Recurring Revenue Quotes

A good psychologist will take already-traumatic events in your life and work with you to contextualize them as non-traumatic. A bad psychologist will take non-traumatic events in your life and twist your narrative to both make them traumatic and connect them to your current problems. The problem is that good psychologists solve your issues while bad ones create dependency and thus recurring revenue streams.

We had a massive budget shortfall with a structural budget deficit and seemingly no way to close it; the city had been spending at levels way beyond its recurring revenue for years, and the nonrecurring revenue streams were drying up as we entered office, leaving us with no good options. The structural deficit was about $180 million on a roughly $600 million general fund—which meant that if we were to eliminate our debt, we would have to develop or attract new housing and businesses that could generate tax income, identify other sources of revenue, or cut our government by one-third.

And do ye know what “the universe” is to my mind? Shall I show it to you in my mirror? This universe is a monster of energy, without beginning or end; a fixed and brazen quantity of energy which grows neither bigger nor smaller, which does not consume itself, but only alters its face; as a whole its bulk is immutable, it is a household without either losses or gains, but likewise without increase and without sources of revenue, surrounded by nonentity as by a frontier. It is nothing vague or wasteful, it does not stretch into infinity; but is a definite quantum of energy located in limited space, and not in space which would be anywhere empty. It is rather energy everywhere, the play of forces and force-waves, at the same time one and many, agglomerating here and diminishing there, a sea of forces storming and raging in itself, for ever changing, for ever rolling back over incalculable ages to recurrence, with an ebb and flow of its forms, producing the most complicated things out of the most simple structures; producing the most ardent, most savage, and most contradictory things out of the quietest, most rigid, and most frozen material, and then returning from multifariousness to uniformity, from the play of contradictions back into the delight of consonance, saying yea unto itself, even in this homogeneity of its courses and ages; for ever blessing itself as something which recurs for all eternity, — a becoming which knows not satiety, or disgust, or weariness: — this, my Dionysian world of eternal self-creation, of eternal self-destruction, this mysterious world of twofold voluptuousness; this, my “Beyond Good and Evil,” without aim, unless there is an aim in the bliss of the circle, without will, unless a ring must by nature keep goodwill to itself, — would you have a name for my world? A solution of all your riddles? Do ye also want a light, ye most concealed, strongest and most

When Adobe announced its transition, its stock was trading at around $25. Its income fell by almost 35 percent the following year. Today Adobe’s stock is trading at over $190, it’s growing at 25 percent a year, and it has roughly $5 billion in ARR (up from practically none in 2011). Over 70 percent of its total revenue is recurring. Amazing.

At this point you may be asking, why not spend all of the recurring profit on growth? Why not, indeed? If you believe you have a big potential market and have control over your churn, you can run this play year over year, and you’re growing by 30 percent annually. And when the time comes to finally start taking profits, you’re working off a much bigger recurring revenue stream.

Find work you want to do for the rest of your life, with products and services that can be broadcast to the world, with highly recurring revenue, and near-zero marginal cost.

The big-ticket hardware folks invest the capital, take all the risks—which are huge—suffer the losses and the write-downs, and then let somebody else capture the business that has predictability, lower price sensitivity, higher margins, recurring revenue, and the opportunity to create an ongoing customer relationship, because the frequency of purchase is ten times greater than the frequency of the initial transaction. “So

Europe’s total banking and trading revenues, $98 billion in 2005, have nearly pulled equal to U.S. revenues of $109 billion. In 2001, 57 percent of high-value IPOs occurred on American stock exchanges; in 2005, just 16 percent did. In 2006, the United States hosted barely a third of the number of total IPOs it did in 2001, while European exchanges expanded their IPO volume by 30 percent, and in Asia (minus Japan) volume doubled. IPOs are important because they generate “substantial recurring revenues for the host market” and contribute to perceptions of market vibrancy.

Don’t dress up a business as something it’s not, in order to attract a high valuation. For example, trying to conjure a technology angle (often in the form of recurring “as a service” revenue streams that emulate richly valued SaaS businesses), then characterizing the business with the customary tech “alphabet raising label” (ie series A, B or C round). While there is arguably more capital today than ever relative to the number of businesses, few investors are naïve enough to fall for this.

