Pricing Web Services: Step 2 – No Annual Plans

A while ago I wrote a piece about pricing web services and getting them into buckets. I mentioned I’d write more so here goes.

Pricing is an incredibly hard thing to do. As I mentioned in the last post, getting things into three buckets is really important, so I want to talk today about yearly packages.

At first blush offering your customers a yearly option may seem like a great idea. For one, you lock them in for a year – this is good. For two, you have more cash right now – this is also good. There are two major problems with yearly packages though.

The first problem is too much choice. When you talk about getting your pricing into three buckets to make your pricing simple, adding yearly packages (assuming you are doing monthly packages in the first place) will double the number of packages you offer. So right out of the blocks you have 6 packages which is three too many. [Note: if you question this, read the pricing buckets post].

The second problem is the smoothness of your cash flow. Reporting, monitoring and improving monthly cash flow is much more manageable and consistent with monthly packages than when you try to manage yearly subscriptions. As a start-up cash flow is king. Demonstrating steady growth is key when you are talking with stakeholders. Monthly packages can derail your revenue reporting if you have a relatively high or low number of annual sign-ups in any given month. With monthly packages, these fluctuations and their effects are moderated.

I’m going to post more on pricing again in the future. By the way, Levi and I are presenting at DemoCamp 8 tonight. If you are there, please say hello.

Microsoft is Waking up a Little

Last fall I found myself thinking about Microsoft and their strategy a lot…I really don’t know why I spent so much time thinking about Microsoft, I think it was because they seemed so utterly absent from the activity (Flickr acquisition, delicious acquisition, etc.)…I guess they were the elephant in the room.

Last week HighRoad – Microsoft’s PR firm – invited myself and about five other Toronto area blogger/developers to meet the director of Microsoft Live, Phil Holden.

I gave the team at HighRoad my feedback on the meeting which was basically, “Why invite us over to see a bunch of your ME TOO apps?” Part way through I asked Phil, “So what is Microsoft doing that is new or different?” The answer (“tightened integration across all our products”) was frankly lacklustre, though I can see how having your contacts simply managed across your email, your cell phone, your social network is compelling. But will Microsoft allow you to easily participate in non-Microsoft social networks? A murky answer was given…almost a “Why would you need that?” feel to it, though Phil was clearly listening.

I’ll give the reason why they should allow you to move freely between networks for your future reference. Social networks and communities are only as good as the people within them. There will come a day when any given person will need to be a part of a very specific community. Let’s use a niche/vertical knowledge network as an example and let’s assume the network is not based on a Microsoft platform. If I can’t easily take my identity with me to that other network, it’s going to piss me off. So much so that I will probably never come back to Microsoft once I leave. If they made it easy to move out and back in, well then, I’d probably come back.

So basically they still have not learned to LET GO. They still want to tell you who you can play with. I would not hang out with a person who told me who I could associate with and held me back from joining a new group of friends…at the end of the day, it’s not very social is it?

Anyhow, the reason for this post was actually something totally different. The reason was the one really positive thing I took away from the day. As I mentioned, in the fall I had got my head stuck thinking about Microsoft’s strategy. Here are some of my posts from that time:

Microsoft Getting Disrupted – What is their Strategy?
What Microsoft can learn from the Xbox
Microsoft and APIs – The Only Strategy That Remains?

The one thing that Phil Holden said that really caught my attention was some numbers Phil shared. Basically Microsoft has about 350 million MSN users and 350 million hotmail users and 300 million unique users between the two services. Phil said Microsoft is going to focus on serving those 300 million. As someone who believes deeply in serving his users, and from years of consulting knows that your current clients are your best prospects for new business, I think Microsoft has settled on a strategy I can live with for now. Well done.

By the way, Tom Purves did a good write up of the session there…you can see me (beardless) behind Phil in the photo there.

About Writing a Blog…

Stowe dropped by and wrote another great post on the FreshBooks Blog.  This one focuses on blogging and why small business owners should blog.  There is useful content in there for any blogger though, and that is why I am posting it here. He touches on some of the reasons to even bother blogging, and more importantly, gives excellent guidance on how to do it well.

In Zen Buddhism, there is a concept known as the sudden school: that it is possible to become enlightened in a single moment, without years of training, based on even a single interaction with the right teacher. Bam! One well-pitched Zen Koan — “What is the sound of one hand clapping?” — and you are shaken to your core, and the world never seems the same again.

