On Sustainable Business Models in Business (And WordPress)

Prepare yourself. This is going to be a long one.

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So today, WooThemes, who we have known for a while and have been around as long as iThemes, starting their shop back in 2008, announced some significant changes to their business model — namely that “support and updates will be capped to one year after purchase.”

Like Woo, when we made this decision back in 2009, we have heard the trickle of complaining from a few people each month since that they are encountering now all at once.

For the core, those who are our true customer community and who understand and appreciate what we provide for them, it hasn’t been an issue. For those who look at what we do as a commodity and thus devalue our daily work, they don’t like it very much.

But we pressed on with it because we knew each year we’d usher in more and more customers on top of the layer of previous customers … and eventually we’d have this huge snowball of burden on our support and infrastructure. And yes, support would suffer because we couldn’t keep up. And we’d have to eventually raise our prices to be able to add new support personnel (salaries are the biggest line item we have in our budget).

That’s called compounding debt. You don’t want it in your own life, and especially finances. No one wants it.

So if compounding debt sucks, why would you want the people who provide you with ongoing products and services to have it buried in their business models?

This type of model demonstrates short-term thinking, focused on profits by undercutting others who are focused on long-term sustainability … and guess what, all at the ultimate expense of the customer experience.

My questions for others with an “unlimited” business model are the same they were in 2009 when we looked at our own business model in regards to lifetime support and updates:

  • How can we keep up the same level of support without adding more personnel?
  • How will we pay to maintain the extra level of support personnel without increasing prices?
  • How much is our customers’ experience going to suffer as a result?

Here are some principles to think about as you, as a CONSUMER, look at commercial software (aka WordPress themes and plugins):

1. You get what you pay for

If you invest in something that promises unending support … you’re going to get more for what you paid for (maybe) in the short-term, then see that value erode eventually. Maybe not tomorrow or a year from now, but at some point you’ll see the value tarnish. And maybe one day, they just close their doors, drastically change their model and you’re left alone.

Managing expectations in business is paramount. And this means your original expectations don’t last. See the comments on Woo’s post for more evidence.

Nothing lasts forever.

Free has no guarantee to show up.

And unlimited, which we’ll talk about in a minute, always has strings attached.

Remember that when you put your money down on something free and forever, without a great mechanism for supporting it.

(And yes, Exchange is free, but support isn’t. And we’re monetizing through add-ons, which has proven fairly successful in that space. Also, yes, WordPress is free, but supported by a for-profit business whose best interest is to keep it going.)

2. You have to spend money to make money

It’s cliche, but it’s true. Anything worthwhile requires some kind of investment in life (time, energy, money).

Relying on free stuff (or even borrowed time) is too often disappointing. If something you care about matters that much, be willing to spend the money on making it a success. This goes from hiring the RIGHT web designer for your ecommerce site, to buying hosting for that site.

And as web designers, just like craftsmen, you want the right, quality tools. Would a carpenter want the cheapest hammer on the market?

If you want a result or a benefit, be willing to pay well for the delivery of it. (And thus, be justified in demanding it deliver.)

3. The worker is worth his wage

Or said NLT version of the Bible: “The laborer deserves his wage.” (Yes, I just quoted the Bible.)

What this means to me is that … just like you highly value your time, talent and expertise, so do we. We might just package and deliver it differently.

But because of this core value, I stopped apologizing for making money a long time ago when I really embraced the value we provide for our community.

We must make money and we are entitled to make money.

If I do an awesome job for you, you should want to reward me, and handsomely.

Personally, I’ve paid lawyers, plumbers, electricians, and counselors (and a whole host of other people and companies) a lot of money. But I don’t begrudge them for it because I got the results I desired for it. I’m not jealous if they drive nicer cars than me, or live in fancier houses.

I got what I paid for and more. They deserved my money for saving me grief or time or energy or whatever.

Now, our challenge as entrepreneurs and business owners, or specifically at iThemes, is to demonstrate that our time, talent and expertise — packaged in product form through all we do — is worth the price attached to it.

If we do it well, then you’ll recognize what we’re saving you (time, energy, money, whatever) and quickly purchase it.

I remember talking with a developer in Texas about an undercover project we were working on at the time that would essentially save him $300 a site. He told me he was paying someone else to copy sandbox client sites (you know where you build the site to show the client without going live on their domain) over to live sites for his clients. I told him our project would let him do that — copying everything including settings, theme customizations, plugins, etc in probably 15 minutes.

His response was essentially: “When can I have it? And how much can I pay for it?”

He got that product — BackupBuddy — a month later when it was released. The top plan is $150 per year. And he gladly pays it.

That’s showcasing value, right? But again, that’s our job, not yours as the consumer.

But I do believe that if you undervalue other people’s work … your clients will devalue yours too. It’s a mindset, an attitude, a philosophy and a core value you should seek to change.

Changing that one thing will start to affect everything you do and everything you see. I know it did for me years ago as I slowly started to realize what I was worth to the world and vice versa.

And you should value what they provide to you. Then if they don’t, take your money elsewhere and thus, vote for someone else’s business model with your pocketbook.

But you should consider what it provides for you … just like you share with your clients about the value YOU provide to them.

You should buy products from people who want to be here for you. You should support those who want to be here for you in 1 year, 5 years, 10 years because they have created a sustainable business model FOR you.

4. Question anything with ‘Unlimited’ in it

Now … let’s talk about the word “unlimited.”

Unlimited isn’t a business model. It’s a marketing angle and pitch.

We all know there’s nothing truly unlimited in life. And nothing lasts forever, particular in business. Quality, availability, price … they change.

Saying you can have unlimited of anything forever has got to mean something else suffers. There’s got to be a catch. Fine print somewhere.

Hosting companies though are notorious for “overselling” and offering “unlimited” bandwidth and storage. They get around that by talking about “resource usage.”

Up until now, I’ve focused on unlimited support mainly in this post. But one of Woo’s moves has made me think about our own plans. Currently we offer a plan for “Unlimited” sites essentially. There is currently no cap for the number of sites you could use it on and get updates and support. Woo is capping theirs. This is something I honestly hadn’t thought about with our current plans and something we’ll be evaluating over the next month or two.

The reason we haven’t tweaked it or capped it is because updates aren’t as resource intensive as support. But still. It warrants some thought and evaluation from us.

So if you see the word “unlimited” attached to a product … investigate it further.

I’m not saying don’t buy it … I’m just suggesting you think about some of the issues weighing into anything “unlimited.”

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Those are some of the things we should all consider when purchasing good or services from anyone, even outside of WordPress.

I believe businesses exist to make money … but also meaning.

If we don’t make money though, we can’t make meaning. At least through our organization. Money is foundational. It doesn’t supplant meaning, but it’s essential for making meaning happen through business.

One quick example … we started The Div, our nonprofit tech foundation, to make meaning. It costs us a lot of money to get off the ground and to run … and to continue to run even now. If we hadn’t made money via iThemes, we could not have done that. Period.

But it shows that making money and making meaning CAN go together.

(By the way, I’m stealing some thunder from an ebook I’m outlining right now on the New Rules of Entrepreneurship, vote for it here.)

Anyway … that’s my two cents worth on this recent topic in WordPressLand. Now I gotta get back to work, helping make people’s lives awesome through what we do at iThemes.

 

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16 thoughts on “On Sustainable Business Models in Business (And WordPress)”

  1. How you add value to a customer’s life or business is definitely important. But I couldn’t stand reading the “logic” about how they deserve a chunk of the change a developer makes off of one Canvas install. If that’s the logic they want to use, shouldn’t they cut their numbers down for what I’m sure is a significant chunk of people who make *nothing* off of a canvas install? What about those who DON’T ask support questions once per project?

    The reason I have so many issues with this is because it didn’t seem authentic. It felt like an attempt to justify their actions because they knew people would be pissed about it. I would’ve much rather seen less flawed logic and more honest truth. There was plenty of straight forward truth in the post… but a lot of it will be forgotten behind claims like the one above.

    The post was arrogant and frankly, so is this one.

    “For the core, those who are our true customer community and who understand and appreciate what we provide for them, it hasn’t been an issue. For those who look at what we do as a commodity and thus devalue our daily work, they don’t like it very much.”