And do ye know what "the universe" is to my mind? Shall I show it to you in my mirror? This universe is a monster of energy, without beginning or end; a fixed and brazen quantity o; energy which grows neither bigger nor smaller, which does not consume itself, but only alters its face; as a whole its bulk is immutable, it is a household without either losses or gains, but likewise without increase and without sources of revenue, surrounded by nonentity as by a frontier, it is nothing vague or wasteful, it does not stretch into infinity; but it is a definite quantum of energy located in limited space, and not in space which would be anywhere empty. It is rather energy everywhere, the play of forces and force-waves, at the same time one and many, agglomerating here and diminishing there, a sea of forces storming and raging in itself, for ever changing, for ever rolling back over in calculable ages to recurrence, with an ebb and flow of its forms, producing the most complicated things out of the most simple structures; producing the most ardent, most savage, and most contradictory things out of the quietest, most rigid, and most frozen material, and then returning from multifariousness to uniformity, from the play of contradictions back into the delight of consonance, saying yea unto itself, even in this homogeneity of its courses and ages; for ever blessing itself as something which recurs for all eternity,—a becoming which knows not satiety, or disgust, or weariness:—this, my Dionysian world of eternal self-creation, of eternal self-destruction, this mysterious world of twofold voluptuousness; this, my "Beyond Good and Evil" without aim, unless there is an aim in the bliss of the circle, without will, unless a ring must by nature keep goodwill to itself,—would you have a name for my world? A solution of all your riddles? Do ye also want a light, ye most concealed, strongest and most undaunted men of the blackest midnight?—This world is the Will to Power—and nothing else! And even ye yourselves are this will to power—and nothing besides!

And do ye know what "the universe" is to my mind? Shall I show it to you in my mirror? This universe is a monster of energy, without beginning or end; a fixed and brazen quantity of energy which grows neither bigger nor smaller, which does not consume itself, but only alters its face; as a whole its bulk is immutable, it is a household without either losses or gains, but likewise without increase and without sources of revenue, surrounded by nonentity as by a frontier, it is nothing vague or wasteful, it does not stretch into infinity; but it is a definite quantum of energy located in limited space, and not in space which would be anywhere empty. It is rather energy everywhere, the play of forces and force-waves, at the same time one and many, agglomerating here and diminishing there, a sea of forces storming and raging in itself, for ever changing, for ever rolling back over in calculable ages to recurrence, with an ebb and flow of its forms, producing the most complicated things out of the most simple structures; producing the most ardent, most savage, and most contradictory things out of the quietest, most rigid, and most frozen material, and then returning from multifariousness to uniformity, from the play of contradictions back into the delight of consonance, saying yea unto itself, even in this homogeneity of its courses and ages; for ever blessing itself as something which recurs for all eternity,—a becoming which knows not satiety, or disgust, or weariness:—this, my Dionysian world of eternal self-creation, of eternal self-destruction, this mysterious world of twofold voluptuousness; this, my "Beyond Good and Evil" without aim, unless there is an aim in the bliss of the circle, without will, unless a ring must by nature keep goodwill to itself,—would you have a name for my world? A solution of all your riddles? Do ye also want a light, ye most concealed, strongest and most undaunted men of the blackest midnight?—This world is the Will to Power—and nothing else! And even ye yourselves are this will to power—and nothing besides!

