Everything has a price.
At the last job where I was an employee – my immediate manager was always busy and happy to work long hours. Then, I observed that he didn’t really enjoy spending time with his family. Then and now, I see people commuting 45+ minutes each way, for decades, to live where they want to live. But they’re commuting, and spending more time in an office and on the road then in their dream house with their life partners. Any time I feel a pang of envy, I remind myself, I don’t know what price they’re paying for the thing I’m envious of, but it’s likely much higher than I’m comfortable with.
For the past 10 years I’ve owned and managed a small business selling consulting services to larger businesses. I’ve been fortunate that Minnesota’s business climate has allowed me to support my growing family and work with some great Minnesota businesses. While many of my clients have been based in Minnesota, many others have been based throughout the United States: California, Colorado, and Florida.
Under the Governor Dayton’s proposed tax plan my small business would be required to collect a 5.5% sales tax on our services. This will immediately make my business 5.5% less competitive in Minnesota and around the US. But it’s more than just 5.5%, it a adds a layer of complexity to my day-to-day operations, eating into my overall profitability, and discouraging me from engaging other businesses to support my clients. Taxing professional services will mean not just lower profitability but decreased business activity for many of the great creative service firms Minnesota is known for: design, advertising, architecture.
The past couple years have been some of the most challenging for my business – it’s been a slow and arduous recovery and I’m just now starting to see some of the profitability I once enjoyed. The addition of a sales tax burden on my business will significantly impair my ability to grow my business in Minnesota.
I’m a small business owner, I’d rather not be a smaller business owner. I’m against Governor Dayton’s Sales Tax proposal – I encourage you to vote against it as well.
If you’re building any sort of web service or mobile app and you can’t yet receive money from people – stop. Right now. Stop. For all that is right in the world – stop.
If you can’t process credit cards right now – you don’t have a product and you barely have a business. Your minimum viable product isn’t _would_ someone pay for it at some price, it’s _can_ someone pay for it at any price. You could be selling nothing right now – I don’t care. You need to figure out how to process credit cards. So, the exact moment you have anything to sell – you’re ready to make that first sale.
Sure, there’s still something of a taboo around asking people to pay for software especially browser-based software – and other text work. Something about a culture of free, marginal cost is $0, economies of scale, SEO-findability, marketshare, blah, blah, blah. It’s bullshit. Part of it’s a remnant from a time when processing credit cards was hard, required merchant accounts, and more security than a $90 HTTPS certificate. The other part is people whose business is to turn interesting software companies into massively awkward advertising companies (MAAC) before selling their interest for a huge profit.
Neither of these things really a problem – the high of making your first sale will quickly evaporate both these notions. There’s a reason restaurants frame their first dollar received. That first sale is a vote of confidence, a recognition of value received, and most of all a ‘Thank you’.
Unlike even 5 years ago, there are plenty of services that will happily process credit card transaction for you – from the ubiquitous PayPal, to Stripe.com, Amazon Payments, and Google Checkout, the list goes on and on. For mobile apps – all the app storefronts will handle payments for you. One caveat – you need to price your app above $0.
Not asking for money guarantees you’ll never receive it. Asking for something only improves your chances that you’ll receive something. Based on my experience, for small services 1% of the people will give you an average of $1. This conversion rate can easily cover hosting costs for a year. It only goes up from there.
Though, the primary benefit of being able to take money isn’t really about being able to take money.
It’s about seeing your product through your potential customers’ eyes. Who they are? Which aspects of what you’re building are most valuable to them? What’s the most valuable thing you could build that they’d open their wallet for? Build that atop your payment processing system. Done. With enough customers, we can talk about bundling features into different payment tiers. Even completely different products. That’s down the road. But now that mindset exists, the technical capability exists, more paths to success open up. All in this small shift from $0 to >$0.
This isn’t even specific to building software – this is for anyone that creates something and distributes it online. Late last year I paid $250 for a weekly 5 minute video series. Announcements of new videos are distributed via email (one of the few emails I look forward to each week). The videos themselves live on Youtube. Last I heard, 160 others had paid as well. That’s $40,000 gross – atop an email with a YouTube link – from the sheer audacity of asking for real money for a year of creative work.
A century ago, Suck.com defined good writing on the web: short sentences, self-deprecating humor via self-referential links, and the biting humor of a playful wolf pup.
Thankfully someone’s brought that to 2012: