This is the second post in the series in which I explain how we are carrying out our strategic and marketing plan for the launch of our new product, Nelio Content. Don’t miss any post of the whole series!
- The Idea
- Strategic Objectives
- Marketing Training
- Marketing KPIs
- Buyer Persona
- SEO Strategy
- Web Content
- The Blog
- Social Media and Emailing
As I mentioned in the first post, Nelio Content has arisen from the need and desire to grow Nelio faster. That immediately brings up the key question: What do you mean by “grow Nelio faster”?
Or in other words:
- What are our objectives with this product?
- How do we get there?
It wasn’t easy to define what we wanted in our new product (it never is, right?). But to determine clearly how much money we should make with Nelio Content is even trickier! Why? Well, the simple reason is that it’s not as simple to come up with the number as you might think…
In July 2015 we were fortunate to participate (or rather, we were one of the selected teams) in the Strategic Acceleration Workshop (Taller Estratégico de Aceleración – or TEA) offered by IESE Business School. We found it very useful and it aimed perfectly at helping us to create a strategic plan. The first part of this workshop made you consider the growth of your startup and evaluate opportunities to create a strategic plan for achieving your vision.
The first thing we had to do in the workshop was a SWOT analysis. As simple as it may seem (I remember that, once I knew they wanted us to do that, I thought we’d be wasting our time), the truth is it’s an incredible tool! The trick is to consider the proper questions and answer them honestly.
For example, here are some of the questions that should be answered to identify internal strengths and weaknesses:
- Do we know the sales potential and expected growth of the target market?
- Have we properly defined market segments?
- Have we validated the market fit for the product we offer?
- Have we validated the assumptions of our business model? These include, for instance:
- Customer value.
- Prices and source of income.
- Key and related activities.
- Key competitive advantages to customers, suppliers, competitors, potential new entrants, substitutes, and cost structure.
- Do we have a clear marketing strategy?
- Do we have the necessary resources (capital framework) for deployment?
- What level of market presence have we achieved?
- Do we work and interact properly with key customers?
With over 100 questions, we made a rigorous self-diagnosis of our company. It wasn’t easy, but I was quite satisfied with what we achieved… and I hope the resulting analysis will come handy when we look for our first investment round or request any credit or grants.
Anyway, bear this in mind: our goal was to identify what kind of growth we wanted for Nelio Content and how to achieve it, and this inevitably involves a process of self-reflection. Let’s see the most relevant points in our SWOT and some of the discussions that arose because of it.
As you can see, there’s nothing special here—it’s a pretty common analysis, right? However, there’s one thing worth mentioning (apart from how wonderful we are): “bootstrapping model” is both a strength and a weakness. Why? From our point of view, it’s a strength because our two services generate revenues that allow us “to survive”, but it’s also a weakness, because we don’t have a lot of capital to spend.
And that’s when one realizes the important role money plays in any business. In our case, some of the topics we discussed a lot were:
- How much money do we have and how much do we need to generate from the other services we offer (Nelio A/B Testing and Migrate to WordPress)? That’s the only source of income we have… and our salaries depend on that!
- How much time and resources are required to create the new product?
- How much time and money is necessary to perform all our marketing activities before and after the release?
- Do we need to hire outside staff?
- Can we or should we get rid of any of the services that we currently offer? That is to say, we would forego the income it brings, but thereby gain the extra time to create the new product and perform marketing actions.
- How much do we need to financially invest in marketing (CPC, reviews, prepaid, etc) or development (cloud, etc)?
- What’s the minimum wage we’re willing to work for? And how much time are we willing to invest to get it?
- If it’s necessary to invest money in the company, can we and do we want to out of our own pockets or should we look for external financing?
- If we seek external funding, what percentage of our stake in the company are we willing to give up?
