Why are you still building consumer apps? Enterprise pays 4x more(developereconomics.com)
developereconomics.com
Why are you still building consumer apps? Enterprise pays 4x more
http://www.developereconomics.com/still-building-consumer-apps-enterprise-pays-4x/
31 comments
Exactly - at my last startup, revenue "lumpiness" was the worst part of the whole thing. In the early days, we'd have $0 in bookings one month, and then next month, a check for $800k would come in.
Building an enterprise sales funnel is also a challenge. It takes real discipline to be able to say "100 leads->25 opportunities->5 POCs->3 deals at an ASP of 450k". With consumer apps, the volume is so much greater that you can have conversations about A/B testing the homepage to drive a few extra percentage points - for enterprise apps, odds are not enough people will ever visit your website to be able to gather enough data to A/B test anything.
And deals will fall apart for the most random reasons - a regime change at a big bank. A bigger company releases a product that uses some of the same words as yours, so the customer decides to evaluate it. Your EU channel partner gets bribed to tank a deal by a competitor. Anything can happen.
True story: we lost a deal once because the customer did a POC, and then fired the engineers who evaluated our software. With the departure of the engineers who evaluated the software, management lost the use case doc and evaluation criteria that was used by the fired engineers, so they wrote a new use case doc without telling us, scored us based on the new doc (despite never having used our software), then had a competitor come in and execute their POC with the new engineers and new use case doc. Unsurprisingly, the competitor "won". The call with the customer was amazing:
Them: You lost because of X, Y, and Z reasons
Us: Those weren't use cases in the pilot, but even if they were, we can do those things
Them: Well...we didn't know that you could do them. But it doesn't matter. We picked the other guys.
Us: Where are the people who looked at our software?
Them: We had to let them go. Unfortunately they didn't have time to write a report before they left, so we based our evaluation of your software on your user manual.
This is one of the reasons why SaaS apps are so appealing on paper. They have:
- Recurring revenue stream
- Freemium models allow leads to self-select
- Less sales friction (no need to send a sales engineer onsite, just spin them up a free 2-week trial)
But there's still a ton of money to be made in on-premise enterprise software, it's just a long, annoying, dangerous sales process.
Building an enterprise sales funnel is also a challenge. It takes real discipline to be able to say "100 leads->25 opportunities->5 POCs->3 deals at an ASP of 450k". With consumer apps, the volume is so much greater that you can have conversations about A/B testing the homepage to drive a few extra percentage points - for enterprise apps, odds are not enough people will ever visit your website to be able to gather enough data to A/B test anything.
And deals will fall apart for the most random reasons - a regime change at a big bank. A bigger company releases a product that uses some of the same words as yours, so the customer decides to evaluate it. Your EU channel partner gets bribed to tank a deal by a competitor. Anything can happen.
True story: we lost a deal once because the customer did a POC, and then fired the engineers who evaluated our software. With the departure of the engineers who evaluated the software, management lost the use case doc and evaluation criteria that was used by the fired engineers, so they wrote a new use case doc without telling us, scored us based on the new doc (despite never having used our software), then had a competitor come in and execute their POC with the new engineers and new use case doc. Unsurprisingly, the competitor "won". The call with the customer was amazing:
Them: You lost because of X, Y, and Z reasons
Us: Those weren't use cases in the pilot, but even if they were, we can do those things
Them: Well...we didn't know that you could do them. But it doesn't matter. We picked the other guys.
Us: Where are the people who looked at our software?
Them: We had to let them go. Unfortunately they didn't have time to write a report before they left, so we based our evaluation of your software on your user manual.
This is one of the reasons why SaaS apps are so appealing on paper. They have:
- Recurring revenue stream
- Freemium models allow leads to self-select
- Less sales friction (no need to send a sales engineer onsite, just spin them up a free 2-week trial)
But there's still a ton of money to be made in on-premise enterprise software, it's just a long, annoying, dangerous sales process.
Self-replying to add: The other thing to think about with on-premise enterprise software is that while it's a huge pain to sell, it's incredibly sticky. If you build up a sufficient volume of customers, you can basically fund operations off of renewals, and invest all of your net new income in new R&D and development.
Many companies will renew support contracts for years, even if they're not heavily using your software anymore, because the risk associated with their being out of support and then running into a critical issue is greater than the $100k it's going to cost them to renew. But if you've got 100 customers paying $100k/year to renew support, that's $10m in basically guaranteed revenue, which means that now you've got some breathing room to plan and grow sensibly. That's when the lumpiness goes away.
Many companies will renew support contracts for years, even if they're not heavily using your software anymore, because the risk associated with their being out of support and then running into a critical issue is greater than the $100k it's going to cost them to renew. But if you've got 100 customers paying $100k/year to renew support, that's $10m in basically guaranteed revenue, which means that now you've got some breathing room to plan and grow sensibly. That's when the lumpiness goes away.
Having a predictable income from support contracts is also a buffer against seasonal sales cycles. The company I work for sells software to large enterprises that tend to go on buying sprees during the fourth quarter, when departments have to use up their yearly budgets or lose them. Many years we don't know if it will be a horrible year or a great year until we've hit the fourth quarter.
You should feel lucky they even told you the truth. I've had customers lie to me directly over the phone about how they used our product and found it unsatisfactory, and when it was returned we found the CD-ROM was still sealed in its original plastic.
Selling to businesses (and governments, too) involves a lot of dealing with bullshit. Many times we've told someone we couldn't do the "absolutely must have" feature, and they still bought it. (Once the critical feature was to disable the copy protection, after which they would buy one. And when we refused they bought three.)
Selling to businesses (and governments, too) involves a lot of dealing with bullshit. Many times we've told someone we couldn't do the "absolutely must have" feature, and they still bought it. (Once the critical feature was to disable the copy protection, after which they would buy one. And when we refused they bought three.)
As a (too) long time enterprise guy, this post and the parent are incredibly true to life.
I think you've hit the nail on the head with the appeals of SaaS. Something else I would add to that from my "inside" perspective.
* People tend to be less territorial about SaaS as regimes and responsibilities change. It makes sense, premise stuff is a tangible reminder of someone else's influence and there can always be question about the quality of the implementation. Not so much with SaaS, it's regarded much more like a utility - no need to fire the existing ISP or power company when you take charge and no need to drop the SaaS contract.
* Less implementation friction. SaaS tends to be smartly designed with working around and through traditional barriers in mind. When all you need is a web browser and an innocuous configuration change or perhaps a lightweight agent or appliance to get started it's faster to get to the point of convincing adoption through demonstration as opposed to talking about it.
* No complications from folks who "buy" a product, but won't pay for ongoing maintenance creating mine-laden islands of trapped expense.
>"But there's still a ton of money to be made in on-premise enterprise software, it's just a long, annoying, dangerous sales process."