I think the same thunderstrike of insight can happen — in a much more modest way — when someone “gets” what blogs are, and sees what they can do for a solo practitioner or small business. I don’t mean to suggest that in a single moment all of the labor and love involved in blogging gets compressed to zero, but that it is possible to grasp the dynamics of social media and its benefits in just one exposure to the right description. Which I am setting about to do, here, after blogging for six years or so.

Here is the whole article.

Green Thinking

As posted here, if you can lend a hand, please do.

Currently I have a research project on the go. I am looking for useful resources (books, websites, podcasts, experts) that help small businesses become more “GREEN” in their operations.

You see, I cut my entrepreneurial teeth organizing a sports event.  The event is/was  an ultimate Frisbee tournament.  I was responsible for providing food, shelter and entertainment for roughly 600 people and I looked at the design of the event as a way to express and promote some things I believed in. 

As someone who has spent well over 200 days of his life on enjoying and guiding canoe trips in places like Quetico Park, Temagami and Algonquin Park, it turns out the environment is something I believe in and want to see preserved. 

So I gave the overage of my sports tournament to the Sierra Legal Defence fund – they do legal work and take on big companies and governments on behalf of the environment…it’s a GREAT organization.  I also told all the players (all 600) that to cut down on waste they were to bring their own plates and cutlery.

All the players went with it.  In over eight years we prepared dinner for about 5000  people… in about 16 bags of garbage.   Think about your home and how much garbage  5000 meals (about 5 years of eating) generates…scary no?

I’m sharing this with you because I want to do more to help small businesses understand how they can cut down on waste in their business processes and generally operate in a more “GREEN” way.  FreshBooks cuts down on the paper used to do business by facilitating paperless invoicing.  We have been proud of this fact for years.

Over the coming weeks, months and years I want to share with you hundreds of useful tips that will help you and other small businesses operate with less impact on the environment.  So again, if you can help me with my research, I’d appreciate it.  Send me a note.  Thanks.

Mark Vs. Mark – Is the Internet Boring or What?

Mark Cuban put up a great post this morning about how boring the internet really is. I think the main point he’s trying to make is that it’s not the “internet” that is new and exciting, it’s the applications that are so much cheaper and easier to build that are now changing the world:

Its the brainpower that is changing our world. THe internet is just a utility to deliver the digital bits they create.

I tend to agree with Mark Cuban because he is right about the countless cool new applications that are popping up mainly because of the low cost to build them, and not because of any remarkable breakthrough in the internet.

Mark Evans disagrees wholeheartedly with Cuban saying that there really are a lot of people out there that have no idea how powerful the internet has become:

Mark, it’s a nice rant but you can’t be totally serious to claim the Internet is more than “just a utility to deliver the digital bits” created by entrepreneurs or kids. To be honest, you need to step back from the fire and realize how many people have little clue about the Web’s capability and power.

Perhaps this is a Canadian vs. American viewpoint because in a lot of ways we Canadians are lagging behind the US when it comes to utilizing the web’s power.

Either way, I think both Marks agree that the explosion of creative and remarkably useful web applications being released every day are really good things, both for the consumer and the entrepreneur.

Stowe on Small Business Survival

The crew and I at FreshBooks are lucky to count Stowe Boyd amongst our seasoned and talented advisors.  Stowe dropped by the FreshBooks blog today and crafted a post about small business survival.  Here is an excerpt:

This existential aspect of business execution is perhaps the key reason that few individuals survive as soloists. It is difficult to determine what is the most important thing to do next and then to execute on that, even if the task is outside your comfort zone.

Here is the whole post.

Ingredients for Successful Open Source Projects

As posted on the FreshBooks Blog:

I posted about PHP on Trax recently, and Daniel just came across this post about PHP on Trax. Brace yourself, it’s not a glowing review…but if you notice the date, and make your way through the comments, you’ll see the tune changes.

The post is interesting to me because it is a timely snapshot of an open source movement in its infancy.  It also highlights some key ingredients for successful open source movements:

1) open source projects demand excellent documentation (see DH’s comments)
2) open source movements need bodies (i.e. people to contribute)
3) open source projects can evolve very very quickly

Hopefully the PHP community will get behind a framework and make it happen.  If you know any PHP developers, encourage them to lend a hand.  There is no reason why PHP on Trax or some other PHP Framework can’t rival Ruby on Rails… as Mark Evans my friend and fellow co-founder of the mesh conference says, “it takes a community to raise a child.”