EG154: from tech services to products
For the past 12 years I have only worked with software services and products.
Sold outsourcing services to startups.
Sold hardware and on-premise licenses to factories all over the world.
Design pricing models for scaleups.
Helped services teams to increase prices for their clients.
I did workshops and training sessions with hundreds of B2B software companies.
Most companies I have seen and worked with stumbled upon a working business model after many years of trial and error.
That is one way to learn and grow.
But I would argue that it makes more sense to be intentional about it.
Why go through all the trouble of spending time, money, and resources on trying to build something new if you don’t think first of how you are going to make money?
Yes, you can create a lot of value with technology.
But can you capture some of that value back, to build a sustainable business?
The common view among tech entrepreneurs is perfectly captured in this LinkedIn post by Greg Head, Founder of Practical Founders and podcast host:
“Twenty years ago, it was really hard to build software, but it was relatively easy to find open markets with people eager to buy from you. It's the opposite now.
It's much easier to build software now, but it's more difficult and expensive to find open markets or niches with ready buyers who clap when you show up.
Product is still important, but the Saas scale-up game is mostly about sales and marketing: your Go-To-Market (GTM).
Technical founders who have grown big and valuable companies always say their biggest learning that paid off was learning to market and sell.”
When we look at the B2B software space, we can see a broad range of different types of services, products and combinations of these.
For any given problem faced by a specific customer segment, the solution can be offered as:
> Custom software starting from zero
> Software based on frameworks
> Productized services
> Integrations of existing software
> Implementations of existing platforms
> Mini-apps in existing ecosystems (AWS, Oracle, Shopify, Wordpress, Hubspot)
> Simple apps (eg. 1 dev, 1 month)
> SaaS
> Platforms
> Marketplaces
> Building an ecosystem of solutions and partners
Where most entrepreneurs fail is going to extremes.
Thinking in black and white.
It’s either custom software with hourly billing and no risks for the vendor.
Or a fully fledged product, that requires 1 year of development and huge marketing budgets.
The right way to start is to combine services and products.
Even the most scalable tech products need implementation or customization services.
Services companies would benefit a lot from using productized services as a marketing tool.
When you decide on a clear customer profile, you know the problem you want to solve, the solution to that problem might be a combination of services and products.
Tech services entrepreneurs looking to build their own products have the impression that their biggest challenge is marketing (because they already know how to build software).
But it’s not only about product and marketing.
Before you think about the product,
before you worry about marketing channels,
you need to get your pricing model right.
From day 1.
You can get all the data and information you need to make decisions without building a product.
Without spending money on ads.
That is what I learned the hard way.
Don’t make the same mistakes I did.
It’s much faster and cheaper to learn from others’ mistakes.
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PS.
Do you have dilemmas or questions about your pricing model?
I’d be happy to help.
We can do this with a 4 hours workshop
or a 2-week sprint.
In just a few well spent hours of work we can design the right pricing model for your B2B software company.
Reply to this email if you want to schedule a call with me (or DM me if you are reading on LinkedIn).