* The Business of Software

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Andy Brice
Successful Software

Doug Nebeker ("Doug")

Jonathan Matthews
Creator of DeepTrawl, CloudTrawl, and LeapDoc

Nicholas Hebb
BreezeTree Software

Bob Walsh
host, Startup Success Podcast author of The Web Startup Success Guide and Micro-ISV: From Vision To Reality

Patrick McKenzie
Bingo Card Creator

Government Discounts

For those of you based in the US, what discount do you offer to US government agencies?
Bill Anonomist Send private email
Thursday, November 07, 2013
 
 
None.
Doug Send private email
Thursday, November 07, 2013
 
 
Why would you offer a discount? It seems to me the US government has a lot of money.

When requests like this come through I usually respond with no, but we do have discounts on multi-user license packs. It's an opportunity to up sell and makes the response seem less negative. Also large organisations will sometimes buy multiple licenses just in case they need more because going through their procurement procedures is such a pain they'd rather minimize the frequency they have to do it.
Jonathan Matthews Send private email
Thursday, November 07, 2013
 
 
The least amount required to close the sale.

Sometimes they will come back and say 'our budget won't cover that'. Then you may need to negotiate a bit.

Given the hideous beaurocracy often involved in selling to the US Govt, I certainly wouldn't offer them a bigger discount than I would offer a private company buying the same number of licences.
Andy Brice Send private email
Thursday, November 07, 2013
 
 
Nothing. Imagine going to IRS and asking for discount on your taxes?
Blocky Send private email
Thursday, November 07, 2013
 
 
Due to the huge risk involved, if anything the discount should be negative several thousand percent.

Let's say you have software that costs $100. Charge $60 million.

It's not that you want to bilk them. It's that they are going to lay a bureaucracy on you so thick that if you don't charge this amount you will go bankrupt complying with their requirements.

Once you accept a purchase from a federal agency for example, you can easily end up becoming a government vendor, and suddenly these massive amounts of regulations apply to you that will cost you tens of millions of dollars to comply with correctly, and if you don't you can have your company dismantled and you thrown in prison.

You need an army of bureaucrats and lawyers to deal with these sorts of deals.
Scott Send private email
Friday, November 08, 2013
 
 
Well, it was mostly rational until this bit: "[...] and if you don't you can have your company dismantled and you thrown in prison.". That's straight from crazy town.

But if you ignore the detour into crazy town, everything else was right. It will cost you more to support big bureaucracies. That's just a fact; whether the bureaucracy is a corporation or a government agency there are more hoops to jump through.

So, absolutely no discount for government (or big corps). Make sure you're charging enough to cover the extra legal and bureaucratic expenses. Otherwise it will be a net loss for you.
Wyatt O'Day Send private email
Friday, November 08, 2013
 
 
Andy Brice Send private email
Friday, November 08, 2013
 
 
What Scott said - and nothing crazy about it.



AC
Reluctantlyregistered Send private email
Friday, November 08, 2013
 
 
OT - Andy, your link perfectly describes one of the many reasons I'm a libertarian :)



AC
Reluctantlyregistered Send private email
Friday, November 08, 2013
 
 
I have done business with a couple cities and I did not offer them a discount.  I don't over charge them but they are some of my better paying clients in that as much as they *think* they are trying to be cost conscious, well, they just don't think the way a private company does when it comes to the line between "want" and "need."

So I would not give them a discount.  EXCEPT...  I know some vendors will give deep discounts on their products to sectors that are filled with people who may leave the government agency and enter the private sector and then become paying clients.  For example, I know the courts get cheap to free software from vendors because they figure the court clerks, fresh out of college, will use it, become attached to it, then later take jobs at private law firms and encourage their firm to buy the software.

So a long term marketing strategy like that might work for some software.

As a general rule though I have found that those who ask for a discount usually end up being more high maintenance in every way and can end up costing you more than you'll ever make from them.  I assume this goes for the government too.
Emily Jones Send private email
Saturday, November 09, 2013
 
 
> As a general rule though I have found that those who ask for a discount usually end up being more high maintenance in every way and can end up costing you more than you'll ever make from them.

