How to make money selling software wasn't a topic I imagined covering one day when starting Niche Pursuits.
If you've been hanging out on my blog for a while, you know that I talk a lot about building niche websites.
However, I haven't discussed other parts of my business quite as much, including Long Tail Pro. As you may know, Long Tail Pro is a keyword research tool that I created out of my own frustration with other keyword tools as I researched my own niche websites.
It's the software business I made without being a developer.
How To Make Money Selling Software
Today, I wanted to share a few lessons learned about how I've created a highly successful software business even though I'm not a programmer. Along the way, I'll share a few details about Long Tail Pro that I haven't shared previously as well.
Including a massive payday that I achieved in a period of 20 days.
While my first love has always been niche sites, and they are still a great place for someone to learn the ropes and earn a decent income… I highly recommend you look into starting a software business as it can be a LIFE changing business.
Here are a few ways you can make money selling software. I go into more detail about these later on down the post:
- Don't worry if you don't have coding skills. I hired a programmer to do all of the technical work for me while I provided creative vision
- Don't skimp on quality. The first programmer I hired was inexpensive… but he ended up trying to hold my source code hostage. The next programmer I hired was expensive, but he was worth every penny
- Recruit affiliates for your product… and keep recruiting. I recruited until the day I sold Long Tail Pro and that was one of the biggest reasons for my success. Affiliates change the game for you
- Email your own list and talk about it on your website or blog. Publish to social media about your software. Those who already know you will make a natural audience for what you're offering. These people are often the first to sell for you and recommend your product to others
- Try new marketing tactics that scare you
- Prepare to deal with customer service (and hire others to take care of it if possible)
- You don't have to go in to paid marketing to be a success… but it can help. Make sure that you know what you're doing and start small. I once heard that you should only increase your ad spend by 10% per day, and start at just $10 per day. This keeps you from making big mistakes and helps you to adjust as you go
- Expect ongoing maintenance. The more people use your product, the more bugs that you'll uncover
- Try to create some kind of monthly fee. This was a game changer for my business
Why a Software Business?
First of all, why is software such a great business? The reasons are fairly simple: with software you can create something once and then sell it an unlimited amount of times. For this reason, the profit margins are much larger than a typical business selling a physical product.
If you were manufacturing a product, like socks, you have to pay for materials and manufacturing costs every time someone buys a pair of socks.
This is not the case with software. The additional cost when someone buys software is usually very little; especially if its an online application or something delivered by email.
Obviously you knew all that though!
In addition, a software business is something you can run out of your home or anywhere else. I run Long Tail Pro completely out of my home as 100% owner.
All my programmers and customer support staff are virtual; working out of their own homes as well.
Isn't business in the 21st century great?!
I'm not telling you that you shouldn't start a business based on a physical product that you have to ship; any business is better than none in my opinion. But from my viewpoint, a software business has some pretty nice lifestyle and profit margin advantages that others opportunities don't offer.
To put it in perspective: I currently put in around 1 to 2 hours a day on average running my Long Tail Pro business (sometimes more, sometimes less). It now makes more money in 2 months, than most people make in a year.
Yes, this is revenue, not net profit…but as mentioned before the profit margins are pretty huge for software in general, and that is no different for Long Tail Pro.
In addition to my own time, I pay programmers, customer support, APIs, hosting, etc.
At the end of the day, the profit margin (excluding my own time) for Long Tail Pro is around 85%.
I'm Not a Programmer
I am not a coder. I know some very basic HTML and CSS that I've picked up along the way creating websites, but that's about it. So, instead of just thinking, “Well, I guess I can't create a software business…”, I decided to hire someone.
For Long Tail Pro, I actually made several rookie mistakes, and the first programmer I hired did not work out well. Rather than share the sad story of what I did wrong, let me just share some tips that I learned for hiring a great programmer.
First, always communicate as much as possible before you hire a programmer.
Do a Skype call or phone call. Exchange emails. And document as much as possible what is expected for the task.
Second, ask your potential hire what concerns or problems they see with your project. If they don't see any issues, chances are they haven't thought it through. For every successful programmer I've hired, they've always been able to ask deeper questions or bring up issues that perhaps I hadn't thought of.
What you are looking for is someone that is willing to take interest in your project and make it as successful as possible.
Third, clearly define what is to be delivered at the completion of the project.
You will want to specify that you have full ownership rights of the source code.
Fourth, discuss what the expectations are for ongoing maintenance and resolving bugs. Every software project is going to have bugs that come up when different people use your product, so you need to know that your programmer is will to fix those; and what his compensation will be.
I paid my programmer a fixed job price to get the first version of Long Tail Pro up and running. But I now pay him on an hourly basis for any ongoing maintenance, updates, and resolving bugs.
Your software is likely to need constant maintenance; you can't expect it to be a one time payment and you are done. It rarely works out like that.
Fifth and finally, I've learned that you get what you pay for. Most of the time, the more expensive programmers are going to do the best job and perhaps save you money in the long run. The very first programmer I hired, I tried cutting corners and found someone cheap…not good! My second attempt, I found the most qualified…period.
