PMPro Business Update

I wanted to post an update on our Paid Memberships Pro business. In the style of other “transparency reports”, I will share real numbers for our business. I will also share some of my current goals and planning for the business.

Business is Growing

  • $3,000,000 in all time sales.
  • $810,000 in revenue in 2019, a 23% growth over 2018 sales.
  • Active on over 80,000 sites. We had about 4000 paying customers last year.

What About Profit?

Kim and I are the only 2 owners of the company. We also work roughly full time in the business.

Of that $67k/mo we made in 2019, the expenses broke down like this:

  • $50k for salaries and benefits, including for Kim and myself.
  • $5k for travel and marketing, a big retreat, going to and sponsoring WordCamps.
  • $3k for credit card fees and affiliate payments
  • $2k for server and other IT costs.
  • $7k of profit. (A nice portion of this was distributed as a bonus in December.)

Our Team is Growing

  • Went from 8 employees to 10 in 2019. (We hired 2 more in Q1 2020, for a total of 11 full time employees and one part time employee.)
  • We had our first full team retreat in September 2019. All but one of our employees was able to come to our home (and a nearby AirBnB) to spend a week getting to know each other better and planning for the future. Five of us hit up WordCamp NYC the weekend before and really made a presence there in our Nugget shirts. Good times bar hopping and eating pizza and ramen in NYC.

Product Developments in 2019

  • We launched PMPro v2.0, with a newly designed dashboard and support for Gutenberg and the REST API
  • We overhauled our proprietary customer support system used on the PMPro and Memberlite sites.
  • We ran a successful Spring Sale for PMPro and experimented with other sale formats in the fall.
  • We revealed Nugget, our PMPro mascot.
  • We released the Payfast Add-On for PMPro. Payfast is the payments processing service for South Africans and South African websites.
  • We launched PMPro v2.1, with SCA support for Stripe and native 8 decimal support for Bitcoin and other crypto currencies.
  • We finished the initial version of the Sitewide Sales plugin for WooCommerce, our first, non-PMPro ecommerce product.

Why write a transparency report?

Our primary goal as a business is to support the Paid Memberships Pro open source project. Our customers and partners will want to know that our business is sustainable and we will continue to maintain the project and provide quality support.

Many people will have ideas about how big our business is and how well we are doing. Some will think we’re bigger than we are and wonder why it takes so long to reply to support or push new features. Some will think we’re smaller than we are and wonder if we’ll be able to stay in business. If we share our real numbers, we won’t avoid criticism or concern, but at least these interactions will be based on facts.

I also want to help others looking to start a business like ours. By sharing our story, I hope others can learn what to expect when launching a WordPress plugin or a paid support plan around an open source project. These numbers are specific to our business and product, but they can be one more data point for someone deciding whether they should get into a business like this or keep pushing on a side project.

Hang in There

This is what $3,000,000 in sales looks like.

In 2012, one year after our launch, we were making little more than $1000 per month. I hear of so many projects at this stage of income, with the founders wondering if it’s worth it to continue working on the project or move on to something else.

When I hear someone taking a project to $1000 per month, I usually quip “That’s awesome. You’re halfway to $10,000 per month.”

I can only share our own experience, but it is as hard or harder going from $0 to $1000 than $1000 to $10,000. For Paid Memberships Pro, it took 2 years, 2010-2012, to get to $1000 per month. Two years after that, in 2014, we were making almost $10,000 per month. Two years after that, in 2016, we were making about $34,000 per month.

In 2019, we averaged $67,000 per month. If we can grow just a bit more than we did last year, we will cross the magical $1,000,000 per year milestone.

Targets and Budgets for 2020

We are targeting another year of 20% growth for PMPro, which would bring our average monthly revenue to $80k. With that in mind, we have hired 2 more developers to help with technical support and maintenance of the core plugin and Add Ons.

For the past few years, we’ve had this neat little cycle of reinvesting in PMPro that goes something like this:

  • Target a 20% annual growth in revenue.
  • Target a 20% profit margin.
  • Hire and invest in marketing such that we will break even if we match last year’s sales.
  • If we hit our growth targets, we will be on pace to earn 20% profit going forward.

