by Steve Pavlina
CEO, Dexterity Software
Several months ago I decided to conduct an informal but lengthy study of successful software businesses. The primary question I asked was this: Why are some software developers more successful than others? I looked at dozens of software businesses with sales ranging from only a few hundred dollars a year to those with sales of over one million dollars a year. This article summarizes the absolute best of what I learned.
Most of us enjoy working on our strengths, myself included. If you are a talented programmer, you may spend a great deal of time refining your programming skills. Many software developers see themselves primarily as programmers, and this makes perfect sense, since that is how most of us got our start in software. Unfortunately, I've found that the "software programmer" mindset will probably do more to limit your success than just about anything else. Beyond a certain minimum threshold, programming skill becomes a fairly insignificant factor in running a successful software business.
It is said that in every field, there are only a handful of critical success factors, such that if you master just those factors, you master your business. This is no less true with software, which I believe has seven critical skills. They are: decide, create, promote, sell, serve, measure, and improve. To the degree to which you fail to master any one of these skills, that is the degree to which you limit your own success. I found that the most successful software businesses paid attention to most or all of these factors, while the least successful ones tended to focus on only a few while virtually ignoring the rest.
So here are the seven critical success factors in software:
Set clear goals, and make plans to achieve them. Goal setting is of paramount importance in any business. A famous study conducted at Harvard University found that only 3% of Harvard's 1953 graduating class had clear written goals with plans to achieve them. Twenty years later, the same class was surveyed again, and it was learned that that same 3% was worth more in financial terms than the other 97% combined! In addition the researchers found that the 3% had better health, relationships, and social skills.
Goals must be clear, written, specific, realistic, and measurable, and every goal must have a deadline. Making more money is not a goal. Increasing your sales by 20% within the next 90 days is a goal. Write your goals down, or type them up on your computer, and review them regularly, at least once a week if not every day. You should set both short-term (one year or less) and long-term (one to five year) goals for your software business. Then construct plans for the accomplishment of these goals, and schedule time to work on these plans. Goals should consist of measurable outcomes, but plans should consist of actionable steps. Increasing your sales by 15% may be a goal, and submitting your software to ten more download sites is an actionable step.
The word "decide" comes from the Latin decidere, which means, literally, "to cut off from." When you decide to set a goal, you are also deciding not to engage in all the possible alternatives. When you decide to spend your week marketing your software, for instance, you are deciding not to spend that week on product development, email, web surfing, etc. There is tremendous power is making absolute, committed decisions. If you have a tendency to lose hours, days, or even weeks to unimportant email correspondence, web surfing, phone calls, or other distractions, then you probably have impotent goals that do not inspire you. You will notice an immediate improvement in your effectiveness and attitude the first day you decide in advance how you will use your time, and commit to that decision. Simply ask yourself at any given moment, "What is the best use of my time right now?"
Develop high-quality products that people will want to buy. Many software developers have mastered this skill, but it is only one piece to the puzzle. Obviously if you are going to succeed in software, you need one or more products to sell, yet I've found that many of the most successful software developers spend less than 50% of their time on product development. And you don't necessarily need a lot of products; many incredibly successful software developers have only one or two.
Focus on creating assets in your business while minimizing liabilities. Robert Kiyosaki's book Rich Dad, Poor Dad provides my favorite definitions of these terms: Assets put money in your pocket, while liabilities take money out of your pocket. It isn't really that difficult to find yourself with more liabilities and expenses than assets. Magazine and service subscriptions, depreciating hardware, frequent software upgrades, development tools, web hosting and internet fees, taxes, and materials and supplies can whittle away your software income very quickly, especially when you are first starting out. Your goal should always be to develop assets that are capable of producing income on their own. If you aren't making money while you are asleep, then you probably have a job instead of assets. Think of product development as investing, and strive to maximize your return on investment. You are investing your time and energy to produce something which can generate income on its own. The most successful software developers have spent their time building up strong assets; they make huge incomes even when they aren't working. As you develop new products, keep in mind the goal of creating an automated income-generating system.
Market your business and your products, and distribute your software as widely as possible. If you build a better mousetrap, you will only attract mice, but if you market a better mousetrap, you will attract customers. This is an area where one finds a great disparity between the best and worst performing software companies. Spending 15-25% of their time and resources on marketing is common among the best companies, with little or no marketing among the worst. If you don't like marketing or feel that it is beyond your abilities, you have two choices. Either commit to learning how to do it, or partner with someone who can help you. If you do decide to learn marketing yourself, I recommend books by Jay Conrad Levinson, Al Ries / Jack Trout, and Jay Abraham.
