Brian Armstrong

UniversityTutor Revenues Fall by 50%

As you might have seen a few weeks ago, I posted about how the new business model wasn’t working very well. Revenue has fallen by about half during this time.

Also, it’s not just the summer time effect. There are still a fairly large number of contacts going through the site (see below). Even taking this into account, it does not look good.

I’ve been thinking long and hard about it over the last week, and I’ve decided it’s probably time to cut my losses on the “online payments” business model and go back to the subscription model I was using before. Adoption of the online payment system has been very low - and most people aren’t using it (probably a combination of the fact that is less convenient, and also to avoid the fee).


At least I know that my previous business model was working fairly well and growing steadily - and this test to see if I could beat it has just about reached it’s conclusion (2 months).

I surveyed some of the tutors this week to get their feedback, and you can read some reactions there.

Also, here are a few emails I’ve written to people over the last week which summarize my thought process:

Just had a big realization: if it was me, I don’t think I would use the online invoicing either. I would be cool with it when I saw it and probably have every intention of using it. Then I’d go do a session, and the person would say, well shall I just write you a check? And I wouldn’t know what to say say because it was my first time meeting them, and it would almost be rude not to, so i’d just say ok. Then afterward, I’d go read about the benefits of getting paid online and think about it…but now that I’ve already accepted the higher amount of money once…it would be really hard to go back and give up the extra money next time especially when nothing bad happened from the first time I did it, so I’d probably just say forget it and keep doing it the same way unless the parent didn’t show or something and I had to get paid later.

So yeah…when I just went through the whole process in my mind like I was a new tutor signing up, I realized that I probably would not use the invoice thing. That is a bad sign if even I wouldn’t do it.

The argument for it being summer is a valid one, but not really. I’ve been watching the number of daily contacts going through the site. Last semester it was averaging about 60 per day and right now it is still doing 40 per day so it really hasn’t dropped that much. Even if I take this into account (30-50% drop), it doesn’t make up for the lack of adoption.

I’m also thinking about split testing $5/month vs $10/month to see which is more profitable. I realized also that offering a yearly subscription with a discount to the tutor is common online and could really help cashflow (since you get more up front).

After reading this I’m starting to think the price point of $10/month might be wrong.

I also need to include an option to pay yearly instead of monthly. There is good research this improves conversions and helps cash flow to get the money up front.

Maybe give the option of $5 per month or $45 per year. Something like that where it’s a no brainer to sign up. I’d have to test it…but to me I’d def sign up for $5 per month whereas $10/month I’d hesitate and have to think about it. If I remember right, the conversion rate for $10 per month after people’s free account ran out was about 10% so at $5/month it would have to be at least 20% to make it worthwhile.

Closing thoughts…

On the one hand it is sort of depressing to do all the work to launch a big feature like this, and NOT have it work. Worse still, the number of subscribers has fallen by about half since I launched the feature. That means it will probably take at least several months to get it back to where it was previously revenue wise. It’s also hard not to think about where it could be right now if I had just left it instead of changing things :)

But on the other hand, this is the reality of business. If you don’t test then you will never know. And a failed test is much better than staying stagnant with your business. You have to look at things over a longer time frame (say 5 or 10 years) where losing $1000 in revenue early on is nothing, but getting the right business model in place could translate into millions of dollars down the road.

So in short, I’m glad I did it, but it’s still not easy to admit defeat and realize your idea didn’t work. Such is the life of an entrepreneur - you gotta stay mentally tough and get back on the horse after every setback.

Hey, if it was easy - everyone would be a millionaire, right? :)

Until next time, keep breaking free! Brian Armstrong