These debates between members of a startup are usually intense, because it’s important to bring to light the dreams and concerns of each. We’re all on the same boat, but our goals and (current) obligations might differ slightly. If you want a healthy startup and relationship, it’s crucial to know where everybody stands. For instance, David thought that, in order to understand his goals, we had to watch the video of the new Tesla Model 3…
Of course, at this point, it was better to limit the debate to deciding the minimum objectives we want to achieve by December 2016, period. And I say, “period,” because we also agreed that if we didn’t reach this minimum, we would close up shop. All three of us have very good career opportunities outside of Nelio, and although it’s hard to think about it (personally, I refuse to consider them right now), we felt it was important to decide in advance the exact point in which continuing with this project makes no sense.
Thinking about the worst case scenario might seem discouraging, but I think it has two clear advantages. On the one hand, it minimizes conflict between partners about the future of Nelio. That is, if the minimum requirements we agreed upon are not reached and one of us wants to leave, it’d be the end of Nelio. The second advantage, and the most important, is that having a deadline and a minimum amount to reach adds a lot of pressure (healthy pressure, of course!).
Strategic goals and KPIs
In order to analyze our Key Performance Indicators (KPIs) and determine whether they’re successful or not, we need to have a clear view of what our goals are and what expectations we have. Let’s start by taking a look at the goals we set for this year and their related KPIs:
As expected, this year we’ll be focused on creating Nelio Content and pushing it to the market, as well as working hard to become a strong actor in the WordPress ecosystem.
Once we had a clear view on the goals we pursue, we discussed our financial needs and decided the following:
- Outsource WordPress migration service, so that we reduce that revenue to only the commission that we can take for referring our customers to a third party. The priority here is: we need Toni work hours to create Nelio Content.
- Maintain Nelio A/B Testing and only develop functions that are absolutely necessary (security or efficiency issues, etc.). This ensures recurring revenues and focuses our efforts on support and improvements.
- We set a small salary for three partners up to the end of the year.
- We won’t request any bank credit during 2016 (actually, we never requested any). We believe our cashflow will cover the overhead up to the end of the year, so there’s no need to.
- We won’t seek any investment rounds during this year either. Our priority here has been, on the one hand, not having to spend the amount of hours involved in this task and, on the other, not to lose our share in the company. We see much more sense in having an injection of money, if necessary, when our KPIs are attractive and our recurring revenue is viable—in other words, when the value generated by a client of ours (his Life Time Value) is greater than 3 times the customer acquisition cost (CAC). On this subject, I recommend reading the article by David Skok, Startup Killer: the Cost of Customer Acquisition.
- Do not add staff to the company, but (maybe) outsource some tasks. Here again we’ve come to the conclusion that there are certain tasks that take us too much time, such as web design, and there are professionals who can do an excellent job for us.
As you see, our philosophy here is to continue to the year’s end with our bootstrapping model (i.e., maintain our participation at 1/3 each with no funding or banks or foreign investors) and try to be as efficient as possible so that, by the end of the year, we have a product on the market generating enough income to confirm that the product has been well received and it generates traction.
That brings us to the million dollar question: what’s the minimum income we want to get in 6 months, by December 2016? This are the things we considered for answering such a complex question:
- What are the revenues from our current services (Nelio A/B Testing and Migrate to WordPress)?
- What are the budgeted expenditures to the end of the year?
- How many users should Nelio Content have?
- How many of them will be paying customers?
- How much do we need to invest to reach the expected revenues?
After thinking about all these numbers and putting them in a spreadsheet, we decided that this was our target:
Monthly Recurring Revenue (MRR) for Nelio Content by the end of the year (2016): $4,000.
Now that we have the key indicator of the minimum we want to achieve by the end of 2016, we can define the exact steps we must take to get there.
In a startup, having an idea for the creation of a new product and then implementing the idea is the most exciting work (well, right after making money with it, of course). But it’s necessary to specify the goals you want to achieve with the project. I’m not talking so much about the “business plan” for the next 4 years, or knowing how to get foreign investment, as what you agree on internally with your team—i.e. what you have to achieve this year to be able to take the next step forward. In any case, this is our our startup philosophy at Nelio.
Continue with next post: Marketing training.