October 22, 2018

You Are Not Netflix

You don't have 156 million customers.

You don't have global name recognition.

You don't have massive economies of scale.

You don't have competitors breaking down your door and competing you into the ground(if you're in the right industry).

You are not Netflix.

So don't act like it!

This is your weekly reminder to charge what you're worth (which is most likely more than $10.99 per month). Your business, and your health will be better for it.

It's a lot easier to bring in 2,000 customers at $49.99 than 10,000 at $9.99.

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    I think the same is true with your architecture. You are not Netflix...you don’t need a massively scalable microservices architecture.

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      I had this argument countless time with so many developers who would pull off massive tech architectures for just making a functional prototype to work.

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        There's a distinction to be made from developers and indie hackers I would think, which would explain their behavior; indie hackers, and other business people, see the product as a means to an end, while developers see the product as the end within itself, and thus it's part of the fun to create a massive tech architecture.

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        It's not our fault, its hard!

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      That said, be aware of technical debt. I built an unscalable back-end, and when we had thousands of people in the database, things got slow and expensive and I had to rebuild everything. I would do the same thing if I had to start again today (mostly), but it's good to know it's coming.

    3. 1

      Definitely agree here. There is so much shiny new tech these days, and it gets very exciting to dig deeper :) but the truth is you probably don't need to scale that much in the beginning. I've learned it the hard way but I think it's definitely a better strategy to focus on a better / more expensive / less scalable product

    4. 1

      I'm on the fence about the original post but 100% agree with your point here.

      A cheap server can handle way more traffic than people think it can. Not only has software improved, but we're not using 2002 hardware or paying 2002 bandwidth costs anymore either. I know multiple people doing well off of ad-supported sites running on single PHP instances. Not only that but they started them back before PHP got its massive performance gains in v7.

      Also, if you are charging and setting prices high enough that you only need thousands of customers as the OP suggests, then worrying about scaling at the beginning is even more insane.

  2. 5

    While this advice is probably right in most cases, remember there are always exceptions.

    I charge $39 - $99 per year for my product and it’s been going really well for me since February. I previously tried charging more and it didn’t work out, and this is the most successful solo business I’ve started.

    Granted I might be doing better working on a more valuable problem, but right now this business is doing better than my previous attempts.

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      Yep, it's unlikely you'll get your pricing right the first time. Set your initial prices and continue iterating on your pricing model.

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    Great advice. Another one I would add is that your idea isn't anything. When we came up with Threadbase.io, we initially didn't tell too many people about it, thinking it was too precious to share in its infancy.

    Instead, it was so much more valuable to start talking with people about it to get feedback on 1) the product and 2) the pitch. The more you talk about your idea, the better you will be at perfecting your pitch, and you'll get more user feedback to see if you're actually solving a problem for people.

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      This is very true.

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    I don’t get this..... What if $10.99 is what the sites content is worth? Are you saying that folks should charge more than they initially think when offering a service?

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      I would generally avoid starting a business where what you're selling is only worth $10.99.

      Oftentimes, you could just as easily start a business where the value you're providing to customers is worth orders of magnitude more. I have a friend who started a company last year, solo founder, no particular domain expertise or unfair advantages besides the ability to code and a great idea, built something valuable, and charges customers > $3000/year. The number of customers this person has to find to earn a living is small enough that a few sales calls per week is all it takes.

      If you're charging $10 for your product, either you're making something that's not very valuable to your customers, or you're in a highly competitive industry where what you're producing has become commoditized. Neither of these is a desirable state of affairs.

      The common reaction is to simply change your product to make it more valuable, but that's less effective than changing your customers. Instead, pick a market where you see lots of money changing hands. Money roughly = value. I pay a lot for a car because a car is worth a lot to me. I pay a lot to hire an engineer because hiring well is valuable to me. Etc.

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        Correction: I think this friend is now charging $5k/year. 😉

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          what service/product does he offer exactly?

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            What makes you think it's a he?