Yeah, I see it being particularly tough on an individual vendor. If you're addressing something apparent enough for one of the big monstrosities to notice they'll be looking to acquire/claim a solution to push you out.
If you're addressing something emerging, forward-thinking enough that the cartels haven't caught on to it, you'll have a steep uphill battle convince anyone what it is and how why they'd actually want it.
I think you've hit the nail on the head with the appeals of SaaS. Something else I would add to that from my "inside" perspective.
* People tend to be less territorial about SaaS as regimes and responsibilities change. It makes sense, premise stuff is a tangible reminder of someone else's influence and there can always be question about the quality of the implementation. Not so much with SaaS, it's regarded much more like a utility - no need to fire the existing ISP or power company when you take charge and no need to drop the SaaS contract.
* Less implementation friction. SaaS tends to be smartly designed with working around and through traditional barriers in mind. When all you need is a web browser and an innocuous configuration change or perhaps a lightweight agent or appliance to get started it's faster to get to the point of convincing adoption through demonstration as opposed to talking about it.
* No complications from folks who "buy" a product, but won't pay for ongoing maintenance creating mine-laden islands of trapped expense.
>"But there's still a ton of money to be made in on-premise enterprise software, it's just a long, annoying, dangerous sales process."
Yeah, I see it being particularly tough on an individual vendor. If you're addressing something apparent enough for one of the big monstrosities to notice they'll be looking to acquire/claim a solution to push you out.
If you're addressing something emerging, forward-thinking enough that the cartels haven't caught on to it, you'll have a steep uphill battle convince anyone what it is and how why they'd actually want it.
I find this applies in developing custom apps for larger companies.
When we were smaller, we dealt with smaller companies. Most of the work was brochure sites. Although these bring in around 4-5x less than larger companies I found that it was easier to secure the deal and equally please the client. You can't build the same brochure site for a corporate and charge 4-5x more, it just doesn't work.
Now we are larger we deal with larger companies. The apps we build are larger and bring in greater deals. The chance of securing the deal though is a lot more than 4-5x harder. I also find the client harder to deal with. You end up dealing with people who are further removed from the people really making the decisions. You end up developing to the people you are talking to then you end up reworking projects when they actually show it to the people making the decisions.
All this process ends up costing us more but we are slowly refining processes for this. I suppose it's a learning curve in dealing with larger companies but I find each client has their own set of challenges.
We now service both types of clients. The quick and easy brochure sites for quick turnover and high profit and the higher end client who pays more but the profit is always less than if we did (x) amount of smaller sites.
When we were smaller, we dealt with smaller companies. Most of the work was brochure sites. Although these bring in around 4-5x less than larger companies I found that it was easier to secure the deal and equally please the client. You can't build the same brochure site for a corporate and charge 4-5x more, it just doesn't work.
Now we are larger we deal with larger companies. The apps we build are larger and bring in greater deals. The chance of securing the deal though is a lot more than 4-5x harder. I also find the client harder to deal with. You end up dealing with people who are further removed from the people really making the decisions. You end up developing to the people you are talking to then you end up reworking projects when they actually show it to the people making the decisions.
All this process ends up costing us more but we are slowly refining processes for this. I suppose it's a learning curve in dealing with larger companies but I find each client has their own set of challenges.
We now service both types of clients. The quick and easy brochure sites for quick turnover and high profit and the higher end client who pays more but the profit is always less than if we did (x) amount of smaller sites.
The many years of "yea we'll add that feature" usually means a long lasting enterprise product ends up as a customize-able workflow tool with a customize-able rules engine that stores data as an EAV. It may be slow, but throw enough servers at it, and it can handle your workload. Then you just have presets for each market that you can pre-load the rules and workflows, and data if required. It's absolutely crazy. You have to fight to keep your product from turning into an XML parser.
The worst thing is when a big customer becomes dependent on a buggy behavior, and after fixing the bug you need to add a configuration option to preserve the buggy behavior for the customers who rely on it.
The other thing I've found annoying about enterprise is that the best idea doesnt always win- in fact, it regularly loses. You have to deal with users who are trained on bad software. You have decision makers who might have gotten their job by bringing in software x, they might have a personal relationship with the guy who sells them software x, they might not want to shake things up too much before aspiring to a new position, etc. In other words: politics.
In other words: politics.
You could call it "politics" or you could call it "people." Ultimately the world (even the technology world) is about people, more than about technology or economics. That truth often seems lost on HN.
You could call it "politics" or you could call it "people." Ultimately the world (even the technology world) is about people, more than about technology or economics. That truth often seems lost on HN.
Yes of course- but there is a difference between the "people" in an enterprise vs. world-facing project.
In the world-facing project there might be millions of potential decision makers (i.e. customers). You can make the technical decisions you believe make the best product knowing that if you are correct you will gain more new users than you lose of old users.
In enterprise, sometimes you have to make whacky irrational choices because there might only be hundreds of potential organizations to sell to and they might have only 1-2 decision maker(s) each.
No one wants to lose customers. But at the end of the day if you know feature x is best for your application, you might make it even if it costs you 100 customers.
In enterprise its harder to make these choices because its harder / takes longer to recover.
In the world-facing project there might be millions of potential decision makers (i.e. customers). You can make the technical decisions you believe make the best product knowing that if you are correct you will gain more new users than you lose of old users.
In enterprise, sometimes you have to make whacky irrational choices because there might only be hundreds of potential organizations to sell to and they might have only 1-2 decision maker(s) each.
No one wants to lose customers. But at the end of the day if you know feature x is best for your application, you might make it even if it costs you 100 customers.
In enterprise its harder to make these choices because its harder / takes longer to recover.
People exist in every area you could possibly want to go into, but the peculiar hassles of enterprise sales don't. "Politics" seems like a decent label for it to me.
One company that I worked at sold expensive B2B products(real hardware with software). If a prospective client demanded a feature it was added to the sales and product manuals immediately.
However, it so often happened that a sale was made before a feature could be actually added as programmers were swamped.
It was common to add a feature years after it actually appeared in the product manual. Call it vaporware or deception but it was not uncommon. Internally, company hated the practice but every other company was doing it. It also shows how quirky client demands could be if some feature could go missing for 2 years and no one would notice.
I guess you could call it feature-on-demand-programming...
However, it so often happened that a sale was made before a feature could be actually added as programmers were swamped.
It was common to add a feature years after it actually appeared in the product manual. Call it vaporware or deception but it was not uncommon. Internally, company hated the practice but every other company was doing it. It also shows how quirky client demands could be if some feature could go missing for 2 years and no one would notice.
I guess you could call it feature-on-demand-programming...
We charge per month.
0. A monthly profit makes a business that can be sold (growth helps but is not required). 1. Same issues getting clients. 2. After some years, you have a steady income. 3. Some initial problems with cashflow (so we did consultancy also to earn money. Now we don't). 4. Provide a useful service with some customisation. Clients can't be bothered to change unless you are causing pain.
