I had to make up for it. This year was a huge diversion from my usual work as I scrambled to monetise properly. I spent a lot more time on topics that bring revenue, instead of purely optimising for usefulness as in the past.
It had a good outcome though: I made a series of really useful upgrades to my health insurance advice. I am happy that the solution was to make a better product, not to squeeze my audience more.
In the beginning we sold a product for a one-time fee. Every couple of years we'd release a (paid for) upgrade. The market was young, new features were obvious.
The company was funded by "new sales". Development, support, admin etc was all funded by sales.
As our customers grew, so our costs grew. Support goes up, so fine, we'll offer support contracts. But users typically don't sign up for these (but call support anyway and get pissed if we blow them off, or bill them.)
We make "updates" and sell those. But to do that we must "add features" (customers expect all bug fixes to be free forever). Adding features which offer true value becomes harder. Upgrade sales drop off, but now we have lots of different versions in the field.
Obviously sales plateaus at some point. The list of people receiving value goes up, the potential market gets smaller.
In short, the source of revenue and the receivers of value are disconnected. This is not sustainable. You are one or two bad sales months from closing up shop.
The optimal strategy for this business model is to find the sales peak, terminate all support, and accumulate as much from residual sales as possible.
We switched to a subscription model. Now those receiving value (updates, fixes, support, training, features etc) pay a known amount at a known time. We can budget, they can budget. If sales disappear current development and support can continue. (Aka Covid). Income and expenses are aligned.
We sell to business not consumers. While consumers might not like subscriptions, businesses love them. They allow for much simpler procurement (no sudden support or upgrade bills), assurance of longevity, reduced capital costs upfront.
We can grow headcount based on known income. We can grow sustainably without requiring sales to match.
Subscriptions work because the match income to expenses. Those who receive value pay for it in a sustainable way. It's as simple as that.
Thanks for your detailed response. I agree with what you wrote. But the key part is: "We sell to business not consumers." --> My product is not business-oriented. Probably there is a small % of businesses that use it but it's definitely not a majority (at least not right now). If I had a B2B product I would just do a subscription without thinking too much.
Building a business based on sales to consumers is hard. Consumers are fickle, their life-time value is low and acquisition costs are high. Products also tend to have very short life cycles. Any hint of success is quickly cloned and iterated on by others. It becomes primarily an exercise in marketing, not coding.
Assuming the value in the sale is static (ie not something like DuoLingo but more like Tetris) I would say the approach here is to build something fast, (like a couple months), spend the rest of the year promoting and pushing it, then (more or less) abandon it to make the next thing.
By year 2 you're looking to spend money only on marketing that is demonstrably profitable, while relying on word-of-mouth for residual sales. Sales will eventually approach zero.
Rinse and repeat, with a new product each year. Avoid the trap of "just coding" - remember you need probably 5 times coding time in marketing.
Try and save up enough to cover the inevitable flop years.
Of course the goal is to find the increasingly rare "hit". With any luck, sometime in the first 30 years, you'll have a "great year". Try and see this as your retirement and spend it accordingly. Resist the urge to use it to improve your life-style.
I wish you good luck on your journey. It is a very crowded space, with many intrinsic barriers to success. But it can also be satisfying if you manage to find success.
no, Lex has barely any connection to MIT. He taught (only once) a January community class, that’s all. If you want to get the full picture, I recommend watching this video: https://youtu.be/Z1Ua1hVRtdE
This is not accurate, you can look up the fact that he was a paid research scientist. Why are you using a poorly sourced youtube video to inform an opinion that you then repeat without doing any research?
Don't people feel embarrassed by being this easily swayed?