I did not worry about price. As a result, I've had the same programmer over the past few years.
Yes, he's the most expensive programmer I've ever hired, but he's well worth every penny.
A Slow and Fast Approach I Took to Launch My Product
The Slow Approach
I'll be the first to admit that my first attempt to launch Long Tail Pro was pretty lackluster. I did have a small list of readers (from a previous blog), and then I listed my Long Tail Pro offer on the Warrior Forum special offers section in January 2011.
That's it. That was my launch.
I listed it up and emailed probably around 1000 people on my email list. I didn't try to recruit any affiliates or really do anything else.
Despite the very small launch, there were still buyers…and the feedback was very positive!
The one thing I DID do right was to blog.
I had been blogging for about a year before I launched Long Tail Pro, and I continued after launching it. My blog slowly but surely continued to grow.
For someone like me that didn't want to go out and recruit affiliates or hold webinars or do active marketing in general, blogging was a great fit. I simply wrote about my niche website business and it started to grow organically.
This continues to be my primary marketing strategy today: write great content and share true value; build a loyal following, and then solve their problems with software.
Sure blogging is a slower approach, it took a couple years before Long Tail Pro was a “real” business.
But my blog continues to be the #1 source of sales for Long Tail Pro by a long shot; even over all of my affiliates…combined.
The Fast Approach
After a couple of years and tons of updates to Long Tail Pro, I wanted to try doing an actual launch that generated some buzz. In December 2012, Long Tail Pro was making around $10,000 per month (you can read a blog post I wrote around that time).
I decided to hire an affiliate manager (Mark Thompson) to help me recruit affiliates and put together a special offer, just to see what could happen and generate more sales.
What happened during this launch still blows my mind. Not only did it exceed my expectations by many times over, it also broke all kinds of records at the time for the biggest launch on JVzoo and Forum Special Offers.
The offer we made was pretty simple. We ran a 7-day special offer that started at about $70 off the normal $97 price tag.
Yep, people were grabbing Long Tail Pro at $27…but it was on a dime sale, so the price went up every 10 sales or something like that. (We ended up increasing the number of sales required for the price to go up because so many people were buying).
I also created an upsell: Long Tail Classroom that taught people how to build niche sites using Long Tail Pro.
Because the sale was SO successful after 7 days, we increased the price to $47 and left it there for a few more weeks; and sales continued to roll in before we eventually closed it down.
How successful was this sale? Well, for the first time ever I'm going to share the exact numbers.
(An image from the special offer launch sales page)
The Launch Numbers…
The screenshot below shows the revenue from the special offer launch after just 11 days (Jan. 11th, 2013 through Jan. 22nd, 2013). I wanted to show this screenshot, even though the one further down shows the total revenue after the sale; because this one shows more stats such as conversion rates and revenue per visitor, etc.
Money Paid to Affiliates
The below screenshot shows that not all of that revenue was mine to keep, we paid out over six figures to affiliates after the first couple of weeks.
We paid out more once the entire sale was done, not all of these screenshots were taken at the same time, which is the reason for some differences in the numbers.
Total Revenue from the Long Tail Pro Special Offer
This screenshot below, shows the total revenue after 20 days (Jan. 11th 2013 to Jan. 31st 2013).
The numbers from this sale STILL blow me away!
To put it in perspective, I was selling about $10,000 worth of Long Tail Pro per month prior to this launch. Then in a matter of a couple of weeks, I sold over $260,000 of the software!
Obviously, a lot of that went out to affiliates, but trust me, I ended up with the fastest paycheck I'd ever seen in my life. In fact, I personally made (in my pocket) more money in Jan. 2013 than I made in an entire year at my previous job as a business banker with an MBA.
Going into the sale, Mark Thompson (affiliate manager) told me to be ready for up to 2,000 sales of the software. This number blew my mind and I said NO WAY are we selling that many copies! Well, we were both wrong…and sold nearly 6,000 copies of the software when all was said and done.
What made this launch so incredibly successful?
Here's some quick points, because unfortunately not every product will be able to replicate these results. But if done properly, you can have a huge payday:
- I created a solid product and had been updating it for 2 years. I believe a huge reason (the biggest?) for the success of this launch was that Long Tail Pro was already a great product and had lots of happy users. Many people had heard of it before, but they weren't necessarily willing to pay the full price right away. Having a solid reputation in the marketplace goes a long way.
- Offer a price people can't refuse. Some people already knew about the product and hadn't bought. But when they saw it for $27, it was a no brainer! So many people pulled the trigger, it was ridiculous.
- Recruit affiliates…and then recruit some more! Mark Thompson had connections with lots of affiliates, and so a huge hats off to him for recruiting some great people. However, once the sale started going and we saw it was a huge hit after the first day, Mark hit up even more people and said, “you don't want to miss out on this!”. So, keep recruiting, even after the launch has started…and ask them to email their lists multiple times if possible during the week. I also recruited a few of the top affiliates myself including Chris Guthrie and Pat Flynn….
