And I thought we don’t have money for advertising…

Yesterday I had a conversation with another friend of mine—she is providing customer service for Google AdWords. In the middle of a talk about the most common problem people have with the product it hit me—”We can advertise! But wait, we don’t have the budget for it…” Not so fast cowboy. Think first!

My biggest takeaway from the conversation was that if we want to make omframework.com our main sales channel and avoid OpenCart.com’s marketplace we can use the same amount of margin they take from us(sales commission) and feed an AdWords campaign with it. The marketplace is costly and especially business-model limiting, despite bringing in a lot of sales.

Running the numbers, the budget per sale becomes unexpectedly big for a business with our scale. After all we are just a product company with a very niche offering.

The actual size of the billboard

OpenCart.com takes from us 20% of the sale price.
The cost of having Gumroad as an alternative sales channel is 5%+$0.25 on every transaction.

So, our customer acquisition budget is 20%-5%-$0.25 = 15%-$0.25 = $11.6. A quick CPC research using the Keyword Ideas Tool in AdWords told me that the average price of the keywords I am targeting is around $1.44 which means that if we have around 12.5% conversion rate from AdWords traffic everything will be in balance.

$11.6 is a good baseline to start from. There are other ad networks, too, yet this is not that important for the moment. What is important though is where to start? Obvious answer—keyword research. Not so obvious—where to research for them?

Time to focus on the (product) stars

I have a friend with business experience, whom I trust, who becomes something of a business advisor to me. After a 2 hour biz-analisys talk with him yesterday, I came to the following conclusions:

  1. We(the company) should focus more on our current product star/flagship product—(OMFramework)
  2. We are not self-sufficient, because we can’t really sell much on our own
  3. There is still opportunity to grow, but not as much as I thought there is

Every company needs to grow. Especially ours—after filling in a balance sheet for the last 7 months and counting in my expected salary(which I am not paying myself currently) we end up at 0 profit. A bit of a loss actually.

Not good for all the effort that went and continues to be put into the business.

Which means there may be a direction in which the effort invested will result in higher profits, which will give us a REAL room to grow—pay for the development of bigger and more complex software(if needed) or take the time for deep research… and to increase the salaries :D But before that, we should milk an opportunity, so that we have the margin to grow to the next one.

Maybe I really need help to get my business to the next level…

What follows is the thought journey towards growth, ending with a “next action” plan.

Current Status

1. Opportunity to grow

1.1 Estimating market size

Researching the OpenCart market size I’ve found various data about the number of installations online. Averaging it I came to the conclusion that there are around 170K OC installs online. This means we have reached 0.75% of the market. But that’s not actually true (for the market size). Why? Because, if we are aiming to reach actual people, we need people data.

Here comes the OpenCart community members (which I think share the same registrations as the marketplace). They are ~75K

Based on the number of extensions(13350) I presume this is the number of active OpenCart developers. Again, these are assumptions—we know many developers have more than one extension and many are not active on the marketplace at all(they install and customise open cart for clients instead).

Analysing our sales data, tells me that 90%+ of the sales are one-off—people(store owners) come to buy one license for their store. Focusing on agencies or developers is not the right direction.

So, the next logical thing, would be to find the actual potential we can reach.

75000 – 13350 = 61650

OC Community – OC Developers = OC Users(store owners)

Out of these, I assume 50% may have a working responsive solution. Responsive themes are everywhere, aren’t they? If I was a store owner and the responsive theme is working “good enough” the cost of changing the working solution would be higher, so i won’t even bother. I know there are people who do this, be they are exceptions, not the norm. Yes, we can try to persuade them into doing, but it is a lot harder to force a user to behave a certain way, instead of focus on their existing needs that dictate their behaviour.

This leaves us with 30825 customers without a mobile solution. Let’s say that 50% of these don’t even care—they either don’t know about their mobile traffic or they justify their lack of inaction with the fact that “my customers don’t shop on mobile”, because “we offer heavy machinery, people don’t buy these on the go”.

Now we are left with about 15414 people who actually need a mobile solution, know that, and are or would be looking for different options.
The above is an estimate which sounded plausible. Then I told my friend about our site’s stats—~1360 new visitors every month. Multiply this by 12(twelve months in a year) and you get 16320, very close to the market size we’ve been estimating.

1.2 Growth potential

Just like it is normal for an e-commerce site to see between 0.5 to 3% conversion rate, there are the same averages about market share. With weak competitors and aggressive marketing it is not unlikely for a business to get up to 50% of the market.

The 90% share is a monopoly, and also an exception.
Apple has dominated the smart phone market shortly, until Android was introduced 2 years later. This evened out the shares of the market.

50% out of 15414 leaves us with 7707 potential customers of OMFramework. Up till now we have reached 1270. This means we have 8.2% of the available market. We have 41.8% percent to go(till 50%), which is 6437 new users of OMFramework.

6437 more, times the $69(average current net profit per unit sale across both sales channels) will result in $444153 of one-time revenue. That’s not much at all, especially taking into account the time we can reach it, the fact that our expenses may become up to 50% of it and my goals for the business.

