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May 4, 2013


Small to Mid-Market Software Business Model

by Adam Famularo

There are many different business models that you can use to develop a successful business.  The one listed below is a favorite of mine in the small to mid-market software business.

Start with the product, focus on simple good enough technology that satisfy a customer’s basic needs

  • Build into the product an ability for a customer to trial the software
  • Then purchase the software through eCommerce
  • Then unlock additional features, that are visible but grayed out, as the customer becomes a more advanced user of the software
  • Be able to track usage of the software, what are the most used/valued features
  • Be able to provide customer support within the software
  • Enable users to provide product feedback directly to engineering
  • SaaS delivered, preferred, along with a usage based licensing model

Then on to the supporting systems

  • Need a complete ERP system that can handle online  eCommerce orders to recognizing product revenue
  • The system should also integrate into a customer CRM system for managing all the important customer information and customer support
  • Ideally there is also a tele sales based system that can enable sales people with multiple call lists that also provide all relevant information on the customer that is being called, leveraging social media
  • Finally, a partner component that can manage lead flow, deal registration and customer order management

Now on to sales, marketing, product management, development and support

  • Ideal sales environment is a hybrid tele-sales model, where reps make 50-60 calls a day or roughly 3 hours of phone time, this will be combined with on-site customer visits when a rep can set 10 appointments in a given geography that can be completed in a 2-3 day period. There should be roughly 2-3 sales people to every pre-sales resource and ideally all orders procured through an online  eCommerce system or a local channel partner.
  • Other sales channels should be developed based upon how the customer likes to purchase complimentary goods.  These sales channels can range from solution providers to service providers to distributors to OEM partners.  These sales channels will vary by region and will be instrumental in growing a business at a lower cost of sale.
  • Marketing is focused on generating leads for the technology which means getting as many free trials in the hands of potential customers. These trials will capture user information and can be followed up by a call from a tele sales rep. Secondarily, we need a solid brand that will start with the product and then will need to ensure that the product is visible to all potential users.
  • Product management should be polling customers information to understand what are the most valued features in the product and ensure that we are getting the right value for our service in the marketplace. They should also run online focus groups and customer panels to understand how users are gaining value in the product, this information should ultimately drive the future road map. Finally, as they add new features they should excitement and a desire for customers to unlock these features in the software.
  • Development should be spending time as follows, no more than 30% fixing bugs in code in the current release, 60% on developing new innovative features or products that will generate new revenue to the business and are aligned to the product road map.  The final 10% of time should be working outside of the box on adjacent technologies that might not be on the current product road map.
  • Support should be phone with the ability of answering questions any time of day in any local language. The goal is to answer the questions while customers are using the technology and enable them to use customer forums to find frequently asked questions.

Stay tuned for more to come as I expand upon each section.

2 Comments Post a comment
  1. May 6 2013

    Nice blog and interesting subject matter.
    I would be disappointed if my SaaS (assuming that is your focus) business was spending 30% spending on bug fixing. That amount would suggest poor quality software development. Spend it on setting up test first design and agile methodologies lowering the recurring cost of fixing bugs.
    Also spend that extra money on instrumenting how customers are using the services.

  2. May 17 2013

    I blog quite often and I seriously thank you for your content.
    The article has really peaked my interest. I’m going to book mark your site and keep checking for new details about once a week. I opted in for your RSS feed as well.


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