DropSend Monthly Profit
Well, here we go!
How much profit does DropSend bring in each month?
- Revenue: $9,041.81 per month (and growing by 8.6% per month)
- Costs: $2,100 per month (Servers at 365main.com + maintenance)
- Profit: $6,941.81 per month
The above image is from our new stats package that we just installed.
Predicted Revenue Growth?
So how fast is Dropsend revenue growing? A lot :) By the Dec ‘07, based on very conservative estimates, it will be bringing in $21,000+ per month.
The extraordinary thing about this growth, is that we do zero advertising for DropSend. This is purely viral growth. If the buyer of DropSend spends a reasonable ($10K?) on advertising, it should easily double those revenues.
So why are you selling?!
Businesses are built to be sold. Some take a long time to build and sell, some take less. We feel it’s time to capitalize on our initial investment. The timing is perfect for us.
Let me be clear: Carson Systems does not need cash - that’s not what this is about. We don’t have a cent of debt and are profitable as a company.
This might be jumping the gun, but based on this what is your valuation of the worth of Drop Send?
Comment by John — November 6, 2006 @ 7:02 pm
good luck with the sale! i’m curious to see where the offers are at in terms of prices (if those can be published that is).
Comment by paul — November 6, 2006 @ 7:42 pm
Ryan -
What is the stats package that you’ve just installed? Care to share? That looks great!
Chris
Comment by Chris Schultz — November 6, 2006 @ 7:57 pm
A “normal” valuation would put this at around $325,000. But in this crazy buying environment, who knows? This would be a good opportunity to see how big the 2.0 bubble has actually gotten.
Comment by Erik — November 6, 2006 @ 8:57 pm
DropSend goes ‘behind the kimono’ to sell itself…
DropSend is another in a long line of online sites that lets you send large files, easily. Instead of having to worry about email size limits, dropped connections, or technical FTP stuff, you register for an account, enter the recipient’s email a…
Trackback by Web 2.0 Television — November 6, 2006 @ 8:57 pm
What is your server setup like? Who owns the servers? Is the $2,100 a month just for colocation or for colocation + server rental?
Comment by Luigi — November 6, 2006 @ 9:07 pm
I\’ve seen Dropsend ads on 9rules, Vitamin, and The Deck. Care to explain what you mean by zero advertising?
Comment by Chris — November 6, 2006 @ 9:20 pm
Hi Chris - Those ads were very short run (almost non-existent). They were in no way a concerted marketing effort.
Comment by Ryan Carson — November 6, 2006 @ 9:36 pm
Ryan, you said \”zero advertising, purely viral growth\” not \”we didn\’t make a concerted marketing effort, but did place a few ads in a few places for a few months.\”
Just be honest. That\’s all. If you\’re not honest about this what else aren\’t you being honest about?
Comment by Chris — November 6, 2006 @ 9:40 pm
Chris, we are being completely honest. I think you’ll be hard pressed to find anyone that’s as transparent about things as we are.
I’m not sure if you’ve ever done any online advertising, but placing a few ads for a few days does not qualify as “advertising”.
I resent your sentiment that we’re trying to pull the wool over people’s eyes. If my goal was to deceive, I wouldn’t be approving your comments from the moderation queue.
Comment by Ryan Carson — November 6, 2006 @ 9:49 pm
WOW!
Carson Systems rocks! This is just another downright example of a want to genuinely educate a share knowledge. Thanks Ryan!
Comment by Michael Troy.S — November 6, 2006 @ 10:06 pm
I agree with the previous comment saying that its fantastic that you this transparent about your business, think many others will learn from it, at least that’s my hope.
However I can’t agree that all business’ are built to sell, then we wouldn’t have any big companies around maybe. ok, I get it, a pretty naive point from my side, but still you could use Dropsend as something to fall back on, you can always have that 21 000 a month income in a year and that’s solid business. Hopefully you get the cash now so you can fall back on those, but still if you would be trying to build a little bit bigger company it might be a good thing to hold on to Dropsend.
But I also can understand that you might want to keep it small and simple. (This might be my swedish personality resonating with me) But have to say I would like to see you hold on to it and growing it by yourselves.
However I hope you can get as much money as humanly possible for Dropsend. For real. Good luck!
Comment by Jonas — November 6, 2006 @ 10:21 pm
Stat is amazing. Great growth.
On three year revenue ‘normal’ valuation, the sale price would be around $10000 x36 = $360K. Plus some goodwill it will be around $500K.
