Category: Business

For those of you who know me or are readers of this blog you’ll know I have a passion for creating business models based on recurring revenue – the majority of my consulting projects have been based on this aspect of business.

While Salesforce is generally credited with making Subscription based Software / Software as a Service mainstream, the last 20 years have seen

In the architecture space all the major players have introduced Subscription licensing either in parallel or as a replacement for perpetual based licensing. Cadimage was the first in the world for ArchiCAD and I then went on to lead the GRAPHISOFT SE Introduction of Subscription Worldwide.

Subscription businesses build revenue over the long term so have high cash requirements during the short to medium term. However, the pay off, if executed well, can be very rewarding.

Another advantage is that the cost to get started can be very low if based on a monthly model. This is not to say that sales are or will be easy – value still needs to be delivered at any price – but having a fee based on a period of time reduces risk for the customer.

The flip side of this is of course the ability for customer to stop paying if they don’t see value. Therefore the sales process for a subscription business continues long after the initial purchase.

As a person who has always had a customer centric mindset I see subscription models and the associated customer journeys as compliments to the overall strategy.

I’m currently Thinking… about a new business and these posts take a look at different aspects and thoughts

While this may seem obvious, it also requires more explanation. With Cadimage we created a series of Tools for ArchiCAD. While the Tools were our IP, our customers also needed to own ArchiCAD before they were even a prospect for us. 

Some estimates indicate there are 3-4 million architects worldwide. Let’s keep it simple and say 2,000,000. If you create a product that you hope will see a 15-25% uptake (tough) you could have 300,000 – 500,000 customers.  But if you rely on that customer already owning a particular piece of software the 2,000,000 total addressable market is considerably reduced.

We found with Cadimage that even simple marketing like Google Ads was fraught with difficulty, as we’d constantly pay for clicks that were worthless as the people didn’t even own ArchiCAD.

I want to create something that can be assessed completely on its own merits and provide value in and of itself. Depending on what we end up deciding it may need to work alongside other software, but I don’t want other software to be a pre-requisite.

While there is huge potential to create add-ons for the different BIM systems other issues we faced was customer expectations that the primary software should “just do that” ie the tools we were delivering were expected “out of the box” this led to many people not investing (even a relatively small amount) to buy tools that could increase their productivity. They would say “the product will do that at some time so I’ll wait” I could never understand people who would prefer to wait in order to increase productivity. 

I’m currently Thinking… about a new business and these posts take a look at different aspects and thoughts

If you look at business you can sell things or you can sell time – I realise this is reasonably simplistic but I have owned and advised both types of businesses. I find the ability to scale a product business far more compelling as you can scale without the direct correlation to employing staff. 

Don’t get me wrong, it is great to create, build and nurture a strong team, but with a service business the easiest way to scale it to sell more time which requires more staff (again apologies if this is too specific)

If I was interested in the service business I could focus my current consulting business in that direction and think about how I could expand and scale. This isn’t really me, I want to be more hands on creating something tangible (or at least as far as software is tangible!)