Measure the knowledge of the whole team by its least knowledgeable member.

Quote is mine, from my book "How (Not) to Run a Web Development Agency" I'm currently writing.

Today I wrote about focusing on providing less services, rather than spreading yourself too thin.

#mybook   #quote  
Giving "Lifetime" anything is trouble for your software business

The company from the snapshot below offers a lifetime developer account for $219. Forever. "Pay now, and you can use our infrastructure forever" (meaning: till the day one of us goes out of business).

We know this is wrong and dangerous for a software business, because we used to do this. We used to offer free bug fixes forever and we thought that was a good idea. We were fools.

Offering anything for a lifetime sounds good to marketers during brainstorming sessions. You imagine the lifetime offer being the tipping point in your customer's decision process. You have probably come to this idea because you saw someone else on the internet offer the same thing to you as a customer, and it made you feel all warm and fuzzy inside. 

Until the day the company offering lifetime something, goes out of business, or dramatically increases their prices. Price increase almost never happens without serious customer backlash - again, we know, we've been there :)

Lifetime offers are a sign of an inexperienced business. Let's take the example at hand: 

$219 forever. Let's say "forever" is 10 years - if the company makes it that long. 10 years is 120 months. So, the company is selling 120 months of subscription for $1.82 dollars a month. Let's say that a regular price for this type of developer account is $50 a month - developer account being the priciest option, the one a company is supposed to earn profit from.

We're writing this from the perspective of a web development company who did survive for 10 years, and are working our asses off to survive for another 10. We lived long enough to experience the consequences of all the naive, unprofitable ideas we've come up with.

We've found that lifetime offers are nothing but trouble, here's why:

1. The cheapest customers cost your company the most. This is logical, here's the explanation: The cheapest customers are the most inexperienced ones, and inexperienced customers buy the least expensive plan.

2. You have no idea what will happen in six months, let alone in five years, in ten years, or forever. That's why experienced companies like Google, Microsoft or Apple never ever promise you something lasting a lifetime. Google, Microsoft and Apple really plan to stick around for a while and if they continue like this, they will be around for another 20 years at least.

3. Most of your customers will forget your lifetime offer, but you never will. In the near future, you'll have to make decisions that will make every financial and business sense to break your promise of "forever", but you won't make that decision. You'll make the other one - the wrong one. It will take you years to get over yourself and change something. We know, we've made a metric ton of mistakes like that one.

4. Some of your customers won't forget your "forever" promise. You will then offer to "grandfather" their accounts to stop them from lashing back at you publicly. These customers will forever stay with you as the ones paying $1.82 a month, costing you dearly every time their email hits your helpdesk.

Imagine having a two year old client, paying you $1.82 a month, and a new client, paying you your regular price of $50 a month or more. Do you honestly expect yourself to forever treat those two customers the same?

Are you that strong?

Even after the gas prices skyrocket - again? And your landlord increases your rent? And your coffee shop ups the price of your latte? Isn't it better not to bring your customers in that position in the first place?

And what if you already promised to give something away forever, maybe for free forever - like we did with bug fixes?

Your imperative is to stay in business because your profitable customers expect you to and want you to.

Forgive yourself for being young and stupid and just stop offering lifetime promises to new customers.

Prepare to lose all existing customers whose relationship with you depends on your freeloading offer. Those customers were never supposed to bring you any profit anyway, because you designed the offer that way. If they choose to leave, liberate their data and let them go in the most professional manner.

Admit your naive foolishness if needed, admit it sounded like a good idea at the time, offer your most affordable paying plan, and be honest with your customers. Honesty goes a long way. Everybody was a yound entrepreneur once and made foolish mistakes.

Prepare for backlash. Price increase is normal, because inflation is normal, and gas prices going up is normal. Freezing prices forever is not an option and an online business should follow reality or perish.

// Post+ written by +Visnja Zeljeznjak 

Hire us for Python & Django web development:

// permalink to this post+:

#logit   #blogplus  
Are we selling our high-tech, web development services for peanuts?

The book I'm writing is called How (not) to run a web development agency and today I touched on the often repeated quote how many of us are working for peanuts. Meaning, we don't charge enough for our high-tech work.

The sad part is that this perception of working for peanuts is wrong.

We're working for less than peanuts.

Because, even peanuts increased in price in the last 20 years (I took a 20-years span because this is how long web development exists as a business, the web did not exist prior to 1991).

Want proof? See this chart: 

In the last 20 years, price per metric ton for peanuts went from 630.00 US dollars in May 1992 to 2,111.54 US dollars in April 2012.

So, don't complain you're working for peanuts. You'd be happy if you were ;)

#mybook   #webdevelopment   #business  

(p.s. sorry for the typo in the picture, Google+ won't let me edit the image nor upload a new one)
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