But if ryan wants, he can based it on three year revenue based on predicted sales on 2007, which is $20K x 36 = $720K. Plus goodwill equal to $1 Million.
Nice money.
Costs can be lower, by using amazon S3.
Comment by John — November 6, 2006 @ 10:49 pm
Their gross margin currently might be $6,941.81 a month but they still have to do customer service and someone will have to do product management and make feature enhancements over time. Nothing is free to operate.
Comment by Jason McMinn — November 6, 2006 @ 11:00 pm
Ryan you can resent all you want, but you said something that was not true. Sharing information does not make it true.
You have advertised the service. For one day or three days or a week or two. An advertisement is an advertisement. And I have certainly seen your ads in more than a few places for more than a few days.
Apple ran the 1984 super bowl ad once. Is that not advertising? Lots of companies advertise for one day.
The places where you advertised are popular places. They may have been seen by tens of thousands of people.
I am not suggesting you should not advertise, I am only suggesting that you have when you say you have not.
Comment by Chris — November 6, 2006 @ 11:03 pm
Luigi,
BitPusher actually owns DropSend’s servers. We provide Ryan with:
- Server rental
- Power/Cooling/Hosting
- Complete Systems Administration/Management
- 24×7 service
- Internap bandwidth.
Michael
Comment by Michael T. Halligan — November 6, 2006 @ 11:06 pm
[…] Carson Systems is showing the details of how dropsend stacks up in terms of monthly profit. Ryan states that at a conservative estimate by December ‘07, it’ll be making $27k/mo. He also seems to be beating off a bit of bad feedback on the advertising which has/hasn’t been done. […]
Pingback by The Web Tyrant » Blog Archive » Carson Systems shows us the money — November 7, 2006 @ 12:02 am
According to my business advisor and investor, it will be a lot more than 325K. Probably at least double or even triple!
Good luck Ryan.
Comment by Jeremy Freeman — November 7, 2006 @ 8:01 am
Wow Chris, take a chill pill. ANYONE who has every run a web service or sells a product would know that advertising for a day does not constitute advertising. Your are being legalistic about it. All I have to say is CHILL out ;) I agree with Ryan here.
To the poster who said this was worth “$325,000″. Where the heck did you get that from? That is roughly 46 months of profit (considering no growth). Most sites and services I have seen go for 12 months, Maybe 24 max. Just curious.
Comment by Jason — November 7, 2006 @ 8:08 am
Chris, I think Carson Systems own the Vitamin website, so they may just qualify for free advertising there. ;o)
Ryan, if I had some spare cash, I’d be very interested. But a wedding next year has eaten into that. Oh well, surely running a profitable business would be nothing compared to a lifetime of being told what to do, what to wear, what to eat and what not to eat… erm… Wonder if I kept the receipt for that engagement ring… ;o)
All the best with the sale!
Comment by Phil — November 7, 2006 @ 9:01 am
Chris if you don’t like what Ryan and Gill are doing here, why are you still sticking around? The reason for them being advertised on Vitamin is because they own it, the others I’m not sure but still the market those sites cover is very limited. Anyway good luck on the sale guys, i hope you get more than you deserve, simply because how much you’ve educated me/us with amigo etc.
All the best.
Comment by James Deer — November 7, 2006 @ 11:24 am
Hi Ryan
It would be interesting to know the following:
- how many man hours you currently spend managing/administrating DropSend? If you could roughly break this down over the past 6 months that would be great, as it would give us an indication of time spent in relation to growth.
- - - - -
I think Chris had a point with the advertisement. On a couple of occasions, I have also seen a DropSend advert on Vitamin. To advertise on the site, you state, ‘We charge a flat rate of $800 for one month.’ So for the advert to appear on Vitamin, you would have had to shell out $800. Fortunately, your in the situation that Vitamin is part of Carson Systems, so you didn’t have to pay. Needless to say, by appearing on Vitamin (regardless of how long the advert was there), you were reaching a specific target audience who may have be interested in the DropSend Product, and may have contributed to the growth.
At the end of the day, it makes perfect business sense to put the advert on Vitamin (in your case for free). But any prospective buyer will not have that luxury, so i by saying zero advertisment, it’s slightly mis-leading to anyone who hasn’t seen any adverts.
- Zero advertising implies you spent: $0.
- In reality, you would have had to spend a minimum: $800 to appear on Vitamin.
