How We Doubled Revenue By Switching To A Subscription-Based Model [Update]

Maanda Mulaudzi

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Published: August 14th, 2022

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Maanda Mulaudzi

Founder, Common Sense Holdings

$10K

revenue/mo

Founders

Employees

Common Sense Hold...

common-sense-holdings.com

from

started June 2019

$10,000

revenue/mo

Founders

Employees

Discover what tools Maanda recommends to grow your business!

Discover what books Maanda recommends to grow your business!

Principles: Life and Work Ray Dalio

📗

The Art Of War: Sun Tzu: 9781599869773: Books

Want more updates on Common Sense Holdings? Check out these stories:

1. How I Left A Professional Skateboarding Career To Start Developing IT And Mobile Solutions (2020) ➜

Note: This business is no longer running. It was started in 2019 and ended in 2023. Reason for closure: Shut down.

This is a follow up story for Common Sense Holdings. If you're interested in reading how they got started, published almost 4 years ago, check it out here.

Hello again! Remind us who you are and what business you started.

Hello, my name is Maanda Mulaudzi and I am the founder of Common Sense Holdings. We are a startup based in Johannesburg, South Africa and we have been in business for just over 2 years.

Common Sense Holdings is a technology solutions provider that specializes in mobile apps, web-based applications, and IT consulting. Our main focus is on helping businesses improve their IT business operations.

What makes us unique is the rapid prototyping tools we use to have quick turnaround times.

We are currently in the development of our new product which we will release to the world by the end of the year. The product is an online exam monitoring tool that uses AI to detect if students are cheating.

Tell us about what you’ve been up to. Has the business been growing?

In the last couple of years, we have been focusing on revenue growth (working capital), and also something super important to me is the culture of the company. The main thing we have been looking into is how the company scale without losing the essence of the company (the soul).

With regards to the growth of the company, it's been an epic journey both for myself and my co-founders at the same time for the employees we are currently onboarding. To be honest it's been a journey of self-discovery and also learning how to deal with different personalities. The rate of business growth has been amazing, as we have managed to double the income while still keeping our expenses the same.

Creating an open company culture with a focus on team collaboration while adding value is the core of my focus for the next 10 years as we grow.

Our main focus for the past year has been trying to move from a very big client-facing company (consulting services) to a subscription-based business while trying to enter new markets worldwide but mostly in the African market.

What have been your biggest challenges in the last year?

The first big challenge we have experienced in the past year is finding developers who are willing to join us, even on a part-time basis. The main reason for this is because we are not yet at a point where we can offer large salaries that people can get at larger corporations.

The second part is that due to the fact we are still a start-up people feel that job security is still something of an issue. I understand that people need to pay bills etc so they are not willing to take risks. In a way, I understand as from a young age most people are told to get a job and move up the corporate ladder which is funny to me personally.

Let me put it in perspective in a medium size company of let’s say 1,000 employees only one person can be the CEO meaning the chance of you being a CEO is 0,1% which is pretty low but yet people still believe they can do it. The thing is if you join a start-up in the early stages of about 10 employees your chances of being the CEO is about 10 % which means you have 100 times more chance of becoming the CEO in the future and a short period than in a larger company.

The way we have worked around the recruitment issue is to have a grad and internship program, as the younger employees tend to have more ideas and energy while we can afford them which is key to our growth strategy. The second thing we have seen using this method is they get a chance to explore and do more within the company which is something you don’t get to do at larger companies.

The second major challenge which I've been working on a lot is the development of a company culture where the employees and everyone embraces our company values and culture. This is so important to me and the founders as we all experienced the corporate culture of just more profits without any consideration of the human side of people. We feel that people connect more with their work if they feel two particular things:

The business culture is one in which every employee has a voice and their ideas are heard and also discussed. This means that employees are allowed to criticize things that a company does that do not work and give the power to change them. Essentially treating employees as also founders and decision makers within the company.
The second and most important is that employees feel that the work they perform is meaningful and aligns with their personal long-term goals. Of course, this might not always be the case but we try to align the employees to the correct type of work that will get them mentally stimulated.

Hence creating an open company culture with a focus on team collaboration while adding value is the core of my focus for the next 10 years as we grow. This is important as I don't want the company to become a corporation with no soul. I created the term #togetherstronger as our core company motto. The motto is designed to encourage everyone to work together as a team. We will be able to accomplish way more and respect each other.