0. A monthly profit makes a business that can be sold (growth helps but is not required). 1. Same issues getting clients. 2. After some years, you have a steady income. 3. Some initial problems with cashflow (so we did consultancy also to earn money. Now we don't). 4. Provide a useful service with some customisation. Clients can't be bothered to change unless you are causing pain.
It seems like there are a variety of challenges:
- Selling costs are high.
- Sales cycles can be long.
- Harder to MVP and iterate.
- Domain expertise required.
I think the last one is the biggest challenge. To be successful with any product you need to understand the customer. Usually that means, you are the customer. With a consumer app, it's easier for you to be an example of the customer. With an enterprise app, you need to know that sort of enterprise -- its ostensible and implicit product needs, but also the decision-making processes and culture and so on.
As a result, you probably need to be an ex employee of that sort of company. Who became ex only after having been there long enough to understand the business and to make enough contacts at that company and its industry. And who became ex on sufficiently good parting terms.
So I would guess that's the "funnel" narrowing who can pull this off?
- Selling costs are high.
- Sales cycles can be long.
- Harder to MVP and iterate.
- Domain expertise required.
I think the last one is the biggest challenge. To be successful with any product you need to understand the customer. Usually that means, you are the customer. With a consumer app, it's easier for you to be an example of the customer. With an enterprise app, you need to know that sort of enterprise -- its ostensible and implicit product needs, but also the decision-making processes and culture and so on.
As a result, you probably need to be an ex employee of that sort of company. Who became ex only after having been there long enough to understand the business and to make enough contacts at that company and its industry. And who became ex on sufficiently good parting terms.
So I would guess that's the "funnel" narrowing who can pull this off?
Domain expertise is definitely a challenge, but it depends very much on the type of application you're trying to build.
Building something to help manage clinical trials of drugs? Heck, you better have a ton of specialized expertise in the drug research vertical in one way or another.
Building a generalized platform that allows you to store legal records or other sensitive data in a secure and standardized fashion? Well, you might want to build custom sales plays based on individual verticals, but then you just hire a domain expert consultant to put the words in the right order and structure for that vertical.
One of the other benefits of the enterprise is that if you get the right enterprise, they will work with you to build your application. You have to find the right champion at the customer, someone with enough balls to take a risk, but basically you work out a deal:
- they will give you money for a product that barely works/barely exists today
- You will become their roadmap bitch for 12 months
- They will pay a comparatively cheap price for the software
There's a ton of risk associated there too - enterprises sometimes make irrational decisions that you're now bound to abide by, and it can make your product more of something custom as opposed to a general purpose application you want to sell.
However, it is a way to get an MVP out the door and get some money.
Building something to help manage clinical trials of drugs? Heck, you better have a ton of specialized expertise in the drug research vertical in one way or another.
Building a generalized platform that allows you to store legal records or other sensitive data in a secure and standardized fashion? Well, you might want to build custom sales plays based on individual verticals, but then you just hire a domain expert consultant to put the words in the right order and structure for that vertical.
One of the other benefits of the enterprise is that if you get the right enterprise, they will work with you to build your application. You have to find the right champion at the customer, someone with enough balls to take a risk, but basically you work out a deal:
- they will give you money for a product that barely works/barely exists today
- You will become their roadmap bitch for 12 months
- They will pay a comparatively cheap price for the software
There's a ton of risk associated there too - enterprises sometimes make irrational decisions that you're now bound to abide by, and it can make your product more of something custom as opposed to a general purpose application you want to sell.
However, it is a way to get an MVP out the door and get some money.
It was the sales cycle that killed my company off (many years ago).
When three or four deals, with a 6 month lead time turned into an 18 month lead time, as things got pushed into next year, it meant we simply ran out of cash.
And with such a long and intensive sales cycle, we couldn't afford to have a large number of fallback leads at the same time.
When three or four deals, with a 6 month lead time turned into an 18 month lead time, as things got pushed into next year, it meant we simply ran out of cash.
And with such a long and intensive sales cycle, we couldn't afford to have a large number of fallback leads at the same time.
- Harder to MVP and iterate.
With an Enterprise, you often have to sort through a huge pile of legacy and potentially unknown dependencies. Substantial existing hardware assets (mainframes, etc.); massive, valuable databases in obsolete, proprietary, or even flat-out badly-designed formats; internal processes or audit requirements that conflict with design ideals.
With an Enterprise, you often have to sort through a huge pile of legacy and potentially unknown dependencies. Substantial existing hardware assets (mainframes, etc.); massive, valuable databases in obsolete, proprietary, or even flat-out badly-designed formats; internal processes or audit requirements that conflict with design ideals.
"Harder to MVP and iterate."
Once you're established though, the difficulty of creating an MVP becomes an advantage, because it makes it much harder for competitors to enter your space. If your product is an iPhone game, then a couple of college kids can compete with you. If your product is enterprise software, your competitors need to raise tens or hundreds of millions of dollars just to have a chance to compete for your customers. The risk is that if your market segment becomes too large, it may attract competitors that are huge, well-funded companies like Microsoft or Oracle.
Once you're established though, the difficulty of creating an MVP becomes an advantage, because it makes it much harder for competitors to enter your space. If your product is an iPhone game, then a couple of college kids can compete with you. If your product is enterprise software, your competitors need to raise tens or hundreds of millions of dollars just to have a chance to compete for your customers. The risk is that if your market segment becomes too large, it may attract competitors that are huge, well-funded companies like Microsoft or Oracle.
I agree it's an advantage once you're established. And even well-funded companies like Microsoft and Oracle are often so overly-bureaucratic that even with hundreds of millions in support their "me too" offering can (and often does) miss the mark.
They copy once an idea shows traction, but having not done the legwork themselves, they won't necessarily understand why the idea was successful in the first place. This is why you see huge companies like that wasting tons of resources trying to catch up or, if they're smart, simply acquiring the team with the winning idea.
They copy once an idea shows traction, but having not done the legwork themselves, they won't necessarily understand why the idea was successful in the first place. This is why you see huge companies like that wasting tons of resources trying to catch up or, if they're smart, simply acquiring the team with the winning idea.
But Microsoft can afford to spend years throwing resources at their product if they really want to get into that market. Release 1.0 may be crap and not a serious threat to you, but Release 4.0 might blow you out of the water.
I was going to mention the exact same points. The article was a total waste of time and flimsy on any real content.
How does a 6 month sales cycle sound? What about expensive skilled sales reps?
How does a 6 month sales cycle sound? What about expensive skilled sales reps?
[deleted]
We recently made a switch from the consumer space to the b2b space.
There are two things about the change which are very refreshing.
First, we're talking with people who want to pay us money and the amount doesn't even really matter. We're priced 10-100x over what we were charging consumers.
Second, the support overhead of supporting a crapton of free uses has dwindled and we're now able to provide significantly better support to paying business customers. We do phone support even.