Maybe you should change it to we have spent zero on advertising, but have advertised occasionally on some of our products, websites (including Vitamin, CarsonWorkshops etc)
By the way, i think what your doing here is awesome! As a fellow self-employed, i have found your previous articles on work/life balance, freelancing invaluable. Again the openess of selling DropSend, is really educational!
Cheers
Matt
Comment by Matt Branthwaite — November 7, 2006 @ 12:53 pm
Ryan - your number for expenses only includes:
Costs: $2,100 per month (Servers at 365main.com + maintenance)
What about the labor to manage it? Is that included in the Costs? If not, what does the labor look like so one can work that into the numbers? Assuming whomever you sell to would need to hire x people to run the tool.
Comment by Allen — November 7, 2006 @ 1:04 pm
Nice one Ryan. I to would be interested in what stats package you are using to put out that information!
Comment by Tim Child — November 7, 2006 @ 2:35 pm
Come over to Sitepoint and advertise,
Comment by marcel — November 7, 2006 @ 4:41 pm
Thanks for sharing those figures with us Ryan, I’d love to be contender but realistically out of my league;)
Comment by Rodney Joyce — November 7, 2006 @ 4:52 pm
“Businesses are built to be sold.”
That’s a pretty uninspired outlook on the purpose of creating and maintaining a company.
Comment by Will — November 7, 2006 @ 11:55 pm
Jason- my valuation is 36x monthly revenue. That is reasonably standard in “normal” business sectors. With the growth rates exhibited though, it might make it worth significantly more. Most normal business don’t get sold this early.
Comment by Erik — November 8, 2006 @ 1:21 am
Hmm.. no advertising…… well heres the thing…..it hasn’t been purely viral. I think there are several factors that play into the fact that dropsend is profitable and shows growth. I think Ryan is underplaying (not maliciously) the advertising everyone is talking about. What you are buying is Ryan’s network which tends to be viral. Whoever buys this needs to keep Ryan on as a paid advisor. The reason being is that he has certain connections that helped grow Dropsend.
He has been able to do this because of the following reasons:
1) Ryan Carson started bd4d.com back in the day and is well known throughout all of the artist communities. BD4D is By Designers for Designers. It is a great little unconference/meetup where a bunch of people get together and show there stuff at odd little locations all over the world. They have been sponsored by Adobe and Macromedia. One of his clients is Joshua Davis (www.joshuadavis.com) who has a network beyond Ryans. You can see on Josh’s site that he uses dropsend. Personal referrals like this are the most important thing in building a business.
2) Carson systems has been running Carson Workshops for a few years now and it is profitable. This gives Ryan connections with people of influence that are speaking or with people that go to these conferences who are also influential. The people that attend these conferences (sponsored by Dropsend) probably get info on dropsend and end up using it for client needs as most of the people going to these conferences are web developers or designers.
His personal network is to be admired as he has bridged the gap with these conferences between the web2.0 crowd (techcrunch,etc) and the designer communities (k10k,newstoday,pixelsurgeon).
3) Ryan started writing business blog postings on 37Signals as a guest author. These obviously give Ryan more credence in the world as SVN has over 25k subscribers back when he was posting. He no longer posts there as he now posts on Vitamin. Being on a well watched industry blog definitely has its benefits.
4) Ryan is also an author on Newstoday.com and k10k.net (not sure on this one completely). BD4D also gets a lot of hits and he has advertised on his own sites thoroughly. One post on Newstoday can get you approximately 1,000 visits. I know this because a site of mine was posted and received about that much. Pixelsurgeon also hosted the banner ad at the top of the site for a couple of months.
5) Thinkvitamin.com launched shortly after dropsend and now currently has 10k+ RSS subscribers and countless other readers. They also have amassed an author advisory board that includes top bloggers/designers/developers that are well known and respected.
Summary: Ryan has built a nice list of contacts in the industry and he has been successful because of good products/sites/workshops and good connections. My two cents is that the buyer keep Ryan as a consultant and to keep in contact with the people that Ryan has developed relationships with. It may be viral now but it didn’t get there without Ryan’s rep being viral.
reposting this to techcrunch for the 2.0 crowd. :-)
Comment by anonymous friend — November 8, 2006 @ 1:47 am
Whoa. Hold on there. Standard valuations for small private companies typically run 1-2x annual revenues. Solid companies with strong intellectual property and clearly documented future revenues (e.g. royalties) can go for 5x. In the insane-not-based-in-reality web world, you often see higher multiples, but I see a number of issues with that here.