I've never found that myself but the amount of times it comes up is amazing - since so many people seem to experience it I guess it should be factored in.
Jonathan Matthews Send private email
Sunday, November 10, 2013
 
 
I generally mark up any government sales.
Craig Welch Send private email
Monday, November 11, 2013
 
 
None.  Ever.  Ever.  Ever.
Cowardly Poster Send private email
Tuesday, November 12, 2013
 
 
>>
"I've never found that myself but the amount of times it comes up is amazing - since so many people seem to experience it I guess it should be factored in."
<<

Jonathon,
That is interesting.  Maybe it has to do with the type of client one works with.  I am seldom asked for  a discount.  When I am, it sets of red flags for me.

They usually end up being the people who are very demanding and very needy.  I think they often have IT issues in general because they nickel and dime all their support and so when they do find someone who will help them they get all they possibly can from you.

Intellectually, I know that asking for a discount is just smart business.  But emotionally I feel annoyed and wary when someone does.  If someone simply asks and accepts no, that's fine.  But when they try to explain to me how they're doing me some sort of favor like they're this wonderful client I can't live with out -- well, when I was new I fell for that a few times and always resented the client and regretted giving in as their requests piled up. 

I have seen on here a lot of people will give discounts to make a sale and I can see how that profit is a profit they otherwise would not have made.  But I feel disloyal to my good clients who happily pay 100% and never question my prices if I give a discount to someone with whom I don't even have a history.  I am probably being immature and taking business things personally but I'd rather do business with people who value my products and services.  (Now, if business slows, my attitude will adjust quickly.  LOL.)
Emily Jones Send private email
Tuesday, November 12, 2013
 
 
With institutional buyers, they normally have to follow a purchasing process. Sometimes this process is codified in law which assign binding rule making authority to some bureaucracy and the result is binders or even bound books thousands of pages long documenting the required purchasing process.

So the buyer is not being demanding for their own selves, and you'll never hear from them again as a customer after the sale. But they have to ask for the discount as part of the process, and then get bids from multiple sources, and go with the lowest price or similar criteria.

So, if you have full retail pricing only for direct sales, then your distributors are the ones with the lowest price and they get to deal with the buyer instead.

But a lot of software companies only sell direct. In that case, single supplier, they have to pay whatever you ask. But they in return will bog you down with their process, if you allow yourself to get into this. Good news is you're not required to at all. If they really want it, then they will have to arrange with some other supplier to buy it from you and then resell it to them. In that case maybe you sell a license to XYZ Ltd for $200, and XYZ sells it to the feds for $50,000, making a reasonable profit to cover their administration costs.

Individual random buyers asking for discounts are another matter.

A lot of these people are students or otherwise low income. We offer them the student/teacher discount. We are very flexible about being a student or teacher. Homeschoolers qualify, as do people taking on line classes. What doesn't qualify is universities. They are often purchasers from hell, especially and particularly most of the universities in the US. Outside the US university and college staff are far more reasonable. Many universities are like the federal government with binders full of purchasing regulations that will take you dozens or hundreds of hours to comply with all for a few hundred dollars in sales, which will likely later be the source of large amounts of piracy problems as students and staff make copies of the software and then hit your support for key activation, new keys that they "lost", or just support.

But individual students and teachers are never a big problem and them asking for discounts I have not seen to be an indicator of trouble.

What is DEFINITELY a HUGE RED FLAG is people wanting free copies, advance copies, unlimited evaluation copies and so forth.

These people want a free copy AND unlimited pre and post sales support. Some of these guys will email you daily until you tell them no very clearly, and then they will go off to forums and talk about how unreasonable your company is. At that point is when your really GOOD customer service is an advantage, because when this happens, in every case I've seen it, our real and paying customers end up responding and pointing out that that person is insane and noxious.
Scott Send private email
Wednesday, November 13, 2013
 
 

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