Starting out with a breakeven budget, then growing 20% in revenue throughout the year, means that we typically end up banking about 10% of our total revenue, which has allowed us to save enough cash to build a comfortable cushion for the company. We could have been taking on debt to grow even faster, but this has been the right level of financial risk for Kim and I with this business.

What if we don’t hit our revenue target? Then we’ll have some hard decisions to make to cut costs or dip into cash or debt. If sales are flat or just growing more slowly, we can adjust our goals for the next year.

Onward

What are we working towards this year besides 20% revenue growth?

We’re looking to officially launch the Sitewide Sales plugin and along with it a generalized platform for us to release future non-PMPro products.

In Q1 of 2020, we implemented a new development planning and scheduling process based on the Shape Up book by Ryan Singer and the Basecamp team. It is going well so far. We will have a true feel for how this has improved things for us as we get through a few development cycles. “You should bid on that next cycle” has become the new “patches welcome” in our chats.

I’m hoping to pause at 12 employees working on PMPro, with a focus on scaling up the skills and effectiveness of the team we have vs hiring new people. This is about the size company I am comfortable with for now. I believe we will be able to figure out the natural boundaries and needs of this PMPro business and make it work with the team we have.

I’m freeing up some time and headspace to explore the various business opportunities related to PMPro and will consider pursuing those projects with smaller independent teams. Some other great companies in the WordPress space have spread out successfully this way. We can look to them as models and also figure out a version of that that works for us.

Follow Me

I’m going to be writing about my thoughts, struggles, and results in business more often going forward. Join my mailing list to get my new posts direct to your inbox.

How I Sold My Bitcoin SV Coins

The last time I wrote about Bitcoin on the blog here was back in 2013. Bitcoin had just hit $1000 per BTC and I was still bullish.

Since then, Bitcoin has “forked” a number of times. Similar to open source software, if stake holders disagree about how to build out the Bitcoin software and platform, they can fork the platform and let the market decide which fork to support. It’s not a winner take all proposition either. There is room for multiple variants of cryptocurrency. The Coinbase blog has a good post on what forks are.

Wikipedia has a list of the larger Bitcoin forks. The biggest fork was the Bitcoin Cash fork on August 1, 2017. Bitcoin Cash itself forked on November 15, 2018 into Bitcoin Cash ABC and Bitcoin SV (Satoshi’s Vision).

I could talk about forks and the various pros and cons of each flavor of Bitcion, but for this post I’m going to focus on the technicalities of gaining access to the “new” Bitcoin SV coins and how I “sold” them.

If you hold your own Bitcoin and other cryptocurrencies, this fork thing is going to happen every once in a while, and you’ll need to spend some time to claim your “free money”. These are the steps I used to sell my BSV specifically, but the general outline would be used for claiming any fork. Just different software or exchanges might be involved.

Step 1: Own the private key or seed phrase.

To really “own” your Bitcoin, you need to own the private key for the wallet the Bitcoins are stored in. The actual private key is a 256-bit number. The more typical version you will interact with is the “seed phrase” that your wallet and private key were generated from. This will be 12 to 24 words that almost all wallet software will generate for you when setting up a new wallet.

If you store your coins in Coinbase or something similar, you may not “own” your private keys. This is actually not a terrible idea if you don’t trust yourself to keep your key safe and not forget it. In this case, Coinbase will wait until a new fork gets valuable or important enough to worry about and then split your coins for you and issue you an appropriate amount of coins on the new fork’s chain. They did this with Bitcoin Cash and later with Bitcoin SV. If you want to claim your forked coins earlier though, you’ll need to do it yourself.

My seed phrase then is basically the password needed to spend or move my Bitcoin. After a fork, the same exact seed phrase will work to spend coins on either blockchain.

So I could use my Bitcoin Cash seed phrase to “claim” my coins in Bitcoin SV and move those coins wherever I want. The problem with this is that I don’t necessarily trust the people behind Bitcoin SV or the wallet I would use. I am worried that using the “password” for my Bitcoin Cash wallet to spend my Bitcoin SV will allow someone else to steal my more valuable Bitcoin Cash coins.

So I tried to protect my Bitcoin Cash first.

Step 2: Create a new wallet for your old Bitcoin cash and send your coins there.