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              what's the difference nowadays anyways? hahah

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              isn't it more statistically probable that it's a he? lol

      2. 5

        Wow a message from Courtland! 🙏 🙏

        This is very interesting as I was preparing to validate a service for my crypto ratings site (https://coinshakedown.com) for around $10 a month which would we would need over 1500 paying customer to make sense😅. The service would be personalized crypto ratings for individuals interested in the tech. Now that I think about it... I would probably lose my mind supporting that many customers with just me and my co founder charging that low price.

        This thread actually helps because after thinking it through... I need to figure out a better business / support model that makes sense for a really small team. Now I will probably still validate the service I mentioned in the future when my team grows but right now I’m glad i caught this thread to at least spend a bit more time on validating our business model which uses bootstrapped funding.


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        It's interesting that there isn't more competition in whatever niche your friend was able to enter easily... I don't generally believe in the efficient market hypothesis, but it's still surprising when there's a large gap that can be exploited by a single individual with relatively common skills and no insider knowledge.

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          Oh there's a ton of competition in the industry. However, there are a few important caveats here:

          First, the industry is massive enough that carving out a few hundred thousand dollars per year, or even a few million per year, isn't significant enough to be considered a large gap. Just requires a creative angle to carve out a tiny niche. As an example, nobody really bats an eye at a good developer who can make $300k/year doing contract work.

          Second, the problem being tackled comes down to customer preference, and therefore it will never actually be solved. It's not a commodity like paperclips, and it's not a winner-take-all market like online advertising. It's closer to something like, I don't know, wedding planning. The challenge lies with taking what's typically an ad hoc service and turning it into as much of a scalable product as possible. My friend is not the only person tackling this challenge, and interestingly, the other businesses doing it all look very different from each other in terms of their product, but they have more-or-less the same value prop. (Hint: I've had one of them on the podcast.)

          Third, there's no education involved here. Customers are already paying lots of money for this service. If it works they'll pay, very little questions asked. Too many indie hackers are trying to tackle new problems that require lots of education, when there are still so many poorly-solved existing problems that we all understand and complain about. This is a mediocre example, but: you can open a halfway decent restaurant and make lots of money, no creativity or customer education required. There are lots of things like that in the digital world, too.

          Fourth, having a high average revenue-per-user (ARPU) is crucial. That allows growth via sales and ads, which are both far easier imo than growth via marketing. Too many indie hackers shy away from sales and only consider businesses with low ARPU that rely on marketing or viral growth, because the allure of a magical machine that makes money without having to talk to anyone is so attractive to developers. Picking up the phone and calling 10-20 people per week is easier and more effective than marketing, because it doubles as talking to customers, so you learn more, and cycle times are faster. Developers just don't want to do it. 🤷‍♀️

          Also, having a low ARPU prevents you from even considering certain channels that work very well for high ARPU businesses, e.g. running ads, paying for someone else to do your content marketing, hiring a sales team and paying commission, et. (I learned a lot from selling ads for the IH newsletter and podcast back in the day. Some businesses could never buy ads profitably, whereas others could turn a profit so long as their ads netted them one new customer per month.)

          Even in the exact market my friend is in, I see lots of indie hackers trying to solve the same problem by targeting the low-ARPU end of the spectrum, making a completely undifferentiated SaaS product and then charging customers small amounts of money. There aren't enough developers looking at service jobs and asking, "Can I use code to automate 90% of this?" We're too obsessed with only doing things we can automate 100% of, which is a pipe dream anyway, because customer support is a thing.

          cc @coinshakedown @golf

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            This comment was deleted 3 months ago.

      4. 1

        I need to save this and read it over and over again

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      Yes. As a general rule (with exceptions) no US-based indiehacker should sell their product for less than $10.99/month.

      You may think you’re going to automate all the sales/support processes as your business takes off, but you’re not. Below $10.99, if you spend a single hour supporting a customer you’re in the red.

      At less than $10.99 you’ll need 1,000 customers a month to clear $10k im revenue (not profit). I can say from experience that supporting even 200-500 new customers in a month is a lot of work.

      That doesn’t even account for fees and chargebacks. Stripe fees are about 3% + $0.30, so on a $10.99 purchase you’re already losing 6% of your revenue to fees. Chargebacks are $15/piece + whatever revenue you lose.