What are the two most powerful words in advertising? If you don't know these off the top of your head, then you had better memorize them now. They are the words "free" and "new." Those two words have made more fortunes than any others. You will see them used liberally in all types of effective advertising. Sometimes just adding the word "free" to the title of an ad can double or triple the response rate. Sprinkle these words generously throughout your web site. Offer free downloads, freeware utilities, new releases, free contests, a free newsletter, new tips and tricks, etc. Put them on your nag screens by offering free tech support, the newest version, free bonuses, etc. As tired and cliché as these words may seem, their effectiveness in attracting customers remains unsurpassed.
Marketing is not just uploading your programs to software sites, although that is certainly important. Write and send out press releases using a PR service. Take the time to improve your search engine rankings. If you aren't on a first-name basis with at least a dozen software reviewers, set a goal to make it so. A friendly reviewer can do a world of good for your business. I can credit significant numbers of sales to software reviewers with whom I've developed a relationship over a period of months. Host a regular contest on your web site. They cost virtually nothing to maintain, and they continue to bring in new traffic month after month, ultimately resulting in new customers.
There is no reason not to have a newsletter, and if you don't have one yet, start one today. There are free services available to host your newsletter for you, making list management painless. I send out a very simple newsletter once a month, and it takes me less than thirty minutes to write each one. Every time I send one out, web site traffic and sales are measurably higher for the next several days. And since new people sign up every day, each issue tends to be even more effective than the last.
If you are running a business instead of just a hobby, then you actually need to sell your products. This is arguably the one area where most software professionals perform worst of all, but ignorance of selling is perilous. Of all seven success factors, selling is probably the single most important skill. The number one reason businesses fold is simply due to lack of sales. If you have strong sales, it is much tougher to fail, even if you screw up everything else.
Selling is both an art and a science, and there are many outstanding books on selling. Brian Tracy is one of my favorite authors in this area — he has several excellent books and tape programs related to selling. A real page-turner is Frank Bettger's How I Raised Myself From Failure to Success in Selling, which will give you a lot of anecdotal insights into selling. Many people feel that selling is beneath them, a shameless, disreputable occupation. Most of those people are broke! You can develop the greatest new product in the world, but if you don't know anything about selling, you are doomed to failure. What business could possibly succeed without sales? Best-writing authors rarely make any money, but best-selling authors do. If I could spend a day with either the world's greatest programmer or the world's greatest salesperson, I'd pick the salesperson in a heartbeat.
For software developers, there are two important areas where selling counts most. You must have a web site that sells and a software version that sells. Your web site should do a lot of the prospecting and selling for you. It is your on-line salesperson. You must convince people to download your evaluation versions and to buy your full versions. Your order form must be easy to use; it is amazing how many sales are lost by poorly constructed order forms. Your software version is your off-line salesperson. While it is certainly possible to make money where the software and registered versions are identical, most successful software developers agree that having strong registration incentives will increase sales. Many people have time-limited software versions. Some use feature limitation. Both approaches work well. The more compelling reasons you give your customers to buy, the more sales you will get. For more ideas on improving your demo version's effectiveness at selling, see our Registration Incentives Article.
Sell the sizzle, not the steak. Product features do not equal customer benefits. I could have given this article a more logical title such as, "The software Success Cycle." Instead, I gave it an emotional title. If these were the titles of two otherwise identical sales letters, the first one would have gone straight to the trash unread, while the second would have had a chance to generate a sale. It is not uncommon for a simple headline change to make a tenfold difference in response rate. By all means, you should definitely list product features on your web site, since customers will want that information, but it won't sell your product as well as your benefits will. To determine the difference between a feature and a benefit, ask the question, "Will a customer buy the product specifically for this reason?" No one will buy your product because it supports fifty different graphics formats, floating palettes, and customizable colors. Those are features. But customers will buy your product because they believe it will save them money, make them feel more organized and efficient, entertain them, etc. The top six things that people want are survival, power, love, money, recognition, and acceptance. If you can find ways to tie any of these into your product, you will have some compelling benefits. Extracting the benefits behind your product can be challenging, but if you are getting any sales at all, then your product does have benefits. If you're not sure what your product's benefits are, just ask your customers why they bought it. All benefits are emotional in nature. For instance, customers may purchase a screen saver because they believe it will make them feel more creative, amused, peaceful, etc. Customers always buy on emotion and justify with fact, and if you're honest with yourself, you'll realize that you do this too.
A great place to learn about selling is your local WalMart-type store. Look at all the products on the shelves. How do they present themselves? Do you see the words "free" and "new" on any boxes? What is the sizzle that these products are using to entice you to buy? Let's take diapers for instance. You may see Pampers, Luvs, and Huggies. Those are all emotion-laden names. These are products that collect your baby's waste, but they are selling you on the values of pampering, loving, and hugging your child. If you think you are selling a product, you are wrong. Your product is a string of millions of ones and zeros. You are selling values and feelings. If you sell games, you are selling fun. If you sell utilities, you may be selling time or power. If you sell an image editor, you may be selling creativity or beauty. Know what you are really selling.
