NYCPHP Meetup

[Matt Juszczak]

To sum up my response to Mike, this is why I'm a big believer in Software as a Service (SaaS). Built it once, sell to many. 


-----Original Message-----
From: Michael B Allen <ioplex at gmail.com>
Sender: talk-bounces at lists.nyphp.org
Date: Sun, 3 Apr 2011 23:30:01 
To: NYPHP Talk<talk at lists.nyphp.org>
Reply-To: NYPHP Talk <talk at lists.nyphp.org>
Subject: Re: [nycphp-talk] Pricing a PHP product

On Sat, Apr 2, 2011 at 3:55 PM, Anthony Papillion <papillion at gmail.com> wrote:
> So since the topic of what to charge per hour seems to be being
> vigoriously discussed, I thought I'd throw something out there that's
> bugged me for a while.
>
> How to price a PHP product.
>
> I'm starting my third PHP product (an appointment reminder for a
> software system I wrote) and I'm having a lot of problems coming up
> with a price. I don't want to set it too low, like I seem to have done
> with my rates, but I don't want to over price it either.
>
> The system is straight PHP, JavaScript, JQuery, and HTML, so it's not
> anything terribly complex but it does provider a nice extension to the
> existing software.
>
> What is the best way to price such software?

Hi Anthony,

This is impossible to answer without intimate knowledge of the product
(and I apologize in advance for saying I don't care to know).

But if the M/O of the product is your typical business application
running as an HTTP service accessed by potentially many clients, then
the low end would probably be around $500 USD. That's about what it
takes to cover the costs of just helping people get setup and
collecting payment. If the product is a little side component like a
plugin for something then you might make it less but your margins in
this case are going to be poor. If you're app is something small and
you're thinking about a price like $100 or less, don't waste your
time. You need to write something that is useful enough to reach that
$500 range. If the application is really good and solves an important
business need, it is not unreasonable to charge $10,000 or an annual
fee of $1500 or so (but my guess is that you're not in this upper
range because it would probably be something that requires a
significant amount of man hours in which case you would have one
product and not three). Again it really depends a lot on what the
product does and how well it does it. If your software is really good
at something, customers will gladly buy it and they will not care much
if it's $200 or $500. Most developers / operators are not paying for
this stuff themselves. They're just doing an evaluation and submitting
a purchase order. You have to get to about $1000 before someone is
going to ask "why?".

And of course customers are going to expect a trial package that
doesn't cost anything. And customers demand options. You must have a
trial version that costs $0. And even after the trial expires I
recommend leaving that installation functional in some limited way. Of
course you can also have a version limited to a certain number of
users say for $300 as opposed to a "platinum" version for $600 or
whatever. I provide a lot of pricing options. I have a separate
"confidential" document for each product that I attach to every sales
email query which describes all of the pricing options about
discounts, the cost of versions limited to a certain number of users,
reseller conditions and so on. You can make a lot more money if the
options are structured well. For example, I have a simple formula (and
corresponding easy to read price table) that increases the discount as
the number of installations goes up. I think this scheme alone has
accounted for significantly larger invoice prices.

Another thing you can do is to make the debut price less than the
ultimate target price to leave room for increases. After a few months
when you have a better idea of who the customer's are, what they want
and the product has matured a little, you can decide to go higher
depending on the software's popularity, the economy, etc. Then when
you do a major revision 2 years later maybe you increase again.

Good luck,

Mike
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