I have come to a conclusion that I think is important to share with all of you out there inventing new products and companies. I used to believe that great products could find their way in the world, that good products, once customers got ahold of them, could find their way to business models that pay for their existence, and that with enough customers and enough turning over rocks, that would become apparent.
I no longer believe that is the case.
I now believe that a semblance of the business model has to be in place before release and that it does no good at all to hunt and peck for it later. Part of proving that the product is viable is proving that the product can generate enough money to support its existence. The business model is what defines that.
The entire company, at the beginning, has to focus on proving that the product is viable. And the only way to do that is to focus on proving that business model from the beginning. Otherwise there is no business.
It is possible to pivot or change but by human nature it is extremely hard to pivot from a business model that is generating revenue, just the wrong kind. When that income is the only thing that stands between you and destitute, when that income is the thing that feeds your two small children, it is almost impossible.
With powerOne, I proved that we could generate one-off income in the App Store. At $5 per copy its a grand bargain. I always thought that I could eventually figure out how to turn that into recurring revenue. After all powerOne has been very successful! Apple has featured it a number of times now, we have consistently been the number one selling financial calculator app for both iPhone and iPad, and customers love it.
But powerOne is what it is, a reasonably successful product (money-wise) that will never earn enough to pay the bills by itself but has been successful enough that throwing away that success and betting it on a different model would be devastating.
So as we start a couple of new projects — one close to release and another coming later this year — I try to learn from powerOne and try to focus the learning on business models that can sustain us and help us thrive as a business. I’ve enjoyed this too thoroughly for 14 years to quit now.
In the more limited case of having trial and paid versions of an app, I think I’ve done okay with Outline Tracker. The free version is fully functional but limited to 50 items. Unlike a time-limited version, users can try it, put it down, and take it up again months later. And casual users can use it indefinitely for free. The conversion rate appears to be good enough, and in a year and a half, I’ve only had one complaint about the Free/Paid transition.
I wouldn’t classify that as two different models, though. It is one model. The lite version is supporting the paid version. The lite version is really a marketing vehicle.