Emergic: Rajesh Jain's Blog

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The Small Software Company

May 23rd, 2004 · No Comments

Dan Bricklin writes:

The type of business I’m interested in is the small software firm, probably just one or two developers. It’s the type of business that developed my two most influential applications, VisiCalc and Dan Bricklin’s Demo Program. I believe that such firms are an important source of innovation for the world, and should be encouraged. I also know that there are many people who like working in such an arrangement, without being part of a larger organization, and it would be a shame for that not to be available to them as a reasonable form of livelihood.

I am planning to produce a variety of relatively simple “utility” programs and sell them to see which get some traction before continuing to enhance those into more full-featured products.

In the past that strategy would have a problem because of the cost to publicize, manufacture, and distribute the products. Marketing and distribution costs are very real. An ad in a magazine can cost thousands of dollars each time it runs, and you need to run it repeatedly to keep up sales. Printing manuals, duplicating diskettes and CDs, and creating packaging all cost money — all spent in advance of any sales. A product that brought in just a few thousand dollars in sales would be a total loss. You had better be pretty sure that your application was worth the investment, and not just have the time to invest for development, but also the seed money to get marketing off the ground. “Getting traction” for various utilities, from what I’ve seen, can easily take from months to a year or more, and much of that time is devoted to active marketing, not creating new products.

Sales can happen through “push”, where you actively sell the product and find ways to reach people and let them know why they should want your product. They can also happen through “pull”, where the people realize themselves that they need your product and go to you to get it. A really good situation is when the “word of mouth” recommendations of the product create enough pull to make the company self sustaining.

In terms of getting traction, software that you don’t have to pay for has an advantage over software that you do. Unless the “for fee” software has a strong pull or push to recommend it, there is a tendency for many people to try the free version first and only get the more expensive version if the free version doesn’t meet their needs. A variation is using a free “trial” version of a product, but an always free (to acquire) product is better.

Today, there is the Internet with search engines, there are people comfortable with downloading with access to reasonably high bandwidth connections, and more, so the costs to market and distribute can start out much lower than in the old days. The incremental expenses per product during the time while you wait to see if interest reaches a critical mass that creates strong pull can be much lower.

There is a problem, though, for products that, while possibly innovative in their approach to a problem, are not that complicated to code. While you are waiting for traction, or soon thereafter, someone creates a similar product (after seeing yours) and gives it away as some sort of “free” (to acquire, as in “free beer”) software.

An alternative, of course, is to write open source to begin with and make it as likely as possible that many no-fee copies of your product will be distributed and that your product is the one that others recommend and takes over its market niche. This makes considering open source a defensive move for marketing purposes. In addition, releasing a product as a form of open source has many other marketing benefits and can lead to greater user satisfaction and wider use. The question is, of course, can you make money that way?

He has just introduced his first product from Software Garden – Servertest 1.0, which lets “you monitor how one or more web sites respond to requests for web pages over a long period of time, showing an indication of average response time and pattern of timeouts.”

Tags: Entrepreneurship

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