    I know you were talking about your own company here. But to bring it up in support of the WooThemes news is a slap in the face to their customers who disagreed. Are they not part of the true customer community because they don’t agree with the reasoning? In fact, is this even about “community” or is it about law? Because that’s the main defense I’m seeing in the constant references to point 13 of their TOC. Do these customers not appreciate the product they paid for? The above quote takes a lot of shots at a lot of people in a pretty irresponsible way. They knew they owed it to their community to justify the changes? Why? Because the word “community” is being tossed around. If they don’t want the backlash, they should stay away from that word and just keep it real. This is what happens when you try to have your cake and eat it too.

    Point # 3 in this post about the worker being worth the wage is solid. But again, how does it apply? It’s like you’re telling the WooThemes community they should feel bad for all the years the prices weren’t what they are today. WooThemes is talking about FUTURE growth… not August 1st growth. A more realistic approach would have been business model adjustments in line with the business growth.

    The truth of the matter is the company has grown and their previous model wasn’t sustainable. Man… nothing wrong with that at all. But to make such “bold” moves, as they labeled them, and then act like everyone else is trippin’ when they react to the boldness makes no sense.

    Why are the changes bold? What made them call them bold in the first place? If they labeled them as bold themselves, didn’t they already expect this reaction? If so, saying they deserved a chunk of the money made from a Canvas install was their defense? Come on, man. This was done wrong and their reaction is even wrong.

    They’re going to make more money from this. New customers will pay. Many of the existing customers will continue to pay. So they’ll get what they need to get to grow as a company. There’s NOTHING wrong with that. But right now, they’re going to take some punches to the face. How should they respond? By taking the punches. That’s it. Take the punches.

    Each uttered word that in the least bit insults someone who disagrees with these “bold” changes has the potential to do more damage than the changes themselves.

    • Hey Sean, first, thanks for being bold enough to say all of this.

      In this particular post, I’m addressing the fact that they, like us, are moving to a membership model of updates and support rather than an “unlimited” or “lifetime.”

      I’m not a WooThemes customer or fan … they are actually competitors … but I have the privilege of only saying I’ve had beers with them and I like them and respect their work as it has only made us be better for our own customers.

      I choose deliberately not to weigh in on the other facets of their announcement that you brought up for a purpose. I try hard, even though I fail sometimes, not to sling mud either way. Honestly, this was more about OUR philosophy than theirs and using it as an opportunity to showcase why we do what we do.

      Re: the arrogance mention about my particular post, I’m sorry you feel that way … I think that’s going to be the constant challenge when you value your work though like we do. I do feel a strong amount of pride for what we do … because it’s not me doing it, it’s the 20+ on our team who are super committed to our mission and customers and I’m very, very proud of them and what we do.

      But few times in my life have I been accused of arrogance honestly … maybe we can have a beer sometime and we can talk more. 🙂

      • Thanks for the reply!

        This post as a standalone article is right on point to me. I only call it arrogant in this context (the WooThemes news) because it felt like a defense post. If they were to respond to their customers the way this post “responds,” I think things would get even worse right now. But if you’re just sharing your thoughts on business growth and not specifically todays WooNews, just referencing it, then I’m with you 100%.

        You don’t come off as an arrogant guy so don’t take that personal. I wasn’t familiar with your relationship with them, though, so I read this post as being in direct support with everything said in their post. If that’s not the case, parts of my response are misguided for sure.

        I’m always down for a beer!

  2. I’ve often wondered about the “unlimited” business model, and believe it’s essentially banking on customers paying more for the idea of support, rather than the actual support itself. If I pay for upgrades and support for a set time, I expect that during that time I’ll get the best support from the (developer/company), and that they’ll also work to improve their product so that I’ll want to buy the newest one when my year is up.

    There are several apps that I’ve purchased recently with the understanding that I’ll get all the updates to the current version for as long as I own it, but if if they release a new major version I’ll need to pay for it. I appreciate knowing right away that this one won’t stop working when that time comes, and I expect I’ll purchase the next major release when it comes up. This seems to be a very sustainable model that I can support both as a developer and a consumer. I’m interested to see how your review of the “unlimited” model works out.

    Sorry to see close, but glad it’s still alive in spirit!

    P.S. Your Bible quote is from the ESV, not the NLT. That one is a fun “Those who work deserve their pay!”

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