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What Did We Learn From The Pandemic?

March 11, 2021 by Michael Frew

What Did We Learn From The PandemicLike most people, I talk to my cat. Even when other humans are around.

This morning, I shamed her for her laziness.

“It’s 7:30am on a beautiful Saturday. No customers are sending in questions, no business emergency surfaced overnight. How can you still be laying in the same place I left you eight hours ago? Don’t you have any drive? Don’t you have goals?” With forehead veins starting to pop, “Where is your motivation for action, Ser Pounce!”

Obviously, I know the answer. She’s a cat. Her motivation is to maximize sleep and conserve energy. The human desire to “do something” will never equal the animal desire to rest a long time in a safe place.

The uncertainty of the future – if she even has a concept of time – adds no stress to her life. On the occasion her equilibrium is out of balance – likely my failure to feed her in a timely manner – she lets me know immediately.

That is her world. Rest, speak up against the tyranny of imperfection, and sleep.

In December 2019, my cat personified a large portion of business owners, myself included. The economy was humming, we were in our usual resting spots, and our environment was safe. There are always times when we need additional “food” from our masters (usually around tax time). But overall, we churned along towards our goals, driving forward with our pre-pandemic plans.

This morning, Ser Pounce reminded me of my life one year ago. Comfortable, content, and enjoying that warm sunshine streaming through the window.

Ser Pounce in the Sun

Babies don’t sleep this well…

How is Your Company Doing in the Pandemic?

Did you hesitate to ask your friends how their careers were going over the past year? I know I did. I live in Las Vegas, a city hit very hard by the slump in travel, cancellation of conferences and the closure of in-person entertainment. For a majority of the pandemic, our city had the highest unemployment numbers in the country.

I was nervous to greet my neighbors with that quintessentially American catchphrase… “Hey, how’s it going?” 

What if I got a true answer?

My friends and neighbors were likely equally hesitant to ask me the same question. But eventually we all came around to it. “Hey Michael, how is your company doing in the pandemic?”

Obviously, a valid question. 

Yet there’s a follow-up question nobody asked. Yet, I ask it of myself daily. 

“How did the pandemic affect the future of your online business plans?”

Appreciate, but Diversify

Despite weekly outages of major tech platforms, we tend to believe in the redundancy of the Internet. We’ve never had a true week-long meltdown that was unrecoverable. Whether we realize it or not, we believe the Internet is resistant to complete disruption – outside of intentional government interference.

Yet, if you look at the intricacies and dependencies, we are one broken underwater sea cable or Russian interference campaign away from finding ourselves in a prolonged “Internet pandemic”. 

The Coronavirus pandemic taught us a lot about gratitude, savoring time with friends and family, and living in the moment. It’s a lesson we didn’t want to learn this way. That said, it’s a valuable reminder about what truly matters.

Once thoughts of gratitude subside, human nature starts to take over. In the past year, I started to reflect on the future for my family, out of a natural instinct of self-interest and preservation.

The question I started to ask myself most often was, “If the pandemic wasn’t an illness, but instead a bad actor took the Internet down for 12 months, what would I do?”  

What would any of us do?

I don’t have an answer right now. I really don’t. It’s still a question I wake up thinking about every day.

Writing and publishing online is one action I’m taking to try and answer that question. To share whatever knowledge I can. So others can take tiny bits and pieces of my experience and patch together answers to the same questions. 

The pandemic unleashed a flood of pent-up creativity across the globe. I hope others continue to write, teach, create, and share what they’ve learned too. So that all of us can piece together a future where we’re more resilient, more unbreakable, and more antifragile together – even when we are apart.

A world made real, every day, by cats. 

Filed Under: Blog, Operating Online Business, Pandemic Updates

Online Business Operations during a Pandemic – July 2020

August 11, 2020 by Michael Frew

Month Five – Yep, I missed a few months…

It’s almost half a year into this pandemic, if you can believe it! If March 2020 was the longest month ever, the last few months feel like they’ve flown by. It’s almost like everyone is getting used to the new normal, and time no longer inches along at a glacial pace.

July 2020 continued to demonstrate the same overall results I’ve seen in the last few months for both of the SaaS-focused companies. The most obvious takeaway was nothing abnormal about the month; it was boring, routine, and predictable. In 2020, that’s a welcome sign.

