How Big Changes Mid-Year Led To The Ultimate Revival [34% ARR Growth]
This is a follow up story for Morningscore. If you're interested in reading how they got started, published almost 3 years ago, check it out here.
Hello again! Remind us who you are and what business you started.
Hey, I’m Karsten Madsen, co-founder and CEO of Morningscore - an all-in-one SEO tool that is built like a computer game.
Thanks for asking me for an update since your first interview from Dec 2021
I can already tell you things have been quite wild in 2022. And not really how I expected.
We grew our ARR by 34% to $575k in 2022. Far from our target, but still solid considering everything we went through.
Tell us about what you’ve been up to. Has the business been growing?
For the rest of 2022 we hit one record after the other on revenue, product improvements, happy customers, and happy employees.
Overall, Morningscore is a healthy business with a strong product, happy clients, and steady growth – despite a tough world situation that also challenged many of our customers.
But there is a bit of trouble in paradise.
2022 was a year of too many undelivered promises. We set big goals and did not deliver.
The goal was roughly 100% growth. And we achieved 34%.
One big failure was our online ads. Facebook and Google mainly. We poured a lot more money into that lead machine and got almost the same results as before. Our CAC (cost of getting a customer) skyrocketed.
In April our CAC was getting dangerously close to the LTV (lifetime value of a customer).
This was a near disaster at the time since we were actively looking for investors and had promising talks.
It’s a bad cocktail to have less growth at higher costs and ask for money.
Which is why 2022 was also the year of consequence.
By mid-2022 everything had to change:
Sadly we had to let a part of our team go. It hurt.
We went from 13 employees to 9.
No more investor hunt. From now on we wanted to reach cash flow positive, with a little money injection from our current angel investors.
And I had to look inwards and change. It’s my responsibility that reaches our goals. And I failed.
So I made a big change, I believe, for the better. I trust myself and my judgments now. I stopped listening to “experts” and let myself be ruled by others. I took more control of this company. I don’t like a dictating leader. But I also saw that I have been too weak before.
The team got smaller. No “middle management” left. Just a strong independent team that was finally allowed to run after goals without blocking meetings and protocols.
The goals completely changed too. They were set by me and the team. No external influence.
And what happened next was almost magical.
For the rest of 2022, we hit one record after the other on revenue, product improvements, happy customers, and happy employees.
I felt confident we would do fine. But I did not expect such a revival!!
What have been your biggest challenges in the last year?
As I mentioned above, our online ads strategy completely tanked. So a big challenge was getting our marketing and sales costs under control to run a healthy business again.
We realized that ads were never our passion or best strategy.
I also learned just how much money it costs to run a Facebook Ads engine:
- You have to pay someone to set it all up
- Then you have to pay someone to constantly optimize things and add fresh ads
- On top of that you need to produce new high-quality content and graphics/video/etc CONSTANTLY! This is probably the biggest cost
- And finally you pay Facebook for running your ads
If you combine all 4, this can quickly become a very expensive machine to run. At least it did for us. Labour costs in Denmark are not cheap.
We had an ad budget of $10k per month for 2 markets, Denmark and Germany. But almost another $10k in other expenses (see items 1-3 above).
We solved this challenge by simply stopping everything and going back to what we are good at in SEO
What have been your biggest lessons learned in the last year?
To follow my gut instinct religiously. And to take in less external advice. I still listen a lot, but only to my team and close mentors that I trust.
A lot of the mistakes made in 2022 happened because we followed someone else’s ideas or advice.
It might sound arrogant, but I do believe it is the truth.
Of course, I am ultimately to blame for not reaching our goals.
I also learned:
- We need to do fewer things - and then do them better.
- Product Market fit is still not fully there.
- Getting things done is the ultimate superpower. Process and strategy work can be killers to productivity in a startup.
What’s in the plans for the upcoming year, and the next 5 years?
In 2023 we have one goal to rule them all:
- Reach the promised land of cash flow positive
- Cutting more costs is not an option. The only solution is to make more money
- The magic number is $70k in revenue per month
We also want to reach:
- 1000 total paying customers
- 1000 trials / month
- Max 3% Churn
How will we reach those goals?
Growing our SEO is the answer. So getting a lot of relevant juicy traffic from Google.
Looking into the future, like 10 years down the line, the goal is to become a top-3 SEO tool.
That’s very ambitious, both on the product side, and also on business size. The top 3 tools are currently all making around $100M / year.
We want to achieve that by religiously improving our product and customer experience.
And by creating the coolest SEO tool the world has ever seen.
Some of our customers are so kind to say that we are already there. But there is still a lot of potentials left to fulfill. Especially for our more advanced users.
And the gamification part can become so next level!!
Our product release videos are celebrating our gamified spirit:
What’s the best thing you read in the last year?
I did not get to read much last year.
Shape Up from Basecamp is probably the one I remember most clearly, and it influenced how we prioritize product development. So I would recommend it to any software product team.
Advice for other entrepreneurs who might be struggling to grow their business?
I think if you don’t struggle at all, you have gotten too lucky. And then you might fail even worse once times get just a bit rough. So struggling is a default state in my experience.
Michael Seibel from Y Combinator said it well here:
“The good times feel bad and the bad times feel bad”
A fresh experience I had, is that summarized takeaways or learnings from others are not really that useful.
What helps are “micro learnings”. I made a little video about that on LinkedIn.
Maybe that is why Starter Story has success. They encourage founders to share their concrete micro-learnings instead of general advice.
Where can we go to learn more?
- Our website
- My Linkedin (very active)
- My Twitter (became active recently)
- Company Youtube
- Company Facebook
- Company Instagram
If you have any questions or comments, drop a comment below!
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