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"Make Better Software" is a 6 movie course designed to help you as you grow from a micro-ISV to a large software company.
Doug Nebeker ("Doug")
Preferably with a 90-95% profit margin.
1 million / year ~ 83K/month
Consultant: Without overbilling/overworking, you need to bill at $520/hour
Consultancy: Without overbilling/overworking, bill other peoples' work at an aggregate of $520/hour
Make 83 sales of something at $1000/pop per month
Make 1106 sales of something at $75/pop per month
Is there anything you can license to 83 companies for $1000/month? The sales cycle for such things are probably huge. Or maybe 83 new sales monthly for $1000?
Can you make a SaaS site which bills at an average of $75/month for 1100 customers? You only need a thousand customers with 2-300 new ones annually to account for worst case turnover.
Can you make 1106 monthly sales of something at $75/pop?
What do you do to make a million bucks?
Pardon me for such a strange post, but I'm curious as to what you do. I've set this goal and now I've got to figure out how to get to it.
I think you'll find the support burden of most of your combinations will probably kill the dream of a 90% profit margin, since you'll need to employ people to service all your customers.
Why do you care about revenue anyway? Isn't your real objective $900,000 of profits a year? There's a lot more ways to make $900K profit, than there ways to make $900K profit on $1m sales.
Thursday, May 20, 2010
Another example you can look at is Salesforce.
Thursday, May 20, 2010
I'm working on something that will sell to businesses for 100 bucks. Definitely solves a need but of course that's not the entire piece of the puzzle. Launching soon so will keep you updated. Would need to sell 833 per month to make a million a year. I'd be very happy with a tenth of that in first year though.
Thursday, May 20, 2010
Not sure I necessarily have specialized knowledge. It's more of a better mousetrap situation (the competition was crappy, bad UI, hard to use -- at least that was the case 8 years ago). I'm not a UI expert or web designer, but I'm always looking hard at things and trying to figure out what it is about them that makes them 'good'. Then I attempt to remember that principle and implement it (rarely do, but sometimes). Long term persistence is the key, and constant improvement. Always be watching and learning from others. Though I'm not a Mac developer, I fuss over the tiniest things to try and make it as perfect as I can. I'm shooting for best in class.
Oh, and it's not a web app (just to spite the 'desktop is dead' mantra).
I'm pretty private so I doubt I'll tell you much, but you can email me at speedyBOS@hotmail.com (and I expect the email addy won't be any good after a few weeks because of bot-spam).
The need was found by using the competition as part of my day job. I'll just say most companies that have computers (are there any that don't?) could use this. Lots of competition too. One of the bigger ones was a $30 million/year company until they took VC money -- now they're doing $120 million/year.
One idea I had but never did, was an Outlook plugin that would organize email threads sort of like GMail does. Had a prototype but never took it further. That's something algorithmically fairly complex, but once you work through it, many people can benefit.
There's lots of pain and nuisance out there waiting for a better way.
A few ideas:
Don't you wish you never had to worry about your computer crashing or hard disk dying? An idiot proof backup, and one where I don't have to set _anything_ would be nice. How about Time Machine for Windows? What if a company didn't need to worry about someone walking off with customer lists? With disk space being so cheap, I wish I could load my CD/DVD into it and have it image it and then simulate the CD/DVD automatically when the app that needs it runs (that way my kids could use it -- no complicated CD mounting software). Then I wouldn't need to keep track of all these pieces of plastic... Or how about CD-keys for games and such -- keep them some place safe. I really wish everyone in my family that uses iTunes could easily share all our music (even if the computer was off) -- a central repository for all music files that worked for iTunes, Media Player, etc. even if someone accidentally 'organized' the songs... I REALLY wish there was a way to regulate the amount of time my kids play on the XBox, PC and watch TV. I'd like to give them 2 hours total to use on all three - let them divide it up however they want. (I've seen power strips that have a card swiper -- each kids gets their own card, but the strips aren't integrated to keep track of a grand total across different devices).
Just automate almost anything that's a pain, and something that seems pretty hard to automate, and you'll find customers.
And about patience, probably made $1K the first year, then $2K, then $5K, then $8K, then $50K (major re-write with easier UI flow and look and feel), then $100K, $250K and $480K last year. Definitely starts slow...
I was doing 2-3 a year at $200,000 a pop, but I couldn't physically do any more because I was working and traveling more than full time to support it and having to line up the next sale.
I think it was the Money magazine website that had a list of the top 1000 software companies, and I remember seeing almost uniformly the revenue per employee (not profits!) was in the range $200K-$500K. with I think Google the standout at $800K. That seems to be some kind of economic steady state. So I wonder if there's downward economic pressure, that if there is a product that could generate $1M revenue (let alone profits) with just one employee, large companies would tend to assign one employee to develop and support it and you'd have more competition -- tending to drive things back down. Likewise, for products that can make $200-500K a year revenue per employee , they'd tend not to get into those because they're already making that. Maybe?
Although I did average more than a million a year profits in the end (profits divided by years since product release, not counting development years) because I sold everything to a mega-corp that felt they could make a lot more with it with a lot more people and marketing involved (and they have). That might be an easier strategy if it's just making the most money with least business-running you want.
On the other hand, the consulting group idea works too! I had a former co-worker quit and form a consultancy. He had eight people he was charging $150-$200 an hour for and paying them only $50-$90, pocketing the rest. If you have the contacts for it, that might be an easier gig than selling and supporting a product.
