November 2020 Profit Report: The Month We Increased Members by 8%, But Saw 11% Less Revenue (Here’s Why)
Episode 497: Show Notes
Hi! Let’s take it back to the month of turkey days! We feel like with the holidays you quickly forget how November went, because you just roll straight into the next holiday, get distracted by family, and shopping, and cookies. Emylee promises to make Abagail some marshmallows again this year, but instead of talking about marshmallows for the whole episode which we definitely could do, we are here for another profit report!
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If you are new here you should know that we now have well over a year’s worth of episodes where we share profit reports with you. We made a goal at the end of 2019 to focus more on profit – keeping more profit within our business to make more money and pay ourselves instead of reaching huge, sexy revenue goals, and our business drastically changed because of that mindset. So now, every month we share with you the breakdown of expenses, profit, where the money went – a breakdown of products in our company, so you can be inspired to do the same breakdown within yours!
What Was Different About Our Four-Day Batch Blitz Challenge
If you guys know us well, you know that we love challenges, and in the beginning of November, we launched a brand new one – The Four-Day Batch Blitz! In this challenge, we helped our participants create 30 days’ worth of content to use as promotional material across different platforms in just four days! Like all challenges, we saw a spike in engagement in the beginning which led to some of the participants losing steam but as always a portion of the participants stuck it out to the end and really engaged which was great. We had a person DM us on Instagram who had made it to the end, who now had all this content to use so the aim of the challenge really worked for those who used it. Our goal for this challenge was to get 3000 participants, and 3407 ended up signing up which felt great. We love seeing droves of participants because, at the end of the day, the point of our challenges is to drive value for participants, not convert them. The main purpose of challenges is to grow your list and drive engagement, and get people to know, like, and trust you. The point is to provide people with such a sense of value that they make their own decision to stay and buy later. We have done a few challenges now, so in a way, this one felt plug and play, not because it was a carbon copy of previous ones but because the systems around launching it felt familiar to us. We had so much fun with this challenge but it was different from previous ones. The biggest difference was that in the past we have fed our challenges into a webinar to promote a product of ours, but this year we promoted a partner of ours instead. Also, in previous challenges, we did a lot of promotions but this one didn’t require that.
How We Attempted to Reduce Churn Using A Yearly Subscription Sale
While we structured our challenge slightly differently, we did run our own sale during it where we offered participants $100 off our annual plan. This led us to realize that when you change what you put emphasis on it can have long-term effects on your business. What we are talking about here specifically is churn in our Creative Template Shop membership. As the shop grows, churn is becoming more of a problem but it is an issue that almost all memberships have to deal with. Churn is something that needs to be managed in a way that benefits everybody because, with memberships, you want to generate an effective community but you also need to manage your cash flow expectations. Churn is an overwhelming issue because there are many ways to deal with it. You could raise the price of your membership which will make up for the loss of some members. Also, you could only offer a quarterly or yearly package. Another approach is to keep the membership monthly but find a way of nurturing members so they don’t leave as quickly. The issue with all these options is that they all work but need to be tested for a few months before you can tell. We also don’t have the longest period of data for the Shop, and even if we did, the internet changes so frequently that it would be hard to measure past data from a different environment against the present. So as much as forecasting is a science it is also an art. But in any case, we needed to implement some strategy to attempt to reduce our churn. We have talked about only offering an annual membership package but our conversions are not high enough to cut off the monthly stream. Thus we continued to have a monthly membership option but decided to upsell our annual subscription using our sale. This happened during October and November but November was the first time we saw an impact and in a few months we will have a better idea. Just as a reminder though – when you push annual subscriptions you get all the money from a person upfront, and then have to wait a whole 12 months before the next.
