I have a friend whose house was designed using some of the principles set forth by [Christopher] Alexander. For example, one important idea is to go to the site and look at it and its surroundings, and situate the structure to take advantage of the site. Her architect built a wall framed with wood and covered with cardboard, with the windows cut out, that was the size and shape of the main living area wall. He and an assistant held the wall in place as my friend looked through the window, standing and seated, in the center of what would be the living room. They moved the wall this way and that, trying various angles, until the mountains in the distrance were framed in the window to my friend’s satisfaction. And that defined the location [of] that wall and its windows, and thus the living room and main house.
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At 37signals we sell our web-based products using the monthly subscription model. We also give people a 30-day free trial up front before we bill them for their first month.
We think this model works best all the time, but we believe it works especially well in tough times. When times get tough people obviousy look to spend less, but understanding how they spend less has a lot to do with which business models work better than others.
There are lots of business models for software. Here are a few of the most popular:
Freeware
Freeware, ad supported
One-off pay up front, get upgrades free
One-off pay up front, pay for upgrades
Subscription (recurring annual)
Subscription (recurring monthly)
Cutting new before cutting old
Typically people look to cut new spending before they cut current spending. They’ll often put a freeze on anything they aren’t already paying for. Eliminating new costs is easier than eliminating existing costs.
For example, if they’ve been evaluating something new, they’ll put that evaluation on hold. If they’ve been able to get by without it they can likely continue to get by without it. Or if there’s a big upgrading coming up they’ll stall or just consider it unnecessary.
But if they’re already paying for a service they use, they’ll likely continue using that service. They may downgrade to a cheaper plan, or try to negotiate price, but if it’s still useful there’s a fair chance they’ll continue using it.
The problem with one-off selling
The problem with one-off selling is that once the customer pays you once, that revenue stream runs dry. In tough times, when people freeze new spending, less new customers means less new revenue. And in extreme cases, you may see no new customers at all. That means no new revenue at all. So if you have no new customers for three months, you have no new revenue for three months. If you don’t have reserves, going dry for three months could sink you.
Via The Year in Photography: Maasai warriors cover a battle field as they clash with bows and arrows with members of the Kalenjin tribe in the Kapune hill overlooking the Olmelil valley located in the Transmara District in Western Kenya on March 01, 2008.
[The Congressional oversight panel’s first report on the spending of the $700 billion of bailout money] is tough and it’s fast. And I think fast was important here too. An ordinary Congressional panel would’ve taken three months to get up and running and would’ve fooled around with hiring staff and deciding who had what tasks and setting up deadlines and timelines and so on. We didn’t do that. In 13 days, we produced a hard-biting document that pushes hard for some real answers. We don’t have a phone, we don’t have a photocopier, we don’t have a coffee maker yet, but we have a very strong report. And there’s another report coming in 30 days and another one 30 days after that and another one 30 days after that. And I think that sets the stage.
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Elizabeth Warren, chair of the oversight panel, speaking on NPR about the committee’s recently issued first report. Why can’t government run like this more often? Why does it take a serious emergency to make us realize it’s a good idea to skip all the BS upfront stuff and get to something real?
I just recently finished reading “Black Postcards: A Rock & Roll Romance” by Dean Wareham, ex-frontman for the band Luna (review). Great read. I’m a big fan of the man’s music, but I think even non-fans will enjoy his frank descriptions of internal band conflicts, the creative process, life on the road, etc.
It also got to me thinking that Wareham, a smart guy, and his bandmates really did a wise job of exhausting potential revenue streams for the band, while simultaneously making its hardcore fanbase happy.
For one thing, they released a 2006 documentary,
“Luna – Tell Me Do You Miss Me,” of its farewell tour. It’s not just a celebratory feelgood flick though. It really takes you inside the disappointments and strains of the band. You don’t often see a band that’s willing to reveal the depressing side of trying to make it as a musician…what it’s like to be approaching 40, touring around in the back of a van, and having people constantly tell you, “I don’t know why you guys aren’t bigger.” Amazon’s summary:
In Tell Me Do You Miss Me, the four members of the celebrated New York-based indie-rock band Luna confront the ceiling of their ambition, the harsh realities of their modest success, and their conflicted feelings about each other as they embark on their final world tour and uncertain futures. Laced with moments of both humor and melancholia, Tell Me Do You Miss Me earnestly exposes the underbelly of a touring rock band in their final days together. Supported sonically with Luna’s dreamy catalog of indie-pop and visually with lush travelogue footage—with adventurous stops in England, Japan, and Spain—Tell Me Do You Miss Me is an elegy for an era.
The book and movie are both surprisingly raw and open. That admirable level of honesty will probably continue to draw in fans (and non-fans) even after the band is gone.
And the DVD landed in stores the same day as The Best of Luna, a greatest-hits CD. Previously, Luna put out a live album too. Both of those are good examples of how a band can make money without having to write new songs and return to the studio. And of course there’s the usual merch stuff like ringtones and tshirts (which was actually the only way the band made money on tour after covering costs).
Revenue is like water going into a dam. The more holes you can poke in that dam, the more ways the money has to trickle through to you. Plus, it gives fans more ways to connect with you and interact with you (especially if you’re willing to be open and honest). When that’s true, everyone wins.
Lead singers aren’t supposed to write books. That doesn’t mean it’s a bad idea though. What are you not supposed to do that’s actually a pretty good idea?
The goal with products is to give people a great story to tell, so they can tell two friends, and they tell two friends, and so on. Being new is a great advantage on this front. Would you go tell a friend about Pepsi? No, because they’ve been around too long. That’s the advantage of being David in the David and Goliath story.
Highrise [Case study] How record producer Bill Moriarty uses Highrise to keep track of album projects “Despite living in the same city we rarely see each other in person, we barely have meetings, we don’t have conference calls, we don’t do IM… Highrise is where everything goes. It’s how Chris & I stay in sync with what was said, what was promised, potential projects, and where I’m currently in an album’s progress. If we worked only in email all these vital communications would just be lost in the email noise. Using Highrise makes us focus just on what’s important to making records and running our company.”
Using Highrise export as an offline backup
“We were recently talking to a customer who occasionally needs to access information in Highrise while he’s offline. His solution: He exports all his data from Highrise every few weeks so he’s got an offline backup on his hard drive.”
Basecamp How Ice-Qube Preparedness System founder relies on Basecamp
“Basecamp has enabled me to function like a big company, makes the most effecient use of my time, gives me the most information I could want to supervise and access my teams participation, serves as the ultimate back up and makes sense of my wild mind and ultimately grows my business.”
[Case Study] The Vianova Group President on “the ‘less is more’ streamlined eloquence that is Basecamp”
“Reluctantly I set up my first project which was a large-scale fundraising event involving a large and diverse committee of staff and volunteers. Much to my surprise the entire group began using Basecamp immediately. More importantly, there are significant intangible team benefits to the “less is more” streamlined eloquence that is Basecamp. My clients frequently tell me how much they appreciate us giving them a highly effective tool that is so easy to use.”
Multiple products Backpack and Highrise at Wall Street Journal site
“Tips for ‘Getting Things Done’” is a video at The Wall Street Journal that includes a discussion of Backpack (and screenshots of Highrise) as tools that help you be more productive.
“Despite living in the same city we rarely see each other in person, we barely have meetings, we don’t have conference calls, we don’t do IM… Highrise is where everything goes. It’s how Chris & I stay in sync with what was said, what was promised, potential projects, and where I’m currently in an album’s progress. If we worked only in email all these vital communications would just be lost in the email noise. Using Highrise makes us focus just on what’s important to making records and running our company.”
