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Peter Thiel spends 6 months writing down everything he knows about business. His book sells for $10.
Adam Wathan and Steve Schoger spend 6 months writing down everything they know about design. Their “book” sells for $79.
Believe it or not, both prices make perfect sense.
Thiel is selling to the masses and the masses are sensitive to price changes (price elastic).
If he raises the price to $30 they wouldn’t think twice before substituting his book for one of the many cheaper alternatives on Amazon.
Adam and Steve are selling to hardcore fans and hardcore fans are insensitive to price changes (price inelastic).
They've all been following the Twitter tips, watching the screencasts, reading the Medium posts.
In their minds, there are no substitute resources available.
When demand for your good is inelastic, you raise your price.
In the case of Adam and Steve, all the way up to $79.
As the diagram shows, a 8x price increase ($10 to $79) results in just a 2x drop in books sold (20k to 10k) and 4x more revenue (area of the rectangles).
On a serious note, it's interesting to observe that you can build a decent business charging $20 - $50 per month for something that any good developer can set up. This is one of those micro-saas sweet spots between "easy for me to build" and "tedious for others to build"— Jon Yongfook (@yongfook) September 5, 2019
Every year at MicroConf I get surprised-not-surprised by the number of people I meet who are running "Does one thing reasonably well, ranks well for it, pulls down a full-time dev salary" out of a fun side project which obviates a frequent 1~5 engineer-day sprint horizontally.
"Who is the prototypical client here?"
A consulting shop delivering a $X00k engagement for an internal system, a SaaS company doing something custom for a large client or internally facing or deeply non-core to their business, etc.
(I feel like many of these businesses are good answers to the "how would you monetize OSS to make it sustainable?" fashion, since they often wrap a core OSS offering in the assorted infrastructure which makes it easily consumable.)
"But don't the customers get subscription fatigue?"
I think subscription fatigue is far more reported by people who are embarrassed to charge money for software than it is experienced by for-profit businesses, who don't seem to have gotten pay-biweekly-for-services fatigue.
Listened to Jeremy Thiessen explaining how and why, on the Sales for Founders podcast
1/ When you build a landing page, you’re putting all your assumptions out there. In the early stages of a business you need facts. To do that, you’re better off talking to a prospect. Instead of making wrong assumptions, in a place where you can’t control the conversation. 🤷♂️
Later, when you’ve got facts, build the landing page
2/ Figure out who you’re serving and where they are. Then start calling. Need to have one person who wants this “thing” other than you 📱
3/ When cold calling get to the point. Don’t sell. Ask good, authentic questions. Show that you want to help 🎯
Drop some questions in there! Happy to answer anything, esp around building side projects with a full-time job :)
My high level plans for Starter Story.
On almost quitting
@daviswbaer How I find so many businesses to interview
@daviswbaer On balancing different projects
When I saw that @gumroad supported Pay What You Want, I had no doubt that this would be the pricing strategy for CSS Scan.
I'd always recommend PWYW with a minimum price instead of a fixed pricing. Why? [...]
It turns out that some people just value your product more than others!
👉 With PWYW you're not only receiving the value that you expected but also donations for a good work.
Plus, with a minimum price, you'll at least earn the same amount you were supposed to if it was fixed.
💡 You only need 1 person paying more to already make it worth.
It's not easy, though. CSS Scan started at $1.99. It was selling like water, so I raised the price to $2.99, and after that, $3.99 - in about 3 days.
❗️ What I didn't expect was that 30% of people were paying more!
I realized that the price could still be higher by looking at the average of the sales prices. E.g., when it was $3.99, the average price of it was actually at $4.69!
I left it at $3.99 for 3 months. Based on the $4.69 average, 1 week ago I decided to raise it again to $4.99.
🧐 Now let's look at the data!
📈 Previous conversion rate: 6,5%
📉 Current conversion rate: 5,7%
It received 1403 views this month. Doing math:
(1403*6,5%)*3,99 = $363
(1403*5,7%)*4,99 = $399
🤔 So there's actually a growth in revenue
⬆️ $363 to $399
🎉 +$36 or +10% per month
There should be be evidence that folks are already spending money in the space you’re thinking of entering.
Before AirBnB, folks paid money to stay at hotels, B&Bs, cottages, vacation homes, and hostels.
Annually, people spend $570 BILLION on travel accommodation.
Entrepreneurs need to follow the money:
“Where is it already being spent, and how can I get a piece of it?”
Don’t look for “problems that need solving.”
Look for categories where people/businesses are already spending money.
From an entrepreneur’s POV, if folks are willing to spend money on it, it’s a problem worth solving.
Apple has consistently followed this approach.
They didn’t make the first:
- MP3 player
- Smart phone
They saw the existing demand, and built on it.