I wanted to talk about customer relations and how to have a successful startup. And what not to do.
Let’s start with a story. I’ve bought a Premium Lifetime license from ManyCam. ManyCam is a software that does several things, I needed it to be able to use a webcam in two applications at the same time. One year after I’ve bought the Lifetime license, they released a new version and my Lifetime license effectively stopped working.
“ManyCam is now under new ownership. […] Visicom Media stands by the Lifetime customers and will continue to support them by arranging with the new owner for a total of two years of free subscription." Standing by the lifetime customer by offering two years and dishonoring the lifetime license? I call that a “Weasel License” not a “Lifetime Premium License” as the lifetime of a weasel is two years (Can you believe that? I didn’t know either).
There is the saying that a happy customer doesn’t talk, but an unhappy customer spreads their bad experience to ten people. The person you’ve sold the lifetime license to will probably never update, because they hate you, there is no money in it for you anymore from that customer except you can hold them hostage. In this case even more sinister, offering a free subscription to get you on the subscription bandwagon - screw you twice. But I chose a one time lifetime license exactly because I don’t want a subscription. So trying to get me on a subscription doesn’t make any sense at all. In the end money for you but the downside of an unhappy customer running around, telling their story.
I do understand the constraints of a business, and sometimes you need money right now, so you want to get all your future income from a customer and offer a lifetime license. I also understand selling a business and the new owner has new priorities (the reason I tell all my CTO coachees they need everything in writing from their boss in their contract, a new boss will probably only honor what is written down, not spoken promises). I understand the reason for the lifetime license might be to increase sales numbers before you sell the business. But then you should honor that deal and let the customer use your software for a lifetime, and not make it stop working after a year. You can argue it’s a new release, and lifetime was only for the old software. If you keep lifetime bug fixes coming and all the features working for the old software, this might be fine but still feels dishonest (they didn’t answer my question of how long my version would be supported with bug fixes - especially as it crashes rather often1). And I’d argue from a software developer point of view it’s easier to let the customer use the newest software than updating and fixing older version for “Lifetime”, especially if you have a complete rewrite.
This tradeoff between short time benefits and long term benefits is something that goes on in every company and especially startups. Do you do everything to get this one customer? Do you want to develop a feature for one customer to win the customer or develop some other feature to win potentially more customers in the future? Do you invest in future growth? In stability and scalability? Or do you invest all your effort into short term gains?
A little detour. In the beginning of a startup it’s often a good idea to invest in short term gains. There is too much work to do, you need to show traction at all costs or if bootstrapped, make some money. Then at a certain point, a startup needs to switch to a more sustainable future. Put things on the roadmap for future growth. A good way to do this is having development budgets. In financial budget planning companies plan on how they want to spend money (resources) for maximum effect. What percentage goes to development, what percentage of the budget goes to marketing. The same can be applied to development time (resources). You plan to spend 10% of your development time on scaling, 10% on maintenance, 20% on short term gains, 20% on marketing and 40% on future growth features. Then from quarter to quarter you can adjust the numbers to reflect you current situation. But just as budgeting your calendar (something I highly recommend) you do not lose focus and make sure you work on the right things instead of having development chaos.
Coming back to customers. Do you invest in extracting short term money from customers? Or do you invest in long term relations. In the case of ManyCam they could have sold me add-ons that feel like they are worth it. By honoring the lifetime license the likelihood of me buying from them increases. It is the same as from the detour. In the beginning it’s about getting traction, then about getting money. And then the key to growth is retention. If you want to grow your customer base, the first thing is to prevent customers leaving. If you fill water in a bucket with a hole - something I’ve seen in to many startups on how they use marketing without product market fit - then after some time the bucket is empty when you stop pouring. So don’t make your customers run away.