For QuotaGuard, very little changed in the overall business environment for cloud application service providers from my vantage point.

For Appointment Reminder, there continues a slow return back to normal with some sectors (travel) still not returning in full force yet.

QuotaGuard Static IP’s

QuotaGuard had normal subscription growth in June, and I didn’t notice any lingering effects from the pandemic during the month. As businesses continue to migrate towards a new normal, many customers now have their work from home teams established. Companies are moving forward with normal business operations, including using cloud infrastructure services.

Appointment Reminder

Appointment Reminder had a few clients return with notable exceptions from our travel industry customers. This is a welcome trend, but we’re still likely to have many companies never to return. The start and stop nature of many state reopening plans has caused too much havoc on smaller businesses.

We’ve seen new customers sign up as they need more appointment scheduling software to plan for the future, and we’ve been a welcome beneficiary of that trend.

The team is also working on updating the website for a new fresher, cleaner look, and I hope to have that go live in August or September.

IT Spending Bounce?

Now that we’re well into the new normal, I am starting to wonder…will there be an IT infrastructure spending boost in the future as the pandemic becomes less of a threat and the future looks more positive?

Since many companies still aren’t operating with completely back-to-normal budgeting, plans, or operations, this may be wishful thinking or too far off to assume will come to fruition. Still, it is something I’ve been thinking about a little bit lately.

That’s a lot better than the “how bad can this get” thinking of just a few weeks ago.

Hopefully, there is a delayed spending boost to come at some point in the future. It could be 6 months out, or it could be two years from now. But once the rear-view mirror sees more pandemic, a delayed spending boom is a possibility.

Last Words

All in all, a very routine month with mostly blocking and tackling work on a day to day basis.

After the last few months, a boring month of normalcy was a welcome change.


Online Business Ride AlongWant to learn more about my journey acquiring and operating online companies, including other failed acquisition lessons learned?  Check out Online Business Ride Along, a monthly deep dive into my journey, with actual online investments and monthly P&L’s for each businesses.

Filed Under: Blog, Operating Online Business, Pandemic Updates

Unknown Unknowns of Buying Online Businesses

June 5, 2020 by Michael Frew

“Reports that say that something hasn’t happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns — the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tends to be the difficult ones.”

We’ve all heard the Donald Rumsfeld quote about the “Unknown Unknowns” by now. It’s easy to laugh at until you find yourself faced with a situation where an unknown unknown from a business you bought, or a project you inherited, creeps up and surprises you. Hence, that is why they “tend to be the difficult ones”

One of the biggest unknown unknowns in taking over and running someone else’s project – whether it be their code base, their old business, or even a school project – is where the former user failed to point out – either on purpose, or malice, or through sheer neglect – a few details about their project that are essential for your long term success and viability.

I would wager that it’s not even possible to remember every single detail one would need to share with a potential new business owner, no matter how small or insignificant the business project may be to the seller or buyer.

Even the simple sale of a basic, low 5 figure Amazon Associates website will have a few particular unique qualities about it that might not be properly conveyed to a new owner.

Amazon Affiliate Unknown Unknowns

Many years ago, I purchased my first Amazon Associates affiliate website to get my feet wet and see if acquiring websites as assets for a portfolio of cash-producing investments was something I would enjoy. (The answer turned out to be a resounding Yes!)

What the seller forgot to mention was that all of the tracking ID’s that were passed to Amazon when a user clicked on an Amazon product link weren’t really set in the Associates WordPress plugin where it appeared they were set. Those settings were actually overridden from a different location, leaving the sellers associate ID’s intact and mine “accidentally” overwritten.

Basically, the seller was hijacking my affiliate tags and substituting his despite it looking like mine would be used, and I would get credit for the sale.

(Incidentally, this is how Honey works; they hijack the transaction when you click “Apply Coupon” and slip their own associate ID into the mix, removing the ID of the originator that sent the buyer to Amazon in the first place. For some reason, nobody other than affiliates relying on Amazon Associates for income feels this is unethical, which I believe it is.)

Keep in mind, a broker specializing in transferring Amazon Affiliate websites swapped my associate’s ID for the sellers before transferring the site to me and didn’t even notice that the seller was still going to get credit for future sales. Trust, but verify.