How The Sale Is Affecting Our Business and How We Are Coping with This
We saw an 8% increase in memberships from October to November. Increases in previous months have been more significant though, so we are not sure what the threshold of the normal growth rate looks like. What we can say is that because of our push for annual we made 11% less revenue month to month because we got it all upfront. This is likely to happen again in December so it is a bit of a catch 22. You all know we prefer consistent growth so we probably won’t be offering an annual sale for a while, and this fits into our business values. However, before we promoted our annual membership, the number of members we had who were on annual subscriptions was negligible, but now it is 9%. Of the people who signed up for annual, there was about a 50-50 split between those who were existing members and those who weren’t. 91% of our members are on monthly subscriptions so we can deduce quite easily from this what our monthly revenue will look like. Guess what though? Our monthly revenue might have dropped, but so did our churn, which dropped by 6%! We also noticed that members tend to leave after the six to seven-month mark so we are thinking of how we can possibly do an email campaign to our members at around that point to get them to stay. In part, we think about this issue of churn strategically but another part of us understands that people are human and if they want to leave then they must do what they feel. Many members leave with the intention of coming back in any case. Like we said earlier, any change you make in your business will have an impact on it, and for us, because the shop accounts for such a large part of our business, it is hard not to be emotionally impacted by these changes. Last year this time the shop literally did not exist, but now it makes up for 61% of our business, so it is understandable that when it fluctuates, we tend to get a little caught up in it.
Metrics for Trello, Strategy Academy, and Cost of Goods Sold
It’s time to move from the subject of the shop and give you some details about the other sides of our business. So we said the shop accounted for 61%, and as for Strategy Academy, it brought in 25%. Trello is sitting at 7%. We didn’t give the last two much attention in November which explains our numbers for them. We did do an upsell on Trello that is increasing its customer value per sale though. Now 35-40% of people who buy Trello are upselling meaning we are getting paid for certified interest leads which is awesome. This is giving us some wiggle room for what to adjust on the back end. Previously we have flip-flopped between ads and our team for what takes the most budget. Regarding ads, we are not gambling with ours but we watch them like hawks. During our challenge, our ad spend went up but didn’t produce the usual results because of our partnership promotion. So ad costs accounted for 29% of our budget, where our goal was 30%, and this was in a month of increased spending due to the challenge so we are happy with that. This puts our cost of goods sold at 33% including advertising. There was an increase in team costs because we have been working on including a project manager in the team. It should go down in the new year and as revenue rises team costs in percentage go down too so to have it where it feels like we are on track. Previously team costs have been around 20% but this month we were sitting on 31% of our revenue.
Making Good Budgets, And Dealing with Having the Capital to Take Risks
When we make budgets, we like to base them on what we are spending and then also come up with a second version of what the budget could be. But here is the thing – if your team costs are lower, the revenue you need to make the same amount of money is lower too. So when we talk about profit, we are OK with having less revenue and keeping more profit. This plays into our new mentality of prioritizing profit over revenue and it feels great. Regarding cash flow, we are at a point where we have enough savings and cash flow to make strategic decisions but spending in order to grow the business is still scary! Especially with how this is playing into the adjustments we are making to the shop regarding the yearly membership. So this is what we are thinking about going into 2021. This month our profit was a little low but this is definitely due to the added expense of the challenge and the fact that we didn’t sell anything on the back end of it. It is also due to November volatility with the added costs and competition of Black Friday as well as the fact that this month hosted the U.S elections. But we still made 9% profit and are feeling great about that. We are feeling good about December because things are going to chill out a lot for us and we will fill you in next month about how profits looked in this new landscape. So enjoy the end of the year and we can’t wait to see you again!
Highlights
What Was Different About Our Four-Day Batch Blitz Challenge. [0:04:18.1]
How We Attempted to Reduce Churn Using A Yearly Subscription Sale. [0:11:00.1]
How The Sale Is Affecting Our Business and How We Are Coping with This. [0:20:18.1]
Metrics for Trello, Strategy Academy, and Cost of Goods Sold. [0:28:20.1]
Making Good Budgets, And Dealing with Having the Capital to Take Risks. [0:33:23.1]
Quote This
To have something in 10 months go from not existing to occupying 61% of your business, you best bet that any volatility at all is alarming, but also exciting.
ON TODAY’S SHOW
Abagail & Emylee
The Strategy Hour Podcast
We help overwhelmed and creative entrepreneurs break down their Oprah-sized dreams to create a functioning command center to tame the chaos of their business. Basically, we think you’re totally bomb diggity, we’re about to uplevel the shiz out of your business.
KEY TOPICS
Challenges, Upselling, Churn, Profit, Revenue, November, Emotional reactions, Four-Day Batch Blitz, Trello, Creative Template Shop, Strategy Academy, Budgets, Membership structures