      That also doesn’t account for marketing expenses, incorporation/accounting costs, and hosting costs.

      If you try to sell a new product as a commodity, you’d better be prepared to lose money and burn out in the process.

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        So, in short, if $10.99 is all your site is worth, make it more valuable

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          Ah, I appreciate the breakdown!.Didn’t think about the scale in terms of support Opex... just customer sales revenue like many founders dream.

          In that case is there ever a case where you can charge under $10 and get away with limited support? I typically don’t bother with customer support for a product I get charged $5 bucks for... I just cancel the service.

          Thanks for this!

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            Honestly, not if you want to grow. Support is a great way to learn about your customers and your product and improve, plus, when you have thousands of customers, there will always be things that require a human response and some action.

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        It really varies on what your product is. For example, a community product like BotList is really hard to charge more per month than say a SaaS product.

        Community products are really hard to charge more per month because the value is really what the user puts into the community.

  5. 2

    Agreed Michael! This sounds like a summary of an entire podcast we did titled "You Are Not Google/Amazon/LinkedIn" ~> https://changelog.com/podcast/260

  6. 2

    Price my app, I'll just change it to the price you quote, https://everyday.app ^_^

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      Trying this now! Love this concept. I stuck to a routine for 1.5 years using this idea (Seinfeld calendar).

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        awesome, feel free to share any feedback! (I think you've already shared some with me ;D) Hope it helps you!

  7. 2

    I love this advice. Wish more people would take note of it. Another point that a lot of people don't think of often is the race to the bottom for software.

    If creators consistently try to sell the cheapest thing. i.e. - If your best selling point is 'we're like company X, but cheaper' that's a race to the bottom and you're going to make it harder for everyone who comes after you to earn a living.

    Same to developers who charge $5-$10/hour for their time.

  8. 2

    Extremely good advice

  9. 1

    Hey, total newbie here! What about startups like Notion or Airtable? They charge starting at $8 or 10 per user. What makes it ok for them to charge such a low price per user?

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      Airtable is a venture-backed startup with $160 million in funding. The only way the founders, investors, and employees successfully profit off of Airtable is if they have a $1 billion + exit. This means that, despite the costs and the low-probability odds, they need to focus on growing to the largest number of users possible. You are (I assume) not a venture-backed startup seeking a 10-figure exit. You’re seeking a sustainable, profitable business. The highest-probability way to do that for you is to charge what you’re worth.

      Airtable is a whale, a massive entity aiming to eat lots of small customers with its massive mouth. You are a tiger, trying to find 1-2 large, sustaining meals per day.

      In addition, Airtable (because of its noteriety) gets a lot of earned media, meaning it’s easier for them to acquire customers, and benefits from the economies of scale of having hundreds of thousands of users.

  10. 1

    You're not Microsoft / Autodesk / Adobe etc. either. Don't try to price match them if you are selling something you perceive of "equal value" - your thing is almost definitely more tightly aligned with your customers needs, problems and workflows. Savvy customers also understand economies of scale and "one size doesn't fit all". You don't really want un-savvy customers, it's no coincidence they are the ones that obsess about paying less.

    Also -B2B ! Businesses like spending money when it saves them money and makes them money, consumers - not so much.

    Charge more! Yeah, my app (www.tvcad.tv) took 10 years to land but it only took a few months after that to get itself financially into the black. Spoiler alert: 6 sales is all it took. Did I mention "charge more!"? Time-wise tvCAD owes me a lot but I actually use it in my "day job" which gives me some very distinct advantages: I got a lot more efficient, I can charge more for my day job and I am the guy who made tvCAD so I get to be a "bit of an expert".

    You are the expert, charge accordingly.

  11. 1

    Wow! This is it!

  12. 1

    Great points! But the tricky thing is finding the target price which is not too much either. I guess if you are providing some value then you do have the opportunity to make some trial and error to find the right spot.

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    Yeah this is true. We went out too low and it really boxed us in.

    People see your value as the price you set. So later when you try to raise it they think you are selling your $10.99 value thing for $49.99 and its a rip off/not worth it/ blah blah blah.

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    This comment was deleted 3 months ago.