I do not sell annual or other maintenance plans, and avoid that kind of terminology like the plague. It makes it too easy for folks to unplug a nice revenue stream. I do not sell my software solutions either. I provide "maintenance" (support) on a No Additional Charge basis! What the hell? Read on...
I license my software solutions with an initial setup/config fee which is minimal - really minimal. Sometimes no initial fees at all. Then I charge a reasonable monthly license fee, where over the course of a few years I recoup what I would have gained with an initial full fee for a single pay billing. But, for the remaining months/years I keep receiving these monthly payments for a client having the right to keep using my software, and gaining income benefit far in excess of its monthly license fee. I also provide support/maintenance on a No Additional Charge basis for clients paying me a monthly recurring fee. I can come in very inexpensively for my clients with respect to how their cash flow gets hit, and in the longer run I end up generating far more revenue from my offerings. For instance, I have one client who has been paying me $1,000 per month for 43 dealerships to use my software (very inexpensive on a per store basis). They have been with me since 2001, just about 8 years, 96 months. Do the math. I could never have charged them that kind of money for that solution, despite it being well worth the investment. This kind of arrangement makes my software cost effective on both a monthly cash flow and a return on investment basis for my clients. And it gives me monthly incentive to keep doing the best possible job I can for them. When they request upgrades or consulting I handle those items on a no additional charge basis, whether it is directly related to my solution or not. For all the months I have had to do nothing for the income as they keep on using it internally with their own personnel, a few weeks here and there for special projects is fine with me <g>. The name of the game now-a-days, more than ever before, is client retention and revenue stream protection. This is how I am accomplishing it, providing excellent solutions for beyond reasonable pricing, and not trying to nickel and dime a client at every turn. I get my recurring revenue stream from multiple clients, they get my attention whenever they need anything extra - plus make and/or save money using my software in excess of the revenue they provide me. If they begin to clip services in a tough economy I am betting I will be the last vendor standing as I not only make them money, I ask for relatively little in return. But when I sum the income from all clients each month I find I am doing just fine, without having to chase the next dollar while needing to ignore my current clients in the process. Of course, one can't simply flip a switch and migrate to this kind of model unless there is enough cash on hand to survive the initial lean months as a core client base is built. I was lucky in being able to bide my time as I built my business around this model. I know another FoxHead who chimes in once in a while in ProFox who has begun to adopt this kind of business model. He has a full time (or more <g>) job, and can afford (from what I can tell) to take his time in building up his client base on the recurring fee and minimal initial charge business model. If he continues to do an excellent job for his clients, and he grows his business a bit at a time, keeps his overhead low (work out of the house), his "side income" may well exceed his employment income in time. Other folks may have a spouse whose income can help with the reduced income as one transitions from full up front billing to a smaller initial billing with recurring fee billing model. For others yet it may have to be a matter of offering the smaller initial fee with recurring fees on a situational basis for some offerings, but not all. It is not for everyone, but from where I stand this is the ultimate win-win for myself and my clients. My two cents... Gil > -----Original Message----- > From: [email protected] [mailto:profoxtech- > [email protected]] On Behalf Of MB Software Solutions General Account > Sent: Monday, April 13, 2009 11:04 AM > To: [email protected] > Subject: [NF] Yearly support fees vs. hourly fees > > Question for those of you who sell yearly maintenance/support contracts > on > your software: suppose a customer says to you: "I don't want to buy > the > yearly maintenance contract. I only want to pay for the hours where I > actually need you to fix something for us." (...because he's thinking > that he'll have little or no problems for the year, given the > software's > solid track record.) > > How do you respond to such a customer? > > tia, > --Mike > > > > > > > [excessive quoting removed by server] _______________________________________________ Post Messages to: [email protected] Subscription Maintenance: http://leafe.com/mailman/listinfo/profox OT-free version of this list: http://leafe.com/mailman/listinfo/profoxtech Searchable Archive: http://leafe.com/archives/search/profox This message: http://leafe.com/archives/byMID/profox/[email protected] ** All postings, unless explicitly stated otherwise, are the opinions of the author, and do not constitute legal or medical advice. This statement is added to the messages for those lawyers who are too stupid to see the obvious.
