Thursday, 26 May 2011

6 Rules to making money from software

I live in the world of software, and to me it is simple.  I follow some basic rules and in the majority it has always allowed me to make good money from them.

So, here are 6 basic rules to follow to make money from software.  

Be new

If you have a product which is new and exciting and no one has done before then go for it.  

Be better

Do not make something which has been done before and expect to get great results.  The first company that made it, released it, it did well and now that company probably owns a small pacific island. 

So, when you come along and make something exactly the same,  well it is not going to go as well as what it did for that pacific island reclining company.

So, if you are going to make something make sure it is better than what they made. 

Be different

Make it different. Have a twist to it that the other system doesn’t have and from this it will make it better.  (PS I will talk about determining how to select a product to create in a later blog).  For example, a game that already exists but make it so it can connect to all my facebook friends and play with them.  Maybe this has already been done,  and I am only using this as an example.

Make sure it is usable

When a person opens your software application for the first time, make sure it is easy to use.  You have seconds to make them feel at home and realise that they can use this with very little effort. 

I will talk more about this at a later date as this is one of my favourite subjects and often talk about it to staff.


Do not rely on the internet to do wondrous things if you just put a web page up and expect sales to come through.  Work out your marketing and advertise to get sales. 

If you do not then you will not get sales.  I have seen many a great product over the year die a slow and painful death because a company does not know how to market it.

Don’t give it away

If you have made something new, better or different then do not give it away.

I have been reading through the stats of sales from apps sold through I-Tunes.  And there are very few examples of people who have made it rich by giving away a free version.

My theory is,
  • If it is good enough then people will buy it. 
  • People’s expectations when something is free are not very high.  
  • People do not upgrade from the free version to the paid version if the free version is good enough.

An example of my own

I own a Maintenance Management System called MEX.  I released it in 1995, and at the time I was better, different and also more cost effective than the others on the market.   I like to say cost effective, it is just a nice way to say cheaper.

At the time,  companies were getting sick of paying ridiculous prices for software that really did not do that much,  I came along with software which did the same job for a fraction of the price.  And literally over the next 5 years consumed the market. 

And it is funny I have had 2 staff who have worked for me.  In both cases they left and believed they could do a better job than me.  So, they basically rewrote my software and put it into the market. 

And, if I look at the steps I have just written about, neither of these had a chance.  Neither of these systems was better or different.  Potential customers asked why would they buy this software over MEX, and could not find one.  So, they stuck with what they knew was tried, reliable and respected in industry.

And on the money, these competitors also dropped their price significantly lower than MEX, and still could not get sales.   Hmmm, customers are not dumb.  They ask themselves why they are discounting;  If it is so cheap it cannot be any good.

Early days and price

When I first released MEX we sold a single user licence at about $1,000.  Sales were good, but not strong.  So, after 6 months, I doubled the price, and sales quadrupled. 

At $1,000 the price was too low.  At $2,000 it was acceptable as being a credible and worthwhile product. 


These rules have been based upon my experiences.  I have made some absolute clanger decisions over the years and regretted them,  but always learnt.  So, I hope this will be of use to you.

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