Welcome back to the Subscription Rockstars series!
In this series, we will take a closer look at wildly successful companies to better understand how they got to where they are today. We will analyze both their mistakes and their victories to draw lessons that you can apply to your business. And, of course, we will pay special attention to how their subscription billing models and pricing strategies contributed to their growth.
Now, without any further ado, let’s see what we can learn from Design Pickle…
Russ Perry has spent almost all of his professional life freelancing and building agencies.
However, it all came crashing down in September 2014, leading to what he called “my mid business life crisis”.
After reading “7 Day Startup” by Dan Norris he came up with a business idea: Unlimited graphic design for a flat monthly fee.
He launched Design Pickle in January 2015. Three years later it was on track to hit $10 million in annual recurring revenue.
How did Russ go from a simple business idea to a thriving multi-million dollar business?
No job, no savings, a family to support
Russ owned a seemingly very successful international branding agency for more than a decade.
However, things weren’t really working, as evidenced by the fact that they did over $3,000,000 in revenue in 2013 but yielded minuscule profits.
Russ and his business partner agreed to dissolve the agency after it lost $650,000 in booked revenue in 90 days.
As a result, on September 1, 2014 he found himself with no job, no savings, and sizable credit card debt from the dissolved agency.
Russ had a family to support — he knew he needed to decide on his next venture fast. He tapped into his vast professional network to offer consulting services, but Russ knew this wasn’t what he wanted to do long-term.
His ultimate goal was to build a business. But what kind of business?
“Outside perspective is a magical thing if you’re open to the process”
Russ decided to get some help and hired Taylor Pearson as his coach.
Taylor Pearson is an author and entrepreneur best known for his essays and his book “The End of Jobs: Money, Meaning and Freedom Without the 9-5”.
He had built a solid reputation in the entrepreneur community, so it’s no wonder that Russ chose him when he needed an outside perspective.
On their first coaching call Taylor assigned Russ homework:
- Read the best-selling book “Principles” by Ray Dalio.
- Create a three-year vision and a list of decision filters.
“Pearson asked me to answer the question: Three years from now where will I have to be personally and professionally in order to be satisfied with my progress?” remembers Russ.
Here are some of his answers:
- One more (and final) son or daughter.
- Be professionally focused around my strengths.
- Dream home purchased.
- 2+ months a year abroad.
- Summer in Japan.
- Summer in Italy.
- Mission trip with my family.
- Regular paid speaker.
Now, it’s great to come up with a vision, but you also need to know what exactly do you need to make that vision come true.
That is why Taylor encouraged the importance of decision filters as a way to see whether Russ’ day-to-day tasks were in alignment with his long-term goals.
Here’s the exact list of Russ’ decision filters:
- Recurring income component (selling a software/platform).
- High-value consulting components (builds my brand).
- Able to be executed remotely.
- Virtualized teams for support on implementation.
- A niche where I can be an expert.
This allowed him to immediately see whether a particular business idea was worth pursuing.
Now, whenever a new business idea popped into Russ’ mind, he would run it through these filters and weigh it against his three-year vision.
For example, he had an idea for an innovative car seat, but after running it through these filters, it became obvious that this business idea was incompatible with his vision.
Although Russ was now able to identify which ideas were a bad fit for him, he was still struggling to come up with a good one.
Rather than rush the process, Russ stayed true to his vision and continued to focus on consulting, a decision that proved to pay back in spades. Because removing the pressure of feeling like he had to uncover his next venture as soon as possible gave Russ the time he needed to come up with a truly great business idea.
“The 7 Day Startup: You Don’t Learn Until You Launch”
In December 2014 Russ stumbled upon “The 7 Day Startup: You Don’t Learn Until Your Launch” by Dan Norris.
Dan Norris is a serial entrepreneur who is most commonly known for his productized service company WP Curve, which he eventually sold to GoDaddy.
The WP Curve business model was very simple in those days — pay a flat monthly fee, get unlimited WordPress support.
In his book, Dan shares how he launched WP Curve in seven days and shows how other entrepreneurs can do the same.
The book’s main premise is “You don’t learn until you launch.”
Dan suggests that an entrepreneur should test their business idea by launching that business. He also emphasizes the importance of acquiring paying customers as quickly as possible after a business launches.
When Russ was reading the book, he realized that his consulting work was very similar to the WP Curve business model.
This inspired him to build a “WP Curve for graphic design.” On December 26th, 2014, he broke ground on what would become Design Pickle.
His idea was unlimited graphic design for a flat monthly fee — a concept that was completely unheard of at the time. Even Russ himself wasn’t sure if this business model was viable.
It’s important to note that he identified a target market and stuck to it from the very beginning. Russ decided that his focus would be on small and clear graphic design requests and decided to stay away from complicated tasks such as website design, branding, etc.
Russ followed Dan’s advice and moved fast. He had a name, a logo, and a website in 72 hours. And his offer was simple — unlimited graphic design for $195/month.
Wait, what? Unlimited graphic design for $195/month??
If you’re wondering how this business model and pricing structure was possible, you’re not alone.
At the time, graphic designers in the United States charged around $75/hour. So how was Russ able to offer unlimited graphic design for only $195 per month?
The answer boils down to simple math and meticulous planning.
When Russ was building the business’ financial model, he estimated that completing a small graphic design task such as creating a business card design template would take around 15-20 minutes.
