As 2010 wrapped up, we decided it was time to do an analysis of Tender, not just for 2010, but from the public launch in March 2009. Based on transaction data from Paypal, initially I plotted out the total gross revenue:
Initially, there's not a lot interesting to say about this chart, but there are some notable details that we can glean from the (fairly) smooth curve:
- It's faster than linear. This, for any business, is a Good Thing.
- There appear to be no prolonged linear or flat periods. Also a good thing.
But in order to get a better sense of the growth, I plotted a rolling 30 day window of revenue. Effectively, each point on the chart below is the sum of that day's gross income plus the income of the 29 days leading to that date. This was done in order to smooth out some of the wilder daily fluctuations that can happen with signups and conversions on any SaaS application where the signup form is running 24-7.
Below is a display of the daily rolling 30 day window of revenue (in blue) and connecting only the points at the first of each month (in red).
If the total revenue plot is a plot of position, you out there who remember your physics can probably best see this as a plot of velocity (the first derivative of the position versus time, d/dt) -- what is the rate of income in the 30 days leading up to any given date? As you can see, this is a more illuminating chart. We can see big growth months, as well as months where our revenue decreased from the preceding month.
Though it is never good to see the monthly income decrease, they always proceeded after big growth months, so what we were seeing is a temporary increase in the churn rate delayed about 30 days after an increase in growth and/or conversion. This is to be expected; we know that not everyone who signs up for us and sticks around on Tender for a month or two will find our application suitable to their business needs.
The third chart, below, can be thought of as a plot of acceleration (the change in monthly revenue growth from month to month, or the second derivative d^2/dt^2). Strictly speaking, this isn't exactly true because we're comparing the rolling wave of an aggregate number, but velocity and acceleration are good analogies for considering this type of data.
Here we can see wide fluctuations in monthly growth, day for day. When considering this chart, it's obvious to look for items where we have product launches, or errors in billing, or other promotional-type events which are notable only in hindsight with a big data set.
Lastly, I fitted a polynomial curve (4th order happened to visually "fit" the curve the best), which shows that aside from an early big growth period, Tender's revenues have settled down into a fairly reliable 8-9% monthly growth period. Those might not be Twitter numbers or Facebook numbers, but for us, we think it's a very good thing.
So... what's next?
I'll just leave this right here for now.
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6 Comments
I guess you’re hoping that expenses flatten at some point? There’s got to be an inflection point where the blue crosses the red or I cannot see how Tender continues to exist.
Do you have a prediction on when that will happen?
It seems a great growth rate and tendency, but what interested me more is the last graph. If i don’t misunderstand even with this growth rate you aren’t profitable indeed you’re spending with higher rate than what you earn?
That can only be explained if you’re funded, but is this sustainable as an approach?
@William & @Martino … it’s revenue, not turnover … so this looks like a healthy business case :-) congrats, Tim; thx for sharing your insights and all the best for growing your business even further!
I’m sorry, maybe it’s ‘cause my bad economic-english, but i thought that ‘gross-revenue’ was revenue before expenses deduction.
I’m working on another post which I hope to get up within the next week that goes into a little analysis on the last graph, but at this point, the blue is definitely gross revenue and the red is definitely expenditures (according to a formula set I have that takes into account overhead).
At this point, Tender is not yet profitable in aggregate, but (I’m giving away some of the secrets of what the next post is here) our revenues are only outpaced by 9-10 months, and that is closing in from the first year after launch (it took 1 year to bring in revenue equivalent to our expenses leading up to the public launch), you can see that by drawing a horizontal line at any height and seeing how many months long it is between expenditures and revenues.
There’s also more to it (hint: a shift from doing consulting work to only supporting our own products also affected the amount of headcount that is going against our budget).
The tl;dr takeaway is: Tender isn’t (yet) profitable on its own, but between our growth and our costs, we feel very good about 2011.
Awesome post! Thanks for the insight! Just signed up for tender and really digging the app. Quick question…are your costs just Tenders costs or all ENTP costs (including Lighthouse costs etc.)? Look forward to your reply. If not all, curious why the costs are so high?
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