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A few months ago, Justin Jackson was tweeting about margin in business non-stop. He persistently spoke about how important margin is in business.
Well he’s right. Your underpriced SaaS is going to shoot you in the ass.
Thread
Well he’s right. Your underpriced SaaS is going to shoot you in the ass.
Thread
Margin allows you to absorb unexpected blows. You need margin to build an emergency fund. Some people live without emergency funds, and if their boiler breaks, they have to either go without or go into debt to fix it. It's a challenging way to live.
For businesses, lack of a margin will mean that you don't have the space to breathe. Your growth will be hindered if you don't have anything to re-invest into the business. Or you might have have unexpected costs, run out of cash flow and go out of business.
Before anyone gets stroppy (
), I'm talking about tech businesses. I know nothing about restaurants, retail shops etc. so I'm not going to spend a second pretending I understand their margin challenges.
But let's get to the benefits of margin.
), I'm talking about tech businesses. I know nothing about restaurants, retail shops etc. so I'm not going to spend a second pretending I understand their margin challenges.But let's get to the benefits of margin.
A few months ago, we were able to introduce uptime monitoring to all of our customers at no extra charge. This was a huge value add, and people were so pleased when we launched it. This addition wouldn't have been possible without margin in our pricing.
We've been able to work with some of the world's best digital privacy lawyers & experts. A few months ago we came up with a groundbreaking revelation regarding privacy law, and we had the margin to pay for them to review it. We review privacy law so our customers don't have to!
When customers go crazy viral, we can afford to absorb the extra infrastructure costs that come with that, because we keep an emergency fund for server excess (e.g. deploying a larger MySQL instance to handle the extra workers being thrown at it). https://usefathom.com/blog/viral
We were able to go full time on Fathom much sooner because we were able to replace our income. Both myself and Paul did well in our respective businesses before Fathom, and we both have families, so we needed to replace a good chunk of income to go full time.
When Fathom was open-source, we had millions of downloads and only $20/month in open-source donations (thank you @austinginder!). Austin is a great guy and we actually spoke on the pros & cons when we were moving away from open-source. Very smart guy.
Because of margin, we are able to pay for fully managed services, which comes at a premium, to free up time for ourselves to spend time on designing & programming. That one is huge for us. If we were a cheap/budget provider with no margin, we would be doing the DevOps ourselves.
For Version 3, we're able to roll out DynamoDB (infinitely scalable database) and Elastic cloud, because we have margin. This will lead to a much quicker dashboard and API for our customers. It's so damn fast.
More margin = better service.
More margin = better service.
We have one of the leading affiliate programs, where people get $10 credit when they join and the person who referred them gets 25% commission for life.
If we were only charging $5 per month, we'd be left with $3.75 after the 25% cut.
At $14 per month, we're left with $10.50.
If we were only charging $5 per month, we'd be left with $3.75 after the 25% cut.
At $14 per month, we're left with $10.50.
Another huge piece is that margin lets us donate 2% of our revenue to carbon removal & rainforest preservation, and it's substantial.
And it lets us make donations to food banks.
And do cool things like make cat hoodies for giveaways/brand building... https://twitter.com/pjrvs/status/1283895847520833539
And it lets us make donations to food banks.
And do cool things like make cat hoodies for giveaways/brand building... https://twitter.com/pjrvs/status/1283895847520833539
Without margin, we wouldn't have the same trajectory. We wouldn't be building the world's best privacy-focused analytics software. And we'd be at high-risk of failing financially. Without margin, our growth could be our downfall, because we wouldn’t be able to afford it.
This tweet thread came about because I've been concerned with how people price their software. Don't sell your software cheap. It's a huge disservice to your customers who need you to be sustainable. $5-6 per month is a dangerous game to play if you're bootstrapping.
Some people like playing the game of customer volume. They'd rather go low on price, accumulate millions of customers, and then work it out.
Look at Zuckerberg. He had extreme volume, zero revenue and now he sells his users' data.
Lack of margin can mean lack of choice.
Look at Zuckerberg. He had extreme volume, zero revenue and now he sells his users' data.
Lack of margin can mean lack of choice.
For us, we've been intentional about building a sustainable, antifragile business that our customers can rely on. If you build your business to be profitable & sustainable from the start, you don't have to compromise on values.