Creating Key User Segments The beauty with segmentation is that it can be used for more than email targeting. You can use your segmentation for tracking and reporting, to recruit candidates for interviews, and for quality assurance. If your segmentation doesn’t get you the right users, you want to find out as quickly as possible. Before starting to write emails, you’ll want to create key user segments. Those could be: people who haven’t signed up for your product (if the required data is available); people who signed up today; people who signed up in the last seven days; people who signed up in the last seven days, but didn’t engage, or didn’t activate; people who signed up in the last 30, 60 or 90 days and activated; inactive users; users whose trial is about to end or just ended and that you would eventually like to convert; paid subscribers in their first month; paid subscribers retained for two months or more; subscribers on annual plans; users who you think would be willing to refer your product to others; subscribers who cancelled; subscribers who cancelled more than once; or signups per specific acquisition channel. Don’t go too far, but do try to test real segments with real data. Let them run a few weeks. Do users flow through the way you’d expect them to? Go through random profiles in each of these segments and compare with the data from your database. Are those the users you’d expect to find in each of these segments? Any issues? You want to uncover issues with the implementation or your segmentation as early as possible. It’s easier if you do this—and much less costly in terms of mistakes—before you start sending emails than after. Make sure you can track users across different segments and that your segments truly are mutually exclusive when they need to be. Identify issues, adjust, and refine. This step will save your team a lot of headaches later on. As you test your segments, make them available to the rest of your team. Your colleagues can also help point out issues. At this point, if there aren’t any major issues, your setup is complete. Let’s get started sending some emails!

1. Create intimacy: You’ll get more trust—and capture the attention of your prospects—by establishing a personal connection. Your emails should read as if one person has written it to another: one to one. This can be achieved by: using a personal, or plain-text template; using “you” instead of “we”, or “I”; telling stories; and making good use of personalization. For an even greater effect, you can add subtle personalization throughout your copy. For example: “…this is what we’ve heard from other people in [ Tampa ]”. 2. Make users feel special: On top of personalization, you can create exclusivity: “This offer is only for our most engaged users” “…it’s for early adopters” Or appeal to vanity: “Our most successful users want to feel this way…” 3. Demonstrate that you understand their reality: You can create obvious qualifications everyone wants to have assigned to themselves, for example “…people who care about maximizing their return on investment”; or “…savvy marketers”. Illustrate product benefits and value with clear examples that relate to the unique situation of your users. 4. Create urgency: As Zapier did, you can also get creative with deadlines. Use coupons with limited-time offers to accentuate the fear of missing out (FOMO)17: “Offer only available until June 4th…” “Only a few people get this plan…” 5. Use clear actions: Use a CTA that clearly establishes the next steps. Repeat it throughout the email, coming at it from different angles. Use the P.S. to attract the eye and to reinforce the action you want users to take (when appropriate). Keep your emails simple and your messaging scannable. It’s important for users to be able to get the email at a glance. Short and sweet often outperforms long and complex emails. You want a near-instant reaction from your readers. Your email has to build up to the desired action. Use copy to overcome objections, and accentuate the desire to buy or engage. A good email has to: capture attention through the subject line, personalization, or a story; build reader interest by demonstrating either the benefit or the problem; build desire to act by creating information gaps, time constraints, or the fear of missing out; and drive action through a well-timed CTA, telling users exactly what you want them to do. These are really just the four steps of the AIDA model18 (Attention, Interest, Desire, and Action) applied to email copywriting. Don’t get intimidated by copywriting. Emails that are too polished often don’t work as well. Get started crafting your own email offers. We’ll get started working on subject lines in the next chapter.

Prioritizing Your Email Roadmap Chances are you’ll need a Hail Mary. And a Net Promoter Score survey email. And a newsletter. And… And… And… If you are getting started with your email program, the list of emails you’ll need will probably be very long. Do you need to do everything at once? Definitely not. In fact, it’s best to start your program by aligning with business priorities and getting results before thinking about expanding. What areas are most troublesome in your business right now? What metric are you expected to move with email? Is it: Engagement? Retention? Conversion? Revenue? Signups? If none of those stick out above the rest, start from the top. Welcome and onboarding emails set the tone for product usage. Better onboarding and value communication lead to reductions in churn and disengagement down the road. Welcome and onboarding emails are also sent to most, if not all, of your users, thus they have a greater potential to influence user behaviors. At Highlights, for example, we set up a welcome email, five onboarding emails, and an upsell email the week before we launched the product. The goal was to maximize the number of people in a position to convert. It also allowed us to start getting some data to optimize performance. In general, you’ll want to prioritize emails that: send a lot (large volume of sends); send consistently (every day, or every week at least); and have the potential to have a big impact on a key business goal. In the beginning especially, you want to make sure that you have a clear goal or metric to monitor with the aim of evaluating performance with user data. Start implementing a first sequence, test, gather data, and move on to the next sequence.