All I've ever done in the past have been consumer startups. I don't think I'd ever do one again.
Edit: It's no silver bullet by any means. But it just feels much saner than the homerun derby which is the consumer Internet.
There are two things about the change which are very refreshing.
First, we're talking with people who want to pay us money and the amount doesn't even really matter. We're priced 10-100x over what we were charging consumers.
Second, the support overhead of supporting a crapton of free uses has dwindled and we're now able to provide significantly better support to paying business customers. We do phone support even.
All I've ever done in the past have been consumer startups. I don't think I'd ever do one again.
Edit: It's no silver bullet by any means. But it just feels much saner than the homerun derby which is the consumer Internet.
Are you referring to B2B, or Enterprise?
I've blown my proverbial load on Enterprise, and while I appreciate the money to be made, I've found that my psyche is more suited to 100 small wins than one win worth 100x the others. In short, enterprise isn't for me, at least, not if I'm involved in the sales process. The sheer arbitrary-ness of it was so mentally exhausting that it affected my productivity.
I can work on enterprise software, but if I'm in any way involved with the sales channel, it's a hardship.
For me, the happy middle ground is vanilla B2B, e.g., the same general demographic that 37Signals sells to. You still have customers that want to pay you money, but while cost is a factor, it isn't usually the driving factor -- there's likely little difference between $25 a month and $125 a month, assuming you're solving a problem that isn't cost-centric, and you're saved from the mental turmoil of enterprise whale-hunting.
I've blown my proverbial load on Enterprise, and while I appreciate the money to be made, I've found that my psyche is more suited to 100 small wins than one win worth 100x the others. In short, enterprise isn't for me, at least, not if I'm involved in the sales process. The sheer arbitrary-ness of it was so mentally exhausting that it affected my productivity.
I can work on enterprise software, but if I'm in any way involved with the sales channel, it's a hardship.
For me, the happy middle ground is vanilla B2B, e.g., the same general demographic that 37Signals sells to. You still have customers that want to pay you money, but while cost is a factor, it isn't usually the driving factor -- there's likely little difference between $25 a month and $125 a month, assuming you're solving a problem that isn't cost-centric, and you're saved from the mental turmoil of enterprise whale-hunting.
B2B, really. We did have quite a few conversations with enterprise customers and the B2B conversations were so much better.
We haven't ruled out enterprise but I hope and imagine that our sweet spot is B2B.
As you said it has much of the benefits of consumers (little friction to get in the door) and enterprise (willing to pay).
We haven't ruled out enterprise but I hope and imagine that our sweet spot is B2B.
As you said it has much of the benefits of consumers (little friction to get in the door) and enterprise (willing to pay).
Well, the word is out.
I have a friend, we'll call him Jon. Jon has been making apps for the past three years. He never learned to code, or design, or market, but he somehow managed to pickup xcode and started making fun apps for his nieces and nephews.
Eventually a day came when his sales skyrocketed, roughly $5,000 in a single day (a figure I made up, but he has stated before is realistic for him). Seemingly by chance. As Jon dug around a little he realized that a school -- who regularly provide iPads to students -- had bought his app in bulk.
Now, years later, he specializes in developing apps not for children or parents, but explicitly for schools. That's where the money is right now, he tells him.
You can make a lot of decent money selling quality apps or tools to consumers, but if you want to make boatloads you have to think in terms of those who would buy what you make via bulk purchases; from organizations large enough who need the thing you've made.
Isn't this how 37signals found their way?
I have a friend, we'll call him Jon. Jon has been making apps for the past three years. He never learned to code, or design, or market, but he somehow managed to pickup xcode and started making fun apps for his nieces and nephews.
Eventually a day came when his sales skyrocketed, roughly $5,000 in a single day (a figure I made up, but he has stated before is realistic for him). Seemingly by chance. As Jon dug around a little he realized that a school -- who regularly provide iPads to students -- had bought his app in bulk.
Now, years later, he specializes in developing apps not for children or parents, but explicitly for schools. That's where the money is right now, he tells him.
You can make a lot of decent money selling quality apps or tools to consumers, but if you want to make boatloads you have to think in terms of those who would buy what you make via bulk purchases; from organizations large enough who need the thing you've made.
Isn't this how 37signals found their way?
> He never learned to code, or design, or market
sounds to me like he was never taught how to code, design or market. he sure did learn it though.
sounds to me like he was never taught how to code, design or market. he sure did learn it though.
Precisely. I could have thought the wording through a bit better in my reply. Thank you!
Thanks for the value adding clarification, genius.
From Joel Spolksky's "Camels and Rubber Duckies" (which is a great read in its own right):
>The joke of it is, big companies protect themselves so well against the risk of buying something expensive that they actually drive up the cost of the expensive stuff, from $1000 to $75000, which mostly goes towards the cost of jumping all the hurdles that they set up to insure that no purchase can possibly go wrong.
Personally, I'm just not interested in playing that game.
*Edit: Yet. Not interested in playing that game yet.
>The joke of it is, big companies protect themselves so well against the risk of buying something expensive that they actually drive up the cost of the expensive stuff, from $1000 to $75000, which mostly goes towards the cost of jumping all the hurdles that they set up to insure that no purchase can possibly go wrong.
Personally, I'm just not interested in playing that game.
*Edit: Yet. Not interested in playing that game yet.
Enterprise customers pay a lot once you get them paying, but selling to them is brutally hard.
Cold selling a large org is brutally hard. Usually what winds up happening is that internally in the org, there are people who follow what options are available in a particular space and are in a position to champion them. Companies need to find these people and then help these people make the convincing argument. If users internal to an org want to use product X, they will do much of the hard part of selling for you. You can find these people all over the place -- meetups, confs, blogs, etc.
That's true, but what you can't really do is target those people passively. You need hunter-gatherers to find them, corral them, and set up a collaborative sales process with them. Graham calls this "brutally hard", but what it really is is expensive: it requires direct sales teams, which in turn requires a founding/managing team that knows how to (a) hire and (b) manage direct sales teams.
Those tasks, tasks (a) and (b), are probably what's really brutally hard about enterprise sales. When an inexperienced founder/manager hires a direct sales team, the sales team sets to work on selling the founder/manager instead of the customer base.
An alternate path to getting a beachhead in an enterprise market is consulting. It's much easier to sell services to bigcos than products. Delivering services to someone gets you ~60% of the way to being able to sell products to them. The other 40% you can do on your own. That's worked for us (to greater/lesser extent depending on the specific offering we're talking about). But "consulting" is toxic to the species of startup we talk about on HN.
Those tasks, tasks (a) and (b), are probably what's really brutally hard about enterprise sales. When an inexperienced founder/manager hires a direct sales team, the sales team sets to work on selling the founder/manager instead of the customer base.
