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Doug Nebeker ("Doug")
I sell business software at low price i.e. skirting around $100. I do reasonably well and get a constant stream of orders.
A couple of years ago a organization providing a national service (the majority owner is the government) purchased one license from us.
Our website allows an immediate online payment via a debit/credit card. The registration key is immediately emailed to the buyer automatically. We also accept payment by check and wire transfer. 99% of our customers manage to complete a sale immediately and automatically.
However this customer wanted to pay via purchase order. Weeks went buy and they didn't pay. Eventually the user in the organization emailed us directly and asked for a registration key. We handed it over. 5 or 6 months later the organization paid.
This wasn't without many emails going back and forth about how the organization wasn't allowed to use credit or debit cards etc. and how they had difficulty paying using our methods. Eventually they said they would make an exception in their policy and paid for the software with their credit card.
This wasted our time and at the end of it all we got was $95.
This time around the company wants a few more licenses.
However it seems the company wants to take up more of our time and want us to fill in an online vendor form. This requires company financial statements going back several years and operating agreements etc. We provided these.
As it looks like they are set to waste more of our time we upped the price of the software three fold.
Are we right to do this? We really aren't that desperate for the money.
> Are we right to do this?
Yes, it's either worth it to make the sale or it isn't. They have the option to walk away.
Monday, May 05, 2014
AnonForNow, I had this same problem for years. You get government agencies and schools that want to negotiate license conditions, want to use a very complex purchase ordering process, want you to supply a proposal and compete with bids from other suppliers, want you to go through a background check to become an authorized reseller or supplier, want you to subject to a security interview, want you to send in a signed and notarized affidavit signed by the officers of the company certifying that your company is compliant with various federal regulations regarding the number of minority employees, and that you've never sold any software to, or visited within the last 10 years Cuba, Iran, Syria and North Korea. Etc, etc.
Giant pain in the ass and costs you way more to deal with their process than you get it for.
This is a big part why Enterprise level stuff costs $20,000-$1 million per license. To deal with the bureaucratic overhead.
So you can tell them that standard edition is credit card purchases only, and they need to purchase your $100,000 enterprise edition instead if they need a purchase order and/or any of that stuff.
Since implementing this, 10% of the time they will downgrade to the normal edition, 90% of the time they either drop the whole thing or send more BS emails which I ignore.
Also, 100% of the BS over the years has been from American schools, corporations and government agencies.
I have sold to lots of foreign schools, corporations and government agencies and have never once had anything remotely resembling the total and utter BS I have gotten from US institutions, which are surely the most bureaucratic, absurd, Kafkaesque, timewasting and inane institutions of any country in the world. US is not rich because they are smart or good at business. They are rich because they game the system and back it up with threats of bombing campaigns, torture, and pay offs.
Or you can charge an non-negotiable administration fee if someone wants to use a purchase order.
I've seen places that specifically had a higher price for schools and government institutions. They didn't usually show it as a separate line item unless asked for a price break down. And when they did it was shown as an admin fee for all the paperwork that had to be done, tax differences, etc. Surprisingly very very few (I think only once) did anyone ever question it. And the owner had some quote he made up of how long it took for someone to deal with all there paperwork and the cost.
He always said if you could prove what the costs of extra fee's are for they'd pay. And they did.
The moment anyone asked for anything different from the standard sales method and documentation the priced increased significantly.
Monday, May 05, 2014
+1 to everyone. @Scott, you crack me up.
Absolutely you are right and it is fair to do it. You are a business and can't stay in business if it takes you hours of time to make a $95 sale.
My immediate thought was the separate admin fee for the purchase order idea. Reason being, you have your software on line for a certain price, so you can't really hide the an extra fee inside the software, and I don't know but there MAY be laws about selling the same product for two different prices.
But they are asking you for *additional services* to help them acquire it.
I'm not sure what to call it -- purchase order fee, admin fee, project management fee, etc.
I'd consider what you expect it will cost you in time and headache then at least double that since this is a special service outside of your normal business model. And things almost always take longer than anticipated... If they pay, you'll make a nice amount, if they walk away, you'll have dodged a bullet.
And you might insist on payment in advance. A systems engineer once told me govt agencies are notorious for not paying. (I have not had that problem though.) He did about $20K worth of work for one and they never paid despite tons of effort on his part. It was always just "oops, sorry, we'll look into that."
Over a year after he gave up they called him because some crucial printer he put in that used special paper stopped working and it was an emergency that they get it going. It was a simple fix but he said "You have not paid me" and they said "Oh we will...." And he said good, after the check clears I'll fix your issue.
They were apoplectic that he would not fix it first but he refused and, magically, they managed to have a check overnighted to him within a day. At which point he remotely fixed their issue in 5 minutes.
Tell them your PO policy is delivery after payment, and if they are not happy with that, they can order through their favorite reseller. And when their reseller approaches you, and that's not one of your resellers (if you have any at all), say your reseller discount is zero for one-off sales.
What will happen is the reseller will buy the licenses from you at your full list price using one of your standard payment methods and sell them to your client at a premium on your client's payment terms. Effectively, your client will pay the reseller for the latter's payment chasing efforts.
And the paradox is that all parties will be happy in the end, so this works 100% of the time.
Dmitry Leskov @Home
Tuesday, May 06, 2014
+1 to Scott.
Surprisingly I also had similar "fill our crazy forms" problems with mostly US organizations.
But I also remember one company from Egypt asking to fill their forms.
Tuesday, May 06, 2014
I wonder what is the optimal value for "Administration fee" for filling forms and accepting purchase orders?
Is it $100 or $30 or $200.
What the number looks reasonable?
Tuesday, May 06, 2014
It's at a minimum the price which removes your pain of dealing with the hassle. This may vary.
If you are a skilled engineer and dealing with it takes 40 hrs on average order, then that minimum price just for your time should be something like $10,000. Add to that extra if the process is particularly frustrating because they do things like stall, lie, or demand stuff that is none of their business.
Anything under $1K is a rounding error for any enterprise.
Waiting 5-6 months for a PO? Sounds like you can either charge late fees (not recommended), or simply dramatically increase your costs for them. If they want it, they won't even blink on the cost.
As said by many others, this is why there is Enterprise pricing. You should have it listed on your site for future clients. You can also offer then other "premium" options, like priority support, etc (basically answer their emails first).
Also, are you using their logo as a proof point on your website? Do you have a testimonial from them? Large enterprise can be great social proof for other customers who are on the fence.
Tuesday, May 06, 2014
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