At the time, I don’t even know such a problem was even possible; it was unknown to me that such risk even existed. One could argue it’s known that sellers might try to cheat you, and it’s just unknown how they will do it. Yet, as green as I was, it was unknown to me that someone would try to sell me their site and still keep their IDs in the process, and it was certainly unknown to me how to detect such trickery.

That’s the danger of being new, naive, and not researching as much as humanly possible when starting on a new venture.

Everything I read was public. Anyone could buy the same books and magazines. The same information was available to anyone who wanted it. It turns out most people didn’t want it.

– Mark Cuban on the secret to his success in the computer business

Only after days of digging into the WordPress source code (to solve a completely different problem) did I realize that this developer had set the ID’s in the child theme’s javascript, not via the plugin normally used to set these types of ID’s.

It was a bit of a magic trick – obviously on purpose – where I would change the IDs in the Amazon plugin he claimed he was using to set the affiliate IDs. However, unknowingly, those values were overridden by the javascript affiliate ID’s of his own that were still left in the theme settings. But only a certain percentage of the time, there was a rand() function that only caused this substitution to happen occasionally.

I wonder how that type of seller would trick many non-technical people? They would see a drop in sales immediately after the sale and think traffic was down 20-30% due to the seller removing a PBN or one of the many other usual downticks in income after a sale. There’s little risk to the seller, as the seller is still getting some perpetual income and a purchase price on top of it to boot.

That’s an unknown unknown that I never, ever would have thought of…until I found it. Now I know, but how many more unknown unknowns are still out there that I don’t know about?

Github Code Repo Unknown Unknowns

Could there possibly be unknown unknowns still lurking in a business you’ve been running for 5 years?

Obviously, yes, there could be…

Alerted by Dead Man’s Snitch to some issues with one of our proxies, we slowly discovered that a library we depended upon had been deleted in Github.

How could that happen? What library did we depend on – that we didn’t control – was lurking in our code?

After considerable digging, reviewing backups, and head-scratching, we realized that a prior developer that worked for us was cleaning out his Github repos that he didn’t use any more. He was interviewing for a new position and wanted to clean up his Github profile…a completely logical and sensible move.

Yet, one of those repos he was cleaning up was inserted at some point in the past into our codebase when he worked for us, but it still was called by one of our processes. Obviously, deleting it caused the problem.

The solution wasn’t too hard. We could pull back an old copy of the code and bring it into our private repo. However, what a shock to find that someone who was no longer with our project still had his hands deep within our business!

I’ve been at the helm for over five years, and a developer was able to slip in his own code into the project, leave, and still be able to bring my business to a screeching halt.

That’s pretty much the worst of the unknown unknowns.

Should I have caught it beforehand? Well, I guess so, I’m the owner, and all responsibility falls on my shoulders, the good and the bad.

However, our product is fairly distributed, and I’m not sure, even if I knew that there was code in our files that we didn’t fully control, that I could have found this particular situation.

There still may be some remote library reference that could go offline in the future and catch us completely flat-footed.

The only known thing about that situation is that it will cause a problem at the worst possible time because that’s how it always happens. That I do know.

Challenges for Non-Technical Buyers

I believe that one of the hardest parts for non-technical buyers of technical/online businesses is that by not knowing the nuts and bolts of the underbelly of the business, their blind spots increase, and the number of unknown unknowns that can devastate your cash flow increases exponentially.

I’m not saying that non-technical people shouldn’t buy an online business, far from it, but what I do want to point out with this essay is that not knowing how to build what you are running carries an unquantifiable risk.

In many ways, I think of online business buyers, like myself, like general contractors. General contractors (GC) manage a large project from the top, overseeing resources allocation, scheduling time management for personnel and little bits of code, and taking responsibility for the results.

What I don’t see very often is a construction project with a lead general contractor who has never worked in construction on his or her way to reaching that top-level status. In fact, I would expect that all GC’s know the fundamentals of electrical wiring, bricklaying, fabricating a structure, and framing a house. When you’re going to operate a business solely based on the Internet, technology, and code, and you don’t know your DNS from your DMZ, there’s a considerable amount of risk introduced by that lack of knowledge.