An alternate path to getting a beachhead in an enterprise market is consulting. It's much easier to sell services to bigcos than products. Delivering services to someone gets you ~60% of the way to being able to sell products to them. The other 40% you can do on your own. That's worked for us (to greater/lesser extent depending on the specific offering we're talking about). But "consulting" is toxic to the species of startup we talk about on HN.
> But "consulting" is toxic to the species of startup we talk about on HN.
FWIW, we grew out of a consultancy into a more HN-compatible startup through precisely the path you describe. Most of our investors, who are traditional get-big-or-go-home investors, see our "consultative sales" as an asset, not a liability. In particular, having that as a backstop is very useful for achieving PG's prime directive of startups, i.e. "don't die". My understanding is that Heroku's origin story was similar (growing out of a Rails-app consulting shop). So there's definitely room for interpolating between the two if one is so inclined.
FWIW, we grew out of a consultancy into a more HN-compatible startup through precisely the path you describe. Most of our investors, who are traditional get-big-or-go-home investors, see our "consultative sales" as an asset, not a liability. In particular, having that as a backstop is very useful for achieving PG's prime directive of startups, i.e. "don't die". My understanding is that Heroku's origin story was similar (growing out of a Rails-app consulting shop). So there's definitely room for interpolating between the two if one is so inclined.
When an inexperienced founder/manager hires a direct sales team, the sales team sets to work on selling the founder/manager instead of the customer base.
This made me spit out my coffee. I've never heard it expressed that way, and it's a hilarious image, but come to think of it I've observed that situation more than once.
Can anyone recommend some resources for learning to manage direct sales teams?
This made me spit out my coffee. I've never heard it expressed that way, and it's a hilarious image, but come to think of it I've observed that situation more than once.
Can anyone recommend some resources for learning to manage direct sales teams?
> You need hunter-gatherers to find them, corral them, and set up a collaborative sales process with them.
I guess it depends on what the product is. I've initiated contact in a bunch of cases (mostly situations where the product is a public SaaS or already well-liked) and in others, evaluating a product stems from of a conversation at a meetup or conf.
IMO, the best thing anyone can do is make the product discoverable. If it has competitors, write blog posts and clear feature comparisons (they don't all have to be positive, either). If performance matters to whatever it is, write objective benchmarks and discuss performance aspects/tradeoffs. If it is something with an API, try to ensure there are a variety of platforms supported. This stuff is all good-to-have anyway, but many companies might not realize that people from large companies are browsing their sites and leaving unsatisfied.
I think developer-evangelist roles actually play a big part in this. Having someone set up real-world use cases and blog about them or post code somewhere can really help a customer out who just wants to try something but doesn't want to spend a lot of time doing it.
If the product is private, maybe have an easy way to generate an expiring VM image with some kind of demo setup so that you can quickly send it to leads. There's not a single person on earth that wants to do rounds of conference calls and in-person visits to just play with something.
> It's much easier to sell services to bigcos than products.
I've found the exact opposite, but maybe it depends on what you're referring to exactly. Carving out budget dollars for "3 people @ X/hr" is much harder and more scrutinized than product. "Product" is a loose term, though. "1-yr license" or "1-yr maintenance contract" are products, not consulting, even though the company selling them might not view them that way.
When it comes to SaaS products, we typically want to buy an appliance (read: VM image) that just works, deals with some form of standard authentication/authorization tech (LDAP/AD, OAuth, SAML, OpenID), and x-yr support contracts. Per-seat licenses usually involve more effort. Purchasing professionals are looking to mitigate risk. They don't want to enter into a purchase that has an attractive up-front price, but open-ended potential rate hikes down the road.
I guess it depends on what the product is. I've initiated contact in a bunch of cases (mostly situations where the product is a public SaaS or already well-liked) and in others, evaluating a product stems from of a conversation at a meetup or conf.
IMO, the best thing anyone can do is make the product discoverable. If it has competitors, write blog posts and clear feature comparisons (they don't all have to be positive, either). If performance matters to whatever it is, write objective benchmarks and discuss performance aspects/tradeoffs. If it is something with an API, try to ensure there are a variety of platforms supported. This stuff is all good-to-have anyway, but many companies might not realize that people from large companies are browsing their sites and leaving unsatisfied.
I think developer-evangelist roles actually play a big part in this. Having someone set up real-world use cases and blog about them or post code somewhere can really help a customer out who just wants to try something but doesn't want to spend a lot of time doing it.
If the product is private, maybe have an easy way to generate an expiring VM image with some kind of demo setup so that you can quickly send it to leads. There's not a single person on earth that wants to do rounds of conference calls and in-person visits to just play with something.
> It's much easier to sell services to bigcos than products.
I've found the exact opposite, but maybe it depends on what you're referring to exactly. Carving out budget dollars for "3 people @ X/hr" is much harder and more scrutinized than product. "Product" is a loose term, though. "1-yr license" or "1-yr maintenance contract" are products, not consulting, even though the company selling them might not view them that way.
When it comes to SaaS products, we typically want to buy an appliance (read: VM image) that just works, deals with some form of standard authentication/authorization tech (LDAP/AD, OAuth, SAML, OpenID), and x-yr support contracts. Per-seat licenses usually involve more effort. Purchasing professionals are looking to mitigate risk. They don't want to enter into a purchase that has an attractive up-front price, but open-ended potential rate hikes down the road.
It may be the case that developer offerings are easier to sell into bigcos than other services. For my part, I have (a) had no luck selling products into enterprises using passive sales techniques (blogging "developer evangelist"-type strategies being an example of passive sales), and (b) talked to a bunch of other people who report similar results.
Regarding consulting: yes, 3 full-time consultants as staff aug is hard to sell. But most consulting projects aren't like that. Our typical project is 2 people, 2 weeks; we scale down to 1 person/week easily. A 1 p/w project isn't hard to sell at all.
Regarding consulting: yes, 3 full-time consultants as staff aug is hard to sell. But most consulting projects aren't like that. Our typical project is 2 people, 2 weeks; we scale down to 1 person/week easily. A 1 p/w project isn't hard to sell at all.
Also, once you sell to one division of a large company, it becomes easier to sell to other divisions, assuming that there are people in the company who end up liking your product. And if your company has multiple product lines, you may also end up selling additional products to existing customers, which is also easier than an initial cold sale.
Yammer?
Because consumer apps bedazzle VCs who in turn bedazzle Wall Street which uses them to bedazzle institutional investors who need unrealistic growth projections to pay for unsustainable pension promises. The money being sloshed your way for obviousbullshit.io is a Hail Mary pass by a society facing a demographic tsunami.
B2B is an interesting animal. I find I can only do enterprise sales. I frankly suck at consumer.
I love having a sales pitch being as simple as: my product saves you this much money and time or gets you this much profit.
It's a gigantic numbers game. Aside from that, get an internal project champion to gather all the necessary stakeholders necessary to make a sale. (Yes I just threw out a lot of buzzwords there, sue me) Those are usually how you speak to bigger customers though. If you want, internalize the lingo as something you'd think of it as( a guy on the inside who becomes my sales guy!) .
