October 2020 Profit Report: One UX Tweak We Made that Increased Our Membership by 15%
Episode 488: Show Notes
Today on the show, Emylee and Abagail walk listeners through their October profit report and, as per usual, it is nothing short of wild! Before October kicked off, Abagail and Jared suddenly needed a bigger space and ended up purchasing a new home without even planning to. What’s more is it is a fixer-upper that needs quite a bit of work, and we don’t need to tell you what a time-suck buying and renovating can be. At the same time, Emylee was away for a week on a much-needed break, and things got crazy and chaotic very quickly, but they managed to pull it together and still make a great profit in the end.
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Amidst it all, they planned for a big launch in November and ran their first sale on the Creative Template Shop’s annual membership, all of which they discuss in this episode. They also had to establish whether a monthly or annual membership would be more profitable in the long term, so they did an experiment to see whether they could switch over to just an annual membership but realized that the slower conversion rate was not going to cut it just yet. Tuning in, listeners will find out how they managed to increase their memberships while reducing the one-off purchases in the Shop, and where all the other revenue came from in October. Of course, they also share the details on what they had to spend to keep things moving along smoothly and treat themselves appropriately. Be sure to tune in for all of it, and more!
Abagail Has Officially Taken on the Title of CFO (And What It Means)
You all know Abagail likes numbers, and in October she started calling herself the CFO when everybody else has known for a long time that this is one of the roles she fulfills like a boss! She handles the finances, budgets, and does the forecasting and planning, so it just made sense for her to make it a bit more official and provide clarity on things. However, being the co-founder and the brains behind the concept for the business, she is never going to have only that part to play; she will still wear her other hats too and is involved in various (if not all) departments. Knowing that she is the CFO helps to define things a lot better and lets the team know who to go to when they have finance-related questions. At this point, Abagail and Emylee both still do random tasks as they continue to grow and figure out their ideal roles in the company, but taking the lead in the finance department helps Abagail to focus, and it makes her twice as excited about the numbers!
The Pumphreys Bought a Home and Everything Else That Happened in October
October was a wild ride for Abagail since she and her husband purchased a new home and had to move in quickly without even planning to. Jared’s grandmother moved in with them and they suddenly needed a bigger, safer space, so they went house-hunting and hoped to find a house that was perfect the way it was. They ended up buying a fixer-upper that wasn’t unlivable, but definitely needed a lot of work! This sudden new development naturally plunged them into a lot of unexpected chaos, so, for Abagail, late September and October have been very busy. Meanwhile, Emylee was on leave for a week since she desperately needed a break. Consequently, a lot of their time was taken up by personal things and they couldn’t pay as much attention to the business. Amidst all of this, they were planning for a big launch in November and as you might know, the planning part is the most hectic. They also had a mini-promotion in October that they were planning for and executing.
The First Shop Sale and What They’re Seeing with Monthly Versus Annual Memberships
Abagail and Emylee decided to run their first sale for the Shop, which was a bit of an experiment. Since the beginning, they did not want to discount things and instead opted to bundle things together and add value, but then they decided to give the sale a shot after all. What they were trying to find out was whether switching from a monthly to an annual subscription would be a viable model. For a long time, they mostly promoted the monthly plan, not the annual one, even though it was available. So, they put a $100 discount on the annual membership. They’ve talked a lot about the pros and cons of recurring income: on the one hand, it is slow and steady but, on the other hand, in your first year of running a membership, you never know how long members are going to stay. Therefore, a monthly and annual membership can impact very differently on your monthly revenue. The jury is still out on which one will actually work better, and they have to consider how long their average customer will stay and what their lifetime value is.
When they first started, they estimated that someone would stay about three months but, ten months in, they are seeing that people are staying between six and eight months. The question becomes: Would you rather collect more upfront with an annual membership that surpasses the lifetime value of the average customer, but potentially make far fewer sales? Or is it better to stick to monthly, where you don’t make a lot upfront but could potentially sell a lot more? These two options have to be considered according to what works best for you. They would still like to hang onto the monthly subscriptions though, since the conversion rates for annual are not that strong yet. Here are the two scenarios: If they get 150 new members at $47, that amounts to $7050 and, if you multiply that by seven (the lifetime value), you get to $49,000. If they sell 150 at $397, it comes to almost $60,000 but the conversion rate for it is far slower. You can’t bet on the same conversion rate at all, and you also don’t know how long your annual members will stay anyway.
How They Went from One-Off Sales to More Memberships in the Shop
In October, 53% of their revenue came from the Creative Template Shop, which is outstanding. A few months ago, they made a UX tweak on their website that helped them increase memberships and decrease one-off sales. Before that, they saw a surprising number of one-off products being bought, which they didn’t plan for, but now they are seeing more memberships. Since implementing this change, very few people have left their memberships after the first month. Similar to Amazon, they would like to have an automatic function that lets you know what you save when you subscribe to a membership and, in this way, more people are drawn to the memberships than just purchasing one-off templates. They tried several things before making the tweak to the website, where they would send follow-up emails to those who purchased only a template, especially those who bought a template that was more expensive than the membership. They spent a lot of time and resources to remedy this problem and this recent tweak has proven to be the most helpful.
Other Revenue Percentages and Expenses
Since October marked the beginning of a new quarter, their sponsorships dollars were higher and came in at 24% of their total revenue. Strategy Academy brought in 19% after they recently updated their webinar, and they continue to support it with advertising. They have changed how they do their coaching calls and they are seeing better attendance and participation – just a positive change in general. If you want to know what exactly changed – become a member! And then, the baby you guys love to hear about, Trello for Business. It was only 7% this month but, compared to everything else they were focusing on, they’re still pretty happy with this number. In terms of the expenses, the most exciting change has been that they spent less on advertising. They budget up to 30% for advertising and, in October, they only spent 17%. Their ad team is aware of the volatility of ads at the moment, so they take a conservative approach. Emylee and Abagail also felt like they deserved a treat, and they each bought themselves a new iPhone and iPad. From an equipment standpoint, they bought most things right when they started the business, which was five years ago, so upgrades were due. Therefore, they spent 9% on hardware. Recently they started paying some of their contractors via Gusto, and the reason they like it is that it offers an EFT option, and contractors can log into their own portal and see all their previous payments. With that, however, came some overlapping payments, so the figure for October is higher than what it usually is at 25%. Their payroll remained the same at 15% and, believe it or not, they still made a 27% profit overall! Despite what everyone is saying about 2020, it is going to be their best year yet.
Quote This
You guys need to pay yourselves consistently – the same every month.
Highlights
Abagail Has Officially Taken on the Title of CFO (And What It Means). [0:03:29.1]
The Pumphrey’s Bought a Home and Everything Else That Happened in October. [0:08:15.1]
The First Shop Sale and What They’re Seeing with Monthly Versus Annual Memberships. [0:16:55.1]
How They Went from One-Off Sales to More Memberships in the Shop. [0:29:54.1]
Other Revenue Percentages and Expenses. [0:40:05.1]
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
Chief Financial Officers (CFOs), Creative Template Shop, Monthly/Annual Memberships, Subscriptions, Revenue, Expenses, Lifetime value, Conversion rates