1) They are selling a single application, not a company. Therefore the deal does not include any of the creators of the product which is a big part of the value in any acquisition. Simply put, product development is at a standstill until someone comes in and takes over. Inheriting someone else’s code is never simple — it takes time and effort and both of those factors will discount the deal price.
2) While the revenue growth is impressive, there is less than a year of history. The projected numbers are very nice, but completely unprovable at this point. Anyone with Excel and itchy fingers can build the same model. Since you haven’t been through a calendar year yet. you also have no idea if your revenues and their growth are in any way seasonal, or dependent on outside variables.
3) The product is a one-trick pony, not a platform driving broader adoption. That puts a limit on the multiple you’re going to get too.
4) This is a space that quite a few companies are targeting. Unless you have a clear advantage over everyone else, the value goes down.
5) As others have noted, the “profit” really isn’t a real number. There is no accounting for support, future development, company overhead etc. If you assume everything can be handled by two people — an engineer at $60k and an admin person at $30k — your entire profit is gone. And you don’t even have an office, phones, foosball table or any of the stuff that makes a business fun…
The bottom line is that while many businesses are built to be sold, you usually need to build the business first. What you have is an early stage product with some good early-adopter numbers and reasonable potential.
There are only 4 reasons I can think of as to why you would sell this product:
a) Your company needs cash
b) Your other products are far more profitable and it is simply not worth the time and effort to maintain and develop this product further
c) This was a pet project for someone but management sees an opportunity to make a quick buck
d) You don’t believe the product has a real future at your company, and based on the current projections, now is the best time to sell.
You’ve already stated that (a) is not the case, which leaves (b)-(d). With such a short time in use and the future growth projections, it’s hard to believe now is the best time to sell.
And the truth is, if your making money, the product has a future and everyone is happy with it, you don’t sell. Or at least, you don’t sell until you can really make money. In your case, that would be after you’ve hit some consistent profitability and growth, and that means more than a few months of numbers.
Having been through several acquisitions, both successful and otherwise, the #1 thing is to make sure your expectations are reasonable. Whoever said “it will probably be a lot more than $325k” needs to get a new business advisor, or smoke less (one or the other).
I wish you the best of luck.
Comment by fewquid — November 8, 2006 @ 5:40 am
Thanks for the reply Erik. I was just curious. Still seems like an awful lot.
Comment by Jason — November 8, 2006 @ 6:56 am
Hi Ryan:
Could you explain complete story of you business? When it born, how many people, which servers, technology, etc?
Thank you.
pjbs39____________________
http://www.babynamepicker.com
Comment by pjbs39 — November 8, 2006 @ 9:07 am
Fewquid - thanks for the thorough comment.
I’ve got good answers to all your questions, but I’ll reply in the morning as I’m too tired now.
Comment by Ryan Carson — November 8, 2006 @ 9:11 am
Ryan, why are you moderating? :)
My comment had nothing negative in it.
Comment by Alex — November 8, 2006 @ 9:47 am
So, whats the name of that stats package? thx
Comment by Gustavo — November 8, 2006 @ 12:34 pm
I disagree with the sentiment that there’s something wrong with the notion that “Businesses are built to be sold.”
That is a perfectly legitimate exit strategy. Not everyone wants to run a company until they’re 84. I am starting a company and I don’t want to work forever. Of course, looking ahead a bunch of years, having used my reputation to build my business I will not just hand it over to the highest bidder. I have a responsibility to my customers to leave them in capable hands. Selecting a successor is as important as selecting employees and customers. And then I plan to take my pile of money and go live in a log cabin in the mountains. :)
Comment by Christian Romney — November 8, 2006 @ 1:00 pm
“Businesses are built to be sold. Some take a long time to build and sell, some take less. We feel it’s time to capitalize on our initial investment. The timing is perfect for us.”
There may be a more concise point to this statement, but it seems… wrong? I would think that businesses are built for all sorts of reasons. Some people build them out of the things they love to do and keeping them healthy and profitable simply supports that. For others selling may simply be a personal choice to free up capital, pain, or time (as indicated by Ryan). But building a business on the premise of selling it seems rather risky on many fronts and goes against much of the advice that circulates the topic of startups.
Comment by Chris D — November 8, 2006 @ 3:49 pm
Great topic an frank discussion. I’ll have to send you some GoogleJuice.
