April 6, 2019

How do you "charge more" as an indie hacker?

I see this kind of statement all the time:

"I get why it's helpful to charge more, but as a bootstrapper, it's difficult to develop and market a product with a high price point."

That's actually not true, and I'll show you why.

Your price is determined by two things:

  1. the price of alternatives, usually driven down by the existence of undifferentiated competition
  2. the value your customer perceives they'll get from your offering

Okay, the solution for #1 is simple: don't build a commodity product. Differentiate. Maybe target a specific niche that others are neglecting. Etc.

But what about #2? How do you provide more value to customers?

The obvious answer is to build more features. However, building features is similar to adding sauces and seasoning to your food — it helps, but it's not as important as cooking the food well in the first place.

What I mean is that choosing a valuable problem/market for your business is 90% of what matters. It's the difference between a $10, $100, or $1000/mo product. Whereas features are what make a $10/mo product worth $15/mo.

"Well yeah, but isn't it always harder to break into a more valuable market?"

Counterintuitively, it's not! Several reasons why:

  • There's usually less competition. Far more people are making simple to-do list and note-taking apps than are tackling valuable problems like helping people learn to code, helping businesses set up websites, helping startups hire developers, etc.
  • More valuable markets usually have more money changing hands, so you can build something super tiny and niche to avoid the competition, and yet still make good money.
  • When you only need to make 20 or 50 or 100 sales to hit profitability, you can do things that don't scale. As much as we all hate it, doing things that don't scale is easier than scaling. Cold calling 100 customers is easier than building a viral product or repeatedly developing successful marketing campaigns.
  • etc.

It's not rare for me to see a founder who's successfully charging $300/mo and writing far less code and fewer features than a founder who's charging $5/mo.

They're just in a more valuable market solving a more valuable problem.

(cc @nunodonato @QuaffAPint who were talking about this in the comments of the latest podcast episode with Jason Cohen)

  1. 5

    So much truth in this post. I think one of the reasons I do more talking than doing here on IH is because all of the ideas I would jump on as a younger me start looking inconsequential in terms of value provided or $ charged. I can think of a handful of apps that could be created to make a few bucks on the side, but provide very little value. These days I am looking for bigger problems to solve that are easier to charge for precisely because there are only a handful of large players in that market with plenty of room for comparably small fish.

    One little trick I've been trying lately is going on Upwork and looking for the types of webdev posts people are making. These are people ready to pay money for REAL problems that they need fixed. Sometimes they pay thousands to fix this problem. I think these are golden opportunities - fix the problem for that person and then charge a recurring fee for everyone who needs this fixed. On that note, here are some trends I notice on Upwork:

    1. Despite all the solutions available, people STILL need constant wordpress updates. Webmaster for hire so to speak. Why can't this be a service?

    2. Despite all the solutions available, people are still looking to create wordpress websites from scratch and are willing to pay thousands of dollars. Why can't this be a service? (I'm sure it already is, but the fact that people still post these things tells me there is a lot more room in this industry).

    3. There are a ton of opportunities for customizable dashboards for internal purposes in the industrial space. I constantly see people asking to build some sort of internal dashboard for reporting, communication, reporting etc. Surely they know there are tools out there to do all of this for you?! Why can't this be a product that delivers a ton of value without a ton of investment up front?

    I found a few golden nuggets on Upwork and now trying to figure out how to proceed with them.

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      I attempted to help a small chiropractor business with #3 (dashboard), and the stumbling block was extremely messy data. There's a million dashboard apps (and the chiros received sales pitches from all of them), but every dashboard depends on importing clean data. I'd imagine that the same is true for most of these postings, and the heart of the "job" is to write a bit of glue code which converts their messy, proprietary data into something which can be piped into a standard dashboard display.

      Addendum*: Gathering all the data this dashboard required would have also required operational and process changes. For example, his front-office staff would need to start taking notes in a certain way on their computers, instead of the way they were comfortable with on paper. So although it looked like a tech problem, it also required training, processes, management, etc, which gets to a place where they really needed an in-person consultant instead of an off-the-shelf product. Not sure how much that generalizes, but that was my experience.

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        Thanks for this comment. It made me rethink the entire "oh people have this problem on Upwork and they are willing to pay for it" approach. I just got your book and so far it's very helpful!

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          I think the approach is still a smart one, you just need to distinguish between problems which are generic vs. problems which are fundamentally bespoke.

          Happy the hear the book started off on the right foot. Give me a shout if there's anything I can clarify or help with.

