Video From Business Of Software 2009: Building Great Software Businesses

By Dharmesh Shah on August 23, 2010

Of the several conferences I attend or speak each at each year, my favorite is the Business of Software conference organized be Neil Davidson (of Red Gate) and Joel Spolsky (of Fog Creek).  There are several reasons for this.  The speakers are great and have enough stage time to really get into the topic they’re passionate about.  There’s no no “sponsor fluff”.  You can’t pay your way into a speaking spot.  There are no booths.  No panels.  It’s single track so you don’t have to make hard decisions around which sessions to attend.   But, most importantly, the attendees are awesome.  Even when the conference was in Boston (where I live), I rented a hotel room where the conference is held just so I could spend more time with the people there.  I plan to do that again this year.

The 2010 conference is in Boston Oct 4th – October 6th.  It’s a beautiful time of year to be in Boston and the speaker lineup is once again, awesome.  Folks like Seth Godin, Eric Ries (Lean Startup Guy), Scott Farquhar (of Atlassian) and of course, Joel Spolsky himself.  Check out the schedule, and if you can go, you should go.  Just ask someone that’s attended in prior years.

The 2009 conference was held in San Francisco and the title of my talk was “Ideas For Building Better Software Businesses”.  There are essentially two parts to the talk — the first half is about inbound marketing (how to pull customers in using Google, social media and blogs).  The second half (which starts at about 37 minutes) is about customers and sales. If you enjoyed my talk in 2008 titled “Everything I Know About Startups”, you’ll likely enjoy this one too. 

Ideas For Building Better Software Businesses

 

Some notes from the video, for your convenience:

1. My objective for this particular presentation was to improve the odds of your survival and your success if you're growing a software company. 

2. Types of risk:  Development risk (given an idea, can you actually build the product?), Market risk (if you do indeed build it, will anybody pay for it?), financial risk (will you have the necessary capital to build a business?) and execution risk (assuming you’ve mitigated the other risks, will you manage not to screw it up?).

3. Introducing the concept of smarketing (sales + marketing). 

4. Charge early.  Like pre-alpha early.  Like it sucks so much I’m surprised people don’t go running out of the room, early.

5. Sell early not because the revenues are going to amount to anything (they’re not), but because the data from paying customers is exceptionally valuable. 

6. Sell often, because you want reliable, negative feedback too.  Selling early tells you whether people will buy — selling often (i.e. charging smaller amounts in regular intervals) tells you whether they’ll stay.  Let customers vote with their dollars (by giving them the option to cancel their subscription). 

7. Don’t hire sales people too early.  In the early days at a startup, regardless of what your title is, you should be bringing customers on board.

8. Consider creating a sales waterfall chart that shows you daily, how the business is tracking against your sales goals.  This proves invaluable as you scale and surfaces problems in the business early.

9. Keep pricing simple in the early days.  You’ll have plenty of time to make it more complicated later.

10. In most big markets, you can afford to get pricing wrong in the early days.  If your potential market is thousands of customers, then selling the first hundred at a “sub-optimal price” is not fatal.  If you end up getting thousands of customers, getting pricing wrong for the first 100 won’t matter.  If you end up getting just 100 customers, getting pricing wrong for those 100 won’t matter.

11. You should Implement something like the HubSpot Customer Happiness Index (CHI).  It’s a quantitaive method for measuring how happy your customers likely are using available data (like their product usage pattern). 

12. Things that you can likely include in your CHI:  Frequency of product usage, breadth of product usage and actual benefit received.   

13. The CHI can be used for many things, the most important of which is predicting which customers are likely to cancel (because they have a low CHI score and are likely unhappy).  Other uses include compensation for sales people, calculating the quality of leads that marketing is generating, and making product roadmap decisions.

If you attended this talk or took the time to watch the video, would love to hear your feedback I can make my talk this year more valuable.  Hope to see you at Business of Software 2010!

