More About Billing & Scaling (Because It’s Incredibly Fascinating)

25 May

Other titles that were considered for this post:

  •  “No Please Don’t Cancel Our Service- I Swear You’ll Get Messages In the Future and You Will Love Them!”
  • “Don’t Call The Police- We’re A Real Company I Promise!”
  • “The Irony of Ironies: For A Company That Collects & Sells Data, Our Internal Data/Records Are Pretty Comical”

That pretty much sums up what our billing has unearthed about NextDrop as an organization. I used to not understand why people thought scaling was so hard.  You figure something out, and then just…go do it again-but bigger this time.  That’s doesn’t sound so bad right?  Yeah….about that logic….it’s similar to going in thinking you just need to do some simple algebra, when you’re really dealing with multi-variable calculus (sorry, I had to get a little nerdy on you guys). But that’s the closest analogy I could think of.

I think if you keep your eye on the prize (profitability), then you learn a ton about the problems that arise when you scale.  On one hand, this is great.  We need to get better.  But man.  If you’ve never faced harsh reality, let me tell you.  It’s not the most fun thing in the world.

Here is the breakdown of the good, the bad, and the ugly.

The Good: People who get our messages regularly, pay for our service.  Not only that, they pay a 3 month advance payment for our service.  For people who regularly get our messages, we have in insanely high retention/payment rate (~95%). Yay us!

The Bad: A ton of people are not receiving our messages. (And by a ton, I’m talking ~50% of the customers we were supposed to bill this month).  So the logical next question- why not?  Well, there’s a simple answer.  The valvemen just weren’t sending the messages to the people.  Next question- why didn’t you do anything about it?  Simple answer- we just weren’t tracking it very well.  Why not?  Great question.  I have no good answers there.  (Nothing that doesn’t sound like an excuse at least).  Looking back, I think we were just focusing on growth, and validating our core business.  Up until last month, we were still trying to decide between the utility and the end user as our main revenue stream.  With half our focus with the government, and the other half with our citizen facing product, we were just trying to figure out if we had a real business here or not.  We were focusing so closely on whether our initial customers would pay/how they would react to the service (and tracking their behavior), that we really didn’t focus on creating a system to accommodate all the other people we were launching (i.e. we were not planning for the best case!)  Looking back, it seems so obvious and dumb.  Of COURSE you need this organized system in place!  How WOULDN’T you need this organized system?  No argument there.  We’re getting it together and putting it in place right now!

Learnings for the future: As soon as you know you have something, start thinking about systems.  Start putting systems in place from the get go so that you can practice at a small scale and leverage this “muscle memory” to run on a pseudo auto pilot at a larger scale.  That being said, there is definitely a tradeoff between taking time to establish a system, and agility/being able to produce results fast- but it’s our job to find the right balance.  I mean, we DID get a lot of people interested/excited about this service in a short period of time. Will we keep them interested and excited? We’ll see.  Hopefully we will.  But next time, I am hoping we get closer to finding that elusive balance between systems and scale.

The Ugly: People are starting to cancel our service.  I mean obviously, if someone asks you to pay for a service that really hasn’t been sending messages regularly, why would you ever want to continue?  Luckily, when we realized these people weren’t getting the messages, we quickly stopped billing in those areas and just used the opportunity to apologize/tell them the service will start soon (and by quickly, I mean 2 days).

The Good (that came out of the ugly):  We found out that ~10-20% of the customers who don’t even get our messages will pay 30 INR advance payment for this service! That was pretty cool to find out.

Learnings for the future: I think we handled this part well.  We reacted quickly, and changed tactics.  I have a feeling that even in the areas where we DO regularly send messages, some people may not see them.  We’ll have to figure out what to do in those situations- probably try to tell them about our IVR system and see if that works.  But some good still came out of this- if we have a 95% payment rate with people who get our service and a 10% payment rate with people who don’t, we’ve validated the fact that the free month trial is pretty key to getting customers to sign up/buy the service.

In the grand scheme of startup growth, I think we’re right on track/par for the course.  The main thing is that we have a product that people want and will pay for.  We are undergoing the classic growing pains of rapidly scaling, and I think this is going to really test us as an organization.  What is our team really made of?  Can we figure this out and still keep all of our customers? Given our track record, and our ability to rapidly recognize and solve problems, I am confident we can handle it.  But it really doesn’t matter what I think, or say.  The numbers will speak for themselves.  So we’ll see in a few months what happens.

Will NextDrop overcome the growing pain pitfalls and defeat the evil scaling demon? Stay tuned for the next episode of NextDrop’s unfolding business drama.

PS- the thing about the police.  Some people didn’t think we were an actual company, and one of the local politicians threatened to call the police on us.  Then, we had to get her on line with the Chief Engineer, who vouched for us and said we were who we said we were. She seemed ok with that.  Mini crisis averted! This is why it’s key to work in conjunction with the government.

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2 Responses to “More About Billing & Scaling (Because It’s Incredibly Fascinating)”

Trackbacks/Pingbacks

  1. WDI Global Impact 2012: Entrepreneur Profile: NextDrop - August 16, 2012

    [...] I want to share one theme: transparency. To be frank, NextDrop is not perfect and has been unabashingly open about its mistakes and missteps since its inception. With each misstep, however, NextDrop has [...]

  2. Bada Bing, Bada Boom: CEO Post Time | NextDrop - June 18, 2013

    […] all the data we need at our fingertips.  Without data, we have nothing.  Plain and simple.  And speaking from experience, let me tell you this is what makes or breaks you as a […]

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