QUOTE: And about patience, probably made $1K the first year, then $2K, then $5K, then $8K, then $50K (major re-write with easier UI flow and look and feel), then $100K, $250K and $480K last year. Definitely starts slow...
Thanks for posting that... and I feel like an idiot for making less than $5k/year for my first two years.
Friday, May 21, 2010
Speedy, thanks for the details. Do you plan to take on any employees? Do you have employees? Do you contract out work regularly?
That's pretty much all I need to know: that it's possible :)
CC: yes, you need the contacts if you want to make consulting work. Not my strength, unfortunately.
@speedy How difficult is it to do enterprise sales?
When your product is selling for 10 bucks a month, then usually it is an impulse buy. But your product must be expensive so volumes must be lower. However, as you say, in your market there are couple big players as well. So you how to convince enterprises to buy your stuff? And how do you get to talk to them in the first place?
We are trying to adopt a similar model with keeping prices a bit on the higher side https://dev.visualwebsiteoptimizer.com/signup.php
However in A/B testing industry, there are some big players (Omniture, Webtrends, etc.). So, just wondering how to get past them in roping in big enterprises to use our product?
Friday, May 21, 2010
I was doing consultancy for just over $600,000 a year, for a few years. So, I guess I was half way there ;-)
I'm working on something that will save businesses and governments a lot of time and money, so if I can get it to work, I think it'll do well, especially in the current climate (and looking forward things don't get better, maybe much worse here in Europe).
@Bring back anon
Just recently hired my first employee. I've tried contracting out web design, but was disappointed with the quality of the HTML. Now I just farm out screenshots (for website and app - pure graphical design) and implement myself.
It's possible, just takes a very long time, and keeping your eyes wide open and learning from everywhere.
Advertising: Google. Product page is ranked pretty high on Google which is probably everything. Did it myself -- didn't hire any SEO. Just learned principles, and then did them. (You know how we all have lists of 'things I need to get to', but never quite do it? GET TO anything related to SEO before everything else). This is how I'm found. I'd guess it took 2 years to get onto the first page once I started focusing on it. Think about what search engines want, and then give it to them. But don't do any black-hat stuff -- I've been banned before and it was not good.
Enterprises Google and find me. They try my app along with the competition and choose mine a fraction of the time (basically I'm living off the crumbs in this giant niche). The ones who choose me ultimately make the choice because of ease of use. And $1000 price point is nothing for a company. I spend that on my own company without worrying too much. An 'enterprise' is sometimes just a school district, or a grocery store chain, not necessarily IBM or Cisco.
Back to ease of use: It's a giant differentiator.
Think of this: What if you made an app that could take database connection specs, and an Amazon S3 account and then automatically backs up the database for you (wish I had this app). If such apps exist, they would likely have dialogs and dialogs of settings that were needed, sync time, tables to focus on, encryption to use, bandwidth throttles, backup set aging, backup frequency, etc, etc, etc, etc. Blah! What if you hid all that and just made it super simple (with an advanced button somewhere so the techies that want to dig in could). What if you didn't even ask the user if the database was MySQL or MS SQL or Oracle in the connect settings? The app could quickly spin through all possibilities and figure it out for the user. Make the app (and programmer) do the heavy lifting, and let the user (thousands of different users) benefit. That's the secret. My app does lots of brute force searches/checks to relieve the user of having to do that. The competition doesn't.
I wish you all luck. It takes time. I'd guesstimate it took 1500 hours of work before hitting $5K/year, so less than minimum wage for a number of years. But it's paying off now. Notice how life works that way? (sacrifice now, benefit later -- ie exercising, education, investing/saving, family, etc).
@speedy: I can't thank you enough for sharing those numbers. Well, benchmarks is what can keep founders sane and keep them motivated.
Incidentally, my app (Visual Website Optimizer) also differentiates on usability. I am trying to make it world's easiest A/B testing tool and think I'm on the right path.
As you say SEO took 2 years for you to get the top spot. In my industry the top positions for keyword "A/B Testing" are completely saturated and it looks I will need to topple some established players to get to that coveted spot :) Now, I don't think it is impossible but it isn't easy either.
My aim for a million bucks is to have 1000 customers paying 100 bucks a month. As I am just getting started, currently it is a tiny fraction of that goal but hopefully we will reach there!
Friday, May 21, 2010
@speedy and CC, I echo the other poster's sentiment. It really helps to see numbers.
I'm at about $2K/month comfortably after a year. I thought that was a failure but now I see that I just need to plug away. Especially given your progression.
Thanks for the motivation!
@Yakisoft Not sure why you consider it meaningless and empty. Extra zeros in the bank account always mean something. Like designing your own house or chilling all day.
1000 customers x $100/mo = $100,000/mo = >$1 M per year
What is wrong with this calculation?
Saturday, May 22, 2010
Wrong thing here IMHO is 1000 new customers every month.
To reach 1000 new customers your website should have at least 100 000 new visitors per month, i.e. 3333 new visitors every day.
For me it is easier to imagine 100 customers/m by $1000.
But frankly even 333 new visitors every day is a high number.
And IMHO is not easy to sell software for $1000.
Probably it is way easier to reach software markets where price tag is from $200 to $500.
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