No, CaseySoftware is not being shutdown. This was just an interesting question I've been considering recently.
A few years ago, I knew someone running a dating website. It was not a breakout success like Match or any of the others, but it wasn't a miserable failure either. It had somehow reached that level where it was almost self-supporting, but not quite. From what I remember, revenue covered upwards of 80-90% of expenses. He reached an interesting point that others of us are likely to reach:
We all secretly hope that we're the next Google and can start lighting our cigars with $100 bills and most of us are prepared to live on Ramen for a year or so while we get our feet on the ground…. but there's this horrible spot in the middle where basically your expenses are covered, you can squeak out a lifestyle which you're comfortable with, but the bank account is not growing or even just barely.
It comes back down to the simple equation:
Revenue – Costs = Profit
Although I'm not an accountant and most of you aren't either, this really is the core of it. If you want to increase profit, you can increase Revenue or decrease Costs. I'm sure there are dozens more, but here are some strategies that I've used successfully in the past.
- Reduce hosting expenses – If a user is only on your site long enough to input their credit card number and download something, server horsepower is almost irrelevant. If you have a dedicated server with all the bells and whistles, do you really need it? Depending on your business, would a VPS or even a shared hosting account suit your needs?
- Evaluate your website – If a user is expected to stay on your site for long periods of time, make sure your site is fast, easy to navigate, and creates a reason to come back. Yes, this one might cause you to spend more money on hosting, development, etc, but if your customers spend more time there, they're more likely to spend money.
- Evaluate your users – Why do users come to your site? What distinguishes your site from all the others? Is there something sticky that keeps them coming back or will you never see them again?
- Evaluate your advertising – Using various tools (Google Analytics, Urchin, etc) you can determine the number of people hitting your site, where they stop in the purchase process, and often where they come from. Do your ads make sense? Are you getting to your target market?
- Make effective use of your advertising – Would it be better to have a single ad on one site in your specific niche or does the current Adsense model work for you? Yes, that ad might end up costing more, but how effective will it be?
- Choose an effective price – How are your prices? If 90% of your potential sales are becoming actual sales is that because your site is incredibly effective at making the sale or is it because your price is too low? If you can get X customers at $9.95, will you get more or less than half of them at $19.95?
- Choose a new strategy – Finally, are you using the right strategy? What sort of market penetration do you have? If you already have 90% of the market and the market isn't growing, then it's time to figure out a new strategy or simply close up shop.
As I noted before, CaseySoftware is nowhere near this, but I had a conversation recently that touched on this. If you near the point, but not quite there… do you hold on to see what happens or do you cut your losses and move on?