Happy Hour #7 - Projections Versus Reality (Patreon)

April 15th is a National Holiday for nerds of a different variety. We may think we're hardcore geeks here at the Glass Cannon, but no one can hold a candle to the legions of accountants who were busting their asses crunching the numbers on literally hundreds of billions of dollars as the yearly tax deadline hit this week. This also happens to be the week that marks three months since I went full-time on Glass Cannon. In honor of the first-quarter filing deadline and my first full quarter as a self-employed business owner, I thought it "customary" and "responsible" to take a close look at our first-quarter numbers and see how our business was doing. I'd like to share some quick highlights with you guys.

Troy and I didn't take blind leaps into doing this full time. Though I used to think of our monthly Patreon income as a magically high number that would make us all rich, the reality of the situation was much more complicated. The expenses required to generate that income are not cheap. In fact, for the first 21 months after launching our Patreon, we as individuals took home only 16.2% of our Patreon earnings. The other 83.8% went to the expenses needed to form a solid foundation and then start to grow the business. Lawyers, accountants, professional recording equipment, a studio space, royalties, travel, a website, marketing, and dozens of other small expenses are all required for us to generate that number on Patreon. So when it came time to seriously consider going full-time, I spent about two months projecting our next three years of revenues and expenses. Going over every dollar with a fine-tooth comb. Figuring not only how much we might sell in GCP 2.0 hats, but also how much a hat costs to embroider, how much the box costs to ship it in—and don't forget the tape and mailing labels! Costs like that may seem inconsequential—until you scale it for a ton of hats. Then you need to make sure that you even have the money to BUY the hats and boxes before you can sell them and make a modest margin. I didn't intend to make this a cash flow seminar, so I'll get off the topic, but I just wanted you to get the idea. I tried to factor in everything, and while there is plenty that I missed, I want to share with you some highlights of my first quarter projections versus reality.

In summary, I nailed the projections for first quarter revenue to within 0.5%. We made half a percent more in revenue than I projected. Making more is always good, but it's also good that the target was so close. Initially, I had thought that I wanted to surpass my revenue projections by 10%, 20%, hell...50%! Then I went to a small business seminar and learned that under-projecting is no good either. A large business with investors aims for its actual numbers to hit within 1-2% of projections. While  surpassing your projections by 10% sounds great, in actuality it means you left growth potential on the table. You had not accounted for cash you could have used to fund additional projects to further increase the value of your company. So, I was happy with where we landed in terms of overall revenue.

I was really happy with our Patreon. You guys are amazing and actually covered for some areas where we didn't hit my projections. Patreon outperformed our projections for first quarter by 8.5%! You guys are simply the best. So where did we fall short to come back to 0.5%? Twitch is one area—I thought we'd be running more Twitches by this point, but our schedules have not permitted it yet, though it will eventually be here. Also, live show income is a wacky world that I'm just now figuring out. I was projecting income in an industry I'm completely unfamiliar with and I've learned a great deal in the last three months. The main thing I've learned is that while a sold-out show sounds good, like a micro version of our Patreon, there are a ton of expenses included to make a sold-out show happen, especially one that we have to fly to. So our take-home from the live shows is under my projections thus far, but, again, it's a question of cash versus value. There is such incredible value in us being able to get out there, perform in front of you guys, meet you guys, and connect with the community rather than just playing Pathfinder in a glorified version of my parent's basement. Also, I've learned that we're not alone. Most acts that play venues of this size are not doing it for the profit margin. As long as we are covering expenses, it's a success in our book.

Merchandise sales is another significant part of the projection process and fulfilling online orders for our We're Having Fun shirt and GCP 2.0 Hats, which were restocked this past week, took up a large portion of my week this week. I was frantically boxing and taping and shipping all week to keep up with the demand! At the end of the first quarter, we have outperformed my projected merchandise sales by a hefty margin. We're blowing 2018 averages out of the water! This was largely because of the merch sales at live shows. I had not projected nearly enough for what folks would buy when they are live in-person versus purchasing from our website. In my defense, though, the guy from the venue in Dallas that monitored our merch table talked about how he understood that we were just trying to make "gas money" with our merch. Clearly, he's never met the Naish. You guys came out in droves to support us and I can't tell you how grateful we are when that happens. After three months and three live shows on the road, I can tell you that when you support us with merch sales, you save our ass on what, in some cases, is a net loss on pure ticket sales after the house takes their cut. So yeah, once again, you guys overachieve on our behalf and make us look amazing.

All in all, I'm happy with our first quarter. I'm thrilled that, despite my projection that we would dip into our operating line of credit to purchase merchandise inventory in February, we never needed to touch the credit. We haven't gone into debt and, most importantly, we've paid me and Troy on time. For both of us, it was projected to be a really close call on a month-to-month basis through September of this year. So far, so good, though. We know we have a lot of work to do and there are exciting upgrades to come in a variety of areas, but it's terrific to know that you all are out there supporting us. I mean it when I say we couldn't, and wouldn't, do it without you.

The week is wrapping up and I look forward to one last recording push before heading home for Easter. I'm heading into the studio now to see my good buddies and record Androids & Aliens tonight! Then, tomorrow, it's off to Philly so my kids can hang with their cousins, hunt some Easter Eggs, and cry about something nonsensical. I hope all of you have a terrific weekend and a Happy Easter if you celebrate it.

See you on the other side of GCP 204. 

It's recorded.

That's all I will say.

-Joe