Our main goal is to launch two of our subscription-based products as this will help us transition from a consulting business into a product-based business.

What have been your biggest lessons learned in the last year?

The first thing I have learned especially with a client-facing business is to always underpromise and charge the correct rate for your work. I think a lot of small businesses tend to over promise and under charge to get business but it leads to the following issues:

The client will expect very low prices for a large amount of work which will cause the business to lose money while the time spent to complete the work will be the same.
By overpromising, you're setting yourself up for failure as small businesses do not have the capacity and resources to compete with large companies. The second part is you will lose your reputation.
The final thing is that as a small business you have the flexibility to move quickly but at the same time due to the limited resources you should not make tight deadlines. I have learnt that it is fine to leave money on the table as tight deadlines will make you overwork and eventually burnout is inevitable.

The second most important lesson I have learned is that being an entrepreneur has its advantages and disadvantages. The big advantage is pursuing your dreams and trying to find happiness in the work you do. These specific advantages come with a lot of sacrifices as you generally work between 10 -16 hours a day to get the work done.

On a personal level, I view the sacrifice as a moral obligation to my dreams and ambitions. The problem with big goals is that it takes time to archive them hence most people give up. I have developed a strategy to overcome this by setting daily goals rather than big ones. I call them micro-wins and they are essentially daily goals I have to meet for me to reach yearly targets.

Here is an example, let's say you want to generate one million dollars of revenue a year that is a lot for a small start-up. Most people will look for one deal that will make them money and in most cases as a small business, you will not find people trust you or even willing to give you the sort of money in one go. But, if you take it from my personal experience and perspective you do some simple math and the following is how you can archive your 1 million dollar target by using micro-wins:

The average person works about 267 days a year so you want to find out how much money your business needs to generate daily to reach 1 million dollars.

Daily Revenue = ($1,000,000)/(267 days)

Daily Revenue = 3,745 dollars per day

So after we did the simple math we now know your business needs to make $3,745 per day which is a more reasonable and achievable target. This would be my daily goal or micro-win, so if my business generates that amount of revenue on any given day I know I will reach my yearly goal. This method has worked amazingly well for me and also given me a more focused way of working which has been great on a personal level too.

The final lesson I would like to talk about is personal development which has helped me and the business. I always feel people tend to only focus on the number side of being an entrepreneur but another side is personal growth. So I made a list of development goals that I would like to work on this past year and the following are my personal development goals.

Accountability
Humility
Self-awareness
Kindness
Live every day and enjoy it like it’s your last day on earth

What’s in the plans for the upcoming year, and the next 5 years?

The next five years are going to be wild and interesting. The first thing we are planning for is how to run a small business during a recession as we all know this is coming or already here.

Our way is going to see how we can navigate and grow during a time of difficulty. The way to believe this will be done is to ensure that we are always lean and ensure that we add maximum value to the customers. The value to customers is the only way you can keep your business running and alive.

The second part which looks into the future of the company is that we are planning to go more into new markets and businesses. The main goal is to have launched two of our subscription-based products and have them up and running as this will help us diversify from a consulting business into a product-based business.

What’s the best thing you read in the last year?

I must be honest, I am not the biggest reader and prefer audiobooks as I can listen to them while I work. I have recently read The richest man in Babylon. This book has changed the way I view money and how I should use money on a personal and business level.

The book talks about how you should distribute your income and give you the way you should do it. So long story short the manner you take care of your income is fairly simple and I am sure most readers know but I will break it down from a business perspective.

The first rule is that 10% of all income earned by the business on a monthly basis must be saved in a simple savings account, I like to call it the rainy day fund.

The second rule is that your business operating expenses should not exceed 20% this must exclude salaries. This is important as this means that don’t advertise for the hell of marketing, you need to find other ways of driving business e.g network events, LinkedIn is good for this and also simply put in the hours in the email game (old school but still works)

The third rule is the business needs to have other investment sections. So in my company we take 20% of the monthly income and invest it into the following type of investment vehicles;

Retirement fund for all the partners and future employees
Unit Trust this a nice stable investment and has about 7-9% annual growth which after 10 years will reap the rewards (please note if people are telling about 30% returns every year be careful)
Investment funds are also good. We generally use about 5% of the 20% on a monthly basis on investment funds and generally we say this money you can lose. This is important as this money will be invested in aggressive and risky funds but will not break the business. The great thing about this strategy is if the funds do well you will be able to get a great return but if you lose business goes on like normal. I call it a win-win

The most important part about the third rule is this is a long-term game and one should not look at it as a quick win but a long term general strategy. The idea is to create capital and funds for future projects while creating stability in the financial position of the business. The following is a graphical view of how to invest the 20% of the monthly income that will be used for investments.