Comment by jeff barson — November 8, 2006 @ 5:11 pm
[…] Carson Systems annonserade häromdagen ut DropSend till försäljning. Redan då lovades siffror på hur mycket pengar som tjänsten genererar. Dessa siffror presenteras nu på bloggen som dokumenterar försäljningen. […]
Pingback by Hej Varlden » Mera siffror för DropSend — November 8, 2006 @ 7:35 pm
Maybe clarify the position “Businesses are built to be sold” with “Businesses are built to make money”
Selling is one way to make money with a business, but running a Business that is profitable is usually better. I think this is the source of some of the skepticism about this sale. If it is indeed profitable then why the need to sell? There were several options posted above and I would guess B, that this just isn’t the owner’s top priority anymore, so instead of growing the business they’d rather take the short term sale.
Comment by Brya — November 8, 2006 @ 9:22 pm
without constant pushing from very smart (and experiensed and skilled and connected, etc) individuals this project will quickly lose momentum and will no longer be bringing nowhere near the projected revenue.
which, by the way, the fact that its not being advertised means project mostly depends on Ryan’s connections and exposure for publicity, which makes it even less attractive once it is disconnected from Carson’s. if that were not the case, all it would have taken is couple of interns and the cash cow would have kept bringing steady (if small) revenue stream. why give that away?
what i think is happening, he’s just got tired of pushing it. which is hard work. and it just isnt worth the money dropsend is pulling today. add small staff, office and you’re in the red already. the only reason this project is still alive is probably because it is supported (indirectly) by other Carson’s projects.
sorry to poop on your parade, just my $.02.
Comment by cynic — November 8, 2006 @ 9:41 pm
Everybody sitting around complaining about Ryan’s advertising statements should get back to coding. Ryan owns thinkvitamin.com.. Any advertising that he did on thinkvitamin.com can not be counted as advertising costs for DropSend.
The rest of you sitting around trash talking the value of DropSend. The value of DropSend is whatever somebody will pay for it, period. I smell much jealousy in your arguments.
Selling a business is a valid exit strategy. Ryan runs ThinkVitamin, BD4D, Amigo, Carson Workshops, and DropSend. It’s obvious he can’t be putting the amount of time into DropSend that it deserves.
How many of you have been able to hit $9k/month in revenue on the sites you put 100% of your effort into? Any of you? I didn’t think so. The fact that with $30KGBP and a bare minimal amount of effort, Ryan has built a 6 figure business means an incredible amount. What do the rest of you do besides whine on other peoples’ blogs?
Comment by theman — November 8, 2006 @ 10:51 pm
I’ve responded to several of the negative comments on my next post. Head on over …
Comment by Ryan Carson — November 8, 2006 @ 11:45 pm
[…] Ryan Carson has posted the monthly profits for dropsend, a web startup he created in 2005. I saw Carson talk about the costs of starting dropsend at the future of webapps conference earlier this year, so it’s interesting to see how it’s doing. It’ll also be interesting to see how much he gets for it when it sells. […]
Pingback by Phil Dawes’ Stuff » Web Startup monthly profits — November 9, 2006 @ 1:25 pm
1. It’s very interesting that people ,who comment this posting, are used model based on annual multiplyer. I remember that at booble era , some investors used more than 5x multiplyers.
As example, people who discussed at reddit.com about them deal, used “count of visitors” criteria. May be it’s because reddit not profitable now?
2. the question ” how many Ryan spend to ads ” it’s not important now , because this “added value” (how like say VC’s :) already reflected in cash flow.
3. About exit strategy DropSend.com : it seem’s that owner’s believe that in web 2.0 boom this service have a better cost , and it’s true. Major company with huge advertising ability can multiply their client base.
With best regards to dropsend.com owners :)
p.s: sorry for english
Comment by Dan — November 9, 2006 @ 1:38 pm
Don’t sell it too cheap :)
Can you please share average price of offers you have received?
I am not a potential buyer, but this info is interesting not only for me I guess.
Thanks in advance.
Comment by absolut — November 10, 2006 @ 1:24 am
[…] My, what a portentous title for a simple little post. I stumbled across this: Bare Naked App » DropSend Monthly Profit, in which the founders of DropSend, a nice little server-side piece of business that allows you to store large files when you can’t email them to people, outline their current revenues as part of the process of selling the company: […]
Pingback by Dadblog » Profit, reputation and Web 2.0 — November 10, 2006 @ 6:25 pm
Businesses are built to be sold. Nice mindset you’ve got there… so you didn’t plan ahead, you never really meant to keep this operation running for years. How can a potential buyer be sure that he’s not getting a house of card that will fall down tomorrow? I preferred the “old” economy.
Comment by Giacomo — November 15, 2006 @ 5:59 pm