Even if Your 3rd Revenue is Only $250 – Don’t Quit

Romeo: Can you explain how the products that you build make money at the end of the day?

Yaroslav: (smiling) At the beginning of the day as well. It really depends on how intimately you know the market. It’ll take less time if you’re already well-connected in the market. You’ll have some ideas and suggestions to begin with, and you might not need to build everything from scratch just to show it to people. 

Often, people build prototypes and hit the streets, showing them to people. You could do that, but street feedback might not always represent the ideal target audience, especially if it’s not a consumer market or you’re not in the US. 

It may not provide the best representation of the people you’ll be working with. If you’re already familiar with a hundred seasoned professionals who can give you feedback about your Figma prototypes, MVP, or hard prototypes, then you’ll likely get high-quality feedback. But if you’re not well-connected, you’ll have to rely on your own experiences or slowly gain access to those seasoned professionals. For instance, you can incentivize them with Amazon gift cards or simply ask for their feedback, but you must understand their perspective. However, even seasoned professionals may not provide perfect feedback. 

For instance, if you look at documentaries about successful products like Netflix or Spotify, they faced immense struggles initially. Nobody wanted to invest in them, but they eventually became hugely successful. So, success often depends on your industry contacts. Some people might have a great idea for a seemingly ordinary product, but they know the right people who will buy it immediately and provide substantial revenue. This creates a different dynamic for achieving product-market fit, depending on your industry connections. 

Apart from that, when you’re trying to build an MVP and get feedback, people might not always respond. You’ll send emails, they’ll sign up, try the product, and then disappear without a trace. You could send surveys to churned users to get some insight, but it’s challenging. People are overloaded nowadays and might not have time to engage, even in a five-minute call.

Romeo: Do you receive feedback on the revenue generated by the features or projects you implement for clients? And how do you measure them?

Yaroslav: First, look at things like subscriptions. MRR is an infinite revenue stream. In many cases, we were the first to assist our clients in this, rather than their CFOs or financial teams, except for simpler cases.

Sergiy: There’s no silver bullet that guarantees success with a product. Every success story you read about has a unique backstory. While these stories may seem cinematic, the reality involves a lot of hard work and luck. Sometimes success comes from unexpected opportunities, like meeting someone working on a new marketplace who asks you to build the first plugin. It’s a mix of accidents, hard work, and seizing opportunities. Finding success often involves fine-tuning your approach and identifying niches or ways to outperform competitors.

One inspiring example is Clockify, a time-tracking tool. They offered a free alternative to the popular tool Toggle as it raised its prices to exorbitant levels. It was simple, they just position themselves as a “free Toggle.” Clockify’s timing was perfect, and they gained a significant user base from migration. In a year or so, Clockify introduced paid plans and eventually became a billion-dollar business. It wasn’t about advanced UX or deep research—it was about recognizing and seizing an opportunity.

Yaroslav: Then, people were running away from that ridiculous pricing Toggle made. They ran toward whoever was on the Google search in the first position, and they happened to be the guys of the time tracking.

Actually, I have another silver bullet for you, which is super awesome, and it really works. If you don’t quit, you have a higher chance of success within your product than people who quit. Many of my friends who succeeded didn’t quit, even when it was ridiculous. Some first-year revenue was $5. The second year, they did 250. Not 250K, but $250. The third year — $1,400. And in the fourth year – 50,000. In the fifth, they did five million. 

And a similar thing happened to Calendly. It didn’t become a billion-dollar the day after tomorrow. But at some point, it was like 100k. And then not quitting is very important. Then, you have a chance of arriving at revenue. 

Making Product Decisions

Romeo: I know a Polish company that started doing parking for corporations. But then, at one point, a customer asked if they could do the same for desks. They pivoted the whole business, focusing on desks. And then COVID came, which made them really successful. So, as you said, luck plus knowing when to pivot and commitment are crucial. So, I’m just wondering about the feedback with revenue. How do you link all these features or product versions to revenue?

Sergiy: Successful companies don’t do that. When you have enough money to run the company, it’s just absolutely useless to try to measure every feature. Surely, you need to measure impact. For example, if we introduce a better onboarding flow and see that conversion grew from 10% to 15%, that’s valuable. Or if we introduce a certain feature that improves retention, that’s important. So, you need to observe all those important metrics for you, and in the end, it’s revenue. 

But again, at a certain moment, you may work not on revenue but rather on the number of signups. Your strategy could focus on having as many customers as possible, making them happy and stick to your product. Then you can introduce a simple plan for $20. Then, when they’re already working with the whole company on this product, you convert from $20 to $200. That’s the case with Zapier. 

We were one of its early users, with a $20 plan. The whole company was running without any issues, with a bunch of automations in different areas. But with time, it became $200 and $500 for the same plan. Surely, they added a bit of new functionality, but the core that we used was the same. So, we didn’t change the automations much after that. 

Yaroslav: Indeed, raising prices is another silver bullet. But do it like Zapier, not like Toggle (laughs). It’s crucial not to make that mistake. 

Concerning measuring, I first got caught up in needing to measure many things, which led to a lot of experimentation. If you’re running a castle, you probably need to set up processes, but if you’re living in a tent on the street, you don’t need that much stuff. Focus on pushing one thing, and that one thing will impact your conversion. If it doesn’t, then it’s probably not worth pursuing.