If you aren’t knowledgable in the area of business you prepare to invest in, you owe it to yourself to spend some time learning about the fundamentals of technology and online companies before you risk your time, money, and reputation on a business that’s completely virtual, rarely understood by outsiders, and difficult to protect if you don’t know the risks.

I’ll do my best to help educate via sharing my experiences, but make sure you utilize every resource possible. Read books, take classes, even do a small website design project yourself.

That’s the type of focus and engagement with your future that can help eliminate those types of unknown unknown risks…

The Future – Customize Solutions Trojan Horse

I still have an unknown unknown that I have yet to solve to this day.

I purchased a business from a very skilled technical owner who had customized a considerable amount of an open-source shopping cart platform. It created really wonderful solutions for customer problems, but I always had a nagging feeling that something in the platform was there waiting for me, watching my every sale.

The whole business was too specialized, too personal, and too difficult to figure out where every piece fit without intricate knowledge of how each piece fit together and why it was done that way in the first place.

With this particular project, the seller-financed a majority of the purchase price (so he was still invested in the success of the business), and I was always concerned that if he were disappointed in how I was operating the business, he would reassert his control over the entire platform and shut me out of it. Certainly, he had left some Trojan horse or backdoor in there somewhere, right?

What would be my recourse? You can shut someone out of a software business very easily by changing a few permissions, records, or ownership details. Even if you can’t gain full control back, you can certainly keep someone from operating their business at 100% capacity for long enough that you could prevail in a hostile takeover (would that be a “takeback”?).

Was this something worthwhile to be concerned with on this project? Should I have someone looking for backdoors or a name record not properly listed for my business somewhere? Or would that be a paranoid waste of time?

Fortunately, nothing ever came of it, as the business was never harmed (as far as I know).

Yet, that’s the flip side of unknown unknowns…what if you try and know something by assuming it must exist, but it doesn’t?

One could wrap themselves in a pretty tight knot over these types of concerns, fabricated or not.

So what unknown unknowns are there lurking in your business right now?


Online Business Ride AlongWant to learn more about my journey acquiring and operating online companies, including other failed acquisition lessons learned?  Check out Online Business Ride Along, a monthly deep dive into my journey, with actual online investments and monthly P&L’s for each businesses.

Filed Under: Blog, Featured, Operating Online Business

Online Business Operations During a Pandemic – April 2020

May 11, 2020 by Michael Frew

Writing this at the end of April, we now have a full month of global shutdowns behind us, with the partial reopening of some Chinese manufacturing and small portions of the US economy.

Many businesses have rapidly adopted a delivery or curbside pickup service to try and keep the doors open.

(If you haven’t read March’s report, you can find it here: Online Business Results During a Pandemic – March 2020 Results)

April QuotaGuard and Pandemic Thoughts (B2B and B2E Customers)

Fortunately, QuotaGuard customers in April continued March’s generally unresponsive reaction to the global pandemic, with a normal level of new customers, growth in current customers, and rate of customer churn.

I made a point of responding in customer service emails that we were running the business as normal since the team was already remotely working around the United States, so the shutdown didn’t require any changes for our support and development teams.

Surprisingly, none of our customers were concerned we’d be unresponsive or working fewer hours.

In fact, I felt that April was one of our busier months. It is not just due to the usual work with customers and continued development, but also because now our offices are full-time out of our homes and since we can’t leave, we can’t really leave the office either. It felt like work was constant and never-ending.

Very few customers mentioned the ongoing business challenges, and even if they did so, it was mostly to wish us health and good fortune in the coming weeks.

Takeaway (Reemphasis): IT Departments Are Essential Businesses…*

Just like I mentioned in the March update, it’s eye-opening how business operations continue on normally for essential IT services.

I would love to pretend this is something I had the foresight to envision when I decided to work on products and services that are part of the cloud ecosystem’s infrastructure. Still, I don’t have anywhere near that level of futuristic insight.

I’ve seen new projects started this month that I would have assumed would be put off for a few months until the economic picture became clearer. Once again, the marketplace disproved some of the assumptions that I believed in heading into this economic headwind.

*…Until they are not

I’ve been developing and managing software projects through a few seminal periods in the last 30 years of seemingly non-stop technology-based business growth.

