Colorado proving to be a tough sell

We now have three solid months of data since the pivot, so it’s time to take a hard look at our performance. One of our primary conclusions is that marijuana businesses in Colorado are a tough sell.

The Evidence

One of goals of the pivot was to remove price as an objection. We lowered the monthly subscription from $100 per license to $49 per location. So if price were the main objection, sales should have substantially increased. Let’s see how the numbers look.

• From August 1 to October 31, we projected 54 prospects in trial. It seemed reasonable given the new price point. We got 21 prospects in trial, just 39% of our projection.
• Of those, seven converted to paying clients for a 33% conversion rate. This is much better than the 8% conversion rate we had before the pivot, but we expected something more like 80%. The new 11-day trial period was thoughtfully designed to proactively engage users. That, combined with the lower price point, should have resulted in a much higher conversion rate.

As sales performance lagged, we discussed the “friction” we were encountering.

• Most of the friction can be put into a bucket labeled “No Fear of MED.” They don’t fear the consequences of non-compliance because they don’t think they will be the target of any enforcement activity by the MED. Or even in the unlikely event they are visited by the MED, they believe they are doing most things in a compliant manner and therefore will not be penalized in any significant way.
• There’s a second bucket labeled “Fear of Work.” They understand just enough about what Simplifya does to be intimidated by the work it creates for them. Audits are time-consuming and tedious. They identify areas where someone is not doing a good job, which is embarrassing. Action Items are also time-consuming and tedious. Negative package reports highlight when a mistake is made, which is embarrassing. Then someone has to reconcile inventory, which is time-consuming and tedious. At the end of a demo, they feel like they can save a lot of time and avoid a lot of tedious work by NOT subscribing to Simplifya.

At the same time, Brooke noticed these friction points weren’t coming up nearly as often while prospecting in California. In fact, they seemed uniquely tied to prospects in Colorado. Marijuana businesses in Colorado have been in play longer so they’ve had more time to learn the regulations and see what the MED is capable of doing from an enforcement perspective.

Our Response

There’s not much we can do about the MED being under-resourced. Some of you have heard me say in meetings, I think this substantially undermines our value proposition in Colorado. This is where Jordan said, “Then we should all just pack it in and go home.” Maybe you’re feeling the same way? Take a deep breath, relax, that’s not what I’m saying.

Realistically, we just need to lower the bar for what defines success in Colorado and make sure our investment in Colorado is proportionate. Keep in mind Marion used to tell investors we’d be at breakeven in February 2017! Later, he stopped saying “breakeven,” but still talked about how our revenue curve would look like a “hockey stick” (honestly, so did I after the pivot).

Now, we’re talking about showing steady growth, adding at least a handful of paying clients every month. Thanks to continuing tweaks to the sales process and trial period, this now seems like a very realistic expectation.

Another Pivot

I warned you back in June, we will pivot as often as necessary to find the business model that works. So yes, this is another pivot, a small but important pivot. To ensure steady growth, we need to reposition our product so that we’re not so reliant on MED enforcement activity.

You may have noticed this repositioning is already underway. We’re no longer talking about Simplifya primarily as a self-auditing tool. Instead, we’re talking about Simplifya as a compliance hub that allows clients to meet a variety of compliance needs. Self-auditing is just one of those needs. And the other compliance needs are now high priority development items:

• Badge Validation, just released last week in version 1.19.0
• Enhanced SOP functionality
• SOP Templates
• Document Storage
• Compliance Awareness Quiz

This doesn’t mean we are abandoning the self-auditing feature. We are continuing to refine with improved audit reports, a new Remediation Report feature, new Labeling content, a new Packaging feature, additional notifications, and more.

The new and improved SOP functionality is a big part of this pivot because of its potential in California. More on that in a separate post. For now, just know that revenues from the SOP feature alone could eclipse revenues from all other features combined.

User Truths

I also want to call out Dave for leading the discussion on what we’re learning about our users. We are documenting a series of “User Truths,” statements of how our target users think, feel, or behave. A set of user truths creates a narrative that we can use as input for how we prioritize, design and develop new features.

For example, one of our truths says, “Our users would rather have multiple features in one interface than use multiple interfaces, regardless of how advanced those interfaces are.” It came out of the realization that our users attach value to the ability to store compliance-related documents in Simplifya.

• They want this feature in spite of the fact there are plenty of free solutions available in Google Drive, Apple iCloud, Dropbox, etc. I know, it’s “slap on the forehead” crazy, but it’s true!
• They want this feature even knowing these solutions are more robust than what we would build into Simplifya. Shut the front door!

User truths such as this are changing how we prioritize features. It helped document storage, for example, make it to the top of our roadmap when it would not have otherwise happened. User truths are also changing how we design features. We spend a lot more time on copy, for example, to pull users through the app in simple and consistent ways.

Conclusion

Whew, this ended up being a longer post than anticipated, but I want to be accountable. Some of the accountability is in my willingness to admit that our first pivot has not had the impact I expected. It fixed some problems and exposed others. Another part of the accountability is in my belief that we need to continue pivoting until we get it right. Today, it means three things:

1. We are repositioning from a self-auditing tool to a compliance hub. Self-auditing is just one piece of the compliance puzzle that we are helping to solve.
2. Another piece, perhaps an even bigger piece, is the Standard Operating Procedures feature. We are attacking SOPs from both a software and a content perspective, and with a laser focus on prospects in California.
3. User Truths are changing the way we prioritize and design new features.

Hopefully, you are energized that we are continuing to pivot and not freaked out that we have to pivot again. In startup lingo, it’s called failing fast. Hang on, this is how we iterate toward a profitable business model!