Companies with lots of money operate differently. For instance, we can take booking.com, with all the cool, fun additions and automated testing. But if you’re not as big as booking.com, you don’t need all that. It’s just going to overload your team. Even with 90 engineers, we still find ways to overload people. Some on our team generate too many ideas, and we have to tell them to stop. It’s a problem because it diverts the team’s focus. You have to choose, and make decisions. 

Sergiy: Jeff Bezos once shared a profound statement: make decisions when you have 70% of the information. If you wait until you have 90%, it’s too late. You have to take risks. Constantly measuring and analyzing everything is expensive and doesn’t necessarily help you pay salaries or cover infrastructure costs. Ultimately, it’s revenue that matters. If there’s not enough revenue to cover your expenses, you’re in trouble. Focus on the high-level things that help you convert customers. That’s what really counts.

Yaroslav: Another thing Bezos said, is not to optimize your operations until it’s scaled. This was one of my biggest mistakes when we were a 60-person company with just one office manager. We tried to make that office manager perfect, like a master craftsman, capable of handling everything from buying hardware to fixing air conditioners better than the technicians themselves, and even running events flawlessly. It was a huge mistake. I spent years trying to find this perfect office manager, but it just wasn’t realistic.

As we grew to over a hundred people, we realized we needed separate roles for procurement and office management. Events shifted between different departments. That’s when we found success. Don’t try to perfect things too early on because you won’t fully understand what’s needed, and you won’t find those perfect people to run it. The same goes for optimizing processes.

Keeping Everyone Informed

Romeo: How do you allocate resources? Do you have dedicated teams for it?

Yaroslav: Typically, we start with companies from zero and try to push them further. Many times, they already have their own marketing. For instance, with Calendly, we just nudged it over the edge for some clients, and they started booking meetings with their own clients, creating a snowball effect.

But this is a rare case when the product presents itself. When we look at our own marketing, it’s about finding the right audience, the persona that will convert the best. However, at the start, it’s tricky to pinpoint that persona. As marketing teams have various roles, you have to hustle to understand who will actually engage with your tool, rather than just putting it on their to-do list to be forgotten. 

You need users who will engage with your product. You need to specialize initially. Then you can expand into solutions. That’s why you have to craft wording that grabs their attention as people will only give you a few seconds initially. If those few seconds hook them, they might give you more time. For example, for companies between 100 and 300 employees, we provide X, and for companies between 300 and 1,000, we offer Y. It’s a different path, but at the beginning, it’s all about specialization.

Sergiy: To better understand, try separating the service and product businesses. In the product business, each product has a separate marketing team. Initially, we usually have a full-stack marketing manager with a broad understanding of marketing and its tools. As the product grows, the team expands, with roles like SEO specialists, content writers, and performance marketers added gradually.

We build marketing teams similar to how we build product teams, starting with someone with broad expertise and incrementally adding more specialized experts. Of course, this growth depends on revenue generation. As we generate more revenue, we can invest more in marketing and expand the team. It’s like a snowball effect, where increased revenue allows for more investment in both marketing and the product team.

On the service side, we don’t charge for specific marketing services. Instead, we provide advice to young entrepreneurs who may lack experience in marketing. This advice includes organizing their marketing website to improve visibility on Google and increase their ranking. These advisory services are part of our goodwill gestures and aren’t charged for.

Romeo: Is the product manager the one giving this marketing advice, or who handles that?

Sergiy: No, it’s not the product manager. We have a separate person for that role. We call them liaisons. They manage relationships across the consultancy service, providing advice and guidance in marketing matters. They are also part of the board of directors. So, they are involved in decision-making and are familiar with what’s happening within the company. 

Yaroslav: Because we overshare information using tools like syncs and guilds, where people come in and share what worked and what didn’t, everyone is familiar with all updates. Additionally, we have company management meetings where the entire company’s operations are discussed. With this knowledge, liaisons can connect clients with the right knowledge holders within our organization.

Looking into the future

Romeo: What’s the future of Railsware? What’s the next step for you?

Yaroslav: We’re expanding, aiming for a trillion! But realistically, we’re expanding our products. They grow linearly until they experience a hockey stick effect, which indicates product-market fit. We hope to achieve this soon. With three products, expansion in one should drive expansions in others. 

After executing on these three products and taking them to a greater scale, we’ll continue expanding. Simultaneously, our consultancy business grows. We’re always looking to hire the best talent. Over the last three years, we’ve evaluated 21,000 people and hired one out of 143 across all roles. We have an incredible team that balances product and service offerings.

Romeo: Are you leaning more into service or consulting? 

Yaroslav: The market will dictate the balance. We’re open to both and execute on both. There’s a future for both, and we enjoy providing excellent work. Whether they leverage our consultancy services or our products, we strive to offer meaningful work. We’re expanding everything simultaneously while deepening our knowledge.

Sergiy: I would say this year is pretty crucial because historically. Each of our products has had its own trajectory, but they all come to a certain point where the line can be curved, and we really hope for that. Our solutions are becoming more solid, and more professional, and in every product, we start to understand our audience much better—who they are and how to work with them. We see positive traction, but we still need to find this curve line, and that’s something we’re working on.

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