I learned COBOL for Y2k, shuffled around San Francisco following the crash of the Internet dot.com bubble in 2000, scrambled for new consulting clients during the 2008 recession, and now find myself trying to navigate the Unknown Unknowns of the 2020 pandemic.

Those prior events in my career left me with a strong level of skepticism that this downturn should spare IT spending simply because this time, “it’s different.”

It’s intellectually reckless to believe that IT spending can’t or won’t be impacted by the looming 2020-2021 recession, as those prior implosions decimated vast swaths of technology spending and tech infrastructure companies, just like mine. Yet, fortunately, so far, I don’t see it showing up on the top line or the bottom line.

That leaves me wondering, is IT investment more bulletproof today than it was in the past, simply because IT continues to be more and more of a core aspect of business continuity? Or is the momentum of IT spending just enough to push the hard decisions down the line for a few months before the bottom starts to fall out, as it has in the past?

Takeaway: Price Points Matter…Maybe?

There are many articles and people out there that constantly tell you to raise your prices, raise your prices, RAISE YOUR PRICES!

There is nothing wrong with that sentiment. Many companies have increased their prices significantly, and it has worked out for them very well.

Yet, I wonder how that is going at this very point in time.

The price points we operate QuotaGuard are a line item that’s not (yet) coming under scrutiny for medium to large-sized businesses. Many of our customers are on a subscription plan that’s not enough to move the needle to save a struggling business. Still, it would certainly be a challenge to continue operating without the service we provide for this low price point.

Still, I wonder if that would be the same if our prices were doubled what they are today.

Maybe this is a chance to raise new customers’ prices (never, ever on current customers) and see what happens? I’ll leave that as a thought experiment for myself for another time.

April Appointment Reminder (B2B Customers)

April proved to be right about where I expected it to be for Appointment Reminder based on what happened to revenue at the tail end of March 2020. We were down 8.7% for the month on the top line. Due to some cost rearrangements I’d made a few months ago, the bottom line wasn’t hurt quite as bad, which is very fortunate considering revenue is down around 18% in six weeks.

I hope that there is some stability coming in May as two factors converge; small pockets of business reopening and the exhaustion of the number of businesses that need to cancel because of the pandemic. Only time will tell, of course.

Opportunity from Adversity

One opportunity that will occur in the future is that more companies will need appointment reminder-like services that didn’t need them before.

I doubt we’ll be able to sit in a barbershop for an hour before being called into the chair. The world’s barbershops will now need to take appointments and text their customers when it’s their time to come to get a trim.

This could open up a new market for businesses that never needed appointment reminders previously.

To take advantage of this, I’ve written targeted ads for Adwords, put up landing pages addressing this need for new companies, and will monitor their performance over the next couple of weeks to see if there is an uptick in need for new services in the future. I’ll pass along what I learn in May 2020.

There is Heartbreak. This Is Not the Same Type of Churn

Churn is the enemy of a SaaS-based business. Every churned customer is lost long term revenue, customer interaction, and mutual support.

I get upset whenever a customer cancels on me. I take it personally, even though I shouldn’t. It’s just business; it’s not me.

Yet, I feel they are saying my business that I work hard on every day isn’t worth their support anymore. It can influence my entire day. Sometimes I’m in a bad mood, and I can’t remember why. Then I think about it, and it’s “Oh, that’s right, a $5/month customer canceled this morning…” and it ruins my whole day. Over $5, that’s how much it affects me.

The churn that’s happening now does not have that same feeling. The churn now is one of sadness and empathy. That’s one more business that is scrambling to survive. Our monthly costs are low, so if $49 is the difference between a business surviving or never reopening, I know it’s getting desperate very quickly.

A majority of the people we meet in my life are not business owners. They are W-2 employees, independent contractors, bartenders, retirees from the public sector, etc. Very few of these people understand the incredible toll it takes to start, operate, and sustain an ongoing company.

I believe running a business is one of many noble professional callings because it is difficult to be successful by continually creating and delivering value for your customers for a long time. It is hard. Many business owners do it because it is hard.

Therefore, it really pains me to see owners losing all they have worked for, forced to lose their business, and no way to fight for their own survival.

I do hope I see every customer come back at AR because that hopefully means their business survived and will continue to prosper. We need more business owners running companies, delivering services, creating jobs, and propelling the economy forward. Hopefully, every prior AR customer – whether they return to us or not – is operating again soon and continues that mission for our global community.