- Email your own list. I have always been hesitant about emailing my own blog email list about offers. However, it was my own product! I emailed a few times during the sale to my email list, and as a result I was the one of the top sellers of my own product. Yep, I was right near the top of all “affiliates” for the entire sale. But trust me, the I NEEDED all those other affiliates. Combined, they sold WAY more than me.
- Try something new. I'll admit that I was super hesitant about the “salesy” type copy that was proposed. I never really liked the long sales letter with the “sales” copy. But I decided to let go and try it out. Turns out long sales copy works really well! For this particular offer it was a home run. I'm not saying you should always do that (and if you look at LongTailPro.com, you can see I have a short video sales page now)…but trying something different can yield nice results.
Get Ready for Customer Service
Before my special offer launch at the beginning of 2013, I handled all of the customer service myself, and escalated issues I couldn't handle to my programmer. I've always done my best to respond quickly to customer questions or concerns.
If you are starting your own software business, you need to know that customer service can account for a huge amount of the time spent on your business. There will be pre-sales questions, post sales, bugs, happy testimonials, and complaints.
You need to take it all in stride and do everything you can to keep your customer happy.
When I did my special launch, I was NOT ready for the customer service needs. As you can image with nearly 6,000 sales in a couple of weeks, I didn't sleep much.
As soon as I could answer 20 emails in my inbox, there would be 20 more when I was done.
This didn't stop for about a month.
I did nothing but customer support for almost 2 weeks. But I didn't go alone!
After the first day, I could see that I needed help and immediately went out looking for someone to hire. Luckily I found an existing user of Long Tail Pro that was happy to help out…and he is still my full-time customer support rep to this day!
Those few weeks of refreshing my inbox every few minutes to see sales rolling in and customer service issues was the most exciting, most draining, and longest hours I've probably ever worked, but also the most rewarding.
The bottom line is that you need to have some sort of customer support in place. If you are going to handle it yourself, that's fine; but be ready for the good times when you have so much work you need to hire someone else!
This isn't a business model that works without good customer service. If you are going to sell software, that's an important point to hammer home.
All are good – with pros and cons for each.
I have not really done any paid marketing for Long Tail Pro. However, I AM in the process of getting a Facebook campaign set up to expand the reach of Long Tail Pro a bit more.
So, in a nutshell, paid marketing is not actually needed…if you go the same route I did with Long Tail Pro.
However, if done correctly, paid marketing can potentially be a very smart move for your business.
Obviously, its much faster way to grow your business than taking the simple blogging/content marketing approach that I have with my software business.
Paid traffic is a bit of a risky move if you don't have a lot of experience. But getting your software product right out in front of your target audience can make a big difference.
As mentioned previously, there will likely be ongoing maintenance that is needed for your software. Long Tail Pro in particular may need more updates than most because it has so many moving parts and gathers data from so many different sources.
When any of those sources change how they share or present the data, we also have to change.
In addition, you may want to update the look and feel of your software over time. Or come out with newer versions with updated functionality as your business grows.
For Long Tail Pro, we are constantly updating features and have a backlog of requested features to be added.
I'm happy to pay the cost for this on-going investment. You just need to be aware when you go into the software business, that you will likely always be paying a programmer to update, fix, revamp, or otherwise keep your software up to date.
This is not a passive income source. If you want to make money selling software then be prepared for the long haul.
But it still beats the heck out of manufacturing and shipping a physical product though!
How I've Significantly Grown Long Tail Pro Since That Launch
Since that launch, Long Tail Pro has continued to grow beyond my expectations. More affiliates now have Long Tail Pro on their radar, and even though the “special offer” is over, they still want to promote a great product.
So, sales gradually grew from the norm of $10k a month before the offer to $15k/month over the next couple of months immediately following.
However, the smartest thing I ever did for my business was creating a monthly subscription option for Long Tail Pro (Platinum subscription). You see, all the sales previously were just a one-time purchase. People bought the software and had lifetime access to the software and all updates forever (and still do).
The platinum subscription was actually in the works for almost a year before it was released in Feb. 2013. I wanted to provide users with some advanced features (including a Keyword Competitiveness calculation) that other keyword tools didn't offer.
The problem was that to gain access to the data needed, I had to pay each time I queried the APIs or they had a monthly charge.
So, I had to charge a monthly fee in order to offer these features. At the end of the day, people LOVE the platinum features, and they are happy to pay the small price that it sells for.
Lesson: don't assume you know how your potential customers will react. Test, don't assume.
As a result, my business has grown significantly since adding a monthly subscription option in 2013. I highly recommend a SaaS model or some type of subscription option if you are going into the software business.
Your Thoughts on Selling Software
I'm sure that this blog post will bring up a few questions, especially if you are considering getting into the software business. I'm more than happy to answer those questions in the comments below.
Overall, I've always been hesitant about sharing exact income numbers for my business. However, I hope you don't mind seeing some of these launch results even though they are over a year old. If this post can help inspire others to pursue their entrepreneurial dreams, then that will be the biggest success of all.
I look forward to the discussion below!