4 ms·

> There's no middle ground between "here's your free font" and "pay me/us a lot of money". This is a general problem in many businesses. Back in the early days

by a4isms 4y ago

> There's no middle ground between "here's your free font" and "pay me/us a lot of money". This is a general problem in many businesses. Back in the early days of blogging, Joel Spolsky wrote an entire article about how there was basically no software that cost more than $1,000 and less than $75,000. This was more than a decade ago, the numbers today would be different because we care about LTV not sticker price, but the gap would still exist.[1] Of course, heuristics like this are not strictly true, but the general shape of his argument is still correct: There are three kinds of monetization models for software: Free, cheap, and dear: 1. Free as in beer. Open source, etc. 2. Cheap. $10 – $1,000, sold to a very large number of people at a low price without a salesforce. 3. Dear. LTV of $75,000 – $1,000,000, sold to a handful of rich big companies using a team of slick salespeople that do six months of intense PowerPoint just to get one goddamn sale. The Oracle model. Net result is that some products are sold to people to scratch their own itch, and some products are sold to businesses that can justify the ROI of spending a large amount of money, and between the two it is hard to find reasonable options. We see this in all the products that start at a low price and solve a simple problem, like DropBox and 1Password. Then they pivot to "The Enterprise" and you are now talking subscriptions, seat licenses, and all sorts of fancy enterprise features to justify the price. I used to see this in hotels when I travelled on business. When my clients were paying, they put me up in fairly luxurious hotels that charged me $3 for a room service coffee. When I was paying, I stayed in Motel6-type places that had free coffee in the room or at the end of the hall. I think everyone eventually offered free coffee in the room, but the last time i traveled there was a similar dynamic with WiFi: The naive would expect the cheapest accommodation to try to rent you internet access, but it was the other way around. "You have an expense account? Ha! Pay for WiFi!" Same dynamic: If you are selling to business, you have to have the sales force, customer success organization, and features business want to buy (like back-end integration with business expense and planning systems). That all costs you money, which you recoup by charging an arm and a leg. TL;DR: The moment you start selling to business, you are on a path to charging huge money for something that when sold to individuals, ought to be affordable. [1]: https://www.joelonsoftware.com/2004/12/15/camels-and-rubber-duckies/ https://www.joelonsoftware.com/2004/12/15/camels-and-rubber-... "Camels and Rubber Duckies"

jacobr1 4y ago
Part of the problem is that selling to small/medium business sucks, unless you can make it very transactional (the cheap model above, just scaled per-seat). Anything that needs to be hands on costs you almost as much in labor costs as big company ... without the high-price point to justify it. And especially in medium business range they often actually need _more_ support, since they are complex enough to have integration problems, but not big enough to have specialized personal to internally manage and deliver a project. It works for some products and services but not others. One model you'll see though in this market segment and VARs and other channel providers. They'll have set of enterprise vendors they work with, but take on the sales and service aspect themselves. So while it might not make sense to have dedicated sales and customer success for a $5k piece of software - if you are effectively bundling 10 of these from different vendors + profserv, a $100k/deal starts making sense of the VARs, and offloads the costs from the vendors who are then just giving bulk pricing to the channel.
- a4isms 4y ago
  Part of the problem is that selling to small/medium business sucks, unless you can make it very transactional (the cheap model above, just scaled per-seat). Anything that needs to be hands on costs you almost as much in labor costs as big company ... without the high-price point to justify it. My very first personal ISV "hustle" was a classified ad product for desktop publishing. I priced it at $750, and discovered that my cost of sales and support made this untenable. Now I know why small desktop publishers were doing classified ads by hand, and the really big companies had mainframe- and minicomputer-based systems costing five or six figures in the 80s and 90s. Same dynamic, and all it took was my car being repossessed to make me realize there was something wrong with my business model.
- ghaff 4y ago
  Yeah, SMB has to be partner-led. They're often specialists (geography, vertical, etc.) That don't have the BigCo overhead that enabled BigCo to build the product in the first place. Partners are a huge part of selling for most B2B hardware and software companies. 50% or more of sales is not uncommon.
4y ago

by a4isms 4y ago

jacobr1 4y ago

Part of the problem is that selling to small/medium business sucks, unless you can make it very transactional (the cheap model above, just scaled per-seat). Anything that needs to be hands on costs you almost as much in labor costs as big company ... without the high-price point to justify it. And especially in medium business range they often actually need _more_ support, since they are complex enough to have integration problems, but not big enough to have specialized personal to internally manage and deliver a project. It works for some products and services but not others. One model you'll see though in this market segment and VARs and other channel providers. They'll have set of enterprise vendors they work with, but take on the sales and service aspect themselves. So while it might not make sense to have dedicated sales and customer success for a $5k piece of software - if you are effectively bundling 10 of these from different vendors + profserv, a $100k/deal starts making sense of the VARs, and offloads the costs from the vendors who are then just giving bulk pricing to the channel.

a4isms 4y ago
Part of the problem is that selling to small/medium business sucks, unless you can make it very transactional (the cheap model above, just scaled per-seat). Anything that needs to be hands on costs you almost as much in labor costs as big company ... without the high-price point to justify it. My very first personal ISV "hustle" was a classified ad product for desktop publishing. I priced it at $750, and discovered that my cost of sales and support made this untenable. Now I know why small desktop publishers were doing classified ads by hand, and the really big companies had mainframe- and minicomputer-based systems costing five or six figures in the 80s and 90s. Same dynamic, and all it took was my car being repossessed to make me realize there was something wrong with my business model.
ghaff 4y ago
Yeah, SMB has to be partner-led. They're often specialists (geography, vertical, etc.) That don't have the BigCo overhead that enabled BigCo to build the product in the first place. Partners are a huge part of selling for most B2B hardware and software companies. 50% or more of sales is not uncommon.

4y ago