It Could Be Worse. I Could Have Tried To Be A Tech Unicorn

It’s tough to complain that AR’s income is going down during these extraordinary few months of adversity, considering we have not had to lay off any staff and are vastly more profitable than AirBnB, Uber, and WeWork combined.

None of those companies ever seriously planned for adversity, and they are now suffering for that lack of foresight.

I won’t say I saw any of this coming, but I know I try to build and manage my businesses with a lot of flexibility to adjust to the eventual adverse market conditions. Ask my wife. She knows I’m always planning, “What if this or that goes bad…then what?”

Tech unicorns are only (sometimes) successful in a perfect environment where investors continue to give them cash to stay afloat.

This is no longer that environment.

Takeaway: Never Operate Your Online Business Like What You See From Silicon Valley

Don’t ever mistake Silicon Valley’s hubris for how a real online (or any…) business should be run.

Frankly, I only study their business actions to learn how not to run a sustainable business. Ignore profit and rack up losses to grow top-line revenue? Over hire because we’ll need them “someday…”? Take on debt to build a product nobody asked for in the first place?

Unicorns can sometimes get away with little marketplace education, poor business acumen, and out of control execution, but never assume you can do the same in your business.

Ironically, behaving the opposite of how tech unicorns act allowed my companies to weather this storm better than the most well funded, professionally advised, industry experienced, and over-promised companies from California.

For that, we can call April a manageable, yet also sadly disappointing, month. One that we survived.

Now, onward to the challenges looming ahead of us for May…


Online Business Ride AlongWant to learn more about my journey acquiring and operating online companies, including other failed acquisition lessons learned?  Check out Online Business Ride Along, a monthly deep dive into my journey, with actual online investments and monthly P&L’s for each businesses.

Filed Under: Blog, Operating Online Business, Pandemic Updates

Online Business Operations During a Pandemic – March 2020

April 1, 2020 by Michael Frew

The Coronavirus pandemic has closed a majority of economies, banned retail and in-person businesses, and brought the global economy to a halt in a manner unlike any experienced before by anyone alive today.

I’m pretty sure a lot of business owners learned a lot about how stable, solid, necessary, and vulnerable their businesses were in the first few weeks of March.

At the start of the closures in early March 2020, I’m managing two online businesses (and a few smaller projects) with a few thousand customers spread as far across the globe as possible.

Some customers are operating directly in the most affected spaces, like retail, travel, and entertainment. Other customers are working harder than ever as more and more of their business success is dependent on their continued – and increased – online productivity.

For a business-to-business company focused on a set of products and services, I’ve seen both sides of this issue play out in various ways in the first month of the shutdown.

Hopefully, I can capture just a few down on paper for posterity.

Initial Reaction

Like almost any business owner the world over, there was some initial disbelief that the solution to a global medical crisis was to shut down the economy of every country on the earth immediately.

The jury is still very far out regarding whether heeding this extreme reaction was advisable, but that is what we collectively did, so we have no choice but to move forward with the situation we have been given.

Once it was obvious that governments would close all non-essential businesses that had a face-to-face interaction component, thoughts of how to survive became paramount for everyone invested in the ongoing viability of their companies, businesses, and their own livelihoods.

I can only speak of my small visibility into the businesses that I manage, so I wanted to write about what I experienced during the months that this shutdown continues in more of a journalistic fashion.

So here goes nothing!

First Month for QuotaGuard (B2B and B2E Customers)

The month of March 2020 seemed to be the longest in human history. I thought it was just me until I saw multiple cartoons and memes pointing out how painfully long March felt to everyone.

Obviously, it was a busy few weeks trying to prepare for the unknown of what was about to happen.

Fortunately, as of March 31st, not a single QuotaGuard customer has written us using any variation of the phrase “because of the pandemic, we are doing X, Y, Z…” which is surprising. In fact, the month of March continued to be business as normal.

Overall Picture from QuotaGuard’s Point of View

In total, for March, I didn’t see cost-cutting at a level that would cause me concern at this early phase of the pandemic.