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      That's a very smart approach — go to place where real money is changing hands, and you'll be likely to find problems that people care about having solved.

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    "Charge more" should be a more brother concept. For us, removing the smallest plan and adding a more expensive plan doubled the revenue. We didn't change the pricing or features of the middle plans, but rather positioned them as entry level.

    I think that a different way to look at this is: double the perceived value rather than double the pricing.

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    Love the point that it is relatively easier to get 100 people paying you 50$ a month than creating a viral product. Not to downplay the effort that getting a 100 people involves.

  4. 2

    I was actually struggling with this issue while listening to the podcast with Jason. Thanks for the ping Courtland and your comments about this.

    Everything makes sense, but the issue on "adding more features" is a knotty one. I was recently reading "Get Real" by 37signals and actually, one of Jason Fried's advice is to stay simple and lean (less features), instead of overcomplicating and trying to do everything. According to him, having less features in their product, was what made the product more attractive to their customers, which increased sales.

    So I guess there's no one size fits all in this as well. Perhaps some products can benefit more from being focused and simple. But doing that probably means you can't increase the price.

    thoughts? :)

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      The boring-but-probably-right answer is: it depends.

      I'm sure there are some products that do a better job solving customer problems by adding features, and some that do a worse job. Really depends on what you're building, how far along it is, who uses it, and why.

  5. 1

    @csallen I'm currently building a subscription-based service. I'm not sure if I should charge people based on my personal/market rate or make it cheaper to attract initial customers and increase later. Do you have any thoughts?

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      Don't give it for cheaper. Have tiered pricing, have your market value as the full-featured subscription. Others as with fewer features. This can also help you increase pricing if their perceived value is higher than what your personal value is.

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    Great points! :)

  7. 1

    They're just in a more valuable market solving a more valuable problem.

    I get what you're saying, but this bit is really hard for me to accept. IMO, of all the companies you've interviewed, it's Paystack that's solving the most valuable problem. A minimum fee of $300/mo wouldn't solve it.

    The word "value" being overloaded is a huge part of my reaction, but even in purely economic terms, the value of what they're doing is vast.

    1. 1

      Well, you have to factor in the other half of the equation, which is competition. Competition drives prices down, even if the value of what you're providing is massive.

      Theoretically, water is infinitely valuable. It's necessary for life. But you aren't going to pay me $1000 for a gallon of water, because you can so easily get it elsewhere. If you couldn't get it, though?

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        It looks like one dimension of this water analogy is long-term vs short term valuation metrics! Maybe when looking at markets, my bias is more towards potential energy than kinetic.

        (I know, Alchemist Camp doesn't really fit that at all. This is a project of necessity that I took on after failing to fund (or sustainably bootstrap) something aimed at a large developing world market.)

  8. 1

    So much true. It's totally worth spending the time to find a valuable niche. Charging your customer is more important because it determines what kind of channels you can use.

    For example, last month I built a product where I was charging $19/month. I soon realized that ads are not going to viable to acquire customers. But the game could have been totally different, if I were able to charge $300.

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    I need to print this out and stick it to my wall :D

  10. 1

    Courtland, I possibly got a gift for you

    I write daily for SaaS companies and am looking to join actively the IH community — it’s just that I haven’t got a reply to an email with a problem/bug on IH

    I wrote a piece called “If you want to charge more as a SaaS/startup, do this” — not published anywhere yet

    Should I send it to you? For background, I’ve founded an app that went 0 to 200k users in the 1st year and am running a design agency that helps SaaS CEOs reduce user churn

    Let me know!

  11. 1

    But what if my passion is making simple to-do apps, while I feel indifferent about "valuable market" products? Am I doomed?

    Besides, speaking of

    helping people learn to code, helping businesses set up websites, helping startups hire developers

    I’m pretty sure those markets are oversaturated already too.

    But overall I agree with the point. Pricing is more art than science, and it shouldn’t depend as much on the features but rather on perceived value.

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      But what if my passion is making simple to-do apps, while I feel indifferent about "valuable market" products? Am I doomed?

      Not at all — do what you love! Just important to be aware that a passion for products is different than a passion for business. Product is a subset of business. Business also involves other things besides product, e.g. understanding your market, distribution, pricing.

      I’m pretty sure those markets are oversaturated already too.

      Going to have to disagree with you here!

      @lynnetye built Key Values as a solo founder in the recruiting space over the past two years, currently on a $400k ARR run rate. This time last year her ARR was closer to $0. @levelsio built RemoteOK not too long ago, and I believe it makes over $20k/mo.

