Reforming Retail

Anonymous Mailbag

How much money does your blog make? How much do you want to make?

After shelling out our payments commissions to Stripe, the blog nets $2,000 per month. On an hourly basis this is nowhere near close to covering the costs to generate our content (for context, when we do engagements with investor groups we start at $10,000 per day.)

However the blog makes us credible experts in the field of brick and mortar technology. Because of that we’re extended opportunities that wouldn’t otherwise come our way. So it’s not as black and white as the monthly subscription revenues.

That said, we’d at least like to directly cover our costs of writing content. We’d estimate it takes us 8 hours a week to research, draft, and edit articles. This number would be much higher if we didn’t have the relationships we do. 8 hours a week is 32 hours a month and 384 hours per year.

How much is an hour of time worth?

Why hasn’t the payments industry figured out that SaaS businesses get higher multiples than payments ones? Shouldn’t they just give the payments away for “free” and roll the payments revenues into another software product billed as SaaS?

This is a hilariously thought provoking question that we ask ourselves all the time. The inquirer has observed that payments businesses trade at roughly 4-5x revenues while SaaS companies trade at 8-10x revenues (both subject to market fluctuations, of course). For a quick sanity check, Global Payments (GPN) does $4B in revenue and trades at ~$20B market cap while Salesforce (CRM) does $10.5B in revenue and trades for ~$120B.

Seems to us like there’s a great multiple arbitrage opportunity in here but payments companies keep prioritizing payments over software. See no further than “free POS” where the revenues come through as processing revenue.

Toast might be clever enough to figure this out, actually. If they IPO we’ll be curious to see how they’ve engineered the financials to set themselves up to maximize their multiple. As they should.

I attended one of NCR’s Dealer Roadshows and met NCR’s CEO. During the meeting NCR’s CEO kept bashing you. What do you think about that?

It says a lot about both the CEO and the state of the company that leadership believes this to be acceptable behavior. Of course we don’t live in North Korea and people have the right to say whatever they want. But we’d ask this: did the CEO bring any data to justify his points, assuming they were logically constructed counterarguments to begin with?

From the feedback we’ve received thus far, the answer is no.

The number one thing NCR’s channel wants to know is WHEN THEY WILL HAVE RELEVANT BUSINESS PRODUCTS. We don’t understand how NCR has still not grasped this. Does their CEO think by bashing us it’s going to fix their market relevancy issues? We’re referring to:

  1. Aloha POS being 10+ years behind the cloud POS migration
  2. Closed integrations, unworkable 3rd party “partner” processes, and tolls on everything that touches their POS
  3. Subpar, NCR-branded solutions that are prioritized over what’s best for the customer

NCR’s CEO makes far too much money to deserve your sympathy, but you must empathize with people whose livelihoods are collateral damage to NCR’s aloof business strategies. What a sad display of desperation from a once sterling company.

2 comments

  • Could you clarify where you would like to see the POS industry revenue come from? You’ve mentioned a move towards SaaS but also said no barriers to entry for their market. Should they focus all on the POS device (hardware and software) and no other services? I’m not saying the industry should go one way or the other, I could just use clarification on what your dream POS company is.

    • POS needs to focus on POS. It’s not that complicated. That’s partly what drew me into Orchard – their ability to compartmentalize core from API partnerships. POS is infinitely more valuable than payments (because that’s the mathematical reality when you divide by a figure that asymptotically approaches 0) and should have associated costs. POS companies, if they’re smart, will be able to find the correct partnerships to extend their core AND earn new revenues in exchange for distribution.

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