Sign-ups continued at a normal, to even a slightly accelerated pace. Since QuotaGuard is part of the overall move to a more cloud-based infrastructure focus, the business may be benefiting increasingly from the overall growing need for cloud services occurring from businesses moving to WFH across the globe. But that’s just a guess, considering no new customer has said they are starting with us due to current events either.

In fact, if I weren’t aware of what was going on outside, I’d have no idea – based on my interactions with the QuotaGuard customer base – that anything had changed in the economy.

One Customer Example of (Possibly) Cancelling Due to the Closure

There was only one prominent larger retail store chain that I saw go from a large plan to $0, yet they did not cancel their subscription.

Not canceling a subscription is usually a good sign because when customers cancel a subscription, they lose all their configuration, historical data, and integration within our infrastructure.

But, if a customer needs a short pause, they usually switch to a lower plan, but they don’t cancel.

Maybe they are moving their integration from staging to production, or maybe they intend to pick back up on a new project again soon. Therefore, I always look to see if a customer cancels or downgrades, to see if they are churning or just pausing for a bit of time until our service is needed again.

In this particular case, I saw that company closed their entire national chain of stores the day before they downgraded with us, so I’m hoping once those stores open back up, that account will go back to its normal level of usage, and we’ll be back in business with them.

Takeaway: IT Departments Are Essential Businesses

One lesson that I learned from this month is, “IT departments are ‘essential businesses,’ they need to keep operating, continue to pay their vendors, and operate as if the business is running and will continue to run in perpetuity, even if their customer-facing business is closed.”

In mid-March, I wrote on IndieHackers, “If a national lock-down occurs, will customers cut off “in progress” projects and cancel current subscriptions…possibly to pick them up again in the future? Or will most tech companies (by far our biggest customer segment) continue to work, deploy, and create new projects from remote locations?”

I guess now I know a bit more about the answer. I’m never going to feel 100% confident we’re going to sail through this with no issues, but I’m feeling better as of the end of March.

If you’re trying to think of a product or service to build, buy, or have designed for you, having an offering that is integrated into a company IT department might be a good idea, as IT never closes (even if the Internet is down for days, the IT department will still be working).

No matter what is happening globally, IT departments’ tools are likely to continue to be needed and/or increased during periodic changes to normal business operations, such as pandemics. It’s not a bad idea to be selling those tools as a long term business plan.

Takeaway: Not All Customers Quit For Financial Reasons

I spent one Saturday morning at the end of March compiling a list of customers who churned in the preceding four weeks, assuming that some of them did it for financial reasons. I emailed each of them saying that if they were having cash flow trouble, write back, and we’ll figure out a way to make it work for them during the pandemic time frame.

Not a single one wrote back, not one!

Those customers all left because they no longer needed the product. Not for financial reasons that would have been strong enough from my offer to help to save the project they were using QG for in the first place.

This really surprised me, I thought we’d get more of a response, but alas, that’s what I got! A bit of a head-scratcher, for now. I haven’t given up on some “win back” campaign, but so far, it looks like that’s not going to be a very successful endeavor.

First Month for Appointment Reminder (B2B / B2SMB)

(At the time the first half of this was written, there was no shutdown order in the USA yet, so I’m keeping it in there to show what my thoughts were at the time and how they changed through March 2020)

Appointment Reminder is the type of business usually in higher demand at this time of the year since it is tax return prep time. That demand causes an increase in CPA / Tax Prep company customers returning from years prior.

What I obviously didn’t expect was a pandemic at the same time.

With the extension of tax filing dates, I could see the CPA revenue stream continuing a few more months out than usual, which is obviously good for business. Yet, some CPAs also wrote in saying, “they’d be back in a few months,” implying they were going to take some time off until taxes are due again in July.

But that small bump will likely be dwarfed by the pandemic and the public/government reaction to it in the short term for Appointment Reminder.

AR is predominately a business that customers still need to keep setup and running during a short term loss in business velocity. At the beginning of March, I didn’t see a wave of cancellations, nor have I seen a diminishing number of signups vs. a typical March. Yet, many of our customers are SMB’s and a prolonged (by which I mean 4 weeks plus) shutdown of their business will likely cause bankruptcies for some of them.

It is important to point out that AR only runs for businesses in the USA and Canada, so any economic changes in those two countries will have a heavy impact on AR.

