Bootstrapping to $15 Million: David Braun, CEO of TemplateMonster (Part 5)

David Braun: The next challenge was when the customer acquisition cost was starting to double every year. Since we were now working with the platforms, there were a few challenges to initiate the major change in the release. In a year, we were producing 3,000 to 4,000 products. We had to make a decision on whether to update the old products or create new products with the new version. We decided to create new products because the labor cost associated with the upgrade is almost equal to creating a new product. It also brings in a lot of new unplanned extensions. The main challenge was customer acquisition cost.

We started to think of how we could bring new customers at a lower cost. We tried email marketing. We tried social media, which was not very popular by that time. We also tried paid search, affiliate referral banner ad, and cost promotion with the bigger partners. We stopped thinking that only word-of-mouth publicity could save the business. We still continued to play with those paid app channels, but you have to find a way that people will start talking about you. Our recipe was support. Before that, support was just an expense that we wanted to minimise this cost as soon as possible.

Nowadays, we see that support as not an expense but rather a revenue stream. We hired much more people to support and started to think about the ways people in support will not only support the customer, but think about how to exceed the expectations so people would start sharing with their friends. Now, the support drives about 25% or the revenue for us. Right now, the competition is hundred times bigger than it was in 2005, for example. Today, we have more than 150 competitors. Some of the competitors like Envato actually overgrew us 10 times because they used a more innovative marketplace model. We’re still like an app in the App Store. They are like Android where everybody can join and start selling online.

Sramana Mitra: What is your revenue level now?

David Braun: It’s about $15 million.

Sramana Mitra: Excellent. Is there anything else that you want to add to your story?

David Braun: We started to think, “How do we compete in this saturated market besides the support?” We are the only company, by the way, in the template market that provides 24/7 support. We spent a lot of money but it paid back. Back in 2004, our main advantage was a standard type of business. We developed SOPs for every business process in the company. We started to do the same right now for the products because with this rush of new platforms appearing every year, it has become much more harder to maintain the quality standards.

Our main priority right now is actually to standardize the processes and products so we can provide the highest ever support standard to the customer but still minimise the support cost. Every year, we have to increase the support cost by 25%. If you see the trend, at the end of the day, it would become unprofitable. That’s why we decided, “The main challenge will be how you manage the support cost but not damage the support level.” This is only possible if you standardize the product and production process. It’s much harder because we are not an in-house production anymore. We’re a global marketplace and loads of different people and companies are doing products for us.

Another way out for us is actually to increase the conversion. We were always enjoying one of the highest conversion rates in the industry. Right now, it’s even higher. Our global conversion rate is about 7.5% right now including India.

What I would want to share with people who want to start a business is number one, you don’t have to have any fears. If you really believe in it, just do it. Do it 24/7. In my first two years in this business, I was working 18 hours a day. My family didn’t see me. After two years, you understand if it’s worth it or not. Second lesson would be you would never build a business that will stay as it is. It would always be evolving into something different and you have to be ready. You can never predict what would happen. Nobody predicted that Flash would die. If you are not ready for these major shifts in your business, you’d die.

The third lesson will be if you don’t build a team of at least five to six managers who are thinking the same way as you are, you are dead no matter what business you do. The team is the key asset that you have. You can always find the financials. You can always find partners who would do the business with you in terms of cross-promotions and cross-selling, but you won’t be able to do it if you don’t have a good team.

Sramana Mitra: That was a very interesting story that you told. Thank you very much. 

This segment is part 5 in the series : Bootstrapping to $15 Million: David Braun, CEO of TemplateMonster
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