Here’s the trick to significantly improving your SaaS email marketing skills—you have to become a student of it. This means you should: Start collecting great email copy, CTAs, and designs. Understand the objective behind each and every email that businesses send. Try to understand the rationale behind copy, link, and design decisions. There are great websites like Really Good Emails11, Good Email Copy12, and Good Sales Emails.com13 that you can use for your research. These sites categorize email copy and designs by types. As well as this, you should sign up to receive emails from some of the leading SaaS brands. Those include, among others: Drift MailChimp Pipedrive Shopify SurveyMonkey Trello Wistia Zapier You should also sign up to competing products and mailing lists from companies in your sector. I personally signed up to thousands of products and newsletters. It’s great for benchmarking and research. At the time of writing, I’ve already passively collected more than 60,000 emails. Obviously, don’t sign up to your competitors’ products with a business email address! I have a special email address I use for this. This account allows me to get data, understand what other organizations are doing, and find good copy ideas. For example, here’s what a search for ‘Typeform’ gives me: Figure 18.1 – Inbox Inspiration It’s not uncommon for me to sign up several times to the same product or newsletter. This allows me to see what they have learned and to track the evolution of their email marketing program. At LANDR, we created a shared document to keep track of subject lines, offers, and copy we wanted to test. Our copywriter was even going through his junk mail folder to find ideas and inspiration. There are tests we ran that were inspired by copy found in his spam folder. Some of them turned out to be really successful too—so keep your eyes open for inspiration. You can use Evernote, Paper, or any other platform to collaborate on idea generation. Alternatively, you can subscribe to paid services like Mailcharts14 or Mailody15. These services will help you track and understand your competitors’ email programs. Build processes to find and access copy and design ideas. It will help you create better emails, faster. In the next chapter we’ll get started creating our first email sequences.

Does It “Really” Need to Be an Email? By this point, you’ve probably figured out that I love email. Well, in spite of my love for email marketing, not every communication needs to be an email. In fact, there are times when emails really aren’t the best solution. So, if not email, what else? Other solutions include: In-App messages like popups, sidebars, site notifications, chat messages, browser or push notifications, desktop notifications, text messages, and even product tours and onboarding flows. Email is great when the user isn’t currently using your product. It’s great to drive them back in, but when they are right there using your product, you can’t expect them to be checking their emails at the same time. Before setting up a new email campaign, ask yourself if email is the best way to achieve your objective and drive the user behavior you seek. Maybe a popup or site notification would be more effective. Users can’t typically unsubscribe from popups, sidebars, site notifications, chat messages, or onboarding flows. They are usually better embedded into your app and more contextual. Because of this, they tend to reach users more directly than email can. That means that they can often be more effective to influence user behaviors. Push notifications, desktop notifications, and text messages still have some novelty to them. They can also reach users in different contexts from email. Although sometimes it’s better to use a different communication type, sometimes combining email with other options is the best way to go. For this reason, it’s important to consider the mix. For example, an email followed on-site by an In-App message, or an onboarding flow followed by an email summing up the process may be more effective than a single email. It will allow you to follow up on user actions, and make it really clear what needs to get done. By breaking down the steps one at a time, there’s more chances for users to learn. At LANDR, we often followed feature launch emails on-site with In-App messages. This helped to keep communications simple and goal-focused (one goal per message). The email was about getting people in the product, while the In-App message was about getting them to engage with the product. This approach allows you to evaluate and optimize each step of the process independently. Automation platforms like Intercom, ActiveCampaign and HubSpot generally allow you to combine messaging types. If your platform doesn’t currently have site messaging or onboarding functionalities, you may have to use multiple tools in conjunction in order to maximize results. This will make it trickier to track pacing, sequencing, and goals but it isn’t impossible. You also need to consider tracking effort when adding new communication types to your mix. As your program becomes more complex, it can be easy to lose track of the overall user experience: Are your users getting spammed? Are you creating a disjointed customer experience? Test things from your users’ perspective. Keep an eye out for social media messages and support requests as you do. In the next chapter we will look at setting up automations to minimize issues and maximize outcomes.