By the end of March 2020, we saw about a 10%+ pullback in customer billings almost exclusively coming from customers who had to cancel due to their businesses’ shuttering.

Almost all of them said they would be back as soon as this was all over, but that’s only if they are all still in business.

Many of AR’s customers are small businesses, nail salons, barbershops, yoga studios, exercise class locations, etc. Obviously, these are the types of businesses that everyone worries will fail before the economy can get back to a respectable level of traction, as they likely have a high fixed cost and little flexibility to survive a sudden cessation of income.

I imagine April will see the same contraction level – if not an accelerated amount of closed or postponed accounts. Obviously, that hits our viability as a going concern as well, as fixed costs are tough to get out of quickly.

Takeaway: Software Margins Save Your A** in These Situations

We all know that software has a higher margin and much more of a variable cost structure (I’m generalizing a lot there. Bear with me, as I realize some online businesses aren’t this fortunate), and with less usage, our costs will go down a bit. I’d guess maybe 2-3% reduction in costs for every 10% in lost revenue.

Compare this with the total loss of business for an Amazon store selling travel-related products, or an e-commerce business with no recurring revenue structure as part of the income plan, or an FBA store that either has a warehouse full of product they can’t sell or lost its Chinese production pipeline for a few weeks. Each month, those types of businesses must find new customers, convince prior customers to buy again, and struggle to keep their supply matching demand.

When you’re working with software products and services – especially those with a recurring revenue model and high margins – your business product is likely integrated into the way your customer makes money from their customers. Because of this, you may find that software businesses are a more stable bet than most other online businesses when times get rough in contraction periods, recessions, depressions, and even pandemics.

The higher margins help your business weather the storms because even if many customers need to cancel, your margins can keep you in the black through a prolonged storm… and even the occasional global hurricane.

Like many small businesses, if AR can survive to the point where the economy is allowed to function again, and most of the customers come back, it will survive through the pandemic. If a loss of 40-50% of customers is permanent, then AR would still be profitable from its margins, fun to operate, and continue to help SMB’s recover in the future as the business environment gets back to normal.

End of March Thoughts

This will continue to be a tough time for non-governmental employees, gig contractors, and small business owners in particular. I am afraid that governmental steps to curb real and perceived threats to public health and safety will come at the expense of those three groups almost exclusively when the dust settles (hopefully) in a few weeks.

The best we can do is move forward, accept the things that we can not change, and double down on the things in our lives that we have control over and manipulate for the better.

The ongoing viability of my type of software products and services, especially ones with a strong recurring revenue / SaaS component in the revenue model, further highlights why so many businesses are moving rapidly to a subscription-based economy.

Just imagine if my local car wash had created a monthly subscription-based service before this pandemic (I kept telling them to do it)? They would likely still have many customers paying for the subscription, even though they can’t get car washes right now.

I’m still paying for my gym membership, not because I can go to the gym, but because I know it will help out the small gym owners get through this difficult time and open soon. I’d be paying my car wash too, but they never opted to consider a subscription-based business model.

Looking ahead…April 2020 will have a full 30 days of lockdown, and those results will prove to be very interesting, I’m sure.


Online Business Ride AlongWant to learn more about my journey acquiring and operating online companies, including other failed acquisition lessons learned?  Check out Online Business Ride Along, a monthly deep dive into my journey, with actual online investments and monthly P&L’s for each businesses.

Filed Under: Blog, Operating Online Business, Pandemic Updates

Who Am I?

Moving to Grand Cayman
Acquisition Entrepreneur (a hoity-toity way to say I get really excited about buying and running companies) based out of Las Vegas, NV.

I write essays about my experiences as a buyer of online businesses at MichaelFrew.com, steward the The Best Damn Newsletter for Buying Online Businesses, and provide back stage insight into running a real online business portfolio at Online Business Ride Along.

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Online Business Ride Along

Online Business Ride Along

Online Business Ride Along is an all-access backstage pass to learn how I manage my 7-figure portfolio of Internet-based businesses. I share exactly how I’m operating these companies, the monthly P&L’s, and all the behind the scenes activities of managing multiple online companies.

If you ever found yourself saying “I’ve spent years taking courses to learn more about online business, but none of them explain what is it really like?”, then this is your answer.

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