Growing in this market is not advisable in the long-term, because it is too small. But we can grow once and then just run business.

With our current speed of client acquisition, which is around 491.6 users per year, it would take us 13 years to grow to the maximum estimated potential (6437/491.6).

2. Seizing the opportunity

13 years in a fast changing software market are centuries in human years.

We don’t have that much time, because:
* our niche may shrink or disappear(more responsive themes being produced)
* our product won’t match the market anymore (it will get out of date; OpenCart will release version 2 and everybody will have responsive theme by default).

If we want to seize the opportunity we have to act now. Now that we know that we can roughly sell 6437 units more, what are we going to do about it?

2.1. Focused on the wrong thing

It is much harder to launch a new product than to optimise an already selling one. If the goal is to turn profit consistently we shouldn’t be working on new products, but actually do the thing we are not so comfortable with(compared to software development and customer support)—marketing and advertising. All kinds of it. In other words: Reach more people before the opportunity window closes.

So far we have been neglecting this part. There is no one to blame here—as human beings we go where there is less friction, and for us as a team fiddling with code (or design) is much, much more comfortable compared to reaching people and promoting stuff.

The best exercise for you is the one that you avoid doing.

Also, number wise, once we reach the ~7000 we’ll be dead. Which is bad. But we’ll be dead if we keep the same business model that is.

3. A business model refresh

3.1. Revenue streams

To live beyond the 7000 user mark we need recurring revenue. On OMFramework.com we can implement a subscription model based off yearly pricing for access to updates and support. This will bring a boost in the revenue as time goes by.

OMF Lite helps us implement the freemium model—the Lite is free and has 27K downloads while the paid version has only 1270 sales. But lite is essential to the process of customer acquisition. We should focus on having as much people as possible on lite first.

3.2. Channels

We need to become independent and actually do the selling ourselves. This means that the omframework.com channel should dwarf the opencart.com one because the above stated subscription model is not available on opencart.com

3.3. Key activities

To increase the flow through our preferred sales channel we should focus on marketing and promotion.

Our product is already good enough. The maintenance and support processes are standardised. What we are missing now is content strategy and content creation for inbound marketing.

Goals(next actions) to focus on

Based on the described business model refresh above, here are our goals for the next 30 days:

  1. Stop activity on everything else that is not OMFramework related.
  2. OMF(star product) support, maintenance and active development continues(closing open threads)
  3. Lite should be acknowledged as part of our funnel and be pushed to the customers as a first step to reduce friction(it is free after all)
  4. OMF Blog content creation & Promotion
    We will create that is of interest to our target demographic—e-commerce store owners, Opencart in particular. They may be interested in business, selling, CR optimisation, cost-reduction, getting to know their customers better, customer-relationship building and more. Hopefully this will drive more target traffic that trusts us and in result converts better than the random goooglers.
  5. OMF subscription product will be live and OMF homepage will link to it instead to the single-sale one. The moment we get this we can offer 40-50% discount to existing OMF Gumroad customers if they update now.

Your business is as big as your dreams

This is a realization I had after filling in a Profit&Loss statement for the past 7 months. My fears came true. The reason I was neglecting my business was just because of that—fear to see that it isn’t profitable at all, if I want to survive on money from that business, that is.

Here is some background info—I am the creator of a bestselling OpenCart extension called OMFramework. Basically it is a mobile-optimized theme for OpenCart that works alongside your current desktop webstore template.

Shameless pitch aside, the business grew over the years. It grew to the point where now we are 3 people running it—me as a manager/designer, Nelly—a full time developer and Gerry—a customer support fairy :D

So what was so frightening after filling in the Profit&Loss statement?

Well, if I start paying myself a salary the word “Profit” from P&L would vanish. We will be at zero profit, probably a small or none loss. Which is fine.

How can you think that running an unprofitable business is fine?

Well, the business serves the purpose it was started for. Back in the days I wanted to survive on product income, without having the need to work for clients directly. That was my dream back then. And the goal is achieved now(it has been almost from the start actually).

Do you see the connection? I’d dreamt of surviving and I achieved it. “Doh, it is obvious that you can survive”. Common sense, right? Well, you know what? Common sense is not so common.

Count me in the group deprived of common sense, 50% of the time. This is a double-sided blade—it can help you achieve what is thought impossible or it can make the possible quite hard.

The problem with lesser dreams

The moment I had achieved the dream of “survival” and financial independence was the moment my business had stopped growing.

End of journey.

Finito.

We have arrived. Done.

The eagle has landed.

But there is a problem with being “done” in your life. When do people feel they are “done” with life?

On their death-bed, hopefully.

I don’t want to die

I am very much alive actually. A living and breathing organism.

In nature everything that isn’t growing is dying, there is no middle way.

So, having a dream that is easily achievable sets you up for failure. Not failure of the dream, no, no. Dreams this size, when turned into goals, are almost always achieved.

It sets you up for failure in your personal development. Because the moment you stop growing and developing… well, we can’t call it “personal development” anymore. I would rather call it “personal stagnation” leading to a “personal crisis”.