I used Electron Cash to create a new wallet. I then sent a test transaction from my old wallet to my new wallet, followed by a transaction to send all of my Bitcoin Cash into the new wallet.

I now have a different set of seed phrase words to access my Bitcoin Cash.

Step 3: Claim your Bitcoin SV using Bitcoin SV wallet software.

I chose to use the ElectrumSV wallet to access my BSV. ElectrumSV is an open source wallet, and while I didn’t compile from source or even double check the code myself for malware or back doors, being open source makes it less likely that this wallet is sending my keys back to a malicious third party.

Once I booted up ElectrumSV, I just chose the options to restore a wallet from my seed phrase and there my coins were.

Step 4: Move your Bitcoin SV into an exchange.

I’ve been investing in Bitcoin and other cryptocurrencies for a while, but I’ve never really used an exchange outside of Coinbase. I’ve created accounts on a few exchanges, but mostly just tested the UI.

I read that the CoinEx exchange is pretty popular, especially for trading BSV, and so I setup an account there. I was surprised that I didn’t need to give too much personal information to start my account. I confirmed my email address, set up Googlel Authenticator, and then I was ready to go.

As a new user, I was able to withdraw up to $10,000 USD worth of assets per day. If you want to withdraw more, you need to verify more information or wait. The amount of BSV I had would only take a couple days to withdraw.

Step 5: Exchange your BSV for BCH or Bitcoin

CoinEx gave me an address to add BSV to my “assets” there. I sent a small test amount, which showed up after a few confirmations.

Step 6: Withdraw your BCH or Bitcoin from the exchange.

I then exchanged that BSV for BCH using the exchange. And then “withdrew” those BCH into my Coinbase account.

After the withdrawl went through (it took about an hour’s worth of confirmations), I moved all of my BSV into CoinEx, exchanged it, and withdrew it to Coinbase.

Step 7: Exchange your BCH or Bitcoin for cash on Coinbase.

You could technically withdraw cash from CoinEx, but since I’m comfortable with Coinbase, I moved my coins there to convert to USD.

In this case, I think I am going to hold onto the BCH for a bit. I also left some BCH in CoinEx to play around with. I’m trying to come up with a trading strategy to test there, but I’m mostly a longer term investor, so I’m struggling to come up with something.

Since I’ve sold my BSV, it has rallied $75 more dollars per coin, while Bitcoin and Bitcoin Cash have stayed flat. I feel that BSV is a scam in some sense, but there might be some virtue to it. I’ve been out of the loop. I think there is some value in making a coin that is useful and good for consumers and users, but also good from a mining standpoint to get them more involved. Maybe BSV will do that better than BCH or BTC.

Bitcoin SV Wash Trading

Rick D. at BeInCrypto.com digs into a theory for the recent spikes in the Bitcoin SV price. Is it from a BSV miner mining BCH instead, selling that BCH, then “wash trading” BSV on exchanges which pumps the volume and price.

The original Twitter thread by @vinarmani can be found here.

It’s actually a pretty genius gambit with essentially no downside. He can actually use this tactic to keep BSV at basic parity with BCH.

@vinarmani on Twitter

Tesla Update. Two Key Lessons.

I took some profits in my Tesla ($TSLA) position yesterday for the first time in 7 years. Technically, this was my second time taking profits, but the last I rolled my profit into Solar City ($SCTY), which was acquired by Tesla a year later.

Tesla Model Y in Red

Tesla’s share price was up over 50% on the week and up over 100% since the beginning of the year. This after a decent 30%+ gain in 2019. To me, the last week of action was an obvious “short squeeze” situation, making it a good time to take profits.

Another thing on my mind was the fact that Tesla stock is now about 10% of our net worth (minus the value of our business) and about 20% of my stock holdings across all of my retirement and brokerage accounts. I’m not too too worried about this. As Warren Buffet once said “If you have LeBron James on your team, don’t take him out of the game just to make room for someone else. … It’s crazy to put money into your 20th choice rather than your first choice.” Tesla is the Lebron James of my investment accounts.

The final thing I was thinking about was numbers from my Simple Tesla Model. A few years ago, I put together a simple spreadsheet to calculate the potential revenue, earnings, and share price of Tesla stock based on the production estimates Elon Musk was putting out. This is the first lesson I wanted to reiterate in light of the action in Tesla stock this week.