LOW: Cost to Acquire a Customer (CAC) In its simplest form, CAC is all the costs associated with landing new customers (e.g., marketing, advertising, sales) divided by the number of customers you acquired during that period. It’s sometimes tricky to calculate because getting a handle on your marketing costs can be tricky. If you’re focusing on SEO, you may be creating all the content yourself rather than paying a writer. You may be getting a lot of your early customers from forums you spend time on or by getting in front of other people’s audiences. In those cases, the cost is your time rather than an easy-to-calculate number. It’s a lot simpler to calculate CAC if you’re running ads. Then, you can see how much you’re paying per click and track how many people convert from each source. But if you’re not in that position, valuing your time at a certain rate (e.g., $150 an hour) and taking your best guess at time and money spent on marketing in a given month can get you to a good enough estimate of your CAC. How do you know if your CAC is too high? By calculating how long it’ll take to pay back the costs of acquiring each customer. As I was first getting into recurring revenue, I thought that if I was getting $1,000 in LTV from each customer, I could spend $700 to acquire every customer and make $300 a pop. Right? The problem is that you’re not getting $1,000 every time you sign a new customer. With a $50-a-month contract, you’re getting that $1,000 over the course of the next year and a half. If you spend $700 per new customer in January, you won’t break even on those customer acquisition costs until next February (assuming the customer doesn’t churn). With venture capital, the rule of thumb is that you should spend no more than one-third of your customer’s LTV or no more than one ACV. As bootstrappers, we don’t have enough cash to wait 12 months to recoup CAC from every customer. Most successful bootstrappers I know are in the two- to six-month payback period (depending on how much cash they have in the bank). There are times when that number can get more aggressive. For example, at our peak with Drip, we could afford to spend more on customer acquisition because we had the cash in the bank and I knew the numbers in the rest of our funnel by heart. Even at our peak, though, we were only running seven or eight months out—that’s the high end for bootstrapped companies.

Tope Awotona, founder of Calendly, started three very different companies for three completely different communities before eventually building the scheduling software business in 2013. In 2020, Calendly posted nearly $70 million in annual recurring revenue, more than double its 2019 figure. But Awotona’s first company was a dating app that never really got off the ground. The second was projectorspot.com, which sold (obviously) projectors, but sales were poor and margins small. He tried again with a third startup, selling grills, but as he says, “I didn’t know anything about grills and I didn’t want to! I lived in an apartment, and never even grilled.” Not only was he not part of the grilling community, but he didn’t even want to be! He took a different approach to building Calendly. He had been a sales rep earlier in his career, and he knew the hassle of sending multiple emails to schedule meetings. He had even run into the scheduling problem while trying to sell his own products as an entrepreneur. As time went on and his other ideas failed to gain traction, he saw a gap in the marketplace and resolved to address it for the community of sales reps he cared about and understood. He says that “the journey to creating something that’s impactful, something that serves people, something that you know people are willing to open up their wallets and pay for—is not something that you can do just for money.” While lots of people have scheduling fatigue, Awotona focused on problems specific to sales reps, which helped him define a problem he could both solve and monetize. What does that mean for you? First, get involved in those communities wherever they are, offline and online. Then, contribute, teach, and, most important, listen. Finally, use the filters above to make sure you are picking the right community to serve. Then, your problem becomes: Which problem should I pick?

This is the Rocketship Growth Rate—the precise pace at which a startup must grow to break out. How do you calculate this rate of growth? First, by setting a goal of exceeding a billion dollars of valuation—thus being in a position to achieve an IPO—and working backward. Hitting a $1 billion valuation generally requires at least $100 million in top-line recurring revenue annually, based on the rough market multiple of 10x revenue. You’d want to hit that in 7–10 years, to sustain the engagement of the key employees and also reward investors who often work in decade-long time cycles. These two goals—revenue and time—work together to create an overall constraint. Neeraj Agarwal, a venture capitalist and investor in B2B companies, first calculated this growth rate by arguing that SaaS companies in particular need to follow a precise path to reach these numbers:64 Establish great product-market fit Get to $2 million in ARR (annual recurring revenue) Triple to $6 million in ARR Triple to $18 million Double to $36 million Double to $72 million Double to $144 million SaaS companies like Marketo, Netsuite, Workday, Salesforce, Zendesk, and others have all roughly followed this curve. And the rough timing makes sense. The first phase, in which the team initially gets to product/market fit, takes 1–3 years. Add on the time to reach the rest of the growth milestones, and the entire process might take 6–9 years. Of course, after year 10, the company might still be growing quickly, though it’s more common for it to be growing 50 percent annualized rather than doubling. The argument is that products with network effects both can see higher growth rates as they tap into the various network forces I’ve discussed, and can compound these growth rates for a longer period of time—and looking at the data, I think that’s generally true.