Provide outstanding customer service with a positive attitude. Serve the customer better than anyone else serves the customer. This is one area where software can massively outdo retail. Turn every tech support situation into an opportunity to create a customer who is shocked and amazed to receive such incredibly good service. Some of my users with the worst technical problems ended up becoming my most loyal customers, referring friends and family members in droves, simply because I went the extra mile to solve their problems. They know and I know that no other company would have ever gone so far to help them. See every tech support email as a golden opportunity by knowing that you can provide better service than any large retail company ever could.
Find new ways to provide value to your customers. Give away freebies now and then to keep them feeling good about your company. Fix bugs promptly, and continue to add commonly requested features. Offer a free newsletter with helpful tips and tricks on getting the most out of your products, and inform customers of updates, bug fixes, and new releases. If you talk to customers on the phone, stand up and smile as soon as you answer. Treat your customers as you would want to be treated.
It always amazes me to see fellow software developers complain about their customers. You may indeed have a challenging customer on occasion, and there are a couple different ways to handle it. You can blame the customer and ultimately flip the bozo bit on him/her, or you can assume total responsibility for attracting that customer and having a product or system that doesn't adequately serve him/her. The first option leaves you disempowered with no chance to change the situation. The second option empowers you to take action to resolve the problem. If you hold a core belief that your customers are idiots, then this will be reflected in your product design, marketing, web site, etc. You will then attract idiots as customers because that's the type of person you had in mind throughout your design process. If, however, you start from a core belief that your customers are brilliant, friendly, honest people who want you to succeed, you will make different decisions in product design, marketing, etc, and you will attract those types of customers. I chose the latter approach when developing Dweep, and I am absolutely amazed at the brilliant, warm, loving, honest customers it attracts on a daily basis. Tech support becomes a joy instead of a headache. Never release a product thinking that someone would have to be an idiot to register it, or you will attract nothing but idiots. When you release a new product, you should feel that it will attract nothing but intelligent, friendly customers. Attitude is everything.
Keep track of all the metrics in your business. Measure your web traffic, especially hits, visitors, and top referrers. Is your traffic increasing or decreasing? How many hits are you getting from search engines? What keywords are most effective for you? How many people signed up for your newsletter in the last month? Measure your sales, expenses, profit / loss, new customers, and number of tech support emails. Are these figures increasing or decreasing? How effective was your advertising?
Measure the subjective areas as well. Were your goals met? Where did you succeed? Where did you have a learning experience? What went as expected, better than expected, or worse than expected? What were the causes? Did you get any new reviews? If so, did they contain any constructive criticism? What kind of feedback did you get about your products and web site? Take the time to conduct a simple competitive analysis. Review five or ten competitor's web sites, products, search engine positions, etc. Then ask other developers for their honest opinions about your own web site. If you've never done this before, you'll be amazed at all the constructive feedback you'll receive.
The purpose of measuring is to gather accurate data with which to make better decisions. If you don't measure your results, it is very easy to draw erroneous conclusions. Create a simple spreadsheet to record your numerical results on a monthly basis, and make sure all the figures make sense to you. If you think you made a profit this month, but your checking account doesn't reflect it, then you may be missing some expenses. Strive to understand the causes behind every figure. If your sales spike or dip, always find out why. Then do more of what causes positive results and less of what causes negative results.
Refine your approach in each area of your business, based on conclusions drawn from your latest measurements. If your current plan isn't working, revise it and try something else. Apply what you learned from your last competitive analysis. Bounce new ideas off other developers. Read a book in your weakest area, and develop a new skill. Evaluate new software and web-based services, set up a network, or experiment with some new technology that can help improve your business. Expand your web site. Improve your on-line order form. Add new features to your products, and improve your product descriptions. Based on your latest measurements, how can you do more of what worked and less of what didn't work?
Master these seven skills, and you will have an outstandingly successful software business. Fail to master any one, and that is the one that will limit the height of your success. You don't have to be 100 times smarter to make your business 100 times more effective. The horse that wins the race by a nose may get ten times the prize money of the horse that loses by a nose. Rate yourself on a scale of one to ten in each of these seven skills. Then begin working on your worst skill first, since that will provide you with the greatest overall improvement. If you bring a level nine up to a level ten, that is only a 10% improvement. But if you bring a level two up to a level six, you can triple your effectiveness.
About the Author: Steve Pavlina is the CEO and founder of Dexterity Software and writes and speaks on software and computer gaming industry topics regularly.
Copyright © 2000 by Steve Pavlina.