This may take a while, so budget your cash flow accordingly.
I've found if your product offering is compelling enough you 'll get calls returned.
Many people just try to throw a bunch of buzz words out there to random people working at a place and think that's sales.
Talk to the right people who would want to use your product and build up internal evangelists. The rest will play out in the form of meetings and other random exchanges.
Typical SaaS businesses also seem to think that you can just put up a pricing page and expect that to close a sale.
There will be contracts going back and forth, custom pricing negotiations, SLAs being signed, among other things.
I typically attribute the sales cycle being similar to freelancing. Just replace that with a product.
I love having a sales pitch being as simple as: my product saves you this much money and time or gets you this much profit.
It's a gigantic numbers game. Aside from that, get an internal project champion to gather all the necessary stakeholders necessary to make a sale. (Yes I just threw out a lot of buzzwords there, sue me) Those are usually how you speak to bigger customers though. If you want, internalize the lingo as something you'd think of it as( a guy on the inside who becomes my sales guy!) .
This may take a while, so budget your cash flow accordingly.
I've found if your product offering is compelling enough you 'll get calls returned.
Many people just try to throw a bunch of buzz words out there to random people working at a place and think that's sales.
Talk to the right people who would want to use your product and build up internal evangelists. The rest will play out in the form of meetings and other random exchanges.
Typical SaaS businesses also seem to think that you can just put up a pricing page and expect that to close a sale.
There will be contracts going back and forth, custom pricing negotiations, SLAs being signed, among other things.
I typically attribute the sales cycle being similar to freelancing. Just replace that with a product.
Sure. Lots of money to be made. The reason I got out of enterprise though is that the feedback loop is flawed. Your users are rarely your decision makers, large capital investments and stickiness that comes with adopting an organization-wide solution means the best product is less likely to win than the best sales force. I want to build the best products, so I chose to go find a company who's business model was better aligned with that value.
Good point about the feedback loop. My experience in the educational software industry was that it was the worst of both worlds: the broken feedback loop, but slower because of yearly cycles, plus they don't want to pay as much as enterprises.
In my experience SMBs are a much bigger cash cow than enterprises.
Likewise. Their demands are practical and they retain their humanity in dealings... probably even moreso than mass market consumers.
This is an area where I have tried and failed with my SmartPointment (online appointment scheduling). Are there any words of advice you can share in reaching out to SMB market?
+1 this. SMBs all the way. It's a good balance between too small and too large. I always saw it as better to be standing on 100 legs rather than 5. Less instability when you lose one.
Friends and Family.
How do you get enterprise clients? I'd love to have some tips or direction because all I can find reliably are small fries.
If you don't have the budget like IBM, Microsoft, etc. to schmooze with those with purchasing power, you can do what Atlassian does, which is sell from the bottom up. The idea is to make the product cheap enough that individuals/departments will not have to go up the purchasing chain to pay for it. Hence their use any of our products for $10 for up to x number of users.
If your product is able to solve a problem of theirs, you'll have evangelist within the company and they'll spread the word within the company. And eventually their product will reach somebody with purchasing power.
If your product is able to solve a problem of theirs, you'll have evangelist within the company and they'll spread the word within the company. And eventually their product will reach somebody with purchasing power.
It's about who you know more than how good you are.
This. Certain disreputable companies in my sector are recruiting staff from competitors just for their contact list.
I'm sure this happens in all industries and sectors..
The takeaway I feel here is that if you are considering working at an enterprise-focused company (or especially startup), try to get a feeling for how well connected the leadership is, because that will make or break a lot of deals.
The takeaway I feel here is that if you are considering working at an enterprise-focused company (or especially startup), try to get a feeling for how well connected the leadership is, because that will make or break a lot of deals.
Not all industries and sectors although it's more common than not. I've done a bit in most industries.
The most successful companies I've worked for have no contacts and sell directly. The most politics-filled and most likely to fail enterprise products have always been sold via the "old boys networks".
The most successful companies I've worked for have no contacts and sell directly. The most politics-filled and most likely to fail enterprise products have always been sold via the "old boys networks".
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Not only because is very hard to a sale, you also become a kind-of-employee where your work for them, and have less freedom. And the requeriments change all the time. And the development can (and WILL) take years.
Plus, the corruption. Without "sales comissions" you can't even get the foot in. And you need to know people, and give them vines, go to a fancy restaurant, etc.
IF exist a enterprise somewhere that just do this: I need x, you can do it, let's do it, then I love to get in. I'm not afraid of "boring" CRUDs apps and that stuff.
But without the social connections and bribes,is a not start for me.
Plus, the corruption. Without "sales comissions" you can't even get the foot in. And you need to know people, and give them vines, go to a fancy restaurant, etc.
IF exist a enterprise somewhere that just do this: I need x, you can do it, let's do it, then I love to get in. I'm not afraid of "boring" CRUDs apps and that stuff.
But without the social connections and bribes,is a not start for me.
When discussing B2B sales on HN, I often see black and white arguments. Either you're in the B2C space, or you sell your products for north of 50K.
This is IMHO a false dichotomy, there are lots and lots of opportunities between these extremes. I'm currently in a project at the intersection of software and shipping, it sells like hotcakes, we currently have a conversion rate (inbound prospects to signed clients) of more than 75%.
This is far from easy to pull off, and there are a few points I'd like to make based on my current situation (we're pulling a gross margin of $500 to $5000 by client):
* Selling pure software is hard. At the most basic level, we sell shipping rates and the accompanying software is the cherry on top (I'm saying this even tough I run the technical side of things). We're doing well because our target market understands the value proposition even better than we do, we manage to offer a free product and make money on it.
* Co-founders matter. I couldn't even have had the idea on my own, much less the resources (contacts, skills, ...) to launch the business. I'm very fortunate to have met co-founders that are beasts on the business and shipping & logistics sides of things, we form an awesome triptych, which is a very delicate balance to have.
* Everything takes much more time than you expect. You're at ease in the technical domain, this won't be much of a problem while developing your core product. But selling will take much of your time, it's is a time-consuming activity and you don't know anything about it. Plugging your product in your client's systems will take time, either because your client hasn't any in-house developer or they're less than half as skilled as you are.
If you're a solo hacker selling pure software in the B2B space, you are, I believe, in for a rough, rough ride.
This is IMHO a false dichotomy, there are lots and lots of opportunities between these extremes. I'm currently in a project at the intersection of software and shipping, it sells like hotcakes, we currently have a conversion rate (inbound prospects to signed clients) of more than 75%.
This is far from easy to pull off, and there are a few points I'd like to make based on my current situation (we're pulling a gross margin of $500 to $5000 by client):
* Selling pure software is hard. At the most basic level, we sell shipping rates and the accompanying software is the cherry on top (I'm saying this even tough I run the technical side of things). We're doing well because our target market understands the value proposition even better than we do, we manage to offer a free product and make money on it.