Lesson 1: Don’t forget Main Street. Build Real World Models of How The Businesses Behind Your Stocks Make Money.

It’s easy to get caught up in the numbers and calculations of Wall Street. What’s a good PE ratio for a certain sector? This company has grown sales at 50% per year and could continue growing 50% per year for the next 5 years. This kind of math is useful for comparisons and valuations, but you want to make sure you take a step back and think about what that company looks like in the real world (Main Street) after growing revenues 50% for 5 years. Is that REALLY possible?

At the time I built my simple model spreadsheet for Tesla, there were many people talking about how a valuation in the tens of billions of dollars didn’t make sense for a company like Tesla. Traders who were short the stock talked about how Tesla could never make enough money to justify their share price. But when I put my spreadsheet together, I found that if Tesla could sell 500k cars, they’d likely make $28B in revenue, which would justify a stock price as high as $517. If Tesla only got halfway there, they’d be worth much more than the $200 or so they were trading at in 2016.

To calculate in the risk of bankruptcy or larger failure, you would want to discount the price targets of the model to account for this, but we were already assuming Tesla would only hit 50% of their target, never grow past that, and never make money off their other business lines.

I’ve updated this model a couple times, most recently today. The current tab indicates a future share price of $494 if Tesla can hit about 392k cars sold this year. This is BELOW the current price of $734. And so I am much more comfortable selling Tesla stock when it’s trading above the values my models are spitting out.

Again, while I’ve updated the model to account for energy sales and service revenue, it assumes no growth in car manufacturing or those other business lines. If you plug in different numbers for where you expect Tesla to be 5 years out, you’ll get different targets.

I was also reminded of another important investing lesson:

Lesson 2: Stock Prices Go Up Even When Companies are Not Yet Profitable

Many investors have shied away from investing in Tesla because they feared the company would never turn a profit and thus eventually run into cashflow problems. Not even eventually, Tesla’s investments into the Giga Factory and in general have required them to raise money through special stock sales a few times in the past. Each time this happens, the value of your Tesla stock is diluted.

If you wait for a high flying companies to turn a profit before investing, you might be waiting a long time and miss out on huge returns. Another big winner in my portfolios has been Amazon, who famously hit almost exactly $0 profit each year for most of its existence. Only recently have they been showing a profit, and I would guess Bezos and Amazon would invest more to avoid that profit if they had things to invest in. (Or I don’t know, maybe they think they need the cash now.)

In any case, if you waited for Amazon to turn a profit, you missed a large gain from a well run company that is changing the world. The same can be said for Tesla. So how do you invest with confidence in a company that makes no profit? Here’s what I do.

First, I focus on revenues. As long as revenue is growing or likely to grow from current investments, I feel the companies stock is likely to grow in value as well. I lean toward valuation calculations based on revenue.

Second, I think about whether the company will be able to switch their focus from revenue to profits when they want to later. Will Amazon or Netflix be able to raise their prices? Will Tesla be able to lower their production costs? I tend to give these companies the benefit of the doubt unless there are very obvious concerns about this. You can choose to focus on the negatives, like when Tesla was forced to build cars in tents in the parking lot. Or you can focus on the positives that will drive higher production speed and higher sales margins. Things like removing purchase options that slow down production and figuring out the right mix of automated and human-powered labor will improve Tesla’s bottom line.

With more and more people switching to electric cars, Tesla continuing to own the electric car market, Tesla ramping up production in its existing factories and planning on building even more factories, the Model Y coming out soon, and so much potential in their other products… Tesla is set to potentially become a very large company making a lot of money. Tesla stock has generated a lot of returns for its investors and has a grand enough vision to continue doing that. That said, while the stock is temporarily inflated from a short squeeze, I booked some profits. Tesla is still a large percentage of my investment accounts, and I will continue to try to add to my position if and when the stock’s price falls below my fair value calculations.

Some Thoughts on Montessori Schools

We have been happy with our Montessori school in Berks County PA. We plan to keep our kids there through 8th grade, which is as far as this particular school goes.