      @ajlkn has been working on Carrd as a one-man show for a few years, helping people build websites. His growth has been picking up tremendously over time.

      @austenallred's Lambda School for helping people learn to code didn't even exist until a year or so after I made Indie Hackers. And although it's amazing, it's not the Only Word nor the Last Word in the space. There will always exist different ways that people learn how to code.

      More people are learning to code than ever and will continue. Education in general will always be important. So will hiring, so will marketing and creating websites.

      None of these spaces are oversaturated imo!

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        Thanks for the answer. Finally got time to get back on IH to reply.

        Fair examples, but they partially prove my point. Why build another landing page generator or another remote job marketplace when we already have Carrd and RemoteOK? I regularly see people launching those on PH, and you probably regularly see people launching those here on IH. They all seem to be trying to repeat the success of Carrd and RemoteOK, and yet too few (if any) take off.

        Valuable market or not, I think what matters is that you bring something disruptive to the table. Some unique feature (like Key Values’ filters), or a different pricing model (like Lambda School’s repay option), or a different approach to solve a common problem, or finally just the maker’s cred (I think RemoteOK wouldn’t take off so much if Pieter weren’t a famous IH icon).

        That’s why while I agree that we should price our products higher, I disagree with the advice to aim for high value markets exclusively. Almost everyone seems to be building SaaS'es these days, and idk, maybe it’s just me but wouldn’t a wealthy customer rather choose an established product over an indie one? Speaking of Carrd, I’m wondering how many enterprises chose it over, say, Wix — because it seems that it's mostly other indies who are using it.

        1. 3

          They all seem to be trying to repeat the success of Carrd and RemoteOK, and yet too few (if any) take off.

          I've found that most people who directly clone other products tend to be those who place too much stock in the idea itself. As a result, they aren't great at executing. Even if they were, I wouldn't be surprised to see so many fail, because startups are hard and failure is the default expectation.

          Why build another landing page generator or another remote job marketplace when we already have Carrd and RemoteOK?

          I think this is looking at it from a product-first perspective, but I prefer to come from a problem-first perspective. I would change the question to: "Why help developers find remote jobs when there are already people trying to help?"

          Phrased this way, you might respond differently. The answer is because the problem is not totally solved yet. People need a lot more help, and different people want different kinds of help.

          I think what matters is that you bring something disruptive to the table.

          Yes, I agree this is one option. I would also phrase it slightly differently.

          If you want to have an undifferentiated product, that's fine, but you need to make that up with cheaper pricing, better marketing, or better distribution. For example, among a sea of identical toothpastes, I buy the one with the best brand marketing. Among a city full of similar restaurants, I go to the ones closest to my apartment or with the cheapest/fastest delivery options. Etc.

          Alternatively, you can build a differentiated product like the ones you mentioned.

          I think RemoteOK wouldn’t take off so much if Pieter weren’t a famous IH icon

          Famous icons launch failed products all the time. While it's true Pieter's audience helps him tremendously, there's a lot more going on there with RemoteOK. I'm 100% sure someone not famous could've made it a success as well, they just would've had to find a different distribution channel initially.

          I disagree with the advice to aim for high value markets exclusively.

          You can aim for lower value markets, that's totally fine. It's just very likely going to be harder. It takes years to get to 1000 paying customers. If they're only paying you $5/mo, that's going to be a tough year or two. If they're paying $10-15/mo, that's still tough, but better. But my personal preference would be to get to $10k MRR with < 50 paying customers. It's easier. Doesn't require all that much marketing genius or cleverness. I can just make a few hundred phone calls.

          Almost everyone seems to be building SaaS'es these days

          I think that's also a product-focused analysis. It might help to think less about what people are creating and think more about what problems are being solved. For any given problem, there are many things you could do or build to solve it.

          Also, remember that you're an insider! You're on the bleeding edge of this stuff. What seems to you like "almost everyone" is in fact < 0.1% of the population. Don't count yourself out as being too late when in fact you are super early.

          The Insider's Dilemma is real. I remember in 2013 thinking Bitcoin had peaked…

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            It might help to think … [from] a problem-first perspective

            That is an extremely good point. Thank you.

  12. 0

    Spot on Courtland.

    I really like this part:

    the value your customer perceives they'll get from your offering

    A common mistake founders are making in my Sales for Founders course is to assume that it's the responsibility of the customer to work out what the value of the product is to them.

    In reality, it's our job as founders to guide customers to understand the full value of the product to them.

    A lot of founders I talk to could successfully 2-3x their prices by just doing a better job at that.

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