would be able to earn some extra income from it, but I could only consult one client at a time and I would have to keep investing my spare time to generate more revenue. That’s an option to improve income temporarily, but clearly not a sustainable or healthy goal for a side project.

A Software-as-a-Service (SaaS) based business seems a natural choice, and MRR is one of the key metrics for SaaS. In a nutshell, MRR is the revenue you generate from customers who find your product useful enough to keep using and paying for it on a regular basis, normalized into a monthly amount.

“Recurring revenue is the lifeblood of any SaaS. It’s what makes building a SaaS so appealing. You don’t have to worry about one-off sales that may or may not return. If you’ve got a solid product, they automatically return. Every. Single. Month. Amazing.”

Baremetrics (#2)

The beauty of generating MRR is that you’ll kill two birds with one stone: being able to generate MRR typically means being able to generate one-off sales, too.

How much MRR

I could easily refuse this question as irrelevant with reference to the highlighted remark at the beginning, but I’m anticipating to have very little cost, so it’s actually a valid one.

Yet, I’ve deliberately called this endeavour Road To MRR, not Road to X$ MRR. Two reasons.

First, I don’t know how the year ahead will look like, at all.

There are so many other things that might require more attention than planned: family, health, motivation, my other businesses. Even if all goes well and I can invest a normal amount of spare time into building and selling a product, both parts are still huge unknowns at this point in time.

I do have an idea in mind. I do have some plans how to build it. But I don’t know how long it will take to get to a point where the idea of generating revenue from it becomes reality – if ever. And I have no idea just yet how it will be received by it’s target audience. Figuring all this out will be part of the journey.

Should it turn out that today’s idea won’t work at all, I’ll have to pivot and probably start over from scratch.

Second, I don’t have a specific goal in mind.

Luckily my families’ living expenses are comfortably covered by my day job, so I don’t have any minimum requirements. Upwards, the sky is the limit.

And again, there are way too many unknowns right now and testing the waters will be part of the process.

Dealing with unknowns

I am aware that others might find this to be a totally wrong approach. Doomed to fail, probably. One needs to have a clear goal, one needs to be absolutely optimistic and confident.

Well, after 40 years with myself, more than 10 years self-employed, and 6 years with wife and two kids I know that that’s just not enough – there are too many outside factors that I can influence, at most, but never control.

I don’t want to end the year with a loss. But that doesn’t sound great as a blog name.

So the goal is to generate any monthly recurring revenue first, and then see where I’ll get from there.


#1: https://qz.com/1726403/wework-is-running-out-of-cash/
#2: https://baremetrics.com/academy/saas-calculate-mrr

Photo by Erik Mclean on Unsplash

3 Comments

  1. Hey Matthias,

    My name is Nert and I’m currently in the process of building a simple and intuitive email forwarding application for freelance developers: https://quicknotify.app. The application is an attempt at allowing developers to send custom email notification from various CMS platforms(wordpress, shopify, wix and etc…) utilizing REST API.

    I’m curious to find out if you ran into problems when trying to send custom email notifications utilizing aforementioned platforms? Or if there’s a problem that’s not being addressed by the platforms regarding email notifications?

    P.S: I really like your blog idea and your twitter profile. Excited to see your progress.

    Regards,
    Nert Siva
    nert@foglitstreet.com
    https://quicknotify.app

  2. Hi Nert,

    I’m afraid I haven’t quite understood what you’re building, but when it comes to WordPress (this blog runs on WordPress, too) and my general campaign and transactional email concerns, I am a happy Mailjet user for quite some time already. I started with Mailchimp and Mailgun, or sending through Googles SMTP server for testing, but eventually I migrated everything to Mailjet.

    Best regards
    Matthias

  3. Pingback: Plans for January – Road to MRR

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