Video From Business Of Software 2009: Building Great Software Businesses

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Video From Business Of Software 2009: Building Great Software Businesses


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!

Posted by Dharmesh Shah on Mon, Aug 23, 2010


Love the idea of CHI. We have something similar, but never thought about connecting it to sales. 
Connecting CHI to understand which segment to focus resources on also sounds like a good idea.

posted on Monday, August 23, 2010 at 12:22 PM by Vineet

Great post. Thanks for sharing it with us. I just finished reading your book, Inbound Marketing, last weekend - and love your idea about marrying sales and social media to form Smarketing. The two need to work together now, more than ever. 
Also like your way of stating that getting in early and risking early failure is a sound business approach. All variables to a business enterprise cannot be fathomed until it is launched, so do not stand on the sidelines waiting for nirvana. Failing early is OK. Get in early, learn and change - or cut your losses. Either way, it will encourage constant refining. Seth Godin also makes these assertions, with his Ship Early references.  
Keep up the good work.

posted on Monday, August 23, 2010 at 2:25 PM by Robert Piller

Dear Mr. Shah, 
I love your video and the importantance of inbound marketing. 
I like to explore opportunities of mutual interest with your company. has created a very innovative News Script tool that can help with SEO and perhaps to be incorporated with HubSpot range of products. 
Please visit to discover more. The Java Script delivers content relevant news to web pages. 
Your feedback and suggestions are very much appreciated. Thanks again and I hope to hear from you. 
Thank you.  
Best regards,  
Corey Katir 

posted on Monday, August 23, 2010 at 2:51 PM by Corey Katir

Very insightful Dharmesh ! Very interesting concept of CHI ! Thanks for great presentation and posting it here !

posted on Monday, August 23, 2010 at 3:23 PM by Satheesh

Totally agree on No 4 and charging early otherwise how will you ever know if all those people who `love your idea' will actually pay for it. 
Like the idea of Smarketing, looking forward to watching the video to learn more and definitely want to attend this conference - the no fluff aspect and no panels appeals greatly. 

posted on Monday, August 23, 2010 at 3:57 PM by Natalie Sisson

What a fantastic video. This was extremely eye opening and reassuring to me at the same time. Thanks!

posted on Monday, August 23, 2010 at 4:51 PM by Wayne Helpard

Nice of you to share this.... 
I would request -- if you can share this years video after the event it would be great. 
Good Luck for the presentation. 

posted on Monday, August 23, 2010 at 8:22 PM by Mihir

Hi Dharmesh! 
This is a very insightful video. And I must say that for a guy who doesn't do presentations for a living, you give a killer presentation. 
I only wish I could scroll to the 37th minute to see that part again. This seems to be the only video on that doesn't allow sliding to a convenient point in the video. Or maybe it's just me. 
Thanks for the insights!

posted on Tuesday, August 24, 2010 at 4:44 AM by Siim

These excellent tips align very well with what we actually did, except for the CHI tips (11-13) which is in the plan... :)

posted on Tuesday, August 24, 2010 at 8:59 AM by softwarecandy

dharmesh - did not watch the video but 12 point sumamry is fantastic. we have a 3 year history of software and services development and transition now to the cloud.  
could not agree more on the value of paying clients feedback... 

posted on Thursday, August 26, 2010 at 1:05 AM by rajiv chopra

Thanks Dharmesh, 
One year I will get to Business of Software. In the meantime, I appreciate the videos. 
I am particularly keen on the concept of CHI.  
I have been using the concept, informally, in cash flow projections - and have been wanting to make it more tangible and transparent for some time. 
Here's some thoughts about how we might implement specific to our circumstances. 

posted on Friday, August 27, 2010 at 7:27 AM by Paul McArdle

Hi All, 
In case anyone need a direct link to the video mentioned here for future use: 
Video From Business Of Software 2009: Building Great Software Businesses 
- Great vdos Dharmesh..

posted on Tuesday, August 31, 2010 at 2:43 AM by Aneesh Abraham

One more.. 
Video from Business of Software : Everything I Know About Startups

posted on Tuesday, August 31, 2010 at 2:44 AM by Aneesh Abraham

I have a general question on Software Licensing Rights - does a customer with purchase of software license entitled to Free Upgrades of the product or just free Updates!  
any generally accepted practices? 

posted on Thursday, September 02, 2010 at 9:11 AM by rajiv chopra

Good presentation. I didnt like the joke about children dying in Africa.

posted on Friday, September 10, 2010 at 5:19 AM by Jose

Jose: Glad you liked the presentation. Apologies for the joke, that was insensitive.

posted on Friday, September 10, 2010 at 9:31 AM by Dharmesh Shah

No problem Dharmesh. I am sure it was not with any negative purpose. To use jokes in the presentations is of great risk, it's a double edge sword. I am also sure you are able to find better jokes :)

posted on Friday, September 10, 2010 at 9:38 AM by Jose

Infoupdater looks like something straight from 1999... along with a "contact us" page that lists a non-toll-free number. Classic. Wouldn't use it on any serious site.

posted on Friday, September 10, 2010 at 4:00 PM by Richard

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