He then used this estimate to calculate how many similarly small tasks a graphic designer would be able to complete in one day.
He then used this time calculation to determine what full-time wage he could afford to pay to a graphic designer.
Lastly, he used his extensive experience from running his own agency to determine the quantity of design requests he would receive from clients. He knew most customers wouldn’t just bombard Design Pickle with requests 24/7. He estimated that each customer would probably only need a few jobs per week on average.
Backed with this context, Russ realized that he needed to find people who could do quality work for less than $75/hour, which meant that he had to turn away from the US market and towards the developing international market.
Although, he soon found that his initial pricing of $195/month was too low — his customers started telling him that he should charge more. (Note: This is a classic indicator that a business should change its subscription model, something we recently wrote about.)
This is not surprising. $195/month for unlimited graphic design was an incredible bargain, especially for entrepreneurs who regularly needed things like Facebook ads, YouTube thumbnails, flyers, etc.
Getting Design Pickle off the ground
Russ launched Design Pickle by emailing all his contacts about it and publishing several guest posts on relevant blogs.
Once he had enough money, he started running Facebook ads, which to this day are a crucial part of their marketing strategy.
Russ also promoted his new business at a tradeshow where he wore a pickle costume and handed out pickles to the attendees.
Since then, Design Pickle has grown through various channels, including word of mouth, content marketing, partnerships, paid advertising and live events.
One of their more creative marketing tactics to date was a graphic design battle between a non-designer and a designer on YouTube. Both participants received the same task and then worked on fulfilling the request while a host provided commentary and picked the winner. (Spoiler alert: The designer won!)
You can watch the whole thing here: https://www.youtube.com/watch?v=rMeB8E5rutk
What can you learn from Design Pickle’s pricing?
Innovative pricing is a massive risk.
Typically, customers just want a product that gets the job done and solves their need at the most affordable price.
If you use a subscription billing model that they aren’t accustomed to, the chances are that they are going to get confused about what you are offering and gravitate toward a pricing model they are more familiar with.
This is why it’s usually best to price in a similar structure to your competitors — it allows customers to make a true apples-to-apples comparison between the price and feature sets of various products.
In this scenario, businesses should differentiate on features, support, subscription flexibility, and price points themselves.
However, there are rare cases in which innovative pricing works. Typically in markets that are untapped or undergoing significant transformations. Design Pickle is a great example of this exception.
Before Design Pickle, if you needed a graphic designer, you could either hire one full-time (monthly salary + benefits), hire a freelancer who charged per-hour, or hire a freelancer that charged per-project.
Russ tossed all of these preconceived pricing notions aside and disrupted the market — offering a sort of “graphic design as-a-service” for a flat monthly fee.
This was a huge risk, but it was also a deal that was impossible to resist. This pricing structure and reimagined design service delivery model is why Design Pickle was able to grow so fast.
Since Design Pickle’s launch, Russ has doubled the price of his Standard Plan, which is now $399/month. He also introduced a Pro Plan for $995/month.
The company continues to grow rapidly because customers still see the value in this pricing model. They know that the flat monthly fee is far less than the cost of hiring a contractor and produces higher-quality deliverables than a do-it-yourself (DIY) approach.
The main lesson for businesses here is that, if you want to take an unconventional approach to pricing, you need to ensure what you are offering provides an obvious value and price advantage over what is currently available in the market.
$10,000,000 in annual recurring revenue
Unlimited graphic design for a flat monthly fee was unheard of before Design Pickle pioneered this idea.
A lot of people doubted it. In fact, Russ got rejected from 500 Startups because the investors thought that this business model simply wasn’t scalable. All the numbers were there, but people just couldn’t wrap their heads around the idea.
Russ himself admits that he too wasn’t sure if his business idea was going to work in the beginning.
However, the model and pricing structure clearly resonated with the market. In their fourth year, 2018, Design Pickle had served more than 10,000 clients and was on track to do $10 million in annual recurring revenue.
And, Russ created over 250 full-time jobs and continues to provide training and growth opportunities for the graphic designers he employs.
What’s next for Russ and Design Pickle?
Russ’ long-term vision for Design Pickle is $100,000,000 in annual recurring revenue.
He is also bold when it comes to his other ambitions. He wants to:
- Buy or establish an e-sports franchise in Arizona.
- Democratize design by creating something akin to Khan Academy but for creative professions.
- Invest in and create space-centric businesses.
“Without question, I love space and humanity is destined for the stars. Why not spend the rest of my life supporting ideas, science, and research to positively impact generations to come,” he explains.
You cannot start a great business without vision — a vision for your personal life, your career, and how you aim to change a given industry.
What is important to you? What kind of life do you want? What kind of business do you need in order to make that dream come true?
The idea doesn’t have to be “sexy” to be innovative. Sometimes, a simple idea can be enough to change the way businesses operate and ultimately generate eight figures in annual revenue.
What matters is that you start a business that you are passionate about — one that satisfies a major need in the market and is priced and structured in a way that resonates with target customers.
Achieve this, and you will build a successful business that allows you to enjoy the life that you’ve always wanted — just like Russ Perry and Design Pickle.
Want to become a Subscription Rockstar but don’t know where to start? Talk to one of our billing experts to find out how you can transform your billing and revenue management from a business blocker to a revenue accelerator.