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6 Simple Selling Tips For Software Entrepreneurs

By Dharmesh Shah on August 20, 2010

The following is a guest post by David Mytton founder of Boxed Ice, which provides software for server monitoring.  Deep down inside, many software entrepreneurs really dislike selling.  This article provides some practical tips for “selling without selling”.  That is, ways to avoid having to be that stereotypical "sales guy". - Dharmesh

"Sales" is sometimes perceived with an aura of mystery. As a developer, it's something I always assumed was reserved for a "real salesperson" and even though I was selling our products, I thought it was because the customer had come to us directly. Whilst there is an aspect of "sales" that involves cold calling and making visits to prospects, I actually recently realised that many of the things I'm doing on a daily basis are all part of what might be called "sales".onstartups sales guy

What sales activities consist of will differ depending on what you're selling, who you're selling to (consumers, smaller businesses or enterprise) and how large your organisation is, but there are a few things that can be used universally and to great effect. Here are a few that I use with my own SaaS product.

1. Signup followups

Getting a customer to sign up is a major step but it's not the end of the process - you need to make sure they're actually using the product. E-mail them the next day to remind them of a few of the cool features or recommend things to try. Being smart about it helps - you can easily track whether they have logged in and performed various tasks so include those in an e-mail.

In our case, the e-mail subject is "Have you tried our iPhone app?" and the e-mail highlights the advantages of the free app, with a link to the iTunes Store, plus a reminder of the web UI URL for their account.

In the early days, I used to phone every one of my signups to see how they were doing. We don't collect the phone number as part of the signup process but many customers add it because our product allows for SMS alerts. This helped get early feedback and users were often surprised to get a call before they'd even paid anything.

2. Trial followups

All our users sign up to a 2 week trial before they have to pay. An e-mail is sent to remind them the trial is expiring 2 days before, and we e-mail them again on the day of expiry. The key thing here is to ensure the user has time to upgrade, sometimes requiring internal approval. All our trials are set to expire on a Thursday i.e. mid-week. This means expiry notifications go out on a Tuesday. This avoids being lost in the Monday e-mail overload from the weekend and avoids Fridays when people just want to go home.

And because most of our users are in Europe or the US, we time the e-mails to arrive during the afternoon/late morning rather than overnight. Users will clear out their inbox in the morning so this leaves them clear to receive our e-mails!

3. Mixing automation with real people

I think you're more likely to look at an e-mail that's from a real person than one obviously from a machine "From: David Mytton" vs "From: Boxed Ice Mailer". I mix these up so the day after signup followup comes from "me", is written in a casual style and signed off by me. It also comes from my company e-mail so replies go directly to me and because I'm asking a question about using our iPhone app, I often get replies with feedback or questions.

But our trial reminder e-mails come from the system. You'd expect these to be automated whereas an e-mail asking how things are going is more personal.

4. Making automation interesting

Our signup e-mail with the user's login details and the trial e-mails are sent by the "Boxed Ice Robot Llama". This makes it a little different from other automated systems and we've had some good feedback from users enjoying this differentiation. It all goes towards making the service a little more friendly and has been used to good effect by the guys at Moo, who use "Little Moo" as their order processor.

5. Highlighting the higher value customers

Our product is a server monitoring service so the more servers you monitor, the more you pay. We run a script to highlight users on the trial with more than 3 servers and add a task to our customer system to get in touch with them directly before their trial ends. This will be a phone call if they have provided their details, or we'll e-mail them. This comes directly from me as a real person, asks how they've been getting on, whether they're going to upgrade and includes volume
discount pricing.

I've found that some users do plan to upgrade their accounts but haven't had time to, or have a few questions first. Often these will get pushed to the end of the todo list so getting in touch directly allows you to speed up the sale. You can also be flexible with your
pricing to offer discounts if the customer agrees to a minimum number to get access to the volume discounts in anticipation of future growth, or if they're willing to pay in advance for a discount.

6. Convert With Newsletters

All our signups get subscribed to our monthly newsletter which contains not just product news but interesting links from our blog, Twitter and around the web. We've had many cases where the user has not converted from the trial immediately, but months later they come back when a feature they wanted has been implemented having found out from the newsletter.

Wrap-Up

Although this doesn't fit with the stereotype of the hard sell from the sales guy who just won't give up, these are all legitimate "sales" activities that can be done by any software startup and can easily scale as the customer base grows. We've only recently started highlighting the higher value trial users but this has already proven to be worthwhile. So let me know what you think and what's worked for you in the comments.

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