the daily job of the CSM in a SaaS company has to do with setting and resetting customer expectations,

But there were also pressures from within to grow revenues. During my interviews with partners, one of the recurring themes was the need for Goldman to “increase the size of the pie.” This means that revenues, and consequently the firm, had to expand for the firm to be successful in recruiting and retaining talented people. If the pie stayed the same size, then as more people became partners, each partner would keep getting a smaller slice of the financial rewards, making partnership less attractive.

The core of The Wall Street Journal is not its physical newspaper, but rather its journalists, its brand, its culture, its reach, its values. Its real value (and requisite expense) is in its content, not its format. That is something that people will pay for. If you start with the premise that you have loyal customers who identify with your brand, and you see this as a chance to engage them more deeply with a rich digital experience, then your new model becomes less reliant on the whims of advertising and more supported by stable, recurring subscription revenue.

Instead, I argued, the goal of business should be to start with the wants and needs of a particular customer base, then create a service that delivers ongoing value to those customers. The idea was to turn customers into subscribers in order to develop recurring revenue. I called the context for this change the Subscription Economy.

You can't pour enough business into the top of the funnel to sustain real growth if customers are leaking out the bottom at a high rate.

Cisco isn’t just managing a dependable if relatively flat hardware business while it hunts for growth in software and services. It’s embracing subscriptions in a broad, systemic way in order to shift from selling boxes to selling outcomes. Its new cloud-based management services help mitigate the boom-and-bust effects of new product cycles. It doesn’t have to act like a retailer chasing after make-or-break holiday sales in order to make its annual number. Today almost a third of its revenue is recurring, which is resulting (as CFO Kelly Kramer is quite happy to point out) in a short-term hit to its GAAP revenue numbers. Again, standard revenue loss is a good thing. That’s a sign that you are carrying your book of business out into the future.

Xerox had an attractive financial model focused on leasing and servicing machines and selling toner, rather than big-ticket equipment sales. For Xerox and its salespeople, this meant steadier, more recurring income. With a large baseline of recurring revenues, budgets were more likely to be met, which allowed management to give accurate guidance to stock analysts. For customers, the cost of leasing a copier is accounted for as an operating expense, which doesn’t usually entail upper management approval as a capital purchase might. As a near-monopoly manufacturer of copiers, Xerox could reduce costs by building more of a few standard models. As owner of a fleet of potentially obsolete leased equipment, Xerox might prefer not to improve models too quickly. As Steve Jobs saw it, product people were driven out of Xerox, along with any sense of craftsmanship. Nonetheless, in 1969, Xerox launched one of the most remarkable research efforts ever, the Palo Alto Research Center (PARC), without which Apple, the PC, and the Internet would not exist. The modern PC was invented at PARC, as was Ethernet networking, the graphical user interface and the mouse to control it, email, user-friendly word processing, desktop publishing, video conferencing, and much more. The invention that most clearly fit into Xerox’s vision of the “office of the future” was the laser printer, which Hewlett-Packard exploited more successfully than Xerox. (I’m watching to see how the modern parallel, Alphabet’s moonshot ventures, works out.) Xerox notoriously failed to turn these world-changing inventions into market dominance, or any market share at all—allowing Apple, Microsoft, Hewlett-Packard, and others to build behemoth enterprises around them. At a meeting where Steve Jobs accused Bill Gates of ripping off Apple’s ideas, Gates replied, “Well Steve, I think there’s more than one way of looking at it. I think it’s like we both had this rich neighbor named Xerox and I broke in to steal his TV set and found out that you had already stolen it.

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