* Co-founders matter. I couldn't even have had the idea on my own, much less the resources (contacts, skills, ...) to launch the business. I'm very fortunate to have met co-founders that are beasts on the business and shipping & logistics sides of things, we form an awesome triptych, which is a very delicate balance to have.
* Everything takes much more time than you expect. You're at ease in the technical domain, this won't be much of a problem while developing your core product. But selling will take much of your time, it's is a time-consuming activity and you don't know anything about it. Plugging your product in your client's systems will take time, either because your client hasn't any in-house developer or they're less than half as skilled as you are.
If you're a solo hacker selling pure software in the B2B space, you are, I believe, in for a rough, rough ride.
If you're just building products and your end goal is making money, then Enterprise is the way to go. While innovation comes from both spaces, I feel like the consumer market has a better more realistic feedback cycle. In enterprise, it's usually a small group of people making large decision deals which impact a large group.
Salesforce is a great example of a company that's widely successfully and their products are critical in enterprise, but I've never personally heard an Enterprise consumer say "Oh I love the Salesforce software." By contrast, I've heard people rave about apps like Pinterest, Instagram and Snapchat even though none of them are profitable businesses.
For me, If I wanted to build a money making product, I would go enterprise, but I choose consumer because I want to make a great product--very rarely do I find great enterprise products.
Salesforce is a great example of a company that's widely successfully and their products are critical in enterprise, but I've never personally heard an Enterprise consumer say "Oh I love the Salesforce software." By contrast, I've heard people rave about apps like Pinterest, Instagram and Snapchat even though none of them are profitable businesses.
For me, If I wanted to build a money making product, I would go enterprise, but I choose consumer because I want to make a great product--very rarely do I find great enterprise products.
> Salesforce is a great example of a company that's widely successfully and their products are critical in enterprise, but I've never personally heard an Enterprise consumer say "Oh I love the Salesforce software." By contrast, I've heard people rave about apps like Pinterest, Instagram and Snapchat even though none of them are profitable businesses.
I think there is a certain inevitability to these things when you compare software that people are required to use as part of their job, and software they choose to use in their spare time.
It strikes me as a vicious cycle. People don't enjoy using enterprise software, so developers don't enjoy making it.
The incentives are all wrong, the purchasing decisions are made by the wrong people, for the wrong reasons, and it's near impossible to avoid locking yourself into a particular solution or provider. Welcome to enterprise software.
I think there is a certain inevitability to these things when you compare software that people are required to use as part of their job, and software they choose to use in their spare time.
It strikes me as a vicious cycle. People don't enjoy using enterprise software, so developers don't enjoy making it.
The incentives are all wrong, the purchasing decisions are made by the wrong people, for the wrong reasons, and it's near impossible to avoid locking yourself into a particular solution or provider. Welcome to enterprise software.
Working in the consumer space is not just an easier sell from a sales prospect, it's also easier to persuade talented people to join your company. Great engineers and designers want to show off their work to friends and get bonus points for working on cool stuff.
Working on an enterprise application/system tends to be process heavy and requires lots of QA before shipping. It's driven not by the engineers or designers working on the product, but by requirements outside of their control.
If you're someone who just wants to work on hard problems, then enterprise is a no brainer. Though the common theme I hear amongst startup folk is that they want to be part of the decision making process too. They aren't interested in being handed a list of requirements and just asked to make it work.
Working on an enterprise application/system tends to be process heavy and requires lots of QA before shipping. It's driven not by the engineers or designers working on the product, but by requirements outside of their control.
If you're someone who just wants to work on hard problems, then enterprise is a no brainer. Though the common theme I hear amongst startup folk is that they want to be part of the decision making process too. They aren't interested in being handed a list of requirements and just asked to make it work.
Because the selling costs to the enterprise are 16x!
Not always. Look at the app marketplace, for example. Businesses are in dire need of better quality apps for managing employees, HR, payroll, networking, etc. And to get your app into their hands is as simple as making a unique app.
> And to get your app into their hands is as simple as making a unique app.
No, it isn't. It's about marketing to them, selling to the decision-maker, working through existing competition, wining and dining, proving your value with an on-site sales team, proving your integration...
and most of all, proving beyond a shadow of a doubt that you will not fail or disappear in the next 5 years.
The problem with getting into Enterprise is not product-related. You can imagine all kinds of better products than what exists today. It's easy to build that better product that solves the same problems but prettier and with better UX. And make a great demo for it. Sure. I've done that.
The hard part is proving that your startup will be around in 5, 10, 15 years and won't leave them high and dry, proving that you will have a support team serving their every need, and ensuring you have the ability to implement and customize to the specific company's process and requirements (because every large company is so different and with such ingrained processes that it's not them that will change, but you. Or else.)
It seems easy, but it isn't. This isn't even a problem of the "build it and they will come" fallacy—it's on an entirely different scale. And you'd have to be ready for all of that if you want to enter into enterprise.
No, it isn't. It's about marketing to them, selling to the decision-maker, working through existing competition, wining and dining, proving your value with an on-site sales team, proving your integration...
and most of all, proving beyond a shadow of a doubt that you will not fail or disappear in the next 5 years.
The problem with getting into Enterprise is not product-related. You can imagine all kinds of better products than what exists today. It's easy to build that better product that solves the same problems but prettier and with better UX. And make a great demo for it. Sure. I've done that.
The hard part is proving that your startup will be around in 5, 10, 15 years and won't leave them high and dry, proving that you will have a support team serving their every need, and ensuring you have the ability to implement and customize to the specific company's process and requirements (because every large company is so different and with such ingrained processes that it's not them that will change, but you. Or else.)
It seems easy, but it isn't. This isn't even a problem of the "build it and they will come" fallacy—it's on an entirely different scale. And you'd have to be ready for all of that if you want to enter into enterprise.
To a degree, I completely agree with you.
But then, on the other hand, we see that making something unique does often propel the "build it and they will come" mentality. Because it works.
What marketing have you seen from Snapchat (not directly related to the enterprise discussion though)?
I'm reminded of the words of the great Steve Martin: "Be so good they can't ignore you."
It this always the case? Absolutely not, which is where I do agree with you. But when an executive walks into a quarterly meeting and asks: "I keep hearing about xyz app/tool, are we using that?" you've won a huge part of the battle. Possibly with no marketing.
Make something unique, something a good majority of people will want to use and talk about, and your marketing/selling is half-way done for you.
But then, on the other hand, we see that making something unique does often propel the "build it and they will come" mentality. Because it works.
What marketing have you seen from Snapchat (not directly related to the enterprise discussion though)?
I'm reminded of the words of the great Steve Martin: "Be so good they can't ignore you."
