Skedsheet Blog

Where we talk about the product, calendars, organization, and business

Business plan – show me the money?

with one comment

We’ve been putting money into Skedsheet, but haven’t really thought about a business plan much.  Typically you need to think about finances, market, and plan for our products.  Here’s a swag at the finance part for Skedsheet.  Of course, the dirty secret of any business plan is that this is all a guess…

$ pillow by klynslisLet’s say that the cost of doing the beta version of skedsheet is around $100K – that’s development time, graphic design, and the direct costs of setting up a website, getting trademarks, and all of the other administrative parts of setting up a new product.  I think that’s the right ballpark. 

After that, there are the ongoing costs of running skedsheet.  We’ll need servers, which will probably start around $500/month, and grow as we’re successful.  I’m sure we won’t have all of the features right in the first version, so there’s going to be ongoing development, and I’m sure that  we’ll have to spend time on customer support, too.  Let’s say that adds up to $2000/month for each. 

Even if we’re willing to toss out the initial investment, that means around $5000 per month just to break even.   And if we want to recoup the original outlay in the first year, it looks more like trying to get $14000/month.  Zoiks! maybe instead we want to break even on the original investment in 2 years, which makes it closer to $10K/month.

While we haven’t thought about price in detail, there are a couple of strategies we can take.  We’ve ruled out having expensive software.  Even if we choose a number as low as $100/month, chances are that we’ll need a sales process, and a sales guy to convince people to part with their money.

We can’t be totally free either.  That could get lots of users, but there’s not a chance of making money for just giving away our service.  So the answer is Free + Cheap.

Is a $10/month cheap?  $1?  I think that the right model for us is to have a small group of our hardcore users pay for the costs, and allow us to give away our software to 95% of the people who want to use Skedsheet.  So if the numbers I just pulled out of the air would work out, it’d be something like:

(Paid Users) x $10 = $10000, so we’d need a thousand paid users.  And if

(Paid Users) = (All Users) x 5%, we’d need twenty thousand people using Skedsheet before it makes financial sense.

So, the next  question should be “Does Skedsheet solve a problem for tens of thousands of people?”


Written by Harry Hollander

September 3, 2009 at 7:49 am

Posted in Pricing, Strategy

One Response

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  1. If you design the pricing model so that 5% of users think it’s worth paying for, you’re doing it wrong. This is not a social media app where you can monetize non-paying users some other way. The non-paying users are simply leads in the sales process. There must be important & valuable features only available to paying customers.

    Also, I’m guessing your numbers for the ongoing cost are too low. I don’t think it’s reasonable to assume the cost is less than 1 full time employee, even though it’s spread out across multiple people. But I also don’t think it’s important (or possible) to recoup the development cost in the first two years. The important point for the first few years is to become self-sustaining.

    Ted Pitts

    September 3, 2009 at 8:35 am

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