All Montessori Schools are a little different, so make sure you check out the particular school you are looking at. We’ve seen some that are too preppy and focused on grades (which aren’t even a Montessori thing), or just really small and quiet/depressing.

One of the main benefits is individualized learning. Each student goes at their own pace in each subject area. Smarter kids are given higher level work as they are ready for it. Kids struggling with particular subjects are given more time to get through it.

The individualized learning is also useful if you travel a lot during the school year. We can take our kids out for 1-4 weeks at any time, and when they come back, they just pick up where they left off. They haven’t missed Chapter 12 and won’t fall behind in their classes.

I think Montessori is particularly good for younger, pre-school aged children. They really teach a level of independence that other schools don’t. Montessori kids are using scissors, and getting their own food, and helping to clean up, and all of that kind of stuff a lot earlier than non-Montessori kids.

Depending on the school, children are in classrooms with older and younger kids. Our school has two pre-K/K classrooms, one 1-3 classroom, and 4-8 classroom. They also might have the same teachers year after year, which is good as the staff really gets to know your particular kids and their needs.

Some of the benefits taper off as the kids age. You probably want a PHD teaching your kids Physics in a more college-like setting. At the same time, Montessori is good for addressing the emotional needs of pre-teens and teenagers. It’s a relatively safer environment than typical public schools. I’ve found the Montessori staff more open to address the emotional growth of our children along with the academic growth.

If you are comparing a private Montessori school vs a public school, there is also just a huge difference when you are paying a private school. You are a customer and they will listen to you and generally do more for you to keep you as a customer. What might take an independent education plan (IEP) and 6 months of back and forth meetings in a public school, is usually just one meeting with a private school.

Bitcoin hits $1000. Where is it going?

I’m bullish on Bitcoins, from a price perspective and also from a technology perspective.
Like many out there, I’m kicking myself for not jumping on the bandwagon sooner. I remember when they were $5 and I was first reading about them. I remember when they were less than $1 per coin, and my office computer could mine about 1 per week, thinking it wasn’t worth the electricity cost. I remember wanting to buy 200 of them at $10 each as a speculation play with our InvestorGeeks ad money, and then wanting …

Looks like a buying opportunity in BBBY

My Mom asked me about Bed Bath and Beyond recently. She used to be a store manager there. She sold her stock a while ago (missed that big up swing) but thinks there may be a buying opportunity now. I also owned some way back and sold after a small gain, missing most of the big 2-3 year rally here.
Anyway, here is my analysis and response to her. (The spreadsheet I refer to is one based on Phil Town’s Payback Time book you should be able to find on his …

Would I Buy Netflix in the $50s?

Netflix lowered their subscriber numbers for the year last night, leading to a big 14% drop in the stock price today (so far). Fellow InvestorGeek Chris texted me asking if I’d be buying Netflix in the 50s.
I personally won’t be buying any $NFLX stock today, but only because I already own a lot of Netflix stock int he $60s. I have too much tied up in $NFLX already to add to my position. Though I may buy in more later this year, early next, as I fund my account and if …

Mistake #2: Playing Designer

Unless your business is website design or something else in the arts, you don’t need a beautiful website. A nice looking website is a bonus, but make sure you’re working towards a functioning website instead of something that will look great printed out and framed on your wall.

Oftentimes when going over design mockups or newly updated websites, you’ll find yourself leaning back in your chair and staring at your homepage for a minute or two taking it all in.

Stop it! No one browses the web this way.

If you think of your website as a work of art, you surely will find little things here and there that might be smaller or larger or a little bit to the right. Resist the urge to do this.

If you know the primary goal of your website (see post #1), make sure the design focuses on that goal. Focus your design feedback on how well the design enables sales, mailing list sign ups, contact requests, etc.

As for website design, hire an experienced web designer at a decent rate and trust their instincts for what looks good.

If you hassle your designer with a lot of feedback on what “looks good”, they are going to shut down and move into “code monkey” mode where they just code up whatever requests you have. Unless you are paying bottom dollar (in which case you get what you pay for) you are wasting money by paying designer rates for code monkey work.

More importantly, micro managing a code monkey will not get you as good of a website as one where you control the vision via a strong primary goal, and an experienced designer controls the particulars of the site’s look and feel.

View all posts in this series here.