A crisis, that is inevitable and obvious, just like the economic/financial ones. It is in front of everybody’s eyes, yet few people recognize what they are seeing. But recognized or not, the crisis is still creeping, slowly, but steadily towards you. Because you have stopped moving, developing, growing.

What should I do from here?

I don’t know about you, but I would examine my goals in the following way: are they easily reachable in the following month or year? Is there something bigger my current goals will lead me to?

It is normal to break down a big dream into a set of goals that get further broken down into a set of easily completable tasks. Yes, that’s fine. But having just these tasks on your horizon will make you halt the moment you get there.

We are curious by nature. We want to play and grow. But we are also highly adaptable(mentally), so that we can survive as species. The process of adjustment is called Hedonic Adaptation, we get used to happiness as well as to depression.

And this hedonic adaptation is what will make you compromise, satisfy with less and in the end it will leave you in the muddy gutter in the middle of a rain storm, where you will be thinking “Ah, it is not that bad here. I have seen worse”. Couple weeks later your corpse will be found in that same gutter…

As a conclusion, something I have heard attributed to Steve Jobs, who in turn said he has read it on the back of the “Whole Earth Catalog”:

Stay hungry, stay foolish.

That’s enough to keep you from the gutter.

Testing: Will working on my business for 1 day a week make a positive difference?

I want to try to limit myself extremely and work on my business only one day a week. I hope this will be a substantial improvement mental and result-wise.

Note: my current lousy work schedule(as a self-employed) is “sometimes during the weekdays”. I definitely need a better structure…

Why am I doing this?

I have lost the enthusiasm

For the past couple of months I noticed I don’t want to work on my existing business.

By removing the need for creativity I painted myself into a corner effectively making my work boring. I don’t get to the creative stuff, because there is never the time for it. But you know that “the lack of time is a lie”, don’t you? The real reason is that…

I have lost my focus

Trying to fit OMFramework and all my side projects in the same day forced me to juggle with them daily, eventually dropping many of them on the ground.

My task-juggling olympics are actually known to the world as “switch-tasking”.

I would like to avoid that, please.

Switch-tasking leads to attention deficit. No attention—no focus.

Should I start working now? How much time do I need for this task? Oh no, I got caught up in researching about [insert side project]… and so on.

These are the usual thoughts during a day of mine. Questions like these only tax my glucose system, because I think about them. Glucose in our blood is essential for the non-default-decision-making mode of the brain. Important if you want your business to grow instead of just react to the environment.

Removing these questions will leave me with more “decision-making” power which I can invest in solving business-related problems.

Bonus: I have lost sense of direction

Yes, there are tasks to be completed ranging from marketing to copywriting, design and development, yet I feel lost. And I procrastinate.

I expect to feel good when working on these tasks, but there is no way I can do it if the only time I have left for them is at the end of my workday.

Why do I put my side projects first?

Because if I don’t work on them early in the day, later on I will be tired or would want to go out. Also at the end of the day I am easily distracted.

So, how do I plan get by with only one day of work?

I will return to my trusted tools, the tools that got me trough the initial war with myself that OMframework’s launch was. I needed focus, because I knew I had the time, it was just me not using it very well. Applying them was also fun, too.

My “battle-tested and trusted” tools are the following reputable principles:

  1. 20% of the work accounts for 80% of the desired effects—the 80/20 rule or otherwise know as Pareto’s law
  2. Work expands to fill the time available for its completion.—Parkinson’s law

I won’t go into details, but the application of these two alone helped me focus my efforts during initial development of OMFramework. I worked only on the most essential tasks and features applying the 80/20 analysis and kept them from blowing up with the help of shorter-than-I-wanted deadlines.

What am I going to do now?

Here is what I intend to do every monday during the time of this test:

  1. Work for the day ONLY on the OMFramework project

    This is intended to help me eliminate the questions “Is it time to stop working on this side project and get back to ‘real work’?”, “Should I work on OMFramework today?”, “When during the day should I check the Slack and Trello notifications I received?”

  2. prioritize tasks to be done for the day using Pareto’s principle(80/20)
  3. Put incredibly short deadlines (Parkinson’s law) to focus on execution thus avoiding any loss of attention

    You can’t afford to lose concentration when you are pressured by a deadline

Achievements waiting to be unlocked

Trough this monday routine I hope to achieve the following:

  1. Work regularly on OMFramework
  2. Improve the conversion rate of OMFramework’s landing page (aiming for 10–12x in general)

    Primary focus in my long-term business strategy

  3. Re-evaluate the project’s direction, it’s goals and the way we achieve them right now (i.e. work “on the business”, not “in the business”)

    secondary focus in the long-term biz strategy

When?

Starting today(June 30) this test will run for the next 5 weeks—last workday in this schedule should be July 28. Expect updates/detailed report at the end.

Posting here in the hope someone besides me will find use of this, and of course, as a public reminder. Otherwise I would have buried it in some of my awesome notebooks filled with amazing stories, brilliant ideas and clever notes… that never see the light of day.