It this always the case? Absolutely not, which is where I do agree with you. But when an executive walks into a quarterly meeting and asks: "I keep hearing about xyz app/tool, are we using that?" you've won a huge part of the battle. Possibly with no marketing.
Make something unique, something a good majority of people will want to use and talk about, and your marketing/selling is half-way done for you.
Statistically speaking, that's not an average experience. It's an outlier. Don't count on it.
Businesses--well, big businesses anyway; sole proprietors and small partnerships are more like consumers or will just use whatever their accountant recommends i.e. Quickbooks--are not going to just buy an app for HR or Payroll. They will have a committee and a long checklist of requirements and you'll need to go on-site probably several times to make sales presentations and give demos to various constituencies.
That's absolutely true.
Which means the options for getting a product into their hands would be either to work with them, wait for them to change, or create something they don't know how to categorize and hope it captures the interest of their executives/board?
Which means the options for getting a product into their hands would be either to work with them, wait for them to change, or create something they don't know how to categorize and hope it captures the interest of their executives/board?
Because I'm not solely motivated by money.
The enterprise product we built cost us close to $1m in building it and around 300k per year for maintenance. [The engineering costs].
Each sale was supposed to bring in around $50k for a two yearly contract. A dedicated team of 25 people could barely make 20 sales per year. Bringing around $1m in revenue.
Remember the salaries of these 25 people ended up being the biggest cost component which made the entire business into a loss making proposition.
Each sale was supposed to bring in around $50k for a two yearly contract. A dedicated team of 25 people could barely make 20 sales per year. Bringing around $1m in revenue.
Remember the salaries of these 25 people ended up being the biggest cost component which made the entire business into a loss making proposition.
Well - have you worked on enterprise software? It's not fun.
In the enterprise market you have to talk to 15 different people inside a company before you can make a sale. And often you have to go out of your way to convince them trying to cover every little insecurity they have and learn to live with the anxiety of failing because of actors outside your influence. You also have to dine them and wine them and laugh with their stupid jokes and generally try to be as pleasing and understanding as possible. The hell with that. In the consumer market things are a bit more straightforward. You focus your energies on the product and marketing and that’s all there is.
Your startup will never live long enough to survive the procurement process.
to put it succinctly and in gamer terms: would you rather have a giant sword that does 16 points of damage with a 10% chance to hit? or a dagger that does 4 points of damage, but with an 80% chance to hit?
it's all about the dps, baby.
note: that metaphor obviously assumes "A little over 12% of the money-making developers" means that it's 8x easier to actually make money in the consumer space. not that 80% of consumer plays make money. not to mention it's way, way easier to build a company with 10 people than 45.
it's all about the dps, baby.
note: that metaphor obviously assumes "A little over 12% of the money-making developers" means that it's 8x easier to actually make money in the consumer space. not that 80% of consumer plays make money. not to mention it's way, way easier to build a company with 10 people than 45.
Really? How do you target enterprises? It seems impossible to me to know which companies are actually willing to pay decently for apps. All the enterprises that I've encountered generally didn't like to pay more than ~10k euros for an effort of roughly two months of work, which isn't that much if you factor in the expenses (mostly wages).
It seems to me that the enterprise app development space is a low-margin business. At least over here in Germany. There seems to be quite a lot of competition in this space.
It seems to me that the enterprise app development space is a low-margin business. At least over here in Germany. There seems to be quite a lot of competition in this space.
It depends on what kind of product you're selling. Certain budgets in enterprise are seemingly unlimited, generally when it comes to improving sales. If you're selling security products (outside of the compliance-driven market), you won't find much appetite for large margins. If you're selling CRM products (which are a dime a dozen), you won't find large margins.
You have to find out where a business is willing to invest no matter what the price. I know it exists, unfortunately each industry (and each subset of each industry) is going to have a different area where price is no concern.
You have to find out where a business is willing to invest no matter what the price. I know it exists, unfortunately each industry (and each subset of each industry) is going to have a different area where price is no concern.
Because you can't be passionate about B2B apps. When we're reading about that to become an entrepreneur you can't be after the money, you have to do something you're passionate about, something you would die for.
All this, passion, solving a problem to die for, disappears by doing B2B and you're only going for the money again.
Of course there are exceptions, but that's the difference between B2B and B2C.
All this, passion, solving a problem to die for, disappears by doing B2B and you're only going for the money again.
Of course there are exceptions, but that's the difference between B2B and B2C.
Find an aspect that you are passionate about. There are a lot of niches, whether it's specific types of companies, specific problems, or whatever. It's like saying "you can't make money with consumer apps." The space is far too large to permit such blanket generalizations.
I agree, you can't make blanket generalizations. However, there is just a stark difference that are few consumer apps that the founder ISN'T passionate about and there are few B2B apps that the founder IS passionate about.
You don't have to be passionate at all to make money. Actually being passionate can blind you to the fact that a business idea sucks.
To me, it just break even. It might be large sump value but the process of approval payment and user acceptance are way to long.
There aren't much diffirent 30 buck subscription accounting software and 30 million erp software. The way much diff is building for enterprise system take lot of time doing discussion and reporting rather then make software itself.
Enterprise might pay 4x more even for a product that is crappier by 10x than a consumer product but enterprise is also 100x smaller than consumer in sheer number of opportunities to make a sale.
Not to mention there are too many legalities around B2B sales some of which might threaten the very existence of your business.
Not to mention there are too many legalities around B2B sales some of which might threaten the very existence of your business.
A lot of us are in it not just for the money. Sure enterprise companies can pay many times more, but who cares? Literally, who cares? You will never be "cool" by building the next oracle. And that's why most of us don't want to be the next oracle.
It would be a rung up the ladder from "wordpress plugin builder and PHP monkey for hire"
In the consumer space, you're working with averages over large quantities. The number of potential buyers is huge, so you need to build a product that, on-average, will result in more sales than non-sales when the customer reaches the point of making a decision. This decision point might happen tens of thousands of times -- sometimes millions -- a year for consumer products.
In the enterprise world, the number of sales opportunities are smaller by orders of magnitude. Every sale becomes a huge gamble, and as a result you tend to throw an immense amount of resources at every sale. This is also one of the primary reasons enterprise software ends up so bloated and unmanageable. On the front-end, the decision making process for purchasing enterprise software is driven by checklists and "due diligence" procedures that are horrible at accounting for software quality. You're more likely to win an enterprise contract by saying "sure, we'll add that feature" than you are carefully explaining how maintaining product focus results in a more usable product.
This makes enterprise software a high-stakes game. A sale results in windfall revenue, but a non-sale can severely strain cash-flows. At the end of the day, you're still trying to beat the averages, but you're working with a much smaller number of opportunities, so wins and losses move the needle in a big way. I think this is a significant incentive for small shops and independent devs to avoid the enterprise space. You need a larger bank roll to attack the enterprise market. We bootstrapped our company, and we hit several gut checks along the way. The days of writing large checks to my company are not quickly forgotten.