The fourth rule is to keep your salary expense to 40% of the monthly income as this is one of the biggest expenses in a business, especially a start-up. We generally have a rule of thumb that all employees and funders need to generate about twice their annual salary otherwise they are not worth it. It might seem a bit strict but we are a company that would like to show profits while growing especially in the early stage instead of looking for investment from other people or VCs.

The fifth rule is that 10% of the monthly income must be spent on either research and development of new technology or getting better equipment for the company to help generate more income or be more effective.

Fund Allocation for Investments for your business

If your business manages to stick to these key 5 principles you find the business will be able to succeed in both recessions and booming times. This is all a matter of looking at the long-term view and being able to enter new markets using the business capital.

Advice for other entrepreneurs who might be struggling to grow their business?

I think one of the reasons entrepreneurs struggle with growth is the lack of patience and the inability to trust others. This is very important as in the beginning you will not be in a great place and also will be clueless about how to grow. The funny thing about this most businesses struggle with scaling a business is it depends on a lot of factors from the capital, human resources, etc but the biggest one is fear of failure.

I would like to start with the fear of failure as this is what stops entrepreneurs from scaling. In my experience, this starts from caring about what people will say if you fail. This is something I have been dealing with lately and what has helped me is understanding my fears (insecurity) and lack of belief in myself.

The funny thing is a met an old guy (he was an established businessman) at a bar about a year ago and we had a chat and I asked him two questions:

How do you know if your business will succeed
How do I scale my business

So for the first question, his advice was the following; be humble and work as hard as possible while making sure your family and health are intact. Then he went on to tell me about a Japanese philosophy called IKIGAI.

The basic principle of the philosophy is to find your purpose in life and follow through with it. It makes you start thinking about yourself and your goals which will force you to be self-aware of yourself and your values, for example, how do you define success is it more money or waking up and doing what you love every day on your own terms.

In the age where social media has painted a picture of success, one must be careful of what and who they identify with as this is very important. After I had that talk with him, I started asking people this question: If you knew you could not fail, what would you do?

This question always catches people off guard as it gets people to start thinking about their purpose/meaning in life. The funny part is most people always say they want money but never can tell you how or what they can do to get the money. After studying the philosophy I realized that a successful business to me is creating happiness for all the people who either work for the business or our clients as this is my Northstar.

The following is an image of what an Ikigai is. I hope it will help lead all struggling entrepreneurs to start using it, as the answers are within you and you can use it as a framework.

The second of how to scale the business is a tricky one but the advice he gave me was the following. The reason why small businesses struggle is because the founder tends to not want to delegate the work and pay other people to do certain things in the business. The reason is that they either say that it costs too much or don’t think the employee will execute the job.

We have learned one thing that we hire fast and fire fast as both parties are wasting time. It might seem very hard but in the game of business you have a limited amount of chances and you need to be comfortable being uncomfortable as this leads to growth personally and business-wise. I don’t like to fire people but I have to always put the business first and the rest is just noise.

The second part of the question is scaling can be done in two ways: either get capital but the downside is you lose control of the business or my preferred way is slow and steady as this allows you to learn more. I know it is hard to go slowly in a world each day you hear of a new unicorn but like I say I started an Edutech business to help children and happiness is the main goal the rest generally falls into place.

The reason I have focused on happiness as a key company matrix is that happy people produce better work and have better lives in general. I get this from a quote my father once said to me. He said, “you can buy an expensive watch but can you buy the thing it is telling you”. This has been something that I have taken forward in life and happiness is so expensive that no shop can sell it and it should be something that one should think about while on the entrepreneur journey. I have added a video we show to all our employees and always helps me remember why I started this business.

Are you looking to hire for certain positions right now?

We currently looking to see if we can get some freelance full stack developers for some projects and also a business analyst (more of a junior position), so if anyone is interested they can connect with us via our website and fill out the contact us form.

Where can we go to learn more?

If you have any questions or comments, drop a comment below!